I have a few more thoughts on coupons. I ran errands this weekend, and two stores I shopped at asked for customer emails that they already have in their system. The rationale given both times was that better coupons would be sent to more frequent shoppers. This is puzzling and it suggests three things:
- Companies are courting their loyal shoppers, giving them coupons for items that they would purchase anyway (a bad move on their part).
- Companies are courting their loyal shoppers to bring them back for another shopping trip that they would not otherwise make (a clever move on their part).
- The employees at these stores have been misinformed by management.
What am I missing?
To be honest, I was a bit frustrated by this. I always use the same credit card to make purchases at these stores, and they could save me the hassle of entering my email again and again by data mining. But I relent when they promise me better coupons (and I noticed that everyone else did, too). I’ll be a believer when I actually see one of these coupons. A good coupon would bring me back to the store.
I have noticed that stores like Kohls routinely send out semi-personalized coupon codes for savings of either 15%, 20% or 30% off anything in the store. These coupon codes are not random. I only get 30% off coupons when I haven’t been to Kohls in awhile. It works like a charm: I pop in Kohls to stock up. Kohls seems to reward their loyal shoppers, but only in order to bring them in for another shopping trip that they otherwise wouldn’t make.
I have even more thoughts on coupons and discounts, but I’ll save that for another post.
Related post:
Punk Rock Operations Research 
June 16th, 2010 at 10:51 am
Don’t rule out the possibility that their info system fails to connect the dots between your credit card and their database, and simply does not register that they already have your e-mail address. A colleague and I amuse ourselves at lunch with anecdotes about retail and e-tail systems designed by the clueless.
June 16th, 2010 at 11:00 am
Good point!
June 16th, 2010 at 11:39 am
Imagine in heaven shopping god has a matrix. This has a list of items and of users. The item/user matrix has a utility/price score on it. Ignore for the moment having enough money to actually buy stuff. Say when the utility/price >10 you buy when less you don’t. Each item also has a profit associated with it. So you cannot reduce the price below that of your profit (this is an assumption that you have no loss leaders, which you will).
So the question is find out what utility/price score each item in the matrix has. Give discounts to move those to ten where there is enough profit to do so and do not increase those over ten as someone will buy them anyway.
So roughly. Fill out the matrix to figure out how little you need to reduce the price of something to move it to buy and do not reduce the price of anything in buy already for each user? You need to work out how much utility each item has for a user do you not?
June 17th, 2010 at 8:24 am
That argues for the Benevolent (?) God of Shopping to issue coupons to Laura for products she does not currently buy (to see how much discount would be required to induce her to purchase) and surreptitiously raise the prices of things she does buy (until the price reaches her threshold). Issuing coupons for things she already buys sheds no information on her utility function (although it might provide information about how much of the stuff she’s prepared to consume) (which in the case of hummus is infinitely more than you’d catch me consuming).