Debate: Are Paper Coupons History?
Can you envision it? There’s a room in a church hall basement with a group of people sitting on metal folding chairs and the smell of too-weak coffee filling the air. From among the ranks, a sole figures stands, albeit a little unsteady, to speak. Hi, my name is (fill in the blank) and I’m (a hesitation) a coupon clipper.
Okay, so maybe there will never be a Coupon Clippers Anonymous, but there is no doubt that there are consumers in the U.S. that have made coupon clipping a required exercise before every shopping trip.
Kristine Davis, who lives with her family of four in Marietta, Ga., is among those who wear their coupon-clipping badge proudly. “It makes me feel terrible when I go to the store and don’t have a coupon,” she told The New York Times. “It’s a way of life.”
Ms. Davis clips coupons to save money. She estimates she can cut her monthly grocery bill by up to 40 percent by sitting down with newspaper and scissors in hand.
While Ms. Davis is a devotee of coupon clipping, the reality is that the overwhelming majority of coupons (99 percent is the estimate) go direct to the recycling bin or trash.
Many see the internet as a means to distribute coupons more efficiently to consumers while holding out the promise that redemption rates may go up, as well.
“The paper coupon is the single most inefficient marketing tool you could imagine,” said Peter Sealey, a former chief marketing officer at Coca-Cola. “The traditional paper coupon is going to die. It can’t survive in the Internet world.”
Charles Brown, co-chairman of the Coupon Council, believes it is way too early to be signaling the end of paper coupons. “Coupons are an ingrained part of the nation’s shopping culture,” he said.
Discussion Questions: Is the traditional paper coupon going to die? What will the future of coupons hold for consumer goods marketers and retailers?
Count me among the big fans of electronic couponing. They offer reduced costs combined with an ability to target specific customers in a timely manner. The bottom line is that they can dramatically alter the financial dynamics of couponing.
But I’m not ready to sound the death knell for paper coupons.
The reason is that paper coupons still work and nothing has the mass impact that they can. For the launch of a new product, a Sunday insert will likely generate far more trial than any electronic effort.
The other reason why I’m reluctant to predict a total shift to electronic couponing is that it’s not as easy as some people would like you to believe. Just today, Starbucks announced that their emailed coupon would not be honored because it had been distributed beyond the initially intended target audience.
I think Ryan Matthews was on target with his comments. We’ll continue to see a shift from paper to electronic coupons, but it’s a little too early to predict the end of paper coupons.
It doesn’t matter if paper is an old technology and it doesn’t matter that coupons are distributed electronically, too. Marketers use coupons because they help induce people to try their brands. When the coupon offer is compelling, great results are achieved. The fact that well over 99% of all coupons become trash doesn’t matter when that figure is compared to the effectiveness of the alternatives. Well over 99% of all ad impressions (radio, TV, newspaper, magazines, billboards, table tents, signage, press releases, skywriting, package inserts, public transit posters, blogs, spam, online banners) don’t induce people to buy.
Death to coupons! Consider the waste built into the coupon process today. Company resources devoted to creating coupon strategies. Publishing resources (wasted paper, etc.). Recycling and trash resources. The amount of waste for a less than 1% redemption rate is truly otherworldly.
While coupons at one time conveyed some possibility of value and urgency, today they simply convey waste. While the Internet might prove an alternative outlet for distributing coupons, the real question is whether any time should be spent on them in the first place? Retailers have other ways to drive value and urgency today and should skip the coupons. If nothing else, the environmental gain should be significant.
Coupons are nearing their end. Retailers need personal information to remain competitive and paper coupons are not going to allow them the access to the consumer segments they need. There are too many outlets for information today to rely on one medium and I believe that manufacturers and retailers alike will find that the cost/benefit will not justify paper coupons.
I think some of us may be missing the point here. Paper coupons have had declining effectiveness — as measured by redemption — for years. But, some manufacturers still view them as a form of cost effective advertising, i.e., low cost visual impressions. Also promotion is not now, nor will it ever be a one size fits all activity. Will the level of paper couponing decline over time? No question. Will coupons disappear altogether? Unlikely! Will we one day see a “retro” coupon-based promotion that works? There’s isn’t much question. If we were to judge their future solely based on performance, paper based coupons would have disappeared over a decade ago. Let’s face it: they are what they’ve been for years — cheap reinforces of a brand message. Do they work? Does a lot of advertising?
