June 16, 2024

Advertising: Cashing In Coins and Skipping the Surcharge

“We have videos of folks pouring coins into the machine and they’re watching the ticker go up and up and they can’t believe it, because they usually have about 50 percent more than they thought they had,” said Engle Saez, vice president for consumer experience at Coinstar. “They’re elated.”

What may come as less welcome news, however, is the Coinstar service fee, which is 9.8 percent in the United States.

Now Coinstar — with operations throughout the United States, Canada and Britain — increasingly is teaming up with retailers, who essentially pay that service fee on behalf of consumers, who in turn agree to spend their bounty with them. After tallying, instead of receiving a levied cash voucher, users choose a gift certificate for the full value of the coins from retailers including Starbucks, Gap, iTunes and Amazon.com.

For Coinstar, which receives fees for transactions regardless, the growth potential for such partnerships is considerable, because the companies promote Coinstar to their own customers on their Web sites, through promotional e-mails, and in print and online advertisements.

While Coinstar, which converts $3 billion in coins annually, has offered the fee-free option from some retailers for as long as five years, the company had until recently never advertised the option. While Mr. Saez declined to say how many customers opted for no-fee gift certificates, he said that “the ratio is inordinately high” for cash vouchers.

“We haven’t told anyone about it,” Mr. Saez said. “For all intents and purposes it’s been the best kept secret out there.”


But now Coinstar is trying to change that. Late last year, in publications including People and The New York Times, Coinstar advertised a program where several retail outlets, including iTunes, Borders and Regal Cinemas, went beyond shouldering the fee to offer gift cards that exceeded the value of a $40 minimum coin exchange by $10, meaning that $40 in coins could be redeemed for a $50 gift certificate.

After that promotion ended on Jan. 1, iTunes made the same bonus offer for the 30 days that ended March 6, while another company, Rixty, is offering a $30 gift certificate in return for cashing in $25 in coins from March 25 through April 17.

Rixty enables consumers who lack credit cards to make cash-based purchases online, primarily for virtual goods in games like Farmville and on social networks like Facebook. When the company first started selling credits to consumers in 2009, it began by offering fee-free credit exclusively to Coinstar users.

“When we launched they were our first partner, and the great thing was on Day 1 we were live on 10,000 kiosks across the country,” said Ted C. Sorom, chief executive of Rixty. (Today there are about 17,000 Coinstar machines in the United States.)

While most Rixty consumers are adults, many are adolescents who earn cash baby-sitting and mowing lawns, but lack credit cards.

“When they go to their parents and say, ‘Can I borrow a credit card to buy a pair of virtual pants in a virtual world that you’ve never really heard of?’ the results are not positive,” Mr. Sorom said.

While his company today has numerous ways to use cash for online purchases, including Rixty gift cards available at retailers like Kmart and J. C. Penney, Mr. Sorom is partial to the freewheeling nature of Coinstar consumers.

“It is found money,” he said of their transactions. “It doesn’t come from a wallet or bank account, and people are much more willing to spend it on something on the edge of their budget, something they couldn’t justify spending money on before.”


Coinstar, which says it has kiosks within five miles of 95 percent of the United States population, says it has an average coin transaction of $38 and about 76 million transactions annually.

The largest coin exchange on record for the company involved Edmond Knowles of Flomaton, Ala., who in 2005 cashed in $13,084.59 — all in pennies. Coinstar sent an armored truck to Mr. Knowles’s home to retrieve the pennies.

Amazon, which has offered fee-free gift certificates through Coinstar since 2005, says spending among Coinstar users increases every year, though the online retailer declined to give specifics.

“We know there’s a segment out there that doesn’t have access to credit cards, and we also see a lot of college students who don’t have credit cards,” said Marcell King, senior manager at ACI Gift Cards, the issuer of Amazon gift cards.

More than eight million consumers stopped using credit cards in the last year, a nearly 11 percent increase in the number of consumers who forgo them, according to a recent report from TransUnion, a credit rating agency.

The latest effort by Coinstar, in pilot programs under way at both the Albertsons and Stop Shop supermarket chains, entails a first for the company: offering no-fee gift cards at the very store where shoppers are exchanging coins.

Stop Shop is running its pilot program for a six-month period through May at 50 stores, most of them in Massachusetts, and promoting it through newspaper circular advertisements and billboards — by Eleven Inc. in San Francisco — and in-store radio announcements.

“What we’re hearing from our customers is that they like it and they’re happy with it,” said Mark McGowan, president of the Northeast division of Stop Shop, who declined to provide preliminary data from the pilot program.

Mr. Saez, of Coinstar, said such in-store programs had enormous potential — and should have been initiated long ago.

“We’re trying to appeal to those consumers who are fee-averse by putting a product in front of them that we know is highly, highly relevant to them,” he said. “To convert coins into a grocery store gift card — that one was a no-brainer that skipped over a lot of brains here for many years.”

Article source: http://feeds.nytimes.com/click.phdo?i=e27e9b1da28238a7c7f033d879a5dc82

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