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COUPON RELATED ARTICLES

wpe4.gif (1222 bytes)        COUPON DISTRIBUTION INCREASED 12% AND REDEMPTION INCREASED BY 19% IN THE FIRST HALF OF 2009

wpe4.gif (1222 bytes)      COUPONING ENTERS THE DIGITAL SCENE

2008 PROMOTIONAL TRENDS REPORT

GS1 DataBarTM COUPON BARCODE MAKES ITS DEBUT

SCARBOROUGH STUDY FINDS 83% INCREASE IN INTERNET COUPON USAGE

MULTICULTURAL CONSUMERS ARE AN ATTRACTIVE EMERGING MARKET

SAMPLING IS EXPENSIVE BUT IS AN EFFECTIVE TACTIC

ADVO STUDY REVEALS HISPANICS REDEEM COUPONS

COUPONS PROVIDE PRODUCT MOVEMENT, SALES AND ADVERTISING

ONLINE COUPONS INCREASE 111 PERCENT TO 242 MILLION IN 2002

AC NIELSEN STUDY COUPON USAGE HIGH IN ALL REGIONS OF CANADA

COUPONS INCREASE IN CANADA IN 2001

GUIDELINES TO CONTROL COUPON FRAUD

 STUDIES INDICATE COUPON ARE AN EFFECTIVE PROMOTIONAL TOOL

HOW TO USE FREE-STANDING INSERTS AS A PROMOTIONAL TOOL

COUPONING AS A MARKETING STRATEGY

IN-STORE, ON-PACK AND DIRECT MAIL COUPONS

COUPONING SCHEMES ON THE INTERNET

HOW TO DEVELOP A SUCCESSFUL FSI COUPON

HOW TO DESIGN A COUPON

GUIDELINES TO CREATING AN EFFECTIVE COUPON

MARKETING RELATED ARTICLES

REBATE & PREMIUM FULFILLMENT ARTICLES

FREQUENT SHOPPER & RETAILER ARTICLES

SWEEPSTAKES ARTICLES

wpe4.gif (1222 bytes)    COUPON DISTRIBUTION INCREASED 12% AND REDEMPTION INCREASED BY 19% IN THE FIRST HALF OF 2009

NCH Marketing Services reported that Consumer Product Good marketers are taking action to the down economy by increasing coupons distributed in the first half of 2009 totaling 158 billion coupons. Coupons distributed during the first half of 2009 increased 12% while the number of coupons redeemed increased 19%. CPG marketers have progressively increased coupon distribution by 23% over the last five quarters. The distribution of HBC product coupons increased 10.4% while the distribution of grocery products increased 12.9% for the first half of 2009.

CPG marketers continue to allocate the majority of their promotional budget for coupon distribution in 2009 to FSI’s (86.2%) followed by Handouts (5%), Direct Mail (3.0%), Magazines (2.6%), In/On Pack & Cross Ruff (1.5%), Newspaper (0.8%), Internet (0.7%) Military (0.1%) and Others (0.1%). Marketers are controlling redemption liability with shorter durations. Multiple purchase coupons decreased from 28% in 2008 to 24% in 2009 while the average coupon duration decreased from 11.2 weeks in the first half of 2008 to 10.9 week for the first half of 2009. The average face value offered decreased from $1.42 in the first half of 2008 to $1.37 for the first half of 2009; however it is an increase over the $1.29 average over the full year 2008.

CPG coupon redemption volume has increased gradually over the last four quarters by 33% as 1.575 billion coupons were redeemed in the first half of 2009. CPG coupon redemption volume increased in all key retail segments led by mass merchandisers (including Supercenters) (30.2%), Grocery stores (16.7%), Drug stores (15.7%) while decreasing at Military Commissaries (8.1%) in the first half of 2009. The average coupon redemption rate for Consumer Product Goods increased by 21.4% on Instant on Pack coupons followed by Internet coupons (16.61%), Electronically dispensed (10.48%), Direct mail (3.80%) and FSI’s (1.05%) for the first half of 2009.

Source: NCH Marketing Services, Inc., Mid-Year 2009 Coupon Facts Report

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wpe4.gif (1222 bytes)     COUPONING ENTERS THE DIGITAL SCENE

Digital coupons are a form of consumer promotion that allows consumers to find and redeem coupons without ever touching a piece of paper. Digital coupons should not be confused with print-at-home a coupon which utilizes an altogether different technology. Digital have the potential to appeal to consumers who may otherwise not look for paper coupons to bring to the store and may reach a desired demographic of young affluent families. A recent study by Scarborough Research found that consumers who obtain coupons via text or e-mail tend to be young, affluent, educated and female. The marketing research firm Leo J. Shapiro & Associates found that consumers interested in using scannable mobile coupons were more likely to be younger, affluent and with families.

In 2008, the number of such coupons distributed in the consumer packaged goods segment via digital coupons accounted for less than one tenth of one percent of the total U.S. coupon distribution marketplace. Even though several companies have emerged, each with its own unique approach to digital couponing, digital coupons will not replace paper coupons anytime soon, they are a new and growing distribution vehicle. These include handheld devices in stores and screens built into grocery cart handles that alert shoppers to deals, text messaging and iPhone applications with the two technologies that appearing to lead the way  involve delivering coupons to consumers’ mobile phones and linking coupons to loyalty cards.

According to eMarketer, mobile phones are expected to exceed 91% penetration this year. As a result, many marketers see them as a means of reaching a broad base of consumers appealing of to marketers. Only 26.3% of mobile phone subscribers are using the mobile Internet A number of mobile coupon services, however, require that the phones be Web-enabled, which reduces their potential reach according to eMarketer. This figure is expected to grow over the next several years, the projection is that it will remain under 50% even by 2013.

“Loyalty-Marketing Programs in the Retail Food Industry,” states that 75% of customers participate in a loyalty program, including 41% who use their loyalty cards almost every time they shop. Since onsumers are already accustomed to using loyalty cards, linking digital coupon discounts to a loyalty card, a retailer can provide consumers with the convenience of using digital coupons without requiring them to utilize Web-enabled mobile phone applications. While marketers utilize many different forms of paper coupon media to deliver discounts how, when and where consumers want to receive them, digital couponing will likely do the same thing. Digital coupon technologies (such as mobile coupons) may be used more in the restaurant market segments, other digital coupon technologies (like down-loading coupons to loyalty cards) may be faster to market in retail grocery industry.  Advances in digital coupon distribution will grow faster if they can work within the parameters of existing POS technologies and still meet the unique redemption management goals. It is important to first define your marketing objectives utilizing digital coupons distribution by first identifying which consumers you want to target, then evaluate your results and refine your promotions.

Source: NCH Marketing Services, Inc.,

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wpe4.gif (1222 bytes)        2008 PROMOTIONAL TRENDS REPORT

Promotional spending rose by just 3.5% in 2007, to $45.81 billion, according to Veronis Suhler Stevens Communications Industry Forecast. (Their report covers P-O-P, coupons, licensing, premiums, loyalty programs, product sampling and games, contests and sweepstakes.) Only 30% of marketers expect to increase their consumer promotion budgets this year, compared with 42% in 2007 and 16% are reducing their consumer promotion budgets, which has increased from 7% the previous year. Of the total 37% was spent on consumer promotions, 32% on general advertising, 24% on trade promotions and 7% on other promotions in 2007.

CONSUMER PROMOTIONAL BUDGETS

 

2008

2007

INCREASE BUDGET

30%

42%

STAY THE SAME

41%

38%

DECREASE

16%

7%

DON’T KNOW

11%

12%

NO ANSWER

2%

1%

TRADE PROMOTIONAL BUDGETS

 

2008

2007

INCREASE BUDGET

23%

30%

STAY THE SAME

44%

46%

DECREASE

13%

6%

DON’T KNOW

18%

18%

NO ANSWER

2%

0%

HOW PROMOTIONAL BRANDS ARE EVALUATED

Brand Awareness

54%

Return on Investment

47%

Incremental Sales

39%

Response Rates

39%

Lead Generation

37%

Increased Customer Knowledge

36%

Redemption Rate

25%

Media Impressions

21%

Retention Rates

13%

Trade Sell-in

9%

Other

5%

HOW MARKETERS BASED ROI

INDIVIDUAL CAMPAIGN RESPONSE

49%

TOTAL CAMPAIGN VALUE

34%

PROFIT

31%

TOTAL CUSTOMER VALUE

21%

TOP-LINE REVENUE

18%

OTHER

6%

WHAT DETERMINES AGENCY REVIEWS

CREATIVE WORK

52%

PRICE

48%

SERVICE

36%

CLIENT RELATIONSHIPS

35%

STARTEGIC WORK

27%

PREVIOUS RELATIONSHIP

26%

CATEGORY-SPECIFIC PERFORMANCE

23%

CREDENTIALS

22%

TIME TO MARKET

9%

According to the DMA’s Power of Direct Marketing 2007-2008 report, spending on non-catalog direct mail is set to reach $36.4 billion globally in 2008, up 5.6% from the $34.5 billion spent in the channel last year. That makes direct mail the second highest item in the marketing budget, behind only telemarketing, on which $47 billion will be spent this year. By 2012, the DMA forecasts, non-catalog direct mail spending will reach $44.5 billion for a compound annual growth rate 2007-2012 of 5.2%. The study found that direct mail produces a lower return on investment (ROI) than other media: in 2008, $15.60 for every dollar spent, according to the DMA. That comes in below this year’s anticipated ROI of $45.65 for commercial e-mail and $20.19 for non-e-mail Internet marketing.

