Coupons keep luring customers

The Baltimore Sun

More than 100 years ago, Asa Candler introduced the first coupon in an effort to get people to try a new drink called Coca-Cola.

Today, consumers still love their coupons although they're using fewer of them. Coupons remain a powerful way to find bargains, and some retailers that scaled them back have paid a price. And coupons still target a core group of customers for retailers and manufacturers.

"Any way you can save money, I'm there," said Lorie Lawson, a 22-year-old cashier from Baltimore who uses coupons for a variety of products, including clothing from the Gap or Old Navy. "Those people who don't use coupons must not worry about money."

Despite consumers' hectic lives and the promises they hear about everyday low prices, the coupon remains a shopping fixture, according to retailers and marketing consultants. And most consumers are trained to seek them out in direct mail, on Web sites and in the newspaper. Because even though just one in five customers says he or she uses coupons, according to the National Retail Federation, shoppers still like the thrill of nabbing an even greater bargain.

"Anytime you feel as though you're going to be saving money, it enhances the value in your mind," said David Urban, a professor of marketing at Virginia Commonwealth University.

And woe to companies that try to wean customers off their coupon addiction.

Macy's department store chain said last month that customer visits dropped when it cut back on coupons at the Baltimore-area Hecht's and the 10 other regional department stores it recently purchased.

Learning the hard way, Macy's announced that it would slow its efforts to reduce coupons, acknowledging that customers had been turned off by the loss.

"They reduced the coupons, which everybody loves, and it was a disaster," said Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consulting and investment banking firm. "You have tens of millions of people who their whole driver of shopping is coupons. It's not just something you can take away."

Even as customers are redeeming fewer coupons, many companies are reluctant to stop using them because hard-core shoppers notice when they're not there.

"Like it or not, consumers are addicted to coupons, and they count on them," said Susan M. Jones, vice president of business development and marketing at CMS Inc., which tracks coupon usage. "You take it away and your competition doesn't, you're going to lose market share. Because a certain percentage of the consumer is looking for them."

In 1996, Procter & Gamble tried to eliminate coupons in three cities in upstate New York, only to have consumers boycott its products. The experimental program was designed to see whether shoppers would buy products at "everyday low prices" instead. Consumers responded by buying other brands for which they could use a coupon.

Despite that backlash, consumers are redeeming fewer coupons, according to industry figures. The 2.6 billion total coupons redeemed last year was 13 percent less than the year before, according to CMS. And the number redeemed is a tiny percentage of the total coupons printed: Manufacturers and retailers issued 286 billion coupons last year - 11 percent fewer than in 2005.

CMS attributes the drop to a decline in Sunday newspaper circulation, where most coupons still appear. Manufacturers also have shortened expiration dates on coupons and required consumers to buy more of a product - such as two tubes of toothpaste instead of one - to get the discount.

Some retailers insist that many customers believe coupons are too much work and inconvenient. That's one reason why Macy's executives said they wanted to use fewer coupons and still hope to convince customers that their merchandise carries low prices every day.

Macy's reduced the number of coupons at Hecht's and the other stores it bought from the May Department Store Co. in 2005 by 15 percent. And even though Macy's executives said they made a mistake in scaling back those discounts too fast, they have no plans to ever offer as many coupons as Hecht's once did.

"Customers have told us that coupons are too complicated and confusing," said Macy's spokesman Jim Sluzewski.

Former customers of Hecht's clearly miss the abundance of coupons. "I used to cut and use coupons all the time before, and Macy's certainly does not have as many," said Baltimore County retired schoolteacher Sheila Holley, a former Hecht's shopper who still visits Macy's. "Everyone wants a bargain."

Many retailers would not discuss in detail their coupon strategies, reluctant to reveal trade secrets to competitors. Several use coupons as a marketing plan to lure customers.

Express and the Limited mail coupons to consumers. Bed Bath & Beyond periodically features a 20 percent-off coupon in its newspaper circulars and uses direct mail, too. Sears places coupons in newspaper circulars and will provide customers with specific discounts after they purchase an appliance that is installed by the company.

"It's one segment of a multifaceted marketing strategy," said Sears spokeswoman Kim Freely.

Giant Food also mails coupons to shoppers. In August 2000, it introduced a bonus card that shoppers could swipe at the store for additional discounts. Coupon use has gone up since the bonus card was introduced because the grocer was able to better target to whom it mailed coupons.

Coupons remain important to retailers and manufacturers that hope to influence shoppers to try new brands and products. And more consumers typically seek out coupons to better control costs when prices for things such as gasoline and electricity rise, marketing consultants said.

"The coupon business is still alive and well," said George Whalin, CEO of Retail Management Consultants in California. "You look at things that consumers respond to, and coupons are still a very viable way of selling a product."

But retail experts also warn of the danger to businesses when shoppers become too dependent on coupons. In some respects, department stores conditioned shoppers to wait for the next big bargain, contributing to one of the reasons those institutions performed so poorly in the past, some experts said.

Some shoppers will buy only when they know there is a sale or discount. The holiday shopping season has become one that doesn't pick up until the final week before Christmas because shoppers figure that's when stores will start slashing prices to get rid of merchandise.

Hecht's issued coupons several times a week, Macy's less often. Hecht's put more coupons in the newspaper; Macy's prefers mailing the discounts to credit card holders and loyal shoppers.

"May Department Stores had become excessively dependent on advertised promotional events and coupons, which became the bane of department stores and in many respects representative of weaker merchandising skills," said Bernard Sosnick, a retail analyst with Oppenheimer & Co. Inc.

And not all consumers are coupon fans.

Louise Baylor, who works at the Baltimore City courthouse, has plenty of friends who clip coupons, but she believes the hassle isn't worth the savings.

"By the time they cut their coupons, I've been to the store and bought what I want," she said.

Some retailers agree that clipping coupons can be tedious work that neither they nor their customers want to deal with consistently. And while retail consultants said coupons can weaken a company's profit on some items, the stores are betting that consumers will spend more money once they arrive to shop with the discount.

"They tolerate them to get more shoppers in the stores, but they hate them because it affects their profitability," said Britt Beemer, owner of America's Research Group, which tracks consumer shopping habits.

Shoppers say they'll keep looking for the bargains.

"I use them all the time," said Brenda Smith, a 55-year-old nurse's assistant from Baltimore, who clips the discounts whenever she can for shopping trips to J.C. Penney, Superfresh and Giant Food. "I even go to my girlfriend's house and get her newspaper so I can have double the coupons."

For retailers, there are enough people like Smith to keep coupons in circulation.

"Coupons are part of an American way of selling products. They're not going anywhere," said Bud Miller of the Coupon Information Corp. "They'll evolve over time, but consumers demand them."

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