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• Cognizant 20-20 InsightsHow to Take Advantage of the ExplosiveGrowth in Digital Coupons   Executive Summary             ...
332 billion, the largest single-year distribution    In the traditional coupon redemption process,              quantity e...
be gained about their wants, needs, desires andpatterns. That information can lead to targetedpromotions, employee-suggest...
analysis of multiple or complementary deals.         •    Reporting & Analytics: Cognizant ACR     Furthermore, centralize...
About the AuthorsKarl Swensen is an Assistant Vice President with Cognizant Business Consulting and leads the storeoperati...
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How to Take Advantage of the Explosive Growth in Digital Coupons


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With soaring use of digital coupons, retailers need to adopt an automated coupon redemption capability, with coupon aggregation, validation, redemption and analytics functionalities.

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How to Take Advantage of the Explosive Growth in Digital Coupons

  1. 1. • Cognizant 20-20 InsightsHow to Take Advantage of the ExplosiveGrowth in Digital Coupons Executive Summary Our solution is discussed in greater detail at the conclusion of this paper. Smartphone adoption is rapidly changing the retail shopping experience. Shoppers armed Digital Coupons Soar with smartphones want instant access to pricing information and special offers via their devices. Paperless digital coupons are taking off. In 2010, A growing part of this mega-trend is the use of their use in the United States grew by 41% digital coupons — driven by group-buying, accep- compared with 2009, according to tance among the young (and affluent), and ease of Inc., the largest digital coupon network on the redemption. Recessionary economics plays a role Internet.1 The savings issued were worth approxi- but the use of electronic coupons appears to be mately $1.2 billion. here to stay, regardless of the economic climate. The online saving industry is growing rapidly, Retailers that don’t develop a digital-coupon strat- and the digital coupons space is no exception, egy are risking lost business. Yet there’s confu- according to Steven Boal, CEO of sion in the marketplace about emerging hardware He says that not only are more consumers making and software solutions. Most major retailers plan digital coupons part of their shopping routine, investments in multi-channel strategies, including but they are accessing them across the entire digital coupons. But the vast majority have yet to digital domain — including the Web, in social commit. Most are unsure of the best solution and media, with consumer electronics, via their mobile concerned about the impact on their business. phones, etc.2 Given these trends, we have created an automat- The key driver is smartphone adoption. By the ed coupon redemption solution that is delivered end of 2011, says market research firm Nielsen, as a cloud-enabled service that requires minimal there will be more smartphones in the U.S. market upfront investment. than feature phones.3 Automated Coupon Redemption (ACR) links Ongoing recession and high unemployment retailers and manufacturers with customers are still driving coupon use. In a mid-2010 through coupon aggregation, validation, redemp- survey conducted by Harris Interactive, 41% tion, and analytics. It is part of our Cognizant of adults surveyed were spending more time IntelliStore™ solution to improve the future of shopping for the best deals and 40% reported in-store retail but can be deployed as a stand- increased use of coupons.4 Coupons in general alone solution. grew during 2010 by 6.8% to approximately cognizant 20-20 insights | august 2011
  2. 2. 332 billion, the largest single-year distribution In the traditional coupon redemption process, quantity ever recorded in the U.S.5 customers have to watch for deals, remember to carry the coupon, check if it’s accepted in the But the use of coupons is no longer restricted to store, make sure it hasn’t expired, and adhere to lower income groups. In fact, the average user all other conditions in the fine print when arriving of printed digital coupons at POS. Two questions has a householdhigher than $105,000, 26% income of Retailers must jump through just as many hoops: must always be the U.S. average. And 36% ensuring employees can identify fraudulent asked: Does the of those who use digital coupons, sending accepted coupons (or data) coupon improve the degree.6 Ithave a college coupons appears as if to manufacturers, and then completing and tracking settlement. Two questions must alwaysshopping experience conspicuous consumption is be asked: Does the coupon improve the shopping (or complicate it)? being replaced to some experience (or complicate it)? Will it improve Will it improve extent in wisely mindset that by a shop the United States customer loyalty? customer loyalty? is working well for purveyors Paperless digital coupons have none of the of digital coupons. downsides and many upsides. Several less-reactionary trends are also at play. • As long as the shopper has a smartphone, there are no inconvenient usage barriers. Young people with mobile lifestyles have embraced digital coupons. According to Coupon • Digital coupons are instantly redeemable. Sherpa, a popular coupon-related website, what • They can be provided on short notice to drive began slowly with printable online coupons has sales. rapidly gained momentum in 2011 and become a • Retailers or manufacturers can distribute multi-platform phenomenon, mainly due to the them to a wide