Marketers really like e-mail, as about 840 billion messages will hit inboxes by 2013, compared to 418 billion this year. The boom can be attributed to e-mail’s low cost and high return. Spending on e-mail is expected to reach $4 billion by 2012, compared to $3.1 billion in 2008, according to Forrester Research. Companies whose customers have opted in to receive marketing messages are likely to spend 138% more than non opt-in customers, says Jeanniey Mullen, the founder of the Direct Marketing Association’s E-mail Experience Council. These customers also purchase products 25% faster when notified through e-mail about specials, discounts, new products and services. Response rates vary significantly based on the type of e-mail. The costs to send e-mail are dropping as marketers push service providers for volume discounts and the return-on-investment remains strong. Companies average a $48 return for every $1 spent, Mullen says. E-mail budgets are increasing, but not at a significant pace—about 25% to 30% year over year for the last five years.

WHO SENDS E-MAILS

(In Billions)

2008

2013

CONSUMER PRODUCTS

7

13

FINANCIAL SERVICES

5

14

MEDIA & ENTERTAINMENT

9

18

MANUFACTURING (HIGH-TECH)

11

21

BUSINESS SERVICES

13

32

RETAIL & WHOLESALE TRADE

158

258

TRAVEL AND HOSPITALITY

216

482

Source Forrester Research, Inc.

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%. 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. 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. Internet coupons redeemed at 1.82%.

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. 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%)..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%. Marketers cut the average redemption time down from 2.9 months to 2.5 months in a bid to suppress redemption’s and cut costs.

Event marketing is hitting a high note in these low economic times by enabling marketers to stage effective, efficient promotions as an alternative to pricier media messages. Stevenson Communications Industry Forecast, growing 12.2% to $19.18 billion, up from $17.1 billion the year before. Companies will drop about $1.86 billion on games, contests and sweepstakes this year, about flat with $1.83 billion in 2006, a trend that has continued over the last five years, according to the Veronis Suhler Stevenson Communications Industry Forecast.

GAMES, CONTESTS AND SWEEPSTAKES SPENDING

2002

$1.796 BILLION

2005

$1.804 BILLION

2008

$1.854 BILLION

Retail sales of licensed products in North America remained flat at an estimated $107.8 billion in 2007, from $107.4 billion in 2006, the result of soft economic conditions, according to the International Licensing Industry Merchandisers’ Association (LIMA). Royalties also remained about flat, slipping 0.8% to $5.98 billion last year after three consecutive years of growth. Trademarks and brands, the second largest licensing category, dropped 2.7% last year, to an estimated $19 billion in retail sales, and rang up $1.09 billion in royalties. Sports followed at about $14.7 billion, bringing in $815 million in royalties. Despite a 1.2% dip from 2006, the category remains healthy, Brochstein says.Fashion generated about $14.6 billion in sales, while royalties dipped by 2.4%, to $810 million. Overall spending on promotions tied to loyalty programs showed modest growth last year—approximately $2.1 billion, a 3.6% rise over the $2 billion spent in the previous year, according to the Veronis Suhler Stevenson Communications Industry Forecast.

LOYALTY PROMOTION SPENDING

YEAR

2003

2004

2005

2006

2007

SPENDING (IN MILLIONS)

$1,902

$1,991

$2,010

$2,060

$2,134

GROWTH

2.2%

4.7%

1.0%

2.5%

3.6%

According to estimates from marketing research firm eMarketer, total U.S. mobile advertising spending will reach $1.7 billion this year, up from $878 million in 2007, and should hit $6.5 billion by 2012. Sales of promotional products jumped 3.5%, to $19.4 billion, in 2007, a new record, the association says. Apparel is the top category at 30.7%, followed by writing instruments (10.3%), bags (7%), drink ware (6.3%) and desk/office/business accessories (6.1%). Nearly half of the respondents to Promo’s 2008 Premiums and Incentives Survey said they hand out premiums at events or on tours. And premiums appear to deliver better ROI (55%) compared to ad specialties (15%), the survey found.

Paid product placement was a particularly bright spot last year, as spending grew 33.7% to the $2.9 billion mark, from $2.2 billion in 2006, even though it was the slowest rate of growth since 2003, according to the Veronis Suhler Stevenson Communications Industry Forecast. Most of that growth was on television, 71.6%, because of the frequency, exposure and reach that TV series offer. Films took 25% of the spending. Other media, such as newspapers, magazines, videogames, the Internet, books, recorded music and radio, made up the other 3.4%, the report found.

P-O-P is also playing a bigger role. Marketers increased spending on PO-P by 5.2% last year, to $20.3 billion, making it the largest consumer promotions category, according to the Veronis Suhler Stevenson Communications Industry Forecast. P-O-P was the biggest expense for 8.6% of marketers last year, according to Promo’s 2008 Marketer Trends Study. Some 73% of consumer packaged goods manufacturers and 86% of retailers ranked shopper marketing programs among the top-four activities that deliver meaningful ROI, according to a recent study by Deloitte Consulting LLP.

According to the Veronis Suhler Stevenson Communications Industry Forecast, marketers will spend almost $2.3 billion on product sampling in 2008, an increase of about 5% over the $2.15 billion spent in the same channel last year.

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wpe4.gif (1222 bytes)        GS1 DataBarTM COUPON BARCODE MAKES ITS DEBUT

 
In January 2008, manufacturers distributed the first coupons containing the new GS1 DataBarTM coupon code. The introduction of the new variable length company prefix numbers was the result of the old UPC-A / GS1-128 coupon code becoming obsolete. Many of the newer company prefix numbers could not be fully encoded in the old coupon code resulting in newer company prefixes could overlap with other elements of the code, leading to increased billings to the wrong manufacturers and delayed payments to retailers.

The Joint Industry Coupon Council (JICC) addressed this problem by establishing the Coupon Re-engineering Task Force to develop a new coupon format with a larger number of fields. The GS1 DataBar would accommodate the newer, variable-length company prefixes while allowing marketers to encode more complex coupon offers. In addition, the new code allows retailers to capture additional data at the point of sale. The DataBar coupon code is much more complex and has created greater potential for promotional coding errors. The industry timeline called for the adoption of an interim code that contained both the old UPC-A coupon code and the new GS1 DataBar on all coupons issued from July 2008 through December 2009. In order for the benefits of the new coupon code to be realized, retailers will need to implement the point-of-sale (POS) upgrades that are necessary to scan and interpret the DataBar anytime through the end of 2009. The majority of retailers will hold off in investing in expanded purchase validation at POS until a very high percentage of manufacturer coupons have the new code and are using the code correctly to efficiently and effectively validate coupons at the point of sale.

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wpe4.gif (1222 bytes)    SCARBOROUGH STUDY FINDS 83% INCREASE IN INTERNET COUPON USAGE

According to a study by Scarborough Research, Internet coupon usage is growing, but consumers still prefer clipping coupons from the Sunday newspaper compared to printing them online. The study revealed that 11% of households obtain coupons via the Internet, a number that has grown 83% since 2005, however the Sunday newspaper is still tops for coupons where 53% of people get their discounts, up 8% from 2006. Mail is another popular source for coupons used by 35% of people, followed by in-store coupons at 33% and loyalty cards and in-store circulars, which tied at 22%. Less popular coupon spots include weekday newspapers and product packages, both at 17%, respectively and magazines at 15%.

"With prices for consumer goods rising, we can only expect that a ‘good deal’ is of increasing importance to shoppers," Alisa Joseph, vice president of advertiser marketing services for Scarborough Research, said in a statement. "Coupons are one of several economically-focused promotional tools that stores and product brands can use to get shoppers in the door and spending despite these uncertain economic times."

Coupon clippers are shopping at a variety of retailers, including mass grocers, such as SuperTarget, traditional supermarkets, including Kroger’s and warehouse clubs, such as Sam’s Club. Consumers that clip coupons tend to spend more money on groceries each week, $114 compared to the national average of $110. They also are more likely than the average household to buy a variety of grocery products across multiple categories, the survey found. The top market for coupon-clipping was Milwaukee, Wisconsin, where 40% of households engage in the consumer behavior. Albuquerque, New Mexico, El Paso, Texas and Fresno, California are the markets least likely to have consumers clipping coupons.

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wpe4.gif (1222 bytes)       MULTICULTURAL CONSUMERS ARE AN ATTRACTIVE EMERGING MARKET

The multicultural population in the U.S. is experiencing tremendous growth and is expected to reach 239 million by 2050 (54% of the U.S. population). The multicultural consumers encompasses across all ethnic groups, including African American, Asian or Hispanic. According to Alternative & Innovative Marketing’s (AIM) President and CEO, Jeff Symon, these numbers make the multicultural consumer “one of the most attractive emerging market opportunities.”

