CPGmatters: How are illegal “coupon trains” hurting CPG brands?
By John Karolefski
Through a special arrangement, what follows is an excerpt of a current article from CPGmatters, a monthly e-zine, presented here for discussion.
More consumers are hopping on the “coupon train,” an increasingly popular way for them to share coupons distributed in different parts of the country. The problem is that such a practice hurts brands and is illegal.
According to coupon executives, the practice of consumers mailing coupons to other consumers in a share group around the country violates manufacturer redemption policies since coupons are “void if transferred.” What’s more, retailers may be denied payment from manufacturers if they redeem these coupons.
“They are, at least, technically illegal,” said Matthew Tilley, director of marketing for CMS, a provider of promotion management solutions for CPG manufacturers. “At the most basic level, coupon trains represent unethical behavior. And taken to a logical conclusion, these trains are a systematic abuse of a consumer-friendly method of promoting and marketing.”
Here’s how the scheme works: A person posts a “train” on a coupon website, such as Families.com, Mommysaver.com or Hotcouponworld.com. That person is the “conductor” and others sign up as “riders.” When the “train” has enough passengers, it “leaves the station.” This means the conductor mails a package of coupons to the first rider, then to the second, and so on. Along the way, expired coupons are tossed.
Ron Fischer, president of Redemption Processing Representatives (RPR), recently viewed a CBS broadcast in Philadelphia touting coupon trains as a creative way to save money.
“The manufacturers generally know that transferring coupons happens between mother and daughter or friends at a low level, but this is really setting up and establishing a business,” he said. “It basically destroys a manufacturer’s analysis of coupons. If it were a direct mail coupon sent to somebody in New York and now it’s appearing somewhere else, the manufacturer is not getting the right information back. This also puts the retailers at risk. They could be redeeming the coupons in good faith, but then not get reimbursed for their efforts because the coupons were not distributed in their area.”
Bud Miller, the executive director of Coupon Information Corporation (CIC), the industry watchdog group, warned that consumers could get caught sharing counterfeit coupons.
“At minimum, it’s a potential civil issue which means consumers are at risk of litigation. At worst, there could be some criminal after-effects if somebody’s (sharing) counterfeit or stolen coupons,” he said.
Discussion Questions: Should practices such as “coupon trains” be a serious concern for retailers and vendors? Should the retail industry be aggressively policing such practices?