Digital discounts: Coupons remain a potent sales tool

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I recently read an article on digital coupons and their effectiveness. If offered great ideas and some thought-provoking questions. We do a lot of this in the cinema industry, more than you probably think. If you visit any of the theatre circuit websites, you will see a mixture of both being offered. I looked at some more research on the use of coupons and discounts and compared it to what we are doing and thought it would be a good topic for this column.

Coupons have been around since paper money was invented. Discounting is a byproduct of bartering that came with hard currency. So the concept of offering a product for a price and then discounting it for a return incentive is nothing new. The question is: How well does it work? Does it still work within our digital world of today?

We offer discounts in the form of coupons, product mix promotions, membership rewards, and advance purchases; all are offered in the cinema business. Paper coupons are still very popular in this country, in some industries more than others. Grocery coupons are alive and well. The vehicle for delivery is more robust than 15 years ago; so many coupons are delivered electronically. If you go onto Cinemark’s website, you will see the offer to sign up and receive free weekly concession coupons. You can print it out and take it to the theatre, or keep it on your smartphone and show it at the counter. Do they work? Most definitely. Do they work within our digital world of today? They are a perfect marriage.

The statistical table below was published in July of this year by Static Brain, and the sources for the information include RedPlum, eMarketer and The Nielsen Company.

Coupon Statistics
Percent of consumers who reported using a coupon in 2013    72.3 %
The average savings per coupon used in 2013    $1.94
Total value of coupons distributed in 2013    $515 billion
Number of coupons redeemed in 2013    2.8 billion
Total coupon savings in 2013    $4.921 billion
Total coupon savings in 2012    $4.708 billion
Percent of coupons distributed that required multiple purchases    27 %
Average coupon expiration length    9.9 weeks
Percent of smartphone/tablet users who have used a mobile coupon    42 %

Redemption Percentage by Coupon Type
Internet    263 %
Direct Mail    69 %
Magazine Popup    51 %
Instant Redeemable    48 %
Electronic Checkout    39 %
Freestanding Insert    36 %
Digital Promotions    31 %
Shelf Pad    30 %
In-store Advertisement    27 %

The question of whether coupons, discounts and promotions work in our digital age is answered resoundingly in the redemption percentage by coupon type above; the Internet has a 263% redemption rate. This is only possible with repeat usage, which is what the offering company of the coupon wanted in the first place.

In the cinema industry we use lots of combo product promotions and also membership rewards to increase sales and create loyal customers. Almost all chain operators now have membership clubs, and combos were inspired by the quick-service restaurant (QSR) industry, which works very well at upselling the consumer with additional product. The cinema industry is different than the grocery retail industry in many obvious ways. But they are similar in that they serve members of the public who are always looking for a good deal. A very popular website for couponing called Groupon, which you may have heard of, has often had theatre deals offered to my marketplace. I have had conversations with theatre groups about whether the Groupon deals have been worth it to them, with a mixed answer. Do they drive purchases? Absolutely. But are the Groupon deals often too much of a discount? Yes. So finding the right balance to how and where you offer coupons is what each company must decide for itself.

As for the life cycle of product promotions and memberships that make up the other types of discounts, there’s no reason to believe they won’t be used for the foreseeable future. I wondered when the trend of store memberships would wane, but that doesn’t seem to be the case. Everywhere you go now, the cashier wants you to become a member of their business before you check out. The point of offering discounts is to drive purchase rates and revenue. There are multiple ways to accomplish this and the cinema industry has and will continue to use many of them very successfully. The digital age has not curbed this action, but rather increased it. The options for discounting and creating repeat purchases and customer loyalty have never been greater.

Send your comments to Anita Watts at anitaw@reactornet.com.