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The juggernaut of everyday low pricing, in-store marketing and efficient consumer response has put coupon marketers at a crossroads.

Three studies released within the past two months found coupon distribution declined or held steady last year, marking the first time since 1970 that coupon distribution has not risen.

The studies revealed varying numbers and trends but were aligned on one point: The decrease in coupon use reflects manufacturers' growing interest in alternatives to traditional promotions.

Dun & Bradstreet Corp.'s NCH Promotional Services, Lincolnshire, Ill., a processor of coupons and promotions, found 298.5 billion coupons were distributed in 1993, a 3.7% drop from 1992. NCH also said manufacturers shortened the average expiration date of a coupon to an all-time low of 3.1 months, down from four months in 1992.

Decreased distribution and shorter coupon life spans combined to cut coupon redemption in 1993 by 12%, with 6.8 billion redeemed, NCH reported.

Shorter expiration periods mean there are fewer usable coupons in any given month; in 1993, consumers had 26% fewer coupons available to use each month than in 1992.

Promotion Information Management, Chicago, which tracks promotion spending, reported that within the first nine months of 1993, coupon distribution dropped about half a percentage point to 278.9 billion, from 280.6 billion during the same period in 1992. The PIM survey pinpointed several categories whose decreased couponing may be responsible for the overall decline (see chart).

The third survey, released by Carolina Manufacturers Services, Winston-Salem, N.C., showed that despite declining coupon distribution early in 1993, the fourth quarter actually marked a 13% increase over fourth quarter 1992. But overall distribution in 1993 was flat at 322 billion, and overall redemption was down by 2.5% to 7.7 billion.

CMS attributed the fourth quarter surge in coupon distribution to marketers trying to meet yearend sales targets.

Conflicting with the NCH study, CMS registered a longer average expiration period of 3.8 months, down from four months in 1992 and a high of 7.6 months in 1988.

Everyday low pricing, initiated by Procter & Gamble Co. in November 1992, caused a slight dip in coupon distribution in late 1992 and a significant decrease in 1993, NCH said.

"If you look at the Sunday paper each week, P&G probably has three or four coupons where they used to have dozens," said Tom Greer, chairman-ceo of Catalina Marketing Corp., a provider of electronic checkout counter coupons.

Price wars were particularly intense in the frozen food category, where coupon distribution in 1993 dropped 6%, according to PIM.

At Nabisco Foods Group, promotional spending fell last year while the ad budget has grown.

"We're definitely dropping fewer coupons," a spokesman said. "We're putting more mon-ey into advertising, and that money has to come from somewhere-some of it is coming from the hides of" free standing inserts. The Nabisco Biscuit Co. division is raising 1994 ad spending an estimated 30% to $110 million.

Consumer confidence in the economy was probably the greatest contributor to decreased coupon distribution and redemption in 1993. The recession forced manufacturers and consumers to focus on dollars and cents in 1992, said one executive at a Northeastern supermarket chain.

"But now that people are feeling a bit more confident, manufacturers can get back to the advertising and marketing tools that really build brands," said the supermarket executive, adding that retailers welcome a drop in coupons, which are "costly to handle and a pain in the neck."

FSI supplier Valassis Communications said its clients have been affected by corporate downsizing and budget crunches, and that promotional spending in 1993 reflected the "uncertain mind-set about our economy."

Although distribution of traditional coupons is down, in-store coupons do not seem to be picking up much of the slack. Most in-store alternatives are provided by ActMedia's shelf-attachable instant coupons and Catalina Marketing's electronic coupons, printed at the checkout counter on the back of the customer's receipt.

NCH reported that while electronic in-store couponing grew by more than 50% in 1993, it still accounts for less than 1% of coupon distribution. Marketers most likely to use in-store coupons are those with relatively small target audiences, whose money would be wasted on a national coupon drop, said Catalina's Mr. Greer. But for big marketers, in-store couponing will never replace FSIs, he added.

And while tools like EDLP are forcing marketers to re-evaluate coupon use, a further swing toward EDLP would make coupons all the more necessary. Low pricing would become standard, and coupons would be needed to establish a point of difference, said Kermit Myers, president of Chicago-based Sun Alert, a weekly list of manufacturers' promotions sent to retailers.M

Emily DeNitto contributed to this story.


Coupons cooling off

Some major categories contributed to the lack of growth in coupon distribution

in 1993.

Top 10 categories Coupons Change

Health & beauty aids 55.4 billion -8.7%

Prepared foods 37.9 billion +20.0%

Cereals 32.8 billion +9.0%

Household products 27.7 billion +19.0%

Frozen & refrigerated 21.0 billion -6.0%

Pet foods 18.7 billion +2.0%

Candy/snacks/chips 15.4 billion -27.5%

Beverages 12.6 billion +6.1%

Dairy 11.3 billion -14.0%

Baking/cooking 10.3 billion +9.1%

Data from Jan.-Sept. 1993. Change compares data from the same period in 1992. Source: Promotion Information Manage ment

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