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Digital Coupons

Digital Coupons are virtual coupons that involve no paper and are tied directly to a unique identifier that triggers in-store redemption. Read the latest on this innovative method of couponing.

December 31st, 2011

3 digital coupon trends that will impact 2012

I am amazed at how rapidly the digital coupon market is evolving.  I recently was invited to speak at the Shopper Marketing Expo sponsored by the Path to Purchase Institute where I discussed what some of our customers and the market is doing.  The topic?  What’s New in Digital Coupons and the Path to Purchase.  I thought I’d share some of my presentation in this post.  You can also replay an audio version of the presentation by clicking here.

Digital coupons are growing rapidly, with total downloads across our network more than doubling this year from 2010.  Digital coupons are growing because they deliver results by increasing reach, trial, and most importantly, incremental sales beyond what retailers and CPGs can achieve with paper coupons.

Here are the three key areas we believe will continue to create impact through 2012:

  • Retailer websites becoming the primary destination. Retail websites are emerging as the go-to destination for digital coupon downloads.  Indeed, across our retailer network, well over 80% of all digital coupons are downloaded from retailer websites (the rest are from consumer destination sites like AOL Shortcuts, Cellfire, or P&G eSAVER).  By aggregating digital coupons from multiple coupon providers, retailers are able to offer shoppers a “best of the web” source for coupons.  More importantly, retailers and their CPG partners are using digital coupons to enhance and extend the sales plan online by, for example, featuring digital coupon call outs in the print circular, creating exclusive digital merchandising events tied to in-store promotions such as March Madness or Feeding America, and delivering personalized offers.
  • Social networking is evolving to be a powerful sales tool. Social networking sites provide a vast new opportunity for retailers and CPGs to reach and engage shoppers.  Indeed, according to recent research, 25% of shoppers visit a retailer or CPG Facebook page at least once a month, primarily to find sales information and coupons.   That’s a staggering number and far beyond what it was at time last year.  Kroger has had particular success using digital coupons to engage its shoppers on Facebook.  For example, it regularly features a Deal of the Day coupon tied to its Cart Buster in-store event.  More recently, Giant Eagle launched a holiday-themed Facebook app that included recipes, digital coupons, and a sweepstakes promotion.
  • Mobile couponing provides an always-on channel. Although it is still in its infancy, the mobile phone has an unparalleled opportunity to transform couponing in particular and the in-store experience more broadly.  Already today, more than one-third of smart phone users say they have used their phones to research food prices or product information while in the grocery store.   ShopRite, for example, has added digital coupons to its existing mobile apps and mobile Internet sites.  Shoppers can access all of the digital coupons available at ShopRite’s online digital coupon center and add them to their cards in real time.   Shoppers can also use the app to see what coupons they have already downloaded.  Longer term, the opportunity is to use mobile to create a richer shopping experience by incorporating such things as QR codes, health and wellness data, in-store mapping and product search, and personalized offers.

Digital coupons are already playing a key role along the path to purchase.  Their impact will only grow as more retailers, brand manufacturers, and ultimately shoppers adopt this new technology.

November 7th, 2011

Recognizing the shopper at checkout

To redeem digital coupons (truly paperless ones) at checkout, retailers must be able to identify individual shoppers in real time, in the lane.  Although the solutions and choices may seem abundant (and even complex), there are in reality only a few options available to retailers looking to deliver digital coupons to their shoppers.

With digital coupons, shoppers can find and download offers via the Internet, email, mobile phones, or in-store devices and automatically receive their savings at checkout without having to clip or print offers.  Unlike paper or print-at-home coupons, digital coupons are personally connected to the individual shopper.  Because of this, the retailer has to have a way to identify the shopper when she reaches the checkout.  Or, said another way, the shopper has to be able to say, “Hi.  I’m in the lane now.  Please give me the savings you promised me by redeeming my coupons for me.”

