Which Performs Better: Digital or FSI?
By Jack Grant
Which coupon vehicle – FSI or digital – gives marketers a bigger bang for their buck?
While traditional FSIs still dominate coupon distribution, a lot of the buzz in couponing nowadays centers on digital coupons and their steady growth, although from a small base. A race is hardly underway for top coupon share, and the two vehicles are radically different in terms of delivery. But a comparison even at this stage is instructive.
So how do they compare in terms of driving incremental volume, attracting new buyers, and Return on Investment (ROI).
To find out, Knowledge Networks, a market research firm with an expertise in coupon measurement, conducted a two-year analysis of what’s happening in the digital world and comparing it to the traditional FSI. It compared 17 digital events and 28 traditional events across similar categories over the last two years. The five categories making up the sample universe were four edible grocery and one non-food.
“This is a starting point of where we think this is going,” said Neal Neffernan of Knowledge Networks. The senior vice president and general manager of the Cincinnati, Ohio-based firm explained the results in a presentation at the annual Industry Coupon Conference in Las Vegas. The well-attended event was hosted by the Association of Coupon Professionals (ACP).
“Twenty-nine percent of coupon users are exclusive digital users,” he said. “They’re not clipping FSIs out of the Sunday newspaper. They’re going online and they’re using the coupons exclusively for their CPG shopping. This is very interesting as we think about the space growing so much over the last couple of years. It’s going to become more and more important to understand the metrics of what’s happening in the digital world.”
According to the results of the study, the average digital incremental volume was 78% versus 63% for the traditional FSI – a 24% advantage to the digital FSI.
“78% incremental volume is a very strong result,” said Neffernan. “I’m basing this on five categories, but what we see early on is very promising for digital coupons.”
He said brand managers always want to know how many new buyers were brought into the franchise. The research methodology, based on loyalty card data, enables Knowledge Networks to look at redeemers and see how many were prior non-buyers of that brand and then redeemed on the coupon.
On average, 53% of redeemers of digital coupons were prior non-buyers versus 32% for traditional FSIs – a 66% advantage to the digital FSI.
The last metric examined was ROI. On average, Traditional FSIs returned $0.67 on the dollar, compared to $0.60 for digital Digital FSIs yield a 10% lower ROI due to the higher CPM and redemption rates.
Heffernan runs the behavioral research division of Knowledge Networks that uses loyalty card data in its analysis.
“We’re seeing a real analysis shift from store POS data to store loyalty card data over the last four to five years,” he said. “Using loyalty card data is really where the analyses are taking place: getting to the actual shoppers, understanding what they have in the basket, and what drives them into the store.
“The loyalty card data allows you to see that bump in the last few weeks of the coupon fuse which the store POS model cannot pick up because there are too few redemptions (one to two on average) taking place in any given store,” he said.
For 15 years, Knowledge Networks has relied on the National Shopper Lab (NSL) to measure coupons effectiveness and ROI. The NSL database is home to 22 million unique frequent shopper households across grocery and drug retailers.
“We’ve analyzed over 1,600 coupons,” he said. “We’ve looked at many, many categories across all coupon vehicles over the last decade. We’ve got a very good understanding of what really works and we leverage this knowledge with our clients to help them improve their
coupon ROI.”
Market Watch
Inmar Adds Mobile Coupon Partner
To Digital Incentive Network
By Rose Anthony
Inmar, a leading provider of digital coupon clearing and other promotion transaction settlement, has unveiled a new mobile couponing partner on the ONiX digital incentive network. As part of the network, Shopext, a leading mobile promotion response and loyalty firm, can enable brands to present Text2Clip coupons to consumers in any ad and securely connect offers to a loyalty card.
“ShopText brings a very innovative application to the digital promotions discovery process by allowing consumers to electronically ‘clip’ coupons from virtually any media,” said Bob Carter, President of Inmar’s Promotion Services division. “Now that Text2Clip coupons are on Inmar’s ONiX network and powered to work with point-of-sale (POS) systems, TV, circulars, in-store ads and receipts can be just as interactive and measurable as web-based coupons, without the hassle of printing.”
