Coupon Redemption at All Time High

Discussion
Jul 22, 2010

By George Anderson

Consumers are looking to save money wherever they can and
they’re clipping coupons at a furious pace, nearly $2 billion worth in the
first half of the year, according to NCH Marketing Services (a division of
Valassis).

The number of coupons put out by brand marketers jumped 11.4 percent
versus the same period last year and nearly 25 percent higher than in 2008.
Health and beauty care marketers put out 20.8 percent more coupons year-over-year
while grocery was up 6.7 percent.

Marketers were looking to build a sense of
urgency with coupons by increasing the value (up 4.4 percent) and shortening
the period they could be redeemed by nearly a week-and-a-half (9.5 weeks) over
last year (10.9).

Redemption rates are also higher with a number of “alternative” channels
getting in on the act. NCH reports that convenience stores, dollar stores and
warehouse clubs redeemed coupons at a 36.6 percent higher rate. Grocery, drug
and mass still continue as the coupon heavyweights with 90 percent of all redemptions
coming through these channels.

The vast majority of consumers continue to get
their coupons through FSIs (85 percent) while online sees the biggest percentage
gains over a low base. Coupons clipped online represent just over one percent
of the total today.

Discussion Questions: Will coupons continue to grow as part of the advertising/promotional
mix for brand marketers and retailers? What do you see as the positives and negatives
associated with increased use of coupons by both brands and consumers?

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19 Comments on "Coupon Redemption at All Time High"


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Bob Phibbs
Guest
10 years 9 months ago

What would you expect a company that markets coupons to say? They weren’t working? CMOs are so quick to give away other departments’ money in the misguided attempt to prove they work that they rarely see how they have attracted bottom-feeder consumers.

Nikki Baird
Guest
Nikki Baird
10 years 9 months ago
You can blame part of brands’ coupon craze on oil–yup. Oil. When gas prices were high, retailers told CPGs they didn’t want to see price increases on products, so CPGs created smaller pack sizes (which had its own consequences, but that’s another story). But when oil prices fell and the economy tanked, rather than go back to increased pack sizes and face the possibility that costs might go up yet again, retailers and manufacturers both moved towards coupons as a way to make the effective price less, without changing the fundamentals of pack size and “base” price. However, ‘coupon’ is just the mass, non-targeted version of a customer offer–and that’s really where we should be headed. I have to say, after being stuck in line in the grocery store for 20 minutes this past weekend, and that’s not just perception on my part, 20 agonizing minutes by my watch, while a woman with no less than 30 coupons (clipped from FSIs, printed from online, cut from targeted mailers) wrangled with the cashier for every last… Read more »
Max Goldberg
Guest
10 years 9 months ago

When the economy is uncertain, consumers turn to coupons to save money. Marketers have become much smarter about coupon values, purchase requirements and expiration dates. FSIs reach millions of homes and the Internet millions more. We should expect coupons to remain popular, as being thrifty has become a status symbol.

Mark Johnson
Guest
Mark Johnson
10 years 9 months ago

The fact is, the economy is worse than many think. Corporations are making money due to cost savings and job cutting. When consumer confidence wanes you always see a spike in conservative spending measures.

Roger Saunders
Guest
10 years 9 months ago
Couponing belongs in the Marketing Mix. Consumers, of all ages, income, and education levels make use of the tool. They work, for the consumer, because they readily and conveniently meet their operating needs…and they are more than just the bottom feeders. Retailers and manufacturers have to address what portion of the marketing mix that coupons should play. That varies depending upon the category of merchandise that is being promoted, which consumers are being targeted, how often those coupons are going out, links to channels of distribution, etc. Coupons work. Is there a margin of “waste” in this tool? Of course there is, just as there is “waste” in the broadcast, newspaper, magazine, online, mobile, and any number of 30+ other media forms. Marketers have to make use of applications that guide them around how media forms INFLUENCE, ARE CONSUMED/USED, and COST, as they evaluate the best methods to reach the consumers (existing or new) that they are seeking. Marketers who have stopped using media measuring tools from 40 years ago and have stepped into the… Read more »
Mel Kleiman
Guest
10 years 9 months ago

The use of coupons is growing for four reasons.
1. They attract new buyers to try the product.
2. They keep old buyers coming back.
3. They help some brands to be more price competitive without actually lowering the price value equation in the buyer’s mind.
4. They are working in today’s marketplace.

Dan Berthiaume
Guest
Dan Berthiaume
10 years 9 months ago

Coupons are absolutely here to stay. Data shows that the wealthiest consumers actually use the most coupons and several recent consumer surveys indicate the “new normal” of shopper frugality is a very real phenomenon that will outlast what looks like a developing double-dip recession. The stigma associated with going out of your way to save money has vanished and is unlikely to return anytime soon.

