Online Coupon Debate

One of the biggest issues within the Internet industry is that of online privacy and its impact on consumers. But there is another evolving issue that could have a major impact in terms of how consumer packaged goods manufacturers and supermarket retailers use the Internet for promotions. This issue deals with consumers who are printing online coupons from their home computers. Driving the urgency of the issue is the recent introduction of several Internet sites that allow consumers to do just that. Without adherence to secure industry standards, these types of coupons could lead to significant increases in fraud and misredemption.

Coupon fraud, as it stands today, comes in the form of misredemption and malredemption of coupons. Over the years, prevention and detection procedures have been put into place to minimize abuse. With the advent of better PC software, graphics, scanners, and printers, there is the potential of increased fraud unless Internet vendors are held to traditional techniques that would make counterfeiting very difficult using home computer equipment.

Traditional coupons (newspaper FSIs, in-store, and mail) are almost always printed on special paper (thermal, glossy, or paper with watermarks), printed in color (either the paper stock or the printed images), and printed on both sides. Coupons with these characteristics are difficult to produce without sophisticated equipment and are easy for cashiers to recognize and identify.

Home-printed coupons, on the other hand, are relatively easy to manipulate and mass produce using inexpensive computer equipment. Consumers don’t even need a scanner or graphics software to do it. With reasonable technical skills, the coupon print image can easily be intercepted – even with the special coupon print controls that some Internet sites have. The coupon bar code, value, or even the offer can then be manipulated, and as many copies as desired can be printed (or copied). It is almost impossible to detect if these types of coupons have been altered without special computer equipment not normally found in the checkout lanes of supermarkets.

This circumstance requires the more than 350,000 cashiers in grocery stores across the country to, in effect, police this problem. This isn’t a good solution for manufacturers, retailers, or the cashiers. The industry will have to make a choice whether to accept or reject user-generated coupons. If home-printed coupons prevail, a Pandora’s Box may very well be opened for the grocery industry.If fraud is detected at the clearinghouses or by the distributing vendor’s post-redemption security methods, the damage has already been done.

There are several industry-accepted methods of securing online couponing: installing special technology (such as printers or kiosks) in stores to control distribution of the coupons; replacing the printed coupon with an electronic discount at the checkout stand; or delivering the coupon via a secure off-line method such as the U.S. mail.

In the first approach mentioned above, there are at least two vendors with secure solutions. Consumers using Catalina Marketing’s Supermarkets Online ValuPage service visit a Web site and print a shopping list – rather than coupons – that is scanned at checkout. As participating products are scanned, “Web Bucks” are printed on special printers (and paper) alongside the point-of-sale terminal. Likewise, shoppers using Inter*Act’s Shopper Perks system, which has kiosks installed in several East Coast stores, select their offers online and scan their loyalty cards at the kiosk to receive the corresponding discounts at checkout.

The second example of secure solutions involves the vendor and retailer implementing an electronic discount application whereby offers selected from a Web site are communicated to the in-store POS system. Consumers using this type of online couponing receive discounts at checkout by scanning their loyalty cards and purchasing the applicable products. This approach is implemented at Dick’s Supermarkets in Wisconsin through SuperMarkets Online, Relationship Marketing Group, and PlanetU.

The third approach allows consumers to select designated offers online but receive the actual coupons via mail. Both Custom Coupons and PlanetU have implemented this approach in several regional markets.

Each of the above secure solutions avoid the home-printing of coupons. In this way, the user is never in control of the actual offer distribution. Major manufacturers and retailers are supporting these Internet solutions, and there have been no significant fraud or misredemption problems reported.

About three years ago, the Joint Industry Coupon Council (JICC) issued a white paper on the subject of Internet couponing. At that time, online consumer promotions were in their infancy and only a few vendors were offering online solutions. Today, the Internet continues to be an excellent medium to communicate promotional offers to consumers in the home – as long as the industry is diligent about how it is done and the necessary controls are put in place. The easy way out is for the vendor (who does not have the potential fraud liability) to allow the user to control the distribution process and let the manufacturers and retailers worry about the consequences.

It is time to revisit this critical issue and for industry leaders to adopt “safe and sane” Internet coupon standards.