2016 Canadian Coupon Market Review

[Pages:8]2016 Canadian Coupon Market Review

Market Overview

The promotional marketing landscape in Canada continued to evolve in 2016 with a growing number of methods available for marketers to influence shopper purchase decisions. Couponing remained an important and proven tactic in marketers' tool kit that can effectively target consumers at various stages in their shopping journey.

The growth in available options has fragmented promotional marketing spending, contributing to declines in both distribution and redemption of coupons in Canada in recent years. Marketers continued to run successful traditional coupon programs, just at a lower rate than previously, as a wide range of couponing media remain highly efficient and effective at achieving program objectives.

In 2016, total paper coupon distribution declined from 6.2 billion in 2015 to 5.1 billion in 2016. The decline in total coupons distributed, along with a shift in the mix of distribution media, resulted in 15% fewer coupons redeemed in 2016, for a total of 57 million.

The main reason for the decline in total distribution was that marketers executed fewer Free Standing Insert (FSI) coupon programs. That primarily impacted the Household and Personal Care product categories which in recent years have featured the highest concentrations of FSI coupon distributions. In-Store coupon distribution was also lower in comparison to 2015, with the greatest impact to the Food category.

While the Food and Personal Care categories had the largest decreases in redemption, Household maintained redemption levels comparable to 2015. The Pet and Infant Care categories saw redemption growth in 2016.

In our analysis of the 2016 coupon market, we have grouped the various distribution media into four categories that mostly relate to stages in the shopper's purchase journey.

The stages and distribution media that each of these include are as follows:

Pre-Shop

FSI, Magazine and Direct Mail. These coupons are generally delivered to or brought into the home, designed to impact purchase planning and intent.

In-Store

In-Store (At Shelf, Booklets, Demo) and Instantly Redeemable Coupons (IRC). These coupons are made available in store at or near the point of purchase decision, designed to impact unplanned purchases.

Post-Shop

In & On Pack (IOP). Coupons printed on or inserted inside products to be brought into the home and designed to influence subsequent purchases.

Digital

Internet coupons that are discovered or received through personal computers or mobile devices. As such, they can reach consumers at any of the three stages of shopping.

Across all categories, over 90% of coupons were distributed to shoppers via media targeting them prior to shopping. This proportion dropped slightly from 93% in 2015 to 91% in 2016, reflecting the above mentioned reduction in FSI coupon programs.

However, the 5% of coupons distributed via In-Store methods resulted in 51% of coupons redeemed in 2016, thus influencing a large number of consumers during the In-Store shopping stage. These included coupons distributed at shelf, in booklets, through product demonstrations and those that can be removed from the product and redeemed instantly at the time of purchase.

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2016 Canadian Coupon Market Review ? 1

All Categories

2015

Distribution 2016

2015 31%

Redemption 2016 30%

93% 91%

49% 51%

1% 4% 2%

1% 5% 3% 10% 10%

9% 10%

Pre-Shop

In-Store

Post-Shop

Digital

Looking at the results by category, the charts provide additional insights.

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2016 Canadian Coupon Market Review ? 2

Food

2015

Distribution 2016

2015 20%

Redemption 2016 19%

75%

15%

9% 1%

68%

19%

10% 3%

59%

12% 9%

62%

Pre-Shop

In-Store

10% 9%

Post-Shop

Digital

Pre-Shop: Accounted for 68% of the 2016 Food category distribution. This share was lower than the previous year due to decreases in Free Standing Inserts, Magazine and Direct Mail offers.

In-Store: The In-Store media group's share of distribution grew due to the decline of Pre-Shop offers. There was a shift in redemption within this media group whereby, for the first time, more redemptions resulted from Instantly Redeemable Coupons than from In-Store At Shelf coupons. This media group accounted for 62% of all Food category redemptions and highlights marketers' focus on using In-Store media to influence shopper purchases in this very diverse and competitive category.

Post-Shop: There was slight decline in redemption share in the Post-Shop media group vs. 2015. It is not uncommon to see year over year swings in Post-Shop redemption, such as In and On Pack Cross coupons, where the product carrying the coupon delivers it to an audience that is relevant to buyers of the couponed product. These collaborations between brands, and sometimes between companies, aren't always repeated from one year to the next, but can be cost effective opportunities to pursue.

Digital: Coupons distributed and discovered on the internet contributed 9% of all redemptions in this important product category. Overall, Food products continued to be the highest redeeming category accounting for 51% of all coupons redeemed in Canada in 2016. Redemptions were down across all media in the Food category contributing to total market declines.

