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SN Asks: Consumers Clip Costs With Coupons

While manufacturers pare down ingredients and retailers decide how to pass inflated prices on to shoppers, the American consumer is quietly devising her own plan for rising above climbing food prices. In addition to trading down to private-label items and eating more meals at home, many are honing their shopping savvy by perusing weekly sales circulars, consulting their Sunday papers,

DES PLAINES, Ill.While manufacturers pare down ingredients and retailers decide how to pass inflated prices on to shoppers, the American consumer is quietly devising her own plan for rising above climbing food prices. In addition to trading down to private-label items and eating more meals at home, many are honing their shopping savvy by perusing weekly sales circulars, consulting their Sunday papers, searching the Internet and even turning to their cell phones for coupon offers. Behind the scenes, the retailer, manufacturer and service provider members of the Association of Coupon Professionals are working on guidelines, best practices and educational efforts to ensure the viability of coupons as a sales and marketing tool. John Morgan, executive director of the ACP, spoke with SN about the economy's effect on coupon redemption, targeted offers and how the GS1 DataBar will affect the future of couponing.

SN: Skyrocketing commodity prices are driving the cost of consumer packaged goods at a time when shoppers are tightening their grocery budgets. What effect is the economic downturn having on the number of coupons distributed, the types of items being promoted (premium vs. staple products) and the number of coupons redeemed?

JM: History indicates marketers increase coupon distribution during economic uncertainty, and redemption typically increases as consumers are compelled to capitalize on incentives to offset the increase in their grocery bill. Marketers look at increasing face value as a tactic to garner more redemption and the increased product sales it generates. Face values have been increasing steadily, and they are contributing to increased redemption. Marketers of premium items may employ coupons to protect market share and maintain sales when consumers may be cutting back on premium items. Brand managers of staple products can deploy coupons as a tactic to increase sales and market share where there may be an increased sales opportunity. There is also an opportunity for retailers and manufacturers in the grocery channel to gain share from foodservice by communicating savings opportunities for Center Store and perimeter meal solution categories along with menu ideas and recipes, and bring eating back to the home.

SN: According to a study that was recently released by coupon processing house CMS, consumers redeemed 2.6 billion coupons in 2007, which represents the same number of coupons redeemed in 2006, and the first time in 16 years that coupon redemption has not dropped. Do you anticipate an increase in coupon redemption in 2008 as compared to 2007?

JM: I would not expect coupon redemption to decline in 2008. Consumers more actively look for bargains and discounts in a struggling economy, which should increase redemption. Increased face value and marketers moving towards more targeted promotions also contribute to higher redemption. Historically, coupon distribution and redemption increase during difficult economic times, and marketers are becoming more targeted in their promotions, which also yields higher redemption rates.

SN: Targeted coupon programs are growing at a rate of about 10% to 15% per year compared to mass-market programs, according to ICOM Information & Communications. How dramatic is the effect of relevancy on coupon redemption rates?

JM: Certainly, it makes sense that delivering targeted offers to consumers can increase redemption rates significantly vs. mass-market programs. When you're talking to the right person, at the right time, about the right topic, in the best media, you're going to motivate them to action much better than when communicating to a random, unrelated person about a product that has no bearing on their personal needs. But the market's response to targeted communications really goes beyond that. Today's consumers expect contextual relevance for all marketing — from advertising to coupons. And some segments of the population, especially desirable youth and ethnic demographics, aren't going to seek out a brand's marketing at all. Unless brands make a point to be where the target consumer is and make certain that it is communicating in an authentic and relevant way, many audiences will simply ignore the message, regardless of whether or not it has savings attached to it.

SN: Retailers like Kroger Co. are partnering with CPG manufacturers to distribute coupons in varied ways. For instance, Kroger shoppers can automatically load offers onto their loyalty cards by visiting AOL's Shortcuts coupon service or by perusing offers on their cell phones as part of the Cellfire program. How do shoppers want to receive their coupons and where do these new media leave paper-based channels like the Sunday paper?

JM: We certainly are living in a “me” generation where people want everything personalized, including their Starbucks coffee, TiVo programming and iPod music selections. As shoppers become more sophisticated with technology, they expect personalized, targeted coupon offers as well. The key for marketing is to understand the demographics of their consumers, and reaching them in the method they prefer, whether it's online, in-store, FSI [freestanding insert], direct mail or mobile device. It's a blend of consumers, therefore a blend of tactics. Traditional and non-traditional vehicles will continue to be an influential component of promotion.

SN: By next month all coupons should include the GS1 DataBar (previously called RSS datacode), which will allow manufacturers to include expiration dates as well as a wider range of discounts and offers on their coupons. What sort of opportunities and challenges (especially for the retailers who'll be receiving them) does/will the DataBar present?

JM: Yes, offers should contain the GS1 DataBar; however, we are in an interim period where both the UPC-A barcode as well as the GS1 DataBar will appear. The retailer is not required to read the GS1 DataBar until June 2010. This interim period is an opportunity to provide a learning period and adjustment period to fine-tune processes for all manufacturers, retailers and processors. Retailers should be discussing the new barcode with their point-of-sale service providers in anticipation of the shift to the new barcode in 2010. Once in place, the new barcode enables more robust coupon offers with precise system-based validation. The ACP is actively addressing industry issues like these through its committees and task forces. We encourage and invite interested parties to contact us, become involved and influence the industry in a positive manner.

SN: ACP's annual coupon conference is scheduled to take place next week, April 29-May 1 in Miami Beach, Fla. This year's event is themed Keeping Pace with Tomorrow's Consumer. What are some of the highlights of the agenda?

JM: David Ciancio, vice president of customer relationship marketing for Kroger, and Felix Martinez of dunnhumby USA are going to present their successes related to mining purchase data and targeting coupon promotions. Don King of P&G, Alan Williams of Ahold and Steve Arens of GS1US are going to give the latest update on the transition to the new GS1 DataBar. There will be plenty of new research and trends led by Lisa Bradner of Forrester Research, Rick Abens from ConAgra Foods, Fran Garcia of Coupons Inc., Brent Dusing of Cellfire, Dr. Ann Brumbaugh of the College of Charleston, and Matthew Tilley of CMS. Information and registration is available at www.couponpros.org.