Editor’s note: Joannie Chen is senior media planner at media agency Kelly Scott Madison, Chicago. This article is an edited excerpt from Kelly Scott Madison’s 2017 issue of State of Media. 

In 1887, Coca-Cola distributed what is considered the very first coupon offer for “one free glass of Coke” to local pharmacies. In exchange for Coke syrup, the pharmacies provided the company with names and addresses of its customers who lived within the proximity of the store. The coupon offer was redeemable at any participating pharmacy that carried the product. For decades, this “discounted” marketing tactic has remained a key component of consumer’s lives. This was of course especially true during financially distressed periods, such as the Great Depression, which spawned other couponing opportunities such as the Valpak and free standing inserts to satisfy increasing demand.

For years, the primary strategy for executing couponing campaigns has been through the traditional distribution of these paper coupons. However, since the invention of the Internet, marketers have had to evolve and adapt their delivery methods to reflect new consumer preferences. While eMarketer claims paper coupons are still the primary format used in the U.S., digital and mobile coupons have experienced exponential growth in recent years. Now, with emerging technology, advertisers are continuing to find better ways of blending old and new methods of coupon advertising.

Digital coupons

According to eMarketer, the population of Internet users who have redeemed digital coupons has grown from 42 to 61 percent over the past 10 years. We now take it for granted that across all generations, consumers are digitally connected to a database with unlimited access to coupon offers through the simple click of a button. As a reactive media strategy, advertisers are retargeting audiences based on their search history and previous site visits. From a proactive standpoint, potential consumers are targeted through keywords and category-related search terms.

The Internet also opened a window for new coupon delivery via e-mail marketing, allowing brands to reach loyal customers who have opted in to this communication. The prospect of receiving discounts is clearly a powerful draw for engaging with brands in this manner, as GetData reports that deals and special offers are the second most common reason why people sign up for e-mail lists. These individuals also tend to have a higher potential for redeeming the advertised coupons. Multiple reports over the past few years claim that e-mail marketing converts consumers at a higher rate than either search or social, which is important to note for companies aiming to drive conversions and purchases over awareness and brand initiatives. Still, “inbox fatigue” and the cluttered space are both downsides that are necessary to consider. Brands should always be cognizant of the number of e-mails delivered to a customer. Instead of quantity, consumers crave quality messaging, with content and offers that are customized to their needs. Companies that achieve this goal through detailed list segmentation are bound to rise above the rest.

Mobile technology  

As smart phones took off in the 2000s, so did mobile coupons. Picking up the trend, many retail and fast food brands began creating their own mobile apps to connect with loyal consumers. In addition, third-party apps that aggregate coupons across the Internet from multiple brands sprung up as a way for discount seekers to easily locate the best deals. Ibotta, Checkout 51, SavingStar and RetailMeNot are just a few of the top players in the discounted and rebate apps space. These apps, in addition to first-party options, have steadily driven in-store shopper engagement over the past few years. According to the 2016 Brick-and-Mortar Consumer Study (BMCS), conducted by Kelly Scott Madison and ORC International, 33 percent of shoppers indicated that they planned to use their mobile devices while in stores to find and redeem promotions or coupons. This represented the most popular mobile activity for in-store shoppers, followed by the use of price comparison apps and pre-purchase social shares, both at 24 percent.

Beyond engagement once in a store, mobile coupons have also been an effective tactic to drive consumers into stores. Chipotle is just one example of a brand that utilized this approach to its fullest potential. After its norovirus crisis in 2015, the chain focused on getting their customers back through a “free burrito” coupon campaign offer that was delivered via both physical and mobile coupons. About 5.3 million people downloaded the coupon through their mobile devices, and 2.5 million of those offers were redeemed, according to Business Insider. Considering this 47 percent redemption rate, the brand saw the campaign as a clear success.

While mobile couponing may successfully drive customers into stores, brands do need to ensure the redemption process is streamlined once shoppers arrive at any given store. For example, ensuring that all store locations have the ability to scan the mobile barcode is essential, since a physical copy is not collected at check out. Keeping that in mind, brands with franchised locations may have difficulty executing a mobile-only couponing campaign if point-of-sales systems differ from store to store.

