When the going gets tough – the savvy use coupons Coupons can help marketers maintain the brand’s “value” and customer loyalty.
Here’s how.By Nizam Walji and Wayne Mouland
As more households come under greater financial pressure during a recession, more consumers will try to save money on the products they need. Conventional wisdom tells us consumers may switch to less expensive brands and products, change stores, seek out bargains and use more coupons.
But do consumers actually use more coupons in a recessionary period? Empirical research from Resolve Corporation (formally known as NCH Promotion Services Canada), indicates that historically not only do consumers use more coupons in a recession, but marketers also distribute more of them to consumers. Independent research also confirms there is a definite predisposition for all savvy consumers to use more coupons in tough economic times, not only consumers who are in financial difficulty.
A new consumer study conducted by Nielsen Canada for Resolve found that nearly 84 percent of key grocery shoppers in Canadian households used coupons in 2008.
A recent US consumer survey by ICOM Information & Communications LP, a Toronto-based marketing consultant and targeted coupon distributor, found that 67 percent of consumers say they are more likely to redeem a coupon during a recession.
Of the 1,529 US consumers participating in the survey, 45 percent said they were much more likely to use more coupons in a recessionary period, and 22 percent said they were somewhat more likely. Interestingly, income didn’t make a significant difference in the results, with 68 percent of those earning less than $50,000 a year saying they are much more likely or somewhat more likely to use coupons in a recession, compared with 67 percent of those earning $50,000 or more.
During the 2001 economic downturn, ICOM’s tracking also showed a significant increase in the number of coupons consumers redeemed each week.
A new consumer study conducted by Nielsen Canada for Resolve found that nearly 84 percent of key grocery shoppers in Canadian households used coupons in 2008. Earlier Nielsen studies show that coupon use among Canadian households has remained at more than 80 percent for more than 20 years.
Another recent US study conducted by Prospectiv of Wakefield, Mass, polled 1,386 consumers and found that 72 percent are using more coupons than they did six months ago. Three-quarters of these respondents claimed the economy made them do it. The vast majority (81 percent) said they use coupons for grocery items. Nevertheless, consumers need to have access to coupons in order to use them.
Resolve’s historical trends show that consumer packaged-goods manufacturers tend to distribute more coupons during recessions. As Canada’s largest coupon redemption agent for marketers and coupon clearinghouse for retailers for over 40 years, Resolve processes most of Canada’s cents-off coupons in its modern production centre in Saint John, New Brunswick. Resolve also provides most of the available Canadian statistics on cents-off coupons, along with a variety of promotion fulfillment, contests/sweepstakes, and sampling services and solutions.
Previous recessionary behaviour
Resolve’s Canadian coupon market trends show that during the last two major recessions in 1991-1992 and in 2001, marketers distributed more coupons to consumers, and consumers redeemed more coupons than at any time in the three years before each recession. Of course, there were market and marketing differences during these recessions.
In the early 1990s, most coupons were marketer-funded In-Ad coupons in the weekly retailer flyers. In-Ads are no longer a factor in most of Canada. At that time, however, distribution and redemption of traditional direct-to-consumer coupons also peaked.
In 2001-2002, coupon usage by consumers peaked because of increased In-Store Ad-Pad coupon activity. This type of couponing achieves higher redemption rates and remains a very effective method of building brand sales and share.
Although the current recession did not start in Canada until the last half of 2008, marketers distributed more coupons in 2008 than at any time in the last five years. This increase in couponing occurred because of a marked increase in the number of Free Standing Inserts (FSI) coupons carried in newspapers.
In 2008, Resolve’s coupon market tracking shows that approximately two thirds of all coupons were in the FSI, and its share has grown for each of the last three years. However, redemption by consumers has not matched distribution growth because FSI coupons garner lower redemption rates than those distributed via most other media.
So, consumers want to use coupons and manufacturers want to distribute coupons, the question becomes how do consumers want to receive their coupons? The Prospectiv study found that while newspapers, which are the delivery method for FSIs and magazines were the primary source of coupons for 51 percent of consumers, 39 percent of them said that in the future, they wanted to receive coupons via direct mail. Additionally, 26 percent of respondents said that e-mail would work, either directly or through newsletters, and another 16 percent preferred Web sites. As this study was conducted in the US, it is not surprising that consumers did not mention Ad Pad coupons, since a much smaller proportion of all coupons in the US are distributed in-store.
Of the Prospectiv study respondents polled:
80 percent said that they would be very likely or likely to increase their use of coupons if these coupons could be tailored to the respondents’ respective interests and delivered online.
87 percent said that they would be more likely to shop at a retailer that offered coupons. This could mean these consumers would be more likely to shop at a retailer that offers coupons at the entrance or via On Shelf Ad Pads. In future, this could even mean the use of electronic coupons that are accessed via a loyalty card program.
47 percent found traditional print and online coupons to be equally convenient, while just nine percent of respondents reported that online coupons were most convenient.
While on-line coupons are a growing trend, it would be a mistake to focus entirely on that distribution approach today as Internet coupons currently account for only about one percent of all coupons issued and redeemed in Canada. In general, most consumers are still relying on traditional methods to obtain coupons and they redeem far more of these coupons. In addition, some retailers may also still be apprehensive about accepting Internet print-at-home coupons because of potential fraud. As a result, marketers can comfortably focus on traditional couponing methods but also consider trying other ways to reach more consumers via the Internet. In support of newer Web-based delivery methods, Resolve has established best practice rules and guidelines to mitigate perceived and real risks.
In spite of tightening budgets, many marketers increase their coupon spend in tough economic times because savvy consumers redeem more coupons; which results in additional, measurable brand sales.
Regardless of the economic environment, coupon usage by consumers is a function of the:
number of coupons available
products being couponed
Marketers also use coupons to keep current users buying their brands and stop them from trading down to cheaper options. One of the biggest threats to well-established brands during tough economic times is that loyal consumers might be forced to buy previously overlooked, lower-price brands and in the process, discover these new brands are acceptable. Coupons are an effective way for marketers to maintain the “value” of the brand and keep current users loyal during a period when many consumers, even those who are well-off, try to reduce their expenses.
For some marketers, a recession also presents an opportunity to steal market share from weakened competitors who might not be in a position to support their brands’ loyal users. Protecting market share also keeps product volumes flowing at economically viable levels from the factories through the whole distribution system.
The bottom line is that when the going gets tough and households come under even greater financial pressure, they look for relief. That relief can be in the form of cheaper alternatives to the national brands customers normally buy or a complete cessation of certain purchases altogether. It is also clear that relief can come in the form of coupons from marketers who recognize the power of protecting their brand, and stimulating spending. In the end, coupons are the friends of consumers and marketers and they will always play an important role in our economy — whether it is the best or worst of economic times.
Nizam Walji is managing director and GM – North America, Resolve Corp – Promotional Services Group. Wayne Mouland, is the former (retired) director, Analytical Services, Resolve Corp - Promotional Services Group. Resolve works with businesses as an outsourced resource, taking on critical processes to manage them better, faster and more cost-effectively. It has over 35 years of experience managing processes for Fortune 500 clients in the financial services, retail, government, consumer goods, communications industries and promotion/fulfillment services. The company is headquartered in Toronto. For more information, please visit www.resolve.com.