How mobile coupons could clip newspapers
The good news for publishers at the moment is that newspapers carry 90% of the printed coupons issued annually by consumer-products companies in the United States, according to a mid-2012 survey by NCH Marketing Services, a division of the Valassis direct-mail company that serves as a clearinghouse for many of the billions of coupons redeemed every year. NCH says 305 billion coupons were issued in 2012.
But things could be about to change, as consumers and marketers rapidly embrace the power of mobile phones to deliver the right deal at the right place and time to exactly the right customer. While only 6.0% of mobile phone owners used mobile coupons in 2011, the number rose to 16.3% in 2012 and is projected to leap to 24.3% by 2014, according to eMarketer, an independent research company.
As reported here previously, preprinted ad circulars represent about a quarter of the advertising volume (chart below) of an industry whose aggregate revenues last year likely came in at less than half the all-time high of $49.4 billion achieved in 2005. Final 2012 statistics have yet to be reported by the Newspaper Association of America, so this projection is based on the industry’s performance in the first nine months of the year.
In addition to being a major revenue source for publishers, preprints have an even bigger impact on profitability. “Preprint advertising accounts for 70% of the Sunday revenues at the average newspaper,” said one industry executive who declined to be named because he is not authorized to speak for his organization. With the Sunday paper producing “most of the profitability” for many publishers, he added, the health of the preprint business has a significant bearing on the bottom line of almost every publisher.
Carefully targeted mobile coupons appeal to consumers not only for the money they save but also for the uncanny immediacy and relevance they represent. Mobile coupons appeal to marketers because they are highly targetable and granularly trackable; can be issued on the fly in response to changing business conditions; are cheaper and more reliable to distribute than printed circulars, and – perhaps best of all – much more likely to be redeemed.
NCH, the coupon clearinghouse, reports that only 1.1% of coupons in free-standing newspaper inserts and only 1.4% of coupons in run-of-paper ads were redeemed in the first half of 2012. But mobile-coupon advocates say they can do way better than that – at a fraction of the cost.
Referring to FSIs as “f-ing Sunday inserts,” Adam Lavine, the chief executive Fun Mobility, one of the many emerging companies hoping to cash in on mobile couponing, told a meeting last week of the Mobile Marketing Association (MMA) in San Francisco that the effectiveness and efficiency of mobile delivery was bound to divert marketing dollars away from print.
“This is happening a lot faster than you think,” said Chris Wayman, the head of the mobile marketing practice at Merkle, a direct-marketing agency, who appeared with Lavine on a panel at the trade group's conference. Without identifying his clients or other specifics, Wayman said some of his travel-oriented campaigns resulted in 25% to 40% redemption rates while driving purchases that are 12% to 14% higher than via traditional channels.
The shift from print to mobile couponing “is reaching critical mass,” agreed John Morgan, the executive director of the Association of Coupon Professionals, a trade group whose members include such advertisers as Campbell Soup, Coca-Cola, Kellogg, Target, Unilever and Winn Dixie.
The Starbucks mobile app illustrates the potential for this emerging medium, said Brent Hieggelke, the chief marketing officer of Urban Airship, a provider of mobile publishing technology. The free app is built around a customer-loyalty program that allows customers to pay for products at the same time they accumulate points toward free drinks. Hieggelke said he used a recent award to sample a cup of Starbucks' new individually brewed coffee. “Even though it costs twice as much as a regular coffee,” he said, “I sometimes now buy it on my own.”
Noting that mobile couponing captures more actionable data about customers than print, Forrester market analyst Sarah Rotman Epps said the biggest value in mobile couponing may be in “upselling and retaining customers, not in initial acquisition.”
One of the obstacles to increased mobile couponing is that there is no ecosystem to support marketers like the one long in place for print. To address this shortcoming, the MMA has launched an initiative to create industry standards for the creation, distribution, discovery, redemption and reconciliation of mobile coupons.
As discussed in this prior post on the master apps coming from the leading tech companies, mobile couponing also will get a boost from such native smartphone tools as Apple's Passbook and Google's Wallet.
Up to now, said Epps, no one has put together “the right mix of convenience and value” to bring mobile couponing to scale. But, she added, it is only a matter of time “until new entrants will disintermediate the existing channels.”
Unless publishers get together to leverage their relationships with local businesses to create their own mobile-coupon ecosystem, they almost certainly will be among the disintermediatees.
NAA battles to halt Valassis deal
In another challenge to their long dominance in couponing, publishers were jolted last summer when the U.S. Postal Service gave Valassis, the competing direct-mail distribution company, a discount that will allow it to mail certain types of national retail preprints for 42% less than newspapers are required to pay.
A federal appeals court in September denied an emergency injunction requested by the Newspaper Association of America to block what it characterized as a “sweetheart” deal. The NAA reports that it will continue to challenge the rate break in a series of legal proceedings scheduled for the spring.