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Mobile discounts a treasure trove of data for retailers, CPG companies

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Mobile discounts a treasure trove of data for retailers, CPG companies

For decades, grocers have relied on paper coupons as a means of advertising their best discounts to customers. But that era may be ending as retailers and consumer goods manufacturers use digital coupons and rebates on mobile phones to get discounts to consumers.

As technology has expanded into almost all facets of the retail world, discounts of various sorts, once printed on tiny pieces of paper, have gone digital. Grocers such as Whole Foods Market Inc. and Wegmans Food Markets Inc. have revised their loyalty programs to include coupons tailored to customers' smartphones. And apps such as Checkout 51 Inc. and Ibotta Inc., which offer discounts on products after customers buy them, present users with a curated list of rebates.

Those interactions with individual customers give retailers specific data on which products are selling and how customers are buying them — information that had previously been available only in aggregate. They also represent an opportunity for consumer packaged good manufacturers to collect the data themselves instead of having to rely on the retailers or market research firms such as Nielsen.

"Access to that information is pretty exciting to them as more and more manufacturers begin to think about selling directly to consumers," Bill Bishop, chief architect at consulting firm Brick Meets Click, said in an interview.

Industry analysts and the creators of some digital discount systems say that information also allows retailers and consumer products manufacturers to target their most loyal customers, shoppers many in the industry believe are the best bet for increasing sales.

Whether that strategy is successful in practice will be determined by companies such as Austin, Texas-based Whole Foods. After releasing results for the second quarter of its 2017 fiscal year in May, the grocer outlined plans to launch a new loyalty program that provides "personalized and relevant communications" to customers across the U.S. by the end of 2017.

In 2016, Whole Foods began sending coupons directly to users of its mobile app, which was previously focused on a shopping list function and a library of recipes that use the grocer's products.

"One of the things we're really focused on here is targeting our existing customers," Executive Vice President and Chief Information Officer Jason Buechel told analysts during a conference call on May 10, according to a transcript. He added that the grocer's goal is to give "core shoppers," which account for 40% of sales, an incentive to purchase one additional item per trip. Those additional purchases could boost revenue at the company by $500 million in the next few years, Buechel said.

But headline sales growth isn't the only financial motivation retail grocers have to experiment with digital coupon systems, said Ron Lunde, a retired retail executive who has also worked as a consultant to the Financial Accounting Standards Board.

In the early 2000s, a change in accounting rules meant retail companies and consumer products manufacturers had to report the amount they spent on promotions, including coupons and rebates, as a sum taken out of total revenue instead of lower in their financial results. That led companies and investors to become more critical of promotional spending and figure out how to get more bang for their buck, Lunde said.

"Some [companies] have been struggling with how to make their promotions more effective," he noted.

That scrutiny coincided with the rise of the smartphone and retailer apps, which have provided a way for retailers to gather data on what customers registered for their loyalty programs buy and when they buy it. Such customer-specific data has challenged more traditional ways of figuring out what shoppers like, such as large demographic studies on age and ethnicity, Lunde said.

But as retailers reach out to customers, some mobile apps are looking to take their method a step further by providing data directly to some of the packaged goods companies that rely on grocers to sell their products.

Those apps, including Checkout 51 and Ibotta, give customers manufacturer rebates on items such as ConAgra Inc.'s Reddiwip or Clorox Co.'s bleach products when they upload information from their grocery receipts. That gives these companies access to data similar to what grocery stores are trying to capture.

"We're going over the top of retailers to manufacturers with data from the consumer," said David Florence, CEO of MobiSave, a rebate app that allows customers to upload photos of their receipts in exchange for discounts. Getting more data directly from consumers is an asset to consumer product-makers, Florence said, especially as many look to bypass retailers and sell products from razors to laundry soap directly to consumers.

Asked for details about how they use information from these apps, five major consumer products and food companies, including Procter & Gamble Co., Unilever PLC and ConAgra, either declined to comment or did not respond.

There are signs that the core concept of the apps is popular with consumers. Smartphone users open some of the most popular discount apps, including Ibotta, almost as often as apps for CNN and Pinterest, according to App Annie, a firm that analyzes mobile apps across a variety of sectors. And Checkout 51, founded as a Toronto-based startup, sold itself to a division of News Corp. in 2015.

To be sure, though, such apps have room to grow before reaching a scale comparable to major grocery stores' consumer bases. As of late May, Florence said, MobiSave was "closing in on 1 million users." Whole Foods, meanwhile, reported in May that about 30 million customers visited at least one of its stores in 2016.

With all the attention given to developing audiences on mobile devices, others say it is getting harder for retailers and consumer product-makers alike to reach customers through the medium.

Larry Mortimer, a former advertising executive who is building his own third-party digital coupon system, opted to design his service around a network of tablets that allows customers to retrieve coupons next to the product in store aisles.

Getting customers to use a mobile phone app for coupons is "like trying to get on the 405 freeway at rush hour in southern L.A.," he said, adding that app-based discount systems of all kinds must compete for shoppers' limited attention in order to succeed.