Paper-based coupons are expensive to issue, time-consuming to redeem and hard to track. Yet they still dominate at retail. Here, MEF Minute looks at the challenges facing the mobile coupon sector.
Consumers love coupons. According to the trade body ACH, marketers of consumer packaged goods in the US issued 310 million coupons in 2013. Meanwhile US shoppers saved an estimated $3.6 billion by redeeming them.
The statistics reflect how hungry the public is for coupon-related bargains. But if shoppers love the money-saving element of coupons, they appear to be frustrated at the process of redeeming them.
NCH said the 310 billion figure was down from a peak of 332 billion in 2010. It revealed that one of the reasons for the decline is restlessness at the time it takes to clip coupons.
There are also frustrations for the brands undertaking the campaigns. The redemption rate on paper coupons is said to be one per cent. In other words, you need to print one million coupons to get 10,000 redemptions. Then there are fraud issues of fraudulent copying, with some consumers duplicating the same coupon. Finally, it’s difficult for marketers to track which consumer is redeeming which offer.
For all these barriers, the fundamental power of paper coupons endures. In an age of increased competition from e-commerce, they represent a powerful channel to sustain high street footfall. This is why marketers are so interested in mobile coupons. In the past five years, many specialist companies have emerged to offer a platform through which brands can send offers to opted-in customers either via SMS or app.
Recipients usually receive a unique number or a barcode, which is scanned by the assistant. The number links the coupon uniquely to the recipient, which solves the targeting and tracking problem inherent with paper. These coupon firms have enjoyed some success. For example, UK-based Vouchercloud gained 1.8 million registered users and had more than 2,000 active merchants in two years before being bought by Vodafone in 2012.
However, it’s undeniably true that the mobile coupon habit is far from mainstream. In 2015, GfK revealed that 70 per cent of consumer packaged goods coupon users in the US still use print-based coupons. It added that traditional FSI (free standish insert) coupons are redeemed at eight times the rate of digital coupons. It’s possible mobile is being held back by a universality. After all, paper works the same way for everyone. There’s also an issue of retailer acceptance at the point of sale.
Still, the analysts seem convinced that consumers will eventually gravitate to mobile as a channel for coupons. Juniper Research says brands will push 1.6 billion coupons to consumers by 2020. This is up from just 11 million in 2015.
One factor that may make a huge difference to the market is Bluetooth BLE. This is a long distance, low energy comms channel that links an app in the consumer’s phone with a small module called a Beacon. Retailers can install Beacons around their stores, and shoppers can fire up a mobile application that looks for them. The Beacons can be configured make offers to these nearby consumers.
According to Juniper, the response rates are very high. It cited the case of the Chinese jewellery chain CTF (Chow Tai Fook), which recorded redemption rates approaching 60 per cent for a 2015 campaign.
Another factor that may accelerate the shift of coupons from paper to mobile is the evolution of mobile payment wallets. Clearly, it makes sense to send a coupon or offer to an app that can also pay for the item. This is taking some time. Apple only announced the first integration of a loyalty program to its payment app in October 2015. That was with pharmacy chain Walgreens.