Digital Coupons at Retail

Coupons aren’t dead. Inmar reported that, for Q1 2015, they had a 41.6% share of overall coupon redemption. That was the “lowest watermark ever as a percentage of redemptions,” says Steve Frenda, managing director – strategy, Path to Purchase Institute, “but like radio, they’ll be with us for an entire lifetime.”While paper coupons are sticking around, digital coupon programs are on the uptick. Inmar noted that the “continued notable rise of digital offers” has kept coupon redemption activity higher than pre-recession levels.Millennial parents, in particular, seem to be driving redemption – of both digital and print offers. According to the 2015 Valassis Coupon Intelligence Report, in comparison to the prior year, 51% of Millennials with kids increased their use of paper coupons and 53% increased their use of a smartphone to get coupons or deals. That same demographic is also more likely to have increased its use of the Internet to find coupons and is more likely to visit coupon websites – 15 percentage points higher than all consumers, according to the report.Part of what may be keeping FSIs alive – and hindering even quicker adoption of digital among all demographics – is ease of use. “Digital isn’t a Millennial thing. Millennials want things to be easier, smarter, faster and better. And that usually means digital. But dumb and digital is still a fail,” says John Caron, chief marketing officer, Linkable Networks, pointing out that many coupon apps have been unsuccessful. “Digital is about making the experience better for the consumer, more efficient for the retailer and more measurable for the brand. Aligning with those goals is what will drive the transition from print to digital.”“The big challenge is that most downloads occur via a retailer website or mobile app,” says Ken Fenyo, an industry consultant who, while at Kroger in 2007, launched the first load-to-card digital coupon program. “There is no national vehicle similar to the FSI or print-at-home where the CPGs can reach a national audience with brand vs. shopper marketing dollars.”Shopper Marketing recently assembled a virtual roundtable to dive deeper into the current state of digital coupons.What falls under the umbrella of “digital coupons”?MIKE SCRIVEN: We look at two main types used by CPGs, grocery, drug and mass retailers today – digital print coupons, meaning digitally distributed for shoppers to print before their shopping trip; and digital paperless, coupons linked to a store loyalty card or alternate form of identification.KEN FENYO: There are digital paperless coupons, often called load-to-card coupons, and print-at-home coupons. There are also savings/rewards programs, where a shopper uploads a picture of her receipt or provides a loyalty card number. There are card-linked offers, using a credit or debit card to redeem offers. And mobile coupons where offers require scans of an individual mobile bar code, or for the shopper to show the offer on the phone to the cashier. Also, daily deals/Groupon-type offers. These are generally not used in CPG, although Aisle50, acquired by Groupon, created a subscription-type offer program for reordering CPG items.JONATHAN TREIBER: There are e-commerce coupon codes, in-store printable coupons, mobile scannable coupons, text message coupons and other means redeemable online and in-store. It depends on whether the retailer is looking to establish a CPG coupon program and have vendors fund the offers (ideal for the retailer), or if the retailer wants to market digital coupons to customers on its own with discounts on the entire basket. Clip-to-card and clip-to-cloud digital coupon programs are types of CPG-funded coupon programs that retailers can offer to its shoppers.Clip-to-cloud? We’ve also heard the term “click-to-cloud.” What are they?STEVE FRENDA: If you go to places like Publix or H-E-B, which recently adopted them, they call them digital coupons. The difference is, with “click-to-card” someone has a physical loyalty card. Kroger, Safeway are leading the way on this, and about half of retailers have these. With the new version, being adopted by Publix and H-E-B as well as Dollar General and Albertsons, you click an offer to a personal identifier.SCRIVEN: We refer to this as “alternate-ID,” “alt-ID” or “store account.” These are programs that use a form of shopper identification other than a store loyalty card number. Meijer has been doing this since the inception of paperless forms of coupons more than four years ago. The great thing about this capability is that it opens up the power of digital coupons as a driver of store trips to retailers that don’t have a loyalty program in place.TREIBER: They are also referred to as load-to-account, among other descriptions. This method hit the industry with Zavers, which was acquired by Google a couple of years ago and subsequently shut down because the technology was too advanced for the marketplace at the time. Redeeming coupons via the cloud implies that a customer inputs their unique account identifier – email, account number or mobile number – and the retailer makes a call from their POS system to the cloud provider during checkout to apply the qualifying coupons.“Traditional couponing takes a lot of time and energy; the process of having to do work to save is one that is not trickling down into the Millennial generation.”— John CaronHow much do they differ from a click-to-card program? And do they allow the retailer to gather shopper data?SCRIVEN: They really don’t differ at all. As long as you have a way to identify shoppers and associate their purchases, whether via their phone number or a PIN number a shopper creates, you can unlock all the features of a loyalty-card program.FRENDA: A loyalty program is one that suggests when you go to the store, let’s say there are 7,000 items that are tagged just for you – contingent upon you presenting your card and getting those prices. In the case of a loyalty card that has a click-to-card mechanism, you are combining savings of manufacturers coupons with temporary price reductions into one program. Click-to-cloud couponing sits on its own. A loyalty card gives the retailer all of your purchase history. Click-to-cloud doesn’t always do that.TREIBER: When the retailer has the customer coupon data attached to a loyalty account, the retailer is capturing coupon and purchase data. With a third-party cloud provider, the retailer can choose to provide complete basket data or have the cloud provider match products with clipped coupons, or it