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    The Coupon Comeback

    Once on their way to extinction, coupons made a strong resurgence in 2009. While they offer consumers a chance to stretch their dollars further, they also offer real growth opportunities for retailers and manufacturers — if they know exactly who to target and how to leverage established and emerging coupon delivery vehicles.

    By Todd Hale


    Once on their way to extinction, coupons made a strong resurgence in 2009. While they offer consumers a chance to stretch their dollars further, they also offer real growth opportunities for retailers and manufacturers — if they know exactly who to target and how to leverage established and emerging coupon delivery vehicles.

    Back to the Future
    People of a certain age may nostalgically recall the sight of Mom flipping through the Sunday newspaper to clip coupons from the numerous inserts stuffed in the paper. She may have even had a little envelope or “coupon caddy” organized by product category. This kind of memory tends to be among those of us who are baby boomers or Gen Xers — a quaint recollection from the previous century. Indeed, coupon redemption hit a peak in 1999: 4.6 billion, as reported by Winston-Salem, N.C.-based Inmar.

    Since then, it’s been downhill for the humble coupon. During the three-year period ending 2008, annual manufacturer coupon redemptions leveled off at just 2.6 billion per year.

    The “Great Recession” of 2009 changed all of that and marked a sort of renaissance for the coupon. Inmar reports that coupon redemptions grew by 27 percent as Americans searched for ways to cut household costs and get more for their money. Deerfield, Ill.-based NCH Marketing Services claimed 2009 coupon redemption levels “achieved the second-highest year-over-year growth ever recorded.”

    Paperless Progress
    While newspaper inserts are still the primary method of coupon distribution (89 percent) and redemption (53 percent), Internet redemption growth has skyrocketed, rising 263 percent in 2009.

    And while clipping continues to be a primary means of distribution, manufacturers and retailers launched new ways to get coupons into consumers’ hands, such as printable coupons on the Internet, in-store kiosks, and discounts linked to frequent shopper cards via smartphones and computers, negating the need for a paper coupon at all. In short, it is easier than ever to distribute and use coupons, and this convenience is also a key driver of redemption growth.

    Inmar reports that the majority of coupons were redeemed at conventional grocery stores (65 percent), but all classes of trade — dollar stores, mass merchandisers, convenience stores, military commissaries and drug stores — posted double-digit redemption growth:

    Category Redemption Growth Share of Redemption
    Dollar/Discount/Variety 71% 20%
    Mass Merchandiser 26 20
    Conventional Supermarket 20 65
    Pharmacy 16 6
    Convenience 12 4
    Military Commissary 12 4

    Source: The Nielsen Company

    Redemption growth outside of traditional food channels is a reflection of a coupon movement that started with food, but quickly turned to nonfoods in the second half of 2009. Nonfood coupon redemption growth escalated from a rate of 9 percent in the first quarter to 46 percent in the second quarter and continued growing throughout the year — rising 45 percent in the third quarter and 37 percent in the fourth quarter. A total of 1.2 billion nonfood coupons were redeemed in 2009, representing one-third of all coupons.

    80/20 Rule in Play

    While the recession drove heavier coupon usage across low to heavy coupon users from 2008 into 2009, all but the heaviest coupon user group experienced negative total unit growth (with and without a coupon). All told, 83 percent of units purchased with manufacturer coupons in 2009 were done so by just 22 percent of households. Coupon enthusiasts — the heaviest users — accounted for 65 percent of manufacturer coupon unit purchases and 18 percent of all unit purchases in 2009. They drove a disproportionate amount of sales and sales growth — shopping more frequently, making 1.7 more trips than nonusers and buying more (at a rate 1.8 times greater annually). While some might think that “crazed coupon clippers” are only interested in a good deal, these findings suggest real benefits to manufacturers and retailers deploying coupons in their marketing mix.

    More Money = More Coupons
    With the value offered by coupons, one might think that the lowest-income households would be among the heaviest users. In fact, more affluent households dominate coupon usage: 38 percent of “super heavy” users and 41 percent of “enthusiasts” come from households with incomes greater than $70,000. Households with income of $100,000 and up were the primary drivers of coupon growth in 2009. The enthusiast category also attracts a disporportionate number of households with incomes between $50,000 and $69,900.

    Trends relating to newspaper readership provide some explanation for this imbalance. According to New York-based Scarborough Research, better-educated and higher-income households buy and read the newspaper more than others, and newspapers remain a key vehicle for delivering coupons. Additionally, promotions are generally targeted in areas with more affluent consumers. In essence, better-educated and more affluent consumers are much better at looking for deals, as they recognize the value of money.

    Beyond income levels, more than half (51 percent) of larger households (three-plus members) are “enthusiasts,” while roughly one-third of non- and lighter coupon users are single-person households. Younger-female households use coupons more, while male-only households use them less. Older users (65-plus) are also important “heavier” and “super” coupon users.

    All ethnic groups use coupons, but three-fourths of average coupon “clippers” are white. Households residing in comfortable country and affluent suburban spreads are more likely to be heavier coupon users, while nonusers are more apt to come from those households in rural areas and struggling urban core areas.

    Manufacturers and retailers have real opportunities to reach different groups with coupons and promotions, particularly African-American and Hispanic households. While this may require adjustments to existing tactics, the potential payoff — in terms of volume growth and winning new customer loyalty — can be significant.

    Future Look
    As the economy improves, will consumers continue to use coupons? With the economic recovery taking hold slowly and without significant employment growth, expect coupon use to continue. As long as Americans feel unsure about their personal finances or confident about their jobs, they are going to continue to look at ways to save and get the most for their money. In addition to expanding the appeal of coupons in general, manufacturers and retailers would do well to target enthusiasts: their shopping behaviors and demographics make them extremely appealing. With advancements in coupon delivery vehicles that enable both better-targeted coupon distribution and redemption, manufacturers and retailers will continue to have real opportunities to use coupons to drive sales for the next few years and beyond.

    By Todd Hale
    • About Todd Hale

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