audience or just top customers popularity of smartphone-compatible coupons. to reward loyalty. A younger, hipper crowd is using barcodes, in-store access, and social media rewards.7 • Manual handling is a thing of the past. Also, manufacturers avoid the considerable For the first time in 2010, according to Coupons. expenses of printing, advertising and distribu- com, digital coupon growth outpaced newspaper tion. coupon growth. The ratio was a lopsided 6 to 1.2.8 Why Get In the Game Now Digital Coupons: Convenient & Inevitable For retailers, digital coupons are both a defensive tactic and a competitive advantage. Digital coupons are likely to continue their rapid growth for two other seminal reasons: Many consumers these days are time-pressed and online-savvy — which means they have high They are part of the updraft in cross-channel mar- expectations about speed and convenience of keting, especially mobile. Between the growing service. Couple that with a low tolerance for acceptance of smartphones and consumers’ long checkout lines and store associates who need for instant access to information, mobile is often don’t have the information they need (frus- becoming a major channel for retailers, according trations often cited in shopper studies).11 It all to Boston Retail Partners.9 The digital marketing adds up to the need for retailers to provide the firm Unica estimates that over 40% of European speediest, most convenient, most informative and American marketers (based on the compa- service technology can provide. That includes ny’s 2010 survey) already use mobile marketing, streamlined POS, which opens the door to digital mostly through mobile apps, mobile sites and coupons. mobile messaging. And most marketers intend to get onboard eventually.10 Of course, networked POS has many other benefits. Of equal importance, digital coupons are extraor- dinarily convenient for both shoppers and Paperless digital coupons are part of a wider retailers. connection to shoppers and all the knowledge to cognizant 20-20 insights 2
  3. 3. be gained about their wants, needs, desires andpatterns. That information can lead to targetedpromotions, employee-suggested selling, and Faster and More Convenient, Pleaseup-selling opportunities. ( does this Our recently completed 2011 Customerbrilliantly.) Shopping Survey sought to understand how shopper preferences have changed inThe other obvious reason to enter into the the last year. Conducted in April of 2011 andnetworked in-store experience now is that others involving more than 2,400 shoppers acrossare already doing it and customers expect it. As the U.S. and Canada, the survey confirmedBoston Retail Partners pointed out in its 2011 that speed and convenience are prioritiesAnnual POS Benchmarking Survey, there are for time-pressed shoppers. Regardingmany smartphone applications (apps) not coupons, these three facts rose to the topassociated with a specific retailer that are helping of the survey:customers become more price-savvy. Theseapps are forcing all retailers to make decisions • 52% of surveyed shoppers identifiedon how to present their pricing strategies and mail-in manufacturer rebate couponsprice-matching policies across channels. And as the second-most irritating part ofunpleasant as the prospect may be, customers are the checkout process (after uninformedalready scanning the barcode on items in retail sales associates).stores. The app they use is searching for the bestdeal locally and online, and some customers are • Automatic coupon redemption was the second-most-popular store serviceleaving the store to make the purchase elsewhere. offering (after free home delivery).That’s what you call a retailer’s nightmare. • Top choice for new mobile apps fromAutomated Coupon Redemption: retailers: paperless digital coupons.High-Returns, Low-RiskOur Automated Coupon Redemption (ACR)solution enables retailers to address many of theaforementioned challenges. It provides a low-riskway to embrace paperless digital coupons because • Customer requires no upfront investment in hardware orsoftware. It simplifies the coupon process for • Information “pushed” to customers based on preferences.customers and retailers with a single real-timePOS connection to a central database. • Special offers made in real-time.Reward customers on the spot. With Cognizant • Aggregation and redemption of digital coupons.IntelliStore™ ACR, coupons can be applied auto-matically to the purchases of selected customers • Greatly expedited “dynamic checkout.”— driving added sales or reinforcing customer Our ACR service links manufacturers, retailers,loyalty. and customers through work flows and servicePurchased as a service with minimal upfront level agreements (SLAs).cost, Cognizant IntelliStore™ ACR aggregates Four key components include:all coupons in one database. Business rulesare tracked and applied for every SKU. Loyalcustomers can be rewarded at checkout via • Coupon Aggregation: A coupon database built in partnership with manufacturers anddigital wallet. Coupon handling costs are drasti- media partners stores both manufacturer andcally reduced. Front-end and back-end fraud are retailer coupons. Retailers are also able tovirtually eliminated. define their own coupons/offers online.ACR is part of Cognizant IntelliStore,™ a • Coupon Validation: ACR maintains a currentnetworked “intelligent store” concept that copy of every client’s master data (SKU/leverages customers’ mobile devices so retailers category/manufacturer, etc.) to instantlycan integrate online and mobile channels with tie manufacturer coupons to retailer shopping. In a networked store, the Customers are always assured of gettingshopping experience is enhanced through: the best deal through automatic sorting and cognizant 20-20 insights 3