Because lane efficiency and shopper ease are critical to every retailer, processing speed and scale are essential.  There are two options available today that deliver these benefits:

  • Load to card.  Most retailers that are driving digital coupon usage today, including Kroger, Safeway, Giant Eagle, and ShopRite, link digital coupons to their shopper cards.  Digital coupons increase the value of the retailer’s loyalty program to the consumer by connecting shoppers and offers in a more timely, relevant way.  They also extend the ROI of the retailer’s loyalty program by taking advantage of their existing loyalty technology infrastructure.  For shoppers, downloading offers to the card makes it very easy to use digital coupons.  Once a shopper downloads a coupon, she can redeem it by doing what she typically does every time she is in the lane – swipe her card to get savings.   Interestingly I have spoken to many retailers over the past several months that are thinking about launching loyalty programs specifically to make it easier to deliver digital coupons and other incentives.
  • Using PIN pads.  This option is for retailers without a loyalty card program.  For these retailers, shoppers redeem digital coupons by punching their mobile phone number (or other code) into the PIN pad during check out much like shoppers use alt IDs in card retailers.  In this scenario, the shopper easily creates a personal account number (usually a mobile phone number) the first time she downloads an offer.  Shoppers can use their personal account numbers not only at the retailer’s own site and mobile apps but also with third-party coupon providers such as AOL Shortcuts and Cellfire.  Harps Food Stores (using our technology) and Meijer are two retailers using this approach.

Two additional options for identifying shoppers in the lane are just beginning to emerge:

  • Scan a mobile barcode.  Target has been experimenting with a mobile couponing program that lets shoppers redeem coupons by scanning a barcode from their mobile phones in the lane.  Here, the shopper uses a single barcode to redeem multiple coupons.  In effect, the mobile barcode plays the same role as a loyalty card by providing a trigger that calls the retailer’s back-end systems to retrieve and redeem digital coupons and promotions.  The challenge is that most retailers do not have the optical scanners required to accurately read mobile barcodes in a consistent manner.  In my experience, even at Target, which has invested in advanced optical scanners, I have had significant trouble getting the mobile barcodes to scan (this is probably a big reason why Target has not actively marketed the program since it launched over a year ago).   Although it is possible that new technologies will make it easier to scan mobile barcodes it seems that alternative solutions such as near-field communication (see below) will be a better and more scalable long-term solution to delivering digital incentives.
  • Near-field communication (NFC).  Perhaps the most promising long-term option for identifying the shopper in the lane is near-field communication.  Google recently generated a lot of press for its Google Wallet product that leverages NFC chips in its Android phones.  Apple has long been rumored to be working on its own NFC solution.  The value of NFC is that it doesn’t require any special action by the shopper to redeem offers, such as scanning a mobile barcode or entering the mobile number into the PIN pad.  All the shopper has to do is to have their phone in the lane and the technology can do the rest.  Several prominent retailers are getting behind NFC payment include Pete’s Coffee, CVS, and Walgreens.  Contrary to some of the hype surrounding the launch of Google Wallet, however, NFC alone cannot redeem digital coupons on specific items in the store (such as $1.00 off Tide or 50 cents off a box of Cheerios).  Google Wallet is integrated with the financial gateway and as a result can only provide discounts at the basket level; the retailer must still create a separate connection to the POS as well as a digital couponing platform (such as the one we provide to deliver item-level digital coupons and promotions).

Though some of the latter options seem futuristic, there are viable solutions available today that have been tested, refined and in high-volume use for years.  My advice:  Stick to the basics and re-engage with your customer to grow sales and loyalty now.  But keep your eye on horizon.  The growing popularity of digital coupons will push technology innovation and investment quickly, which ultimately increases choice and reduces risk for the retailer.

July 29th, 2011

250 million digital coupon clips & counting

Across the spectrum of providers, digital coupons grew rapidly in the first half of 2011, as retailers and CPGs continue to invest in this new medium.

Digital coupon downloads increased over 700% between the first half of 2010 and the first half of this year across our retail network.  We have now delivered over 5,000 unique digital coupon offers and over 250 million downloads over the past 2 years, far outpacing the rest of the market.

