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WHERE ARE CONSUMERS USING THEIR COUPONS?

Although the economy has stabilized to some degree, consumers who turned to alternative retail channels during harder times are continuing to shop in these channels. This shift in consumer spending has been paralleled by a shift in consumer coupon redemption. Understanding where consumers are using their coupons is crucial for marketers seeking to match their consumer and trade spending to changing consumer shopping patterns.

According to a study by The Food Institute and Willard Bishop Consulting, in 1998, traditional grocery formats accounted for nearly 90% of grocery and consumable sales. By 2003, these retailers only accounted for 56% and by 2008, they are predicted to account for less than 50%.¹ Much of this spending is expected to shift to pharmacies, dollar stores and warehouse clubs ? retail formats which are not typically associated with coupon redemption.

But does coupon redemption follow these trends? The below chart suggests that this shift does indeed apply to coupon use.

Within aggregate redemption, different types of coupons are redeemed through the respective channels to varying degrees. The most prominent coupon distribution method ? the free-standing insert (FSI) ? is redeemed according to aggregate trends, with 72% being redeemed in supermarkets and 19% in mass merchandisers.

Other distribution method topics of interest include:

Internet coupons - After supermarkets, Internet coupons are most commonly redeemed at mass merchandisers, accounting for over a quarter of this distribution method's coupon redemption. 
Convenience stores - Looking solely at convenience stores, instant redeemable coupons represent the majority of all coupons redeemed, possibly because consumers in this retail segment are prone to making impulse purchases. Almost one-third of all shelf pad coupons distributed are redeemed at convenience stores. 
Military coupons - Not surprisingly, the majority of military handout, military magazine and military shelf pad coupons are redeemed in military commissaries (e.g. DeCA, AAFES), because these methods are targeted at those consumers who frequent this retail channel. 
Pharmacies - Both in-ads and direct-mail-with-sample coupons see a healthy portion of their redemption come through the pharmacy channel. 
Dollar stores - Dollar stores receive many of their coupons from consumers who picked the coupons up while shopping, with 43% coming from instant redeemable, handout, in-pack, on-pack, shelf pad and in-ads. 

Coupon redemption by class of trade also varies by product category. Coupons for household products represent the largest portion of coupons redeemed at mass merchandisers, dollar stores, and military commissaries. Over 80% of coupon redemption for perishable products (frozen, refrigerated, packaged deli) still comes through supermarkets. 59% of coupons redeemed at convenience stores are for beverages.

Coupons distributed through different methods and for different products can be expected to redeem in specific channels. This consideration is important for marketers seeking to drive channel-specific traffic, which in turn impacts choices regarding in-store marketing support. Following a coupon all the way to its use at point-of-sale provides a unique way for marketers to observe the consumer purchase process.

Source: CMS, Inc. Advantage Update, "Redemption by Class of Trade," Issue 2, 2005.

For more information on this study, please contact CMS Market Research.

www.foodinstitute.com

COUPONS PROVIDE PRODUCT MOVEMENT, SALES AND ADVERTISING 

Couponing not only provides short-term product movement and sales, it also provides an advertising benefit. Historically, advertising increases long-term brand equity, creates brand awareness, image and delivers a brand message. It is very difficult to determine that advertising benefits of promotions such as Free-Standing Inserts (FSI) coupons. The return on investment of issuing coupon promotions is normally determined by how many coupons were redeemed and do not evaluate the reach, brand awareness or advertising value of couponing. An FSI delivers a brand message, conveys an image, reaches a large portion of the population (60 million circulation) for a relatively low cost ($7.00 per thousand inserts), and consumer’s look at FSI’s for coupon promotions. 

Both advertising and consumer promotions generates product awareness, enhances the brand’s image and increase sales. Brands must not compete solely on the basis of price. A study by Roper ASW that compared FSI advertising to magazine advertising reported that “ FSI advertising has the same kind of impact as magazine advertising to build brand awareness and brand equity. 

Coupons are promotional offers used by consumers to redeem a cash value or free item at the point of sale in retail outlets. These coupons require bar code structures as defined within the EAN/UCC for scanning purposes. Scanning coupons provides several advantages including: 

The efficiency of coupon handling at the point-of-sale and reconciliation; 

Sorting and administration of coupons is more efficient and the associated costs are reduced;

Payment to the retailer can be made faster and marketing redemption data can be made sooner;

Various levels of validation can be facilitated, minimizing the problem of invalid redemption. 

A well-designed coupon is a valuable and effective marketing tool. Developing a compelling offer to the consumer, the proper technical specifics and a good design moves product off the shelf as well as delivers extra advertising value at minimal cost. A poorly designed coupon may cause problems for retailers and consumers. The result: confused consumers, unhappy retail customers and increased costs for you. While the specifications of your coupon should suit the situation, following best practices for designing coupons can enhance your success with coupon promotions. 

