Busting The Myth About The Quality Of Free Standing Insert Coupon Redemption

1. CSI Meets FSI:
Busting The Myth About The Quality Of
Free Standing Insert Coupon Redemption
By Valassis
Marketing Intelligence Department
January 2011 valassis.com 1

2. Myth: Free Standing Inserts (FSIs) only reward current brand buyers.
Reality: New and lapsed brand buyers make up the majority of FSI
coupon redemption.
Coupon distribution and redemption have experienced a resurgence in popularity with
the economic downturn that started in Q3 2008, yet marketers still have
misperceptions. Therefore, an in-depth analysis has been conducted; consider it a
Coupon Success Investigation (CSI) of the Free Standing Insert (FSI). The following
paper confirms through primary analytical findings by Valassis that coupon offers
delivered through FSIs do not solely reward current brand buyers (a common belief of
marketers), but also drive purchases among new and lapsed brand buyers. The study
illustrates that 57% of FSI redeemers are either new or lapsed consumers of the
promoted brand, which validates the FSI as an effective vehicle for generating trial
and conversion.
WHAT IS THE FSI?
For nearly 40 years, the Cooperative Free Standing Insert (FSI) has enabled
advertisers to run four-color print ads and coupon offers delivered in the newspaper,
or in some cases in the mail. Consumer Packaged Goods (CPG) manufacturers (i.e.
Grocery, Health & Beauty), Grocery Retailers, Direct Marketers, Restaurants, Retail
and many other industries have grown accustom to leveraging the FSI’s national and
regional distribution flexibility to drive traffic and incremental sales for their brands.
According to the 2010 NCH Topline Coupon Facts clearing and redemption study, the
1
FSI represents 87.7% of all CPG coupon distribution .
PERSISTENT MYTH
In the last four decades, during every rise and fall in economic times, advertisers
have leveraged the low-cost, mass-reach FSI to drive brand awareness and product
trial as part of their overall marketing strategy. In classic form, during the most recent
economic recession starting in 2008, brands increased distribution of coupons through
the FSI in record breaking year-over-year numbers. Despite the trends, an age-old
debate looms about the “quality of response” the FSI is generating among consumers.
For years, CPG advertisers have wanted to understand if FSI redemption is only
rewarding loyal (current) brand buyers, or is it also encouraging non-brand buyers
(lapsed or new) to buy the product?
White Paper: CSI Meets FSI 2

3. The ideal scenario for brands is to minimize rewarding customers that currently
buy the brand (loyals), yet keep awareness top of mind while driving new customers
to their featured products with enticing coupon offers. Until now, the challenge has
been proving that the FSI is driving both current and non-buyers to the promoted
brand. In the past, brands or retailers could only capture Point-of-Sale (POS) data
and did not connect it to consumer purchase behavior tied to FSI redemption. The
connection between coupon redeemers and prior purchase behavior could only be
derived by qualitative studies – asking coupon users in the FSI drop zones how
recently they have bought the brand and if they used a coupon to make the purchase.
This leads to directional insights at best.
SOLVING THE MYTH
FSI Redeemer Segmentation using Grocery Retail Frequent Shopper Card Data
In 2007, through a collaboration among grocery retailers, CPGs and Valassis,
a breakthrough in measurement methodology was conceived which now allows
advertisers to measure the effectiveness of redemption driven by the FSI using POS
driven Frequent Shopper Card (FSC) data. This enhanced data allows us to look
at a broader spectrum of consumer behavior - their purchase habits and
redemption tendencies.
For approximately four years, Valassis has aggregated response data from over
420 FSI events amounting to nearly 17 billion in FSI circulation. The response
data is mined through a proprietary data collection system which tracks FSI coupon
redemption at specific grocery retailers that have FSC programs and identifies if the
redeemer is either a new, lapsed or current brand buyer.
HOW IT WORKS
Quality of Redemption Analysis Defined:
Quality of Redemption (QOR) is essentially a redemption segmentation analysis
that ties FSC purchase history to the FSI coupon transaction to enable marketers to
understand whether the promotion is driving new, lapsed or current customers to the
promoted brand.
For a majority of the FSIs analyzed, the following redeemer type classifications are
used, but there are some cases when a seasonal item may require a custom set of
timeframes to define each segment.
White Paper: CSI Meets FSI 3

