Historically, the world of grocery coupons has hardly been Planet Change. Since the first half of the 20th century, we clipped them from the Sunday newspaper circular and brought them on weekly shopping trips (or forgot them, as was often the case) for a discount at checkout. Then about a decade ago, they began to get a makeover. From coupons printed on register tape and printable online coupons to e-mail offers, digital ads and social media–driven options, brand marketers have discovered a myriad of new ways to reach consumers who, particularly after the recession hit in 2008, tightened their belts and welcomed the familiar idea of coupons.
Today, we are entering the era of Coupon 3.0. CPGs and retailers are scrambling to keep up with complex, ever-shifting technologies, while also facing overwhelmed consumers tired of coupons being tossed at them willy-nilly. Thanks to the latest innovations in data analytics and new delivery mechanisms such as mobile apps and load-to-loyalty cards, coupons are becoming less about blanketing consumers with offers and more about personalization and relevant shopper targeting.
Coupons aren’t going anywhere. A whopping $470 billion worth of coupons were offered by CPG brand marketers to U.S. consumers last year, a 26 percent increase over the pre-recession year of 2007, according to the NCH Annual Coupon Facts Report. Budget-minded shoppers, in turn, redeemed $4.6 billion in savings, a 12.2 percent increase over the previous year, and 58 percent more than five years ago.
Still, the pace of coupon change is accelerating rapidly. “With the explosion of digital, barriers really dropped and all of a sudden for the cost of an email or text message, you could deluge people with coupons,” says Alec Newcomb, chief strategy officer of MyWebGrocer, which powers the websites of top grocery retailers including ShopRite, and works with brands such as Kellogg’s, General Mills and Post on targeted campaigns. “Consumers were overloaded by options. Now my customers want to know, what’s really effective?”
The Rise of the Relevant Coupon
Take supermarket leader Safeway, for example. Last month, the grocer, which operates more than 1,600 stores in the U.S. and Canada, expanded its “Safeway Just 4 U” program to Oregon and Washington after testing in several other states last fall. The effort, run through its Shopper’s Club Card program, offers digital coupons based on purchase histories as well as personalized deals based on a customer’s buying patterns.
“In today’s on-the-go culture, many shoppers no longer want to spend time clipping coupons,” says Mike Minasi, president of marketing at Safeway. “We saw an unmet need in the marketplace and strived to create an effective digital solution. Now, shoppers can manage their shopping lists and savings from anywhere with the click of a button and the swipe of a Shopper’s Club Card.”
Safeway is hardly alone among grocers in its efforts to capitalize on valuable opt-in customer data to drive personalized coupons. Kroger, for example, through its partnership with analytics company dunnhumby, has been leveraging this type of data for several years, offering highly personalized deals that load directly to “best customer” frequent shopper cards, or similar options through whatever delivery option the customer prefers, such as e-mail or direct mail.
“Marketers will find there is a severe penalty for being irrelevant,” says Matt Nitzberg, EVP of media and communications at dunnhumby. But, he points out, the key is to respect the use of the data gathered, both in terms of overall privacy and customer preferences.
“It’s about understanding the difference between what we could do and what we should do with the data in terms of being both relevant and respectful,” he says, citing a recent example of another retailer that deduced from someone’s shopping patterns that she was pregnant. “It’s different to say we understand this person is buying for a baby versus deciding without any opt-in or validation,” Nitzverg points out. “It may be a fact they’re not ready to reveal.”
“Brands and retailers are definitely able to better target their campaigns as a result of the amount of data that is at their fingertips today,” concurs Marco Muzzi, marketing director at AcuityAds, whose real-time bidding system is being used by retailers.“Being able to deliver a message that is tailored to the individual needs of the consumer only increases the probability they will engage.”
For many consumers, the notion of receiving targeted coupons based on, say, a gluten-free diet or the buying patterns of a busy mom with three young children would be welcomed as helpful and efficient.
Catalina, known for its checkout coupon machines and its immense database of actual consumer behavior that it uses in partnership with many retail programs, believes this personalization represents the coupon’s evolution.
“The overwhelming consumer trend is desire for personalized value, so the landscape is evolving to meet her needs,” says Todd Morris, EVP of brand development and marketing innovation at Catalina. “That means traditional coupons in the Sunday paper, which have been the mainstay, are rapidly declining because they require consumers to do a lot of work for little value.”
In addition, the information consumers share on social media is telling brands more about what they are ready to purchase. As a result, Facebook “likes” and other social data can add another targeting level for brands and coupon providers. Sarah VanHeirseele, VP of digital at Blue Chip Marketing Worldwide, notes that Facebook’s obvious use is to identify brand fans, yet it can be used more powerfully to identify possible conversion targets. For example, an ice cream brand might identify Facebook users who have “liked” its competitors. It can then target those users with ads that include a coupon incentive. “This generates trial in a niche audience,” she says. “The coupons actively encourage them to buy us, convert and be loyal.”
