What are the advantages of Internet coupons?

What are the weaknesses of Internet coupons?

Is credit card fraud easier to pull off now than in the past? What should retailers be doing to protect their businesses?

Recent reports suggest that the self-checkout technology adds convenience and speeds consumers through the front-end. It also has provided a new opportunity for credit card fraud as stores have largely stopped checking for ID. There is little risk for an identity thief to use self-checkout technology.

Coupon Processing Terminology

Many of these terms are the result of the coupon process and specifically relate to deductions and misredemption. The exact terms may vary by clearinghouse and manufacturer's agent.

Coupon Appearance:

Consecutively Numbered
Coupons have consecutive serial numbers.

Counterfeit
Bogus coupons that may have a different print quality or paper than the coupons distributed by the manufacturer.

Gangcut/Gangtorn
Matching cuts or tears on two or more sides.

Mint
Coupons that do not appear handled or are in an uncirculated condition.

Poor Mix
The shipment(s) lacks variety in the type of coupon(s) normally submitted to the manufacturer(s).

Straight-Edge Torn
Coupons have identical straight-edge cuts.

Washed Appearance
Coupons have a rough, washed appearance.

Wrinkled Coupons
Coupons appear to have been wrinkled in a matching pattern.

Credit Memo
The retailer is in the Manufacturer’s deductor file.

Does Not Stock
The store does not stock the product for which it is submitting coupons.

Expired
The coupon has passed the expiration date printed on the face of the coupon plus the grace period allowed by the manufacturer.

Foreign Coupon
A manufacturer’s term referring to coupons which were sent to them but were issued by other manufacturers. Most manufacturers return such coupons to the sender.

In-Ad Coupons
Coupons that are included in a particular retailer’s newspaper ad or handbill, which shoppers may redeem only at the retailer’s store(s). The coupons are usually issued under a special agreement between the retailer and the manufacturer of the product.

Method of Distribution

Coupon promotions can be delivered to consumers in many ways such as Free-standing Inserts (which represent approximately 84% of all coupons distributed) efficiently reach a mass audience. Some methods, such as direct mail, may be more expensive but enable more precise targeting.

You need to consider both production and distribution costs which is dependent on the distribution method selected. FSIs are typically printed and distributed by an FSI vendor at a contracted rate per thousand whereas on-pack coupons are part of existing product labeling and distribution, and therefore may not carry any incremental cost other than printing plate charges. Your costs will vary by method and vendor. Retailer-negotiated methods, such as in-ads may involve use of trade funds.

The following are the various methods of coupon distribution:

Bounceback (BB) - A coupon sent in response to a consumer’s special request, usually requiring proof of purchase.

Color Run-Of-Press (CRP) - A multi-colored coupon printed on a newspaper page.

Direct Home Delivery (DHD) - A coupon delivered to the consumer’s home via a delivery medium other than the U.S. mail. Examples include door hangers, leaflets, or plastic bags containing subscription publications.

Direct Mail Solo (DM) - A coupon delivered through the mail directly from a manufacturer or supplier.

Direct Mail Co-op (DMC) - Several coupons from different manufacturers that are mailed together in one envelope.

Direct Mail with Sample (DMS) - A coupon delivered through the mail along with a sample of the featured product.

Electronic Checkout (EC) - A coupon that is printed by a machine in the retail store at the time of checkout. It is intended for use on a future purchase.

Electronic Discount (ED) - A discount received by all consumers at the checkout if they purchase a specified product at a participating retailer during the promotion period.

Electronic Frequent Shopper (EFS) - A discount received electronically at checkout by all frequent-shopper club members if they purchase a specified product during the promotion period.

Electronic Internet Coupon (EIT) - A non-targeted electronic coupon delivered by the Internet. The consumer may receive a shopping list or other information with a bar code to be scanned at the checkout. No paper coupons are required.

Electronic Kiosk (EK) - A coupon delivered by a machine at a kiosk in a retail store.

Electronic On-cart (EOC) - A coupon delivered to a consumer by a machine located on a cart. The coupon for the product is dispensed when the cart approaches that product’s location in the store.

Electronic Shelf (ES) -

Free-standing Insert (FSI) - A multi-color coupon in stand-alone format, inserted in the Sunday newspaper.

Handout (HO) - A coupon handed out by someone at the store level.

Handout Co-op (HOC)

Handout In-store with Sample (HSS) - A coupon presented to a consumer at the retail location with a sample of the featured product.

In-ad (IA) - A coupon printed within a retail store’s advertisement. It is usually only redeemable at the retail location that sponsored the ad.

In-pack (IP) - A coupon found inside a product package.

In-pack Cross Ruff (IPC) - A coupon found on one’s product package that is redeemable on a different product.

Instant Redeemable (IR) - A coupon found on a product’s package that can be easily removed for instant use when the consumer purchases the specific product.

Instant Redeemable Cross Ruff (IRC) - A coupon found on one’s product package that can be easily removed for instant use on another product.

Magazine-on-page (MOP) - A coupon printed on a magazine page.

Newspaper Co-op (NCC) - Coupons, printed in a group in a newspaper, that are from more than one manufacturer.