When exploring the evolution of these capabilities, it’s interesting to consider a time when redeeming mobile coupons wasn’t always as easy as opening an app. In the early 2000s these vouchers had to be redeemed through manual input at cash registers. As technology continued to evolve and improve, redemption methods became easier. According to USA Today, in 2010 Target became the first national chain to use scanner-based technology for mobile coupons. Customers registered to receive texted weekly coupon notifications. The coupons were then opened through the mobile phone’s Web browser, and redeemed with a barcode scanned at checkout. This advancement not only made the process faster, but also created an opportunity for brands to gather detailed information about the consumers who purchased their products. Each individual could now be assigned a different barcode that would identify them through the entire redemption process.

Taking things even further, RetailMeNot launched geofencing technology on their mobile app in 2012. Marketers can now target their potential consumer based on a specific location and serve coupons in real-time. These changes all brought about the elevated mobile couponing capabilities brands and marketers enjoy today. Besides being able to dynamically track and opportunistically deliver more relevant deals, understanding when a consumer obtained a coupon, where they redeemed the offer, the specific time that they made a purchase and how long it took them to redeem are now all possible through the power of mobile coupons.

Strategies for couponing 

Since physical coupons still maintain dominance in this space, marketers must challenge themselves to blend more traditional, yet effective, strategies for couponing with the resources and information gathered from new technologies to maximize effectiveness. Just last year, media vendor Valassis introduced both a new targeting capability as well as an audible offer to its advertisers, called Apio Targeting. Instead of implementing freestanding inserts and shared mail campaigns through a basic algorithm of predetermined parameters based on miles and radius, Apio combines offline data and online data from mobile devices to determine the best zones for physical coupon delivery. Demographics, lifestyle past purchases, device location and Web or app behaviors cultivated from mobile phone data is used to build specific audience profiles, all to find potential consumers who are most likely to engage.

On the content side of things, Valassis Audible now offers a new beacon technology that allows advertisers to transform broadcast TV, radio and online video spots into audio-triggered coupon distribution. A watermark is embedded into the spots and the mobile devices will pick up this watermark when the spot is heard, allowing users to download the coupons instantaneously into their mobile wallets. Valassis explains that this new technology allows advertisers to “leverage their existing broadcast media to trigger second-screen experiences on their mobile device.”

However, there are a few current and anticipated drawbacks. Valassis Audible can only be implemented through two mobile methods. The first is via the advertiser’s existing mobile application, where a software development kit must be incorporated on the back end in order for the application to pick up the watermark. The second would be through the Mobii Couponing App, which currently only has 152,000 downloads. Although the app is growing, this small footprint allows for limited reach compared to the traditional print drop methods, or even when matching it up against the other big coupon apps available.

Anticipated development 

As the Internet and mobile phones sparked consumer interest in receiving digital ads, there will undoubtedly be continued growth as even newer technological advancements take place. The next greatly anticipated development is the age of smart cars. By 2020, research service BI Intelligence estimates “75 percent of cars will be equipped with Internet connectivity.” Cars will have the ability to stream music and receive real-time traffic and weather reports. This also means that, based on automobile location, marketers can reach potential customers while they are on the road. It is still unclear how these coupon offers might be delivered to vehicles, and what the user experience would be. However, this new technology will take mobile couponing to a new level, since there has been an increased demand for more “on-the-go” customized experiences.

Still, we are far from smart cars being the norm. Automobiles are considered investments, and not a leisure good like mobile phones. Given the drastic difference in pricing and longevity of the product, it will take a longer period of time before advertisers can expect to accumulate the necessary reach. For coupon advertising to make an impact, the percentage of smart car owners must obviously be at a high volume to deliver an efficient plan worth the media cost.

The evolution of couponing, paired with new world technology, has certainly opened the door to a surplus of information for advertisers. Useful data can be taken and applied to media strategies for a more advanced approach to discount marketing. The granularity of this information has given marketers the opportunity to further home in on target audiences, and build a more personalized couponing experience for a brand’s consumers. This not only increases the odds of redemption, but also improves customer satisfaction. And if that wasn’t enough proof of the tactic’s viability, the 2016 BMCS even found that e-mail ads and coupons are one of the top drivers for in-store visits across all age groups, second only to store circular ads. Pair that with the fact that Millennials bucked the older generation’s top choice to list e-mail ads and coupons as their number one driver for in-store shopping (at 42 percent) and it becomes clear that this century-old concept has a long and useful life for brands looking to drive traffic and conversions.