Coupon trends of 2013: Like a box of chocolates

By Charlie Brown

Vice president of marketing, NCH Marketing

In 2013, the couponing strategies and tactics of individual marketers at retail and consumer packaged goods (CPG) companies had more variety than a box of chocolates, producing different results across product categories, companies and retail channels.

With so much diversity among individual marketers, "you never know what you're gonna get" at the total market level. But, NCH's 2013 Year-End Topline Coupon Facts show that these diverse approaches to marketing with coupons came together to yield an overall increase in the distribution quantity and higher average values. But, they also produced overall shorter offer durations and an evolving coupon media mix being used to promote new and existing products. The net result was that many companies were able to expand their use of coupons while keeping their coupon redemption costs in check.

Coupons remained popular

Chocolate, on the whole, always remains a highly popular treat, as do coupons.

The number of coupons issued to consumers for CPG products increased, on the whole, by a healthy 3.3 percent, bringing the total to 315 billion coupons distributed. Additionally, consumer interest in coupons remained strong. The 2013 Valassis Shopper Marketing Survey found that the share of consumers who reported using coupons regularly in 2013 remained steady at 80.9 percent. And, among those who reported using more coupons than the year before, 45.7 percent said they found that more coupons were available to them.

As you would expect with any box of chocolates, it was at the level of individual marketers at CPG and retail companies that the real variety occurred. Their diverse strategies and tactics, designed to be uniquely appropriate to engage shoppers with their brands and activate shopper preferences for their banners, drove an evolving mix of promoted products and coupon media formats in the marketplace.

The product mix continued to evolve

"What you got" in 2013 was likely very different, depending on whether you were in the food or non-food segment. In the non-food segment, marketers distributed 5.8 percent more coupons in 2013, while marketers in the food segment distributed 0.9 percent fewer coupons. However, the net effect was an increase in the share of non-food coupons, which redeem at a lower average rate than coupons promoting food products.

In addition, Marx, a Kantar Media solution, measured an 18.3 percent increase in the number of new products delivering an FSI (free-standing insert) coupon in 2013. New product promotions further altered the mix of coupons in the market, which impacts redemption volume, since new product coupons tend to redeem at a lower average rate than coupons for high market share brands.

Naturally, the evolving product mix contributed, in part, to decreased redemption response. Among those consumers who reported using fewer coupons in 2013, the number one reason (49.1 percent) was that they could not find coupons for the products they wanted to buy.

The media mix continued to evolve

The media mix utilized by marketers for coupons continued to shift in 2013. As a result, you would have been very likely to pull an FSI or possibly even a digital coupon "out of the chocolate box" in 2013.

The FSI continued to grow as the dominant vehicle for distributing coupons, accounting for 91.2 percent of all coupons distributed and 50.8 percent of all coupons redeemed. Digital coupons (including print-at-home, mobile, social, and downloadable coupons to a loyalty card) continued double-digit growth in 2013, although they still account for less than one percent of all coupons distributed, and their audience reach tends to be comparatively small. The redemption generated by digital coupon formats grew to slightly more than 10 percent of the total market volume.

One of the main drivers behind the evolving media mix has been to intelligently deliver the right blend of print, digital and in-store media to optimize the marketer's consumer audience reach throughout the path to purchase. For example, FSI coupons, with their broad reach and relatively low redemption rates, remain popular among marketers seeking to grow or maintain brand awareness among consumers as they plan their shopping trips. Combined with digital coupons targeted to a smaller, but ever-connected audience of consumers who deliver high redemption rates, marketers are able to achieve a complete and complementary media plan to motivate brand selection.

Offer durations were shorter

In addition to the evolving product mix and media mix, CPG marketers offered a higher average face value, yet continued to shorten the amount of time consumers had to redeem coupons. While individual offers varied widely, the average coupon offer duration declined from 9.3 weeks in 2012 to 8.6 weeks in 2013. Although the average duration was shorter for both food and non-food coupons, it was the food segment that drove the overall trend, reducing average duration by more than a week.

Naturally, shorter durations tend to suppress redemption. In fact, 28.7 percent of consumers who reported using fewer coupons in 2013 said that coupons expire before they have a chance to use them, the second most cited reason for reduced coupon use.

Marketers kept redemption costs in check

Due to the variety of strategies and tactics, you may not always know what redemption results individual categories, companies or brands will get. But, the overall effect was to manage redemption growth.

In the food segment, overall redemption remained flat from the prior year, following a significant reduction in 2012. In the non-food segment, the media mix, products promoted and short duration of offers resulted in another 100 million decrease in redemption volume. As a result, the total volume of CPG coupons redeemed in the U.S. in 2013 fell by 3.4 percent to 2.8 billion.

The moderate decline in redemption volume was experienced in some degree across all of the major retail formats. However, the products promoted and evolving mix of coupon media affected redemption volume differently within the retail channels. With a steady volume of food product redemption and paperless coupon adoption at specific retailers, Grocery Stores experienced the smallest decline in redemption volume (-0.7 percent) compared to the non-food impact on total redemption volume in Mass (-6.3 percent), Drug (-2.8 percent) and Other retail formats (-11.7 percent). As a result, Grocery Stores were able to regain some of their previously lost redemption share from competing retail formats.

One last piece of Forrest Gump wisdom

To summarize what I've said so far about 2013 coupon trends, the strategies and tactics of individual marketers had more variety in 2013 than a box of chocolates, producing different results across product categories, companies and retail formats. With so much diversity among the marketers at CPG and retail companies, "you never know what you're gonna get" at the market level. Yet, these diverse strategies and tactics came together to give consumers a unique mix of offer characteristics and product promotions across various media, all of which had the net effect of moderating redemption costs for marketers.

Or, to borrow another piece of wisdom from Forrest Gump: "And, that's all I have to say about that" – at least for today.

(Photo by Carol Pyles.)

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