DECEMBER 2008

COUPONS

Can Better Measurement Lead to Improved ROI?

Two New Task Forces for ACP: Market Research, Printing

ConAgra Boosts ROI through Better Measurement, Forecasting

Marketers Are Optimistic about
Growth of Non-Traditonal Coupons

Sections
Departments
Can Better Measurement
Lead to Improved ROI?

By Al Heller

There’s one couponing truism that rarely fails to get a rise, whether in challenging times like now or in robust, freer-spending periods:  Couponing is one of the most closely watched, heavily invested aspects of brand marketing by CPG companies, yet redemption rates have remained stubbornly low overall for decades.

Today’s efforts by CPG leaders to target consumers and apply sophisticated analytics to the process seem to be opening doors to new performance opportunities and sparking lively discussion from many corners of the trade. But there is doubt that a single program – no matter how well conceived – could significantly raise ROI on a coupon event beyond historic levels.

“Measuring coupon effect is not done in a vacuum. It’s difficult to sort out the single effect of a coupon. There are so many factors that affect performance, the general economy being the big one today, I don’t know how you isolate,” said Bill Bittner, president, BWH Consulting, Mahwah, NJ.

Executives like Bittner feel compelled to draw a distinction between “causation and correlation” when talking about coupon performance.

Jonathan Marek, senior vice president, Applied Predictive Technologies (APT), San Francisco, said, “Whether at the market, store or individual consumer level, we believe it is extremely important to get a read on the incremental attributable impact of a coupon. Have I really increased sales? Is my reading affected by lots of noise from factors like competitive activity, weather, changes in season or changes in concept?

“Retailing is a noisy environment in which sales can go up and down 20-30% everyday. Coupon effect is tougher to read in a tight economy because consumers spend less money. To really know what would have happened had you not done the coupon requires a test-and-control methodology,” added Marek, who went to describe that retailers and CPG are often confused between coupon redemption and true incremental impact.

APT advocates that tests and controls be set up for retailer-CPG collaboration, by dividing a chain’s loyalty cardholders into many test groups to receive different offers, based on their prior spending patterns. The controls are samples held out from each of these groups to not receive a particular offer.

This, he said, is better than the danger that trading partners face when they compare redeemers’ redemption rates versus that of the control groups. Naturally, redeemers spend much more money and have more frequent transactions when compared this way.

But it’s not the right way to measure the coupon effect. CPG and chains need to look at the entire test group versus the controls. Then they’d see practically no difference in spending: “Redeemers are the biased sub-group that likely would have bought the product anyway. All companies do is give money away to these people that they don’t have to,” stated Marek.

“If people who would have bought the item anyway tended to be higher income, if you’re not careful about reading test results, you could easily read that higher-income consumers had a better response. What you have to do is split up higher-income consumers into groups that get or don’t get a coupon, and do the same with lower-income groups, to arrive at the right reading,” he noted.

Better data sharing and analysis between trading partners could help determine “thresholds for the most-desired consumer for a particular retailer and a particular product,” said Max Goldberg, founding partner of The Radical Clarity Group, Los Angeles. “They’d have to get together and test various coupon values. They want to do right by their best customers. Enhance metrics and they could really hone in on ROI. But I don’t see this happening in the U.S. because we don’t mine data here the way that Tesco does in the United Kingdom.”

In his opinion, Tesco and its analytics partner, dunnhumby, “have perfected offers. For example, if you buy exotic fruit, they’ll see what else they can move you to that tends to be higher margin and of benefit to both retailer and supplier. I don’t yet see General Mills, Kraft or ConAgra aiming to offer full programs of assembled meals, but coupons done right to find thresholds could become conduits
to that.”

In Goldberg’s search for logical threads in U.S. couponing, he sees instead “isolated incidents, not a lot of planning or strategy behind coupons to build a larger market-basket size.” Moreover, it would be good if retailers shared data that showed when consumers used the coupons, whether they bought the product again and, if so, was it at full price, on sale or with another coupon. “With those insights, they could do better next time,” he said.

That may be besides the point if coupon values are too small to be relevant for the times anyway, believes Len Lewis, president, Lewis Communications, Floral Park, NY.  “The value proposition of coupons is getting worse. Giving people 25 cents off for two packages that will cost them $3.50 each doesn’t give them what they need or want. A good coupon will stimulate purchases of both new and existing items. People need more help in this economy. Some consumers already suspect that in order to pay for the coupons, the item prices have been boosted.”

Al Heller is co-author, Consumer-Centric Category Management (Nielsen/Wiley, 2006) and president, Distinct Communications, LLC.


Market Watch
Two New Task Forces for ACP:
Market Research, Printing

By Rose Anthony

The Association of Coupon Professionals (ACP) has added two task forces: one for market research and the other for printing. 

In both cases, the trade group is leveraging the resources of its members to develop studies and propose guidelines that will benefit couponing. ACP is an industry-wide trade organization whose membership has interest in providing coupon incentives to drive brand growth (www.couponpros.com).

ACP Executive Director John Morgan said the market research task force will work on developing unique research that can be presented at the Industry Coupon Conference in the spring. 

