Coupons are integral to retail marketing. Yet, it takes collaboration between retailers and suppliers to promote them effectively.
That's what food retailers are finding out as they work closely with manufacturers on freestanding inserts and on in-store, online and direct-mail campaigns.
Collaborative efforts run the gamut: They encompass simple communication between manufacturers and retailers about couponing plans so that stores have sufficient product in stock, plus more advanced collaboration where coupons are redeemable at a specific retail chain. Such efforts also include manufacturers and retailers teaming up on FSI programs, or both parties working together to target coupons to specific consumers.
Some retailers are even using trade dollars to create their own coupon booklets. Already used prominently in the drug store channel by such chains as CVS, coupon booklets are being eyed in the supermarket channel as well. One industry observer cited Kroger Co., Cincinnati, as an example. But other chains are also involved, including the Stop & Shop Co., Quincy, Mass., which issued a booklet last month filled with manufacturer coupons. The booklet was printed as part of an anniversary celebration.
One reason for the coupon push at retail is Wal-Mart. While supermarkets may not be able to compete with Wal-Mart's low pricing on an everyday basis, coupons enable them to deliver a value to their consumers and reward their best shoppers, said industry observers.
At King Soopers, Kroger's Denver-area subsidiary, about half the manufacturers that conduct sampling events in the frozens department opted to use coupons, according to Tom Gruenberger, category manager, frozens.
"Coupons draw more attention to an event. By having the coupon right there, it makes the event more impactful," Gruenberger told SN.
This type of in-store couponing has certain advantages, but manufacturers and retailers are also working together for more targeted distribution. One indication of the growth of such efforts came last summer, when retailers and manufacturers gathered in Chicago for the first-ever Symposium on Collaborative Couponing. The goal of the event was to discuss how collaboration between retailers and manufacturers can improve sales and promotional efforts.
Data from promotional services providers show increased use of collaborative tactics. The volume of in-ad coupons, or those redeemable at a specific retailer, grew 4.3% from 2001 to 2002, according to CMS, Winston-Salem, N.C., a provider of promotion management solutions. This figure excludes store coupons issued by a retailer using trade promotion funds.
ShopRite, part of the Wakefern Food Corp., Elizabeth, N.J., teamed with Kraft Foods for an FSI, in-ad program several weeks ago. Kraft offered a $1 coupon on any can of the new vanilla and hazelnut flavors of Maxwell House coffee. Beneath the $1 coupon was the ShopRite logo and ShopRite's sale price of $2.99 for Maxwell House. The two discounts resulted in a final cost of $1.99. "ShopRite sale price plus coupons in this insert add up to more savings for you," the copy read, in part.
Besides providing the retailer with a pricing edge, collaborative couponing can improve trade relations or help introduce a product into a new market. Retailers, meanwhile, can enjoy increased store traffic and store loyalty.
Creating the One-to-One Relationship
The tactic can also help retailers win over certain customers who may be purchasing certain categories in an alternative format. Loyalty card data analysis may show, for example, that certain heavy shoppers aren't purchasing paper goods in the supermarket. The retailer can then team with a paper goods manufacturer and distribute coupons to those consumers.
"Coupons enable retailers to reach consumers in a one-to-one relationship," said Lorraine Gallaher, director of marketing, CMS.
The movement toward collaborative couponing comes at a time when overall redemption rates are down. While coupon distribution in 2002 rose 3.4% to 336 billion coupons, redemption slipped 5.4% to 3.7 billion, according to CMS. The company noted, however, that coupon redemption trends have strengthened over the last few months in response to concerns over war, unemployment, market declines and rising energy costs.
Retailers are using collaborative couponing to target all types of consumers, even children. Giant Eagle, Pittsburgh, for instance, distributes select coupons to youngsters as part of its "Be a Smart Shopper" program. Under the program, elementary school students are given a supermarket tour for lessons in nutrition, biology, food safety, and meal planning and preparation. Coupons are distributed for value comparison.
"Children, just like adults, are interested in saving and getting the most from their dollar," said Tina Thomson, marketing manager, community relations, Giant Eagle.
