Pictured above is a graph captured today from Google Trends, showing the volume of consumer searches on the search engine for "online coupons," from 2004 to today, April 5, 2009. Notice the progression of online search for the manufacturers' discount grocery coupons.
When it comes to online manufacturers' discount grocery coupons, the younger an adult consumer is, the more receptive he or she is to the online discount offerings, according to a just-released joint-study by AOL's Platform- A business intellegence group and consumer packaged goods research firm Information Resources, Inc. (IRI).
The joint study, which utilized information provided by 36,000 IRI consumer panelists, offers the following three key results:
>The youngest market segments are the most receptive to online coupon offers, with 51% of 18-24 year-old shoppers indicating that they would be very likely to use coupons presented to them online.
>While historically ambivalent to traditional coupons, younger couples are the most likely life-stage group to use online coupons, indicating an opportunity to influence product choices within this segment.
>Young couples without children are among the respondents most likely to use a coupon they found online, followed by shoppers with younger children.
"What's particularly remarkable about the study results is how open young people are to the idea of using coupons online – even though clipping coupons from the newspaper really hasn't been their thing," says J. P. Beauchamp, senior vice president, IRI Consumer & Shopper Insights. "I think we’ll be seeing consumer packaged goods manufacturers jumping on this trend – using online coupons to court a new generation of consumers and build loyalty during these cost-conscious times." [We don't think the finding that young people are "so open" to using online coupons is remarkable. In fact, it makes intuitive sense that 18-24 year olds would be so receptive to online coupons. Most spend more time online today than they do watching television, for example. And the Internet and the Web is to today's 18-24 year olds what the telephone was to 18-24 year olds in the 1970's and 1980's.]
Based on input from more than 36,000 IRI panelists gathered in September, 2008, the study gauged consumer usage of traditional newspaper coupons and interest in digitally distributed online coupons.
"The research comes at a critical juncture, when American families are extremely value-focused and eager to stretch their buying power, yet newspaper circulation (and thus the traditional vehicle for coupons) is in steep decline," says Mark Ellis, senior vice president of the AOL/Platform-A business intelligence unit.
AOL owns and operates an online manufacturers' grocery coupon service called Shortcuts.com. The service allows shoppers to search for and download online manufacturers' grocery coupons using a cell phone or other personal digital device right in a supermarket or other format store aisle. The product item discount value of the coupon is downloaded directly onto the shoppers store loyalty card. The discounts are then given to the customer at check out and printed out on their receipt.
"This data highlights a number of trends that are converging to make online couponing an appealing option for consumer packaged goods manufacturers, Ellis says. "We have an economy that makes coupons much more relevant to the average consumer, a rising generation of families totally at home with the Internet, and an overall decline of the newspaper and its Sunday circular distribution. There's clearly a huge window of opportunity here."
The AOL/IRI study reports that more than 90 million consumers (78% of retail shoppers) currently use traditional newspaper coupons, with nearly one out of every four of the newspaper coupon clippers likely to be at least 65 years old.
Additionally, It also suggests that nearly four out of every 10 shoppers – a total of 40 million consumers – would be very likely to use coupons accessed online. Not surprisingly, the younger the consumer, the more comfortable they were with the idea of accessing coupons online. After all, consumers aged 18-24 years old, the top online grocery coupon demographic, according to the study, were literally born into the era of the Internet. Conversely, consumers over 40 have had to adapt to the Internet and its various offerings.
As a result, younger consumers are early adopters to everything digital and online; it's coded in their DNA. For older consumers it's a more learned behavior. But one shouldn't discount the fast-growing numbers of older consumers who are going online to search for and download manufacturers' grocery coupons. It is significant, and growing rapidly in the current recession.
Older consumers may be late adopters in some cases, but when they adapt they tend to go big online. For example, people over 40 are the fastest-growing consumer segment signing up for the social networking site Facebook, according to data released by the company in March.
AOL, which is owned by Time-Warner, obviously wants to get more consumer packaged goods companies to use its Shortcuts online coupon service, along with getting more consumers to regularly use the site to obtain the coupons.
But the study's results basically fit with Fresh & Easy's Buzz's independent research, which finds online consumer coupon use fast-growing, particularly among adult consumers 18-35, but also those 40 years old and over. Most of the online use by consumers at present involves downloading manufacturers' (and in cases where retailers like Tesco's Fresh & Easy and others that offer store coupons) coupons from Web sites, printing the coupons out, and taking them to the supermarket to redeem.
