PAPER COUPONS: WHAT'S THE FUTURE?

David Merrefield

As ECR cognoscenti gather this week in Chicago for the Joint Industry Conference on Efficient Consumer Response, the newly emergent issue of the future of paper coupons -- or the lack thereof -- is likely to be top of mind.

Interest in the efficiency of coupons hasn't been pumped up because Efficient Promotions has finally blown free of the doldrums and is sailing to the top of the industry's action ledger. Instead, the future of couponing is in play because of Procter & Gamble's bold "zero-coupon" experiment started Feb. 1 in upstate New York markets.

The moment it became known that a packaged goods behemoth such as P&G was involved in a fundamental tinkering with coupons, it became evident that whoever thought that the sun will never set on coupons might be wrong. And, bolstering that line of thought, Durk Jager, P&G's president and chief operating officer, described in a speech to a trade group convened earlier this month just how inefficient couponing is. His bottom-line conclusion was this: "We decided coupons have to go." Here's the full context, as reported on the front page of last week's SN: "More than 300 billion coupons are issued annually and less than 2% are being redeemed. Some 8 million trees are cut down for coupons annually. About 40% of total coupon spending never reaches the customer. We decided coupons have to go."

Certainly, P&G has the wherewithal, if any company does, to give lengthy trial to the strategy of removing coupons incrementally from a market here and a market there, and, all the while, trying out one or another merchandising technique in a bid to make up for whatever value-perception customers have about coupons. Sooner or later, P&G will discover that downplaying coupons is a good idea, or, if not, P&G will hit the wall. What are some of those obstructions? No matter if P&G is the biggest promoter, it's not alone in the world of promotion. So, even as P&G moves toward a rational cutback of coupons -- and even if some other first-tier manufacturers follow suit -- a host of second- and third-tier players, and others, are likely to see in the situation an ever-enlarging vacuum into which they will release enhanced coupon activities. And they will point out this differentiation to consumers.

And, regarding consumers: Retailers in a growing number of markets will hear from their customers about the coupon cutbacks. At least some of those customers -- and perhaps many -- won't like the idea of coupon attenuation. Retailers often find a way to reward manufacturers who help them reward consumers.

The presumption that a coupon purge won't be easy is also the view of Frank Manetta at Riser Foods: "P&G is testing [coupon elimination] in one market, and putting savings into consumers' hands. But I don't know how [P&G] is going to accomplish that without offering additional price reductions or incentives for customers. If everyone is EDLP, what is going to persuade customers to select one product over another?" His comments are part of an ECR update that starts on Page 17 of this issue.

So, in the end, the big question remains: Will P&G, and, in time, others, be able to lead the industry into vanquishing the palpably inefficient practice of couponing? For my money, I will vote yes, but I won't predict when. In any case, if coupons go, they will go kicking and screaming all the way. It won't be quick or pretty.

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