Newspaper Run-of-press (ROP) - A black and white coupon printed on a newspaper page.

On-pack (OP) - A coupon that is printed as part of the product’s package. The package must be "destroyed" to use the coupon.

On-pack Cross Ruff (OPC) - A coupon, printed as part of a product’s package that is redeemable on another product. The package must be "destroyed" to use the coupon.

Shelf Pad (SP)

Sunday Supplement (SS) - A coupon printed in a Sunday supplement or magazine.

Targeted Frequent Shopper (TFS) - A discount targeted to certain frequent shopper club members received electronically at checkout if they purchased a specified product during the promotion period.

Circulation 

The total number of coupons distributed is a factor of your overall promotional objective and distribution method.

Coupon Design Costs

The coupon's design can also affect processing costs and retailer fees more information. The bar code is the essential centerpiece for getting good marketing information from your coupon program and can facilitate quicker and less expensive transaction settlement with retailers.

Good coupon design can mean the difference between a consumer using a coupon or not. Following the industry guidelines for standard designs can also save costs in the transaction settlement process that often appear as hard-to-handle fees.

Colors - Make the coupon a contrasting color from the ad. Avoid distracting background colors and textures. Don’t try to fill in the entire coupon; white space is OK.

Purchase Requirements - The requirements for purchase should be shown prominently and stated in simple, easy-to-read language. Multiple purchases should be clearly stated and shown next to the face value. Avoid complicating the offer with different sizes, flavors, etc.

Manufacturer Coupon - The words "Manufacturer’s Coupon" should be printed in bold type within a box at the top of the coupon to distinguish its origin.

Expiration Date  - The expiration date or the words "No Expiration" should be prominently displayed at the top center of the coupon. Include month, day, and year.

Product Name & Logo  - Where possible, put your company logo on the coupon.

Perforation - If possible, actual perforations should be printed around the coupon. If not, dotted lines around the perimeter show the consumer where to cut.

Coupon Size - Ideally, coupons should be 6" X 2.5" (with a tolerance to 3" X 2.0625"), or roughly the size of a dollar bill.

Picture - Always put a picture of your product on the coupon.

Value - The face value of coupons should be clearly stated and prominently displayed.

Offer Code - Coupons should be encoded with a numeric offer code conforming to Uniform Code Council Guidelines and printed directly above the UPC code.

Paper Stock - Coupons should be of a texture and weight that can be processed efficiently.

Address - The name and address of the manufacturer or redemption center to which the coupon should be sent for reimbursement must appear on the coupon.

Terms of Offer - The legal terms of the offer outlining valid coupon redemption (including an 8¢ retailer handling fee, one coupon per consumer, etc.) should be stated in simple, easy-to-read language on the face of the coupon.

Consumer Code - For extra value, every coupon should be coded to provide consumer tracking and/or geographic market analysis.

Barcode

The U.P.C. coupon code is a 12-digit, all numeric code that:

It consists of a number system character (NSC) 5 (unless the EAN-99 is being used), followed by a five-digit manufacturer identification number, a three-digit family code, a two-digit value code and a modulo 10 check character.

Face Value

The face value of the discount will vary depending on the product's retail price, your promotional objective and the competitive environment. For example, higher face values for new products may be required to help consumers overcome the risk of purchasing an unknown, whereas current brand loyal consumers may still appreciate a lower face value as a simple reward.

Redemption Rate

This rate is the percentage of total coupons distributed that were actually redeemed by consumers and submitted by retailers for reimbursement. Redemption rates can be forecast by studying historical redemption trends for similar products and distribution methods as well as your brand's coupon redemption history, if available.

Coupon Handling Fee

The industry standard provides a handling fee of 8 cents per coupon to offer retailers reimbursement for the cost of handling manufacturer coupons. The retailer-handling fee should be stated on the coupon under the terms of offer, as well as in a formal coupon redemption policy distributed to your retail customers.

Retailer Invoice Deductions and Fees

Some retailers charge fees for non-standard coupon design or other hard-to-handle coupons, shipping or transportation costs and special handling. Some of these fees can be avoided by following standard coupon design guidelines and best practices. If you don't reimburse retailers fast enough or if you fail to pay the amount claimed on the retailer's coupon invoice, you may find the retailer will attempt to recoup his funds by taking deductions from your product invoices.

Redemption Agent Service Fee

Source: CouponInfoNow.com sponsored by CMS.  

The manufacturer's agent will charge a fee for processing your coupons and providing reporting and other promotional management services to your business. The contractual fee may vary according to the total annual volume of coupon redemption.

What is the number 5 system character on a U. P. C. coupon and what is its importance?

The number 5 is the number system character on a coupon U. P. C. All coupons must have a number system of 5 as that is what tells the scanner that it is scanning a coupon and not a product.

Why can’t a U. P. C. product symbol be on a coupon and a U. P. C. coupon symbol cannot be on a product?

If a U. P. C. product symbol is on a coupon, the consumer could be charged for an item that was not purchased instead of being credited for the value of the coupon. If a product has a coupon U. P. C., a consumer could get the item for free instead of the coupon value.

