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Why the Future of Coupons Matters to Everyone

Even if you don’t care about coupons or have never heard about them (you must be living in a cave), you can’t deny the incredible impact they have in society. Since their inception, coupons have had the power of saving industries during recession and exponentially boosting growth of multiple businesses.

If you’re an entrepreneur, business owner, investor or professional in any industry, you should take note; otherwise, your competitors will – to your detriment.

The Extensive Impact of Coupons

Understanding the far-reaching impact of coupons will show you just why everyone must pay attention to the future of coupons

1. Coupons Boosted Business Growth During Downturns

As far back as 1972, the popularity of coupons was so evident that the National Coupon Month was created. In fact, the circular FSI (free standing insert) which featured coupons helped save newspapers, especially during the Great Recession.

Coupons were so effective in boosting newspaper sales that people were buying 2 and even five copies of the Sunday paper… just for the free standing insert.

This peculiar ability of boosting business growth during downturns continued as couponing progressively moved online and mobile…

2. Coupons Created an Online Niche

Several blogs like The Krazy Coupon Lady gained tremendous traction based on the increasing popularity of online coupons. Notably, such popularity of online coupons and the related tremendous growth of coupon-focused blogs occurred during The Great Recession. This literally pulled bloggers out of debt in a time when the nation was in an economic hole.

Moreover, a whole new industry has been created around coupons.

3. Businesses Emerged Around Coupons

Various coupon sites like RetailMeNot and Coupon Buffer have become go-to sources for coupons. Companies devoted to coupon redemption were set up as far back as 1957 (the Nielsen Coupon Clearing House), with newer companies focused on mobile couponing.

Coupons have become such a common and necessary component in retail, with a whole range of associated terms like BOGO (Buy One Get One Free), Blinkie (coupons in boxes – which sometimes had blinking lights – attached to store shelves) and CAT/ Catalina (coupons printed at the register after making a purchase).

The phenomenon that’s couponing also inspired the show Extreme Couponing in 2010, sparking a nationwide frenzy.

4. The Consequences of the Print-to-Digital Coupon Shift

The print-to-digital coupon shift has had both positive and negative consequences.

As more and more advertisers have shifted from print to digital, the traditional news print has shrunk by 39 percent during the last 20 years. That’s 20,000 jobs gone. The highest job count in newsrooms was 1989 with 56,900 jobs, which progressively shrank over the years to 32,900 in 2014.

What is interesting is, while 60 percent of newspaper jobs vanished within a period of 26 years from 1990 to 2016, internet jobs gradually increased during that period from less than 30,000 to about 200,000.

No wonder The Wall Street Journal started laying off staff for its print edition in 2016, while expanding its digital sections.

 

What Will Influence the Future of Coupons?

Multiple factors could influence the future of coupons, and determine which direction they take and how much of an impact they’ll have.

 

1. Shoppers Prefer Coupons

 

A 2016 study by RetailMeNot and Placed – “The State of Coupons and the Role of Mobile” – shows that shoppers (3 out of 5) prefer coupons over other promotions. Rebates come in second with 1 out of 3 consumers seeking them out before shopping.

Moreover, 85 percent of shoppers for non-grocery items search for coupons before visiting the store, based on the 2016 study by RetailMeNot and Placed.

The trends of online searches on Google support these findings, showings sustained interest in coupons for the past 8 years.

Google search trends for coupon, promo code, promo, coupon code and coupons

Interestingly, a coupon is enough to convince almost half of consumers (49 percent) to switch brands. In fact, 60 percent of mobile coupon users would gladly switch brands when food shopping, if offered a coupon.

Considering the demand from shoppers and potential benefit for retailers, coupons are here to stay.

 

2.Potential for Greater Online and Mobile Coupon Adoption

 

In 1887, coupons came in after newspapers and magazines had already been in circulation since 1690 within the US. Hence, the challenge people faced was adapting to the new coupon inserts, since they already had almost two centuries to adapt to newspapers.

The internet age faced a different challenge, since the internet was started in 1991 and smartphones in 1994, after coupons had existed for more than 100 years. Hence, it has been more about people adapting to the online world rather than coupons (and perhaps also shifting their long-held allegiance from print to online and mobile). In fact, approximately 40 million Americans don’t use the internet.

Since we’ve only had about 20 years of online coupons and 10 of mobile coupons, there’s certainly a good chance both could grow to surpass print.

 

3.Growing E-commerce

 

Online and mobile coupon use will increase with growing e-commerce.

US e-commerce sales in 2016 were valued at $394.86 billion, which was a 15.6 percent increase from the previous year. This makes up 11.7 percent of total retail sales.

