If coupons surge beyond the recession, what form will they take?

Few people can stretch a food budget like a college student living in a dorm. We’re talking more about pure energy than nutrition. But when a 20-year-old University of Connecticut junior told us recently, “Brands don’t matter as much. We use coupons and buy what’s on sale, especially BOGO [buy one get one free],” we felt that signified behavior that has spread beyond the campus into countless American households in this recession. Indeed, Nielsen recently reported that redemption of paper coupons rose nearly 10% in the fourth quarter of 2008, despite lower readership of traditional newspapers. Meanwhile, noted Ken Cassar of Nielsen Online: “Visitors to online coupon sites increased 42% from December 2007 to December 2008….Time spent is also up by 28% year-over-year, indicating that visitors are more thoroughly engaged.” Consumer packaged goods manufacturers and retailers are keenly aware of this recession-driven trend to seek and redeem coupons (What stigma?). They’ve ramped up efforts to facilitate the distribution and acceptance of legitimate cellular and online coupons to augment the classic print versions. The Unilever and Samplesaint test with a ShopRite store in New Jersey, as well as the Kroger and Safeway programs with Cellfire (participants include General Mills, Colgate-Palmolive, Kimberly-Clark and Unilever), are examples of mobile couponing on the rise. Cellfire chief executive Brent Dusing notes redemption rates as high as 15% to 20% on his cellular coupons (comparable to online coupon redemption rates) vs. less than 1% on paper coupons.

Few people can stretch a food budget like a college student living in a dorm. We’re talking more about pure energy than nutrition. But when a 20-year-old University of Connecticut junior told us recently, “Brands don’t matter as much. We use coupons and buy what’s on sale, especially BOGO [buy one get one free],” we felt that signified behavior that has spread beyond the campus into countless American households in this recession.

Indeed, Nielsen recently reported that redemption of paper coupons rose nearly 10% in the fourth quarter of 2008, despite lower readership of traditional newspapers. Meanwhile, noted Ken Cassar of Nielsen Online: “Visitors to online coupon sites increased 42% from December 2007 to December 2008….Time spent is also up by 28% year-over-year, indicating that visitors are more thoroughly engaged.”

Consumer packaged goods manufacturers and retailers are keenly aware of this recession-driven trend to seek and redeem coupons (What stigma?). They’ve ramped up efforts to facilitate the distribution and acceptance of legitimate cellular and online coupons to augment the classic print versions.  The Unilever and Samplesaint test with a ShopRite store in New Jersey, as well as the Kroger and Safeway programs with Cellfire (participants include General Mills, Colgate-Palmolive, Kimberly-Clark and Unilever), are examples of mobile couponing on the rise.  Cellfire chief executive Brent Dusing notes redemption rates as high as 15% to 20% on his cellular coupons (comparable to online coupon redemption rates) vs. less than 1% on paper coupons.

CPG companies and chains are simply following the money, attempting to protect their hard-won brand franchises during this recession by delivering value without lowering their baseline prices. How heated is the activity? The annual couponing report from NCH Marketing Services Inc., a subsidiary of Valassis, shows that:

•    Total CPG coupon redemption soared by 16.7% in the fourth quarter of 2008 vs. the year-earlier quarter, though redemption was flat when comparing full-year 2008 vs. full-year 2007.
•    Online coupons grew the fastest, at an 80% clip, though they still account for less than 1% of all coupons printed. Redemption volume of online coupons soared nearly 130% to 4.8% of all CPG coupons redeemed in 2008. For perspective, freestanding inserts delivered nearly 90% of the 281 billion coupons distributed in 2008.
•    Health and beauty care coupons increased their average cents-off savings to $1.75, up more than 9% above 2007. This compares with the $1.29 average face value of CPG coupons, up nearly 5% above 2007. 
•    HBC coupons also extended expiration dates to 2.8 months. This compared with the average coupon expiration of 2.5 months, which stayed flat with 2007.
•    Coupon redemption volume is growing by double digits in non-traditional grocery channels such as mass merchandisers, dollar and drug stores.
•    More than nine consumers in 10 (94%) say they use coupons, up five percentage points over 2007. Three out of four (76%) says they use coupons regularly.

“As the year progressed and consumer demand grew, manufacturers increased the overall number of CPG coupons [grocery and HBC] in the marketplace in the second half of the year, and utilized targeted media to a greater extent,” says Charles Brown, NCH vice president of marketing.