Coupon-Redemption Conventional Wisdom Sometimes Foolish

August 9, 2007

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Overall coupon redemption rates are in decline in North America, and some of the conventional wisdom on couponing is out of date or simply wrong, according to ICOM, which studied redemption trends derived from its 20-year database.

ICOM said the data is from 6,300 targeted direct mail programs it has designed and 425 million coupons it has issued to 28 million US and Canadian households that voluntarily provide information about their purchasing preferences.

According to ICOM, the Top 10 “myths” about coupon redemption are these:

  • Myth #1: Short-term expirations drive immediate sales.
    Finding: Consumers need more time. A short expiry often cuts redemption far more than any increase in value can make up.
  • Myth #2: Higher value always equals higher redemption.
    Finding: Value alone isn’t enough. Maximum redemption comes from an optimal value-expiration sweet spot.
  • Myth #3: Store brand users aren’t worth pursuing with target coupon offers.
    Finding: As store brands upgrade their quality, fewer store brand consumers will be price-centric and more will be quality and feature conscious. They’ll often redeem targeted offers at rates as high as other competitive users.
  • Myth #4: Targeting the most loyal users of a competitor’s product yields the best return on a coupon program.
    Finding: Light to moderately loyal competitive users are more likely to try a new product and will do so on a lower-value coupon offer.
  • Myth #5: The presence of a sample is a requisite for driving high redemption rates.
    Finding: There are other factors much more likely to drive redemption rates. Some of those include expiration, value, current vs. competitive user, and frequent vs. infrequent coupon user.
  • Myth #6: The current users of a product don’t need long expirations to get them to redeem a coupon offer.
    Finding: Even for current users, to gain more than two-thirds of potential redemptions, offers must be six months at minimum, and in the 10-12 month range for personal care categories like skin and beauty products.
  • Myth #7: Coupon clutter is pervasive in all delivery strategies.
    Finding: Escalated volume is not a factor in targeted coupons mailed directly to homes. Notably, targeted promotion redemption rates are up in this sector for household products and pet products.
  • Myth #8: Coupon offers on frequently purchased items are redeemed quickly, so an expiration of less than six months will do.
    Finding: Targeted offers with expirations shorter than six months in general have only half as many redemptions as longer term offers.
  • Myth #9: Current and competitive product users need the same coupon value to be motivated.
    Finding: In any product sector, current users typically require much less offer value to drive them to purchase. Sectors vary, but it often takes 40% less value to move a current user than a competitive user.
  • Myth #10: Americans and Canadians share the same coupon redemption behavior.
    Finding: There are shared traits, but the difference in absolute redemption rate is substantial. Americans receive 10 times more mail than Canadians and are less likely to respond to offers. Canadians favor contemplation over quick action and require longer expiration terms. The net result: the decline in overall coupon redemption rates is steeper in the United States.
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