Destroying profitability for your entire market
Coupons trigger people's pleasure side of the brain. That is the part of our brain that gets addicted to things and needs more of the same in order to get the same satisfaction -- things like alcohol, drugs, sex, and now also discounts.
Once people expect a product at a certain price, it is very hard to get them to pay more for it. So if you are going to discount your products or services by 50 percent, you will find it almost impossible to ever get paid what you used to get paid before. Discounts not only destroy your profitability, but they also destroy the profitability for every other business around you; they destroy the profitability for entire geographies or industries.
The world of business is littered with case studies that prove that point -- a recent one being the pet food industry in Brazil. As economic conditions improved in Brazil over the past few decades, more people kept pets, and an increasing number of them fed them packaged foods -- the perfect storm for the creation of a huge new market. The subsequent competitive war in Brazil, however, centered on pricing and discounts to gain market share, and it destroyed the market for all the players. None of the pet food providers in Brazil can achieve profitability that comes anywhere near their profitability levels in other countries. In short, pricing and discounts destroyed the opportunity for healthy profits for everyone.