Why are barcode colors and spacing critical to the scanning process? What colors should be avoided in the bars and spaces?

If poor color choices are made, the bar code symbol might not scan due to poor symbol color contrast. The suggested color combination is black bars and white spaces. Avoid red, reddish, pastel or light colors for the bars and dark colors for the spaces. Poorly designed coupons may result in hard-to-handle fees from retailers.

How do retailers get family code information? What is the minimum information that they need to enter family codes into their systems?

Manufacturers supply family code information to retailers. Retailers need the following information to enter family codes into their systems: manufacturer name and address, U.P.C. number for the product being couponed, product description, family code number assignment, and the manufacturer’s contact person.

What are my alternatives if you cannot find a value code on the value code table that matches the value of the offer that you want to use on your coupon?

The suggested solution is to change your offer to one of the industry defined valid values. Any other offer will not validate at the point-of-sale and therefore will cause errors and slow-downs.

How is the family code 000 used? Are there any limitations to its use?

The family code 000 is used to coupon products with the same manufacturer’s number and no other coupon relationships such as summary code and super summary code. The family code 000 cannot be used with certain value codes, such as 01, 14, 16, and 19.

What family code should a manufacturer use when couponing products together that have different manufacturer numbers?

None. There is currently no way to bar code a coupon for products bearing different manufacturer numbers.

What is the coupon code used when retailers want to distinguish in-store distributed coupons from other types of coupons?

The coupon code is the EAN-99 13 digit in-store distributed coupon code.

Should all in-store distributed coupons be coded using the EAN-99 in-store distributed coupon code?

No, only in those stores where the retailer has specifically asked for that format. This format is not meant to be mandatory and is therefore used only by retailer request.  

What are the Advantages and Disadvantages in selecting the appropriate distribution

Below are several of the distribution vehicles and the advantages and disadvantages for each distribution method from CouponInfoNow.com sponsored by CMS.  

Free Standing Insert (FSI) Coupons

Advantages

Disadvantages

Direct Mail Co-op Analysis

Advantages

Disadvantages

Direct Mail Solo Analysis

Advantages

Disadvantages

Electronic Shelf Analysis

Definition of Electronic Shelf

Advantages

Disadvantages

Handout Analysis

Advantages

Disadvantages

In-Pack Analysis

Advantages

Disadvantages

Magazine-on-Page Analysis

Advantages

Disadvantages

Newspaper Run-of-Press Analysis

Advantages

Disadvantages

On-Pack Analysis

Advantages

Disadvantages

Source: CouponInfoNow.com sponsored by CMS.  

What is an In-Ad coupon and what are the potential problems with this type of promotion?

An in-ad (IA) is a coupon sponsored by the retailer, usually in conjunction with the manufacturer. It is usually only redeemable at that retailer’s location. The retailer is responsible for the printing and distribution of the in-ad, usually within newspapers or within a retailer’s in-store flyer. The manufacturer may pay for all or a portion of the coupon’s expense.

Retailers like in-ads because they promote store loyalty, defray the store’s promotion costs, and give the store more control over design, timing, and distribution of the coupon. In-ads are trade promotions for a manufacturer. In-ads help maintain trade relations as retailers request them. They encourage immediate sales and can allow a manufacturer to target specific markets. Consumers like in-ads as their average face value is usually higher than the average for media coupons.

Current Situation

There are no industry standards for designing, administering, or executing in-ad programs. There are, however guidelines. Retailers usually control the in-ad programs and the manufacturers have no final approval of the program’s elements. Therefore, confusion within the industry is inherent with this promotion tool.

Potential Problems with In-Ad Coupons

What are the design requirements for an In-Ad coupon?

In-Ad coupon design should follow the basic Joint Coupon Guidelines for well-designed coupons. In addition, because of the nature of the In-Ad coupon, the ACP recommends the following design criteria to aid in the processing efforts:

This coding scheme allows retailers and manufacturers to use feature pricing or consumer savings that differ from the manufacturer’s reimbursement to the retailer. This insures that processors will clearly understand the proper amount to reimburse the retailers.

In-Ad Design Checklist

Source: Association of Coupon Professionals

What is included in the standard In-Ad coupon Agreement?

The standard written agreement between the retailer and the manufacturer is pivotal. It communicates requirements and expectations. Spoken agreements are not enough, as they may omit key details, resulting in misunderstandings later.

A contract agreement with retailers for all manufacturers will better position you to enforce the special policies you have set in place.

Generally the agreement process works like this:

Every area listed is critical for correct handling and payment, thereby fostering positive trade relations. Clear and precise agreements prevent many problems.

Printing

Manufacturers should provide the artwork for in-ad coupons and require that it be used. This ensures that promotions for your brands align with your image. It also ensures that correct dollar values are printed, as well as offer codes.

Many problems can and do occur at the printing stage. Since the retailer usually assumes printing responsibilities, changes or errors can occur without the manufacturer’s awareness. For example, products can be inappropriately depicted; values can differ, causing increased costs; or offer codes can be changed or eliminated. This results in the loss of ability to track offers by event and creates problems during processing by the manufacturer or its agent.

