Download Opportunity Exists for Valassis to Raise Prices on Shared Mail

INITIAL REPORT
Reverdy Johnson, [email protected], 415.364.3782
Opportunity Exists for Valassis to Raise Prices on Shared Mail
Companies: NWS, VCI
April
April 21, 2011
Research Questions
Questions:
Will Valassis raise prices on shared mail and freestanding
freestanding inserts? If so, when, by how
much,
much, and how will advertising volumes be affected?
affected?
Silo Summaries
Summary of Findings
1) DIRECT MARKETING AGENCIES
AGENCIES
Sources have not heard any rumblings about Valassis
Communications Inc. (VCI) raising prices on shared mail or
freestanding inserts (FSIs). Direct marketers believe an increase
would be poorly timed as the marketplace already is cutting costs.
Coupon demand and use, namely those distributed through shared
mail, are on the rise. Sources were positive about shared mail and
its ROI, especially compared with FSIs, which are threatened by
lower newspaper circulation. Such demand for shared mail present
an opportunity for a price increase.
Companies and grocery chains that use Valassis are pleased with
the service, price and return, and would accept a moderate price
increase as a matter of doing business. Their increase threshold
ranged from 10% to 25%, at which point they would turn in-house,
consider Valassis’ competitors or rein in circulation.
A direct marketing source said Valassis is becoming slower to
respond to rate quotes and no longer guarantees rates beyond 90
days. Still, her firm maintains its relationship with Valassis and
refuses to work with News Corp.’s (NWS) News America, which
reportedly tries to skirt agency channels and go directly to clients.
Only one source said the coupon business was threatened by a rise
in digital marketing and Groupon Inc.. The remaining sources said
digital marketing does not work for all business types. Valassis has
the strongest online presence among competitors.
VCI To Raise
Prices on
Shared Mail
VCI To Raise
Prices on FSI
Big Price Hikes
Would Harm
Ad Volumes
Direct
Marketing
Agencies
Cos. Using
Shared Mail, FSI
Newspaper
Publishers
Grocery Store
Management
Industry
Specialists
Three sources had not heard of any pending price
increases from Valassis and do not expect a price hike
given the state of the marketplace. Still a shared mail
provider said Valassis could successfully push through
a price increase on shared mail because demand is
increasing and shared mail is providing a proven return
for advertisers.
2) COMPANIES USING SHARED
SHARED MAIL, FSI
None of the four sources has heard anything about
Valassis raising prices.
prices. Two are satisfied with Valassis,
with good service, a nice return and a fair price. They
expect and are willing to accept a reasonable price
increase on an annual or biannual basis, but would
consider leaving if Valassis’ services become costcostprohibitive
prohibitive and lessened the return. Of the other two
sources, one was dissatisfied with the return on
Valassis’ shared mail and will not renew at the end of
the year. The final source does not use Valassis and
prefers to stick with freestanding inserts and
newspaper wraps.
3) NEWSPAPER PUBLISHERS
PUBLISHERS
Four sources said prices on freestanding inserts have
been steady for the last several years, and more of the
same is expected for 2011. Advertisers are asking for
discounts and rate cuts, so sources do not believe the
environment will respond well to any price increase
from Valassis on FSIs. Shared mail is a realistic threat
to inserts, putting pressure on FSI prices. No source
believes digital marketing is a threat the newspaper
coupon business.
4) GROCERY STORE MANAG
MANAGEMENT
AGEMENT
Three sources are pleased with Valassis’ services and
current prices, and would weather a reasonable price
increase on shared mail, FSIs or both. Grocers will rein
in their circulation to cut costs if Valassis raises prices
too steeply. None had heard any news about a potential
price increase, though some expect it as a matter of
course, on the order of every other year.
5) INDUSTRY SPECIALISTS
SPECIALISTS
Three sources said coupon use overall is on the rise,
but the industry is in flux. FSI is becoming less effective
effective
because of the rising popularity of shared mail and
electronic coupon methods. Publishers are pushing for
more shared mail as newspaper subscriptions and,
thus, FSI use continue to decline. Valassis is at the front
of the movement toward shared mail and electronic
coupons.
1
321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
Background
Valassis has become a market leader in the growing coupon business, potentially giving it the power to increase prices on
shared mail delivered through the U.S. Postal Service and freestanding inserts, also known as Sunday circulars. Shared mail
represented more than 50% of Valassis’ 2010 revenue, while freestanding inserts made up around 15% of its 2010 revenue.
CURRENT RESEARCH
This report aims to determine the timing and the effects on Valassis’ business if it were to raise shared mail and FSI prices.
Blueshift employed its pattern mining approach to establish and interview sources in six independent silos:
1) Direct marketing agencies (3)
2) Companies using shared mail and freestanding inserts (4)
3) Newspaper publishers (4)
4) Grocery store management (3)
5) Coupon industry experts (3)
6) Secondary sources (4)
Blueshift interviewed 17 primary sources and included six of the most relevant secondary sources focused on the success
and growth of digital coupons, Valassis’ partnership with News America in the digital coupon world, and high marks for
Valassis’ freestanding insert coupons.