So, what’s driving the growth?  According to our customers, a few things:

  • Value-seeking shoppers.  Shoppers are using digital coupons to save money on their groceries.   In the first half of the year, shoppers downloaded coupons with nearly $125 million in savings across our network.
  • No longer an optional ingredient for Retailers and CPGs.  Retailers and CPGs are increasingly using digital coupons to drive sales and loyalty by integrating coupons into the circular, creating digital merchandising events tied to the sales plan, and developing co-branded digital shopper marketing programs.
  • Greater reach.  Retailers and CPGs are also using digital coupons to fuel social and mobile marketing initiatives that would be difficult if not impossible to execute with paper or print at home coupons.

What categories are most popular?

Shoppers are using digital coupons across a broad range of categories.  Across our network, the most popular category is personal care followed by paper, cleaning & home, frozen foods, and breakfast & cereal (see top 10 list below):

Total digital coupon downloads– top 10 categories

  1. Personal Care
  2. Paper Cleaning & Household
  3. Frozen Foods
  4. Breakfast & Cereal
  5. Cookies Snacks & Candy
  6. Condiments Spices & Baking
  7. Dairy Eggs & Cheese
  8. Beverages
  9. Baby
  10. Bread & Bakery

Although redemption rates vary by category, deli, meats & cheese, dairy, eggs & cheese, and bread & bakery all redeem well, suggesting retailers have a big opportunity in using digital coupons to promote the perimeter of the store and to deliver meal solutions.  The data also shows how more niche brands and categories, such as international cuisine and organic, can use digital coupons to stand out online and at the shelf.

Average Redemption Rates– top 10 categories (min 10 coupons)

  1. International Cuisine & Kosher
  2. Snacks
  3. Canned Goods & Soup
  4. Deli Meats & Cheese
  5. Household Needs
  6. Dairy Eggs & Cheese
  7. Beverages
  8. Bread & Bakery
  9. Organic
  10. Frozen Foods
May 3rd, 2011

To Groupon or Not to Groupon

General Mills recently became the first major CPG to test a deal on Groupon.  Although the test was by all accounts successful, I don’t believe Groupon and its many competitors will prove to be as effective as other social media options for large CPGs and retailers.

In its Groupon deal, General Mills offered a sampler pack of 12 General Mills products (including Fiber One bars, Cinnamon Toast Crunch cereal, and Fruit Roll-Ups), a $15 coupon book, and shipping for $20, a discount of over 50%. The company quickly sold through the 5,000 packages it had for sale in its two test markets of San Francisco and Minneapolis.

Given its huge popularity, Groupon is certainly a service worth testing.  However, deal of the day services are not a great fit for CPGs and their retailers for a few reasons:

  • Acquisition vs. Loyalty.  As many pundits have pointed out, Groupon attracts a large number of extreme deal seekers who are searching for huge discounts but aren’t likely to buy again without another big incentive.   As a result, Groupon is a much better tool for acquiring new customers than building loyalty.  Additionally, at this point there aren’t good ways to send different offers to consumers based on purchase history or other factors to develop purchase continuity.  Groupon could be an interesting vehicle for supporting a new product launch or as a turbo charged sampling tool (as General Mills did here) but the vast majority of CPG sales are for everyday items where the key driver of growth is to get existing consumers to buy more of the product.
  • Retail Collaboration.  Although many CPGs are experimenting with direct sales, most sales will continue to flow through retail partners.  CPGs will need to partner with their retailers on future Groupons if they want to see the vehicle deliver meaningful sales results (indeed, General Mills said that it will look to team up with retailers if it does future Groupon offers).  While it is relatively simple to offer dollars off a restaurant meal, for example, it gets much more complex when the offer includes multiple CPG products and different price points.  The financial, risk management, and operational issues alone could well overwhelm the incremental sales result it could generate.
  • Fit.   It is not clear consumers will respond to CPG deals in the same way they do for skydiving lessons, spa days, or a half priced entre at your local restaurant.  Most Groupon deals are for local products and services with high prices, infrequent purchase, and reasonable profit margins.  To put it mildly, that is not the case with most CPG items.    For its part, Groupon does see the challenges in becoming more relevant to CPGs.  As a Groupon spokesperson told Ad Age, “Packaged goods – that’s not why people look to us.”

