PAPER-BASED COUPONS NOT BLOWN AWAY: STUDIES SAY

STEPHANIE FAGNANI

Despite the popularity of the loyalty shopper card and the growing number of consumers who use the Internet as part of their grocery-shopping experience, paper-based coupons are still in high demand, particularly among Center Store products, according to recent studies.

While use of e-based coupons increased by 500% last year, it still remains a small component of overall coupon distribution, Bob Carter, president of information management firm Carolina Manufacturer's Services, Winston Salem, N.C., told SN. "Coupons have become such a part of an established shopping pattern for consumers," Carter said. Plus, he said, e-based couponing has a higher incidence of fraud.

"Print-at-home coupons are controversial because people wonder, 'if you allow people to do this, do you open the door to fraud?' It's totally a coupon-fraud issue, and most often you don't catch it until the coupon has been redeemed."

In addition, being a relatively new practice, there is insufficient data available to track the performance of Internet couponing, he said.

However, according to data from NCH, a Lincolnshire, Ill.-based coupon-processing and promotion information management firm, 1999 saw a surge in the overall number of consumer packaged-goods coupons distributed, resulting in a total distribution volume of 256 billion.

The category with the highest growth in number of coupons distributed in 1999 was the frozen-food segment, followed by prepared foods and cosmetics. Disposable diapers ranked seventh.

While more coupons are being distributed, less are actually being redeemed, due to requirements and limitations placed on coupons by manufacturers, said Charles Brown, vice president of marketing at NCH.

"Some of the volume redeemed is down in beverage and dry grocery. Some of the characteristics of those coupons make them less attractive to redeem; such as having to buy more than one of a product and a shorter expiration date time.

"Sixty-five per cent of consumers say the coupons expire too soon. That percentage is down from 71% who claimed the same thing in 1997. The average expiration cycle of three months or less has become more accepted," Brown said.

Once the category leader in terms of largest volume of coupons distributed, the cereal segment dropped to second place in 1999, with household cleaners taking the lead.

However, coupons still remain a powerful tool in promoting the cereal aisle, and a recent consumer study conducted by KRC Research and the Free Standing Insert Council found that 44% of shoppers said they were very likely to use FSI coupons from the Sunday newspaper for breakfast cereals.

"Breakfast-cereal sales have been eroded by other forms of portable breakfasts and marketing has been important to move the product," said Lynn Liddle, vice president of public relations and investor relations at Valassis Communications, Livonia, Mich.

"In this competitive category, with its high consumption and high volume, you need to give the consumer a reason to buy your product."

The survey also found that no one income bracket is more apt to use a Sunday FSI coupon for cereal than another, and the incidence is also not affected at all by geographic location. Also, seven out of 10 people who normally buy store-brand cereal said they would buy a national brand if they had a coupon to accompany it.

"FSIs have been around for 30 years, and there's a reason -- they work," Liddle said. "Old statistics show that of all cereal sold, about 25% was sold on coupons. I don't think Internet coupons will replace paper coupons, but the two will continue working in conjunction."

A 1998 in-store systems study conducted by the Food Marketing Institute, which was used as part of Brown's presentation at the recent Association of Coupon Professionals conference in Florida, pointed to the growing use of Internet-based coupons by showing that 52% of all retail companies accept black-and-white manufacturer's coupons with an additional 10% expected to do so in the future. In addition, 20% of all retail companies at that time issued coupons themselves via a Web site.

Brown said he believes the overall volume of coupons will stabilize and, being counter-cyclical, receive a boost whenever the economy turns sour. He said marketers are moving away from targeted marketing -- or targeting by demographics, users of competitors' products, or geography -- and moving toward mass media, increasing the share of FSIs.

"Marketers are trying to get that short-term sales life in a certain amount of time," he said.

Electronic couponing will continue to grow, and coupons will continue to be a big part of the overall marketing mix, Brown added.

In the meantime, manufacturer-funded discounts through retailer-controlled loyalty cards will continue to gain ground, while electronic promotion will see more of Internet discounts tied in directly to the retailer point-of-sale, Carter predicted.

One thing that would help retailers, Liddle said, is if manufacturers could give them forward notice of a promotion they plan to run with a particular product.

"Retailers face out-of-stock problems. If it's a good coupon, it moves the product," she said.