Thursday, March 19, 2009

Ground Control to Shopper: Point-of-Purchase-Based Mobile Couponing the Next Hot Ticket; Kroger Co. Leading the Food Retailing Pack

Above is how a paperless coupon looks on a mobile phone using the Cellfire mobile couponing system at Kroger Co. stores.

Promotional Merchandising 2.0: Mobile Couponing

Kroger Co., which operates supermarket chains under the Ralphs, Food 4 Less, Fry's and Smith's banners in California, Nevada and Arizona, and over 2,200 supermarkets under various banners throughout the U.S., is continuing to make it easier for shoppers to use manufacturers' "cents off" coupons right in the store, as well as tapping into the fast-growing grocery coupons trend even further, by adding a second electronic, mobile couponing service to its stores.

Kroger is now offering the paperless coupon systems in its stores in the three states, along with in all of its chains and stores throughout the U.S.

Tesco's Fresh & Easy Neighborhood Market's 115 stores are located in California (Southern and Bakersfield), southern Nevada and Arizona.

How the system works: While shopping in a Kroger supermarket shoppers can go to on their cell phone or other hand-held mobile communications device and select the available and desired manufacturers' coupons online. The coupons then become available right away on the Kroger Co. customer's loyalty card for discount at checkout.

The Shortcuts system, which is owned by AOL, allows users to search for specific coupons as well as view their shopping lists from their mobile devices, according to Kimberley Partoll, executive vice president of AOL’s new ventures unit, which runs Shortcuts and just announced the new partnership with Kroger Co. The service is free to shoppers.

" Mobile enables users to access coupon savings while they're doing their shopping and the coupons are available for use once they hit the checkout line, Ms. Patroll says in describing the convenience of the manufacturers' "cents off" coupon system.

[You can view the Shortcuts Website and some of the coupon offerings here.]

In addition to Kroger Co, other supermarket chains using the Shortcuts mobile system include QFC in the Pacific Northwest, Payless supermarkets and a few others.

Fast food chains like McDonalds, Subway and Jack in the Box are also using mobile couponing very aggressively.

Cellfire mobile system

In December, 2008 Kroger Co. became the first grocery chain in the U.S. to offer shoppers the mobile, paperless coupon option through the Cellfire mobile couponing system. Kroger is keeping Cellfire as well as adding the Shortcuts system.

"The manufacturers are finally realizing that there's a way to do couponing better," Dan Kihanya, the vice president of consumer marketing for Cellfire said in announcing the Kroger partnership last year. "They realize the power of digital media can be applied to the coupon promotion world."

Major consumer packaged goods marketers are offering coupons through both mobile systems. They include Proctor & Gamble, Kimberly Clark, Kellogs, Quaker Oats, Con Agra and numerous others. Smaller food companies also are beginning to use the mobile couponing systems.

Before adopting the Cellfire system for its 2,220-plus stores in the U.S., Kroger Co. tested the mobile coupon system in the summer and early fall of last year in 200 of its supermarkets in the southern U.S. According to data from the 10-week test more than 50% of shoppers who joined the program redeemed more than one coupon, and the average coupon’s conversion rate was between 10% and 20%. That's pretty good for a test program of a then brand new coupon technology.

The Cellfire mobile coupon system works similar to Shortcuts system. The manufacturers' coupons are downloaded directly to a user's mobile phone, then a discount is given at the checkout stand via the customer's store loyalty card. You can learn more about how the system works here.

Point-of-purchase where the action is

The ability for shoppers to be able to access coupons right at the point-of-purchase in the store is powerful. It's also a powerful tool for the retailer in that having customers search their mobile phones for manufacturers' coupon offerings right in-store at the point-of-sale leads to incremental sales, in our analysis.

For example, suppose a shopper is in the cleaning products aisle and after choosing her laundry detergent (say Tide brand) and dish washing soap (say Dawn brand), both of which were on her shopping list, and which she found "cents off" coupons on Cellfire or Shortcuts for via her mobile device, she also picks up a container of Downey fabric softener and a box of Bounce dryer sheets because she found "cents off" coupons on the site for the items, along with the laundry detergent and dish washing soap. All of those brands are produced and marketing by Proctor & Gamble, a heavy distributor of coupons.

