Coupons shine on in hard times

Consumers love coupons, but don’t take my word for it. In a TolunaQuick survey carried out in December 2011, over 50% of UK consumers said that coupons they receive through the letterbox were really useful. And, a massive 78% said they would redeem coupons more regularly if they received them in the post.

Marketers underestimate coupon use
Marketers have a tendency to wrongly predict consumer behaviour when it comes to coupons. In 2011, only 5% of marketers correctly estimated that 60-70% of consumers redeem coupons, albeit occasionally.

This was just one finding in the 2011 fast.MAP Marketing Gap survey, which each year reveals the marketing preferences of consumers and analyses marketers’ predictions.

The survey also revealed that 34% of people search their post for coupons or offers, while marketers expected only 12% of them to do so. And, 44% of people have used a coupon in the last 12 months but marketers wrongly predicted it at just 13%.

Coupons vital statistics
Recent research reveals that 61% of consumers use coupons, up from 52% in June 2010. Over a third of consumers (37%) are looking out for promotional offers more than they were a year ago. And, contrary to popular belief, wealthier AB shoppers use coupons as much as other demographic groups – 22% have used an internet coupon in the last 12 months. (Valassis May 2011)

According to Valassis research conducted in November 2011, 42% of shoppers planned to shop around at Christmas, indicating a drop in loyalty levels.

Organisations can deal with this challenge by using panel shopping data (eg from loyalty programmes) to understand how consumers shop within each category, and specifically how different promotions encourage consumers to change their shopping habits, and to what extent.

Coupons and mis-redemption
2010 estimates from the Institute of Sales Promotions, Valassis and Multi Resource Marketing (MRM) showed an average mis-redemption rate of 25%. (This has been known to rise to over 40% in certain geographical areas and in certain stores).

The supermarkets have since taken action to remedy the problem of mis-redemption. In October 2010, Tesco changed its coupon policy, after years of lobbying from the Institute of Promotional Marketing, and agreed to only redeem coupons against the correct product. Sainsbury’s, Asda, Co op and Waitrose soon followed suit.

However, an excessive focus on redemption, mis-redemption and mal-redemption isn’t helpful. The key thing to ask is has this campaign added value to my brand? Redemption levels were for a long time the be all and end all of measurement because they were relatively easy to get hold of.

Why redemption rates don’t always matter
Redemption rates can be misleading. A Bertolli spread campaign redeemed at just 1% but added £500,000 of sales, achieving £1.86 consumer spend for every £1 invested. It also had an increase in market penetration of 1.65 % in a competitive segment. Clearly, this is preferable to a campaign that redeemed at 5% with no discernable uplift.

If you get the sales, then in reality the levels of mis-redemption and mal-redemption become equivalent to the wastage that you get in all media – you may not like it but it shouldn’t switch you off a channel that is performing.

Low redemption if accompanied by high sales uplift is surely the perfect outcome for a brand – purchase triggered by the brand communication (which it should not be forgotten is what a coupon also is) – that you haven’t had to discount to achieve?

Door drop coupons and customer acquisition
Direct response clients have been measuring successfully for years. They understand that when it comes to customer acquisition, door drops is invariably one of their best routes to market. However, it is much harder for FMCG companies to follow suit. Where it has been possible to glean some sort of measurement other than coupon redemptions, the results speak for themselves.

Case study: SCA Hygiene’s Velvet brand
When Chemistry ran the “Join our Campaign for Trees” door drop campaign on behalf of SCA Hygiene’s Velvet brand in October 2010, little did they realise that it was about to be the most successful door drop campaign in SCA Consumer Tissue’s history. Incremental sales led to an exceptional 286% ROI in the first year.

The door drop effect was optimised through targeting. Velvet’s ethically minded segment was overlaid onto a Dunnhumby clubcard base to maximise response.

Dunnhumby’s robust test and control methodology showed an extremely healthy incremental sales contribution. All brand metrics increased, not only recruiting many new quality consumers but also preventing others lapsing and driving many to spend more on the brand.

It is critical that marketers do not underestimate the halo effect of using a door drop. Door drops are not just about instant rewards via the provision of a coupon but also work well as a customer acquisition tool. Understanding the overall impact of this medium requires accurate measurement and this can not be gleaned from coupon redemption alone.

Julie O’Neill, New Business Director, TNT Post (DDM) Ltd