Retailers Embrace Digital Couponing

Retailers Embrace Digital Couponing

The Tipping poinT:

The Tipping poinT: RetaileRs embRace Digital couponing 2

Table of Contents

Executive Summary .................................................................................................3

The Evolution Of Coupons ......................................................................................4

Digital Coupon Delivery Moves To The Forefront ..........................................................................................6

Personalization Tops Digital Coupon Benefits ........................................................................................11

Retailer-Manufacturer Collaboration Moves The Needle On Digital Couponing ............................................................................................15

The Retailer Learning Curve For Digital Couponing ...........................................................................................16

The Digital Future ..................................................................................................18

Conclusion: Retailers’ Digital Couponing Predictions and Demands ................................................................20

Appendix .................................................................................................................21


Executive Summary

Over the last two decades, technology has helped put security and distribution controls in place to build the online coupon system that we see today. With the rise of smartphone usage, we see an even more dramatic shift for consumers away from traditional clip-and-save paper coupons and towards digital coupons. In a recent Google survey, 59% of consumers said they have loaded coupons onto a loyalty card (from mobile or web).1

To understand the digital coupon mindset of retailers, Google commissioned Retail TouchPoints to survey nearly 150 retail executives.

Key findings include:

n 74% of retailers believe digital coupon use will increase dramatically by 2018.

n 74% of retailers are integrating mobile apps, SMS text messaging, web sites or email to deliver their coupons.

n 90% of retailers agree that digital coupons improve their ability to deliver personalized offers.

n 61% of retailers said digital coupons improve speed of checkout.

With digital technology, retailers can not only deliver coupons directly to customers’ loyalty cards, they also can offer targeted, personalized coupons to shoppers via their mobile devices. Retailers have found digital couponing to yield cost savings, ease of delivery, ease of redemption and an increase in overall revenue.

The following report provides detailed results on the survey findings to help retailers formulate current and future couponing strategies.

1 Zavers by Google and Shopper Sciences, Coupon Usage Study, December 2012


The Evolution Of Coupons

More than 120 years after Asa Candler first offered paper tickets for free samples of his new Coca-Cola drink, coupons continue to play a significant role in successful product marketing strategies. Retailers know that consumers love coupons, and coupons drive sales.

But no one loves the old-fashioned couponing process. Manual handling of paper coupons — sort-ing, counting, submission and reimbursement — is expensive, time-consuming, error-prone and inefficient. Plus, paper coupons don’t provide the robust redemption data that merchants need to support educated decisions about their future marketing strategies.

Couponing is primed for improvement and innovation. The Internet brought the first major para-digm shift in coupons in the ‘90s, as retailers were able to offer downloadable coupons online. However, retailers and manufacturers were slow to adopt due to the risk of fraud. Over the years, companies have put new security and distribution controls into place. Today, mobile technology is rapidly enabling the second paradigm shift — delivering targeted, personalized coupons to the mobile-enabled shoppers who are most likely to purchase those products.

the evolution of coupons 5

1888 First paper coupons:

Asa Candler uses paper tickets for free glasses of Coke to help market

his new soda

1930 Coupon usage grows

dramatically during the Great Depression

2008 Merchants begin using mobile

phones to deliver coupons to consumers

1940 Big chain grocery stores begin to use coupons to attract consumers away

from purchasing at local markets

1965Half of all the families in the United States begin

cutting coupons

1990The Internet leads to the

downloaded printable coupon and online coupons

2013 Target becomes the first national chain to offer

scannable phone coupons for all its stores

In June 2013, Google surveyed nearly 150 retail executives representing the Grocery/Supermarket, Big Box, Pharmacy/Drug Store and Department Store segments — as well as a broad range of an-nual revenue and store counts — on the benefits, practices, and progress of digital couponing. Their responses, outlined in this report, offer deep insights into retailer and consumer preferences and trends that will affect the future of couponing.

