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Natural Foods Merchandiser

Beyond scissors...the next generation of coupons

Coupon users spend an average of 24 percent more than customers who don't use coupons, according to 2007 research led by Kenneth Herbst, a Wake Forest University marketing professor, and retail consultant Harold Lloyd. That's because a discount on one product makes consumers feel OK about paying full price on others. Coupons also provide retailers and manufacturers insight into who their shoppers are and what compels them to visit their store.

"If I lower the risk for you as a consumer, I'm allowing you to stretch your budget," says Matthew Tilley, a spokesman for Winston-Salem, N.C.-based Inmar, which represents both retailers and manufacturers in clearing coupons. As a result, he says, "The person feels more comfortable with purchases that are higher priced. You give them the opportunity to buy more."

About 50 percent of consumers have used a coupon in the last year, according to Inmar. Most consumers use them to save money. The rest feel a coupon offers enough of an incentive to sample a new product.

Granted, most of the research on coupon use is broad-based. And the naturals shopper skews toward higher education, higher incomes and interest in health and the environment. But as more mainstream consumers find reasons to shop at natural products stores, and more natural products shoppers pick up organics at conventional supermarkets, chances are at least some of your customers are using coupons in other stores.

Target your coupons
There are retailer coupons and coupons generated by distributors and manufacturers. Coupons in print and online. Coupons available to consumers via direct mail, newspaper inserts, fliers, your checkout line, your website and through e-mail. So where do you start?

First, decide what you're after. Coupons are one of a wide range of marketing options, including product sampling, shopper loyalty programs, customer service and community outreach. Consider the following three questions to determine your needs:

Did you just open a new store and want to spread the word?
Run an advertisement that's also a coupon in the local newspaper.

Do you want to encourage infrequent regulars to shop more often? E-mail them a coupon they need to use within a few weeks. Herbst suggests retailers ask customers for their names and e-mail addresses, then send them weekly e-mails featuring a specific product, with a coupon for that product. It's a low-cost way for the retailer to connect with customers—some of whom may reply with questions about the product—and drive traffic into the store.

Are some customers finding it hard to pay your prices?
"If retailers are hearing price point is a concern and they feel they're losing competitive value to stores nearby, they may want to look at how they can bring value," says Tripp Hughes, director of category management for LaFarge, Wisc.-based Organic Valley Family of Farms, which distributes a variety of coupons targeted at different shopper segments. Coupons are one such value-added vehicle, he says. "Manufacturers are out there offering lots of (coupon) programs."

The Organic Valley strategy
Organic Valley distributes coupons for its products on its website and via other online programs, as well as through more traditional print channels including direct mail. Each type of coupon is directed at a specific segment of its consumers. "There are certain segments that are much more interested in coupons than they were a year ago," Hughes adds, though he believes that has less to do with hard times and more with the ever-increasing use of the Internet. "Consumers are becoming savvier. My mother told me the other day she downloaded an online coupon. I almost fell off my chair."

Hughes didn't share much detail about what types of coupons are directed at which type of consumer—that's a trade secret. But he noted some coupons, like those Organic Valley advertises online through Living Naturally's Health E Savers program, are aimed more at generating brand awareness than anything else. "It's a low-cost way to reach consumers," he says.

The Health E Savers strategy
Sarasota, Fla.-based Living Naturally, which specializes in providing technology and marketing support to independent natural foods stores, offers Health E Savers coupons in concert with Eating Well magazine. (There are several others doing online couponing for the naturals industry, including marketing and market-research firm Mambo Sprouts.) About 450 retailers use the Health E Savers program. On their websites, shoppers see a Health E Savers box that links to about 10 coupons. A few recent examples included $2 off Bach Rescue Remedy, $1 off a Frontier spice and $1 off Bossa Nova Superfruit Juice.

About 50 percent of consumers have used a coupon in the last year.

The Harvest Market strategy
Retailers NFM talked to have mixed opinions about coupons.

"Independent health food stores have for the most part not gotten hit by the downturn in the marketplace," says Matt Redd, vice president of e-media for Living Naturally. "They're just starting to see it a little bit. I think [later this year] coupons are going to be important."

At Harvest Market Natural Foods store in Hockessin, Del., coupons are a vehicle for learning about who the customers are and what they like. "It's instant feedback," says Grocery Manager Leslie Beckett. "Some of our clients are not the least bit concerned about cost, but I think for the most part people respond positively to coupons, especially when they're attractive and easy to use."

Harvest Market has used a variety of coupons to bring shoppers in, some for $5 worth of produce, $5 off a purchase of $25 and money off specific items. The retailer saw an uptick in business after sending coupons as a newspaper insert, which informed readers of the store's new location. And for years, Harvest Market had success using UNFI's customized marketing program to distribute coupons to customers.

"Based on that experience," says Beckett, "when we built our website—finally—we thought, how about if we use a coupon page, changing every month, to drive traffic to the website?" The coupon page also includes articles, events information and more about what the store offers, like special ordering.

Harvest Market's website and online coupons—mostly on specific products—were launched several months ago, and so far the response has been good, says Beckett, adding, "We were entirely satisfied with [the UNFI] program. But we're looking for the most impact with the least expense, just like everybody else."

To let current customers know about the website, Harvest Market printed new business cards and refrigerator magnets and posted signs at cash registers. Beckett says the store is also working with vendors so that a search for a particular brand of product links to Harvest Market's website.

The Good Earth strategy
At Good Earth Natural Foods in Fairfax, Calif., coupons are low priority. "They've come along and we've tolerated them," says co-owner Mark Squire. He questions their value, expecting that only a certain segment of the store's customers would use more coupons if the store distributed more of them. "You end up giving too big a discount to people who are really looking for discounts. People come to expect it," he says. "I've come more from the place of let's give good prices to people. Let's give specials to people at the point of purchase."

However, Good Earth does offer coupons on its website, via Living Naturally's Health E Savers program. "More [of those coupons] are coming in," Squire says, but he doesn't think the economy is a significant driver. "I suspect the use of those coupons roughly matches the use of our website, which is more and more all the time."

And as for the mind-numbing task of tabulating coupons or wrangling for reimbursement—which happens on occasion—Squire says those days are over. "We used to do it ourselves and it was a ridiculous chore to keep up with," he says, noting it's more cost-efficient to outsource that task than to do it in-house.

Kelly Pate Dwyer is a Denver-based freelance writer.

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