Successful FSI Promotions

Marketers obviously like couponing. In Supermarket News' 2005 Survey of Manufacturer Promotional Practices, more than two-thirds of the participants said they feel couponing is an effective promotional tool. Fast forward to 2015 and yes, things have changed but they are still a vital consumer and trade marketing tool. Read on.

And marketers aren't just saying they have a taste for couponing. It can be seen in what they are doing. NCH's annual report of coupon trends shows that U.S. CPG coupon distribution hit a 10-year high in 2005 - increasing from the prior year by 3 billion coupons (1.1%) to a total of 278 billion coupons distributed. Competitive couponing is fierce in many categories, with marketers ensuring coupon shoppers have a discount offer available to them for nearly every purchase occasion.

The 2005 Supermarket News survey indicates that there are three main reasons why marketers have a taste for couponing. Among those who feel couponing is effective:

  • 41% say they feel this way because couponing increases brand awareness
  • 56% report that couponing boosts retailer support
  • 85% say couponing encourages product trial
To get the maximum effect, some marketers are using a recipe for coupon promotions with ingredients that help them achieve all three objectives in a single event: increased brand awareness, retailer tie-in merchandising, and motivation of consumer purchases. Let's look closer at how to best use some of those "secret ingredients" to fully realize the potential of your promotional investment in couponing.

Ingredients To Build Brand Awareness

At one time, it was common to hear marketers distinguish between advertising and consumer promotions. Today, the boundaries are no longer clear. Some marketers are including ingredients in their coupon promotions that are designed to achieve many of the same "brand awareness" objectives as traditional advertising.

Coupon promotions are becoming branded events. Companies using a solo-FSI insert are perfect examples of how the boundaries between advertising and coupon promotions are blurring. These inserts are heavily branded, featuring both the company and its line of products. In addition, each custom corporate insert features a different theme or tie-in, associating the brands with consumer values or seasonal interests. While many marketers may not have the budget to distribute a solo-FSI, others are leveraging their spending power across multiple brands to create themed, corporate FSI events that span multiple pages in the Co-op insert.

Coupon promotions are being integrated with other brand messages. In addition to branding their consumer promotions, companies are increasingly integrating their consumer promotions with other communications. For example, some FSI pages direct consumers to a website where, in addition to receiving more coupons, they can find recipes and other content that reinforce the brand image.

Coupon promotions are being designed to stand out. Naturally, if a coupon promotion is to achieve its objective of building brand awareness, then it must be noticed by consumers. As a result, many marketers are experimenting with new creative devices to get their coupon promotions to stand out. In the Co-op FSI, some companies are leveraging the purchasing power of multiple brands to create corporate events that span multiple pages. Others are experimenting with creative designs and layouts. Still others are developing coupon promotions that tie in with local retailers. And many coupon promotions - especially multi-page, corporate events and events that include retailer tie-ins - are prominently featuring the total savings to the coupon shopper.

Coupon promotions are being used to achieve cost-effective reach. In order to enhance brand awareness, marketers must be able to reach a wide audience of consumers. That said, studies have shown that the Sunday FSI is one of the most widely read parts of the Sunday paper, after the front page. And the Sunday paper is estimated to reach as many consumers as the Super Bowl - only at a much lower cost. Thus, Sunday FSI continues to be the dominant method through which manufacturers distribute coupons. In 2005, according to NCH's measurement, 87.8% of all CPG coupons were distributed through the Sunday FSI, up from 87.6% in 2004.

When ingredients such as these are used in coupon promotions, they can deliver many of the same "brand awareness" benefits as traditional advertising - only in a more cost-effective manner

Ingredients To Collaborate With Retailers

In addition to using coupon promotions to build brand awareness, more marketers are using coupons to generate and support collaborative co-merchandising opportunities with their retail trading partners. The ingredients that marketers are using to support this objective include:

Designing coupon promotions with retailer tie-ins. Marketers are increasingly incorporating retailer tie-ins into their coupon promotions. For example, FSIs offer the opportunity, on certain dates and with certain retailers, to include an extra page advertising a local retailer's price, net of the manufacturer's coupon discount. NCH studies have shown that when this type of tie-in event occurs, the redemption rate of the coupon is increased by 11% on average.

Coordinating trade advertising with consumer promotions. In addition to mentioning local retailers in their coupon promotions, some marketers are using trade advertising to alert consumers to the coupon savings that are available in the Sunday paper. Such ads typically take the form of call-out alerts or announcements in the retailer's weekly flyer. Other manufacturers are going one step further, collaborating with retailers to include their coupons in retailer-branded direct mail or solo retailer FSIs.

