Coupons Boost Sales, Even When Consumers Don't Use Them

Coupons are a popular advertising marketing tool. In 2010, U.S. consumers redeemed 3.3 billion coupons, cutting about $3.7 billion from purchase prices, though only about one percent are ever used.

But a new study suggests strong sales lift, even from consumers who do not use those coupons.

The study by University of Virginia Darden School of Business professors found that unredeemed coupons are still valuable to the companies that issue them.

“In fact, the coupons that wind up in the trash ultimately may deliver greater returns to a company than the coupons that are redeemed,” Rajkumar Venkatesan and Paul Farris write in the article “Unused Coupons Still Pay Off” in the May issue of Harvard Business Review.

Venkatesan and Farris analyzed the advertising campaigns of eight national retailers involving more than 500,000 targeted coupons for items representing more than 300 brands mailed out over 16 months.

The professors found that consumers who got the coupons but didn’t use them still “typically increased their purchases in the associated stores.”

In fact, these consumers accounted for 60 percent of the coupons’ “sales lift," the additional amount spent on both promoted and unpromoted items.

The professors predict that a company targeting 1,575 households with customized coupons for groceries over one week should succeed on two levels, first by prompting coupon redeemers to spend more than non-redeemers who nonetheless will be prompted to visit the store and spend.

Also, as a group, the non-redeemers will spend more at the store than the redeemers simply because there are more of them.

Coupons often get tagged as “bottom of the funnel” tools but clearly they also drive brand awareness and sales lift, says BIA/Kelsey. Redemption rates, while important, are not the only success metric.

Venkatesan and Farris conclude that new media players such as Groupon and Living Social are best evaluated not just in terms of list building and redemption but also in terms of long term sales lift even from non-redeemers and presumably even those on the list but who never bought the coupons.