  4. 4. analysis of multiple or complementary deals. • Reporting & Analytics: Cognizant ACR Furthermore, centralized validation of paper clients have the added benefit of a custom- coupons greatly reduces exposure to “mis- ized dashboard showing various parameters redeemed” coupons. such as coupon analysis by store, coupon cat- egory analysis, coupons that are active, most Our solution (via our partnership with ICN) popular coupons, etc. These analytics also help also validates and redeems paper coupons — manufacturers analyze the effectiveness of virtually eliminating fraud, simplifying recon- coupon campaigns. ciliation and reducing the amount of time and money tied up before a retailer is reimbursed. With Cognizant IntelliStore™ ACR, the right While use of digital coupons is growing, paper coupons are waiting for the right customer at coupons will still be the dominant channel, co- checkout. The benefits are many: existing with digital coupons for the foresee- able future. Our ACR solution helps retailers • Enrich customer shopping experience. manage both with equal convenience at POS. • Increase customer loyalty. • Improve labor efficiency.• Coupon Redemption: At checkout, a retailer’s • Reduce coupon fraud. POS connects automatically to the Cognizant IntelliStore™ ACR database to find valid • Settle manufacturer/retailer accounts faster. coupons, which are applied instantly for • Understand customer coupon patterns. identified customer segments. The customer is able to view the coupon details and savings. Learn More The details are recorded on the sales receipt. To learn more about the Cognizant IntelliStore™ Redeemed coupon data is shared with man- Automated Coupon Redemption solution and ufacturers and applied to the settlement other elements of Cognizant IntelliStore,™ please process. contact “Digital Coupons Trends Report for 2010,” Inc.2 “Digital Coupons Represent Fastest Growing Coupon Segment in 2010,” 2011 press release3 nielsenwire blog, March, 26, 20104, from a press release summarizing findings in a Harris Interactive survey conducted for PerkStreet Financial, July 20105 “National Coupon Facts,” 2010, NCH Marketing Services, Inc.6 Simmons Market Research, Summer 2010, quoted in “Digital Coupons Trends Report for 2010,’ Coupons.com7 Coupon Sherpa, website posting, December 27, 20108 Kantar Media, Press Release, January 5, 20119 “Mobilizing POS,” 12th Annual POS Benchmarking Survey, Boston Retail Partners, January 201110 “The State of Marketing 2011: Unica’s Annual Survey of Marketing”11 “Taking the Store to the Shopper,” RIS News/Cognizant 2011 Shopper Experience Study, June 2011 cognizant 20-20 insights 4
  5. 5. About the AuthorsKarl Swensen is an Assistant Vice President with Cognizant Business Consulting and leads the storeoperations and supply chain practice. He has over 25 years experience helping companies implementchange and growth strategies at both retailers and consumer product companies globally froma strategic, business process, technology and human resources standpoint. His work experienceincludes leadership positions at Oracle, Home Depot, and Kurt Salmon Associates and has a Bachelor’sof Industrial Engineering degree from the Georgia Institute of Technology. Karl can be reached Russo is a Senior Director with Cognizant Business Consulting and leads the product managementorganization focused on innovative software solutions for the retail industry. He has 25-plus years ofexperience in retail information technology centered on store operations solutions and the headquar-ters systems that support them, including POS, inventory, replenishment, labor, CRM, merchandising,business intelligence and analytics. John’s work experience includes leadership positions at Infor GlobalSolutions, RedPrairie, Radiant Systems and NCR. He has a Bachelor’s degree in Computer Science fromPurdue University. John can be reached at Menon is a Senior Manager within Cognizant Business Consulting and leads the StoreOperations practice and product management functions for the Retail Business Unit from India. Sree hasover 15 years of experience in the retail and distribution businesses focused on product managementand consulting functions across in-store applications and processes. Previously, he held positionswith Satyam and Retailor Technologies and with retailers in India. Sree has a Post Graduate degreein Business Administration from Pondicherry University, India, and is an alumnus of the Institute ofChartered Financial Analysts, India. He can be reached at CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered inTeaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industryand business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50delivery centers worldwide and approximately 118,000 employees as of June 30, 2011, Cognizant is a member of theNASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing andfastest growing companies in the world. Visit us online at or follow us on Twitter: Cognizant. World Headquarters European Headquarters India Operations Headquarters 500 Frank W. Burr Blvd. Haymarket House #5/535, Old Mahabalipuram Road Teaneck, NJ 07666 USA 28-29 Haymarket Okkiyam Pettai, Thoraipakkam Phone: +1 201 801 0233 London SW1Y 4SP UK Chennai, 600 096 India Fax: +1 201 801 0243 Phone: +44 (0) 20 7321 4888 Phone: +91 (0) 44 4209 6000 Toll Free: +1 888 937 3277 Fax: +44 (0) 20 7321 4890 Fax: +91 (0) 44 4209 6060 Email: Email: Email:© Copyright 2011, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein issubject to change without notice. All other trademarks mentioned herein are the property of their respective owners.