the checkout 3.10 - coupons issue

ISSUE 3.10 | COUPONS

IN THIS ISSUE

Coupons: How savvy shoppers are fi nding value and making decisions

• The causality dilemma: Do shoppers decide what to buy fi rst and then seek coupons or vice versa? The answer is yes, it’s both.

• Men utilize technology when seeking and using coupons while women go the more tradi-tional route.

• Not all coupons are created equal. The structure of the coupon offer plays a large role in shopper preferences.

• Shoppers rank the brands and retailers that have the best coupons. See who makes the list.

Prolonged recessionary pressures have caused many shoppers to come up with creative coping mechanisms to stretch the family budget. Of those mechanisms, coupons, a staple in the brand mar-keters and retailers tool kit, have begun to make a signifi cant resurgence. While the U.S. seems to be on the path to economic recovery, shoppers are likely to continue to employ many of the money- saving techniques they have developed, into the near-term. This issue of The Checkout delves into the world of the modern coupon user— who they are; how couponing fi ts into their lives; and more important, what brand marketers and retailers can do to meet their shoppers needs.

inside the in-store experience

Issue 3.10 powered by The Integer Group® and M/A/R/C® Research

powered by The Integer Group ® and M/A/R/C ® Researchissue

Shopper mindsets and behaviors change along the path to purchase

The shopping process has changed dramatically in the last decade. Our sources of product and brand information have multiplied exponentially. We trust the opinions of complete strangers, shop online with our social network, and even become “fans” of brands. We watch commercials on YouTube, then skip over them with TiVo and satellite radio. We read reviews on Amazon, then go and play with the products in-store, check in on FourSquare, take a vote of Facebook friends, buy them with our mobile phones, and then Tweet about our experiences with our friends. Where, then, is the First Moment of Truth?

The Shopper ContinuumTM is a proprietary Integer framework that helps us understand and articulate the role of communi-cation and marketing actions during three distinct phases of shopping behavior.

Pre-Tail™ includes all the actions people take when preparing to shop and se-lecting a retailer, including how we respond to all the things brands and retailers do to infl uence us.

Retail is all the activities that take place in a real or virtual retail environment. This includes the behavior of the shopper and the actions of the retailer and brands on the shelves (real or virtual).

Post-Tail™ encompasses what happens after a purchase. It includes what retailers and brands can do to reinforce and celebrate the purchase and encourage shoppers to repeat their behavior.

The Shopper ContinuumTM framework is one of the tools employed by The Integer Group to identify the questions we need to ask about our shoppers, how we go about getting those answers (the data), and then what we do to improve our strategy (the analytics).

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Illustration 1.0 The Shopper ContinuumTM

Using the product

Post-Tail™ ing thg tg t Purchase moment

Retail

Browsing, comparing,

researching and selecting

items

hrchh

Pre-Tail™

Entering a store or Web site

= points of action, behaviors

Copyright © 2010 The Integer Group

powered by The Integer Group® and M/A/R/C® Research


Despite the economic rollercoaster, shoppers are begining to enjoy the ride

Falling off the frugal wagonThrifty shopping has dipped to its lowest point since February 2009, as consumers continue to show signs that they’re ready to move away from the frugal-spending mind-set. Men continue to appear more willing to spend, but the trend seems to be picking up steam among women as well. Compared to Q4’09, January’s fi gures show a signifi cant decline in frugal-shopping behavior among female shoppers, increasing the importance of brand marketers understanding and nurturing the fragile shopper mindset. A mis-step can erode shopper trust and cause the shopper to purchase a competitor’s brand.

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Issue 3.10

Copyright © 2010 The Integer Group



Female shoppers are driving the coupon boom through traditional media

Combing for coupons primarily a woman’s taskCoupons fi t into the lives of male and female shoppers differently. They search for coupons in different media, redeem them in different channels, and use them to accomplish different shop-

ping objectives. Across both gender groups, newspapers and direct mail/circulars hold the top spots for fi nding deals (62% and 58%, respectively). However, women are clearly more involved in clipping coupons, surpass-ing males in just about all coupon sources except mobile phones. Interest-ingly, when it comes to technology and coupons, men start to become more involved in the shopping process with coupon, retailer, and brand Websites coming in right behind newspapers as places where they actively seek out coupons. The increased interest in online coupons indicates that men who are seeking coupons online during their Pre-TailTM (pre-planning and research) stage of the Shopper ContinuumTM are more open to marketing messaging if provided with the right amount of benefi t. In this case, the coupon would not serve as an awareness-raising vehicle or customer-acquisitions device but as a driver to CRM marketing programs, like frequent-buyer clubs and member-ships.

