August 30, 2021

What Will Universal Digital Coupons Mean for Retailers?

By Meggie Giancola
Categories

Summary:

Universal digital coupons will expand the marketing power of digital offers to help retailers engage shoppers who are not yet part of their loyalty programs.

• As this new coupon format becomes available, retailers who are early adopters may hold an edge in the battle for differentiation.

• This new coupon format also provides even more confidence in accepting and validating coupons at the point of sale.

There’s a new type of coupon being introduced into the grocery market. It’s called the universal digital coupon. And, while we’ve discussed the benefits for marketers and consumers, the benefits to retailers are especially exciting.

First, these new coupons will help retailers engage with shoppers who don’t yet belong to their loyalty programs. Second, early adoption of these new coupons may offer a competitive edge with shoppers looking for deals and value. Third, the technology and controls of universal digital coupons will help retailers mitigate some of the fraud risks they face today.

Expanding Shopper Engagement Opportunities

Discount coupons clearly play an important role in helping grocery retailers reward loyal customers and win new ones. Coupons can help drive incremental shopping trips and bigger basket sizes.

And, as people have become comfortable with the digital ecosystem, more shoppers are looking online for savings. In the past decade, digital coupon use has seen impressive growth in the grocery sector. Representing a mere 6.9% of all grocery coupons redeemed in the U.S. back in 2012, digital coupons have nearly quadrupled their share to account for 27% of all redemption in 2020.1

Despite the impressive growth, there remains an important segment of shoppers that most of today’s digital coupons simply can’t engage. That’s because most digital coupons need to be activated through a retailer’s loyalty program.

These loyalty-connected offers play an important role in the promotion mix by building and rewarding loyalty with existing customers. However, this older generation of digital coupons also leaves a critical gap; they can’t help retailers engage shoppers beyond their loyalty programs.

Why does that matter?

1. No matter how great their loyalty programs may be, many retailers will have a substantial segment of shoppers who don’t use them. A Synchrony Financial poll revealed that only about 80% of American adults belong to some type of loyalty program, leaving a full 20% that do not belong to any. According to KPMG, “One in seven millennials do not belong to any program.” And, some research indicates even worse statistics: “Only about half of male shoppers reported using a grocery loyalty program during the previous three months compared to 65% of female shoppers.” That leaves a huge segment of shoppers that grocery retailers simply cannot engage with via loyalty-based coupons.

2. It’s important for retailers to be seen as welcoming all shoppers and helping them save money — not just the members of their loyalty programs.

3. No retailer wants to lose sales to its competitors. Capturing a $50 shopping trip from an occasional shopper is worth just as much as capturing a $50 trip from a loyal shopper — maybe even more, since every trip captured from a non-loyal customer provides a new opportunity to turn them into a loyal customer.

4. The beauty of the new universal digital coupon is that it fills this void left by the current digital coupon format. Since universal digital coupons can be used by shoppers without being activated through a loyalty program, retailers can use them to engage this large and valuable segment of shoppers.

Gaining a Competitive Edge

Universal digital coupons are still in their infancy. It will take time for retailers to make adjustments to their point-of-sale systems and front-end processes, so they can accept these new coupons. This creates an opportunity for the retailers who move quickly and start accepting universal digital coupons first.

According to research by Washington University in St. Louis, 83% of surveyed shoppers regularly visited between four and nine chain stores over the course of a year to purchase groceries. Less than 1% stayed loyal to just one store. What’s more, the research found “a substantial number of shoppers who are ‘cherry pickers’ clipping coupons and shopping from store to store for bargains.”

In other words, retailers must compete for every shopping trip — even among their ‘loyal’ shoppers — particularly when deals and savings are up for grabs. When a shopper leaves the house or logs onto a third-party website site like Instacart, it’s up to the individual retailer to lure that shopper to their storefront over the competitors’. Retailers who adopt universal digital coupons first will have a whole new array of manufacturer-sponsored savings opportunities to use in that battle — opportunities that the slow-to-market competitors simply cannot offer.

Advancing Coupon Security Measures

Retailers should be happy to learn that universal digital coupons feature built-in controls to promote security. These include offer validation to make them resistant to counterfeiting and streamlined purchase validation to enforce coupon terms.

What’s more, there are plans to extend the essential technology and controls underpinning universal digital coupons to a new type of paper coupon. So, over time, manufacturers would have opportunities to shift their paper coupon distribution volume to a type of paper coupon that includes these built-in validation and anti-counterfeiting measures. As a result, retailers could see some of their biggest concerns with coupons being alleviated.

Taking the First Steps

Of course, reaping the benefits of universal digital coupons requires retailers to be ready to accept them. Retailers can reach out to The Coupon Bureau, the non-profit data exchange that offers connectivity to a centralized database of universal digital coupon offers, for more information.

As important as loyalty-based channels may be, a true omnichannel strategy also means engaging with shoppers beyond the loyalty program. For more about the omnichannel savings opportunities that people are wanting, check out our latest snapshot of coupon distribution and redemption activity from the first half of 2021.

1 Projections based on measurements and proprietary modeling of market activity by Vericast’s NCH Coupon Solutions

An industry veteran, Meggie Giancola specializes in connecting the dynamics of the CPG ecosystem and the Valassis/NCH suite of solutions, providing strategic thought leadership in marketing strategy, analytical solutions, media activations, and performance measurement. She is a graduate of Miami University and an active member of the Juvenile Diabetes Foundation.

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