CPGmatters: FSIs Poised for Growth After ‘Historic’ 2009
By James Tull
Through
a special arrangement, presented here for discussion is a summary of
a current article from the monthly e-zine, CPGmatters.
Freestanding inserts (FSIs)
– always a significant force in couponing – have surged in recent times.
In fact, FSIs have seen the most activity in a decade, with over 272 billion
coupons dropped in 2009, representing an increase of eight percent since
2008, according to the 7th annual FSI Distribution Trends Report.
Authored by Marx Promotion
Intelligence, a division of TNS Media Intelligence, the report says retailer
promotion pages earned a record spike, increasing more than 37 percent
to in excess of nine billion pages in 2009. This continues the pattern
of substantial year-over-year growth rates that started in 2007.
“Last year was an historic
one for the FSI industry as well as for coupon industry in general,” said
Tom Murray, vice president & general manager, freestanding inserts
for Valassis. “Redemption was up 23 percent. Clearly, coupons have never
been more relevant to consumers.”
Mr. Murray confirms that
2009 represented the single highest page volume in history for FSIs. All
the consumer and economics factors are currently in place for another big
year, he added.
Mark Nesbitt, president,
TNS Media Intelligence, says that leading retailers are also increasing
their use of FSI vehicles to drive planned shopping trips and further solidify
shopper loyalty. Both retailers and manufacturers are working together
to deliver relevant incentives to their consumers and shoppers.
Meshing the goals of retailers
and manufacturers is something Tom Murray believes in.
“Over the last three years,
Valassis has observed a number of key changes in the marketplace that have
helped us form our current FSI strategy,” he said. “In order to facilitate
this change in consumer behavior, we have worked to align our FSI distribution
model to dovetail with how major retailers go to market.”
Mr. Murray says that one
particular change is in the consumer’s weekly stock-up shopping trip, as
it is more of a pre-planned event than ever before. More consumers now
use a list when they shop (65 percent according to IRI’s 2009 Consumer
Trends) and the two key pieces of information consumers use to create
their shopping list are the weekly retail circular and selection of coupons
that are available such as FSIs, he added.
With so many factors to
consider, it is no wonder that companies such as Valassis are looking at
a multi-tiered approach in order to most effectively engage customers.
“Our FSI strategy is actually
much more than a shared mail strategy,” Mr. Murray said. “We believe that
in order to continue to reach consumers in significant numbers it will
take a fully integrated media platform that will include newspapers, shared
mail, online and digital coupons.”
Discussion
Questions: What’s supporting the growth in freestanding inserts? What
trends do you see driving FSIs over the next several years? What the
best ways for retailers to optimize their FSI strategies?
The growth in FSIs is linked to the down economy. Consumers are trying to save money. FSIs provide that savings through coupons and special offers. Equally telling is the recent report that more coupons were downloaded from the Internet than were clipped from FSIs. Consumers are looking for advertising vehicles that provide value.
The Great Recession is the consumer driver. Some who never used coupons are active users now. Those who sometimes used coupons are heavy into them now. Newspapers have lost so much advertising, they are dealing inserts to the point that our weekend paper has more inserts than news. Mass coupon mailing has changed. It is no longer the world, but targeting likely purchasing households.
But this is all going to change. The future is retailer-directed coupons to frequent shopper cards. This saves the cutting and handling time for the consumer. Browse and click links a coupon to the consumer’s card. In the store, when the item is purchased, the coupon is credited. This also provides the retailer savings in handling coupons. What is missing for consumers is a list, laid out in store sequence, of all the coupons selected.
As Max stated in his comments, the down economy helped drive FSIs in 2009. 2010 will still be a tough year, but I am not convinced the growth will be as significant. There are a lot of exciting in-store programs that focus on catering to shoppers’ needs to save that will be more cost effective and drive better returns for both the retailer and CPGs. These programs will be supported more and more by electronic coupons. FSIs are a good add-on to in-store programs to help drive awareness and traffic to the store.
The new customer that was created because of our economic situation is what’s driving coupons. Retailers understand this and have pumped up coupon output to bring in those customers that are looking for value. I call it “controlled cherry picking.” I have said in the past that I don’t believe the customer will change even if and when the economy does fully recover, so coupon printers rejoice!
