How to Take Advantage of the Explosive Growth in Digital Coupons

With soaring use of digital coupons, retailers need to adopt an automated coupon redemption capability, with coupon aggregation, validation, redemption and analytics functionalities.

Smartphone adoption is rapidly changing the retail shopping experience. Shoppers armed with smartphones expect instant access to pricing information and special offers via their devices. A growing part of this mega-trend is the use of digital coupons, driven by group-buying, acceptance among the young (and affluent) and ease of redemption.

Retailers that neglect digital couponing risk losing business. Yet there's confusion in the marketplace about emerging hardware and software solutions. Many major retailers plan investments in multi-channel strategies, including digital coupons. But the vast majority have yet to commit. Most are unsure of the best solution and concerned about the impact on their business.

Digital Coupons Soar

Paperless digital coupons are taking off. In 2010, their use in the United States grew by 41% compared with 2009, according to Coupons.com Inc., the largest digital coupon network on the Internet. The savings issued were worth approximately $1.2 billion.

The key driver is smartphone adoption. By the end of 2011, according to market research firm Nielsen, there were more smartphones in the U.S. than feature phones. But that is not the only trend at work.

Young people with mobile lifestyles have embraced digital coupons. According to Coupon Sherpa, a popular coupon-related website, what began slowly with printable online coupons rapidly gained momentum in 2011, becoming a multi-platform phenomenon, mainly due to the popularity of smartphone-compatible coupons. A younger, hipper crowd is using barcodes, in-store access, and social media rewards. For the first time in 2010, according to Coupons.com, digital coupon growth outpaced newspaper coupon growth.

Digital coupons are likely to continue their rapid growth for two other reasons:

1. They are part of the updraft in cross-channel marketing, especially mobile. Between the growing acceptance of smartphones and consumer's need for instant access to information, mobile is becoming a major channel for retailers, according to Boston Retail Partners. The digital marketing firm Unica estimates that over 40% of European and American marketers (based on the company's 2010 survey) already use mobile marketing, mostly through mobile apps, mobile sites and mobile messaging. And most marketers intend to get onboard eventually.
2. Of equal importance, digital coupons are extraordinarily convenient for both shoppers and retailers. In the traditional coupon redemption process, customers must watch for deals, remember to carry the coupon, check if it's accepted in the store, make sure it hasn't expired, and adhere to all other conditions in the fine print when arriving at the point of sale (POS).

Retailers must jump through just as many hoops: Ensuring employees can identify fraudulent coupons, sending accepted coupons (or data) to manufacturers, and then completing and tracking settlement. Two questions must always be asked: Does the coupon improve the shopping experience (or complicate it)? Will it improve customer loyalty?

Paperless digital coupons have none of the downsides and many upsides:

• As long as the shopper has a smartphone, there are no inconvenient usage barriers.
• Digital coupons are instantly redeemable.
• They can be provided on short notice to drive sales.
• Retailers or manufacturers can distribute them to a wide audience or just top customers to reward loyalty.
• Manual handling is a thing of the past.
• Manufacturers avoid the considerable expense of printing, advertising and distribution.

Why Get In the Game Now

For retailers, digital coupons are both a defensive tactic and a competitive advantage.

Many consumers these days are time-pressed and online-savvy, which means they have high expectations about speed and convenience of service. Couple that with a low tolerance for long checkout lines and store associates who often don't have the information they need (frustrations often cited in shopper studies).It all adds up to the need for retailers to provide the speediest, most convenient, most informative service technology can provide. That includes streamlined POS, which opens the door to digital coupons.

Automated Coupon Redemption: High Return, Low Risk

Given these trends, we have created an automated coupon redemption solution that is delivered as a cloud-enabled service requiring minimal upfront investment.

Our automated coupon redemption solution, couponSERV, enables retailers to address many of the aforementioned challenges. It provides a low-risk way to embrace paperless digital coupons because it requires no upfront investment in hardware or software. It simplifies the coupon process for customers and retailers with a single real-time POS connection to a central database.

To learn more, read the complete white paper How to Take Advantage of the Explosive Growth in Digital Coupons (PDF). Or get more insights from Cognizant's retail practice.