Family Codes for Retailers Ralph Maresco, Inmar, Presenter Amber Shew, Inmar, Presenter John Morgan, ACP, Host

Agenda What are Family Codes? How do they work? The Misredemption & Fraud Problem How Social Media Exacerbates the Problem Retailer Benefits Validating Family Codes & GS1 DataBar Manufacturer Accuracy Risks of not following best practices in current environment Retailer Best practices Family Codes GS1 Databar Front end policies Cashier and Supervisor intervention Questions & Answers

Coupon Components Work Together What are Family Codes? Coupon Components Work Together Printed wording and product artwork Direct the consumer Coupon DataBar Relays purchase requirements to POS Retailer’s POS system Validates the encoded requirements against the consumer’s purchase. GS1 DataBar provides the qualifying GS1 Company Prefix (GCP) and family code POS matches the GCP and family code from the coupon DataBar to their system’s product family code table.

Family Codes 101 - Refresher What are Family Codes? Family Codes 101 - Refresher 3-digit number that identifies a product or family of products Assigned by MFRs based on how they want to issue coupons Resides within: MFR’s family code table The coupon barcode Retailer POS systems

What are Family Codes? Distribution Process Manufacturers are responsible for communicating their family codes to retailers. Family code structures should contain: Product descriptions Product GTIN’s (UPC-12 or EAN-13 code) Assigned family codes Retailers may elect to receive family codes directly from the manufacturer or through authorized 3rd parties. Retailers update their POS systems with the manufacturer assigned family codes.

The Family Code Hierarchy What are Family Codes? The Family Code Hierarchy Universal Code 000 ALL PRODUCTS with GCP 100 Coffee 200 Tea Super Summary 210 Tea Bags 120 K-Cups® 220 Drink Mixes 110 Ground Coffee Summary Universal Code Validates any item (GTIN) that contains the corresponding GS1 Company Prefix (GCP) Super Summary Codes 10 numbers are super summaries (i.e. 100, 200, 300, etc.) Includes all family codes ending in “00” Allows coupon validation of more than 1 product Validates any items whose family codes have the same first digit Are not to be used for individual products Summary Codes Includes all codes whose last digit ends in “0” (i.e. 110,120,450, 720, etc) Validates any items whose family codes have the same first 2 digits Family Codes Includes all codes ending in numbers “1-9” (i.e. 111, 235, 563) Allows validation for specific products 211 Regular 212 Decaffeinated 221 Single Serving Packs 222 2.5 oz. Bottles 111 Regular 112 Decaffeinated 121 16-Cup Packs 122 18-Cup Packs Family Code

Family Code Table Example What are Family Codes? Family Code Table Example Example of the data included in a family code structure. Family Code = Current family code assigned to product Old Family Code = Previously assigned family code. An update has been made and the product now has a new family code assignment. Product Description = Description of the item Product UPC’s = Product’s GTIN.

Application of Family Code Hierarchy What are Family Codes? Application of Family Code Hierarchy Application Formula Company Prefix + Family Code = Product UPC (GCP) 0614141 + (FC) 112 = Only Decaffeinated Coffees Family Code (GCP) 0614141 + (FC) 110 = Any Ground Coffee Summary Code (GCP) 0614141 + (FC) 100 = Any Carolina Coffee Super Summary Code (GCP) 0614141 + (FC) 000 = All Products with Company Prefix 0614141 Universal Code

Paper Coupons dying a very slow death… Misredemption & Fraud Paper Coupons dying a very slow death… Paper Coupons: ~98% of coupons distributed >90% of coupons redeemed FSCI (Sunday paper) coupons: >50% of total redemptions Only declining 1-2% per year So we need to find solutions to issues driving paper coupon mis-redemption and fraud

Background The GS1 Coupon Databar debuted in 2007 Misredemption & Fraud Background The GS1 Coupon Databar debuted in 2007 Advantages vs. old UPC/EAN barcodes: 1) Enables validation at family code level 2) GS1 not human-readable (a subject for another day slide!)

Misredemption & Fraud “Some coupons are coded to give you a discount off your purchase of any item in the store!” “The bar code does not require you to purchase the item described on the coupon. You do not even need to purchase an item from the manufacturer listed on the coupon.” “QSeer tells you what products are required according to the coupon’s barcoding. What you do with that information is up to you!” (Wink, wink) “As with any product, there are a small percentage of users who navigate to a usage that is unintended and inappropriate…” “The fact that some write bad checks doesn’t condemn check printers, or that some assaults are made with hammers doesn’t mean that Home Depot should stop selling those important tools.”

Misredemption & Fraud Problem Statement Almost 10 years after GS1 adoption, many retailers still not scanning/ validating to the family code level

The “Real” Problem Statement Misredemption & Fraud The “Real” Problem Statement Paper coupon fraud and mis-redemption could be as much as $1 Billion annually!

