Getting Clipped

Ever clip coupons out of the Sunday paper and take them to the grocery store? Ever decide that there aren't enough coupons for anything you want to buy to make it worth your time and just give up on them? Well, if you fall into that second category, you're not alone. According to an article on MSN Money News today, only about .5% of the 285 billion coupons printed last year were ever actually redeemed, and the number is continuing to drop. I call this to the reader's attention because if nothing else, these events are noteworthy from a historical standpoint. Discount coupons have been in common use (primarily as an advertising method) for nearly a century now, and have formed the heart of too many marketing plans to count -- and in a few years they may be completely gone...

If you wonder, as I did, how effective these things were in the first place, consider that the redemption rate on printed coupons was, up until recently, pegged at about 1%, or something on the order of 2,850,000,000 coupons redeemed each year -- rather a lot, really, especially when you consider the difficulties inherent in getting anyone to use them in the first place. Placing too small a discount onto each coupon will degrade their effectiveness to the point where no one is going to bother cashing them in; placing too large an amount on each coupon will turn the item into an instant loss-leader. It isn't usually possible to overcome brand loyalty with a small discount; in order to convince consumers to try a different brand name it is usually necessary to offer a rather substantial savings, and even that may not be effective. And even if a coupon is being redeemed, you must still subtract the cost of printing and emplacing the coupons from the increased profit margin.

A major factor contributing to the decline of print coupons is believed to be those in-store loyalty club cards that most markets now use to offer lower prices in exchange for demographic purchasing information. True, the decline in newspaper readership is definitely a factor, but the fact that people believe (correctly or not) that they can save more money just by swiping their card than they can by clipping out coupons has had a significant impact in recent years. The impact of warehouse stores like Costco and Food 4 Less on this type of marketing is harder to gauge (these stores often issues their own coupons), but is also believed to have had some influence on the industry.

Interestingly enough, the e-commerce people have come up with a new wrinkle that may bring the discount coupon back -- in a way. Some markets that have their own loyalty club cards had taken to offering "coupons" on their websites, available to anyone with a club card number and a printer. Customers could go online, select only those coupons they actually wanted to use, print them, and take them to the store, without the bother of clipping them out with scissors. This met with some success, but wasn't exactly a runaway success; the demographic of tech geeks who go online looking for bargains does not overlap all that much with the demographic of people who clip coupons. But then some bright person got the idea of eliminating the printing. Some chains are now testing a system where their club cardholders can go online, highlight the "electronic coupons" they want to use, and then have those discounts appear at the register when they make the purchases.

It's an interesting idea which takes care of all three functions of tradition coupon advertising: it gets the customer to read (or at least look at) more product advertising; it brings the customer into the store to make the purchase, and it lowers the total purchase price for those items, thus serving the needs of the advertiser, the retailer, and the customer. Of course, there have been many other online efforts to boost retail store performance, but I believe this is the first one to address the needs of all of the stakeholders involved. It will be interesting to see if these schemes actually work to boost sales -- and if the manufacturers and retailers who participate are successful as a result...