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Couponing in the profit zone

Coupons are a proven marketing tool for grocery retailers to boost sales and retain customers. But they are still far from being a sure bet. Swiss Coop shows how it can be done profitably: through intelligent personalisation of offers. For many years, the cooperatively organised retail company has successfully offered its customers purchase incentives with individualised coupons through its loyalty programme Supercard. Through several touchpoints, the Swiss-based retailer provides an online shop adapted to the personal interests of their customers and personalises the shopper experience based on online and offline buying behaviour.

Retailers are struggling with shoppers’ ever-increasing tendency to switch: not only in terms of the (branded) products they choose and competitor’s stores, but also between the retailers own brick-and-mortar and online channels. Retailers therefore spend a lot of energy on establishing themselves as a distinctive brand against their competition and on retaining customers. Shopper loyalty to the shopping location is becoming an increasingly important target.

Customer retention programmes are becoming an increasingly important instrument with which retailers try to increase the loyalty of their customers. In Switzerland, this is particularly well received: On average, every citizen of Switzerland uses no less than six customer retention programmes, as the Loyalty Trend Report of the two consulting companies Conceptio Consulting and Milesahead AG shows. In the ranking of the current edition from 2020, Migros Cumulus leads the top 10, ahead of Coop Supercard and Ikea Family.

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Couponing is no guarantee of good results

It took a long time for loyalty programmes, long established in the USA, to make their way across the Atlantic. Nowadays, retailers all over the world are using coupons and discount vouchers. In addition to coupons in paper form, digital coupons in newsletters or in shopping apps have recently become increasingly important.

However, although coupons are among the most popular customer loyalty tools used by retailers, they do not automatically guarantee success. According to Nielsen, 59 percent of all discount campaigns in German retail do not reach the break-even point. All too quickly, the return for the retailer can be negative.

Personalised content boosts success

If retailers do not simply adapt their coupon campaigns according to the one-fits-all principle, but customise them to the interests and purchase history of each individual customer, they can bind shoppers better and achieve higher redemption rates. This contributes significantly to the success of coupon campaigns.

Numerous retailers are currently discovering the opportunities that lie in personalised offers. Most of these promotions aim to increase the purchase value per customer: through up-selling, retailers offer their customers discounts on higher-priced items within a product category. Through cross-selling, they provide coupons individualised with new product categories.

Access to numerous data sources in real time

For a long time, however, retail companies lacked the possibilities to individualise offers to the preferences of customers on the basis of data. But today, they have solutions at their disposal that use artificial intelligence (AI) to analyse large amounts of data from online shops and POS data from brick-and-mortar shops. For the recommendations of individualised content, the AI-based systems access databases in real time.

Starting point for recommendations to customers can be related to the last product purchased, sample or colour variants, as well as the product category, among other things. A good basis for product suggestions are also the search terms entered by the customer in the online shop and the behaviour of the user on the website. A powerful recommendation engine based on artificial intelligence can provide personalised content and continuously optimise the recommendations through machine learning from the consumer’s behaviour.

Coop Switzerland has already proven that it is possible to achieve greater net sales as well as a higher purchasing frequency with individual coupons. For many years, Coop has relied on the AI solution of prudsys AG, a member of GK Group, ‘GK AIR Personalization’ for the intelligent management of individual customer coupons. The software calculates suitable promotion products and discounts for the customer coupons based on historical shopping behaviour and configures the individualised online shop.

Coop is one of the largest grocery retail and wholesale companies in Switzerland. It is organised as a cooperative with around 2.5 million members and has its headquarters in Basel (Photo: Coop Switzerland)
Coop is one of the largest grocery retail and wholesale companies in Switzerland. It is organised as a cooperative with around 2.5 million members and has its headquarters in Basel (Photo: Coop Switzerland)

1:1 personalisation made accurate

In a one-month A/B test, Coop Switzerland proved that the recipients of the personalised coupons in the customer newsletter generated higher purchasing frequency and greater net sales per shopping basket compared to the control group. And in such a way that the discounts granted in the process did not have a negative impact on the contribution margin. The AI-based solution from GK helps Coop to automatically select the appropriate items for each customer individually so that the Swiss retailer always works profitably with them. A discount of a constant 20 per cent is granted on the promotional items.

Matching coupons to the individual interest of the customer multiplies the probability of use. (Photo: Coop Switzerland)
Matching coupons to the individual interest of the customer multiplies the probability of use. (Photo: Coop Switzerland)

“By using GK AIR Personalisation, we achieve a strong recommendation quality of our individual coupons in the newsletter. This is reflected in the high acceptance rate on the part of the recipients,” reports Frederik Mantel, Head of Digital Marketing Solutions at Coop Switzerland. The personalised coupons have a proven positive impact on net sales, shopping frequency and also on the contribution margin.

“Thanks to the close cooperation and professional support from the AIR project team, we were able to bring the project to a successful conclusion within a short period of time,” says Mantel, praising his technology partner. He plans to use the AI solution for other personalisation use cases in the future.

Coop links data from the brick and mortar and online world

Based on the positive experience with the solution in bricks and mortar retail, Coop expanded the personalised customer approach on the omnichannel platform coop.ch in May this year, where the retail company offers its customers a selection of more than 17,000 products in the areas of food, wine, household, pet and drugstore assortments.

Based on the data on purchasing behaviour in the physical stores and in the online shop, the AI solution GK AIR Personalization calculates individualised product suggestions and content, which are shown on numerous recommendation areas within coop.ch: Directly on the home page, within the assortments as well as on product detail and search result pages.

The new ‘My Coop’ format offers customers a customised online shop interface that allows them to see the products and content that are relevant to them much quicker. The solution sorts favourite products based on historical buying behaviour and highlights them for the customer. Tedious searching in different categories for the preferred articles is no longer necessary.

In order to make this possible, customers have to uniquely identify themselves. Since the vast majority of customers have stored their loyalty membership in their customer data, all they have to do is log in to the Coop online shop with their login data.

Huge amounts of data form the basis for individual content

Coop uses all internally available behavioural data from the online and offline world via GK’s AIR personalisation solution for 360-degree personalisation across all channels: for the calculation of individual content, over 420 days and more than two billion behavioural data are accessed from the customer history in the online shop. From the brick-and-mortar stores, more than 7 million data points on transaction and behavioural data are available, which are analysed to calculate individual content. In addition, the solution also uses current data from third-party providers such as weather data. The Swiss retail company has shown that intelligent couponing and personalised content engage customers. This has a positive effect on net sales, purchase frequency and contribution margin.

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Annette Böhm

Annette Böhm has been specialising in the development and the management of marketing campaigns targeting retailers and consumer goods companies for more than 20 years. The focus of her expertise is on lead generation campaigns and client nurturing. She is an expert in social media and e-mail-marketing and has a high level of experience with the most relevant CRM and marketing automation tools.

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