Article

New kiosk to provide coupons on demand

Matthias MoneyBoard's new kiosk will give customers the exact coupons they want, as they enter a store. But how will it fare against the long-established habit of clipping coupons on Sunday mornings?

April 30, 2006 by James Bickers — Editor, Networld Alliance

The author is also editor of SelfServiceWorld.com.

Retailers have a love-hate relationship with coupons: They love the business they bring in, and they hate both the expense of distributing them and the tire-kicking, bargain-hunting attitude they can cultivate. But there is no doubt about their effectiveness.

"After 25 years of active retailing, I can say that without a doubt, the No. 1 source of business is couponing, more than anything else," said Rick Segel, retail consultant and author of Retail Business Kit for Dummies. "I could show you ads that are more beautiful than anything else, but they didn't work as well as a coupon."

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Inventor and entrepreneur John Matthias is counting on the enduring appeal of coupons to drive his new company, Matthias MoneyBoard. The MoneyBoard Coupons on Demand kiosk, which he said will roll out to about a dozen grocery stores in the BI-LO/Bruno's chain by the end of June, lets shoppers browse an on-screen selection of coupons when they enter the store, printing only the ones they want.

The paper chase

Coupon distribution is on the rise, and measurably so. Companies distributed 323 billion coupons in 2005, a 10 percent increase over 2004, according to research consultancy CMS. Almost 90 percent of those coupons were distributed through Sunday newspapers, in what the industry calls "free-standing inserts" or FSIs.

But while the number of coupons entering the consumer ecosystem rose, the number redeemed dropped: Consumers used $3 billion worth of coupons in 2005, compared to $3.2 billion the year before.

"Manufacturers spend billions of dollars advertising through coupons and inserts on Sundays," said Gordy Lennartson, executive vice president of Matthias MoneyBoard. "And less than 1 percent of the coupons that show up in the Sunday paper are redeemed."

The MoneyBoard machine, which uses hardware from NCR and printers from Zebra, contains 72 coupon "slots" on screen. Product manufacturers can reserve a spot on a machine for a flat fee of $875 per store per year; they then pay 30 cents for every redeemed coupon. Alternately, they can skip the annual fee, waive the guarantee of an on-screen slot, and pay a higher per-coupon fee of 50 cents.

Lennartson said that represents a savings for the manufacturer of about 50 percent over traditional couponing systems.

"Our coupons don't have to go through a clearinghouse," he said. "We're a coupon management system for the manufacturer. Once our coupon is redeemed at the POS, that information is automatically sent to our server. And we then develop all of the reports and data for the manufacturer and retailer to view."

That data can be viewed from any Internet-connected computer. Another boon for the manufacturer is that it is only charged when the coupon is redeemed, as opposed to traditional and online coupon distribution which generate a charge at the moment of printing.

John Matthias said retailers will fare better using the MoneyBoard, as it pays them a higher percentage of the coupon amount as a handling fee: 15 percent versus 6 to 8 percent from traditional couponing.

Lennartson said placing the machines has been a "chicken-and-egg" proposition, with retailers wanting more manufacturers on board, manufacturers wanting more guaranteed store placements. Even so, the company has met with high-profile grocery chains in the South like Meijer and Brookshire; Matthias estimates that 1,300 stores have been identified as "very interested" in placing the machines in their locations.

The experts weigh in

Segel is bullish about the kiosk, even if he does think MoneyBoard's dismissive view of Sunday coupons and their 1 percent redemption rate is flawed.

"They're making the assumption that 1 percent is bad," he said. "What would you rather have - 1 percent of $10 million or 10 percent of $300,000? Yeah, it's 1 percent because (FSI distribution) is overkill. But I don't think they're going to replace the newspaper coupon."

He points to the level to which coupon-clipping is entrenched in society as a habit, one associated with frugality and good sense: When times get tough, people begin talking of the need to get better about clipping coupons.

More research on these key terms: Retail Coupons Printers

"There are groups of people where the game is to get the national coupon out of the Sunday inserts and then cross-reference it to the store special," he said. "It's not so much the dollar amount of the savings, it's the hunt. What this kiosk is doing is increasing the access to coupons - making people say, `Oh, let's see what this machine has that I might not have been able to find.'"

But George Whalin, retail consultant and author of the book Retail Success!, isn't convinced. He points to the sheer volume of existing coupons as one reason the kiosk might not attract the needed number of users.

"The idea that consumers will stop at a kiosk in the store to print coupons seems, at first, like a good idea," he said. "But I would be very surprised if this method will enjoy a substantial distribution rate. There are a number of companies who already distribute coupons from small dispensers on grocery store shelves. I believe this method has more appeal to consumers."

Time alone will tell, but Segel thinks it is precisely the volume of coupons available - and the tantalizing prospect of getting an exclusive bargain - that makes the MoneyBoard look like a winner.

"You're giving someone one more source," Segel said. "What will happen is this: If in fact the exact same companies are offering the exact same coupons in all these different areas, it'll come down to which ones are the easiest to find. But if they're offering coupons that, say, might not be available in the Sunday paper, then the kiosk becomes a must-stop."

About James Bickers

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