Consumer Study 2007A survey conducted by Alternative & Innovative Marketing’s came from manufacturer’s representing 71% of respondents and distributors, retailers and others making up the remaining 29%. There has been a rapid growth among U.S. ethnic groups in the past ten years, however (67%) of the respondents indicated a limited to fair understanding of multicultural consumers even with over half of the respondents indicating that these consumers account for over 20% of their customers. According the survey, companies simply don’t have the infrastructure or resources to properly target this growing consumer base.
When asked what percentage of the company’s annual marketing budget is spent to target multicultural consumers, 48% of respondents indicated that less than 10% of their budget is allocated to target multicultural consumers and over 30% of companies have allocated none of their budget to multicultural consumers. 

Consumer Study 2007Over half of the respondents indicated that they have no dedicated staff within their organization focused on multicultural efforts. Only 15% of the companies have divisions whose purpose is to find ways to target the multicultural consumer. 

A growing number of companies are implementing strategies to address and target these consumers. The most popular strategy is to change the product packaging, mostly by making them bilingual in English and Spanish. Only 11% indicated using a comprehensive, integrated approach to this market while nearly 40% said nothing was being done.

The survey results show that an important customer base is not being fully targeted and significant opportunities to grow brands being overlooked. More marketers are increasing their efforts to reach multicultural consumers.

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        SAMPLING IS EXPENSIVE BUT IS AN EFFECTIVE TACTIC

Consumer Study 2007A research study conducted by Arbitron, in combination with Edison Media Research, found that nearly 30% of consumers are offered product samples at least once every three months and 64% of them will accept and try the product. The Study was conducted in early 2008 and found that product samples produced a same-day sales lift. Over a third (35%) of consumers who tried a sample purchased the product during the same shopping trip. 

This effect extended across all customers regardless of whether this was their first introduction to the product or a repeat purchase. Not only did sampling allow for same-day sales increases, but the long-term outlook was positive as well. Nearly half of those sampling the product had intentions of purchasing that product in the future, with that number growing to 85% among those that had purchased the product before. These results indicate that sampling can contribute to customer retention and increased brand loyalty.

Consumer Study 2007In many cases, sampling-inspired purchases actually resulted in brand switching. Survey results indicated that 24% of shoppers decided to buy the sampled product rather than another product that they had planned to purchase. While sampling is one of the most expensive promotional tactics, it can also be among the most effective, if executed properly. The bottom line is sampling not only entices consumers to try your product but also is an effective tactic that encourages initial and repeat purchases. 

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       ADVO STUDY REVEALS HISPANICS REDEEM COUPONS

A study by direct mail media company Advo has found that Hispanic’s redeem coupons at the same level as other demographic groups. They obtain coupons from newspaper inserts, direct-mail and in-store take-one machines.

The Advo study also found:

Hispanics use coupons for more than their usual brand purchases.
74% of Spanish only/preferred Hispanics say they use coupons and would use them more frequently if they received more.
77% of English only/preferred Hispanics sometimes use coupons.
55% of bilingual Hispanics at least sometimes used coupons, compared to 45% of Spanish only/preferred.
Circular readership is 32% higher among Hispanics than non-Hispanics.
40% said they only receive 10 pieces of direct mail a year, and 39% said they want to receive more.

Vincent Andaloro, president of Latin-Pak stated that "If advertisers would spend more money on coupons they would reach more Hispanic consumers because they skew 33% higher on supermarket spending on a weekly basis than traditional general market families." The Hispanic family unit is much larger, so they need more food and they eat home more often." Latin-Pak deliver coupons via direct mail, using Hispanic consumer databases. It also delivers them door-to-door, and sends Spanish-language free-standing inserts. Its weekly FSI circulation is about 9 million.

Marketers should make sure coupon campaigns are culturally and geographically relevant, especially when it comes to food products and recipes, using frequent and consistent messaging. They should also conduct in-store sampling events with bilingual personnel.

Coupon redemption rates range from 6% to 24% and sales can go up by 20% to 65%, depending on the brand and offer, says Geoff Gropp, president of the Hispanic Retail Network, a company that offers in-store dispensers with coupons. An estmated 73% of all Hispanic shoppers enjoy looking through coupons and offers in the mail and 62% choose stores based on coupon offers and 60% of Hispanics look through direct mail grocery flyers on a regular basis according to El Mercado, a 2005 study on U.S. Hispanic shopping behavior from the Food Marketing Institute.

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        COUPONS PROVIDE PRODUCT MOVEMENT, SALES AND ADVERTISING

Couponing not only provides short-term product movement and sales, it also provides an advertising benefit.  Historically, advertising increases long-term brand equity, creates brand awareness, image and delivers a brand message.  It is very difficult to determine that advertising benefits of promotions such as Free-Standing Inserts (FSI) coupons.  The return on investment of issuing coupon promotions is normally determined by how many coupons were redeemed and do not evaluate the reach, brand awareness or advertising value of couponing.  An FSI delivers a brand message, conveys an image, reaches a large portion of the population (60 million circulation) for a relatively low cost ($7.00 per thousand inserts), and consumer’s look at FSI’s for coupon promotions.

Both advertising and consumer promotions generates product awareness, enhances the brand’s image and increase sales. Brands must not compete solely on the basis of price. A study by Roper ASW that compared FSI advertising to magazine advertising reported that “ FSI advertising has the same kind of impact as magazine advertising to build brand awareness and brand equity.

Coupons are promotional offers used by consumers to redeem a cash value or free item at the point of sale in retail outlets. These coupons require bar code structures as defined within the EAN/UCC for scanning purposes. Scanning coupons provides several advantages including:

The efficiency of coupon handling at the point-of-sale and reconciliation;

Sorting and administration of coupons is more efficient and the associated costs are reduced;

Payment to the retailer can be made faster and marketing redemption data can be made sooner;

Various levels of validation can be facilitated, minimizing the problem of invalid redemption. 

A well-designed coupon is a valuable and effective marketing tool. Developing a compelling offer to the consumer, the proper technical specifics and a good design moves product off the shelf as well as delivers extra advertising value at minimal cost. A poorly designed coupon may cause problems for retailers and consumers. The result: confused consumers, unhappy retail customers and increased costs for you. While the specifications of your coupon should suit the situation, following best practices for designing coupons can enhance your success with coupon promotions.

In-ad coupons offer benefits to both retailers and manufacturers. Retailers can use in-ads to encourage store loyalty, defray their coupon costs, gain control over design, timing, and distribution of coupons, and enhance their image through brand association. Manufacturers can improve trade relations, encourage immediate product sales, target specific market segments, preempt competitive activity, and provide promotional support to retailers, thereby encouraging them to buy products. Cooperation between the manufacturer and retailer in creating an in-ad offer is essential to the success of the program.

One of the biggest factors in coupon redemption is finding the product in the store. Many consumers are tired of taking a coupon to the store only to find the store does not stock the product. The rise in INTERNET downloading of coupons is most likely a cost reduction on an item the household normally uses, not trial of a new item. Any increase in coupon redemption is generally related to economic uncertainty, not geo-political.

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    ONLINE COUPONS INCREASE 111 PERCENT TO 242 MILLION IN 2002

Consumer Product Goods (CPG) marketers are beginning to devote more of their budgets to online marketing. They are offering coupons that customers can print out at home and redeem at the store. Consumers downloaded about 242 million coupons last year, an increase of 111 percent over the 114 million downloaded in 2001, according to Carolina Manufacturer Services Incorporated. Of those, 7.6 million were redeemed, which is more than a 400 percent increase from the 1.7 million in 2001. But online coupons remain less than one percent share of the coupon market. More than 335 billion paper coupons were distributed last year, with 3.7 billion being redeemed for a total of $3.1 billion.

One company that has used online coupons extensively stated that they spend 20 percent less to acquire each new customer in marketing campaigns that include coupons, compared with noncoupon campaigns. One benefit of using online coupons is the ability to track such statistics. When the coupon is downloaded, users give the company their name, e-mail address and other information. The coupon's code is tied to each individual user, so when it is redeemed, the company knows who redeemed it and where.

The SmartSource iGroup, which includes the online coupon unit (SmartSource.com) of the News Corporation's News America Marketing Division. works similarly to many other online coupon sites. Users register with the site, including details about family members' ages, gender and pets, along with the names of stores where they shop. After that, users have free access to 30 to 35 coupons on a given day, worth about $14. Manufacturers pay SmartSource an undisclosed fee each time a consumer redeems a coupon. "We're seeing companies start to budget for this, which hasn't happened before," said Bill Christie, SmartSource's president.

Other coupon providers include CoolSavings, which offers discounts and coupons for online and off-line companies, and E-centives. CoolSavings last year began to offer coupons on sites other than its own, a service that Coupons Incorporated and E-centives also provide. Manufacturers often place the coupons on their own sites, where they can have more control over the presentation.

