Although redemption continues to slide, brand marketers still view couponing as an effective promotional tool, according to a new SN survey.
Nearly 70% of respondents to SN's 2005 Survey of Manufacturer Promotional Practices said couponing remains a valuable promotional tactic. Of these, 85% said that's because it encourages product trial; 56% said it boosts retailer support; and 41% said it increases brand awareness.
Among other survey highlights:
- 63% of respondents said they are focusing more on account-specific promotions.
- 64% said the biggest hurdle to using loyalty-card data is the amount retailers charge for it.
- 29% said their company has begun using bilingual packaging.
- Nearly 60% said they plan to spend more on consumer promotions in 2006.
- Health and wellness will be the subject of most promotions in 2006.
COUPONS
The fact that most respondents still support couponing even though redemption has slid over the last few years says a lot about the promotional tool.
Marketers continue to rely on coupons because they influence consumer-shopping patterns, said Ted Taft, partner, Euro RSCG Meridian, Westport, Conn., a sales and marketing consulting firm.
"A lot of people plan their shopping trips around coupons," Taft said.
Consumer packaged goods marketers distributed 275 billion coupons in 2004, a 6.6% increase from 2003, according to NCH Marketing Services, Deerfield, Ill., a coupon processing and promotion marketing services company. However, just 3.3 billion coupons were redeemed in 2004, down from 3.6 billion in 2003 and 4.5 billion in 2000.
NCH said the lower redemption rates stem from the fact that marketers are making coupons less attractive to consumers, in part, by shortening expiration dates and requiring multiple purchases.
CMS, Winston-Salem, N.C., another coupon settler, said another contributing factor is baby boomers, whose use falls off as they become empty-nesters.
Val Stark, vice president, Association of Coupon Professionals, Des Plaines, Ill., attributes the slide to a decrease in freestanding insert redemption. Since FSIs account for the bulk of couponing, usage trends affect the overall industry. Stark said FSI redemption is lower because FSIs are a mass-marketing rather than a targeted approach.
Although such coupons produce lower redemption rates, FSIs still act as a form of advertising, Stark said.
"Even though a consumer may not clip a coupon, the coupon still makes them aware of a product," Stark said.
When it comes to which coupon vehicles manufacturers are using, respondents cited growing interest in in-store electronic and Internet vehicles. Ninety-two percent said they plan to use Internet coupons next year, up from 50% who said they're currently doing so.
Stark of ACP said this reflects growing confidence in and success with Internet distribution.
"Internet coupon companies have tightened up any security breaches that may have existed," he said.
Likewise, 80% said they plan to use in-store electronic coupons, compared with 65% in ACP's previous survey. Stark said this is a result of advances in technology, which have led to more in-store electronic options. He referred to handheld shopping scanners as one example.
In comparison, respondents said they will use direct-mail, FSI and circular coupons less next year than they did this year.
CONSUMER PROMOTIONS
A strong number of respondents said spending will increase in 2006 for media advertising (38%) and trade promotions (41%). An even larger amount (59%) said budgets will rise for consumer promotions.
When asked which media types most effectively support their consumer promotions, an equal percent of respondents (36%) listed newspapers and magazines. Next came in-store electronic media, radio, television, cable and the Internet, respectively.
Nearly two-thirds (63%) said they're running more account/retailer-specific promotions now than in the past.
Paul Thompson, partner, Henry Rak Consulting Partners, Chicago, said such programs are on the rise because they benefit both the retailer and manufacturer. Retailers support account-specific promotions because they help differentiate their stores.
"Account-specific promotions help retailers connect with their shopper base by tying in the retail brand with big consumer brands," he said.
Manufacturers benefit, meanwhile, through increased retail support, including display space, merchandising and advertising.
Another area of growing interest is joint promotions with non-competing brands from other companies. Thirty-four percent said they're using more of these promotions now than before.
As for other types of promotions, manufacturers plan to place more emphasis on Hispanic marketing (34%); integrated marketing (25%); joint promotions with sister brands (24%); Internet marketing (19%); general ethnic marketing (17%) and experiential marketing (17%).
ETHNIC MARKETING
Marketers are bolstering efforts to meet the needs of various ethnic groups. Twenty-nine percent said their company is using bilingual Spanish packaging. A comparable amount (28%) said they have developed separate marketing initiatives targeted at ethnic shoppers, primarily Hispanics.
Fourteen percent said their companies are using ads featuring people of multiple countries of origin.
