Wednesday, August 17, 2011

The Coupon Phenomenon - by Charlotte Buchanan

As a consequence of the recession and resulting consumer thrift, coupon distribution and usage has skyrocketed in the last few years. And it’s not just coupon-clipping moms on TLC buying hundreds of rolls of toilet paper and jars of peanut butter. Our summer focus groups have highlighted the importance of coupons and specials in influencing EDSCs’ (Emerging Digital Service Customers) everyday purchasing decisions. EDSCs proudly report how they comb the internet for deals. They know what websites to visit and what phrases to type into Google in order to find coupons for specific goods and services. When it comes to LOF service, they know Jiffy Lube offers a standing $5 off coupon on their website.

Timeout: How do they know this? Well, a Google search for “oil change coupons” or “oil change” turns up the Jiffy Lube website as the top result. Alexa’s search analytics tool confirms that the highest impact query driving organic search traffic to is in fact “oil change coupons”. This is not just dumb luck for Jiffy Lube.

Through ubiquitous daily deal sites like Groupon, EDSCs also receive coupons right to their inbox. The aftermarket quickly jumped on the Groupon bandwagon, with Midas, Goodyear, and a host of independent repair facilities selling thousands of oil change deals in 2010. OEMs came late to the party; this April a group of ten Chicago-area Hyundai dealers tested the water by offering a $29 Groupon for an oil change, tire rotation, carwash and multipoint inspection. Over 1,300 people purchased the deal, many of them new customers and/or owners of competitive makes. Other OEMs and dealers quickly followed suit, offering various deals across the country.

Hyundai’s press release indicated that they will be monitoring redemptions of their Groupon, which expires this fall, to assess the promotion’s benefit. One metric will be whether Groupon holders purchase additional parts and service during their Groupon appointment. Another, far more important metric, will be what these customers do after they redeem their Groupon. How many new customers return to the dealer six months, a year, two years down the road, and for what? Can dealers convert these dealer-skeptic EDSCs into loyal customers?

Bottom Line: Coupons have proved to be a lever that OEMs and dealers (as well as aftermarket providers) can use to get people in the door. However, coupons alone won’t educate customers about the benefits of genuine parts and service. And, as we explored in a previous blog, customers who don’t know what “genuine” means won’t prefer it. We must educate customers to retain them.

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