How are Stores Paid for Coupons?


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Stores are Paid for Coupons???

How are stores paid for coupons? Inquiring minds want to know! The overwhelming majority of the population at large probably doesn’t give this a second thought, but the Wiz Kids, that’s a different story! When you clip a coupon, it is only about 1/3 of the way through it’s life cycle.

In order to understand where coupons go, it’s important to understand how they arrive! Manufacturers have very sophisticated marketing strategies that take many variables into consideration: geography, age demographic and median income are just a few.

Roughly 5 months before you see a coupon in a Sunday Coupon Insert, the manufacturer places their order with SmartSource, Red Plum or one of the other marketing companies that distribute inserts.  Once this order is placed, it is locked in. The next phase of the life cycle is when you actually receive, clip and organize the coupon.  By doing those three actions alone, you have fulfilled the manufacturer’s greatest desire: brand exposure by you, not just the stores. Now, not many people get that far. Some get that far and don’t use the coupons. Others pretty much go all the way. We call those people The Wiz Kids!

What Happens to Coupons at the Stores?

Once you have gone through the checkout line and paid for your order, the coupon is put into the cashier’s drawer.  It will remain there until one of three things happens (depending on how stores account for their money): the head cashier does a “lane pick-up”, the cashier’s shift is over and they reconcile their drawer or the store closes.  In any event, a report is run, the cashier’s coupons are totaled with an adding machine and then compared to the lane report that is generated in the office. The amount of coupons is then reconciled in the computer so that the total office will balance at the end of the day.

Once this is done, the coupons in the stores are typically placed in a large manila envelope some other receptacle where they will remain until the end of the day. At the end of the day, every single bundle from every single cashier will be added up and banded with rubber bands and an adding machine tape so that the office itself can be in balance before the day is closed out. Once this is done, that large band is put into another manila envelope or receptacle where they will remain until the office does its “end of week” close out.

Stores Shipping Coupons

End of Week Closeout

When the office closes out for the week, the coupons are then shipped from the stores either to the corporate office or directly to the clearing house where coupons are processed.  In my grocery days, they were sent to the division office in inter company mail where they were subsequently forwarded to the clearing house.

Regardless of how they get there, they end up at the clearing house.  Once at the clearing house, the coupons are scanned and a running total is kept.  It truly depends on the stores or chains as to how the coupon revenue will be reported. Some places do it by the store, others give the chain a lump sum and then it’s reimbursed back to the store at the same amount that they were tendered. In any event, they scan every single coupon and then issue the credit.

Are the Stores Paid for Coupons?



When the stores are paid for the coupons, they are not only paid the amount of money that is on the face of the coupon, they are also paid a standard .08 cent handling fee. This handling fee is for their “time and effort” in handling the coupon. Did it seem like it was a lot of work? Any guesses as to how many times a dollar bill is handled and accounted for as opposed to the coupons?  I call the .08 interest.

The fact of the matter is that the store is buying their goods and selling them to the public.  If the shoppers are using the coupons to pay for their purchases, then the store is paying the float on their money and getting reimbursed in a 30-45 day time period.  If you do that math, that ends up annualizing out to a very nice interest rate.

The Coupon Life Cycle

Coupons have an interesting life cycle.  They certainly travel an interesting path before they have reached the end of their useful life.  Millions and millions of coupons per year are sent to the clearing houses for redemption.  With such a high volume and so much money at stake, speed and accuracy are equally as important.  Any miscues at the clearing house could have a serious financial impact for the stores and manufacturers that use their service.

~David

Comments

  1. Its a wonder you can learn something new everyday

  2. Kleptos Mommie says

    I enjoyed reading this article about the life of the coupon. What I do wonder is what happens after the coupons are at teh clearinghouse adn the payments are forwarded to the grocery store. Do they shred those coupons since they have already been accounted for?

  3. A much more interesting story than the life cycle of a fly! lol.

    Seriously, I used to work in a grocery store when I was 15, I remember balancing my drawer at the end of my shift and having to run a tape against all the coupons that were in the drawer. There weren’t that many considering how many I can use in one shopping trip. I guess that’s just a sign of the times…what a difference a couple of centuries can make! Thanks for sharing this info – it was fun to see where they went after I was done at the store with them!!

  4. On secondy thought…I want to work at the clearinghouse…sounds like fun! How do I get a job there????

  5. Susan Clark says

    You write some great articles. Ihave always wondered what the process for the coupon was. Thanks for the great article.

  6. Susan Clark says

    Love the articels you write. I have always wondered what the process was for a coupon. Now I know. I learn something new from you everyday.

    • Susan Clark says

      Sorry that posted twice. THe first time it said error and didn’t show it posted so I typed it again. Crazy! LOL

  7. This was very interesting to read, my only question is regarding stores that double coupons. If I use a 50 cent coupon that doubles to $1, is the store out that other 50 cents? How does a store that doubles coupons make their money back to make it worth it for them?

    • The Wizard says

      The store eats the amount that above the face value of the coupon.

    • Any store that doubles coupons will lose the .50 cents that they cover. In my opinion, it is a marketing tool that some store use to get customers in the store. They also use loss leader items, etc. Once they have you in the store, the hope is that you will buy more than just the item that they won’t profit from.

      Thanks for this article!

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