A comparable amount said they have developed new Hispanic foods and beverages (16%) and created a dedicated Hispanic marketing group (14%).
Along with creating new products, manufacturers are also developing new packaging to meet the needs of Hispanic consumers. When asked about the type of products they plan to promote in the upcoming months, one respondent cited multi-packs for Hispanics, who tend to have larger families.
SAMPLING
The majority of respondents (88%) favor in-store sampling. A smaller percentage (79%), however, plans to use this method next year.
After in-store, the top sampling vehicles are direct mail (87%), event (81%), newspapers (67%) and magazines (67%).
Along with growing interest in Internet couponing, respondents also voiced more support for Internet-generated samples. A whopping 90% of respondents said they plan to use Internet samples next year, up from 40% who reported using this tool this year.
LOYALTY CARD DATA
Nearly 40% said they are increasing involvement in targeted consumer promotions involving supermarket loyalty-card data.
Retailer support is a big reason why. While 24% said retailers are less likely to share information with manufacturers than in the past, 40% said retailers are more likely to share information than they used to.
But obtaining such information comes at a cost. Sixty-four percent of respondents said retailers charge too much for the data.
Just 10% said obtaining the data is worth the cost that retailers charge for it.
In some cases, marketers are charged up to 40% of a loyalty-card promotion's cost, said Steve Thornberry, senior vice president, Partners in Loyalty Marketing, Chicago, a consulting and research firm.
Many manufacturers are growing increasingly frustrated over such charges since loyalty-card promotions benefit retailers, too.
"Brand marketers are trying to determine if these programs are cost-justified," Thornberry said.
PROMOTIONAL TRENDS
Now that interest in low-carb dieting is on the wane, manufacturers have shifted promotions to other areas.
SN asked which food trends will be the subject of most upcoming promotions. Of 30 write-in answers, the majority named health and wellness issues, specifically whole grains, fiber, childhood obesity, Omega-3s, and gluten-, dairy- and MSG-free.
About the Study
This is Part 1 of SN's 2005 Survey of Manufacturer Promotional Practices. Nearly 75 brand managers, marketing directors and other representatives from consumer goods companies responded to the survey, posted online last month at www.supermarketnews.com.
Seventy-seven percent of participating companies market food products. Respondents also market beverages (19%), household goods (16%), beauty care products (14%) and non-edible groceries (10%). The remainder cited beer/wine/spirits, prescription products, general merchandise and other health care.
More than half (60%) of the participants said their responses apply to their entire company rather than a specific division.
Part II, which will run in the Nov. 7 issue of SN, will reveal how consumers respond to manufacturer promotions.
A Commitment to Couponing
Despite lower redemption rates, marketers still support couponing, largely because it spurs product trial
Coupon redemption continues to slide. Do you still feel it is an effective promotional tool?
No 32%
Yes 68%
If yes, why?
Couponing increases brand awareness: 41%
Couponing boosts retailer support: 56%
Couponing encourages product trial: 85%
Source for all charts: SN's Survey of Manufacturer Promotional Practices
Cyber-Samples
Marketers plan to significantly increase Internet sampling
Describe your company's usage of the following sampling vehicles.
Sampling Using This year; Plan to Use Next Year
Direct Mail: 87%; 73%
Doorknob: 50%; 50%
Event: 81%; 78%
In-Store: 88%; 79%
Internet: 40%; 90%
Magazine: 67%; 56%
Newspaper: 67%; 77%
Retailer Rapport
Nearly two-thirds of respondents are running more account-specific promotions
Which types of consumer promotions are you focusing more on now than in the past?
Joint promotions with sister brands: 24%
Joint promotions with non-competing brands from other companies: 34%
General ethnic marketing: 17%
Hispanic marketing: 34%
Account-specific marketing: 63%
Experiential marketing: 17%
Integrated marketing: 25%
Internet marketing: 19%
Concentrating on the Consumer
More than half of the respondents said their companies will spend more on consumer promotions next year
What will happen in fiscal 2006 regarding spending in the following areas?
Type of Promotion; Spending Will Increase; Spending Will Decrease; Spending Will
Remain the Same
Trade: 41%; 23%; 34%
Consumer: 59%; 13%; 28%
Media: 38%; 21%; 39%
Charge Cards
Marketers are growing increasingly frustrated with fees retailers charge for loyalty-card data
Which of the following statements describes your company or division's experiences with retailer frequent-shopper data?
