A decade ago, coupons frequently had a “shelf life” of six months or more. The same coupon today will likely expire in six weeks or less. Why?
As with most issues, things are more complicated than they seem. All of the reasons revolve around the need to convince the consumer to purchase the product. NOW.
A large number of manufacturer coupons are produced as promotions introducing new products. In the early 1980’s, new consumer packaged goods were introduced at a rate of roughly 2,500 a year. By the late 1990’s, the number of new products has risen to more than 25,000.
The average grocery store holds about 40,000 items. Competition for shelf-space is, well, an understatement. Manufacturers pay “slotting fees”, also known as purchasing shelf space, just to make the items available to the consumer. They must compete to keep their product on the shelf. The grocery store needs to sell the product at a profit to keep the product on the shelf.
Failure rates for new products are estimated to range from 50 – 90%.
One way of addressing this problem is the coupon. Coupons highlight products, introduce them, add incentives and encourage consumer to at least try the new product. Manufacturers can also buy “category exclusivity” in those Sunday inserts, meaning that there will be no other ads running the same type of product on any specific date, in the same markets; at the high end, they can purchase category exclusivity for in-store coupon machines.
Whatever marketing and coupon strategy is used, it needs to work quickly. Other products and manufacturers are not only competing for the shelf space, but purchasing it out from under each other. Those newspaper inserts aren’t inexpensive, either: Smart Source magazine’s average charge is $3.28 per every thousand coupons produced; with a circulation for 69 million, it adds up.
Internet marketing is also more expensive than it may seem on first glance. Suppliers still pay slotting fees, only to gain access to sites for their products, to place information such as banner ads and site links, and to obtain visibility on screens and through pop-up windows. Same song, difference verse, and the melody is always “cost per marketing dollar.”
The large manufacturers can absorb these costs across their established products lines. Smaller manufacturers, with new products struggling to emerge, need to recoup costs quickly and establish a loyal customer base almost immediately. Enter the expiration date.
The shorter the expiration date, and the closer the “valid through” dates are to any other marketing promotions like television or internet ads, the bigger the bang for the buck. Statistics also clearly show that the redemption rate decreases the longer the coupon remains valid. The “pressure” to use the coupon and purchase the product before the expiration date helps the suppliers move the products along.
Besides, with the large failure rate, there’s a very good chance that if you haven’t used the coupon before the expiration date, the product itself will have expired.