“We had our initial meeting and are taking a look at having the ACP be kind of like a repository or clearing house for research. The work would involve connecting the dots of disparate research to come up with new insights on couponing. For example, combining research on overall trends, ROI, consumer insights, and so forth,” he said. 

Another objective of the task force is to standardize Internet terms.

“With coupons, it’s easy when you do an FSI,” said Morgan. “Distribution is whatever you send out. But when you get into Internet coupons and emailed coupons, it is more difficult to determine what is considered a distribution.”

Matt Tilley of CMS is the chairman of the task force, which also includes the following members: America Online, Campbell Soup, CMS, Dunnhumby, Genesi USA, Knowledge Works PDI, Prologic, Redemption Solutions, Resolve, Shopping Insights, TNSMI/ Marx intelligence, and Yerecic Label

The printer task force will be looking at security around coupons printed by commercial printers or distributors, according to Morgan. 

“When you get into RFPs and reverse auctions, there’s the potential for a manufacturer to choose a company that - just because they offer a lower price - may not be as secure as it should be,” he said. “So we’re going to create voluntary guidelines for the right way to do it. Hopefully the packaged goods companies will consider that as they develop RFPs to make sure that there is security around the printing process.”

Val Stark of NCL Graphics is chairman of the printer task force, which also consists of these companies:  Yerecic Label, NPC, Meijer, Goss International, Promotion Eyes, Unilever, Symbology, Cunningham Electronics, Resolve, and Shopper Insights. 

Mobile Coupons to Surge
Coupons delivered and redeemed via mobile phones are predicted to be used by 200 million worldwide subscribers by 2013, according to a new study by Juniper Research. The report also states that Western Europe and North America will jointly account for almost 20% of total coupon redemption by that time. The twofold benefit of mobile coupons, according to the researcher, is consumer convenience and organizational efficiency for the companies who issue them.

Although most mobile coupons today are delivered by a code (often bar code) and SMS, Juniper predicts that Near Field Communications (NFC) technology will move to the fore. In identifying the biggest hurdle to mass adoption, the researcher cites the lack of suitable point of sale (POS) infrastructure at supermarket checkouts, which would allow for the quick and easy redemption of coupons. The full report can be accessed at juniperresearch.com.

Cellfire Wins Award
The Mobile Marketing Association (MMA) presented its 2008 Innovation award to Cellfire in recognition of its mobile grocery coupon program. Currently in use by companies across several industries, such as Kroger in grocery, Cellfire enables digital coupon processing by linking to a retailer’s point of sale system.

Consumers can save coupons on their phone and have the discounts applied when they present their loyalty card at checkout. Cellfire mobile grocery coupon service offers savings on products from dozens of CPG brands, and can be redeemed at thousands of grocer locations across the U.S.  


NOVEMBER 2008

ConAgra Boosts ROI through
Better Measurement, Forecasting

By Al Heller

ConAgra Foods instituted best practices in coupon measurement and forecasting four years ago to improve ROI on this part of its marketing spend. Since then, the maker of Healthy Choice, Hunt’s and Banquet brands has posted strong increases.

“Because we have insights on coupons across every media channel, we can pinpoint performance differences and manage expectations in the various brands and categories we represent,” Rick Abens, director of advanced analytics, told CPGmatters.com in an interview.

He now wants the CPG industry to similarly embrace best couponing practices and use performance benchmarks shared by third-party analytical vendors such as IRI, Nielsen, PDI, IFX, MMA and Marketing Analytics.

“There’s a knowledge gap in CPG,” said Abens, also vice president-research for PMA, the Association of Integrated Marketing. “If people really appreciated the analytics behind effective couponing, they could strengthen their brands. Enacting best practices could increase ROI on coupon spend by 10%.

“Most of our modeling vendors report a 60%-70% ROI in the short-term, and about 100% over a longer two- to three-year period because of repeat sales. Performance varies extensively by category and by detail of the promotion (face value, purchase requirement, season, and time to redeem),” he said.

As companies such as ConAgra improve their ability to measure and analyze coupon performance, they also become better predictors of demand. Through this knowledge, they’re better able to manage logistics, balance sheet and P&L statements. And with retailers, they can better secure shelf placement of brands and raise confidence in the effectiveness of their couponing events. “More strategic data sharing produces synergistic insights,” he said.

Coupon analytics are most important to brands ranked number
two, number three or lower in their categories, according to Abens, because “these brands need to use coupons to help become a
more preferred choice of consumers versus the leader. Coupons also help brands reduce the price gap that exists between them and private label, and lessen the likelihood they’ll lose any shelf facings to store brands.”

These disciplines are also key to brands in “expandable” categories which people buy infrequently, less than once a month, but will
use more if in their pantry (such as packaged meals and cereal),
he contended.

“Consumers are consolidating trips to save on gas, and they’re planning more as the economy is tanking. With more stock-up trips and fewer quick trips today, brands need to get on the shopping list in the planning phase at home – and that occurs when they review the weekly freestanding inserts and circulars.

