Winston Mok, P.Eng.
University of Waterloo
Co-Founder of Simply Good Technology
winston@simplygood.com
OFFER
MANAGEMENT
SYSTEMS
The New Age of Digital Coupons
Throughout the past decade, marketing has changed dramatically. With the internet dominating the social and professional world, marketing mediums had to be transitioned from their original paper roots. From print ads in newspapers and magazines to online banner ads, the digital world has continued to change the way we market, adding many new tools to the marketing mix. This digital push can be seen in many different areas of marketing, and continues to evolve and change with new innovations in the digital space. Social networks such as Facebook and Google+ have exposed more demographic data than previously available to marketers.
What does this all add up to? Consumers are constantly bombarded with advertisements each day. It becomes increasingly difficult for companies to differentiate themselves within the marketing mix. As it only gets harder to market in a world with so many marketing channels, companies have sought to improve their campaigns, endeavouring to become more effective, to stand out amongst competitors, and ultimately to leave a lasting impression on their audience. In an effort to increase sales, gain new customers and grow brand loyalty, companies are increasingly aware that much of their success in these areas can be a directly attributed to their marketing campaigns. In 2010 the Canadian online advertising marketplace experienced a 23% growth to $2.23 billion from $1.8 billion in 2009. Online advertising in Canada is forecasted to grow by 16% by 2011 to an estimated $2.58 billion (Interactive Advertising Bureau of Canada).
The Marketing Evolution
Marketing has changed throughout time, and evolved to the wireless world of today. Yet marketing goals have retained a universal mandate “how to get the word out there?” In an effort to meet this challenge, most marketing methods used to address this mandate have evolved substantially. For example, print advertisements have often evolved to online banner ads. Online banner ads have evolved too, into video ads, which are proven to be much more effective than banner ads, with 4-7 times higher click through rate. Coupons have evolved in a much different way. For example, deal-a-day companies such as Groupon and LivingSocial have been pioneers in the digital coupon industry. They created online coupon websites that combine collective pre-paid buying and mass discounts to generate viral appeal for their coupons. This approach to couponing has resulted in huge swells in consumer interest surrounding the offer. It has however posed questions around the long term sustainability of this approach compared to more traditional methods of new customer acquisition and building loyalty. Below you will a 5 year trend analysis of the total online ad revenue growth by the type of online advertising.
The Origin of Coupons
To fully understand the coupon industry, one must know the origin of coupons as well as their purpose. Coupons have been dated back to the 1800s, when Coca Cola printed the first coupons to introduce the world to their product. The intent was to entice people with their beverage, in hopes they would buy their brand in the future. Since that time coupons have largely remained the same. They have been paper cut-out discounts distributed to customers, motivating them to purchase a product or service. One unique feature of the coupon amongst the marketing mix has been its ability to provide feedback on the performance of a promotion against sales. By physically collecting the coupons as a means of redemption, businesses such as Coca Cola were able to gauge the success of the coupon based promotion with concrete metrics.
One intrinsic problem with paper based coupons, however, was that it was difficult to identify anything more about the consumer given the information available after collecting the coupons. Paper coupons were typically bulk printed and absent of any unique promotional codes to identify the channel or consumer to whom they were delivered. That being said, paper coupons have still been very successful in supporting new product launches and appealing to price sensitive consumers. Looking forward into the digital age, paper based coupons will likely go the ways of print advertisements and make an evolutionary jump online.
The ‘Digital’ Age of Coupons
With online marketing methods continuing to grow in popularity and provide deeper analytics, the coupon industry has also seen advancements through technology. Examples such as print at home coupons and mobile coupons mark a clear indication that more and more consumers continue to adopt the new age solutions. In fact JupiterResearch estimates that by 2011, over 87 billion dollars in sales will be generated by 3 billion mobile coupons” (MMA Global & JupiterResearch). By going online, digital coupons in contrast to paper coupons benefit from the mass market of the web and social networks along with the lowered cost of distribution.
Long term success, however, will likely be built on a more fundamental advancement in coupon technology. We believe the adoption of unique codes used in distribution, sharing and redemption are essential to the advancement of couponing. This gives way to more customer-specific analytics as it enables businesses to track who, where and when coupons are used along with how they are socially shared. For example, creating coupons with unique codes allows businesses to send coupons that are tied to specific email address. When the coupon link is opened, shared or redeemed it provides feedback to the business that an action has occurred. This over the course of a coupon’s lifetime gives insight as to how it is used to influence behaviour.
In addition to deep analytics, unique codes would help resolve other systemic issues inherent with traditional coupons such as controlling limited-use, fraud, and coupon stacking. Unique codes enable businesses to know if a coupon has been redeemed already, whether the code is valid and what rules it’s allowed to work in conjunction with.
