Manufacturers working to end “selling” of coupons
In April, I wrote an article about how manufacturers and coupon redemption houses are cracking down on “gang-cut coupons” — coupons that contain identical cuts and identifying marks. I received a lot of feedback on that article from coupon shoppers around the country, and much of it was negative. “It’s not fair that they’re voiding coupons because they’re cut the same, it’s my right to cut however I want.” “Why do they care if coupons are sold, they print so many of them!” And, with TLC’s “Extreme Couponing” glorifying purchasing coupons from clipping services or Ebay, an entire wave of new coupon shoppers have been led to believe that this is an acceptable way to get coupons.
Indeed, though, manufacturers do wish to stop the sale of coupons. One might think that the “Void if Sold” stipulation in the terms of the coupon would be enough to prevent anyone from selling them, yet clipping services and coupon auctions on Ebay abound. At the Association for Coupon Professionals conference that I attended in Atlanta this spring, the Coupon Information Corporation gave a presentation and discussed the resale of coupons. Bud Miller stated that the CIC was trying to put a halt to coupon resale in 2011. In February, the CIC began sending certified letters to numerous Ebay coupon sellers requesting that they both stop selling coupons and also sign and return a Memorandum Of Understanding. This MOU acknowledges that the sale of coupons violates the terms of the coupon’s redemption policy of nearly all coupon-issuing manufacturers and also asks the seller to immediately cease all Ebay coupon sales.
After the first round of CIC mailings, about 20% of the targeted Ebay coupon sellers stopped. The CIC stated that they intend to continue working on stopping Ebay reselling this year. But coupon clipping services are still prevalent on the web too, and after hearing about how much the industry wants the resale of coupons stopped completely, I’ve wondered how long the clipping services would be allowed to continue too.
It appears that the industry is cracking down. Earlier this week, CouponDede and several other large clipping sites posted notices that they were “temporarily unable to offer any new whole inserts.” Jennifer Jacobson Carew at GreenBayConsumer.com posted a notice that one clipping service sent out to its customers. In part, the notice reads:
Apparently Red Plum, Smart Source and P&G are filing suit against eBay for allowing the buying and selling of coupons. They are also in talks regarding the same with TLC. According to them it`s all considered coupon fraud… They are going to do everything possible to make it almost impossible to get coupons without buying the actual newspapers. They are also going to shut down all online sites that sell whole coupon inserts.
While this does not affect me as a coupon shopper (I’ve long advocated simply buying extra copies of the newspaper to get more coupons) coupon shoppers who depend on clipping services have been voicing their disbelief since the GreenBayConsumer article was posted yesterday. Do I believe changes are coming? Absolutely.
So why do manufacturers care about this?
One argument I often hear from shoppers is “the manufacturer prints all of these coupons, why do they care how many we use?” To answer this, it is important to understand that a manufacturer budgets for a free-standing insert coupon campaign fully expecting only a small percentage of those insert coupons to be redeemed. At the ACP conference I attended, one session referred to this as the “shotgun approach to marketing” — blast your marketing effort out there and see what campaigns hit the mark.
With this approach, of course, there’s a budget to consider as well. With the average coupon redemption typically running at less than 6%, it means that statistically speaking, 94% of the coupons a company issues for a particular campaign will not be redeemed. But, it also means that when a company runs a coupon campaign, their expected payout for the coupons redeemed during that promotion will also likely fall into that same low, expected range of return. (The numbers shared at the conference during this discussion were closer to 3% overall redemption.)
Of course, the company wants as many people to buy its product as possible, but there’s a new element in the mix that companies have had to contend with – the extreme couponer. When a manufacturer issues a coupon, it certainly realizes that some customers may buy more than others. But realistically, if they’re looking to move 100 products, they would rather have 50 people using two coupons to each buy two of their products rather than one person using 100 coupons to buy all 100.
When a extreme couponer orders large numbers of coupons from Ebay, a clipping service, or even goes dumpster diving for them (and we’ll get back to diving in a moment) an “artificial demand” is created for that product. The same shopper that might buy one, two, four or five of a product might now be buying 20, 30, 50 or more of them. And while the shopper certainly can buy however many the store will allow them to, like it or not, a manufacturer isn’t too thrilled about the same person redeeming that many coupons for the same item. They want us to buy their products, but when the quantities move into the extreme range, they also know that person is purchasing far more than he or she would normally buy if coupons weren’t a factor.
