Kroger and P&G in Digital Coupon Test

Discussion
Jan 15, 2008

By George Anderson

Kroger and Procter & Gamble are involved in a test to deliver coupon savings to consumers sans the paper. Shoppers at the grocery chain can select coupons from offers on the grocer’s website and the savings are automatically loaded onto their Kroger Plus Card. When they check out, the savings from their card are automatically processed with their purchases.

Therese Sangermano of Cincinnati has used the digital coupons. She told The Associated Press, "It’s really nice, because I always forget to bring my coupons along … and I don’t have to organize them."

Carol Hoffman of Covington, Ky., prefers the digital coupons to paper, as well. "You don’t have to waste your time going through all those little pieces of paper in your purse," she said.

While being supported by the likes of Kroger and P&G increases the likelihood of adoption, digital coupons are not going to be for everyone.

"If you’re very computer savvy, this is probably a plus," Peter Meyers, vice president of ICOM Information & Communications, said. "But if you’re more of a traditionalist, paper is familiar and this is not."

Ken Fenyo, Kroger’s vice president for corporate loyalty, told the news service, "We really are just trying to provide more options, not take things away. We know many of our customers are online heavily anyway. I believe over time, more and more customers will want to use the online option."

Mr. Fenyo said Kroger is in currently talking with other manufacturers to bring them into the test, as well.

P&G, for its part, is optimistic about the potential for digital coupons to drive sales.

Matt Kemme, a P&G marketing manager, told The Associated Press, "It’s very early, but we’ve been able to run the water through the pipes and from what we’ve seen, things are looking pretty good."

Discussion Questions: Will digital mean the eventual end of paper coupons? Do you expect to see higher or lower redemption rates with digital coupons versus paper? How will this play into the financial assumptions that brands make when dropping coupons? What impact will it have on brand sales during non-promotional periods?

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19 Comments on "Kroger and P&G in Digital Coupon Test"


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Anna Murray
Guest
Anna Murray
14 years 4 months ago

Here’s a scene:

Person with dozens of coupons appears at the register. You are behind her.

Person: I was supposed to get 10 cents off that product.
Cashier: Which one?
(They both sift through the pile. Three coupons fall on the floor. You bend down to help, and hit your head on the magazine rack on the way up. You hand it to the Person.)
Person: This one. You see. It says 10 cents.
Cashier: That’s on the 16-ounce size. You have the 10-ounce size.
Person: Oh! Can you wait. I’ll go back and get the 10-ounce.
You: Listen, I will pay you $20 to put the coupons down and step out of line.

Digital coupons? I’m all for it. In addition to going a long way towards eliminating the scene above, it just makes sense. I don’t carry airline tickets anymore. My doctor’s appointment reminders come through email not through a card in the mail. Come on! It’s about time coupons got on board.

Joel Warady
Guest
Joel Warady
14 years 4 months ago

This is a great new use for loyalty cards, and it is about time. It makes a lot of sense for the manufacturer if they are looking to initiate trial of a product that they are promoting. At the same time, it is a great service for the consumer as it will allow for a more convenient method of using coupons.

Will paper coupons disappear? Probably not in our lifetime. There are always going to be those people who like to hold the coupons in their hands when shopping the store. But digital does not necessarily have to replace paper. It is another way in which to connect with the consumer, and for those consumers who are living a more digitally centered life, this option will most likely result in them using coupons more often than they had in the past.

More retailers should follow Kroger’s lead on this.

Mark Lilien
Guest
14 years 4 months ago

Ken Fenyo has the right message when he explained that this is not an attempt to take anything away. All too often folks create a “tyranny of or.” Kroger’s paperless solution requires the customer to select their favorites before visiting the store. It also requires shoppers to remember what they chose. So impulse shopping might not be easier.

Some things aren’t clear to me: can the shopper simply load every coupon onto her card with one click? Why bother to load coupons manually onto the card? Many supermarkets and drug stores give all the discounts to card holders automatically anyway.

W. Frank Dell II, CMC
Guest
14 years 4 months ago

We are just at the start of the Digital Age. In five years we will look back and ask why did it takes us so long to get here. Digital coupons will replace paper just like credit cards have replaced cash and checks. CPG companies and retailers will move from target market segments to target consumers.

