Is Bed Bath & Beyond smart to draw the line on coupons?

Discussion
Source: Bed Bath & Beyond
Apr 15, 2019
Tom Ryan

Bed Bath & Beyond last week said it is taking a number of steps to reduce its reliance on coupons as a traffic driver in order to shore up profitability.

Those moves include coupon exclusions, adjusting its value offers and limiting coupon availability.

On the retailer’s fourth quarter conference call with analysts, Steven Temares, CEO, said, “Of course, actions like these do have a near term impact on sales, but they benefit our overall profitability. While early, these actions are beginning to take hold, contributing some moderation in our coupon expense rate in the fourth quarter of fiscal 2018 and our plan to continue as the year progresses.”

Bed Bath & Beyond is known for its 20 percent-off coupons and dollar-denominated coupons such as $10-off on purchases over $30.

The company expects its comps to decrease in the low- to mid-single-digit percentage range in 2019 due to continued declines in traffic as well as moves such as de-emphasizing coupons to improve margins.

Longer term, Bed Bath & Beyond sees its revenues recovering to single-digit growth due to enhancements to assortment, including new proprietary brands and continued growth in personalized products such as engraved teddy bears. In-store innovations and building on its baby business are also expected to help.

From a marketing standpoint, Bed Bath & Beyond is incorporating enhanced branding and a greater focus on personalized messaging. The retailer is hoping to leverage investments in pricing tools to modify algorithms across initial, dynamic and local pricing and markdown strategies. The company will apply analytics to coupon distribution as well.

“Now that we have much better analytics and the ability to look at these coupon transactions, the lifetime value of a customer, [and] the attachment to what items and what channel, we’re able to make better decisions about it.” said Mr. Temares. “So, the decisions that we’ve made do impact sales, but they’re also driving profitability.”

Historically, a number of retailers, notably J.C. Penney and Jos. A. Bank, have faced challenges downplaying coupons without overly impacting traffic and sales.

DISCUSSION QUESTIONS: What would be the best way for Bed Bath & Beyond to reduce its reliance on coupons? To what degree do you think coupons should continue to be part of its marketing approach?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The curation consultants, inspired by shopper insights, need to get busy!"
"If the company simply reduces coupon distribution across the board, history from other companies shows the results will not be positive."
"...retailers need to completely rethink their pricing strategy, coupons, zones, etc. as the world has changed around the current practices."

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31 Comments on "Is Bed Bath & Beyond smart to draw the line on coupons?"


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Mark Ryski
BrainTrust

Bed Bath & Beyond has spent years training its customers to expect coupons, and it will take time to wean them off this coupon fix. Using analytics to selectively moderate the number of coupons and value of the coupons it offers is a sensible first step. I suspect that coupons will be part of their marketing approach for years to come, but de-emphasizing the use of coupons and focusing on delivering a better in-store experience is the right approach.

Neil Saunders
BrainTrust

Coupons at Bed Bath & Beyond are a kind of bribe. They’re almost compensation to offset the abysmal shopping experience. And therein lies the solution: create a better experience with a more refined range of products and people will be happier to shop there without coupons. Unfortunately, the company hasn’t got a clue how to execute this vision which is why it’s still experimenting while sales are plummeting.

Dr. Stephen Needel
BrainTrust

The coupons are iconic, I think, and as such we have all learned over time that you don’t mess with things iconic. That said, there are simple things they could do that, again I think, most people might find reasonable. For example – one coupon per visit (with perhaps special coupons or a waiver for pre-college purchases – “bring in your acceptance letter and …”), actually care about the expiration dates on a coupon, escalating value coupons based on what you spend, and so forth. But if they think they can walk away from coupons they will find out quickly how bad it can be.

Ray Riley
BrainTrust

I haven’t read a recent BBBY 10-K to glean the details on its coupon finances, but the word does show up six times in their 2018 report. It’s a delicate balance when distancing oneself from a hand that feeds. Frankly, the last time I visited a Bed Bath & Beyond was to purchase sheets for a new house nearly one year ago. There wasn’t a sales professional within a hundred-foot radius of me, and the store (as always) was merchandised to the rafters. Those last two areas seem like the right place to start for driving new revenue and conversion as opposed to potentially alienating loyal customers who solely purchase and visit due to coupons to drive an increase in profitability on existing revenue.

Dick Seesel
BrainTrust

Bed Bath & Beyond needs to be very cautious scaling back coupons. Coupons are not just a traffic driver to its stores and websites, but also an essential part of the brand identity. The growth of data analytics offers the company a chance to be more targeted in its coupons and other promotional offers, without scaling back a key marketing tool too drastically.

Speaking of IT investment, my neighborhood store is the only big-box retailer I can think of that still requires a signature on paper for a credit card purchase. I don’t know if this is an exception to the rule, or if it points to years of tech under-investment by Bed Bath & Beyond.