Distribution

Retailers also control distribution. This can cause problems, as it may be easy to make additional copies of the advertisements, which then can be improperly submitted for reimbursement. You should apprise retailers of the fact that payment for in-ad coupons will be paid on performance, not on distribution quantities.

Redemption

Since in-ads are a trade promotion, the manufacturer’s sales department frequently handles their redemption. However, this does not allow for tracking the efficiency of programs, nor does it guarantee quality control in handling.

The actual coupons should be presented for reimbursement and the contents of submissions be reviewed. This "proof of performance" is a valid request. Retailers should not be allowed to simply present an invoice or deduct off an invoice. Such procedures result in a loss of control on the manufacturer’s part.

Costs

Sharing costs is another area to consider very carefully. Traditionally, the retailer pays the printing and distribution costs and the manufacturer pays the face value and handling costs. But, variations on this model do exist. The manufacturer may agree to a specific face value and the retailer may supplement the value. Some retailers also prefer to print the product price rather than the face value on the coupon. A face value be printed on the coupon.

In any event, a statement in the agreement of the value the manufacturer will reimburse prevents future misunderstandings. It also protects the manufacturer from additional liability if values printed on the coupon change. For example, if the manufacturer agrees to pay 25 cents per coupon and the coupon is printed at 35 cents, the retailer – not the manufacturer – is legally responsible for the 10-cent difference. Please keep in mind that any agreement is only worthwhile if enforced. Manufacturers must be willing to take appropriate action if the terms of the agreement are not met.

Processing

In-ad coupons are different from media coupons in several ways: in-ads are redeemable at only one store or chain; in-ads must be verified against the written agreement; in-ads tend to list the sales price as opposed to face value; in-ads are more prone to omitting the offer code. In-ad coupons can be paid promptly only when all the pertinent data is available and coupons are issued correctly. Otherwise, payment delays can be lengthy.

Policy

The manufacturer using in-ads develop a formal internal policy and procedures. Crucial topics for the policy should include:

Marketers should have their in-ads closely monitored to ensure the effectiveness of their in-ad programs.

What is an Electronic promotion?

Electronic promotions are discounts given to consumers for product purchased at the point-of-sale or via the Internet. They are similar to coupons, but have no paper trail to validate or audit against. They are communicated to the consumer via the Internet, direct mail, or shelf tags, and often go hand-in-hand with a retailer’s frequent shopper program. Scanning the UPC at the point-of-sale or through a product purchase over the Internet triggers them. Retailers then use the point-of-sale purchase data to invoice the manufacturer.

Electronic promotions are growing and, as there are no established standards or guidelines surrounding the set-up, distribution, redemption and validation of electronic promotions, manufacturers must take it upon themselves to address these issues.

What are the advantages of Internet coupons and what is the potential for fraud?

The exceptional graphics and dynamic multimedia capabilities of the Internet allow manufacturers and retailers to work together to target consumers. Consumers can access retailer web sites or third-party coupon distribution sites to find retailer- and manufacturer-sponsored coupons. Internet coupons can become an attractive part of a company's overall marketing strategy.

Internet coupons, however, are not without risk. Santella and Associates is fully aware of the controversy and has worked with other industry organizations to develop Internet coupon best practices. The Association of Coupon Professionals (ACP) recently published A Guide to Internet Coupons, which discusses the benefits and risks of Internet coupons. If your target consumers respond well to Internet incentives, you should experiment with Internet coupons. However, should you choose to incorporate Internet coupons into your marketing plan, consideration must be given to the clearing and processing of these coupons.

The potential for fraud is one of the most debatable issues surrounding Internet coupons. In fact, the Coupon Information Corporation recently published The Security Risks of Print-at-home Coupons. While the issues raised in this paper are valid, they are not supported by current industry data. Recent CMS research shows the volume of misredeemed Internet coupons indexed against the volume of paid Internet coupons at 20 (Base = 100) - much less misredemption than expected .

What are the advantages of On-Pack coupons?

The main advantages of On-Pack Coupons include:

Useful Tips:

Source: "Building Brands with Coupons", PMA Coupon Council

I am a manufacturer that wants to distribute coupons. How do I clear the redeemed coupons?

Consumers love to use coupons. According to Carolina Manufacturer's Services, consumers saved over $3 billion with coupons in 2002. And they get them through a variety of channels -- everything from the Sunday paper to the Internet to the retail checkout. In fact, manufacturers use more than fifty methods of coupon distribution.

Your customers collect these coupons and bring them to your store. After the cashier deducts the value of the coupons from the total purchase, the coupons are set aside. And periodically send them to your chain headquarters or a retail clearinghouse for processing. Now that they’re out the door, what happens to them?

Eventually, all coupons, whether shipped directly from your store or through a chain headquarters, arrive at a retail clearinghouse such as Carolina Services. The clearinghouse's job is to count the coupons and send an invoice for payment either to the product manufacturer or a manufacturer's agent. Each shipment is logged and tracked throughout the clearing process.

