We have all been engrossed in the spread of the COVID-19 epidemic, the disruption in our normal lives and the complete shut-down of our economy. Our country is looking at record unemployment claims, with over 16 million filing in the last 3 weeks. That number will continue to rise as social distancing and shelter in place orders are handed down state to state. But while many small businesses are struggling to survive, supermarkets and CPG brands have a very different problem.
Consumers are clearing grocery shelves, overloading online shopping carts and finding whatever ways they can to get the products they need. Price is not the main concern—consumers are just grabbing what they need at whatever cost. A friend of mine summed up the situation pretty well saying, “I just need to know that I have extra rolls of toilet paper and plenty of chicken nuggets for my kids.”
Consumers are feeling uncertainty and overwhelming insecurity in the likes this country has not seen since the Great Depression. And yet, we know there has to be a light at the end of the tunnel. This will end. And then we will get back to normal. Right? Even as it relates to Consumer Promotions. Maybe. But a lot was already changing in CP before all of this, especially in the areas of incenting consumers with coupons and other offers.
As a marketing agency with a focus on Consumer Promotions, we have been evolving any couponing element of our programs over the last few years. Not so long ago, a printed Free Standing Insert (FSI) was the best way for a brand to reach a mass audience with their coupon programs. But over the last few years, we, like the rest of the industry, have seen declines in redemption for most of our clients using this vehicle. The industry has attributed this to a good economy, reduced newspaper circulation and millennial moms not subscribing to traditional media.
All fair and logical points, but people were still looking for ways to save money. And now, with an economy that has drastically changed, it would make sense that redemption would rise.
At the P2Pi Conference in November of 2019, we heard direct from retailers they were pushing CPG Brands to get on the bandwagon of support at the digital shelf (including Click n Collect). They want to see more loyalty programs, specific to their shoppers, purchased directly on their channels.
In our planning for 2020 programs, we were looking at additional alternate ways to reach consumers using digital programs like coupons.com and mobile incentive programs like Ibotta, being layered on top of traditional tactics. While these tactics don’t provide the scale of a traditional FSI, they enable highly specific targeting of offers in ways that an FSI does not.
So, it was to be a layered approach for 2020 using all the tools in our toolbox and providing our clients with a mixed approach to consumer promotions. We recognized that we needed to push the envelope and target new users, not incentivize loyal consumers who are likely to purchase brands whether they are on deal or not.
Then COVID-19 hit, and products started flying off the shelves. Availability is suddenly king. Brands and supermarkets were quick to react to this disruption, canceling consumer and trade promotions alike, until such time that products become more readily available. How long this will take is anyone’s guess.
So now as we pause and take a look at this new landscape, what will be the effect on how consumers shop and use coupons? And how will brands adapt?
Progressive Grocer cited the Brick Meets Click/ShopperKit Online Grocery Shopping Survey, conducted last week, reporting that “new research shows 31% of U.S. households (about 39.5 million in total) have used ecommerce for groceries in the past month. In August 2019, that number was 13%.”
Many other stats out there talk about massive increases in online shopping for groceries, first time orderers and the like. There will be a rebalancing, but some behavior changes have certainly been accelerated. CPG brands need to be mindful of these changes. And they will need to provide support at the digital shelf. Most online grocery sites allow CPGs to provide offers through the retailers’ loyalty cards that can be activated in the cart. You’ll see a lot more of this.
For those consumers who have their pantries and freezers maxed out, it could be 3-6 months before we see them go back to normal patterns. But according to Path to Purchase, there are lots of consumers looking for coupons and savings and will continue to do so after the crisis is over. This makes sense. After the initial frenzy, with money tight and job losses mounting, looking for ways to save and be smart are quickly returning. So couponing, comparing costs via circulars, making shopping lists and bulk meal planning are essential right now in millions of households. And that trend will continue unless we see some real upturns in the economy.
The pandemic has also created one of the largest trial programs in modern times, or maybe, ever. With the lack of product on shelf, consumers are being exposed to other lesser brands and more private label products and have randomly switched their routine brand purchases simply based on availability. Private label is already a brand’s greatest threat, and moving forward, brands are going to need to incentivize loyal consumers, in order to get them back and keep them in the fold.
On the flip side, those brands that have found a moment in the sun can take advantage of this unique opportunity. They are gaining unexpected trial without incentives. According to an interview in the April 1, 2020 Food Navigator USA.com e-newsletter, done with Joan Driggs, Vice President, Thought Leadership, IRI, she recommends that these smaller brands begin to increase marketing and trade spends in order to reach consumers looking for savings.
In the end, consumers are looking for brands that are in this fight with them and are willing to provide discounts to help with the overwhelming effects of COVID-19, now and in the future. So incentives and coupons aren’t going anywhere. They will actually be more important in the foreseeable future. And an important tool in your CP arsenal.