If you think about Groupon as really just another social media channel, there are a wide range of broader social media and tools – including Facebook, Twitter, and mobile apps such as Foresquare -that allow CPGs and retailers to more directly engage shoppers and build long-term loyalty and sales. Done right, even deals of the day can drive sales and enhance collaborative marketing programs.  For example, Kroger and key CPG partners such as P&G, General Mills, Pepsi, and Nestle, recently ran a Cart Buster digital and in-store event.  In addition to strong in-store pricing, shoppers could find and download additional coupon savings right to their Kroger card.  Kroger also featured a digital deal of the day on Facebook that let the first 1,000 shoppers who responded download a coupon for a free product featured in the promotion, such as Charmin, Coffee-mate, Chex Snack Mix, or Pepsi Max.  Kroger and its CPG partners leveraged a wide range of media to promote the program, including social media, blogs, emails, display advertising, Kroger’s circular, and in-store marketing.

Groupon might get new feet in the door, but the real opportunity from social media is to build loyalty and sales throughout the path to purchase.

April 13th, 2011

Digital couponing picking up steam

34% growth in digital coupon distribution in one year.

5% to 20% digital coupon redemption rates vs. 0.9% for traditional coupons.

Those are a few of the recently released numbers that underscore the rapid growth and strong value provided by digital coupons.

New reports from Supermarket News (see Poised for Growth) and Shopper Marketing magazine (see Digital Delivery on page 16) provide in-depth looks at the pivotal role digital coupons are playing as retailers and CPG companies shift budgets from traditional to digital media.  With digital coupons, shoppers can automatically redeem coupons and other offers in lane without having to print or clip.  Unlike print at home and paper coupons, digital coupons seamlessly integrate into online, email, mobile, and in-store marketing campaigns making them easier to use and more convenient for shoppers and providing better reach and results for retailers and brands.

Although experts estimate digital coupons make up roughly 1% of the total coupon market today, they already account for 3-5% of redemptions at retailers with active digital coupon programs.  For a technology that just launched three years ago, that is remarkable growth.  These results are consistent with our own experience.  For example, YOU Technology recently announced that we have delivered more than 150 million digital coupons (providing more than $160 million in value) to shopper cards through our retail network —a significant milestone in the growth of digital coupons in general and our solution in particular.

The reports from Supermarket News and Shopper Marketing point to a number of factors driving digital coupons forward:

  • More relevant for shoppers. Digital coupons can reach younger shoppers who don’t use paper coupons and are proving to be an effective tool to drive sales and loyalty.  In addition, strong consumer demand for mobile and social coupons will further fuel digital coupon growth.  By delivering offers in a relevant way, at a relevant time, and in a relevant place, retailers and CPGs can better engage shoppers in and around the moment of truth.  This relevance, along with the ease and convenience of using digital coupons, is an important driver of digital coupons’ strong redemption rates (5% to 20% vs. 0.9% for paper coupons).
  • More offers and better values. Over the past year, the number of digital coupons has increased by 34%.  In addition, the number of CPGs participating in digital coupon events has jumped by 17% with over 150 brands actively participating in direct-to-card programs last year.
  • More retailers. Kroger has played the leading role in driving the growth of digital coupons.  More recently, Safeway and Target have launched prominent digital coupon programs and industry experts predict that several other large retailers will jump on board this year.  Retailers are also integrating digital coupons into their in-store merchandising and marketing initiatives, which in our experience drives an order of magnitude increase in shopper engagement.

Just as with online shopping vs. the mall, CDs vs. iTunes, and now the books vs. the Kindle, it will be consumers that drive the additional use of digital as an alternative method of accessing content—at a time and the way they prefer.   The digital coupon market is just getting started.

March 19th, 2011

To drive sales, think digital not print-at-home

Digital coupons can drive significantly more sales and loyalty than print-at-home or other paper coupons, underscoring the need for retailers and CPG companies to invest in this fast-growing promotional vehicle.  The reasons seem fairly logical.  They are more convenient for shoppers to use.  They are easy to access with mobile phones and in-store devices.  And they enhance and extend in-store merchandising and shopper marketing events.

