Cell phones find niche in retail coupon market
The venerable coupon, deliverer of savings for more than a century, is getting a makeover via the cell phone.
Marketers are increasingly experimenting with mobile coupons with the belief that the savings vouchers can find a wider reach and gain new effectiveness and flexibility.
Mobile coupons are still in their infancy. JupiterResearch said only about 2 percent of people have tried mobile coupons in the past year. San Jose’s Cellfire, one of the largest mobile coupon companies, has offered more than $17 million in savings since it began in late 2005. By contrast, traditional coupons, which weigh down Sunday newspapers and clog mail boxes, offer more than $300 billion in savings annually.
But mobile coupon companies believe they can give new life to coupons by offering them on a device that more than 233 million Americans carry with them every day. And they believe consumers are ready: According to JupiterResearch, about 8 percent of cell phone customers said they would use mobile coupons in the next year.
“Paper coupons don’t always work for people who don’t clip coupons,” said Brent Dusing, chief executive of Cellfire. “But this works for anyone who can surf the Web on their cell phones.”
Here’s how it typically works: Consumers can fire up their Web browser and visit a mobile coupon company’s Web site, where they can find deals on everything from restaurants and dry cleaners to video stores. They just show the store employee the relevant digital coupon, and the employee punches in its redemption code. Some companies also offer coupons via text messages, which can be sent out when offers become available or when a user sends a query about a specific advertiser.
To take advantage of the savings, a user will have to pay cellular data charges, buy an unlimited data subscription or pay for text messages. Consumers who agree to these charges can find promotional coupons wherever they are and they’re not stuck wishing they hadn’t left the newspaper coupon at home.
Coupons have been around since the end of the 19th century, when a druggist who bought the formula for Coca-Cola gave out handwritten tickets for a free glass of the new soft drink. Today, 3 out of 4 people use coupons, though the heaviest users are older than 45, according to the Promotion Marketing Association.
Cellfire’s Dusing said mobile coupons have advantages over their print counterparts, such as their relative effectiveness. Cellfire says its redemption rate for coupons is about 15 percent, far better than the less-than-1 percent of print coupons that actually get redeemed. And they reach a younger, more tech-savvy audience, which is attractive to advertisers.
Mobile coupons also are cheaper for advertisers. Netinformer of San Ramon places coupons on cell phones starting at just $50 a month. There’s also a green advantage: Going mobile has the potential to save billions of dollars in paper and printings costs.
The method also offers advertisers flexibility. A national company may need to decide months in advance what kind of discount it wants to offer through coupons. Once the coupons are printed, they’re often good for 30 days.
But with mobile coupons, advertisers can decide to offer a discount within days of the promotion. And they can tailor it to specific days or times to drive traffic during slow periods. For example, a restaurant could offer a lunch special for just one day.
“That’s flexibility we don’t have right now with print coupons,” said Steven Lemley, president of field marketing media and merchandising for Hardee’s, which is using Cellfire in two markets.
Lemley said the company, which spends $6 million annually on print coupons, uses the cell phone coupons to introduce products. A recent promotion was for a “buy one, get one free” deal on a new buffalo chicken sandwich. He said mobile coupons allow Hardee’s to reach its target demographic of 18- to 34-year-old men better than print promotions and has shown to have a redemption rate three times as good as print coupons.
But mobile coupons present challenges. One is for companies that still like to keep track of coupons using a paper trail.
Netinformer is working on delivering a small terminal that can be placed in stores that allows consumers to print a coupon and present it to employees.
“Some merchants will take a mobile coupon but they still want something to put in the drawer that their accountant can count,” said Greg Pinter, CEO of Netinformer.
The lure of mobile coupons is drawing in companies like Coupons Inc. of Mountain View, the No. 1 online printable coupon provider. Coupons Inc. plans to release a mobile service this year that will incorporate both mobile Web and text message coupons.
The company also is teaming up with AirPrint Networks to help customers print mobile coupons while they’re shopping. AirPrint will start rolling out Bluetooth-enabled printers in more than 50,000 stores in the coming months.
Coupons Inc. CEO Steven Boal said mobile coupons have not yet proven themselves. But he said his company has decided to jump into the market because it extends the vouchers’ reach beyond personal computers.
“This gives you an opportunity to answer people and give them the opportunity to participate in price promotions wherever they are,” said Boal.
E-mail Ryan Kim at rkim@sfchronicle.com.