Silos
Silos
1) DIRECT MARKETING AGENCIES
Three sources had not heard of any pending price increases from Valassis and do not expect a price hike given the state of
the marketplace.
marketplace. Still, one source, a shared mail provider himself, said Valassis could successfully push through a price
increase on shared mail because demand is increasing and
and shared mail is providing a proven return for advertisers. Clients
already are opting for lessless-expensive advertising avenues,
avenues, including buying leftover
leftover space just prior to publication;
publication; a
significant
significant price increase could hinder volumes.
volumes. One source said Valassis
Valassis was becoming slower to respond to rate quotes and
no longer guaranteed
guaranteed rates beyond 90 days. Still, this source’
source’s firm maintains a strong relationship with Valassis,
Valassis, and she
said her clients refuse to work with News America.
America.
VP of print media for a Midwestern direct marketer that uses Valassis for clients’
clients’ mail and insert ads
This source had not heard of any price hikes coming down the pike from Valassis. Many clients already are struggling with
the cost of mail and inserts, and are buying the less-expensive leftover space just prior to publication. Valassis recently
has become more difficult to work with, responding more slowly to rate quote requests and refusing to guarantee rates
more than 90 days out. However, her agency has a good relationship with Valassis overall, and will not work with News
America based on past experiences.
§ “Valassis’ rates have been pretty consistent over the years. However,
we have noticed that there have been markets which we have placed
with Valassis on a regular basis that are no longer offering the costValassis’ rates have been
efficient rates we require. We have not received any indication that
pretty consistent over the
overall their rates might increase, but we certainly know that could
years.
years. … We have not received
change at a moment’s notice.”
any indication that overall their
§ “Our clients are choosing to go a cost-efficient route of ‘remnant buys’
rates might increase, but we
to keep their media costs down. The disadvantage is we don’t have the
option of targeting our preprints to the best demographics. It is leftover
certainly know that could
space; we can schedule it in advance and be specific about states, but
change at a moment’s notice.
notice.
we do not have control over what markets or ZIP codes they place the
VP of Print Media, Direct Marketer
inserts within a given timeframe.”
§ “We have seen a slight increase in our shared mail program costs, but
2
321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
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most have been due to the postal increases. We used to work directly with several shared mail programs, but
have found that most have been bought out by a bigger company, MailSouth [Inc.], which increased our
placement costs.”
“We work with Valassis on several of our projects, mostly with solo insert programs, not advertising in their FSI
coupon books. We are always wary about the fact that they could be our competition, but they have been a great
help in securing rates in certain markets we find unreachable.”
“We do not work with News America, and our preference is not to deal with them due to past experiences with
our agency and our clients. The salespeople had a regular habit of going direct to our clients instead of pursuing
proper agency channels, which we believe is very unprofessional. We have talked to clients who said that News
America in the past was hard to deal with, and they experienced issues with regards to specific insertion runs.
Because we do not work with News America directly for our clients, I can’t speak to what all those problems
were, but have been told our clients would prefer not to work with them if possible. We have found that between
Valassis, other representatives, groups, owners and the newspapers direct, we have plenty of market selection
to forego working with News America.”
“We do have a good relationship with Valassis, and they know not to
approach our clients directly about any advertising.”
I enjoy working with my sales
“I enjoy working with my sales reps at Valassis, but every time we turn
reps at Valassis, but every time
around there is one more procedure put in place to request a quote or
we turn around there is one
to have our orders approved, and it gets frustrating at times, especially
more procedure put in place to
in light of the multitude of campaigns we might be working on at once. I
don’t know if it is a corporate directive or what is happening.”
request a quote or to have our
“Their standard operating procedures have become more stringent over
orders approved, and it gets
the past year, which makes it difficult to receive quotes or place
frustrating at times.
times. … Their
business without jumping through hoops or waiting for longer periods of
standard
operating
procedures
time. That is more of a challenge, and we are researching and working
have become more stringent
with other sources to assist us with negotiations.”
“If we want to run a zoned program, we will select a quantity and work
over the past year, which
with that amount at actual placement time. Valassis now requires us to
makes it difficult to receive
give them specific zones and ZIP codes before they will give us the rate,
quotes or place business
which takes a lot of time and research in advance. In our mind, it’s
without jumping through hoops
putting the cart before the horse as we won’t even know if the market
or waiting for longer periods of
will make the cut until we see the rates.”
“It is very difficult to get recommendations [from Valassis] in a timely
time.
time.
manner. We have some representatives that will give us a rate
VP of Print Media, Direct Marketer
approved for the entire year, where Valassis will only give us 90 days.
That defeats the purpose of planning four to six months in advance for
quotes or scheduling multiple runs, because then we have to go back and get a new quote from them, adding
more time. It takes Valassis at least two to three weeks to present us with a quote. While we work with them, we
also do a great deal of negotiation on our own directly with newspapers and other shared mail programs, and we
find it will only take us a week at the very most to confirm what we need for our client.”
“We also will receive last-minute requests for new test insertion runs and become hesitant to ask for rates from
Valassis because we are under time restraints and cannot wait the time they require. It can be too much of a
hassle from our perspective.”
“With regards to the shared mail program, we work with [Valassis’] RedPlum, formerly Advo, but the rest of the
shared mail business is handled directly with the individual companies such as MailSouth and National Mail-it
[Inc.]. We believe we have much better control over our placement working with the companies that actually do
the insertions, and have developed very strong relationships with these programs and their sales
representatives.”
