Coupon Conundrum

Coupons have become a familiar sight on most major supermarket shelves. But while they allow retailers to cash in on consumers’ impulse buying, do they benefit brands in the long run?

Point-of-purchase (POP) displays are one of the most commonly adopted retail marketing ploys, especially popular among the big supermarket chains. “Buy one, get one free” or Bogofs, as they are called in the trade, are a long-used method of grabbing the customer’s attention and rely largely on impulse buying.

Companies are latching on to the idea that these displays can be enhanced by incorporating further means of luring consumers. Evidence suggests the use of coupons at point of sale, for example, helps to boost sales. This has been borne out by the Instant Coupon Machine (ICM), developed and managed by Aspen Specialist Media, which is now being used in branches of Somerfield, Budgens and Safeway.

The ICM has been successful in parts of Europe and the US, and has been shown, according to Aspen, to raise brand sales by an average of 184 per cent. Aspen executive director Jeremy Williams says: “ICM was launched in the UK two years ago and we already have three of the top five retailers using the system. Retailers like it because it increases basket size and offers consumers another reason to visit their store.”

The ICM is typically located next to the product on special offer with a header card showing customers the coupon on offer inside, and a flashing red light on top of the machine to attract their attention. Customers can then pick up an instant discount coupon on a variety of packaged goods.

Williams says: “What’s good about the ICM is its simplicity. You don’t have to cut out coupons from newspapers and you don’t have to remember to pick up the coupons that drop through your letterbox. It can also be linked with reward points or loyalty schemes.

“I think the ICM does more than enhance a campaign. It stimulates people to try something new, it doesn’t devalue the product, and it doesn’t offend the consumer.”

Mike Oliver, director at below-the-line agency Twenty20, points out another benefit of incorporating coupons in a POP display – they allow a retailer to study consumer purchasing patterns, and sometimes reveal intriguing results.

Oliver says: “The ICMs in Iceland have lifted sales by about 152 per cent. The redemption of these coupons, however, averages out at 12 per cent. That means that 88 per cent of consumers who pick up the brand plus the coupon then forget or simply decide not to use it when they pay.”

So while the incentive of a coupon has enhanced sales, the low redemption rate still indicates an ignorance among UK consumers towards coupons in general. Oliver calls this the “shame factor” which may suddenly kick in at the checkout, stopping the customer from using the coupon.

Kessler’s International designs and manufactures POP displays. Marketing director Charles Kessler believes point-of-sale is evolving faster than usual because tough competition has put retailers under increasing pressure to attract customers.

If coupons are used as part of the display, Kessler argues that simplicity is the key. “Don’t be too clever or too subtle. You’ve only got a few seconds to grab customers’ attention in the store so it must be obvious,” he says.

An excellent example of this is a joint campaign carried out by Promotional Campaigns Group on behalf of Best Foods, makers of mayonnaise brand Hellmann’s, and The British Iceberg Growers Association (BIGA). Iceberg lettuces carried a 30p-off coupon for Hellmann’s salad dressings in a number of leading supermarket chains, including Tesco and Asda. Sue Sherring, account manager at Kessler’s for the promotion, says: “Both companies wanted to do a joint promotion to drive sales. The lettuce was the medium and the coupon worked simply by adding value.” The campaign significantly boosted sales of both products.

Considering the options

Used cleverly, vouchers can add more of an incentive to a display. However, Charles Endacott, managing and creative director at marketing services company Endacott RJB Marketing, argues that discount vouchers may have less of an impact if the brand is already well-established. He also claims that there should be no need to incorporate incentives if the POP display has been creatively executed.

Endacott says: “There are many display possibilities besides introducing incentives. We’ve worked closely with clients to improve instore displays. We’ve dealt with companies such as TetraPak and talked directly to some of the major multiples about ways to make the most of the dairy area.”

This has included putting up large-scale instore displays using cow graphics and mooing noises, a novelty which Endacott claims has worked well in lifting sales of dairy products. He also cites the example of European department store displays which emit a fragrance when customers walk past, enticing them to buy a new perfume. He believes a similar approach could be used in UK supermarkets to sell products such as fruit juice.

Distribution channels

An alternative means of distributing coupons is through door-to-door campaigns. Circular Distributors (CD) recently carried out a leaflet drop on behalf of DIY retailer Great Mills. CD managing director Nick Wells explains that promotional “hotspots” and products on special offer were highlighted on the door-to-door flyer while this was supported instore with POP material.

Interactive kiosks are also playing an increasing role in retail outlets and can tie in well with instore marketing. Smart Media recently launched its Smart Till kiosk, which can be used to deliver special offers or themed product promotions.

Smart Media managing director Ian Williams says: “You can use it to give more detailed information about the item you’re promoting, or to redeem points. It is more effective to use the kiosk as part of an integrated strategy because customers can use it to enquire about promotional material they have received through the post.”

For the good of the brand?

Many in the industry agree that the traditional style of POP displays seen in supermarket chains can often be detrimental to the brand. While Bogofs are an excellent way of increasing sales in the short-term, they may devalue the product in the long run as sales can often tail off sharply.

Aspen’s Williams says: “Consumers are intelligent and know that ‘Buy one, get one free’ means the brand is making a lot of margin. Would you see the same offer on a Ford forecourt? And if you did, what would you think? Who’s kidding who, here? Let’s be realistic with our pricing and let’s offer smaller incentives.

“There’s nothing more off-putting than going back to a store a few days later and discovering the six-pack of beer you previously bought at full price is now being offered at two for the price of one. I think retailers have to wake up to that. It actually alienates me as a consumer.”

The best way to combine incentives with POP displays clearly depends on the product being promoted. Sampling, for example, might be more appropriate with new products while an established brand wouldn’t necessarily benefit from the incentive of a discount voucher.

Equally, how to incorporate vouchers in the promotion, be it as part of a display or a door-to-door leaflet drop, depends entirely on the product, and unless used correctly, will not automatically enhance a promotion.

While a simple display will always have its place, retailers must be wary of devaluing a brand over time. If incentives such as coupons are to be incorporated successfully, they must reflect the brand’s identity.

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