Coupons used to justify brand selectionIn general, it appears that most shoppers perceive coupons as rewards for products they typi-cally buy as well as incentives to try new or alternative brands or products. Convenient and

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60%The percentage of shoppers who look for coupons before entering the store, indicating that coupons are still largely a preplanning mechanism.



Coupons serve as both incentives to try new brands and as loyalty rewards

useful, coupon consumption is largely geared toward spending less money overall rather than buying a larger quantity of products except for attached-coupled (married; living with partner) and lower-income households (below $50,000 annual HHI). Female shoppers are more likely than males to use coupons as a gateway to trying new brands and products. In fact, women are twice as likely to say they ‘always’ use coupons as a means for trying new brands.

Coupons are a shopper’s best friendNearly three out of four shop-pers (74%) report using coupons because they are convenient and useful, while 26% say coupons take too much effort to fi nd and use. Older shoppers (50+ years) use coupons often and are more likely to use them to buy famil-iar brands and products, yet a signifi cantly higher amount (32%) report that coupons take too much effort to fi nd and use. Interestingly, shoppers are split when addressing the issue of whether coupons cause the brand decision or the brand decision drives the coupon search.

Shoppers who report that cou-pons are ‘convenient and useful’ are using them for items that they buy and re-stock often (e.g. paper products, cleaners, ce-real). For items that have a larger repurchase cycle (e.g., furniture, electronics, motorcycles), cou-pons may not be as useful to the shopper unless they receive them at precisely the right time when they are considering a repurchase or close to a repurchase point that it lead into another Pre-TailTM shopping phase.

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Shoppers want it all: coupons that offer high-value and are simple to use

Cash is kingNot surprisingly, coupon value is the most motivating factor driving consumers to switch from their preferred product or brand. Though the value of a coupon is the most compelling aspect, brands must still be aware of their brand positioning in the marketplace and need to align their promotional couponing with their category entry strategies. If a new product is more high-end, then extensive couponing may only serve to cheapen the brand and thus tamper with the overall brand position-ing.

A small percentage of respondents (3%) say that the most compelling aspect of using a coupon to buy a new product is the ability to use the coupon online or save it to their loyalty card. While these digital capabilities are not yet mainstream, trends show consumers are increasingly making more big-ticket purchases online. For product categories like comput-ers, electronics, and DVDs, the ability to use coupons online might have a stronger infl uence on shoppers.

Shoppers seek simplicityIn terms of incentives, instant discounts or two-for-one deals resonate strongly with consum-ers (75% and 72%, respectively). Shoppers want coupons that are easy to fi nd, simple to understand, and effortless to use. Shoppers favor coupons that word their discounts in terms of actual dollars off versus the potentially confusing percentage-off type of discounts.

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Coupons have become an integral part of shoppers’ coping strategies

(e.g., FIFA World Cup, Super Bowl, etc.) Over-all, this synergy realized from couponing, fea-ture, and display is a win-win for the brands, the retailer, and the shopper.

Channel selection tied to coupon usage It’s no surprise that almost half of all shoppers (47%) think coupons are ‘extremely important’ when shopping at grocery stores. However, of interest is the signifi cant drop in the impor-tance coupons hold when comparing grocery stores to mass merchants such as Walmart or Target, where 29% of shoppers say coupons are extremely important. Coupon importance among drug and clothing stores, as well as online websites is similar— about 20% of shoppers think coupons are ‘extremely impor-tant’. Offi ce supply, home improvement, and convenience stores each report similar levels of reduced coupon importance. As expected, signifi cant differences exist along gender lines, with female shoppers indicating that coupons are at least ‘very important’ when shopping at grocery stores, Walmart or Target, drug stores, and clothing retailers.