“All of our clients’ [insert advertising] placement increased or stayed the same [in early 2011] from the overall
2010 budget. 2010 was a year of slight trepidation with regards to how consumers would respond after the
economic downturn in 2009. In most cases the response did increase, presenting a more optimistic approach
for 2011. As far as shared mail programs, we have a client that does place business in first and second
quarters, and the budgets have not changed from the previous years.”
3
321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
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“The main issue affecting demand [for inserts and shared mail] is cost. The clients need to have a certain
placement CPM [cost per thousand impressions] to ensure their freestanding insert programs will be profitable,
so the biggest issue is whether we can keep our budgets where they need to be. This, unfortunately, limits the
number of newspaper markets we can run in if they can’t be at the cost we are requesting.”
“Online and e-mail advertising will have an affect with regards to the allocation of our clients’ advertising dollars.
All of [our] clients currently place advertisements with online, e-mail and print, so for the most part, print
budgets have just changed slightly. In 2010, we did have one book publisher client who discontinued their
newspaper insert programs; however, the decision was based on a combination of issues including a reduced
advertising budget, not as many new book titles to advertise and the high cost involved with the freestanding
inserts. Because of that, they chose to do more extensive advertising online or through e-mail.”
“We know that coupon distributors like Groupon are increasing their presence, but we don’t look at it as a
threat, just another piece to the advertising puzzle. We consider these programs a way for the client to bring in
new customers or encourage old customers to give them another chance, but don’t believe it will completely
replace other advertising approaches. They cannot always give a 50% discount. Once the customer takes
advantage of the business, it will be up to the advertiser to remind them of the advantages of their services and
keep them coming back to the location. That will happen through several advertising sources, not just [online
coupon] distributors.”
“Our insurance, publisher and auto-aftermarket clients are still placing advertising in shared mail and
newspaper insert programs, and that will not change in 2011. The mix has not varied much from the previous
year.”
“We are a huge proponent of newspaper insert programs and still feel it is a viable advertising source for our
clients as long as the newspapers are willing to work with us on rates. We understand that there are new
advertising mediums being produced every day, and it is up to us as an agency to include them in our
recommendations.”
Vice president for a direct mail specialist with
with $80 million in annual revenue
Direct mail publishing is a dying business. This source expects prices to continue to fall as they have for years. He does
not foresee Valassis successfully raising prices other than the normal seasonal increases. Digital marketing options and
e-mail coupon distributors like Groupon are serious threats to Valassis and other mail advertising publishers.
§ “There’s no big future in this [direct mail publishing] business, and the pricing erosion that started in the 1970s
has only persisted over time.”
§ “It’s a dying industry. Everyone is just trying to keep it going. There are 20,000 [direct mail printing] companies,
and there aren’t going to be that many next year or the year after.”
§ “The paper mills are pretty good examples for the printing industry. There used to be 30 [major mills], and now
there are four. And the top two have over 70% of the market, and they still barely make money. They don’t have
control over the pricing.”
§ “There’s a seasonality to our business. If you want to get a direct mail piece or an insert printed in the fourth
quarter, October or November, you’re going to pay more than if you
wanted to print it in May or June. But if you normalize for seasonality, I
don’t think Valassis will be selling for more this year than they were
Digital marketing is really
[during the same period] last year.”
eating up the conventional
conventional
§ “Right now there’s a little bit of inflation in the cost of materials, paper
and ink. The margins are being compressed.”
print marketing dollars.
dollars. …
§ “You’re going to need to see a lot of consolidation [among direct mail
There’s a lot fewer fixed costs
printers] before anyone has any kind of pricing command over the
associated
with
digital
market.”
marketing.
The
cost
of
entry
is
§ “There are serious threats to this business. Digital marketing is really
extremely
low,
and
the
value
of
eating up the conventional print marketing dollars. Marketers are very
forward-leaning, and they’re very into what’s new and what’s hot.
the
impressions
and
There’s a lot fewer fixed costs associated with digital marketing. The
advertising they can get from
cost of entry is extremely low, and the value of the impressions and
that is really high.
high.
advertising they can get from that is really high.”
§ “This Groupon thing is really interesting because they’re going after
Vice President, Direct Mail Specialist
Valassis’ exact business. They have to be really watching that closely.”
4
321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
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“There’s a lot of window dressing there [with Groupon], but at the end of the day, they might have the new
business model. Certainly [the new model] is electronic rather than print. How quickly this transitions, that’s
open to interpretation.”
“Our clients are typically retailers, travel and leisure, financial services. It’s not your traditional low brand equity
advertiser that says, ‘I’m going to use direct mail because I need to get a response to sell crappy products.’ A
good chunk of our business focuses on loyalty marketing, so people do have a connection to the company they
buy from. They want to receive the communication as we send out. That’s the only way it works because if it’s
junk mail to people, it goes in the garbage and doesn’t return on the advertiser’s investment.”
“We’re up double digits this year. We were up 24% last year. Through this whole downturn we’ve done very well.
But [demand in] the industry overall looks fairly flat in general.”
“[Valassis is] definitely competing with us for ad dollars, but we’re selling different solutions. They’re mostly
‘spray and pray,’ just sending things everywhere although they’re a little more targeted now, based on ZIP codes
and demographics. But we try to play on a one-to-one level, using demographic information and transactional
information—what are they buying, how much are they spending, how frequently. We try to leverage that in a
much deeper way.”
CEO of a national shared mail distributor
Shared mail rates should remain steady in 2011. However, demand from advertisers is growing and, coupled with a
proven return on investment, could put shared mail distributors such as Valassis in position to raise prices.
