How Do Coupons Work?
The world of coupons may seem mysterious to the average consumer. After all, how can manufacturers and retailers offer such great deals without losing money? Understanding how couponing works will make it easier for buyers to grasp why coupons benefit not only them but the individuals who make and sell the products.
Coupons are Technically Worth Cash
Few shoppers – unless they pay attention to the fine print on their coupons – likely realize that their coupons are worth a small amount of cash. This cash is nothing that you can redeem, however. Instead, a coupon given to a retailer serves as a piece of cash at the same value as the coupon’s savings. In simpler terms, a coupon that saves you $0.25 on shampoo is worth $0.25 to the retailer when the final sorting process has been figured out.
Manufacturer coupons – a majority of the kind you find at most retail outlets – are provided to the retailer as a way of ensuring people come to their stores. Simply put, manufacturers and retailers alike benefit if people buy their products. And coupons are designed to draw in people to a business and to provide them with deals on items that they may be interested in purchasing.
Just as importantly, these coupons are designed in a way to prevent a business from losing money when they are used. For example, if a retailer offers $1 off of toothpaste to drop the cost to $1.25 from $2.25, you can be sure that the cost to produce, manufacture, box, and ship that individual tube of toothpaste was far below even $1.25 for the manufacturer and the retailer.
Simply put, coupons are a win-win situation for everyone involved. The customer wins because they get deals on products that they want. The manufacturer wins because you buy their products and provide them with profit. And the retailer wins because people buy at their store – likely buying many items without coupons – and because they get compensation from the manufacturer for the coupon.
Coupons Create a Deal Between the Retailer and Manufacturer
Retailers who use manufacturers coupons sign a deal with the goods provider to use these coupons in their store in exchange for compensation for using them. Interestingly, studies show that paper coupons still far outweigh the use of digital coupons, with over two billion paper types used every year to just 62 million deals. Essentially, though, both types work in the same way.
Whenever a coupon is given to a retailer by a buyer and the retailer accepts it, they must collect these coupons. Each used coupon has a bar code that is scanned by the retailer at the time of the purchase. When these codes are scanned, the coupon can no longer be used, and its bar code is stored in a computer memory system. The store must then collect all of these paper receipts, print out a list of which ones were used, and send them to the manufacturer in an orderly fashion. Digital coupon receipts are similarly e-mailed to the company.
Typically, the store manager is the one who goes through these receipts to ensure that everything is in order. Once the used coupons reach the manufacturer, another individual must sort through these to confirm that they have been used. This process allows the manufacturer to ensure that no coupons were scanned inappropriately and to make sure that they pay the retailer properly for the use of these coupons.
The process of confirming all of these coupons may take over a month to perform, as the manufacturer typically sends the coupons to be checked by another company. Once the coupons have been verified, the amount due to the retailer confirmed, and the information presented to the manufacturer, the manufacturer will reimburse the retailer for the value of the coupons.
The payment method will vary depending on the deal created by the retailer and the manufacturer. For example, many companies send a check to the retailers who sell their products. This check may take several weeks to cut and over a week to reach its destination. Other businesses may create a direct deposit approach and send out a check stub that lets the retailer know how much money was placed into their account by the manufacturer. This method ensures that nobody loses cash on the deal.
However, the most significant assurance against a loss of profits is the fact that the vast majority of coupons printed by manufacturers and retailers go unused. In a recent study, researchers found that shoppers redeemed only six percent of coupons with 94 percent going into landfills across the nation. As a result, manufacturers can easily justify creating these deals because so few buyers will take advantage of them to save money on their products.