Friday, March 14, 2008

Coupon Loyalty

At my house we get a lot of coupons. I thought it might be worthwhile to do a little digging to find out a little more about customer loyalty as it relates to consumer coupons. First, some statistics:

1. 300 billion coupons are distributed in the United States each year, which equates to offers that have a total saving of $3 billion.
2. In the United States 1.26 percent of coupons are redeemed. This is only about one-third of the redemption rate in Canada where they redeem 4.46 percent.
3. The average household receives about 55 coupons a week which translates into 2800 per year. Of course, the number of coupons arriving will depend on the season and time of year.
4. 82 percent of coupons come in newspaper inserts - in Canada only 57 percent arrive in newspaper inserts.
5. The average face value of a coupon is 84 cents.
6. The average time before the expiration date is 3.2 months.
7. Coupon useage in the United states dropped 13 percent from 2005 to 2006 (according to CMS a company that tracks coupons trends).
8. When looking at the rate at which coupons are redeemed they found:
18 percent are used in the first three months
41 percent are redeemed between four and six months
34 percent are redeemed after six months.

It appears that companies that use coupons often use them to drive short-term sales rather than build customer loyalty. The companies may have other objectives; e.g. getting rid of excess inventory or increasing their cash position.

One of the drawbacks of coupons is that they take time to clip. People to day seem to have less time to go through the paper and clip coupons. It may be as simple as time and money; that is, how much time will it take me to clip these coupons and then how much will I save. It may not be worth it to spend the time for the amount of money I will save. Some stores are using technology to beat the need for coupon clipping. For example, Target is using a customer card which when scanned will show the available discounts at the time the customer is in the store so that they do not have to clip the coupons before they come to the store. The coupons are available at the cashier once the customer card is scanned.

One area of interest is how much of a discount to offer on a coupon. There are some studies by ICOM Information and Communications, a company that tracks coupon behavior, which indicate that as the value of a coupon rises, so will the number of people who will redeem it - up to a point. Apparently there is a point at which the impact of the discount plateaus and further discounting does not increase the number of customers who will redeem the coupon. The company usually tries to figure out where the "sweet spot" is; that is, where the expiration date and value offered get the most return on investment.

The bottom line is that store coupons are not about building customer loyalty, they are a mechanism designed to bring customers in the store once. The customer loyalty is only as good as the value of the coupon and the convenience of the store location. There is no relationship building in this process. This is all about getting a good deal - if it is worth it.

2 comments:

Nilz said...

A good statistical analysis. I just would like to add one more point, though not based on any statistics but from my experience in digital coupon - overuse of coupons may result in more damages than any good to the reputation of the stores.

Salene said...

Keep up the good work.

 

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