§ “Shared mail rates have generally been flat. We expect that to be the case in 2011.”
§ “Price at [our company] is a factor of ROI. Our unique niche and understanding of the consumer receiving our
packet helps us drive better ROI and, thus, protect rates. My understanding is that Valassis has done well for
many of their clients and should be in a position to raise rates relative to ROI.”
§ “We do not tie rates to specific ROI, but we negotiate rates within the
context of the return rather than negotiating CPM against competitors’
CPM in the market. This approach has allowed us to maintain rates
My understanding is that
even in the face downward pressure on CPM from competitors. I would
Valassis has done well for
assume Valassis could or does use a similar approach, which should
many of their clients and
allow them to improve rates as shared mail continues to perform very
should be in a position to raise
well.”
§ “We continue to see growth in shared mail demand from both existing
rates relative to ROI.
ROI. … We
clients and new clients year to date 2011.”
continue to see growth in
§ “We have seen little if any impact from groups like Groupon. The nature
shared mail demand from both
of the Groupon offer is that it generally drives a one-time influx of
existing clients and new clients
customers for a narrow group of advertisers, such as spas, hair
year to date 2011.
2011.
removal, gyms and restaurants. While it can have great impact, it does
not provide a comprehensive and ongoing acquisition and retention
CEO, National Shared Mail Distributor
channel like shared mail.”
§ “Like with mobile and e-mail, we find group buying is just another tool
in the marketing campaign tool box. Consumers and merchants utilize all channels at various times when they
make the most sense. Therefore, we continue to see direct mail growing at the same time digital options are
taking hold. In short, we see mobile, e-mail and group buying as a complement to our core product.”
§ “The mix of top [industries] using shared mail has not changed much for us over the last 12 months. What we
tend to see is growth in volume from those categories. The top groups continue to be the usual suspects:
grocers, QSR [quick-service restaurants], automotive aftermarket, satellite, big-box retailers, insurance, CPG
[consumer packaged goods].”
§ “Our niche is small town America. We have very little if any overlap in coverage as compared to RedPlum or
Money Mailer [LLC]. The rural America consumer behaves differently as compared to an urban consumer, and
we help our client understand and reach those rural consumers.”
5
321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
2) COMPANIES USING SHARED MAIL AND FREESTANDING INSERTS
None of the four sources has heard anything about Valassis raising prices. Two are satisfied with Valassis, saying they receive
good service, a nice return and a fair price, one on shared mail and another on FSIs.
FSIs. They expect and are willing to accept a
reasonable price increase on an annual or biannual basis,
basis, but would consider leaving if Valassis’
Valassis’ services become costcostprohibitive and lessened the return. One source said anything above a 15% increase would be too high. Of the other two
sources, one was dissatisfied with the return on Valassis’
Valassis’ shared mail and will not renew at the end of the year. She believes
her prices are locked in until then. The final source does not use Valassis, has not had any success with shared mail from
competitors, and prefers to stick with freestanding inserts and newspaper wraps, though he would consider Valassis if
newspapers’
newspapers’ rates became too high. All sources
sources said Groupon was not the right fit for their businesses.
Marketing director for a large
large sporting goods chain on the East Coast
This source is satisfied with the return and particularly the service he gets from Valassis. He will stick with
Valassis/RedPlum as long as the ROI is good, but will bring the insert placement in-house if prices become prohibitive.
§ “We use Valassis. They do a lot for us with regards to mapping, ZIP
codes and such. I don’t know how they compare to competitors, but
we’re satisfied.”
We use Valassis. They do a lot
§ “As long as it fits within a budget and makes sense for what we’re
for us with regards to mapping,
doing, gives us a good return on investment, we’ll keep going.”
ZIP codes and such. I don’t
§ “We just started using shared mail a lot this year as opposed to
know how they compare to
newspaper ads and other ads.”
§ “I don’t know just how much we get from the shared mail and inserts.
competitors,
but
we’re
We’re in the process of analyzing that right now.”
satisfied.
satisfied. … I’m sure they’ll
§ “Price hasn’t been an issue so far. For coupons, the circulars that go
raise prices. I haven’t heard
into the shared mail, the printing and postage are all in one, and hasn’t
anything about it, from them or
been an issue.”
anyone else. Again, if the ROI is
§ “I’m sure they’ll raise prices. I haven’t heard anything about it, from
them or anyone else. Again, if the ROI is good we’ll stay with it.”
good we’ll stay with it.
it.
§ “If prices get prohibitive, I guess we’d just keep it in-house, or maybe
Marketing Director
look at [Cox Media Group Inc.’s] Valpak [Direct Marketing Systems
Large Sporting Goods Chain
Inc.].”
§ “We’ve looked into Groupon, things like it. The success they’ve had is
more in the restaurant business. It wouldn’t do anything for us. If you’re buying a baseball glove, you’re buying it
in baseball season; you won’t use a Groupon for that in November.”
General manager of a nursery, garden center and landscape provider in the Northeast
This source is satisfied with the service from Valassis/RedPlum; he uses both freestanding inserts and self-mailers
versus shared mailers. He is unfamiliar with any competitor companies and has seen little reason to look beyond
Valassis/RedPlum. A 15% rise in prices would be his limit, at which point he would look to Valassis’ competitors.
