Estudios: 4 steps for taking control of the retail coupon experience
Author: David Moran
Source: Retail Customer Experience
Consumers and retailers alike love coupons. It’s the lure of the deal; customers save money while retailers draw in fringe shoppers who might not ordinarily make a full price purchase. Coupons have been dangled in front of customers since Coca-Cola first introduced the concept in 1887, but a lot has changed since then in the way coupons, from how they are issued to how they are redeemed. If companies aren’t paying attention, it could result in a multi-million dollar hit to their bottom line.
So what’s the issue?
The problem is twofold. First, too many employees across too many business functions within organizations have the authority to independently approve consumer-facing promotions. This means that at any given point, companies can have a massive number of coupons available to consumers without a true understanding of the scale — there is no guarantee that the left hand is talking to the right, so no consolidated source really knows how many coupons are in circulation at once.
This leads us to the second, scarier issue: companies bank on the majority of those coupons never being redeemed. As an industry, CPGs publish less than $500 billion in coupon liability in the U.S. alone in a given year, yet they only budget for about $3.6 billion in redemptions. That is a massive differential! It doesn’t take much to imagine what would happen if shoppers called the industry’s bluff on the $496 billion in authorized (but unused) discounts. An increase in redemptions as small as 0.1% could easily and rapidly evolve into a $500 million surprise loss.
Potential for exploitation
With today’s technology, it’s nearly trivial to write a script to scrape all available online coupons and apply them instantly at checkout. If a software company started scraping CPG coupons and applied them whenever consumers shopped on click-and-collect sites, or if a print-at-home coupon aggregator got integrated into a top retailer’s loyalty system and all offers were automatically printed out and deducted at checkout for all shoppers, what would the consequences be? (Assuming, for this example, that such a retailer would be unbowed by manufacturer pressure).
This is already starting to formally happen via third parties. Every other day there’s a «moneymaker» on an extreme couponing site that places companies in jeopardy because one hand didn’t talk to the other. It is only a matter of time before someone, or some third party, does something more ambitious about it.
Despite the current state of ambiguity and potential for catastrophic losses, CPG and retail leaders are not doomed. There are several steps they can take to protect their bottom line, while still offering shoppers the coupons they crave and keeping the lure of the deal alive.
So what can you do?
Consolidate decision-making authority
In today’s digital age, it just isn’t a sustainable business practice to handle coupons and promotions in the traditionally segmented, uncoordinated way. That’s not to say that the practice of stacking is always bad (sometimes it’s done on purpose and can play a valuable role), but unless there’s someone looking out for the full spectrum of investments in an integrated way, there’s (big) money being put at risk. Consolidating the decision-making authority surrounding coupons and promotions to a central place, like your pricing or revenue growth management team, is the first step toward reducing this risk. It might mean an investment in changing some existing processes, and the transition will likely take some time, but the cost of inaction is much greater.
Adopt a «sales mix model»
Consumer promotions and trade spending/vendor funds can be thought of as two parts of a singular model. Marketing and sales spend should shift fluidly between their respective platforms, depending on the areas that drive the best business results — and strong CPG and retail leaders know what’s working and what’s not. Their teams are relying new technologies that perpetually track promotion performance and consumer engagement. When armed with this kind of data, there should be a constant calculus about which promotions are best delivered in a one-to-all, retailer-specific way (i.e., trade spend or retailer marketing), vs. those that should be offered directly to specific consumer segments (i.e., loyalty marketing and consumer promotion).
Implement zero-based budgeting
Too many CPGs and retailers rely on historic data, simple inertia and expediency when determining which promotions to run when. Investment plans get built based simply on how the the same dollars were spent in the same way at the same time last year. But times have changed — and so have consumer behaviors. Teams need to be thinking from the top down about where the best investments can be made based on current data. As technology continues to advance and AI enters the picture, a smarter way to approach promotional investments is to determine where things stand in the present moment, from a perspective of zero — instead of basing everything on what’s happened in the past.
Beware of fact-based lying
A customer of ours introduced me to the term «fact-based lying,» and I wish it was something that didn’t happen, but I would be remiss if I didn’t bring it up. Fact-based lying can surface when members of your teams, or even your partners, attempt to justify promotional investments. Typically, in these situations the ROI being calculated for the lift of a certain investment fails to factor in all of the other activity that may have supported such a deal.
Often, digital offers are excluded from the average prices visible in syndicated or tLog data, and while it must be recorded somewhere, the TPM or post-event analysis tools typically don’t capture it. The same is true for shopper marketing — each group can take credit for the final number if no one is held accountable for controlling for all the other factors that might have been at play that didn’t show up in the syndicated scan or tLog feed that week. I hope you never have such a situation, but this happens more frequently than most companies want to admit.
In summary, coupons are not disappearing any time soon. The form that they take may change, but they’ll remain a strong sales driver in the U.S.
Retailers and CPGs just need to get strategic about how they invest in and deploy coupons moving forward. If they don’t, it could mean a rude awakening to the tune of millions of dollars lost.