The Campbell Soup Co., Camden, N.J., partnered with Giant Eagle for the retailer's 2002 to 2003 "Be a Smart Shopper" program. Doing so meant that Campbell helped fund the program. In return, Giant Eagle actively promoted Campbell's V-8 Splash drink during the store tour. Giant Eagle tour guides discussed the health advantages of the vitamin-packed juice beverage. Coupons were distributed as well.
In addition to Giant Eagle's "Be a Smart Shopper" program, retailers are working with manufacturers for other in-store coupon events. More than two-thirds, or 66%, of the in-store sampling events that Mass Connections, Cerritos, Calif., organized in 2002 at supermarkets included coupons, according to Kevrine Wells, team leader, national accounts, for the in-store promotions company.
Of all the events that Mass Connections held in 2002, those that involved coupons led to a 67% higher sales increase of the product sampled than those that did not.
Some of Mass Connections' events were held at King Soopers. The retailer sometimes hosts sampling events in its frozen section every other week, according to Gruenberger.
King Soopers has conducted in-store sampling events for Boca Burger, a meatless burger from the Boca Foods Co., Madison, Wis., part of Kraft Foods, Northfield, Ill. For these events, $1 coupons are offered.
Michelle Barger, promotions assistant, Boca Foods, said retailers prefer to have coupons as part of a sampling event.
"Retailers usually like to have a coupon with the demonstration because it provides the consumer with added value," she said.
Along with in-store events, other types of distribution tools are showing collaborative potential. For instance, Chicago-based CoolSavings is beginning to power retailer Web sites with its coupon technology, said Peter Leech, vice president of retail partnerships for the online direct-marketing and media company. One reason for CoolSavings' foray into the area of retail couponing is the competitive retail landscape.
"Retailers are looking for ways to offer a value to their consumers," said Leech. CoolSavings' first retail-sponsored coupon Web site is expected to go live soon. Leech declined to name the retailer, but said the site and others like it will be conducive to collaborative couponing.
Getting to E-Continuity
CoolSavings is also working on "e-continuity" programs, or loyalty programs involving retailer-specific coupons for a family of brands, said Matt Moog, president and chief executive officer, CoolSavings. Customers who buy a certain number of the promoted brands over a six- or eight-week period will get rewards, such as cash back.
Moog described e-continuity promotions as a way to strengthen trading partner relationships. Since manufacturers are in a retail market share battle, they need to develop creative ideas that can help retailers drive sales. Coupons do just that, Moog said.
Such collaboration is also making headway in the direct-mail area of the couponing business. Nearly 200 supermarkets worked with Valpak Direct Marketing Systems in 2002. Albertsons, Sav-A-Lot, Piggly Wiggly and Winn-Dixie were among them. Valpak distributes coupons via direct mail in the familiar blue envelope. Valpak is owned by Cox Target Media, a division of Cox Newspapers, a subsidiary of Atlanta-based Cox Enterprises.
The largest rise in Valpak supermarket participation came from the South, where the number of supermarkets increased 25% from 2001 to 2002, according to Valpak.
One co-equity promotion involved HP Hood, a Chelsea, Mass., dairy operator, when it introduced its Hood-brand ice cream into the Florida market. HP Hood distributed Valpak coupons for $1 off any half gallon of Hood ice cream. The coupons were redeemable exclusively at Kash n' Karry, Tampa, Fla., part of Delhaize America, Salisbury, N.C. A spokesman for Kash n' Karry declined to comment.
Valpak consumers are overwhelmingly interested in receiving supermarket coupons in the Valpak envelope, according to Alissa Mandel, business development manager, key accounts, Valpak. In fact, grocery coupons were the No. 1 requested coupon in a Valpak consumer research study. Consumers asked for nearly three coupons per envelope.
Albertsons, Boise, Idaho, is responding to such requests. It worked with the PepsiCo., Purchase, N.Y., and Valpak for a promotion for albertsons.com, its online grocery shopping and delivery service. The coupon offered a free 12-pack of Sierra Mist, a lemon-lime beverage, with a purchase of $20 or more on albertsons.com.