How Digital Coupons Work

If you’ve been to a few supermarkets lately, you may have heard of digital coupons. If not, they are virtual savings which customers at brick and mortar stores can use towards their purchases (these are in contrast to discounts given in digital stores). So how do these imaginary savings work? In this article, I’ll give you a small crash course in this stuff, showing how the user signs up, how it may run through a supermarket’s database, and how the coupon is processed at the checkout. Though let me first say that I only have a small understanding of digital coupons. From what I’ve learned about information systems, how point of sale systems work, and a few of the concepts which string them all together, I can tell you only an overview of how it all works. It is my intention to inform and demystify the user, because an informed customer is a happy customer. So let’s get to it.

There are supermarkets across the U.S. which require a club card in order to purchase the store’s items at a sales price. Higher management at these supermarket chains thought that getting some customer data wasn’t enough, nor were the store’s services providing enough value. So they created these digital coupons which were exclusive to their store. With these digital coupons, a customer opts in to their service, then the customer applies these coupons to their club card, and they’re usually applied at check out. How this all works, though, is a bit more complicated than that.

The customer first enrolls in the digital coupon service. In the supermarket’s system, an entry is made in their database which tells the point of sale system that the customer uses digital coupons, and to be sure to check for this. The customer then adds coupons via an interface (either a web portal or a mobile phone app). The system assigns these coupons to the customer’s file in the supermarket’s database. At check out, the cashier scans the items as usual, and the customer’s club card is applied. Depending upon how the point of sale system is set up to look for the digital coupons in the company’s database, the digital coupons may be applied during the order, or near the end of the order. If it’s near the end of the order, the cashier totals out the order, and the point of sale system evaluates the order, matching items to digital coupons in the customer’s database file. The look-up process can be a bit tedious, because the digital coupon system could be set up such that the digital coupons are matched against the UPC of the product, and so it could take a few seconds, especially for large orders. Finally, any discounts are applied, and the order continues to its end. Is there anything else the digital coupon system can do? You bet!

The system also keeps track of what the customer has purchased. This information can then be used in a few ways. For one, the data can be used to improve the processes and products of the supermarket (though this has been a part of club cards for years, and not just with digital coupons). For another, it can be sold to third parties (mind you, supermarket chains have been monitoring these practices closely so as not to harm the customer, as well as not increase risk for the company). To add to this, a company can make a direct connection to how a customer purchases a product. The company can take this information to the manufacturer of the product, and negotiate better prices on the product. Or, the supermarket company can provide a personal discount on the product because they know that the customer will continue to purchase the product, and the supermarket company can still turn a profit.

Again, remember this is a simplification. The supermarket company many do little with the data they receive. The company could merely provide digital coupons, along with some other perk (such as having a free product every so often, e.g. a free sandwich). Also, how the supermarket company uses the data could be very different from what I have described. For all I know, it could be used in logistics, in advertising, or even in the layout of new stores. Just know that a system like this can be complicated, can be a bit tedious, and yet can also provide a good amount of value. How much are we talking? From my experience, a customer can gain 4% to 10% more with digital coupons (though I’m sure it’s mostly 4%).

Jason Anderson

I'm a man who likes to tinker and learn about things, mainly things of a technical nature. Mostly I work on free and open source software like Linux, but I have other pursuits, such as systems administration, IPsec, and game development. Currently searching for opportunities in the I.T. field.

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