Answer to Question #47019 in Microeconomics for Mickey

Question

Television show called ‘Extreme Couponning’ featuring people who go to extreme lengths to collect and use discount coupons. Though the program focuses on extreme cases, couponing is a poplar strategy used by businesses to generate sales. What key economic concepts underlie the use of discount coupons by businesses?

How critical is the underlying market structure in the choice of this strategy for business revene growth?

Answer 1

In this era of extreme couponing and group deals, consumers love to savor a restaurant meal for the price of fast food or get a facial for half off. But are these bargains a good deal for small merchants? Whether they’re distributed through websites such as Groupon or Living Social or mailed a la Valpak, discounts and promotions need to be highly tailored to your business if they are going to turn a profit. That strategy may not work for businesses such as restaurants, which have fixed food costs.