Endemic discounting is only a short term option in the bid to woo today's price sensitive consumer; it is marketing tools that enable customer engagement and quantifiable returns that will boost brand value and deliver incremental sales, argues Couponstar's Jared Keen
Families are more fearful about their financial future today than at any time in the past 26 years. The combination of falling house prices and soaring food and fuel costs has led to a dramatic drop in economic confidence which is having a very real impact on both disposable income and spending habits.
There is absolutely no doubt that consumers are now far more price sensitive across the board. The downturn is not just affecting the 'sub prime' section of the community; the lack of economic confidence is also being felt particularly hard across middle England.
Recent figures reveal that families suffered the steepest drop in disposable incomes for nearly a decade during the first three months of the year. And this drop in income is having a quantifiable effect on buying behaviour. Across middle England, the response has been a significant move towards the European cut-price supermarket chains Aldi and Lidl. It is this radical purse-tightening and the adoption of discount rather than luxury goods that is the most telling indicator in the extraordinary transformation in economic confidence that has occurred over the past 12 months.
While this shift in middle England's behaviour may appear to represent a real threat for brands, it also represents an opportunity for savvy marketers who are prepared to look deeper into how they can exploit today's economic trends.
Whilst tougher economic conditions are typically associated with decreasing sales, that is not the full picture. Consumption does not stop in a recession — consumers still need to purchase essential goods, from cleaning products to butter. However, consumers are making both conscious and unconscious modifications to purchasing behaviour in a bid to reduce spending, from switching brands and moving to 'own label' goods to taking advantage of promotions such as coupon offers or trade promotions.
In a price-conscious economy, consumers also spend much longer evaluating purchasing decisions. They are also increasingly influenced by the money saving options and clever shopping hints and tips being presented daily by magazines, news programmes and information shows on television and radio.
The impact of this changing behaviour can be seen on the high street as retailers engage in significant price based competition in a bid to win new customers or stop the steady erosion of their existing consumer base. But reactive, tactical retailer discounting alone cannot be a long term solution.
Organisations must look at new ways of maximising sales and achieving strong customer engagement to boost brand value. TV and radio advertising are currently losing significant ground as organisations turn their investment towards customer marketing activity that can build far stronger and more measurable direct customer interaction. There is already a clear trend towards sales promotion and online marketing.
The latest Bellwether report reveals that sales promotion budgets have suffered less than other areas of marketing because of the need to strategically drive sales during a downturn. Furthermore, the only category to see an increase in the last quarter was the internet — one of the media channels used for sales promotion.
This demonstrates the continued move towards leveraging the internet as a powerful and cost effective vehicle for driving sales growth and enhancing brand value. The ability to rapidly access information, undertake product comparisons and research and assess price options has made the internet a key tool to support cost effective buying behaviour.
Consumer internet usage also continues to grow, particularly amongst middle class women — also the primary household shopper — as they search for imaginative ways to live well in a downturn, according to Financial Times research. Their research found that middle England in particular is increasingly using the internet to search for money-off vouchers, discount groceries and cheap holidays. There is also strong evidence that these consumers are changing the way they shop for the mundanities of life – including groceries. According to Nielsen Online, discount retailers are registering increased interest from households with incomes of £50,000 a year or more. And at Couponstar we've reported a 652% increase in redemptions for internet printable coupons over recent months.
As a result of this shift, organisations including Unilever, Mars, Colgate, Palmolive, Johnson & Johnson, GlaxoSmithKline and Ocean Spray have recently turned their attention and marketing spend towards combining online brand experiential campaigns with internet printable coupons to improve customer retention and generate measurable incremental sales.
These organisations are exploiting the inherent customer engagement associated with using internet coupons as a direct response mechanism. By choosing to print the coupons, consumers are automatically engaged in the process. Having made the proactive decision to print, consumers are more likely to be motivated to redeem the coupon and are far more engaged in the brand journey.
This strategy also satisfies the growing demand for marketing activity to deliver tangible return on investment. Internet printable coupons are highly measurable, providing marketers with rapid insight into both the number of coupons printed and the number redeemed. With typical redemption rates of 23.5% and above (Source: Couponstar), in contrast to less than 2% for other major coupon distribution mediums, internet printable coupons are enabling these brands to cost effectively acquire new customers and drive in-store sales.
A common mistake when evaluating coupon promotions — internet coupons included — is to only take total redemptions and the percentage of distribution to redemption rate into consideration. In fact, the coupon is in itself a powerful brand communication and advertisement in its own right. It is not uncommon for a coupon to have only a satisfactory or even a low redemption rate yet be the primary cause for in-store sales uplift. This is easily explained by the fact that consumers don't always remember to bring their coupons with them to the store, though many respond directly to coupon promotions by voting with their feet.
However, if organisations are to use coupons to reinforce brand value and achieve incremental sales growth, offers need to reflect the fast changing behaviour of middle England.
To reach the consumer and boost customer engagement throughout the brand lifecycle, offers need to be targeted, relevant and delivered via the growing number of niche lifestyle sites — such as GMTV,bounty.com and UKTV — that are frequently visited by the middle classes, particularly women. The approach must be dynamic, supported by continual consumer profiling to design offers that reflect an individual's customer value and build upon previous interactions.
Internet coupons are providing organisations with a highly effective route to the newly cost conscious middle England. But to be effective the focus must remain on customer engagement, not just discounting. By targeting this audience with relevant coupon offers, organisations can reinforce brand value and loyalty and, critically, drive measurable in-store sales.
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