Omnichannel Redemption.
Improving coupon performance and
preparing for the era of digital coupons
Omnichannel Redemption.
Improving coupon performance
and preparing for the era of
digital coupons. A thought
leadership paper from Valassis.
Contents
04
10
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24
30
32
42
47
Why should I care?
The case for Omnichannel Redemption
Why isn’t it here already?
Omnichannel Redemption: broken down
Omnichannel Redemption: solution overview
Omnichannel Redemption: solution details
Benefits of Omnichannel Redemption
Further interest or questions?
Why should I care?
01
Today’s Coupon Management industry is primed for an
evolutionary leap to the benefit of all parties
The UK’s coupon industry sees close to one billion
coupons being redeemed successfully in UK grocery
supermarkets each year.
The post-redemption coupon clearing activities, which
account for a very small percentage of the total funds
invested in coupons, have evolved over 45 years in
line with changing client needs and the limitations of
existing technologies. Today’s multi-staged clearing
procedures operate securely and highly efficiently and
have evolved gradually since the introduction of
coupon barcodes around thirty years ago. However,
there has not been a technology-driven industry
reinvention, as has happened in other sectors.
There is no question that,
particularly in the UK’s current
couponing environment, a more
concerted use of available
technology would enable the
industry to take an evolutionary
leap forward for the benefit of all
parties. This document makes the
case for that change.
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Why should I care?
02
Retailers want their Point of Sale to do the difficult work and
not burden store staff with tricky, slow and costly decisions
We are living in an era when price comparisons on a
single product can be done in real time between grocery
retailers, and then a coupon for the price difference
can be printed out then and there. Given this it’s
surprising how little these Point of Sale (POS) systems
examine coupons and vouchers. For coupons and
vouchers grocery POS has not kept up with the times.
People are amazed when they hear that most POS
does not check whether the product on offer has in
fact been bought. It is left to the till operator to scrutinise
the coupon and its small print and to decide whether
to accept it. If the till operator makes the wrong call
then the retailer might not be reimbursed the
coupon’s face value.
The till operator’s “accepted or rejected” decision is
just one flaw. They may be required to place different
coupons into different till slots, representing scope for
further errors. The store’s cash office might be
required to add up all the coupons so the store
knows how much it is owed. Sometimes the cash
office has to sort them into different categories for
different procedures before bagging them up for
onward shipping.
After leaving the store, if the coupon clearing
procedures determine that the coupon should never
have been accepted at POS and the retailer will not
be paid, the coupon will be returned to the retailer.
03
Manufacturers want their coupons to be used against the
product on offer
On the other side of POS imperfections is the brand
manager who distributes coupons to their targeted
consumers in the hope that they might like the new
flavour, fragrance, design or product claim, and perhaps
change their future shopping choice. However, POS
systems very rarely check whether the product on
offer was bought.
Today, and in the main, brand managers pay for
redeemed coupons without knowing who redeemed
them, exactly which product was purchased, and
when the coupon was redeemed. Whilst it may be the
case today, it does not have to be.
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Why should I care?
04
Industry imperfections suggest an opening for
Omnichannel Redemption
Valassis are promoting and supporting the widespread
adoption of Omnichannel Redemption in Europe, and
have developed a range of Omnichannel Redemption
solutions to suit grocery retailers’ different needs and
situations, which we have been promoting steadily for
three years. Our successful implementations are already
in place with retailers such as Esselunga in Italy,
Carrefour in Spain and Netto in Germany. We are also
in advanced discussions with more than one UK retailer.
The purpose of this document is to
share our knowledge and introduce
two Valassis Omnichannel
Redemption solutions that improve
coupon performance for the
retailer and coupon issuer.
As a result of our work to date, we believe that we
have developed an unrivalled understanding of
Omnichannel Redemption and what this means to
various stakeholders.
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The case for
Omnichannel Redemption
Omnichannel Redemption is a
term increasingly used by
grocery retailers and brand
manufacturers in relation to how
they would prefer coupons to be
handled in the future.