Sources: wikipedia.org and blog.couponsherpa.com


Digital Coupon Delivery Moves To The Forefront

Digital media is becoming retailers’ mode of choice for coupon delivery: Nearly three quarters (74%) use mobile apps, SMS text messaging, web sites or email to deliver their own coupons (Figure 1). Digital media is trailed by print media (61.5%) and direct mail (61%), used in almost equal amounts, and half of retailers also deliver coupons on site, through kiosks and in-store circulars.

A closer look shows that some segments have moved more aggressively into digital media than others (Figure 1a). Grocers still use print more than other media. Big Box stores have moved most decisively to digital media and away from print, while pharmacy/drug retailers are heavy users of all methods of coupon delivery.

Figure 1 How Retailers Deliver Coupons To Consumers

74%62% 61%

50%

Digital Media (mobile apps, SMS

text messaging, websites or email)

Print Media (newspaper/ magazines/

circulars)

Direct Mail In-Store (via kiosks,

in-store circulars)

Digital coupon DeliveRy moves to the foRefRont 7

Satisfying consumer demand is the No. 1 reason retailers issue coupons (Figure 2) with Grocery stores (retailers with the longest history in couponing) the most likely to rank “satisfying consumers” as the top reason for issuing coupons.

The second and third most-cited reasons for issuing coupons were closely ranked: encouraging repeat business and enabling retailers to keep pace with competition. Slightly fewer retailers said that coupons’ ability to boost the size of the shopping cart was very important.

In one example, Price Chopper Supermarkets has reported impressive results by offering load-to-card coupons to its shoppers. The New York-based grocery chain has experienced a significant increase in basket size, trip frequency and total weekly spend from its e-coupon customers. At Price Chopper, 50% of e-coupon users are considered the chain’s most-loyal shoppers.

“Digital coupons make it easier for shoppers to get savings at the moment they’re deciding what to buy,” says Heidi Reale, Price Chopper Director of Shopper and Digital Marketing. “Plus, with automatic redemption at checkout, our cashiers don’t have to spend time scanning paper coupons.”

Figure 1a How Retailers Deliver Coupons To Consumers (By Industry Segment)

Big Box Retailer

Department Store Retailer

GroceryRetailer

Pharmacy/Drug Retailer

51%

72%

42%

84% 84%

54%

63%

50%

74%

78%

63%

95%

47%

53%

38%

68%

Print Media (newspaper/

magazines/circulars)

Direct Mail Digital Media (mobile apps, SMS

text messaging, websites or email)

In-Store (via kiosks,

in-store circulars)

Big Box Retailer


GroceryRetailer


51%

72%

42%

84% 84%

54%

63%

50%

74%

78%

63%

95%

47%

53%

38%

68%


Consumer Preference Shifts To DigitalRetailers are acknowledging consumers’ desire for digital delivery of coupons. According to the survey, 38% of retailers believe that consumers prefer digital media versus 32% who believe consumers prefer paper (Figure 3).

Current research supports this viewpoint: A Food Marketing Institute (FMI) study revealed that almost one quarter (24%) of shoppers currently use their smartphones to search for coupons.2 Additionally, a recent Google Think Insights survey found that 84% of smartphone shoppers use their phones in-store to help them shop for everything from groceries to pet products.3

Overall coupon usage also is on the rise: More than half (57%) of retailers report an increase in consumer use of coupons in their stores, compared with just 17% noting a decrease. Smaller retailers, those with between 1 and 50 stores, are the most likely to believe coupon use is declining.

