Retail TouchPoints: Kroger Partners with AOL to Tap Paperless Coupons into Loyalty Program
By Amanda Ferrante, Assistant Editor
Through a special arrangement, what follows is an excerpt of a current article from the Retail TouchPoints website, presented here for discussion.
Kroger is targeting internet-savvy consumers with a new paperless coupon program from AOL. Shoppers can visit www.shortcuts.com to set up an account using the store loyalty card they use at any of Kroger’s banners. Then they search the Shortcuts online coupon service by brand, product, or category, and click on grocery coupons they want to add to their card. Customers can then redeem those coupons at checkout in the store.
Customers who still shop with paper coupons can print out a list of “clicked” coupons to redeem at the grocery store. Registered users can review savings on their receipt and online, and also choose to receive e-mail alerts detailing the value of coupons remaining on their loyalty card and other data.
“Younger consumers (under 35) don’t tend to respond to coupons very well,” said Matthew Tilley, director of marketing at CMS, a promotions management solution provider. “Ninety percent of CPG coupons are made available in newspapers, which they’re not reading. So if you’re trying to reach a consumer audience with a coupon, you’re going to have a lot more luck if you’re using a cell phone or internet based coupon.”
Kroger also is partnering with Procter & Gamble, Clorox, Del Monte, General Mills, and Kimberly Clark to offer coupons via mobile phone through Cellfire, a mobile application that has issued more than five million coupons since 2005.
Proponents of paperless coupons claim they offer convenience for consumers and a means for retailers to reach their target population easily and build loyalty. They also receive kudos for reducing overall paper consumption.
“I believe in five to 10 years, there will be no paper coupons,” said Doron Levy, president of Captus Business Consulting. Levy anticipates that vendors and manufacturers will work e-pons into individual chains’ loyalty program and each user’s card will have the discount programmed onto their account.
“This can be an excellent vehicle to showcase new products and increase sales of existing lines,” Mr. Levy says of Shortcuts. “As people turn to the web for shopping and product information, vendors can use this to literally close the sale in cyberspace by offering a discount or freebie to the customer via the individual loyalty or points card.”
Discussion Questions: What do you think of the AOL/Kroger online coupon service program? What do you think of the pros and cons of such e-pon programs versus coupon clipping? What will this mean for newspaper circulars?
Truth is, manufacturers have cost models of their own to determine the allowances and deals based on anticipated liability. Retailers need to keep in mind that brands will cut back on offering coupons if retailers start taking steps to cause redemption rates to increase too significantly. I’m not too certain about Doron Levy’s projection, “in five to 10 years there will be no paper coupons,” however there is little doubt that the current practices will evolve to greater use of electronic practices.
It is all about ‘content’…. When you look at all the business services, everyone is looking for a way to differentiate themselves from the competition. Understanding that a retail business serves two clients, working with manufacturers to sell their products and consumers to locate the best product for them, then the easier the retailer can make the business transaction the better it is for both sides. The bonus here is that going paperless also reduces the retailer’s costs.
Besides, it sure beats having the consumer log onto the manufacturer’s website or amazon.com to get a discount price delivered to their door.
Computers and cell phones–the way to reach today’s young consumer–what took so long?
It’s an idea whose time is overdue. The easier manufacturers and retailers can make the shopping experience, the better. Many ideas are being tested. Some will work, others will not. The key is to reach consumers using their media of choice, offer value and see if they respond.
I get judged on results. If the e-pon works as or more effectively than a paper coupon, then as a supplier, I will use it. If not, I won’t.
But there is an assumption here that I don’t trust. That assumption is that consumers (young or old) are prepared to spend their valuable time online before shopping for food. I don’t believe that.
In the future it won’t be the coupon but the data the coupon generates combined with customer profiles that’s important. It does not matter how coupons will be distributed. We’ll also see more and more innovative ways to distribute coupons and definitely, mobile coupons will be a huge part of it.
After several abortive attempts to deliver significant numbers of coupons electronically, Kroger and AOL may have found a way. But I doubt it. Thanks to stints at Catalina Marketing and e-Save; as Ad VP and Manager for a few food chains; and as an ad agency drone for several CPGs, it seems that I’ve always been involved with coupons. Currently I’m consulting on a revolutionary new in-store coupon delivery system.
Catalina’s goal for the Checkout Coupon product was to claim a significant share of the annual $7 billion coupon distribution bidness. Depends on what one considers “significant,” but in my view Catalina never made a ripple in the pool of coupon distribution money. And not for a lack of intelligence, marketing savvy, great people, and hard work. Catalina does relatively well and created several millionaires, but nothing of the scope I believe they set out to achieve. Checkout Coupon could disappear tomorrow and would not be missed by the CPGs that keep it alive. That’s due to the humongous mass and momentum of traditional coupon distribution tools–newspapers and mail. This same mass and momentum must also be taken into account by any online coupon effort.
In one of my lives I was part of the Chicago-based Ad Agency team that was responsible for Kroger’s broadcast advertising. I formed a deep, deep respect for The Kroger Company and its people. Very professional. As a former insider, I see this new electronic coupon effort as a way for a retailer to tap into manufacturer money previously unavailable to them. It’s called “marketing money,” which are the funds budgeted for advertising and, not coincidentally, coupon distribution. This partnership between Kroger and (the increasingly inconsequential) AOL is NOT an altruistic marketing effort to drive product movement. Rather, it is a transparent attempt to access previously unavailable manufacturer funds. Some things never change, two of which are coupon distribution methods and retailer efforts to get more manufacturer dollars.
My belief is that as print publication costs continue to rise with declining readership, the ROI on print coupons will decrease to the point where very few manufacturer coupons will be seen in daily or weekly periodicals. The narrowing readership will have the largest affect. Monthly periodicals will see fewer coupons, but will still be used as they carry a wider or larger readership/audience.
With the increasing availability of broadband internet services more and more people are getting into the “e-pon” habit. I think one approach we will see coming onto the scene is the rollover advertisement offering savings coupons with products featured in articles or other advertisements with similar add on items.
I am a FAN of Kroger. I think they are a great, well run company, in a very difficult business.
As for this, however, I am skeptical. This will depend on the consumers themselves, as far as I see it.
Busy people who may not use coupons at all anyway will likely not take the time to “pre-shop” online and discover what they want and whether there is a coupon for it and then take the step to link it to their Kroger savings card. I really think this is a stretch.
For others who have time, this might even be a pleasurable distraction, but, overall, I do not think it will be wildly popular. Even soccer moms are really busy every day.
I thought one of the advantages of the savings card was to avoid the need to worry about coupons. I wish Kroger the very best, but on this idea, I remain skeptical.