Retailers and CPGs bet on coupons to reach Hispanics

As U.S. consumer product companies and retailers develop ad campaigns targeting Hispanics, coupons are playing a more critical role in their marketing plans. “The industry has realized that there is huge potential there,” says Mary Oster, supervisor of coupon administration at Target. Target has been reaching out to Hispanic consumers with Spanish-language coupons in pharmacy booklets in Texas, California and Florida. Oster points out that many of these projects are still in the experimental phase. According to Bernie Kramberg, director of market intelligence at ADVO, more and more companies intend to target Hispanics with coupons, particularly in the Southwestern U.S.

Beauty and cosmetic marketers such as JossClaude Products, which markets Formula Latina, a hair care line designed exclusively for Latinas, are also interested in couponing. Michael Puican, CEO of JossClaude Products, acknowledges that as “a consumer packaged goods company, we understand the importance of using coupons to generate trial and are encouraged by reports that Hispanics, especially those that are highly acculturated, are using more coupons. We are considering adding direct mail and FSIs to our marketing mix as a way to supplement our local marketing efforts.”

 

Doubt remains
There are still doubts in the marketplace as to whether coupons really spur Hispanic buying. “Our feeling is that since the responsiveness is uncertain, it is crucial that material also have a very strong brand message. We look at coupons as an opportunity to communicate our unique brand message in a less competitive environment, as much as a way to drive sales,” notes JosseClaude's Puican.

Joe Benites, president of Los Angeles based The Benites Group, is even more negative. “Coupons are not a good vehicle to get people into the store. Coupons placed in direct mail or newspaper FSIs have, at best, a 2% redemption rate.” According to Benites, coupons can be good in-store vehicles. When handed out in the store, 30% of the people will buy the product. To get consumers into stores, Benites prefers store circulars offering discounts (or TPR - Temporary Price Reductions) and 40:20 second radio spots (40 seconds branding and 20 seconds local store advertising).

Low redemption rates

Although there is not much conclusive research, marketers fear that Hispanics are not coupon clippers. “There is not enough Hispanic specific coupon activity for a statistically sound sample, but typically we see redemption rates that are less than in the general market,” says Charles K. Brown, vice president of marketing at NCH Marketing, a Deerfield, IL based coupon processing and promotion information management company owned by Valassis.

Target's Mary Oster says a lot depends on how Hispanics have assimilated into the American culture. “Lots of Mexicans are not used to clipping coupons,” says Oster. According to Brown, of NCH Marketing, “there can be language barriers with Hispanic consumers who are less acculturated and who may shop at retail locations that frequently do not accept coupons (i.e. “Mom & Pop” specialty stores).”

Coupon redemption rates also vary by region. Redemption rates are are higher in the Northeastern part of the U.S. than in California and the Southwest. Oster says this is the case in both the Hispanic and the general markets. The DMA 2004 Response Rate Report shows a general market response rate of 1.77%, compared to only 0.31% in 2003.

But are they getting them?

According to a recent study by ADVO, the main reason behind low Hispanic coupon usage is underexposure. Hispanic consumers are not getting coupons. ADVO interviewed 1,200 Hispanics for a study it conducted last fall called “Food away from home – Dining.” According to the Bernie Kramberg, director of marketing intelligence at ADVO, one in four Hispanics interviewed said that they did not get coupons at all.

According to a 2004 AC Nielsen study, just under half of “less acculturated” Hispanics claim they regularly use coupons, compared to 89% of general market consumers. The ADVO study also found out that one in ten Hispanics used a coupon the last time they ate out. According to Kramberg, this ratio did not change depending on the consumer's level of acculturation. Hispanics interviewed for the study were nearly 2.5 times as likely to say that having a coupon determined where they ate.

What is the right delivery mechanism? Newspapers or…

In the general and Hispanic markets, newspaper freestanding inserts (FSIs) are the main delivery vehicles for coupons. Magazines also play a role. AARP Segunda Juventud (circ. 600,000, bi-monthly) distributes coupons from Walgreen's.

“FSI coupons traditionally account for the majority of all couponing in the United States,” says Mark Nesbitt, COO at Marx Promotion Intelligence/TNS Media Intelligence. Does this hold true in the Hispanic market? Definitely. Maybe even more so, due to the fact that only slightly more than one third of Hispanics are on lists available to direct mail marketers.

According to the recently released 2004 Marx Promotion Intelligence 2004 FSI Trends report, “Hispanic FSIs showed a wider range of services than general market FSIs. Long distance plans, music club offerings and health care plans appeared, signaling marketers' willingness to use FSIs as pure advertising platforms.” The report adds that “the discovery of circulation irregularities at some of the nation's major Hispanic newspapers contributed to volatility. While these events may have negatively impacted the image of newspaper-delivered promotions, major manufacturers continued to utilize FSIs to create awareness and drive usage. Circulation numbers for co-op FSIs from the major distributors increased significantly in areas of major Hispanic population concentration.”

 

CPGs (consumer packaged goods companies) dominated the top 10 companies in terms of Hispanic FSI ad activity, with the exception of For Your Entertainment and Direct TV, which got into Hispanic FSIs for the first time last year. The Personal Care segment had the most Hispanic FSI ad activity (see box below), followed by Household Products and Health Care. Interestingly, P&G slipped from first to seventh place among the manufacturers with the highest activity.

…and direct mail
Direct mail is another important delivery mechanism for coupons. While redemption rates for direct mail coupons tend to be much higher than rates for coupons in FSIs, they are also much more expensive to distribute. ADVO's Kramberg points out that direct mail coupons are even more effective among less acculturated Hispanics. “They may be less likely to read newspapers,” he says. “But every household has a mailbox.”

According to ADVO's study, Hispanics get 16% of their restaurant coupons from newspapers, compared to 30% in the general market. 34% percent of the coupons Hispanics redeem for out of home dining are delivered through direct mail, compared to the same ratio (34%) in the general market. According to the AC Nielsen study, less acculturated Hispanics are not as likely to receive coupons from either newspapers or direct mail. Additionally, direct mail has more appeal among less acculturated Hispanics.

CPG's lead…

Parent

Rank 2004

Rank 2003

Colgate-Palmolive

1

2

General Mills

2

3

Johnson & Johnson

3

5

Georgia-Pacific

4

N/R

Nestle

5

6

L'Oreal USA

6

12

Procter & Gamble

7

1

For Your Entertainment

8

N/R

Direct Satellite TV

9

N/R

Kellogg

10

10

Note: Top 10 CPG Manufacturers

Ranked by Hispanic FSI Ad Activity in 2004

Source: Marx Promotion Intelligence/TNS Media Intelligence

…and so does Personal Care

Area

Rank ‘04

Rank ‘03

Personal Care

1

1

Household Products

2

2

Health Care

3

3

Non-Packaged Goods

4

5

Dry Grocery

5

4

Refrigerated Foods

6

7

Cereals

7

9

Frozen Products

8

8

Shelf Stable Beverages

9

6

Other Packaged Goods

10

10

Note: Hispanic FSI Ad Activity by Product Type

2003 vs. 2004

Source: Marx Promotion Intelligence/TNS Media Intelligence

For more information:

Check out www.portada-online.com (Search function)

  • Big box retailers give only pocket change to Hispanic print
  • Are Hispanics Coupon Clippers?
  • What you should know about the Spanish language FSI market
  • Direct mailers search for ways to get closer to Latino homes


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