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There's a secret agenda of coupon codes, and it's not all good for you

Laura HellerLaura Heller RSS Feed
Aug 5th 2009 at 8:00AM
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Filed under: Bargains, Shopping, Technology

couponsWhen you get to the check-out stage of an online purchase and see the box waiting there for a coupon code, what do you do? Skip it? Search your email for a discount directly from the retailer? Or scour the web for a code supplied by some friendly virtual neighbor? If you're like most people these days, you're hitting Google and relying on the kindness of strangers to get you free shipping or some percentage off and typing in codes until one works.

For consumers, the wide availability of coupon codes on the web sounds like a no-lose situation, but with success comes problems. Online coupons and codes are now subject to tampering and the whims of the retailers who accept them. Before you start virtually clipping, there are a few things to know.

"Coupon use in the last 12 to 18 months has been explosive," says Bill Bishop of Willard Bishop Consulting. "Some retailers are afraid about security issues and there is plenty of fraud that goes on."

Not all retailers allow codes or coupons to be listed on third party sites, preferring instead to keep customers and their personal information closer to home. Most are trying to grow their own sites and strengthen loyalty programs to keep shoppers coming back. You can be sure, if a coupon comes directly from a retailers' site, it's legit, says Bishop. Some like Kroger, Giant Foods and Festival Foods are going even further and letting loyalty club members select offers online so that they can be accessed at checkout with a swipe of the membership card, virtually eliminating fraud.
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But then there are the codes out there that don't come directly from the retailers to your inbox. There's huge growth in sites that aggregate coupon codes. Individuals tip off these sites to codes they've received through the email promotions, sharing free shipping or a 20% off deal with the entire world. Retailers are also playing the game, sending the codes directly to certain sites and benefitting from the increased traffic.

"More and more retailers are interested in working with us to promote offers," says Guy King, founder of retailmenot.com. "Now it's the merchants who approach us and we often have featured discounts and exclusive offers." Recently, snapfish.com had an exclusive retailmenot coupon code for 30% off, and mediatemple.com offered 20% off web hosting.

Retailers generated $18 million in sales from traffic through RetailMeNot.com in the month of July 2009. During that same period, the site had 9.8 million visitors as measured by Google Analytics, up from 4.5 million last year at the same time. Approximately 60,000 subscribers get e-newsletters about deals and increasingly, product manufacturers and retailers including Best Buy and Dell are paying to sponsor the messages.

At CouponCabin.com, owner Scott Kluth says he upped his full-time account management force from two people to eight in the last year. Those employees spend all day on the phone with retailers, asking for codes and special deals and working out paid promotions that generate revenue for the site.

"The way the economy is, we have more than we've ever had before," says Kluth. "We add about 50 merchants per month and have about 9,000 offers on the site at any one time. And their time is well-spent. At CouponCabin our average user spends 88 seconds on the site and saves $16."

Even with numbers like these, some retailers don't want to share codes or be featured on coupon sites. "It's such a small percentage of those who contact us to be taken off," says King. "Usually, it will be the large retailers with teams of lawyers. We had one merchant ask that their coupons be taken down, so we added a message saying they requested not to be listed on the site," he recalls, declining to name the retailer. "Then, they took offense to that."

Kluth says that his site gets about five requests a day to change or take down deals that are no longer valid, and about once every other month gets a cease and desist letter, mostly from very large brick and mortar stores. But, he adds, "The merchant doesn't understand the process and they think they are losing customers, but a few months later, they are often back, trying to engage us in a paid promotional relationship." Kluth adds that high-end retailers are the ones that don't grasp it the most -- they think having a coupon code out there degrades their luxury image. "There's a learning curve," he says. "Online shoppers now expect a coupon code, so if you're going to offer an online site, you need it."

Many retailers have picked up on this and reversed their policy of fighting the codes. They are now openly encouraging people to share coupon codes, especially on social media sites like Twitter. Kluth even says he suspects some companies of giving out bonuses to employees to "leak" coupon codes, based on IP addresses of incoming tips. When legitimate, these are a win win for everyone. Retailers gain traffic, manufacturers move product and consumer reap big savings.

"We did a survey about a year ago and asked how much users are saving," says King. "On average, people are saving $29 on a purchase of $151. If you can save $29 in 30 seconds, why wouldn't people use coupon codes?"

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Can't get that jingle out of your head? Then all that R&D money is paying off! Companies are increasingly using "neuromarketing" to sell their products, which gets past the fact that people sometimes give the answer they "think" is right rather than saying how they truly feel. Scientists attach electrodes to subjects' brains to test their physiological responses to stimuli. It's a little like giving a focus group truth serum. Spearheading the groundbreaking research is Swedish globetrotter Martin Lindstrom, whose new book 'Buyology' describes his findings. He shared his knowledge of emerging marketing tricks with WalletPop.
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There can also be headaches, like the one experienced by Carl Jr.'s in January when a "secure" coupon code intended for 276 people at a basketball game went viral and the burger chain had to pull the promotion. "Merchants sometimes come out with some effort and four or five hours later they're calling and crying and asking us to take it down," says Kluth.

If a retailer doesn't end up pulling a promotion, they sometimes change the expiration date, change the offer or put on other restrictions. So it's best to check the offer before you make your final click.

Here are some basic guidelines to help you navigate the ever-changing process:

Rule No. 1, if it seems to good to be true, it probably is. "If you have a coupon for an entirely free product that's suspect," says Erin Gifford of CouponCravings.com. Anything that has been scanned in, cirulated or saved from a photo sharing site like Snapfish or Photobucket is likely a fraud, and printable PDF coupons can also be easily manipulated.

Perhaps the most famous coupon caper was KFC's recent free chicken debacle. After being announced on Oprah, the certificate was circulated and printed so many times the chain simply could not honor it, turning a positive experience into nightmare of bad PR and unhappy customers.

Target too, had an issue last year when offering $5 off a $25 toy purchase. "Someone turned it into a $5 off coupon for (any) $25 purchase," recalls Gifford. "This hurts honest coupon users."

Be wary of buying coupons from individuals. You never know what you'll get and according to the Coupon Information Council it's illegal to buy or trade coupons.

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