The combination of Inmar’s ONiX network and ShopText’s Text2Clip technology makes scalable mobile couponing a reality for brands and retailers without expensive POS hardware upgrades.
“With 98% of all mobile phones in the U.S. being text-enabled, and over half the U.S. population sending at least one text per month, Text2Clip coupons are a cinch for consumers. We have tackled the big obstacle, which was making it work at checkout,” said Steve Roberts, CEO of ShopText. “ShopText and Inmar’s ONiX network takes care of that, providing scaled mobile coupon request, distribution and digital redemption by taking advantage of existing infrastructure in a way that satisfies consumers, brands and retailers.”
2011 ACP Conference
Mark your calendars for the next Industry Coupon Conference. The industry’s only all-coupon event, hosted by the Association of Coupon Professionals (ACP), will take place April 12-14 in Atlanta (see www.couponpros.com).
Meanwhile, at its recent conference ACP elected board members: President, Len Harris
(Kelloggs), Vice President, Debbie Settle (Inmar), Treasurer, Joanne Walk (Hormel), Secretary, Pam Samaniego (Catalina Maketing), and Past President, John Irwin
(Promotion Eyes).
Coupons for Miracles
Unified Grocers, the largest retailer-owned wholesale grocery cooperative in the western U.S., is partnering with Brand Coupon Network (BCN), an innovative leader in online print-controlled coupon technology, to launch Coupons for Miracles on September 15. The goal of the project is to raise needed funds for Children’s Miracle Network through an online innovation to couponing and fundraising.
Consumers (supporters) will be able to visit www.couponsformiracles.org or an affiliate website, print out desired coupons and receive the full amount of the savings on participating brands. Neither donations nor solicitations are required. All funds generated through the Coupons for Miracles program will be distributed to the Children’s Miracle Network hospital in the community where the coupons were redeemed.
Brand sponsors participating in Coupons for Miracles benefit from being charged only for coupons redeemed. Traditionally, coupons can be an expensive initiative for companies because of the costs associated with printing inserts or because they’re charged every time a coupon is printed from a website. “Because participating companies only pay for redeemed coupons, participating in Coupons for Miracles is a cost effective marketing spend tying brands to a noble cause. In addition to the coupon, Unified Grocers will have tie-in opportunities at over 1,200 stores in the Western United States,” said Dan Abraham, founder of BCN.
JUNE 2010
Tracking the Surge as Redemption Rolls on
By Todd Hale
Once on their way to extinction, coupons made a strong resurgence in 2009. While they offer consumers a chance to stretch their dollars further, they also offer real growth opportunities for retailers and manufacturers—if they know exactly who to target and how to leverage established and emerging coupon delivery vehicles.
People of a certain age may nostalgically recall the sight of mom flipping through the Sunday newspaper to clip coupons from the numerous inserts stuffed in the paper. She may have even had a little envelope or “coupon caddy” organized by product category. This kind of memory tends to be among those of us who are baby boomers or Gen Xers—a quaint recollection from the previous century. Indeed, coupon redemption hit a peak in 1999: 4.6 billion, as reported
by Inmar.
Since then, it’s been downhill for the humble coupon. During the three-year period ending 2008, annual manufacturer coupon redemptions leveled off at just 2.6 billion per year.
The “Great Recession” of 2009 changed all of that and marked a sort of renaissance for the coupon. Inmar reports that coupon redemptions grew by 27% as Americans searched for ways to cut household costs and get more for their money. NCH Marketing Services claimed 2009 coupon redemption levels “achieved the second highest year-over-year growth ever recorded.”
Paperless Progress
While newspaper inserts are still the primary method of coupon distribution (89%) and redemption (53%), Internet redemption growth has skyrocketed, rising 263% in 2009.
