CLIPPING'S PATH

Electronic and other highly efficient coupon-clearing programs, which promise quick, accurate processing, have made only limited progress in the supermarket industry.Most agree that current manual and multistep methods of coupon processing are slow, labor-intensive and subject to both fraud and error. However, retailers and manufacturers have thus far been reluctant to embrace electronic coupon clearing

Electronic and other highly efficient coupon-clearing programs, which promise quick, accurate processing, have made only limited progress in the supermarket industry.

Most agree that current manual and multistep methods of coupon processing are slow, labor-intensive and subject to both fraud and error. However, retailers and manufacturers have thus far been reluctant to embrace electronic coupon clearing and other single-count coupon processing methods on a widescale basis.

One of the leaders in electronic coupon processing, Catalina Marketing, St. Petersburg, Fla., announced earlier this month that it was discontinuing its electronic coupon clearing service, launched in September 1993. Though Catalina's programs attracted considerable attention, the company cited lack of demand from nonparticipating manufacturers in its decision.

Other coupon clearing houses, such as Carolina Manufacturer Services, Winston-Salem, N.C., and NCH Promotional Services, Lincolnshire, Ill., offer both traditional and innovative coupon processing services. But thus far, questions of trust and who will pay for technology installations that will allow electronic coupon clearing or other streamlining programs on a widescale basis, have prevented rapid progress.

Even though adoption of a paperless, or at least single-count, method of coupon clearing has been a slow process, most retailers interviewed by SN still believe the industry should and will head in that direction.

But for such programs to become a reality, retailers say manufacturers must embrace the technology and trust the data's integrity.

Danny Barnwell, vice president of merchandising for Piggly Wiggly Corp., Memphis, Tenn., said, "When it will become an electronic process depends on how manufacturers view the program and their willingness to change the system and execute it."

"It has to start with the manufacturers -- when they decide it is an advantage to receive coupon redemption information electronically, the process will move forward nationwide," said Donna Piotrowski, accounting manager at Copps Corp., Stevens Point, Wis.

"I personally feel this [coupon clearing] will become a completely electronic system," said Bob Bowers, accounting manager for Francis Markets -- Norkus Foodtown, Neptune City, N.J. "But the time scale is going to depend on the manufacturers and how willing they are to accept an automated process."

Mike Hubert, director of management information systems for G&R Felpausch Co., Hastings, Mich., agrees that manufacturers need to have confidence in the data integrity at store level.

"The biggest issue is manufacturers need to trust the technology used to get accurate retailer redemption counts, without the need to get back a physical coupon," he said.

But resistance to electronic coupon clearing is not limited to vendors. Some retailers also question the cost/benefit ratio of such systems.

"The process is too expensive at this time," said Michael Wheeler, senior vice president/treasurer, chief financial officer for Hy-Vee Food Stores, West Des Moines, Iowa. "Once it is cost justifiable for a large chain like ours, maybe there will be a worthwhile process there -- though no one has been able to do that yet."

Beyond the issue of simplifying the current redemption process, electronic coupon clearing's data-gathering capabilities also hold promise for providing a wealth of information about consumer buying behavior, including response to particular promotions. If properly mined, such data could help the industry target consumers more effectively.

But while the possibilities are enticing, there is still no clear consensus on who will gather and disseminate this information.

Michael Plumley, manager of accounting services for Dominick's Finer Foods, Northlake, Ill., notes that manufacturers have access to immense amounts of consumer data through the use of UCC-128 extended bar codes printed on coupons.

"The information that manufacturers could receive would be key to target who is redeeming their coupons at store level," he said. "Store level demographics of where the coupon was cashed would allow them to target those specific areas with mailers, for example. The way the process is now, it takes months for manufacturers to get access to that information."

Copps' Piotrowski agreed that consumer marketing by manufacturers could be more targeted based on the information collected from the UCC-128 bar codes.

"By manually counting the coupons, manufacturers have no way of taking advantage of the information stored in the UCC-128 code," said David Sefcik, manager of corporate scanning for Giant Food Stores, Carlisle, Pa.

He added, "If the information is captured at point of sale, the data could be sent electronically to manufacturers, then marketing analysis and comparisons could be done on specific items or brands."

Such information could be used for one-to-one marketing programs if it could be linked to retailers' own customer information databases, gathered via frequent-shopper programs.

"As our customers swipe their frequent-shopper cards, they could receive coupons specific to the brands they buy, based on purchase information received by the manufacturers through the extended code," said Felpausch's Hubert.

He added, "Manufacturers would be using their money more effectively to target customers in a specific area based on our database information and data they collect through this automated process."

Besides such marketing initiatives, electronic coupon clearing and other, manual one-step processing tests now under way promise to generate quicker payments and reduce payment times from the current 26- to 30-day period.

According to Dominick's Plumley, the supermarket industry would benefit from quicker reimbursement.

"If the process gets industry support, retailers will scan coupons, electronic information from the coupon goes directly to the manufacturer, the paper coupon is garbage and retailers can be paid a week later," said Plumley.

Some retailers, though, feel that shorter payment times are not a key benefit of electronic programs, and may be overstated in any case. Norkus Foodtown's Bowers doubts that electronic coupon clearing will result in quicker redemption payments.

"Clearing houses are still going to have to go through a process to get payments out, and it is not going to be quicker than we have seen through a paper-coupon process," said Bowers.

He added, "Clearing houses may be offering quicker payments as an incentive to get involved, but if you are sending coupons from your operations weekly, there is not going to be that much quicker of a redemption payment."

Hy-Vee's Wheeler agrees. "I think the process sounds better on paper than it actually is," he said. "If retailers did this process electronically and got their redemption money faster, then it would be a worthwhile investment, but from what I've seen, this is not the case."

All these questions make it unclear as to when electronic coupon clearing will become an industry reality.

"I did not think it would be taking this long to get to an electronic clearing process set up as a standard," said Copps' Piotrowski.

She added, "Where the process is headed depends on where retailers want to invest their dollars -- coupons make money for the supermarket industry, but it is only a small part of the business."