Paula Rosenblum
BrainTrust
The problem with the coupons (everyone has a drawer full, don’t they? I do!) is that they create the presumption that the pre-coupon price is actually higher, otherwise why would it be so easy to get them? So the first thing Bed Bath & Beyond has to do is demonstrate that it already has price parity and also demonstrate it has a great assortment. Honestly, I’ve found their assortment to be pretty weak over the years. It’s very broad and yet, with a store full of stuff, excluding small appliances, it’s actually hard to find what I want. The bedding leaves me wanting — among other things. I think the brand needs a makeover. What part is bed? What part is bath? And what part is “beyond?” And how do health and beauty aids fit into the mix in stores (I think it’s a leased department, but still…)? So it’s going to be a long process no matter what. Hopefully Bed Bath & Beyond has learned from J.C. Penney that you can’t just “stop” doing… Read more »
Bob Amster
BrainTrust

Good point regarding the perception of inflated initial pricing. I think about it every time I redeem a coupon at Bed Bath & Beyond.

Cathy Hotka
BrainTrust

Paula has identified the heart of the issue — the perception (and reality?) that prices are higher here to accommodate for their ubiquitous coupons. Combine this with the reality that most of Bed Bath’s merchandise is readily available elsewhere. The first thing this company should do is to convene panels of real customers and ask for feedback on how to proceed.

Steve Montgomery
BrainTrust

Weaning its customers off of coupons will take Bed Bath & Beyond years to accomplish. They created an expectation that those coupons will arrive on a consistent basis and shoppers wait until they receive them to shop. Issuing fewer coupons may help but I expect the dedicated BB&B customer will simply wait until they come before returning to the store.

Shep Hyken
BrainTrust

Coupons and discounts have been part of Bed Bath & Beyond’s marketing strategy for years. It’s part of the customer experience. It does highlight the price, which is a concern in that customers who focus on price will shop where the price is lowest. In other words, they are loyal to the price versus the retailer. However, I believe that many of Bed Bath & Beyond’s customers feel the coupons are part of the experience. The coupons are a way to engage the customer and keep Bed Bath & Beyond top of mind. Data is key here. There is a new customer demographic that is emerging. If BB&B is going to make a change, test in a market or two, see how it works (or doesn’t), and make decisions based on the data.

Rob Gallo
BrainTrust

I applaud this move by Bed Bath & Beyond. It appears that they now have the pricing tools, analytics and visibility that can drive better decision-making. At the very least they’ll be able to identify the cherry-pickers and adjust the couponing strategy with that segment. For some customers, the coupon IS the brand for Bed Bath & Beyond. Time will tell how large that customer base is.
I also like that they are focusing on personalized messaging, in-store innovation and building on the baby business with Babies “R” Us now out of the way.

Michael La Kier
BrainTrust

Bed Bath & Beyond is right to move away from generic coupons, but they should transition to more personalized offers to better drive trips and build baskets. They have trained us all to buy on coupon. But they have shortchanged themselves by not doing a better job of requiring consumer info in return. They must move from an everyday coupon strategy to more strategic discounting — without shopper data this will be hard to do.

Anne Howe
BrainTrust

Hmm — traffic already down, now weaning shoppers off long-standing coupons, what’s the compelling reason to go there? I think the problem that needs solving is merchandise selection and shopping experience. the stores are “jammed and junky” to quote a designer friend! The curation consultants, inspired by shopper insights, need to get busy!

Georganne Bender
BrainTrust

Ask Michaels or J.C. Penney about the importance of coupons. Like these retailers, Bed Bath & Beyond has trained its customers to rely on them, and customers are not likely going to want to give them up.

I get several emails and texts a month about coupon savings from Bed Bath & Beyond. It’s their schtick and that’s going to be tough to change. The retailer is going to have to go slow here, and like Neil said, fix the stores. Without incentive BB&B wouldn’t be my first choice to buy what they sell.

Jeff Sward
BrainTrust

Differentiated product and a decent shopping experience. In a way, coupons are now table stakes. They aren’t going away any time soon. They can be race-to-the-bottom stuff or they can operate on a more clever and creative level. Coupons are part of the conversation with the customer. What do you want to talk about? Price, or how the brand promise is being delivered on?

Bob Phibbs
BrainTrust

Sounds a bit like a smokescreen, sales are going to be going down – blame our new strategy. I wrote this two years ago: Bed Bath and Beyond’s Marketing Problems Are Yours Too Retailers — and it’s still true. They need a new store design, more people on the floor and less stack it high and hope it flies if they want to encourage more than coupon clipping.

Evan Snively
BrainTrust

This initiative seems to be clashing a bit with the value prop of their BEYOND+ membership program. Perhaps they will decide to phase this out too OR use declining coupon distribution as a way to get more people to sign up and pay the fee so they can collect cleaner data. Either way – getting away from that 20 percent crutch will be a monster lift.

Bob Amster
BrainTrust

Because Bed Bath & Beyond has conditioned its customer base to expect and wait for the coupons to arrive, the weaning has to be done slowly, but not completely. There must still be occasions when the coupons should be issued. The answer to the degree to which the coupons need to be scaled back is: how many other, profitable items do Bed Bath & Beyond customers buy when redeeming coupons good for a single item?

