Retail marketers find less is more with coupons

Some major retailers sharply reduced their use of printed free standing inserts (FSIs) last year but the total dollar value of FSIs still grew to a record $515 billion.

The value of free standing insert (FSI) coupons increased 3.7% in 2015 to $515 billion, according to Kantar Media. However, the number of FSI pages distributed fell 8.1% as marketers cut back on pages that didn’t include a coupon. The number of coupons circulated increased nominally versus the prior year, and combined with higher face value led to growth in dollars circulated.

“With a broad variety of channels to choose from, including digital coupons and shopping apps amongst others, manufacturers and retailers are fine-tuning their respective strategies. Print coupons still remain a critical promotional tool, but are being used more efficiently: While there are fewer pages being distributed, there are more coupons per page containing higher value offers,” said Lisa Ekstedt, director of custom solutions. “Manufacturers are further limiting their financial exposure by reducing expiration lengths while still benefiting from the advertising impact of the FSI coupon. Decreases in direct response advertising and retailer FSI promotion events, which include a featured price and net price after the coupon savings ultimately led to a higher share of voice for FSI coupons.”

Contributing to the decline in FSI pages distributed were sharp reductions at some major retailers. According to Kantar, 350 manufacturers participated across 121 retailers but retail pages distributed decreased 24.9%. The top 10 retailers represented nearly 81% of the total retail promotion pages distributed. Four of the top ten retailers increased FSI pages circulated in 2015, while the remaining six of the top ten each had sharp declines. Walmart retained the top spot despite a 33.4% decrease to 5.8 billion pages. Target continued to hold the second spot in spite of a 25.2% decrease to 3.1 billion pages and Walgreens maintained the third spot in the face of a 38.4% decrease to 2.2 billion pages. Publix and Rite Aid both increased their participation to rank among the top ten retailers in 2015.

“Walmart’s focus on new and exclusive offers and Target’s focus on their Cartwheel app to distribute offers contributed to the decline in overall retailer pages circulated versus the peak year achieved in 2014, allowing other retailers like Dollar General and CVS who increased their participation to capture a greater share of trips and coupon redemption,” said Ekstedt.

As for promotional activity by category, 2015 saw a shift toward non-food categories where there was a 3.3% increase to 197 billion coupons. This was driven by a 8.2% increase in health care and a 19.8% increase in other packaged goods (such as batteries, car care, markers). Non-Food has had steady growth in coupons dropped with increases each year for the past four years. Non-Food categories increased the overall share by two point to 69% in 2015.

Conversely, coupons distributed for food categories declined 5.9% to roughly 89 billion coupons, with a 17.8% declined in frozen food coupons leading the decline.

“With higher priced items, non-food advertisers are able to run higher value coupon offers, which are more likely to drive a retail trip and will more quickly increase the value of the shopper’s basket. FSI coupons provide a way of rewarding the consumer for engaging with their offer through a high value purchase incentive,” said Ekstedt.

Whether the category is food or non-food, both saw an increase in weighted average face value or WAFV. For the non-food segment, the weighted average face value – the average of the dollar values actually shown on the coupon - increased 1.6% to $2.08. Values in the food segment increased 5% to $1.19.

As for other noteworthy trends evident last year, FSI coupon offers requiring the purchase of multiple items to redeem the coupon declined to represent 25.9% of total offers within the consumer packaged good segment, marking the lowest level since 2010. Following a steady downward trend that began in 2005, expiration lengths continued to decline, down 6.8% to 6.3 weeks for the total CPG category, and non-food was the major contributor to this decline with expiration lengths decreasing 8.9% to 5.4 weeks.