Should Bed Bath & Beyond ditch its coupons?

Discussion
Photo: Wikipedia/Coolcaesar
Oct 07, 2016
George Anderson

What comes to mind when you make the decision to go shopping at Bed Bath & Beyond? For many consumers, it’s “don’t forget to bring the coupons.”

As those within mailing distance of any Bed Bath & Beyond store no doubt understand, the retailer is known for sending out percentage-off coupons intended to drive traffic to stores. While this tactic has worked well in the past, remarks made by CEO Steven Temares on the company’s recent earnings call suggest he believes Bed Bath & Beyond needs to come up with something new to drive profitable growth going forward. The retailer saw increased redemption levels of its coupons during its second quarter with a slight decrease in the value of those redeemed.

Mr. Temares, via Seeking Alpha, said coupons have “been an important part of our value proposition, but at the same time we’re committed as an organization to smarter, more intelligent marketing, personalized, targeted, being more meaningful and being more efficient and optimizing that over time as well.”

One possible solution for weaning the company and its consumers off coupons is an annual membership program known as Beyond+ that is being tested by the chain. For an annual fee of $29, members receive 20 percent off all purchases made in the chain’s stores and on its website. They also receive free ground shipping on all online purchases, regardless of order size.

According to a Wedbush Securities analysis, via The Wall Street Journal, prices on bedbbathandbeyond.com would be 13 percent cheaper on average than the same items on Amazon.com with the Beyond+ member discount. The same article, citing UBS, said customers who spend at least $145 annually with Bed Bath & Beyond would benefit from joining the program.

DISCUSSION QUESTIONS: Do you think the Beyond+ membership program is an improvement over Bed Bath & Beyond’s current coupon-dependent marketing approach? Is the Beyond+ offer compelling enough to attract new customers to the chain or do you see it as more of a retention tool for existing shoppers?

Braintrust
"While I do not favor fee-based loyalty programs, this one might work because of the value proposition. "
"Give consumers what they want, regardless of how distasteful coupons may be. Remember J.C. Penney."
"It is a classic example of a brand that defined itself through a segment and quickly realized it was a mistake."

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17 Comments on "Should Bed Bath & Beyond ditch its coupons?"

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Dick Seesel
BrainTrust

Looking at this from the perspective of a Bed Bath & Beyond customer (who never forgets to bring a coupon to the store), I’d be attracted by this new business model. Since a typical coupon can be used only on a single item per visit, it’s likely that the $29 membership fee and subsequent discount would actually save money for the consumer. Whether this helps or hurts Bed Bath & Beyond’s margins is another question, but it’s likely to drive more consistent traffic and fuller shopping carts.

Sterling Hawkins
BrainTrust

The 20 percent off coupons have reached the level of credit card points and miles — they’re expected. Without varying promotions over time, consumers expect the reward and it no longer changes the shopping behavior (which used to be the whole point). Completely pulling the standard Bed Bath & Beyond coupon from market could be a painful transition; however, transitioning to a program that can drive revenue and change consumer behavior again is the right long-term decision.

Dr. Stephen Needel
BrainTrust

Why not both? From personal experience, my wife would not shop Bed Bath & Beyond without the coupons — the back seat pocket of her car is filled with them. If they are making money from someone like her (and lots of people we know are like her), don’t kill it.

Paula Rosenblum
BrainTrust

The coupons are no longer effective for me (and I used to use them all the time) because I prefer to shop online and the coupons are only good in stores. The drive to Bed Bath & Beyond is a torturous drive to Aventura. So I have found alternative sources for the products they sell.

I might consider a membership instead. Maybe.

Having said that, the horse may well be out of the barn since many, like me, have found other sources, like Overstock.com for the same stuff.

Might be too little too late.

Bob Amster
BrainTrust
While I do not favor fee-based loyalty programs, this one might work because of the value proposition. Being a loyal Bed Bath & Beyond customer, I know that our purchases there exceed the $145 in purchases needed for this to work. The free shipping on e-commerce orders adds to the attraction. However, if I walk into a Bed Bath & Beyond store today with a 20 percent off coupon on any item, I do not have to pay a membership fee (but the discount only applies to one item and I have to get my hands on multiple coupons). I never knew whether most items are priced 20 percent higher at Bed Bath & Beyond in order to pay for the flood of coupons they made available to the consuming public, or if the 20 percent discounts really erode Bed Bath & Beyond’s margins (which is a significant percentage). This program is more likely to succeed with retaining existing customers than in attracting new ones. Customers loyal to Amazon and Costco don’t seem to have a problem with paying a fee up front and the merchandise category of a Bed Bath & Beyond is one in which the retailer can… Read more »
Ori Marom
Guest

Bed Bath & Beyond is an unusually good business, at least in financial terms, in the current retail scene. It has seen, however, its margins declining over the last five years and its revenue growth recently stalled. It is easy to see, therefore, why its management may opt for defensive strategies (customer retention).

However, I seriously doubt that net prices will change from 7 percent above Amazon level to 13 percent below. It is far more likely that net prices will remain just about at their levels today. (Who can price at 13 percent below Amazon?)

Modern customers are almost perfectly informed and can see through pervasive “discounting” policies. They are also likely to respond negatively to them. That is, customers with annual purchases of less than $145 may abandon the chain whereas such infrequent customers are exactly the ones who are likely to defect to Amazon.

