You know a phenomenon is thriving when it becomes grist for a reality-TV show. Thus, the mere existence of a new TLC series called “Extreme Couponing” points toward an important truth about today’s marketplace: Coupons play a key role in the choices many consumers make, and marketers must be savvy about making use of them. Moreover, if the word “coupon” puts in mind the stereotype of an old lady plowing through the Sunday newspaper with a pair of scissors, then this picture is at odds with a reality that increasingly includes the Internet and mobile technologies.
“Coupon use, while once perceived to be limited to a small segment of the population, may very well be adopted as the norm going forward,” stated an Epsilon Targeting survey, released last year.
Indeed, any likelihood that consumers might lose interest in coupons as the economy slowly crawled out of the recession has been extinguished by rising prices for food and other items. In a poll by Harris Interactive on behalf of Coupons.com, 72 percent of adults said they’re using coupons to cope with higher food prices. Creating both peril and opportunity for marketers, price pressures are putting brand preferences up for grabs: A SymphonyIRI report on consumer behavior during the first quarter of this year said 38 percent “are giving up their favorite brands to save money.” Along the same lines, the NPD Group last month reported that 74 percent of respondents to its Economy Tracker polling think coupons and special deals are likely to be “much more important” in determining what they buy.
The numbers of coupons flying around are in sync with these findings. A recent report by Valassis said consumer-packaged-goods companies offered coupons last year worth a total of $485 billion, up 13.9 percent from 2009 and 47.4 percent from 2006. The number of such coupons, 332 billion, was 21 billion over the previous all-time record set a year earlier. The volume of coupon redemptions was up 3.1 percent last year. Likewise, 31 percent of respondents to NCH Marketing Services’ 2010 Annual Consumer Survey said they’ve “become more careful about bringing their coupons to the store.”
And while Groupon, LivingSocial, and other daily-deal sites have attracted a lot of buzz lately, numbers like these make it clear that the newcomers aren’t about to displace coupons as an important tool for consumers and marketers alike.
Coupons Go Electronic
Meanwhile, the emergence of digital channels for coupons has further broadened the field. Morpace Omnibus polling earlier this year found 67 percent of respondents saying they’ve used coupons they accessed via the Internet. NCH tracked a 37 percent jump last year in the number of digital-coupon offers--“the largest increase of all coupon media types”--albeit from a comparatively small base. Mobile couponing, in which consumers use their smartphones to download digital coupons at a store or elsewhere, is also taking hold. Leading up to last year’s holiday-shopping season, an InsightExpress poll of smartphone owners found 19 percent planning to access coupons via those devices.
It hasn’t just been a matter of boosting the tonnage of coupons in circulation. “While there has been a significant increase in “mass” and “untargeted” coupons, there has also been an uptick in the use of targeted coupons to drive ‘smart trial’ and loyalty,” said Warren Storey, vice president of Epsilon Targeting, in an interview with CMO.com. “The best marketers are using data to target their offers to drive the highest ROI. This includes targeting who receives coupons, when they receive them, what the offer value is, and even what message is delivered with the coupon.”
Still, does the sheer volume of coupons create a kind of clutter that makes it harder for brands to engage consumers’ attention? Suzie Brown, chief marketing officer for Valassis, told CMO.com she doesn’t see it that way. “My personal feeling is that consumers have been planning their shopping trip around coupon inserts and circulars,” she said, “so from their point of view, the more the better.” That’s especially true as consumers recoil from higher prices. “Marketers are using coupons to bridge the gap in price between private-label and branded items,” Brown noted.
Coupons are especially important when shoppers are “pantry loading.” According to Mark East, president of The NPD Group’s food and beverage business unit, “Consumers are seeking value in their food purchases, and two means to attain value are stocking up and using coupons,” he told CMO.com. “A multi-item or multi-unit purchase coupon will meet both of these consumer needs, build additional sales for the manufacturer, and drive a larger shopping basket for the retailer. This would be a win-win-win.”
For consumers, though, it’s not purely a matter of dollars and cents; people seem to draw pleasure from the sensation of being shrewd shoppers. In the NCH survey, for instance, 29 percent of respondents said they’re using more coupons for “the enjoyment of saving.” As Valassis’ Brown put it, “Savings are sexy now. If you’re a marketer, you’ve got to respond to that consumer sentiment or you’re going to lose your position in the market.”
