Promotion Analytics Team | November 3, 2014

Part one in a two-part series examining the double edged sword of double coupons

One of the more fascinating aspects of retail — grocery in particular, which is the focus of this series — is the leveraging of "OPM" (Other People's Money) in a retailer's marketing, merchandising and promotion plans. A more formal industry term — let's call it the CPG's Consumer Promotion Dollars — may be accurate, but doesn't offer a whole lot of context. In addition to a retailer's own trade activity and investments, there is also a perpetual swirl of dollars and discounts available to shoppers that originate outside of the retailer's own four walls (and often beyond their control): most often coming in the form of a (manufacturer-issued) FSI coupon.

Think about this for a moment. When a soda manufacturer issues a coupon in a particular market, their intent is clearly to drive sales. But where you redeem that coupon and purchase that product (whether at a grocery store, mass merchant or C-store) doesn't really concern the manufacturer. They simply want to ensure that you buy their brand instead of the competitions'.

But if I'm a retailer, my priorities are exactly the opposite: I don't care if you buy one or the other, but I do care dearly that you buy from my store rather than my competitor across the street. So how, as a retailer, do I steer these consumer promotion dollars (intended for everybody) into my store in particular, which is what I really care about?

Enter doubling.

Doubling is an elective practice that retailers use to increase the value of a manufacturer-issued coupon presented by the shopper — at the expense of the retailer. If the face value is only $0.50, but I know that the grocery store down the street will double it up to a dollar… simple math dictates that I will redeem my coupon where it has the highest value. The logic is not complicated.

Retailers are highly attuned to the successful use of tactics deployed by their competitors and, for better or worse, will often replicate what they see as working. So once a grocery store in one market starts to double coupons, other competing groceries in that market may feel like they have no choice but to follow suit. From the consumer perspective, this is a great win — the more places I have to redeem a coupon for an amount higher than the printed face value, the better!

But for these retailers, doubling has become a race to the bottom. "Who can offer the biggest discount?" is no way to build legitimate, ongoing shopper loyalty. If anything, this model actually dampens one of the few genuine ways a retailer can distinguish itself from its competitors (the in-store experience) and instead trains their shoppers to be loyal only to The Deal — wherever it takes place.

As a result, some key retailers have recently changed their collective tune on doubling. It's not only an expensive practice, but quickly reaches a point of diminishing returns when multiple retailers in a market all double manufacturer coupons.

But, is doubling gone for good? Absolutely not. As a matter of fact, during Inmar Promotion Consulting's just-completed annual coupon doubling survey during which more than one thousand retail grocery locations were called and asked to clarify specific details around their doubling policies, we found that in more than half of the markets surveyed there was at least one prominent retailer that doubles.

What has changed, however, are the details surrounding doubling participation: eligible values, different markets abandoning and adopting the practice, etc. So if you have seen changes in redemption or overall coupon performance — but haven't kept up with changes to the doubling landscape — your value strategy might be overdue for an update. In other words, if you've been dropping a $0.50 in markets that now only double up to $0.40, it should come as no surprise when those coupons no longer redeem as strongly as they used to.

In part two of this series, we'll examine the current landscape of coupon doubling, provide details around new or notable policies, and explore how Inmar Promotion Consulting clients leverage our expertise to stretch their CP budgets and formulate a more sophisticated value strategy.

Promotion Analytics Team