Figure 2 Why Retailers Accept Manufacturer Coupons

54%

18%

7%2%

19%

Handling fees make accepting

manufacturer coupons

worthwhile

Satisfies consumer demand

* Percent of respondents ranking 1 on a scale of 1 to 5

Encourages repeat

business

Enables us to keep pace with

competition

Boosts shopping cart size

2 Food Marketing Institute, FMI 2013: Tomorrow’s Trends, Delivered Today, 2013

3 Google, Shopper Marketing Council, Mobile In-Store Research: How in-store shoppers are using mobile devices, April, 2013

44%

40%

20%

9%

9%

Yes, we accept both digital and paper manufacturer coupons

We accept only paper manufacturer coupons

We do not accept digital coupons, but plan to in the future

We accept only digital manufacturer coupons

We do not accept paper coupons, but plan to in the future


More Retailers Accept Digital CouponsThe growth of digital coupons is evident in the fact that the largest group of retailer respondents (44%) accept both print and digital coupons (Figure 4), led by pharmacy/drug retailers and retailers with more than 2,000 stores. Today, 40% of the overall respondents accept only printed manufacturer coupons — dominated by retailers with 1 to 50 stores, as well as grocers. But 20% of the overall respondents plan to accept digital coupons in the future.

Figure 3 Changes In Couponing Preferences: Retailers Say Consumers Shifting To Digital Coupons

Figure 4 Digital Manufacturer Coupons On The Rise

38%

32%

54%

17%

“Most consumers prefer digital coupons over

paper coupons”

“Most consumers prefer paper

coupons over digital coupons”

Digital vs. Paper

38%

32%

54%

17%

“Overall coupon use is increasing”

“Overall coupon use is decreasing”

Overall Coupon Use

Note: Some responses to this question were eliminated due to inaccuracies, so results are based on 129 total responses.

Note: Some responses to this question were eliminated due to inaccuracies, so results are based on 129 total responses.

76%

60%

54%

47%

Consumers can store/redeem coupons on their phones

Consumers can store and access coupons without worrying about losing them

Consumers can save time clipping coupons

Consumers can receive personalized offers


Retailers Remain Confident In Digital Coupon ImpactRetailers are increasing investments in and commitment to digital coupons, as consumers adopt them and become more comfortable with digital technology. A growing number of consumers are storing/redeeming coupons using their smartphones (76%), according to retailers (Figure 5). This trend is particularly significant for grocery and pharmacy/drug retailers. Additionally, 44% of consumers are using their smartphones to look for offers.4

In one example, customers at Canadian Big Box chain Zellers (before its recent sale to Target), were strongly demanding smartphone coupon reading, so the retailer created a workaround with codes to accept the coupons.

The majority of overall respondents (60%) also agrees that consumers’ ability to store and access coupons without worrying about losing them is a key benefit; and 54% see value for consumers in the time saved by not clipping coupons.

As many as 42% of consumers have left a retail store without purchasing an item because they left a coupon at home.5 With digital coupons always readily available, consumers will be more likely to complete their transactions.

Figure 5 What Retailers See As The Greatest Potential For Consumers In Digital Coupons

4 Google, Shopper Marketing Council, Mobile In-Store Research: How in-store shoppers are using mobile devices, April, 2013

5 Zavers by Google and Shopper Sciences, Coupon Usage Survey, December 2012


Personalization Tops Digital Coupon Benefits

Consumers don’t think about the technology behind the scenes of everyday transactions — they simply want the right products at the right time and price. Having the ability to personalize coupon offers gives retailers an opportunity to communicate one-on-one with customers and improve the overall consumer experience.

Retailers see the ability to personalize (72%) as the No. 1 potential benefit of digital coupons, followed closely by providing a new way to engage with consumers on their mobile devices (67%) (Figure 6). Approximately half (49%) also believe digital coupons will increase redemption rates.

Figure 6 Where Retailers See The Greatest Potential In Digital Coupons

72%67%

57%49%

37%29%

Ability to personalize offers/make promotions

more targeted

A new way to engage

with consumers on their

mobile devices

Less costly to process

than paper coupons

Increased redemption

rates

An opportunity to run

a ‘green’ initiative

Can help increase

the speed of POS

transactions

peRsonalization tops Digital coupon benefits 12

These consumer benefits mostly outweighed more tactical deliverables, such as lowering the costs of coupon processing (57%). Pharmacy/drug retailers were most likely to cite lowering processing costs as a key benefit, rating it equally with providing a new way to reach consumers (Figure 6a).