Securing in-store merchandising and displays during the coupon event. Some marketers are also timing their trade promotion and consumer coupon promotions to occur at the same time. By having the couponed products displayed or featured with other price promotions in the store, manufacturers help to ensure that coupon users can find their products. In addition, in-store merchandising can promote greater product movement even when consumers forget to bring the coupon to the store.

Providing advance notice to retailers. Of course, none of these co-merchandising efforts will make any difference if retailers haven't purchased and stocked sufficient quantities of the product to meet consumer demand. It is critical that sales forces or brokers not overlook the most fundamental ingredient for collaboration - giving the retailer plenty of advance notice about the coupon promotion.

Ingredients To Motivate Consumer Purchases

The final ingredients to include in a successful coupon promotion recipe are those that motivate consumer purchases.

Coupons clearly play an important role in shaping the shopping and brand choices that consumers make. Nearly 80% of the participants in NCH's 2005 Consumer Survey indicated that they use coupons. And among the coupon users:

  • 50.3% indicated that they had used a coupon within the past week
  • 77.0% said they use coupons to plan their shopping lists
  • 66.4% reported that they use coupons to try new products or brands
  • 56.4% said they use coupons to choose between the brands they normally buy
So, coupons remain a natural choice for marketers to influence and motivate consumer purchases.

However, today s savvy promotional marketers have come to understand that they can motivate large numbers of consumer purchases without necessarily incurring high coupon redemption liabilities. For example, although multiple purchase requirements typically make coupon offers less attractive to consumers (reducing both average redemption rates and total redemption volumes), they can sometimes increase overall product movement.

Thus, many marketers are adjusting the recipes for their coupon offers - adding more of some ingredients and scaling back on others to suppress consumer response. The facts, as measured by NCH:

  • In 2005, approximately 25% of all coupons distributed in the U.S. included multiple purchase requirements (compared to only 13% in 1995).
  • Less time is offered to redeem coupons. In 2005, the average duration of a coupon offer hit an all-time low of just 12 weeks (15% shorter than in 1995).
Even when marketers have changed the recipe in ways that might otherwise increase the attractiveness of their coupon offers, such as increasing the average face value of distributed coupons to more than a dollar, they have also added more purchase requirements to offset this attractiveness. So, NCH has seen that while the average face value of distributed coupons has risen by more than 41% over the past decade, the true per-item discount has only grown by 33%.

So, it should come as no surprise that these adjustments are making the promotional recipe less appealing to consumers. Based on the findings in NCH's annual study of the U.S. coupon market, redemption volume dropped by 9.1% in 2005 to 3 billion coupons redeemed.

As stated before, although such tactics tend to suppress consumer response, they can still make sense under the right circumstances. For example, multiple purchase requirements can help marketers move more products with fewer coupons redeemed. And shorter offer durations can help marketers achieve a faster bump in sales while better controlling their redemption liabilities.

As a result, in Supermarket News' 2005 Survey of Manufacturer Promotional Practices, not only did 68% of the participants say they feel couponing is an effective tool; they indicated that they feel this way even though coupon redemption has declined.

Does The Recipe Need To Be More Appealing?

In every recipe, it is important to make sure that the various ingredients are used in the right proportions. While it may be possible for marketers to enhance coupon ROI by modestly suppressing consumer response, the strategy can be carried too far. If consumer response slips too much, then fewer products will be moved in total.

In fact, the efforts to control redemption liabilities may have already started to backfire. NCH has found that total product movement with coupons has steadily declined over the past five years, as marketers have shortened duration and expanded their use of multiple purchase tactics. And in 2005, product movement through coupon redemption was only 81% of what it was in 2001.

In short, it appears that some of today's promotional marketers may be outsmarting themselves. They have tried to limit their redemption liabilities to free up more promotional dollars to motivate more consumer purchases. But their efforts have actually had the opposite effect, reducing the total number of products being moved with coupons.

If manufacturers are serious about using coupons to motivate consumer purchases, then they must think seriously about including a more attractive mix of ingredients in their offers - a mix that will increase the appeal of the promotional recipe to consumers, generate more incremental purchases and garner better total returns on the coupon investment.

Conclusion

Clearly, marketers are using coupons to positively impact their businesses in ways that go beyond just redemption rates and redemption volume. They are incorporating ingredients into their coupon promotions that build brand awareness and achieve merchandising tie-in with retailers. And such ingredients can motivate consumer purchases, even if a coupon is not redeemed by a consumer.

Marketers must be cautious, however, to avoid diluting the recipe for successful coupon promotions by tactically constraining redemption. Total product movement can actually be higher, and the payout greater, when the promotions are well designed to motivate coupon shoppers to choose your brand over the deal offered by a competing brand.

Article written by Charlie Brown.
Charlie Brown is Vice President of Marketing for NCH.

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