I hate coupons and hope they go away. Generally coupons are for name brand items with the value of the coupon already factored into their high price. If someone tells me they save 40% on their food bill using coupons, I will show you someone who buys things they don’t need. Perhaps with unrestricted double coupon promotions, someone might come out ahead. I’ve had my moments where I was able to take home $300 in groceries for almost free using coupons, however retailers have now put in safeguards in to prevent this. But there must be a big demand out there by coupon clippers or the manufacturers wouldn’t be printing so many of them.
The example used in this story is a key reason why paper coupons do not work. Too many coupons wind up encouraging people to buy a product which they wouldn’t normally buy if it was at full price. This means the only thing a coupon is doing is moving product at a severely reduced margin to people who do not have the financial means to be a consumer of the brand long-term. However this is not just an issue with paper coupons; paper coupons based on the sheer number distributed do wind up subsidizing the most consumers who can’t be part of a brand’s customer base.
It is not the coupon that fails to deliver, it’s how the coupon is delivered. The reference to 99% waste is based on direct mail or newspaper circulated coupons. The battle to convince the consumer to decide which product to purchase takes place at the point of purchase. Coupon delivery at the point of purchase distributes coupons to EVERY interested consumer when they need it and will use it. When effective promotion and delivery of coupons occur at the point of purchase, on the shelf, rack, end cap, cooler door or counter the redemption rate enjoyed is between 15% and 18%. The effort to influence the consumer is returning full circle to the point of purchase!
Critics of coupons do not understand all the benefits they generate. They let consumers self-select into segments and let manufacturers charge different net prices to each segment. They have advertising value (attracting prospect attention and announcing new products/features) and reminding value (helping get products on shopping lists). Electronic coupons make it too easy for non-price-sensitive shoppers to get the discounts (high redemptions rates mean higher costs, not necessarily higher sales or profits).
I once heard someone argue that the consumers who most need coupons (financially) do not use them. It’s the moderately financially savvy consumer who will take advantage of what is basically branded money. It would be interesting to see if that holds true. If so, those consumers will find the money no matter what form it takes. If the industry is savvy enough to provide a new way to deliver price incentives, consumers will follow. The real trick is to find cost-effective ways to motivate consumers to buy, loyally, without always offering a price discount. Until that happens, coupons are staying. This is the monster we created for ourselves.
I thought paper coupons would be a thing of the past 10 years ago with the onslaught of frequent shopper cards and other technologies that were designed to electronically deliver the discounts to the consumer without the clipping and sorting required by FSI and other coupon vehicles.
What I did not understand 10 years ago, (besides how much easier it was to stay in shape at 40 compared to 50!) was the shopper’s attachment to the visceral process of clipping, sorting, and using coupons. While shoppers often will reveal through consumer research that they would rather just have the manufacturer and retailer lower prices and stop with the couponing, those same shoppers are often the first in line during “Super Triple Coupon” days at the local supermarket.
Beware of surveys that attempt to predict consumer behavior. Consumers often “lie” when they are asked what they want or what they will do…mostly unintentionally. Their intended use of cost containment devices is no exception.
Moreover, brands still revert to the FSI and Catalina when they want national coverage and predictability. There is no group in America more risk adverse than brand managers and paper coupons continue to be one of their safest havens. So my take is simply this; as long as consumers still use them and brands still are financially motivated to offer them….paper couponing is likely to remain a part of the retail landscape for many years to come.
Where to start? Mark Lilien hits the nail on the head with his comment about the expected longevity of paper coupons, yet incorrectly states that over 99% become trash. Jeremy Sacker doesn’t realize his comments echo incorrect predictions from ten, twenty, thirty, and forty years ago. Mark Hunter’s comment that people wouldn’t purchase couponed products without a coupon ignores the fact that most coupon redemptions are for products that shoppers already buy.
Unfortunately, the loudest voices regarding paper coupons are from folks who don’t know or understand the industry. Yes, paper coupons are inefficient. Yes, electronic couponing is growing (and nearly all of them are printed on paper). But no, coupons are not dead or dying. As a Catalina Marketing veteran and current consultant to electronic marketing initiatives, I see nothing but growth for held-in-the-hand discounts.
Ron hit the nail on the head except for his last sentence. Coupons are an effective price discrimination tool and have a number of important, measurable marketing effects.
Coupons have a low, but known, up-front cost of redemption to the consumer that allows manufacturers, when used properly, to price discriminate. Printable coupons (as distinct from “online” coupons used online) have similar upfront redemption costs to paper coupons, maybe even higher, making them equally, or even more effective, as marketing tools, in addition to reaching a broad and attractive audience beyond the FSI audience. That upfront cost is easily adjustable by varying the amount of information a consumer has to provide to get the coupon–a cost that has inherent value, unlike the “inconvenience” cost used to manipulate paper coupon use.