In fact, retailers see personalization of coupons as the key to unlocking cascading benefits for their businesses. As seen in Figure 7, the benefits of personalization start with increasing sales (72%), followed by increasing coupon redemption rates (57%) and more consistent and frequent purchases by individual consumers (55%).

Figure 2 (page 8) shows that retailers do not feel strongly that current paper coupon programs boost cart size. Digital coupon programs, on the other hand, can deliver personalization and targeting that in turn will drive increased sales and purchase frequency. Personalization drives relevancy; and relevancy drives redemption, larger carts and higher sales.

Retailers with strong loyalty programs can use the rich shopper data from those programs to help deliver more relevant, personalized coupon offers, resulting in more satisfying consumer experiences and higher redemption rates.

29%

71%

Big Box Retailer


GroceryRetailer


49%40%

56%

63%70%

74% 74%

11%

28%

35% 35%

68%

58%

71%

84% 84%

57%

49%

56%

32%37%

46%

Ability to personalize offers/make promotions

more targeted

A new way to engage with

consumers on their mobile

devices

Less costly to process

than paper coupons

An opportunity to run

a ‘green’ initiative

Increased redemption

rates

Can help increase the speed of POS transactions

Figure 6a Where Retailers See The Greatest Potential In Digital Coupons (By Industry Segment)

Big Box Retailer


GroceryRetailer


51%

72%

42%

84% 84%

54%

63%

50%

74%

78%

63%

95%

47%

53%

38%

68%

55%

57%

72%

42%

34%


Digital Delivers Coupon Benefits More EffectivelyAs seen in Figure 8, retailers strongly believe that digital coupons can help them become more relevant and valuable to their consumers. An overwhelming 90% of retailer respondents agree that digital coupons improve their ability to deliver personalized offers, and 84% say digital coupons improve their ability to collect and analyze consumer data. As many as 78% of retailers say digital coupons increase basket size, compared to 49% for paper.

Figure 7 Greatest Potential Impact Of Personalized Coupons For Retailers

More loyalty program/card sign-ups

Increased sales

Increased coupon redemption rate

More consistent and frequent purchases by individual consumers

Increased in-store traffic

Figure 8 Digital Coupons Best Vehicle For Delivering Coupon Benefits

PaperDigital Neither

26%

22%

61%

14%

49%

78%

28%

16%

61%

2%16%

90%

14%10%

81%

32%

16%

61%

5%

26%

84%

PaperDigital Neither

26%

22%

61%

14%

49%

78%

28%

16%

61%

2%16%

90%

14%10%

81%

32%

16%

61%

5%

26%

84%

Improves speed of checkout

Increases basket size

Diminishes potential for

fraud – customer or

employee

Improves ability to

collect and analyze

customer data

Improves ability to

deliver personalized

offers

Decreases handling/clearing

costs

Makes it easier to resolve potential

disputes with manufacturers

and/or clearinghouses

That’s been the experience of National Wholesale Liquidators (NWL), an 11-store big box discounter in metropolitan NYC. The retailer’s text-based promotions are becoming incrementally more personalized as they build up a consumer database, but they have already learned valuable lessons about the type and timing of digital coupons. For example, properly timed Spend X-Get Y-Free digital coupon offers have doubled their market basket sizes, according to Drew Bickel, Director of Planning for NWL.

Retailers also said that digital coupons lower costs:

n 81% report decreased handling/clearing costs

n 61% see improved speed of checkout

n 61% note that digital delivery makes it easier to resolve potential disputes with manufacturers and/or clearinghouses

Additionally, more than 60% of respondents believe digital coupons will reduce losses by diminishing the potential for fraud by both consumers and employees. In the past, retailers were hesitant to accept print-at-home coupons for fear of fraud. Thanks to vast improvements in reporting and tracking of digital coupons, many retailers now view them as safer than paper or print-at-home coupons.



