The Hard Sell

Coupon activity in 2002 returned to the stable levels of 1999. “In 2000, the industry numbers were inflated, as was all media. In 2001, it was undervalued. 2002 was the first real measurable year since 1999,” says Wallace Marx Jr., director of operations at Edina, MN-based Marx, a CMR/TNS Co. and an FSI researcher.

Spending inched back up 4.5 percent to $6.8 billion, according to PROMO estimates based on industry sources. The number of CPG coupons printed and issued also rose, jumping 3.8 percent to 248 billion in 2002, after posting a drop for the first time in five years in 2001, according to NCH Marketing Services, Lincolnshire, IL. Winston-Salem, NC-based CMS Inc. estimates that the number of coupons distributed rose 3.4 percent to 336 billion.

Coupons distributed via FSI rose to 86 percent per NCH, while handout co-op, handout off-store location, in-ad, in-pack, in-pack cross ruff, instant redeemable, Internet, and Sunday supplement coupons also gained ground. Electronic distribution accounted for 8.8 percent of total redemption, while Internet coupons measurd 0.2 percent of total redemption, per CMS.

Much of the growth was propelled by Cincinnati-based Procter & Gamble, which ran its own branded insert eight times in 2002 and issued coupons on such brands as Crest, Dawn, and Tide, not just those needing a boost. P&G’s commitment to coupons is welcome, particularly considering that just seven years ago it had issued an edict to eliminate coupons entirely from its marketing lineup.

Others, such as H.J. Heinz, Nestlé, and ConAgra, either developed their own brand-saver inserts or bought out the whole first section of a co-op FSI, as Kraft did with its Friends & Family program. “I would like to see more brands do this but I doubt many can do it on such a grand scale as P&G,” says Marx.

While a P&G or Nestlé has the weight to drive a hard bargain, smaller manufacturers are being driven away. “[Retailers] are boosting the cost but they’re also losing entire programs as a result and not getting any revenue,” says NCH VP-Marketing Charles Brown.

Consumers also sent mixed signals. In 2002 a whopping 71 percent said coupons save them a lot of money, compared to just 50.9 percent in 2001, according to an NCH poll. However, redemption rates fell again in 2002, down 5.4 percent to 3.7 billion, according to CMS. And while the number of consumers who say they sometimes use coupons increased to 37.6 percent (compared to 36.6 percent in 2001), the number of respondents who always use coupons fell from 21.3 percent to 18.5 percent, per NCH. The number of consumers who rarely use coupons rose from 17.9 percent to 23.3 percent.

The average expiration period also dropped 4.8 percent, to around three months, giving consumers less time to redeem coupons.

One boon for the industry is the increased coupon use among Hispanic consumers. More than 65 percent of Hispanics reported using coupons, according to a separate NCH survey. More manufacturers, consequently, are starting to produce double-sided coupons in both English and Spanish.

Coupon fraud reared its ugly head again as federal law enforcement officials in February arrested 16 people suspected of participating in a clip-out coupon plan that generated more than $4 million, making it one of the largest U.S. coupon schemes ever. The year-and-a-half long investigation included 370 retailers in 15 states. The suspects posed as store owners (and in some cases used real store owners) to send the coupons to a clearinghouse for redemption.

COUPONS SNAPSHOT

total spent in 2002: $6.8 billion

Coupon spending rebounded 4.5 percent from 2001 levels

However, overall redemption rates sank for the second year in a row

Big brands produce their own inserts, while smaller brands get squeezed out by high retailer costs