§ “We mail out 1,500 to a retail mailing list, and the rest through [The New York Times Co.’s/NYT] The Boston
Globe, to get the most bang for the buck. We have no way to track the return we get. I have no idea if they’d
come in anyway, but it’s worth the risk.”
§ “I haven’t compared them to anyone else. The service I get is good, price is good, so no need, I guess.”
§ “We’ve been doing this for about 10 years. The printing costs have
gone down, so we increased circulation.”
§ “They haven’t told me they’re raising prices. I don’t know if I’d stand for
If they went up another maybe
a rise in price.”
15%, then we might look at
§ “If they went up another maybe 15%, then we might look at different
different things, different ways
things, different ways to advertise, maybe just reduce the number we
send.”
to advertise, maybe just reduce
§ “I don’t know if I’d look at any competitor at all. I don’t even know who
the number we send.
send.
they are. But I’d find out their prices.”
General Manager
§ “No impact from Groupon at all. We haven’t cooperated with them. I
Garden
Center
&
Landscape
Provider
don’t think any of the nurseries have around here.”
6
321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
Business manager for a Massachusetts cosmetic dentistry office
This source is dissatisfied with the return on shared mail through RedPlum’s SuperCoups package. She believes her
office sees higher return through print ads and coupons in newspapers. Her employer does not plan to renew its contract
with RedPlum.
§ “Since January we might have had four people come in with the coupons, maybe five.”
§ “We’re locked into a contract, and it’s so expensive there’s no way we can do anything else right now. So we’re
not doing any of the mailers or even the print ads. We had much better return on those.”
§ “We’re paying on a monthly basis.”
§ “The price hasn’t moved since January, and we don’t care if it goes up. We’re locked in at a rate, I think, and we
won’t be renewing at the end of the year.”
§ “This is the first time we’ve tried it, and we won’t do it again. Not through this company or any competitor.”
§ “We haven’t used Groupon. I don’t think it’s appropriate for our kind of business.”
Owner of two ski equipment and patio furniture stores in New England
This source has had no luck with shared-mail coupons and very bad luck with Groupon. He uses freestanding inserts in
trade brochures, as well as newspaper wraps, which he has done for several years. He cannot trace a percentage of
business to the wraps, but believes they provide a significant return. He would readily change his mix and consider
Valassis/RedPlum if the wrap prices become impractical.
§ “I’ve got no opinion about Valassis. I’ve heard of them, but they’ve never been in touch with me.”
§ “We tried Valpak for four seasons and the SuperCoups types, but they really don’t draw for us.”
§ “If you’re guaranteed the top slot in those packs, you might get some draw, but not in the middle of the
envelope.”
§ “We use a newspaper wrap with The Boston Globe, and that draws for
us very well if you’re on the cover. We only do it if we’re on the front or
If the price [to advertise with a
back cover. Even in the recycling bin, you get a 50/50 shot of someone
newspaper] went up enough—
enough—
seeing it.”
maybe 20%—
§ “We can’t tell how much business it draws in, by percentage. We
20%—I’d change my
commit to 100,000 households, and I might get 1%; but the rep may
mix. There are plenty of
throw in an extra 50,000 outside our area if he has the space.”
companies
to
advertise
§ “We typically do another big mail insert through an idea book for patios,
through. I’d try a company like
an eight-page magazine for quality pieces.”
Valassis to see how it draws.
§ “We’ve done Groupon, and it drew too well. It was for a ski tune-up. We
tried to limit how many were sold to about two hundred, but the person
The inserts, maybe not the
who ran the ad didn’t set a limit. We sold more than 1,400, which is
shared mail.
mail.
more tune-ups than we do in a season.”
Owner
§ “I don’t believe Groupon’s drawing anything away from us.”
Ski Equipment & Patio Furniture Stores
§ “Our Boston Globe rep has been pretty consistent with us. If the price
goes up, he’ll throw in extras to make it what it needs to be. Our price
went up when the price of the paper went up, but it seems to have evened off.”
§ “If the price [to advertise with a newspaper] went up enough—maybe 20%—I’d change my mix. There are plenty
of companies to advertise through. I’d try a company like Valassis to see how it draws. The inserts, maybe not
the shared mail.”
§ “If a company is giving you a return, they can always raise prices, sure. How satisfied are [Valassis/RedPlum]
customers? Can they prove they’re delivering a return?”
§ “Those companies raise prices with postage, of course.”
3) NEWSPAPER PUBLISHERS
Four sources said prices on freestanding inserts have been steady for the last several years,
years, and more of the same is
expected for 2011.
2011. Advertisers are asking for discounts and rate cuts, so sources do not believe the environment will respond
well to any price increase from Valassis on FSIs. Shared mail is a realistic threat to inserts, putting pressure on FSI prices.
One
One source said demand for inserts has shown a slight uptick recently as retailers try to emerge from a difficult economy,
economy, and
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Valassis Communications Inc.
envisions the possibility of increased insert prices as a result, with large daily newspapers taking the lead. No source believes
digital marketing is a threat the newspaper coupon business.
General manager of a small weekly newspaper in Washington state
Insert prices are not expected to rise as demand for advertising space with
I do not see raising prices as a
newspaper inserts is holding steady and advertisers have other alternatives.
good option right now. Internet
§ “Quantity and regularity of FSIs are holding steady since the last quarter
of 2010. We have had some new ones running once or twice, but not on
advertising and direct mail can
any regular basis.”
offer advertisers an alternative.
