Impending demise of paper coupons?

• Position: YOUR LIFE - Use of digital coupons as advertising and promotional tool in the retail industry

Representing a relatively new phenomenon in shopping, digital coupons show great promise for revolutionizing the industry. "In the literature, there is some information about these coupons, but there is no empirical data," notes Anita Bhappu, associate professor and division chair of retailing and consumer sciences at the University of Arizona, Tucson.

Digital coupons are utilized for advertising and promoting products, but consumers often find them difficult to use. Not to be confused with electronic coupons (available online) that have to be printed out before being redeemed, digital coupons are downloaded directly to store loyalty cards. A variety of retailers currently are testing them.

After loading the coupons to their loyalty cards via an Internet connection, many could not recall what coupons were available. Also, many reported that the coupons did not redeem at checkout and cashiers did not know how to correct this service failure. "The promise, or at least the implied promise, behind digital is that it is more convenient than paper and the way in which this convenience is delivered becomes a service," says Bhappu, also a research fellow in the Terry J. Lundgren Center for Retailing.

It is the service aspect that troubles shoppers the most. Therefore, as services stand, the format is not yet "up to par. While the promotional aspect of the coupon was just as important, the consumers were dissatisfied with the experience related to service," Bhappu explains.

About 3,000,000,000 paper coupons are issued in the U.S. annually...