5 Ways Coupons Can Be Bad

BOSTON (TheStreet) -- Your supermarket doesn't love you. And the folks who make the pasta, peanut butter, cola and condiments you buy don't really worry about helping your household budget.

Those who deal in coupons do so to make money, not to cut you a break. While it can make good financial sense to save a few cents here and there by clipping and downloading coupons, companies provide that service as a means to get you to spend more, and if you don't think through your purchases using coupons can end up costing you in the long run.

Boiling it down, manufacturers have key goals when it comes to consumers -- they want more of them, buying more, more frequently. Coupons allow them to maintain and build upon their market share, draw first-time buyers into the fold, ease the blow of price increases or size or quantity reductions, and push stores to offer prime shelf displays and aisle placement.

Research by NCH Marketing Services, part of the media and marketing services company Valassis, found that shoppers saved $3.7 billion with coupons last year.

In 2010, marketers distributed 332 billion consumer packaged-goods coupons -- the largest single-year distribution quantity recorded in the United States, exceeding the previous year's record by 21 billion coupons. Redemption volume in the U.S. grew 3.1%, to 3.3 billion CPG coupons.

The study found that 78.3% of shoppers regularly use coupons, compared with 75.8% in 2008 and 63.6% of consumers in the pre-recession survey of 2007.

Coupons are in many ways the ultimate lure, a promise of saving money by doing little more than hitting the "print" button or scissoring away at the Sunday newspaper. But there is no guarantee of a "win-win" if you fail to think strategically before reaching the check-out line.

Here are five ways coupons can be bad.

They put unnecessary items in your cart.
Supermarkets and retailers have long perfected the science of impulse buys. From the layout of aisles and shelves to the decor and signs, nearly every detail is calculated to get you to deviate from your shopping list and spend, spend, spend. Coupons can be a valuable means to that end.

The importance of getting customers to give in to impulse-buy urges was illustrated in recent research by NPD Group, a provider of consumer and retail analysis. It found that 94% of the grocery store shoppers it surveyed prepare a written list before leaving the house; 72% say they never or rarely deviate from it.

"For food and beverage manufacturers and retailers, it's all about getting on the list," says Ann Hanson, executive director of product development at NPD and author of the report. "With so many purchasing decisions being made at home where meals are being planned and shopping lists assembled, it's important to focus on the consumer at home before they leave for the store."

Coupons can serve as a way to wrangle a product into that planning, as well as persuade shoppers lacking such a rigid agenda. NPD found that, of the 25% who do buy on impulse, 80% say they do so when they see an item is discounted.

They lead to pointless upgrades.
The store-brand ketchup is cheaper than "premium" brands such as Heinz and Hunt's. But armed with a coupon, even if it fails to split the difference, you may decide to upgrade.

That's why there was a coupon in the first place. Job No. 1 for pushing a product is to get consumers to try it.

Supermarkets have become particularly adept at pairing up items to increase your "savings." According to NCH Marketing Services, 26% of coupons last year required the purchase of two or more items.

Buy a pound of hamburger and there may be a sticker attached that offers an additional discount on a jar of relish or package of cheese -- if bought together. Failing to pair up the items might make you feel like you left money on the table, even if you have an unopened jar of relish in the pantry at home and just bought higher-quality cheese from a local deli.

Stores and manufacturers score all the more because the paired item is almost always a brand name that would cost more with or without the coupon.

They lead to excessive bulk buys.
A newly popular reality show theme on TV is the world of extreme coupons.

Shows such as TLC's Extreme Couponing feature people who spend the equivalent of a part-time job (or more) clipping, stockpiling and organizing as many coupons as they can. Pairing offers, double-value days and other strategies allows them to yank items off the shelves for pennies on the dollar -- sometimes for zero cost.

In most of these shows, the featured household's pantry is loaded with the cheap bounty they were able to finagle -- cases of mayonnaise, dozens of bread crumb containers, hundreds of bottles of Tabasco sauce. It might take years, if ever, for the nonperishable items to be eaten.

Most of us are neither hoarders nor extreme coupon addicts, but all of us are susceptible to the temptation of "buy one get one at half price"-type offers. We may not "need" that gallon container of Greek yogurt -- but the offer was too good to pass up! And you never know when you might need those 20 tins of Old Bay seasoning gobbled up in a two-for-one deal.

Are you really saving money if you're collecting items, rather than using them?

They can hurt businesses.
Have you ever wanted to learn to tango? For most, that inclination might be no more than a fleeting flight of fancy. But the new breed of Internet-based, crowd-sourced discounts may lead you to spend for activities, purchases and restaurants you would not have otherwise.

Groupon, for example, features daily deals that discount a local goods and services. The discounts, however, require a minimum number of participants before they kick in, and the offers expire fast. The lure of a deadline-driven deal may push you to spend money on activities or indulgences you might not have otherwise.

A study released in September by Rice University finds Groupon deals -- which can still lead to wasteful experimental purchases -- can yet be "more beneficial for consumers than businesses."

Groupon promotions were profitable for 66% of the businesses surveyed for the study, unprofitable for 32%. More than 40% of the respondents indicated they would not run such a promotion again.

"Because the Groupon customer base is made up of deal-seekers and bargain shoppers, they might not tip as well as an average customer or be willing to purchase beyond the deal," says Utpal Dholakia, author of the study and an associate professor of marketing at the university.

They may be illegal.
Be careful where you find your coupons, or you may find yourself in a costly legal predicament.

The Coupon Information Corp., an industry coalition, has been stepping up its efforts to stem the proliferation of counterfeit coupons, a growing problem exacerbated by online downloads and auction sites such as eBay.

In May, working alongside California law enforcement and Target, the group was successful in seeking the arrest and incarceration of Las Vegas coupon counterfeiter Glenn Rodgers who was sentenced to 16 months in prison and forced to liquidate his personal assets, including his home and cars if needed, to pay restitution.

That same month, Lucas Townsend Henderson, 22, known by his occasional online alias "The Coupon Guy," was arrested by the FBI and charged with counterfeit coupon related crimes (wire fraud and trafficking in counterfeit goods). Henderson allegedly distributed counterfeit coupons and an instruction manual on how to make counterfeit coupons via various websites.

According to the FBI, in December, Henderson played a role in issuing $200,000 worth of Tide detergent coupons that were redeemed. In court documents, the bureau points out that "Procter & Gamble, which manufactures Tide and is the largest coupon issuer in the U.S., has never issued a single online, print-at-home coupon."

CIC's database of known counterfeit coupons can be found here.

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