By Bill Bittner, President, BWH Consulting
"There is nothing less efficient than doing that which is completely unnecessary as efficiently as possible." This, one of my favorite quotes, came to mind as I recently thought through the whole coupon redemption process and the many efforts to eliminate the paper coupon.
A friend of mine uses an online bank. Until a year ago, paper check deposits were still a problem and required her to visit an ATM. Last year, her bank began accepting check deposits that she scans on her computer. When the deposit appears in her account, she tears up the original check and she is done. Not even a trip to the ATM.
This started me thinking about the whole coupon redemption process. I don't think anyone will argue that paper coupons are not still the most efficient way to reach a large portion of the FMCG consumers. The question is, must we eliminate the paper coupon in order to get back office efficiency?
I don't think so...
I believe we can continue to use the paper coupon to reach consumers. What we need to do is set a standard for POS systems so they properly validate and associate coupons with the items purchased. Today, POS systems validate coupons against family codes, which define a manufacturer's categorization of their promoted items. Even with the new Reduced Space Symbology (aka GS1 DataBar), there is no standard that requires the retailer POS software to associate the coupon redemption with the transaction that triggered it.
As much as retailers have hated dealing with PCI for credit card transaction processing, there needs to be a similar initiative for the processing of coupons. The initiative would define how to validate the many types of complicated promotions such as BOGO and cross merchandising coupons (buy A and get B). The goal would be to associate a coupon with the Transaction Log line items that it affects. By associating coupons with the individual line items, the retailer could tell the manufacturer the who (the consumer's zip code or frequent shopper ID), what (the item), where (the store), and when (time and date) of the coupon redemption. To encourage retailers to upgrade their POS systems, manufacturers could offer higher redemption amounts for the additional attributes. Once the information is captured in the transaction logs, automatic summarization and reporting can be done by the back office systems.
Discussion Questions: What is your position on the need to eliminate the paper coupon? Can we streamline the back office operations while still giving the consumer paper?
[Author's Comment] There are two pieces missing from this coupon scenario that make it different than the check deposit transaction. First, coupons are not serialized so the same coupon may be used to drive many discounts. Unless there is an in-store audit to confirm the physical coupon count, the manufacturer will continue to suspect the retailer is coupon stuffing. Secondly, without the scan of the paper coupon, there is no way to even prove the coupon was presented. Retailers might present discounted transactions without ever receiving any coupon at all.
Ultimately, the DataBar will allow manufacturers to put serial numbers on coupons. This will catch the coupon stuffer if they try to use a serial number that is a duplicate of another retailer's. In the meantime, the expense associated with coupon processing can be significantly reduced. It is still vulnerable to fraud, but I think the risks are worth the savings. Now that more consumers are using coupons and manufacturers are trying harder to influence their decisions, it is about time we streamlined the processing.