Electronic coupons that are triggered when products are scanned at checkout continue to grow. More systems are being installed in supermarkets, and more brand marketers are testing or expanding usage. Some of these manufacturers are imbued with a kind of marketer's pioneering spirit, while others are simply exploring the technique defensively. Either way, they are giving these coupon systems a good hard look in anticipation of a time when this couponing method might become indispensable.
So, after several years in the field and after hundreds of brands have taken part, what's the report card on purchase-triggered electronic couponing? Objectively, industry observers say so far, so good. Optimistically, they believe the best days are yet to come.
"Purchase-triggered couponing works very well in conjuction with other types of electronic marketing, such as frequent-shopper programs," says Carlene Thissen, president of Retail Systems Consulting, Chicago. Such a combination would involve "trial and repeat purchases," she adds, which is what brand marketers are looking for. Advocates say they like the efficient focus of a relatively small number of coupons distributed to a targeted group of shoppers who then redeem them at a far higher rate than vehicles such as newspaper freestanding inserts. Add to this an opportunity to compile precise electronic data on coupon redeemers, and purchase-triggered couponing represents a potentially formidable tool for the postmass market.
Two companies presently are involved in this business. They are Catalina Marketing, St. Petersberg, Fla., and Advanced Promotion Technologies, Pompano Beach, Fla. Virtually every major grocery product marketer, encompassing hundreds of brands, has run purchase-triggered programs in the brief period that Catalina and APT have been wired into supermarket checkouts around the country. With some 8,000 Checkout Coupon stores up and running, and with hundreds more Vision Value locations either on line or slated to go on line this year, the option is being taken seriously by brand marketers.
For example, Jim Horton, manager of sales and marketing at Jimmy Dean Foods, Cordova, Tenn., reports good results from his trials of this couponing. "There's just so much money to spend and you've got to spend it in the most effective way you can, which is why we're testing these other outlets now," he says.
Keebler Co., Elmhurst, Ill., recently began a couponing schedule with APT for several Keebler products, says Dan Azzaro, manager of promotion development. He says he will retain a healthy skepticism until he sees the results of the initial trials.
"We'd have to look at the products and the numbers scanned and the movement. I think in concept it's a great idea, but you've got to see how much you move and how much you're paying for that movement," says Azzaro.
Although users confirm redemption rates from purchase-triggered coupons that are roughly four to five times higher than FSIs, most say they still depend on the FSI as their main couponing vehicle. While FSIs are in the 2% redemption range, some executives report rates as high as 10% with Catalina or APT.
George Off, president of Catalina, gives several reasons for that. "The coupons are handed to shoppers at very convenient times, so it avoids having to search through the Sunday insert coupons. Our coupons, on average, are higher, so manufacturers can afford to pay a higher amount.
"They're customized; they're targeted so they're relevant to the shoppers' needs, so they're more likely to get redeemed. And we avoid a lot of wasted distribution costs," he says.
Another factor in redemption rates, Off says, is that the face values of coupons offered by Catalina average about 84 cents, while traditional FSI values are roughly 53 or 54 cents.
According to Off, Catalina's sales for this quarter are up 50% over last year. The system operated at a 16% capacity last year, running programs for about 600 brands.
Horton says Jimmy Dean Foods is currently under contract with both Catalina and APT, but, like many other manufacturers, it hasn't abandoned its use of FSIs, radio advertising or television advertising.
Azzaro said Keebler also has used Catalina in the past in limited trials, in addition to in-store sampling, venue sampling and Actmedia's Instant Coupon Machines. Like many manufacturers, Keebler's main source of couponing remains the FSI.
The relatively new kid on the block, Advanced Promotion Technologies, Pompano Beach, Fla., was founded in 1987 and tested for several years in limited markets before launching its revised system in May 1993. Currently, APT is installed in 210 stores, according to Cathy Amann, APT's director of marketing communications. She said about 130 different brands are now using the system.
"We have learned a great deal from carefully watching other companies' entrance into the marketplace and other companies' departure from the marketplace -- what has been done right and what has been done wrong," Amann said. "That's why our company has taken the time to really put a product together that we think meets the needs of what the industry is crying out for right now."
Several manufacturers contacted by Brand Marketing say they are "testing" Catalina or APT, and others seem wary about even that admission. An official at Coca-Cola USA, Atlanta, who asked not to be identified, would not discuss the company's experiences with electronic couponing, but said, "We consider it strategically valuable information. I feel it's safe to say it's useful."
Denis M. Canty, director of marketing procurement at Scott Paper Co., Philadelphia, says his company has tested Checkout Coupon and currently is evaluating its effectiveness. "It gets into what we call the 'value formula,' which is the benefits over the price. What are the benefits in terms of increased sales or incremented sales? What's the cost to get there? That equals the value."
The sytem may be more suitable for some categories than others. After several initial trials that produced only "soft" redemption levels, Robert Evans, director of promotion services at Gillette Co., Boston, says the company is continuing to test Catalina. It has found that the post-transaction delivery may not fit well with the repurchase cycle in the shaving category.
"It's too delayed," he says. "We have a typical four-purchases-a-year cycle, so we need to think of how we can adapt that to the individual retail chains. I think it's more of an account-specific device for us at this point.
"The real question is, can we go at competitive users and find the right trigger there that generates something?" Evans continues. "I haven't found that yet, but that's ideally the way the system works best." If there's one concern about purchase-triggered coupons, it is cost.
Gregg Sakoda, manager of consumer promotions at Clorox Co., Oakland, Calif., says his company has used purchase-triggered coupons in the past and reported high redemption rates. However, FSIs remain its main couponing vehicle. The company also uses on-pack coupons, in-store handouts and Actmedia.
"The pricing structure doesn't make it feasible in all situations for all of our brands. But the concept is a good one," he says.
APT's Amann says purchase-triggered coupons actually can be more cost-effective than other means of couponing by virtue of their high redemption rates. She cites other added value as well. "From the manufacturer's side, it's relationship marketing. It's elimination of promotional waste. It's the ability to capture and create brand-loyal consumers.
"And from the retailer's side, it's whole-measure marketing -- identifying who the best shoppers are vs. who the marginal or split shoppers are and then directing targeted marketing campaigns against them."
Gillette's Evans suggests the system's true potential strength may lie in linking purchase-triggered coupons with another of Catalina's enterprises -- electronic coupon clearing.
On the positive side, manufacturers cite higher redemption rates than FSIs; few misredemptions, malredemptions or charge-backs; the ability to target specific accounts, and informational tracking capabilities.
Keebler's Azzaro says he believes the key to effectively employing electronic couponing is determining its correct usage. "You need to use it strategically. Use it to move two or three [units] to save $1 vs. 'If they're buying Nabisco, switch to us.' Target unique categories vs. your immediate competition. Try to use it in different ways."
Jimmy Dean's Horton says, "It's not just your standard couponing program. This one has a lot of promotional evaluation opportunities and competitive information-gathering opportunities that other companies don't offer. So we looked at it from several facets. In a sense we were buying research, and there's value there."