Coupon Conditions

Distribution and redemption of consumer packaged goods coupons dropped in the double digits last year a first in recent years, according to CMS. Newly released data from the Winston-Salem, N.C., coupon settler show that 286 billion coupons were distributed last year, an 11.5% drop from 2005. Redemption, meanwhile, was down 13.3% to 2.6 billion coupons. Marketers are taking many coupons off the table,

Distribution and redemption of consumer packaged goods coupons dropped in the double digits last year — a first in recent years, according to CMS.

Newly released data from the Winston-Salem, N.C., coupon settler show that 286 billion coupons were distributed last year, an 11.5% drop from 2005. Redemption, meanwhile, was down 13.3% to 2.6 billion coupons.

“Marketers are taking many coupons off the table, so there are fewer available to consumers and they're responding in smaller numbers,” said Matthew Tilley, CMS' marketing director.

While redemption has been on the decline for more than a decade, this is the first time in about three years that distribution followed suit, according to Tilley.

Tilley attributes the lower distribution last year to a redirection of CPG manufacturer promotional monies.

“They may be doing a lot more targeted programs,” he said.

R.C. Bigelow, Fairfield, Conn., marketer of Bigelow tea, is one such company.

The firm reduced coupon distribution last year in favor of print, radio and Internet advertising, said Bob Kelly, sales and marketing vice president.

While it runs a coupon program, it focuses on targeted offers.

“We want to build a stronger relationship with key consumers,” Kelly told SN. To do so, the bulk of Bigelow's coupon events include four-page solo inserts delivered via newspapers to highly targeted households in select communities. The inserts include a coupon, health information about tea, new flavors and Bigelow gift options.

The company has also delivered the insert with samples to targeted homes via a Valassis polybag program.

Meanwhile, CMS' numbers differ from those just released from NCH Marketing Services, Deerfield, Ill., a coupon processing and promotion marketing services company. NCH puts coupon distribution at a flat 0.4% growth to 279 billion.

“The pattern follows those in other years: Distribution continues to grow in modest amounts,” said Charles Brown, NCH's marketing vice president. (The disparity between CMS' and NCH's numbers is a result of different clients and measurement systems.)

NCH also says redemption has slipped, though not as much as the CMS numbers: 6.7% to 2.8 billion. Brown attributes much of that to stricter coupon requirements, like reduced expiration dates, which make the offers less attractive to consumers.

The average coupon duration was 11.3 weeks last year, down 5.8% from 2005.

“The expiration dates contributed to lower redemption,” Brown said.

Likewise, some consumers balk at using coupons that require more than one purchase. Last year, 26% of all coupons had such requirements.

One coupon tactic on the rise is handouts, which NCH defines as coupons delivered in-store, on-shelf or at checkout. Such coupons represented 5.8% of the 279 billion coupons distributed last year, a 16% increase from 2005.

“This tells me that marketers are shifting their expenditures to new coupon vehicles,” Brown said.

Freestanding inserts remain the dominant coupon tactic, commanding 89.4% of distribution, according to CMS.

“FSIs continue to be the method of choice for most CPG manufacturers because of the advertising value and reliability,” Tilley said.

While the number of total FSI coupons slipped 0.1% to 253 billion, FSI pages grew 1.1% to 200 billion, according to Marx Promotion Intelligence, Minneapolis, which tracks FSI coupons.

“Consumers continue to seek out FSIs to be exposed to new products, gain additional product information, benefit from purchase incentives and plan their shopping trips,” Mark Nesbitt, Marx's chief operating officer, said in a statement.

Consumer packaged goods coupons dominate FSIs, comprising 67% of all FSI pages. Direct response and franchise restaurants accounted for the remainder at 23% and 9%, respectively.

While CPG coupons dominated, activity was down 2.3% vs. 2005. Direct response and franchise restaurants, conversely, were up 11% and 4%, respectively.

Within the CPG industry, nonfood manufacturers are relying on FSIs more than food marketers, according to Marx. The number of nonfood coupons increased 2.7% to 146.2 million, while those for food slipped 3.9% to 106.9 million.

Household cleaning pro-ducts led FSI coupon activity, followed by pet food, rug/room deodorizers, personal care and snacks.

In terms of FSI distribution, the Top 10 manufacturers are Procter & Gamble, General Mills, S.C. Johnson & Son, Unilever, Reckitt Benckiser, Nestlé, Johnson & Johnson, Altria Group, Colgate-Palmolive and Kimberly-Clark.

Wal-Mart's World

Wal-Mart Stores is the No. 1 retail redeemer of CPG coupons. Following are the Top 5 redeemers:

  1. Wal-Mart
  2. Kroger
  3. Military commissaries
  4. Albertsons/Supervalu
  5. Ahold

Source: NCH

The State of Couponing

Due to different clients and measurement systems, the two main coupon settlers — NCH and CMS — report dissimilar 2006 coupon trends. NCH says coupon distribution is flat, while CMS says it's down in the double digits.

2006 2005 % CHANGE
Coupon Distribution 279 billion 278 billion 0.4
Coupon Redemption 2.8 billion 3 billion -6.7
Source: NCH
2006 2005 % CHANGE
Coupon Distribution 286 billion 323 billion -11.5
Coupon Redemption 2.6 billion 3 billion -13.3
Source: CMS

Time's Up

Coupon users have less time to redeem their offers due to shortened expiration dates. While face values are up, 26% of all coupons require multiple items to be purchased.

2006 2005 % CHANGE
Average Coupon Duration 11.3 weeks 12 weeks -5.8
Average Face Value $1.18 $1.09 8.3
Source: NCH