I don’t know about you, but I love a good coupon! More so, obtaining a deal… or what seems to be a deal. A coupon is a win – a win for not only the customer but the manufacturer or retailer, as well. Think back to a time when you received a coupon from your favorite store. Did it entice you to shop just because you had the coupon? Most of the time, the answer is yes. As the customer, you receive the coupon deal and the retailer makes the margin on the product you wouldn’t have otherwise bought without the push of a coupon; therefore, everyone is a winner.
Let’s take a look into the lifecycle of a coupon and then how to offer coupons to your customers.
The Lifecycle of a Coupon
- The “man” behind the deal. The retailer and/or manufacturer decide to deploy a coupon program and will send the coupon to an agency (internal or external) that will execute coupon design. As a side note, coupon deployment by manufacturers or retailers are planned months or up to one year in advance; this is to allow for internal profit and revenue planning year-over-year.
- Coupon deployment. The coupon is then deployed via e-mail, newspaper, direct mail, direct on the company’s website, in-store and other avenues. The retailer/manufacturer uses the avenue that would obtain the highest redemption rate based on consumer demographics and shopping habits.
- Coupon utilization. The customer uses the couponand takes advantage of the deal!
- Coupon counting. This isn’t in relation to extreme couponing. This is when the cashier counts his or her drawer. At the store level, the cashier is required to count and add up the coupons and cash within the drawer to ensure the drawer is balanced.
- Coupon bundling. The coupons per each store are then combined in bulk and sent to the corporate office where all coupons from all stores are put into a bigger “pot” and shipped to a large clearing house. (This is the first step of the coupon processing phase.)
- Coupon processing. The clearing house gathers and sorts the coupons that are in good condition and places them on a large conveyor belt and are scanned by a machine. An automated process then sorts the coupons by manufacturer and prepares an invoice for the manufacturer and/or retailer.
- Invoicing. The invoice consists of processing and handling fees, postage fees (for shipments), service fees, and any retailer reversal payments. Many coupon processing companies charge based upon a tiered pricing model dictated by projected coupon volumes by the retailer/manufacturer. Pricing is contracted based on projected coupon volume, therefore, if the retailer/manufacturer does not hit the volume projection, it will have to pay something called a shortage fee to the processer to make up for the loss in service fees. The invoices are then mailed to the retailer/manufacturer for payment.
- Payment. The manufacturer receives not only the coupons back and the invoice outlining how many are there, but the processor will pay the bill to the clearing house. Some processors will perform an audit by recounting (two-count process) for clearing house fraud and then pay the invoice amount on the retailer/manufacturer’s behalf. Reimbursement of the coupon also includes handling fees and postage costs.
Are There Times the Store Will Lose Money?
Yes! This can occur by duplicates and fraudulent coupons; after a coupon makes it through the clearing house and is sent to the manufacturer, the manufacturer still has the right to deny the coupon. Printable internet coupons from sites like Coupons.com or SmartSource have unique numbers that make it easy for the manufacturer to spot fraud. Coupons that were accepted and redeemed by the store, but are in poor condition by the time they get to the clearing house or processor, have the risk of being rejected. There are also times when the retailers/ manufacturers obtain their coupons back from the processor and claim they are not redeeming said coupon. This, however has nothing to do with the consumer and everything to do with occasional poor practices of the manufacturer.
This transitions into the topic of the importance of selecting a coupon processor you can trust and know will handle your payments and audits diligently and honestly without any hidden fees. According to Inmar, being one of the largest coupon processing companies for the past 35 years, state that by selecting a processor that is well trusted ensures that “retailers can achieve optimum cash flow while recouping the cost of coupons by relying on the trusted company’s processing and settlement solution. And, it all happens with total invoicing transparency. One-count and two-count processing options, along with flexible invoicing, allow retailers to maintain effective coupon cost management and promotion program accountability while adhering to business rules and meeting trading partner requirements.”
According to MediaPost.com, “When brand marketers or retailers issue a coupon to consumers, those companies have to treat it as a cash liability until it is processed or expires. The information is extremely sensitive, because the coupon processor isn’t just a clearinghouse for financial transactions, but also gets to see the data on all sides of the equation: the brand, the retailer and the consumer. The ability to triangulate financial-grade data among those three stakeholders gives the processor a unique vantage point. It also requires incredible security to ensure that proprietary data is protected on all sides. The processor’s computer processes transactions for competing brands, competing retailers, as well as consumers at a time when marketers are under intense scrutiny from regulators and advocacy groups to ensure consumers’ data and identities are protected.”
This information may not be useful to a consumer of the retailer/manufacturer, but for a manufacturer the coupon lifecycle and processing phases are critical. When sourcing a coupon processing company, ensure that service level requirements, competitive pricing, and a strategic partnership is established. This is why all of us at Milano Promotional Services work diligently on behalf of you, the manufacturer.