According to recent research, digital coupons have a much greater impact on spending than print-at-home or paper coupons.  In particular, shoppers confirmed spending far more than planned with mobile and load to card coupons than they do with print-at-home coupons (49% said they spend more than they planned with mobile coupons, 36% spend more with load to card coupons, and only 25% spend more with print-at-home coupons, about the same as store emails).  These findings are consistent with our own analysis and third-party research results: digital coupons drive increased trips, trial, and sales when compared with other coupons.

Online coupons, including both print-at-home and digital coupons, continued their strong growth in 2010.  The number of online offers available increased by 37%, the largest across all types of coupon media.  The data masks an important fact – while digital coupons are still small as a percent of the total, they are growing faster than any other coupon type.  This trend will only continue as more retailers follow the lead of Kroger, Safeway, and Target, all of which are aggressively expanding their digital coupon programs because of the impact they are starting to see.

Print-at-home and digital coupons are sometimes lumped together into a single bucket.  Although they are available online, print-at-home coupons are not digital in any meaningful sense of the word since a shopper still has to print them out, remember to bring them into the store, and scan them at checkout just like any other paper coupon cut out from a FSI.  Digital coupons (as provided by YOU Technology) are fully paperless and integrate with a retailer’s point of sale system to let shoppers not only find offers online and via mobile phones and in-store devices, but also redeem them automatically at checkout, without ever having to print or clip.

In addition to driving more sales, digital coupons offer significant benefits over print at home and other paper coupons by:

  • Driving shoppers into the store. Because they are redeemed in the store, digital coupons let retailers and CPGs drive shoppers into the store to try new brands, stock up on existing brands, and cross-shop new categories.  Print at home coupons can be used at any retailer, even if they are printed from the retailer’s own website.
  • Providing more convenient, relevant and real-time communications. Digital coupons are more convenient for shoppers to find and use than paper coupons.   In addition, digital coupons allow retailers and brands to tap into fast growing media channels such as mobile (including both apps and text messaging) and in-store digital signage where it would be difficult if not impossible to incorporate a print at home or paper coupon.
  • Enhancing collaboration.  Digital coupons provide an ideal platform for collaborative marketing because of their ability to tightly integrate with a retailer’s existing loyalty program(s) and merchandising initiatives.  For example, Kroger and key CPG partners such as P&G, General Mills, Pepsi, and Nestle, recently ran a Cart Buster digital and in-store event.  In addition to strong in-store pricing, shoppers could find and download additional coupon savings right to their Kroger card.  Kroger also featured a digital deal of the day on Facebook that let the first 1,000 shoppers who responded download a coupon for a free product featured in the promotion, such as Charmin, Coffee-mate, Chex Snack Mix, and Pepsi Max.  Kroger and its CPG partners leveraged a wide range of media to promote the program, including social media, blogs, emails, display advertising, Kroger’s circular, and in-store marketing.

As the market continues to grow, retailers and brands need to launch their own digital coupons programs to take advantage of the opportunity and avoid getting left behind by more innovative competitors. 

January 7th, 2011

Mobile couponing poised for growth

Mobile couponing is poised for strong growth in 2011 and beyond.

Mobile couponing provides a big opportunity for brands and retailers to reach consumers at the moment of truth when they are deciding what to buy.  Although mobile couponing remains a small part of the overall market, the numbers have been growing.   According to recent research analyzed by eMarketer, for example, 15% of consumers surveyed said they had redeemed a mobile coupon—a figure that while still small, has in fact doubled over the past year.

In many ways, the challenge has been that brands and retailers have not yet invested heavily in mobile couponing apps or text messaging programs.  That is starting to change.  Most prominently, Kroger has just launched mobile digital coupon apps for both iPhone and Android devices.  Shoppers can use these apps to view and download all the digital coupons available at Kroger’s website (Kroger averages over 100-150 offers a week from leading CPGs including P&G, General Mills, Unilever, Kraft, and Pepsi).  They can also view any coupons they have already downloaded, which will make it easier for shoppers to remember what offers they have on their card when they are in the store.