Digital delivers coupons up-scale.
Even if consumers do start to feel better about the economy and their own finances, this won’t necessarily pull down their elevated interest in coupons. The aforementioned Epsilon Targeting survey found 48 percent of U.S. respondents saying they’ll be more likely to use coupons than they were in the past, “even with the end of the economic recession.”
The rise of digital coupons is helping expand the base, partly because of digital’s upscale tilt. In the Morpace Omnibus survey, 71 percent of those with incomes of $50,000-plus said they use online coupons, vs. 61 percent of those making less than $50,000. A Coupons.com report earlier this year cited data showing that consumers who print out digital coupons have average household incomes of $105,000; people in households with income of $100,000-plus “are twice as likely to have redeemed coupons printed from an online source than adults with household income less than $35,000.”
Then again, there’s nothing particularly downscale about coupon usage of any sort. One gets a sense of this from a detail of an Experian Simmons report released at the end of March: It noted that iPhone owners have a higher propensity than nonowners to use digital coupons (34 percent vs. 21 percent), much as one might expect. But these households also have a higher incidence of print-coupon usage (68 percent vs. 64 percent). In the Harris polling for Coupons.com, respondents with a college degree were more likely than those without a high school diploma (78 percent vs. 51 percent) to say they include coupons among their money-saving tactics. In short, any company that treats coupon users as a blue-collar, hardscrabble bunch is ignoring a prosperous part of its potential audience.
Attracting New Customers
If a coupon simply let consumers save money without otherwise altering their behavior, then it’d be a bust for marketers. But it’s clear that coupons can shift people’s choices. One telling bit of evidence: In a Simmons DataStream report last fall, “fully 30 percent of adults said they are drawn to a store they don’t normally shop because of a coupon,” up from 26 percent at the start of 2008. A Knowledge Networks report last month, drawing on research by its National Shopper Lab, said 46 percent of people who redeemed a digital coupon “were prior non-buyers of the product,” as were 34 percent of those who redeemed a print coupon from a traditional free-standing insert.
The continuing potency of coupons partly reflects a growing sophistication by marketers in deploying them. For one thing, savvy companies have learned to make coupons an integral part of their overall marketing efforts rather than an ill-fitting afterthought. “Well-designed campaigns are now fully integrated to include traditional media, such as TV and direct mail, with new media channels, such as social media, e-mail, Web targeting and mobile marketing to create synergy,” Storey said. “The new reality is that there are hundreds of channels marketers can use to connect with consumers, and research is now showing that combining media with integrated messages improves program performance. The challenge is knowing your audience and understanding your consumers to effectively select the most appropriate combination of channels to meet your specific marketing objective.”
Christian Gordun, founder/CEO of a coupon-code and deal Web site called Coupon Craze, notes a couple of techniques retailers can use to their advantage. “We have seen great success where retailers offer ‘first-time customer’ coupons as a way to get new customers to their site and make a purchase,” he said. “Another strategy is to change coupons weekly in order to keep consumers on their toes. One week they might offer free shipping, the next they could hold a first-time-customer offer, then potentially a returning-customer offer--and the last week of the month may have no offer at all. This creates the incentive to come back to make sure they’re not missing out on the latest and greatest deal.”
As with any other kind of marketing, use of coupons is not without its pitfalls for companies. Gordun pointed to one of the deepest: “It is important to note that if coupons are being made available too often, consumers will associate the discounted price as being the actual price. For example, if a retailer always offers a $10 off $50 purchase, over time consumers may just presume all of the prices are marked up $10.”
None of this means we’re turning en masse into a nation of Extreme Couponers, TLC’s TV show notwithstanding. “As the title implies, this is extreme behavior,” remarked The NPD Group’s East. What matters to marketers is that regular usage of coupons is standard behavior for regular people. “The average American consumer wants to be a smart shopper,” East said, “and our research shows that couponing is one vehicle that helps them achieve this goal.”
It’s a kind of help that marketers would be wise to extend.