Coupons and Offers Slowly Shifting to Digital: Notes from LEADS Marketing Conference

My colleague Michael Darviche covered the LEAD Marketing Conference in Chicago last week. Here’s his report.

One fascinating area for the past few years has been the coupon and offers space. In a traditionally a paper-based medium, Groupon (and its controversial IPO) have stimulated the question of whether digital couponing can take hold, and in what form. The Shopper Technology Institute's LEAD Marketing Conference offered telling insights to where it all goes next.

Coupons are a $4 billion industry and daily (local) deals are another $2 to $4 billion. The promise of the Web here is in targeting consumers with the right offers and improving the interactivity with consumers to make a buying transaction happen from start to finish.

Here are top 10 insights that might be worth considering.

1) Advertisers and retailers really want digital offers to replace paper. Their paper free-standing inserts (FSIs), mailed coupons, newspaper ads are all too expensive and going away. Worse yet, they are mass distributed. Digital provides a promise of finding new consumers to bring into their brands, and avoid the “extreme couponers”.

2) The conversation seems to be shifting from “it’s all about sending the right offer” to “it’s all about knowing the consumer”. This is great news, and the logical next step as direct marketing principles continue to work their way into the couponing/offers and Web advertising spaces. It is essential for targeting. But it also reflects that brands and retailers may not feel they are being heard these days, and want to anticipate a consumer’s buying needs, shopping moments and better pricing (higher when a consumer is actively searching for product).

3) The offers industry is still very much in the early stages of conversion to digital. All brands and retailers know about mobile and the Web, but don’t know how to get there. The world of Web advertising hasn’t really merged with offers yet.

4) The reason why: It is complex. Digital offers are literally a whole new world in terms of media channels, creative that work, consumer behavior, consumer reader technologies, campaign strategies and designs, data involved, feedback loops, players, substitute offers, and more. To get all the parts into place takes the same kind of hard work that the offline direct marketing world had to try years ago, and in most cases the technologies to get there are not even invented yet.

5) The reason why #2: The economics are tough. Historically, non-targeted mass offers have been worth $.50 to $2.00 per redemption. That’s pretty low and the targeted offers industry needs to push prices up to make it work. It is possible, as brands and retailers really want new consumers who are more likely worth $10-$50-$200 each over their lifetimes.

6) Some providers are successfully doing digital offers. We saw some innovative “mash-ups” of Groupon with brands, and broader retailer FSIs with banners. Then there are mobile phone apps and games with offers too. No shortage of innovation and trials!

7) ROI can be 7x. We saw some industry consultants creating targeted campaigns social (Facebook especially), where the economics are impressive (some are obscenely profitable). Another data provider created a big display offers program with 7x ROI across 1MM users. These are real data points that can be the starting point for broader targeting systems. But it takes some real expertise to design, integrate and execute the programs to work.

8) The big hope is for mobile. Many of the speakers talked about mobile couponing and offers as the ultimate solution, with consumers using phones to scan products, buy in aisles, share with friends, pay with mobile wallets, etc. This is surely technically possible. But there is a lot of consumer participation needed (and business integration issues) to make that happen en masse in the next year or two.

9) Technologies overall are evolving fast. There are a lot of new products and tools out there every 6 months. These are everything from campaign targeting tools, to consumer devices, to in-store technologies, to cards where consumers can store offers and get value back. Brands and retailers absolutely need consulting help to understand all these.

10) The future is here. Well, actually it has been here for the past 4-5 years in lead generation, and in banner advertising too. But then again this targeted offers future will take another 3-4 years to get to mainstream status, and will likely change in form and function a lot before then too. So while there is a lot to like, there is still time.

Bottom line: Big bucks at stake, but a lot of moving parts. Still early stages and a big opportunity for small startups, big marketing providers, and huge brands and retailers.