Friday, November 18, 2011

Coupons, Coupons, Coupons

If you haven't noticed, an abundance of coupon and daily-deal sites have descended upon us with stealth speed. Combine the popular kids of the group like Groupon, Foursquare, and Yelp with the constant rumors of other online players moving into the space and the list goes on and on, and then on some more.  
To put it all out on the table -- consumers have grown to expect discounts and are more than willing to switch to brands and products that provide the best deals. But what's really fueling the fire behind the demand and how can brands and retailers regain control of what feels like an out of control discounting spiral?
Let's get down to the nitty-gritty. What's driving the consumer to seek discounts?
Here are four factors that are likely the driving forces behind the couponing epidemic (or windfall for you deal addicts): 

Economic slowdown
2007 was the year the proverbial music died. The financial bubble-burst left us all in shock, and the after-effects left most people scrambling to adapt. In times like those, the thrifty tend to thrive, and so couponing became a key strategy for consumers looking to stretch their dollars to the limit. Even now, as the economy rebounds, couponing and deal seeking continue to flourish. According to the comScore study below, 66 percent of consumers said they used coupons in July 2010, compared with 59 percent two years earlier. The percentage of respondents who reported shopping online for deals increased from 24 percent in 2008 to 32 percent in 2010.

The explosion of social media
The mass adoption of social networks like Facebook, Twitter, Myspace, and others has created a digitally social audience that has never been seen before. To put this in perspective, keep in mind that Facebook grew from 27 million users in July 2008 to over 150 million in July 2011. That's not just you on a social network -- but your mother, brother, sorority, bowling league, and probably your old eighth-grade math teacher.
What's more important than the quantity of users is that those users are consumers, and consumers are now engaging brands on social media networks. They're also looking for more than just content. Simply put, "likes," retweets, and mayorships aren't enough any longer; it's about added value, and this is where discounts are king. According to a study by Merkle, consumers (aka, social media users) who choose to become a fan of a brand on Facebook most often do so to receive exclusive deals and offers, including coupons.

The digitization of coupons and deals
To capture this movement, more and more brands and retailers made their coupons and deals available online. Daily deal sites like Groupon and LivingSocial have helped popularize digital coupons while offering some fun content alongside it.
This led consumers to embrace digital couponing at a staggering rate. eMarketer forecasts that 47 percent of U.S. adult internet users (approximately 88.2 million individuals) will use online coupons in 2011. Another study by Experian Simmons found that the percentage of households using print coupons has not changed much since 2005, but the percentage of households using digital coupons has risen 83.3 percent.

Smartphone usage
With smartphone penetration hovering around 40 percent and with another estimated 10 percent gain for the end of this year, consumers are poised to receive mobile coupons in a massive way. Additionally, while mobile coupons only represent a small share of digital coupons, they have enormous potential to become the couponing medium of choice in the near future. Because mobile coupons influence a consumer in the midst of making a purchase decision, retailers and brands are beginning to experiment with this type of delivery standard. Imagine how great it would be to unlock a 20 percent discount while standing in line at a local restaurant. The best part about it all is that a customer can gain access to said discount with only a quick download of an app or a check-in, which takes only a matter of seconds.
While understanding this new phenomenon helps bring some clarity to consumer behavior, it doesn't truly clear the fog when it comes to how brands and retailers can develop an effective coupon/deal strategic plan.

History is telling
As many historians would agree -- it is critical to learn from the past. Believe it or not, there's a rich heritage and history surrounding the appropriate and inappropriate use of coupons and deals. More than 120 years of trial and error, by tens of thousands of brands and retailers, actually holds the secret to how smart coupon and deal offering can be achieved.
Much like how they're used today, coupons were first developed to drive product trial, encourage product use, and gain market share. In 1888, a very clever man by the name of Asa Candler used the first paper ticket coupon for a free glass of Coke to help market the new soda and unknowingly started a revolution, in more ways than one.
By 1909, C.W. Post provided the public with 1-cent coupons to promote Grape Nuts cereal, which was likely considered an epic deal at the time. By 1940, big chain grocery stores jumped on the bandwagon and began using coupons to attract consumers away from purchasing at local markets. Then in the 1990s, customer-centric marketers used coupons to surprise their best customers in an effort create customer loyalty and re-engage valuable customers.
Today, the social media explosion requires brands and retailers to entice their followers with coupons and deals to create positive social sentiment.
Despite many cut-and-dry examples of couponing and deal offering, lots of retailers and brands simply see it as a means to buy future sales and tend to over-coupon. Have you ever heard of too much of a good thing? This is true in the case of coupon saturation because it has created a new breed of deal-seeking consumers. TLC recently launched a series, called "Extreme Couponing,"  about everyday customers gaming the system and saving hundreds of dollars. While this was not the intent of the brands and retailers that issued the coupons, these die-hard coupon-cutting hustlers provide a powerful example of why coupons and deals should be strategically delivered.

The future
No one can predict the future, but I think it's safe to say that couponing is here to stay. Communication media will evolve and tactics may vary, but brands and retailers will continue to use coupons and deals to drive customers to purchase. Doing this the smart way will require retailers and brands to recognize consumer demand, leverage historical data, and adapt a coupon supply strategy that delivers customer incentives effectively. Now ask yourself: Is your brand winning or losing in the coupon and deal game?

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