Clipping Path

Spending on coupon promotions grew about 3.5% to an estimated $7 billion in 2003, fueled by an increase in the volume of coupons distributed.

Consumer packaged goods manufacturers distributed 258 billion coupons in 2003, a 4.1% increase over 248 billion in 2002, the largest increase since 1997, according to figures from NCH Marketing Services.

“The driving force is FSI,” says Charles Brown, VP of marketing at Deerfield, IL-based NCH. The volume of coupons distributed via Sunday FSI increased 5%, expanding the medium’s share of coupon distribution to 86.7% in 2003 from 86% in 2002. Solo coupon events, such as Procter & Gamble’s BrandSaver coupon booklets, fueled FSI growth. P&G will continue to drop coupon booklets tied to its BrandSaver loyalty program in 2004, including a 55-million circulation back-to-school edition in September. (Brands featured in the FSI will donate a portion of sales to the United Negro College Fund as part of a series of P&G-sponsored events to benefit the Fund.)

Meanwhile, the number of coupons distributed through newspaper ads (run-of-press) and direct mail also increased. But handouts, the second largest medium, declined, as did in-pack and on-pack, according to NCH.

CMS reported that coupon distribution declined 5.6% to 314 billion, based on preliminary estimates. The Winston-Salem, NC-based firm attributed the trend to launches of targeted promotions rather than national mass-coupon drops.

Internet coupons represented 0.2% of coupons issued, according to NCH, about the same as in 2002, indicating the furor over fraudulent coupons distributed via the Internet didn’t cause the medium to lose ground through December (see related story on p.23).

Manufacturers are also finding new venues by which they can distribute coupons. For example, Campbell Soup Co., Camden, NJ, recently began including its coupons with mail order packages from J. Crew. “The beauty of it is you are able to target to a certain demographic, and a coupon shows up in a very positive environment,” says Terry Atkins, director of consumer promotion and licensing at Campbell.

Although coupon distribution increased in 2003, the improving economy tended to suppress coupon use. Consumers redeemed 3.6 billion coupons in 2003, down from 3.8 billion in 2002, according to NCH. However, NCH reported that 73.1% of consumers surveyed said coupons save them a lot of money, as compared to 70.1% in 2002. CMS’s preliminary figures also show a decline in coupon redemption, with volume down 3% to 3.5 billion. CMS cited the shift in grocery spending to mass merchandisers, dollar stores and warehouse clubs, many of which don’t accept manufacturers’ coupons.

Two factors that could potentially hamper redemption rates remained stable: 26% of all coupons required multiple purchases in 2003, the same as in 2002; and the expiration period remained about three months, NCH reported. While the redemption rate declined, the total value of redeemed coupons remained flat at $3 billion because the average face value of redeemed coupons climbed from 80 cents to 82 cents.

The top five categories in coupon distribution were household cleaners, medication/remedies/health aids, paper products, detergents, and condiments/gravies/sauces, according to research by NCH. Promotions for new teeth-whitening product fueled growth in the oral hygiene category (excluding toothbrushes and toothpaste), making it the fastest-growing category, followed by fresheners and deodorizers, pet treats, cereal and paper products.

Aside from teeth-whitening aids, the fastest-growing categories encompass products that are traditionally promoted through coupons, indicating brands are aiming to hold onto current customers, not just push new products. “Brands are using coupons to maintain their shares and maintain loyalty,” Brown says.

Meanwhile, marketers are devoting more attention to coupon ad designs. To make its coupon ads easy for consumers to read and use, Campbell doesn’t promote all of its brands in one offer, minimizes the space devoted to legal language and clearly states the offer and qualifiers (such as the number of items that must be purchased). “Simplicity is the key,” Atkins says. When Campbell promotes more than one brand in an FSI, it applies the same border treatment to all of the ads to maintain continuity. “It helps keep the Campbell brand family together, and hopefully there is consumer recognition of that,” Atkins says.

SNAPSHOT 2003

• Total spending: $7 billion (up 3.5% for year)
• Number of coupons issued rose 4.1% to 258 billion, driven by FSI
• The number of coupons redeemed declined 5.3% to 3.6 billion
• Despite lower redemption, the total value of coupons redeemed remained flat at $3 billion due to a hike in face value from 80 cents to 82 cents