3 Ways to Harness the Power of Digital Coupons

When the economy is down, coupon distribution and redemption rates go up. And boy, has it been down. The consequences of the 2007-2010 financial crisis was, quite simply, staggering. From June 2007 to November 2008, Americans lost more than a quarter of their net worth. The S&P 500 was down 45%. Housing prices dropped 20% from their 2006 peak. And retirement assets, savings and investment assets, and pension assets lost an incredible $8.3 trillion.

It’s little wonder that consumers have been and still are looking for money-saving values. In fact, 2009 was the most active year in history for coupon distribution with 311 billion coupons distributed by CPG marketers—up 10.7% over 2008. And to top that, coupon redemption in 2009 was up by 25% from the previous year.

FSIs (Free Standing Inserts) held their ground in 2009 as the leading method for coupon delivery with just under 85% of all coupons distributed. However, internet coupons took flight as the fastest growing mode of couponing in 2009. This growth is predicted to explode in the coming years, exacerbated by the boom in smart phone use. During the first half of 2010 alone, the number of digital coupons offered increased by 84.0% compared to the first half of 2009 and the number of manufacturers distributing digital coupons was up 31.5%. And it’s no surprise—with 63% of all U.S. consumers having access to the internet directly from home. But why is digital couponing so hot right now? Here are three reasons.

1. A Favorable Consumer

We’re discovering that digital coupons attract a very favorable consumer. This typically female shopper has a higher income, larger household size and spends more across more product categories. She reportedly has an estimated average household income of about $96,000—that’s 14% higher than the U.S. average. She also considers herself an early adopter and is eager to use coupons to try new products.

2. Positive Performance

Manufacturers and retailers alike are jumping on the digital coupon bandwagon and with strong demonstrated successes, it’s easy to see why. Compared to traditional coupons delivered via FSI over a two-year period, a study performed by Knowledge Networks showed that digital coupons have had very positive ROI comparisons, returning $0.60 on the dollar compared with $0.67 for traditional FSIs. They were proven to drive incremental volume and motivate new users. On average, the incremental volume driven by a digital coupon was 78% compared with 63% for the traditional FSI and 53% of digital coupon users were reported previous non-buyers vs. 32% for traditional FSIs.

On top of these metrics, digital coupons also provide in-depth tracking and measurability, they’re quickly executed, aid in consumer relationship building and can yield additional consumer insights, not to mention additional traffic to your brand’s website. Perhaps most importantly, digital coupons allow you to reach an entirely new, attractive audience of coupon users. These aren’t the consumers who are waiting for the inserts in their Sunday paper each week—they want savings on-demand and when they Google “grocery coupons,” if you’re brand doesn’t pop up, you might be losing out.

3. Execution Excellence

While there are many types of internet coupons out there (free shipping promo code, anyone?), print-controlled coupons have been developed to provide CPG marketers with a secure and effective way to offer coupons to shoppers via the internet. We’ve all heard horror stories about couponing fraud and mis-redemption and internet coupons certainly aren’t immune to it. If anything, they can be more susceptible to it if not executed properly. So, if you’ve decided to execute a coupon offer online, it’s essential to follow some key best practices in order to ensure a positive consumer experience as well as a program that’s safeguarded against fraud and over-redemption. The list is long, but includes implementing technology which prevents the coupon image from ever appearing on-screen in order to avoid potential copying, utilizing anti-coupon capturing technologies to defend against hackers, as well as visible and non-visible security features, rolling expiration dates and the list goes on. It might seem like a complicated process but EMA has extensive experience dealing with many of the reputable vendors that offer digital coupon products and we make it a priority to be at the forefront of newly available technologies.

What’s Next?

Obviously, the next step for digital coupons is mobile. Many providers already offer mobile applications for smart phone users as well as direct-to-card technologies that allow consumers to load coupons directly onto their grocery store loyalty card to be applied when they make a valid purchase. Several large retail chains have already adopted this, and more will follow. Smart marketers will find ways to promote to their consumers through digital coupons, integrating them within mobile websites and social media campaigns to facilitate ongoing interaction with their brands.