Coupons as an instrument for manufacturers of consumer goods to achieve customer loyalty

Term Paper, 2008

33 Pages, Grade: 1,0



Table of figures

List of abbreviations

1 Structure and objectives of the study

2 The concept of couponing
2.1 Definitions of coupons and couponing
2.2 Classification in the marketing-mix
2.2.1 Types of coupons
2.2.2 Distribution process
2.2.3 Target audiences

3 Coupons and their relation to customers’ loyalty
3.1 History and development
3.1.1 The evolution of coupons in the USA
3.1.2 The evolution of coupons in Germany
3.2 Today’s markets and manufacturers’ challenges
3.2.1 The American market
3.2.2 The German market
3.2.3 The worldwide crisis situation
3.3 Coupons and their significance to manufacturers and consumers
3.3.1 Features and positive aspects
3.3.2 Risks and negative aspects
3.4 Options and boundaries of couponing

4 Conclusion

List of literature


Figure 1: Types of coupons

Figure 2: An example of a consumer-printed coupon

Figure 3: Number of coupons (billions) distributed and redeemed in the USA

Figure 4: The new adventure of marketers: mobile coupons

Figure 5: Increase of coupons distributed by manufacturers of CPG’s


illustration not visible in this excerpt

1 Structure and objectives of the study

If you ever take a trip to the USA and “visit” one of those giant supermarkets, the first thing you will recognize as soon as you get to the cashiers is consum- ers giving slips of paper to them. The cashiers would scan those slips of paper and the total amount of the consumer’s grocery payment will be reduced imme- diately. Those slips of paper are called coupons and have been very popular in the USA for many years. Meanwhile, coupons enjoy also a great popularity in Germany but still without such a spread as in the USA. In today’s world many changes, especially such as the current financial crisis, give marketers the rea- son to restructure their marketing strategies. They know that consumers not on- ly try to save as much money as possible, they also have much more brands and products to choose of today. As a form of sales’ promotion, coupons are an ex- cellent way to attract consumers to purchase more products without having re- duced the general price level. But more importantly, they are a very effective way to achieve customer loyalty and marketers know that long-term customer loyalty is more important than ever before to maintain success on the market.1

This research paper will introduce you to the study of couponing - an important marketing instrument that is capturing the market everywhere in the world. It explores how manufacturers of consumer packaged goods (CPG) benefit from couponing in regard to their achievement of customer’s loyalty. First of all, this research paper gets involved with the analysis of the meaning of couponing and coupons, their classification in the marketing-mix as well as the different types and distribution forms. The main chapter distinguishes information about the history and development of couponing and their first evolution in both coun- tries, USA and Germany. Subsequent the current market situations in the USA and Germany, as well as the latest evolutions of coupons regarding customer loyalty will be demonstrated. In additional, it will look into the significance of coupons to manufacturers in regard to achieve customer loyalty as well as chances and risks that appear with them. A summary and a critical view will build the closing of this research paper.

2 The concept of couponing

Coupons are a great way for manufacturers and retailers to let consumers know about the products and brands that they have available. For consumers they are a great way as well, to get introduced to those (new) products and brands by a lesser price or even by a free trial. But what exactly is a coupon ? With this in- troductory chapter, clear definitions of the meaning of coupons will be provided as well as a brief description of most used coupon types, distribution ways and target audiences.

2.1 Definitions of coupons and couponing

Several definitions that describe the meaning of a coupon can be found in the literature. For instance, Nielsen, an American marketing scientist, describes a coupon as a “document that entitles the holder to so many cents off on the purchase of a particular product”2. This description already gives a short vision on what a coupon is used for. But a coupon is much more than just a document that allows price reduction of a product. In his dissertation, Winkelmann defines a coupon in a very clear way and in its entirety:

“ a coupon is defined as a broad marketing instrument in form of a printed or electronic voucher, which allows either a direct or indirect discount to be ob- tained if the redemption conditions of the voucher are met. In general, the voucher is invalidated when benefits are granted and can therefore only be re- deemed once. The coupon understanding only includes benefits granted directly from the obtained coupon. As a result, it does not include trading stamps, which consumers have to collect in order to receive a benefit once a certain amount is collected.3

So, basically a coupon represents an instrument in the form of a voucher that gives the bearer - which would be the consumer - the entitlement to get a direct discount on a product when presenting this voucher to a specific participating business - which could be a store.4 The whole process of providing coupons through marketing and the use of those coupons by the consumers represents couponing which is described as a procedure by Kreutzer’s study. During this procedure, an editor - which could be a manufacturer - provides a proof of au- thority - which would be the coupon - to a selected group of people. If in turn, that selected group of people would show a specific conduct in a defined peri- od, the use of this coupon in an advertised point-of-sale would allow a price advantage.5 In summary, the couponing represents a marketing strategy as a special way to give discounts through the use of coupons which are destined to stimulate consumers to buy more products.6

