Dishing out Discounts

Coupons were distributed in big numbers last year and shoppers, troubled by economic woes, turned in billions of them, marking the first time in 16 years that redemption did not decline.

Consumer packaged goods marketers issued 302 billion coupons in 2007, an impressive 6% increase over 2006, or a whopping 16 billion more coupons.

They also fine-tuned the mix, reducing the number of offers by more than 8% while increasing the circulation of those offers by nearly 5%, according to CMS, a promotions logistics company.

“It’s a different strategy to more mass marketing versus a more targeted approach,” says Matthew Tilley, director of marketing for CMS.

The value of the coupons totaled about $387 billion, a big jump compared to the $337 billion in 2006. Making coupons even more attractive, the average value of an offer increased 10 cents, to $1.28, outpacing the price increases of food for the first time, CMS said.

“If the value doesn’t appear worth as much as the year before, it doesn’t feel like it’s worth the effort,” Tilley says. “That also plays into the mass advertising strategy, because when trying to attract new buyers, you need to offer them a richer offer versus a loyal customer who will probably buy your product even without the rich incentive.”

The boost in value and sheer number of coupons available helped improve redemption. Consumers turned in $2.8 billion of the total $387 billion in available coupon value, or $8.57 per person. That added up to 2.6 billion coupons redeemed in 2007, or 2.6%, the first time since 1992 that redemption did not decline, CMS said.

Early reports through the first half of 2008 indicate that the economy continues to play a role in maintaining flat redemption, Tilley says.

Internet coupons redeemed at 1.82%, according to CMS.

“As the economy softens and the economic indicators point south, coupon usage picks up,” he says.

NCH Marketing, a promotional marketing services company, also reported an increase, albeit a smaller one. It reported that of the overall 285 billion consumer packaged goods coupons offered, the share of grocery coupons distributed grew to 66.8%, or 190 billion, in 2007, from 63.9% in 2006.

“Food prices increased in 2007 for consumers, so that would mean that the marketer needed to promote to the consumer to help compensate for that and keep sales at or above goals,” says Charlie Brown, the vice president of marketing for NCH. On the other hand, coupons for health and beauty products dipped to 33.2%, or 94.8 billion coupons, from 36.1% in 2006, NCH found.

Free-standing inserts continue to lead the way marketers distribute coupons (88.1%), followed by handouts (4.7%), direct mail (2.2%), magazines (2.1%), newspapers (1.2%), in/on-pack (1.2%), Internet (0.4%) and military (0.1%), NCH said.

“It’s an inexpensive way to reach millions of consumers at one time; the typical FSI on a given week will reach 60 million households,” Brown says.

Eight-nine percent of consumers surveyed said they use the coupons, with 64% using them with “some regularity.”

NCH also found that for the first time in over a decade, redemption had not declined but remained flat with last year at 2.6%.

When consumers were asked why they had clipped coupons but not used them, 31% said they found another product at a better price in the store, 24% reported that the purchase requirement was too high, 13% ended up not buying that product at all, 11% said the coupon had expired, and 8% said the discount was too small, NCH said.

Marketers cut the average redemption time down from 2.9 months to 2.5 months in a bid to suppress redemptions and cut costs.

“These marketers are printing money. They don’t want more than 1% of those to ever get turned in, but in spite of the fact that marketers tried to suppress redemption, consumers wanted to save,” Brown says.

SNAPSHOT

302 billion coupons issued in 2007, a 6% jump over 2006

Redemption remains flat at 2.6% for first time since 1992

Free-standing inserts top list of distribution methods