Retail tech’s most uninspiring achievement: the coupon
Mobile marketing, LBS (location based services), SoLoMo (social, local, mobile) — these are some of the hippest terms being bandied about in marketing circles and any retailer that doesn’t give them serious consideration (at least publicly) is chided.
Essentially, these services are used to learn where a consumer is located — on the street, in a mall, or within a store. Then via any number of promotional tactics, an offer is made to the potential shopper to lure them into a store and/or get them to select a particular product. The attraction: a discount, a perk or, by any other name, a coupon. Really?
We live in a time where even kids have more computing horsepower and interaction capability in their hip pocket than the lunar astronauts had on the moon, yet most of the time retailers, e-tailers, and ad/marketing agencies come up with little more use for it than a coupon. While there are apps that offer more features — price comparison, feature selection, product detail, etc. — in the end, it’s typically the coupon that’s used as a purchase incentive.
There are two big problems with this thinking: 1) it’s unimaginative, uninspiring, and does nothing for brand differentiation/building; 2) it trains consumers to make purchase decisions based on the best price offer they can find. Put another way, high tech couponing is rapidly commodifying both products and brands. And no brand/retailer wins selling commodities.
Don’t take my word for it; as reported by Advertising Age in November 2013, Best Buy’s CFO Sharon McCollam said, "If our competition is, in fact, more promotional in the fourth quarter, we will be too, and that will have a negative impact on our gross margin."
Rather than price slashing their way into shopper’s wallets, retailers need to wake up and start empowering consumers to utilize technology in far more creative ways, be it via their personal mobile devices or the store’s technology. There are numerous untapped tech-enabled approaches to making stores destinations and merchandise desirable that do not rely upon couponing to attract customers, engage them, and close sales.
Consider Apple: they’ve built immense brand value and they avoid discounting.
So it seems that despite all the real advantages that technology can bring to the buyer/seller relationship, retailers as a whole are still content with a Sunday flyer mentality. What a waste.
Discussion Questions
Will high-tech couponing only serve to further cement our price-driven buying culture? Are any emerging technology-based solutions promising better sales boosting methods than discounting?
It’s a combination of all of the above. Consumers definitely want to believe they are getting the best price for a product — in part due to their access to information via mobile technology, and in part due to the most recent recession. But retailers must utilize innovative marketing techniques and solutions to deliver the value to shoppers.
Beacon technology, for example, is helping merchants deliver more targeted, personalized, real-time messaging to shoppers in-store, at the shelf, at the point of decision. That type of messaging is very powerful.
As consumers, we’re time-starved; once we make a decision to purchase a product we don’t want to feel like we have to rethink it. Getting that extra value in the form of a last-second offer will push shoppers over the edge, cementing the buying decision.
Like it or not, a large percentage, 80%+, of the population is price driven to some degree. And if a retailer is trying to initiate trial with a new customer, providing a price incentive or discount works. Same goes for loyalty programs as most people expect a reward for committing their loyalty to a retailer.
Lack of price sensitivity is more the exception than the rule and generally applies to the top 10% of consumers. I personally don’t see coupon usage declining in the next 5 years, especially with the proliferation of mobile devices.
This is very similar to my post last week, “Can Coupons Mask The Lack Of A Great Customer Experience?”
It seems there are a remarkable amount of analytical personality types selling coupons as the wave of the future because, at their heart, they don’t ever want to pay full-price for anything and a coupon…just makes sense. What they miss is that great retailing has never been about coupons and discounts; it’s only lately that it has become the default justification of all things big data.
A friend told me about a retail marketing breakout session for graphic designers. They showed all the creative work they had come up with on their own for their brands — then said, “But here is what we work on” with slide after slide of coupons and discounts.
I suspect the app designers are no different. There are so many amazing possibilities that could be tapped but aren’t. Surprise and delight isn’t 10% off as someone walks by a store.
Many retailers will learn that in a few years, after those apps reduce their storied brands to just another brand paying customers to walk in the door.
Why is couponing suddenly perceived as being the slippery slope that brings down retail? 94% of US households use coupons. Consumers like a discount. For most Americans, the buying constraints of the Great Recession have not diminished. If utilized wisely, a discount can bring consumers into a store and initiate the purchase of a number of goods.
The above presumes that consumers will opt into being messaged by retailers as they walk past stores. How many consumers would opt into that scheme?
Mobile technology enables consumers to be more social, do research and yes, look for value. Retailers should embrace the technology for more than just hitting the consumer over the head with offers. Invite consumers to be social. Engage in a dialogue. Solve problems.