After arriving at the clearinghouse, coupons are removed from their plastic shipping bags and rubber bands and staples are removed. Debit or store return items such as rain checks, manufacturer checks, checks, food stamps and pharmaceutical certificates are sent back because the clearinghouse cannot process them.

Then the coupons are counted. Each coupon is verified and important information is entered into a database. Finally, a check is cut for the retailer for the face value of the coupons, plus the 8 cent handling fee per coupon. The manufacturer receives the coupon data to use in analyzing each promotion's success. The entire process can take from two to six weeks, depending on the steps the manufacturer's agent requires the coupons to pass through. After being processed, all of the valid coupons are destroyed and questionable coupons are stored for research.

And as long as your customers keep loving and using coupons as they have since the first coupon for Coca-Cola in 1894, this process will repeat again and again. Over 4 billion coupons went through the process last year.

How to Clear Paper Coupons - Steps to Get Started

1. Manufacturer contracts with servicing agent.
2. Contact Uniform Code Council (UCC) at (513) 435-3870 to get 5-digit manufacturer number.
3. Create a family code structure for the 3 digit family code number within your UPC symbol.
4. Determine the face value of your coupons.
5. Determine what information you want on your coupon. You must include face value, expiration date, legal copy, and extended bar code. The legal terms of the offer outlining valid coupon redemption (including the retailer handling fee; one coupon per customer, etc.) should be stated in simple, easy-to-read language on the face of the coupon. An example of suggested legal copy wording is:
   
   Retailer: We will reimburse you the face value of this coupon plus $.08 handling provided it is redeemed by a consumer at the time of purchase on the brand specified. Coupons not properly redeemed will be void and held. Reproduction of this coupon is expressly prohibited. (ANY OTHER USE CONSTITUTES FRAUD.) Mail to: Le Product, Inc., 100 Le Street, Anytown, USA 00000. Cash value $.001. Void where taxed or restricted. LIMIT ONE COUPON PER ITEM PURCHASED.
   
   (Note: In the early 1990's, Arthur Andersen & Co. conducted a study on coupon handling costs. Since that time, the industry standard for retailer handling fees has been $.08. However, it is up to each individual manufacturer to set its own retailer handling fee.)
6. Obtain 5-digit tracking code (offer code) from manufacturer's agent. Offer code is encoded with the EAN-128 extended symbol and should be printed within 3/8 inches from the left, right, or top of the UPC bar code. Top is preferred.
7. Work with promotional agency to design coupon.
8. Determine distribution date of first coupon. Ensure that coupon distributions are communicated to distributors with ample lead time to accommodate distributor information systems.
9. Supply the name and telephone number of your coupon-coding contact to distributors and to the Food Marketing Institute (FMI) for publication in the Coupon Family Code Contact Directory.
10. Once coupon processing beings, you will be billed on a weekly basis for service fee, retailer transaction fee, face value of coupon, and handling ($.08).

Source: "Building Brands with Coupons," PMA Coupon Council

What is coupon misredemption and coupon fraud?

Coupon misredemption occurs whenever someone attempts to redeem a coupon that is void for a product that he or she has NOT purchased. This activity is often in violation of Federal and State laws.

How much fraud is there?

No precise studies are available. However, industry sources estimate that losses due to coupon fraud exceed $500 million annually. The CIC has successfully worked with law enforcement officials on individual coupon fraud cases ranging from a few thousand dollars to more than $87 million.

When does a fraud occur?

A coupon is valid only when presented by a consumer to a retailer in conjunction with a purchase of the brand, size, and quantity of the product specified by the coupon. If submitted in any way other than that detailed by the issuing manufacturer, misredemption occurs. Misredemption can constitute a violation of Federal and/or State law.

How are coupons obtained for use in frauds?

They are stolen or otherwise obtained from newspapers that carry coupon inserts; from magazine wholesalers; from newspaper vending machines; and from recycling centers. They are also collected in other ways, for example, from members of organizations such as church groups and other charities that are paid to collect and cut the coupon. There are even companies that advertise that they purchase pre-cut coupons. There also have been several cases of coupons being counterfeited.

How can I detect counterfeit coupons?

Hard-to-Handle Coupons

Well-designed coupons can be valuable marketing tools. Poorly designed coupons, on the other hand, can cause problems for manufacturers, retailers, consumers and processors.

Hard-to-handle coupons can:

Hard-to-handle coupons include:

 What are the advantages of Electronic coupons?

Advantages

Disadvantages

What is the coupon flow for One-Step coupon Processing?

Below is a flowchart of the typical One-Step Flow:

What types of adjustments are made by the manufacturers?

Below are the standard reasons for Manufacture Adjustments for coupon payments:

No Partial Pay
Payment is withheld due to a certain percentage of a retailer’s submissions having appearance issues. This percentage varies by manufacturer.

No Pay
Payment was withheld due to the fact that the majority of the coupons submitted to the manufacturer’s agent by a particular store do not meet the guidelines set forth by manufacturers for the redemption of their coupons.

Unverified
Payment for the coupon invoices in question was withheld because a completed questionnaire was not received from the retailer.

