CHICAGO -- Much of the talk about coupons of late has focused on how to streamline the complex processing system with innovative programs such as quick pay, one-step and electronic clearing.
But speakers at a seminar on coupon management here, sponsored by the Grocery Manufacturers of America, Washington, repeatedly raised an even more fundamental question: Is couponing, as a marketing tool, worth the effort?
"We clearly are concerned about the overall efficiency of couponing, about couponing as a marketing device," said Don King, manager of advertising services at Procter & Gamble, Cincinnati.
"Couponing is becoming increasingly less efficient. Redemption rates continue to drop. Distribution costs are increasing. The costs for each coupon redeemed continue to increase. I think it is clear we need to change," he said.
King's and other speakers' remarks were presented against the backdrop of the release of a draft version of a Joint Industry Coupon Committee best practices white paper. The report highlighted the need to apply technological solutions to develop more efficient couponing best practices, including cutting processing costs and speeding information flow.
While speakers praised the overall findings and recommendations of the white paper, they also pointedly questioned the cost-value benefits of using paper coupons as a marketing tool.
"Couponing is like the Scud missile of marketing. You take it, you explode it, and God willing, you hit something on the ground.
You see the numbers today. We have a 2.3% coupon redemption rate in a system that circulated 330 billion pieces of paper last year," said Michael Sansolo, group vice president of the Food Marketing Institute, Washington.
"Clearly, we are not dealing with a program that is flowing with success. There are many solid principles outlined in the white paper that we need to be working toward. But we have to back-up even before that," Sansolo said.
"We have to go back to the genesis of the problem. Why do we coupon? What is the goal of the coupons we are dropping? What kind of consumer are we looking to bring in? We produce 1,100 coupons for every man, woman and child every year in the United States. We have to think about that. That is the absolute most critical issue in coupons today," he added.
Richard McNally, vice president of operations at the Pennsylvania Food Merchants Association, Camp Hill, Pa., and president of the Association of Coupon Processors, Chicago, also called for the industry to take a hard look at some of the issues confronting couponing.
Although many people in the industry are touting the benefits of quicker, more efficient coupon processing programs, McNally questioned whether many of these new systems are worth the investment.
For example, why haven't many of the initiatives, such as single-count processing, paperless information flow and electronic funds transfer, gained widespread acceptance already, he asked. The technology to accomplish these goals is easily available, he said.
"We are a medium-sized clearinghouse and we are doing all of those now. I don't think the issue is hardware, software or know-how. So what is the problem? The problem comes more in the cost-benefits analysis across the industry," McNally said.
Among the challenges facing the industry in the area of couponing, according to McNally, are "how to clarify to manufacturers the economic benefits of adopting an extended bar code. What is the value of marketing data to manufacturers 30 days earlier than they are getting it now?"
He also questioned the bottom-line benefits of some of the scan-driven systems for helping eliminate common problems such as misredemptions. "If there is 8% misredemption and that is interpretable to money, why isn't that a no-brainer? Why aren't manufacturers clamoring to push into quick pay, for instance?" Another key issue involves whether manufacturers will ever accept a processing program in which they do not physically get the coupon back themselves for verification. "I find I can make most of my manufacturing friends drink more quickly when I suggest they might want to run [these types of] programs without getting their coupons back," McNally said.
Gary Trainor, president of Carolina Manufacturer Services, Winston-Salem, N.C., noted that the industry must, and is, moving toward a more targeted couponing system for some marketing applications. "I think there will be increased focus [on coupon efficiency] in the future. At the same time we believe there will continue to be a need for a broadcasting approach to couponing, but maybe less" than at present, Trainor said.
