CPG slow to adopt digital coupons

Oct 06, 2014

Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.

Digital marketing is making an impact in grocery shopping as consumers look for coupons before and during their trip to the store. But most food brands haven’t reacted to this shift in shopper behavior.

That’s the view presented in the Food Insight Report: Digital Coupons from L2 ThinkTank, which benchmarks the digital competence of brands.

L2’s review of 80 major food brands found that, although 36 percent had coupon sections on their websites, just 24 percent were offering coupons during the data collection period (January to April 2014).

The report states that online grocery sites and coupon aggregator applications like Coupon Queen, Cellfire, and Grocery IQ receive the majority of coupon traffic, as opposed to food brand sites, which only attract a small percentage of visits.

As Amazon and Walmart ramp up the development of their online grocery strategies, according to L2’s report, less than two of three food brands distribute coupons on Amazon and only one of three on Walmart. "Digital coupon distribution is even lower through current online grocery leaders Peapod and FreshDirect. While e-grocery players Amazon and FreshDirect have fully developed integrated coupons into the online shopping process, the majority of brands rely on the consumer to print coupons at home for in-store redemption."

Other findings in the study:

  • While digital e-commerce represented just 3.3 percent of grocery in 2013, that share is expected to explode to a range from 6.7 percent on the conservative side to 16.9 percent on the aggressive side by 2023, according to Brick Meets Click research.
  • According to Packaged Facts, browsing for coupons is the second most popular digital activity for grocery shoppers (55 percent) after reading online circulars (62 percent). According to Google, 90 percent of smartphone shoppers use their device in the shopping aisle.
  • The 2014 NCH Coupon Facts Report said digital coupons have average redemption rates of 14 percent, outpacing print coupons that tally rates of just 1 percent.
  • Surveys from Google suggest mobile shoppers spend upward of 15 hours per week researching products or services on their smartphones and are 4.8 times more likely to convert in-store than on their phones. L2 wrote, "Such behavior adds credence to the theory that ‘mobile-influenced’ sales already dwarf mobile sales and will soon overshadow all online purchases."


What’s the next phase in digital coupon adoption? Is expansion a more complicated hurdle for food vendors or stores? How do you see them complementing print coupons in store and online?

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11 Comments on "CPG slow to adopt digital coupons"

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Debbie Hauss
3 years 7 months ago

Speaking from a personal perspective, I was extremely pleased when I was checking out at a Macy’s while on a business trip and I received an option to digitally select a coupon/discount. I usually forget to bring the coupons they mail to me to the store, so this was an unexpected pleasure! It also will save the company a lot of direct mail dollars. This type of approach also could improve participation in loyalty programs.

David Biernbaum
3 years 7 months ago

One of the reasons that CPG is “slow” to adapt digital coupons is because most CPG companies prefer to maintain some degree of control over the distribution of discounts and coupons at any given time, and they don’t want multiple discounts and coupons being used on one shopping visit.

CPG companies like to time their coupons and discounts not to occur simultaneously with retail scan-backs, temporary price reductions or other discount promotions.

So, I think it’s more of a control and brand management factor more so than a technical or learning-curve issue.

Gordon Arnold
3 years 7 months ago

Software compatibility and cost is the issue here. For many reasons under the topics of communications protocol, software security and language. A single coupon that can be used successfully all over by any media just isn’t here yet and may not be for quite a while. IT developers have, to date, lots of reasons and blame but still no affordable results.

Bill Davis
3 years 7 months ago

Digital coupons being delivered via mobile devices where they can be scanned/redeemed at PoS. I would think expansion will be more challenging for stores given they are dealing with a variety of different brands, which I believe will complicate things for them. Eventually I see digital coupons eroding the presence of coupons that need to be printed, as why print something if I can just store it on my phone and have it scanned.

Dan Frechtling
3 years 7 months ago

Let’s first separate online coupons from online grocery. Online grocery purchases are barely significant. Even ten years from now, 83 to 93 percent of purchases will continue to be in-store.

The opportunity, as always, is online coupons for in-store redemption.

“Control” marketers will fear stacking, as David Bierbaum notes, and see price erosion in the 24 percent of in-aisle shoppers who look for mobile coupons on items they were going to buy full-price.

Forward thinkers will integrate offers with online programs that stimulate purchases. For example, with nearly 40 percent of smartphone shoppers looking for recipes, food brands can combine content marketing with online offers to both give shoppers a reason to buy and a call to action.

Smartphone shoppers are characterized by big baskets more than extreme couponing. According to Google, frequent mobile users spend 25 percent more in-store. There is more to gain than lose.

Tim Cote
3 years 7 months ago

The opportunity for fraud here is huge. A digital coupon can be scanned frequently. Smaller and lower-tech retailers would be likely left out of the ability to redeem. Consumers will not understand this problem, causing the big to gain yet another advantage over the small.

Tom Redd
3 years 7 months ago

The next step is the painful elimination of print material. As we sadly see papers fade and e-magazines/papers pick up speed we will see the same for the e-coupons. I will hate losing my newspaper, but innovation and Millennial demands sometimes destroy—it is life.

Give the vendors and the food stores some time. Change to mobile coupons is change and change takes time. Besides the fraud side of coupons (easier with e-coupons?), it just takes time to change a standard we have known for so many years.

Joel Rubinson
3 years 7 months ago

There’s a lot that needs fixing/upgrading. As an anecdote, I was in Bed Bath and Beyond. I had forgotten my ever present 20% off coupons but wanted to see if I could find one on RetailMeNot. There was no reception in the store. I had to step outside to get the coupon to load to show it to the cashier. The cashier had no system for inputting the coupon; she had to call over a manager. The manager authorized it, but told me it would be the last time. (Wow, she should have just kept her mouth shut, right?!)

Anyway, the infrastructure on the retailer side is simply inadequate for digital coupons to be used the way that shoppers want to use them. This will change because shoppers will demand it. Imagine a day with free wi-fi in the store, beacons, apps that integrate digital offers across screens and brought into the store… that will take the lid off of digital offer use.

Ralph Jacobson
3 years 7 months ago

CPG brands need choice and “control” over where they have coupons in market. There are now too many disinternediaries that also handle distribution channels for digital coupons. I see the need for more “choice and control” for consumers being the next level of targeted discounts for brands. Consumers will drive the flow of distribution based upon the evolving redemption channels, and also their evolution of mobile adoption globally.

Ron Larson
3 years 7 months ago

Discount coupons are a great segmentation tool, creating user and non-redeemer groups. If everyone uses coupons, lowering prices may be more efficient. Having high redemption rates is not ideal. Digital coupons make it easier for people to use coupons, something which may not be desirable. Expecting consumers to print coupons at home is a financial cost to consumers (clipping them out of media is a time cost with segments users and non-redeemers). To maintain the segmenting power of coupons, making them easier to use (purely digital with no printing) may not be desirable.

Mark Price
3 years 7 months ago

As I review the opportunity, the main challenge seems to be one of mindset. Neither manufacturers nor retailers should face many challenges in offering or redeeming digital coupons. The primary fear is fraud, and since single-use coupons are much more difficult to implement, both manufacturers and retailers seem to be standing on the sidelines watching the coupon clearing houses move ahead.

Clearly, there is a segment of consumers who not only desire digital coupons, but will change their shopping behavior to take advantage of such offerings. When combined with such initiatives as Apple Pay, the movement to digital becomes much more critical for all players, right away!


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