Consumer demand for promotional coupons is increasing but their misuse is holding them back from their full potential, reports Mark Ludmon
Coupons were first used over 120 years ago to drive trial of an unremarkable tonic and set it on the path to become the global brand that Coca-Cola is today. While coupon usage has dropped from a peak in the 1990s, the decline has been halted and levels have started to rise again. Charles D’Oyly, managing director of promotional solutions company Valassis, says that this has partly been driven by issuers becoming better at targeting but more consumers are also seeking out promotional offers more often because of the economic downturn. The 2008 CCB fast.MAP Marketing-GAP research in August suggested the “credit crunch” contributed to a year-on-year increase in coupon redemption levels, with more than a quarter of consumers now regularly using coupons.
Valassis’s 2008 Report stated that 30 per cent of consumers were more actively seeking out promotions compared to a year ago, and D’Oyly says that trend has continued since the period covered by the research. Three-quarters said it was mainly because of a rise in the cost of food and the general cost of living.
D’Oyly believes that growth is also coming from categories that have not used coupons much before, such as pubs and restaurants, which woke up to this tool only two years ago. “They are tried and tested across a number of categories and have a potential to work pretty much in any category, but some areas have overlooked them for a long time,” he says.
Another rapidly growing area is print-at-home coupons, which consumers can download from the web. Couponstar, which provides brands with the technology to offer this, says this route is more measurable and effective, achieving typical redemption rates of 23.5 per cent rather than the standard two per cent average. “By choosing to print the coupons, consumers are automatically engaged in the process,” says Couponstar managing director Jared Keen.
However, the biggest barrier to growth is the continuing practice of leading supermarkets accepting coupons at the till for products that are not in the shopper’s basket – and sometimes not even sold in the store. Adrian Harris, sales director of risk management specialist Opia, says: “Until supermarkets accept coupons correctly, especially the likes of Tesco, and introduce the technology already available to reduce misredemption, Opia would rarely endorse a coupon campaign as a truly accountable or measurable promotion. It is widely known that some supermarkets simply accept the coupon as cash against any product. Online consumer guides and forums, which are currently very popular given the general economic situation, even direct coupon holders to offending store groups.”
The ISP, with support from MP John Greenway, has been working with coupon fulfilment specialists such as Valassis and Multi Resource Marketing (MRM) on a campaign to lobby retailers to stop accepting coupons unless a customer is buying the relevant product. The group have begun a dialogue with two leading supermarkets but others are remaining stubbornly uninterested.
ISP chairman Clive Mishon admits that progress has been slow but the views of all parties – brands, marketing services and retailers – have to be considered. “We are taking a value judgement based on what the stakeholders’ views are. It’s going to take a number of years,” he says.
Sainsbury’s this month refused to comment on its attitude to misredemption, while Tesco denied that it was significant. “These things do happen but we generally find that customers only use coupons on products that they want to buy,” a Tesco spokeswoman said, before adding: “But in any way that we can, we do try to help customers by accepting them wherever possible. If we found that it was a huge issue for us, we would need to investigate, but it is incredibly rare.”
However, according to CCB fast.MAP Marketing-GAP’s research, misredemption remains high, with 38 per cent of consumers saying they sometimes misredeem and six per cent saying they do it often. However, the number who never misredeem coupons has risen for the first time since 2006, to 56 per cent. “This year’s seven per cent rise in honesty is good news for the industry,” says CCB fast.MAP managing director David Cole.
Peter Kerr, managing director of MRM, believes that misuse of coupons is comparable to other crimes such as price label switching or petty theft. “The practice of misredemption is a malignant disease that has degenerated this massively effective marketing technique to the detriment of all stakeholders within the couponing industry,” he says. “For some reason, retailers perceive they have immunity from it, when in fact they are perhaps the biggest victim of it.”
He points out that in fact most coupons are issued by retailers themselves rather than brands or manufacturers, particularly Tesco through its Clubcard. “Therefore, they have more to gain in promoting proper practices. It is time to wipe this practice out once and for all, to the mutual benefit of everyone, particularly for that majority of consumers who see coupons as they were intended – as incentives to try new products and receive rewards for continued use.”
Campaigners have referenced section 2 of the Fraud Act 2006, which suggests the consumer may be acting dishonestly by false representation. However, it is unlikely any action would ever be taken by a manufacturer or brand against an individual over a £2 coupon. Without the scanning technology to match coupons to what is in the basket, it would cause costly delays at the checkout if staff had to check them manually.
However, Valassis’s Coupon Report 54 per cent of coupons distributed via direct mail in 2007 carried a unique identifier enabling the redemption to be tracked, while replacing the traditional EAN 13 barcode with a new GS1 databar, which can contain more data, will allow issuers to track and control coupons throughout their lifecycle.
While some smaller independent retailers are installing new technology that can scan these kinds of coupons, it could take five to seven years for the tier-one supermarkets to replace their technology at point of sale, says Douglas Shand, chief technology officer for First Ondemand. This is something that was tackled in the US in the 1990s when misredemption levels were halved after the introduction of new barcodes.
First Ondemand provides scanning technology that can process data targeted down to a store or an individual. “Everyone sees a benefit in this,” Shand says. “The manufacturers can guarantee their coupons are being used in the way they want them to be used, the retailers can get settled more quickly, and both parties get real-time information.” He adds that it would drive volumes of coupons and allow bigger values to be redeemed. “What we need to do is put the power back into the hands of the brands and the manufacturers.”
David Laybourne, managing director of digital print and new media solutions company Real Digital, adds: “By personalising coupon content at an individual level, it increases redemption rates and ensures that discount values are tailored to the expected uplift in spend they are likely to generate. For retailers, the ability to fine-tune product and service discounts in line with local demographics and individual retail outlet needs is significant. It enables the effect of the promotional coupons to be tested, tracked and adjusted over time.”
Shand points out that the new technology could also tackle the bulk selling of coupons through websites such as eBay, where sellers are not automatically required to explain how they have got hold of particularly large quantities. “The technology allows you to change the value of the coupon at the back end once it has been created so that if a coupon promotion is not going particularly well, you might want to increase the value,” he says. “If it is being misused, you could cancel the coupon and make it ineffective, or trigger activity for when that coupon is used.” However, following meetings with the ISP, eBay has confirmed that it would investigate any complaints made about specific sellers.
Adam Rawat, managing director of marketing services company RMI Services, warns that promoters are faced with “an environment of misredemption that has been built into our shopping culture”. He adds: “For the fundamentals of this to change, we either have to force accurate redemption at epos through shopping basket validation, or educate the public on the correct use of coupons and the downside of misredemption – that coupon issuers are losing confidence as too high a percentage are misredeemed and therefore are reluctant to issue any more.
“Once the misredemption levels are lower, we should expect to see more issuer confidence in couponing as a viable marketing tool, which should lead to an increase in the amount of coupons on the market at a time when they are much needed.”
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