Coupons valued by manufacturers despite low redemption rate

April 03, 1995|By Bloomberg Business News

NEW YORK -- Of the 310 billion or so coupons manufacturers distributed last year, all but 6 billion ended up in the garbage. With a 2 percent batting average, you'd think coupon issuers would pack it in.

In fact, they're doing quite the opposite. A marketing mainstay, coupon clipping has changed how Americans shop. Even though coupons now have shorter expirations and more restrictions, almost 30 percent of consumers say they wouldn't go grocery shopping without them, 79 percent say they use them regularly and some 86 percent say they save money.

According to Dun & Bradstreet's Nielsen Clearing House Promotional Services division, coupons saved consumers an unprecedented $4 billion last year.

About 3,000 manufacturers issued coupons to tout new products, call attention to new sizes or packages, cushion price increases, garner retailers' support, reward loyal customers and break ties with competing products.

Carolina Marketing Services research shows 44 percent of U.S. shoppers will try a new brand or item only if a coupon discount softens the risk. "They are one of the major secrets of brand loyalty," said Joan Johnson, CSM marketing managers.

The average face value of manufacturer coupons redeemed was 63 cents last year, up 6 percent from a year earlier, said NCH Senior Vice President Jane Perrin. The average coupon is good for 3.4 months, about half the time until expiration of five years ago.

On average, consumers expect a 52-cent face value for brands they already buy, and a 42 percent differential to switch. Many clippers won't touch coupons worth less than a quarter, and more than half shop where they can double or triple their face values.

In general, the costlier the product, the bigger face value of a coupon, Ms. Johnson said. While a cracker or shampoo coupon could offer an 8 percent redemption, trash bag buyers would be lucky to get a 2 percent discount, according to Ms. Johnson. Shoppers expect the most value from coupons for detergent, pet food, cough and cold remedies, cereal, coffee and soda.

Manufacturers issue more cereal and breakfast food coupons than any other kind followed by cents-off offers for medications, remedies and health aids, household cleaners, sanitary, pet food, protection, oral hygiene, hair care, cough and cold remedies, detergents, bread and baked goods.

The coupon revolution began exactly a century ago in 1895, when C. W. Post issued a one-cent certificate for Grape-Nuts cereal.

When NCH issued its first coupon report 70 years later, 10 billion were issued, growing 30-fold in the last 30 years.

Marketers' methods have also changed. Roughly four out of five coupons today are distributed through coupon mailers or free-standing Sunday newspaper inserts. The fastest growing coupons, up 20 percent last year to account for 5.3 percent of all coupons, are highly targeted and distributed in stores. Other sources include magazines (2.4 percent), daily papers (1.5 percent) and product packaging (5 percent).

Also growing are intangible "coupons," which are used by frequent shoppers whose ID cards are electronically scanned and deductions automatically awarded. Last year, 16 percent of stores used these coupons, up from 12 percent a year earlier.

Actmedia, a subsidiary of Dallas-based Heritage Media Corp., dispenses coupons in store aisles from machines with blinking red lights. The crowd-stoppers, which first appeared two years ago, are now in 9,800 food stores, 7,400 drug stores and headed for convenience stores and mass merchandisers soon. Machines without flashers, or with a different color flasher, don't work as well.

Redemption rates from in-store coupons are much higher than the average at 16 percent. "Shoppers forget to turn them in at checkout, or opt not to buy the product," said Actmedia sales director Pat Harris. "But on average, they pump up sales 35 percent."

Who uses coupons? While households with incomes between $15,000 and $30,000 use a shade more than any other group, the Mercedes- and mink-coat set are also apt to clip. New Englanders clip more than shoppers in any other region at 90 percent, compared with 75 percent of Pacific and West South Central shoppers.

Even though 24 percent of shoppers said coupons contribute to rising prices, 78 percent called them easy to forget and 51 percent resent investing the time and effort, only 13 percent said they won't use coupons.

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