Friday, December 12, 2008

Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before

Fresh & Easy Buzz has been writing for the last few months about how manufacturers' cents off coupons are becoming the "new black" in this recessionary economy -- that in fact not only are the coupons gaining popularity among consumers of all income levels; they are even becoming chic to use. We call it the phenomenno part of the making of the new, frugal American consumer.

One of the reasons we've been researching and writing about the growing consumer use and marketer distribution of manufacturers' cents off coupons, is because Tesco's Fresh & Easy Neighborhood Market does not accept the little pieces of free retailer money in its Fresh & Easy grocery and fresh foods markets, despite the fact that as close as you can get to 100% of all the grocery chain's competitors not only accept the coupons, but encourage their use by shoppers.

We've been researching the coupon trend closely, as regular readers know from previous stories in the Blog. We continue to find more and more consumer package goods manufacturers and marketers expanding their use of cents off coupons, increasing coupon distribution, and coming up with new methods for distributing the coupons in the current recession, where maximizing sales is job one.

Below are some new developments we've discovered within the current, fast-growing manufacturers' coupon trend:

>Procter & Gamble, the largest consumer packaged goods advertiser in the U.S., is producing a retail version of BrandSaver, the coupon booklets that the company inserts in Sunday newspapers 14 times a year. A temporary store named BrandSaver Live opened the first week of December on West 57th Street at the Avenue of the Americas in Manhattan.

At the store, which is a temporary holiday promotional location and closes today, visitors can receive advance copies of the BrandSaver coupons to be distributed with Dec. 14 newspapers (this Sunday), along with samples and demonstrations of products like Clairol, Downy, Olay and Tide. If the store does well P&G says it plans to do it more -- and in other cities.

Jim Leish, a P&G marketing vice president, says the temporary coupon store idea is just another aspect of the company's increased useage of coupons, particularly as a way to generate new consumer trial, but also as a way to rasie brand awareness and combat store brand sales.

>All You magazine, published by the Time Inc. division of Time Warner and sold by Wal-Mart Stores is offering subscribers to a new weekly e-mail newsletter, All You Deals and Meals, a sneak peek at the coupons to appear in the coming issue of the magazine.

"Our reader is a value-driven consumer," says Diane Oshin, publisher of All You magazine, which regularly runs so many coupons in each issue that it carries a coupon index. Oshin says numerous new readers are picking up the magazine as well, including those in higher income levels.

Speaking of Wal-Mart, the mega-retailer is now offering a real time text messaging program program in which consumers can sign up and then receive real time texts to their mobile phoes and other handheld devices alerting them to "super specials" at Wal-Mart stores. Manufacturers' coupons are often included in a version of the message sent to home computers e-mail accounts.

>Valpak Direct Marketing Systems, which distributes coupons under the Valpak brand, has been advertising on national programs like "ABC World News" and the "Today Show." Valpak's business is booming as more manufacturers use it to distribute coupons and more consumers use its coupon drops. The advertising is a way to create even more awareness for the coupon marketer, it says.

>New technologies enabling the distribution of manufacturers' cents off coupons like never before. For example, There are now hundreds of Web sites where coupons can be obtained by with the click of a mouse and a push of the printer on button rather than clipping Just a few of these sites include:,,,,, and Many also deliver coupons by e-mail messages. A search of Google using "manufacturers' coupons" will bring up more coupon sites than you can even deal with, for example.

Many of the online coupon sites also allow for customization. Consumers can type in what kinds of coupons they are interested in, say paper towels or bagged mixed salad greens, and get listings for just those coupons. Many also allow for searching by brand, along with other custom criteria.

Online coupons also are in real time for consumers. A shopper can go to the sites right before going to the supermarket, take her grocery list and then search for coupons for the items on the list. Unlike FSI's and direct-mailed paper coupons, there's no having to wait for the Sunday newspaper or the Tuesday coupon envelope in the mailbox.

In 2007, 89% of the U. S. consumer population said it used coupons, according to data from the Promotional Marketing Council's Coupon Council, which track the usage of manufacturers' coupons. In 2006, that number was 86%.

The data for 2008 won't be out until next year. However, Charles Brown, co-chairman of the Coupon Council and vice president for marketing services at NCH Marketing Services in Deerfield, Illinois., a unit of Valassis Communications, which is one of the top manufacturers' coupon distribution companies in the U.S., says he's looked at some of the 2008 data that shows 94% of U.S. consumers say they are using the manufacturers' cents off coupons.

All of the coupon industry people we've been talking to say their business is strong, and that they are seeing higher redemption rates among consumers of the coupons compared to the 1990's and even 1980's. One executive told us the last time he remembers such increased use of coupons by shoppers was in the severe recession of the 1970's, which many economists are comparing the current recession to.

