MINNEAPOLIS - BOGO offers grew in volume and face value last year as manufacturers used them to boost share, volume and customer loyalty in a cluttered ad market, a report from Marx Promotion Intelligence found.
Buy-one, get-one-free offers represent only 3.1% of coupon offers in Sunday freestanding inserts, the rest being cents-off coupons. Yet Marx, a unit of TNS Media Intelligence that tracks FSI activity, found that such offers grew 48% in number to 9.4 billion in 2005 as manufacturers sought to jumpstart volume sales, take shoppers out of the market for competing products and make consumers more loyal to their products through their continued usage. A total of 270 brands used BOGOs in 2005, up from 237 the year before.
"It's a combination of new-product support and to drive trial, as well as the need to respond to competitive, more aggressive promotional offers," said Andy Rumpelt, vice president of business development and marketing at Marx, based here.
It's important for retailers to be aware of the increased usage so that they can allocate adequate shelf space to promoted items, he said.
"It's critical that manufacturers really communicate all upcoming not only BOGO but FSI events," he said.
The average coupon value of a BOGO also continued to rise, reflecting their use to promote higher-ticket items in nonfood categories. From 2002 to 2005, the average value jumped 118% to $3.33.
Nonfood coupons led the gain in BOGO coupons dropped, with a 56% increase, while food rose 44%. Categories that drove the increase were household products (with a 124% increase), health care (271%) and dry grocery (22%). The most significant percentage changes were in shelf-stable beverages and cereal, with gains exceeding 300%, although from a tiny base.
Products driving the nonfood BOGO growth were rug/room deodorizers (up 984%), hair coloring (86%) and diet aids (182%). In food, the biggest product gains were in snacks (320%), baking mixes (167%) and gum (68%).
Within the top 10 product categories by BOGO coupon volume, as measured by Marx, only pet food and treats declined in 2005, by 11%.
Of all the variations on the BOGO, the buy-two, get-one-free offer was the most popular, representing 45% of all BOGO-style offers, the report found. Nonfood offers tend to have smaller purchase requirements, supported by longer purchase cycles and higher price points; 64% of these offers are buy two, get one free. Food items have shorter purchase cycles and lower price points, which suits them for pantry loading and high multiple purchase offers (20% of these offers require the purchase of five or more).
Manufacturers' greater use of BOGOs will likely continue into 2006 as they demonstrate their potential to increase volume, the Marx report concluded. Consumers love a deal, and while BOGOs are still more costly to the manufacturer than cents-off coupons, the expense gap is narrowing as cents-off coupons' face value rises.