Coupon Clipping Stages a Comeback

Redemption Rises 23% in '09, First Gain in 17 years -- and So Far It's Up Again in '10

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A correction has been made in this story. See below for details.

BATAVIA, Ohio ( -- The recession didn't help many industries, but it may prove the savior of print coupons. Even consumers in their 20s and 30s appear to be adopting the coupon-clipping habit, defying what once looked like long odds, declining newspaper circulation and the growth of digital media.

Newspaper inserts still prevail, but as a younger generation gets hooked on print coupons, they'll likely be ones that arrive in the mail or from their own printers. And that doesn't even factor in the harder-to-quantify growth of mobile coupons, which don't go through clearinghouses.

Last year, redemption of coupons that do go through clearinghouses surged 23% to 3.2 billion coupons (and up 30% to $3.5 billion in value) in the U.S., the first gain in 17 consecutive years, according to data from Valassis Communications, which also owns NCH, one of the largest coupon clearinghouses.

Maintaining growth against comparisons like that seemed unlikely going into 2010, particularly amid a recovery, however mild. Yet it's happening. Through the first nine months of 2010, coupon redemption is up another 5.3% to 2.5 billion vs. the year-ago period, with the value of coupons redeemed up 7.7% to $2.8 billion.

Despite rapid growth, internet coupons still account for only 1% of distribution. The majority of overall growth in redemptions still come from free-standing print inserts, which accounted for more than 2.1 billion redemptions overall last year, according to NCH data.

Coupons could be helping to prop up Sunday newspaper circulations, which fell 4.5% in the six months ended Sept. 30 vs. a year ago but did a bit better than the 5% decline in daily circulations.

For newspapers in Minneapolis, St. Petersburg, Baltimore and seven key Gannett markets, Sunday circulations actually rose. Many of those newspapers, particularly the Gannett papers, have focused on their Sunday print editions -- including campaigns to highlight the value of coupons within.

The National Newspaper Network is preparing to release a report later this month showing 91% of consumers ages 25 to 34 use newspaper coupons, a percentage that's in line with historical rates for the age group, said Jason Klein, CEO of the group.

Many marketers cringe at the phrase "the new normal," not only because it's getting shopworn, but because it refers to consumers turning permanently frugal thanks to a deep recession followed by a slow recovery. Not so for the couponing industry, which sees a generational behavior change inherent in that phrase that bodes well for them.

Research from Deloitte, SymphonyIRI and Nielsen among others in the past year all point to consumers spending more cautiously and seeking deals more aggressively for the foreseeable future.

"I think we're seeing this whole recession really helped us pick up those millennials who were not as focused on money management and savings and now have entered the marketplace with a real savings mentality," said Suzie Brown, chief marketing officer of Valassis.

Certainly some marketers have been doing their part to fan the flames with unusually attractive coupon offers. Procter & Gamble Co.'s Old Spice has dropped buy-one-get-one coupons almost continuously since February. Hurt by resulting share losses, Unilever's Axe responded with two BOGO offers of its own the past three months. Birds Eye took the unusual step recently of offering a national coupon for a free full-size package of its Steamfresh products.

But consumers' coupon fever may not keep rising, in part because most marketers are trying to cool it.

Credit: *Percent redeemed as percentage of distributed. Note: Handout includes coupons dispensed by machines at shelf and checkout as well as handed out in store. Other includes in- and on-pack, ROP newspaper and magazine coupons among others. Source: NCH Marketing Services, a unit of Valassis Communications
While redemption is still up on the year, it was flat in the third quarter. That's largely because marketers cut the average time between distribution and coupon expiration by 15% to 9.3 weeks, according to NCH. Marketers are also piling on more requirements for multiple purchases.

Some signs point to consumers' passion for online coupons growing slower too. The Google Insights for Search index on the word "coupon" grew 5.6% through the first 43 weeks of this year, slower than the whopping 42% increase in the same period last year and the 33% increase the year before.

Either way, it's not clear how much longer newspapers will benefit from coupon growth.

Valassis still reaches 60 million U.S. households most weeks with coupon inserts, just like in 1998. But today 14 million of those homes get their inserts via direct mail. That's a response to household penetration of Sunday newspapers declining from 42% in 1998 to 30% last year, Ms. Brown said.

Starting in January, Valassis rival NewsAmerica will start sending its SmartSource coupon inserts via Valassis' mail program -- one outgrowth of the companies settling their long-running antitrust litigation last year.

While internet coupons account for only 1% of overall distribution, they were up to almost 10% of redemptions last year, per NCH data. Were last year's growth rates to continue, internet coupons would account for more redemptions than FSI coupons by next year -- though a repeat of last year's 185% growth will be extremely tough.

Valassis' own fledgling digital coupon business grew more than 500% last quarter as its freestanding insert revenue declined 3.7%. That was because the company is just getting into digital coupons and dropped two weeks of RedPlum distribution, hiking profits by shipping fewer, bigger inserts.

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CORRECTION: An earlier version of the article incorrectly said Valassis will send NewsAmerica's SmartSource coupon inserts to 14 million homes via Valassis' mail program. NewsAmerica said it will only reach 4 million households through the mail program.

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