March 17, 2022

Why Coupons Still Matter

By Megan O'Gorden
Categories

Summary:

Despite some evidence to the contrary, the death of the coupon has been greatly exaggerated.

• Long-term newspaper industry declines and recent supply chain disruptions have tamped down coupon distribution and redemption.

• But there are legitimate reasons for optimism, starting with a deal-hungry populace that’s grappling with rising inflation.

• Brands who tune into how and where consumers are still receptive to coupons will be rewarded not only with sales but a bump in customer loyalty.

As one of the few companies that regularly collects coupon distribution and redemption data, we wanted to start by sharing the latest findings from our Year-End 2021 Coupon Facts™. In a nutshell, the numbers are not great.

  • Coupon distribution volume has been on the decline. Last year saw brands issue 11.4% fewer coupons than they did in 2020. That’s 171 billion, down from 193 billion the previous year.
  • Redemption rates by consumers fell 11.7% in 2021 as compared to 2020. In raw numbers, people redeemed 865 million coupons last year, down from 980 million the previous year.

Coupon-Distribution-Chart

The decline of newspaper circulation has been at the heart of many coupon woes as some 60–80% of coupon distribution has historically relied on free-standing inserts. (Worth noting: The two retailers with the highest ratio of digital coupons last year — Dollar General and Albertsons Cos. — both saw strong growth in their share of overall coupon redemption.) As many brands make the transition from a more newspaper-heavy distribution of FSIs to more direct mail delivery, we may see a reversal of the decline. Data tells us that people are more open to receiving and responding to what comes in their mailbox so the transition can only be positive.

Two words: supply chain. The logistical disruptions of 2021 clearly had a huge impact on promotional spending, including coupon distribution and redemption. There are few bigger brand fails than running out of stock on a heavily promoted item but the reality is, it’s been happening on a large scale across multiple industries. With supply chain issues now being aggravated by inflation issues, concerns linger.

One last thing to consider before we move on from the doom and gloom: While inflation didn’t settle in until late 2021, there is something to the fact that the face value/unit purchase requirement has not fully kept pace with inflation. The result? Coupons literally aren’t worth as much as they used to be. It’s fair to say that makes them less compelling to customers.

CPG Coupon Distribution Chart

Reasons for Optimism

Despite these well-publicized storm clouds on the horizon, we also see four clear encouraging signs for brands that should provide continued optimism about the enduring power of coupons.

1. With financial concerns top of mind, consumers are actively seeking ways to save money. Inflation has been heating up and is unlikely to cool off anytime soon, according to most recent projections. With this in mind, in the coming months deals and coupons are going to be more important than ever for three primary reasons:

  • To help consumers buy the categories and brands they really want (with prices rising on essentials)
  • To win the customer loyalty tug-of-war at a time when people are highly likely to make choices based on product availability or price
  • To contribute to the larger trend of self-care (saving money feels especially good right now)

2. Overall coupon redemption may be down but it’s actually up for digital and direct mail offers, suggesting that these are the areas in which consumers are most receptive to coupons. Why are these methods working so well as of late? It’s likely due to increased opportunities for personalization, both in terms of direct targeting of a person and in matching a product/category to a household or neighborhood. Brands can also leverage data from these offers as a highly effective optimization tool.

3. Good news too for discount/dollar store channels. While most classes of retail trade are showing lower coupon usage, consumers are using them more in discount/dollar channels, suggesting that the more consumers look to save, the more important coupons will become.

4. One final note of optimism: The coming-soon Universal Digital Coupon  is expected to make coupons even more secure for marketers while also making them more broadly useful for consumers. That can’t hurt, right?

Advice to Brands

Write coupons off at your own peril. The fact is, they are still eminently viable if your brand is listening to consumers. Four pieces of advice …

1. Make sure your brand’s offers are truly compelling to consumers and work to ensure that your deals match their direct needs and interests. People are overwhelmed with offers these days and are jaded in many ways. So don’t be the brand that calls everything a DOORBUSTER DEAL when it’s really not. Instead, find ways to provide meaningful savings and earn the trust of your audience.

2. When carefully crafting your brand’s omnichannel strategy, be sure to treat coupons as an equal among those other (shinier, prettier) channels. Surround consumers with multiple touchpoints and do not assume they’ve seen your new product or special deal on another channel. Why not add “Check your Sunday newspaper” to a display ad? Hit them from all angles and it will pay off. In an omnichannel context, as it becomes more widely adopted, the Universal Digital Coupon will make even better sense. One coupon to rule them all, so to speak — a single cents-off digital offer that can be taken into any participating retailer and redeemed.

3. Don’t overlook the fact that coupons and promotions have an inherent advertising value. Visibility is everything on a crowded marketing landscape so utilizing coupons and deals as part of an effective omnichannel strategy can be just the ticket.

4. Be sure your brand is doing everything it can to extend targeted offers to consumers. The opportunity and value of highly targeted offers can be immense and the growth of redemption for both direct mail and digital shows that there’s clearly an appetite for it among consumers.

We offer lots more advice on how to market in inflationary times here.

Consumers are living in a radically different world than they were five or 10 years ago — or even two years ago. To assume coupons are no longer relevant to them is not only wrong, it misses the larger point: It’s on brands to continue to adapt, prioritize customer needs and meet people where they are. The brands who deliver the right deals on the right channel at the right moment will enhance their ability to thrive.

To learn more about what consumers are thinking this year, check out our 2022 Consumer Outlook.

As part of the Vericast marketing team, Megan O’Gorden specializes in the CPG promotions landscape. She has 20+ years of experience in product storytelling and go-to-market execution, helping clients discover and utilize solutions that drive consumer engagement and positive business results.

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