Wean Consumers Off Coupons by Force Feeding

Consumer behavior research gives valuable insight when interventions fall short. We can then decide what to do next. An example is the failure of J.C. Penny Co. to meet its goals under the leadership of Ron Johnson.

• Same-store sales dropped 19% from the corresponding quarter in the prior year
• Weekday store traffic was down 9%, and weekend store traffic down 12% 
• Internet sales dropped 28% 

     Mr. Johnson’s explanation, as quoted in a Retail Customer Experience posting: “Our customer just doesn’t understand our pricing.” Among the changes championed by Mr. Johnson: A switch away from coupons. “Coupons were a drug,” he said. Instead, J.C. Penny moved to an Everyday Low Price (EDLP) strategy. This made sense when looking at the fact that less than 1% of J.C. Penny’s revenues were coming from items purchased at full price.
     However, the cold-turkey withdrawal didn’t make sense when considering the psychology of the coupon shopper. The relevant research concept is “pricing tactics persuasion knowledge” (PTPK). This refers to the understanding a consumer has about how retailers use pricing tactics to influence the consumer to buy. 
     Researchers at Georgia State University and University of Leeds found that consumers who are prone to use coupons have low PTPK. Overall, these shoppers don’t appreciate that EDLPs could result in savings equal to or greater than that obtained with coupons. They enjoy the excitement of using a coupon for a discount as much as, or maybe more than, saving the money.
     The Georgia/Leeds researchers also analyzed consumers who are low on coupon proneness and high on value consciousness. These consumers had good PTPK. They were much better skilled in figuring out what pricing tactic the retailer was using to tempt purchasing. These shoppers also appreciated why the retailer was using the tactic and could calibrate what difference it really made. And those with the good PTPK were confident in their assessments, meaning they could avoid defensiveness when it was advisable to change their opinions. The coupon users stayed locked into their addiction.
     If you choose to move away from issuing coupons to promote sales, recognize that there will be consumers who are high on PTPK, and will therefore pick up on the other ways you’re delivering value to them. For your shoppers who are high on coupon proneness rather than PTPK, you’ll need to assertively and continually pump into them evidence of that value.

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more:
Clip Mistaken Notions About Coupon Users
Use Bounce-Back Coupons 
Promote Promotional Pricing over EDLP 
Watch Ron Johnson