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From...

Web coupons clipping costs for consumers

July 8, 1998
Web posted at: 11:15 AM EDT

by Sharon Machlis

Electronic coupons let advertisers finely tune their marketing strategies.   
(IDG) -- Major retailers, manufacturers and direct marketers are offering coupons on the World Wide Web -- not simply discounts for buying online, but offers you can print out and bring to a store.

"It's another opportunity for us to sell more product to a different customer," said Al Trotta, marketing manager at Cumberland Farms, Inc., a chain of about 800 convenience stores based in Canton, Mass. Others using online coupons include Kmart Corp., Nabisco Brands Co., General Mills, Inc., H & R Block, Inc. and McDonald's Corp.

The advantage of Internet coupons over their paper counterparts is that advertisers can more finely target their offers.

If Web site registration includes a consumer's grocery store "loyalty card" number, for example, a company has a year's worth of family buying patterns to mine. That could help, say, a peanut butter company use targeted coupons to lure users of rival brands.

"This is going to be very sophisticated . . . consumer sleuthing," said Marian Salzman, director of the Young & Rubicam, Inc. brand futures group in New York. "The degree of intelligence that you can compile this way is really mind-boggling."

Internet coupons are also less expensive to distribute because there is no cost for printing, postage or newspaper/magazine advertising. Early indications are that Web coupons have a higher response rate as well.

Fraud fears

But there are problems along with savings. Some in the industry worry about fraud, such as consumers altering a coupon they have downloaded. (Although online coupon advocates argue people can already scan in and alter paper coupons.) And the reach of the Internet -- perhaps 50 million individuals online total -- still can't touch the 55 million households that get Sunday newspapers.

Also, the thought of all that consumer information being tracked is likely to make privacy advocates queasy.

Still, proponents say online coupons are important as an increasing number of Americans move onto the 'net.

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Catalina Marketing Corp. in St. Petersburg, Fla. -- a $217 million company that pioneered in-store electronic coupons -- has created a separate division called Supermarkets Online, Inc. devoted to Web coupons. "The Internet is a much better delivery system than traditional coupons," said David Rochon, CEO of the new division.

Its ValuPage Web site (www.valupage.com) has signed up 37 national manufacturers and more than 7,000 supermarkets and handled 200,000 users during a recent week, he said.

Shoppers there receive a weekly bar-coded shopping list they take to a local store. After presenting that list at checkout time, they receive "Web bucks" good for any future purchase at the store. In California tests last fall, many consumers said they were concerned about privacy issues -- yet 92% also said they would give some information in return for personalized values, Rochon said.

The Interactive Coupon Network in Chicago posted a Web coupon site in March 1997 with retailers such as JC Penney Co., Kmart and Toys R Us, Inc. Its Cool Savings (www.coolsavings.com) site is registering 100,000 new users per month and already has more than a million, said Chairman Steven Golden.

"Our 'clip rate' has beaten our expectations," said John Jeanmonod, Internet merchandise manager at Kmart in Troy, Mich. Kmart believes the program is bringing new customers into its stores, he said.

While the redemption rate for a typical paper coupon is around 2%, Cool Savings said 20% of its coupons printed out are actually used in a store. Golden predicts Cool Savings will become profitable next year.

But offerings on many sites aiming to target ads by city still pale in comparison with what is available on paper. "Many ... offerings remain anemic and poorly organized," according to a report by Jupiter Communications, Inc. in New York.

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