Why don’t some retailers validate coupons at family code? Misredemption & Fraud Why don’t some retailers validate coupons at family code? Belief that many CPGs’ family code tables are inaccurate Belief that CPGs will pay for all coupons submitted since they don’t know the underlying item purchased Company-level validation ensures most coupons will scan: 1) Fewer cashier interventions/conflicts 2) Check-Out lines move faster

The Problem is Getting Worse due to Social Media! Misredemption & Fraud The Problem is Getting Worse due to Social Media! Facebook – Closed and Secret Groups Instagram More to come…

Misredemption & Fraud

Social Media  Coupon Fraud Misredemption & Fraud Social Media  Coupon Fraud Social Media discussions driving coupon “glitchers” to retailers who only validate at Company-level “How to mis-redeem coupons” discussions shared with tens of thousands of members inside a Facebook group

Social Media  Coupon Fraud Misredemption & Fraud Social Media  Coupon Fraud Those posting this content typically: 1) Don’t believe this activity is a crime (or if they know, they don’t care!) 2) Don’t fully understand retailer POS validation, how family codes work, etc.

A Typical Social Media Thread: Misredemption & Fraud A Typical Social Media Thread: “What products can I use the $5 Swiffer coupon on?” “Dawn, Bounty, Charmin…anything with a 37000 code!” “At which stores…?” “XXXXX, YYYYY, ZZZZZ, etc.” “What about Walmart?” “It won’t work at Walmart; they changed their system!” Or: “DG caught on and started saying NO!”

Do people really post pictures of this…YES! Misredemption & Fraud Do people really post pictures of this…YES!

Do people really post receipts of this…YES! Misredemption & Fraud Do people really post receipts of this…YES!

Misredemption & Fraud How bad is the problem? Coupon mis-redemption rises with higher coupon values…

What is P&G doing about this? Two major interventions in the past year Coupon payment denials for: 1) Coupons redeemed for items the retailer doesn’t carry 2) Coupons redeemed in excess of units sold (CRIES)

How does “CRIES” work? P&G drops $5 coupon with 2-week expiry Misredemption & Fraud How does “CRIES” work? P&G drops $5 coupon with 2-week expiry Retailer X: 1) redeems 50,000 coupons 2) sells 10,000 units of promoted product Adjustment: (at least) 40,000 coupons over-redeemed x $5.00 = $200,000

The Retailer Landscape is changing… Retailer Benefits of Validating Family Codes & GS1 DataBar The Retailer Landscape is changing… Estimated % of total coupon volume redeeming at the family code level: 3 Years ago : ~20-25% 1 Year ago: ~40-50% Next 3-6 Months: up to 80%? 

Recommendations – For Manufacturers Manufacturer Accuracy Recommendations – For Manufacturers Ensure your Family Code structure and tables are accurate! Who maintains your Family Code tables? How often do you update your tables? How complex are your tables?

Family Code Accuracy Today’s Reality Manufacturer Accuracy Family Code Accuracy Today’s Reality Accuracy reported as high as 99.8% Retailers scanning to this level has tripled in last 4 years If errors detected on live offer, can back-end fix with use of second family code

Manufacturer Accuracy Considerations & Best Practices Ongoing Communication is critical Make sure everyone internally has up-to-date structure(s) Ongoing immediate notification of new item releases Discontinued items - product shelf life usually determines timeframe for removal. When in doubt include. Modifying family codes Can be done but not recommended frequently Most retailers store immediate “previous” family code, but some may only validate the current Consider DataBar flexibility – up to 3 family codes can be used Keep in mind retailer validation levels still vary

For the Retailers NOT validating to family code level… Risk For the Retailers NOT validating to family code level… The “coupon fraudsters” will figure things out Updates will be shared on social media and the fraudsters will head to your stores This group of people is generally bad for business – both the retailer and the CPG

Why “Coupon Fraudsters” are bad for business… Risk Why “Coupon Fraudsters” are bad for business… Argue for cashier overrides for any coupons that don’t scan Create a scene at check-out that is bad for other shoppers to see Slow down the check-out line – not only by arguing with the cashier, but simply due to the fact that they will hand in a fistful of coupons that have to be scanned

Continued: Why “Coupon Fraudsters” are bad for business… Risk Continued: Why “Coupon Fraudsters” are bad for business… Return the products they purchased with coupons at a later time, especially if retailer policy refunds full value of the item If they intentionally mis-redeem coupons, they are also likely to do other fraudulent activities in your store, such as shoplifting Refuse to pay full price and will likely only “cherry-pick” your deals

Risk Don’t believe me!!!??? Perhaps you’d like to buy a t-shirt with this logo on the front 

Recommendations – For Retailers Retailer Best Practices Recommendations – For Retailers Full scan/validation of the GS1 Databar Validate to the Family Code level; not MIN/Company Prefix Recognize that Family Code accuracy has greatly improved over the past few years

Are there alternatives? Yes! Retailer Best Practices Are there alternatives? Yes!

