Work

Innovative mobile coupon solution delivers transformative business value for CPG.

RJ Reynolds Tobacco Company Digital Couponing Solution

“We are burning millions of dollars on paper coupons, every year.”

The Challenge

RJ Reynolds Tobacco Company (RJR) is the second largest tobacco company in the United States and makes many of the nation’s top selling cigarette brands.

Due to FDA restrictions on how the tobacco industry can market, RJR focuses much of its effort on direct mail coupons. These paper coupons are primarily redeemed at point-of-sale in independently owned convenience stores (c-stores). These c-stores represent an important sales and marketing channel for the company but also a costly one. RJR was spending several million dollars per year on printing and mailing paper coupons in addition to the redemption value of the coupons.

The entire coupon redemption process was expensive, slow, wasteful, and prone to coupon fraud. Paper coupons redeemed at retail were typically stockpiled by the merchant and periodically mailed to RJR’s third party clearing house. This process could take up to six months and dramatically delayed campaign results.

Additionally, consumer experience expectations at point-of-sale (POS) had begun to shift toward digital with the pervasiveness and ease of mobile couponing that consumers were experiencing elsewhere at retail locations such as Starbucks. RJR, however, was faced with a unique technology challenge.

Unlike Starbucks, which controls the operations and technology used by its retail stores, RJR’s retail convenience store channel is made up of independently controlled stores. Each chain or store had implemented its own choice of POS/scanning technology, and many of these laser scanners were unable to recognize a barcode displayed on a smartphone screen.

In order to realize its vision of a digital-first solution, RJR needed a couponing technology solution that would bridge the technology gap between a fragmented ecosystem of POS laser scanning technology and the smartphone.

The Solution

Skookum approached the challenge by employing its Rapid Innovation methodology, and in less than three weeks, the team had created a concept that would solve the interoperability gap between the mobile phone and popular POS technology. The solution included a hardware device (see figure 1) with a special consumer-facing 2D scanner, which was able to read the coupon barcode off a user’s mobile phone and then immediately approve or decline the coupon via RJR’s cloud-based coupon server. The device also included a merchant-facing screen (an e-ink display) that presented a validated universal discount barcode that any traditional laser POS scanner could read. Additionally, the solution enabled faster and more reliable service leveraging a cellular data connection that wasn’t dependent upon c-store infrastructure. Lastly, the solution was able to read and provide immediate approval of paper coupons for those still using them.

Figure 1. RJR POS sketch

Validating the Concept

The next step in the proof-of-concept process was to build a working prototype of the standalone hardware device. It was created using an e-ink display, a 2D barcode reader, and a Raspberry Pi mini-computer. With the assistance of Skookum’s industrial design specialist, the hardware concept to house the technology was built (see figure 2). The solution was then tested at RJR’s office cafeteria with employees, further validating the solution concept.

Figure 2.

POS Hardware

RJR subsequently took the solution to pilot in a test market where the results far exceeded expectations. For example:

  • 99% of consumers were satisfied with the experience.
  • 94% percent said it was easier or the same as a traditional paper coupon.
  • 90% percent said they would “definitely” redeem future digital promotions. M. Kress, “R.J. Reynolds Pilots Retail Technology Program”, November 18, 2015.

The Final Product

Skookum delivered a viable digital solution to help RJR transform its antiquated couponing process. RJR took the proof-of-concept and created its own branded and proprietary technology platform called Spot You More™ (see figure 3). The device is wirelessly connected to the Internet and enables any convenience store with the Spot You More™ device to accept digital promotions regardless of its point-of-sale equipment.

“This technology has the potential to create value beyond just redeeming coupons for our brands,” O’Brien explained. “Right now, it holds the potential to open up digital marketing and fraud-free couponing to any other CPG (consumer packaged goods) in the convenience store channel, a channel where there is currently very little digital coupon penetration. Additionally, it has the capability to seamlessly bring the Internet of things to the c-store channel.” -- J. Brice O'Brien, executive vice president of public affairs and chief communications officer R.J. Reynolds Tobacco Company.

M. Kress, “R.J. Reynolds Pilots Retail Technology Program”, November 18, 2015.

Figure 3. Spot You More Image (Seth)

The Rewards

  • Cost savings through the elimination of paper coupons, pass-along fraud, and need for a third-party clearinghouse
  • Added value for RJR’s c-store channel: 64% of consumers purchased additional items
  • New revenue streams: The solution could be sold or offered to other CPG companies
  • Access to real time data and analytics to drive more effective and efficient campaigns
  • Customer-centric: A solution centered around meeting the needs of the rising mobile consumer
  • A more sustainable “green” solution: Reduction in paper printing, gas and pollution to deliver mail