Anne and I just got back from the grocery store, and I’m wondering why in a world saturated with computers we’re still expected to keep track of coupons by clipping little slips of paper. When we buy stuff, the store prints a selection of coupons derived from what we bought, in effect offering minor discounts for brand and store loyalty. But for the most part these coupons go unused because keeping track of them is such a pain. This is a waste, and it seems to me like there’s a better way.

Most major supermarkets these days have free “club memberships” that allow stores to track peoples’ buying habits and offer discounts to club members. Why not add an array of ‘coupon discounts’ to the membership record? Instead of printing out a paper coupon, set a corresponding electronic bit. Then on future shopping trips, if the customer buys an item whose discount bit is set, give a certain percentage chance the discount will ‘trigger’ and reduce the price paid by the customer. Sort of like a free ongoing mini-discount lottery that correlates with brand loyalty over time. To give it a more Vegas atmosphere, make the register ding each time a discount trigger gets tripped.

Intermittent reinforcement is a powerful training technique. This setup would make use of that, while making customers’ lives easier by removing the need to keep track of paper coupons. Seems to me like everybody wins.

So why don’t stores do this?

4 Responses to “Coupons in the 21st Century”
  1. Sigivald says:

    And if you mention that it works by lowering transaction costs, you could even sound like a hotshot economist!

  2. Mithras says:

    So why don’t stores do this?

    Econ 101. When supply and demand curves cross, the number of units and the price per unit are set. But producers could sell more units if they lowered the price and still make a profit per unit (down to a certain price). The coupon allows them to give a price cut to the people willing to bear the search cost, while still charging everyone else full price.

  3. Kyle Haight says:

    I’m not sure it’s that simple. The way the system is set up now, the store provides discounts to the small subset of people who are motivated to “bear the search cost” as you put it. I’m wondering if, in effect, spreading those savings out to the much larger set of people who are not willing to bear the search cost themselves might result in more of those people choosing to shop at the store in question.

  4. Mithras says:

    You’re effectively arguing the store should just cut its prices for everyone. (After all, that’s what giving everyone the coupon discount amounts to.) I know your original suggestion was random granting of the coupon discount, which would not have such an effect. However, both suggestions have the same problem – the grocery store does not establish the coupon terms, the manufacturer does. The manufacturer doesn’t care whether you buy their product at Safeway or SuperFresh, all they care is that they induce the consumers who are willing to spend the time clipping coupons to buy more of their product by knocking 50 cents off. (The stores, who do care where you shop, go for the effect you are suggesting by matching the coupon discount or giving away free turkeys at Thanksgiving.)

    The purpose of coupons is to divide the marketplace into those consumers who are very price-sensitive and those who are not. None of this is original with me; I wasn’t being sarcastic when I said it was Econ 101.

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