It encapsulates a market need
for a robust electronic validation
and reconciliation solution for
coupons that reduces costs,
solves the problems associated
with fraud and mis-redemption,
improves till performance and
sets up the possibility of digital
coupons being securely
redeemed at point of sale from
mobile devices.
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The case for
Omnichannel Redemption
Through Valassis’ work with many
major grocery retailers across Europe,
we know that Omnichannel
Redemption brings significant
improvements and benefits to all
participants in the coupon and
voucher industry.
• The UK business cases that we have reviewed
typically illustrate a 50% cost saving for retailers
from lower operational costs in store, the near
elimination of mis and mal-redemption, as well as
providing several revenue based benefits and
enhancements
• For coupon issuers the level of mis and malredemption associated with each coupon campaign
is estimated at 20% of all redemptions. This cost is
eliminated through Omnichannel Redemption
• The consumer will also benefit, although perhaps
initially less noticeably than retailers or
manufacturers. Their coupons (and those of the
person in front of them at the checkout) will be
handled more quickly, and there will be no quibbling
or potential embarrassment about whether the
coupon terms and conditions have been met. The
coupon is either accepted or it is not. Also, if the
coupon industry works better it would be reasonable
to expect that more coupons will be issued
• Omnichannel Redemption will shorten the total
coupon processing time so that retailers and coupon
issuers can access their data much faster and refine
the effectiveness of their coupon campaigns. For the
retailer it will significantly reduce their internal
processing costs and lower wastage from mis and
mal-redemption of own funded campaigns.
• For the manufacturer it will increase their financial
return by eliminating mis and mal-redemption. It
also enables speedier financial settlement between
coupon issuers and coupon redeemers.
• Another good reason to consider Omnichannel
Redemption is that we are moving closer to the day
when coupons will be captured, stored and
redeemed securely via consumers’ smartphones
and other personal digital devices.
Omnichannel Redemption ensures
that the electronic redemption
transaction is secure. If it’s not then
the odd incidence of coupon abuse
could turn into a money-spinner for
criminals paid for by either the
manufacturer or the retailer.
Omnichannel Redemption has an
immediate role to play with online
retailers, and implementation of
Omnichannel Redemption here is
quite straightforward. Given the
trends around consumers shopping
online for everyday groceries, this
may be a good place to start for
Omnichannel Redemption in the UK.
“Less than four percent of people in America buy
CPG products online in any given month, but we
project e-commerce to grow at a 25 percent annual
rate through 2015 and more than double its current
share of total CPG sales.”
“We expect personal care categories like vitamins,
skin, hair, feminine and baby care; pantry staples
like coffee and cereal; and paper products like bath
tissue and kitchen towels to win in e-commerce if
manufacturers and retailers collaborate to deliver
price-value, choice and convenience.”
Source: Nielsen
Digital Shopping: What You Need To Consider / October 2012
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Why isn’t it here already?
Given the seemingly obvious
and compelling reasons to
adopt Omnichannel
Redemption, a fair question to
ask would be why isn’t this the
industry standard already?
There are several very good
reasons why this hasn’t been
adopted.
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Why isn’t it here already?
01
Success depends on a comprehensive and completely
reliable central offer database. Different parties must
co-operate to make this work all the way down to
checkout lane 15
• If the offer database contains incorrect or incomplete
instructions, or access to it is unavailable then a
legitimate coupon will be rejected. If this happens
then the customer is unhappy and confused and the
store now has an issue to manage from perhaps a
75 pence transaction
• Unfortunately, many manufacturers have problems
maintaining robust databases for all their Global
Trade Item Numbers (GTIN) or ensuring all the right
acceptance conditions have been logged correctly.
It is Valassis’ view that data entry and checks here
need an experienced third party involved
• Management and hosting of the offer database is
clearly fundamental to Omnichannel Redemption
working, and several parties need necessarily to be
involved to ensure absolute accuracy and unfailing
availability. Deciding which parties perform which
tasks around the offer database is no small decision
• The database needs to be hosted by a reliable
hosting provider to ensure 24 x 7 x 365 availability
and links to the retailer. This service could be
provided either by a third party or by the retailer
themselves
• The issuer of the coupon, or its agent, must enter all
the necessary details around the offer, and these
details must be checked carefully and probably done
better by a third party in a systematised manner
which can detect anomalies
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Why isn’t it here already?
