Are Traditional Coupon Networks Past Their Prime?

As many as 12 years ago, I was predicting the rise of digital couponing and that the traditional coupon networks — FSIs, Catalina and others — would be supplemented or even replaced by new networks delivering coupons digitally. Boy, was I wrong.

The adoption time of digital coupons is taking much longer than I anticipated. I thought it would take just a few years, but digital is still a small percentage of coupons. I thought that technological hurdles would be the problem, and that once those were surmounted, it would be clear sailing — but what ended up happening is that once the best technology became clear, that only got the disputes rolling.

The consensus now is that the best way to execute digital couponing is a combination of digital-offer delivery and load-to-card redemption. Consumers, marketers and retailers all agree that the best way to deliver digital coupons is to inform the consumer that the offer exists, through email, web posting, text message or some other means, and then ask the consumer to load that offer with one click into an existing account — either with a loyalty card or some other tracking mechanism. It’s all more complex than that, of course, but such a system seems to work for all three constituencies: retailer, manufacturer and consumer. Plus the technology to support all of this is now readily and inexpensively available.

But the problem is that my original prediction of how this business would develop turned out to be entirely wrong. I assumed national networks would be built to deliver digital coupons, but as shopper marketing has become a bigger, more dynamic, more important part of the marketing mix, retailers have lost interest in becoming part of anyone’s network and would rather work directly with manufacturers. A lot of companies aspire to build a national digital coupon network, but the big retailers have no interest in being a part of a network when they think their size justifies being their own network.

That gets me to the point of this article. Twenty years ago, the largest retailers were both regional and small — fewer than 3 percent of total U.S. grocery stores. But consolidation, growth in retailer power and, most importantly, the rise of shopper marketing as a large portion of CPG budgets have made the creation of retailer networks both less important and much harder to achieve. This is true not only for digital couponing, but also for all emerging marketing technologies.

I think the world has shifted to the point where the network creators have little chance of success. The large powerhouse retailers have the marketing might, expertise and budgets to create innovative marketing tools for their manufacturer partners.

The rise of shopper marketing has created a new world, one where retailers are taking a major step from passively accepting new technology from vendors and CPGs to one where retailers are ready and able to build their own solutions.

What does this mean for the independent retailer? It means that independents now really need to engage in the shopper marketing world. Shopper marketing budgets have become significant, and independents need to demand equal treatment in that world. It’s time to talk to the CPGs about creating shopper marketing programs for independents and small chains. At this point, the budgets have become significant enough that it’s almost irresponsible not to make this effort. So the next time you hear about a great new product from a CPG giant, ask these simple questions: What’s in it for me, and how are you prepared to support this brand in my store?