Counterfeit Surge Could Tip
Redemption Imbalance to Larger Chains
By Al Heller
Two different worlds in coupon redemption widen the competitive imbalance between larger and smaller retailers – and add to the ongoing fiscal pressures on CPG manufacturers.
On one hand, large retailers have the muscle to be paid within 15 days and gain leeway with payers on questionable coupons submitted. They also have the nerve to take invoice deductions off of CPG supplier invoices if agents don’t pay them quickly enough.
On the other hand, independents and smaller chains get relatively shabby treatment even if they are ethical and comply with payer requirements. One example: it takes 30 days for them to either be paid on redeemed coupons, or at least notified of a discrepancy that prevents such payment. Then the real fun of proving legitimacy begins. That could draw out over months or years because the reason for refusal to pay isn’t called out, so it requires investigation before an appropriate challenge can get underway.
Similarly, CPG suppliers are hurt by unannounced invoice deductions taken by large retailers that are supposed to equate to the value of coupons redeemed that remain unpaid. Retailers that do this don’t often articulate the reason, which leaves CPG challenged to identify it as a coupon deduction. CPG then has to go to the retailer’s portal, look up the debit memo number and find the retailer’s ‘support’ of the deduction. However, that only gives the dollar amount and invoices involved, not the reason such as counterfeit or otherwise illegitimate coupons. CPG then has to investigate within its own systems or the payment agent’s system.
So explains Ron Fischer, president and founder, RPR Redemption Processing Representatives, Blairstown, N.J., which recently settled a claim on behalf of a retailer that began in 2006. That time stretch is unusual, but it signifies the cash flow impact such disputes could have on smaller store operators, or conversely on CPG. His firm uses a proprietary, fully auditable process to collect for retailers on unpaid invoices, to research and challenge chargebacks, and to issue monthly reports.
A sudden rise in counterfeit coupons could tip industry imbalances even further in favor of larger chains, suggests Fischer, because the unregulated industry operates largely on voluntary guidelines. Trading partners that don’t want to take losses will pick on whomever they can. That would mean smaller retailers and smaller CPG manufacturers that lack the resources and the will to fight back.
The non-profit Coupon Information Corporation (CIC), Alexandria, Va., posted images on its website (www.cents-off.com) of approximately 100 new counterfeit coupons in January 2010. This compares with an average of six per month throughout 2009, which ranged from one in February to 16 in August, observed Fischer.
“Some manufacturers will pay a retailer if counterfeits are in small quantity because they realize stores accept them in good faith and there aren’t any instant cashier-level alerts that exist today,” he explained. “RPR (www.rpr-coupons.com) issues e-mail alerts to member retailers with images of counterfeits. But the problem is getting the notification down to floor supervisors and cashiers to keep them from accepting coupons that look good to the naked eye.”
Could the new GS1 databar become the control center for legitimate coupons, whether they come from print media, coupon websites, direct mail or other viable sources? Fischer thinks GS1 could play a principal role in enforcing coupon standards, but only as part of a wider industry initiative that could include:
- Enhanced fraud control measures through CIC
- Education through the Association of Coupon Professionals (www.couponpros.org)
- Collaboration of all couponing parties (CPG manufacturers, retailers, clearinghouses, agents) through a re-energized Joint Industry Coupon Committee – which once had considerable top-down support from major trade associations such as the Food Marketing Institute and the Grocery Manufacturers Association, but operates on more of a middle-management level now with fewer resources.
It remains an open question whether some or all of these elements could come together soon or at all. However, larger retailers will certainly be on board with any new technologies that prevent fraudulent coupons from passing through their registers. “If smaller chains don’t get on board, too, counterfeiting activities will shift more towards their stores,” notes Fischer.
The GS1 databar is just that. “With the new databar, the technology will be in place to load in a specific counterfeit coupon, and have it come up as an instant alert if anyone ever tries to pass one. This will solve the challenge of getting word down to the cashier level. Independents and smaller retailers will need to align with this, or they’ll become relatively easy prey for counterfeiters,” he adds.
Fischer contends the larger chains are already ahead with more powerful point-of-sale systems that scan to the full level, including family codes (which indicate the product type) and manufacturer identification numbers on coupons.
Al Heller is co-author, Consumer-Centric Category Management (Nielsen/Wiley, 2006) and president, Distinct Communications, LLC.