Steve Dennis
BrainTrust
Bed, Bath & Beyond is emblematic of what I often refer to as the pointless pursuit of the promiscuous shopper. There are at least two big issues with this. The first is that, as many have observed, we teach customers that shopping without a coupon is “the sucker price,” i.e. only an idiot would pay regular price. So as we’ve seen many times over, retailers get addicted to these promotions. The second issue is that one-size-fits-all promotions do a lousy job of optimizing sales and margins. A 15 percent off coupon may not be enough to stimulate some customers, while it gives a needless discount to others. With today’s customer analytic and personalization capabilities there is no reason to execute a marketing strategy this way. The best way for Bed, Bath & Beyond to move away is to begin aggressively testing their way into more mass customized and personalized promotions, so that they can understand where to pull back at their current batch, blast and hope strategy. Of course, this is only part of their… Read more »
Rich Kizer
BrainTrust

They have used their coupons to impact store traffic and transactions with both their customer and new customers, Take something away like that, and you better be ready to create new bragging points strong enough to invite and motivate customers back – quickly. I guess the in-store experience would be the best place to start.

Cynthia Holcomb
BrainTrust

Well, looks like Bed Bath & Beyond is seeking to join Sears and all the other retailers lost in the woods, never to be found.

Brent Biddulph
BrainTrust

It is encouraging to hear that “we have much better analytics (capabilities);” so the presumption here is that it will be a data)driven decision, moderated and potentially in phases, with ample market testing to determine the right approach. And in some cases (or entire markets), they may find that it is best to keep the 20 percent coupons in place. If that is the approach, it makes total sense.

Ken Lonyai
BrainTrust

The long-term strategy of having more vision into how/why/when coupons are distributed and tracking analytics to make informed decisions is clearly necessary and wise. However (and it’s a big one) they have ingrained customers with their coupon culture very deeply, so any noticeable change is going to challenge customer loyalty and put them at risk of permanently losing consumers, especially if they are not price/delivery competitive which often, they don’t seem to be.

Zach Zalowitz
BrainTrust

It’s not a question about stopping coupons, it’s a question about making them more personalized. I’m glad to see pricing and promotion tools being applied but, for example, tracking key events in my life or those around me and personalizing offering and coupon to that event still gets me in the store without letting me go crazy with 20 percent off (of a $350 comforter) on a weekly basis whenever I want.

Harley Feldman
BrainTrust

Bed Bath & Beyond should move away from coupons slowly and carefully. Their customers are used to and expect coupons. They should begin testing fewer coupons and using analytics to determine the sales impact from this move. While they will probably never get rid of coupons completely, they can probably reduce their use over a long period of time.

Mark Price
BrainTrust

For BB&B to reduce reliance on coupons and not suffer a serious sales decline, they must use analytics to determine which customers show incremental behavior from the coupons and which customers would have purchased anyway. By targeting coupons on incremental behavior, total coupon usage can decline while revenue maintains.

If the company simply reduces coupon distribution across the board, history from other companies shows the results will not be positive.

Cate Trotter
BrainTrust

For a company that has made coupons part of its brand, getting rid of them is going to be tricky. Customers expect them — it’s basically a game between retailer and shopper where the price displayed isn’t the real price.

I think Bed Bath & Beyond are going to have to go about this in a careful fashion so that customers don’t feel like they’re suddenly being overcharged or ripped off. If the company can make good use of its data to careful target coupons that might help soften the blow. After all if there are going to be less coupons overall, then shoppers are going to want them to be relevant to them.

Peter Charness
BrainTrust

Pricing for any one item (at least for national brands) is a click or scan away, so for plenty of customers out there playing a high low game where the coupon gets you to “fair pricing” doesn’t move the needle. If you incent me to buy multiple products, send me something that is interesting to me, I’ll respond. If the coupon gets me a “real deal” then I’m game.

As has been pointed out more recently, retailers need to completely rethink their pricing strategy, coupons, zones, etc. as the world has changed around the current practices.

Craig Sundstrom
Guest

While I don’t question the advisability of cutting back (OTOH was that a good move for JCP?) doing so by maintaining the coupons but larding them down with restrictions and other fine print seems like the wrong approach: it’s one thing to not give someone candy anymore, quite another to dangle it in their face and say “nee, nee you can’t have this!”

Richard J. George, Ph.D.
BrainTrust

Unfortunately, Bed Bath & Beyond’s extensive use of high value coupons has become like crack cocaine for its users. It will be a difficult & time consuming process to wean customers of this dependency. In addition, the online players in this market will show little compassion for BB&B’s coupon reduction initiative.

However, the move makes sense if BB&B is able to redirect its perception from a price player to a innovative home accessories problem solver.

Kenneth Leung
BrainTrust

I think they need to make the coupon more of a communication vehicle than a discount vehicle, and better enforce the expiration dates and limits (which needs to be done at the POS system level rather than relying on employees). The coupon could be converted to other kind of offer leveraging the well known design.

wpDiscuz
Braintrust
"The curation consultants, inspired by shopper insights, need to get busy!"
"If the company simply reduces coupon distribution across the board, history from other companies shows the results will not be positive."
"...retailers need to completely rethink their pricing strategy, coupons, zones, etc. as the world has changed around the current practices."

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