Monday, February 04, 2013

How mobile coupons could clip newspapers

The rapidly expanding adoption of mobile couponing is poised to become a major challenge to one of the most profitable and important revenue streams remaining for newspapers: preprint advertising circulars. 

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. 


Blogger Larry G said...

You are right on Alan. However, the "opt out" may also block the door for mobile (at least phone) couponing. We still don't know whether phone users will embrace the coming couponing and messaging bombardment or simply ask to opt out. For tablet users, it's whole new ballgame and one that could be very viable.

3:59 AM  
Blogger Gary Meo said...

When asked how they usually obtain cents-off coupons, 53% of U.S. adults age 18+ said newspaper; 31% said mail and 17% said websites or text messages. Scarborough USA+, R1 2012.

5:15 AM  
Blogger Gary Meo said...

When asked how they usually obtain cents-off coupons, 53% of U.S. adults age 18+ said newspaper; 31% said mail and 17% said websites or text messages. Scarborough USA+, R1 2012.

5:16 AM  
Blogger Newsosaur said...

From Patrick Waishe:

For what it is worth, I have consulted with mobile start-ups in Canada since 2006 (was previously CEO at SMG here). I was (and remained) convinced that mobile was the ideal medium for FSI’s.

In fact, when I was at Spreed Inc., we were able to sell H&M a mobile FSI on the Metro Canada mobile platform. We called in m-Flyer.

Based on my experience, there are significant barriers / challenges to m-coupon and m-flyer uptake.

1) Unlike all other retail classifications which have experienced huge y-o-y revenue declines, FSI revenue remains stable. This is a function of retailers’ absolute dependence on flyers as a known source of business - have always thought that FSI’s are the crack cocaine of retail. Retailers are extremely reluctant to re-deploy FSI spending because they cannot predict results. FSI’s are essential to retailers, FSI’s are essential to newspapers, the impact of moving from print to mobile is not well understood. There is no strong incentive for newspaper to change the status quo. The newspaper industry has a great track record of not challenging the status quo.

2) Retailers have long experience in tracking couponing within their current POS systems, most of which cannot “read” coupons on mobile devices. Use of PIN#’s puts added pressure on check-out staff, slows traffic at check-out. Tracking mobile coupons requires a significant investment in POS technology, a cost that many retailers are not yet persuaded to take.

3) You may have a better understanding of pricing practices, but in my experience, newspapers have not clearly understood how to price their mobile products. Typically mobile was seen as an extension of existing digital products and simply folded in to existing rate cards at a comparable CPM.
It would seem to me that the newspaper industry would be well served by creating a dedicated mobile/m-commerce task force which works directly with retailers to:
· demonstrate the power of m-commerce with real-time, real market results
· creates specific, predicable ROI models to facilitate moving from one medium to the other
· understand how to best integrate tracking mechanisms within current and future POS technology

Look forward to reading your commentary. The industry needs your clear-headed assessment of the state of the newspaper business.

10:44 AM  
Blogger Unknown said...

The point when asked how they typically acquire pennies off coupons, 53% of U.s. grown-ups age 18+ said daily paper; 31% said mail and 17% said sites or quick messages supplies-outlet-coupons .

3:09 AM  

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