Friday, 23 September 2011

Why grocery stores worldwide are dropping double coupons

Tesco in the United Kingdom joins by discontinuing double points on their Club Card. Back in April Kroger stopped doubling and tripling manufacturer coupons at its Houston area stores. What is going on? One reason manufacturers drop copons is so they can charge lower price to price sensitive customers. Retailers have been piggybacking on this instead of incurring the cost of dropping their own store coupons. They identify price sensitive customers and attract them to their stores by doubling and tripling coupons.

But now they seem to be having second thoughts. Why? It is because of the recession. During a recession, especially one as long and severe as the current one, there are too many price sensitive customers. A better strategy is to lower price to ALL customers then. That is what is going on now. And it has the advantage of not yielding control over pricing to manufacturers. This is a problem that is well known as my research with Krishnan demonstrated in the nineties.