The concept of couponing in grocery retail is nothing new. For decades, retailers have used coupons to entice customers and drive footfall. The use of digital technology in couponing is growing, but admittedly is in its infancy in the UK. Michelle Russell takes a look at the increasing use of mobile and digital technology in couponing, what is driving this growth and what retailers are having to do in order to stay ahead of the competition.
It is fair to say that couponing has almost become a necessary evil for any grocery retailer operating in the UK. As economic confidence among consumers remains relatively low, retailers are increasingly using vouchers and couponing as a way of capturing a greater share in the competitive retail market. Indeed, any consumer that has ever shopped in a major grocery retail store will, at some point, have been handed a coupon of some description in order to be enticed back. And for the most part, they have become a successful form of winning custom.
According to figures from coupon and voucher services provider Valassis, in 2011, UK retailer coupon redemption grew by 40% to 230m. Five years ago this was just over half.
A spokesperson for Sainsbury’s tells just-food: “There is no longer any stigma attached to using vouchers and coupons so it is really important to reward customers for their loyalty in this way.”
However, as retailers and packaged food manufacturers increasingly turn to social media as a new and innovative form of marketing and consumers become more technology-minded with the development of smartphones and tablets, the need for businesses to embrace a more advanced form of couponing has become vital. Couponing technology providers believe it is the retailers that are early into this market that could be the big winners.
Andy Smith, client services director at Eagle Eye, a firm that uses patented technology as a way to distribute, process and measure mobile couponing, says smartphones have become just one way of targeting consumers in this way.
“It is quite evident that the whole area of digital couponing is very much current and is very much about where the customer behaviour is already residing and I suspect some of it is driven by things like Groupon etc. A lot of retailers are focusing on mobile, and quite rightly, because it’s portable and easy to transport offers but it’s not necessarily the place they’re being issued. You also have apps or offers through email, there are all sort of different channels where the offer might be issued from.
“One of the comment threads we see when talking with grocer retailers is the importance of understanding their customer from a multi-channel perspective. Retailers that get that right are much more likely to succeed.”
Smith says the last 12 months in particular has seen an increase in interest in the use of digital technology to drive couponing from grocery retailers. “Crucially, what we can also see is that it’s not difficult to issue a digital coupon.”
Anke Puscher, European business development director at Valassis believes it has become increasingly important for retailers to adopt new couponing technology in order to compete effectively.
“For retailers who haven’t got a loyalty programme, mobile couponing is a fantastic opportunity. You don’t need to know anything about the person that owns the handset but it is important that you can reach the person and you know you can link shopping behaviour to a time and to a handset. That gives you, at a very low cost, a great insight into behaviours that can be used in advertising and couponing and that is very important.
“Retailers are exploring these areas and how they can benefit from this new technology that consumers are using,” she tells just-food.
The difficulty, however, according to Puscher, is not the interest by retailers in adopting mobile or digital couponing, but the technology required for the transition from the mobile coupon on a smartphone handset to the end redemption.
“All retailers are very very interested in mobile couponing, but the transition from a mobile coupon that sits on a handset as an identifier to redeeming or transmitting the data to a system so that it can be verified, that is a big problem nowadays in the UK.”
Puscher says near-field communications, or NFC, may offer a resolution. Through NFC, consumers receive special offers on their mobile phone when they enter a shop or supermarket. At the till, consumers can then touch their phone on a POS terminal, which in turn reads the coupon and automatically applies the discount to the bill.
Puscher suggests the rate of adoption of this type of technology has been slow and that only “a few” retailers have, to date, taken advantage of this technology.
“[More] retailers will eventually make the investment when NFC becomes more readily available and more applications are possible.”
The story in the US is a very different one. The States appear to be more forward-thinking and ahead of the game when it comes to drilling deeper into consumer habits and offering a paperless and more convenient way of obtaining discounts.
The early adoption of handsets and tablets by consumers to aid the shopping process means that across the Atlantic digital couponing technology has taken off significantly. In the US, consumers use their smartphones to browse offers as they shop, using them as a way of gathering information. Something Puscher says is “quite a new and exciting development”.
A “safebook” application that Valassis developed for use on laptops, tablets or smartphones for the US market, garnered 25,000 downloads in the first month. The app presents coupons and vouchers in a usable format and links to loyalty cards making redemption easier.
“Redemption remains a critical point. It must be easy so that retailers can accommodate it with current technology,” Puscher says.
The app is used through Facebook, which she suggests is key. “It’s important to develop applications that are fun and easy for the consumer to use and linked to other applications that you already use so that it’s not another thing you have to open and engage with.”
Another company at the forefront of this field in the US is Cardlytics, a private company that has developed technology to analyse transaction data held by banks and to use this information to sell targeted advertisements to retailers.
Cardlytics analyse shopper habits through their bank statements and insert relevant adverts into these. Shoppers can then accept the discount by clicking on the box, which will then be rebated automatically to their account when they meet the conditions, such as shopping at the store within a certain period of time.
Cardlytics commercial director, Charlie Humphreys, says the system has been operating in the US for two and a half years and the company now works with over 330 banks and 70 top retailers, allowing it access to around 75m households.
“In the US, this model is now operating at scale and operating very effectively and driving a very high return on investment for retailers.”
Humphreys says the system allows retailers to target consumers more precisely, to cut out any operational requirements of distributing, collecting or managing coupons, to operate through a new media channel and use the data to more effectively measure consumer behaviour.
“From a consumer point of view there’s no need to print a coupon out, it’s all done at the back end. It’s significant and it’s growing very quickly. These banking channels are ones that historically have not seen any marketing. This really stands out and is done in a way that doesn’t distract the consumer from what it is looking at.”
Humphreys says the company is looking to adopt this system in the UK in the next few months.
Whether UK consumers will be open to adopting this type of targeting and privacy invasion for promotions is questionable. But given the number of consumers who are signed up to receive coupon deals via email, many may just see this as another convenient way of adopting a more frugal lifestyle with little hassle.
Puscher suggests the key to winning over consumers lies in the convenience of the redemption.
“For coupons take off in a mobile environment, applications need to be developed that are easy for the consumer to use.”
One retailer that certainly has its eye on this is Sainsbury’s.
“Mobile phones are an incredibly powerful platform in that they combine our personal life and shopping history with our physical location,” a spokesperson tells just-food. “We’re keeping a close eye on our mobile apps for Nectar offers and Mobile Scan and Go and how people use them to see how we can serve our customers best.”
For Smith, the next few years are “unquestionably” likely to see a number, if not all, major retailers investing in more mobile phone couponing technology.
“It will allow them to offer loyalty programmes, targeted programmes that are more campaign driven, also link with the brands, they are crying out to be able to digitally redeem at point of sale.
“The first of the grocer retailers that invest in this kind of capability for digital redemption at point of sale, they will be doing it almost certainly with a loyalty perspective, but they will equally benefit from brands that currently can’t direct their digital advertising spend in the way they can measure the impact at point of sale. If they have partners in retail that can do that then that benefits both. I think there will be big wins for those early into the market.”