§ “I expect rates to hold steady through 2011.”
It seems to make more sense
§ “Supermarkets and home improvement chains [advertise in] inserts
to hold steady until we can see
weekly.”
a little further out.
out.
§ “We work with News America and occasionally Valassis. I find the two
are mostly similar.”
General Manager
§ “I do not see raising prices as a good option right now. Internet
Weekly Paper in Washington State
advertising and direct mail can offer advertisers an alternative. It seems
to make more sense to hold steady until we can see a little further out.”
§ “We have not seen any threat [from digital coupon distributors] as of yet. Perhaps it is because we are a small
enough community and isolated, that Groupon has yet to reach us. I do not expect it to remain that way.”
Publisher of a 13,00013,000-circulation paid weekly in the Northeast
Prices for newspaper inserts are under pressure from direct mail options, and his paper has lost some advertisers by
refusing to cut rates. Still, he believes newspaper inserts are more effective than direct mail and that insert publishers
should push to raise prices this year. Whether they do so will depend on the large daily newspapers.
§ “We get a lot of pressure from [direct] mailers to hold or discount our [insert] rates. We’ve refused to cut rates,
and have lost some business. I wish other publishers were as firm.”
§ “Any increase in 2011 [on insert prices] will depend on how the big dailies respond.”
§ “Newspaper publishers should push to raise their insert rates in 2011, particularly on zoned circulations.”
§ “Newspapers need to have more confidence in the value of their package. For evidence, just go to any post
office on insert-wrap day and check their trash barrels. Most folks who have post office boxes immediately throw
away the [advertising] they receive through direct mail—both standalones and those grouped in a wrap by direct
mail houses. Such reflexive action at the post office undoubtedly repeats itself in the home as well.”
§ “Any direct marketer who bothers to key and track responses between inserts distributed through newspapers
versus those distributed by direct mail will verify superior results from newspaper inserts and lower cost.”
§ “I’m convinced newspapers don’t charge enough for their delivery service, that the Postal Service gives direct
mailers better service than weekly newspapers and magazines.”
§ “In the fourth quarter 2010, we had 74 inserts, down from 77 in the fourth quarter 2009. In the first quarter
2011, we carried 62 inserts, up sharply from 47 in the first quarter 2010. The increase appears to be retailers
attempting to kick-start sales. This area has just finished a very tough retail sales quarter. The economy stinks
with gas and food price increases scaring away other purchase decisions.”
§ “We expect sharp growth in inserts will continue for the remainder of 2011.”
§ “Supermarkets do not use weekly newspapers [to advertise] in our area. The most consistent users [of
newspaper inserts] are big-box national stores in our area, except Wal-Mart [Stores Inc./WMT]. There’s been no
significant change in that mix [of advertisers], just increased frequency.”
§ “Valassis and [News America’s] SmartSource seldom use us. There are no distinguishing characteristics
[between them]. They all try to squeeze on price.”
Advertising director for an 18,00018,000-circulation daily newspaper in Oregon
Her newspaper has not raised freestanding insert rates in four years and will keep them flat again in 2011, but
advertisers continue to ask for further discounts or freebies. In such an environment, she does not expect Valassis to
raise its prices for insert advertising.
§ “We are keeping a rate freeze in place going on four years, but refusing deeper discounts.”
§ “Ad agencies are requesting rate freezes, added value—such as free color and free ads—and a 15% to 20%
discount off of the previous year’s rate. We expect the same trend in 2011.”
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321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
§
§
§
§
§
§
“We have no reason to think [Valassis] might raise prices in 2011.”
We have no reason to think
“We work with Valassis and News America. [Insert publishers] all
request off-the-rate-card discounts. We stick to the rate card and offer
[Valassis] might raise prices in
annual contract dollar volume discounts.”
2011.
2011.
“We are experiencing a slight increase in [insert] preprints this year.
This is due to showing retailers in a nearby market, where our local
Advertising Director
Daily Newspaper in Oregon
folks travel to shop, how to expand their market share and increase
revenue by running preprints in our newspaper.”
“Local retail chain store managers are expected to increase revenue [this year]. However, they are not usually
involved in the ad buy process. We are building relationships with local store managers, showing them how they
can expand their markets, and working with them to get the information to corporate decision makers and/or ad
agencies. This is a long process. Patience, persistence, and educating the decision makers are the key.”
“[Digital marketing is] not a significant threat in our market at this time. Seventy-five percent of our newspaper
readers are ages 45 to 65-plus.”
“Most advertisers’ preprint commitments are remaining the same as last year. We continue to emphasize the
value of our product.”
Sales manager for two weekly newspapers in Vermont
Insert prices have been frozen for five years, and this source expects that to continue. Demand for inserts is mostly flat,
with cost having the biggest influence.
§ “Our rate of $80 per thousand [inserts] has been at the same level for about five years. I expect no change for
2011.”
§ “The demand [for inserts] remains relatively consistent over time. We did see a slight increase in FSIs in 2010
over 2009. So far, 2011 is comparable to last year. The issue that affects demand for FSIs remains relatively
stable: It’s cost. We’re relatively high-priced so we rarely get national [advertisers].”
§ “We do not work with [Valassis]. We publish two small weekly newspapers. Our printer aggregates FSIs, though
most of the inserts that we carry come directly through us via our customers. We’re not big enough for
aggregators to pay attention to, generally.”
