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Marketing: Not just for Granny
The lowly coupon can be an effective marketing tool in
a downturn.
Nov 24, 2008 Calvin Leung
Nobody gets into marketing to run coupon programs, which offer completely uninspiring
discounts or “buy one, get one free” deals. Heck, even the bean-counters in the finance
department can handle that kind of thing. Yet about 70% of Canadians say they would be
more likely to redeem a coupon during a recession, according to a poll by ICOM
Information & Communications LP, a Toronto-based marketing consultant. That means
the lowly coupon deserves a spot in any company’s bag of tricks, especially in an
economic downturn.
But marketers should appreciate that many consumers feel embarrassed to use coupons
because of the fear of appearing cheap. (A recent study published in the Journal of
Consumer Research revealed that even a person standing next to a low-value coupon
redeemer is seen in a similarly unflattering light.) One way around that stigma is to give
shoppers the option of adding a coupon to a retailer’s loyalty card over the Internet.
That’s how self-conscious customers at the Kroger Co., the American grocery giant, save
on diapers, detergent and other products. Nearly 60% of Canadians would increase their
coupon usage, if they could redeem them in this way, reports ICOM.
Yet offering only electronic coupons would be a rookie mistake. The majority of
consumers still prefer to receive them in physical form, typically in their mail or
newspapers. And never assume only cash-strapped people like saving a few pennies,
since the ICOM poll reveals income doesn’t affect usage. But perhaps the biggest error
marketers make is relying on coupons too frequently, which diminishes the boost in sales.
“The consumer quickly realizes the product is always on deal and loses the motivation to
take advantage of the offer,” says Ken Wong, a marketing professor at Queen’s
University in Kingston, Ont.
While most promotions are on relatively inexpensive packaged goods, they can apply to
pricier items if they are presented properly, says Wong. He points out that Danier
Leather, the Canadian clothing retailer, doesn’t hand out coupons on street corners. It
initially e-mails them to loyal customers, making the deal seem more like a customer
appreciation program. Wong adds that messages to consumers should be personalized as
much as possible when offering coupons for higher-end items.
Marketers also shouldn’t forget about the coupon’s original use, namely, encouraging
consumers to try a new product. The practice began in 1894 when Asa Candler, a
pharmacist who paid US$2,300 for the Coca-Cola formula, wrote tickets for free glasses
of the fledgling soft drink.
Wong also says coupons should be integrated with other marketing tactics — the more,
the better. “What we’re really trying to do with branding is almost a form of Pavlovian
conditioning,” he says. “You want consumers to see a brand name and associate certain
characteristics with it.” One way to create a positive association is by making coupons
easy to redeem. If the process doesn’t happen at the store, that means giving consumers
plenty of time to take advantage of an offer and providing them with a quick turnaround
time after they act. A convenient way for people to enquire about their rebate and its
status through a website or toll-free number is also recommended. It should go without
saying that such offers should never be misleading. For instance, product images need to
accurately reflect the promoted items, and key details shouldn’t be buried in the fine
print.
But even with the savviest programs, marketers need to have realistic expectations.
Coupon redemption rates hover around 3%, and the strategy won’t influence consumers
with strong loyalties to a competing brand. On the other hand, coupons can offer benefits
to a company besides the possible revenue bump. For example, their pickup can reveal
where such marketing efforts work and where they don’t, further refining a company’s
strategy either geographically or even at specific retailers. They also give marketers an
easy way to calculate their return on investment, and that’s always something to be
excited about.
Questions
1. According to a poll by ICOM Information & Communications, what percentage of
Canadians say they would be more likely to redeem a coupon during a recession?
What are the general coupon redemption rates? Are lower-income consumers more
likely to redeem a coupon?
2. What prevents consumers from using a coupon? How did Kroger Co., the American
grocery giant, deal with this attitude?
3. What errors rookie marketers make when it comes to marketing with coupons?
4. How does Danier Leather, an upscale Canadian clothing retailer, use coupons?
5. According to Ken Wong, a marketing professor at Queen’s University, what role
should coupons play in a company’s marketing strategy? How should they be treated
in order to be effective in this role?
6. How do coupons offer marketers a way to refine a company’s marketing strategy?
Analysis/Assignments
1. Describe all the benefits of using coupons as part of a company’s marketing strategy.
What are the potential downsides or risks in using coupons?
2. What are some of the ways of providing consumers with an easy way of redeeming
their coupons?
3. In what ways can coupons be misleading? What effect does that have on the
company that issued them?
4. How should coupons be created and used to promote higher-end products?
5. With what group of consumers is the coupon strategy not very effective?
6. The article notes that coupons give marketers an easy way to calculate their return on
investment. How? It also suggests that this ability is fairly rare in marketing. Why?
7. “What we are trying to do with branding is almost a from of Pavlovian conditioning.”
Explain what Professor Ken Wong means in this statement.