Right now it's all about obtaining value, a theme we write about often when it comes to food and grocery shopping. [Related value proposition reading. April 1, 2009: Competitor News: Bashas' Chain Launching 10,000-Plus Item Storewide Price Slashing Program This Week in its Arizona Supermarkets. March 2, 2009: Fresh & Easy Buzz Redux: Much of the Value Proposition-Based Analysis and Suggestions We've Been Offering Now Being Adopted By Tesco's Fresh & Easy. March 11, 2009: Fresh & Easy Buzz Redux: Tesco's Fresh & Easy Changes its Promotional Advertising Flyer to 'Weekly;' Something We've Been Suggesting For About A Year.]
AOL/Platform-A and IRI agree with our value is currently King assessment.
In the study they say: "Value-focused promotion is clearly the strategy of choice right now in the consumer packaged goods (CPG) market, evident in the fact that eight out of Platform-A’s top 10 CPG clients use value-based messaging in their online advertising. And, many of these advertisers are already taking advantage of the innovative approaches to couponing available online, such as AOL’s Shortcuts.com. Launched in 2008, the site allows consumers to apply online coupon promotions directly to their grocery loyalty cards, making coupon discounts paperless and automatic at checkout.
Kroger Co., which operates the Ralphs supermarket chain in Southern California and in California's southern Central Valley region, Food 4 Less in Southern California and Nevada, and the Fry's and Smith's Food & Drug chains in Arizona and Nevada (all markets where Tesco's Fresh & Easy has its current 116 grocery and fresh foods markets), is using AOL's Shortcuts.com service, along with Cellfire Mobile, a competitor. [You can read about the development in this March 19, 2009 piece: Ground Control to Shopper: Point-of-Purchase-Based Mobile Couponing the Next Hot Ticket; Kroger Co. Leading the Food Retailing Pack.]
Platform-A is AOL’s digital marketing and advertising business. It includes AOL.com, AIM, MapQuest, Advertising.com's third-party networks and other services.
Platform-A also includes TACODA's audience insights and behavioral targeting; Quigo, a site- and content-targeting solution; ADTECH, an international digital ad serving business; Third Screen Media, a mobile ad serving network; and buy.at, an affiliate marketing solution.
AOL's Platform-A currently has operations in the United States and in nine European countries: the United Kingdom, France, Germany, Denmark, Finland, Netherlands, Norway, Spain, and Sweden. It also operates in Japan through a joint venture with Mitsui corporation.
Online couponing and Tesco's Fresh & Easy
Fresh & Easy Buzz's research indicates that the only consumer segment that's began to develop some retail brand loyalty to Tesco's small-format, combination grocery and fresh foods Fresh & Easy stores thus far are younger consumers in the about 18-34 year old age range.
It is among this general age range that our research finds the most shoppers having an affinity for the Fresh & Easy concept, model, format and way of doing business.
Among the 18-35 year old age cohort, our research shows those aged about 18-29, the same basic age cohort indentified in the AOL/IRI study as being the most active (or willing to use) manufacturers' online coupons, to be the age group that appears to generally like Fresh & Easy the most. In other words, the younger the adult is the more they seem to like Fresh & Easy, based on our research and analysis.
Unfortunately for Tesco's Fresh & Easy, its stores do not accept manufacturer-distributed grocery coupons. As a result, until the grocer changes that operations practice and starts taking the ocupons, it can't tap into the potential opportunity that presents itself. That opportunity being that the same consumer age group our research shows likes Fresh & Easy the best happens also to be the age group that uses and is willing to use manufacturers' grocery coupons the most. [Related reading - March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track.]
Fortunately (accept from a profit margin perspective) for Tesco's Fresh & Easy, it does sometimes issue its own store brand discount coupons (the $5 off purchases of $20 or more and other value variations) online on its http://www.freshandeasy.com/ Web site, as well as using Twitter.com to sometimes promote the availabilty of the store coupons at the Web site.
The downside between manufacturers' item coupons and retailers'-own store coupons though is that in the case of the manufactuers' coupons, online or paper, the manufacturer pays the retailer back for the discount value (plus a five cent or so handling charge per coupon) of the coupon, which means the discounts don't come out of a grocry chain's profit margins.
Retailer store coupons though come directly out of the retailer's profit margins. For example, if a shopper buys $30 worth of groceries and uses one of Fresh & Easy's $6-off store coupons, Tesco loses a whopping 20% on the transaction. In the low margin grocery business that 20% is a significant percentage to lose. This is one key reason why Tesco's Fresh & Easy has dramatically reduced the distribution of its deep-discount store coupons since the first of this year, much to the dismay of many shoppers who became used to using the coupons as a regular habit at the stores.
