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.