Harvard Business Review: Unused coupons still pay off

The current issue of Harvard Business Review has an interesting article about the effectiveness of coupon campaigns for shoppers who don’t actually use the coupons:

In 2010, U.S. consumers redeemed 3.3 billion coupons, cutting roughly $3.7 billion from purchase prices. That’s a lot, particularly since only about 1% of all coupons are ever used. Conventional wisdom holds that manufacturers and retailers see little benefit from the other 99%. But new research suggests that unredeemed coupons are highly valuable. In fact, the coupons that wind up in the trash ultimately deliver greater returns to a company than the coupons that are redeemed.

We found that consumers who received but did not redeem coupons still typically increased their purchases in the associated stores. In fact, as a group the nonredeemers accounted for 60% of the coupons’ “sales lift”—the additional amount spent on both promoted and unpromoted items. Customers who did not receive coupons served as the control group to establish that the observed lift came from the coupons and not something else.

How do coupons produce a lift among nonredeemers? They increase awareness of a brand or a retailer even when they’re not cashed in.

This finding isn’t surprising, but the magnitude of the benefit is. Smart marketers have long realized that coupons can serve as advertisements that attract new customers and inspire gratitude and loyalty among existing ones by delivering important messages about a company.

Indeed, manufacturers make more money on a successful coupon campaign when shoppers don’t use the coupons, yet still go and buy the product. And, markets bank on this. A coupon campaign that is “too successful” can result in that particular campaign going over budget for over-redemption — more shoppers using the coupons than the company anticipated having to pay out on.

Read the entire article at Harvard Business Review.