Strategy

Marketing: Not just for Granny

The lowly coupon can be an effective marketing tool in a downturn.

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.