1. Proper Coupon Validation Fixing a Dysfunctional Family (Code)
Ralph Maresco
The Procter & Gamble Company

2. Presentation Overview
Today’s Realities and “Case for Change”
Problem Statement
Social Media Impacts
What are we doing about it?
Recommendations and Alternative Solutions
Family Code is not an “all or nothing” solution

3. “Family Codes 101” – A Refresher
3-digit number that identifies product or
family of products
Assigned by MFRs based on how they
want to issue coupons
A collection of UPC numbers
Resides within:
1) MFR’s family code database
2) Within the coupon barcode
3) In retailer POS systems

4. Specific wording on the coupon The coupon’s barcode
Remember, there is a 3-way match that should occur when a coupon is redeemed…
Specific wording on the coupon
The coupon’s barcode
The retailer’s POS system – and how it validates the coupon against the product being purchased

5. Sample Family Code Hierarchy
Universal
Super Summary
Summary
Family
000
ALL PRODUCTS for CP
100 Hair Care
200 Lotion & Body Wash
210 Lotion
120 SpaCare Brand
220 Body Wash
110 ProCare Brand
Not a handout
oz Lotion
oz Lotion
oz BdyWsh
oz BdyWsh
111 ProCare Shampoo
112 ProCare Conditioner
121 SpaCare Shampoo
122 SpaCare Conditioner

6. Family Code Table Example Pantene Brand
Group Code 580 Shampoos/Conditioners 581 Stylers/Treatments 583 Premium (Expert Series) 585 Hair Re-Growth 586
Not a handout

7. Paper Coupon Validation
Case for Change

8. Paper Coupons dying a very slow death…
~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
Not sure if these stats are totally accurate but they are close

9. 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!)

10. “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.”

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

12. The “Real” Problem Statement
Paper coupon fraud and mis-redemption could be as much as $1 Billion annually!
I will show you a summary of a Market Basket study we did which is the source of my estimate

13. 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

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

16. 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

17. 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.

18. A Typical Social Media Thread:
“What products can I use the $5 Swiffer coupon on?”
“Dawn, Bounty, Charmin…anything with a 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!”

19. Do people really post pictures of this…YES!

20. Do people really post receipts of this…YES!

21. How bad is the problem?
Coupon mis-redemption rises with higher coupon values…

22. 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)

23. 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

24. 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%? 

25. 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

26. 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

27. 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

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

29. 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?
Anecdotes – Panera Coffee, Ken’s Salad Dressing

30. 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

31. 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

32. Are there alternatives? Yes!

33. 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

34. 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

35. Over-Redemption Example:
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

36. Crest Brand Purchased New Company Prefix for Crest Whitestrips (CWS)
Former (P&G legacy) MIN =
New CWS MIN =
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

37. 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.”

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

40. 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

41. 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

42. 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

43. 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

44. 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”

45. In general, limiting/controlling cashier overrides is a good idea
Cashier overrides enable…

46. Egregious Coupon Mis-Redemption…

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

48. Gang-cuts of high-value offers are biggest issue…

49. And the activity on the previous slide is enabled by this…

50. 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!!!