Consumers Use over $3.5 Billion in Coupons,
Drive 27% Increase in Redemption for 2009
By Rose Anthony
Annual coupon use is on the rise for the first time since 1992, according to statistics complied by Imnar. In fact, coupon distribution hit the highest level recorded since the company began tracking trends in 1988.
For the first time in 17 years, consumers used more coupons than they did the year before, with 3.3 billion CPG coupons redeemed – an explosive 27% increase over the 2.6 billion redeemed in 2008.
The increased coupon use started in October of 2008, coinciding with news of the U.S. financial crisis. That led to five consecutive quarters of double-digit growth (based on percentage change from the same period of the previous year).
The increase in redemption goes hand-in-hand with an increase in distribution, according to Inmar. Despite the tight economy, marketers invested heavily in coupons, boosting the number available to the highest level in over 30 years. Brands issued 367 billion coupons, at an average face value of $1.44, indicating that they were committed to promotions in 2009.
News America Marketing, the company behind the SmartSource Magazine coupon inserts
and consumer coupon site www.smartsource.com, says the data supports what they saw
last year.
“There has been a noticeable increase in page count over the past year,” said News
America Marketing Executive Vice President of Marketing Jesse Aversano. “Manufacturers understand that in a tough economy, coupons are an effective and efficient way to spend their advertising dollar.”
Matthew Tilley, Director of Marketing for Inmar’s promotion services division, said, “Brands saw coupons as a key to maintaining brand strength. If they reduced their promotional presence, they stood to lose sales to lower priced competitors and store brands. So they doubled down hoping to create brand loyalty once the economic dust settles.”
News America Marketing also reported an increase in retailer promotion pages in its free-standing insert (FSI), driven primarily by the shift in advertising and promotion dollars to shopper marketing initiatives, according to Aversano.
Online coupons also contributed to the rise in coupon distribution and redemption, with Internet distribution up 92% and consumer redemption of these coupons up over 360%.
“The weekly prints from SmartSource.com are more than double what we saw a year ago, which was double what our 2007 numbers were,” said Aversano. “However, in spite of the meteoric rise in online and digital couponing, the traditional newspaper-distributed FSI still accounts for 89% of all coupons distributed and over half of the coupons redeemed. Consumers expect to find coupons in their Sunday papers, and we’ll continue to be there for them. But they’ll also find us online, in stores, on cell phones and anywhere else that they want to find them.”
As coupon numbers across the board were on the rise in 2009, brands were forced to
mitigate the cost of increased redemption by maintaining face values and keeping expiration periods in check. In 2009, face values declined by a penny, reversing a multi-year trend of increasing values. Expiration periods were shortened by 10% last year, despite years of virtually no change.
“This is an exciting time to be in the coupon business,” said Tilley. “Of course, we don’t know how long this upward trend will continue, but it is evident that coupons are back on shoppers’ radar. The economic downturn has instilled a drive to be smart and frugal about spending, and coupons definitely have a role in fulfilling it.”
ACP Coupon Events on Tap
The Association of Coupon Professionals (ACP) has two events on tap in coming months: a regional education seminar and the annual conference.
ACP’s regional Coupon 101-102 Education Seminar is scheduled March 23 at the Hotel Monaco in Alexandria, Va. The annual Industry Coupon Conference will be held April 27-29 in Las Vegas.
For information on both events: www.couponpros.com and 610-789-9993.
ACP Eyes Digital Coupons
Digital coupons such as those delivered by mobile phones or loaded on a store’s loyalty card are gaining traction in the marketplace. To keep its members and the industry informed, the Association of Coupon Professionals (ACP) aims to study these new promotions in 2010.
“We’ll be working on developing a framework and some data for assessing and analyzing digital coupons,” said Matthew Tilley, who heads the Market Research Task Force that will spearhead the research. He defines “digital coupons” as “those that don’t require paper for redemption.”
He is calling for digital vendors to come forward and share some of their insights and data to help establish benchmarks for brand marketers and retailers looking into deploying these coupons.
“We want to come up with some kind of redemption rate that companies can expect from these coupons, and determine what factors into those redemptions,” said Tilley, vice president of marketing at Inmar. “Companies like NCH and Inmar can provide aggregate redemption information, but we’re not able to provide some of the other tracking points,” he explained.
