Suppliers are throwing away millions each year on deep-discount coupons.
Discounts bigger than 25% have minimal benefits in persuading shoppers to try a new product, no influence on subsequent loyalty, and could be costing the industry nearly £200m a year, warned the Institute of Promotional Marketing (IPM).
A survey of more than 1,400 shoppers revealed over half would try a different brand if given a money-off coupon worth 5p to 50p if both the rival product and their usual brand cost £2. Just 27% said the discount would need to be at least £1. This would represent a significant mark down on the current average discount of 48%.
Surprisingly, customers were more loyal to a product they tried because of a coupon when the discount was lower. Three in ten who had used a coupon worth 15p to 20p stayed with the new product afterwards but only 25% who redeemed a coupon for £1 or more kept buying it.
Nearly 90% of people said they had tried a different brand because of a money-off coupon. Coupon redemption has shot up 70% in the last two years, with £813m redeemed in 2009, according to figures from coupon experts Valassis.
"Companies always end up with the largest discount they feel they can afford, typically without good reason," said IPM's head of insight Colin Harper. "If a 25% discount is what's needed for most people to try a new product, as it is for a £2 item, manufacturers and retailers could be giving away an extra £200m without a tangible benefit."
One major dairy brand managed to achieve a 26.8% cost saving by reducing its coupon face value by 25%, according to Valassis MD Charles D'Oyly. This was achieved at the cost of only a 0.66% reduction in redemptions compared with past campaigns.
The research was conducted for IPM by Fast.MAP.
Colin Harper is speaking on Compliance: how to ensure retailers comply with your investment, at The Grocer's Trade Promotion Conference on 6 July in London. Call 01293 910279 or visit www.thegrocer.co.uk/tradepromotion.
Discounts bigger than 25% have minimal benefits in persuading shoppers to try a new product, no influence on subsequent loyalty, and could be costing the industry nearly £200m a year, warned the Institute of Promotional Marketing (IPM).
A survey of more than 1,400 shoppers revealed over half would try a different brand if given a money-off coupon worth 5p to 50p if both the rival product and their usual brand cost £2. Just 27% said the discount would need to be at least £1. This would represent a significant mark down on the current average discount of 48%.
Surprisingly, customers were more loyal to a product they tried because of a coupon when the discount was lower. Three in ten who had used a coupon worth 15p to 20p stayed with the new product afterwards but only 25% who redeemed a coupon for £1 or more kept buying it.
Nearly 90% of people said they had tried a different brand because of a money-off coupon. Coupon redemption has shot up 70% in the last two years, with £813m redeemed in 2009, according to figures from coupon experts Valassis.
"Companies always end up with the largest discount they feel they can afford, typically without good reason," said IPM's head of insight Colin Harper. "If a 25% discount is what's needed for most people to try a new product, as it is for a £2 item, manufacturers and retailers could be giving away an extra £200m without a tangible benefit."
One major dairy brand managed to achieve a 26.8% cost saving by reducing its coupon face value by 25%, according to Valassis MD Charles D'Oyly. This was achieved at the cost of only a 0.66% reduction in redemptions compared with past campaigns.
The research was conducted for IPM by Fast.MAP.
Colin Harper is speaking on Compliance: how to ensure retailers comply with your investment, at The Grocer's Trade Promotion Conference on 6 July in London. Call 01293 910279 or visit www.thegrocer.co.uk/tradepromotion.
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