Coupons: Do The 99 Percenters Really Matter?

“Yes!” say University of Virginia’s Darden Business School professors Rajkumar Venkatesan and Paul Farris. The 99 percenters who fail to redeem coupons they receive in fact do matter. Their new  research to this point is summarized in this month’s Harvard Business Review.

In 2010, U.S. consumers redeemed 3.3 billion coupons for $3.7 billion worth of savings, but that represents only 1 percent of all coupons. What about the other 99 percent, do they matter and if so, how?

Venkatesan and Farris performed an interesting field experiment with eight national retailers to analyze campaigns issuing over 500,000 targeted coupons for 300 brands  mailed out over 16 months. By tracking whom coupons went to, both redeemers and non-redeemers were analyzed in terms of subsequent sales lift (defined as the subsequent amount spent on promoted and non-promoted items). The control group consisted of those not receiving coupons.

What happened? Actually, the non-redeemers accounted for 60 percent of the sales lift.

Coupons often get tagged as “bottom of the funnel” tools but clearly they also drive brand awareness and sales lift. Redemption rates, while important, are not the only success metric. Venkatesan and Farris conclude that new media players such as Groupon and Living Social are best evaluated not just in terms of list building and redemption but also in terms of long term sales lift even from non-redeemers and presumably even those on the list but who never bought the coupons.

Our take on this is that all those semi-annoying one-time, bargain hunting buyers SMBs see after a Groupon or Living Social campaign may in fact just be the tip of the iceberg. Their social media campaigns may actually be far more successful than they’re able to recognize given current tracking systems.

For more on the authors and the Darden School, see http://www.darden.virginia.edu/web/Media/Darden-News-Articles/2012/In-the-Trash-or-in-Hand-Coupons-Make-Money/.

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