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Brands profit off shoppers who do not use coupons

November 22, 2018

In last week’s column, I tackled some of the reasons brands may not want their coupons redeemed. Incredibly, less than three-tenths of 1 percent of all coupons that appear in the newspaper are used by consumers.

More than 99 percent aren’t! I explained some of the complexities behind coupons as promotional tools. When brands issue coupons, they often do so as part of marketing agreements for featured display space in store. Shoppers like us know that pairing a high-value coupon with a sale is the best way to get the product for a great price. Regular shoppers who aren’t necessarily seeking the best price may buy what’s featured on an attractive display.

Brands actually make more of a profit on these shoppers, because they do not have to reimburse any coupon redemptions. The cost of issuing thousands of coupons that ultimately go unused is actually a small marketing expense in the big picture.

It may seem strange, but the products and brands you see front and center on your store’s endcaps typically aren’t selected by the people stocking the shelves — they’re featured because the brand ran a coupon that week, and the retailer agreed to give the featured product prominent shelf space in the hopes that the coupon will drive sales to the store. Far more non-coupon shoppers will pass that featured placement over the course of a week, many of whom will purchase the product because the display motivated them to buy.

I understand that by metaphorically pulling back the curtain on these practices may surprise some consumers, but

it’s true: The primary goal of coupons, from the brand’s perspective, is not to see every coupon redeemed. In fact, it would cause a great deal of over-redemption budget issues if they were. Additionally, stores may not wish to see shoppers using every available coupon either.

DEAR JILL: In today’s column, you refer to coupons that say do not double as “protecting” grocers that double from having to do so. That makes no sense. They do not ever have to double they chose to do it as a sales tactic. They need no protection. They just stop the practice if the store/company finds it not to its advantage.

Grocers want them used in their store. That is why they chose to double the value. — APRIL G.

Grocers indeed do want shoppers to choose their store over a competitor’s. However, doubling coupons also costs more money than you may think. According to National Public Radio, the average grocery store operates on a 1-percent profit margin. Stores do not wish to give away more profits than they have to, so ... who pays when a store doubles the value of a 50-cent coupon to $1? In many cases, it’s the store. For example, if the wholesale price of a toothbrush is 60 cents and the store sells it for SI, the store can expect to make 40 cents on the item.

If a shopper uses a 50-cent coupon on the toothbrush, the store will still earn the same profit, because the manufacturer reimburses the store for the coupon’s value. However, the brand does not have to reimburse the store for the doubled value of the coupon.

So, if the store doubles the coupon’s value to $1, the store will get back 50 cents from the manufacturer for the coupon’s value, but the store is giving up 50 cents worth of their own profit to double the value of that coupon. Now, the store is losing 50 cents on an item on which they were supposed to make 40 cents. (In some cases, the manufacturer will enter into an agreement with the store to reimburse the doubled coupons’ value as well, but this is not always the case.)

As much as shoppers love doubled coupons, over time, they can represent significant losses to the store. Consider thousands of shoppers buying low-profit items with high-doubled-coupon values each week, and you’ll start to see why a store may wish for “protection” in the form of “Do Not Double” wording on its coupons.

Jill Cataldo, a coupon workshop instructor, writer and mother of three, never passes up a good deal. Learn more about Super-Couponing at her website, www.jillcataldo.com. Email your own couponing victories and questions to jill@ctwfeatures.com.

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