Why Paid Coupons Work Better Than Free Ones (Costco & Sam's Club Secret)

Why Paid Coupons Work Better Than Free Ones (Costco & Sam’s Club Secret)

Published: 25th June 2026

Video

In this video, we answer:

• How do Costco and Sam’s Club make billions?
• Why do customers value what they pay for?
• What is the sunk cost effect in marketing?
• Why do free coupons have such low redemption rates?
• How many customers used free coupons in the milk tea store example?
• What was the redemption rate for the barbecue restaurant?
• What is the solution to low coupon redemption?
• How did a bakery achieve a 71.4% coupon redemption rate?
• How many times better is a paid coupon than a free one?
• Why do customers keep asking about their coupon balance?
• What is the key lesson about coupons?

Key takeaways

• The hook: Costco and Sam’s Club make billions not from selling products, but from selling memberships. In 2025, Costco made 5.3 billion dollars from membership fees alone. For Sam’s Club, 90 percent of their profit comes from memberships. Why? Because people value what they pay for.
• The human nature principle: Here is the secret. When customers pay for something in advance, they feel they must use it. Otherwise, they lose out. This is the sunk cost effect. Costco and Sam’s Club don’t give away free memberships. They sell them. And customers keep coming back to justify their fee.
• The problem with free coupons: But many business owners still don’t get this. A milk tea store gave away 2,000 free cash coupons during a holiday. Only 83 customers used them. That’s 4.15 percent. A barbecue restaurant gave away 3,000 coupons. Only 3.2 percent used them. Free coupons have no value. Customers don’t remember you. They don’t care.
• The solution – sell the coupon: The solution? Do what Costco and Sam’s Club do. Sell the coupon. Charge RM9.90 for 3 coupons worth RM10 each. No threshold. Here is a real case. A bakery started selling coupon packs in December 2025. RM4.90 for 3 coupons worth RM5 each. First month, they sold 280 packs. The redemption rate? 71.4 percent. That’s 17 times higher than the free coupon.
• The customer psychology: Here is the best part. Customers who bought the coupon pack kept asking: ‘How many coupons do I have left?’ Because the coupons were stored in the bakery’s system, customers could easily check their balance. They paid for it. They don’t want to lose out. Before, when coupons were free, nobody asked. Free items have no value. Paid items make customers feel they have gained an advantage.
• The final message: The lesson? Stop giving away free coupons. Start selling them. Charge a small fee. Watch your redemption rate skyrocket. You need a good system to track this. But the principle is proven. Costco does it. Sam’s Club does it. And now, you can too.

Full transcript

Voice specification: Female, confident, American accent. Conversational, clear, slightly slower for key points. Light, upbeat, business-style background music.

[0:00-0:08] — Hook

Visual: Split screen – Left shows Costco logo with membership card. Right shows a pile of ignored free coupons. Text: “Free vs Paid. Which works?”

Voice:
“Costco and Sam’s Club make billions not from selling products, but from selling memberships. In 2025, Costco made 5.3 billion dollars from membership fees alone. For Sam’s Club, 90 percent of their profit comes from memberships. Why? Because people value what they pay for. [PAUSE]”

[0:08-0:18] — The Human Nature Principle

Visual: A wallet with a membership card. Text: “Paid = Valued. Free = Ignored.”

Voice:
“Here is the secret. When customers pay for something in advance, they feel they must use it. Otherwise, they lose out. This is the sunk cost effect. Costco and Sam’s Club don’t give away free memberships. They sell them. And customers keep coming back to justify their fee. [PAUSE]”

[0:18-0:32] — The Problem with Free Coupons

Visual: A milk tea shop owner giving away coupons. Then numbers on screen: “2000 coupons given. Only 83 used. That’s 4.15%.”

Voice:
“But many business owners still don’t get this. A milk tea store gave away 2,000 free cash coupons during a holiday. Only 83 customers used them. That’s 4.15 percent. A barbecue restaurant gave away 3,000 coupons. Only 3.2 percent used them. Free coupons have no value. Customers don’t remember you. They don’t care. [PAUSE]”

[0:32-0:48] — The Solution: Sell the Coupon

Visual: A coupon pack – “RM4.90 for 3 coupons worth RM5 each.” Then numbers showing 71.4% redemption.

Voice:
“The solution? Do what Costco and Sam’s Club do. Sell the coupon. Charge RM9.90 for 3 coupons worth RM10 each. No threshold. Here is a real case. A bakery started selling coupon packs in December 2025. RM4.90 for 3 coupons worth RM5 each. First month, they sold 280 packs. The redemption rate? 71.4 percent. That’s 17 times higher than the free coupon. [PAUSE]”

[0:48-1:00] — The Customer Psychology

Visual: A customer at the bakery counter asking, “How many coupons do I have left?” The cashier’s screen shows the customer’s coupon balance.

Voice:
“Here is the best part. Customers who bought the coupon pack kept asking: ‘How many coupons do I have left?’ Because the coupons were stored in the bakery’s system, customers could easily check their balance. They paid for it. They don’t want to lose out. Before, when coupons were free, nobody asked. Free items have no value. Paid items make customers feel they have gained an advantage. [PAUSE]”

[1:00-1:10] — Closing

Visual: Host looks directly at camera. Text on screen: “Sell your coupons. Not give them away.”

Voice:
“The lesson? Stop giving away free coupons. Start selling them. Charge a small fee. Watch your redemption rate skyrocket. You need a good system to track this. But the principle is proven. Costco does it. Sam’s Club does it. And now, you can too. [PAUSE]”

[1:10-1:15] — Outro

Visual: Logo and “Follow for More F&B Marketing and Promotion Tips”

Voice:
“See you in the next one.”

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