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Did you know that digital coupon spending is approaching $1 billion dollars, and that the CPG industry is experiencing a shift from free-standing-insert (FSI) coupons to digital? However, two key questions remain: Does digital move volume like the FSI, and what is the return on investment (ROI)?
True, FSI coupons still account for 90 percent of coupons distributed and are considered the best vehicle to drive mass awareness at a low cost. However, with Walmart focusing on all things digital and buying Jet.com, we may see even more digital incentives being offered. Many leading industry experts try to compare the distribution of FSI coupons to the prints of digital coupons, but that is like trying to compare a banana to a fig. The most accurate way to measure and understand FSI coupons and digital ones is to look at actual dollars, and, subsequently, the ROI between these two vehicles.
FSI Spending is Down
Using the recent 2015 CPG industry report on FSIs published annually by Marx Promotion Intelligence – a division of Kantar Media – and converting coupons to dollars, we estimate FSI dollar spend totaled $2.5 billion, down 10 percent, or $287 million, versus the prior year. This is the largest dollar decline in FSI spending ever, and signifies that manufacturers may be increasingly turning to digital incentives.
FSI Retail Co-op Spending is Down
Second, FSI retail co-op programs, which run adjacent to FSI coupons and feature a retailer outlet with a deep price point, have declined by 24 percent. This significant drop was precipitated by Walmart as it reduced advertising to focus on price, shareholder returns, e-commerce and digital. This, too, signifies that retailers are changing strategies from the FSI co-op to other vehicles, like digital.
Digital Coupon Spending is Up
In contrast, digital coupon spending rose to $799 million, up 18 percent, or $120 million. According to industry sources, the trend is continuing in 2016. This would seem to indicate that FSI monies are now funneling into digital, at the expense of the traditional FSI, a sign that both manufacturers and retailers understand that this group of shoppers is increasingly important to reach.
ROI between FSI and Digital
As digital becomes more widely accepted, an important factor to consider is the ROI or cost per unit redeemed (CPUR). The CPUR also helps the manufacturer compare different coupon programs and even different values for the same item. In 2015, the CPUR for an FSI is $2.52, versus $2.93 for digital.