02
An independent party needs to keep a close eye on
verifying redemptions. Which organisation should play
that role? And do retailers share that view?
• In an industry which involves hundreds of millions of coupons
being redeemed each year, and with each coupon going through
so many pairs of hands, mistakes happen. As such the wrong
business can be billed the wrong amount and this can become
very expensive if undetected
• Some retailers claim that manufacturers have nothing to fear. It will
all work and if mistakes are found adjustments can be reconciled
later, but by this time the money is in the wrong bank account
• However, here is a clue: in the world’s largest coupon market, the
US, manufacturers have always been insistent that third parties
act as a check and go-between to ensure legitimate coupons
have been redeemed legitimately and paid to legitimate retailers
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Why isn’t it here already?
03
Changes to retailer Point of Sale require strong Return on
Investment (ROI), long lead times and must compete with
other change requests
• Any costs incurred by POS hardware and software
demands a ROI, which either hasn’t been clearly
articulated by the proponents of Omnichannel
Redemption so far, or because the ROI is less compelling
than alternative changes being considered at POS
• Probably the single largest factor why Omnichannel
Redemption isn’t already widespread is that
retailers need to make changes at their POS, and
any changes involve costs and the opportunity
cost of making one change over another
04
Smaller retailers with low volumes of coupons may not
find Omnichannel Redemption cost effective
• The business case for changing POS with independent
retailers is unlikely to be compelling until Omnichannel
Redemption is bedded into their POS systems as a
default i.e. no custom work is required
• It should be noted that positive ROI for Omnichannel
Redemption has a strong positive correlation with
large store numbers and high coupon volumes
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05
All the details need to be
figured out before pressing
the ‘go’ button
• Because today’s processes around coupons are so
entrenched and “broadly” work, a shift to a new solution
makes people nervous, and especially the experts who
understand what is involved and where things can, and
often do, go wrong
• Before going live, even on a trial basis, the parties
involved must be clear on the details. Any oversight will
render the trial a headache at best or a dismal failure. For
example, what happens to the physical paper coupon
once scanned and accepted by the retailer? Who destroys
it and how, so that it can never be used again?
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Omnichannel Redemption:
broken down
There are 03 separate activities
relating to Omnichannel
Redemption coupons and
vouchers. Electronic redemption
and settlement happen today in
some manner. It is electronic
validation, which is the new and
defining element that matters.
01
Electronic Validation
Currently, thorough validation of coupons and
vouchers takes place in the retailer’s clearing house
operation, several days after being accepted at the till.
Retailer POS typically just checks for the coupon’s
face value and in a minority of cases, the POS
recognises the coupon issuer.
Electronic validation can be achieved in real time by
providing the offer business rules directly at the POS
enabling the system to decide if an offer is valid or
not, and whether product purchase conditions have
been met. This enables the POS rather than the till
operator, to decide which consumer offers are
accepted and those that should be rejected.
The types of business rules that can be used for
validating the coupon at the POS include some of the
following:
• Start and end dates of the offer
• Store specific (the offer is only valid in certain stores)
• The offer is only valid for certain sales/items in the
basket (GTIN basket validation)
• The offer is only valid if you buy both item A and
item B together
• The offer is only valid for a certain consumer
• The offer is valid for total spend greater than £X
• The offer is time specific (e.g. can only be used in
this branch of this store between 3:00 and 4:00 in
the afternoon)
• Buy 3 of item A for the price of 2
• Get a X% discount when you buy item A
• Only X,000 of coupons can be redeemed as part of
this promotion (e.g. switch the coupon off after
X,000 have been redeemed)
It is worth pausing here and noting that there is more
than one potential technique for undertaking
electronic validation.