Ben Sprecher
Guest
Ben Sprecher
10 years 9 months ago
As the Great Recession plays itself out, untargeted coupons (including both traditional FSIs as well as the “mass-selected” offers that shoppers can access electronically over email, the web, or on their mobile device) will continue to be a crutch that many marketers lean on to prop up sales volume numbers, at the expense of longer-term margins and perceived brand value. The problem with these untargeted coupons is that their effects on individual shopper behavior are extremely difficult to measure, and there is huge adverse selection bias; that is to say, the most likely shoppers to use a coupon are the shoppers who would have bought anyway or those who are so brand-disloyal that they will buy whatever’s cheapest at the time. In the first case, you undercut your margins by subsidizing existing customers, and in the latter you make an unprofitable sale to a shopper who is unlikely to buy again. Behaviorally targeted coupons have the potential to be far more valuable to marketers in the long run, because discounts can be customized to different… Read more »
Kara Sheridan
Guest
Kara Sheridan
10 years 9 months ago

From a customer’s point of view, coupons are here to stay. Having saved over $2600 on grocery coupons alone last year (not including coupons used on clothing, car repairs, travel, entertainment), my household understands the necessity of coupons and the value they add back to our budget. Grocery prices have been raised and package sizes have shrunk. It’s a common complaint heard in the grocery store. Coupons are very much appreciated and most definitely help brand awareness and loyalty. Let’s not forget Scooner Tuna–Tuna with a heart.

Doug Fleener
Guest
10 years 9 months ago

The key point in this piece is “Grocery, drug and mass still continue as the coupon heavyweights with 90 percent of all redemptions coming through these channels.”

For retailers not in these categories doing coupons yourself can be a slippery slope. There are a lot of ways for retailers to deliver value without getting hooked on coupons.

Gib Bassett
Guest
Gib Bassett
10 years 9 months ago

This aspect resonated with me given what I’ve seen around taking advantage of the mobile channel to distribute offers and coupons:

“Marketers were looking to build a sense of urgency with coupons by increasing the value (up 4.4 percent) and shortening the period they could be redeemed by nearly a week-and-a-half (9.5 weeks) over last year (10.9).”

It’s combining that sense of urgency with a discount or compelling offer that is a killer combination only digital channels can provide. Add in very soon the widespread ability to distribute an offer in real time based on location and to any device (not just iPhones), and couponing will soon be seen as an innovative demand generation tactic, not just a cost of doing business.

Bill Bittner
Guest
Bill Bittner
10 years 9 months ago

A broader definition for coupons would be “targeted discounts.” The fact that most coupons are still coming from FSIs is a short-term phenomena. As advertisers begin reaching consumers through their Internet activity by offering discounts at recipe sites, or personal interest sites such as social networking and gaming sites, the FSI priority will decline.

I have always thought targeted discounts offer the best of both worlds. For price-challenged consumers, they can hunt down the discounts while retailers and manufacturers can maintain an everyday price that assures a decent return and sell to those who can pay the higher price. The result is a win-win for everyone.

Brian Kelly
Guest
10 years 9 months ago

Why do retailers ask questions about “brands” and do not consider their outlet as a “brand”?

What is the consumer perception of the coupon from an outlet brand? Is it perceived differently than the product brand coupon? Does the coupon add or detract from the customer’s perception of that outlet?

Hey retail guru, “heal thyself.”

Herb Sorensen, Ph.D.
Guest
10 years 9 months ago

Coupons are just another link in the irrational hi-lo pricing model that ultimately costs everyone, on balance, with no significant benefits. Think of it as a Las Vegas casino operating inside the retail trade. Of course some people love to gamble. No problem when it is for fun, but when they believe they know how to win, it’s often a tragedy. For more insights see “No, the Customer is NOT Always Right!

Nathaniel Fry
Guest
Nathaniel Fry
10 years 9 months ago

Brands are beginning to migrate from broad distribution of coupons to everyone, to targeted distribution of coupons based on optimizing the revenue growth desired through this promotional tool.

Ed Rosenbaum
Guest
10 years 9 months ago

The surge in coupon usage and the fall in the economy are tied together. I can’t imagine this high percentage of coupon usage in a better economy. That said, we have learned to take advantage of any savings we can. Toiletries and groceries are two that benefited from the use of coupons.

Michael Simmons
Guest
Michael Simmons
10 years 9 months ago

I see coupons being an integral part of any brand’s marketing plans for the next couple of years. Consumers are looking for ways to stretch their food dollars, especially in this economy. Using coupons and shopping ads at high/low operators is one way that savvy shoppers do this. In essence, when you make coupons available, you are increasing a consumer’s buying power and getting them to stay with your brand.

The one caution that brand marketers need to be aware of is over-couponing. Some brands such as Yoplait drop coupons approximately every six weeks along with providing internet coupons. Loyal consumers who know this will pantry load and only buy when they have a coupon and a price reduction. You have conditioned your consumer to purchase only when on deal.

Rich Nanda
Guest
Rich Nanda
10 years 9 months ago

Wise comments by Roger and Ben above.

Two points I take as given:
1. Coupons have a place in the marketing mix;
2. Coupons are here to stay and likely grow as (a) consumption fundamentals shift, and (b) digital coupons become increasingly attractive.

The challenge I see CPG struggling with is managing spend across the marketing mix – particularly on a granular category / brand / channel / market / promoted period basis. It’s increasingly difficult to make sure that shelf price isn’t falling victim to “stacked deals.” What’s even tougher is evaluating the effectiveness of each brand support lever.

In the face of this, CPG leaders:
1. Are programmatic in managing that spend across functions (sales, marketing & finance), and
2. Use a common set of effectiveness (ROI) definitions to make informed investment decisions.

Cathy Hotka
Guest
10 years 9 months ago

You know that you have a coupon for frozen yogurt. Somewhere.

You buy frozen yogurt. You can’t put your hands on the coupon.

You’re happy…NOT. Why are we assuming that busy, time-starved adults are able/willing/excited about hanging on to bits of paper to indicate their willingness to purchase new products?????

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