2.2 Classification in the marketing-mix

Marketing consists of four variables that are interrelated to each other: product, price, place and promotion. With those four variables marketers are able to control the marketing activities and to establish marketing strategies on the market.7 Coupons turn out to be affected lightly by any of those four marketing- mix variables. They appear in the first variable because they can change the variety of goods when provided as a benefit to consumers to receive a free sam- ple with a purchased product. They also affect the price when used to reduce the general price of a product. In addition, coupons can be found in the third variable - place - as well, when distributed to consumers. The last variable is the promotion, where coupons have several options to establish a marketing strategy. Coupons that are used to reduce the general price can be used to target consumers, and coupons that provide a free sample can be used to introduce a (new) brand. Even the bond to consumers can be strengthening with coupons that provide loyalty specials as well.8 As one of the four variables is the price, it can be a direct way to generate revenue but the price should always stay inte- grated in the complete marketing strategy.9 To let consumers know the real val- ue of a product, manufacturers have to set the right price because it is the main factor that gives consumers an indication of what kind of product quality they can expect. Both product quality and product price influence the consumer’s perceptions of value, as they mostly associate low prices with low quality and equally high prices with high quality. This is especially true for a new brand on the market as consumers do not know the value of the product. The right set price is able to show at least an indication of the value and the product quality which differentiates their products from competitors.10 While using a coupon consumers still know the real price and the real value of the product as coupons are used as a temporary promotional activity. By saving the consumers money, companies add even more value to their products because a coupon provides instant savings when presented.11

2.2.1 Types of coupons

Coupons exist in several different types and styles and they can be merged with lots of various promotional activities. Consumers get different discounts for different products depending on the type of the coupon.12 The most common type of coupons is the cash-coupon which gives consumers an immediate price reduction on the price of a product, product line or the whole variety of goods as soon as they present the coupon to the cashier. Although cash-coupons can only be used for a certain product that is mentioned on the specific coupon, they are still a very good way to introduce or attract (new) consumers to a product or a specific brand.13 This is especially true for products or brands that are not purchased by consumers as often or as much as manufacturers want them to be.14 Comparable with a cash-coupon is the shopping-coupon except that this one not depending on a specific product. A shopping-coupon allows the coupon user to purchase any product and get the coupon-discount on the total amount of the purchases.15

Another coupon type that offers a free product or service when buying a specif- ic product is called a bundling-coupon. Common advertising slogans used for bundling-coupons are “buy one, get one free” or “two for one”. Bundling- coupons give manufacturers the opportunity to bundle unfamiliar products with a familiar or more significant product to introduce it to the consumers which is also called cross buying.16 With sampling-coupons, which also belong to the type of bundling-coupons, consumers would get an additional smaller test sam- ple with its purchased product that mostly comes in a smaller package. This sample can be another brand or product to introduce consumers to it, or it even can be a newer version of the same brand.17 Marketers can use them to intro- duce consumers to a new or not often purchased product or brand which gives consumers the opportunity to learn more about those products or brands. Oth- erwise they might never have tried and be interested in this product.18

Last named is the loyalty-coupon which is mostly known for collecting bonus points or miles by purchasing certain products or services, as well as making purchases in certain stores. Points or miles will be placed on the consumer’s loyalty card or account and with a certain amount of collected points or miles the coupon holder can redeem them for special premiums. The characteristic feature of loyalty-coupons is that consumers have to collect a significant amount of points or miles before they can be redeemed which is usually done over a long period of time. Marketers use loyalty-coupons especially to target customers and to acquire their loyalty.19 The following figure gives an example of those just described coupon-types.

illustration not visible in this excerpt

Figure 1: Types of coupons

(Own presentation)

2.2.2 Distribution process

Most manufacturers provide coupons for discounts in the food category as well as for personal care and consumers households since those categories provide products everyone needs for living and daily use. As consumers purchase those products very often there is a huge opportunity to attract consumers with cou- pon discounts to save money.20 To distribute coupons, marketers have two op- tions: personal or impersonal. The impersonal way means that coupons are pro- vided to any consumer, for example in magazines. The personal way means that specific consumers can be reached, for example by direct mail.21 The place where the impersonal coupons can be found mostly is in traditional hardcopy newspapers that can be bought, delivered or read every day, anywhere and from anyone. Consumers can find coupons directly posted in the newspapers’ adver- tisement or in a free standing insert, as well as in prospects or in-store displays where they have to be clipped before using them in several supermarkets or stores. Coupons can also be issued in special coupon-catalogs, as well as direct- ly by the stores.22 Present trends clearly indicate that consumers use the internet and media in general more often than ever before. Consequently marketing had to diversify its strategy of advertising and increase their use of the internet and other media as well. As a result newspaper websites became particularly popu- lar for consumers of coupons over the years.23 Recent studies discovered that consumers are even more interested in coupons if they have the chance to download them and have it automatically linked to their loyalty card of a spe- cific store. So the costumers would search online by brand or product, and by clicking on a specific grocery coupon the discount would be added to their loy- alty card. By the next purchase in that specific store they would use their loyal- ty card and get the discount that was mentioned on the e-coupon right away.24 Meanwhile, coupons are often provided by directly sending emails to the con- sumers to give them the feeling of being special.25 This is where Marketers use the personalized way of distribution. Because when using this method, market- ers absolutely need personal information on the consumers, such as buying be- havior, before providing them coupons. This personal information can be gath- ered when building the data base for loyalty coupons, as this information needs to be sent in by the consumer before receiving any kind of discount services.26 In fact, it is very easy for marketers to make sure that the targeted consumers will find the desired coupons. Of course, not all of the consumers have internet access which certainly reduces the response to newspaper websites or e- coupons. But the significance and also the share of the market of those media coupons will expand more and more. However, they will not replace the tradi- tional newspaper coupons completely, as there always will be consumers who do not have the possibility to use the internet or just prefer the traditional hard- copy version.27 The following figure gives an example of a coupon, in this case a consumer-printed coupon:

illustration not visible in this excerpt

Figure 2: An example of a consumer-printed coupon

(Source: Hartnett, M., 2007, p. 33)

2.2.3 Target audiences

Sales, rebates and discounts - and with that the use of coupons - are often asso- ciated with the idea that only price-sensitive shoppers or shoppers with a low income would search for them because manufacturers assume that people with a higher income do not see a need in searching for discounts. But NCH studies show that 75 percent of consumers in all income brackets use coupons at least sometimes.28 Marketer’s main target for coupons is the households. But house- hold does not only mean targeting women. In her research, Hill found out that men also use coupons for saving by purchasing CPG’s. As today’s men are in- volved more and more into household issues, they are engaged in gender neutral duties such as getting groceries for their families. So it is not only men any- more who bring the only income home because women earn a living as well. Hence, families share their duties and for many men getting the groceries is becoming a gender neutral behavior. Hill’s study discovers that on an overall of 76 percent of American households, about 68 percent of men and 84 percent of women use coupons for their grocery purchases.


1 Cf. Smith, S.; Schultz, D. (2005), p. 57

2 Nielsen, A. C. J. (1965), p. 11

3 Winkelmann, A. (2006), pp. 30 et seq.

4 Cf. Smith, S.; Schultz, D. (2005), p. 61

5 Cf. Kreutzer, R. T. (2003), p. 6; q. v. cf. Becker, J.; Winkelmann, A.: (2003), p. 8

6 Cf. Smith, St. J.; Buta, P. (2004), p. 87; q. v. cf. Smith, S.; Schultz, D. (2005), p. 61

7 Cf. Grewal, D. et al. (2009), p. 8

8 Cf. Gaiser, B.; Linxweiler, R.; Brucker, V. (ed.) (2005), p. 414

9 Cf. Johnson, W. C.; Weinstein, A. (2004), p. 143

10 Cf. Johnson, W. C.; Weinstein, A. (2004), pp. 139, 142

11 Cf. Grewal, D. et al. (2009), p. 350

12 Cf. Smith, S.; Schultz, D. (2005), pp. 57, 61; q. v. cf. Gaiser, B.; Linxweiler, R.; Brucker, V. (ed.) (2005), p. 409

13 Cf. Gaiser, B.; Linxweiler, R.; Brucker, V. (ed.) (2005), p. 410

14 Cf. Kreutzer, R. T. (2003), p. 12

15 Cf. Gaiser, B.; Linxweiler, R.; Brucker, V. (ed.) (2005), p. 410

16 Cf. Kreutzer, R. T. (2003), pp. 8, 14; q. v. cf. Becker, J.; Winkelmann, A. (2007), p. 7

17 Cf. Gaiser, B.; Linxweiler, R.; Brucker, V. (ed.) (2005), p. 411

18 Cf. Kreutzer, R. T. (2003), p. 12

19 Cf. Gaiser, B.; Linxweiler, R.; Brucker, V. (ed.) (2005), p. 411

20 Cf. Hartnett, M. (2007), p. 34

21 Cf. Kuhfuss, H.; Kreutzer, R.; Hartmann, W. (2002), p. 28

22 Cf. Hartnett, M. (2007), p. 33; q. v. cf. Kreutzer, R. T. (2003), p. 6

23 Cf. Hartnett, M. (2007), pp. 33, 34; q. v. cf. Becker, J.; Winkelmann, A. (2003), p. 5

24 Cf. McTaggert, J. (2008), p. 36

25 Cf. Zorn, N. (2008), p. 1

26 Cf. Kreutzer, R. T.: (2003), p. 13

27 Cf. Hartnett, M. (2007), p. 34

28 Cf. Nagle, T. T.; Hogan John E. (2006), p. 64

Excerpt out of 33 pages


Coupons as an instrument for manufacturers of consumer goods to achieve customer loyalty
University of Applied Sciences Brandenburg
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ISBN (Book)
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Coupons, Couponing, Marketing, consumer goods, Customer loyalty
Quote paper
Sylvia Krahl (Author), 2008, Coupons as an instrument for manufacturers of consumer goods to achieve customer loyalty, Munich, GRIN Verlag,


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