Posted on by Chief Marketer Staff


Packaged goods companies may have gone too far targeting their coupons and are now shifting back to broad-reach programs.

Or maybe they’ve just become giddy experimenting with new delivery options.

Or maybe the strong U.S. economy has consumer packaged goods makers (CPGs) eager to boost domestic volume and launch new products with heavy coupon support.

Or maybe all of the above.

Whatever the reason, coupon distribution is up, but experts can’t agree why. Packaged goods companies distributed more coupons in 1999 than in any of the previous five years, reports clearinghouse NCH NuWorld Marketing Ltd., Lincolnshire, IL. There were 256 billion coupons distributed last year, up 2.8 percent from 249 billion in 1998, per NCH. Competitor CMS, Winston-Salem, NC, pegged distribution at 288 billion in 1999, up 3.6 percent.

Since 1995, the total number of coupons had dropped steadily as marketers targeted more geographically and demographically. But you can, apparently, be too targeted.

“Too fine an audience means less actual redemption than with a larger offer,” says Charlie Brown, vp-marketing of NCH. “[Targeted efforts] may have had a better percentage rate, but they didn’t move enough volume to make it worthwhile.”

Many companies have looked for growth overseas. But with the economies of foreign markets slowing, U.S. marketers are back to goosing volume at home.

“Public companies work for the almighty quarter. They have to move volume,” says Lynn Liddle, vp-corporate communications at Valassis Communications, Livonia, MI. “There’s a difference between rhetoric and reality. The rhetoric is targeting. The reality is they need to move boxes.”

At the same time, “a strong economy hurts couponing,” says CMS president Bob Carter. “Many people don’t want to work for savings if they feel like they’re doing OK financially.”

CMS pegged total redemption at 1.6 percent – that’s 4.6 billion coupons worth $3 billion-plus, CMS reports. The redemption rate fell from 1.7 percent in ’98, when marketers dropped 277.6 billion coupons and consumers redeemed 4.7 billion of them. Carter cites the booming economy and a drop in in-ad coupons, as manufacturers moved offers to loyalty card programs from retail circulars.

Expiration dates now average 3.4 months, up from 3.1 months in ’98, Brown says. Average face values rose to 66 cents for grocery products, 89 cents for health & beauty care (HBC).

Meanwhile, FSI usage has stayed strong. CPGs are running more full-page ads, coupons with longer expiration dates, and fewer multiple-purchase requirements. Leaders like Kraft Foods and Nestle USA have devised their own FSIs, launching slick pieces that extend brand advertising efforts.

For FSIs, ’99 redemption dipped to 1.1 percent, while redemption via other vehicles was up, per CMS. (NCH releases its redemption Figures this month.)

Eighty-one percent of shoppers use coupons, and consumers gripe long and hard when marketers slow couponing. P&G’s 1997 zero-couponing experiment in upstate New York drew fire from the state attorney general, who threatened to charge the company and retailers with price-fixing. P&G later brought its coupons back. In fact, one observer says P&G used 55 percent more FSIs in ’99 than in ’98 (and 20 percent more in ’98 than ’97).


FSIs still account for 92 percent of all packaged goods coupons, CMS reports. “There’s a lot of experimentation going on in that other eight percent,” Carter says. In- and on-pack couponing accounts for one percent, direct mail 1.1 percent. Internet delivery grew 33 percent last year but is still less than 0.1 percent (see story pg. 71).

CPGs are getting creative with their coupons. Kraft Foods this winter began its own magazine-style FSI in conjunction with NewsAmerica and Meredith Custom Publishing, both New York City. Titled food & family, the insert launched in February with plans to drop in Sunday papers nationally each month. The first eight-page issue had recipes, tips on food storage and serving, and family-friendly snippets highlighting such brands as Oscar Mayer, Kraft Macaroni & Cheese, and Post cereal. It carried six coupons from brands including Tombstone pizza, DiGiorno pasta, and Minute Rice. One page supported “Cartoon Campaign 2000,” a March campaign run in conjunction with Cartoon Network (March promo).

Few companies have the breadth of brands and resources for such a project, but it suits Kraft, which created food & family to extend its 18-month-old corporate branding initiative. “We wanted to do something that stands out, [that carries] our equity message of helping families connect over food, and [shows] evidence of that equity,” says Wendy Kritt, Kraft director of corporate and consumer promotions. Kraft tapped long-standing relationships with Meredith for content and design and NewsAmerica to produce and print the insert. Brands have “the ultimate flexibility” to choose when they’ll participate and in what regions to coupon, Kritt says.