§ “From our perspective, [digital coupon distributors] are not a threat. Our inserts are local. We also offer a
Groupon-like service through our Web sites, though they’re only a couple months old.”
§ “[Major insert advertisers are] local hospitals, art center, dance studios, ski shops, car dealers, [a pharmacy].”
4) GROCERY STORE MANAGEMENT
Three sources are pleased
pleased with Valassis’
Valassis’ services and current prices
prices, and would weather a reasonable price increase on
shared mail,
mail, FSIs or both. One source said his threshold is a dramatic 25% price increase while another pegged his at 10%.
Grocers will rein
rein in their circulation to cut costs if Valassis raises prices too steeply. None had heard any news about a
potential price increase,
increase, though some expect it as a matter of course, on the order of every other year. One source said use of
coupons, shared mail or FSIs
FSIs, is growing compared to last year,
year, and he expects growth to continue throughout 2011.
2011.
General manager in charge of advertising
advertising for a Northeast grocery store chain
This source purchases RedPlum services through a newspaper agency, and
sends out 50,000 mailers per week. The bulk of his mailers are through
newspaper subscribers, while the remainder goes through shared mail. He is
generally satisfied with the services and price, and would only seek other
services if prices increased dramatically.
§ “We use [The New York Times Co.’s] Globe Direct [in association with
RedPlum]. We send out about 50,000 fliers per week, first through The
Boston Globe if the household is a subscriber, and if not a subscriber,
through shared mail.”
§ “I feel like we get traffic from those mailers, and they’re a fair value
right now. If they went up? Then I’d probably just reduce the count or
I feel like we get traffic from
those mailers, and they’re a fair
value right now. If they went
up? Then I’d probably just
reduce the count or bring the
target area in by a few miles. If
it went up some unusual
amount, 25%, then I’d probably
look for other options.
options.
General Manager
Northeast Grocery Store Chain
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321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
§
§
§
§
bring the target area in by a few miles. If it went up some unusual amount, 25%, then I’d probably look for other
options.”
“We have no reason to look at a competitor. This arrangement reaches our trading areas very well.”
“We review our targets once a year and make some adjustments.”
“I wouldn’t be interested in any competitors. We’d be spending money for areas that aren’t in our marketing
areas.”
“As far of coupons of our own, we really only put one in our ads, for floral. Other than that, we redeem
manufacturers’ coupons. Those are on the rise, absolutely. I don’t know exact percentages, but it seems like
maybe seven out of 10 customers pull out a coupon.”
Marketing manager of a small New England grocery chain
This source purchases insert services through a regional newspaper in association with RedPlum and for distribution in
the towns surrounding the chain’s markets. The chain has used the service for 15 years and is generally satisfied with it.
He expects the cost of the service to rise, perhaps biannually, but would resist a sudden 10% rise in price. He has not
considered Valassis/RedPlum’s competitors.
§ “We run a coupon only every once in a while. When we do, we get a
great return; we’ve only started doing that in the last year. As for vendor
My upper limit would be a
coupons, I don’t have those figures.”
sudden, maybe 10% increase.
increase.
§ “We haven’t got involved in Valpak or SuperCoups, but we’ve been
doing inserts for 15 years.”
… If the company justified the
§ “The prices have gone up a bit in the last few years, but not too
increase, then I guess we’d just
significantly. To me, it’s still cost-effective. I can’t divulge what we’re
draw in the circulation to meet
paying.”
the
cost. We’d have to cut
§ “We’ve had meetings with Valpak over the years. We’re happy with
back,
certainly.
certainly.
what we’re doing, and if I recall right, we didn’t think the savings or
promise were worth switching.”
Marketing Manager
§ “Honestly, every price increase hurts. For a small chain every increase
New England Grocery Chain
hurts, but we have to raise our prices here and there. It’s reasonable
for them to do too.”
§ “My upper limit would be a sudden, maybe 10% increase. I’d have to justify the purchase to my managers;
beyond that and it’d be hard to do.”
§ “If the company justified the increase, then I guess we’d just draw in the circulation to meet the cost. We’d have
to cut back, certainly.”
§ “I don’t know when or how much they’ll raise prices. Is that something they do when postage goes up? I expect
something every year or two years at most.”
Customer relations and marketing manager at a large New York/Pennsylvania regional grocery chain
Shared mail and freestanding inserts increase traffic at stores, but the chain is not in a position to brook any steep rise in
price for those services. This source negotiates contracts individually in several markets, with newspapers and with
Valassis. He declined to reveal prices, and was unaware of the percentage breakdown between shared mail and
freestanding inserts.
§ “Coupon usage is going up. It really depends from day to day because
we use couponing in different ways. We honor manufacturers’ coupons,
of course, but conduct our own store couponing programs as well.”
At this point,
point, we are undergoing
§ “We’re using both [shared mail and freestanding inserts] more than we
a
significant
effort to decrease
did last year. Last year we acquired 48 additional stores, and part of
our
costs
as
far as circular
our market strategy revolves around weekly circulars within those 48
stores, to be more congruent with the go-to-market strategy we’ve used
distribution, so we’re not
before.”
prepared to take on any
§ “We use freestanding inserts in newspapers and circulate the inserts
increased costs at all.
all.
on our own in the stores, then use newspaper ads and shared mail
pieces.”
Customer Relations & Marketing Mgr.
Northeast Regional Grocery Chain
§ “I don’t have any figures [on price trends].”