A few other retailers are also piloting programs to deliver mobile offers.  For example, Target launched a text-based mobile coupon program late last year.  As part of the program, Target sends exclusive coupons via text to shoppers who provide their mobile phone number.  In addition, Safeway is testing a coupon program with Foursquare and Pepsi that provides coupons based on mobile check-ins and other location-based activities.  (Both these programs have some potential drawbacks that might hold back redemptions.  Target requires multiple steps to redeem your coupons – assuming the scanner can read the QR code on your mobile phone.  And Safeway is using paper not digital coupons).

By rolling out a greater variety of mobile apps and text messaging programs, leading retailers and brands are beginning to drive what will be significant growth in mobile couponing over the next 12-18 months.

December 7th, 2010

This time it’s personal

Despite the rapid changes in the media industry, brand and retail marketers still primarily rely on the same tools they used 10, 20, even 30 years ago such as TV ads and printed fliers.

Marketers need to change because consumers have changed.  Consumers increasingly expect, and even demand, relevant messages delivered how they want it, when they want it.  The old one-size-fits-all approach is no longer enough to grow sales and build loyalty.

To win in the future, brand and retail marketers must take advantage of the fundamental shift from mass to marketing that is more multi-channel, personalized, and collaborative.

  • Multi-channel.  By tapping new digital channels, brands and retailers have a unique opportunity to impact purchase decisions by reaching consumers online, in-store, and on the go.  Digital coupons are a particularly good vehicle to fuel multi-channel marketing programs.  With digital coupons, consumers automatically receive their savings at checkout without having to clip or print offers.  Kroger is an example of a retailer who is using digital coupons to create compelling multi-channel marketing programs.
  • Personalized.  Consumers consistently say that personalized discounts on products they already buy are the most important factor in deciding where to shop.  These results are consistent with our own findings: redemption rates and sales lift can increase exponentially when offers are personalized using consumer and basket data.
  • Collaborative.  One important recent trend has been the growth in shopper marketing.  At its root, shopper marketing allows brands and retailers to collaborate on promotions and other marketing programs based on insights into the consumer to drive incremental sales and loyalty to both the brands on the shelf and the store as a whole.  Tropicana, for example, has created a retailer-specific overlay to its national Juicy Rewards loyalty program that gives Kroger shoppers double points for buying participating products as well as exclusive digital coupons.

The digital marketing space is growing rapidly as leading brands and retailers demonstrate the value they can create with multi-channel, relevant, and collaborative programs.  As Allen Johnson, AMR Research Director, recently put it: “The intersection of consumer, brand, channel, and technology isn’t just possible, but imminent.  It’s a space that is rich with opportunity and one in which we think companies should invest to reach a fundamentally changed consumer.”

November 10th, 2010

The rise of social couponing

Everyone it seems wants to tap into the sizzle of Groupon.  Barely two years old, Groupon marries social media, group buying, and couponing to provide consumers with deep discounts primarily on local products and services.

According to a recent article in Ad Age, a wide range of other companies, including leading retailers and CPGs, are creating their own Groupon-like coupon programs.   Wal-Mart, for example, recently launched a Facebook app called Crowdsaver that gave consumers 18% off a $500 plasma TV once the offer got 5,000 “Likes” (which it did in less than 24 hours).  On the brand side, ConAgra Healthy Choice posted a Facebook coupon that increased in value as more people liked it (from 75 cents off to $1.50 off to buy-one-get-one).

But social couponing does have some significant challenges.  In particular, it has been criticized for mostly attracting cherry pickers.  What’s more, marketers don’t want people to just like an offer – they want the offer to drive incremental sales.  Group buying (or liking) may be a gimmick but it appears to be a powerful one for getting people to share offers with their friends and encourage them to act.

Social couponing programs provide an important new opportunity for brand and retailers to:

  • Reach younger consumers, many of whom don’t read newspapers or clip coupons
  • Increase trial by using the power of “word-of-mouth” to get consumers to recommend a product to people they know—instantly providing more credibility.
  • Deliver more relevant offers by letting consumers themselves send offers to friends they know either buy the brand or might like the brand.
  • Reduce costs by using viral marketing instead of having to spend on paid media, FSIs or other mass marketing programs.

