Marketing: Coupons redeemed by hi-tech revolution: Check-out computers are enabling supermarkets to tailor discount offers to customers

THE DISCOUNT coupon has become the most widely used promotional device in UK marketing, with its use by retailers and manufacturers growing by 60 per cent last year. An estimated 8 billion coupons, with a face value of pounds 2bn, were distributed - and of these more than 450 million coupons, worth pounds 113m, were redeemed.

Cutting coupons from newspapers became a Sunday ritual in the US in the Eighties - and while British consumers have not caught on to the same extent, they are quickly shaking off the reserve that previously restricted the rate of voucher redemption. This, coupled with the imminent introduction of new coupon distribution methods here, could see the market increase in size and reach a level of sophistication equal to, if not greater than, that in the US.

The recent and planned developments of retailer promotional activity have been boosted by the possibilities presented by electronic scanners at checkout counters.

Already Sainsbury and Tesco have been operating schemes based on bulk buying. On given promotional lines, consumers purchasing a specified amount of the product receive an additional one free. The difficulty is that the retailer doesn't know if the shopper was even aware of the promotion before making the purchase. It could be that the buyer intended to buy that quantity of the product anyway.

However, over the coming months a number of systems are being piloted which, if successful, will revolutionise the distribution, targeting and objectives of couponing.

Gateway is in the process of launching four retail concepts, one of which is Somerfield Food Halls. There are already 25 of these operating as enclaves in large Gateway outlets, and separate Somerfield stores are now being opened.

The new stores are unusual for a number of reasons. They specialise in an up-market range of fresh foods, except dried groceries, which can be ordered through the Somerfield catalogue. Delivery is guaranteed within two hours of the time specified by the customer. Somerfield Food Halls is promoted through a direct marketing campaign by the London- based WWAV Group.

The store openings are preceded by a door-to-door drop to homes in the store's catchment area. This includes store details and a questionnaire devised to establish the size and age range of each household, and where the householder currently shops. In return for completing it, respondents qualify for inclusion in a prize draw and are awarded 'privilege shopping cards' - which they are encouraged to present at the checkout each time they shop, allowing each shopping basket to be matched to the shopper's identity.

The information is analysed and stored on a database created by the Bristol-based Computing Group. Judi Gehlcken, managing director, says: 'The recorded profiles and purchasing habits will enable stores to tailor goods and services to meet customer needs. It also ensures that promotions offered to existing customers will be of genuine interest to them.'

Claire Savage, marketing manager of Somerfield Food Halls, said: 'Within three months we should have an accurate picture of individual shoppers' purchasing habits and we can then target them with tailor-made promotions.'

Somerfield's immediate ambition is to encourage customers to extend the range of products they buy. 'For instance, if, after tracking, we notice that a customer buys consistently from the wet fish and bakery departments but not from the deli, we can issue money-off vouchers redeemable against products from the deli,' says Ms Savage.

In the medium term the aim is to encourage greater purchase of own-label products and trading up. For instance, a shopper who purchases a six-pack might be offered vouchers redeemable against a 12-pack of the same product.

In the long term, Somerfield may take on manufacturers as promotional partners, aiming to introduce 'brand-switching' campaigns - whereby participating manufacturers can target consumers who are loyal to a rival brand, by issuing them with money-off vouchers redeemable against their own brand.

Another initiative which offers brand-switching opportunities is 'Checkout Saver', by Catalina Electronic Marketing, which will be piloted in five Asda outlets from this month. John Eustace, managing director, says: 'The Checkout Saver network operates by monitoring customers' purchases as the bar codes are scanned at the checkout. It then electronically distributes Checkout Saver coupons for pre-programmed products.

'Manufacturers in the scheme determine the specific category, combination of products, or absence of products in the shopping basket which will result in a coupon being issued for their brand. The coupons are printed at the checkout and handed to customers with their receipt, for use on a return trip to that supermarket.' Each promotional cycle lasts 12 weeks, during which time access is denied to competitive brands.

Other popular applications for the system include the issue of coupons for complementary products. For example, a shopper buying nappies could be given coupons redeemable against a new line of baby food. There is also the possibility of giving an incentive to continue purchasing a product, simply by rewarding a customer who redeems a coupon with a similar one against the next purchase.

Mr Eustace believes that his company's patented scanner technology is 'limited only by imagination'.

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