Special Photo: Jill Cataldo saves hundreds on groceries by making the most of the common coupon. You can, too.
Question: “What happens to the coupons after I use them at the store? Where do they go?”
Answer: I’ve devoted lots of time to the best ways to use coupons, how to match them to sales and how to significantly cut a grocery bill with them. But occasionally I hear from readers who want to know more about the life cycle of a coupon. What happens to those little pieces of paper once they leave our hands in the checkout lane?
There’s a lot of them to keep track of! Last year, consumer packaged goods companies distributed 332 billion coupons, according to the NCH annual coupon report. That’s a record number. Overall redemption volume grew, too, as consumers looked for ways to keep household budgets in line. Shoppers redeemed 3.3 billion coupons on consumer packaged goods in 2010.
For starters, let’s talk about how a manufacturer coupon gets into our hands in the first place. A manufacturer decides to run a coupon promotion for a product. After deciding on the amount, value, expiration date and campaign for a coupon, the marketer may distribute it in a number of different ways: in a newspaper insert, as a printable coupon or as an in-store coupon — on a tear pad, in a coupon dispenser or attached to the product packaging.
A consumer takes the coupon, purchases the product and hands the coupon to the cashier. The cashier scans the coupon, puts the coupon in the cash register’s drawer… and then what?
Typically, after the register totals are balanced for the night, the store will collect the coupons and place them in a bag. Many stores weigh the bag to keep an estimated record of how many coupons are inside. At that point, the coupons need to get from the store to the manufacturer for reimbursement.
Have you ever read the fine print on a coupon? Among the information there is a redemption address. Every manufacturer coupon displays a physical mailing address where the store can send the coupon and receive reimbursement. However, with thousands and thousands of coupons coming in each week, few stores have the time or staff to sort through them all and send coupons back to individual manufacturers.
Enter the retail clearinghouse. Clearinghouses take on much of the hard work of processing coupons. On the store’s behalf, the clearinghouse sorts, scans and catalogues the loose coupons, separating them by manufacturer. The clearinghouse also takes care of reimbursement, issuing an invoice to each manufacturer for the total amount of coupons submitted for their products during the specified time period. Some clearinghouses receive the reimbursement back from the manufacturer and then send the payment to the store. Others invoice on behalf of the store, and each manufacturer reimbursing the store directly.
Of course, the clearinghouse gets paid for its work. Look at the fine print on a manufacturer coupon and you’ll see that the manufacturer’s terms state that the store will be reimbursed not only for the face value of the coupon, but 8 cents to 12 cents more than the face value of the coupon. That extra amount covers the clearinghouse fees. Clearinghouses take some or all of those extra pennies on each coupon in exchange for their services.
There can be bumps in the process. A clearinghouse catches expired, counterfeit or fraudulent coupons. If stores accept many fraudulent coupons, they will not receive reimbursement for them. If a store submits an unusual number of coupons, a manufacturer may request an audit to see if the store can prove that it stocked and sold the number of items for the corresponding coupons. If the store cannot prove that it sold these items, the manufacturer may conclude that fraud has taken place and withhold reimbursement.
What might make a manufacturer suspect coupons were fraudulently redeemed? I’ll discuss this more next week, but here’s a clue: It has to do with the way the coupons are cut.
Jill Cataldo, a coupon workshop instructor, writer and mother of three, never passes up a good deal. Learn more about couponing at her web site, www.jillcataldo.com. E-mail your own couponing victories and questions to email@example.com.