Manufacturers are reacting. Any regular coupon shopper has noticed that for many coupons, the expiration dates are getting shorter, and in some cases, dollar values are going down too. Why? According to some of the manufacturers I spoke with at the conference, the shortened dates and lowered values are being used to combat the resale of coupons. With shortened dates, the window of time that those coupons can end up on the resale market is shortened as well. Another manufacturer’s representative was even more candid. The rep said “If we see too many of our coupons on Ebay, we know the dollar value was too high, and the value of the coupons we issue goes down next month.” (As this was said in a closed session, I won’t disclose the company’s name, but if you’ve ever bought a name-brand of 100% fruit juice, you’ve likely bought their product at some point.)
Shortly after the premiere of “Extreme Couponing” aired last fall, P&G added the “Limit 4 Like Coupons Per Transaction” wording to its coupons. Colgate has followed suit on some of its coupons, and I think we’re just seeing the beginning of this. At the ACP conference, these limits were a popular topic of discussion. What’s a good, reasonable limit that a “normal” coupon shopper would buy at one time? Manufacturers were trying to determine at what point “enough to stock up on” turns into “more than one shopper could reasonably want to buy at a time.’
Another issue too is that of reselling. Some extreme couponers also advocate selling stockpile items on their own websites. Regardless of whether or not you feel stockpile resale is right or wrong, clearly, manufacturers do not wish to subsidize home businesses who are reselling product. Per-transaction limits are also designed to “slow the flow” of large quantities of the same product being sold with identical coupons to the same buyer.
An example of how coupon overuse can hurt a company:
Another argument I hear from shoppers at times is “These companies are huge. Who cares how many coupons we redeem, they can take it!”
Let’s play with some numbers on a small scale to show just how much an unanticipated over-redemption can affect a company’s bottom line.
I decide to launch a new beverage: Jill’s Jazzberry Juice. I’ll pretend that this is a small, regional product, so I’m only going to issue a coupon for $1.50 off Jill’s Jazzberry Juice in the Chicago Tribune’s inserts. With the Tribune’s circulation currently at 437,000, I’ll assume that the insert overrun will number at around 450,000 coupons printed.
My analysts state that we can expect 4% of those coupons to be redeemed. That’s 18,000 coupons, or $27,000 that I can expect to pay out to the stores when shoppers redeem these coupons for Jill’s Jazzberry Juice.
So, my coupon runs in the paper. A few weeks later, one of our major supermarkets puts Jill’s Jazzberry Juice on sale for $1.50 a bottle. People are buying thousands of $1.50 Jill’s Jazzberry Juice coupons via Ebay and clipping services. Ultimately, instead of 18,000 coupons being redeemed, 50,000 are redeemed. Now, instead of paying $27,000 for my ad campaign, I have to pay $75,000 – nearly triple what I expected to pay out for that single coupon. My little company, of course, is happy to have so many people trying our new product, but it’s also feeling the sting of a campaign that was “too successful.”
As I try to decide what to do for my next ad campaign, I see an extreme couponer on the news buying 1,000 bottles of my juice… on my dime. So, the next time Jill’s Jazzberry Juice releases a coupon, it’s for .50, not $1.50. And it’s “Limit 4 Like Coupons Per Transaction.”
Now, think of that example on a nationwide scale. An unanticipated over-redemption can quickly add up to millions of dollars.
If you’ve been couponing for a few years, you may remember RedPlum pulling their inserts completely from newspapers in selected market areas of Indiana, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, Texas, Utah, Virginia, and Washington D.C. Instead of receiving the RedPlum in the paper, RedPlum decided to direct-mail the inserts to households – one insert per house. Coupon bloggers in these market areas tried to band together, creating a site called BringBackTheCoupons.com, but they were unsuccessful.
While Valassis, the publisher of the RedPlum insert did not disclose exactly why they chose to direct-mail versus putting the insert in every paper, there are many possible reasons. Was it cheaper to send the inserts via postal mail than have them distributed with the newspaper? Or did they want to guarantee each household only received one insert… and only one?