Going online also provides better management and control by using today’s modern dashboards and online tools to simplify the creation and maintenance of promotions. It also enables real-time data reporting compared against the archaic 45-90 day total processing time required with the original paper process. As a final note, the benefits of a paperless solution compliment the recent green initiatives seen across several industries today. Digital coupons are already catching on with mobile advertising spending growing 83% to 52 million in 2010 and are projected to reach $82 million in 2011 in Canada (Dan Roselli, MMA Global).
“Know Your Customers”
Using analytics that have never been uncovered before, companies now have the capability to know their customers better. By using digital coupons and broadly applicable promotions, businesses can uncover the relationships between existing and new customers. After a generic promotion such as “10% off any purchases over $40”, we typically see customers falling into one or multiple of the following buckets:
Adopters typically engage in promotions once, so they qualify as customers but lack the engagement level of loyalists. Loyalists are those who frequently act on promotions and contribute to continued sales figures. Advocates are those who spread the word and share the promotions to existing and new customers thus broadening the reach of the marketing effort. Influencers are individuals who have influenced additional sales through sharing of the promotion.
With so many different forms of marketing, customers are constantly being bombarded with marketing schemes. It becomes increasingly important to reach your customers more effectively. By leveraging advocacy from your own customers, they automatically target those who would be likely interested within their social circles. This automatic filtering minimizes what we consider the ‘Spam Effect’ of marketing messages. We believe opportunities to send marketing messages should be used conservatively and precisely to those likely to act. For example, if people are constantly bothered with mass emails and broad messages, marketing becomes less effective. People will learn to bypass your continuous emails as they lose interest in your messaging. Leveraging your advocates to spread the word allows you to target messages to the right people along with benefitting from the pre-existing social relationship.
This process however begins with “knowing your customer” first.
Offer Management System OMS
In leveraging digital coupons, an important first step is select promotions that appeal to all customers (example: “10% off all purchases over $40”). These are sent periodically to stimulate the market and identify/re-identify advocates and influencers through redemption. This is important given that advocates and influencers often change with time. Once identified, advocates and influencers can be sent specific marketing initiatives in hopes to spread the word and influence potential buyers. An example would be sending a “10% off Kitchenaid Housewares” to loyalists, advocates and influencers. The hope would then be that advocates would share these more specific promotions to existing and new customers who are potential buyers. New customers would then be additional candidates to become new advocates and influencers.
The resulting SAAS (Software as a Service) based product is our Offer Management System (OMS), and it’s comprised of three main components:
- A web dashboard to create, control and maintain promotions
- Mobile, web and email plugins for distribution and sharing
- Redemption at Point of sale
The web dashboard serves as the control panel for brands and retailers to create and manage promotions. This enables clients to manage promotional campaigns real-time from distribution to redemption including the rules under which the coupon is valid. Clients with Corporation and Dealer/Franchisee relationships can set permissions to manage promotions at a corporate wide, regional or store specific level. Brands such as Unilever and Proctor & Gamble can also create and manage promotions that are intended to be redeemed at participating retailers. The web dashboard establishes a web based eco-system for Brands and Retailers to interact and collaborate.
The plugins for distribution and sharing enables the coupons to be sent through a variety of channels including Email, Web and Mobile. Integration with popular social networks such as Facebook and Twitter further enhance the reach of promotions. Sharing is built right into the coupon making it easy for advocates to share promotions to other people. They simply have to click a link within the coupon and specify the people they would like to share to. Additionally users can copy & paste a URL to sites such as RedFlagDeals or SmartCanucks so community members can simply click to enrol for the promotion.
The image to the left shows the simple process for consumers where redemption at point of sale (POS) enables clients to validate coupons real-time and record when they are redeemed. This gives a clear relationship between a promotion and its related sales. This however is a common technological roadblock given the number of archaic point of sale (POS) solutions in today’s market which cannot scan mobile displays or handle unique coupon codes. We have since developed a proprietary hardware solution dubbed the ‘SCOR Terminal’ that maintains the benefits of digital coupons using unique codes without the need for integration. It pairs with the POS system and enables cashiers to scan unique coupon codes on mobile devices and then displays the instructions on how to proceed.
The Canadian Tire Story
The relationship between Simply Good Technologies and Canadian Tire grew from its beginning in app development as we ventured into Offer Management Solutions. Canadian Tire experienced challenges with their paper coupons and sought to have better control, prevent fraud, and gather important analytics that would help them in future promotions. Thus, we launched our OMS, as it was an optimal opportunity to provide Canadian Tire with a solution to their coupon problems and enable them to validate a true digital coupon system. Furthermore, the high level analytics uncovered by the OMS enabled Canadian Tire to know their customers better, as they found their Adopters, Loyalists, Advocates and Influencers.