And while clipping continues to be a primary means of distribution, manufacturers and retailers launched new ways to get coupons into consumers’ hands such as printable coupons on the Internet, in-store kiosks and discounts linked to frequent shopper cards via smartphones and computers, negating the need for a paper coupon at all. In short, it is easier than ever to distribute and use coupons, and this convenience is also a key driver of redemption growth.
Inmar reports that the majority of coupons were redeemed at conventional grocery stores (65%), but all classes of trade—dollar stores, mass merchandisers, convenience stores, military commissaries and drug stores—posted double-digit redemption growth:
Category
Redemption GrowthShare of Redemption
Dollar/Discount/Variety 71% 20%
Mass Merchandiser 26% 20%
Conventional Supermarket 20% 65%
Pharmacy 16% 6%
Convenience 12% 4%
Military Commissary 12% 4%
Source: The Nielsen Company
Redemption growth outside of traditional food channels is a reflection of a coupon movement that started with food, but quickly turned to non-food in the second half of 2009. Non-food coupon redemption growth escalated from a rate of 9% in the first quarter to 46% in second quarter and continued growing throughout the year—rising 45% in third quarter and 37% in fourth quarter. A total of 1.2 billion non-food coupons were redeemed in 2009, representing one-third all coupons.
80/20 Rule in Play
While the recession drove heavier coupon usage across low to heavy coupon users from 2008 into 2009, all but the heaviest coupon user group experienced negative total unit growth (with and without a coupon). All told, 83% of units purchased with manufacturer coupons in 2009 were done so by just 22% of households. Coupon enthusiasts—the heaviest users—accounted for 65% of manufacturer coupon unit purchases and 18% of all unit purchases in 2009. They drove a disproportionate amount of sales and sales growth—shopping more frequently, making 1.7 more trips than non-users and buying more (a rate 1.8 times greater annually). While some might think that “crazed coupon clippers” are only interested in a good deal, these findings suggests real benefits to manufacturers and retailers deploying coupons in their marketing mix.
More Money = More Coupons
With the value offered by coupons, one might think that the lowest income households would be among the heaviest users. In fact, more affluent households dominate coupon usage: 38% of “super heavy” users and 41% of “enthusiasts” come from households with incomes greater than $70,000. Households with income of $100,000 and up were the primary drivers of coupon growth in 2009. The enthusiast category also attracts a disporportionate number of households with incomes between $50,000 and $69,900.
Trends relating to newspaper readership provide some explanation for this imbalance. According to Scarborough Research, better educated and higher income households buy and read the newspaper more than others and newspapers remain a key vehicle for delivering coupons. Additionally, promotions are generally targeted in areas with more affluent consumers. In essence, the better educated and more affluent consumers are much better at looking for deals as they recognize the value of money.
Beyond income levels, more than half (51%) of larger households (3+ members) are “enthusiasts,” while roughly one-third of non- and lighter coupon users are single person households. Younger female households use coupons more, while male-only households use them less. Older users (65+) are also important “heavier” and “super” coupon users.
All ethnic groups use coupons, but three-fourths of the average coupon “clipper” is white. Households residing in comfortable country and affluent suburban spreads are more likely to be heavier coupon users, while non-users are more apt to be those households living in rural areas and struggling urban core areas.
Manufacturers and retailers have real opportunities to reach different groups with coupons and promotions, particularly African-American and Hispanic households. While this may require adjustments to existing tactics, the potential pay-off—in terms of volume growth and winning new customer loyalty—can be significant.
Future Look
As the economy improves, will consumers continue to use coupons? With the economic recovery taking hold slowly and without significant employment growth, expect coupon use to continue. As long as Americans feel unsure about their personal finances or confident about their jobs, they are going to continue to look at ways to save and get the most for their money. In addition to expanding the appeal of coupons in general, manufacturers and retailers would do well to target enthusiasts: their shopping behaviors and demographics make them extremely appealing. With advancements in coupon delivery vehicles that enable both better targeted coupon distribution and redemption, manufacturers and retailers will continue to have real opportunities to use coupons to drive sales for the next few years and beyond.
Todd Hale is Senior Vice President, Consumer & Shopper Insights for The Nielsen Company
