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How Do Coupons Work?

post #1 of 6
Thread Starter 
I found this on Howstuffworks.com and thought that it may be helpful/informative to some!

"How do store coupons work?." 19 July 2000. HowStuffWorks.com. 21 May 2008.

How do store coupons work?

If you have ever used coupons at the grocery store, then you know the routine. You cut coupons out of newspapers and magazines, take them to the store and use them to get discounts on certain products. A coupon is the same as cash. For example, if you have a $1.00 off coupon on a box of cereal, the cashier takes the coupon as though it were cash. It's not that common any more, but some stores will even double a coupon's face value.
Once the cashier accepts the coupon, the store has a problem. It now has a small scrap of paper that is worth cash, but in order to get the cash the store has to mail the coupon to the manufacturer. On the back of most coupons in fine print, the manufacturer lists the mailing address and states that it will also reimburse the store some amount of money for processing -- typically 8 cents per coupon. Redeeming a coupon would not be that bad if there were only a few of them, but major grocery chains collect millions of them. At that scale it becomes a major headache! The whole process seems hopelessly antiquated, but coupons remain enormously popular and that is why they continue. A coupon is, essentially, free money, and free money is hard to stop...
If you use coupons, you know that when you reach the check out counter, you hand the cashier your coupon(s). The cashier scans them and puts them into the cash drawer. What happens next depends on the store, but here's a typical process. At the end of the day the coupons in each cash drawer are added up as if they were cash, and that amount is added to the cash sum to be sure the overall total for the drawer is accurate. Then all of the manufacturers' coupons (and any coupons issued by the grocer) are sent in plastic bags or pouches to the store's corporate headquarters, typically once a week.
In the big store chains, the value of the coupons can easily total several million dollars per week. There is a person in headquarters in charge of processing the coupons. That person boxes all of the bags of coupons (still separated by the individual stores from which they came) and ships them to a third-party clearinghouse.
This is where the real work starts. The clearinghouse has to sort through millions of coupons, largely by hand. The first goal is to separate the coupons by manufacturer. Another goal is to separate coupons with scannable UPC codes from damaged (torn, smudged, etc.) coupons. This is so much hand work that some clearinghouses pay other clearinghouses -- in Mexico, for example -- to do part of the work. One system places scannable coupons face up on a conveyor belt, where they are moved along under a scanner that reads the UPC codes and tallies the amounts, then adds up the total value of each manufacturers' coupons. Damaged coupons that can't be scanned have to be sorted by hand and added up separately. The other system is to do the whole thing by hand. The clearinghouse then sends all the sorted coupons with an invoice to the manufacturer.
Several things can happen here. The manufacturer might reimburse the clearinghouse for the amount of the invoice, and the clearinghouse will send a check to the store for the amount of the coupons. Or the manufacturer will send a check directly to the store and the store then pays the clearinghouse. The clearinghouse is paid a certain amount per coupon by the store, plus shipping and handling. The whole cycle takes about a month. In many cases, the manufacturer will recount the coupons to avoid fraud -- a process that may send the coupons through another clearinghouse!
This is another great example of how a simple idea -- "let's give people a little scrap of paper that they can redeem for 25 cents off a can of beans" -- turns into a whole lot of work for somebody!
post #2 of 6
Thanks for this info. I never really thought about it.
post #3 of 6
Wow! They sure do have to go thru alot to get their money, but Im sure stores know if they didnt take them anymore they would lose alot of business LOL, they would mine anyway...thanks for posting pretty interesting to know...
post #4 of 6
I wonder how much the clearinghouses get paid.

This makes sitting for an hour or so cutitng out coupons seem like a not so bad task after all! (If seeing the savings at the checkout wasn't a big enough reward!)
post #5 of 6
Thread Starter 
Quote:
Originally Posted by Clarasmom07 View Post

I wonder how much the clearinghouses get paid.

This makes sitting for an hour or so cutitng out coupons seem like a not so bad task after all! (If seeing the savings at the checkout wasn't a big enough reward!)


post #6 of 6
Interesting article. Thanks for posting it.
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