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Use of Coupons Cuts Both Ways

By Margaret Webb Pressler
Washington Post Staff Writer
Sunday, September 12, 2004; Page F01

I just took a coupon off my refrigerator that expired Jan. 14. I don't even remember cutting it out, but that's no surprise. If I happen to clip a coupon, I'm more than likely to forget about it until it's too old to use.

This annoying habit of mine -- why even bother cutting them out? -- has always made me curious about how many coupons are actually redeemed and how much they affect the marketing and selling of products. Turns out that coupons are pretty powerful and pretty complex. They remain perhaps the most potent arrow in many a marketer's quiver, but they're beginning to show some weak spots as well.

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The sheer numbers associated with coupons are staggering: Roughly 258 billion coupons are distributed annually, and there are more of them every year -- last year 10 billion more coupons were distributed than the year before. About 80 percent of all coupons are distributed through inserts in newspapers, according to the Promotion Marketing Association, while the fast-growing category of Internet coupons account for just 0.5 percent of the total.

Only between 1 and 2 percent of all coupons are ever redeemed. That amounts to a whopping $3 billion a year, but redemption rates, which used to be over 2 percent, have been slowly falling. "I can't say that they're less important, but they're more important to fewer people," said Mona Doyle, who publishes a consumer research newsletter for the supermarket industry called the Shopper Report.

The true impact of coupons can't be measured just by redemption rates, because they also work on consumers who don't ever use them -- those who clip and forget, and even those who never clip at all. The fact of the matter is that coupons are so ubiquitous that all kinds of shoppers see them, even if it's just when they fall out of the insert pile, and that gives a brand exposure. This subtle psychological impact is something that marketers count on.

"They'll have some people who will see the coupon and it'll make an impression in their mind about the brand," said Charles Brown, vice president of marketing for NCH Marketing Services, a clearinghouse that processes coupons for retailers. "The next time they're in the store and they forget the coupon, they'll still buy the brand. Certainly that happens."

Coupons also have a pretty powerful afterlife. Brown, who is also co-chairman of the PMA's coupon council, said about 60 percent of people who use a coupon and like the product will buy that same item later without a discount. Shoppers who use a coupon and perceive they were given a good price break will walk away with a positive feeling about the brand and that purchase, which has a lasting impact on future buying habits.

But marketers also use a harder-sell tactic to push loyalty by making the discounts only good on two or more products purchased at the same time. Following the same principle as buy-one-get-one-free promotions, marketers are issuing more and more multiple-purchase coupons ("Get 75 cents off on two bottles of Mr. Clean!") to try to fill people's pantries with specific brands. Today, one out of four coupons requires purchasing more than one of an item.

"Hellmann's wants you to stock up on Hellmann's so you don't buy Kraft for a couple of months," said Carlene Thissen, president of Retail System Consulting of Naples, Fla., which works on electronic forms of marketing in the supermarket industry.

Coupons have an especially powerful appeal to manufacturers that want to get shoppers to switch from one brand to another or try a totally new product. These tend to be the highest-value coupons, because it's the hardest kind of purchasing decision to influence. Brown of NCH said it takes about a 40 to 50 percent discount on an item to get someone to switch from a product they use regularly. For a shopper who might rotate among two or three brands in a category, meanwhile, it takes a 20 to 30 percent discount to sway someone's purchase to a rival brand.

What coupons don't do, however, is increase overall purchases. Michael Sansolo, senior vice president of the Food Marketing Institute, a supermarket industry trade group, said there is simply a limit on how much people will buy.

"There's a limit to how much we can eat," Sansolo said. "At the end of the week, it might not create incremental sales."

And coupons may be losing some luster as a marketing tool. Though discounts can influence shoppers like nothing else, shoppers are not quite as easy to influence as they once were. With more women working, there are fewer consumers who say they have the time to look for coupons and clip them. Other shoppers say they prefer to shop at stores that already offer discount prices rather than deal with the hassle of cutting and keeping track of flimsy pieces of paper. And if there has been any overwhelming trend that has affected the retail industry in recent years, it's so many time-starved consumers looking for ways to make their shopping trips faster and easier.

Retail consultant Thissen said loyalty and club cards at supermarkets and drugstores have also eroded the power of the coupon. "People can just use their card at the supermarket to get the discount," she said. "Although those discounts technically are not the same discounts they'd be getting from the coupon, I think consumers say, 'I'm getting enough savings with the loyalty card.' "

And marketers are perhaps doing some damage of their own to coupons. Doyle of the Shopper Report said consumers don't like added restrictions such as multiple purchases and shorter expiration dates. The average coupon today is good for about three months, but a few years ago it was more like four to six months. Manufacturers, of course, like shorter expiration dates because they limit the company's liability and give more control over the promotion. But shorter dates also make the coupon a more expensive marketing effort, because if more coupons are cashed in over a longer period of time, then the cost of the program is spread over more products sold.

I've got to believe these restrictions, along with changes in buying habits, will start to erode the feel-good effect that coupons are known for -- if they haven't already. But the big consumer products giants, like retailers, have been increasingly focused on short-term results lately, not long-term customer satisfaction. It doesn't mean coupons don't offer good deals, because clearly they can. It's just that those bargains may not be as easy or as clear-cut as they once were -- and getting them takes a good memory.

If you have a question, comment or concern about what you see when you shop, send an e-mail to sellingus@washpost.com.


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