Why Coupons.com Got $200m in Funding

Before there were daily deals, there were online coupons that closely resembled their offline cousins. Although the category has been overshadowed by the flashier Group clones, digital coupons are the fastest growing segment of the coupon industry. Coupons.com in June closed a $200 million round of funding, with $100 million earmarked for expanding the business. CEO Steven Boal, CEO of Coupons.com talks about the effect Groupon’s had on the market, the promise of location-based couponing and why social media is perfect for discount-hungry consumers.

Daily deals are focused on bringing discounted experiences and services to consumers via local businesses. The focus is primarily around local discounts that consumers can quickly take advantage of. What Coupons.com does is provide downloadable manufacturer coupons on brands consumers use everyday that can then be redeemed at grocery, drug, mass and dollar stores like A&P, CVS, Duane Reade, H-E-B, Kmart, Kroger, Publix, ShopRite, Safeway, Walgreens and more. We essentially take the coupons of the Sunday paper and put them where you want them, either online or on your mobile phone. The Coupons.com network is comprised of tens of thousands of sites: everything from lifestyle and recipe sites, to mommy and savings blogs to major retailers. At the core of all this is Coupons.com, a site where consumers can access the largest collection of digital coupons for every day necessities — packaged foods, personal care items, household supplies and more. Users simply click, print and redeem the coupon at checkout. In some cases, Coupons.com allows consumers to digitally upload coupons directly to loyalty cards with our Save to Card feature. The savings from the coupon are applied automatically when the shopper swipes his or her loyalty card at check out — no printing required. The coupons we provide are for well-known, popular brands from companies like Clorox, General Mills, Johnson & Johnson, Kellogg’s, Kimberly-Clark, and Kraft Foods, among others.

I don’t think Groupon or any of the daily deal sites ignited the coupon business. The downturned economy was the real catalyst; people wanted to save and needed to save. In addition, the decline of the newspaper business fueled this shift as more consumers looked online for deals and looked to print papers less. What Groupon did was contribute to the consumer vernacular around coupons and savings and put a spotlight on deals. They really changed the mentality around discounts. The fact of the matter is, people will always want to save money — in and out of a recession. This is something we already knew; our motto for years has been “frugal is the new black,” and it’s true now more than ever. We’ve been in business for 13 years and recently received $200 million in funding. This underscores the emphasis that consumers and now investors are putting on this space. Our business has grown year over year and hockey-sticked about three years ago. Since then, we have experienced triple-digit growth.

Savvy marketers consider coupons as part of an advertising strategy as well as a promotional strategy, which is what makes coupons so effective. As a result, coupons can be very cost-effective as part of a marketing campaign since they provide media value as well as actually moving product off the shelf. While the question about whether coupons devalue or erode a brand is a reasonable question, the truth is that it’s actually the opposite. Numerous research studies on coupon usage find that consumers instead have a more favorable impression of brands that provide them coupons. They are more willing to remain loyal to those brands because they feel they are helping them offset their budget, particularly in these turbulent economic times. Coupons often help accelerate a consumer’s decision-making process for products; they can convince a consumer whether to consider buying a product, at what point to buy the product and what specific brand to buy. At the end of the day for brands, it’s all about protecting your loyal base of consumers while continuously adding more new buyers into the mix — coupons help brands accomplish both.

When you think about the fact that consumers are using mobile devices for every stage of the purchase cycle — whether they are looking for a retailer or a specific product, or perhaps reading a review of a product — you can see where coupons naturally fit into that equation. Retailers know that location-based offerings are crucial for driving consumers who are ready to purchase into the store. The coupon business has been leveraging location-based marketing tactics for years. For example, the coupons that you find in newspaper inserts are often generated based on location; the Midwest often gets different offers than the Southeast, for example. Now, as more sophisticated location-based technologies have entered the digital realm, there are even better opportunities to target offers to consumers in specific locations. For Coupons.com, location-based marketing really shines within our mobile application: Grocery iQ. With our app, a consumer could be notified that a retailer .5 miles away from their current location is offering $1 off Dove shampoo, and that can offer can be acted upon immediately. As the technology continues to gain traction and more shopping is completed with mobile devices, we’ll see location-based marketing impacting couponing in even more ways.

Coupons are the number one reason a consumer will “like” a brand, so it’s no surprise that social media is greatly impacting online couponing. In fact, Coupons.com has powered millions of coupons through social sites, and, in addition, the medium is starting to show its targeting capabilities. It facilitates more of a one-on-one communications channel with consumers. You can directly learn about their favorite products and design a coupon strategy around these learnings. Social media is also a great way to attract new customers and reward loyal customers. To obtain more fans, brands will offer consumers coupons for “liking” them on Facebook. Not only are they apt to buy your product, but they also are likely to share knowledge of the offer with their friends. At the same time, brands often post coupons to Twitter or Facebook feeds. This distribution is fast, and in the case of many brands, more than the circulation of a Sunday newspaper. Oreo is a great example of a brand with a solid social media strategy in place. They have over 22 million fans on Facebook and have been touted as a great case study for other brands to follow. Social media also allows for targeting offers to specific audiences. On Facebook, for example, you can segment audiences based on demographic information; for instance, you may want to offer $1 off pasta to married females in New York while offering $1 off sauce to single males on the west coast. The platforms also allow for tracking why consumers came to the brand in the first place–was it the pasta or sauce? With that knowledge, brands can create targeted messages and have a meaningful dialog with consumers.