More coupons issued in 2005, but redemption fell
Coupon distribution increased by 10% in 2005, with total distribution now standing at 323 billion coupons per year (up nearly 30 billion over 2004), although consumer usage of coupons has fallen slightly, according to promotions management services firm CMS Inc.
The company's research found that 88% of the coupons in circulation were distributed via Sunday newspapers (using free standing inserts). In 2005, consumers redeemed 3 billion of the 323 billion coupons issued at retail stores across the United States, compared to 3.2 billion in 2004. These figures place the US national coupon redemption rate at 0.93%.
According to Matthew Tilley, marketing director for CMS, the fact that brand marketers put out an extra US$37 billion worth of coupons suggests that, although coupon redemption fell by 6% in 2005, there is still significant value in couponing as a promotion technique. Tilley observed: "Marketers are obviously counting on and getting advertising value, retail support, and direct sales improvements. Otherwise, we'd see them cutting back."
Coupon deflation One important consideration in the redemption rate of coupons is the face value. While a variety of market and economic factors influenced consumer response to coupons in 2005, deflation of coupon values emerged as a significant contributor to the falling redemption level.
Since 2001, the average value of coupons offered to consumers increased by almost 8% annually, outpacing inflation (which, in the USA, rose at a rate of less than 3%). But that trend reversed in 2005, when inflation reached almost 3.5% and average coupon values increased by less than 1% (to a national average face value of US$1.16).
Other tactics However, other coupon tactics remained relatively stable. Expiration periods stayed at an average of 2.9 months, with nearly 94% of all coupons expiring in less than 5 months. Purchase requirements improved slightly (from the consumer's point of view) with only 25% of all coupons requiring purchases of at least two products (down from 28% in 2004).
Longer-term trends, such as changing consumer demographics, have a marked impact on consumer response, although these are the most difficult to change. One example cited by CMS is the US Hispanic population, which makes up more than 12% of the national population yet accounts for less than 8% of coupon users. As the Hispanic demographic continues to grow, the gap is likely to widen further.