What Is the Forecast for FSI and Digital Offers in 2016?

By Linda Winick

It’s no surprise that brand marketers will continue to rely on free-standing inserts (FSIs) this year as part of their marketing mix. Meanwhile, digital coupons will become a more important component of a brand’s promotional campaigns.

“Innovative technology and shifting demographics are impacting how media are being consumed and how offers are being distributed. However, the most desirable results are still achieved when the message is delivered while the shopper is receptive to the information, or better yet, while they are actively seeking information and making purchase decisions,” said Dan Kitrell, Vice President, Account Solutions, Kantar Media, provider of competitive brand and retailer advertising and promotion intelligence.
But beyond the obvious predictions about FSIs and digital offers are many trends and developments for brand marketers to consider as they formulate their promotion strategies for 2016. To learn more, CPGmatters reached out to several coupon experts for their forecast for the new year:

John Ross, President, Promotion Network, Inmar, operator of intelligent commerce networks:
"Digital promotions are continuing to scale and their increasing penetration will be the lead story for the industry in 2016. We anticipate that redemptions for digital offers will top one billion by the end of the year and exponential growth for this method will continue. As marketers increase availability of these offers in pursuit of media agnostic shoppers, they’ll succeed in not only driving redemption among already promotion-alert shoppers but also in bringing new deal-savvy shoppers into the marketplace.

"However, increased offer availability alone will not guarantee desired market growth. In order to recognize maximum ROI from their promotion spend in 2016, CPGs will have to deliver relevant, personalized content with every campaign. Doing so will require that brands employ best-in-class analytics to leverage the data captured from digital coupons and collaborate closely with retailers to ensure effective delivery of promotions, across channels, to targeted shoppers.

"The growth in digital will occur in the shadow of FSIs — as these paper offers will continue to more-than-dominate distribution and redemption even as the industry sees continued decline in their redemption. Going forward, FSI optimization will be essential as the industry, and the marketplace, continue to transition. Every offer attribute and aspect of distribution must be matched to shopper demands and media preferences, closely coordinated with other marketing efforts, and aligned with overall brand goals."

Ron Fischer, President, Redemption Processing Representatives, a coupon services company specializing in processing, deduction management and consulting:
"Digital-only providers say paper coupons will become obsolete, and also state there is no counterfeiting with digital.  Never say “No” as someone will find a way to hack into a promotion.  Paper coupons will decline slowly if digital offers meet both the retailer’s and manufacturer’s expectations. There are pros and cons to both types of promotions.

Paper Coupons:
  • The coupon vendors have many, many years of experience in supporting both manufacturer and retailer.
  • Manufacturers that coupon regularly have historical data to prove the promotions can be an effective tool increasing sales.
  • Have established, recommended guidelines that for the most part are followed.
  • Manufacturer has full control in the creation and distribution.

Digital Coupons:
  • Many of the digital vendors are new to the industry.
  • Guidelines are being developed.
  • Require much more systems integration, sometimes requiring retailer approval.
  • Redemption is for the Product UPC, not a generic Family Code.
  • These promotions can reach a growing target for CPGs, the Millennials, as well as new classes of trade.

Digital coupons are still the new kid on the block that will continue to grow over time."

Dan Kitrell, Vice President, Kantar Media:
"Kantar Media forecasts that FSI coupons will remain a key tactic to accomplish specific objectives for both manufacturers and retailers.  As newspaper circulations continue to decline, distribution of the FSI coupon vehicles will continue to shift to shared mail or other distribution methods in some markets.  This will result is relatively stable coupon circulation with a slightly lower redemption rate.  Although the number of households reached can be maintained, some of the households receiving the offers through shared mail will likely be less engaged than households that had opted-in to the advertising by subscribing to their Sunday newspaper.

