The Anatomy of a Coupon

Featured in the Yakezie Carnival at Money Reasons.

I use coupons like money. When I enter a store I have my wallet clutched under my arm to free up both my hands so that I can thumb through my stash of coupons (which I store in a used junk-mail envelope). The more coupons I use the less money that I have to take from my wallet. In other words, coupons supplement my income.

For such an avid coupon user, you would think I understand all of the jargon on a coupon, or maybe even know the history of coupons in general. However, I do not. I, like most of you, just know the mechanics of a coupon and enough about how they work so that I can use them to save money.

When I started to research the anatomy of a coupon and its history, I was fascinated (as only a frugalite can be). So I’d like to take the time to share with you what I have found.

A Brief History of Coupons

Here are some highlights from a well written article on the history of coupons. Coupons have been in use for over 110 years, starting with a handwritten ticket for a free glass of coca-cola in 1894. Over 8 million free glasses were given out during that inaugural coupon campaign! Dare I say that coca-cola became a mainstream product because of coupons?

Clipping coupons became mainstream in the 1930s with the Great Depression and peaked by 1965 with 50% of households using them. I found this statistic to be pretty impressive, considering that a Nielsen study that took place in the midst of the recession (September 3, 2009) found that only 35% of US households use coupons. And while historically people who needed help with bills used to use coupons and the affluent found them to be below them, the affluent are now the biggest class of coupon users.

The Fine Print

There is a lot of fine print on coupons. Before researching what it all means, I only looked at the date to make sure it was not expired, the face value to see if I can get it doubled or tripled, and the product size to avoid any issues at checkout. But what about the rest of the fine print?

Limit of one Coupon Per Purchase: This does not mean per transaction, but per item. In other words, you may use one manufacturer coupon per product. If you have five products and five manufacturer coupons, you can use all five coupons in the same transaction. Please note that you can still use a store coupon in addition to your manufacturer’s coupon for one product.

Void if Copied, Sold, Exchanged, or Transferred: It turns out that there is a lot of fraud with coupon use from consumers, cashiers, stores, and clearinghouses (see below for the role of clearinghouses in all of this). One of the ways that consumers fraudulently use coupons is by scanning them and making copies on glossy paper that look like the originals. This is so prevalent (costing retailers and manufacturers an estimated $300-$500 million per year) because the barcodes on the Sunday paper coupon inserts are generally not unique. Another question with this fine print is whether or not it is legal to sell your coupons on sites such as eBay? See below.

Cash Value: Most coupons state that they have no cash value, or have a cash value of 1/20₵. It is illegal to sell something that has no cash value. So how do people and auction sites such as eBay get around this? Clipping coupons and selling them takes time, and so people actually sell their time as a service rather than sell the actual coupons themselves. EBay coupon auction listings typically include a statement that specifies that the coupons are free and the bidder is paying the seller for the service of procuring, clipping and compiling the coupon sets. Checkout eBay’s policy on selling coupons.

Do Not Double: Most coupons have instructions to not allow the doubling of their coupon. However, if the coupon barcode begins with the number 5, and your store doubles or triples coupons, then your coupon will act accordingly. If the coupon barcode begins with the number 9, then it will not double.

Retailer: The rest of the information on the coupon is directions for the retailer on how to redeem the coupon for reimbursement. This will include an address, the amount of shipping and handling or processing fees they will receive, etc. See below for more information on these terms.

How are Coupons Processed and Who Pays the Cost?

It turns out that stores treat coupons like money as well…because they are. Large retail chains collect millions of dollars worth of coupons each week and have devised a system to get their reimbursements from the manufacturer, who ultimately pays for the cost of the coupon campaign. Typically chain stores will send their coupons via mail to their headquarters after counting up their cash drawers (they include the value of all coupons collected in their count of cash). At headquarters, the coupons remain separated by store, and are shipped to a third party clearinghouse for sorting. The sorted coupons are then sent to the manufacturer with an invoice. The clearinghouse is paid a shipping and handling fee as well as a certain amount of money per coupon for their sorting work, and the store is reimbursed the value of the coupon plus a shipping and handling fee by the manufacturer (typically 8₵).

While researching this, I was amazed at how much processing and handling is involved with redeeming coupons. According to a white paper published in April 2007 by ScanAps, “Coupons are the only cash instruments that are still counted, processed, settled and cleared manually. From the time a consumer submits a coupon to a cashier in the store, an average of eight pairs of hands physically touch every coupon before it is finally shredded and the retailer is reimbursed.” I was also shocked at all of the different types of fraud involved at each point of this eight-hand process.

So there you have it, an abbreviated history and anatomical study of the coupon. Do you use coupons? Is it out of principle or necessity?

Other Articles You May Enjoy:

Saving Money for the Person Who Doesn’t Have Time for Coupons

7 comments… add one

  • Aurora

    very interesting post!!

  • Sandra

    I tell my daughter – “Coupons are money”. It’s so weird that people consider them a nuisance instead of using them to save them substantial cash. I think people have become de-sensitized by debit & credit cards.

  • Diane

    Very interesting, from start to finish! Thanks for compiling all that.

    The one thing I’ve always wondered is what the “cash value of 1/20₵” means. So I just looked it up and found this:

    http://answers.yahoo.com/question/index?qid=20080816044353AArlmAQ

    http://www.chacha.com/question/why-do-coupons-have-a-cash-value-of-1%26%2347;100-of-one-cent

    I guess that’s good enough…unless you’ve learned something more!

  • It really is remarkable what you could come across over the internet. With web access as well as a small bit of time, it is possible to easily acquire on the web coupons that could be able to be applied at the vacation destination of your selection.

  • As we are all discussing Frugal Confessions, Restaurants often offer discount coupons to get people to come in and eat. You do need to pay close attention to the details of the coupon though. Many of them will have specific days of the week they can be used. Some of them also have a set time frame where they can’t be used after 4 pm or something similar.

  • Korting

    It really is remarkable what you could come across over the internet. In a small bit of time, it is possible to easily acquire a lot of web coupons that give you a lot of discount.

  • J Stella

    Wow, great info, thanks so much for doing all that research, I learned a lot! And will be watching my coupons more carefully!

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