To get the most out of social media, we would recommend that brands and retailers:

  • Test . . . but make sure you learn.   Unlike traditional marketing, social media is very difficult to choreograph or control.  Marketers should find ways to test either on their own or through other sites but manage risk by setting limits on the number of coupons they make available (ConAgra did just this with its Healthy Choice social coupon).  In addition, brands and retailers should map consumers who respond to social coupons with their own data to see what types of offers and programs engage loyal consumers vs. cherry pickers.
  • Go digital.  Digital coupons are a natural fit with social media.  In the Healthy Choice example, ConAgra mailed the coupon to people who liked the offer, meaning consumers had to wait 3-4 weeks to get their savings.  By loading the coupon directly to a shopper or loyalty card, consumers can get their savings instantly whether they are online, in the store or on–the-go.
  • Go beyond coupons.  Social media can add significant energy to existing promotional programs.  We have long used a teaming feature with promotions we run with leading CPG companies and retailers that allows friends, for example, to pool the points they earn from purchasing participating products to maximize school donations.

Social couponing is a promising new tool for marketers.  Though embryonic, it will be worth watching how the market develops over the next 12-18 months and how big a role it can play in driving sales for brands and retailers.

October 20th, 2010

Explosive Growth Of Digital Coupons

What’s driving digital coupon’s explosive growth?

Kroger shared new data showing the explosive growth of digital coupons.  In a recent investor presentation, the company forecast it would conservatively cross 15 million digital coupon downloads a month by next March.  That’s a stunning number, especially when you consider Kroger only launched its online digital coupon center earlier this year.  This means that digital couponing at Kroger has grown from 0 to 200 million downloads on an annualized basis in only 12 months.   Based on some back of the envelope calculations, 5% or more of coupon redemptions in Kroger stores may soon be coming from digital coupons.   (Full disclosure, our company, YOU Technology, powers Kroger’s digital coupon center and digital shopper marketing initiatives.)

And Kroger isn’t the only one seeing big growth in digital coupons.  According to a recent article in Brandweek, digital couponing jumped by 84 percent in the first half of this year, compared to the same period in 2009.  Consumers are redeeming digital coupons at high rates.  Kroger says it is typically seeing 10% redemption rates.  Other research pegs redemption rates at 5 percent and 20 percent with some retailers reporting 40 percent redemption rates for highly targeted offers.  The opportunity could even be bigger as retailers begin delivering digital coupon and other promotional services in store and on the go to mobile phones.

So…Just what is driving this growth?

One main reason given by shoppers is that they are more convenient to find and use than paper coupons.  With digital coupons, shoppers can find and download offers via the Internet, email, mobile phones, or in-store devices and automatically receive their savings at checkout without having to clip or print offers.   But it doesn’t end there.  For retailers and brands, digital coupons open a host of new channels such as mobile, to reach consumers who don’t like to clip or print coupons.  Research bears this out.  Almost one-third of consumers who use coupons are exclusively using digital versions.  These consumers are much more likely to try new products than their paper-clipping counterparts, making them very attractive to CPG companies and retailers alike.

As the world becomes more multi-channel, retailers that can provide more compelling online and mobile experiences will gain a critical competitive advantage.    Savvy retailers are investing in digital coupons to grow their businesses by:

  • Creating online and mobile digital coupon programs
  • Allowing consumers to download coupons from third-party coupon sites such as AOL Shortcuts and Cellfire to their shopper or loyalty cards
  • Developing exclusive digital merchandising events tied to the sales plan
  • Collaborating with CPG companies on digital shopper marketing programs
  • Personalizing digital offers where possible with basket and other data

Digital couponing is very quickly taking hold.  Retailers and brands need to start investing in this new marketing channel or risk being left behind.

Related news

Kroger Digital Coupon Center

Brandweek:  Kroger simplifies Digital Couponing (August 2010)

Supermarket News:  Kroger Launches E-Coupon Center  (August 2010)

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