Looked at critically, 41.6 percent of all retail sales growth came from e-commerce, considering that retail sales (excluding fuel, automobile, restaurant and bar sales, which aren’t normally bought online) had only a 3.9 percent increase from $3.247 trillion to $3.375 trillion.

 

4.Growing M-Commerce

Mobile coupon use will increase with growing m-commerce.

Just as department stores, malls, Big Box retail, TV shopping and online shopping were revolutionary concepts that created major impacts in the history of retail, mobile is poised to have a similar influence.

M-commerce made up 19% of US retail e-commerce sales in 2014, which is expected to rise to 27% by late 2018. BI Intelligence forecasts that m-commerce will make up 45% of US ecommerce by 2020, with a value of $284 billion.

M-commerce forecast. Image source: BI Intelligence

 

5.More Consumers Searching for Mobile Coupons

 

A 2016 study by RetailMeNot and Placed – “The State of Coupons and the Role of Mobile” – shows more consumers (42.8%) use mobile apps to search for coupons, which is more than the proportion of consumers searching for print coupons (35.9%).

 

Retailers only need to fulfil this existing demand for mobile coupons.

 

6.Mobile and Online Might Not Completely Replace Paper Coupons

 

Paper coupons flourish in physical stores, and if the trend in the e-commerce world is anything to go by, they won’t be completely replaced by online and mobile.

 

a.E-Commerce Going Back to Brick and Mortar

 

In a strange twist to the impending e-commerce takeover and death of physical stores, as detailed in a 2014 Wall Street Journal article, a 2016 article in The Guardian highlights e-commerce stores setting up physical shops to remain competitive.

 

This issue was also evaluated in a 2014 Harvard Business Review article showing how half of e-commerce sales were going to retailers with physical stores. Such retailers take advantage of the omni-channel retail concept. Basically, their online presence complements the physical shops and vice versa.

 

b.Guideshops: The Mid-Point Between B&M and E-Commerce

 

Despite the physical stores, all sales can still be online. The answer: guideshops.

“Guideshops” or “Webrooms” are a different form of omnichannel retailing, whereby shoppers only try on clothing in the physical locations before ordering them online. Products are delivered to their doorsteps.

Guideshops help overcome the challenge for retailers of dealing with inventory from stocking a physical shop. It also benefits clients who can see and feel the actual product beforehand, which was a critical issue for the jewelry e-tailer, Blue Nile.

 

c.E-commerce Unsustainable?

 

An interesting research by Bain shows that e-commerce platforms have unsustainably lower profit margins, rather than the often-assumed economic advantages of lower costs. This could affect the growth of e-commerce.
Ultimately, omnichannel (physical and online) retail would likely be the more sustainable option. Hence, online coupons won’t really completely take over the coupon world.

 

7.Growth of Location-Targeted Advertising

 

Mobile phones present the unique advantage of precise location-targeting, unlike print and desktops. Hence distribution of mobile coupons is likely to increase with the expected growth of location-targeted advertising/ promotions from $4.3 billion in 2014 to $18.2 billion in 2019.

A significant number of shoppers (36%) actually want location-based coupons. Meaning marketers would just be denying themselves a valuable opportunity if they don’t offer such a service.

 

8.Coupon Distribution Through AI and Chatbots

 

Perfection of AI means chatbots would increasingly be used for instant messaging with clients through apps and online platforms. With increasing sophistication, such chatbots can decipher exactly what clients want and offer targeted suggestions and coupon offers.

Already, sites like Amazon, Netflix and PureClarity deliver highly personalized recommendations, evaluating customer behavior data like pages viewed, searches conducted, products purchased and time of day visited.

 

9.Ease and Better Security Boosting E-Commerce

 

As stated earlier, e-commerce growth means increased online/ mobile coupons.

More clients are shopping online because of easier and increased security of online payment systems, especially using such platforms as Paypal, Amazon Pay and Apply Pay. Such platforms cancel out the need to use your card on every purchase, speeding up payment and reducing risk exposure.

With increased advancements, transaction can be made simply using fingerprints and online pin numbers.

In particular, All Saints’ conversation rates increased by 34 percent simply by eliminating the need of a credit card at checkout, and instead using Amazon Login and Payments. This cut checkout by two-thirds from 90 seconds (that’s a looong time in the online world) to 30 seconds.

 

10.Fast Delivery and Delivery Membership Increasing Online Transactions

 

Fast delivery and delivery membership are making online transactions more convenient.

Such companies as New Look and Boohoo are offering precise delivery, and most retailers offer next-day delivery. With one-time/ yearly, unlimited paid membership on sites like Amazon and ASOS, clients don’t have to worry about delivery when purchasing multiple items. This makes them open to frequent online purchases, meaning more coupon use.

