Redeeming feature

In the US, coupon clipping is a way of life. Every weekend, millions of US housewives get together to drink coffee, eat cake, clip coupons and then trade the ones they don’t want for the ones they do.

In the UK, however, some marketers have been predicting the death of the coupon for a few years now, dismissing it as outdated and a potential danger to brand values. Yet the latest research shows that, far from pushing up the daisies, the coupon is thriving in Britain.

NCH Marketing, the largest coupon clearing house in the UK, says that the number of coupons distributed in 1997 grew by 18 per cent compared with the previous year, from 4 billion to 4.7 billion. At the same time, the number of coupons actually redeemed also increased – up 27 per cent to 271 million.

But the real growth was in the value of coupons redeemed by the public: consumers redeemed 70m worth of discounts in 1996, but in 1997 that figure nearly doubled to 136m.

Patrick Ryan, managing director of NCH Coupon Services, claims there has been “a renaissance in couponing”. He believes the main reason for the growth in the number of coupons issued – and the remarkable increase in the value of coupons redeemed – is better targeting and a more strategic use of couponing by marketers, in particular those working for brand manufacturers.

It was manufacturers which were responsible for most of the extra coupons issued last year, he says: the number issued by retailers actually fell. “Retailer coupons were down 18 per cent, while manufacturer coupons were up 12 per cent. Manufacturer coupons now account for three quarters of the coupons issued.”

In the US, the weekend coupon clipping coffee parties are a direct result of the largely untargeted manner in which coupons are got into the hands of consumers. The biggest distribution method in the US is Free Standing Inserts – pages of nothing but coupons from a range of different companies, slipped into magazines and local newspapers.

In the UK, however, FSIs have never taken off in the same way, despite attempts by major newspaper and magazine publishing companies to sell the idea to marketers. While magazines and newspapers account for just under 60 per cent of all the coupons distributed in the UK, these coupons will be individual ones included as part of an ad, or perhaps a one-off insert promoting one brand – not the dozens of brands that you’d find on an American FSI.

One of the main reasons for UK marketers’ rejection of the FSI and the mass distribution of coupons was their concern over misredemption (where money-off coupons for one product are redeemed against a completely different product). Indeed, it was growing fears over misredemption in this market – exacerbated a couple of years ago by the decision of a number of major supermarket chains to accept any and all coupons, whether the relevant product was bought or not – which led many to predict a terminal slump for the technique.

But manufacturers have found that the problems of misredemption can be significantly reduced (but not eliminated) through targeting techniques and barcoding.

Barcoding allows for better tracking of coupon redemption, and even – if data from a supermarket loyalty scheme is available – extensive analysis of when consumers use coupons, what other sorts of products they might be buying at the same time and where they are redeeming them.

Mike Halstead, managing director of sales promotion consultancy HH&S, says, “The future for couponing is for it to become intelligent. It’s a wonderful marriage of couponing and direct marketing which allows the right offer to go to the right people at the right time.”

Halstead cites as an example work his company is doing for Associated Newspapers. Express readers can be identified through lifestyle database companies and sent coupons offering money off the Daily Mail: from the patterns of redemption, Associated’s marketers can establish which sort of consumers are most likely to respond, and which offers work best.

Another variation is for money-off coupons to be sent to people who buy the Daily Mail only on a Saturday. This is because the Mail sells about 1 million more copies on Saturday than on Monday. If Associated can encourage a small number of its weekend readers to keep on buying the Mail during the week circulation figures should rise significantly.

HH&S has also used couponing for Thorpe Park – but with a twist – distribution through the Internet. Two years ago, when Thorpe Park launched its Website, in addition to pages of information, competitions and a TV ad for the new No Way Out ride, visitors to the site could also print off their own coupons, giving half price entry for children.

Thorpe Park head of sales and marketing Alan Randall says that the group has been using online couponing for the past two years, and there have been “thousands of redemptions”. Distributing coupons through the Internet works particularly well, he says, to promote special themed days – such as a Fireworks Party, or US Independence Day celebrations, which the park has just started running.

“If we find we’ve got space for one of these events, we can put a special coupon on the Website at a negligible cost. Even more important, though, is the ability to change the vouchers to fit specific circumstances,” he says.

Hi-tech couponing distribution systems are not confined to the Internet, however. The Catalina Marketing system links a coupon printer with a retailer’s Epos terminals, so that relevant coupons can be printed out as a shopper’s bill is added up, for use on their next grocery trip.

The system – in store in 700 Asda and Somerfield outlets – will, for example, print coupons for one brand when a consumer buys its main rival, or print coupons for a pasta sauce brand if the consumer buys dried pasta.

Stewart Maguire, marketing manager for Catalina Marketing, claims that coupons have a major advantage over card-based loyalty systems: “Everyone likes to have a bit of paper in their hands that has some value to it, rather than something that floats around in cyberspace. There is an established mechanism for accepting coupons in this country and for processing them. Loyalty card systems are fairly expensive to operate.”

David Lazarus, managing director of promotional consultancy Fingerhut Associates, says his company has recently created a promotion for a new range of mops made by Addis. Consumers who buy one of the new mops can write off for a sample pack of household cleaning products, including a dozen well-known brand names with a total value of about 15. But in addition to the sample products, the package includes a book of coupons, some for products included in the sample pack, and others for non-conflicting household cleaning products not included.

Lazarus says: “It allows trial for various products, and then can provide an incentive to repurchase. By including the voucher book with the sample pack, we can directly address the targeting issue – we know it’s going straight to people who plan to do some cleaning.”

Bill Douetil, group account director for leisure and retail at promotions agency Carlson agrees that couponing can be a very effective technique. “If you launch a new brand, you need to get people into the stores to try it – and coupons can help do that.”

He suggests there is now a recognisable section of the British population which is aware of the benefits which coupons offer in terms of discounts.

However, Douetil is concerned that coupons “may create delay purchasers who will wait until the coupons arrive”.

Robert Prevezer, managing director of promotions consultancy The Communications Agency, speaks for many when he says that couponing is “a basic promotional technique that will never go out of fashion. They may not be very exciting – but they appeal to people’s basic instincts, which are for saving money. Some marketers may sniff at them – but they work”.

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