Retailers work closely with their manufacturer partners to bring value to consumers. When asked about their manufacturer coupon strategies, 58% of retailers said manufacturers delivered coupons through digital media, only slightly behind traditional print (63%), and outpacing direct mail (55%) (Figure 9).

In the retailer deep dives, we see that pharmacy/drug retailers and grocery chains are more likely than other segments to report that their manufacturer partners use digital media for coupon delivery: 94% of pharmacy/drug retailers and 95% of their manufacturer partners use digital media; and as many as 63% of grocers and 60% of their manufacturers use digital media.

Retailers that have seen success with digital media will be more likely to encourage and influence manufacturer partners to use their digital channels as a medium for delivering coupons.

Retailer-Manufacturer Collaboration Moves The Needle On Digital Couponing

Figure 9 How Manufacturers Deliver Coupons To Consumers 63%

58% 55%41%

Print Media Digital Media Direct Mail In-Store

75%

10%

66%

10%“No, retailers already are sufficiently educated about digital coupons”

“Yes, retailers need more education about digital coupons”

Retailers strongly agree that both retailers and consumers need additional education about digital coupons (Figure 10). But in their self-evaluation, retail respondents feel more strongly that they need to catch up to consumers in their understanding of digital products: 75% say they need more educa-tion, compared to 66% of consumers, in their view.


The Retailer Learning Curve For Digital Couponing

Figure 10 Retailers, Consumers Need Digital Coupon Education

Retailers

Consumers“Yes, consumers need more education about digital coupons”

75%

10%

66%

10% “No, consumers already are sufficiently educated about digital coupons”

Retailers have been through several iterations of what might be considered digital coupons, beginning with printing manufacturer coupons at home, then posting circulars (with coupons) on web sites, loading coupons to a loyalty card, and now mobile coupons that can be read right from the shopper’s phone. But the bottom line is figuring out how to increase revenue from coupon delivery while improving customer satisfaction.

Roche Bros., an 18-store grocer in the suburbs of Boston, plans to adopt digital coupons in conjunction with digital wallets as shoppers begin to demand them. “We want to find a way to identify the consumer and have personalized offers, and reward people who shop with us frequently,” said John Lauderbach, VP of IT. One obstacle they cite is a lack of understanding about how digital coupon compensation/reimbursement works. “The infrastructure for coupon compensation is paper,” Lauderbach noted. “If (digital is) more convenient for the retailer, that would be great.”

the RetaileR leaRning cuRve foR Digital couponing 17

Retailers are confident that digital coupons are the future. The largest groups of respondents agree that in 2013, the number of paper coupons will stay the same, while the number of digital coupons redeemed will increase slightly. By 2018, however, paper coupon use is projected to decrease considerably while digital coupon redemption will increase dramatically (Figure 11).

“That seems to be the way the market is going, and a way to be relevant to younger, more tech-savvy people,” said Zellers’ spokesperson.


The Digital Future

IncreaseDramatically

IncreaseSlightly

Stay the Same

DecreaseDramatically

24%

12%16%

48%

20%

12%10%

58%

1%16%

21%

62%

14%10% 2%

74%

IncreaseDramatically

IncreaseSlightly

Stay the Same

DecreaseDramatically

24%

12%16%

48%

20%

12%10%

58%

1%16%

21%

62%

14%10% 2%

74%

Paper coupons now (in 2013)

Paper coupons five years from now (in 2018)

Digital coupons now (in 2013)

Digital coupons five years from now (in 2018)

Figure 11 Digital Coupon Redemption Will Dramatically Overtake Paper

Today, newspapers serve as a primary delivery vehicle for paper grocery and health and beauty aid (HBA) coupons. But newspapers are going mobile: The mobile newspaper audience was up 58% in an average month in 2012 compared with 2011, according to the Newspaper Association of America. New couponing strategies must reflect this trend.