Coupons Incorporated distributes coupons on behalf of more than 200 Web sites, according to its chief executive, Steven Boal. Mr. Boal said that there were no definitive statistics on the size of the online coupon industry but that what marketers pay for the coupon distribution and redemption process is probably in the neighborhood of $50 million per year compared with the $2 billion that marketers spend annually delivering coupons in Sunday newspapers.

Grocery executives are showing more interest in online marketing because the typical Internet user is much like customers who come into their stores. A recent report by Forrester Research, a technology research firm, found that 50 million households in the United States qualify as middle income, defined as earning from $25,000 to $75,000 a year. Of those, 69 percent are now online. A Forrester analyst said those Internet users are obvious potential customers for online coupons because they tend to be the heaviest off-line coupon clippers.

A recent study by NFO Worldgroup outlined Internet coupon usage in the U.S. by product category as follows: 

Groceries 36.9%
Health Care 33.3%
Beauty 32.7%
Restaurants (not fast food) 24.5%
Books 23.2%
Toys 22.9%
Fast Food 21.7%
Computer Equipment/Software 21.4%
Electronic Equipment 21%
Clothing/Shoes 14.2%
Music CD's 9.1%

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     AC NIELSEN STUDY COUPON USAGE HIGH IN ALL REGIONS OF CANADA

A study by AC Nielsen, based on the answers of nearly 10,000 respondents revealed that coupon use is all encompassing across all segments of Canadian society.  This study confirms that key grocery shoppers in larger, middle-income households with children are much more likely to have used coupons.  The study provided regional information on coupon usage that Quebec grocery shoppers use more coupons, more frequently and that coupon use is significant among all levels of society, including households who do not speak either French or English at home. AC Nielsen presented these findings at the Audit Bureau of Circulation Annual Coupon Forum.   The study revealed the following key findings:

Coupon usage is high in all regions of Canada.

Among shoppers, 86% stated that they had used at least one coupon within the past year.  This also matches the results of the Autumn 2000 ICOM Information and Communications Inc. consumer survey.

Among Quebec Households, 51% of shoppers indicated that they had used at least one coupon within the past week and 75% had used coupons within the past four weeks.   This means that Quebec shoppers were 65% more likely to have used coupons within the past week than shoppers in Ontario and the West, and were 46% more likely than those in the Atlantic region.

Quebec shoppers were also 52% more likely to have used 3 or more coupons in their last main grocery-shopping trip than were consumers in Canada as a whole.   Quebec shoppers were twice as likely to have used three or more coupons than Ontario consumers.                                                         

The breakout-results by language spoken confirm that shoppers, whether they speak English or French at home, use coupons frequently when they shop for groceries.    In households that used neither official language at home, however, the survey also showed that more than 50% of this group had used at least one coupon during the past month and 30% had used two or more coupons on their last main grocery-shopping trip.

Considering the fact that many non-English/French households are first and second generation Canadian, this means that new immigrants quickly become accustomed to using coupons, which are rarely used outside of North America and Europe.  More importantly, this presents marketers with a great opportunity to influence the purchase decisions, and establish the brand preferences, of this growing segment of our population that may also be difficult to reach through other forms of marketing communications.

There are also differences by region in the types of stores in which shoppers use coupons.  While Quebec shoppers are more likely to only go to grocery stores to redeem the coupons they receive, they are also 50% less likely to use coupons in mass merchandisers than consumers elsewhere in Canada.

Shoppers in Atlantic Canada are much more likely to have used coupons in convenience stores and those in Western Canada are more likely to have used coupons in warehouse clubs.

A key reason Quebec consumers use more coupons, more frequently is that Quebec shoppers have greater access to coupons than consumers in other regions.  Grocery retailers and manufacturers distribute more coupons per household in Quebec.  In fact, Quebec is the only region where coupons are still a regular part of grocery-retailer advertising flyers.  More coupons are also distributed in store and directly to consumers’ homes in Quebec.

Coupon results show that redemption rates vary by region, not only because of variations in coupon usage levels, but also because of regional differences in market share and in household penetration of the couponed product.  As a result, coupons in some categories achieve higher rates in different regions.  Regardless of relative redemption rates in all regions, however, coupons work by keeping current users loyal and by attracting new users and competitive users to a brand.

Advertising, trade promotion and couponing, along with other forms of consumer promotion, keep adding consumers to the brand.   Research shows that consumers who are added to a brand’s user base by couponing and advertising stay loyal to the brand longer than those who are added through in-store feature price promotions.  In addition to gaining trial, coupons keep consumers in the brand’s user base longer and help prevent them from slipping away to another brand, to a store brand or out of the category. Coupons do this by attracting consumer-attention and making advertising more efficient, everywhere.  The new Nielsen consumer survey shows that coupon use remains high across all regions in Canada.  Most key grocery shoppers, regardless of the language spoken at home, look for and use coupons.  Reaching them all with coupons helps enhance and protect a brand’s market position.

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    TARGETING PROMOTIONS TO IMPROVE SPENDING

Since 1995, 50 consumer packaged goods manufacturers have average 11% annual profit growth, with an average annual sales increase of less than 5%. The slow growth for manufacturer and retailers stocks are primarily due to acquisitions and mergers. To increase growth, marketers must increase their return on their investments. Retailers and manufacturers must develop a disciplined, coordinated and committed consumer oriented marketing process that achieves their return on investment goal. Grocers must combine primary and secondary data to define consumer targets creating a single source platform for target development. They must define the consumers purchase behavior.

Advances in data collection and integration allow marketers to plan, execute and evaluate marketing efforts on a targeted basis. Improving return on investment requires consumer product goods marketers to realign their consumer marketing mix allocation. They must allocate promotional spending according to the consumer's reaction to different targeted promotions, evaluate the effectiveness and analyze the volume and share increase was gained versus the investment made. This evaluation will then lead to new action plan for improving product and brand performance.

What online promotions are most effective?

Type of Promotion

Current Promotions

Most Effective

Coupons

64%

11%

Price Discounts

64%

11%

Free Merchandise

60%

31%

Sweepstakes

53%

20%

Free Shipping

36%

16%

External Point Programs

24%

2%

Referral programs

20%

0%

Gift Certificates

20%

2%

Internal Point programs

11%

0%

Contests

11%

4%

Rebates

7%

2%

Source: Forrester Research, Incorporated

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    COUPONS INCREASE IN CANADA IN 2001

The number of coupons distributed by manufacturers and redeemed by consumers in Canada for the year 2001 was the largest increase sin more than 10 years. There were 2.67 billion coupons distributed in 2001, a 6% increase over 2000, while consumers redeemed 122 million coupons, a 9% increase from a year earlier. Consumers saved $128 million on products which is 7% more than consumers saved with coupons in 2000.

The value of coupons distributed increased to $1.25 due to the Health and Beauty Aid, Infant Care and Pet Food categories. The average value of coupons distributed increased by 17¢, which is 16% higher than a year earlier.

Couponing on Infant Care, Pet Foods and Household Care products accounted for 30% of all coupons distributed last year, up from 26% a year earlier. Growth in these categories offset declines in the food and personal care categories. Coupons on food products accounted for 40% of all coupons distributed, which is a decrease of 4 percent from 2000. Food product coupons, however, accounted for 55% of all coupons redeemed by consumers. On average, food product coupons had above average redemption rates even though their face values tend to be lower than in other categories. As a result, the average face value of coupons redeemed was lower than the value distributed. Coupons on personal care products accounted for 27% of coupons distributed, down from 30% a year earlier.

Free Standing Inserts (FSI’s) accounted for 55% of all coupons distributed in 2001, which is the same share as the previous year. FSI’s are newspaper inserts that contain coupon advertising and other consumer offers are delivered to more than 5 million homes approximately twice each month. The share of coupons distributed In-Store was 17 percent, a 1 percent from the 16 percent, a year earlier. In-Store couponing also accounted for more than 45% of all coupons redeemed. In/On Pack coupons also declined by 1 percentage point to 12% of all coupons distributed. This method accounted for 25% of all coupons redeemed by consumers. This occurred because Instantly Redeemable (On Pack) as well as In and On Pack Self coupons have higher redemption rates. The share of Direct Mail and Door-to-Door coupons distributed remained stable year-over-year, as did the proportion of coupons redeemed. The number of Magazine coupons distributed increased to its highest level since 1995.

Even with the launch of two Internet coupon distribution services, Internet couponing still accounted for less than 1% of all coupons distributed and redeemed last year.

These trends show that consumer-packaged-good marketers continue to be interested in effective and efficient methods to reach consumers with coupon offers that build brand sales.

