Coupons to the Rescue

Beginning next month, U.S. households will receive a tax rebate check from the federal government. The money is intended to stimulate economic activity and prevent a recession or make one less severe. Qualifying families of four will welcome a windfall of up to $1,800.

The government’s goal is to reverse the poor economy. Americans already appear to be staying home, driving less and cutting back on entertainment, food and travel. But smart shoppers needn’t wait for the fed’s check, and they don’t have to adopt a hunker-down mentality. They can launch individual economic stimulus plans right now that exceed the government payout.

Households of four (two adults, two children) who use coupons wisely can save 25% on their grocery bill annually without cutting purchases. A total savings of $2,400 a year (based on $800/month grocery spend) outstrips the $1,800 tax rebate coming in May.

Brand strategists looking ahead to the balance of 2008 ought to pay close attention — and there is some indication they are doing just that. Recession, inflation, stagflation and “agflation” (the rise in food and grain prices) collectively create a pro-coupon climate that makes good sense for consumers and businesses alike. People save money. Companies can effectively introduce new products, convert users of competitive brands and increase ROI.

Coupon redemption has been on the decline over the past 10 years. Despite the focus on increasing face value, the average coupon redemption rate has declined to less than 1% from a level of 1.6% across all U.S. coupons distributed. One reason for the decline is that consumers want more time to redeem than marketers have been willing to give. Coupons have relatively short expiration dates. Another reason is that consumers are flooded with non-targeted offers irrelevant to their needs.

There is reason to believe the coupon usage trend is about to change. Of the 1,529 consumers who responded to a recent ICOM Information & Communications survey, no less than 67% said they are much more likely, or somewhat more likely, to use coupons during a recession. The breakdown was 45% much more likely and 22% somewhat more likely. The nationwide survey of U.S. households was taken in February.

Historically, coupons represent a key area in which manufacturers operating in a recession have not cut back. That’s primarily because coupons are measurable. A brand manager can say, ‘yes, this strategy is working, or, no, it’s not.’ Another incentive is consumers’ greater appetite for coupons. In the 2001 recession, ICOM tracking showed a significant increase in the number of coupons consumers redeemed each week.

Marketers have the opportunity to be smarter this time around. There’s no need to distribute more coupons. The savvy marketer will target potential switchers — the users of competitive products who may be more inclined, as they watch every penny, to try a new product if given the right incentive.

Based on lessons learned since previous recessions, the smart couponing strategy also dictates that consumers be given more time to redeem coupons — three months is not enough. And offers must be relevant to the needs of the individual consumer.

Peter Meyers is vice president of marketing at ICOM Information & Communications, Toronto. He can be reached at [email protected].

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