In-ad coupons offer benefits to both retailers and manufacturers. Retailers can use in-ads to encourage store loyalty, defray their coupon costs, gain control over design, timing, and distribution of coupons, and enhance their image through brand association. Manufacturers can improve trade relations, encourage immediate product sales, target specific market segments, preempt competitive activity, and provide promotional support to retailers, thereby encouraging them to buy products. Cooperation between the manufacturer and retailer in creating an in-ad offer is essential to the success of the program. 

One of the biggest factors in coupon redemption is finding the product in the store. Many consumers are tired of taking a coupon to the store only to find the store does not stock the product. The rise in INTERNET downloading of coupons is most likely a cost reduction on an item the household normally uses, not trial of a new item. Any increase in coupon redemption is generally related to economic uncertainty, not geo-political.

AC NIELSEN STUDY COUPON USAGE HIGH IN ALL REGIONS OF CANADA

A study by AC Nielsen, based on the answers of nearly 10,000 respondents revealed that coupon use is all encompassing across all segments of Canadian society. This study confirms that key grocery shoppers in larger, middle-income households with children are much more likely to have used coupons. The study provided regional information on coupon usage that Quebec grocery shoppers use more coupons, more frequently and that coupon use is significant among all levels of society, including households who do not speak either French or English at home. AC Nielsen presented these findings at the Audit Bureau of Circulation Annual Coupon Forum. The study revealed the following key findings:

Coupon usage is high in all regions of Canada.

Among shoppers, 86% stated that they had used at least one coupon within the past year. This also matches the results of the Autumn 2000 ICOM Information and Communications Inc. consumer survey.

Among Quebec Households, 51% of shoppers indicated that they had used at least one coupon within the past week and 75% had used coupons within the past four weeks. This means that Quebec shoppers were 65% more likely to have used coupons within the past week than shoppers in Ontario and the West, and were 46% more likely than those in the Atlantic region.

Quebec shoppers were also 52% more likely to have used 3 or more coupons in their last main grocery-shopping trip than were consumers in Canada as a whole. Quebec shoppers were twice as likely to have used three or more coupons than Ontario consumers. 


The breakout-results by language spoken confirm that shoppers, whether they speak English or French at home, use coupons frequently when they shop for groceries. In households that used neither official language at home, however, the survey also showed that more than 50% of this group had used at least one coupon during the past month and 30% had used two or more coupons on their last main grocery-shopping trip. 

Considering the fact that many non-English/French households are first and second generation Canadian, this means that new immigrants quickly become accustomed to using coupons, which are rarely used outside of North America and Europe. More importantly, this presents marketers with a great opportunity to influence the purchase decisions, and establish the brand preferences, of this growing segment of our population that may also be difficult to reach through other forms of marketing communications. 

There are also differences by region in the types of stores in which shoppers use coupons. While Quebec shoppers are more likely to only go to grocery stores to redeem the coupons they receive, they are also 50% less likely to use coupons in mass merchandisers than consumers elsewhere in Canada.

Shoppers in Atlantic Canada are much more likely to have used coupons in convenience stores and those in Western Canada are more likely to have used coupons in warehouse clubs.


A key reason Quebec consumers use more coupons, more frequently is that Quebec shoppers have greater access to coupons than consumers in other regions. Grocery retailers and manufacturers distribute more coupons per household in Quebec. In fact, Quebec is the only region where coupons are still a regular part of grocery-retailer advertising flyers. More coupons are also distributed in store and directly to consumers’ homes in Quebec. 

Coupon results show that redemption rates vary by region, not only because of variations in coupon usage levels, but also because of regional differences in market share and in household penetration of the couponed product. As a result, coupons in some categories achieve higher rates in different regions. Regardless of relative redemption rates in all regions, however, coupons work by keeping current users loyal and by attracting new users and competitive users to a brand. 

Advertising, trade promotion and couponing, along with other forms of consumer promotion, keep adding consumers to the brand. Research shows that consumers who are added to a brand’s user base by couponing and advertising stay loyal to the brand longer than those who are added through in-store feature price promotions. In addition to gaining trial, coupons keep consumers in the brand’s user base longer and help prevent them from slipping away to another brand, to a store brand or out of the category. Coupons do this by attracting consumer-attention and making advertising more efficient, everywhere. The new Nielsen consumer survey shows that coupon use remains high across all regions in Canada. Most key grocery shoppers, regardless of the language spoken at home, look for and use coupons. Reaching them all with coupons helps enhance and protect a brand’s market position.