4. Redeemer Types Defined:
Purchase history of the promoted brand drives the definition for whether a consumer
that received the FSI coupon and redeemed it is either a new, lapsed or current buyer
of the promoted brand.
New Brand Buyers: Have not bought the promoted brand in the 12 months prior
to redeeming the FSI coupon.
Lapsed Brand Buyers: Have not bought the promoted brand in the 6
months prior to redeeming the FSI coupon, but did buy the promoted brand in
the previous 6 months.
Current Brand Buyers: Have bought the promoted brand in the 6 months prior to
redeeming the FSI coupon.
In addition to these three primary redeemer types, a fourth redeemer type emerges
called Switchers. This group represents redeemers who are new to the brand but
were already buying in the category.
Data Collection:
The purchase history of redeemers is aggregated using grocery retail frequent
shopper card data. Valassis established proprietary partnerships with several grocery
retailers that offer FSC programs which now make up a standard network of data
providers for QOR measurement. Leveraging these partnerships with retailers using
opt-in consumer purchase data provides CPGs a consumer-centric and non-invasive
method of accurately measuring the quality of FSI redemption.
Quality control measures are also applied to the data to ensure that store cashiers’
and managers’ cards are excluded.
Projection of the Data:
To insure the data can be projected to the U.S., only nationally covered programs
are evaluated. The minimum circulation is typically 30MM while the maximum reach
is around 60MM. The minimum level of coupons analyzed per event is 1,000
redemptions across the entire retailer network.
Additionally, the demographic make up of FSC users within the retailer network has
been examined through BIGresearch via the Simultaneous Media Usage Survey and
is confirmed to be demographically similar to total U.S. grocery shoppers.
White Paper: CSI Meets FSI 4

5. PROVEN REALITY
FSI Redeemers Are New Or Lapsed Brand Buyers
The most recent data, aggregated over the last 4 years, clearly shows that the
FSI drives trial and awareness of the promoted products with 57% of FSI coupon
redeemers classified as new or lapsed to the promoted brand. Further, the FSI also
builds the promoted brand’s category where 29% of redeemers are new or lapsed to
2
the category .
In more detail, 46.8% of redeemers are new brand buyers and 10.1% are lapsed
brand buyers. Brand switchers make up 27.4% of FSI redeemers; these are
2
households who have purchased the category but not the promoted brand .
White Paper: CSI Meets FSI 5

6. Quality Of Redemption: By Department
Among departments tracked that have sufficient sample sizes to report, Health and
Beauty Care (HBC) ranks highest with 63% of redeemers being new or lapsed to the
2
brand, followed closely by Frozen (59%), Edible (57%), and Non-Edible (52%) .
Edible has the highest percentage of brand switchers (29.5%), followed closely by
2
Frozen (28%) .
Non- *Other
Key Measures Edible Frozen HBC Edible Total
Number of Events 218 49 61 78 14 420
Average % New/Lapsed
- Brand 56.7% 58.9% 63.0% 51.9% 56.9%
Average % New/Lapsed
- Category 26.1% 31.6% 42.4% 25.2% 29.0%
Average Brand Switchers 29.5% 28.0% 22.7% 25.4% 27.4%
*Other departments tracked including Dairy (13 events) and General Merchandise (1 event) will be reported
in future releases once a sufficient sample size is established.
Loyalty Churn: Where Have My Loyal Shoppers Gone?
Quality of redemption analysis not only proves that the FSI is engaging with new and
lapsed brand buyers, but deeper analysis also shows that among loyal brand buyers
(defined as the top 30% of customers in terms of brand spend) only 34% are still in
that top 30% one year later. Furthermore, 22% of loyal brand buyers switched to
2
competitive brands one year later (i.e category only shoppers).
This downward shift in spend among loyals is known as “loyalty churn,” a spending
migration measure that identifies when a loyal brand buyer (the top 30% in spending
for the brand) becomes non-loyal after a one year period. The buyer either drops
below the top 30% in brand spend, becomes a competitive brand buyer, no longer
shops the category, or simply is no longer shopping at the store.
6
White Paper: CSI Meets FSI

8. To improve your coupon success or further investigate the QOR analysis and the
additional benchmarks tracked for the FSI, please contact Valassis at 1-877-529-5001
or valassis@valassis.com.
ABOUT VALASSIS
Valassis is one of the nation’s leading media and marketing services companies,
offering unparalleled reach and scale to more than 15,000 advertisers. Its RedPlum™
media portfolio delivers value on a weekly basis to over 100 million shoppers across a
multi-media platform – in-home, in-store and in-motion. Through its digital offerings,
including redplum.com and save.com, consumers can find compelling national and
local deals. Headquartered in Livonia, Michigan with approximately 7,000 associates
in 28 states and eight countries, Valassis is widely recognized for its associate and
corporate citizenship programs, including its America’s Looking for Its Missing
Children® program. Valassis companies include Valassis Direct Mail, Inc., Valassis
Canada, Promotion Watch, Valassis Relationship Marketing Systems, LLC and NCH
Marketing Services, Inc. For more information, visit: http://www.valassis.com,
http://www.redplum.com or http://www.save.com.
Sources:
1
NCH, a global leader in business solutions for redemption, settlement and promotional analysis.
2
Valassis, a leading U.S. media and marketing firm that designed the proprietary data collection
methodology for FSI Quality of Redemption Analysis using FSC transaction data presented
in this paper.
White Paper: CSI Meets FSI 8