"However, the ability to reach 70 million households with a relevant offer during a specific week will continue to make FSI coupons an important tactic supporting new product introductions and weekly promotion opportunities including targeting the “stock up” shopping trip during the first pay week of each month, aligning with scale events including corporate promotions and cause marketing, and leveraging seasonal opportunities like Super Bowl, Back-to-School, Halloween, and Winter Holiday. 

"Non-food categories will continue to increase their share of total FSI coupons distributed.  This shift is due in part to the greater interest shoppers have in higher value offers distributed within non-food categories including Personal Care, Health Care, and others.  This increased share and shopper interest will result in FSI coupons for non-food categories becoming more important to retailers for driving shopping trips.  Competition for these shopping trips and retail sales will be reflected in each retailer’s weekly share of advertising and promotion voice targeting these non-food trip missions.  Expiration lengths will also continue to decrease providing a shorter window of opportunity for shoppers to redeem the purchase incentive and a greater urgency for retailers to capture the associated sales.

"Walmart will continue their participation in retailer FSI promotion events with increased focus on new and exclusive products.  However, this narrowed focus may result in Walmart participating in fewer total retailer FSI promotion pages in 2016 than during their peak year in 2014.  Moving forward, Walmart will need to evaluate the impact of this approach on their shoppers as Target and other retailers implement proprietary mobile apps, and as Amazon gains traction within the traditional food channel.  Since shoppers are engaging with the FSI coupon offers when they are actively planning shopping trips, a shift in focus among some retailers may provide an opportunity for other retailers to capture an increased share of these planned shopping trips by increasing their participation in retailer FSI promotion events."

Cheryl Black, CEO of YOU Technology, a digital coupon network provider:
"Digital coupons will become a more integral piece of a retailer’s promotional mix. Because of the security and flexibility that they offer, they will be used to provide the sharpest of price points to loyal consumers. Retailers and CPGs can track (at very granular level) what is happening with digital coupons. They can see how a coupon is viewed, selected, redeemed and shared - where, how and by whom. This is not possible with paper coupons/FSIs. With proper technology and algorithms, the right coupons can be securely delivered to the targeted person. With FSIs this is not entirely possible and fraud can easily spoil the purpose. Since digital coupons can be implemented within hours not months, stores will use digital coupons to respond to competition the same day.

"In the current ‘individualized’ environment, digital coupons will be used more and more to target specific audiences to promote trial and repeat purchase. It is possible to create uniquely personalized coupons for each person including different price points, quantities, dates, etc. By delivering a very personalized coupon, it is much easier to achieve the intended business objective.

"Consumers’ adoption rate for digital devices, especially mobile, is growing and it has impacted their shopping behavior. Because consumers are attached to a digital gadget almost all the time, retailers are enhancing their strategy on how to reach to consumers more effectively (and starting to focus more on digital marketing), and hence CPGs will eventually shift their budget from FSIs to Digital Coupon. We’ll see mobile play an even bigger part in the delivery of digital coupons.  In addition to being able to add coupons during the in-store shopping experience, we’ll see more offer notifications in-aisle based on consumer history."

Tim Barton, Director, Product Marketing, iVend Retail., a provider of omnichannel software:
"iVend Retail recently commissioned a survey report which examined what North American consumers think would make the in-store shopping experience better – including coupons and loyalty experiences. Many retailers are still using outdated, paper-based loyalty programs, which is a missed opportunity. Four out of ten consumers we surveyed are not using loyalty points because they expired, and 36 percent of consumers forget to use paper coupons they receive in the store.

"This presents a welcome opportunity for retailers to connect with consumers digitally, utilizing digital coupons. Thirty-eight percent of consumers prefer digital loyalty offers sent to their email or mobile device, rather than paper coupons. Retailers can grow sales, increase customer loyalty and improve overall shopping experience by implementing a digital passes program. This gives shoppers the convenience of storing coupons, offers, tickets and loyalty cards in a digital wallet. It also allows retailers to send customers push notifications when a coupon is about to expire, or when they can redeem points for rewards." 

                                                 Early January 2016