Brands’ couponing budgets are flat, but Kraft is spending more for four content pages in each issue. “This is a hybrid of advertising and couponing,” Kritt says.

Kraft tested food & family in two Southern markets last fall after an in-store giveaway of the magazine over Memorial Day weekend. Redemption was the same level gained through co-op coupons, but Kritt expects it will rise when Kraft begins advertising the insert this quarter. Brands will continue co-op couponing as they see fit. Kraft created a new job, manager of food & family, and tapped marketing research veteran David Ervin from Kraft’s own marketing research division to fill it. He works with Anne Price, director of scale communications (Kraft’s term for multi-brand marketing).

Nestle broke its first-ever corporate FSI in February, the first in a year-long schedule that supports a corporate ad campaign themed “For the way you live” that broke last fall. The FSI, handled by Valassis, carries nine brands (one or two per page plus coupons) and a mail-in offer for a “Family Ideas” booklet (created by Meredith) for three proofs of purchase.

Seattle-based Starbucks is running oversized single-page ads that carry one coupon for a cup of Breakfast Blend in its stores and another coupon for beans in supermarkets.

Cereal has long been the most-couponed product segment, but fell behind household cleaners last year. Still, 43 percent of consumers are more likely to use coupons for a new brand of cereal than they did a year ago, according to a survey by KRC Research, New York City, for the FSI Council of North America, Glenview, IL. Plus, 53 percent have a better opinion of a new brand if it coupons, and 69 percent would buy a national brand rather than private label if they had a coupon.

Kraft revolutionized cereal couponing in 1996 when it replaced brand-specific efforts with universal coupons good on all 22 of its Post cereal brands. Since then, the volume of cereal coupons has fallen 50 percent each year, Brown says. But in the last year, cereal marketers have upped individual coupons for new brands and second-tier brands that don’t benefit from universal coupons.

Of course, targeting is still a goal in packaged goods and beyond. CMS’s Carter projects growth among “promotion networks” – electronic alternatives to paper distribution. Electronic systems can use data – frequent-shopper info and past redemption history – to target consumers and “take some of the shotgun approach out of couponing,” he says.

For instance, General Motors wants to build dealer service center business. It uses Valassis’ proprietary Aztec code – a two-dimensional bar code system that lets marketers track as many as 240 pieces of information on each consumer – to pinpoint GM owners within a dealer’s region. The code enables GM to map out competing service centers between the consumer and the dealership. Owners who have to drive past another repair shop to get to the GM dealer get a higher-value coupon than owners with no such temptation en route. Valassis introduced Aztec coding last year after supermarket tests (October promo).

Talk about driving traffic.

Another reason coupons are hot again may be the concerted efforts of the FSI Council of North America. The Glenview, IL-based council is running an aggressive trade campaign and last summer conducted a national search for “America’s Savviest Home Manager.” The July-through-September contest, co-sponsored by cable network PAX-TV, asked consumers to submit money-saving tips. The winner got a trip to the Bahamas and an Arm & Hammer gift pack.

The Council also ran a direct-mail campaign pitching packaged goods promotion managers on the council’s study, “The Effects of Promotion Stimuli on Consumer Purchase Behavior” tracking temporary price reductions (TPRs), feature ads/displays, and couponing. The geography-themed mailing included a Garmin Global Positioning System, an attention-getting toy for promo managers.

In the packaged goods arena, the number of Internet-triggered coupons – either printed from a Web site or requested via mail – rose 33 percent in 1999 to an estimated 13 million to 14 million, per NCH NuWorld Marketing. There were about 10 million Internet coupons distributed in 1998, more than tripl e the 2.5 million distributed in 1997, the first year they were measured.

Couponing Web sites continue to crop up, and marketers are also offering more coupons on brands’ home pages. This quarter, Valassis rolls out nationally with, a service that has been testing in Austin, TX, and Raleigh, NC, since September. Offers scroll across a banner ad-sized space; viewers click on the offers they want. Valassis reports click-through rates of 33 percent, far above the average banner ad click-through rate of 0.4 percent. The service will run in banner ad spaces on other sites.

Petsmart, Phoenix, in January launched a bricks-and-clicks couponing service called Store Savings Center. Site visitors enter their ZIP code, then print out coupons to redeem at neighborhood Petsmart stores. Coupons are updated regularly. The service helps drive customers to the retailer’s 493 stores.

“Vehicles that require some activity [like browsing online] are good, because that gives manufacturers a captive audience,” says CMS president Bob Carter.

At the same time, dot-coms are running their own traditional FSIs. The offers look like 20th Century marketing (read: discounts), but redemption is more high-tech: Users punch in a coupon code to redeem offers.


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