Apr 1, 2006 12:00 PM, Betsy Spethmann

U.S. marketers spent $7.23 billion on couponing in 2005, up a slight 0.4% from 2004, per PROMO estimates based on industry statistics.

That includes distribution, processing and payment of about $3.47 billion in savings to consumers.

Marketers distributed 323 billion coupons in 2005, up 10%; consumers redeemed 3 billion, a 0.93% redemption rate, per coupon processor CMS. (Rival NCH pegs it at 278 billion distributed, up 1.1% from 2004.)

FSIs accounted for 88% of coupon distribution, CMS and NCH each report. Redemption fell 4%, CMS reports, blaming lowered coupon values that didn't keep pace with inflation last year. Face values rose less than 1% (to an average $1.16), after three years of 8% increases and a whopping 14% jump in 2004, per CMS.

NCH says shoppers are redeeming lower-value coupons: Face value averaged $1.09 for all coupons distributed, but only 89 cents for all coupons redeemed. Multiple-purchase requirements could be to blame, though they're down to 25% of coupons (from 28%). Expiration dates stayed steady, averaging three months, per NCH. FSI BOGOs jumped 48%, per Marx Promotion Intelligence/TNS Media Intelligence, mostly in household products, dry grocery and health care (the latter up 63%).

Suppliers' aggressive bundling of FSI and in-store services (last year Valassis sold 118 bundles of three or more services) consolidates marketer spending and spurs tougher competition for those bigger accounts — and at least two significant legal disputes. Valassis settled a FTC charge that it approached competitor News America Marketing to fix FSI prices. The FTC's March 2006 consent order prohibits Valassis from dividing markets, allocating customers, or fixing prices with a competitor.

Meanwhile, in-store distribution expands. Catalina, now in 20,000 U.S. stores (as of March 2006), continues to expand Catalina Marketing Network into 5,000 Walgreens stores and 1,000-plus Kmart stores, and in January began testing its distribution system in 50 Murphy USA gas stations in Florida.

More marketers are supporting FSI coupons with ads in retail circulars, mirroring the two-year-old trend of CPGs pegging FSIs to local retailer tie-ins. “There's good collaboration between the two parties to get the biggest bang from a couponing event,” says NCH executive Charlie Brown.

Same-day coupons got a little play in 2005. Yahoo dangled chits for a free Baskin-Robbins ice cream cone on its 10th anniversary; Toys R Us ran a series of same-day offers via e-mail and on coolsavings.com for its “12 Deals of Christmas” campaign.

Electronic distribution expands online and via mobile phones. Watch Motorola Corp.'s rollout of M-Wallet beginning this quarter: Consumers load credit or debit card info into their cell phones, then swipe phones at checkout to pay. M-Wallet could become a platform for targeted coupon distribution, with offers pegged to the user's purchase history (March PROMO). Online, Tribune Co.'s interactive arm invested in Consumer Networks' boodle, which puts CPG coupons on newspaper Web sites in 360 markets.

Re-engineering efforts keep moving the industry toward its January 2008 target date to adopt coding (RSS, or “reduced space symbology”) to accommodate more manufacturers, process paper and electronic coupons together, and dovetail with loyalty card and gift card operations.

SNAPSHOT 2005

Spending mostly flat at $7.23 billion

Redemption down 4%

In-store, electronic distribution expand

Will cell phones become the new FSI?

FSI dominates distribution

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