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Digital Coupons Get Notoriety, but Use is Limited

By Nov 19, 2012

The vast majority of consumer packaged goods retailers have digital coupons packed into their promotional toolkits, but the offers still lag behind in a secondary role.

Some 84% of CPGs are now using digital coupons, with 45% using them in a “supporting” role because of its limited scale. Another 42% said they have dipped a “toe in the water” to test the offers, according to a new survey by the Shopper Technology Institute (STI), conducted by Partners in Loyalty Marketing (PILM).

The reasons these coupons are used, as reported by 13% of respondents, is to do the strategic work of “securing incremental merchandising at key retailers” and to “amplify an integrated marketing campaign.”

Across the board, there are 311 billion coupons of all kinds distributed annually, with 3.5 billion redeemed, according to Inmar. Of those, 273 billion are distributed by freestanding insert, with 1.5 billion redeemed, and there are 1.2 billion digital coupons distributed with redemption of 0.2 billion.

The bottom line for digital coupon marketers is that while these coupons makeup a very small percentage of total coupon distribution—much less than 1%—they are over 5% of redeemed coupons.

“This shows that people who take the time to print-at-home or load-to-card digital offers are much more likely to use them,” STI said.

The Results

Results were mixed. Some 68% said it was too early to tell, not one respondent reported that digital coupons were very successful, 6% said moderately successful, 16% said moderately unsuccessful and 10% reported their efforts have been very unsuccessful.

Even so, the study found that digital coupons have significant benefits over paper coupons. While 34% of FSI-delivered coupons result in new buyers, 46% of digital coupons attract new shoppers. And while 68% of FSI coupons result in incremental sales, 77% of digital coupons provide additional revenues.

When asked about evaluating the success of digital coupons, 73% based it on traffic and redemption, 40% said sales and volume vs. last year, and 23% checked sales and volume vs. a control.

Delivery vehicles

On the list of methods used the most to deliver digital coupons, coupon websites rose to the top cited by 48%, followed by emails at 16%, retailer websites at 16%, brand websites at 10% and social networks at 6%.

Of those methods used the least, mobile was cited most often by 33%, followed by social networks at 20%, retailer websites at 15%, brand websites at 11% and emails at 9%.

Respondents’ objectives for digital coupons? To drive sales, with 61% saying they use the offers to incent purchases.

Thirteen percent use digital coupons to introduce new products, particularly among younger consumers comfortable with mobile. Another 26% use these coupons for “other purposes,” such as part of an integrated marketing campaign or as a leverage point in talking to retailers to get another facing or special display, and in return, offering to put a digital coupon on the retailer’s website.

Key success factors

1. Ease of use and reach. “We see that the short turnaround time makes digital coupons a great preemptive tool. Because they are so reactive, you can turn them on and off quickly,” said PILM’s Tanya Bhothinard, senior director of client service.

2. Attractive demographics. “We see that digital couponing attracts the younger shoppers and they can be used to build a higher lifetime value,” she said. “CPGs are using the coupon websites as a way to introduce brands and get trial. We saw that one of the benefits of digital coupons was that it attracts new users much more than FSIs.”

3. Brand building. “Digital coupons have the ability to go viral. With all the bloggers out there, this is a very quick way to promote your brand, while achieving an authentic image. Because it is going viral through bloggers, someone else’s endorsement is promoting your program,” she said.

4. Purchase insights. “The ability to track, not just impressions, but also clicks, provides better insight into the purchasing decision funnel,” Bhothinard said. “Because you can track the impressions, you know how many people are printing, and then you can put unique optical character recognition codes on your coupons to find out the redemption.”

5. Potential for lower costs. “Some manufacturers see much lower costs than with traditional printed coupons, meaning FSIs, for the most part. And then the cost for versioning is much lower. When you do versioning on paper, you have to go through so many renditions and there is that up-charge. When you do the digital coupon, you just slide things in and out, and it is very easy to do. And then the load-to-card coupons are less prone to fraud. So there is some cost savings there as we see more people move into the load-to-card arena,” she said.

Obstacles to digital couponing

  1. Lack of distribution control
  2. Low unit and redemption volume
  3. Limited acceptance
  4. Stacking or doubling down
  5. High settlement costs

“From the survey, we learned that digital couponing is a new technology and people are embracing it,” Bhothinard said. “We are not sure what is effective in terms of success from a manufacturers’ point of view, but we know they have to be there. Right now it is being used similarly to paper coupons to incent sales. For this, tracking and evaluation will become more and more important while going down this path.”