Coupons, Inc., provides digital coupons via its Coupons.com website, retail websites such as Walmart.com, newspaper websites and GroceryIQ, a popular shopping-list mobile app in which users can create shopping lists and search for coupons.
“The rate of change is accelerating, as newspaper subscriptions continue their rapid decrease and the pace of digital growth increases,” says Steven Boal, CEO of Coupons.com, who says these shifts are being played out in the coupon budgets of brands. “We see more client plans for the next 12 to 18 months that show a significant C-suite-level commitment to move promotion dollars from static, offline promotional vehicles to dynamic, consumer-friendly online delivery.”
Brands, as well, are hastening the shift to digital coupons to help them gain a clearer picture into the impact of their promotions. “The benefit to the consumer is convenience and the brand can get much faster feedback,” says Bob Bell, COO of shopper marketer Centra360. “Via print, it would take 3 to 6 months to get a read. Now, given the technology, brands can get their reaction every day of the week.”
Print Is Alive and Well
While the race towards the coupon’s technologically savvy future remains heated, the fact is that print coupons remain central to the coupon landscape. Believe it or not, nearly 90 percent of coupons are still printed FSIs in Sunday papers, according to NCH’s Coupon Facts Report. Digital coupons actually are a very small, albeit growing portion of the remainder—currently just 1 percent of the total (the other 9 percent is a mix of direct mail, magazines, in-store handouts and other delivery mechanisms).
“There is so much attention on digital and electronic forms of coupons, including paperless coupons entirely tied into frequent shopper cards,” says Charlie Brown, VP of marketing at NCH. “But while these are great new ways to reach consumers and great for marketers, it is still so small in comparison to the whole. We have to remind people that while things have shifted, print remains the most economical way to reach the most people in one day.”
Industry observers vary in their opinions as to why print coupons somewhat stubbornly hang on to such an outsized degree. According to MyWebGrocer’s Newcomb, print coupons have become a cheap form of advertising for brands. “Most dollars are still in print because it still works on a payout basis—the redemptions are pretty low,” he says.
Perhaps industry inertia is partially to blame, adds Catalina’s Morris. “CPGs and retailers are not always on the leading edge of technology innovation. With the traditional Sunday FSI, you don’t have to think too much. When I was brand manager of Tide, we thought about what the creative would look like and the face value, but while it would reach 35 million people a week, you didn’t really discern who you were speaking with.”
But Brown says shifts in the coupon space are indeed occurring, though print will not disappear. “I don’t think it’s about an inability to change,” he insists. “I think both vehicles—print and digital—work from the marketer and consumer perspective.”
The Paperless Future
The completely paperless universe is where the coupon’s future lies—particularly in mobile. It is certainly a growing space: A recent Juniper Research report found, for instance, that the total redemption value of mobile coupons will exceed $43 billion globally by 2016—an eightfold increase from this year.
Companies such as SavingStar.com are taking advantage of this trend: While smaller in scale than competitors such as Coupons, Inc. and Catalina, SavingStar says it is the only service and mobile app that has coupons that can be used 100 percent electronically, without paper, at 110 chains in 50 states (as opposed to a single retailer), including drug stores such as CVS and Rite Aid.
Shoppers select coupons on the go from over 200 brands and SavingStar automatically links them to users’ grocery and drugstore loyalty cards. The savings are automatically added to their SavingStar account (unlike load-to-loyalty cards, discounts are not given at checkout; once shoppers accumulate $5 in savings they can cash out with a transfer to their bank or PayPal account, get an Amazon gift card or make a donation to American Forests). Launched in April 2011, SavingStar has grown to 2 million users.
“The notion of coupons is about a one-step reward; it’s all about ease,” says Michael Libenson, president of SavingStar. “Here, the consumer can choose the retailer they want to visit, choose the coupon and choose how to be rewarded.”
One example, he explains, is a recent Pepsi campaign, which offered consumers $5 back on SavingStar if they spent $15 on Diet Pepsi or Diet Pepsi Max in a month. “Instead of buying once, you get a high-value reward for spending more, but you could spend towards that reward on one or many trips or at one or many retailers,” he says. “It’s a flexible platform that doesn’t have to just be a discount at the point of sale.”
Minnesota-based grocery retailer SuperValu began testing SavingStar with its private brands in early 2012, having already tested the program on national brand incentives. According to Susan Allen, SuperValu’s director of private brands and strategic platforms, the partnership began because “trying to get the most relevant offer to the right consumers in the most efficient manner is an ongoing challenge.” Print still plays a role, she says, but the efficiency of digital makes it a valuable tool. “Delivery of coupons has been the biggest evolution,” she says.
That delivery is likely to take another turn once mobile payment technologies such as Google Wallet become a reality.
“The future is mobile payments,” says Newcomb. “For example, ShopRite has enabled their POS systems, so as soon as the software is available, you’ll be able to tick off coupons, load them into your mobile wallet and redeem them at the retailers you care about.” In a world of fragmented technologies, mobile might finally be the thing that brings everything together in the world of coupons, he says: “I see mobile as a unifying component that will give consumers true control.”