eCouponing Factory ‑ Advanced BPO Solution for optimized Couponing Marketing

eCouponing Factory – Advanced BPO Solution for optimized Couponing Marketing Author: Dr. Stefan Schlöhmer 1 Introduction Couponing Marketing is very popular to stimulate buying behavior of consumers. More and more people of all age groups use the internet for online shopping. Several studies show that many consumers participate in online couponing actions. Nevertheless, in Germany, the market for Couponing Marketing is dominated by small and medium- sized agencies offering paper- based Couponing Marketing. Especially big retailers, airlines and railway companies established advanced electronic loyalty concepts, while most of the medium - sized retailers and brand manufacturers still concentrate on paper coupon offerings. Couponing has a more advanced shape in several European countries like the UK where couponing concepts are usually based upon loyalty cards or online coupons. Is it possible to modernize paper- based Couponing Marketing by enhancing redemption rate, efficiency and customer friendliness based upon a scalable Business Process Outsourcing (BPO) concept? 2 Market Overview: Online Marketing in Europe and Germany Online and POS Marketing are growing fast in Europe: The market growth rate of POS Marketing in 2007 is approx. 10%, the growth rate of Online Marketing is approx. 33% between 2005 and 2008. Forrester Research is even more optimistic: According to a recent study, the market volume for Online Marketing in Europe will increase by approx. 500% within the next 5 years. For Germany the BVDW estimated the Online Marketing volume in 2007 at approx. 2,5 Billion €, although there are discrepancies between calculations of different market researchers (Fortmann, 2007, website). eCouponing Factory Page 1 Online Marketing is becoming more relevant especially for German enterprises. The study “Marketers´ Internet Ad Barometer 2006” found out that nearly 90% of these firms invested approx. 5% of their total marketing budget for Online Marketing - this is more than twice as much as the European average is. Researchers interviewed 170 top marketing managers of all consumer good industries in this study. More than 50% of the interviewed German marketing managers and 74% of the European managers consider the internet as an essential component of the marketing strategy. In particular Online Marketing budgets for branded products are growing (EIAA, 2006, website). 3 Market Overview: eCouponing in Germany "It makes me feel terrible when I go to the store and don't have a coupon," Kristine Davis said, an American housewife. "It's a way of life" (Lohr, 2006, website). Nielsen Clearing House (NCH) estimated that in the USA approx. 300 Billion coupons are being issued every year. This is approx. 33% of the whole marketing budget of all US consumer goods manufacturers (AF Cinema Agentur, 2008, website). Although Couponing Marketing in Germany is not yet as popular as in the USA, it is th established since the 1960 , particularly for branded consumer goods. Brand manufacturers like Ferrero, Wileda or Procter & Gamble arrange couponing campaigns in order to push their products. Couponing was always very popular, especially collecting of loyalty points and games (Müller, 2007, verbal information). According to the study “Das Marketing Instrument der Zukunft? Couponing in der Praxis“, published by Loyalty Hamburg 2002, approximately 33% of the German enterprises of the retail industry utilizes coupons. Especially the retail branches convenience goods (e.g. detergents), foods (e.g. branded cheese) and electronical products (e.g. cameras) utilize coupons. Other industries like consumer related services (e.g. cinema) want to enhance Couponing Marketing activities (AF Cinema Agentur, 2002, website). Studies, conducted 2003 and 2005 by the eMarketing Agency Insecon, show the following results: • 76% of the respondents would use eCoupons and paper coupons. • 88% recommend eCoupons to friends and family. • For 58% eCoupons enhance buying incentive. • 35% would encash the eCoupon apart from a buying desire. • In 2003 at least 33% had never purchased online, 2005 only 4%. • 21% purchased quarterly online, 38% monthly and 23% weekly or daily (2005). • In 2003 22% preferred a fixed coupon amount (e.g. 5,- €), 2005 already 30%. eCouponing Factory Page 2 • 64% of the respondents want to get specific coupons that are related to the kind of offerings (2003: 69%) (Insecon, 2005, 5-12). Since the late 1990th eCouponing supported