Millennial Shoppers Driving Growth of Digital Coupons
By Pat Lenius
The latest industry research reveals that shoppers are demanding digital coupons more than ever.
“Digital permeates the grocery path to purchase,” said David Johnson, Regional Vice President of Shopper Marketing at Quotient Technology, who presented the shopper research at a recent conference.
He listed the following:
- More than half (53 percent) of Millennials and 37 percent of non-Millennials (age 37 and older) want digital coupons.
- Shoppers rely on digital marketing (or online sources) to browse and research (80 percent), find inspiration (77 percent), reconsider (29 percent), select and validate (19 percent), and purchase and pay (9 percent).
- By 2020 U.S. Millennials are expected to spend $14 trillion annually and represent 30 percent of retail sales.
Johnson and Chad Summe, Vice President and General Manager, U.S. Sales, at Quotient Technology, both former brand managers for Procter & Gamble, spoke about the research at a workshop on digital marketing at the Path to Purchase Expo in Rosemont, Ill., presented by the Path to Purchase Institute and produced by EnsembleIQ. They also shared insights regarding Millennials and shopper marketing trends, observing that current CPG marketing practices are not meeting shoppers’ needs.
“It’s not about doing digital any more. It’s about being digital,” Summe stated.
He pointed out that Millennials have different habits and preferences:
- They are less likely to cook – 46 percent don’t prepare meals often.
- They have a higher preference to buying online.
- Their income is 9 percent lower vs. Gen X consumers at the same age.
- Many Millennials will never open a newspaper.
He said that despite research that shows the digitally active shopper spends more on the basket, shops more categories, and makes more trips to the store, 90.1 percent of marketers still choose to use the traditional freestanding insert. Meanwhile, 34.6 percent of shoppers choose traditional FSIs.
“The market has changed a lot and we haven’t,” Johnson pointed out.
The executives said the historical shopper marketing model, which revolved around in-store displays, features and FSIs, continues to decline in effectiveness. This is creating a lot of tension and poor results in the market place. How can there be such a detachment from what the shopper is demanding and what the market is doing?
“Change is really hard; incentives have to be aligned,” Summe said.
“Mobile is the new endcap,” Johnson noted. More than half of shoppers entering the store (56 percent) have been influenced by digital marketing and 34 percent are influenced by digital while inside the store, he said.
Brands can interact directly with consumers, he explained. Smaller brands can now take on the big brands without occupying even an inch of shelf space.
Household penetration on categories and brands increases with digital coupon activations. Studies find a 30 percent lift in category buyers and 100 percent lift in brand penetration when digital coupons are activated.
The decision to move away from FSIs completely and just do DFSIs works, Johnson said. He recounted the results for one leading brand that discontinued FSIs and relied solely on digital offers: Displays up 21 percent; distribution up 10 percent and sales up 3 percent.
With digital FSIs, marketers can spend half of what they invest in traditional newspaper FSIs and get a higher return, Johnson said, adding that the average ROI on digital coupons is $3. The total spend on newspaper FSIs is $398K compared with $194K for digital FSIs. The ROI in retail dollars is $1.24 for a newspaper FSI vs. $2.55 for digital FSI.
Enablers of rapid growth in U.S. grocery e-commerce are falling into place, he said. Amazon grocery distribution goes to 75 percent of U.S. GDP within two hours. The cost of grocery delivery will decline from 10 to 12 percent today down to 5 to 7 percent by 2025.
In addition, price pressure and retail competition will continue. Amazon’s pricing is 13 percent below multi-channel. Traditional grocery retailers will lose 10 to 40 percent (or more) of sales by 2026. Advanced analytics and automation will grow exponentially; for example, as much as 60 percent of grocery labor can be automated.
Looking back over the past year, and even the last four months, there’s no disputing the transformation underway in shopper marketing, Johnson said. These changes are making shopper marketing more “ownable.”
He said CPG marketers need to understand shopper preferences, form and taste, and do it productively. Digital marketing can provide this. What is on your brand page? Recipes? Contests? Coupons? Content is king. Engage with shoppers. Brands can focus at a higher level. What SKUs do you want them to buy?
Some of the brands that Quotient works with are modifying their usage of FSIs, inviting shoppers to visit a website to get the coupon. “They are seeing pretty good returns,” Johnson said.
Quotient Technology joined forces with Crisp, a mobile marketing and advertising company, earlier this year. This will enable the company to deliver effective, personalized marketing