Coupons with Direct Mail

What Is It and How Does It Work?

Current business world experiences intensive marketing. The companies are now shifting totally towards customer winning strategies rather than solely focusing on providing the traditional quality of products and services. This, however, does not in any way compromise the standards of quality because most companies are evaluated and certified for standard quality in their respective fields of interest. This is a global trend that everyone is willing to embrace and, what is more, even has to embrace if willing to retain and attract customers. One of the marketing strategies which companies have been trying to use for a long time is issuing coupons. Coupons are documents, vouchers, or cards that can be used to reduce the prices of certain commodities by a certain amount of discount during the purchase of a product from a certain manufacturer, retailer, or supplier of the same products (Pickton, & Masterson, 2010, p. 271). Traditionally, coupons are given out by manufacturers of products or those who sell at the retail level for promotional purposes. Most of the hype created is disguised as a way of appreciation but, in essence, succeeds to create the desired awareness in the consumer market. The coupons are mostly dispensed through the mail, company magazines, and the Internet, and delivered by express by the retailer/manufacturer among other methods. They are meant to promote price discrimination aimed at attracting consumers in places of high price competition (Schultz, Petrison, & Robinson, 1998, p. 52).

What Are Some Examples of the Concept or Practice in Use?

A retail outlet in Switzerland, known as COOP, deals with foods and drinks and, further, runs a supermarket online. During the year of 2010, COOP was determined to attract fresh customers which would result then in more traffic in the stores. This would consequently generate more sales from the new market in four of their retail outlets. Their target market was the residents who lived around their departmental stores of Ebmatingen, Emmenbrucke, Thalwil, and Retkreuz within the heart of Switzerland (International Post Corporation). COOP, therefore, resorted to a program that would make their presence noticeable for thousands of individuals in their cities.  They settled on the unaddressed mail strategy, whereby they placed the coupons in unaddressed envelopes and folded them in such a way that one could read the core message without necessarily opening the envelopes. The envelopes were then hung on the mailboxes instead of being dropped in to make sure the owners saw and picked them. The campaign ended by redemption of around 2.5% coupons and an increase in sales volumes of about 30% more than the year before.

Bare Deal is another company based in Chicago the founders of which have actively taken up the direct mail coupon idea to market for the companies that exist in Chicago (Scott, 2011). They have created a website through which they are linked to social websites like face book and twitter. Consumers are, therefore, allowed to bid for products of interest through identifying the product and keying in their postal addresses. The company then prepares vouchers online and then mails the physical coupons that are only redeemable when the customer actually goes to purchase the products (Scott, 2011). They organize for different discounts to be applied and make the customer interested by offering a chance for some lucky shoppers to win up to 100% discount. This has worked well to increase the market share and sales volume of their clients, as reported in the year 2010, over the increased number of redemptions from their consumers.

How Prevalent Is It in Business Today?

Every modern competing firm has mainly adopted this mode of direct response marketing because it gives a sure way and accurate results in terms of measuring performance. Over the recent years, coupons have confirmed their position as a very efficient tool in sales for any business irrespective of the products/services and the size of the business. The main strength is their ability to attract business, thus a highly preferred tool by the marketing department. According to the Advertising age, a prominent marketing magazine that has been in existence since the year 1930 in Chicago, 87% of the American and European consumer markets use this mode of shopping (Scott, 2011). This opinion is substantially true after a survey by the magazine which has spread its popularity to the rest of the world. Campaigns make it the most preferred option of sales and marketing. This provides a clear road map for future marketing plans.

According to the market research, analysis and statistical interpretation of the NHC marketing Inc. for the year of 2010, the American consumer market saved a total of $3.7 billion, which is a 5.7% increase from the 2009 and the gap being equal to $200 million (NHC Marketing Inc.). This is probably due to the increase in coupons for consumer goods distributed during the year of 2010.

What Are the Major Trends?

Users of direct mail coupons have not had major losses in spite of the global recession in economy. As many companies resorted to mass media, some users stuck to this form of advertising due to its nature of having a specific target based on individual preferences. Due to their measurability, coupons are much cheaper and more effective in marketing and have maintained their appeal through providing lower prices despite the hard economic times affecting both the companies and the consumers. This, however, has not been easy in recent times because of the stiff competition offered by the electronic media.

Surveys carried out in America show that all consumers redeem coupons occasionally and the intensity is much felt during hard economic times and subsides during better economic periods (Shimp, 2010, p. 492). While more coupons are offered within the American economy than anywhere else in the world, greater coupon rates are applied in the other countries, but for a few. To date, some countries do not use coupons or even discourage their use by enacting policies that control the regulation of the rates applied. A good example is Germany where a 1% ceiling rate has been put in place (Shimp, 2010, p. 493).  In France, monopoly has played a big role in most industries, thus naturally discouraging the use of coupons, except when a few are issued in appreciation of existing customers rather than a sales growth motive. In Japan, the government did away with the strict controls and regulation, thus, the practice is on the rise and at its early stages.