COUPON TRENDS

 

2001

2000

1999

1998

1997

Quantity Distributed

2.67 Billion

2.52 Billion

2.50 Billion

2.70 Billion

3.0 Billion

Quantity Redeemed

122 Million

112 Million

115 Million

130 Million

130 Million

Consumer Savings

$128 Million

$120 Million

$115 Million

$112 Million

$104 Million

Average Face Value

$1.25

$1.08

$0.97

$0.83

$0.78

Average Valid Period

234 Days

270 Days

232 Days

253 Days

257 Days

COUPON DISTRIBUTION BY SHARE

Distribution Method

2001

2000

1999

1998

1997

Free-Standing Insert

55%

55%

52%

55%

54%

In-Store

16%

17%

17%

14%

11%

In-On Package

12%

13%

16%

13%

17%

Direct Mail

5%

5%

8%

9%

6%

Magazine

6%

5%

2%

3%

4%

Charity

2%

2%

2%

4%

5%

Other

4%

3%

3%

2%

3%

Source: Watts NCH Promotional Services

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    GUIDELINES TO CONTROL COUPON FRAUD

We recommend that you use the following guidelines as one of the tools in controlling coupon fraud in your coupon redemption program:

Coupon Design

Your coupon design will impact the performance of your program.
The terms of the coupon offer should be clear and simple. Consumers want clearly defined products and terms.
Ensure that the coupon is properly bar coded including the manufacturer, family and value code.
You should also utilize the extended 128-bar code to facilitate the efficiencies of One-Step Processing by the retailer's clearinghouse as well as the manufacturer's redemption agent.
Follow the industry recommended guidelines regarding the coupon size and design.
Coupon Redemption Policy
Develop a Coupon Redemption Policy to deal with couponing issues. Establish procedures for dealing with day-to-day issues such as retailer inquiries and invoice deductions.
Notify retailers of your coupon redemption policy.
Establish the Legal Terms and Conditions
Develop legal disclosure of all information required for redemption of the coupon.
Include legal copy to protect against fraud and misredemption and to create a contract between the consumer, retailer and the manufacturer.
Actively Participate in Industry Associations
Join and be an active participant in Industry Associations such as the Grocery Manufacturers of America (GMA), Association of Coupon Professionals (ACP), Food Marketing Industry (FMI), Promotion Marketing Association (PMA), Joint Industry Coupon Council (JICC).
Follow industry recommended guidelines regarding Coupon Design and Format, Coupon Chargebacks, Electronic Data Interchange (EDI).
Participate on industry committees such as Electronic Clearing, One-Step Processing, Retail Scanning, etc.
Use Discretion When Selecting Target Markets
Some markets historically have higher misredemption rates. Develop an alternative promotional plan for these areas, using fraud deterrents such as lower face values, shorter expiration periods or more targeted marketing vehicles.
Monitor New Offer Closely
The majority of a coupon offers redemption are made in the first month of a coupon drop. Monitor submissions from retailers and compare them to historical redemption patterns as well as your forecasted redemption rates.
Use Copy-Proof Paper Stock
When issuing Free or very high value coupons, copy-proof paper stock such as Comark Bates CopyStop paper which produces a "Void" message when duplicated on a copy machine or scanner.
Actively Discourage the Buying and Selling of Your Coupons
The Internet, coupon clubs, charities and coupon magazines operate in a gray area of the law. Have your legal department advise these groups of the "non transferable" policy.
Avoid No Expiration Date and Long Expiration Dates on Your Coupons
Coupon clubs and fraudulent redeemers seek these coupons because they can be submitted over a long period of time, making it difficult to detect fraud. We recommend that you limit your expiration dates to six months or less.
No expiration date coupons make it difficult to close out the liability and budget for these coupons. They also are much more vulnerable to counterfeiting.
Perform a Legal Review of Contracts
Conduct a legal review of contracts with your Coupon Redemption Agent, Printers and Suppliers.
Some of the basic areas to cover are:
Processing and payment turnaround time.
Retailer verification methods.
Fraud and misredemption programs, procedures and techniques.
Proceeds from uncashed checks.
Manufacturer's right to audit.
Data storage and reports
Certified destruction of coupons.
Customer services to be provided.

Insurance & indemnification.

Confidentiality.

Audit Coupon Redemption Agents, Retail Clearinghouses, One-Step Processors and Printers.

This can improve communications and provide the manufacturer with the opportunity to identify, review and clarify administration of your coupon program and responsibility of each party.
Audits can identify areas for possible cost savings as well as make recommendations for increased efficiencies in the processing.
Audits address the reliability of information, the processes that create it, and the effectiveness and efficiency of controls.  The audits include assurances about the effectiveness and efficiency of the services provided by the redemption agent, one-step processor.
The audit provides assurances about compliance with contractual requirements, internal controls or other specified criteria.
Audits detect, identify, prevent and control risks associated with your promotions thus impacting your bottom line.
Audit programs translate into better control over your promotional dollars.
Review Your Coupon Promotional Programs
Conduct an annual review of your coupon programs to determine how effective your programs have been.
Review total coupons distributed and redeemed by vehicle, face value and by brand.
Improve Communications with Your Retailer Customers
Initiate efforts to open communication and provide early resolution of problems.
This will enhance the manufacturer's reputation, reduce legal expenses and increase sales.

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    STUDIES INDICATE COUPON ARE AN EFFECTIVE PROMOTIONAL TOOL

Consumer packaged goods manufacturers spend approximately 50% of their total advertising/promotion budget on trade promotions, 26% on advertising and 24% on consumer promotions. The goal is to determine the optimal allocation in order to maximize their return on their promotional investment. They must evaluate what drives their sales from a consumer’s perspective.

With regards to trade promotions, an Anderson Consulting Study indicated that 51% of consumers were unaware that items purchased were on sale and therefore had no impact on the purchasing decision. Of the 49% that were aware of the sale, 40% said they would have purchased the item anyway. Manufacturer’s estimate that only 50% of trade dollars are passed on to the consumer according to an A.C. Nielsen study.

Consumer promotions, specifically coupons are difficult to evaluate their return on investment due to limitations of the marketing mix models used to evaluate the effects of coupons. These models are limited to aggregate level analysis of retail scanner data according to Frank Mulhern, Ph.D. Northwestern University.

A Promotions Decision Study indicated that trade promotions produced only 16% of total volume, while consumer promotions (coupons) account for 24%. Their test revealed that 42% of total volume was purchased with an incentive (16% trade, 24% coupon and 2% trade and coupon combined) and 58% was purchased at full price.

New versus Current Buyers % of Unit Volume

 

Full Price

Trade Deal Only

Coupon Only

Coupon & Trade

New Buyers

56%

18%

24%

2%

Current Buyers

59%

15%

24%

2%

The study concluded that much of the 15% of trade volume from current buyers would have been made without a trade deal. New and current users are equally motivated by coupons, therefore, coupons discounts can motivate buyers to try a new brand. Previous PDI research indicated that on average, 53% of FSI coupon redemption’s were generated by new or lapsed users of the product. The characteristics of a coupon, where a consumer must collect and present the coupon at time of purchase supports Mediamark Research that 38.03 percent of consumers use coupons in their purchasing decisions.

Switchers versus Loyal Buyers % of Unit Volume

Full Price

Trade Deal Only

Coupon Only

Coupon & Trade

Switchers

53%

16%

28%

3%

Loyal Buyers

60%

15%

23%

2%

Brand switchers are 75% more likely to use coupons than trade promotions when making purchases and 53% more volume is generated by current buyers with coupons than with a trade promotion.

Trade promotions = 50% spending and returns 13.1% incremental volume.
Consumer promotions (Coupons) = 24% spending and returns 10.65 incremental volume.

The 24% of volume generated by coupons is equivalent to the funds budgeted (24%), while trade promotions provides 16% of volume relative to the funds budgeted (50%). All methods (trade, consumer promotions and advertising) generate 35% to 40% of repeat purchases by First Repeat New Buyers and approximately 64% of repeat purchases by First Repeat Existing Buyers. New buyers are more likely to purchase with a discount where the perceived risk of purchase is lower. On average, 53% of FSI coupon redemption’s were generated by new or lapsed users, thereby motivating buyers to try a product.

From a retailer’s perspective, coupon shoppers are purchasing at full margin. Coupons impact new, current, loyal and switching consumers and helps build brands. Manufacturers must allocate spending to all three areas of advertising, trade and consumer promotions.

In the last five years, the 50 largest consumer packaged goods manufacturers have averaged 11 percent annual profit growth with an average annual increase in sales of less than 5 percent. The slow growth that CPG manufacturers as well as retailers have posted is primarily due to consolidations and cost-cutting efforts. Growth for CPG marketers and retailers needs to come from increasing marketing return on investment (ROI). That means retailers and manufacturers must have a disciplined, consumer marketing process that achieves marketing ROI consistently. They must commit to a marketing strategy which provides a framework for every activity that affects the brands or retailer’s relationship with the consumer.

Retailers must integrate primary and secondary data sources that define their customers and create a single-source platform for target development. To obtain a high ROI, marketing starts with consumer targeting. Advances in data collection and integration will provide the capability to plan, execute and evaluate marketing efforts on a targeted basis.

The starting point for all marketing decisions is for marketing, merchandising, media and category management to make decisions jointly instead of planning on separate bases. Improving marketing ROI requires that the packaged goods industry realign its consumer mix allocation. Manufacturers and retailers must allocate promotional spending according to how target consumers respond to different types of promotions.

