Once the 'Future,' Are Print-at-Home Coupons Already in Decline?

Catalina Bets On Fully Digital Coupons That Load to Loyalty Cards

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Digital offers still account for only single-digit percentages of coupon distribution in the U.S. nearly two decades after they first appeared. Now the original form of digital coupons – print-at-home offers – may already be suffering from old age: The number of coupon prints has been declining 10% annually the past two years, according to Catalina.

That's based on a study by McKinsey & Co. commissioned by Catalina in doing due diligence for its recently announced acquisition of Cellfire, part of a newer breed of loyalty digital coupon players that loads offers directly to consumers' loyalty cards or other electronic accounts.

By contrast, McKinsey found the load-to-card mobile and digital coupon format having more than quintupled each of the past two years as marketers shift their focus to digital coupons good only through retailer loyalty programs.

While Catalina declined to make the full McKinsey report available, the consulting firm also predicted that while small today (representing only 3% of coupon spending), digital coupons will overtake all forms of print coupons other than newspaper freestanding inserts within five years. And McKinsey projects load-to-card and mobile coupons will continue to grow distribution by around 50% annually from 2015 to 2019.

A separate study by coupon clearinghouse Inmar found load-to-coupon digital offers already had reached the billion-coupon distribution threshold last year compared to 1.27 billion print-at-home digital coupons. So this could be the year that load-to-card becomes the predominant digital coupon format.

FSIs remain the predominant form of coupons overall, accounting for 89% of distribution in the U.S. last year according to Inmar. But FSIs accounted for only 48% of U.S. coupon redemptions, the firm found, thanks to a microscopic 0.29% redemption rate. Both numbers have been on a steady decline for years.

Internet print-at-home coupons accounted for only 0.4% of distribution, but 5.2% of redemption last year, according to Inmar. Inmar didn't break out numbers for load-to-card or digital paperless, which can't be counted as easily because they don't go through the usual redemption process. But based on Inmar and other industry projections, distribution numbers are similar to those of print-at-home now, while redemption would likely amount to 2% to 3% of the U.S. total.

Paul Sloan, spokesman for Coupons.com, one of the largest distributors of print-at-home coupons, said his company's business is still growing at a double-digit rates, though the company also has increased its presence in fully digital load-to-card coupons. Overall, Coupons.com revenue rose 32% last quarter.

One problem with fully digital coupons is that there's no physical reminder days or weeks after the coupon is loaded when the shopper is in the store, since there's no paper to carry and few stores have shelf signs reminding them of the offers.

Cellfire has been reconfiguring its app to address that, and Catalina, which works with retailers on loyalty programs reaching millions of shoppers, hopes that adding Cellfire to its mix can fuel the process further.

Catalina is encouraging retailers to either use beacons or geo-fencing technology so when shoppers arrive at stores they get reminders of the coupons they've loaded – or of coupons they could load.

"Retailers admittedly haven't fully deployed that capability yet," said Catalina President Todd Morris, but be believes more will.

Also, while major retailers such as Walmart and dollar stores have no loyalty cards where Cellfire coupons can be loaded, Mr. Morris believes more will follow the lead of Meijer and Target by deploying technology that will let people redeem offers by entering their mobile numbers at checkout.

Even with a major new stake in the digital couponing industry, however, Mr. Morris isn't about to predict the death of print coupons. Asked when he believes digital coupon distribution will surpass print, he said: "Not in our lifetime."

But he still believes packaged-goods manufacturers will keep diversifying toward digital to reach "mobile millennials" who aren't getting newspapers.

Then again, one of the fastest-growing ways of distributing coupons relies neither on digital technology or newspapers. Inmar's report finds so-called "instant redeemable" coupons – or those distributed on packages at stores – rose from 9.2% to 15.6% of all coupon redemptions the past five years.