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Coupon Industry Overview.

Couponing is one of several methods used by manufacturers to promote and market their goods. In the late Nineteenth Century, Asa Candler, the pharmacist who bought the formula for Coca-Cola, sought to promote his new fountain drink by offering the first coupons in exchange for a free glass of the beverage. A year later, C.W. Post distributed coupons worth one cent towards the purchase of his new Grape Nuts cereal. Soon other consumer packaged goods manufacturers (CPGs) recognized the power and flexibility of coupons as a marketing tool and quickly followed suit. Over time, coupons have become an integral component of companies’ promotion strategies and one of the most important tactics used to drive business.

In 2001, marketer spending on coupon promotions totaled $6.5 billion, according to NCH Marketing Services. This spending resulted in a total coupon distribution in the United States of 239 billion units. Yet, as is characteristic of the business, consumers only redeemed 4 billion coupons, or less than 2 percent of those distributed. This resulted in a total consumer savings of $3 billion, given an average offer face value of $ 0.74.

The current process for coupon redemption is cumbersome and highly inefficient. In addition to the roundabout and time-consuming coupon lifecycle, which results in costly float and frequent misredemption, the nature of coupons in their current format causes problems across the value chain. Retailers complain that the processing of coupons at the point-of-sale is a burden for cashiers and can result in long checkout delays. Despite being compelled to use coupons because of the available savings, Consumers dislike spending the time and energy required to clip, sort, store, and redeem each week. Manufacturers fear fraudulent use (a study published in 1998 by the Joint Industry Coupon Committee estimated that 20 percent of total coupon redemptions are subject to misredemption and fraud) and hear frequent protests from retailers who complain about the inefficiencies caused by couponing. The associated costs of waste in the current couponing process are of major concern to CPG manufacturers.

"AMS" Advanced Marketing Systems, LLC