Barcode based solution
• In a barcode based solution all the necessary
validation rules and any external “keys” are held in
a special and unique coupon barcode. Such a
barcode, electronic or printed, represents an
identifier which can be used to retrieve information
held in a database associated with the coupon
• GS1, a global standards trade body, is marketing
such a Global Coupon Number (“GCN”). The GCN
will identify a coupon uniquely thus ensuring that it
is always identified correctly anywhere in the world.
Each coupon is unique and allocated a separate
GCN. The GCN itself has no meaning and this
allows the coupon to be looked-up in a database
and its associated information retrieved at any point
or location
Valassis’ view is that such a system could work well
as long as:
• The retailer’s POS scanners can read the GCN
• A database exists which contains all the coupons,
associated GTINs and business rules
• The POS and the database can be engineered
to speak to each other reliably and in real time
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Omnichannel Redemption:
broken down
Electronic Validation.
Real time validation via an
external database using existing
barcodes and POS technology
• Valassis believes real time validation via an external database using existing
barcodes and POS technology is the most practical and comprehensive
implementation option given the various considerations on solution requirements,
today’s starting point, the costs of change, and speed to market
• The external database can either be hosted by the retailer or by a third party.
The database must contain all the acceptance requirements for a coupon
presented at POS and return either an “accept” or “reject” message
• Implementation of this solution does require modifications to be made to POS
software. However, experience has shown that such changes are reasonably
straightforward and inexpensive
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Omnichannel Redemption:
broken down
02
Electronic Redemption
Provided the coupon meets all of the validation criteria then the
retailer will accept the coupon as payment tender or “redeem”
it. This means that the total amount due for the shopping
transaction will be updated by the POS to reflect the benefit of
the offer. For example:
• The consumer will receive a cash credit against their total
amount to be paid at the POS
• The consumer could be credited with loyalty points if the offer
is x number of points per product purchased
The till receipt will list the offers accepted and the reduced
amount spent on the shopping. The POS will contain a brief
description of each offer that is printed on the till receipt for
those offers it has accepted.
03
Electronic Settlement
Once the coupon is either accepted or rejected at the POS by the
business rules, details of the coupon transaction are written to a
redemption database. These details are then sent back to Valassis in
real time. Once the transaction detail is received by Valassis, this can
then trigger a series of events as part of the e-settlement process:
• Payment to the retailer for the coupon and handling allowance
(although payment terms will dictate the payment frequency)
• Billing to the coupon issuer (or their nominated settlement agent) of
the accepted coupon
• Provision of marketing information to the coupon issuer (e.g. date
and time of coupon used and which GTIN or brands the coupon
was used against
• Assess the performance of the promotion in real time (e.g. uptake
after launch or how it performs alongside a TV campaign)
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Omnichannel Redemption:
solution overview
Valassis has a real time
Omnichannel Redemption
solution which can be hosted
either by the retailer or by a
third party. This solution is
supported by Valassis’ Offer
Masterfile, a unique database of
all live offers in the marketplace
with eligible products and
business rules, along with
PromoHub™, Valassis’ online
campaign management solution
that enables coupons to be set
up, authorised and monitored.
The main benefits of a real time solution are:
•
•
•
•
•
Real time can take into account digital coupons which can be uniquely serialised
Offers are live for validation as soon as they are set up in Valassis’ PromoHub™
Potential fraud is identified at POS before the coupon has been accepted rather than post redemption
Enables faster settlement
Real time can be used for all retail formats, i.e. bricks and mortar, e-commerce and mobile commerce
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Omnichannel Redemption:
solution details
Valassis PromoHub™ and Offer Masterfile
Valassis are in a unique position in the UK to execute
Omnichannel Redemption because of our long
established and comprehensive Valassis Offer
Masterfile and the coupon management system it sits
within, PromoHub™.
PromoHub™ is used today by Valassis clients to set
up, authorise and monitor their coupon campaigns.
The data collected through PromoHub™ in the coupon
set up phase is placed into the Valassis Offer Masterfile.
This provides the foundation for all the business rules
that will be used for validating coupons at POS.
