Pulling the right levers: optimizing your promotions mix

As we head into Q2, companies are in the unenviable position of having to plan around recently announced tariffs by the Trump Administration and threatened retaliation from targeted countries. On April 2, President Trump announced a 10-percent across the board tariff for all trading partners, with additional tariffs on countries where the U.S. sees a trade imbalance. Those tariffs range from 34% on Chinese imports, 32% on Taiwan, 25% on South Korea, 24% on Japan, and a 20% tax on goods coming from the European Union.

The Trump administration previously implemented or threatened tariffs on numerous products worldwide, including steel and aluminum. Some countries, notably Canada and China, have implemented countermeasures, and the EU is teeing up its own retaliatory tariffs targeting U.S. goods.

With this latest announcement from the U.S. and nations worldwide drawing up their plans, the amount of additional taxes companies might pay on products or raw materials to make products will be unpredictable. Not only does this impact the price of goods, it can also impact the supply chain, creating even higher prices as well as potential shortages. This makes mitigating tariffs a critical focus for businesses looking to stay competitive and protect their margins.

In January we laid out the advice Arrowhead is giving to our clients as they try to navigate potentially choppy waters ahead. Much of that advice remains the same and is becoming more urgent as consumer confidence is beginning to nosedive. The Conference Board’s Consumer Confidence Index® fell 7.2 points in March, after declining 7.0 points in February. It marks the fourth decline in as many months.

Likewise, the University of Michigan consumer sentiment survey for the U.S. fell to 57.9 in March, down from 64.7 in February, marking a third month of decline, and the lowest level since November 2022. The University of Michigan indicated consumers were concerned about personal finance, business conditions and labor markets, among other things.

Building a promotions strategy in 2025 for mitigating tariffs

As the prices of consumer goods rise in response to tariffs, consumers will inevitably start to make careful choices about where and how they spend their money. This is where a smart and nimble promotions strategy becomes essential. By adapting quickly through promotions, businesses can retain their current customers while also attracting new ones, remaining competitive while alleviating some of the pain for their customers.

CPGs essentially have two levers to pull when trying to retain customers looking for value. You can work to create loyalty within your customer base, and you can offer discounts to make your product more competitive. This is not an either/or proposition for companies – it’s often a matter of knowing which lever to pull and when, without relying too heavily on one or the other.

Coupons provide an immediate remedy on price, and often customers perceive them the same way they do any other discount. It gives them a straight comparison for a similar product with no discount, and for products impacted by tariffs, coupons can provide a temporary reprieve on any price hikes that come when these additional taxes are passed on to the consumer.

Consumers tend to view rebates as more of a loyalty play – requiring an additional step of submitting documentation to receive the rebate. It’s a win for the shopper who follows through to get the rebate, and a win for the seller who retains or even wins a new customer. Because not every shopper follows through with required documentation, rebates can be a lower-stakes method for companies to attract consumers.

Working with a partner who can help you be nimble with your promotions strategy is the smartest move going forward in 2025. Plan for the year, but understand the need to be flexible as policies, and opportunities change. Arrowhead offers our clients a number of flexible strategies, including a quick to market platform that allow our clients the ability to spin up promotions efficiently and inexpensively in order to take advantage of rapidly changing market conditions.

Counter tariffs by strengthening customer engagement

The economy will ultimately decide whether tariffs make good policy or not. Some sectors are cheering an opportunity to negotiate a trade policy more favorable to their businesses. Brands that rely on numerous supply chains to get their finished products into the hands of consumers will follow a more complicated road. Businesses will have to account for how changing tariff policies impact their supply chain as that could lead to delays or even shortages in both the near and long term.

What is clear is locking into the tried-and-true promotions strategy that worked for you in 2024 might be less effective moving forward in 2025. We recommend continuing programs that build customer loyalty, while simultaneously targeting discounts that can quickly take advantage of an opportunity or mitigate a new challenge. Whether you have in-house expertise or a partner that can help you with quick to market promotions, customer engagement is more important than ever, as brands worldwide strap in for the complexities that lie ahead.

Debbie’s role at Arrowhead: leading coupon strategy

Arrowhead is pleased to share our colleague, Debbie Settle, has been honored with a Lifetime Achievement Award presented by the Association for Coupons & Promotions (ACP) at its 2024 conference in Chicago. In her role as Arrowhead’s coupon strategy advisor, Debbie has been instrumental in driving forward our coupon services, leading key initiatives and ensuring we offer cutting-edge solutions to our clients. Her strategic approach to coupon services has significantly enhanced how we connect with consumers and drive value for brands.

Debbie came on board with Arrowhead as Director of Coupon Services in 2019 and has played a key role in leading Arrowhead’s coupon growth initiatives. She was instrumental in establishing our enhanced coupon processing system and also led development for our client promotion portal, which has made it easier for clients to execute successful promotional campaigns. Her ability to foresee industry trends and adapt to client needs has positioned Arrowhead as a leader in the coupon and rebate industry.

