Retailers Test Paperless Coupons

Led by a yearlong test conducted by Big Y, a number of food retailers are participating in a program to replace manufacturers' paper coupons with paperless discounts redeemed electronically at the POS. According to program manager Unicous Marketing, Chicago, 23 food retailers operating about 2,200 stores have committed to participate by this summer in the program, which offers

SPRINGFIELD, Mass. — Led by a yearlong test conducted by Big Y here, a number of food retailers are participating in a program to replace manufacturers' paper coupons with paperless discounts redeemed electronically at the POS.

According to program manager Unicous Marketing, Chicago, 23 food retailers operating about 2,200 stores have committed to participate by this summer in the program, which offers consumers manufacturer-funded “EZ-PIC paperless coupons” that are promoted on retail store shelves. Consumers do nothing to receive the discounts other than purchase the featured products; the amount they saved is printed on their receipt.

Unlike loyalty card programs that offer electronic discounts at the POS via manufacturers' trade promotion funding, the EZ-PIC program is funded by national marketing dollars that would otherwise support conventional paper coupons distributed by manufacturers through freestanding inserts.

Based on data tracked by the Nielsen Co., New York, Big Y experienced an average sales boost of 71% on products featured in the EZ-PIC program's monthlong promotions, compared to the previous year's non-promotional period, said Phill Schneider, Big Y's vice president of Center Store. Big Y launched the program at its 55 stores in November 2006 and has featured more than 580 products from 28 manufacturers since then.

In addition to Big Y, other food retailers currently in the program include Coborn's, K-VA-T and Bi-Lo, according to Unicous. Coborn's, St. Cloud, Minn., began testing the EZ-PIC technology last month with the intention of rolling it out to its 32 stores early in 2008. K-VA-T, Abingdon, Va., went live with the program in mid-December at its 94 stores while Bi-Lo, Mauldin, S.C., launched the program at its 291 stores on Dec. 1.

Big Y was attracted to the EZ-PIC program by the notion of “eliminating the paper coupon and going electronic,” said Schneider. “A lot of marketing money is spent on paper coupons for just a 1% redemption. So we were enthused by the idea of delivering FSI coupons at the shelf level.”

The presence of signs at the shelf promoting the EZ-PIC deals with product photos and offer details is a key strength of the program, said Schneider. “Consumers usually make their decisions in the aisle, no matter how much emphasis we put into additional merchandising.”

Big Y's responsibility in the program has been to put up the shelf signs (for which it has received a handling fee) and make sure enough product is ordered to support the promotion. Its POS system had to be configured so that terminals can receive and process promotions, and transmit results back to Unicous. The chain paid no fee to Unicous.

Because it is electronic rather than paper-based, the EZ-PIC program eliminates the need to handle paper coupons and results in faster reimbursement from manufacturers to retailers (21 days vs. around three months), as well as faster checkout time. “It's just a home run,” said Schneider.

Schneider noted that an EZ-PIC promotion may be used by a manufacturer in concert with a trade promotion, but in any event, the funding for each is separate, and the EZ-PIC promotions don't impact the availability of trade deals.

Michael Schiff, vice president, Partners in Loyalty Marketing, Chicago, noted that the EZ-PIC offers would prevent a shopper who was “on the fence about switching to another brand” from doing so. But he wondered how costly it would be for an established manufacturer to offer automatic discounts to shoppers who would have purchased their product anyway.

“Manufacturers may see a high redemption, but they need to evaluate the program stringently,” Schiff said. “If they do a control store without the program, how much greater absolute value will they get where they run the program?”

But Schneider said the viability of the program — including its ability to sustain sales lifts after the promotion period — was demonstrated by the fact that some manufacturers ran promotions more than once. (He didn't name which manufacturers.) “If this program didn't have sustainability, there wouldn't be repeat manufacturers, and it would have petered out by last summer,” he said.

PetPlay, Los Angeles, a three-year-old manufacturer of gourmet cat food, ran a buy-three, get-one-free EZ-PIC promotion at Big Y last July. Sales increased 93% compared with the previous month, said Eric Weber, chief executive officer of PetPlay. “We're really pleased with it,” he said. “For us, as a new brand, the shelf signage was a way for us to stand out in the stores.”

In a case study recently published by Unicous, Ocean Spray, Lakeville-Middleboro, Mass., reported an average 60% sales lift during several promotions it ran over the past year at Big Y. Ocean Spray's intention during the promotions was to “increase the number of items purchased in one shopping trip.”