Believe it or not, the food industry is becoming increasingly embedded within the digital age. It seems like any time I visit my local Safeway, I see people swiping away on their smartphones as they browse the aisles, looking up the latest deals as they shop. What is this tech phenomenon? Digital coupons. We’ve come a long way since those flimsy, paper-based coupons, and retailers like Safeway, Kroger, and Meijer are realizing the same thing.
Of course, there are still a number of people who prefer paper coupons, according to a 2014 Allrecipes.com survey (pictured below), but overall, it appears that Americans are using paper coupons less and less every year, according to NCH Marketing.
NCH Marketing, one of the country’s major coupon clearinghouses, reported that the number of paper coupons redeemed by Americans in 2012 dropped by 17% to 2.9 billion coupons after Consumer Packaged Goods (CPG) manufacturers distributed 305 billion that same year. Some argue that this drop is caused by a “poor mix of coupon offers in 2012,” according to The Seattle Times, while others say we’re beginning to reach the end of the paper-coupon era. Are we or are we not? For starters, an eMarketer report suggests that mobile coupon usage is set to increase by a whopping 300% by 2014, yet that other NCH Marketing report also says that digital "remains less than 1% of all coupons distributed" in 2012. Let’s take a closer look at what might account for that huge increase in usage and why digital coupons might actually be becoming ubiquitous in grocery stores...
1) Acquisitions: This past February, Kroger acquired YOU Technology, a Silicon Valley-based company specializing in digital coupons and promotions. Meanwhile, as we all know, Safeway was recently acquired by Cerberus. Could it be that Safeway’s technological capabilities and ‘Just For U’ program were seen as attractive assets?
This digital coupon technology is paving the way toward personalized pricing, and retailers like Kroger are starting to see the benefits. As we discussed in an earlier article (linked below), companies like Engage3 are actually predicting future shopping behavior to provide shoppers at the same store with different prices and special offers.
Indeed, digital coupons are providing more than savings. Back in 2011 when Google joined in on the digital coupon craze by acquiring Zave Networks, the company was working on ways to offer relevant, personalized coupons to loyal retail customers with various incentive programs to increase brand loyalty. Several companies are keeping a close eye on these tech businesses. I wouldn't be surprised to see future acquisitions soon...
2) Increasing brand loyalty: Consumers are spending more than 20 hours online per month and more than 30 hours on their phones in the U.S., according to a December 2013 Nielsen report, and those numbers may be well on the rise. What better way to keep old and new shoppers engaged with coupons to keep them coming back for more?
Meijer and Kroger, for example, are seeing a digital-coupon redemption rate of up to four times than that for traditional coupons, according to The Columbus Dispatch. Programs like Meijer’s mPerks allow consumers to store digital coupons in their loyalty card accounts, which they can then redeem during checkout. When shoppers have easy access to savings on the go, it’s no wonder they’ll keep coming back to the same stores time after time.
3) Smartphones are changing the way we shop: Take a look around the next time you’re at a supermarket. You’d probably be hard-pressed to not find at least one person on their phone checking something. These days, shoppers, especially millennials, expect to see savings and special offers instantly. An eMarketer report predicts that the number of U.S. mobile coupon users will rise from 12.3 million in 2010 to 53.2 million in 2014, a more than 300% increase, driven by the “rapid adoption of smartphones.” By 2014, one out of every four mobile phone users will redeem a coupon via a mobile device, the report also says. Consumers recognize that they can instantly redeem digital coupons and have access to them immediately without having to fumble them around in their pockets.
Will millennials continue to turn the tide in the grocery store? It remains to be seen, but I believe we’ll continue moving forward with new technology like personalized pricing and that it will take quite some time for consumers and perhaps even retailers to adjust. I don’t think we’ll ever see the “true end” of the paper-coupon era, but it looks like digital coupons are a force to be reckoned with.