Coupon Use Skyrockets

In one of the most telling signs yet of new consumer frugality, annual coupon use is on the rise for the first time since 1992, according to Inmar, a promotion transaction settlement company. Coupon distribution last year hit the highest level recorded since Inmar began tracking trends in 1988.

For the first time in 17 years, consumers used more coupons than the year before; 3.3 billion packaged goods coupons were redeemed, a 27 percent increase over the 2.6 billion redeemed in 2008. The increase in coupon use began in October 2008, as the U.S. financial crisis took hold, and led to five consecutive quarters of double-digit growth.

“There’s no great hard-core data about whether there is a fundamental shift in consumer behavior but looking at the culture at large, we’re seeing and hearing about a fundamental shift toward back-to-basics, with people doing more to save money,” said Matthew Tilley, director of marketing for Inmar’s promotion services division.

As evidence of that, Tilley underscored the health of freestanding inserts, a coupon staple in Sunday newspapers. “FSIs continue to make up almost 90 percent of coupon distribution and over half of all coupons redeemed are from FSIs. That big dog grew at an even faster rate than overall coupon growth last year, a 36 percent increase to the overall growth of 27 percent,” said Tilley. “Despite the readership decline in newspapers, people are still willing to go back to their Sunday newspapers for coupons.”

Tilley doesn’t foresee coupon redemption continuing at current levels but expects growth of 3-5 percent annually in the foreseeable future.

The increase in coupon redemption goes hand-in-hand with an increase in distribution. Brands issued 367 billion coupons, at an average face value of $1.44, indicating their embrace of the promotions in these tough times. “Brands saw coupons as a key to maintaining brand strength,” Tilley said. “If they reduced their promotional presence, they stood to lose sales to lower-priced competitors and store brands.”

Food-related coupons dominated the first half of 2009, while ones for non-food drove distribution and redemption in the second half. Tilley said that in prior years, particularly 2008—when redemption levels were decreasing—the industry saw increases in the face value of coupons. Now, he said, the industry is seeing a complete reversal in the face of soaring demand: Brands are mitigating the cost of increased redemption by maintaining face values and keeping expiration periods in check. In 2009, face values declined by a penny, reversing a multiyear trend of increasing values. Expiration periods were shortened by 10 percent last year, after years of virtually no change.

Categories that traditionally haven’t been heavy users of coupons, like alcohol marketers, increased their coupon distribution last year.

While still a small factor, online coupons also contributed to the rise in coupon distribution and redemption in 2009, with Internet distribution up 92 percent and consumer redemption of these coupons up over 36 percent.