Back to Basics: Coupons rebound with 8.2-percent jump.

Couponing continued its resurgence in 1999, with spending up 8.2 percent to $6.98 billion due to increases in distribution, average face value, and expiration dates. The figure is promo’s estimate, based on average costs for distribution and redemption tracked by coupon clearinghouses.

Coupon distribution rose 3.6 percent to 288 billion, according to clearinghouse CMS, Winston-Salem, NC, although NCH NuWorld Marketing Services, Lincolnshire, IL, pegged the total at 256 billion, up 2.8 percent. Face value averaged 73 cents, up from 70 cents in 1998. (Grocery products averaged 66 cents, HBC 89 cents, per NCH.) Expiration dates now average 3.4 months, up from 3.1 months in ’98, NCH reports.

Redemption, meanwhile, fell to 1.6 percent, totaling 4.6 billion coupons and falling from 4.7 billion in ’98 (when the rate was 1.7 percent), CMS reports. Redemption dipped to 1.1 percent for FSIs, but was up via other vehicles.

CMS president Bob Carter attributes the redemption drop-off to fewer in-ad coupons, as manufacturers moved offers to loyalty card programs from retail circulars. But the economy was a factor as well. “A strong economy hurts couponing,” Carter says. “Many people don’t want to work for savings if they feel like they’re doing OK financially.”

Packaged goods companies distributed more coupons in 1999 than in any of the previous five years. Since 1995, the total number of coupons had dropped as marketers targeted more tightly geographically and demographically. “Too fine an audience means less actual redemption than with a larger offer,” says Charlie Brown, vp-marketing of NCH. “They may have had a better percentage rate, but they didn’t move enough volume to make it worthwhile.”

In other trends, many companies that have been looking for growth overseas in recent years were back goosing volume in the U.S. as foreign markets slowed.

FSIs have stayed strong, accounting for 81.3 percent of all coupon distribution, per NCH, and 92 percent of distribution in the packaged goods category, per CMS.

CPG are running more full-page ads, with coupons of longer duration, and fewer multiple-purchase requirements, reports FSI giant Valassis Communications, Livonia, MI. Leaders like Kraft Foods and Nestle USA have launched their own FSI programs.

In February 2000, Kraft unveiled a magazine-style FSI, food & family, produced by NewsAmerica and Meredith Publishing. The insert is dropping nationally each month with eight pages of recipes, tips on food storage and serving, and family-friendly snippets that highlight brands such as Oscar Mayer, Kraft Macaroni & Cheese, and Post cereal. The first issue carried six coupons from brands including Tombstone pizza, DiGiorno pasta, and Minute Rice. The insert extends Kraft’s 18-month-old corporate branding initiative.

“We wanted to do something that stands out [and carries] our equity message of helping families connect over food,” says Wendy Kritt, Kraft director of corporate and consumer promotions. Kraft tested food & family in two markets last fall. Redemption was the same as co-op coupons, but Kritt expects it will rise when Kraft begins advertising the insert this quarter. Brands will continue outside co-op couponing as they see fit.

Nestle also broke its first corporate FSI in February, the first in a year-long schedule that supports the company’s “For the Way you Live” corporate ad campaign, which broke last fall. Produced by Meredith and Valassis, the FSI carries nine brands (one or two per page, plus coupons), and an offer for a “Family Ideas” booklet with three proofs of purchase.

Marketers haven’t backed off targeted couponing completely. CMS’s Carter projects growth among “promotion networks” – electronic alternatives to paper distribution. Electronic systems can use data like frequent-shopper information and past redemption history to target consumers and “take some of the shotgun approach out of couponing,” he says.

EXPANDING SERVICES

FSI leaders Valassis and NewsAmerica made different technological advances in the past year. Valassis rolled out Aztec code, a two-dimensional bar code system that lets marketers track as many as 240 pieces of information on each consumer – including which competing stores the shopper has to drive past to get to the retailer’s own store (October promo).

Grocers and other retailers (including General Motors dealerships) use Aztec to track response to different offers. One grocer opening a new store wanted to learn where new customers came from and what kinds of promotions they liked. The chain mailed 12 offers over 24 weeks, each carrying an Aztec code encrypted with shoppers’ ZIP codes, addresses of competing stores near their homes, and ranks based on purchase volume (gleaned from the grocers’ loyalty card databases). Coupons were scanned each day to track which shoppers responded to which offers. Reports came back in two days – versus six months for coupon clearinghouse tallies. Each week, the grocer tailored offers more tightly, and tracked how many new shoppers came in for the first time.

GM used Aztec to map out competing service centers between GM dealerships and owners’ homes. Owners who have to drive past another repair shop to get to the GM dealer get a higher-value coupon than owners with no such temptation en route.

NewsAmerica Marketing, New York City, invested heavily in high-tech couponing and targeting businesses. In August, it bought Consumer Card Marketing, Inc., Braintree, MA, a leader in loyalty card marketing, to extend its in-store marketing services with customer-specific database promotions.

In July, NewsAmerica bought a 30-percent interest in Internet couponer Planet U, San Francisco, and a 22-percent stake in SoftCard Systems, Athens, GA, an electronic promotions company that ties on-shelf couponing to loyalty cards. NewsAmerica’s goal: to be a leader in e-commerce and targeted marketing while expanding its core FSI and in-store businesses.

ONLINE STILL MINOR

In packaged goods, the number of “Internet-triggered” coupons (either printed from a site or requested online for mail delivery) rose 33 percent to an estimated 13 million to 14 million in 1999, per NCH. About 10 million were distributed in ’98, more than triple the 2.5 million distributed in ’97, the first year they were measured.

At the same time, dot-coms are running their own traditional FSIs, using coupons redeemable online to drive traffic to commerce sites. Some are using coupons to merge bricks and clicks: In January, PetsMart launched a Petsmart.com Store Savings Center. Site visitors enter their ZIP code, then print out coupons to redeem at their neighborhood PetsMart store. Coupons are updated regularly to drive customers to PetsMart’s 493 stores.

Couponing sites continue to crop up, and marketers are offering more coupons on brand-specific sites. Valassis is rolling out save.com, which has tested well in Austin, TX, and Raleigh, NC, since September. Offers scroll across a banner ad-sized space; viewers click on offers they want. Valassis reports click-through rates of 33 percent, far above the average of 0.4 percent for banner ads. The service will run in banner ad spaces on other sites.

Cox Target Media, St. Peterburg, FL, extended its local-couponing expertise to the Internet with the February merger of its Val-Pak direct-mail business and Coupons.com, a year-old Internet company in Palo Alto, CA. Consumers enter their ZIP code to get local offers they can download.

Cox also bought a stake in BrightStreet.com to offer Web-based promos to Cox’s direct-mail advertisers.

– Spending rose 8.2 percent to $6.98 billion.

– Distribution hit a five-year high of more than 256 billion coupons.

– Marketers like Kraft Foods and Nestle USA are publishing their own FSIs.

– Online couponing rose 33 percent, but still distributed less than 14 million coupons.