BrainTrust Query: Is the Coupon Answer

Sep 18, 2009

By Bill Bittner,
President, BWH Consulting

Everyone but
the consumer hates coupons. Manufacturers can never get enough information
about who uses them. Retailers feel like they are caught in the middle,
forced to disappoint consumers if they don’t accept them yet knowing
that new technology has made counterfeiting child’s play (or at least
tech-savvy teen play). Actually,
consumers aren’t all that happy either. They like the discounts but hate
the clipping. Now
relative newcomer Zave Networks is offering a way to process POS discounts
that should make everyone happy. First, some background…

Point of sale
discounts involve three processes at the front end: presentation, validation
and valuation. Presentation
is how the system is notified that a discount exists. Validation
is the process the system goes through to ensure it is a valid offer
and that the customer has met the requirements (minimum purchase amount,
buy one get one, etc.). Finally,
valuation determines the amount of the discount, such as cents off per
pound or laddered discounts based on quantity purchased. And
there are out of store processes associated with coupons that are also
of interest, such as where the customer found it, who it was redeemed
by, and reimbursing the retailer.

Much of the
talk today is about variations on the presentation process. Traditionally,
the customer presented a paper coupon and this is still done for most
manufacturer discounts. Zave
changes how the coupon is presented and also performs the other steps
for the coupons via their network. They
use their database to validate the offer, determine the discount amount,
and return the total to the Point of Sale. They
also know where the consumer “clips” a coupon and manage retailer reimbursements.

The Zave approach
takes advantage of the “Network Effect” to bring all the processing into
their data center. This
allows them to control and monitor the whole sequence of events from
the creation of the offer to its redemption. To
make this work, each store has to have a broadband connection to the
Zave Network. They
send the customer transaction and it is quickly processed and the discount
returned. Since
they are dealing with customer data (although not financial transactions
such as credit cards) there is a certain amount of privacy that must
be ensured. But
by doing all the processing, Zave has taken the burden off the retailer
to implement process changes at each store and they can continue to evolve
at the data center.

Now Zave Networks
has teamed up with ScanBuy to allow customers to collect coupons using
their mobile phone. Instead
of going onto a website to select the coupons, consumers can take a picture
of a barcode displayed near an ad and send it to the site. The
coupon is automatically added to the consumer’s account and will be applied
to their next purchase when they present their frequent shopper card.

Discussion Questions:
Do you expect the Zave Network approach to be a winner? Does
it make sense for retailers and manufacturers to team up with Zave? Will
consumers accept it?

commentary] I really feel the Zave approach will turn out to be a “disruptive
technology” that changes the whole approach to POS discounts. It
has the potential to be a winner for all the players. Zave
gets paid for their service, manufacturers get better control over
their offers, retailers get faster reimbursement, and customers get
easier-to-use coupons. Paper
coupons are becoming easier to duplicate, but more importantly they
are becoming easier to modify into bogus discounts. Retailers
are caught holding the bag (or I guess the coupon) when the clearing
house rejects a bogus coupon. By
tying all the processes together, Zave is putting a firewall around
POS discounts that makes them safer for everyone while also providing
more data on their use.

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14 Comments on "BrainTrust Query: Is the Coupon Answer"

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Doron Levy
Doron Levy
11 years 7 months ago

I’m seeing another trend here and that is coupons that are built in and part of the chain’s individual loyalty system. It would make more sense to keep it in house and team up with the vendor in establishing discounts that are unique to that chain. I’m not sure where I see Zave fitting in with that. The direction is to integrate everything into the loyalty program so it is paperless, thus reducing the chances for fraud, misuse etc.

Dan Raftery
11 years 7 months ago

This is a no-brainer from the consumer perspective. Cell phones are ubiquitous and getting smarter with each generation–coupon presentation is a perfect application here. However, the Zave Network model has some significant challenges on the manufacturer component and the question of intellectual property ownership. Hopefully, they have recognized these challenges and developed viable strategies. I would love to see this gain traction, as I expect would most retailers.

Joan Treistman
11 years 7 months ago

Zave’s concept has legs. It depends on technological savvy among consumers and retailers. Accordingly, if Zave makes it easy for consumers to participate regardless of their IT abilities this revolutionary vision can become a reality.

