Penny-Pinching Millennials Are Keeping the Coupon Alive

A new generation of deal hunters goes digital—and still keeps clipping.

By Polly Mosendz | June 16 2016

Heather Schisler once had a Sunday morning routine that connected her to generations of frugal people: Buy a stack of newspapers, get her scissors, and plan her grocery shopping based on the colorful cutouts. Now Schisler, a 31-year-old mother of three, has replaced all that paper with multiple apps and websites for digital rebates.

“I don’t get three or four copies of the newspaper anymore,” she says before rattling off a list of her favorite apps. You can read all about it on Schisler’s discount shopping blog, Passion for Savings. Eighty percent of her readers are women between the ages of 25 and 45, many of them millennials.

PHOTO: GETTY IMAGES

First introduced in the late 1800s, coupons exist to hook consumers on a product by offering it at a discounted price. The store eats the cost upfront and is later reimbursed by the manufacturer, allowing the customer to save money at the register. Rebate programs, a subsequent retail innovation, asked consumers to pay full price up front and send in a request for a portion of the money back. Coupons retain a grandmotherly air, and yet today’s young consumers, often laden with piles of student debt, have become perhaps the most ardent practitioners. Nearly nine in 10 millennials use coupons, according to a report by Valassis, the company behind the RedPlum coupon circular.

QUOTE
         Somehow,   in the upside-down world of couponing,
digital is actually more difficult than paper

For the rising generation of deal hunters, coupons are an almost ubiquitous part of life online. Asked to describe their couponing habits, millennials told Bloomberg about checking for discount codes on such websites as RetailMeNot, using web-browser extensions such as Honey to highlight bargains, and seeking out cash-back programs like Ebates. Flash sales proffered by Groupon Inc. and Gilt City, pharmacy loyalty cards that trigger discounts at the register—all these approaches are seen by young shoppers as basically indistinguishable from the coupons of old.

Adriana Krasniansky, 23, refers her roommates to food-delivery services offering free credit in exchange for inviting friends. “Then we cancel it because we don’t want to pay full price. We’ve all been there,” she says. “I don’t think most people consider it couponing, but mostly it is.”


Veteran coupon distributors are getting on board with this diffuse digital redefinition. News America Marketing Inc., which owns the weekly coupon circular SmartSource, last year purchased Checkout 51, a Canadian company with an app that provides retroactive discounts after users upload their receipts. Once the app balance hits $20 in discounts, a shopper receives a check. Quotient Technology Inc., the parent company of Coupons.com, purchased another such app, Shopmium, in 2015.

“We saw it as a way to reach a younger demographic,” says Mike Pollack, senior vice president of News America. “This speaks their language. This is definitely a millennial-targeted audience.”

Valpak Direct Marketing Systems Inc., known for its thick blue envelopes of coupons for neighborhood businesses, has reproduced that localized search online, offering users coupon codes for these nearby businesses on its websites. Last year, the company says, close to 2 million coupons were printed through the Valpak app and mobile website.

Coupons appear to be a rare example where the arrival of digital equivalents hasn’t done much to dent the original paper versions. Valpak’s coupon-stuffed envelopes have maintained a circulation of 39 million, flat over recent years. The print circular SmartSource maintains a circulation of 73 million, a number that hasn’t changed much in the past five years.

Millennials, too, remain more likely to use a coupon received in the mail than one found on an app or website, according to a survey for Linkable Networks conducted by Forrester Research. “Even in today’s digital world, consumers still use paper coupons at a surprisingly high rate, likely because most digital options do not provide a seamless customer experience,” Forrester wrote in its research. “Somehow, in the upside-down world of couponing, digital is actually more difficult than paper.”

PHOTO: GETTY IMAGES

There is no Sunday newspaper of online couponing, and this lack of a one-stop digital destination leads to a complex and winding user experience for those looking to do virtual clipping. Brands issue discounts on their websites, apps, and social media pages. Grocery stores have their own competing apps and circulars. Third-party websites tout distinct deals. In some cases, a coupon found online can be printed for use in a store. Other times an app should be scanned at the register, or a link sent via text message or e-mail.

Experts such as Schisler are left to wade through this digital discount jungle, determining how these digital offers can be combined, sometimes with print coupons, to unlock the best savings. Those hoping to score cheap toilet paper are advised to shop at Walgreens, where an in-store discount reduces the price to $4.99 for a 12-pack, and then use a $1 printable coupon from Coupons.com. Once the purchase is made, Schisler tells her readers to upload the receipt to Checkout 51 to save another buck, reducing the price to a quarter per roll. Want garbage bags for less than a dime apiece? The coupon expert recommends combining an in-store discount at Target with a printable coupon and two rebate deals offered on the Ibotta app.

Pollack of News America acknowledges the pitfalls of a coupon environment that can become confusing based on the “different objectives between retailers and manufacturers.” What Procter & Gamble wants in a discount is not necessarily the same as Meijer, Kroger, or Walmart—and none of them wants a coupon for a deep discount to be printed out infinite times or photocopied. “That’s one of the reasons digital couponing hasn’t scaled as quickly; there is a lot of fragmentation,” Pollack says. “There’s not a ton of uniformity.”


Online grocery purchases are a different kind of oddity, as a FreshDirect or Amazon.com user must take the less-than-intuitive step of “e-clipping” a coupon by clicking a check-box to receive the discount. These large websites don’t automatically add the discount, even though presumably any shopper will want to save money. The reason for the e-clip is so the brand can track coupon usage, says Lisa Kolodny, FreshDirect’s vice president of brand marketing. “All coupons are largely funded by the company that’s trying to push their product,” she says.

To those who want to replace the old model of tangible coupons, this digital patchwork system appears fundamentally broken. Bryan Leach, chief executive officer of Ibotta, a rebate app with 18 million users, has no patience for newspapers, printable coupons, or app-flooded phones. “Our goal is to destroy and obliterate paper promotions and to replace them with something more interesting, more fun, and more valuable,” Leach says. “You don’t need to download 16 different apps, you don’t need one for every other place you shop.”

QUOTE
        Our goal   is to destroy
and obliterate paper promotions

Between 75 percent and 80 percent of Ibotta’s users are under age 35, and the app yields $10 to $12 in savings each month, on average. Ibotta’s shoppers spend $4 billion per year, according to receipts uploaded to the app, and the company has doled out close to $100 million in rebates. The app is a competitor to the News America-purchased Checkout 51 and Coupons.com’s Shopmium, and Leach hopes to launch an initial public offering within three years. Ibotta has raised $73 million since 2012.

Ibotta stands a chance to kill the circular once and for all because of what the app can offer the brands behind the deals. The companies that work with Ibotta don’t pay upfront, only when someone uses the discount through the app. “Unless and until you sell that Budweiser and get someone using that app, you don’t pay us a cent. It’s very low risk,” Leach says. Most important, companies get access to anonymized and aggregated data of the users who purchase their products, helping them to understand purchase trends and sharpen regional marketing tactics. A paper coupon can be linked to a grocery store, providing location information, but the demographics of the clipper are far more important.

Getting brands to understand this unique marketing proposition is Ibotta’s biggest challenge, Leach says. “You have to get them to think about, ‘Wow, I have all this transaction data. I should be using this to create intelligent promotions.’ If you don’t have it, your competitors are going to get you. It’s just a question of how long it will take to replace the status quo.” Scouring the Sunday newspaper might be a thing of the past, but the future isn’t done with coupons.

(Corrects Bryan Leach's title in the 15th paragraph.)