Finally, the industry must analyze ROI by consumer target by measuring the effective increase in coupon redemption among targeted groups at retail and determine what volume and share increases were gained versus the investment. This evaluation will result in the creation of new action plans for improving product and brand performance.

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    HOW TO USE FREE-STANDING INSERTS AS A PROMOTIONAL TOOL

Packaged goods manufacturers are forced to make tough choices regarding the promotional tools they use and how they use them. Once viewed as a mass vehicle, the Free-Standing-Insert (FSI) is now capable of meeting more targeted needs. By gathering actionable data, targeting decisions can be simplified, and promotional dollars can be used to their fullest. The targeting process begins with segmentation, or the process of dividing the population using specific criteria. The three main segmentation alternatives are demographic (characteristics of the population), psychographics' (consumer lifestyle profiles), or geodemographic (depicts where customers-or people like them-live). Once an approach is determined, various resources can be used to apply the segmentation process to a brand's market list.

There are many different ways by which you can break down your market list, including the following:

Custom Region/District: Reviews coverage by custom sales or broker territory; can reveal differences in support levels.
Scanner Market - Looks at coverage by IRI Infoscan or Nielsen Scantrack markets; help align promotional support with your marketing strategy.
User Profiles: Identifies the newspapers with the greatest concentration of potential brand, category or competitive users; get to know the consumers your promotion is reaching.
County Coverage: Provides options of ways to improve coverage in counties where your brand usage skews; improve penetration levels by county.
Brand and Category Development Indices: Weighs markets by sales volume; optimize results by altering page sizes, face values and coverage levels to best meet your marketing objectives.

The components and characteristics of a Free-Standing Insert that impact redemption rates significantly include face value, expiration period, clear and simple offers, coupon size and layout. If you review your historical redemption data, you will likely find that as you lower the face value of the coupon or increase the purchase requirements, you will reach a point where the redemption rate significantly declines. You should be conscious of the "outer limits" of your coupon's face value or purchase requirements. Your brand advertising should use a headline that is well established and systematically run to generate higher redemption rates. It should be simple, clear and highlight the benefits of the product.

Over an extended period, a coupon with two time-releases (i.e. one month and three month expiration dates) will redeem significantly higher than a solo coupon with either a one month or three month expiration date. Coupons offering "One Free with multiple purchases" will redeem higher than a dollar value "Cents-off on multiple purchases even if the face value is the same as the value of the "Free" offer. It should be noted that if the free offer is more generalized, the redemption rate will be lower than a "Free" offer that is clearly defined.

Larger coupons redeem significantly better than smaller coupons, especially if the coupon is not cluttered. In a test of dual coupons, the $1.00/2 and 50¢/1 redeemed higher, collectively than the $1.25/2 and 50¢/1coupon. While the $1.00/2 redeemed less than the $1.25/2 coupon, it's 50¢ coupon redeemed significantly higher than the $1.25/2 counterpart 50¢ coupon.

Combined with a market leader, a weaker brand's coupon redemption will be higher than by itself. Where possible, take advantage of a strong related brand to strengthen a weaker brand. If you are sharing a page, redemptions are considerably stronger, collectively, on a horizontal rather than a vertical layout.

The following are variables that can affect the redemption rate of a Free-Standing Insert:

Face Value
Expiration Period
Coupon and Page Size
Competitive Activity
Brand's Market Share
Product's Purchase Cycle
Trade Support or Display Activity
Economic Factors
Seasonality of Product
Product Availability
Number of Coupons on the Page
Effectiveness of Ad Copy

Atypical FSI with 40 million circulation will cost approximately:

Artwork $30,000
Insertion (Full Page) $240,000
Redemption (50 cents) $400,000
Handling (10 cents) $100,000
Total $770,000
Assumes a 2% national redemption rate.

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   COUPONING AS A MARKETING STRATEGY

C.W. Post is recognized as the first manufacturer to use coupons. In 1895, he offered a certificate worth one cent toward the purchase of Grape-Nuts and coupons have been used steadily since then. In 1965, the first reports were prepared regarding the distribution of manufacturers' coupons. It was reported that ten billion coupons were distributed in 1965. In 1998, NCH NuWorld Marketing reported that 249 billion coupons were distributed.

The development of a successful couponing program is dependent upon clear goals and objectives as well as an evaluation and careful selection of the promotion vehicle. The size of the customer base, brand loyalty, your brand's market share and product purchase behaviors are some guidelines used by marketers in developing the marketing strategy. Products that have a weekly purchase cycle by a large consumer base are a good fit for FSI's. More than four out of five households use coupons. Coupons can be used to:

Introduced new or improved product;
Maintain or increase market share;
Reduce product inventory in order to introduce new product, size or package;
Attract first-time users in an effort to convert them into regular buyers;
Soften price increases;
Increase product awareness and brand switching;
Develop retail support with increase shelf space, store displays and support sales staff.

No single coupon promotion can accomplish all or even most, of these objectives. It is critical to establish a specific objective for each promotion so that appropriate strategies can be developed to successfully reach that goal. The are basically four types of coupon users:

  1. Brand Buyers (Low Usage) - The face value of the coupon is an insignificant factor for them. They overwhelmingly insist that they do not use coupons to try a new product;
  2. Persuadable Purchasers (Moderate Usage) - They enjoy a bargain and are likely to buy a product after receiving a sample. They compare prices and calculate the savings from a coupon;
  3. Shrewd Shoppers (High Usage) - These are high coupon users who average six to ten coupons a week. They are influenced by the face value of the coupon, but are less likely to try a new product;
  4. Compulsive Coupon Users (Very High Usage) - They are willing to try a new product with a high value coupon and have very little brand loyalty. They switch brands within a category if they have a coupon. They stock up on items whether they are needed or not.

Many consumers view coupons as an effective way to reduce their food bills. Shoppers are aware of those retailers who offer double and triple couponing as a marketing strategy.

The costs for distribution of Free-Standing Insert coupons remains relatively low and FSI's provide the following advantages:

Brand recognition;
Low distribution costs;
Product exclusivity within an insert;
Four-color printing;
Broad market coverage (large circulation).

The disadvantages of FSI's include:

Lack of targeting;
High misredemption potential;
Long lead time required.

Electronic couponing is a relatively new but growing vehicle for couponing. The advantages of electronic coupons are that they can be highly targeted, have significantly higher redemption rates, ability to limit coupon distribution and expiration period of the offer. The disadvantages include a higher distribution costs, generally lack color in printing and are redeemable only at the store chain where printed.

Magazines are no longer widely used as a vehicle for coupon distribution. Their advantages include creative flexibility in color and space, targetability, remains in household longer. The disadvantages include low redemption rates over a longer period of time, long lead times and weak merchandising support.

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   IN-STORE, ON-PACK AND DIRECT MAIL COUPONS

The in-store environment is the last opportunity in the purchase process. Those marketers who best utilize the in-store tools work. Among these tools, in-store coupons have proven to be among the most effective at influencing consumer purchase behavior. It is easy to understand the emphasis on in-store marketing, and specifically in-store couponing. In the 1950's, over 70% of brand decisions were made OUTSIDE the store. Today, consistent with brand loyalty levels averaging only 24% (according to American Demographic), over 70% of brand decisions are made INSIDE the store.

Following are a few key factors focusing on in-store promotions:

1. Time Pressures. Consumers no longer have adequate time to plan their shopping trip. Stressed for time, they make decisions on the spot. In-store coupons simplify those on-the-spot decisions.

2. Fragmentation. Manufacturers are faced with an assortment of out-of-store media vehicles. Not long ago TV consisted of only 3 important networks, but today consumers can view up to 100 or more cable stations. Additionally, average reach of the top rated prime time shows has dropped significantly since the 70's

3. In-Store Promotions Work. The average primary shopper shops his/her supermarket 2.6 times per week. With shoppers spending 10-15 seconds in front of their preferred categories, the store is a high potential coupon and media delivery location.

4. Focus on Retail Partners. A focus on in-store and account-specific marketing and a growing understanding that the retail environment can make or break a well-devised marketing plan.

It's clear that growth in in-store couponing has been a response to powerful changes in today's consumer lifestyles. In-store is viewed more and more as a common sense approach to targeting consumers.

After all, the store environment itself has changed dramatically over the last 25 years. Today the average supermarket has 18,000 brands vs. 8,000 in the 70's, with 30,000 sku's (stock keeping units) vs. 12,000.1 Supermarkets have gone "mega", with superstores bringing the average space to well over 30,000 square feet. And manufacturers are filling all that space with over 20,000 new items annually. On a weekly basis that translates into 400 new items, so the store never looks the same from one week to the next.

Confused yet? Your consumers definitely are. Importantly, there is a proven opportunity in breaking through this confusion directly where the confusion is, taking place. In-store couponing helps simplify the cluttered, complex and often confusing shopping experience.

