CPGmatters: Pressure Mounts to Leverage ’09 Surge in Distribution

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Nov 11, 2009
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By Al Heller

Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.

One bright side to the nation’s economic turmoil is the increased attention on couponing as a promotional vehicle for CPG brands, and the attendant greater efforts to distribute these offers in alignment with retailer go-to-market strategies within trading areas.

U.S. consumers redeemed 1.6 billion coupons in the first half of 2009, a 23 percent jump from the same year-ago period, reported Inmar, the coupon processor. According to Inmar and reported by The New York Times: Redemption of printable coupons from web sites grew 308 percent in the first half of 2009, off of a small base. The face value of coupons rose by 9 percent, and food makers in particular distributed 29 percent more coupons in the first half of 2009 versus a year ago.

That’s blazing coupon heat, as CPG brands issue them to compete with private label and help consumers save money. A Valassis executive noted recently that two of its largest CPG clients added incremental 8- to 12-page coupon events that weren’t planned at the start of the year, specifically to offset the threat of private label.

"In today’s environment, the stigma of redeeming coupons is clearly less of an issue for people, who get them from newspapers, mail, online, and offers placed directly onto their frequent-shopper cards," Tom Murray, vice president and general manager of the free-standing insert business at Valassis, also told an audience at an Association of Coupon Professionals (ACP) conference. "Whatever you do, don’t make coupons less accessible."

Data from The Nielsen Company data supports his view.

"With more consumers looking for value and savings – and CPG retailers and manufacturers collaborating to enable easier coupon access – coupons are back in vogue," noted Todd Hale, senior vice president, Consumer & Shopper Insights, Nielsen. "It’s important for manufacturers and retailers to understand who is using coupons and how frequently. For example, while some might think fervent coupon clippers are only interested in a good deal, our research shows this was the only group to show an increase in overall purchases – with or without a coupon – suggesting real benefits to companies deploying coupons in their marketing mix."

Four of 10 affluent households (earning $70,000-plus annually) are "super-heavy coupon users" (39 percent) and "coupon enthusiasts" (42 percent) vs. just 35 percent of total U.S. households in each group, according to Nielsen Homescan Panel. The "super-heavy coupon users" bought between 51 and 103 items using coupons during the first-half 2009, while "coupon enthusiasts" bought 104 or more.

"Without question, coupon usage is undergoing a renaissance," added Mr. Hale. "More consumers are looking for value and lower prices. Retailers and manufacturers are distributing more coupons and making it easier for consumers to leverage technology to access coupons they want with less effort."

Despite some consumer pushback (see www.bringbackthecoupons.com), Mr. Murray sees shared mail becoming more important in the coupon mix because of the sliding circulation among so many newspapers.

Discussion Questions: What adjustments should be made to maximize coupon effectiveness in light of declining newspaper circulation and emerging online technologies? Second, for national brands, how critical and worthwhile are coupons as a tool against store labels?

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11 Comments on "CPGmatters: Pressure Mounts to Leverage ’09 Surge in Distribution"


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Max Goldberg
Guest
11 years 6 months ago

Manufacturers should distribute coupons through a wide variety of channels. With consumers no longer relying primarily on the newspaper and direct mail for coupons, brands need to diversify coupon delivery. Electronic delivery (internet and mobile phone) also allow for infinite flexibility in terms of the offer.

Coupons can be an effective way for brands to compete with private label, but if a brand is frequently discounted with coupons, it risks training consumers to expect it at a lower cost and may experience a decrease in sales when not couponed.

Doron Levy
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Doron Levy
11 years 6 months ago

For the big and medium guys who are fortunate enough to have a loyalty program, you can easily integrate coupons into your existing platform. You can create custom deals based on customer behavior. Manufacturers should approach coupons the same way, working with the individual retailer’s loyalty program to come up with a deal suited for those particular customers.

New launches and flavors would do well incorporating themselves into a chain’s loyalty program. Smaller business should focus on e-coupons and deals printed off from their web presence. Smart phone bar codes are all the rage nowadays so it’s a good idea for smaller guys to get on that bandwagon.

As a side note, my weekly flyer package every Saturday seems to be getting bigger and bigger. I’m not sure we should be discounting paper coupons just yet.

Joan Treistman
Guest
11 years 6 months ago
Coupons have certainly come into their own. The article neglects to mention that every person who examines an FSI is looking at each and every ad/coupon. There is no other media that can make that claim. It’s a significant opportunity for every brand. While consumers expect coupons to represent a good value, not all coupons demonstrate a strong enough value proposition vis a vis the actual or perceived cost of the product. This is an area marketers should explore for their brands. In an atmosphere where shoppers want to be savvy, FSIs have the opportunity to present a satisfying experience. But many marketers throw the coupons out there without realizing that this page or that page is where the relationship with the shopper begins. Use the space to convey brand equity, product imagery, and benefits that warrant consideration…beyond a few cents off. And explore whether a few cents off is enough to motivate the shopper. There was a time when coupons were considered somewhat demeaning for brands, and probably best positioned for introductory opportunities. This… Read more »
John Bajorek
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John Bajorek
11 years 6 months ago

With a greater emphasis by all consumers on value and savings, margins will continually be cut for companies. Online and mobile provide both the greatest level of personalization and the lowest cost. Recent inroads to prevent fraud have also been more successful.