A few credentials about the Valassis Offer Masterfile:
• It contains details of over 200,000 live offers in the
market place
• It includes barcoded offers that contain GS1 issuer
numbers (30% of all offers on our database use GS1
issuer numbers) and other barcodes that are unique
to specific retailers (70% of all offers on our database)
Coupon issuers contributing data to the Valassis
Offer Masterfile include:
• Approximately 300 packaged goods manufacturers
and 4,000 brands
• Various national newspapers and magazines
• Offers from Tesco, Sainsbury’s, Asda, Morrisons,
Waitrose, Iceland, Superdrug and retailers in the
convenience sector
• The Government (Healthy Start Vouchers) and
Edenred (Luncheon Vouchers)
We have historical offer data and redemption results
going back over decades. This is an important point,
since some of the larger brands do not wish to close
offers issued several years ago.
In the context of Omnichannel Redemption, the
following information is needed in the coupon set up
phase to enable settlement today:
• Issuer name and issuer number/code
• Offer barcode (generated by PromoHub™)
• Product type, e.g. Health and Beauty, including sub
sets, e.g. toothpaste, mouthwash, etc
• Offer start and end dates
• Face value or % discount
• Min/max values in the case of variable face value
coupons
• Store specific flags, e.g. ‘S’ stocked only at ‘Y’ retailer
• Retailer own-funded or supplier funded flags
• Distribution method
• Distribution quantity
However, for Omnichannel Redemption eligible GTINs
against which the coupon can be redeemed are also
needed.
Thinking ahead to smartphone coupon redemptions,
the set up phase might also require:
• Time of day acceptance
• Short term acceptance (e.g. next 6 hrs) to sell
newspapers after 3pm, or stock with soon to expire
sell by dates
• Greater variety and complexity of offers than
typically are offered today
VERSO™ is Valassis’ real time
Omnichannel Redemption
solution. It stands for Valassis
Electronic Redemption Solution.
It is a real time Omnichannel
Redemption solution for retailers
and is not licensed by the size of
the POS estate, therefore a
growing POS estate has no
bearing on the costs of VERSO™.
Valassis offer 02 options for hosting
VERSO™. Retailer Hosted and
Third Party Hosted.
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01
Real time Omnichannel Redemption: Retailer Hosted
With this option, the retailer hosts their own version of VERSO™
in their own data centre, therefore giving the retailer complete
control of their own Omnichannel Redemption infrastructure.
Valassis will provide all Offer Masterfile and business
rule updates, created by the coupon issuers via
Valassis’ PromoHub™, to the retailer on a daily basis
using agreed interfaces and protocols. In turn, the
retailer will provide Valassis with successful
redemption transaction data, also on a daily basis, to
enable settlement and associated reporting.
With this option, the retailer will be responsible for
developing any future market driven enhancements to
their own hosted solution.
• Valassis can supply the offer database and the
associated business rules to the retailer to host
their own VERSO™ solution at their chosen hosting
location
• Valassis can provide a fully managed service for
hosting the VERSO™ solution in a highly secure,
fully resilient, 24 x 7 x 365 location
When a coupon is presented at POS, the coupon
details are sent in real time to VERSO™ for validation.
VERSO™ will undertake some of the validation
process. Provided the coupon meets the initial
validation criteria (e.g. coupon is within the start and
end period), VERSO™ will send back to the POS, the
coupon validation rules in real time. VERSO™ has the
potential to validate all of the coupon transaction.
However, to achieve this the retailer would have to
provide the basket data to the application hosting
the VERSO™ database. Valassis believe this is
something that retailers will be reluctant to do.
• The POS will then have the validation rules in order
to make the decision to either accept or reject the
coupon
• The POS coupon acceptance or rejection details will
then be sent back to the VERSO™ solution, again in
real time in order to trigger the e-settlement processes
Omnichannel Redemption:
solution details
Process flow for retailer hosted
Omnichannel Redemption
solution:
A
New offers are supplied by
manufacturers, the retailer and
its partners via the Valassis
PromoHub™ portal.
C
The retailer’s POS sends
validation requests to the
VERSO™ database, VERSO™
sends approval/decline
responses back to the POS. All
successful and declined
transactions are written to the
VERSO™ database, including
product validation data.