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Discounts applied to future visits as well as those incentives that require multiple or bulk purchases, are the least popular coupon type; implying an inverse relationship between the number of cognitive or physical ‘hoops’ that the shopper has to jump through.

However, from a brand and retailer stand-point, there are other reasons for alternative coupon structuring beyond simple discount-ing. For example, in the wine and beer category, “Buy one, get different item free” or “Mail in rebate discount off multiple items” executions drive incremental sale of comple-mentary products (e.g. beer and salty snacks) for the retailer that provides the fi nancial incentive for future shopper marketing efforts. Legally, beer brands cannot sell directly to re-tailers, meaning they have limited control over the displays being placed in stores.

By cross merchandising in a display, the brand creates a one-stop shop for shoppers that can be tailored to a specifi c occasion


RANK BRAND

1 Bed Bath & Beyond2 Target3 Macy s4 Borders5 Costco6 Kroger7 Kohl s8 Walmart9 The Gap

10 CVS11 Old Navy12 Safeway13 Best Buy14 Walgreens15 JCPenney16 Express17 Michaels18 Publix19 Barnes & Noble20 Banana Republic

Source: The Integer Group | M/A/R/C Research 2010 February Checkout Study N = 1,241 www.shopperculture.com

Table 1.0 Top 20 Retailer Brands for Coupons


Retailers are picking up the coupon game and driving shopper awareness

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Retailers get aggressive...and smartThe top fi ve retailers in this list frequently send out high-face-value coupons to their existing cus-tomer base where the likelihood to return to the particular retailer is high. During Pre-TailTM, these coupons serve as a shopping starter and trip driver and aid the shopper in the channel and retailer-selection process. Sophisticated retailers will utilize direct mail as just one component of an integrated marketing campaign and setup in-store displays with the product featured by the coupon alongside other products with historically high basket interaction. Retailers would use the coupon as a loss leader in order to increase shopping-basket dollar amount through incre-mental sale of complementary products. Additionally, retailers can identify high-value shoppers by tracking coupon redemptions and incremental sales in their CRM database during Post-TailTM programming to ensure that their most profi table shoppers continue to receive the best offers through properly tailored messaging.

Coupons justify brand selectionThe infl uence of coupons on brand selection is enormous, with almost nine out of ten shoppers (86%) reporting that coupons are at least ‘somewhat infl uential,’ about half of those say coupons are either ‘very’ or ‘extremely infl uential.’ Females tend to be more infl uenced by coupons than their male counterparts, with nearly half (49%) indicating that coupons are either ‘extremely’ or ‘very’ infl uential when making purchase decisions versus males at 39%. This gender split raises the issue of brands effectively utilizing gender-based targeting when it comes to couponing.


RANK BRAND

1 P&G2 Kraft3 Kellogg s4 General Mills5 Pillsbury6 Campbell s7 Tide8 Yoplait9 Post

10 Colgate11 Johnson & Johnson12 Betty Crocker13 Coca Cola14 Green Giant15 Crest15 L Oreal15 Bounty18 Oil of Olay19 Scott20 Gillette


Table 1.1 Top 20 Product Brands for Coupons


Chart 1.7 Coupon Influence on Brand


3%

11%

44%

28%

14%

Extremely influential Very influential Somewhat influential Not very influential Not influential at all

CPG fi rms take top honors as shoppers rate them as having the “best” coupons

Products that target the male shopper (e.g., beer, energy drinks, men’s razors) may fi nd that their redemption rates index lower compared to rates for the general market. For this reason, both brand marketers and retailers alike need to carefully distinguish between the shopper and the consumer, who are different in many cases (e.g., dia-pers and dog food).

When asked which brands come to mind as offering the “best” coupons, Procter & Gam-ble is the top mentioned company by over 1,200 respondents. Not surprisingly, most shoppers think the best coupon deals are on food-and-beverage brands like Kraft®, General Mills®, Kellogg’s®, and Pillsbury®, which round out the top fi ve. Interestingly, health and beauty brands like L’Oreal®, Oil of Olay®, and Gillette®, also fi nd their way onto the Top 20 List, potentially indicating a relationship between purchase frequency and category involvement, with the perceived importance of coupons to shoppers.

