The death of the coupon

By Melinda Fulmer

Paper coupons appear to be headed the way of the VCR.

Grocery chains, food and drug manufacturers, and even coupon marketers themselves are going electronic. The concept is almost as simple as scissors and the Sunday paper: Visit a Web site, type in your loyalty codes, and find all the coupons waiting for you, electronically, at a store's cash register or on your cell phone.

The hope is that these electronic discounts will revive the dying coupon business. Only 0.5% of the 285 billion coupons issued last year were redeemed, according to coupon processor NCH, down from an average of 1% a decade ago.

Part of the problem is that newspaper readership is declining, so fewer people are looking at the Sunday circulars. The younger shoppers sought by marketers read their news online. And fewer people these days have time to clip, organize and sort coupons each week.

But apparently, we all seem to make time to surf the Net and talk on our cell phones, so these areas are where the industry is casting its net for savers.

"We are committed to reaching our customers when and where they are most receptive," says Jenifer Nunnelley, a Procter & Gamble spokeswoman.

Should you ditch the Sunday paper?

Not yet. At least 75% of the coupons issued are still in the old Sunday circular, said Stephanie Nelson of The Coupon Mom, a site that helps shoppers combine these coupons with sale items to get the biggest discounts.

And grocery chains and food and drug companies have no plans to cut out these paper coupons until they see that enough people have migrated to the Web for discounts.

"I think it will be a long time before shoppers completely become online grocery coupon users," Nelson said.

Yet the e-coupon transition is attractive to retailers and manufacturers for reasons beyond shifting demographics:

• Redemption rates are higher, though the technology is so new that the industry won't be more specific.

• Redemptions are easier and quicker to track.

• They get more information about who's buying their products.

• They can be used to cultivate loyal customers.

• They're more environmentally friendly.

How e-coupons work

To get these electronic discounts, shoppers must type in their loyalty-card numbers on a store Web site and click to load the coupons to the account. The discounts are subtracted after those items are scanned at checkout.

Grocery giant Kroger, which owns Ralphs, King Soopers, City Market, Dillons, Smith's Food & Drug Stores and eight other supermarket chains, has coupons from Procter & Gamble on its store Web sites.

Kroger shoppers can also go to Shortcuts.com to link their card numbers to a broader array of savings from manufacturers and print out a list of the coupons they have loaded.

"There's no clipping and sorting and no forgetting the coupon at home," says Sharon Baker, Shortcuts' executive director. Baker says the site will have 75 to 100 coupons up by the end of the year.

Grocer Giant Eagle has partnered with SmartSource, one of the country's largest coupon distributors, to allow its grocery customers to load SmartSource discounts onto their store cards on its Web site.

In the next six months, most major grocery retailers are expected to offer these kind of e-coupons linked to store cards, says Nelson, of The Coupon Mom.

Continued: Phoning in the discounts

Phoning in the discounts

In a few months, shoppers will also be able load discounts to their loyalty cards via cell phone. Kroger has signed a pact with mobile marketer Cellfire to transfer coupons from manufacturers such as General Mills, P&G, Kimberly-Clark, Clorox and Del Monte to an application downloaded to cell phones.

There are no text messages or mobile spam involved. Customers will just download a coupon application to their cell phone and register their grocery-store card. Then, when they want to add coupons, they'll scroll down and click "OK" to select them. The coupons will be credited to their accounts immediately, says Cellfire CEO Brent Dusing.

Shoppers can even retrieve the coupons as they are walking down the grocery aisles.

"You are only in front of your computer a few hours a day. This allows consumers to save money when they are on the go," Dusing says.

Cellfire's application works with all mobile carriers, and the company is working to add more retailers and discounts to the service in the months ahead.

What's in it for shoppers?

Like it or not, you'll be confronting electronic coupons soon. Here's why:

• Convenience is the biggest draw, analysts say. Rather than clipping and sorting and trying to keep track of a messy wad of coupons, shoppers can have the discounts waiting at a register before they leave home.

• There's no embarrassment. Coupons allow people who don't like to be seen as cheapskates to get the discounts in stealth mode.

• At least in the current experimental mode, some of these coupons have larger face values.

• Conceivably, Nelson said, you could triple-dip and use paper coupons -- those printed off the Web and those you load to the card. Instead of buying three Sunday papers to get deals on three of the same products, you could print one off the Web (you can find click-and-print coupons on sites such as CoolSavings, SmartSource and RedPlum), load one to your card and use your Sunday coupons.

However, these electronic coupons aren't without a few drawbacks:

• Most have a shorter expiration period than paper coupons.

• There's no room for an error in your favor. Because they are linked to UPC codes on products, there isn't the same fudge factor at the checkout. If you didn't buy the exact same size or variety that the coupon stipulates, you won't get the discount.

"We all know the payoff is there" from coupons, Shortcuts' Baker said. But, she said, "It's not as easy as it could be."

Published April 15, 2008