The strategic benefits offered by digital coupons can help retailers achieve overall business goals, as indicated by a wide range of executives, including C-level, who are now involved in executing coupon initiatives. In addition to expected titles, such as head of marketing, head of merchandising, head of store operations and head of consumer service, 22% of retailers involve CEOs, 21% CFOs and 16% CIOs in coupon projects (Figure 12). C-level executives at department stores are more likely than others to be engaged in coupon initiatives, while fewer pharmacy/drug store execs at this level get involved.

the Digital futuRe 19

Figure 12 The Cross-Functional Involvement Of Digital Coupon Decision-Making


Retailers across industry segments are realizing that the benefits of digital coupons surpass paper coupons in a number of ways, among them:

n Cost savings

n Ease of delivery

n Improved consumer satisfaction

n Increased revenue

n Reduced fraud

Digital couponing also offers retailers vastly improved ways to identify, understand and build relationships with consumers based on their individual needs and values.

Our survey of retail executives indicates that the more merchants learn about how to implement digital couponing programs, the faster they will adopt digital as their primary couponing vehicle.

A large majority of retail executives believe the benefits of personalizing digital coupons will translate to higher sales, increased redemption rates, and more frequent purchases. An even larger majority agree that digital coupons improve their ability to track and analyze valuable consumer data that will likely result in bigger basket size.

Driven by these benefits and consumer demand, companies will increasingly embrace and adopt the digital coupon model.

Conclusion: Retailers’ Digital Couponing Predictions and Demands


AppendixSURVEY DEMOGRAPHICS

My company is a:

What is your company’s annual revenue?

How many stores does your company operate?

39%Grocery/Supermarket Retailer

13%Pharmacy/Drug Store Retailer

23%Big Box Retailer

25%DepartmentStore Retailer

24%$11 million - $50 million

18%Less than $10 million

17%$51 million - $500 million

11%$501 million - $1 billion

30%More than $1 billion

13%11-50

20%1-10

15%51-100

22%101-500

9%501-1,000

9%1,001-2,000

12%More than 2,000


About Retail TouchPointsRetail TouchPoints is an online publishing network for retail executives, with content focused on optimizing the customer experience across all channels. The Retail TouchPoints network is com-prised of a weekly newsletter, insightful editorial blog, special reports, web seminars, exclusive benchmark research, and a content-rich web site featuring daily news updates and multi-media interviews at www.retailtouchpoints.com. The Retail TouchPoints team also interacts with social media communities via Facebook, Twitter and LinkedIn.

About Zavers by GoogleZavers is a fast and easy way to offer the right coupons to the right shoppers, and track redemption in real time. Shoppers can find manufacturer discounts on their favorite retailer websites or across the web, and add the digital coupons to their online accounts. Savings are automatically deducted at checkout when shoppers swipe their rewards card or type in their phone numbers — no scanning or sorting necessary.

With Zavers, retailers can reward loyal customers with relevant coupons, extend incentive programs, and speed up settlements. For manufacturers, Zavers provides the ability to manage and track the effectiveness of coupon distributions, giving marketers access to realtime redemption data so they can tailor and optimize their campaigns.

411 State Route 17 South Suite 410 Hasbrouck Heights, NJ 07604

P: 201.257.8528 F: 201.426.0181 [email protected]

Learn more at google.com/Zavers.

http://www.retailtouchpoints.com/index.php?format=feed&type=rss

http://retailtouchpoints.tumblr.com/

http://www.linkedin.com/groups?gid=2265767

https://plus.google.com/115255934101318078449/posts

https://www.facebook.com/RetailTouchPoints

https://twitter.com/rtouchpoints

mailto:info%40retailtouchpoints.com?subject=

http://googlecommerce.blogspot.com/

google.com/Zavers

Business

Retailers Embrace Digital Couponing