EXPERT ANALYSIS
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SECTION TWO
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Key Challenges for Digital Coupons
Inmar recently announced that overall coupon redemption volume increased one
percent in the third quarter of 2013, as compared to the same period last year This
increase was driven in part by redemption growth for paperless, digital coupons.
Redemption volume for these e-wallet offers was up 86% versus Q3, 2012. Meanwhile, YTD redemption of digital coupons is up 160% versus 2012.
KEY QUESTIONS:
What developments -- whether market-based or consumer-based -- would inhibit or spur growth in redemption of digital coupons? How much of an issue is POS integration and electronic clearing of digital coupons? How does the industry make sure there isn’t massive malredemption or misredemption, and how does it limit consumers from gaming the mobile bar codes?
EXPERT ANALYSIS:
You can’t electronically clear digital coupons without controls for paper coupon validation because of the problem of “deal stacking.” Some manufacturers are insisting that POS controls be in place to protect against this abuse (when both a digital and a paper coupon are accepted for the same single product purchase). Deal stacking doubles the discount for the consumer (which consumers caught onto quickly), but it also doubles the cost for the brand. Manufacturers and retailers would both benefit from having an electronic real-time validation solution that handle both digital and paper coupons. Once deal stacking can be managed at the POS, I think we will see digital coupon growth accelerate even more.
Due to the lack of coupon serialization and the lack of controls in place at the POS, you see various levels of adverse coupon interaction by the cashier trying to make their customers happy. This malredemption is part of the cost that manufacturers bear in this new digital world. But without real-time validation, a second and more costly type of cashier fraud emerges. With the high cost for the retailer to count the paper coupons at the store level, most retailers have simply eliminated store-level accounting. Store employees know that the bookkeeper has stopped counting the coupons and is using the POS t-log as the record of coupons redeemed. Without store-level accounting, the cashiers can reduce any transaction they wish by merely scanning a high-value coupon multiple times and reducing the basket total to zero.
This is a direct retailer cost that is not recovered through manufacturer reimbursement. Electronic validation of both paper and digital coupons can ensure accurate redemption takes place to the benefit of the consumer, retailer, and manufacturer.
Jon Robertson, Intelligent Clearing Network
For mobile couponing, there are several issues that must be confronted and overcome. The biggest obstacle is the integration of the POS system with the mobile device. Today only 5-10% of food, drug and mass grocery stores — these are retailers selling perishables and high consumption products in addition to other products — allow true mobile couponing.
They struggle with the ability to scan a bar code and get it into the POS system, which requires a line-of-sight scanner, or an otherwise upgraded front-end scanner, to read codes off phones. The cost per lane can be $600 for one line-of-sight scanner, although a retail chain buying great quantities will obtain cost efficiencies that will reduce the cost to the $300-400 range. Even at the lower cost, this means a multi-million dollar investment for a large chain, with more costs involved in upgrading software.
Wade Allen, President, Coupon Factory
The current growth trajectory is being driven by positive, repeat shopper experience with more mature retailer load-to-card (L2C) programs and increased participation by, and collaboration among, engaged manufacturers and retailers. But while digital shows great promise, traditional forms of promotion still perform well in both reach and cost.
Successful digital promotion requires seamless integration with point-of-sale systems to ensure accurate coupon redemption - with qualifying UPCs (found in basket) matched instantly (via the cloud) with live, shopper-acquired offers. System uptime rates and sub-second transaction speeds must be maintained in order to meet stringent retailer demands. With existing clearing processes, already proven and vetted by current digital participants, this function should not pose a barrier to digital coupon growth.
JICC Digital Coupon Guidelines discourage the use of a barcode image on a cell phone for manufacturer-funded offers. While some retailers have tested mobile barcode technologies within their own unique (or “closed”) point-of-sale environments, mobile barcodes (with mass acceptance commensurate with paper barcodes) are not recommended for manufacturers.
Travis Lewis, President, Digital Solutions and CMO, Inmar
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