can require the third party to provide the associated coupons to the retailer for the retailer to match products to coupons during checkout. In the latter example, the coupon provider wouldn’t have the basket data and might not even be allowed to store the basket data due to privacy rights, etc.Why are we seeing a proliferation of click-to-cloud programs?FRENDA: I think there was recognition of the value of digital coupons and how they could be stored more easily, especially for people with mobile devices. Particularly retailers without loyalty programs have gone this way, if they felt digital was of value to their shoppers. It eases the shopping experience.Why are we seeing an increase of digital coupons in general, and what does that mean for the future?FENYO: Digital coupons provide CPGs and retailers with a seamless way to engage shoppers digitally. They provide retailers with a vehicle for driving more traffic to their own websites and mobile apps. It’s a powerful platform for collaborative shopper marketing programs with CPGs. It’s a more secure and fraud-proof vehicle for delivering coupons and enables more personalized/targeted coupon delivery.JESSE SEARBY: It means higher engagement rates, measurability and increasing opportunity to personalize the content to the audience itself. Increasingly offers will be distributed toward digital channels and less and less to traditional channels.JOHN CARON: Traditional couponing takes a lot of time and energy; the process of having to do work to save is one that is not trickling down into the Millennial generation. Millennials want offers to be easy and seamless, so retailers and brands have to evolve to digital. Most have tried a one-size-fits-all solution to couponing that is based on their view of what they think consumers will do, not what consumers actually want. Digital coupons that solve the fundamental issues of convenience and value, such as [credit/debit] card-linked offers, will be the ones that succeed.TREIBER: It means they are generally faster to market, and there is an opportunity to capture and glean far more information on customers. However, we’re finding that most marketers have yet to tap into the data/insights capabilities of digital coupons at this stage in the adoption curve. They are simply trying to implement basic programs and establish audiences and usage patterns.So who out there is leading the way with digital couponing?FENYO: Kroger and Safeway. Target is also getting a lot of traction with its Cartwheel program. For all its digital investments, I think Walmart is falling behind. Walmart was rumored to be launching a digital coupon program this spring but then decided to indefinitely delay the rollout to focus more on EDLP savings. I think this was a mistake. Walmart is by far the largest redeemer of coupons in the U.S., and digital coupons would provide Walmart with a new way to engage its shoppers.CARON: Supervalu’s SVLinx program is a great example of providing an all-digital coupon experience that’s optimized for Millennials. Target’s Cartwheel is beloved by its shoppers, with the exception of the 10-coupon limit.SEARBY: Albertsons Safeway with its utilization of “coupon to identifier” through both of its loyalty programs (Just for U and MyMixx). Kroger is also leading the way, leveraging its loyalty card program, as well as its You Technology asset. The ones falling behind are all of those that are laggards in implementing digital coupons, personalized pricing or relevantly indexed content.TREIBER: This is a tossup because certain retailers that were leading, like Safeway, are now rumored to be shutting down their loyalty programs and clip-to-card coupon programs along with them. Other retailers that adopted clip-to-cloud solutions from Zavers were trailblazers with more sophisticated POS systems, but when Google shut down the business those retailers had to look for another solution provider or decide not to continue with digital coupons.Most large retailers have suffered from poor or fragmented implementation. Target is a great example. While Target offers digital coupons, the programs are all fragmented between Catalina, SMS/text, Cartwheel and many others. These siloed programs don’t unify the customer experience.I don’t believe any retailer is implementing digital coupons to their full potential. Most are trying to get a program implemented at a basic level, engage customers, and then advance the program from there.One retailer that has been particularly strong with digital coupons is Walgreens, but it has eliminated most of its digital coupon programs to focus on the loyalty-card and point-based program.Where do we stand with third-party coupon platforms?SEARBY: These are interesting offerings and provide above-average customer utility. The largest challenge is that they are more often than not consumer-facing brands, which presents a scale dilemma. None of the existing third-party platforms (SavingStar, Ibotta, Shopmium, etc.) have been able to show the ability to find true scale, the way Coupons.com Inc. or Catalina have in traditional or load-to-card channels. By circumventing the retailer and only leveraging third-party providers, retailers lose control over the brand experience, the conversation with customers, and most importantly, the data.FENYO: Third-party platforms seem to be growing in popularity, at least the ones where you take a picture of the receipt. They are relatively easy to launch and manage since you don’t need the retailer to OK anything to integrate with the retailer’s POS. Ibotta is the leader in this space. SavingStar recently was picked as the back end for the Plenti rewards system, which should give it a boost.And what about print-at-home coupons?FENYO: They are still popular and are the only way to redeem Internet offers at Walmart. Coupons.com dominates this market. Based on my analysis of NCH data, 2014 was the first year that shoppers downloaded more digital coupons than printed print-at-home coupons. I expect this trend will continue and even accelerate in the coming years.SEARBY: They are commonplace across the industry, though losing favor to load-to-card, load-to-identifier or third-party-provider offerings. They are simply another form of an FSI at this point.CARON: They are dying because they’re clunky and inefficient.TREIBER: This is still a major vehicle that accounts for billions of distributed coupons a year and hundreds of millions of coupons redeemed.

Digital Coupons at Retail

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