Coupons and Social Media: A Risk?

Couponing. It’s become rather popular again, although some evidence suggests it’s a waste of marketing dollars. Now with the common use of social media by consumers, there may be an added risk for retailers, especially when a campaign isn’t well thought out. We write this post for CPG companies as we’ve now done a couple of risk analysis projects for consumer product manufacturers in the U.S. that have lost revenues as a result of social media use in coupon promotion.

The Dangerous Viral Effect of Couponing in Social Media
In two cases, the client indicated they didn’t think social media was involved, yet we showed in all cases social media were key. What happens is that most print flyers also get uploaded either to an online flyer site or by the retailer. There are a large number of bloggers who hunt for coupons (we identified over 1,800 in the US and 400 in Canada alone) then assemble the information into a coherent focus on a product or brand. In the US (not in Canada) a consumer can combine coupons on a product so instead of just 20% off they can end up getting 80% or sometimes actually end up getting money back! The manufacturer makes up the difference on the coupons to the retailer. The retailer therefore doesn’t really care what happens; they aren’t taking the hit.

Consumers watch the flyer sites and active couponers are well connected with the various bloggers that bring them together. When a really good deal comes along, especially when they can combine coupon offers, it spreads quite quickly. We found that a combined offer will spread 35% faster than a single over 40% discount coupon when the deal exceeds 45% of the value of the product. The deal is shared across Twitter, Facebook, Blog Rings, Pinterest and a number of other social media services.

The Risks of Couponing Via Social Media
Some, like the Retail Doctor Bob Phipps, show why couponing isn’t a very effective marketing strategy to begin with. When combined with the impact of social media, especially on combination deals, the risks can have a major impact on a retailers bottom line. In addition, no loyalty to the product is built up.

Unintended Retailers & Liability Risks: What we are also starting to see is that people will go heavy on buying products where they get over 60% off. They then “resell” these products on eBay or other auction sites at 40% to 50% off the listed retail, the consumer thinks they’re getting a deal (because they didn’t coupon) and the couponer makes some good margin – and you as the retailer get nothing. Fraud? Could be. A couponer may also sell the products via Craigs List or at local fleamarkets. Yes, you might be reaching new markets, but no loyalty is built and with some products there could be liabilities.

Conclusion
Couponing today presents some serious risks to a business, from hurting brand loyalty to third party liabilities and to reducing the consumer value perception. Social Media usage makes these dangers compounded. Is couponing really worth it?