Out of Area
The coupons in question were not distributed in the retailer’s area and, therefore, should not have been accessible to consumers in that area.

Over on Free
Free value coupons for which the requested amount is over the maximum amount allowed by the manufacturer.

Paid Amounts
Amounts that were paid for coupons that were processed as good.

Store Tag Error
A discrepancy found in the number of coupons claimed and the number of coupons actually received. Because reimbursement can be made only for the coupons received, the invoice/store tag error represents the difference between the claimed amounts and the actual amounts.  

What was the accounting change in recording slotting allowances?

The Emerging Issues Task Force of the Financial Accounting Standards Board issued rule 02-16 which requires retailers to record vendor allowances as part of the cost of goods sold then the products are actually sold to the consumers.  This concept makes sense because it matches the allowance with the revenue.  The SEC rule does not specifically address how certain types of payments like slotting fees should be accounted for, but a good approach is to recognize them as the products are sold instead of recording them when the products are introduced. The funds that come in, as reimbursement for advertising will be credited to the cost of goods sold, and recorded when the merchandise is sold.

How do retailers feel about slotting allowances?

Retailers argue that vendor allowances hide the true cost of doing business because the price retailers actually pay for the product is never known until after the product is sold.  “The problem comes when a retailer becomes “buy-driven” rather than “sell-driven” and he stocks stores based on what’s available from the vendor rather than what his consumers demand according to an analyst from McDonald investments.  If a company tries to fill its warehouse just to get the vendor’s allowance, the business is badly managed.’

What are slotting allowances?

Suppliers pay distributors slotting allowances for product placement on store shelves. Sometimes distributors request them, and sometimes suppliers offer them. Although common, these allowances are neither uniformly requested nor offered.  The most common allowances are for new products or new product introduction allowances. These may also cover premium product placements, such as on eye-level shelves or special displays; the cost to have products remain on shelves or pay-to-stay allowances; or the cost to retailers if a product fails.

How much are slotting allowances?

The amount varies depending on numerous factors, such as whether the supplier has a proven track record, whether consumer testing has been performed, whether the product is carried by competitors in the same market, and whether the supplier has a well-conceived advertising program. The amount can be as small as several hundred dollars to have a new product introduced in a single store to many thousands of dollars for a chain-wide promotion. In some instances, manufacturers provide free cases of new products to help retailers gauge consumer demand. Since each new product introduction is unique, these allowances are typically negotiated individually and no industry-wide numbers are available.

Why are slotting allowances used?

The principal reason is to cover the considerable costs to introduce a product, to remove the item that previously occupied the shelf space and to recover some of the investment in the likely event that the new product fails. Depending on how a new product is defined, the failure rate ranges up to 80 percent per year.

Each year, food retailers spend an average of $956,800 per store on new products that fail, according to a study of 1995 introductions by the market research firm Linton, Matysiak & Wilkes. The major reason cited for failures is a lack of market research. In many cases, manufacturers are using retailers to test-market new products. Through slotting allowances, manufacturers are, in effect, having the retailer conduct a live market trial instead of paying for test market research.

Why are new product introductions so costly?

About 100,000 grocery products are available on the market.  The typical supermarket has space for only 30,000 to 40,000 products, and the failure rate for new products is as high as 80 percent. With so many items competing for so little shelf space, new product introductions have become a high-cost, high-risk proposition. As many as 24 steps are needed to introduce a new item and another 10 to remove the one that occupied the space, according to a Deloitte & Touche study (Managing the Process of Introducing and Deleting Products in the Grocery and Drug Industry, 1990). Based on this study and current retail practices, these steps include:

Are slotting allowances offered for all products?

They are typically not offered for most established products or for new offerings that have a high likelihood of success.

Arguments for Slotting Allowances include:

Argument against Slotting Allowances include:

The true impact may depend on how the practice is applied. The Federal Trade Commission (FTC) takes the view that these issues need to be considered on a case-by-case basis as it reviews complaints.

Are slotting allowances legal?

According to Oct. 20, 1999, testimony by Willard K. Tom, deputy director of the FTC’s Bureau of Competition, before the House Judiciary Committee, the legality of slotting practices “can be determined only in light of all the surrounding facts and circumstances.” Even in cases where a small supplier cannot afford a high slotting fee, the practice can be deemed legal, he said, as long as the market remains competitive and consumers “receive the benefits of low prices and wide product selection.”

What is a coupon overlay and should they be used?

In 2001, marketers distributed more than 239 billion freestanding insert coupons and marketers are facing the challenge to find unique ways to distinguish their promotions. Coupons remain the best way to get a direct incentive in the hands of a consumer or a potential consumer. Some marketers use overlays - related promotional offers to make an ad or offer more interesting. There are different types of overlays, such as:

FSI overlays can provide advantages over issuing a coupon alone, including:

Overlays that target your desired consumer can further support your promotion and overlays that are based on a theme that can be carried over into other aspects of your promotional campaign can help generate trade support for your product.