“If you get on the shopping list with coupons,” he continued, “you can take the consumer out of the market for an entire purchase cycle so your brand wins and others lose. Otherwise, your brand will have to wait another purchase cycle – when the consumer is back in the market for your category – to compete for a purchase.”

Indeed, NCH Marketing data show that consumer reliance on coupons has increased as the economy has worsened. “Coupon distribution volume grew by 2.2% in 2007 [and] for the first time since 1992, total CPG redemption volume remained flat compared to the prior year. The grocery segment saw a 6% growth in redemption volume,” read the 2008 NCH Coupon Facts Report.

Today’s greater coupon reliance could be good news for CPG because coupons drive purchase frequency, which in turn drives customer retention and reduces buyer churn.

“When the typical CPG brand loses 40%-60% of its buyers each year they have to replace them just to stay flat. Heavy buyers
switch too, while others stay heavy or become light or non-buyers,” Abens added.

One of the key best practices is to start to measure coupon events earlier or do it faster so results are available in time for brand plans, he advised. This is becoming more achievable, he added, because “we’re in a transition period where automated marketing effective-ness models will become common just like syndicated POS baselines became commonplace in the 1990s. Many vendors are in this space.”

Another is to measure coupon events often enough so their results could “turn insight into foresight” and be the basis for “what-if" forecast scenarios. Use the benchmarks to understand patterns, to know which brands tend to respond well to particular offers. Metrics can drive a coupon program planning tool – one that will forecast ROI and help you understand which program elements to change to improve ROI,” he said.

Moreover, Abens suggested that CPGs in search of a marketing effectiveness measurement vendor start with a recommendation from another CPG company. Once decided, “establish an ongoing relationship. The longer you work together, the better your predictive models become. You’ll have consistency in measurements, and that will drive your reliability,” he said.

Al Heller is co-author, Consumer-Centric Category Management (Nielsen/Wiley, 2006) and president, Distinct Communications, LLC.


Market Watch
Marketers Are Optimistic about
Growth of Non-Traditional Coupons

By Jack Grant

What are the growth prospects for coupons printed from the Internet?

Six of ten respondents to an Instant Poll on the home page of the September edition of CPGmatters were optimistic. “Rapid growth” was chosen by 27%, while “moderate growth” was the prediction of 33% of respondents. Meanwhile, 37% voted for “slow growth” and 2% said “no growth.”

According to a recent Simmons/Experian study, the number of people turning to the web for coupons soared to 38.6 million in 2008, an increase of 13 million people (52%) since 2005.

Respondents writing in the Comments of the CPGmatters poll outlined a future of non-traditional coupons. Here are some of
the views:

  • “Direct to card is the way of the future.”
  • “The real growth in coupons will be electronic delivery to     the cell phone. Scan the bar code directly from the iPhone  (or other smartphone screen), and save a ton of wasted  paper. Plus, everybody has their cell phone with them. It’s a killer app.”
  • “Coupon promotions will go from online to in-lane and transactions will be validated at the UPC level. The transparency will give marketers – and especially retailers – a way of understanding results and gaining insights in near real time. The strategy that will work best is for consumers to get offers anywhere online and use them at the store of shopping choice. The only way to accomplish this is with a vault or bank (similar to I-tunes) that connects to the POS system across multiple retailers. When the consumer identifies themselves in lane with their loyalty card or phone #, the offer is sent from the vault to the register when the product UPC matches what’s in the vault. The transactions can be settled financially in an accurate manner. No fraud.                                                                                                                 "The idea of getting offers anywhere online – IPTV computer and SMS text-cell and use any where when purchase is validated – has a tremendous appeal for marketers. The consumer signs on and places offers in their account much like you putting money into your bank account and spending where you want.”

Money Mailer Partners with Coupons Inc.
Money Mailer Direct Marketing, a veteran company in the $62 billion direct marketing industry, and Coupons, Inc., a leading provider of printable coupon marketing and technology solutions, have formed a strategic partnership to increase the amount of savings opportunities available online to consumers.

Money Mailer will be able to increase its circulation by an average 20% using the Coupons, Inc. DigitalFSI network. The partnership with Money Mailer expands Coupons, Inc.’s offerings to include
more service-oriented coupons from local business such as restaurants, automotive shops, retailers, and home and professional service providers.

Mobile Marketing Effective: Survey
Cell phone marketing recall rates among consumers are extremely high compared to other forms of media, according the 2008 Mobile Response Survey sponsored by HipCricket. Of those surveyed, more than half who received mobile marketing messages in the past year recalled at least one brand. A whopping 96% remembered the promotion’s call-to-action and more than one third said that the promotion made them more likely to buy the brand's product/service.

In terms of making a message go viral, cell phone marketing is very effective: 37% reported telling a friend about the message and 6% forwarded the promotion to a friend. About 58% said they would be interested in receiving mobile coupons and nearly 40% would be willing to receive location-based, time-related offers and coupons. Forty-seven percent said they would be “likely” or “very likely” to redeem a mobile coupon, with 70% of those respondents expressing interest in redeeming them both online and in-store.
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