Coupon Machines Lure Customer at Checkout Counter

AN old dog of product promotion - the coupon - is being taught some new tricks.

At thousands of supermarkets across the country, coupon-distribution machines sit side-by-side with products they promote. And at thousands of checkout counters, departing shoppers receive coupons for products that compete with the ones they just bought.

These programs are designed to target likely customers with greater accuracy and to achieve a higher rate of coupon use, or redemption, than coupons distributed by direct mail or in newspapers.

"The closer you can get the coupons to where the customer is actually making the decision, the more likely he is to use it," says John Rubin, a spokesman for ActMedia Inc. of Norwalk, Conn.

In February, the company installed 10,000 of its Instant Coupon Machines on shelves in 42 cities nationwide.

Where ActMedia reaches shoppers before they purchase, Catalina Marketing Corporation, based in Anaheim, Calif., reaches them as they leave the store - using data from the electronic scanners at the checkout counter.

The boon of this system is that manufacturers can pitch their wares directly to users of rival products. If a shopper bought Kraft's frozen macaroni and cheese, for instance, the bar-code scanner would trigger the coupon machine to print out a coupon for the same dish made by Stouffer's, explains Tommy Greer, Catalina's chief executive officer.

The coupons could also be for a related product. A shopper who buys baby food might get a coupon for a nearby clothing store for toddlers.

"We are more efficient, by far," in terms of generating purchases, than are coupons distributed through newspapers in free-standing inserts (FSIs), Mr. Greer says. Catalina's program costs manufacturers 10 times as much as FSIs, he says. But its redemption rates average 9.4 percent, versus 2.5 percent for FSIs.

CATALINA, which was founded in 1983, has machines in about 4,500 grocery stores, up from 1,200 in 1988. Each store has about 10 machines.

ActMedia, by comparison, has 6,000 machines in grocery stores and 4,000 in drug stores. ActMedia's program costs clients $23 or more for 1,000 coupons, also higher than the $7 per thousand cost of FSIs. Catalina's program costs $30 to $100 per thousand, Greer says.

ActMedia's redemption rate averages 20 percent of all coupons taken. This sounds small, given that shoppers can use them minutes later as they pay for their goods. But Mr. Rubin explains that many people save the coupons for later use, and others take a coupon and then decide not to buy the product.

Rubin says ActMedia hopes to grab a portion of the $1.3 billion FSI market. The company, a division of Heritage Media Corporation, aims to expand into convenience stores and mass-merchandise retailers.

Both ActMedia and Catalina offer "category exclusivity;" they will not sell their services to competing products at the same time. Both also give a portion of their revenue to the host retail stores.

Greer says Catalina's clients can regularly raise or lower the value of coupons in response to data on redemptions.

The machines in a given store are all managed by one personal computer, which is updated with new programs from clients each week.