Colgate promotion preceded P&G's test in N.Y. state
Procter & Gamble Co.'s zero-coupon market test is the first known effort to look at the elimination of couponing, but not the only prototype around.
Competing marketers and retail partners also are searching for ways to reduce the reliance on cents-off coupons.
And just as P&G's early experiments with everyday low pricing eventually revolutionized the package-goods marketplace, reverberations from its coupon elimination test could have a major impact on consumers, rivals and the trade.
In a potentially similar effort last fall, Colgate-Palmolive Co. is said to have cut couponing in 20 of its top 50 markets on household products like detergents, and to have replaced coupon promotion with account-specific trade promotions.
People familiar with the project said the promotion, via Reach Marketing, Westport, Conn., resulted in both increased sales and market share.
`TEST' OR `PROMO'?
A Colgate spokesman said that "was not a couponing test but a promotion in conjunction with NBC ... In some markets, we did account-specific promotions as opposed to coupons, though there was still a national coupon drop. We have not reduced couponing."
Nevertheless, said industry consultant Burt Flickinger, director of Price Waterhouse & Co.'s Management Horizons, New York: "Even though they are not calling this a test, it has implications because a good part of the effort was promotion without coupons, and the money historically allocated to Sunday FSI coupons was in part reallocated ... It gives Colgate an excellent read and an opportunity to react to P&G's move."
P&G's test, starting Feb. 1 and expected to run through 1996, is more extensive in scope, affecting all P&G brands in Buffalo, Rochester and Syracuse, N.Y.
"I think the P&G test is a good idea. Coupons are costly for manufacturers and retailers. But it'll have an impact on customers who are so used to having these out there," said Barbara Page, spokeswoman for supermarket chain Price Chopper, Schenectady, N.Y.
"Practically everyone is looking at coupons," said Jo Natale, consumer services manager of Rochester, N.Y.-based Wegman's Food Markets.
IS IT A TREND?
Still, argued PaineWebber analyst Andrew Shore: "This will only lead to a rationalization, not an elimination."
P&G, which spends an estimated $5 billion annually on marketing, has reduced national coupon spending by 50% since 1990. Given its leadership in categories ranging from toothpaste to laundry care, observers believe it's best positioned to test coupon elimination and plow the savings back into value pricing and brand-building.
According to NCH Promotional Services, coupon distribution and redemption fell 6% in 1995. Distribution declined to 291.9 billion coupons, while redemption dropped to 5.8 billion coupons.
Partially because marketers used more targeted coupons, redemption rates didn't decline, NCH said.
Copyright January 1996 Crain Communications Inc.