Sales Promotions on the Internet

We describe a sales promotion application for distributing and redeeming coupons on the Internet during online shopping. Various types of sales promotions and coupons, and the methods used to target coupons to select potential buyers are reviewed. Security mechanisms needed to prevent alterations, duplication, and trading of coupons by customers, and fraudulent use of manufacturer's coupons by retailers are identified. An implementation of electronic coupons is described. The impact of coupon trading and duplication, facilitated by the Internet, on the effectiveness of sales promotion campaigns is discussed. Sales promotions are important marketing tools in today's businesses. They command a greater portion of the marketing budget than advertisements [1] (in consumer-packaged-goods business). However, while advertisements are quite popular and a big business on the Internet, sales promotions on the Internet have not caught on yet. Part of the reason is that an advertisement is purely informational with no exchange value. It is broadcast to the largest possible segment of population possible within a budget. On the other hand, coupons, the primary vehicle for sales promotion, have an exchange value and are intended for a select section of the population. The digital nature (ability to make perfect copies inexpensively), easy access, and low overhead for distributing information on the Internet is a boon to advertising, but a problem for sales promotions. In this paper we discuss the use of the Internet for distributing coupons. We describe the software needed to issue and redeem coupons on the Internet. The three attributes of the Internet we focus on are: 1) the ability to monitor the user's online shopping behavior (click stream analysis) to issue coupons; 2) mechanisms for embedding coupons in advertisements and publications and potential for fraud due to uncontrolled duplication and distribution of coupons; and 3) ease in capturing the coupons and redeeming them which will result in e-coupons being used by buyers who previously did not have sufficient incentive to cut the coupon and remember to carry it to the store. We begin this paper by discussing different types of paper coupons in use today and draw the distinction between manufacturer's coupons and store coupons. Store coupons are issued by a merchant to attract shoppers in his local area to his store. Store coupons are primarily used to: 1) manage (reduce) inventory; 2) reward customer loyalty; and 3) attract buyers to the physical store by discounting select few products. Manufacturer's coupons …