Coupon-o-Metrics: Has the Web Changed Coupon Use?

One of the many ways that we (know-it-all) consultants recommend measuring online to offline conversion rates (and vice versa) is to do so with the help of coupons. For example, web site visitors can be offered a coupon while they are online to be redeemed at any store. When the coupon is redeemed it will have a key code that is captured and funneled back to the marketing management systems. This code then suggests what source should be credited with the business.

But, come on! Coupons? Who uses coupons any way?

Well, Scarborough Research has asked that question and published some of their research results last month. They provide the percentage of households using coupons broken down by channel (e.g. online, newspaper, etc) and geo locations within the US.

Among Scarborough’s findings is that the Internet coupon usage is up 83% in 2007 compared to 2005. You may remember seeing this in news headlines.

Wow.

But if you read further you will learn that only 11% of households usually obtain their coupons on the Internet. (More than 50% obtain their coupons from the Sunday paper, the primary source for coupon clipping.)

Plus, the report isn’t actually saying what I thought I was hearing when I first read it, namely that “11% of households that are online were using coupons.” Upon second reading, what the report seems to be actually saying is that “of the households using coupons, 11% obtain them online among other places”.

So what about that former question though? It is top of mind for retailers that wish to use coupons online for

1. Pushing prospects that are on the fence over the edge towards a purchase
2. Make it more likely that prospects that are doing their research online will continue their evaluation/purchase offline at the same company’s brick & mortar stores rather than just going to whatever competitor’s store happens to be located most conveniently to them.
3. As a side effect, use coupon key codes to measure conversion rates from online to offline.

Well, Scarborough’s research does list the percentage of households using grocery store coupons in each of the top 75 markets (DMA) in the US. For example, 33% of households in New York were found to be using grocery store coupons. (the publicly available subset of their research results says nothing about frequency though.)

So if 11% of 33% of households are going online for their grocery store coupons, we can calculate that a maximum of 3.6% ( 0.11 * 33 = 3.6) of households in New York are estimated to be using grocery store coupons online.

So, no more than 3.6% of NY households used grocery store coupons from the Internet in 2007 up from 2% in 2005.

Is that percentage large enough to help multichannel retailers with their goals #1 – #3 stated above? The answer to that is probably:

• If you can increase business from a subset of 3.6% of your customers that is worth something.
• From a marketing analytics perspective, studying coupon clippers’ behavior may not yield information that is representative of non coupon users’ behavior. Unless further research suggests these group behave in similar ways, except for the coupons, one can probably not extrapolate from the subset to others.
• But for specific promotions the percentage of coupon users can be much higher. It will just depend on the value of the offer and how prominently it is presented.
• Even more promising may be the delivery of personalized coupons based on past purchase and online browsing behavior. See for example one shopper’s experience who accidentally received her own and her neighbor’s personalized coupons in the mail.

No easy answers.

But as always in marketing today, marketers need to go an extra mile to make their work relevant to their audience. Personalized coupons may be that extra mile.

The most common form of personalized coupons today is of course what the grocery store printer spits out at the check out. As you will know, these offers are based on your purchase behavior. The primary technology / intelligence provider that retailers rely on for this functionality is Catalina Marketing.

Multichannel retailers from other categories, e.g. electronics, can refine this approach by considering each customer’s web site behavior in addition to their purchase behavior when personalizing the coupon. For example, if web analytics reveals that a customer has spent more than 10 minutes looking at a smartphone’s page online, but did not purchase it, an email can arrive a week later with a coupon. These kind of programs are known as abandoned shop cart programs. Still rarely implemented today, they are sure to become ubiquitous soon.

Between now and then, the biggest gap that I see is a gap in know how. Namely know how for integrating the online and offline marketing worlds. I tried to contribute to closing that gap with my book, Multichannel Marketing.