In her latest role as Arrowhead’s Coupon Strategy Advisor, Debbie is involved in new and existing sales with our clients and helps guide strategy for our coupon services with our Director of Coupon and Rebate products. Her leadership ensures that our coupon strategy continues to evolve with the ever-changing market demands and remains a core component of our clients’ marketing success.

A strong industry leader

Debbie has served the ACP through numerous committees, including representing Arrowhead for our board member position. Her leadership and expertise have not only benefited Arrowhead but have also contributed to shaping industry standards. Debbie is a true industry juggernaut, bringing passion and conviction to the coupon industry. Her ability to build strong relationships with clients and industry peers alike has earned her well-deserved recognition. Without her, Arrowhead wouldn’t be where we are today. Thank you, Debbie, and congratulations!

The future of coupon redemption: innovations and legislative challenges

While many shoppers are used to whipping out their smartphones to search for digital deals or scan the web for discount codes, the world of coupons still looks strikingly similar to what your parents experienced years ago: Take a paper coupon to the register, hand it over to the cashier, and look for the savings on your receipt. The good news is, the coupon industry, along with coupon redemption services, is in the process of rolling out some of the biggest innovations we’ve seen in decades, offering exciting benefits for both manufacturers and shoppers.

Key leadership innovations in coupon redemption services

As the industry undergoes these changes, lawmakers nationwide are starting to take a look at how coupons are delivered to ensure equity for all shoppers. Manufacturers and retailers will need to understand the promise of innovation, while ensuring they are up to speed on potential legislative changes that could impact their businesses at both state and federal levels.

Let’s start with the Universal Coupon, (AI)8112. This is a monumental shift, allowing manufacturers to offer both paper and digital coupons that can be used in any store, are single-use, and validated at the point of sale through The Coupon Bureau. Once validated, the customer receives their discount, and the data is sent to a third party for immediate reconciliation.

It’s a win for shoppers because it allows them to use either a digital or paper version of the coupon at any retailer, thanks to the single-use code preventing the coupon from being shared multiple times. For the retailer, the win is rapid reconciliation. For manufacturers, the rewards are immense. The single-use code can dramatically reduce fraud and provide data to measure the success of a campaign. Because it’s electronically validated, it also creates processing efficiencies.

The impact of electronic clearing in coupon redemption

Another innovation, electronic clearing, is a more streamlined reconciliation process leveraging the retailer’s point-of-sale (POS) system. Shoppers present their coupon at the POS, where the system creates and sends a digital file of the coupon and transaction details to a clearinghouse for faster processing. The experience remains the same for the shopper, but the retailer benefits from quicker reimbursement compared to traditional methods. It’s also a win for manufacturers who would no longer pay to ship paper coupons to a clearinghouse.

Legislative considerations for coupon industry innovations

While the march toward digital seems inevitable, driven by shopper preferences as well as manufacturers, lawmakers in some states are concerned that digital-only discounts could exclude shoppers who either don’t have access to the necessary technology or find the process difficult to understand.

For example, a large grocery chain uses digital coupons within its store app. To get the discount, shoppers must first “clip” and save the digital coupons, which has proven confusing for some less tech-savvy shoppers. Last year, legislation introduced in New Jersey requiring retailers offering digital coupons to make an in-store alternative available didn’t pass after opposition from business groups. The bill has been re-introduced this year.

States such as Illinois, Massachusetts, Rhode Island, and Washington have also been considering similar legislation. In Washington, a bill currently in the state legislature would mandate all grocery shoppers automatically receive a discount on any digital coupon item, whether or not they present the coupon.

The future of digital coupons: opportunities and challenges

On the federal level, over a dozen House members, backed by consumer groups, signed a letter delivered to the Federal Trade Commission in Fall 2023, urging an investigation into potential harm caused by store-issued digital coupons on consumers who can’t access the discounts.

Legislators’ scrutiny of coupons underscores their continued importance in marketing strategies. A 2023 Capitol One survey found nearly 178 million U.S. adults have redeemed digital coupons, and 86% of shoppers said they would be more likely to try a new business because of a coupon.

Manufacturers, vendor partners, and retailers should monitor legislative efforts to understand how they might impact digital coupons. However, nothing proposed to date should stop brands or retailers from adopting either the universal coupon or electronic clearing, which allow for both digital and paper coupons.

Adapting to change in the coupon industry

An industry not known for innovation is suddenly finding itself at the crux of major advancements that offer benefits to manufacturers, consumers, and retailers alike. Manufacturers and retailers may need to be nimbler to take advantage of technological advancements while staying compliant with state laws. While change can be disruptive, what is happening now in the coupon industry represents exciting steps forward and highlights the value shoppers place on these promotions.

Contact us today to learn more about how Arrowhead can help you navigate the evolving coupon landscape and stay ahead of industry changes.