In America, the trends in distributions are 88% in favor of Freestanding inserts in papers. These are most circulated during the Sunday distribution of the newspapers (Shimp, 2010, p. 494). The next popular method is through distributing the coupons to walk-ins within shopping outlets or the outside distribution of the coupons by businesses by hand delivery. This accounts for 5% and is followed by the direct mail coupon delivery at 2%. The rest are magazines (1.8%), newspapers (1.5%), inside and on packages (1.4%), the Internet (0.2%), and other distribution channels form the remaining 0.3% (Shimp, 2010, p. 494). These statistics, however, are as a result of the methods chosen by companies after analyzing how the various methods of distribution can be effective. This calls for surveys with the favorite method being the Internet and its networking capabilities. Recent studies have, however, incorporated this and recognized a significant increase of 37% of digital coupons used (Brown, 2011).

The major trends in the use of coupons are summarized by Suzie Brown, the Chief Marketing Officer in Valassis Communication, Inc.:

Sales and marketing executives went on to differentiate their coupon distribution channels and designs in order to enhance the use of coupons in developing greater market shares and sales. The main categories of modification in methods of offering the goods were (NHC Marketing Inc.):

• Application of a moderate face value of $1.46 in coupons that were distributed in the year of 2010, which reflected an appreciation of 6.6%.
• The marketers by 26% preferred to combine more than one item in their offers as a requirement for consumers to enjoy the set discounts.
• Most of the marketers decreased their coupon validity period by one and a half weeks.

With the tough economic times showing no sign of future improvement, the companies expect the three categories mentioned to be acted upon further so as to intensify the market population of the use of coupons by the consumers. This should ensure a higher inventory turnover for businesses, thus the reflection of higher sales volumes.

What Marketing Benefit or Opportunity Does It Create?

The main reasons for the loyalty to this method, as indicated by the survey, include:

• The ability to increase a company’s market share; and it is proven that customers travel over long distances for the redemption. Therefore, the market physical boundaries are increased too.
• The coupons have made it possible to attract customers of one’s business rivals as they are made to look for better offers in terms of price in an attempt to save money and get cheaper but still quality products.
•  Coupons are always the first thing to capture the attention of residents who move into new neighborhoods. This category of consumers is always on a mission to establish a new shopping routine and to decide on what will be the best way to do this via ready and guaranteed discounts.
• Coupons have the ability to reunite the business with its former customers who will find a good reason to establish the old links via discounts and great offers
• As customers are lured into the stores to redeem their coupons, they always buy other related or unrelated items, thus increasing the overall profit margin of the company. This also provides an opportunity to sell other products that the customer may not be aware of by virtue of having them physically in one’s premises.
• The ability to measure and take stock of productivity resulting from any coupon

What Risks or Challenges Does It Entail?

Due to the recent technological advancements in the world and the intense use of the Internet, more businesses are resorting to using digital coupons more than the direct mail coupons because of their instant communication and availability (Brown, 2011). Websites and social media have developed links where creation of trends makes it easy to reach a larger market share of consumers than the direct mail coupon distribution. Furthermore, the ability to use online shopping options has stimulated people to do their purchases via Internet, thus receiving the electronic coupons and redeeming them online. This is seen as a much faster method of transaction that is flexible for the busy consumer market with majority not having enough time to redeem the coupons in person. This is made worse by the shorter periods of redemption available. The daily trends indicate the fact that marketers are minimizing the period for validity of coupons and so, when consumers run out of time, they interchange the physical vouchers for electronically available options by just entering the identity codes into an online system (Shimp, 2011, p. 496).

The other challenge that runs across all types of modes used to distribute coupons is that people are facing tough economic times and majority of them do not have the extra income to satisfy all the coupon offers in place. At initial launch, the consumers had some patience to look for offers but with time, they have grown impatient and are either ignoring the offers or destroying them. They seem as a junk or a form of nuisance to them. Therefore, companies are forced to be more than simply innovative in order to ensure that people get to open the envelopes and have a look at what is in the store for them. Many companies like COOP used the outside mail hanging technique with the core contents visible to the addressee. Others use unmarked envelopes in seeking anonymity to raise the curiosity in the targeted customers (Schultz, Petrison & Robinson, 1998, p. 53). Some companies are known to use prints that look more like handwritten letters, thus creating an impression of the contents being of personal nature rather than general.

Customers are also afraid of issuing their private details for confidentiality purposes. Some of the methods used to collect this information are exposed to the public or can be accessed easily and so create a possibility of unwarranted contact with the customer. As a result, companies use a lot of money to prepare physical coupons and directly mail them to the consumers or access them through their websites, where one should pay first in order to log in. Furthermore, this mode of advertising may change the way how the customers who shop regularly perceive the company (Meisner, 2006, p. 166). By offering strangers cheaper prices for what they pay in full may cheapen the existing customers’ opinion about them. To some extent, this is seen as a desperate move. Therefore, there exists a risk of losing existing and loyal customers.

Where Can We Go to Learn More (e.g., Books, Articles, Websites)?

For handling this topic at a much advanced level, there are various books, journals, and magazines, especially in business marketing, which offer case studies of historical application of the coupons to generate sales and increase the market share of the businesses. Further analysis of trends and statistics can be found in summary of performances of the listed in the stock exchange companies. Besides, a lot of analytical reports are found in various public and private libraries. The Internet provides a faster and more effective way of looking for information and has the advantage for the user to access numerous websites when searching for information on this form of marketing. The final recommendation is to do a practical survey of the companies, supermarkets, and huge retail shops that sell assorted products from various producers in order to be able to understand the essence of the coupon marketing.