Retail Management 12th Edition by Barry Berman ,Joel Evans

Exercise 4

Case 4: Coupons in the Digital Era
After a 14-year decline in coupon redemption among consumer packaged goods (with coupon volume falling from its peak level of 7.7 billion redemptions in 1992 to 2.6 billion in 2006), redemptions rebounded somewhat and increased to 3.3 billion coupons in 2010. As an executive at one large market research firm observed, until the recession, "it wasn't cool to clip coupons. Digital is making it cool."
Although mobile and social media and other platforms are exciting, print coupons are still the most important coupon type in terms of marketing expenditures and redemption value. An industry executive who specializes in coupons states that free-standing inserts (FSI) still command 90 percent of the coupon market. Marketers spent $19.9 billion for FSI coupon distribution in 2010, a 5 percent increase from the 2009 level. A significant problem with FSI distribution is the poor redemption rate, 0.7 percent in 2010.
A significant trend is the increased use of targeted coupons by retailers. Many of these retailers now use in-store couponing programs in which coupon distribution is based on a customer's purchase history. For example, a customer who is a loyal Maxwell House coffee drinker may get a Folger's coupon. Some manufacturers have increased their use of themed coupon pages that highlight multiple brands, such as the P G Brand Saver (http://pgeverydaysolutions.com/pgeds/brand saver-coupons.jsp) that appears as a coupon book in many Sunday newspapers. P G has also developed a coupon book especially for Wal-Mart (www.walmart.com).
Another recent development is the use of digital coupons that are promoted and distributed by coupon sites, social media sites, and E-mail. One research study found that 290 manufacturers distributed digital coupons in 2010, a 17.4 percent increase from 2009. Despite this high growth rate, digital coupons still accounted for only 1 percent of U.S. coupon distribution in 2010. On a positive note, the distribution redemption share of total coupons was 9.8 percent in 2009 (up from 1.1 percent in 2006).
Cold Stone Creamery (www.coldstonecreamery.com), the ice cream chain, began to use digital coupons in 2010 through an association with Coupons.com (www.coupons.com), an online coupon aggregator. Twenty percent of Cold Stone Creamery's couponing budget was invested in digital couponing. The retailer's couponing for ice cream cakes was promoted on Coupons.com's Web site, at Facebook (www.facebook.com/coldstonecreamery), and via E-mail. Its digital coupons had a 14 percent redemption rate, far in excess of the firm's traditional 0.2 percent redemption rate. Cold Stone attributes the success of this program to the large number of Facebook and E-mail account holders who are loyal Cold Stone users. Cold Stone's digital coupon audience is also younger, more affluent, and more highly educated than those who typically redeem its print-based coupons.
Mobile coupons currently account for less than 1 percent of all coupons issued. However, with 68 percent of all U.S. households having a smart phone, this medium will grow very quickly for coupons. Stop Shop (www.stopandshop.com) uses mobile devices to produce coupons for customers based on the location of their shopping carts (by aisle) in the supermarket. This makes purchasing the relevant product relatively easy. One limiting factor to the growth of mobile couponing is the need to update a store's POS system to be able to read digital coupons.
Questions
1. What factors account for the large increase in coupon re-demptions Will the growth continue Why or why not
2. Are manufacturer-based coupons an example of channel cooperation or channel conflict Explain your answer.
3. Describe several tactics that a retailer can use to increase its in-store coupon redemption rate.
4. Discuss the pros and cons of digital coupons versus print-based coupons from a retailer's perspective.