Is couponing an effective promotional strategy?

Coupons have been a promotional strategy for many years. Many manufacturers printed and also used the coupons with seting up their strategy. At the beginning of using coupons nearly all manufacturers attend to thise trend.But then they noticed that promotions encourage volatile demand and franchise building activities such as advertising lead to stable demand.
According to Procter & Gamble , wasting time had to decreased (Yarbrough ,1997 , p. 74) This makes for a costly investment in a strategy that provides little if any return for the manufacturer so that coupons were reduced or completely eliminated to cause high cost and low return.
During 1970 s the growth in coupon distribution hit the market. From 1970 to 1996 using of coupon increased as realised. According to Jones , the number of stabilized markets caused the number of still growing markets. Because many products reached maturation or saturation , manufacturers found it more difficult to grow market share as well as profit. When this situation continued , the US economy was stagnant and it was thought that using coupons caused suffering through 9 yerars of high inflation.As increasing the profit , the prices was shifted to above.Coupons and other sales tactics accelerate the sales in the short term. In 1990 when a brand is promoted , the consumer ‘s evaulation of that brand is lowered.Beause the consumers were tired of purchasing qualities in promotion.They would like to buy qualities which are inherit of the brand. According to searching , in the long term promotions have a negative effect on brand equity and the long-run profitiability of the brand. The ultimate goal of any brand marketer is to create the loyalty buyers. But the coupons do not strengthen the brand’s values or even provide brand diffirentiation except for price. It has been reported that only one in three people will use a coupon to try a new brand , but nine out of ten will use a coupon for a brand they already buy.In various product categories such as ready to eat cereals , disposable nappies , laundry detergents , hair care , oral hygiene products an deven fast food profits increase and the consumer’s evaulation and repurchase remains price driven not brand driven as the competitors prompt.After this, manufacturers looked for alternatife ways to promote products.
In 1996 C.W. Post decided to change the coupon strategy. According to this new strategy , Procter & Gamble announced that it would test eliminating coupons in three upstate New York markets and provide consumers with low prices everyday.
Procter & Gambler which is one of the most important coupon distributors publicized its organized strategy in 1992. The goal was to make promotions adn pricing more effective in meeting the needs of both consumers and the trade (Smith ,1997 ) The company has dropped its retail prices by 2 billion$ ,reduced the number of stock keeping units available and cut spending on established brands by 50 % (Smith, 1997)
In coming 1996 ,Procter & Gamble is used seting on strategy which is the elimination of coupons.The result was completely surprising however it was used in regions of living buyers. Many manufacturers followed Procter &Gamble strategy which is no coupon.According to this strategy, supermarket is reimbursed for the value of the coupon but the cost of doubling or tripling comes directly out of the supermarket’s profit. Consumers in the region protest this strategy. The test not only angered consumers but also public official joined in. After big struggle , the state of New York had reached an aggrement with ten grocery product manufacturers and brokers , including Procter & Gamble and the Wegmans Food Markets supermarket chain , to a 4,2 $ million settlement of the case.Procter & Gamble made a statement that they had only wanted to see if there were more efficient ways of delivering value to all consumers other than with coupons. Linda Ulrey ,who is Procter &Gamble spokeswoman , said that during the test period consumers paid the same for Prodect & Gamble products without coupons as they did during the year before the test.
In conclusion, consumers love coupons. However they paid less for Procter & Gamble products during the test without coupons, consumer was upset to prefer to have lower prices to hassle with finding , clipping , sorting and redeeming coupons . (Anonymus ,1995 ) One trade journal reported that price promotions are the brand equivalent of heroin , easy to get into , but hard to get out of . (Ambler 1999) Researchers have tested this discount requirement of consumers and determined that the growth of discounts can have negative effect of brand’s profitability.In spite of discount , consumers required coupons offer.
Is couponing dead or alive? It is doubtful. In spite of Procter & Gamble’s strategy , coupons have been delivered throug the newspaper and free standing inserts. Retailers use shopper/loyalty programmes and manufacturers.Mills and RJR Nabisco use database programs in order to tap consumers.Every marketing decision needs to be one that will create or reinforce a loyal relationship with the consumer and which will continue to build brand values.These are the ways that will build profits in the long term.

Bilge OZANSOY
107604042
Journal of Marketing Communications 7-3-9 2001