Will couponing continue to be a mainstay of retailing?

Discussion
Jan 05, 2015

Bernice Hurst grew up in New York City but has lived in England for the past forty years. Her return trips — now a mixture of business and pleasure — often trigger trains of thought on the way things have (and haven’t) changed in American retailing. A recent trip inspired her to harvest some of those observations into a mini-series.

First stop: Southern California where the local newspaper, San Diego Union-Tribune, clearly knows its audience, both advertisers and readers. Coupon shopping is one of the things that doesn’t seem to have changed.

Supplements cover all the bases newspaper, retailers and shoppers all win. The latter get bonus discounts for cutting ads from the paper itself. The newspaper wins whether they do or don’t. Shoppers win if they do; retailers if they don’t.

Young and old are catered for in this area of ever-expanding retirement communities whose residents still shop, even if differently from their younger neighbors (and selves). So where do they go, how do they get there (and home with their purchases), and what do they buy? Maybe TVs (coming later in this mini-series), not usually large-quantity food or household goods purchases, but still some of each plus clothes and gifts for families, perhaps. Especially HBC and pharmaceuticals. It all gives retailers a pretty reasonable playing field.

As for transport, gone are the days of wheeling shopping carts through the neighborhood. Nowadays you can wheel them through a mall but still have to drive to get there and back. Seniors may rely on buses to and from their residence. Online shopping and coupon apps may be the default option for some, but there are times when technology just doesn’t cut it.

Back to the retailers. Do they know all this and, if not, why not? If they do, what do they do about it? Coupons again. Seniors who have lived most of their lives bargain hunting aren’t likely to change their ways late in life, even if it’s a game as much as a necessity. Younger people on limited incomes often have no choice.

Multigenerational households, too, can find bargain shopping a sensible solution to diverse needs. In some, aging parents have moved in with children and grandchildren to be looked after. In others, parents host children and grandchildren struggling to support themselves. Either way, retailers benefit by advertising products across the spectrum.

Bargain shopping takes time, energy and concentration but can pay off. The ways retailers address this and tailor by target is what makes research and observation fun and challenging. It’s all about enticement. Inducement to spend or separating shoppers and their wallets, as one of our colleagues frequently reminds us. However you look at it, though, it still seems part of the American way of life.

Are traditional coupons still better traffic drivers than margin killers for retailers? Do you see coupons still being prominent traffic drivers for Millennials and Generation Z? If so, what approach will work best?

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17 Comments on "Will couponing continue to be a mainstay of retailing?"

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Ken Lonyai
BrainTrust

Couponing (traditional paper ones) is definitely a generational staple for people of a certain age. Those on limited incomes of any age are dependent upon them as well. Whether they beat loss-leaders or not probably depends upon each specific store brand and the neighborhoods it serves.

The problem going forward with switching to digital couponing and in-store LBS promotions is that the discount habit just gets passed to the next generations. By doing so, stores have to have inflated regular pricing to ever hope to keep margins up after discounts.

For the sake of retailers, I would like to see a transition away from discounting wars and see them replaced with value-ads targeted at younger shoppers, to break the coupon habit. It won’t work in all markets, but in middle-class areas it is possible.

Tony Orlando
BrainTrust

Coupons are still viable for shoppers, and with the digital coupons we have a choice as to what we want to use. Redemption may seem small, but as a total, it is still something CPG companies are willing to invest in. In our area we have certain customers who always use coupons, which is smart if they actually need the product. Some stores have finally gotten off the double- and triple-coupon mode and have gone to a stronger promotional ad format, and others still believe it is necessary to continue doing this.

I still get about the same percent of sales of coupons that I did 10 years ago, but we have an older population. I’m sure in younger urban areas the digital is growing, so it is a situation based on where you reside. Both ways work well for the people who redeem them, and they will both be around for years to come.

Max Goldberg
BrainTrust

What this article does not mention is the great leveler, the Internet. Generations Y and Z, as well as Boomers, use the Internet to pre-shop or to simply buy online. Why deal with going to a store when the click of a mouse can bring products to your door in a matter of hours?

Retailers need to use a full compliment of tactics to separate shoppers and their wallets. Coupons—yes. Promotional offers—yes. Retail-tainment—yes. Retail is now so much more than going to the store.

Zel Bianco
BrainTrust

Millennials and members of Generation Z who continue to go through circulars and newspapers to clip traditional coupons are more likely to be extreme bargain hunters who will kill the margins for retailers. These generations are simply less likely to be looking at physical papers and paying attention to their ads unless they are already hunting for something in particular.

A better approach for driving traffic would be targeted emails and ads that make use of the incredible amount of data retailers have collected on these shoppers.

J. Peter Deeb
BrainTrust

Any type of promotion is better than margin-killers in the long run. Retailers today have to be multi-dimensional in how they reach consumers. The demographics, not only of your current customer base but your desired customer base, have to be put into the mix. We should see more targeted online communications and targeted offerings utilizing shopper data for more tech-savvy consumers (some seniors are in that group) and coupons for as long as they deliver desired results for retailers. My papers are still filled with retail flyers and coupon books!

Frank Riso
BrainTrust

A combination of coupons and sale prices appears to be doing quite well with all generations of shoppers. Traditional coupons are still of great value to only a smaller set of shoppers from my observations. Many stores have automatic coupons that are redeemed when their loyalty card is being used. In the supermarket segment both lower prices and the new added relationship with a gas station chain appears to be the new norm. The Buy One Get One Free promotion has a new cousin: Buy 10 and get 10 cents off a gallon of gas. In short I would say that lower prices are a stronger traffic driver than traditional coupons.