It’s true that in some delivery areas, the insert distribution has been scaled back. Locally, we’ve seen this with the Chicago Tribune’s inserts too — outlying areas toward Rockford, and areas both north and south of the city can still get the paper, but their insert distribution is hit or miss. This isn’t due to the Tribune “deciding to take inserts away” from those areas, but instead due to the insert distributors themselves pulling back insert distribution from those areas.
Over the past few months, I’ve noticed that the number of emails I receive from readers of my newspaper column regarding missing inserts has increased too. Here’s an email I received this week:
“I have only been couponing for a few months now and I was doing pretty good until the Lakeland Ledger stopped putting all the inserts in the papers. For a month now I drive all over Polk City and Auburndale looking for more than just SS inserts… I don’t think this is fair I think if I’m paying for my paper I should get what I pay for. I get 10 Sunday papers and I feel cheated. I’m not getting the same kind of saving without the other inserts.. Please help me understand. I don’t want a subscription and pay $60 a month for 10 papers a week when sometimes they don’t have any coupons. I don’t even read the paper I just want the coupons.”
Another element: Dumpster diving
Newspaper circulation and delivery statistics give the manufacturer an idea of just how many of their coupons are “out there.” When dumpster diving comes into the equation, it is possible to have a situation where more coupons were redeemed than were actually delivered in a newspaper in a certain market. In April 2010, Valassis sent letters to Albertson’s and other major supermarkets demanding that newspapers stop selling the Sunday paper after the “specified publication day.” Again, it goes back to numbers — once the Sunday sales statistics are reported, they didn’t want “extra” coupons out there being made available to inflate those redemption numbers over what potentially was sold on that particular Sunday.
With dumpster diving being glorified on TLC’s Extreme Couponing as an acceptable method to get more coupons, look for the coupon distributors like Valassis, SmartSource, P&G and others to further clamp down on what happens to the coupon inserts from unsold newspapers. Many newspapers now have contracts in place that the extra inserts must be “destroyed,” not merely recycled.
The Extreme Couponing show doesn’t share that information with viewers though — instead, shoppers are shown happily climbing in dumpsters for inserts. This is spawning copycat behavior, and recycling centers are having to enforce the rules that the inserts become the property of the recycler once they’re placed in the dumpster. This week, an Oklahoma news network reported “Oklahoma Parents Using Children To Dumpster Dive For Coupons.”
Conclusion… for now
So where does this leave us? Again, as what I’d consider to be a normal, non-extreme coupon shopper, I’m not likely to be affected by these changes. People who depend on large numbers of like coupons or inserts to fuel large-scale shopping trips will feel the heat though if enforcements continue. And again, manufacturers also don’t want to redeem any coupons that they feel were sold at any point from the time of distribution to the time they reach a shopper’s hands. Whether its by denying gang-cut coupons (again, identical coupons that were stacked and cut together) or by outright discouraging “sold” coupon use, the manufacturers have made their stance very clear.
At the ACP conference, the CIC’s session urged all retailers to deny coupons that had any indicators of being sold as well. The print materials provided to retailers (and all attendees) at the conference even read, “If a couponer states that they have purchased coupons from Ebay or any other source, refuse to accept them.” While actually getting stores to enforce that is another issue entirely, stores do take notice when the coupons they submit for redemption are denied because the manufacturer suspects that they were obtained through fraudulent means. I spoke with a representative from a supermarket chain in the southern US who told me that they had over $15,000 worth of coupons from one single, cereal manufacturer denied by the clearinghouse in May — even though they had the product on hand and sold the cereal. Anyone who feels that things aren’t going to change has to ask themselves this question: Do you honestly feel that retailers aren’t going to react to a $15,000 loss from a single manufacturer in a single month? They are.
I have always said that coupon usage is a privilege, not a right. The manufacturers hold all of the cards, and they’re also free to change the game at any time if they don’t feel people are playing by their rules.
This is the third in a series of articles written to share my observations from the conference on topics related to consumer coupon usage.
Previous articles: ““Gang-Cut” Coupons Hurt Stores, Manufacturers and Consumers” | “The Future of Couponing: Digital vs. Paper“