Thursday, March 05, 2009

Annual Primal Scream

It is time for my periodic rant against grocery store -- and other -- coupons. On March 4, the store receipt says we saved $21.46 from manufacturer's coupons on a total grocery bill of $300.86. Hooray for us, right? Well, yes and no. Here's why: We saved money in the immediate context but contributed to a scheme that is on the whole inefficient and wasteful.(1)

Suppose all manufacturers and retail stores without exception abandoned them and competed solely through prices. That practice would be more efficient and could make possible reductions in prices for all consumers and yet not hurt the ability to compete or the profit margin -- but only if everybody cooperated and did not violate the process for their own immediate private gain..

Just think of the complicated and expensive process involved: Somebody has to decide which items are to be promoted with coupons. They have to be designed, printed, and made available to consumers in various ways. The consumer has to look for them, choose relevant ones, clip and sort them, search for the qualifying products in the store, and hand them to the cashier, who has to ring them up, followed by a further sorting to send to the manufacturer, who has to make sure they qualify, send the promised handling fee to the stores, which have to feed it into their accounting system. Whew! The inefficiency involved is clear in terms of money, time, and materials.

So why do they work? A. Manufacturers like them because of what economists call "price discrimination."(2) B. Customers use them to save money in the immediate context.

Will they be abandoned? Not likely, so I will continue my protest-- a voice crying in the wilderness, fragrance wasted on desert air.
(1) At one time Proctor & Gamble said "it would lower prices instead of providing coupons"and called "coupons inefficient, saying only 2 percent of the millions it distributes are ever redeemed."

"But despite the growing sentiment among many major marketers in the US that coupons are ineffcient and wasteful, very few are likely to abadon them entirely." See:

(2) Read about the theory of "Price discrimination," i. e., the ability to sell the same product at different prices to different customers to the sellers advantage:

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