I agree. To be blunt (and piling on to Ken’s theme and tone) there are so many new ways to engage the shopper it’s embarrassing to see the “paving the cowpaths” mentality that most retailers have. And to focus on the coupon is an accelerated “race to the bottom” strategy.
Current capabilities allow for better understanding of the customer, personalization, more efficient shopping, and an overall more entertaining and effective shopping experience.
Unfortunately, the new world of fast-changing technologies has left many retailers behind. With the smartphone increasingly becoming the gatekeeper and bottleneck to the shopper, retailers who don’t take better advantage of it will quickly become the next JC Penney or Sears.
Build the brand. Its value, its loyalty and its impact. Then people will want to be a part of it, with or without a discounted price.
Nothing really wrong with coupons, I suppose, but Ken is right to call them “uninspiring.”
As a group, the innovators behind new location-based, card-based, online and otherwise targeted marketing mechanisms have been surprisingly un-creative about the benefits they bring to participating shoppers. Mostly they boil down to scrip (points, miles, etc.) and discounts (offers and coupons).
It seems to me that incorporating other forms of reward might help change the game. Shopper experience enhancements, value-added services such as home pantry management, time-saving convenience – all harder to conceptualize, but also potential differentiators.
There will always be a place for coupons because they do serve the purposes stated by others and it’s easy to track ROI. The hard part about mobile is offering content that results in non-discounted sales and loyalty. That takes creativity beyond a discount.
Building connections and loyalty by giving the customer information and a personal platform to manage their connections to their chosen brands gives them control. It also provides the retailer a certain status with their customers and valuable insights into their purchasing.
The hard part is making the investment to create these platforms and patiently waiting for the ROI to build over time. Waiting is something neither retailers nor Wall Street are good at.
While uninspiring, people talk service and experience, but for the most part they shop price. Apps and tech sound cool, but what does the consumer want from this technology? A deal, i.e., a lower price.
We (the retailer) have trained our customers to expect discounts. Be it ongoing sales or coupons, if that has been the retailer’s strategy, then that is what the customer expects.
Some retailers make couponing and sales a weekly event. Others do it once or twice a year, if at all. Customers know what their favorite retailers do.
With all of the technology and changes that have taken place over the years, isn’t it interesting that the coupon still exists. It just exists in different forms. Customers aren’t cutting them out of a newspaper or magazine. They are saving them on their smart phones. The advantage is the retailer can more closely track the customer’s buying habits, which can lead to targeted coupon strategies. Can’t wait to see what’s coming around the retail technology corner.
High technology has tremendous benefits, but it is not as effective as water: it doesn’t satisfy the thirst for lower prices via coupons. Coupons, whether for bad or better, will likely stay in the price-driven retail game as it continues into tomorrow.
Apple avoids discounting because it had or has break through products while P&G effectively uses coupons to market their quality products that are not necessarily breakthrough items despite placing “new” on the labels.
I’m reminded of an article in which I said, “All consumers who want a discount without a coupon raise both feet now.”
Once upon a time in retail, we could say that if a consumer came into a store to pick up 1 item they would more often leave with 4. Don’t have any idea what that number may be today, however, if it is still more than 1 then…so be it; that coupon may be what gets them into the store to buy the first 1.
It’s what retailers do in the store that will drive consumers to buy more. Arm sales associates with tools that will help them cross-sell, up-sell, answer questions that the consumer can not find on their own on the internet, curate…you get the picture.
Yes, there is a place for the lowly coupon, but please don’t make it the center of attention.
Certainly there are other purchasing motivators beyond cutting the price, but many retailers find it difficult to differentiate their offerings when their competitors continue to lure shoppers away with better deals.
The author cited Apple as an example of a brand the built their business on full-margin innovation, but given their recent iPhone results, they too are being pressed by Samsung and other Android competitors that are offering essentially the same features, but at a lower price.
Key to competing about the fray of price, retailers and manufactures must continually re-invent themselves and stay one-step ahead of their competitors on features and shopper experience. That is much easier said than done, especially when boards of directors, shareholders, and other stakeholders expect positive growth and financial results each and every quarter.
Technology-based innovations can provide the edge needed to avoid the “price” game, but to do so, companies cannot “coast” or take profits in lieu of re-investing in human and technical capital necessary to stay ahead of the pack.
The opportunity for retailers with couponing is leveraging analytics and personalization. If the retailers can use locationing and relevance, this will create an improved shopper experience and drive loyalty.