At 68%, Pre-Shop distribution media were used to a lesser degree by marketers than in the other four categories, where Pre-Shop media accounted for between 92% and 96% of category distributions. This suggests that marketers believe that consumers make significantly more Food category purchase decisions in store. They allocate relatively more of their couponing budgets to media that can effectively influence them at that stage in their shopping journey.

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2016 Canadian Coupon Market Review ? 3

Household

2015 Distribution 2016

2015 Redemption 2016

96% 96% 59%

1% 1% 2%

1% 2% 1%

22%

7% 12%

52% Pre-Shop

31%

5% 12%

In-Store

Post-Shop

Digital

Pre-Shop: Despite a 32% decline in distribution for FSIs vs. 2015, the Pre-Shop media group maintained its 96% share of distributions due to marketers' higher use of Direct Mail and Magazine offers. With a 52% share of redemptions in this 3rd largest redeeming product category, marketers of Household products influenced more planned purchases with coupon offers than in any other major category.

In-Store: Looking at In-Store results, we can see that marketers also influenced a significant number of purchases in store, with a 31% share of all coupons redeemed in this category. These redemptions were split roughly evenly between In-Store (At Shelf, Booklet and Demo) and IRC. In 2016, In-Store gained the share of redemption that was lost by Pre-Shop and Post-Shop methods combined (+9%). It is also worth noting that since 2014, In-Store coupon vehicles have more than doubled their share of redemptions in the Household products category, from 14% to 31%. Higher face values and longer offer durations for In-Store and IRC offers were contributing factors in 2016, suggesting marketers may have taken a more aggressive approach at influencing decisions made in store.

Post-Shop: This media group continued to account for the smallest share of the four media groups, in terms of both distribution and redemption. This is not surprising given the challenges that can be associated with printing coupons on pack or inserting them in pack due to the nature of some product packaging in this category. As well, some subcategories of Household products may

likely have longer purchase cycles than many products in the Food and Personal Care categories, making PostShop methods relatively less effective at impacting future purchases of Household products.

Digital: With a 12% share of redemption, unchanged from 2015, Internet coupons continued to be a useful method of targeting consumers primarily in an effort to influence planned purchases. Subcategories with higher purchase frequencies can be good candidates for Internet coupons and are often supported by other media to call attention to the availability of the coupon.

Despite declines in total Household category distributions, redemption held steady vs. 2015 (-1%). There were significantly fewer FSI coupons distributed and redeemed while other media grew to offset those declines. The category also became more diversified in the types of media that were utilized by marketers and redeemed by consumers. Direct Mail, Magazine, In-Store (Shelf, Demo and Booklets) all grew in distribution, resulting in redemption growth in those same media. The strongest redemption growth occurred with IRC and In-Store media.

Several large companies compete in the Household products category, often with multiple strong brand offerings across many subcategories, presenting consumers with a variety of good purchase options. Given the number of strong competitors in this category, opportunities may exist for some to differentiate by issuing coupons through media not heavily used by other brands.

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2016 Canadian Coupon Market Review ? 4

Personal Care

2015

Distribution 2016

2015 34%

Redemption 2016 31%

96% 95%

49%

.5% .5% 3%

1% 3% 1%

7% 10%

Pre-Shop

49% In-Store

7% Post-Shop

13% Digital

Pre-Shop: Fewer FSI coupons were distributed in this category, contributing to a decrease in distribution share for Pre-Shop media. This resulted in a reduction in redemption share for Pre-Shop methods from 34% in 2015 to 31% in 2016.

In-Store: Overall, In-Store media redemption share held steady at 49% of the product category. Within In-Store methods, Instantly Redeemable Coupons took a slight lead in terms of redemption share.

Post-Shop: Post-Shop media also maintained its share of redemption at 7%.

Digital: Internet had the 2nd largest increase in the number of coupons redeemed, after IRC, increasing its redemption share to 13%. Redemption in the Personal Care category declined by 12%, mainly due to declines from In-Store Shelf and FSI redemptions. Despite that, Personal Care remained the second largest redeeming product category in the Canadian market.

Marketers distributed 95% of their coupons via PreShop methods, which resulted in 31% of category redemptions. The remaining 69% of redemptions came from distributions comprised of all other media combined.

Despite the similarities in distribution shares between the Personal Care and Household categories, the mix of coupon media being redeemed were different in one important way. In-Store media accounted for the largest share of Personal Care redemption (49%) followed by Pre-Shop (31%), whereas in Household the opposite was true, with Pre-Shop at 52% and In-Store at 31%. Some of these differences in redemption may stem from how the products and shoppers differ between the two categories.

