Digital Coupons Are Finally Delivering Better Bang-for-the-Buck to Retailers

Last Updated Aug 26, 2010 2:46 PM EDT

Digital coupons are helping retailers who use them achieve something that the Internet has long promised companies: the ability to reach consumers with greater precision and lower costs.

In fact, a study by Kantar Media suggests that digital coupons are providing companies more bang for their promotions buck.

Digital coupons -- product discounts that are downloaded onto devices such as cell phones and retailer loyalty cards -- certainly provide convenience. Consumers can't forget to clip them and always have them available when a spontaneous shopping urge arises.

Using available data, product manufacturers can target digital coupons specifically at critical groups of potential customers, either their own or those of their retailer partners -- the latter, specifically to keep business relationships friendly.

Digital coupon campaigns can use information captured by the companies launching them -- and by distribution partners such as mobile phone networks -- to more precisely target specific consumer groups than was previously possible. Paper coupons, of course, continue to be mass circulated, and even those that are printed from websites are available to a wide range of consumers, many of whom are looking for any bargain they can get. Digital coupons can be distributed directly to shoppers based on detailed data that can include gender, age and even shopping behavior.

Not only that, but sophisticated digital marketers can work out just how deep a discount is necessary to motivate consumers and can also set strict time limits on promotions. As a result, they can target customers who are the most critical to their marketing efforts, provide a discount that doesn't cost any more than is necessary to motivate the shopper and in a time frame that ensures only the most enthusiastic consumers -- those most likely to purchase a product again -- get the deal. All that adds up to more cost-effective marketing.
The Kantar study certainly suggests that digital marketers are getting the results they want.

Kantar said in the first quarter, the average face value for digital coupons was 75 cents compared to $1.33 for print-at-home coupons. Additionally, expiration periods were shorter for digital coupon promotions than for print-at-home coupons. Digital coupon websites also generated a higher number of visits per visitor than those of print-at-home, which may translate into greater customer loyalty.

According to Kantar, the number of companies offering digital coupons actually declined in the first quarter, to 142 from 152. However, the comparison was between the first quarter and the fourth quarter of 2009. Take into consideration that many retailers and the consumer products companies that supply them do more than a third of their business in the fourth quarter, and a seven percent decline looks like a sign of strength. The number of companies distributing print-at-home coupons dropped more than 10 percent in the quarter, Kantar said -- more testimony to the digital coupon advantage.