Critics say coupons are expensive, wasteful and inefficient advertising. Some companies have gone to great lengths to get rid of them.
It didn’t end well.
A devoted base of shoppers loves the hunt of clipping coupons from newspaper booklets and, more recently, on their phones. Many will buy products solely on the offers they can find.
In the grocery industry, 865 million coupons were redeemed last year, according to marketing and payment services’ firm Vericast.
The rise of coupons
Coupons have evolved over the years since Coca-Cola popularized them in the late 1880s.
To promote Coca-Cola to the public, the bookkeeper of John Pemberton — the pharmacist who invented the Coke formula — used a city directory to mail coupons to Atlanta citizens, according to the company.
Later on Asa Candler, founder of the Coca-Cola company, distributed paper tickets for complimentary free glasses of Coke. Within two decades, Coke had handed out an estimated 8.5 million free drink vouchers.
Coupon use took off during the Great Depression. Some of the early distribution methods were newspapers and women’s magazines, according to the Association of Coupon Professionals, a trade group for the industry.
As chain supermarkets expanded in the 1940s, coupons became a widespread practice. The introduction in the mid-20th century of direct mail coupons and freestanding inserts in newspapers also propelled their popularity.
By the 1970s, 65% of US households were clipping coupons, according to the trade group.
Printed inserts in newspapers were the most-used coupons for decades, but the rise of online shopping and smartphone apps made digital coupons more popular.
Coupons vs. sales
Coupons are different than products on sale, price promotions or discounts at the store. Sales are available to all customers when they walk in or buy online. But brands target coupons in mailings and websites to reach the shoppers who are fiercely loyal to them.
“Coupons play an important role giving brands a chance to reach and activate shoppers who aren’t making a brand choice” based on sale prices on shelves, said Aimee Englert, executive director of client strategy at Vericast. “Coupons help get a brand on the shopping list.”
Brands also dangle coupons whenever they introduce new products to spur shoppers to test them. Sometimes, companies also offer coupons to push shoppers to sign up for their loyalty programs.
But coupons aren’t loved by everyone.
Brands and retailers dislike them because they prime shoppers to only buy products at deep discounts, making it harder for them to sell their merchandise at more profitable full-prices.
Companies have said offering coupons is a waste of money that would be better directed toward dropping prices across the board or investing in improving their products’ quality. Some companies have even likened coupons to a drug.
“You’re taking money and you’re essentially paying the consumer to buy your product,” said Kimberly Whitler, an associate professor at the University of Virginia’s Darden School of Business and former marketing executive at David’s Bridal and PetSmart. “It’s taking away resources from building longer term, more sustainable equity in the brand.”
Coupons also can create challenges in predicting demand and keeping products in stock. It’s much simpler and easier on operations to keep prices consistent. What’s more, coupons cost money to design and produce, and some customers redeem expired coupons or fraudulent ones.
“The first time you do a coupon, it’s awesome because it’s incremental,” Whitler said. “The problem is now it’s baked into your base. You have to maintain that coupon.”
But most brands have decided coupons are a necessary evil and remain a part of their pricing strategies. They’re afraid to eliminate them for fear of driving away customers or losing business to competitors that keep them.
Retail history is littered with cautionary tales of brands that tried to quit coupons and failed.
“More than 300 billion coupons are issued annually and less than 2% are being redeemed,” said P&G’s then-chief operating officer Durk Jager. “Some 8 million trees are cut down for coupons annually. About 40% of total coupon spending never reaches the consumer. We decided coupons have to go.”
JCPenney had the biggest coupon misfire.
The plan backfired.
Sales tanked nearly 25% in a year and the company’s stock plunged. Johnson lost his job after just 17 months and Penney quickly brought back coupons. “We did not realize how deep some of the customers were into [coupons],” an executive said at the time.
Johnson agreed: “Coupons were a drug.”