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Implications for brands and retailers

Brands RetailersShoppers

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2

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The prolonged recession has caused many shoppers to adopt new coping mechanisms; cou-pons are being used to level the economic playing fi eld by shop-pers seeking to maximize value.

Understand the consumer along the Shopper ContinuumTM, how your category is shopped, and how the coupon best fi ts into the overarch-ing marketing mix.

In-store circulars, direct mailers, and FSIs are strong trip drivers for shoppers across multiple catego-ries. Understand the trip types and channel shifting behaviors. At-shelf and on-pack coupons drive “plus-one more item” basket strategies.

Shoppers are increasingly using coupons to drive their brand deci-sions before entering stores.

CPG manufacturers and beauty brands are percieved by most shoppers to have the “best” coupons.

When coupons are simple and easy to redeem, they are three times more likely to resonate with shoppers. Recession-weary shoppers want it simple!

Shoppers are using technology as a platform for their money-saving strategies; retailer, brand, and coupon aggregating websites are quickly becoming Pre-TailTM destinations.

Branding campaigns that use out-of-store and in-store merchandizing strategies need to be synchronized in order to cohesively build top-of-mind awareness, infl uence consid-eration set, and ultimately drive trial.

Couple frequently purchased HH products with adjacent high-involve-ment products with lower shelf ve-locity (e.g., health-focused breakfast cereal with nutritional diet shakes).

Keep it simple. Cross-category promotions can greatly benefi t by driving basket ring through simple BOGO offers across multiple SKUs. Don’t make your shopper jump through hoops.

Develop multilayered and cohesive promotional programming targeted to shopper microsegments; catch shoppers while they are reading (even writing) reviews, conducting research, using mobile apps, or checking out at the register.

Organize direct mail and FSI cou-poning strategies to begin mes-saging and price incentives that are consistent all the way from home to shelf; allow coupons to be saved to loyalty cards to drive CRM partici-pation.

Specialty retailers can use coupons to increase trip frequency or change trip type all together. Reposition the weekend smoothie into a daily offi ce breaktime treat with a “BOGO for a friend” reusable coupon.

Drive basket ring and trip frequency by offering simple percentage-off coupons, usable on and offl ine through the entire category.

Retailer coupons that are accessible and usable across mutliple media channels have greater opportunity to get into the hands of the shop-per; FSIs, direct mail, online, mobile, and loyalty-card coupons need to be in sync.

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Shopper summary tables

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The Integer Group® is one of America’s largest promotional and retail marketing agencies and a key member of the TBWA\Marketing Services portfolio. The Integer Group resides At the Intersection of Branding and Selling® and creates strategic marketing solutions for clients in categories that include beverage, packaged goods, telecommunica-tions, fast food, home and shelter, and power sports. Join Integer® in a conversation on shopping culture and brand strategy at:

The Integer GroupCraig ElstonSr. VP, Insight & [email protected] West Alaska DriveLakewood, CO 80226tel +1.303.393.3474

M/A/R/C® Research is a brand develop-ment fi rm dedicated to helping clients create, evaluate, and strengthen their brands. Our teams design and execute qualitative and quantitative, traditional, and online solutions while adhering to a client-service ethic built on being easy to work with and delivering what is promised. Our core competency is measuring attitudes and behaviors to accu-rately explain and predict market share,revenue, and bottom-line impact of a client’s actions. We help our clients address con-sumer, channel, and B2B marketing issues to launch better products and services attract and retain valuable customers, and build stronger brands. Our proven, marketing-is-sue-focused solutions support clients’ brand-building efforts.

M/A/R/C ResearchRandy WahlEVP, Advanced [email protected] North Westridge CircleIrving, TX 75038

Visit us at www.shopperculture.com

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The Checkout is based on a nationally representative survey of 1,200 U.S. adults conducted monthly by M/A/R/C Research. Please contact us to learn more about the data we collect or additional analysis.

©2010 by The Integer Group® and M/A/R/C® Research. All rights reserved.The data contained in this report may be reproduced in any form as long as the data is cited from The Integer Group and M/A/R/C Research. www.ShopperCulture.com.

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the checkout 3.10 - coupons issue

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