A Tipping Point for Online Coupons?
I’ve frequently pondered whether and when CPG manufacturers’ cent-off coupons will find widespread circulation on the Internet. Yes, I am aware that there are worries about potential fraud in the event that hackers find a method to print millions of coupons and attempt to redeem them through dishonest retailers. However, given the apparent halt to the practice of gang-clipping coupons from newspapers, I reasoned that it would only be a matter of time until manufacturers felt secure enough to use the Internet. I wonder if we’ve arrived at that stage now.
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Here are some fascinating, if not astounding, statistics on coupons to get you started. According to PROMO magazine, CPG manufacturers sent out 302 billion coupons in 2007, an increase of 6% over 2006 and an astounding 16 billion more than the previous year. The face amount of the coupons was $387 billion, which represented a 9% rise in face value and a significant 16% increase over the $337 billion in 2006. According to NCH Marketing, free-standing inserts in newspapers remained the most popular method of coupon distribution (88%), with handouts coming in second with 5%, direct mail with 2%, magazines with 2%, newspapers with 1%, in/on-pack with 1%, and the Internet with 0.4%.
A promotional logistics business called CMS claims that the increase in value and quantity of coupons made accessible in 2007 contributed to better redemption rates. 2.8 billion of the $387 billion in potential coupon value was returned by customers. In 2007, 2.6 billion coupons were redeemed, marking the first time since 1992 that the amount of redemptions did not decrease.
In 2007, the combination of consumer-friendly methods and economic pressures ensured that consumers and manufacturers would continue to interact with cents-off deals. In fact, there is a direct correlation between the economy and coupon redemption when comparing coupon response to major economic indicators throughout time. Most notably, coupon redemption rises in tandem with price and unemployment rates. Therefore, given the difficult economic circumstances of today, I don’t think it should come as a surprise if coupon redemption rises this year and the next.
What has been going on with online coupon usage, then? Indeed, it seems that searching for coupons online is becoming more and more common. According to Comscore data, 27 million individuals visited coupon sites in October, a 33% increase from the same month last year (or 18% of the 148 million Americans who use coupons annually). From January to September of this year, there was a 100% rise in the quantity of searches made using coupon phrases. We saw a 42% rise in the quantity of pages seen at discount sites globally, proving that this is certainly not only an American phenomenon.
The fact that mid-to-upper income households are seeing the fastest increase may initially appear counterintuitive. However, this might be a reflection of the fact that those who redeem offline coupons often have greater household incomes and educational backgrounds than people who do not. This pattern has been explained by a number of factors, including the fact that more costly goods often run more coupon campaigns and that the distribution channels utilized by coupon marketers tend to target higher income families rather than lower income ones. Whatever the true cause, I believe that such strong rates of internet growth among mid-to-upper income households—homes with significant purchasing power—are positive for marketers.
What then is ahead for us? I think the usage of electronic coupons by CPG firms is going to skyrocket. There are several reasons why I believe this will take place. First, I think that manufacturers and retailers will be forced to reevaluate their distribution strategies, which are currently so reliant on the use of newspaper FSIs, given the sharp increase in consumers’ willingness to use the Internet to obtain coupons and the ongoing decline in print newspaper readership. Retailers may reach a wide audience and save a significant amount of money compared to newspaper delivery by providing coupons online. Second, merchants are seeing more and more opportunities to efficiently and smoothly connect the usage of their loyalty cards with online coupons. Customers just need to enter their loyalty card ID numbers on a store’s website (or another website) and click to load the coupons to their card account in order to receive these electronic savings. Once the products are scanned at checkout and customers have presented their loyalty cards, the savings are deducted at the retail location.