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THE STATE OF COUPONING

LINCOLNSHIRE, Ill. -- Along with security issues, another important topic of discussion in the coupon industry is distribution and redemption trends -- and overall efficacy.A shift in the media mix, along with a backlash against multiple purchase requirements, led to a sharp decline in coupon redemption last year, according to a new report by NCH Marketing Services, a coupon clearing and processing

LINCOLNSHIRE, Ill. -- Along with security issues, another important topic of discussion in the coupon industry is distribution and redemption trends -- and overall efficacy.

A shift in the media mix, along with a backlash against multiple purchase requirements, led to a sharp decline in coupon redemption last year, according to a new report by NCH Marketing Services, a coupon clearing and processing agent here.

The consumer packaged goods industry distributed a total of 239 billion coupons in 2001, down 3.6% from 2000. Of this, 4 billion were redeemed, an 11% decline.

Historically, volume changes in distribution from one year to the next typically reflected shifts on the redemption side of business. Last year, however, the redemption drop was more than 7 percentage points higher than the distribution change.

Brown attributes this to a greater focus on freestanding inserts as the distribution method of choice. FSIs accounted for 84% of total distribution, up from 82% in 2000. To control costs, marketers spent more on FSIs than on targeted vehicles that typically lead to higher redemption, like coupons distributed via in-store handouts, in-/on-packs and magazines.

At the same time, manufacturers relied more heavily on multiple purchase requirements. Such coupons accounted for 25% of total distribution last year, up from 24% in 2000 and 13% in 1995.

While the average coupon face value rose to 83 cents, consumers needed to buy more items to get the savings. This translated into an average savings offered per item of 72 cents. Consequently, for the first time since NCH has been tracking coupon trends, the average face value redeemed dropped. It now stands at 74 cents, from 79 cents in 2000.

Multiple purchase requirements have been used successfully in other years, leading to increased product movement -- and improved return on investment. Last year, however, it seemed as if the strategy backfired.

"Last year, consumers reached their breaking point," Brown told Brand Marketing.

Brown attributes the distribution drop, in part, to continued manufacturer consolidation in 2001, like the mergers of General Mills/Pillsbury, PepsiCo/Quaker and Nestle/Ralston Purina. Due to delays in getting merger and acquisition approval, companies' promotion budgets were reduced or remained status quo.

Another reason for the drop in the number of coupons could be the "dramatic increase" in retailer coupon invoicing practices.

"While these costs are rising, manufacturer budgets aren't increasing to cover them," said Brown.

Meanwhile, consumers are growing more dissatisfied with coupon values, according to an NCH consumer survey conducted in January. A low of only 51% of consumers said that coupons "save them a lot of money," and 70% of coupon users say they skip coupons requiring them to buy more than they normally would.

Overall, coupon usage was reported by 76% of shoppers in 2001 -- comparable to other years. But, consumers who report they "always" use coupons while shopping has dropped to 21% of the population last year, compared to 22% in 2000, and 25% in 1999.

As for the impact of the recession, about 10% of the population said they had increased their use of coupons since the recession started. NCH noted, however, that the downturn of 2001 was "mild and unlike any previously studied recession periods, where multiquarter declines occurred in gross domestic product, such as in recessions of the '70s and '80s, when both distribution and redemption grew."

NCH is optimistic that "some in the industry will have to take a step back, based on these reported results, and evaluate their couponing strategies to maintain viability for consumer motivation," said Brown.

"What's needed is a basic evaluation of marketing mix allocations and appropriate redemption incentives for each brand's promotion objective," Brown noted.