Kiosks at the supermarket where consumers can log on, see their account, and indicate which coupons they wish to use in their shopping trips will help cover those consumers who are otherwise unable to take part for lack of know-how, internet access, etc. Further, in-store access (kiosk) will create more awareness and usage among shoppers overall. Finally, it will familiarize employees with the service, how to activate and use it.

Without attempting to embrace and encourage all consumers to participate, Zave might miss out on share, overall acceptance and the fulfillment of an exciting vision.

Kenneth A. Grady
Kenneth A. Grady
11 years 7 months ago

Call this ePhone Coupon 1.0. It will start to get some traction, but more likely coupons delivered to the phone or some variation will eventually take over. But, think of the person laboriously cycling through pictures to upload information. Perhaps adding coupons to an iPhone database and then downloading all coupons with one click? There are many variations that can play out here, but the end result is that as newspapers go away and we simply move to digital platforms, coupons will need to follow (or lead?).

John Boccuzzi, Jr.
John Boccuzzi, Jr.
11 years 7 months ago
This is where coupon technology needs to go and is one of many that is looking to grab market share., cellfire, Incentive Targeting and Catalina are just a few companies’ that have some overlap with what Zavers is looking to deliver. The industry is at the tipping point for electronic coupons. Why? 1) The technology needed to run such a system is now available and not cost prohibitive.2) Most consumers have cell phones and access to the web.3) Retailers and manufacturers now more than ever need to find ways to take waste and cost out of the system.4) Being “green” has become a top priority.5) Consumers are willing and ready to accept the solution. What will be needed to win market share?1) A beachhead of retailers sighing up–The solution needs to be free and easy for the retailer to run.2) Acceptance by manufacturers. Without paying clients it is tough to move forward.3) Effective message to consumers so they adopt your technology. Consumers will pick one maybe two solutions to use. Any more than… Read more »
Bill Robinson
Bill Robinson
11 years 7 months ago

Like all consumer-facing applications, the issue is whether a critical mass of retail stores offer the Zave Networks service. It also depends on how and whether the industry giants offer a similar program connected to their loyalty programs. I wonder if Zave has considered offering their services to private label their services to the Kroger’s of the world.

Doug Stephens
Doug Stephens
11 years 7 months ago

I don’t think the question here is really around the value or viability of Zave’s technology. Anything that replaces the need to clip-paper coupons and then streamlines processing and eliminates fraud is a good thing. I think the question is really more around the value of coupons as a tactic.

There have been numerous studies, including a 2008 study by SheSpeaks, that conclude that coupon use is quite significant…particularly among affluent households (maybe that’s how you get rich?)

Other studies have deemed coupons no more or less effective than advertised discounts in driving awareness and sales.

In the long term, I expect a continued general migration to EDLP in commodity goods sectors coupled with continued consumer sophistication as it pertains to price and promotion.

Where this will leave coupons as a convention in the future is difficult to say.

Max Goldberg
11 years 7 months ago

Making coupons easier to get, use, track and redeem (for both consumers and retailers) is a great idea. Zave may be a player in this arena. They have to make the process simple for consumers. Yes, mobile phones are everywhere, but a tiny fraction of mobile phone users use those phones to pay for products. Consumers are concerned about privacy. Zave must demonstrate that data is collected in aggregate or provide sufficient rewards that gain a consumer’s permission to individually attribute data. Finally, there is the reliability of the delivery system. Zave’s systems must be up and running flawlessly 99.999% of the time.

Kiosks where consumers have to stop and take time to enter data, or asking consumers to photograph bar codes into their mobile phones will not work. It takes too much time and tech savvy. Zave needs to create an ultra-simple consumer delivery system and subsequent retail back end.