Proven for over 100 years, couponing has been and remains a pivotal piece of the marketing mix for hundreds of major consumer packaged goods brands. Couponing really works. Couponing succeeds at persuading consumers to purchase a specific product. But in-store couponing takes couponing to a new level because it combines the persuasive power of a coupon with the relevance and targetability of the in- store environment.

Notable sales-impact results support the use of in-store couponing. In-store couponing can complement an out-of-store couponing and promotion program by reaching a large number of consumers who don't regularly clip coupons. It is this incremental reach that is driving a majority of packaged goods marketers to rely more heavily on in-store couponing as a part of their 'couponing mix." Moreover, the quality of the redemption can be excellent, because in-store coupons capitalize on shopper impulse and target very efficiently. News America Marketing In-Store with its SmartSource Coupon Machine and Catalina with its Checkout Coupon Program are the two largest in-store coupon distributors..

While coupons delivered outside the store still represent the largest share of coupons distributed, in-store coupons represent a growing share of distribution and a disproportionately high and growing share of redemption. Given manufacturer trends toward targeted marketing, account specific marketing and promotional efficiency, you can expect in-store couponing to continue growth.

ON-PACK COUPONS

Research shows that 70% of the buying decisions are made in-store. One way to influence the consumer is with an effective on-pack promotion. An on-pack promotion can be used in many ways:

Provide an instant redeemable coupon;
Offer a discount on future purchases;
Provide a rebate offer;
Add value to the product to differentiate it from others on-shelf,
Differentiate the product from others on the shelf with a violator.

Brands are sometimes apprehensive about on-pack promotions because of potential interruptions in the manufacturing process and the possibility of misredemption. Following are some tips to ensure the efficient application of your next on-pack promotion:

  1. Have the coupon supplier's machinery and product development staff meet with your Production, Marketing and Purchasing staff at the beginning of the project so the correct on-pack coupon design is created.
  2. Have your supplier's machinery staff survey your plants. It will ensure that the proper equipment is installed and will also help to get a buy-in up-front from the production personnel who will be involved in the application.
  3. Run a plant trial under actual conditions. Have the actual label construction produced with generic consumer graphics - "Thank you for buying our product," etc., and apply them under actual production conditions for several hours. This should be enough time to learn of any potential application problems.
  4. Be sure to allow time for training the application machinery operators and plant mechanics.
  5. Have a production team that will head this project in the plant.
  6. Have your provider show you how redundant labeling machines can eliminate production down time.
  7. Do not design a coupon size or shape that relies on application tolerances under 1/16". There are very minor shifts in production lines and in labeling machine dispensing, so allow for some movement of +/- 1/32'.
  8. Design your coupon graphics to contrast with your packaging for the greatest visibility.
  9. Remember on-shelf placement when determining on-package placement for your coupon. Pick a spot that is visible to the consumer when the product is stacked in the store.

When planned properly, an on-pack promotion can be executed without interruptions. Use an on-pack promotion to influence the 70% of undecided consumers to purchase your product.

DIRECT MAIL COUPONS

Couponing continues to be a major tool for product promotion for many packaged goods and service marketers. Recent studies published in advertising trade journals cite cases where coupons are very effective in achieving the goals of awareness, trial, and usage. Recent advances in technology and knowledge have further enhanced the ability of companies to execute, track, and analyze the effectiveness of couponing promotions. New delivery executions such as Account Specific promotions, On-line and Internet sites In-store promotion programs and targeted direct mail delivery have supplemented the traditional newspaper FSI and provided new levels of targeting and efficiency. The number and type of marketers distributing samples, coupons, and offers in targeted promotions have increased significantly in the last several years reflecting the growing desire of these advertisers to impact the best potential consumer.

Distributing coupons and samples via direct mail marketing has a number of features and benefits that make it an attractive alternative for many marketers.

Targeting - Highly specialized mailing lists make it possible to select and reach potential customers that most closely match the user profile of a product. The target audience can be expanded or reduced to meet reach, budget, and redemption goals.

Cost Effectiveness - Multi-advertiser direct mail programs allow advertisers to reach large numbers of the target audience at low rates. With more targeted audiences which typically result in higher redemption's, mail delivered coupons have a cost-per-redemption comparable to or better than other promotion methods.

Waste and Fraud Reduction - Mail delivered coupons targeted to the most desirable consumer reduce waste and reduce the possibility of misredemption or fraud.

Control - In addition to the audience selection, mail delivery of coupons allows the advertiser to control other elements such as timing, geography, test panels, and deliverability.

Impact - Mail demands people's attention! For the most part, people deal with their mail daily, apart from the clutter of newspapers, magazines, shopping, etc.

Personalization - Direct mail allows advertisers to take advantage of technology that allows for personalization and inter-activity to further engage and interest the prospective consumer.

By it's nature, direct mail is flexible and applicable to a number of marketing goals. It can be used strategically to support general advertising campaigns or tactically for a specific promotional effort. Marketers use direct mail as a stand-alone promotional vehicle, and many times as a way to build a database of mail or promotion-responsive customers.

There are several commonly used forms of delivery available for direct mail coupons.

For marketers with larger budgets or desiring extra high impact, a "solo" direct mail package is often employed. These are usually a "self-mailer' brochure or flyer that is sent directly from a manufacturer or, perhaps in conjunction with a retailer, in the case of an Account Specific program execution.

The most popular and cost-effective format is the multi-advertiser or co-operative mail program. In these programs, a number of advertisers share the cost of targeting and reaching large groups of consumers with a common interest, product preference or geography.

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    COUPONING SCHEMES ON THE INTERNET

Promoters and con artists are making money by fraudulently marketing and misrepresenting coupon related business opportunities featuring coupon certificate booklets, distributorships and work-at-home coupon clipping services. These promoters market these coupon-related schemes as business opportunities to unknowing consumer and charitable organizations including:

Retired individuals and people with limited income opportunities, would be entrepreneurs trying to run a business from their homes;
Churches, schools and charitable groups using the certificate booklets as fundraisers.

Another scam relates to coupon clipping services. Promoters make exaggerated claims about the income and profit potential for work-at-home coupon clipping services. You can identify these scams by some of the advertising claims such as:

Guarantees of high income quickly;
Claims of No Risk Involved;
Pressure to Act Now;
Claims this is a Can't Miss Opportunity.

Certificates Booklets - The investor purchases a distributorship to sell coupon certificate booklets (containing 50 certificates each of which are redeemed for $10 worth of grocery store coupons) and other distributorships at a reduced price from the promoter. The investor is then to sell the booklets to consumers for $20 to $50 each and distributorships in which the investor will get a percentage of each distributorship's sales.

Consumers who buy the certificate booklets have to complete and mail in a form selecting 40 to 60 products from a list and include a self-addressed stamped envelope and a processing fee in order to receive the coupons. The promoters promise hundreds to thousands of dollars in earnings from these business ventures.

In theory, the investor makes big profits selling booklets and distributorships to consumers and the consumer save money using the coupons to buy groceries. In reality, the promoter is the only one who makes money. Consumers find that the booklets have significant restrictions and that they have paid for complicated forms and requirements, difficult procedures, substantial processing and handling fees, additional postage costs and they end up with nothing to show for it. The booklets are very hard to sell due to their limitations and hidden costs.

The buying and selling or transferring of coupons violate most manufacturers' coupon redemption policies and therefore voids the coupon. The distributorships are generally based on a pyramid scheme, which is illegal and may violate federal law by making misleading or exaggerated claims regarding potential earnings.

In conclusion, before you enter into a business venture like this, you should find out:

  1. The total cost, including fees, postage and supplies;
  2. The details of the companies refund policy;
  3. Check with the Better Business Bureau;
  4. Find out who will pay you, whether you will be paid by salary or commission, and when you will get your first paycheck;
  5. Get all promises in writing.

Remember, if a deal sounds to good to be true, it probably is!

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        HOW TO DEVELOP A SUCCESSFUL FSI COUPON

In order to develop a successful FSI coupon you must first determine what your marketing objectives and goals are for your product or brand.  There are several factors and variables involved that will determine how your FSI will be accepted by the consumer and thus, what affect you FSI will have on sales and product movement.  Among these factors are:

    1. The type of product/category for your coupon;
    2. The sales volume and market share held by the brand;
    3. Frequency of purchase for the category;
    4. Face value of the coupon;
    5. Expiration date "Length of time for the promotion";
    6. Distribution or circulation of the FSI;
    7. The present state of the economy; and
    8. The related competitive activity.

The proportion of new buyers depends considerably on the market share of the brand.  Other variables that may impact an FSI's redemption rate include:

    1. Related promotion support (in-store sampling, displays, shelf talkers, etc.);
    2. Product availability;
    3. Seasonality of the product;
    4. Effectiveness of ad copy and ad placement;
    5. Coupon size and number of coupons per page.

A study entitled, "The Advertising Exposure Effects of Free-Standing Inserts"  indicated that integrating advertising and promotion has a greater affect on brand sales than what is represented in coupon redemption rates alone.  This is achieved by combining a four-colored FSI coupon with an impactful advertising message that creates brand awareness and an incentive for the consumer to purchase the product now.  The study revealed that the combined use of advertising and promotion in an FSI is more effective in increasing incremental sales as well as providing image enhancement and brand recognition.