B
Via PromoHub™, Valassis
maintains its Offer Masterfile
and transfers its relevant
content in real time to the
retailer’s hosted VERSO™ solution
using an agreed protocol.
D
All successful transactions and
associated product validation
data are sent from the VERSO™
database to Valassis, using an
agreed protocol at an agreed
frequency (as required by the
retailer) to start the settlement
process.
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Omnichannel Redemption:
solution details
02
Real time Omnichannel Redemption: Fully Managed
Service hosted by third party technology partner
This option minimises retailer development to interfacing
with the Valassis hosted VERSO™ database from either the
retailer’s POS devices or from its central system/central host.
Valassis also offer a fully managed, 24 x 7 x 365 resilient
Omnichannel Redemption service to retailers. VERSO™
is located in a highly secure data centre with automatic
failover capability to an alternative highly secure data
centre 150 miles away. VERSO™ has capacity on demand
to manage comfortably the high levels of concurrent
transactions that retailers experience at peak times.
With this option retailers will benefit from future
development enhancements to the hosted VERSO™
solution. Valassis will provide enhancements in line with
the priorities agreed by its customers using this fully
managed service. Valassis have a clear development
roadmap and investment commitment in place for the
fully managed service option of VERSO™.
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Omnichannel Redemption:
solution details
Process flow for real time
Omnichannel Redemption
solution via a fully managed
service platform:
A
New offers are supplied by
manufacturers, the retailer and
its partners via the Valassis
PromoHub™ portal.
C
The retailers POS or central
system sends validation
requests to the VERSO™ hosted
database, VERSO™ sends
approval/decline responses
back to the POS or central
systems. All successful and
declined transactions are
written to the VERSO™
database, including product
validation data.
B
Via PromoHub™, Valassis
maintains the Offer Masterfile
and associated business rules,
and transfers them to the fully
managed VERSO™ solution
located in the highly secure
data centre.
D
All successful transactions and
associated product validation
data are immediately
transferred to the Valassis
internal systems for
commencement of the
settlement process.
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Benefits of Omnichannel Redemption
All
stakeholders
win
with this solution
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Benefits of Omnichannel Redemption
The benefits of Omnichannel
Redemption for the retailer
are compelling...
Benefits for the Retailer
• Minimises fraud and mis-redemption on retailer own branded
coupons, therefore saving the retailer promotional wastage
• Speeds up time at the checkout
• Reduces back office/administration
• Reduces or even eliminates coupon transportation (this is also
a green issue)
• Improves cash flow through faster payments
There are strategic benefits for the retailer too:
• Omnichannel Redemption provides a platform to support digital
coupons, which in turn can reduce media distribution costs
• Promotes growth opportunities since there is potential to secure
a greater proportion of the manufacturers’ trade marketing and
promotional spend if they believe that the retailer’s handling of
coupons is more secure and reliable than others in the market
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Benefits of Omnichannel Redemption
...and as persuasive for the
manufacturer and consumer.
Benefits for the Manufacturer
Benefits for the Consumer
The key benefit of Omnichannel Redemption to the
manufacturer is that it eliminates mis and malredemption by validating the coupon against the
items being bought. Additional benefits include:
For the consumer, the benefits are:
• Omnichannel Redemption provides a platform to
support digital coupons, which in turn can reduce
media distribution costs
• Faster, more relevant marketing information enables
robust ROI analysis where the true effect of couponing
can be isolated from integrated marketing campaigns
• Time at checkout is quicker – coupons are accepted
or rejected with one quick scan
• It will accommodate new coupon distribution
methods, such as mobile and therefore the
consumers’ choice of media for receiving new
offers is accommodated
• Arguably, it will also encourage more coupons to be
issued as wastage goes down and campaign
performance improves
Further interest or questions?
If you have any questions about
the content of this paper or about
Omnichannel Redemption,
please contact: Penny Dryden,
Commercial Director. Telephone
+44 (0)1536 445222. Email
pdryden@valassis.co.uk
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Valassis Ltd
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NN17 5JG
T +44 (0)1536 400123
W www.valassis.co.uk