Consumers will not have to carry 15 frequent shopper cards as either their Homeland Security Card or Cell Phone will contain their personal ID. This ID will be captured at checkout by Wi-Fi, RFID or Bluetooth technology. CPG and retailer coupons will be targeted for trial, brand switch or loyalty to the individual. Processing will be automatic. The remaining issue will be communication to encourage use/purchase.

Kathy Broniecki
Guest
Kathy Broniecki
14 years 4 months ago

I think Kroger has the right idea. Digital issuance versus asking a consumer to print manufacturers’ coupons via that consumer’s computer makes sense.

One of the issues as a marketer trying to move coupons online vs. print is the issue of home computer printers. While we’ve experimented with coupons on our website, there seem to be scan issues when printed from home. Grocers don’t like to redeem coupons they cannot scan and many won’t accept them.

Dr. Stephen Needel
Guest
14 years 4 months ago

This works great when I want to go shopping at Kroger. Doesn’t do me much good when I go to Publix or Wal-Mart. So good for Kroger–building loyalty. If manufacturers move to this option at the expense of paper coupons though, they’ll lose that face-to-face moment with shoppers who may shop multiple outlets (like almost everyone). A shopper is unlikely to go to 3 retailer sites and arrange for the e-coupons just in case they happen to end up shopping at one of the three.

Alison Chaltas
Guest
Alison Chaltas
14 years 4 months ago

Paper coupons will become the exception when shoppers really see value from their loyalty cards. This P&G/Kroger move is a big step forward in engaging shoppers in today’s version of clipping. When consumers actively participate in the act of saving money, they feel good about it and are doing more than just saving money. Will paper totally disappear? Doubtful. Let’s just hope this doesn’t encourage a plethora of coupon activity that leads to more printing than the old fashioned way.

Gene Hoffman
Guest
Gene Hoffman
14 years 4 months ago

Coupons have a preferential place in marketing and benefit those who use them, whether paper or electronic, but will the day ever come when manufacturers and retailers offer all available discounts to all purchasers without coupons of any kind?

Max Goldberg
Guest
14 years 4 months ago

Paper coupons are not going to disappear any time soon. This seems to be another example of giving the consumer what she wants, the way she wants it. Digital coupons build retail brand loyalty by requiring the consumer to visit the retailer’s website, where she can be exposed to other offers and advertisements and build a digital shopping list.

I would expect to see higher redemption rates in the short term which will taper off somewhat as the novelty of online coupons becomes an every day occurrence. Once brands understand the redemption patterns of electronic coupons, brand budgets should accurately reflect the associated costs.

As Kroger adds more brands to the test, I’d like to see the results.

Stew Reynolds
Guest
Stew Reynolds
14 years 4 months ago

Working in a market like Australia where coupons are a no go, anything that provides an additional opportunity for trial is to be welcomed.

However, for a consumer, the paper coupon provides a tangible reminder to pick the product up. Being loaded onto a card is unfortunately ‘out of sight, out of mind’ so I’d believe uptake will be a lot lower because despite consumers having the best intentions of picking the product up that without visual stimulus they’ll forget about it.

I also agree with the comment above that as a loyalty cardholder, the consumer should be rewarded for their loyalty without exception. Asking them to go to the website to find cardholder-only offers is pushing the boundaries of a rewarding experience a bit far.

Good concept being able to link websites back to cards but not in the context of replacing paper coupons

Herb Sorensen, Ph.D.
Guest
14 years 4 months ago

Ten years from now it will probably be all digital.

James Tenser
Guest
14 years 4 months ago
This solution is very interesting as it poses fundamental consumer behavior and process issues. Digital coupons as described require a sequence of shopper action that is unusual today: online planning, followed by remembering the selected deals in the store. While convenient in some ways, the shopper card does not display the selected coupon deals. So it is up to the shopper to carry along a list of the e-coupons selected. If the coupon site offers an automatic feature to print this list, that would help, but of course, it would belie the “paperless” descriptor. The electronic acceptance and clearing of the offers, of course, is paperless to the retailer and manufacturer. Online delivery incurs no printing or distribution costs, per se; the quantity of digital coupons can be precisely controlled, limiting exposure; digital coupons will be difficult to transfer or counterfeit or bring to a competing retailer. Meanwhile the linkage of data about selected offers, redeemed offers, interaction effects and subsequent repeat purchases, if any, with the shopper identities specified by the card opens a… Read more »
Jeff Weitzman
Guest
Jeff Weitzman
14 years 4 months ago

As Stephen pointed out above, this is an option for brands to work with Kroger to help drive traffic to Kroger stores, but works alongside consumer promotions, not instead of them. From a manufacturer perspective, they each have a place in the marketing repertoire.

