The Age of Digital Coupons

Coupons are experiencing a renaissance. Shoppers are on the prowl for savings, and merchants are responding online. Electronic coupons have the capability to deliver significant savings to consumers when, where and in the format they need them - including the Web, e-mail or any mobile device. The amount of Internet print-at-home coupon distribution is climbing; up 41 percent from last year according to Nielson Clearinghouse, and comparable to the number of offers in a Sunday newspaper. "In 2009, consumers printed $313 million in savings from Coupons.com," explains Patrick Crisp, senior director of communications for Coupons.com.

Coupons by the Numbers
Traditional grocery items and packaged goods have represented the majority of online coupons. But today, retailers, restaurants, car rental and entertainment providers, among others, are battling for the consumer's tightly held wallet. Simmons Market Research Bureau claims that more than 40 million people in the U.S. use online coupons to generate substantial savings and the number of shoppers who adopt online coupons will multiply. Also according to Simmons:

- Today's e-coupon users skew to a younger, wealthier crowd with larger households that appear less likely to subscribe to the traditional, print newspaper and clip coupons.

- Factors impacting the growth of Internet print-at-home coupons include the convenience of browsing on a twenty-four-hour, year-round basis, the increase of users with Internet access, and the decline of newspapers.

According to the Harris Interactive Poll 2009, coupons are the deciding factor in the purchases of a growing number of consumers. - At 41 percent, the 35-44 age group is the largest segment to use handheld devices or websites to find deals when shopping online. - Nearly one-third of households with children use coupon websites. - Thirty percent of adults will not purchase from an online store without a coupon, a 27 percent jump from 2008. When an online coupon is not available, 22 percent of adults will go to a different store to make the purchase, while eight percent will wait until a coupon is available to make the purchase.

Bonus: Check Out the Web's Most Popular Coupon Sites

Shifting Spaces
To attract new shoppers, retain existing customers and increase average sales, a wide range of suppliers including Kroger, Safeway, CVS, Walgreens, K-mart, HEB, Duane Reade and other intermediaries are leveraging online coupon programs and recording double-digit results, claims Crisp. On the marketing side, two practices are evident regarding coupon usage: Brands new to online coupon programs are using them strategically to increase sales, while brands acclimated to online coupon programs are increasing the amount of unique coupons and allowable prints. "We've been very pleased with the success of our digital coupon campaigns and have been steadily moving more and more of our couponing budget out of the newspaper and onto digital delivery," says Karl Schmidt, director of promotion marketing at General Mills.

Companies recognize that online coupons provide a lower barrier to entry and higher return over traditional newspaper coupon inserts. Consequently, some companies are transitioning their entire coupon budget to online distribution and eliminating print coupons completely.

Crossing Channels
"To determine the most effective channel for online coupons, marketers are measuring the methods of discovery: e-mail, mobile, Web, and search," claims John Morgan, executive director for the Association of Coupon Professionals. According to the 2008 Online Coupon Survey conducted by Coupons Inc. & Simmons Market Research Bureau, the majority of online coupon users will access all channels to get money saving coupons. But when merchants request personal information prior to accessing the savings, the coupon value influences the consumer's willingness to participate.

By tracking and analyzing online activity, the Web enables marketers to develop engaging, long-term relationships with each consumer, states Kelly O'Neill, product marketing director at ATG. This information gives marketers the ability to personalize coupons based on consumer segments, refine offers based on the results of a coupon campaign, expand offers to include a "friends and family" element, and recommend products based on past purchase behaviors. "For example, personalization capabilities allow merchants to tie a coupon directly to brands and products most relevant to each individual or segment. And, prioritization allows discounts to be applied in the appropriate order; such as discounts before free shipping at certain spending levels. There are definitely benefits to offering discount features across all marketing channels," says O'Neill. For example, CVS has been a leader in the personalized coupon space. The CVS Extra Care program ties coupons to their Extra Care cards, permitting consumers to e-mail and print redeemable, in-store coupons. The CVS website incorporates shopping lists, coupons, shared loyalty programs, prescriptions and product information to complement the program nicely, notes Crisp.

Online Obstacles
Speedy check-outs, customer safety, consumer abuse and fraudulent behavior create the majority of obstacles for merchants offering online coupons. Retailers are constantly evaluating check-out processes, eliminating anything that jeopardizes a fast purchase. For example, handing a mobile device to a busy cashier for redemption purposes slows check-out lines, adds Crisp. Therefore, using handhelds for high-volume transactions is likely three to five years out.

To provide customers with a safe, hassle-free online experience, Coupons.com provides secure digital coupons. And to protect retailers and manufacturers, advanced technological controls limit allowable prints on the Web. E-mail providers such as TailoredMail and Exact Target offer solutions to help control coupon prints for e-mail use, too. Merchants should also develop an online coupon policy to reduce risks that include limiting redemption levels per user, per visit and per order. The Internet Coupon Task Force, created by the Association of Coupon Professionals, developed guidelines to educate retailers and manufacturers on Internet print-at-home coupons, according to Morgan.

Furthermore, O'Neill reminds merchants that consumers re-selling online coupons through Web outlets such as eBay and craigslist pose additional threats. Allocating resources to police such sites is costly and generally only justified for coupons of significant value.

Of course, there is always the concern of losing revenue to coupons. However, coupon costs can often be offset with vendor negotiations and expanding partnership efforts between manufacturers and key retailers.

Digital Advantage
"There is a wealth of shopping options available to consumers, and an online coupon is a call-to-action," explains Morgan. "Digital coupons can influence purchase decisions to move product off the shelf for instant savings and help drive customer loyalty." Research shows that coupons are dramatically increasing effectiveness of online marketing campaigns, including websites, e-mail, mobile and social networking initiatives.

In October, Coupons.com introduced three new ways to save: The Save to Card program allows users to load digital coupons directly onto supermarket loyalty cards. Next, the Show & Save initiative enables shoppers to load e-coupons on mobile phones and then show the device to the merchant. Last, Grocery iQ is an iPhone and iPod application that permits barcode scanning and integration of coupons to create and manage grocery lists.

Many retailers provide coupon galleries on their websites and gladly accept printed online coupons. When starting an online coupon program, following best practices can yield better results, ensure proper security and distribution controls, eliminate costly mistakes and avoid losing control of coupons that unintentionally go viral.

About the Author: Michelle M. Wicmandy is the director of marketing for Southeast Media, a marketing communications firm, and specializes in mobile and e-mail marketing.