Ed Rosenbaum
BrainTrust

I am not sure age will be a determinant for people who use couponing. The difficulties of the times will force more people to use coupons. Heck, we saved $25 on our restaurant bill last Saturday. Why would we stop when the money is better used in our pocket?

Roger Saunders
BrainTrust
Coupons continue to be a part of consumers’ lives, be they adults 18-and-older, Generation X or Generation Y. However, the use of coupons holding sway over consumer purchase decisions varies depending upon retail merchandising categories. The annual Prosper Media Behaviors & Influence (MBI) Study of 15,000-plus adults 18-and-older—weighted and balanced to the U.S. population—monitors 32 different media forms, including traditional, digital/new, internet, and in-store media and promotional practices. Those consumers maintain that everyday CPG products such as groceries/cleaning products/beauty products are the number one influence of their purchase decision. 64.9 percent of adults 18-and-older, 66.3 percent of Generation X buyers (think family formation) and 52.4 percent of Generation Y cite coupons as the media form of importance. That is followed by in-store promotion and word of mouth. Consumers also point to coupons as an important medium of influence. Examples: Dining out, coupons earn the highest score, followed by word of mouth and direct mail, with 43.4 percent of adults 18-and-older, 45.2 percent of Generation X and 31.2 percent of Generation Y consumers relying upon coupon media. When it comes to apparel/clothing, in-store promotion tops the list, then coupons, and closely followed by word of mouth and e-mail advertising. Adults 18-and-older… Read more »
Ralph Jacobson
BrainTrust

I see paper coupons still lingering in the marketplace, at least in the U.S., for some years to come. There are too many Boomers feeling the need to hold something in their hands to give them the sense that they are not paying full price. Younger Millennials and other consumers who have grown up in the digital age are already adept at searching and using coupons via mobile devices.

Even though paper coupon redemption has traditionally been a low percentage of total distribution, I feel the revenues gained by the redemption is significant enough to keep them in the market, as long as the are still valued by a percentage of shoppers.

Suzanne Stein
Guest
Suzanne Stein
2 years 7 months ago

Coupons are the drivers in my rural area. I am in the retail business and I get asked every week for coupons and where can they find them.

Tim Cote
Guest
2 years 7 months ago

Most studies show the youngest consumers out there still crave “the deal.” Brand loyalty means little. Coupons convey a limited deal that maybe customer A got and customer B did not and gives the deal, and maybe gives the socially-driven Millennial the best deal available and bragging rights. Coupons are likely to INCREASE in use over the next 10 years to satisfy consumer demand for them.

Mark Heckman
BrainTrust

Digital coupons only represent about three percent of redemptions from all coupons offered. To embrace this new delivery medium, stronger content (better deals), better technology and retailer adoption, will ultimately win the day with younger shoppers and push digital adaptation.

Paper coupons (free-standing inserts) on the other hand, are dying a very slow death as CPG brands still find them to be one of the few sources of predictable results across multiple markets they have in their arsenal of options.

Frank Beurskens
Guest
2 years 7 months ago

Coupons rely on a psychological tendency for “anchoring” where the retailer sets an anchor based on the stated retail price, and the coupon reduces that price, creating an instant “win” that seems to trigger some primal part of the brain we all share. It’s difficult to imagine the gifted Millennials and Generation Zers having different primal brain functioning. Rather we may see more sophisticated ways to “win the game” beyond just price. Gamification in retail will grow because it fulfills a similar need: It doesn’t matter how simple the game, as long as one has a chance to play and “win.” We’re seeing renewed interest in creating and executing digital games integrated into loyalty programs and in-store displays. Making “winning” fun may be more effective for brands than giving away dollars, and more fun for the next generation of consumers. Time to get creative!

David Zahn
Guest

Bernice shines a bright spotlight on the issue around couponing. I am of the opinion that paper-based coupons will be reduced in importance over time as more and more of the shopping population goes digital. We are not there yet, and it is still very much in the preliminary steps of the transition. However, whether it is paper-based or electronic, the notion of coupons, promotions, deals, rewards, etc., will continue and ALL generations respond.

The messaging may need to be targeted to the specific shopper (geo, demo, psycho, previous shopping trips, and all other ways), but the idea of providing an offer will remain. Groupon, RetailMeNot, and nearly every retailer have proven that. “Just” pricing-specific coupons may ebb and flow in importance based on any number of factors, but offers (like Max Goldberg points out) will be a critical part of messaging and marketing efforts.

gordon arnold
Guest

Coupons work for the retailer, the consumer and the manufacturer. When the information technology gurus get an electronic one that is easier to use, the proliferation of coupon acceptance and use will explode to to even higher levels. With so many application software programs each creating its own data file structure, this might take a while—the sooner the better for all.

Christopher P. Ramey
BrainTrust

Coupons may change in shape and their method of delivery will change too. But, they’ll always be effective drivers of traffic. Too many customers are human to ever change that.

Furthermore, a smart merchant won’t allow them to be margin killers. It’s about processes and managing assortment.

J. Kent Smith
BrainTrust

Coupons, as a way to get something cheaper, are here to stay … but clipped out of newspapers and flyers? Less so. There’ll always be the couponer as long as there are coupons. But, leveraging smart devices not only enables the retailer to build in reminders etc., but better track who and how much is redeemed. So…once upon a time there was a company that made really, really nice horse carriages….

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