Shelf-coupons have almost no upfront cost to the consumer, and are really just an advertised discount – effective to promote trial, but a blunt instrument.
My bias is obvious, but the objective evidence shows that printable coupons will capture a significant share of coupon distribution. That share will provide a quantum leap in marketing intelligence. Printable coupons have all the power of interactive advertising coupled with the ability to track consumer behavior offline to real-world purchases.
Paper coupons will continue to provide “bulk” distribution to move units off shelves until consumer habits shift more completely to online.
In the 90’s several manufacturers did away with coupons. Amid a large outcry and some lawsuits the coupons came back. Doing away with coupons because of waste was the intention then, but missed the issue. Coupons are extremely important to some people and they don’t want them to go away. If those consumers are important to you, you don’t want to eliminate coupons. If you examine scanner data you can determine who uses coupons, who uses a lot of coupons, and if you collect those coupons at the store, you can identify which ones are clipped and which are from an online source. Then you can determine whether eliminating coupons and/or going online is a good move for your consumers.
Isn’t it amazing the number of times the demise of a certain marketing medium is predicted … then later disproved? For this reason, I do not believe paper coupons will ever completely disappear. Even if the statistic is correct about 1% being salvaged from the trash bin, the number of impressions made through this low-cost vehicle remain a very solid value.
The future of in-store couponing remains strong (and after all, aren’t these generally paper, also?). I also think that after-the-purchase customer loyalty programs (e.g., instant rebates, etc.) will gain steam.
Customers of all shapes and sizes still like to save on their purchases. And whether through FSI couponing, in-store methods or Cash Back rebates, this market opportunity is not going away any time soon.
Coupons are almost as old as retail and are everything but dead, but paper coupons are – and you only need to review the redemption rate (less then 1%) to predict this. Still it’s very important to use coupons, create traffic to a store and build a relationship, which explains the billions of coupons still printed and distributed every year.
Next step will be the mobile coupon as mention in the article. SMS coupons will show a higher redemption rate and, when the customer scans their phone, there is a handshake between the customer and the retailer or manufacturer and the system starts to build a 1 on 1 relation because it registers all valuable info like who is responding, where is he is redeeming the coupon and what coupon is redeemed. Next time the customer responds, you start to build a relationship. Don’t underestimate the paperless distribution of the SMS either…..
Future? No. Start to look at the UK for mobile ticketing – and couponing platforms like Mobiqa, Swiftpass or Regisoft. Validation equipment is around too – see Mbarc and Gavitec. So what are we waiting for?
Although coupons do not enjoy the success and redemption rates they once had, paper coupons will continue to exist for a long time. Much like the earlier predictions of cash currency going away and being replaced by plastic, paper and coin currency is alive and well. For those who doubt the the viability of paper coupons, they should check out (pun intended) the new color coupons being issued at the checkouts of major supermarket retailers. These new color coupons that are being issued by Catalina Marketing appear to add a lot of life to paper coupons. For now, I believe that paper coupons are alive and well.
I believe paper coupons will be with us for a very long time. Electronic coupons still require printing and clearing. I’m not sure electronic coupon are that much of a cost-saver , since it still costs the manufacturer to clear the coupon and pay the store for handling, and companies offering internet “electronic” coupons charge manufacturers per printed coupon. True electronic coupons will eventually have electronic clearing. The problem is that conventional coupon clearing is an established industry and a culture that is tough to overcome. Stores don’t want to give up the $0.08 handling fees, and conventional clearing houses save the manufacturer significant work in managing redeemed coupons. Everyone who has attempted true electronic coupons and electronic clearing has run into the proverbial “stone wall.” There’s no question that electronic coupons and electronic clearing is the way of the future, but the world is not yet ready.
As far as FSI coupons going extinct, we need to consider that FSI coupons have a primary purpose. That purpose is to saturate consumers with a discount offer that can move cases quickly to fill in the sales gaps. You print 30 million offers and move 300,000 units in 10 days. Not many coupon delivery methods can do that. As far as the high cost of FSI, even at 0.8% redemption rate, it costs about $0.63 per redemption plus face value. FSI circulation costs have recently plummeted to stay competitive.
Internet coupons have higher redemptions, but even at 15% redemption it costs about $0.77 per redemption. They usually have the same coupons running for months, and are designed to entice consumers to switch brands and reward brand loyalty.
The cost per redemption is rather meaningless in terms of meeting a manufacturer’s objective. It is sometimes better to pay $1.00 per redemption for someone that never tried your product, than $0.50 to four people who were going to buy it anyway. Each of these couponing methods serves different needs and objectives, and no one method can replace the others.