by loyalty cards like “Miles & More” of Lufthansa1 started to squeeze the traditional paper- based Couponing Marketing. Although paper couponing is still relevant the internet assault on the paper - clipping coupon business is well under way and many customers take great and growing interest in eCouponing (Lohr, 2006, website). In many cases eCouponing Marketing and Online Games are mixed. Thus, it is interesting to consider market trends for Online Games as well. The study “Ergebnisband-zur-Online- Gewinnspielstudie 2003“ assessed the German market for Online Games. Essential results are as follows: • All age groups accept online games well, although middle-aged persons (41 – 50) game more frequently. • 25% of the participants recognize organizer or brand manufacturer who presented the game and the kind of bonus for many weeks. • High value of bonus and easy handling of Online Games are the key issues to enhance participation. • Online advertising within the game does not disturb 56% of the responders. • Most of the participants are willingly to reveal address data incl. email, family status (approx. 80%) and kind of job (approx. 72%). • Value of bonus and kind of Online Game are important factors for customer’s motivation to reveal data. • Many participants (approx. 50%) consider game organizers as friendly, customer oriented and innovative. • Online Games motivate approx. 70% of the responders to buy products of the organizer. • Approx. 90% recommend games to friends, colleagues etc. or consider that (eResult, 2003, 16-39). These surveys show that Couponing Marketing and Online Games are highly attractive marketing areas. Main problems for retailers and brand manufacturers are to identify target customers in order to place the right products by offering an efficient and user-friendly solution. 1 See www.miles-and-more.de eCouponing Factory Page 3 4 Paper Couponing Marketing: Poor Results and much Administration Peter Sealey a former chief marketing officer at Coca-Cola said: "The paper coupon is the single most inefficient marketing tool you could imagine. The traditional paper coupon is going to die. It can't survive in the Internet world" (Lohr, 2006, website). Franz Müller, managing director of Penny Dialogmarketing GmbH, a German Direct Marketing agency, said that in Germany only 1% of all paper coupons of a campaign will be encashed by customers – 99% are lost (Müller, 2007, verbal information). The overall problem of paper- based Couponing Marketing is a missing holistic concept. The involved organizational units work mostly independent which results in many lacking interfaces and therefore in ineffective and inefficient processes. Apart from that, it is impossible to get valuable information about consumer’s behavior. In the following, the main pain points are explained: Brand Manufacturer • Normally campaigns are being realized individually or supported by marketing agencies without involvement of retailers and credit card processors: o No targeted campaigns: Only approx. 1% of coupons are encashed. o Results of campaigns are unclear due to lacking analysis and reporting capabilities. o Neither purchase information nor card or customer information is available (e.g. market basket analysis). • If customer data is available: Reutilization of data and information about customer behaviors is still an exception. Retailer • Administration and manual processing of POS campaigns burden retailers. • They receive only marginal information of customer behavior and needs by paper couponing campaigns. • Retailers get purchase data by POS systems in parts, but customers are unknown. Credit Card Processor • Credit card processing companies get only card information, no information about customer behaviors or market basket analysis. • No purchase data are available. eCouponing Factory Page 4 • Therefore, information is worthless for marketing purposes. Customer • High manual efforts to collect and dispatch coupons by mail • Holding time until receipt of bonus • Potential loss of bonus Couponing Marketing Agencies: • Agencies do not have access to customer data. • Normally tool support is low: o High manual efforts o Low analysis / reporting functions o Marginal utilization of data o No customer profiling • Administrative effort is high. • Level of work qualification for paper coupon dispatching is low. • Reuse of campaign results is marginal. eCouponing Factory Page 5 The following figure shows a typical process of paper- based Couponing Marketing in overview: Konzept der P. Factory.