Labor savings

The Cellfire and Shortcuts' mobile systems also are valuable to grocery chains because the "paperless" nature of the mobile systems eliminates the labor needed at checkout to scan and handle paper manufacturers' "cents off" coupons. In the grocery business even saving a few seconds on each checkout can boost productivity numbers.

In order to use each of the mobile coupon systems a retailer must have a loyalty card system in place like Kroger and many other supermarket chains do have because that's how the discounts from the paperless "cyber coupons" get credited to shoppers' grocery order totals. A customer buys $100 worth of groceries at Fry's, for example, and has $5 worth of coupons downloaded from Cellfire or Shortcuts. When the checkout clerk scans the shopper's loyalty or club card, which contains the discount value, the $5 is subtracted from the customers account.

Mobile couponing will soar

We expect the use of mobile couponing systems like Cellfire and Shortcuts to spread to numerous other supermarket chains and other format retailers like mass merchandisers and drug chains. The convenience, cost-saving and potential to add incremental sales aspects of the systems are to powerful in our analysis and opinion for food and grocery retailers to avoid. Kroger Co. sees that, which is why the grocery chain is getting into using the systems in an aggressive way.

We aren't alone in that analysis. A research report issued recently by market research firm Juniper Research forecasts that the redemption value of mobile coupons will increase by over 30% by 2010. The report says mobile couponing will be a big winning for retailers that use it in the current recession. Read more about the research report here

The mobile couponing systems also have a built in growth potential. Consumers 16-35 today use mobile and smart phones like Apple's iphone as the norm. And older consumers are fast joining the club. Retailers like Kroger that have mobile couponing systems in place stand to benefit as shoppers discover the availability of such systems in the stores.

Everybody online

Manufacturers' also are putting more and more coupons online. It's provides them with a cost-savings over the printing, distribution and redemption costs that come with paper coupons. Paper coupons aren't going away anytime soon though. While shoppers can download and print the online coupons at home then take them with them grocery shopping, the mobile systems eliminate that entire step, making it much more convenient for the shoppers. That's powerful.

[See these two recent posts regarding the soaring use by consumers of manufacturers' coupons: March 7, 2009: Consumer Use and Retailer Redemption of Manufacturers' Coupons Soaring Says Leading Redemption Company in the U.S.; But Not at Tesco's Fresh & Easy. March 9, 2009: Consumer Use and Retailer Redemption of Manufacturers' Coupons Soaring Says Leading Redemption Company in the U.S.; But Not at Tesco's Fresh & Easy.]

The point-of purchase in-store is perhaps the most powerful marketing, promotional and selling place in food and grocery retailing. That's why grocers put so much effort into how the store shelves are set with product, store displays, signage and other in-store merchandising aspects.

Therefore, having the ability to allow shoppers to download manufacturers' "cents off" coupons, which the marketers not the stores pay for, is a logical extension to what's referred to as store marketing, the concept that today the main thrust of grocery marketing and merchandising is in the store aisles.

Expect to see much more of it.

No mobile couponing at Tesco's Fresh & Easy

Tesco's Fresh & Easy Neighborhood Market doesn't except manufacturers' "cents off" coupons in any form in its stores. We think the new, fast-growing mobile couponing segment, coupled with the existing and also fast-growing Internet-based couponing boom, along with the still most-used and increasingly popular paper manufacturers' coupons segment demonstrates what a mistake that policy is for Fresh & Easy, in our analysis.

As we've been writing for about a year, not accepting the manufacturers' "cents off" coupons is like saying to a huge and fast-growing segment of shoppers who regularly use the coupons when they shop, that their business is welcome, as long as they don't bring their coupons with them to the store. It's a customer-limiting factor for Tesco's Fresh & Easy, in other words. [See our March 7, 2009 story here: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track.]

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