April 2, 2004, 12:00 AM

Double Duty

(Page 2 of 3)

Getting market info

That raises the subject of the purpose of couponing in either environment. Because promotions give away margin, Overby adds, marketers sometimes paint coupons as a necessary evil, and manufacturers have had something of a love-hate relationship with coupons as a result. But online couponing can deliver something more than sales: customer data.

“Where Internet couponing is effective is in the measurement capabilities it supplies,” Overby says. “In the offline environment you know basically what your impressions were and what your redemption rate is. But you have no way to test if you would have gotten a better redemption rate by increasing the offer by 25 cents. The cycle is longer to plan, and you don’t have that direct information on a household basis on who used the coupons.”

While grocery coupons are its biggest category, about 22% of CoolSavings’ coupons are redeemed at mass merchandise stores such as Wal-Mart, Kmart and Target, an increase of four percentage points from last year. Both supermarkets and mass merchandisers are interested not only in selling to but in learning more about the consumers that now constitute a sizeable chunk of CoolSavings’ database. According to Moog, “Nearly 80% of our customers are female, and we have a very strong bias toward the woman who has children, is a homeowner, has a pet and a household income in the $50,000 to $70,000 range. Nearly everything we do is with that profile in mind.”

While that means CoolSavings won’t be looking to the likes of Neiman-Marcus for growth, there’s plenty of potential upside among marketers looking to target consumers within the CoolSavings profile. By Moog’s own estimation, the biggest challenge in realizing that potential is persuading advertisers to shift money away from traditional media such as direct mail, TV, print and radio to the Internet.

To make that case to prospects, CoolSavings points out that in contrast to those other media and even to other online advertising, Internet promotion distribution can quickly demonstrate sell-through in the brick-and-mortar channel as well as online. “It’s unusual for an Internet company to be able to show sell-through in different channels. What makes it possible is that the coupon is a trackable mechanism,” Moog says.

Leveraging the database

Moog also emphasizes CoolSavings’ ability to target different offers to different types of customers, arguing that offline coupon distribution to a mass audience is less efficient. “You might be giving a valuable customer who already would have shopped at your store the wrong kind of discount. And you might be giving a shopper who spends a lot, but just not at your store, too low a value. So to the extent that you can vary the value of the offer based on what you know about the consumer, you can not only make the campaign more effective, but more strategic,” he says.

To give retailers, CPG manufacturers and other marketers more reasons to shift promotional dollars online, CoolSavings finds more ways to leverage its customer database. On that broad set of services, it competes with other promotion services providers on a category-by-category basis. Coupons Inc., for example, is another major provider of Internet-delivered, printable coupons, but under a different model. Rather than providing marketers with access to a customer database like CoolSavings’, it licenses its technology to an online component of SmartSource, the offline distributor of grocery coupons, to compete directly with CoolSavings on its printable grocery coupon business. In other lines of business CoolSavings competes with providers of targeted sampling, lead generation, e-mail and even offline direct mail promotion services.

With coupons figuring large in its offering, CoolSavings has expanded beyond printed and Internet-printed coupon formats. With the recent acquisition of Targeted Marketing Services-a company it once sued for patent infringement under its former name of PlanetU.com and settled with in 2000-it acquired the ability to deliver paperless coupons at the point of sale in grocery stores, as well as the grocery retailer and CPG manufacturer relationships TMS had developed to support it. The first time a consumer using the technology selects an offer presented online, she’s asked to type in her grocery-store frequent shopper card number. If the grocer is participating in the program, the shopper is able to use the card at the store without printing or clipping any coupons to receive the discount automatically.

For the rest of its growth strategy, CoolSavings is working to advance its targeting and personalization technology to fine-tune offers to consumers. It’s launched a distribution and syndication network for its customers’ promotional offers that allows it to serve and track those offers not just on CoolSavings.com but also on partner sites. In a bid to build consumer loyalty to CoolSavings.com, it’s planning a cash back awards program that will record customers’ purchases both online and offline to allow them to build up a rewards account more quickly.

A hedge

With multiple services on offer or in development, CoolSavings has a hedge against what some see as a drawback to sites that do no more than aggregate coupon deals. “There are a couple of ways manufacturers and brands use online couponing and I would say the aggregate sites are not going to be the most effective in the long term,” says Overby. “They tend to attract people who are more discount minded. That is not always the type of consumer a company goes after. But if you take an Internet coupon and use it as a means to get people to register for your e-mail newsletter, for example, it’s the first step in a loyalty program. That becomes more attractive for the brand because then it’s not giving away margin just to get someone to buy once.”

The factor most critical to CoolSavings’s future is also one of the most basic: putting up more online offers to pull in more shoppers-and more customer data. Moog calls it “the single most important thing.

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