Robert Heiblim
Robert Heiblim
11 years 7 months ago
This is an interesting topic in that coupons and rebates clearly move sales along especially in this environment. On the other hand, retailers have good reason to be concerned in that they receive the bulk of reaction to how these redemptions work out. As we specialize in the CE world, we point to Best Buy who has simply required ALL rebates to be taken off at POS. The reason is simple. Consumers have complained to them that refused rebates, complex forms and submissions, etc, are a big negative. Best Buy would rather challenge vendors to offer a “real” price rather than one formed by the expectation of low redemption. I think services like this one will only accelerate that. By which I mean that vendors in the internet enabled world may need to revisit the cost and effectiveness of coupons and rebates in a world when it is getting increasingly simple to redeem by consumers. As well, transparency is increasing so that consumer complaints cannot be buried, nor net pricing. So in fact, while the… Read more »
Gene Hoffman
Gene Hoffman
11 years 7 months ago

Being late in today’s insightful reply cycle, I come neither to rouse or rave for Zave. But improving the effectiveness of the current coupon paradigm would be an asset to the industry. So let’s hope Zave can pick up the necessary share holders and streamline and expand the existing process.

But as I look forward into the horizon, I wonder if coupons are fair to consumers who buy products without them; who pay the full price that partially helps subsidize coupons. Will the day ever come–OR SHOULD IT–when technology, with the unexpected blessing of manufacturers and retailers, will allow every purchaser to get the existing coupon discount on a purchase without a paper coupon or a Zave transaction? What a bucket of worms that might create in Marketingdom.

Li McClelland
Li McClelland
11 years 7 months ago
For a while at least, manufacturers and retail stores are going to need to deal with two separate types of couponers–and this makes things somewhat complicated for them. The younger, newly frugal who now seek out and readily use coupon codes for online purchases and who will likely embrace cellphone and other means of electronic delivery and tracking may (or may not) be the way of the future. But, for sure, many traditional couponers (not necessarily older people) really like their paper coupons. They cut and/or print out coupons, save them, and use them when items they regularly use actually need replacing or are on sale. Family groups and friends share coupons they may not themselves want to use. This is all part of the “fun.” Also, receiving “surprise” cash back paper coupons at checkout applicable for ANY future purchase at the store, as I recently did through my purchase of Hershey’s and General Mills products, was delightful and like having cash in hand. Personal observation at the checkout line suggests that the recession has… Read more »
Jonathan Marek
11 years 7 months ago
The key open question in my mind is how this type of offering will affect the economics of couponing. The economics of coupons, like rebates, rely on the fact that consumers self-select based on their own price sensitivity. The fact that coupons are a pain to use is part of their economic benefit. In plain English, people who don’t care as much about price don’t want to deal with the pain, and so they don’t use the coupon, and therefore they buy at higher margin. If I make it easier for those “lazy” consumers to get the discount, then I may well be eating into margin at a much greater rate. Now the supermarkets have already started to eat into this with loyalty card discounts, and it isn’t at all clear that this has been to their net benefit. This is a potentially scary value trap for retailers and manufacturers. Once I’ve given away extra margin to less price sensitive consumers, it will be close to impossible to get that margin back.
Ben Sprecher
Ben Sprecher
11 years 7 months ago
What is interesting to me about the Zave model is that, like Cellfire, AOL Shortcuts, etc., it is a “pull” rather than a “push” model from the consumer’s perspective. That is to say, the consumer must take action to install the software on their cellphone, then another action to get the coupon, then another at the checkout to redeem it (or perhaps it’s tied to the shopper’s loyalty ID, in which case the discount can be automatic). Having used the Zaver’s website, though, they definitely present a modern, attractive, and friendly website. David Diamond–the retail marketing guru–refers to these sorts of programs as “mass-selected.” In other words, the offers are available to any shopper who both signs up and selects the offers they want. As Jonathan Marek points out, that means there is a strong bias towards the price-sensitive shoppers. The challenge of every “mass-selected” model is maintaining a deep pipeline of appealing offers. Zave and its competitors need walk a fine line in giving brand marketers what they want: measurable results, short cycle times,… Read more »
Justin Time
11 years 7 months ago

It’s so cool and easy to download zavers coupon savings onto my ClubFresh card at SuperFresh.

While I still use paper coupons – because most Great A&P banner stores accept those of their supermarket competitors I must clip coupons – I find that zavers makes planning for the weekly supermarket trip easier and more convenient.


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