Technology-based loyalty solutions will continue to provide consumers the choice without the hassle or cost of paper-based coupons.

Paul Stanton
Guest
Paul Stanton
11 years 6 months ago

WHEN DOING AN FSI, MAKE SURE THE RETAILERS TIE IN….

Without this happening, you are not getting maximum benefits.

Jonathan Marek
Guest
11 years 6 months ago

Such big increases in coupon redemption scare me from an economic perspective. At some level, I’m sure increased couponing is necessary and effective, but CPGs and retailers need to have a relentless focus on one question: what is the INCREMENTAL impact of this coupon? It’s a fine (and hard to measure) line between stimulating additional sales and discounting purchases that would have happened regardless of the coupon. But the first is growing the business and the second is economic suicide.

Bill Bittner
Guest
Bill Bittner
11 years 6 months ago
There has to be a better way to deliver internet coupons before meaningful promotion can be delivered electronically. We talked a few weeks ago about the Zaver coupon delivery and reimbursement system and I have since run into others trying to address the issue. This is probably a good area for the major manufacturers to get together and define some standards so that retailers don’t have to deal with individual services. A central exchange that connects with individual service providers like Zaver would support competition while also simplifying the interface for retailers. Until internet discounts can be verified online during POS transaction processing, retailers will be afraid of fraud. Some retailers may accept small discounts, but the habit changing offers such as “get it free” will not be accepted without verification. In the meantime, manufacturers can work with retailers to offer discounts based on frequent-shopper card participation. This has a twofold effect because it reinforces the retailer’s position with the price sensitive consumer and builds loyalty, while at the same time it helps the manufacturer… Read more »
M. Jericho Banks PhD
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M. Jericho Banks PhD
11 years 6 months ago

Regarding the question about national brands using coupons to combat store labels, it’s bidness as usual and will continue to be so. Retailers love national brand coupons because they stimulate sales (that’s dollars through the registers–regardless of what’s being purchased), increase traffic, and pay handling fees. Remember the “coupon exchange tables” of several years ago? That’s where customers dump their unused coupons on a table in the store and sort through the coupons already there for those they can use. Ever wonder what happens to the coupons left on the table? Retailers redeem ’em. Look for these tables to return, along with instances of coupon fraud.

Roger Belanger
Guest
Roger Belanger
11 years 6 months ago

The value proposition of print remains the most compelling, giving brands the most effective branding and the largest audience. Past surveys show that print still has nine times the audience and fourteen times the page views over the Internet. That is a lot of eyes the internet does not see!

Even though print remains the best way for brands to distribute coupons, it does not mean paper has to be the redemption method. I think this is the point most are missing. The tried and true “print,” and new technologies “internet and mobile” can complement each other.

We are and others are developing enhanced methods for discovery and redemption. Being able to discover coupons locally within print flyers and redeem them locally or nationally without paper are solutions CPG brands need, to compete with local brands.

Ben Sprecher
Guest
Ben Sprecher
11 years 6 months ago
Jonathan Marek’s point about incrementality is a critical one–if you are simply encouraging forward buying by existing customers and one-off purchases by deal seekers with no possibility of lasting brand loyalty, then couponing is a bad idea. On the other hand, if redeemers are buying *more* than they would otherwise, or you are seeing trial by non-buyers that results in repeat purchases, then coupons can be a big win. So, how can you tell if the impact is incremental or cannibalistic? Well, you could bring in the modelers–the syndicated data companies and the consultants who surround them who build complex models to estimate the lift, the shift, the halo, and so on, based on extrapolation and estimation. But you’ll end up paying an arm and a leg for the privilege, and at the end of the day, the results are still just a scientific guess. A far better way is by tying into loyalty programs, as mentioned in several other comments. If you can tell who is redeeming which offer, you can look at those… Read more »
Daniel Long
Guest
Daniel Long
11 years 6 months ago

Tom Murray, Valassis, had it right when he stated, “Whatever you do, don’t make coupons less accessible.”

So, where do consumers turn to obtain the coupons they use? The latest national, multi-market data released from Scarborough Research is based upon more than 200,000 interviews conducted between February 2008 and March 2009 and it demonstrates a continued reliance upon newspapers as the primary source for cents-off coupons. Two-thirds of adults who report that their household uses coupons also report that they use the Sunday newspaper (leading source) to obtain coupons. An additional 23% report using the weekday newspaper as a source. In total, more then 70% report using Sunday or weekday newspaper to obtain coupons. In-store methods and direct mail follow.

Success depends on keeping coupons accessible and keeping them in the places where consumers expect to find them. Explore other options if you are creating custom deals based on the consumer’s behavior or if you are utilizing segmentation marketing methods in your distribution of coupons.

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