Retailers: Don’t Write Off Coupons Quite Yet

Retailers Shouldn’t Write Off Coupons Without Understanding the Process

 Companies that don’t currently use coupons typically stay away for one of two reasons. They either don’t understand how the coupon process works, or they’re afraid of developing a culture of discounting with their customers. While both of these reasons are very real, they’re ultimately pretty weak excuses for avoiding coupons. By understanding how coupons work and the value they add to your business, you can build successful coupon-based campaigns that increase conversions and drive sales.

A Behind the Scenes Look at the Coupon Redemption Process

Do you know how the coupon process works? While your initial response may be an automatic “yes,” do you actually understand it from start to finish? Don’t worry, you’re not alone. Most businesses and consumers are unclear of the coupon redemption process and how each part of the chain is affected. Clearing up this area of concern will give you a better understanding of what’s going on behind the scenes.

From the time the customer presents the coupon to the final reimbursement, here’s how the process works:

1. Store cashiers scan coupons when customers present them at checkout. They generally place them under the cash drawer and store them there until it’s time to balance the money at the end of the shift. When counting up cash, cashiers actually count the value of the coupons and add this number to the total. In other words, coupons are treated exactly the same as all other forms of payment.

2. At the end of the day, week, or month (whichever timetable the store follows), the store manager collects all manufacturer coupons from the period and mails them to the store headquarters or coupon clearinghouse.

3. Once the clearinghouse receives the coupons from a store, they are counted, scanned, and totaled. This total dollar amount is then reimbursed to the store by the manufacturer.

4. Clearinghouses have very rigid practices and quality control measures to ensure both the individual stores and manufacturers are treated fairly. The entire process – from sending in coupons to receiving a reimbursement check – typically takes four to eight weeks.

Sounds simple enough, doesn’t it? Well, that’s pretty much all there is to it. Sure, there are plenty of smaller steps along the way (including keeping detailed proof of purchase records), but you can break the entire process down into these four stages. Doing so allows you to better understand how coupon redemptions work and why these little slips of paper are so valuable.

How to Determine if Coupons are a Good Fit for You

Yet, even after getting a glimpse into the coupon redemption process, some companies still have questions regarding how they fit into their existing business model. If you fall into this category, mull over the following points and you should be able to reach a definitive conclusion regarding whether or not coupons are a good fit.

• Look at coupons as a form of marketing. Coupons are essentially another form of marketing. They help build awareness for your brand, drive traffic to your stores, and encourage purchases.

• Think about your business model. What sort of business do you run? Do you have a single location or many? Are you a physical or online company? Are you product or service oriented? As Caron Beesley writes for the U.S. Small Business Administration, “Coupons tend to work best for location-based, product-oriented businesses where local customers can realize quick and easy savings.”

• Ensure you’re financially stable. Not all companies can afford to accept coupons. After all, you have to be able to afford the discounted price until the manufacturer reimburses you. If your business depends on monthly revenues to survive, it may not be able to take a hit of a few hundred or thousand dollars each month.

Tips for Avoiding Developing the Wrong Consumer Culture

Many businesses understand how coupons work, but are afraid of developing a consumer culture that depends on discounted prices. An example of a company that’s built a culture of discounting is Bed Bath & Beyond (though it doesn’t seem to have hurt the brand any). Rarely does anyone make a major purchase from the popular home goods store without using the company’s standard “20{988946e7c6722684e0339e40880443ac55aac89e798188bb48d33230dd04a8dd} off any single item” coupon. Customers have been conditioned to expect 20 percent off and won’t make purchases unless they get the discount.

While it’s arguably been an effective strategy for Bed Bath & Beyond, not every company wants to develop that sort of consumer culture. This begs the question: How can you use coupons without hurting your brand? Here are a few ideas:

• Move stale inventory. Use coupons to move inventory that’s been sitting on your shelves for an extended period of time. By using available manufacturer coupons or creating unique store coupons, you can target this inventory and make room for new product.

• Reward customers. The value of coupons is maximized when they help a company attract a new customer or reward an existing one. You can build customer loyalty by giving new offers to first-time buyers, as well as generous discounts to customers who’ve purchased from you in the past.

• Seasonal offers. Does your business experience overwhelmingly slow periods of sales? Offering seasonal coupons can help drive sales during these droughts and help your company avoid bad quarters.

• Buy X, get 10 percent off Y. Do you have a product with excellent margins? Offering a coupon where the consumer buys one of these items and then gets a set percentage off another item allows you to increase sales of your most profitable SKUs without losing any of the margins.

Contact Mandlik& Rhodes Today

At Mandlik& Rhodes, we handle the entire coupon redemption process so you can focus your attention on increasing sales and growing your brand. With timely communication, clear payment reporting, and efficient processing, you’re able to receive the full value of your coupons each and every time you send them to our clearinghouse. And with a customer first attitude that doesn’t charge postage chargebacks, you don’t have to worry about hidden fees or extra expenses. For additional questions related to your coupon processing needs, please contact us today!