December 26, 2000, 9:55 AM

Once just a fad, online coupons are catching on big with retailers and shoppers

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Another fan of online coupons is Jeffrey Steinberg, vice president of marketing at MotherNature.com, a health products and services e-commerce site. “These sites perform very well, in part because of self-selection,” Steinberg agreeing with Levin that shoppers who request promotions are more likely to use them.

The one uncertainty Steinberg sees is whether the couponing sites’ retention level will continue to remain as high as it has been. “Will people who ask for the discounts shop regularly or just take the deal and run? That’s a tough behavior to build a business around,” he says, but notes that the early indication of customer retention looks good.

Another kink to smooth out is that many sites have problems with customers re-using the same coupon. CoolSavings sidesteps this obstacle with a patented technology that prevents greedy consumers from re-clipping. Once a registered shopper at CoolSavings redeems a particular coupon, it disappears. “We are the only site that can keep consumers from using coupons over and over again,” Levin says proudly.

Certainly, online coupons are catching on with shoppers for an obvious reason: everyone likes to save money. But the Internet puts a new spin on the subject in terms of customer profile. The old stereotype-an economically disadvantaged person-doesn’t reflect reality, especially in the online world. “There are a lot of value-focused people who use the Internet. These are people who want to know they’re getting a fair price,” McQuivey says.

A demographic dream

Actually, the average online coupon user is a merchant’s demographic dream. According to CoolSavings, the average users are females about 30 years old. These shoppers-and coupon clickers-also tend to be homeowners with an average yearly salary of $51,000.

The Internet offers advertisers an alternative-and effective-way to reach these folks. “People age 25-35 are not reading newspapers,” Levin points out, which means traditional coupons aren’t necessarily tapping into this demographic group.

For shoppers, the Internet’s accessibility translates into instant gratification. CoolSavings features a “Notify Me” button that allows shoppers to specify what bargains interest them. For example, Martha Stewart sheets may not be marked down today at Kmart, but CoolSavings will let you know when they are.

As coupon sites pull in larger numbers, more merchants are certain to join in. Right now CoolSavings boasts more than 60 national retailers, including J.C. Penney Inc., Chuck E. Cheese Restaurants, Kmart Corp., eToys Inc. and United Airlines. DirectCoupons features savings from L’eggs Hosiery, Meineke Discount Mufflers, Eastman Kodak Co., Wolf Camera and LensCrafters. In many cases, merchants can-and do-advertise with more than one coupon site.

In fact, because many online couponing companies are seeing such big increases in traffic, they’re diversifying their e-commerce efforts. DirectCoupons, listed by NPD Online Research as the fifth largest coupon site on the Web, provides subscribers with a weekly newsletter delivered to their e-mail address. It also features a centralized location to search for coupons at coupondirectory.com. Jason Wolfe, DirectCoupon’s CEO, calls his company “the Yahoo of coupons sites.” In addition, he offers the newly launched MyCoupons.com, an organizing service that sorts coupons and then sends them to pre-determined e-mail addresses.

Wolfe acknowledges that online savings sites are blazing a new trail-one that calls for rethinking standard ways of doing business. For instance, Wolfe points out that his company cooperates with competitors. “We don’t require users to stay within our space, we provide information,” he says-even if it means information on other coupon sites.

Nearly painless

Online couponing programs certainly aren’t cheap. CoolSavings charges an average of $15,000 to $20,000 per month for a national retailer to place up to five promotions. But most merchants agree that virtual coupons pay off.

Chuck E. Cheese’s Rice says the online coupons are catching on with restaurant customers. And at MotherNature.com, Steinberg says that he, too, is very pleased: “We’re definitely seeing results.”

McQuivey at Forrester Research believes that virtual coupons are definitely a marketing tool more online retailers should use. “There’s very little trouble putting coupons online. It’s nearly painless.”

He doesn’t see online couponing fading anytime soon. Some industry insiders are even predicting that online coupons will exceed the $6 billion offline coupon business. And McQuivey doesn’t rule that scenario out. “It’s a burgeoning industry,” he says.

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