If there's a model example of a fraud-proof coupon, the Kimberly- Clark Corp. could be using it, according to Bud Miller of the Coupon Information Corp.
Kimberly-Clark -- the Dallas-based manufacturer of Huggies, Kotex, Cottonelle and other brands -- is printing certain coupons on special paper that creates a hologram pattern. Inside the hologram, the words "authentic" and "valid" appear. These words don't appear if the coupon is copied.
The coupon instructs retailers to not redeem it if the hologram pattern does not appear.
"A black-and-white coupon is not an original," the coupon states, noting that "alteration of this coupon may be a criminal offense."
The hologram makes it difficult for anyone to illegally reproduce the coupon, said Miller, operations manager of the CIC, Alexandria, Va., which works to identify, investigate and prosecute coupon misredemption. Along with Kimberly-Clark, the CIC's 25 manufacturer members include Procter & Gamble Co., Kellogg Co., General Mills, Johnson & Johnson and Kraft Foods.
Currently, Kimberly-Clark uses the holographic coupons only two ways. First, it sends them to consumers who contact the company's customer service department for certain reasons, according to Jim Baer, promotion service manager, Kimberly-Clark. Face values include $3 and $5 off a purchase of Kimberly-Clark products.
"Please accept this coupon as our way of saying 'Thank You' for your interest in our products," the coupon states. "We value you as a loyal customer."
The coupons are also sent to consumers who participate in special mail-in promotions for higher-value discounts.
Because they are expensive to use, they are not part of the company's freestanding inserts, which account for 90% of its coupon distribution. Despite this, Kimberly-Clark feels it has made a big first step in preventing coupon fraud.
"By using this paper stock, we feel we've eliminated an option or two for people to copy our coupons," Baer told Brand Marketing.
Kimberly-Clark is also exploring other security methods, said Baer.
"As new technology comes along, we hope to apply it to our coupon production-and-redemption process to minimize cases of fraud," said Baer.
Toward this end, it eagerly embraces retail point-of-sale systems that can verify if the consumer has actually purchased the product for which they've submitted a coupon.
"These systems, which more and more retailers are using at checkout, are a major step toward reducing the scope of fraud," he said.
Kimberly-Clark's proactive stance comes at a time when coupon fraud is costing manufacturers what some industry executives say could amount to $300 million to $600 million annually. (NCH Marketing Services, a Lincolnshire, Ill., coupon processor, says the loss is more like $100 million to $150 million each year). The CIC says one organized fraud ring cost an unnamed manufacturer $87 million over several years. According to some reports, organized coupon-fraud rings even have terrorist ties and may have helped fund the Sept. 11 attacks, though some industry observers describe such stories as being sensational.
While industry executives may disagree on the scope of coupon fraud, most concur that it is a problem, and suggest that manufacturers take steps to protect themselves. Miller recommends the following:
Stay alert. "It's important that manufacturers understand their business and make an effort to protect their assets," Miller said.
Explore coupon designs. "Some designs are extremely difficult to counterfeit," he said, citing Kimberly-Clark's hologram coupons, along with others that feature special inks and paper.
Though the hologram paper is expensive to use, Kimberly-Clark feels it's worth the money because coupons are an efficient tool to generate product trial and, as a result, gain market share.
"Consumers still expect to see paper coupons," said Baer. "They see them as proof that they're saving money."
Monitor redemptions. "Look for over-redemption and unusual redemptions," Miller said. * Work with the CIC. For the last 10 years, Kimberly-Clark has been a member of the CIC, which works closely with law enforcement to detect and prosecute cases of fraud. It has already been instrumental in two cases of civil litigation. It has encouraged law enforcement to take a closer look at the crime, according to Miller.
"I expect there will be increased law-enforcement activity to prevent coupon fraud," said Miller.
Consider third parties. Some manufacturers use third-party vendors to conduct coupon audits.
Re-examine coupon-redemption agents. "Make sure [clearing] agents have security procedures in place," he said.
Kimberly-Clark, for instance, relies on its coupon-processing agent, NCH, to conduct in-depth analysis of coupon redemption.
Re-evaluate method of distribution. While coupon fraud exists both on- and offline, a 2001 CIC study said the potential risks of Internet-based, print-at-home coupons outweigh the benefits. The CIC recommends that if manufacturers opt for Internet coupons, they use alternative delivery methods like those linked to retail loyalty cards or mailed directly to the consumer's home.
But vendors of print-at-home coupons maintain the marketing benefits far outweigh the risks.
"In the next year or so, I think most of the CIC's members will be using online coupons," said Matt Moog, president and chief operating officer, CoolSavings.com, an online marketing company that offers e-coupons.
Manufacturer concern about e-coupons has begun to shift in terms of where it was a few years ago, according to Moog. Today, only a few marketers haven't tried them, he said. "[Manufacturers] are much more accepting of this distribution method and technology," Moog said. "They've seen enough successful campaigns that they're willing to try it." While Kimberly-Clark is concerned about the potential for abuse of online coupons, it has tested online couponing and will continue to do so, according to Baer.
"We recognize that that's where the future [of couponing] is going to be," said Baer.
Likewise, GlaxoSmithKline Consumer Healthcare, Pittsburgh, has been actively using e-coupons for the last three months and will continue to do so, said Bob Pflueger, manager of e-promotion development for the U.S. over-the-counter division of London-based GlaxoSmithKline.
Pflueger said he doesn't feel they're any riskier than traditional coupons.
"Once you print a coupon from the Internet, I don't see how it's different from any other (offline) coupon," he said. Because each Internet coupon is unique and trackable, Plueger said fraud is not a concern.
Pfueger considers e-coupons to be a valuable promotional asset because they help GlaxoSmithKline better target consumers.
"We want to get the right coupon into the right consumer's hand," he said.
Moog said many of CoolSavings' manufacturer clients even view its coupons as more secure than traditional ones. That's because each CoolSavings coupon has a unique code that enables CoolSavings' clearinghouse to track where it came from. This way, if a retailer is committing fraud, the manufacturer can detect it before any money is paid to the retailer.
Further, consumers who select a coupon on the www.coolsavings.com Web site never see the coupon on the computer screen. This prevents the consumer from changing the face value or altering it any other way.
Though there have been some "isolated" cases of consumer fraud -- amounting to less than 1% of the millions of coupons CoolSavings has distributed -- CoolSavings hasn't seen any retailer fraud, according to Moog.
CoolSavings recently made its coupon technology available to manufacturers, allowing them to market their own printable coupons directly on their Web sites, and also via e-mail and banner ads.
UNDER CONTROL
While coupon fraud is a serious problem both on- and offline, it's not out of control because of the diligent efforts being made throughout the industry, said Charles Brown, vice president, marketing, NCH.
Among such efforts, according to Brown, are:
Involvement. Manufacturers need to stay involved in every aspect of the coupon process, from design to distribution.
"Manufacturers that are involved and diligent can minimize cases of fraud," said Brown. Caution with media. Brown said manufacturers shouldn't offer high-value coupons and coupons for "free" products in print media. Rather, they should restrict such offers to targeted and personalized delivery methods, like coupons issued at store checkouts and via direct mail.
Retailer verification. Most of the big money in coupon fraud comes from retailers who submit coupons as if they were redeemed, even though they weren't.
Manufacturers and their clearing agents should verify that every store is a legitimate retail operation, said Brown.
