POV

Special offers in the form of coupons, rewards and discounts have long been a mainstay of marketing to drive product sales, customer acquisition, trial, and loyalty. Now at a time of high inflation, when shoppers are feeling intensified financial pressures and stretched budgets, the power and importance of promotional offers and rewards is even greater.

Indeed, in 2021 as the effects of inflation were beginning to be felt, the use of digital offers increased 13 percent. Responding to this need, brands increased the distribution of these offers by 21 percent, according to industry estimates.

Given the sharper rise in prices in recent months, consumer interest in and reliance on special offers will surely increase further. However, as consumers look for ways to make their dollars go farther, consumer brands would be wise to do the same by reducing waste associated with coupon and offer fraud and refocusing this savings on helping consumers continue to try and buy their products.

Consumers Feel the Pinch

Inflation is taking a big bite out of consumer pocketbooks. U.S. inflation is currently at its highest level since the early 1980s. Based on the Consumer Price Index, inflation reached an annualized rate of 8.5 percent in March before moderating only slightly in April to 8.3 percent. Rising prices were costing families an additional $327 per month as of March, according to Moody’s Analytics. Food prices were up 8.8 percent from a year earlier. Gas prices climbed a dizzing 48 percent.

Right now, many U.S. households are struggling to make ends meet.  They’re being forced to be more selective about what goes into their carts and look for better deals on shopping excursions. Some 50 percent of Americans say rising prices are making it harder to buy things, according to the EY U.S. Future Consumer Index.

Offers and Rewards to the Rescue

Brands have an important opportunity to come to the rescue of U.S. consumers who are feeling the pinch of inflation. Special offers and discounts can address consumer needs, while helping brands and retailers win and retain customers, grow market share, and build lasting consumer relationships. Indeed, shoppers are now more likely to switch to new products, brands and experiences that address their needs and budget constraints.

The use of special offers and discounts by consumers has been climbing steadily of late. Sales at discount store sales grew 65 percent in a single week last November. Approximately a third of all shoppers increased their use of coupons in 2021, with 54 percent of these consumers saying their increased use of coupons was due to shrinking budgets, according to Inmar Intelligence. Given the sharp rise in inflation in 2022, those numbers will undoubtedly climb.

CPG manufacturers and retailers are facing their own challenges with rising supply chain and labor costs. At the same time, consumers are expected to cut back on eating out, helping sustain demand for food and beverage products. Yet, brands can win consumer goodwill and competitive advantage with well-timed offers and pricing strategies.

Coupon Fraud Hurts Consumers in Need

However, there’s an ugly fly in the ointment. Coupon fraud will make it tougher to deliver optimal savings to consumers. Fraud is a multi-billion problem that hasn’t gone away. According to Pymnts.com, coupon fraud costs U.S. businesses between $300 million and $600 million a year.

Unfortunately, I expect offer fraud to increase during this period of high demand for deals as fraudsters increase efforts at counterfeiting and other schemes to capitalize on consumer pain. Late last year, a Virginia Beach couple was convicted of a counterfeit coupon scheme valued at approximately $32 million. More recently, a woman from Modesto, California, admitted to creating and selling nearly $10 million worth of counterfeit coupons.

CPG manufacturers and other companies, and ultimately the consumer, pay for all this fraud. If companies could eradicate fraud, they could—and I believe most brands would—plow much of that savings back into delivering greater promotional dollars to help consumers.

Solving Fraud

How can manufacturers and retailers radically reduce fraud and thereby help consumers? There are a number of initiatives underway to combat fraud. Yet, as discussed above, existing approaches and technology used to verify and process coupons have failed to stop it.

However, I believe advanced technology and new approaches to offer delivery and redemption will make a major contribution to this effort.  Blockchain technology and distributed ledger systems, which provide a decentralized and highly secure database and record of transactions, can virtually solve fraud. Serialized, single-use offers, verified by a general ledger system have a wide range of advantages for retailers and brands, as well as consumers. They increase consumer convenience by making redemption an automatic part of a mobile payment process. They provide next-day reimbursement for retailers and give brands valuable, on-the-fly insights into campaign results.

Serialized, payment-based offers also virtually eliminate fraud and mis-redemption, allowing brands to provide more savings to consumers. By removing fear of fraud and over-redemption, they allow brands to deliver higher-value offers to consumers.

Retailers and brands have a big opportunity right now to help consumers in need while growing loyalty and market share. Solving the problem of fraud will allow them to do more when it’s most needed.