Digital couponing is already dramatically affecting marketers’ coupon strategies, and it will only continue to grow in importance as digitally-inclined Millennials’ spending power grows.
For brands, the rise of digital couponing (downloadable and smartphone coupons) presents many opportunities, but also some possible pitfalls.
The Digital Coupon Landscape
Although digital coupons account for less than 1 percent of all coupon distribution, they represent 12 percent of all coupon redemption, according to a recent study (2016 Coupon Scoreboard, Valassis). This finding highlights the effectiveness of digital coupons in driving coupon redemption. Digital coupons undeniably redeem at a higher rate than print coupons.
For many consumers—particularly Millennials—digital couponing leads them to increase their engagement. In a 2016 study by Inmar, 54 percent of consumers said they had increased their coupon usage because they’re seeing more online coupons, and 59 percent of Millennials (ages 18-36) say they wish all coupons were digital!
Among consumers of all ages, the desire for digital couponing is also pronounced and increasing, with 46 percent saying in 2017 that they wish all coupons were digital, up from 37 percent in 2013. A clear majority (62 percent) said they want coupons sent to their mobile phones for products they normally buy.
The Pros and Cons of Digital Coupons
The increasing popularity of digital couponing isn’t only due to evolving consumer preferences. Brands are also eager to embrace digital couponing because it provides a multitude of benefits.
- Allow brands to connect with consumers outside of retail locations
- Have expiration dates that are automatically enforceable
- Enable almost-instantaneous redemption reporting
- Reduce the risk of fraud because fraud-prevention guidelines are set and enforced by digital technology (e.g., automatic disabling of an offer after first use)
- Can be launched as part of a campaign much faster than coupons in offline campaigns, which require printing and physical distribution that can take months
- Make it easier to apply qualifying restrictions in constrained-distribution campaigns
- Are available to consumers as they shop in retail locations, so that consumers can take advantage of the offer even if they forgot or never gathered a print coupon
- Can be offered to consumers in real-time via digital channels, based on which retail location they’re at.
These benefits come with some risk, however. Without proper restrictions, “extreme couponers” may redeem the offer multiple times, leading to lack of stock and decreased profits. And sometimes, even without fraud or manipulation, a promotion may simply be more successful than anticipated, which is good from a brand awareness point of view but can reduce profits.
There’s also the obvious fact that brands aren’t reaching consumers who aren’t tech-savvy or simply don’t have the technology. The number of consumers without the wherewithal or desire to use digital coupons will continue to shrink, but leaving them out could still be problematic for some brands.
And when doing a cost-benefit analysis of a digital coupon campaign, brands must be aware of the cost of any IT infrastructure of system enhancements necessary to accommodate the problem.
How to Succeed with Digital Coupons
Despite these risks, two key steps can permit brands to enjoy the benefits of digital couponing, while eliminating avoidable pitfalls.
First, select a respected, trustworthy, and experienced Promotional Risk Management (PRM) provider. Your PRM firm will play a vital role in coordinating your digital coupon campaign, using their expertise to:
- Help you develop the offer terms.
- Manage budgets associated with the offer, projecting liability associated with the redemption of the offer as well as applicable fulfillment costs.
- Place over-redemption coverage with a secure insurance company to ensure your brand minimizes its financial exposure in the event the offer exceeds the promotional budget.
Second, consult your digital coupon publisher (DCP) to:
- Ensure that coupon codes and other necessary information are entered into the brand and DCP systems.
- Confirm offer acceptance with retailers.
- Distribute the offer to the targeted consumers through relevant digital and social channels.
With these steps, you can reap the advantages of digital coupons while avoiding the risks. And you can avoid falling behind and losing market share as digital couponing becomes even more prevalent and expected.
I’m the Director of Underwriting at Insured Creativity.