Promotional coupons: What do retailers need to know?

Why are we talking about this now?

After admitting it lost out to “a lot of promotional couponing” over the Christmas period, Tesco hit back almost immediately with a new ‘£5-off voucher when you spend £40’ deal in national press ads.

While such vouchers are an old idea, their significance has been heightened by market conditions. The economic downturn has provided an excuse for the consumers to ignore any stigma relating to coupons.

Why do they resonate with customers?

Being savvy with cash has become fashionable, and restaurants have led the way in providing electronic vouchers to tempt cash-strapped consumers. Keegan Campbell consumer psychologist Sheila Keegan believes that now, more than ever, people are looking for deals.

“People will go to extraordinary lengths. It’s all part of how we can get the best deal,” she says. “It’s almost a game with people collecting and saying ‘I’m going to get one over the supermarkets’. Psychologically, it’s better to see a direct saving. Coupons are more straightforward than price cuts.”

Which works best?

Promotional coupons were part of Asda’s success in the festive run-up, but Sainsbury’s Brand Match – which gives vouchers to Nectar cardholders – has garnered particular praise. “It’s the easiest mechanic and Sainsbury’s has made a significant investment at the till,” says Kantar Retail director of retail research Bryan Roberts of Brand Match.

“It gives something that is painfully missing from Asda and Tesco: immediacy. While it mustn’t be forgotten that it’s only on brands, it is still a tangible and transparent amount of money off.”

Which retailers are doing it?

All the big four grocers employ the tactic, while Boots offers money-off vouchers at the till to shoppers who spend over a certain amount. Tesco’s monthly Clubcard mailouts – which contain money-off vouchers – are now considered some of Royal Mail’s busiest days of the year.

Are vouchers a short-term phenomenon?

Winter is traditionally a strong time for coupons with Christmas gifts and January thrift leading people to analyse their grocery shop much more closely, so expect further short-term activity. Sainsbury’s says Brand Match redemption rates are high, but voucher redemption rates are usually variable as people can forget to cash them in. In the long-term, few grocers want to over-rely on vouchers without also fostering loyalty.