To coupon, or not to coupon?

Coupons are not a new form of marketing. Nor are they a particularly complex or sophisticated form of marketing. They squeeze margins, but they are an effective and a necessary part of the mix.

Rosie

Earlier this week, Tesco CEO Philip Clarke slammed the high level of coupon promotions in the market, calling it “unhelpful” but conceded that Tesco must continue to play its part or risk falling behind. Not participating in coupon activity is more damaging to the business than the impact on margins.

This played out at the end of last year when Tesco attributed some of its poor performance to its retreat from coupon activity while its rivals, Sainsbury’s, Asda and Morrisons, ramped it up.

Speaking candidly to journalists Clarke said that he would rather not do so many coupon promotions, but the reality is that they are welcomed by consumers and because all its rivals continue to run coupon promotions, Tesco can’t really pull back.

Sainsbury’s has also just extended its deal with coupon firm Valassis, which manages its ‘coupons at till’ scheme, and Morrisons has revealed that it has been trialling its first ‘at till’ coupon scheme in a number of stores in the North East.

Whether it gets extended throughout the chain is yet to be seen but if feedback from consumers is positive, Morrisons is likely to roll it out.

There’s been a marked increase in coupon use in recent years. According to Fotorama promotions research, coupons account for 43% of all promotional tools in 2011, compared to 20% in 2005.

The trend isn’t likely to reverse as the behaviour to seek out bargains and take advantage of promotions that consumers have learned since the recession hit in 2008 will continue well beyond this period of economic uncertainty.

Anecdotal evidence from one of the supermarkets has shown that the pressures on household budgets is meaning some people have stopped buying newspapers to save money. Indirectly, this means that they are being excluded from traditional in-print coupons and money off vouchers, which is another reason that at till coupons could be set it increase.

Although they are popular with consumers looking for short-term money savings, in the long term, a continual increase in promotional activity is not in anyone’s interest.

The rise in coupon activity hits both retailers and brand owners’ margins, which is why Clarke, and equally his contemporaries, are keen to reduce reliance on the promotions.

Consumers will also fare better in the long-run if supermarkets replace one off coupon promotions with a constant offer of good quality products, at fair and sustainable prices.

Learn more about retail marketing and how to gain a competitive edge at Marketing Week Live. The event is being held on June 27 and 28 at London Olympia and is free to all registrants. Find out more here.

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