Stop us if you’ve heard this one before – a retail CEO likens coupons to a bad drug habit that needed to be kicked.
Sound like JCPenney’s spectacularly misguided boss in 2012? Well, this time the unfavorable analogy is coming from the man in charge of Victoria’s Secret.
L Brands, the parent company of Victoria’s Secret, announced a change in strategy earlier this year. The lingerie retailer did away with its printed catalog, streamlined its product selection – and stopped sending out so many darned coupons.
“We’ve been doing a lot of direct mail couponing for a number of years, and we think there’s a better way to drive business and build our brand going forward,” Chief Financial Officer Stuart Burgdoerfer said back in August.
This week, CEO Les Wexner expanded on that concept in a meeting with investors. “We abused our brands at Victoria’s Secret by promoting endlessly and endlessly,” he said. So “we bit the bullet,” he said. But he acknowledged that going cold turkey isn’t easy. “If you’ve promoted the brand by sending out millions and millions of coupons that say $10 off everything, and you suddenly stop that, it would be like being off of drugs or something. You’d probably tremble a little bit,” he said.
Investors are also trembling, worried about whether the company is making the right move – or whether Victoria’s Secret customers are going to disappear just as its coupons did. So far, sales are down and the company is warning that its earnings this quarter will be less than expected.
Compare this to what happened in 2012, when JCPenney CEO Ron Johnson decided to do away with coupons in favor of everyday low pricing. “Coupons were a drug. They really drove traffic,” he said at the time. “We have got to wean off this and educate our consumers.”
Turns out customers didn’t want to be “educated”, and instead taught Johnson a thing or two. Shoppers abandoned JCPenney, the no-coupon gambit failed, Johnson was fired, and the coupons came back.
If coupons were a drug, JCPenney shoppers showed no interest in quitting.
So will Victoria’s Secret shoppers?
L Brands executives insist their situation is different from JCPenney. Johnson wanted to streamline pricing to have it make more sense. L Brands just wants to stop giving things away for nothing.
So it eliminated the popular “Secret Rewards Program”, a twice-annual event in which Victoria’s Secret gave away free gift cards. And it eliminated some of its most popular coupon offers. “The offer of, come into the store, get a free panty, and get $10 off a bra, is not brand-building in our opinion,” Burgdoerfer told this week’s investors meeting. “In fact, 40% of the people that came in to redeem that offer came in, she got her panty, and she left.”
The free panty coupons and Secret Rewards gift cards were particularly popular in online coupon groups, where they were shared, traded, sold and even counterfeited by people who just wanted freebies and had no intention of becoming regular Victoria’s Secret customers.
So in order to cut off the 40% of customers who got their free stuff and left, Victoria’s Secret decided to risk alienating the 60% of coupon-bearers who actually did come into the store and buy other things. And it’s too soon to tell whether the strategy will work.
“Have we got that all completely figured out?” Burgdoerfer asked. “I’m not going to sit here and tell you we’ve got it all completely figured out.” Wexner was more optimistic. “We can measure the pain, and I’m beginning to see the gain,” he said.
If coupons are indeed a drug – no one ever said kicking the habit would be easy.
Image source: Victoria’s Secret
My daughter and I did the secret rewards last spring for the first time. She was really excited to use those $10 rewards and spend over the $10 but could not find anything that fit her. There was so little available. They lost two customers.
They have plenty to choose from unless your looking at the $10-$15 dollar range to cut costs which is what the point of this article is.. If there is nothing in store online shopping is also available.. They do run deals on shipping you just have to keep checking..