FSI overlays may also have a negative impact because the additional distraction caused by more than one message competing for the consumer's attention may detract from the FSI ad and consequently coupon redemption. However, overlays may help call attention to your brand and create a value-added association, which can ultimately help build brand equity and increase sales. If you decide to use overlays you should conduct a post-promotion analysis and review your results. Make sure to account for factors such as market conditions, competitive activity and retailer support.

A survey completed by Carolina Manufacturer’s Services regarding coupon overlays revealed the following results:

Percent of Offers Redeeming Above, Equal to or Below Brand Average
(Food vs. Non-Food, by Overlay Type)

Source: Carolina Manufacturer Services

Percent of Offers Redeeming Above, Equal to or Below Brand Average
(by Product Category, by Overlay Type)

Source: Carolina Manufacturer Services

What is Sunrise 2005?

Since the introduction of the 12-digit Universal Product Code (U.P.C.) more than 30 years ago, the use of the EAN. UCC System has expanded rapidly to facilitate global commerce. To meet the need for improving commerce efficiency, the Uniform Code Council, Inc. (UCC) has announced that by January 1, 2005 all U.S. and Canadian companies must be capable of scanning and processing EAN-8 and EAN-13 symbols, in addition to 12-digit U.P.C. symbols, at point-of-sale. The UCC announced this initiative named 2005 Sunrise, in 1977 to allow U.S. and Canadian companies ample time to address all conversion issues. There are also topics related to 2005 Sunrise that deserve every company’s attention.

Why is Sunrise 2005 Important?

What does it mean to be 2005 Sunrise Compliant?

What are the topics related to 2005 Sunrise that every company should consider?

What does it mean to be GTIN Compliant?

Recommendations:

Failure to update systems may have the following consequences:

The UCC urges all companies that have not yet achieved 2005 Sunrise compliance to begin system planning, testing and update/conversion activities. For more information visit www.uc-council.org/2005sunrise or send and email to info@us-council.org.

Reprinted with permission from Uniform Code Council.

How important are customer services to online retailers?

Fundamentally, customer service and customer satisfaction is very important.  For online retailer's, the cus­tomer's outcry for service underscore the reality that online retailers are just start­ing to learn. Customers that are lured online with low prices and one-click ordering still de­mand the same level of customer service as they do in the real world. They expect or­ders to be filled on time, complaints to be addressed and employees to help them answer questions.

So, a handful of online retailers are starting to come up with measures to keep customers happy. In some cases, that means trying to replicate real-world cus­tomer service online: hiring service reps to take phone calls, and providing quicker, and more substantive, answers to e-mail. Other companies are making changes that aren’t quite as personal but either save customers money such as offering dis­counts or dropping some shipping fees or give them greater control over the buying process, such as the ability to track orders. In this system, a customer with a ques­tion is guided to a Frequently Asked Ques­tions page on the retail site, then given the chance to send an e-mail message if he or she can’t find an answer. Only if the e­-mail reply doesn’t satisfy the customer is he or she given a phone number to call for a live rep.

If the cus­tomer picks up the phone, it’s good because they’re still talking to you, but it’s bad be­cause it’s inefficient. Brick-and-mortar retailers that open Web outposts face customer-service issues their online-only brethren don’t have to consider. One of the most demanding tasks they face is integrating the computer systems they use for inventory tracking in the real world with the ones they use online. That way, inventory information online is as up-to-date as it is in the real world, and orders in­tegrated to its computer systems and estab­lished a common database of all sales, whether real world or online. This allowed the retailer to begin offering online buyers the option of returning goods to real world.

What are Smart Cards and How Do They Work?

A smart card looks like a credit card, but has an embedded chip that carries unique identifying information.  The information is stored in such a way that it can be used but not easily copied. Smart cards have many functions, including carrying electronic cash or serving in lieu of an identity card.  While they are popular in Europe, they have not been widely adopted in the United States.  The American Express Blue Card has a smart chip with identifying information.  It is used to access the American Express Online Wallet (Software that automatically fills out online forms with the user's name, Blue card number and shipping address.  To use the Blue card with the online wallet, American Express customers must order a smart card reader that attaches to a computer.  The company began by giving complementary readers to card members.  To access the wallet, you place the card in the reader and then type a personal identification number.  Smart cards can hold a great deal of information on them and can be used for several applications. They come in a variety of configurations with one or more embedded microchips. Their integrated circuit read-only memory can contain a large amount of data.  Smart cards can hold from 16 kilobytes to 5 megabytes of information.  Some cards are capable of high-speed transactions by interacting with a card reader using radio frequency

What is digital or e-money?

It is the electronic payment or exchange of value for a purchase, which may include, smart cards, credit cards (which currently represent 90 percent of payments), debit cards, digital wallets.  It is based on the premise that consumers and businesses provide information online that is converted into currency or used to release funds from a bank.

What are micropayments?

Many online merchants sell low-dollar items for less than $10, where the credit card transaction cost virtually eliminates their profit.  Only consumers can push micropayments, probably through online music purchases.

What will make consumers adopt the use of digital cash?       

Online merchants want a critical mass of customers that want this payment system and consumers want to know that a merchant will accept this form of payment.  Your guess is as good as mine.

What can web sites do to encourage consumers to use online payment methods?

