By Rebekka Coakley, Penn State
UNIVERSITY PARK – The recent recession, The Learning Channel’s reality show “Extreme Couponing” and the popularity of coupon sites like Living Social and Groupon have inspired more and more people to clip coupons. While coupons can sometimes just be a click of the mouse online, it can also take time to search through local papers, cut, paste and find the store with the right product.
Tulay Girard, assistant professor of marketing, business and engineering at Penn State Altoona, studied consumer online shopping behavior and shopping orientations during her doctoral program and is an expert in the cultural habits of shopping and buying behavior. Girard talks about the overall worth of couponing.
Why do companies offer coupons?
Girard: Many companies create coupons for certain products or services, although not all customer segments use them. Most companies that produce and/or sell household products for daily consumption, such as detergents, paper towels and soft drinks, offer coupons because of intense competition. A decision to offer a coupon may be made based on where a product is in its life cycle. Coupons can be offered during the product’s introduction stage if it has a high price and the company wishes to appeal to price-sensitive customers and build brand loyalty for the product. Or, coupons may be offered during the product’s maturity and/or decline stage to increase sales in a saturated or decreasing market, respectively. If consumer demand is high for a given product and the customer segment is not price sensitive, companies are better off not offering coupons and therefore reducing their profits. One caveat is that if companies offer coupons on a regular basis or too frequently, consumers will be conditioned to buy the product only with the coupon.
Since the economic recession struck the U.S. in 2007-09, has there been a rise in coupon use and/or distribution?
Girard: During a recession, you see an overall change in the consumer spending behavior to save money due to the reduced confidence in the stock market, employment rate, and/or economic growth. One of these changes we observe is increased use of coupons. However, a recession is not the only factor affecting consumer spending habits. Recent technological advancements in mobile devices such as the iPad2 or smartphones enable consumers to utilize applications to instantly search for the best price when consumers scan product barcodes with their cell phones. Many people are able to take advantage of the coupons, discounts and sale information. Over time, we will see how this shopping behavior disseminates among consumers and affects their use of coupons.
Do you think clipping coupons is worth the time it takes?
Girard: It depends on whether consumers prefer to purchase major brands or are satisfied with store brands. Store brands are usually less expensive than national brands and most of the time consumers can save money without having to look for coupons for store brands. Store brands also go on sale on a regular basis.
Can consumers trust coupons they find online?
Girard: I have read about cases in which clicking on coupons downloads some type of malware program that gathers private information without the user’s consent. Consumers should download coupons only from the websites of the companies that they trust to avoid the likelihood of downloading a virus or another type of malicious software program.
Do sites like Groupon really offer good deals, or do they get people to spend more money than necessary for their own profit?
Girard: The coupon or discount sites like Groupon are multiplying fast, but they still have limitations and carry risk to some extent. For example, Groupon mostly covers deals of food, getaway places, salon and spas, wellness centers, and stores in the U.S. and internationally. It is a group-buying site that individuals buy deals in certain locations leveraging their collective buying power. That means a minimum number of people must click on the “BUY” icon and enter their credit card information within a certain time period to receive the deal at the advertised price. If the minimum number of buyers is not reached, their card is not charged. If the minimum number of people agrees to the buy, the buyers are provided a link to print the coupon with an expiration date.
You can directly buy 50 percent discounts in the form of an electronic coupon. You may end up spending money that you never meant to because the deals on their websites may be too attractive to resist. I can imagine impulse buying is common on these websites. If you subscribe to Groupon, you receive email announcements of daily deals of restaurants and stores. According to Groupon’s website, individuals can find deals of up to 90 percent off. The coupon is supposed to save you at least 50 percent of the regular price. For example, a $50 worth of food or service may only cost you $25. The vendor does not make as much profit but it builds its customer base and maintains a cash flow. The risk to the individuals is their inability to use the coupon before it expires. Also, some deals on getaways may require additional purchases to use them such as airfare.
Can you offer advice for consumers looking for Groupon-type of sites that might actually be scams? Is there a Better Business Bureau-type of site that consumers can use to ensure the legitimacy of an online business?
Girard: Consumers can search online using Google, Yahoo or Bing, read about them and even look them up in Wikipedia. Trustworthy websites like Groupon disclose important information on their site, such as privacy statement, return policy, terms and conditions, how they secure credit card and personal information, frequently asked questions, area coverage and other important information. If consumers cannot find adequate information online for a given social buying website, and not much information on their sites, they should not take the risk.
BBB Online is a good place to look up a business if you know in which state the company is headquartered. If the company is found to be a BBB accredited business, then it is very likely not a scam. Also, searching archived news articles about a company may reveal information. I suggest consumers use only known discount sites such as Groupon and LivingSocial and the retailers they have had a prior positive experience with and look for full disclosure of important information on their websites.