The Internet and the Coupon Problem

It’s one of those marketing givens: consumer packaged goods (CPG) companies dislike coupons, yet can’t get away from them.

The thinking goes like this: there’s a class of consumers who search through the Sunday newspapers, the overstuffed envelopes that come in the mail, and the backs, sides, and tops of product boxes. They grab the coupons that are available and buy that brand. They’re loyal coupon-shoppers. They’re not loyal brand-shoppers. Brands feel they’re consistently paying (in a sense) for these shoppers’ purchases.

To make matters worse, if the brands stop printing coupons, not only do they not get bought, they tend to get flamed. Maybe the flaming doesn’t happen online, but it certainly happens. There’s an apocryphal story of a really big CPG company years back deciding to stop printing coupons in one particular market, just for a short time, just to see what would happen. They saw: people were angry, vocal, and vindictive.

Reward Loyalists and Reasonable Prospects

The solution CPGers (and really, all marketers) chase is the notion of focusing coupon distribution just on the segments that truly matter: brand loyalists and reasonable prospects. Giving coupons to loyalists represents a bit of a problem as well, but a reasonable one: if a consumer’s loyal and headed to the store to spend a dollar to buy your product, why would you give him a coupon? Doesn’t this mean the purchase he’s about to make suddenly generates less revenue? It’s a problem, for sure, but one brands seem happy to accept.

Reasonable prospects are people you believe you can leverage into a purchase, either away from a competitor or toward a brand-new purchase. By offering a discount on a first purchase, you may be able to get them to try something once, love it, and continue to buy it forever. Maybe. There’s a problem here too: it’s hard to wean customers off paying a discount price if they start there. Revoking the coupon represents a price increase.

Coupons Have Been Broadcast…and That’s the Problem

These little squares of paper, these coupons, are really complicated little things. The fact is, coupons are a practice of negotiation, strategic distribution, and consumer interaction.

We do it through broadcast media: print and on-pack. If there was ever a business problem interactive technology could solve, it’s the problem of coupons.

There have been more than a few entrants into the online coupon space over the years. The latest is RedPlum, which is really a new venture for Valassis, a company that’s been around a long time, sending those overstuffed envelopes mentioned earlier. The site is in its early stages, but it seems to be doing something right: allowing coupons to exist in a social space.

That is, in addition to providing the visitor with lots of coupons, it allows consumers to share the coupons with one another via widgets. (See this ClickZ blog post for more details.) The site itself is certainly a step above the top two coupon sites on the Net, Coupons.com and Coupon Chief (per a Google search for “coupons“). Coupons.com seems to have given up on any attempt to connect with consumers, and Coupon Chief provides lots of links and direct navigation.

RedPlum seems to have the right idea. There don’t seem to be a lot of coupons online right now (although that may have to do with my Zip Code or earlier fraud issues), but the idea of leveraging the fact that consumers want to share coupons with one another seems dead on. The problem the unnamed CPG company ran into when it stopped distributing coupons was not just that it didn’t get bought but also that it was criticized. Clearly, coupons are social objects.

What Needs to Happen

The next step in the online coupon solution must be a better understanding of consumer purchasing habits. RedPlum is ripe (pun, as always, intended) for a behavioral targeting system that would pay attention not only to frequency of use but also to distribution patterns. It’s entirely possible that one person could become a hub, distributing coupons over a large network.

As well, it should consider all the other social media tools that would allow coupon mavens to bubble up, such as the ability to publish a list of “my coupons” complete with comments and feedback on retailers and offers, and the ability to embed a coupon widget on a blog or a post.

That way, the coupon problem would be solved bottom-up, rather than top-down. No brand manager will ever be able to whiteboard-up a perfect broadcast solution to the coupon problem. But creating a coupon space where consumers can lead? That may just be crazy enough to work.

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