Food and grocery retailers are backing up those claims. Chain grocers and independents tell us coupon use has soared in their stores, particularly since September of this year when the news of the financial crisis first hit. The retailers also said they saw much higher coupon use during Novembers busy Thanksgiving holiday grocery shopping period than most can recall experiencing in many years.

The store director of a supermarket affiliated with a major U.S. chain recently let us look at just one days take of manufacturers' cents off coupons in his store. He didn't need a garden wheel barrow to haul the coupons up to the office -- but almost.

We couldn't check with Tesco Fresh & Easy stores because, as we mentioned, the grocery chain does not accept manufacturers' coupons. It's reasoning is because it wants to save labor by having its store-level employees handle as little paper as possible.

In addition to not accepting the coupons, that's also the logic behind Fresh & Easy Neighborhood Market not accepting paper checks of any kind and not accepting WIC paper vouchers (they look like a check), which are the food coupons given to the poorest of the poor mothers to be used for infant formula, whole milk, fresh fruit juice, whole grain cereals, fresh produce and a few other items for their infants and toddlers. Retailers get paid 100% for the value of the WIC coupons by the federal government.

Fresh & Easy does accept some paper though -- paper money. Currency. But that's it. Besides that its just plastic debit cards and credit cards. The grocer does accept food stamps because the federal government distributes the food stamps on plastic cards similar to debit or credit cards.

Fresh & Easy also issues its own paper coupons, which it accepts in its stores. The current version, which it mails out frequently and gives out in its stores now in a more limited fashion (up until a couple months ago they were given out in multiples in the stores), is $6 off purchases of $30 or more. That's a good savings for a consumer -- and unlike specific manufacturers' coupons, a shopper can use the $6 off coupon on everything in the store, as long as they purchase $30 or more worth of food and groceries.

The coupons aren't so great for Fresh & Easy though. That's because unlike manufacturers' coupons, which retailers get paid for by the manufacturers 100% plus a few cents per coupon in handling charges (hence our "free money" comment earlier), the $5 off Fresh & Easy coupons come right out of the grocery chain's profits. Ouch. And sense the retailer uses the deep discount coupons regularly, and has done so since the first stores opened a year ago, those coupon discounts amount to lots of dollars not being kept by Fresh & Easy.

Besides that, with manufacturers' cents off coupons becoming the "new black," at least the economic recession version of that popular color in everything, Tesco's Fresh & Easy is missing out on much added sales in its stores.

We've talked to numerous consumers who say they don't shop at the stores because they don't accept manufacturers' coupons. We've also talked to many who said they buy far less at Fresh & Easy stores because they can't use the cents off coupons. And among those, most tell us they only shop at Fresh & Easy when they have one of the retailers' $6 off coupon in hands.

Tesco is really missing the boat by not accepting manufacturers' coupons like just about 100% of the grocery chain's competitors do. But it's Tesco's boat, so they have the right to sink it any way they see fit. Although their stockholders and the great Fresh & Easy store employees would disagree with us on that.

Would accepting manufacturers cents off coupons make a huge dollar difference to Fresh & Easy in sales. Probably not a huge difference. But it would make a significant one.

And even more importantly it would make a huge perceptual difference. It's hard to convince consumers you operate a value-based grocery chain, for example, when you don't accept the manufacturers' coupons. Fresh & Easy wants to be viewed as such a value-based grocer. The cents off coupons are a major aspect of food and grocery shopping behavior in the U.S., like it or not. And it is consumer perception that counts in the long run.

Now, if you add accepting paper personal checks and cashing payroll checks, along with accepting the WIC vouchers, which all of Fresh & Easy's competitors of note do, on top of also accepting the manufacturers' coupons, we think that could amount to a very nice sales boost for Fresh & Easy.

Even more important is it would improve the grocer's value proposition and its value perception among consumers.

After all, when it comes to the cents off coupons, there must be a very good reason why just about 100% of Fresh & Easy Neighborhood Market's food and grocery retailing (and most all drug stores) competitors accept the cents off coupons, despite the fact they are pesky to deal with, right?

Reader Resources

Recent, related posts from Fresh & Easy Buzz:

December 6, 2008: Use of Manufacturers' Coupons Soaring Among U.S. Consumers; Coupon Delivery Systems Going High-Tech; But Fresh & Easy Stores Don't Accept the Coupons

Wednesday, November 26, 2008: Consumer Briefing: The New, Frugal and Near-Broke American Consumer is Staying Home For the Holidays

Sunday, August 24, 2008: Sunday Supplement: 'America's Cheapest Family' Helping to Spur Increased Use of Manufacturers' Coupons At the Grocery Store; Accept At Fresh & Easy

1 comment:

Beth said...

I have email F&E a few times, to explain to them that if they would except manufacture coupons I would shop at their store a lot more. However I think the whole coupon thing is lost on them.
Great post