In the Household products category, the primary shopper may tend to buy one product in a specific subcategory for the whole household, such as one bathroom cleaner. On the other hand, in some Personal Care subcategories, the household's primary shopper may not be the only buyer and each person living in the household may use a different product, such as four different shampoos in a household of four people.

Personal Care is a vast category that includes a wide array of products within most subcategories, presenting shoppers with many suitable products to choose from when shopping, where their decisions can be influenced through In-Store media. Personal Care shoppers are also likely more diverse in terms of age and life stage. This suggests a diverse coupon media approach to influencing purchase decisions across all shopping stages.

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2016 Canadian Coupon Market Review ? 5

Pet

2015

Distribution 2016

2015 Redemption 2016

50% 38%

97%

.5% .5%

2%

96%

1%

2% 1%

43%

5% 2%

Pre-Shop

49% In-Store

Post-Shop

9%

4%

Digital

Pre-Shop: In the Pet Category, Pre-Shop was the method with the highest distribution decrease in comparison to 2015. This was due to lower distribution for FSI, Magazine and Direct Mail offers. The decrease in PreShop redemption share was mainly due to increases in redemption in all other shopping phases.

In-Store: As in Food, Personal Care and Household, IRC redemption for Pet products exceeded all other In-Store redemption media in 2016. IRC also had the largest redemption growth vs. 2015, followed by other In-Store media. Combined they accounted for 49% of coupons redeemed in the Pet category in 2016.

Post-Shop: This media group grew its redemption share from 5% in 2015 to 9% in 2016, while also increasing the total number of coupons redeemed. In and On Pack Cross offers accounted for 86% of the Post-Shop redemptions, highlighting opportunities that exist to encourage a purchase of a different product at a later date.

Digital: Digital's redemption share increase was driven mainly by free product coupons requested through the Internet. There is over redemption risk associated with issuing free coupons on the internet, however using the mail to home option might be an efficient way of distributing samples of lower priced products to target individuals. Risk for these types of coupons can also be mitigated by using very short expiry dates and ensuring proper safety controls are in place.

Overall, redemption in the Pet category was 35% higher in 2016 vs. 2015.

Opportunities may exist with In-Store methods to create spontaneous purchases and encourage trial in certain segments of the category where loyalties aren't as entrenched. An example might be the snacks and treats subcategory which accounted for 33% of In-Store redemptions in 2016.

? Copyright ? Inmar Promotions Canada, Inc. All Rights Reserved.

2016 Canadian Coupon Market Review ? 6

Infant

2015 Distribution 2016

2015 Redemption 2016

90%

5% 3%

2%

92%

2%

4% 2%

58%

8% 12%

22%

55% Pre-Shop

18% In-Store

10%

17%

Post-Shop

Digital

Pre-Shop: FSI and Magazine both increased distribution however Pre-Shop redemption share decreased due to higher growth from In-Store methods.

In-Store: Both distribution and redemption grew in 2016. In fact, the In-Store media group had the largest redemption growth in this category, up from an 8% share to 18%, fuelled mainly by growth from In-Store At Shelf coupons, followed by IRCs.

Post-Shop: In 2016, fewer marketers took advantage of the opportunity to drive brand sales by inserting coupons inside product packaging or printing coupons directly on the packaging. In and On Pack coupon distribution and redemption were both down in absolute numbers and resulted in Post-Shop media losing redemption share in this category.

Digital: There were fewer Internet coupons redeemed in 2016 which, against growth in most major coupon media types, resulted in a loss in redemption share. Despite this, at 17% Digital retained a higher share than it reached in all other product categories.

Infant category redemption was 11% higher vs. 2015. Pre-Shop methods had a greater redemption share than in any other product category. With a generally younger shopper base, digital is an important media to use in this category. Overall, this category appears to have the most balanced redemption by shopping phase.

There is likely a very high degree of brand loyalty in many product subcategories, which suggests that marketers may need to use higher face values to change their shoppers' purchase behaviour.

? Copyright ? Inmar Promotions Canada, Inc. All Rights Reserved.

2016 Canadian Coupon Market Review ? 7

Summary

The data presented provides two broad views of the Canadian coupon market in 2016. The distribution data indicates the coupon media choices marketers made in an effort to influence shoppers at different stages in their purchase journey. The redemption data tells us where they had success in engaging consumers and persuading them to purchase their products.

Across all categories, over 90% of CPG coupons were distributed using Pre-Shop methods in 2016, yet over 50% of the redemption resulted from the various In-Store distribution methods. In some cases, the results varied significantly by category. Analyzing the results of the categories in which you participate may offer helpful insights for planning future promotions.

? Copyright ? Inmar Promotions Canada, Inc. All Rights Reserved.

2016 Canadian Coupon Market Review ? 8

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