Sunday 27 September 2009

Divide and Conquer

lg_couponCoupons.  Despite their long history - first appearing in the early to mid 1800’s and being used to great effect by Coca-Cola in 1887 - they are however strange beasts.

Every brand seems to want to give them – research suggests almost all of us use them – yet no consumer wants to be seen with them.

One of the reasons for this is that as we have a tendency to upward social comparison, we are more likely to want to align with those better off than ourselves – and as people tend to associate coupon usage more with less well off people, coupon usage overall has a negative image.

The modern word “coupon” derives from the French couper which means “to divide with a blow or stroke, to cut” which led to the word coupon which means “a portion that is cut of” - essentially describing how the coupon is actually presented.  However, the meaning of the word coupon today has less to do with physically how it is made available and more with how it is used – the association being more one of a discount.

Coupon perception can though span between money saving discount and deserved benefit, although at this end of the scale it’s typically called a voucher – probably more to disassociate it from its “cheaper” cousin. 

Whilst many of us may shy away from using a 20p off coupon, we wouldn’t think twice about a coupon which gave us a perceived exclusive benefit.

As an example, I was travelling on a flight recently and purchased priority boarding as part of my car park booking - a benefit which essentially allowed me to whisk through security and customs and something which many frequent flyer programmes offer as a feature. 

When I arrived, people were standing in a very long queue, which was even snaking down the entry stairs, and yet I had a “coupon” which allowed me to ride up the escalator and go through a dedicated channel with no hold-ups.  The cost of this privilege - £3 – the benefit (to quote a popular card brand) – priceless.

There is a very fine line between an unmerited discount and deserved benefit and it’s all in the positioning – how it is “sold” to the consumer and the reason for achieving it.

Clipping a coupon from a magazine for buy 1 get 1 free is obviously a mass campaign and smacks of penny pinching or smart consumer depending on who you talk to.  However, earning benefits based on purchase behaviour, perceived position or who you know turns it into a deserved privilege.

Another advantage of focusing on a benefit rather than a discount is that it tends to attract the more affluent consumer who, whilst not accounting necessarily for a larger share of the footfall or penetration will typically account for a larger share of the revenues – they will be loyal rather than shopping around based on who has the special offer.

In promotions I’ve worked on with FMCG brands where the campaign focuses on delivering a benefit, not a discount, there is a definite skew in participation and redemption to more affluent groups. 

Whilst less affluent groups tend to show initial interest, it is the more affluent who follow through to redemption.  However, providing a deserved benefit can be harder within an acquisition campaign than a retention one.

It is obviously hard to position something as a deserved benefit when quite obviously it is delivered via a non-discriminating channel such as a door drop or magazine coupon - however there are brands that have achieved this. 

Threshers famously managed to reposition a discount coupon to a deserved benefit by simply using viral elements so people thought they had access to a benefit that wasn’t intended for them. 

GHD created a programme called Blessed which was positioned more as a members only club than a mass loyalty programme.

Closer to home, I’m currently working with a hotel group which has created a programme which uses advocacy to drive through acquisition.  It’s positioning of secrecy which bestows privilege to those invited, allows them to offload inventory at discounted rates, without ever appearing to be discounting their brands.

It’s not the discount itself that is bad, it is how the discount is positioned and the perception as to why it has been granted that is key.

For them, the whole proposition is one of deserved benefit rather than cheap discount and they get to know their customers and potential customers at the same time.  (I’d love to tell you who they are and how you get access, but I'm sworn to secrecy – unless you’re a friend of course…)

Ironically, despite the negative image coupons have, usage has increased in the last year or so as people look to reign in their spending – however this is a false positive for brands.  These consumers are buying simply on price and won’t stick around for long or at all after the coupon has been used.

Better to make people want your brand, rather than paying people to take your brand - coupons can be used to do both, it just depends on how you position them.

Whilst the original definition of a coupon referred to the division of the physical paper, used correctly they can be used to divide good customers from bad – now that's got to be a challenge worth conquering.

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