Julie Parrish
Guest
Julie Parrish
14 years 4 months ago
When P&G flirted with halting coupons a dozen years ago, consumers sat up and took notice, and needless to say, they continued to print them. I think if Kroger/P&G want to rope in consumers that are wired, that’s great, however, if this is a replacement instead of in addition to the paper variety, they are doing customers a disservice. The stat from a recent e-commerce class I attended is that half the country still isn’t online. So while the redemption rate might be higher for those dialed in, if there isn’t a paper copy, the potential for the other half of the country to use the offers goes away. Take also into consideration who regularly redeems coupons. The same shopper who clips one or two and lets them expire is likely going to be the same person who forgets to go online to upload her 25 cents. The result is that PG actually loses brand awareness by not having that same shopper view the ads at all. As busy as we all are with our… Read more »
Carlos Arámbula
Guest
14 years 4 months ago

This makes a lot of sense. Especially for older retail brands that might not be as attractive to younger audiences. Paper coupons will eventually be a thing of the past, and the issues like “non-computer friendly” customers can be solved with a kiosk at the retailer and loyalty cards.

The best thing a retailer can do to increase consumer loyalty is build a relationship. Creating a ritual of visiting the site and selecting coupons before the shopping experience is a great start.

For CPG marketers, digital coupons allow for an extension of the brand all the way to the last ten feet of the grocery aisle. Talk about personalized marketing!

There is too much upside on this to allow current seasonality patterns to be an obstacle in retailers and manufacturers adopting digital coupons.

Dan Desmarais
Guest
Dan Desmarais
14 years 4 months ago

Paper coupons will be with us for at least another 25 years. Demographics say that there’s a certain analog generation that will be around for many years, and will refuse to go digital.

This digital coupon test sounds like a great way for Kroger to build loyalty and gather extensive data on their best customers. I suspect shoppers will want a paper printout from the Kroger web site with their “shopping list” of selective coupons.

A smart shopping list would have the items sorted in the preferred order for the particular store’s flow. This would also give Kroger the ability to guide a shopper around the store in a defined order.

Joy V. Joseph
Guest
Joy V. Joseph
14 years 4 months ago

This seems obvious now that someone is doing it! Yet another simple innovation that just didn’t occur to people before, I guess.

Given the increasing usage of broadband, especially across the aging baby boomers, this may change the declining coupon redemption trend. It may also improve the FSP data quality, providing better insights coupon consumption behavior by demographics so they can be better targeted, thus improving redemption rates.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 4 months ago
This Kroger experiment is both a decade old as an untidy failed concept and remains untidily irrelevant today. All of the best features of Kroger’s plan have previously been provided elsewhere, and all of its worst features have been sold and then canceled elsewhere as well. Yet, it escapes me why a major respected company like Kroger (a former employer of mine) would require the services of a V.P. Corporate Loyalty. Face it, we are not loyal to corporations and we will never be. “I’m a Chevy guy.” “I’m a Ford guy.” “I’m a MOPAR guy.” We’ve all heard those chauvinistic claims and more. But, I’ve never heard “I”m a Kroger gal.” Not once. Not ever. (BTW, the term “chauvinistic” means “blind enthusiasm to a group, attitude, or cause.” It does NOT necessarily carry a reference to maleness, and does not here. We live and learn.) At Catalina Marketing we tested and then rejected paperless coupons. Perhaps ahead of its time. But here’s a thought that emanated from that experiment: Paper coupons will go away… Read more »
Karin Miller
Guest
Karin Miller
14 years 4 months ago

It is a smart idea and they Kroger is thinking ahead of most grocers…but behind many other retailers. Newspaper circulation is declining, and therefore the reach and effectiveness of the free standing insert.

In order to access the P&G coupons, customers have to provide all of their contact data and set up an online account. By doing so, the customer is automatically opting-in to receiving communications by direct mail and email.

The customer data provided by coupon selection combined with club card purchases will allow Kroger/P&G to send highly targeted offers and to run multivariate tests to determine which deals are the most effective.

I was a bit surprised that they were not collecting cell phone numbers as an optional field. They may regret that at some point in the not-too-distant future!

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