Redeeming qualities

The humble money-off coupon may not at first glance appear to be the touchpaper for a bloody retail battle. But a row is brewing between major manufacturers, which say they are being short-changed by £60m a year, and UK grocery giants, which have so far dismissed claims that they are misusing coupons for their own profit.

Edwin Mutton, director-general of the Institute of Sales Promotion (ISP), is leading a crusade by the trade body and its members to stamp out “financial impropriety” and change retailers’ attitudes towards coupon redemption (MW last week). He named Tesco and Sainsbury’s among grocers that, he claims, accept coupons at checkouts from shoppers regardless of whether they have bought a product, but as long as it is in stock.

Among the UK’s top four supermarket chains, Tesco, Asda and Morrisons have yet to make any public response. A spokeswoman for Sainsbury’s says: “Customers must buy the appropriate product to qualify to redeem a coupon and we train our colleagues accordingly.” Meanwhile, a spokeswoman for Waitrose reveals the chain takes a different view. She comments: “We do accept vouchers provided the product is stocked in the store concerned. This policy is understood by our suppliers.”

a victimless crime? Mutton is trying to enlist more manufacturers and politicians to back a lobbying and publicity drive to cut out what he calls a “morally wrong” practice. The ISP has already recruited Conservative MP John Greenway to help its campaign gain momentum. Greenway has described misredemption as “essentially the same as shoplifting”.

Meanwhile, other couponing experts say the blame should not be laid solely at the grocers’ doors. One observer believes that, as “stakeholders”, manufacturers and trade bodies are also guilty of inertia.

In truth, manufacturers – along with newspaper publishers, which are the other big users of coupons and vouchers – have known about the problem since coupons became popular in the 1980s. But, Mutton explains, the cost to suppliers has reached a level at which the ISP has finally been urged to take action by its members. He says: “We have one big manufacturer using coupons which has examined [the scheme] and reckons it’s losing £1m a year. [The company] represents 2% of Tesco’s business. Using that you get to £60m losses across the board easily – and it thinks that’s conservative.” He adds: “Misredemption is killing coupons, which are a very useful mechanic compared to expensive promotions such as buy-one-get-one-free.”

One former packaged goods marketing director backs up Mutton’s claims. He states: “We all had the suspicion that retailers accepted coupons as a cash discount and did not bother checking what was in shoppers’ baskets. There is absolutely no way it didn’t happen. But you couldn’t challenge the retailer because it could refuse to do a promotion or take the product off [shelves].”

making allowances Another ex-food marketer says that misredemption became so prevalent it was worked into budgets when companies decided to use coupons. Mutton now wants his campaign to build a head of steam to change what he calls “a climate created by retailers in which people increasingly know they can get away with it”.

He adds: “We’re not asking for every coupon to be redeemed properly, but they’ve got to reduce the boundaries of psychological freedom that are being given to consumers. All the industry is asking is that retailers [display] a policy statement of not redeeming coupons without a purchase. Checkout staff could also take coupons before scanning starts.”

Mutton is critical of other industry trade bodies on both sides of the fence. He believes the British Retail Consortium (BRC) and Food and Drink Federation (FDF) have backed off getting involved because of the potential cost of funding updates to technology that could, in theory at least, reduce the problem.

“The technology does exist,” says Mutton, “but it would mean [the retailers] investing in a data bank of all the coupons that are issued, which they have always declined to do. The BRC doesn’t want to know and the FDF isn’t terribly interested. The retailers’ power is so great that the FDF feels if it raises the issue, the BRC will turn round and say it wants more money for handling coupons. It’s a vicious circle.”

Yet an FDF spokeswoman issues a scathing rebuke: “Firstly, this is not a new issue. It’s been around for many years. Secondly, it is simply not true that we refused to act on manufacturers’ behalf on this issue. We tried to work with the ISP a few years ago to develop a code of behaviour that all parties would buy into. Retailers were involved in this, because without their buy-in nothing would be achieved. However, no agreement was reached.”

She adds: “Manufacturers are well aware that they have no guarantee their coupons will always be correctly redeemed. FDF is open to further discussions on this but retailer buy-in is essential.”

nothing to do with us For its part, the BRC denies any knowledge of the issue. A spokesman states: “It’s a matter for individual retailers to determine their arrangement with manufacturers. We’re not a regulator. It’s not our role to tell members what to do, so it’s not something we’d get involved in.”

Meanwhile, Jamie Matthews, managing director of integrated agency Initials Marketing, understands the effect on manufacturers but feels there is little they can do. He says: “It is a serious issue, but I think Mutton is wasting his time trying to get retailers to change their habits.

“Look at issues such as health labelling that the Food Standards Agency has been leading with the retailers. Only a few – like Sainsbury’s, Waitrose, and Marks & Spencer – have really taken it seriously, and that’s a much more serious issue than couponing. It is up to the brands to make sure their own marketing spend is effective and efficient. If they know that couponing is a waste of money, they should change strategy.”

Until now, coupon misredemption has been a tacit agreement between powerful retail barons and fearful manufacturers. The ISP, led by Mutton, is trying to encourage debate and promote change. Whether it will succeed seemingly depends on retailers acknowledging the problem and coming to the table with their suppliers.•