The savings can be substantial, but there’s just nothing more annoying than having to sort, organize, and locate tiny scraps of paper. When it’s easy to download these to a phone and have them redeemed automatically, manufacturers will see an even bigger upside.
When a lot of folks are looking for ways to save money, coupons rise in prominence … but not with everyone. For instance, according to NCH Marketing Services, 66% of consumers use coupons occasionally, 11% always use them frequently and 23% rarely use them.
Last year more than 311 billion were distributed and 3.2 billion were redeemed in 2009, a 23% percent increase over 2008. BUT that’s only a tad over 1% of the coupons issued. Thus almost 99% of all coupons printed were not redeemed. Is that a waste in marketing dollars?
“Experts” tell me that those 307.8 billion unredeemed coupons still represent good advertising investments. “Non Experts” suggest that coupons are merely preferential devices available only to consumers who seek them out, not discounts available to all consumers. Who is correct?
While this recent up-trend in coupon distribution and redemption is indeed significant, it will be important to ask the question: “Among which consumers?” to fully understand it.
We’ve also seen recent research that suggests coupon usage and pre-planning habits tend to be enduring and heavily concentrated among about one-third of shoppers across demographic lines (Henkel/Dial, 2009).
Wise marketers will drill down into recent coupon behaviors to understand whether these changes are across the board or narrow and deep. “Why” matters very much in this analysis. I would not assume that a simple economic explanation is sufficient.
There is also a growing number of consumers who take the time to understand the coupon policies of retailers and then take full advantage of the opportunities. Using FSIs, Catalinas, store coupons, and BOGOs to bring purchase prices down to ridiculously low levels and in some cases actually receiving money back. Some of these deals are so generous that they are buying in bulk and giving the food to the local food pantries. Some argue that these people are “gaming” the system, but others contend that they are merely taking the time to understand how the system works and then making sure that they take full advantage of it. I’m not sure how much of this has caused the recent rise in coupon redemption on a national basis, but it seems to be quite prevalent in our area of suburban Chicago.
FSIs will continue to be a part of integrated marketing strategy for HBC and grocery. FSI coupons just happened to be the “shining star” of the strategy in 2009 and probably through 2010. As most everyone else has stated–a down economy will increase coupon usage. According to NCH, FSI accounted for 87.5% of all CPG coupons distributed in the U.S. However, the Internet was the fastest growing with increased distribution of 80%. People want their coupons and have gotten comfortable in the savings these coupons bring–even when the economy improves.
I’ve always looked at FSIs as a way to supplement your coverage in retail circulars. As retailer circulars ebb and flow–some shrinking due to seasonality, costs, or if the space dedicated to your category simply shrinks–FSIs are a great tool to stay in front of the consumer in a place they are trained to look. Beyond offering discounts/coupons, they are a platform to expand on the 1/16 page box you normally get to tell your story.
Here are 2 strategies that could be contributing to the growth of FSIs (and if not, they could yield growth in the future):
1) If your buyer believes in you but simply can’t deliver the ad space you need, try working with them on the concept of a retailer-themed FSI. Leverage the look & feel of their circular, but dedicated to your messaging. Involve them in the process. It’s a win for both parties. This strategy echoes the idea Tom Murray mentions of meshing the goals of retailers and manufacturers.
2) Another great way to leverage FSIs is to create your own retail one-week “event” for your brand/products. Secure circular ads on the same date across as many of your retailers as possible, and then align a national FSI to hit the same week. Potential incentives are to tag participating retailers, as well as offering a special promotion.
Across the entire spectrum of consumers, online coupons will take some time to evolve into a normal activity. The online coupon clippers still represent a small minority of all people. FSIs, on the other hand, address the human need to touch and feel something in order to find value in it. There are still coupon clipping clubs in many cities. Some of them meet at supermarkets weekly to share coupons. These folks arrive will full-size suitcases of thousands of coupons. It’s amazing, actually. This interest has only grown due to the current economic climate. Long live FSIs … even if they have poor redemption, as a % of distribution.