“For example, how many people selected the offer and whether they redeemed it or not, or
how many people viewed the offer. Those kinds of data points have got to come from the distribution companies.”
The task force aims to develop a primer for these digital coupons. He hastens to add that the primer will not promote one vendor or type of digital offer over another one. “It will be basic and objective head-to-head evaluation, and people can make a decision based on that.” Internet print-at-home coupons will be included in the analysis as a point-of-comparison, he said, since those coupons are relatively mature and the analysis standards are widely accepted.
JANUARY 2010
Lingering Recession to Spur
More Redemption in New Year
By John Karolefski
Thanks largely to hard times, coupons are on the comeback trail.
Redemption was up well over 20% in 2009 vs. 2008, according to Inmar. Meanwhile, CPG marketers in both the health and beauty care and grocery categories increased the quantity of coupons distributed in the third quarter of 2009 compared to the same time frame the previous year, according to NCH Marketing Services. HBC was up 14.3% and grocery was up 9.4%.
“The appropriately coined ‘Great Recession’ has caused permanent shifts in consumer behavior and established coupon-use habits with a whole new generation of shoppers,” says Charles Brown, vice president of marketing at NCH Marketing Services, a Valassis Company.
The momentum will continue in 2010, other leading coupon executives agree.
“All indications are that the increased response could be with us to stay,” predicts Matthew Tilley, director of marketing for Inmar. “Even as the economy showed signs of strengthening,
it seems that there’s a new frugality among American consumers that drives them to clip
and save.
“In 2010,” he continues, “that new frugality will likely combine forces with an old and not-yet-discarded desire for convenience when digital coupons – delivered through the Internet, loyalty cards and even cell phones – will offer new ways for consumers to save. These new methods of coupon and promotional delivery will reduce some of the friction and thereby encourage even higher levels of redemption.”
Brown of NCH says that 2010 will have all the ingredients for a record-breaking year. He points to high consumer interest in coupons due to personal economic situations, more coupon-backed new product introductions, and marketers’ reliance on coupons to generate sales and retain loyalty in the face of competition from private label.
“I expect that coupons will be used at an even greater rate than the increases we’ve seen in 2009,” he says. “The well-established coupon media will evolve with new ways to retain their position of dominance across the $400+ billions of coupons offered to consumers annually. For example, FSIs will be expanding their reach in important market segments via shared mail delivery as well as newspapers.”
Tilley of Inmar is also enthusiastic about coupon redemption in the new year.
“I don’t expect 2010 to show us the kind of steep redemption increases that 2009 did,” he explains. “After all, digital promotions delivery is still in its infancy, the economy is showing some signs of improvement and consumers are just now getting their bearings on what’s possible with coupons. But I do expect continued growth – both in terms of the number of coupons used as well as the numbers of consumers using coupons on a regular basis.”
According to Coupons.com, the leading online coupon site, consumers printed coupons worth $313 million in 2008. The site was on track for a total of $1 billion in printed coupon savings by the end of 2009.
“Our business grew roughly 170% in 2009, and I anticipate the growth of digital coupons to continue on a similar trajectory in 2010,” predicts Steven Boal, CEO of Coupons.com.
“The vast majority of the growth will remain in printable online coupons as available offers increase with more brands offering more coupons and more prints,” he says. “Anecdotally, we are hearing brands say they are moving 100% of their coupon budgets online. Save-to-Card offers will expand rapidly as a natural turn-key extension of printable.”
Boal sees substantial growth from mobile coupons, albeit from a very small base. Mobile works very differently for restaurants and specialty retailers than for the CPGs and grocery retailers, he points out. With the former, coupons can be visually displayed for redemption; while grocery coupons must be processed and formally cleared.
“As a consequence, in ‘high-volume’ transaction scenarios like grocery, drug, mass, etc., 2010 will be a year for mobile coupon ‘discovery’ versus ‘redemption.’ What I mean is that consumers will use mobile devices to find grocery coupons versus having coupons scanned directly from the phone’s display for redemption. That’s simply too slow and the risk for damage to the phone is just too high. I suspect mobile redemption in these high-volume scenarios is still 3-5 years out and won’t involve the scanning of the actual device,” he says.
Tilley of Inmar summed up the feelings of most executives: “In 2009, coupons became cool again. And in 2010, coupons will continue to be a must-have accessory for well-heeled shoppers everywhere.”
