COUPON COMBAT

DEENA AMATO-McCOY

Though still in their infancy in the supermarket industry, coupons delivered via the Internet have the potential to turn this traditional mass-marketing medium into a much more targeted one -- without raising a retailer's costs. In addition, retailers using electronically delivered coupons told SN they provide a vehicle to cost-effectively reach consumers outside their current customer base.

Internet coupons currently take one of two forms. One version can be downloaded and printed by customers, and presented for redemption when the customers return to the store. The other type is downloaded and electronically transmitted to the retailer, with the discount automatically applied when the customer purchases the specified product.

Retailers are exploring both options, through home-grown systems and third-party companies such as Supermarkets Online, a division of Catalina Marketing Corp., St. Petersburg, Fla., and Planet U, San Francisco, as another means of attracting and retaining consumers.

"This kind of service fits in well with the strategy of attracting and talking directly to a customer in the most cost-efficient way possible," said Ron Cook, manager of electronic marketing for Nash Finch Co., Minneapolis.

Besides providing cost-effective targeted marketing, retailers also expect electronic coupons to have higher redemption rates than traditional paper coupons, and to reduce misredemption problems.

On-line coupons won't be able to crumple paper coupons, however, until retailers' front-end infrastructure can handle and process the electronic discounts.

"Before retailers can really take advantage of the benefits, on-line coupon programs need to interface with current point-of-sale systems and computing architecture," said Carlene Thissen, president of Retail Systems Consulting, Naples, Fla.

"In some cases, a company's marketing strategy can be limited by what a POS system can do," she added. "You can have your Web site connected to corporate databases, and the offers will be available to consumers, but if your POS can't process or access the discounts, the program cannot work."

Family Fare Supermarkets, Hudsonville, Mich., launched proprietary on-line coupons through its Web page in November, and is already redeeming "thousands of on-line coupons weekly," said Bob Kaiser, president of Family Fare. The 14-store retailer, a member of Spartan Stores, Grand Rapids, Mich., expects Internet coupons to help expand its customer base.

"Providing coupons via the Internet lets us hit customers who may not regularly see our printed circulars, or may not be in our market area," said Kaiser. "The Internet is just another medium that lets us extend incentives to another class of customers."

High redemption rates for some electronic-coupon programs indicate that customers are responding to the Internet-delivered offers.

"Based on one third-party company's results, retailers using their electronic coupons, without the need to print a paper coupon, are looking at a 20% redemption rate," said Thissen. "This is compared to 1.7% redemption of traditional paper coupons."

The benefits of electronic coupons argue a good case for expansion, but will they ever replace paper coupons?

"I think many retailers have had it with FSIs and they are looking for alternatives," said an anonymous source from a Midwestern retailer. "I cannot say this is an effective way to promote product to consumers. We need a more targeted approach, and the Internet is an interesting concept."