Raising the bar on retailer coupons

 

Insights:

Raising the bar on retailer coupons

 

Duncan Campbell / Senior Client Manager

On average, a shopper is faced with around 40,000 products every time they enter a supermarket. Of this, they’ll buy approximately 250 of these products every year. As soon as they’ve purchased, they’re 30% more likely to buy a second time: they’ve tried the product and removed the risk. When buying for the third time this increases to around 50%, the fourth 60% and so on, with the curve gradually flattening out as purchases increase. It’s much easier therefore to encourage existing shoppers to buy more frequently than it is to bring new shoppers into a brand.

One way this can be done is through coupons, which are excellent for driving loyalty. Coupons have a bad reputation however, as they can be complicated to execute. We’ve outlined some common pitfalls and how best to maximise their impact.

An unremarkable offer

When it comes to couponing, the temptation can be to reach as many people as possible by reducing the amount of discount on offer. For example, issuing 200,000 coupons at 25% off, rather than 100,000 coupons at 50%. This is crazy. It offers poor value to the shopper as it doesn’t better what they’d get on an average day at the shelf, resulting in a huge wastage.

Solution: create value. It is better to have a smaller issuance, be more targeted and offer a better reward. Although total net redemptions will be lower, it will cost less to do and be significantly more likely to get the target shopper to buy again.

Trying to reach people who haven’t bought before

Often, brands don’t want to target shoppers who already buy into their brand and they target those shopping the category at large as their source of growth. This can be problematic for two reasons. Firstly, the modern shopper isn’t loyal to one brand, they buy a subset. They might buy Persil but will probably buy Ariel as well. Secondly, although they’re loyal to the subsets, that does not mean it can be extrapolated to the rest of the category. The Persil and Ariel buyer probably won’t buy Tesco own label as well. Solution: target the right people. Targeting should always be aimed at those who have previously bought the product. This will result in the coupon working much harder to drive incremental sales.

Thinking in volume

In some cases, retailers like a coupon to be activated within a designated time frame. This works well for retailers as it means they’ll hit broadcast targets but won’t necessarily work well for the brand or shopper.

Solution: take your time. A brand would be better placed to serve the same number of coupons over a longer period of time to ensure they’re hitting the right shoppers, rather than volume.

Asking too much

Coupons are often used to drive trial when they’re far better at increasing frequency or weight of purchase. Many coupons offer little or no messaging/branded content to explain what the product is; there just isn’t enough information for a shopper to make the decision to trial. Money off alone just doesn’t work.

Solution: drive trial. If the objective is to drive trial then consider using FREE, rather than money off. This is affordable if a brand gets its targeting right.

Summary

Coupons work best when driving loyalty, not trial. Take longer to activate and offer the right amount off, only use it for the latter if you’re prepared to offer a deep discount or for free. Targeting is everything: just think, if a shopper won’t buy a product when it’s on deep discount on gondola end, why would they buy it for a 25% off coupon? Getting a shopper one more rung up the purchase ladder will see them cement your product into their purchasing habits and show regular incremental sales; a much easier job than trying to get new shoppers in.

If you’d like to get to know more, get in touch via  hello@capturemarketing.co.uk