CPGMatters: P&G, Ahold USA Call for Readiness for New Barcode
By Jack Grant
Through special arrangement, what follows is an excerpt of a current article from CPGmatters monthly e-zine, presented here for discussion.
Are you ready for the new barcode on coupons? Two executives from Procter & Gamble and Ahold USA have called for CPG manufacturers and retailers to prepare to issue and handle the so-called GS1 DataBar that allows for more complex offers. A set of deadlines for specific action steps underscored their urgency.
“We need to be putting codes on coupons by June 2008,” said Don King, associate director at P&G, recently speaking about his manufacturer peers in St. Petersburg, Fla. at the annual Coupon Industry Conference sponsored by the Association for Coupon Professionals (ACP). Said Alan Williams, vice president for applications development for Ahold USA: “What we’re recommending to retailers is project planning for 2008. Put this on your agenda. You’ve got to deal with it. Get ready.”
In May 2006, GS-1, the organization that sets standards to improve efficiency in the supply and demand chains, set January 2010 as the global sunrise date for GS1 DataBar codes and the unique GSI Application Identifier to identify the item as a coupon.
The GS1 DataBar is expected to solve many of the inefficiencies in the current coupon system. Among them:
- Unable
to handle variable length company prefixes; - Value code structure is limited;
- Validation with a single company prefix and
family code only; - No systemic expiration data checking;
- Casher intervention required to handle
complex offers.
The GS1 DataBar will enable manufacturers to code more complex offers and give them more options for values and purchase requirements. It will allow coupons to be validated at checkout to ensure the manufacturer intended the purchase that was made.
Meanwhile, retailers will have better scanning accuracy. More specific coding and a reduction in human readable elements should decrease fraud and misredemption, while minimizing the number of “hard-to-handle” coupons. The DataBar will enable the coding of retailer-specific promotions, which now is almost impossible to do. Stores will be able to leverage offer tracking and provide improved purchase auditing back to the manufacturers.
The move to a new coupon bar code is part of a larger initiative of global data synchronization for product information, marked by the 2005 introduction of a variable-length manufacturer Company Prefix. The new identification numbers allow international trading partners to forgo repackaging products for sale in North America, but are not compatible with today’s coupon bar code. The GS1-US Coupon Initiative addresses both this conflict as well as other long-standing shortcomings of the UPC-A/EAN-128 coupon bar code
Meanwhile, the change to the GS1 US DataBar parallels similar efforts in the meat, produce, and healthcare industries to take advantages of increased data capacity and improved scanning accuracy of a smaller bar code.
“There is a lot of change coming,” said Mr. King, “and it is going to impact all manufacturers, retailers, processors, and everyone else associated with coupons in one way or another.”
Discussion Questions: Do you think the new GS1 DataBar will adequately address former problems and shortcomings with coupon redemption? Do you see this reinvigorating the use of coupons among marketers?
Couponing has been a mainstay of CPG marketing for a long, long time. Coupon offers are a proven way to maintain loyalty among current customers to to stimulate brand trial among new ones. My take on new GS1 Data Bar is that any way to make the coupon process less fraudulent, more flexible, more accurate and more global should be applauded–assuming the implementation cost is not a major impediment to manufacturers or to retailers.
The adoption of the GS1 DataBar is a significant step forward in couponing. The new barcodes will allow for far more sophisticated programs, with coupons good on purchases from up to three different manufacturers, for example.
On paper, there are all kinds of reasons everyone should want to move forward. In practice, there will be a need for a lot of marketing and prodding to get universal adoption among retailers. Even today’s barcodes provide for POS systems to scan and validate coupons down to the family code level, yet at least half of retailers do not do so. One of the reasons is the need to subscribe to a clean, reliable source of data (disclosure–my company provides such a source), and many retailers don’t feel they have the technical expertise to keep their POS systems up-to-date.
The GS1 DataBar does present real opportunities for efficiency in the coupon redemption chain, and real progress in areas such as electronic clearing. But there will be very strong inertial forces to be overcome. At Coupons, Inc. we’re pretty deeply involved in the effort (one of our executives is on the the committee setting this standard), and I’d be happy to discuss with anyone here if you’d like more information.
The GS1 DataBar will probably help to resolve the inefficiencies in the current coupon system including variable length company prefixes, value code structures, validation with single company prefixes, systemic expiration data, casher intervention requirements, etc. However, the concern that I have is the possibility that the transformation could cause coupon events to become even more expensive for smaller and medium sized manufacturers than the already nearly cost prohibitive expenses associated now with couponing. Hundreds of companies that are smaller than the 800-pound gorilla multi-nationals are having a difficult time offering coupons to consumers due to the high costs associated with redemption, processing, and fulfillment. It’s my hope that the GS1 DataBar will help, not to increase the cost of couponing to manufacturers, but instead to help reduce the associated costs, so that manufacturers, retailers, and consumers all will benefit from the value and also the many marketing advantages from coupon events.
As far as retailers are concerned, most scanners have autodiscrimination functions, which means the scanners will be able to read a variety of bar codes. If major chains (Kroger, Safeway, Wal-Mart, Target) pressure their suppliers for quick adoption, cashier lines will move a little faster. The cost of this implementation, for retailers as well as CPG firms, is very low.
As one example of how the barcode upgrades will speed up the process at checkout…if you can imagine, the current system has no automated way of reading coupon expiration dates. That leaves it up to the poor, squinting checker to verify each one (assuming they bother). This innovation alone should be worth the price of adoption.