COUPONS AREN'T WORTH IT, VENDOR SAYS

RICHARD TURCSIK

ORLANDO, Fla. -- Coupons are now costing brand marketers more than they are worth and may have outlived their usefulness.

"In my mind, coupons have become parasitic and are taking more value out of the system than they contribute," said Glen Griffiths, vice president of strategic promotion at McNeil Consumer Products Co., Fort Washington, Pa. "Overhead exceeds value. That is very disturbing, and is something that has to be looked at very closely in the future."

Griffiths made these claims here last month at the Coupon Management Conference sponsored by the Grocery Manufacturers of America.

"Coupon redemption has been declining for 10 years in a row, and it is an indication that there is not going to be a lot of strength left in this leg of the [promotional] stool," he said.

Citing the phenomenal growth of debit cards, credit cards, automated teller machines and direct deposit, with 42% of the work force having their paychecks directly deposited in the bank, Griffiths said the United States is well on its way to becoming a "paperless society," one that may not have room for coupons.

"There are about 80 billion cashless transactions a year. The cashless society is here and it is growing. Consumers acceptance of cashless transactions is very, very high. In fact, many consumers now prefer to have their transactions cleared electronically. My question is, how do coupons fit in this picture? Does nine billion pieces of paper being cleared manually through the system really fit in this world? I'm beginning to have my doubts," Griffiths said, suggesting manufacturers follow Procter & Gamble's lead and switch to value pricing.

He said his doubts were being felt across the board, with many retailers beginning to dislike coupons and seeking other means of promotion from manufacturers. These include asking them to reduce the price of the product directly and asking for trade allowances based on overall product performance.

"Retailers are seeing through the smokescreen and seeing for the very first time that the coupon is really not what it is built up to be," Griffiths said.

"Some retailers have actually trapped themselves into double and triple couponing, and coupon redemption does not increase proportionally for double and triple couponing. It puts more overhead into the system as opposed to more value for consumers," he said.

Griffiths said manufacturers should seek out alternatives to coupons because the coupon industry is rife with fraud.

"The fact that there is $1 billion in fraud is an opportunity to fund alternatives," he said, suggesting instead of couponing that manufacturers attach a promotional discount to a specific Universal Product Code number and track the number of units sold with that number.

The efficiency of coupons is also being hampered by spiraling paper costs that have increased the price of a freestanding insert to $7 a page cost-per-thousand, up from $5 CPM a few years ago, according to Griffiths.