In Push for Digital Dollars, Look Beyond CPG's Big TV Budgets

ComScore's Gian Fulgoni on Using the Web for Coupon Distribution

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Gian Fulgoni
Gian Fulgoni
By any measure, sales of consumer package goods represent an enormous industry -- convenience and club stores, supermarkets, supercenters and drug stores, macaroni, mouthwash, mustard and other daily necessities generate more than $1 trillion in annual sales.

So it's no surprise that, for years, the online-ad industry has eyed CPG giants' vast marketing budgets, knowing that shifting just a few percentage points of traditional-media spend would do wonders for its share. But here's an idea: If the internet really wants to take a bigger slice of the CPG ad pie, it should look beyond the tens of billions of TV advertising and focus on where the real money is spent: the trade and consumer-promotion budgets.

According to a recent SAP report, while manufacturers allocated 25% of their 2008 revenue to marketing, most of these dollars (78%) were actually spent on promotions, with media/TV accounting for a much lower 22%. Importantly, the vast majority (86%) of manufacturers' promotion spending took the form of trade deals -- which represented 17% of revenue.

Trade deals are the monies that manufacturers pay retailers in return for in-store displays, temporary price reductions and newspaper feature ads that communicate those price reductions. Supermarkets have used newspapers almost exclusively as the medium in which to advertise the week's special prices. When you consider that Sunday newspapers also account for about 90% of all cents-off coupons, print has been the medium of choice for the CPG industry. The use of TV has been mainly reserved for manufacturers' brand-building efforts.

Recently, however, I've been seeing some changes afoot. First, manufacturers are beginning to realize that the internet can be a powerful branding medium and are accelerating their testing and measurement of the ROI from online advertising.

On the promotion front, as cash-strapped consumers seek savings in every way possible, overall coupon redemption has increased for the first time in 14 years. More and more, retailers are using the internet as an efficient and secure distribution vehicle for manufacturer coupons.

ComScore data show that almost 40 million people visited coupon sites in November, up more than 40% in the past two years. Individual sites such as Coupons.com (a high of 15 million monthly visitors in 2009), Eversave.com (7 million) and CoolSavings.com (5 million) have built substantial traffic.

Will supermarkets' websites be the place that consumers visit to obtain their coupons? Don't count on it. Traffic to supermarket sites has just not grown to meaningful levels. The leading supermarkets haven't been able to attract more than 1.5 million monthly visitors to their individual websites. It might well be that consumers have come to expect to view all of their options for discounts and coupons in one location.

Interestingly, in contrast to supermarkets, other channel retailers have been able to generate much higher website visitation levels. Walmart.com attracted 31.9 million monthly visitors; Target.com saw 29.5 million; Walgreens.com drew 6.3 million. Why the disparity? Well, for mass merchandisers, the main driver of traffic appears to be the appeal of non-grocery e-commerce.

For supermarkets, however, a compelling reason for consumers to visit their websites en masse has yet to materialize.

That means supermarkets need to "fish where the fish are," and some have begun offering their coupons on third-party sites that promise to attract higher levels of consumer traffic. Kroger and Safeway, for example, are integrating coupons with their loyalty cards, on their own sites and others such as ShortCuts.com (owned by AOL). Forget clipping coupons. Rather, you log on to the website with your loyalty card number and select your desired coupons; the savings are automatically loaded to your account and applied to your bill when you check out.

Retailers also need to understand how to distribute their information in line with how consumers use media. ShopLocal is digitizing retailers' localized price and product data and placing it not only on the retailers' own sites, but also on high traffic sites such as Yahoo. Other companies are busy placing price incentives in mobile phone apps, in shareable widgets for social communities and in out-of-home digital screens.

Looking to the future, retailers and manufacturers will have to recognize the declining audience for print newspapers as well as understand how they can better use some of the internet's inherent advantages. And media sellers will have to continue touting these messages. But the good news? The recession may well have accelerated the dawning of that day.

ABOUT THE AUTHOR
Gian Fulgoni is the executive chairman of ComScore. Previously, he was president and CEO of Information Resources Inc.
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