The problem is that credit cards still have many issues that must be addressed before online merchants will accept new methods.  Today, merchants are responsible for fraudulent online credit card transactions because there is no signature.  The credit card issuers are working on better ways to validate credit card users on the web.

Will cash no longer be used in five years?

Definitely not.  Every year, experts predict the demise of the check, and every year people write more checks.  We will see more consumers eventually adopt online payment systems and services for paying their bills, making purchases and sending money.

What is EDI?

Electronic Data Interchange (EDI) is the application-to-application electronic transmission of business data between organizations in a standardized format.  It is a vital component of Efficient Consumer Response (ECR) in the grocery industry.  Purchasing, invoicing, payment and other transactions are processed through EDI and EDI improves bi-directional information, accuracy and speed as well as reduces management costs.

What is an Optical Memory Card?

An Optical Memory Card is a secure data storage card that uses a laser light to read.  They have a user capacity of 28 megabytes.  Optical cards write once, read many (WORM) technologies ensures security as files can be added or updated but not deleted.  The card is not affected by magnetic or electrostatic fields and can withstand temperatures up to 212 degrees Fahrenheit.  Optical Memory Cards are less costly, durable, secure and also offer large data storage capacity. Optical Memory Cards signals without making contact. In addition to storing information, their built in microprocessor can perform calculations or sort information.  Utilizing smart card technologies to enhance e-business transaction will allow companies greater confidence of their sensitive data and communications.

Where Do I Go to Get a UPC Code?

This information was retrieved from the Uniform Code Council Web site:
http://www.uc-council.org/membership/main/ID_Numbers_and_Bar_Codes.html

"The UCC Company Number is a globally unique number that identifies a UCC member company. This company number allows a company to build ID numbers that uniquely identify products, assets, or shipments in the global supply chain.

To obtain your UCC Company Number, you must become a full member of the UCC by completing and returning an application form accompanied by a check for membership. You may obtain a copy of the application by pressing the Full Membership Application link below, or calling UCC´s customer service at (937) 435-3870."

What is the average number of items (SKUs) carried in your typical supermarket?

According to the Food Marketing Industry Speaks, 2002 the average number of items (SKUs) carried in your typical supermarket was 30,580.

What is Escheat?

Over $32.8 billion is currently safeguarded by state treasurers and other agencies across the U.S. acting as custodians of these funds.  The states receive the money through “escheat”, a process by which unclaimed or abandoned property is transferred over to a state authority.  The escheat process gets complicated as unclaimed property can pertain to not only to tangible objects, but also the intangible.  These are articles that for one reason or another remain uncashed, unapplied or unaccounted for.  Examples of unclaimed property under these terms include:
 
• Unredeemed gift certificates
• Stored-value cards
• Uncashed coupon payment or rebate checks
• Inheritance
• Checking/savings accounts
• Unclaimed stock dividends
• Safe deposit boxes
• Uncashed Paychecks
• Travelers checks
• Security deposits
 
Escheating varies by individual state regulations and may include reporting requirements, due diligence requirements and dormancy periods.  In most cases, the location of the property or last known address of the owner of said property deems which state holds the funds however, the state does not take permanent possession of the items or funds; rather, it becomes the custodian until a rightful owner comes forward to claim the property.  Since it is impossible for a state to store tangible property indefinitely, these are sold off after a given period of time and the funds obtained are safeguarded. The state is able to generate revenue from the interest of the held money.  As a result, state governments are being more aggressive with regards to enforcing the collection efforts of unclaimed property. States are actively conducting escheat audits to ensure compliance to all laws.  Companies must submit the required annual reports of property owing on a timely basis, twice a year. 

What is Unclaimed Property?

Unclaimed property (sometimes referred to as abandoned) refers to accounts in financial institutions and companies that have had no activity generated or contact with the owner for one year or a longer period. Common forms of unclaimed property include savings or checking accounts, stocks, uncashed dividends or payroll checks, refunds, traveler's checks, trust distributions, unredeemed money orders or gift certificates (in some states), insurance payments or refunds and life insurance policies, annuities, certificates of deposit, customer overpayments, utility security deposits, mineral royalty payments, and contents of safe deposit boxes.

What happens to these accounts that have no activity?

Acting in the best interest of consumers, each state has enacted an unclaimed property statute that protects your funds from reverting back to the company if you have lost contact with them. These laws instruct companies to turn forgotten funds over to a state official who will then make a diligent effort to find you or your heirs. Most states hold lost funds until you are found, returning them to you at no cost or for a nominal handling fee upon filing a claim form and verification of your identity. Since it is impossible to store and maintain all of the contents that are turned over from safe deposit boxes, most states hold periodic auctions and hold the funds obtained from the sale of the items for the owner. Some states also sell stocks and bonds and return the proceeds to the owner in the same manner.

How do states locate the owners?

The state treasurers and other officials who administer the unclaimed property programs have developed many powerful and effective methods to locate owners including the use of websites, cross-checking public data and developing a national database, The methods work as tens of millions of potential lost owners inquire annually resulting in this vital consumer protection program returning money to people at a rate approaching two billion dollars annually.

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