 

11.Millennials are Saving

 

Younger Americans seem to be more frugal than the older generations. Which probably explains why more and more of them are using coupons.

The younger generation is becoming more conscious of how they use their money, with 67 percent of 22-year-olds and 76 percent of those in thirties already saving for their retirement, based on a Transamerica study.

It so happens that the current 30-something workers started saving at a much younger age (an average of 25 years), compared to the older generation in their 60s who started at 35 years on average.

 

12.Increasing Household Debt – On the Verge of Another Coupon Rush?

 

The US is experiencing increasing debt compounded by lack of or inadequate savings for emergencies and retirement, which bears some similarity to both the Great Depression and Great Recession.

The current US debt levels almost match the debt levels before the Great Recession.

  Q4 2016 Q4 2007
Debt Accumulation $60.4 billion $64.7 billion
Total Outstanding Credit Card Debt $978.9 billion $981.8 billion

This means people might seek out and redeem more coupons just as they did during the Great Depression. Even during the Great Recession, coupon redemption rates rose by about 27 percent from 2.6 billion in 2008 to 3.3 billion in 2009, all the way to 3.5 billion in 2011.

Redemption rates during the great recession. Image source: Inmar

 

13.Americans are Excessive Consumers

 

Due to current excessive spending habits, a coupon rush might not really happen like it did during the Great Recession and Great Depression, despite a similarity in debt levels.

Couponing during the Great Depression had the added aspect of a frugal lifestyle at the time. During the Great Recession period, people actively sort out savings. That’s unlike the current excessive consumer spending habits, which have seen American consumers rack up an $89.2 billion net increase in credit card debt in 2016, the largest yearly increase since 2007.

 

14.Americans Have Jobs

 

The current low unemployment rates would also make a coupon rush less likely as happened during the Great Recession and Great Depression, despite a similarity in debt levels.

Increased coupon redemption rates have often occurred during periods of increased unemployment. This is particularly evident during the Great Depression, which experienced such high unemployment rates as 24 percent (almost a quarter of the labor force). As well as the period following the Great Recession (2008 – 2011), which got to as high as 10 percent unemployment levels and saw a reverse of the gradually decreasing coupon redemption trend.

Coupon redemption vs. unemployment trends. Image source: Inmar

 

Currently, the US jobless rate is the lowest since May 2007, standing at 4.5 percent in March 2017. This might mean, despite the high debt levels, coupon use might not spike as much as it did in the past.

 

15.The Mobile-and-Online-Coupon Generation is Using More Coupons

 

Millennials have shown increasing growth in coupon use, year-on-year, unlike other groups such as baby boomers and generation X. This is a group that has also shown decreasing use of paper coupons and increasing use of mobile and online coupons from 2014 to 2016.

Online and mobile coupon use for 18-35-year-olds rose to 48% and 33% respectively.

The mobile-and-online-coupon generation. Image source: PRRI-US

 

16.Retailers are Holding Back Potential Online Shoppers

 

Based on Inmar’s 2016 study, 37 percent of shoppers say they could make orders online from their normal grocery outlets and pick purchases at the brick and mortar (B&M) store.

If the stores would offer such online ordering facilities, even more coupons would be used and redeemed online.

 

17.Greater Redemption Rates for Mobile Coupons

 

The increasing online and mobile couponing isn’t just a fashionable trend. Online and mobile platforms offer extensive opportunities and advantages that aren’t possible with print. One such advantage is higher mobile coupon redemption rates.

According to Cellfire, a mobile-coupon company, mobile coupons have between 5 and 20 times the redemption rate of print coupons. Print coupons only have a 1 percent redemption rate.

 

For marketers seeking greater returns on their investments, mobile coupons are certainly the way to go.

 

18.Digital Coupons can Be Personalized

 

CVS Pharmacy, which spent $216 million on advertising in 2016, significantly reduced advertising on circulars in a shift to digital. One of the key reasons was to focus on personalized deals through their rewards program, Extracare. Extracare lets clients access coupons through smartphones, while tracking buying habits.

 

More retailers are following a similar trend.

 

19.Mobile Coupons are Convenient

 

For shoppers, smartphones give them greater mobility than printable or online coupons. Many use them in-store while making purchases. M-coupons also eliminate the tedious tasks of searching for and clipping print coupons.

 

The Key Insights

From all these data, it’s quite clear that although likely to be diminished, print coupons won’t completely disappear soon. Even so, online and mobile couponing is sure to increase. The extent of this increase will depend on how effectively retailers meet expectations of their clients.

Above all, there’s potential for another coupon rush as seen during the Great Recession.