Use of Digital Coupons is Growing

Stephen DeAngelis

November 27, 2013

Earlier this year I posted an article entitled Americans Love Their Coupons. In that article, I quoted Emma Rosenblum who wrote, “[Americans have a] longstanding affection for those money-saving pieces of paper.” It won’t be long before such a statement is anachronistic. More and more Americans are learning to love their digital coupons. Earlier this year, Karl Greenberg reported, “Coupon use is returning to modest growth, with digital distribution driving some of the activity.” [“Coupons See Post-Recession Recovery,” Marketing Daily, 30 July 2013] Although the use of digital coupons is growing, Greenberg reported, “Digital notwithstanding, free-standing inserts (FSI) stay ahead of the game, with 91.1% share.” If you are surprised by that, you’ll be even more surprised to learn that Millennials, so-called “digital natives,” still “turn most often to the newspaper for coupons and deals.” [“RedPlum Survey Reveals Millennials Still Clip Newspaper Coupons,” Retail TouchPoints, 18 October 2013] Not so surprising, the same study “found Millennials to be the largest users of digital deals.” It would be my guess that the first type of business that pops into the minds of Americans when they hear the word “coupon” is the grocery business. Americans probably use more coupons in grocery stores than any other venue. Surprisingly, however, Greenberg reported, “[Coupon] growth is being driven by a number of factors extraneous to food and traditional media.” Supermarkets, as we all know, sell more than just food items and many of the coupons that are driving coupon growth are probably still supermarket-related. Greenberg noted, “In the first half of 2013, coupons for non-food products represented 62.5% of all coupons distributed, a 2.9% increase from the first half of 2012. Overall, CPG manufacturers issued 168 billion coupons in the first six months of 2013,” Suzie Brown, an Executive Vice President of sales and marketing at Valassis, the company that conducted the study from which Greenberg drew his facts, told him that even though Consumer Packaged Goods (CPG) marketers still turn primarily to FSI, “they are also expanding the use of digital formats that continue to grow but on a smaller scale.” I anticipate that digital formats will continue to grow because the use of smartphones is growing. Other conclusions drawn from the Valassis study include:

“Marketers are shortening the lifetime of coupons by 3.2% to 9 weeks on average, led by the food segment where expiration dates were reduced by nearly one week; they are using more coupons requiring the purchase of two or more products, particularly for food items, which represents 42%, per the report; and they are Increasing the average face values distributed by 4.5% to $1.62, driven by non-food segment marketers. The study says that redemption has dropped 8.1% in the first half because of the changes. Digital coupon formats have seen redemption hit 6.1% for print-at-home coupons, and 2.5% percent for paperless formats.”

Conclusions from a study conducted by GfK makes one wonder why CPG marketers aren’t moving more aggressively into the digital coupon sector. According to the GfK study, “Digital coupon users spend 42 percent more per year at supermarkets than the average shopper — a differential of $1,029, according to a GfK report, based on more than 120 campaigns run by Coupons.com in 2012.” [“Digital Coupon Users Spend 42% More Annually Than Average Shoppers, Survey Says,” SupplyChainBrain, 13 May 2013] The article continues:

“The report, which covers six major product categories and 49 subcategories, also shows that heavy digital coupon users (defined as the top 1/3 of redeemers) are among the most desirable shoppers, spending 50 percent more per shopping trip and $3,171 more per year than average shoppers. The major categories covered are Food, Beverage, Personal Care/Baby Care, Household Care, Health Care, and Pet Care. The prolific shopping of digital coupon users becomes more noticeable when examining just ‘stock-up trips,’ or occasions when shoppers spend $75 or above. Digital coupon users make 48 percent more stock-up trips than average shoppers: 19.5 per year, compared to 13.2. Heavy digital coupon redeemers make 169 percent more stock-up trips annually, for a total of 35.5.”

One reason that CPG marketers have been slow in digitizing coupons is that the grocery business as a whole has been slow to adopt digitalization. That, however, is changing. Kristopher Kubicki reports, “In the U.S., where grocery sales are more promotion-driven, digital change has finally arrived.” [“For Grocers, After Years of Shunning Internet, Digital Starts to Click,” Ad Age, 18 March 2013] He continues:

“In 2011, Procter & Gamble unveiled PGEsaver.com, which enabled anyone to register a store loyalty card and receive discounts at the in-store checkout. In the past 18 months, no fewer than five other e-coupon aggregators have joined the fray. This means consumers no longer have to scan their Thursday newspaper and clip coupons. A consumer merely enters her loyalty card, checks her desired coupons and swipes her card at checkout to get the full discount. We’ve found that U.S. grocers on average doubled the amount of e-coupon offers every six months since the PGEsaver launch, with more than 500 unique manufacturer offers running every week. This growth is accelerating. In the past four months alone, the number of grocery e-coupon offers doubled again.”

Kubicki believes that we are on the cusp of a “dramatic, predictable and relatively sudden shift in consumer behavior” involving the use of mobile technology. Such technology, of course, can generate mountains of useful data (if properly analyzed) for marketers, retailers, and manufacturers. Matt Devine reports that a 2012 Booz & Co. study supports Kubicki’s prediction about the character of the digital consumer. Devine reports that the Booz & Co. study “reported that 52 percent of U.S. consumers are already using technology in their grocery shopping experience with 31 percent using their mobile while grocery shopping.” [“The Digital Future of Retail Foods,” Progressive Grocer, 29 May 2013] Devine also reports that in another “study examining how moms feel about mobile advertising, Instant.ly reported that 62 percent of moms say their purchased have been influenced by mobile advertising and 42 percent recall a mobile ad helping them save money.” Devine concludes:

“With such a keen awareness of the power of their mobile device, consumers are developing strong relationships with brands that serve their needs at the time and place where they are searching for something. When examining how the digital consumer is using their online access in relation to their shopping choices, the results are mixed. While the majority of online shoppers are seeking discounts, coupons or increased value with relation to their grocery cart, other groups are willing to spend more on a premium product if it serves their needs. For example, 57 percent of moms admitted to rewarding retail brands that made their lives easier, willing to pay for individually packaged items that fit easily in their children’s lunchbox. When creating a digital strategy, … as with any marketing strategy, it is critical to understand your customer. Once you know who they are and what they value you can partner with like-minded companies to create an effective digital strategy.”

Kubicki asserts that getting to know your customer is going to be much easier as consumers, retailers, and manufacturers move forward together in the digital age. He concludes:

“Suddenly the movement between a location, promotion and a purchase is practically seamless. This new era of coupon-clipping means a wealth of new metrics available to the marketing community. Rather than a weekly refresh of circulars, marketers can now gauge the efficacy of a campaign to the minute, with real-time analytics the norm. … When coupled with other metrics, powerful campaigns are now just a few hours away from reaching millions of consumers, rather than weeks and months. Who knows, maybe in a few years through broader marketplace understanding, marketers can finally drop the ‘E’ and just go back to using the word coupons again.”

In the post mentioned at the beginning of this article, I noted that Americans, more than shoppers in any other country, love their coupons. It only makes sense as more Americans adopt mobile technologies that their love of coupons will follow them into the digital arena.