We began the pilot project with Canadian Tire’s Gas+ Petroleum Stations in select regions within Canada. During the pilot, weekly offers were sent out via email and on the mobile application to customers within that region. Upon clicking on the advertisement, they would be presented with the customer specific QR code, ready to be shown to the cashier. At Point of Sale, the coupon would be scanned and validated. The Cashier would then get clear instructions on how to proceed. The process was entirely digital and streamlined compared to traditional paper coupon processing.
Canadian Tire was impressed by the OMS and all of the analytics that it provided. They had never before seen the direct effects of a marketing campaign, and the OMS enabled them to generate thorough reports so they could better understand the nature of their promotions.
“Simply Good essentially propelled our business forward into the digital space more seamlessly than could ever be expected. SG’s expertise in the industry coupled with their unrelenting desire to help our business succeed and offer practical solutions to problems contributes significantly to the overall success that we have experienced. In addition back-end Offer Management System has given us invaluable insights into how our consumers behave and ‘share’ in ways that would simply not otherwise be possible” – Josh Denes, Marketing Manager , Advertising & Promotions, Canadian Tire Corporation, Petroleum Division
Their initial challenges with couponing had been resolved. It was now an efficient process, as it was all online. Canadian Tire was able to maintain control as they limited 1 use per customer, and were able to do so without point of sale integration. Fraud was also reduced, with the use of customer specific coupon codes. The system also ran on a digital basis, which limited paper waste and promoted a valuable green alternative.
As for new findings, they were enlightened by the results, as their advocates and influencers did their marketing for them. Canadian Tire harnessed the power of their customer’s networking capabilities. Through their original customers, they gained new customers. They found that their advocates and influencers were better able to predict who would be most interested in specific offers, and through their promotion of the brand, were able to market more effectively to their friends.
The Social Effect
A key factor to the success of the OMS is the social sharing feature. Social media has played a significant role in the digital age for the last several years. Simply Good’s digital coupons offered sharing features right on the coupon itself, enabling customers to share easily and quickly. Sharing features include Facebook, Twitter, email, and URL for additional sharing purposes. Moreover, each share is tracked to gain even more analytics that have never before been gleaned.
The OMS uncovered more about each customer. It developed data that would allow companies to find the brand advocates that drive their brand. Brand advocates are important as they promote the brand to their friends; in essence, they market for the brand without compensation. The data from the OMS suggests that on average, brand advocates increased the total customer base by approximately 8 per cent. The OMS went beyond brand advocates, and discovered the influencers. Influencers are customers that encourage their friends to purchase the brand, and their friends listen. The OMS was able to uncover data that also suggests that customers are roughly 4 times more likely to redeem when reached through people they recognize in their own networks, versus being reached through the brand or retailer directly. On average roughly 6% of customers redeemed from corporate messaging where 28% of customers redeemed when reached through advocacy for certain promotions.
With the OMS, businesses are able to know more about their customer base and how they are influenced. This enables marketing efforts to weave a storyline of promotions that build loyalty and find new customers.
Loyalty, Not Just Deals
With deal-a-days paving the way for digital coupons and short-term market advantage, loyalty and sustainability are issues marketing departments are still challenged with. Often pushed to follow the trend of one huge deal a year, what happens the other 364 days? Finding loyalists and advocates for your brand versus deal hunters can be challenging when deep discounts and volume buys are the prerequisites.
We believe customer loyalty and advocacy are key contributors to continued growth and the success of any business. In reality, loyalty takes time and requires building a personal relationship with your customer. Our solution enables businesses to discover the intricate social relationships within its customer community. Everyone from head office marketing to franchise store owners are able to reward those who spread the word and engage with the business.
However, it’s not about daily, weekly or monthly promotions, it’s about crafting a promotional storyline throughout a customer’s lifetime. Knowing your customer requires continual engagement through multiple marketing channels and continuous refinement of the marketing message. Simply Good Technologies understands the importance of this and we have created an ecosystem to support the relationship between Brands, Retailers and Consumers. If you’ve always wanted to know more about your customer, then it’s time for a retail reboot.
About the Author
Winston Mok is a Professional Engineer with an Honours Degree in Computer Engineering with an option in Mechatronics from the University of Waterloo. He is the Co-Founder of a start-up based in Toronto, Ontario at Simply Good Technologies, whose Offer Management System (OMS) enables clients to easily manage, distribute and track redemption of consumer offers whether online, in email or through mobile. The systems goal is to customize offers to reach new customers and strengthen brand loyalty and advocacy. Simply Good Technologies has worked with Canadian Tire, ScotiaBank, VISA, City of Toronto, Nuit Blanche and ScotiaBank Caribana.
http://www.simplygood.com
