Coupons can be an effective part of a retail marketing program, but only if they reach the right shopper.
A growing number of retailers today said they are looking to make sure that more coupons are targeting the right shoppers in their stores. Advances in technology are now enhancing these promotions at checkout, according to retailers and others familiar with in-store delivery methods. They enable coupons to be more targeted than ever before. The result is higher redemption and more satisfied shoppers.
"We use our loyalty cards to reward customers with coupons at the cash register," said Marc Jampole, spokesman for Penn Traffic Co., Syracuse, N.Y. "We also do mailings based on product purchases. We cluster individuals and send them coupons in the mail. It's not to demographic groups, but to individuals who we can cluster into self-defined groups based on the products they purchase."
Peter Leech, president of PJL Marketing, Chicago, explained that most of the discounts offered as "clipless coupons" from a card program are not targeted because they are available to anyone with a card.
"How do you get targeted offers to be held at the point of sale? That has been a challenge. NCR and IBM have been working on getting more sophisticated targeting modules installed at retail. Many retailers have that capability now, but the question is how to tie it all together," said the retail marketing consultant Giant Eagle, Pittsburgh, provides discounts to specific consumers or groups of consumers in many different ways. They are generated by special hardware installed at the front end, they are sent to shoppers by direct mail or via e-mail, and they are available as e-coupons on the retailer's Web site.
"They all have their place," said Rebecca Kane, Giant Eagle's director of customer relationship marketing. "The technology that's getting more advanced is at the front end. In the next few years, we'll be seeing a tremendous shift to [offering discounts] at the checkout. We're looking at technologies that would enable us to deliver offers or let customers know about special offers at the front end."
A targeted direct-mail program is being tested in about 4,000 supermarkets operated by Food Lion, Kroger, and the Stop & Shop Supermarket Co. It ties into shopper data collected from each retailer's card-based loyalty program. Consumers receive a mailer with "clipless" coupons. In the store, they get the discount electronically by purchasing the products featured and presenting their card at checkout. The next generation of the program will involve e-mailing the coupons, according to the program developer.
"This is more of a consumer promotion program," explained Lynn Liddle, co-chair of the Promotion Marketing Association's Coupon Council, New York. "The marketers are not going after the mass approach here. They're saying, 'How can I identify some loyal users of my product, or how can I get this product to have more loyal users?' It's almost more of a long-term approach to consumer loyalty or building a relationship as opposed to a freestanding insert, which is, 'How can I get my coupon for a high-penetration household product out and move a lot of boxes?"'
Experts believe that coupons distributed in the supermarket provide special value to consumers.
"Many moms used to clip coupons and put them in a recipe box, arranged alphabetically, and take them to the store," said Richard George, professor of food marketing at St. Joseph's University, Philadelphia. "Nobody has time to do that anymore. There are more women working outside the home than anytime in our history. People don't have a whole lot of time and are not willing to go to that particular level of effort."
Meanwhile, a strategic benefit to retailers comes in the form of understanding shopping behavior, according to promotion analysts.
"Coupons distributed at checkout offer a strategic advantage to retailers who understand the benefits of 1:1 marketing," said Michael Ross, director of marketing and e-commerce, Meijer, Grand Rapids, Mich. "The shopping basket provides insight into the customer's lifestyle and buying behavior. Understanding this information provides the opportunity to target coupons at higher-margin categories or merchandise that fits the customer's profile and is not being shopped. For the customer, offering incentives that are meaningful and aligned to their shopping behavior adds value to their shopping trip and promotes excitement of new item trial."
Another benefit of targeting coupons is being able to drive profitable behavior, said Leech, and that's far better than a mass approach.
"Right now, most mass marketing incentivizes unprofitable behavior," he said. "It incentivizes switching, trading down and cherry picking. It doesn't incentivize things like loading up, being more loyal, or buying a product that you already buy more frequently. As much as 50% of a typical promotion's volume is being bought by people who would have bought the product anyway."
Kane of Giant Eagle sees a pro and a con to coupons, depending on the specific tactic. At the checkout, it's hard to communicate to consumers the offer they are getting. Direct mail is very effective in communicating the offer, she explained, but it's not there at checkout. "Doing in-store couponing is less expensive than direct mail, but it's not as effective at this point," she said. "As customers get used to it, it will get better."
Retailers and other executives who work with coupons said these in-store discounts are becoming a key part of a retail marketing program.
"Coupons are an important part of the marketing promotion mix," said Ross of Meijer. "Consumers have a tendency to treat them as cash, allowing them to extend their buying power. They also encourage trial and can have a measurable lift in category sales." In-store coupons are especially valuable because about 70% of purchase decisions are made in the store, according to George.
"I'm not saying impulse," he pointed out. "Your shopping list may say cereal and you see a coupon for Cheerios. Or your shopping list says Cheerios and a coupon makes you switch to Frosted Flakes.
"The extent to which people do not prepare shopping lists will create a continued opportunity for marketers to get people to make decisions to switch [brands] and buy something they would not have. In effect, if you look at the coupon, it's like a mini-billboard in the store. It gives information and has additional advertising benefits.
"I think that will continue," he said.
Coupons are part of Mealtime Choices at Giant Eagle. This unique program is designed around meal solutions that are quick to prepare. Program components include special displays in-store and targeted coupons via e-mail and direct mail at various times throughout the year.
"Coupons are big for us right now, but they will become even more important," said Kane. "They're efficient and effective. Whenever we run targeted coupons, we always get a better return on our investment.
"The issue with targeted coupons is that they don't have the mass appeal. It's a culture change for the industry. We do see better returns, so we use them. Over time, they will become more and more critical. As we know who our customers are, we realize that we don't have to spend money against every customer to drive our bottom line," she said.