How does a business drive higher sales, grab a customer’s attention and create brand loyalty? By doing the unthinkable - charging less in exchange for a piece of paper.
The paper in question is what we all recognize as the coupon. This tiny voucher, trimmed from a box or newspaper, promises savings to the holder. The coupon became an industry itself and is now ubiquitous in the American sales cycle. It continues with its original purpose of driving sales while it evolves with the times. Doing the most counterintuitive thing imaginable - giving customers the chance to pay less for a product - has proven to be the key to higher profits. How did we get here?
Pioneers of a New Industry
Unlike the coupons or free samples attached as inserts to popular publications or on the point of sale packaging with removable fugitive glue, the original iteration were handwritten vouchers handed out to excited consumers.
Drugstore owner and business tycoon Asa Candler needed customers for his new soda fountain product. The problem was that none of the would-be buyers knew what a Coca-Cola tasted like or if it was worth their money. As a marketing pioneer, Candler mailed prospective customers a handwritten letter including a voucher for a free Coke in 1887. The promotion was a massive success and made Asa Candler one of Georgia’s most successful businessmen. Candler is credited with first popularizing the word “coupon” from the French “couper” which means to cut.
It’s estimated that between 1894 and 1913 over eight million free Cokes were served to customers who exchanged their coupons for a chance to try the revolutionary drink. The campaign had a net success rate of one in nine Americans who tried the product over the course of its first 20 years. By 1895, Candler’s promotional marketing ensured consumers could drink a Coke in every state. Unbeknownst to him, he launched two industries at once.
As food manufacturing took off, cereals hit the market. After spending time in Battle Creek, Michigan, C.W. Post was inspired by Kellogg to launch a prepared food company. Grape Nuts was among his early product offerings. He was a pioneer in brand loyalty marketing, offering a coupon inside the box for a subsequent purchase.
The slip promised one penny off the customer’s next box of Grape Nuts, keeping buyers coming back to the same product and creating long-term loyalty. This became an industry standard practice that continues today.
Coupons and the Great Depression
Coupons do more than get customers excited about something new; they also offer a helping hand during tough times. After the stock market crash of the 1920s, coupons were right on the heels of tragedy and ready to restore consumer confidence.
During the Great Depression, consumers pinched each penny. Gone were the days of eating out in restaurants, sumptuous meals, and beach vacations. Instead, everyone had to budget to buy everything, including blocks of ice and a few vegetables.
Coupons were printed to give buyers a penny discount whenever possible. This helped to get buyers out of the house and back into the market. The only reason manufacturers stepped away from the massive coupon printing was because they became too popular and no one could keep up with the demand for reimbursement.
War Effort Turns Consumers to Grocery Stores
As financial stability was restored and shoppers felt more comfortable opening their wallets, grocery stores began to pop up around the country. However, everyone had an alternative, smaller markets that served local crowds in each neighborhood. In order to compete, stores started offering colorful coupons that promised big savings if only customers would give them a chance.
As World War II and rationing became mandatory, grocery stores outpaced local markets by having a streamlined distribution service and broader product selection. Conserving money became a patriotic duty, so coupons were seen as providing troop support.
It wasn’t until after the war and recovery efforts were back on track the first official coupon company was created. The boomers had returned to raise their families, and consumer demand for reimbursements was on the rise.
Coupon Companies Take the U.S. by the Wallets
Nielsen Coupon Clearing House, (NCCH), was founded in 1957 and streamlined the process of turning paper coupons into savings. The company was the first to devote itself solely to coupons and served as a clearinghouse, helping stores and customers use and handle coupons effectively.
The method of distributing coupons grew as well. They appeared in newspapers, on sales receipts, and on shelves. Fugitive glue became a popular way to temporarily attach a coupon to a product without a permanent bond that might rip or tear the packaging. Coupons were attached to free samples, glued into magazine inserts, or included in recipe books. By 1965, half of American households were using coupons.
Coupons became so widespread in Sunday newspapers that about half of all newspaper sales were attributed to buyers wanting their savings vouchers.
NCCH is still in operation today and played a big part in the development of coupon management software as well as finding better ways to create coupons and get them into the hands of customers.
Their success inspired subsequent direct mail marketing companies such as the iconic blue envelope known as Valpak in 1968 which revolutionized local marketing. By the 1970s, coupons were part of American culture. Successful coupon clippers were celebrated in headlines of local publications and newsletters popped up to share tips and tricks for getting the most savings.
Later in the 1970s, the free-standing coupon inserts still seen today in local newspapers were pioneered by entrepreneur George Valassis.
Coupons go Digital
In 2008, the global economy experienced a huge recession, a crisis that inspired financial analysts to compare it to the great depression. Americans found their major banks and financial groups facing bankruptcy, and going to Congress for relief or TARP, Troubled Asset Relief Program, funding.
The rest of the economy felt the effects through increased unemployment and smaller budgets for shoppers.
Enter the Quick Response Code or QR Code. The new, two-dimensional coupon went beyond the barcode and set of numbers. These black and white squares could hold and process thousands of pieces of information and connect consumers and businesses in a matter of seconds.
Used in Japan as early as the late 1990s, QR Codes look like black and white nonsense at first glance. Enter the smartphone, which allowed shoppers to instantly scan the code to receive instant feedback, a marketing video, or a discount. QR codes drove web traffic and information campaigns which were tied to discounts as a reward.
In 2010, progressive retailer Target got in on the digital trend by offering the first digital coupons to shoppers’ smartphones. They were able to mine the user data to gain valuable demographic information customers were willing to trade for a discount on common products like yogurt and cereal.
Your Ticket to Higher Sales
The method of distribution and redemption may have changed, but the coupon remains a key driver of sales.
Coupons work as a great marketing tool. They raise brand awareness and encourage customers to try a product they might not buy otherwise. They can help move a specific product if it’s not selling and open the door to an upsell; the chance to add a more profitable add-on or second item that has a higher price point.
Today it is reported that shoppers from every level of income use coupons in some way. The savings earned by shoppers as they take advantage of coupons is more than three billion dollars. One survey reported that over 69% of shoppers say they use coupons frequently, an average of five coupons a week.
No matter what the business, everyone benefits when a coupon is involved. They seem to be here to stay, and that’s good news. Shoppers and sellers can all take advantage of coupons in every form and keep the savings coming.