Naomi K. Shapiro
BrainTrust

Coupons are an integral part of Bed Bath & Beyond’s identity/branding — and they’re what keep the Bed Bath & Beyond customers coming over and over, so Bed Bath & Beyond would be making a huge mistake if it did away with its coupons. At worst, Bed Bath & Beyond should keep the coupons and ADD a program. But, to tell the truth, the program sounds too much like “me-too” and there’s not a whole lot to distinguish Bed Bath & Beyond from anyone else, so my advice to Bed Bath & Beyond is don’t destroy your trump card with customers.

Max Goldberg
BrainTrust

Much as I can appreciate the thinking behind the idea, I don’t think Bed Bath & Beyond will be able to successfully convert to a membership system. Many customers are not going to spend $145 annually — enough to justify membership — which could drive them into the open arms of Amazon. Plus, if you don’t pay the membership dues, you will feel pretty stupid knowing that you’re paying 20 percent more for everything in the store, and that could be a deterrent to shopping Bed Bath & Beyond in the first place.

Bob Phibbs
BrainTrust

As I wrote in this post, Bed Bath and Beyond’s Marketing Problems Are Yours Too Retailers this once effective strategy has resulted in consumers weaned to never pay full price. It is unsustainable. The membership is still a discount — and probably a worse deal for the brand.

Gene Detroyer
BrainTrust

Strategically, coupons are not and never have been a “loyalty program.” Consider the comments from our panel … “I never go to Bed Bath & Beyond without my coupons.” That indicates that the first decision is to go to Bed Bath & Beyond, then get the 20 percent off. It is not a tool to make Bed Bath & Beyond the first retailer to come to mind. The membership program is, “I need X, Y and Z … I will start with Bed Bath & Beyond.”

Naomi K. Shapiro
BrainTrust

Gene, for me and maybe others, it’s the opposite: “Oh, I have a coupon for Bed Bath & Beyond, so I’ll go there — not the other way around.

Shep Hyken
BrainTrust

Bed Bath & Beyond has trained us to look for the deal. As I visit their stores I see consumers coming in with stacks of coupons in hand. It’s worked. It’s what they are known for. They’ve created a good following of loyal customers who love the deal. So, why not offer them an inexpensive membership with the promise that they will come out ahead? Similar to what Amazon Prime is doing, they will create customers who choose their company over a competitor’s. This program will, at least at the beginning, be more of a retention tool. But handled well, a cashier can sell a membership to a new customer who is buying $145 worth of merchandise to offset the price of the membership. I look forward to seeing the numbers a year from now. I think everyone will be happy.

Christopher P. Ramey
BrainTrust

Give consumers what they want, regardless of how distasteful coupons may be. Remember J.C. Penney.

Tom Dougherty
BrainTrust
Bed Bath & Beyond has landed itself in a tough place. I agree with Steven Tempers in that they need something to drive traffic and couponing is a black hole. However knowing that keeping the customer dependent on coupons is akin to a heroin dependency … with all of the drawbacks of addiction, it’s a too late awareness and awakening. But I think the die is cast. BB&B has REAL brand problems because of the incessant couponing and the resulting dependency on it. The best way to stop addiction is to not start in the first place. Most addicts fail to recover and I think the positioning of Bed Bath & Beyond in the mindset of the consumer is set in stone. “Where is my coupon?” Of course, they have gotten very lost in developing a brand in any case. It is a routine joke around my shop “that I want to visit the BEYOND department.” It is a classic example of a brand that defined itself through a segment and quickly realized it was a mistake. It is another mistake to then fix the problem by adding beyond or more to the name. As Napoleon once said “an army… Read more »
Craig Sundstrom
Guest

Do people regularly shop there enough for this to make sense? I would think — except maybe for those setting up a new household — purchases would be rather episodic. Even if they averaged out to $145/year — say $50 one year, nothing the next, then $500 — the uncertainty of future purchases would discourage participating. After all, a coupon costs someone nothing.

Shilpa Rao
BrainTrust

Customers’ behaviour varies by the segment. There are customers who feel a sense of achievement and joy when they have to present a coupon they found and receive a discount, while there are others who would enjoy the convenience of the long-term program. In this economy, unless you have an offering for both customer types, it’s difficult to be profitable.

Susan O'Neal
BrainTrust
8 months 11 days ago

Membership, in lieu of Bed Bath & Beyond’s heavy coupon strategy, is a means of shifting the risk from the retailer to the customer — and in my opinion, only Bed Bath & Beyond’s most regular and loyal shoppers will adopt. If their most loyal and regular shoppers are a large enough group, that could work just fine. However, my guess is that their average frequency is such that many of their customers will just shop elsewhere and that their sales, which (again my guess) are heavily impulse driven, will suffer without the coupon in hand. There are better ways to keep their heavy coupon-using shoppers AND expand trip frequency and spend among non coupon-users.

wpDiscuz
Braintrust
"While I do not favor fee-based loyalty programs, this one might work because of the value proposition. "
"Give consumers what they want, regardless of how distasteful coupons may be. Remember J.C. Penney."
"It is a classic example of a brand that defined itself through a segment and quickly realized it was a mistake."

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