Consumers learned to save while shopping during the 2008 recession and shoppers take pride in saving. By extending a relevant shopping experience, both retailers and shoppers win.
No amount of technology enhancements will save a retailer with a poor assortment and/or a tired and undifferentiated experience. So, I think we’ll continue to see the most interesting use of technology come from already established leaders like Lowe’s, Apple and Starbucks while retailers that are struggling overall will just bombard our smartphones with coupons.
I’ll be brief, as this topic for me hits home. Couponing and discounts are a way of life in my store, and those who have worked in this business lately understand the need for incredible value. Consumers expect a great price on everything, and unless you stay aggressive, the store will be empty.
Driving traffic to stores still requires heavy promotions, just look at Black Friday. And as long as the economy is weak, nothing will change for the better.
I understand the shopping experience we all talk about, and I agree the consumer must be treated well, with signature products for them to see and sample.
It is not easy to get the consumer to pay regular price, but you can discount items and still make money. Don’t take any customer for granted, and never, ever gouge them, as they will tell everyone about you to others, which doesn’t bode well for future visits.
Today marketers spend tens of millions across all the various media platforms to drive consumer engagement and demand for their brands, but the sad fact is that all this omni-channel engagement ends at the threshold of a retail store.
Because so much of retail today is pure self service, retailers are simply distribution points for marketers’ products. Retailers do not care which brands their customers buy as long as they buy it at their stores.
Ken is correct in saying this is a “…most uninspiring achievement.” Now the race to the bottom is super charged by technology. It is an age old tenet that a sale won on price will be a customer lost on price.
CPG marketers who discounted their brands to maintain sales volume over the last few years are feeling the negative effects of these price focused sales tactics. Marketers have abandoned their unique value propositions at the point-of-purchase in order to make a quick sale and have cheapened their brands in the process. There is a serious disconnect between the sales and marketing functions of many CPG companies today.
Purchases can be driven without discounts, believe it or not, but it requires a corporate commitment.
Couponing dominates mobile because it is the only thing that comes to mind for the retailers, and is SO simple for the tech people. ZERO creativity, to my way of thinking.
The real money lies in the money – payments. Checkout is NOT an overall positive. Why, when every device with a camera is a scanner, and many phones already have banking on them, can’t payment be simply automated with a pay as you select app, that is simple and not another “hustle?” The VAST majority of ideas for mobile are just more SPAM dumped into the shopping environment, adding to the cacophony.
All the data shows that if you help people SPEND money faster, they will spend more of it.
While I don’t recall the exact percentage of purchases that are considered impulse buys, it was a huge amount. Getting a “deal” significantly influences that impulse and a personal offer to buy a product that you are predisposed to like, at a price that is compelling is a winner in my books. Now if you want to send the same offer to everyone on your mobile opt in list, shame on you, that’s like sending an ROP through a mobile phone. The coupon needs to die, buried on the store parking lot, and be replaced by a meaningful (and probably mobile) shopper engagement.
Retail is still at anchor with the “merchandising is sales” mindset. This is demonstrated every day in the stores and online. Differentiation is a function of sales and service and has nothing to do with shelf location, product affiliation or presentation. Leadership from an operations or finance background has little or no appreciation for what selling is other than a vision of circus barkers and showgirls/Chippendales.
While most might think these opinions are condescending, they are in fact a sad truth of just how unaware many of retail’s leaders truly are of what a sales plan is and how execution methods are measured and corrected for increasing results. Professional sales people are highly organized and focused on the goals of the company. Everything they do is for the purpose of enhancing the total sales experience for all involved. This can and will create corporate stability and growth even in hostile markets and economies.
One of the key functions of a well organized and autonomous sales department is to prepare and provide a constant flow of information about customer and market trends and direction. At the same time, the full benefits of all product and service provided by the company are made available to any and all prospects. In short they get customers on the phone and or in the store to resolve a specific area of concern as soon as possible with the confidence that the company will engage and resolve all needs satisfactorily.
If the customer is assured and a relative value can be attached to the products and services price is only a part of the equation and not the goal. Coupons are a means of selling price only and putting the customer in charge of your future and that simply is selling out and not selling.
The reason that coupons are still used is for the analytics. At its best, a coupon helps to identify not only campaign impact, but ideally to identify the consumers that are most responsive. A well constructed offer should push consumers to engage in incremental activity. Paying a small % to measure a campaign and drive incremental volume is not a bad thing.
That said, many coupons are not targeted, do not drive incremental behavior, and are simply the default tactic for the lazy. Those coupons are a waste.