Is Overcouponing Hurting Your Business?

Article Featured Image

coupons and offers," Hodkinson suggests. Diluting excessively available online offers with more targeted money-saving opportunities that get customers back into the store to browse is one way to do that. "By implementing a high level of targeted mobile couponing, brands could help revitalize the brick-and-mortar model, and may rely less on online couponing," Ostrovsky agrees.

Solving the Consumer Packaged Goods Crisis

Brands that produce consumer packaged goods (CPGs) have suffered tremendously as popular television shows such as TLC's Extreme Couponing have turned the practice into a sport, featuring consumers who spend as little as $10 on purchases that total thousands of dollars before coupons are scanned.

Even in less drastic cases, CPG companies typically have the least loyal customers. CPGs are considerably less expensive than other coupon-friendly items, such as clothing or electronics, meaning consumers are more likely to experiment with different brands and "shop around depending on the best deal," Ostrovsky says. Adding coupons spells even more trouble. "Many shoppers...won't think twice about switching brands if one offers a coupon and the other doesn't," he explains.

For CPG brands to benefit from offering savings, the companies need to use coupons to build loyalty, not discourage it. A Denver-based start-up cleverly named Ibotta (pronounced "I-bought-ah") is helping CPGs achieve this by making customers work for their savings, rather than giving them away.

Before shopping, users select offers for certain products in the Ibotta app and complete tasks that include learning a fact about the brand, taking a poll, playing a trivia game, posting on Facebook, or watching a video ad. In exchange, the app offers 25 or 50 cents for each completed task. Juice brand Simply Orange, for example, offers customers 25 cents to take a poll, to like the brand on Facebook, and to learn a fact about the brand, for a total of 75 cents in savings on any size and variety of the juice at a participating retailer.

After claiming the offer, consumers have to buy the item at one of the participating stores (Target, Walmart, and Walgreens are among the 40 current participants), take a photo of the receipt, and scan the bar code of the item. Once the transaction is verified, the money is transferred into the consumer's PayPal account.

According to CEO Bryan Leach, Ibotta's business model works because it's attractive to both brands and consumers. The reward for consumers is obvious, but for brands it's a bit more nuanced. "In a nutshell," Leach explains, "companies win because they get consumers to not only buy their brand, but also engage with it in meaningful ways by sharing on social media and learning interesting facts about it. This has the potential to grow brand awareness and build loyalty."

While traditional CPG coupons are offered as weekly deals and short-term discounts, offers on Ibotta's app could be available for months, which is also conducive to forming a more loyal customer base. Ibotta's solution, Leach explains, attracts users with longevity. "Because the offers are long-lasting, customers might make a permanent switch to a brand they didn't previously buy," he says, "rather than switching to their original preference within a week because the promotion ended."

The reason brands can afford to honor Ibotta's discounts is that they are getting two valuable things in return—engagement and data. The purchasing data allows brands to track consumer behavior in real time and gather intelligence on how many times the offer was redeemed, where it was redeemed, and the demographics of the consumer. "These aren't 'coupons'—they're marketing strategies that are mutually beneficial to both consumers and companies," Leach says.

As of April 2014, the Ibotta app had generated roughly 15 million unique brand engagements, and had saved its 700,000 users about $1 million over the last six months, according to Leach.

As companies consider the coupon strategy that best suits their needs, one thing is clear: Couponing has to return to its roots by getting customers back into stores and building brand loyalty. Though many small businesses have adopted innovative technologies to help them thrive, bigger companies have been slow to follow.

Still, progress is being made—even JCPenney is learning from its mistakes. The retailer not only brought back coupons, but regained control over its distribution by putting the deals right on its e-commerce site, eliminating the need for customers to search elsewhere and abandon their shopping carts.

"We've made it easier than ever to find all the best JCPenney coupons in one place. Whether you're hunting for a printable in-store coupon or an online coupon code, the savings start right here," the company wrote on its Web site. JCPenney is upping its coupon-centered marketing as well. "We love to keep it fresh and exciting—sign up for new deals and promotions sent straight to your mobile phone or email inbox and you'll never miss out on another offer," the brand promised on its site.

Is this strategy enough to keep JCPenney away from the brink of another nightmare? "Only time will tell," Ostrovsky says, "but either way, their mistake is a good lesson in coupon moderation."

Associate Editor Maria Minsker can be reached at mminsker@infotoday.com.

CRM Covers
for qualified subscribers
Subscribe Now Current Issue Past Issues

Related Articles

Meeting the Mobile Marketing Data Integration Challenge

Switch from a channel-centered to a customer-centered approach.

Card-Linked Marketing Offers Better Return on In-Store Ads

A new measurable marketing channel is causing retailers to take notice.