It's our analysis that Tesco is missing a huge opportunity to tap into the fast-growing online manufacturers' grocery coupon trend by not accepting the coupons in its 116 Fresh 7 Easy markets in California (Southern and Bakersfield), southern Nevada and Metro Phoenix, Arizona.
Additionally, since Tesco isn't using a loyalty card program at Fresh & Easy USA like it uses at Tesco in the United Kingdom, it can't utilize paperless online manufacturers' grocery coupon services like AOL's Shortcuts.com and Cellfire Mobile, both which allow retailers to accept the online coupons without any paper transactions.
The primary reason Tesco's Fresh & Easy doesn't accept manufacturers' cents-off coupons, just as it doesn't take WIC vouchers or paper checks from customers, is because the retailer believes the labor savings of avoiding store-level paper transactions (although last time we looked cash is still paper money, as are the Fresh & Easy paper store coupons) outways the benefits of accepting the paper coupons and checks from shoppers. We disagree with this based on extensive experience and our research and analysis.
Therefore, if Tesco's Fresh & Easy did use a loyalty card scheme, it could utilize the various paperless manufacturers' grocery coupon services and still avoid handling the paper coupons. But it can't since in order to use services like Shortcuts and cellfire a retailer must has a loyalty card system in place.
Therefore it's a "lose-lose" proposition all around regarding manufacturers' coupons for Fresh & Easy until it changes its operations policy, which would be the smartest thing to do since paper manufacturers' discount coupons are still the vast majority of those used by shoppers, or the grocer brings in a loyalty card program.
Conclusion: Competitive advantage
It's our analysis that those food and grocery retailers like Kroger Co. that have adopted the use of paperless coupon technology like Shortcuts and Cellfire for their stores have in their hands what will increasingly become a competitive advantage.
This is particularly the case because more and more consumer packaged goods companies are signing up with the paperless coupon services, offering their coupons with them in addition to elsewhere online and in the traditional paper formats like Sunday newspaper inserts and direct mail.
Additionally, consumers are increasingly buying smart phones like Apple's 1-phone and others. These units make going online anywhere a breeze. This superior protable digital technology will result in more consumers of all ages using digital media, including online manufacturers' coupons.
Lastly, the power of combining the ability for shoppers to obtain online coupons via their handheld devices right at the point-of-purchase, in the supermarket aisle, is powerful. For example, a shopper can check Shortcuts.com or Cellfire Mobile right in the cleaning products aisle in a Kroger Co. store before deciding which brands to buy. They can then download a coupon for a particular brand of laundry detergent, household cleaner, paper towels and the like, buy those brands, and get an instant discount on each of the items at checkout.
The store is increasingly where the action -- and marketing -- is. Therefore the obtain at the point-of-purchase manufacturers' paperless coupon technology is only going to continue to grow, in our analysis. Those retailers that are early adopters, like Kroger, will reap the most competitive advantage from the technology, we believe.
Select related stories from Fresh & Easy Buzz:
>March 19, 2009: Ground Control to Shopper: Point-of-Purchase-Based Mobile Couponing the Next Hot Ticket; Kroger Co. Leading the Food Retailing Pack
>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
>March 7, 2009: Google & Yahoo - The Tale of the Search Engines: An Analysis of How Tesco's Fresh & Easy is Losing Out By Not Accepting Manufacturers' Grocery Coupons
>February 3, 2009: Competitor News: 'Grocer-Gone-Wild:' Arizona's Fry's and its 'Bring it On' 'Take All Competitors' (Including Tesco's Fresh & Easy) Store Coupon Move
>February 12, 2009: Consumer Use of Manufacturers' 'Cents Off' Coupons Continues to Grow: The Latest American Rage: Home Coupon-Clipping and Coupon-Trading Parties
>December 12, 2008: December 12, 2008: Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before
>September 4, 2008: >September 4, 2008: News & Analysis: Tesco's Fresh & Easy Launches New Direct Mail Promo Piece Full of $5-Off Discount Coupons; Is it Taking Deep-Discounting Too Far?
>December 22, 2008: December 22, 2008: Marketing: Tesco's Fresh & Easy Launches E-Mail Promo Alert Program; Something Fresh & Easy Buzz First Suggested it Do Many Months Ago
[You can follow Fresh & Easy Buzz around on Twitter.com at: www.twitter.com/freshneasybuzz.]