Is Overcouponing Hurting Your Business?

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told Bloomberg Businessweek in a fourth-quarter conference call last year. "But we learned she prefers a sale. At times, she loves a coupon." With Johnson let go last year, the company has been working to rehabilitate its image. Ullman is back, and so are coupons.

Getting rid of discounts entirely is rash and unnecessary because couponing has become a tradition that Americans love, as well as a marketing practice that brands could benefit from when it's executed effectively, according to Ostrovsky. "Overcouponing isn't just a question of the quantity of offers; it's a question of quality as well. Mainly, it becomes a problem when brands aren't mindful of what offers they're distributing, how they're distributing them, who's receiving them, and how are they being used," he says.

Tracking and Targeting

Historically, couponing played an introductory role—it was about introducing consumers to new brands, or introducing existing customers to new products. "Now that it's so easy to post and claim coupons on the Internet, it has become a race to the bottom, a question of who can offer the lowest price," Amna Kirmani, professor of marketing at the University of Maryland's Smith School of Business, says. Rather than allowing offers to run rampant online, she suggests, companies should balance e-commerce coupon codes with in-store-only offers that bring customers back into physical locations.

According to Kirmani, local businesses are leading the way in revolutionizing couponing. Behavior- and location-based targeting, for example, have played major roles in helping local businesses build effective couponing strategies by bringing consumers past the mobile or e-commerce experience, where small brands may have a modest presence, and into stores. PayPal, for example, helps its partners use coupons effectively by leveraging the power of location and data-driven targeting through the PayPal Media Network, which provides targeted advertising and offers products that are distributed on mobile devices.

PayPal's redesigned mobile app now includes a "Shop" section, which enables users to locate nearby merchants by searching PayPal's partner database. This includes mostly small local businesses, but a few more recognizable brands, such as Home Depot and American Eagle Outfitters, as well. The app has a search bar so users can search for specific businesses, but also enables users to browse, sorting the merchants by location, the types of coupons and deals they currently offer, and whether or not they accept payments through mobile wallets.

Furthermore, as users interact with other apps on their devices, the PayPal app serves up targeted ads, sharing special offers available nearby. Because the app is connected to a consumer's PayPal account, PayPal Media Network's targeting tool can track purchasing history and allow the merchant to make decisions based on that data. American Eagle could, for example, choose to serve an ad for a $10 coupon to anyone who's near a store and has been a customer in the past, but hasn't made a purchase in more than six months. This type of offer can build urgency and momentum, inspiring consumers to make the purchase immediately not only because the discount is lucrative, but also because they're already nearby.

"With the PayPal app, we're creating custom audiences for our merchant partners. Not only are we targeting the likeliest customers based on their location, but we're also giving the merchants an opportunity to customize to whom they serve their ads," Sarah Hodkinson, the company's director of marketing and sales strategy, explains.

Hodkinson also points out that offers aren't shareable and won't spread like wildfire, as some online offers do. Each person can only redeem a coupon by logging in to his or her PayPal app, checking in at the location, claiming the offer, and then using the Web to complete the transaction through PayPal. Some stores also allow mobile payments, which involve the same steps, but don't require users to check out through the app. Instead, they simply present their device to the cashier.

Though most of the companies currently taking advantage of PayPal Media Network's mobile ad solution are small to medium-sized businesses, big-name companies should consider borrowing a few moves from their local counterparts' playbooks. "It has gotten to a point where there are just too many coupons out there, and companies need to win back control over the distribution of their 

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