The Holding Pattern Coupon Strategy

Typical retail IT execs trying to map out their chain's long-term coupon strategy are hoping for 20 percent off their migraines. That's because as Web fraud—not to mention the death of newspapers across the country--is making today's paper coupons less and less viable, the frequently-discussed replacements for paper coupons are still likely a couple of years away.

Many retailers had hoped that paper coupons will die a slower death, hanging on until mobile coupons were ready for mass market. But that's not the way it's playing out, especially among younger consumers.

The nirvana is to go with a full mobile approach, whether it be NFC or regular smartphone coupon displays. The idea would be a color display with enough CPU and RAM to handle a very large number of customized coupons and a POS-connected scanning device that could read off of the screen. Or perhaps it could be beamed to the POS system.

Even for those retailers who want to deploy such a system today, there are three obstacles to widespread immediate deployment:

  • Upgrading Retail Hardware (especially imaging scanners, typically costing between $400 and $800 each)
  • Upgrading Consumer Hardware (waiting for the marketshare of smartphone-like devices to be substantial enough)
  • Evolve Consumer Behavior (fancy way of saying that we need to give consumers enough time to get comfortable with using a cellphone as a payment mechanism).

    Most vendors involved expect all three to take roughly two years, which conveniently suggests a very ripe market for the next stage coupons around mid-2011. But with the strong belief that coupons will lose support in all segments (other than, perhaps, senior citizens) long before then, the migraine-inducing question becomes "What do we do until then?"

    One strong possibility is to make a few small changes in the system. First, start the migration from manufacturer-centric paper coupons to retailer-centric digital coupons. This might be done by having consumers go to the retailer's Web site and logging into a free account that has already been authenticated to that consumer. On the site would be displayed a virtually unlimited number of coupons, mostly from manufacturers but also from the retailer.

    Consumers would select whatever coupons they want and then save it. Nothing more would need to happen. When those consumers went to that retailer's store and purchased some of the incentivized products, they would have to identify themselves, preferably with a loyalty card, but a driver's license or any other ID would suffice. The system would then automatically apply the discounts.

    Not only would this keep CRM records current, but it would effectively prevent abuse of the one-coupon-per-customer rule. It would also nicely sidestep any of the hardware issues detailed above.

    Duncan Taylor, director of product management for Epicor Software, a retail specialist, said the interim approach will likely be effective, but only as a temporary stopgap.

    "You won't need mobile to do it. (Mobile will be) just a nicer and cooler way to do it," Taylor said. "I don't want the customer to have to present anything other than themselves."