Retailer Best Practices Alternative Option for Manufacturers: Purchase a new MIN/Company Prefix When should this be considered? When you want to issue high-value coupons on premium-priced items When the MIN of these premium-priced items is shared with lower-priced items If you’re willing to incur the costs and issues associated with a hard conversion

The Crest White Strips Story Case Study The Crest White Strips Story Premium-priced item High-value coupons drive merchandising Coupon Mis-Redemption extremely high Social Media accelerating the level of Mis-Redemption

Over-Redemption Example: Case Study Crest White Strips Over-Redemption Example: “$5 off 1” coupon -- July, 2015 Retailer moved 10,000 units of this item nationally during 2-week offer period They redeemed 50,000 coupons (coupon scans on any of the items shown to the right) Overpayment: >40,000 x $5 = >$200K

Crest Brand Purchased New Company Prefix for Crest Whitestrips (CWS) Case Study Crest Brand Purchased New Company Prefix for Crest Whitestrips (CWS) Former (P&G legacy) MIN = 037000 New CWS MIN = 889714 First “New MIN” coupon dropped on 11/1/2015 Significant reduction in mis-redemption P&G reached out to media (CITN) to publicize and explain the change

Case Study Headline: ”Glitchers in Mourning: Crest Whitestrips Coupons Now Only Work on Crest Whitestrips” P&G’s Statement: “P&G’s objective is to ensure that the coupons we issue are used on the products for which they are intended…coupon misredemption is a growing issue across the industry and this is just one of many steps we are taking to rectify the situation.”

Case Study http://couponsinthenews.com/2015/11/17/glitchers-in-mourning-crest-whitestrips-coupons-now-only-work-on-crest-whitestrips/

Alternative Option for Retailers: POS Interventions/Parameters Retailer Best Practices Alternative Option for Retailers: POS Interventions/Parameters Controls on cashier overrides Manager intervention required Some level of validation beyond MIN

Examples of POS Parameters: Retailer Best Practices Examples of POS Parameters: 1) Number of coupons can’t exceed number of items in basket for a specific MIN 2) Sum of MFR coupon value can’t exceed value of items purchased 3) Single MFR coupon can’t be higher than value of items in basket

Retailer Best Practices 1) Number of coupons can’t exceed number of items in basket for a specific MIN Shopper purchases 3 P&G products (Bottle of Dawn, Box of Puffs, Roll of Bounty) Shopper attempts to redeem 4 P&G coupons 4th coupon triggers manager intervention

2) Sum of MFR coupon value can’t exceed value of items purchased Retailer Best Practices 2) Sum of MFR coupon value can’t exceed value of items purchased Shopper purchases 3 P&G products (bottle of Dawn, box of Puffs, roll of Bounty) Total retail value = $6.00 Shopper attempts to redeem 3 P&G coupons Total Coupon value = $7.00 3rd coupon triggers manager intervention

3) Single MFR coupon can’t be higher than value of items in basket Retailer Best Practices 3) Single MFR coupon can’t be higher than value of items in basket Shopper purchases 3 P&G products (bottle of Dawn, box of Puffs, roll of Bounty) Each item is $2.00; total retail value = $6.00 Shopper attempts to redeem $5.00 P&G coupon $5.00 coupon triggers manager intervention

Other/Simpler POS Options Retailer Best Practices Other/Simpler POS Options No >2 coupon overrides per transaction No overrides for coupons $3.00 or higher Manager intervention after the 10th coupon Family code validate “high-value” coupons only Family code validate for those Manufacturers whose family code tables are “reliable”

In general, limiting/controlling cashier overrides is a good idea Retailer Best Practices In general, limiting/controlling cashier overrides is a good idea Cashier overrides enable…

Egregious Coupon Mis-Redemption… Risk Egregious Coupon Mis-Redemption…

Risk Gang cuts and tears, mint condition and violation of “4 like coupons per day” policy

Gang-cuts of high-value offers are biggest issue… Risk Gang-cuts of high-value offers are biggest issue…

And the activity on the previous slide is enabled by this… Risk And the activity on the previous slide is enabled by this…

In Summary… Paper coupon fraud and mis-redemption represents up to a $1 Billion industry problem Most can be eliminated if both sides collaborate There is more than just a “one size fits all” solution (although we fully support family code!) We are all partners in the war on…Drugs Crime Coupon Fraud!!!

Questions & Answers

Contact Information Ralph Maresco – Ralph.Maresco@inmar.com, 513-248-5895 x2101 Amber Shew – Amber.Shew@inmar.com, 336-631-2957 John Morgan – john.morgan@couponpros.org, 610-789-9993