Full page FSI's redeem higher than half-page.  Promotion Decisions, Incorporated research revealed that when comparing the benefits of full-page FSI ads to half-page ads, full-page ads redeem 17.5% higher; have 9.0% more incremental sales; 27.5% more new and former users of the product; and result in a greater number of repeat purchases.

In developing your FSI coupon, Santella & Associates recommends the following:

  1. The ad should simply highlight the benefit of the product  and be visually uncluttered and uncomplicated.  You have a brand image and an offer to convey and creativity plays a key role in getting your ad noticed.  The coupon should compliment the ad;

  2. The coupon should be large enough to be easily read by the consumer.  Use clearly defined terms that make the decision easier for the consumer;

  3. Display the name of your product/brand boldly;

  4. Place no more than two coupons per page with a pictorial reinforcement.   Time release coupons are more efficient for faster consumer response (possibly using expiration dates of one and three months);

  5. Combine your market leader brand in an FSI with a new or weaker brand to strengthen sales of the new or weaker brand;

  6. Use lower value coupons good on any size to generate more volume movement;

  7. Do not use self-destruct (overlay) coupons.   Beverage manufacturers should not issue small adhesive bottle cap coupons.  We recommend that these manufacturer's use a coupon that has perforated edges that can be torn away from the packages.  This would allow the manufacturer to issue a larger coupon with a barcode that can be scanned at checkout, thus reducing hard-to-handle fees and invoice deductions from the retailers.  I realize that bottle cap coupons are not FSI's but I feel it is an important point for beverage manufacturers to realize;

  8. Include the 128 extended barcode on your coupons to improve processing efficiencies and ultimately reduce your costs;

  9. Use higher face value coupons that require multiple purchases, where possible;

  10. Consider the market and demographics of your present and potential customer base.

  11. Coupons form a contract between the issuer and the retailer as well as the consumer.  Legal copy is intended to protect the issuer from fraud and misredemption and should include:

    A.   The product name, size, variety and any other purchase requirements.
    B.    The face value or  the "maximum value allowed" on free coupons.
    C.    Statement indicating "Void if copied, transferred, purchased or sold."
    D.   Handling fee to the retailer.
    E.    Indicate "One coupon valid per item" or "May not be combined with any other offer."
    F.    Redemption address.

  12. Manufacturer's should audit your Redemption Agent every two years and conduct an   annual audit program of Retailer Clearing Houses.  This can improve communication and provide you with an opportunity to identify, review, and clarify administration of your coupon program and the responsibilities of each party.  The audit program of Retail Clearing houses ensures that your retail partner's are reimbursed promptly, ensures that there is an adequate accounting of transactions and reduces the opportunities for fraudulent misredemption.

  13. Establish a Coupon Redemption Policy and the legal terms and conditions to provide disclosure of information essential for redemption.  This will also provide legal protection against fraud/misredemption by providing a contract with consumers and retailers.

  14. Perform a Legal Review of the Contract with your Coupon Redemption Agent, Printers and Suppliers.  The basic areas to cover include the costs of coupon processing and the related reporting services, retailer verification methods, misredemption detection techniques, processing and payment turnaround time, manufacturer's right to audit (including the use of a third party auditor), data storage and reports, destruction of coupons, customer services provided, confidentiality, insurance and indemnification.  There are additional areas that should be covered based on the specific needs and concerns of the manufacturer.

  15. Finally, Develop a Corporate Deduction Policy which determines if the deduction is caused by a coupon adjustment.  The policy should describes how to document the original coupon invoice number, date, amount, retailer name and the reason for the deduction.  Determine how you will direct your inquiries to the retailers and discuss the situation and the options for settlement with the retailer.  Establish procedures for dealing with the day-to-day issues such as invoice deductions and retailer inquiries.  The policy should describe the factors involved in determining whether the deduction will be accepted or denied.

    A coupon invoice deduction is an amount deducted from a manufacturer's product invoice in lieu of non-payment of the manufacturer's cents-off coupons.  This practice has affected the industry in the past and this issue has received renewed attention recently, as retailers, manufacturers and redemption agents continue to discuss the issues such as chargebacks and payment efficiencies.

The following are factors that we feel are important to know when making your decisions:

Brands with higher market share will have higher redemption rates.

The face value of a coupon affects redemption rates.  By dropping the face value, the coupon reaches a level where redemption dramatically declines (value threshold).  Therefore you need to identify these limits in determining the value of your FSI coupon.

Where product movement is your primary objective, use one free with multiple purchases coupons (i.e. buy two, get one free).

The design of the coupon will impact the performance.  Horizontal coupons provide greater impact.  Good design can improve awareness, increase redemption rates and intensify the advertising value of your FSI ad.

FSI's provide you with a full page four color advertisement with a national distribution for minimal costs and therefore, the redemption rate (approximately 2.1%) should not be the only factor in evaluating your FSI coupon program.

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  HOW TO DESIGN A COUPON

I have received several requests asking me for a list of items that should be on a coupon. Below are my recommendations for developing an effective coupon:

  1. Purchase Requirements - The purchase requirements should be prominently shown and stated in simple, easy to read language. Multiple purchases should be clearly stated and shown next to the face value. Avoid complicated offers, where possible. 
  2. Product Name & Logo – Place the product name in the center and also the logo, if room permits.
  3. Manufacturer Coupon – Place the words "Manufacturer Coupon" at the top center of the coupon in Bold type.
  4. Size – The coupon should be 6" x 2 1/2" (with a tolerance to 3" x 2 1/16"). Larger coupons are hard to handle and smaller ones are difficult to read.
  5. Expiration – The expiration date or the word "No expiration" should be placed at the top center next to the words Manufacturer Coupon. You should always include the month, day and year.  The use of "No Expiration Date" coupons should be limited.
  6. Picture of Product – A picture of the product should always be displayed.
  7. Color – Your coupon should be four color with contrast from the ad. You should not use distracting background colors.
  8. Terms of the Offer – the legal terms for the offer should be simple and easy to read. It should also indicate that reproductions will not be accepted and that there is an 8 cent handling fee and the name and address of the manufacturer, P.O. Box address where the coupon should be sent for reimbursement.
  9. UPC Code – use the standard 12 digit UPC code which includes the Number System Character "5"; your Manufacturer Identification Number (MIN); Family Code; Value Code and Check Digit. The UPC code should always be printed in Black on White background.
  10. UCC/EAN 128 Extended Barcode – Always use the extended barcode which can be in one of 5 different formats and include a 5 digit Offer Code; 4 digit Expiration Date; 8 digit Household ID; or a 1 digit Null Code.
  11. Physical Qualities – The coupon should be printed with the texture and weight for easy handling and efficient processing. The coupon should also be perforated or includes dotted lines to indicate where to cut the coupon.

These are the main components in the design of a manufacturer coupon. You should remember that a coupon should only be a part of your overall marketing or promotional plan.

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GUIDELINES TO CREATING AN EFFECTIVE COUPON

The following are recommended guidelines in developing an effective coupon:

  1. THE OFFER: The coupon offer should be clear, specific, and visible including the purchase requirements such as quantity, size, etc.
  2. FACE VALUE: The face should be visibly prominent.  Use lower face values on coupons good on any size to generate more volume movement and higher face values on coupons that require multiple purchases.  Where product movement is your objective, consider using a coupon for one Free with multiple purchases.
  3. MANUFACTURER COUPON: Place the words "Manufacturer Coupon" at the top center of the coupon in Bold type.
  4. EXPIRATION DATE: It should be clearly visible at the top center of the coupon and highlighted next to the words manufacturer coupon.  Shorter expiration periods limit your liability and promote faster response to your promotion, however, longer expiration dates increase your redemption rates.
  5. PRODUCT: Display the name of your product/brand boldly for quick recognition.  Include your company logo to emphasize product recognition.
                                                                              
  6. BACKGROUND: Use bright, clean colors for the background of your coupon.  Outline your ad with a thin border that contrasts with the rest of  the ad.
                                                                     
  7. HEADLINE: Use a clear, Bold headline emphasizing savings.   Keep ad copy to a minimum using an eye-catching message.
                                                                                                                          
  8. COUPON LOCATION: Coupons should be located at the bottom of the ad.
                                     
  9. UPC CODE: The Universal product Code (UPC) should be placed in the lower right corner of the coupon.  The UPC must be in black on a white background and should be at 100% magnification.  You should also include the 128 extended barcode on your coupons to improve processing efficiencies.                                                                                                                      
  10. COUPON SIZE: Coupons should be distributed in standard sizes and shapes.  The following sizes are recommended:

    Length: 6 inches with a tolerance of 3 inches;
    Width: 2½ inches with a tolerance to 2 1/16 inches.

    Place no more than two coupons per page with a pictorial reinforcement.  Print a dotted line around the
    coupon to show consumers where to cut out the coupon. 
                                                   
  11. LEGAL COPY: Keep the legal copy to the minimum required by law.

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Last modified: January 17, 2011