Penny Pinchers' Paradise

E-coupons are catching on fast--and companies are learning how to use them

Something about saving a few bucks brings out the miser in almost everyone. Maybe you won't admit it, but Lauren Tascan does. She's among the 80% of Americans that clips coupons every year. The 32-year-old New Yorker accepts her parsimonious streak with an easy shrug. "There's a little thrill that comes from just a little bit of savings," Tascan says.

Get out your piggy bank, thrill seekers. The Internet is becoming one of the hottest spots to save with coupons. Web surfers who clip virtual coupons have risen to nearly 30% of those online from 23% a year ago, says researcher NPD Online.

What exactly are e-coupons? They're discount offers either found on a Web site or that can be redeemed online. Sites such as and, for example, let you print a coupon and redeem it at your local grocer. Just as often, consumers see an e-tailer's coupon bearing a special code in a magazine or on a Net portal. They then enter the code on a Web site to get a discount when buying online.

Virtual coupons have clear advantages over those you clip from the local paper. For starters, they have a "phenomenal" redemption rate, says Charles K. Brown, vice-president for marketing at promotions researcher NCH NuWorld Marketing Ltd. To be sure, e-coupons make up less than 1% of the 256 billion coupons distributed yearly in the U.S., vs. the 80% that are distributed in Sunday papers. But nearly 57% of those who click on e-coupons or get them via e-mail redeem them, Brown says, compared with the 1.2% of Sunday paper coupons that are redeemed.

What makes e-coupons so effective? Merchants can e-mail offers targeted to customers' tastes once they find a consumer who loves the Beatles or Legos or 2% milk. "The manufacturer is able to build a relationship with the consumer in a lot more depth than in any other media," says Steven M. Golden, CEO of, the Web's most visited coupon mall, with 11 million members.

Like their real-world counterparts, e-coupons help lure new customers, too. During the six months that ended in November, jumped from 23rd to 14th among retail Web sites with the most buyers, says researcher PC Data Online. Many new customers were lured by an e-coupon that saved $25 on purchases of $75 or more. Web coupons are "a key tool in the tool kit," says Kelly A. Mahoney, chief marketing officer for Staples Inc.

But Web sites should be careful not to give away the store. In 1999, when the Web teemed with fledgling e-tailers, merchants flooded consumers with "impossible" promotions, says analyst Mike May of Jupiter Communications Inc., for example, closed down partly because it was too generous with discounts. The site offered new visitors $25 off purchases of $25.01 or more. Then it added a $15-off coupon for the buyer's next purchase--and delivered it all free.

Better to be wise than bankrupt. Sure, the bigger the discount, the bigger the draw. But the idea is to wean consumers from boffo deals, migrating them from big savings to smaller ones. "If a dollar off works the first time," May says, "the customer should not see that discount again." A good coupon campaign offers just enough savings to give consumers a little thrill. /