§ “We negotiate with a few companies. It varies by market. In some of
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321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
§
§
§
§
them we use the local newspaper, which organizes shared mail for nonsubscribers. In other markets we use
Valassis.”
“It’s hard to nail down a price because we have negotiated contracts with every paper we use, and with
Valassis.”
“At this point, we are undergoing a significant effort to decrease our costs as far as circular distribution, so we’re
not prepared to take on any increased costs at all.”
“We send out over a million inserts and shared mail pieces per week. I’m not sure how it breaks down between
inserts and shared mail.”
“We haven’t studied it closely, but whenever we add shared mail and inserts in a market, we do see an increase
in business. That’s why we continue to do it. The impact varies from market to market though.”
5) COUPON INDUSTRY SPECIALISTS
SPECIALISTS
Three sources said coupon use overall is on the rise, but the industry is in flux. FSI is becoming less effective because of the
rising popularity of shared mail and electronic coupon methods.
methods. Publishers are pushing for more shared mail as newspaper
newspaper
subscriptions and, thus, FSI use continue to decline. Valassis is at the front of the movement toward shared mail and
electronic coupons. Grocery stores are losing their mantle as the No. 1 spot for redeemed coupons as mass merchandisers
merchandisers
and drugstores trend up.
Promotions industry veteran and executive director at a logistics/promotions solution provider
Publishers are pushing for more shared mail as pricing is better and distribution more efficient compared to FSIs.
Freestanding inserts are less effective now, but still a widespread method to distribute coupons and reach consumers.
FSI price would have to rise significantly before use would plummet. Valassis has a strong online practice.
§ “The main trend in shared mail is what FSI distributors are using to make up for the decline in standard
newspaper circulation. So they’re able to keep up the circulation numbers, the pages actually sold to
advertisers.”
§ “The jury’s still out, but I strongly believe those shared mail methods
simply don’t get the same consumer response that FSIs get.”
My broad understanding is that
that
§ “My broad understanding is that the pricing is probably as good or even
the pricing is probably as good
a little better for the shared mail compared to the FSIs in newspapers.
or even a little better for the
It’s really why I believe the publishers are trying to push people to
shared mail compared to the
shared mail. It’s probably a more efficient way to distribute, and at
worst will be the same price.”
FSIs in newspapers. It’s really
§ “Certainly, the competitors have pluses and minuses. It’s very situationwhy I believe the publishers are
specific. The real value of having at least two players in the market is
trying to push people to shared
that if I’m in a particular product category like household cleaners, if my
mail. It’s probably a more
competitor bought form News America, I can buy Valassis. There
efficient way to distribute, and
appears to be category exclusivity.”
§ “There’s a lot of parity between the competitors, so I don’t know that
at worst will be the same price.
price.
one has an advantage. It appears Valassis might be stronger online,
Executive Director
with News America stronger in stores.”
Logistics/promotions Solution Provider
§ “In the most recent five or seven years, prices have been dropping and
that’s probably leveling out. It could potentially affect volume. One thing
FSI has going for it is that it is a very inexpensive way to reach a whole lot of consumers. If pricing changes
dramatically, then Internet and shared mail will look more attractive. So price could have a significant effect on
FSI volume, but it would have to be a significant increase.”
Executive director at a coupon industry association
Inserts and shared mail are valuable ways to reach consumers, but electronic methods are becoming increasingly
valuable as well. Consumers want coupons to be where they can easily find them, be it in print or electronic. Valassis
positions itself well with online coupons, but could branch into click-to-card campaigns in which coupons are loaded on to
customer loyalty cards. Pricing is difficult to surmise; any contract with a company like Valassis/RedPlum will be a bundle
of shared mail, in-store, inserts, freestanding mailers and online exposures.
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321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
§
§
§
§
§
§
§
“Valassis is looking at markets and saying, ‘My newspaper readership is declining. How can I reach consumer
packaged goods buyers?’ That’s how they came up with the concept of the shared mailer.”
“One trend that we saw in last week’s conference [Coupons: Opportunities and Options] is that in consumer
packaged goods, their consumption of media has splintered. That’s what mobile and digital coupons are for; the
consumers want it where they want it, and it’s up to the CPG companies and distributors to figure out how to get
to them. That’s why Valassis is online as well and why other companies are doing click-to-card frequent shopper
cards.”
“I don’t speculate on pricing. But that’s something that’s based on
scale. Procter & Gamble gets a better price than Tom’s [of Maine]
Valassis/RedPlum
and
toothpaste because P&G buys multitudes more pages per year.”
SmartSource
compete
at
a
high
“The inserts and mailers have value. They will increase traffic for the
and intense level. SmartSource
retailers, and the dollar rate. A coupon stimulates a purchase, so now
is a little stronger for insomeone’s in the store buying something they wouldn’t normally buy
in-store
and the manufacturer pays for the incentive. If someone uses a 25¢
coupons, Valassis is stronger
coupon on spaghetti sauce, the retailer still gets his whole profit, so
with ads on the mail side, and
he’s happy when he sees coupons. And once the consumer is in the
freestanding inserts.
inserts.
store, not all purchases are couponed; the retailer makes money that
way.”
Executive Director
“Valassis/RedPlum and SmartSource compete at a high and intense
Coupon Industry Association
level. SmartSource is a little stronger for in-store coupons, Valassis is
stronger with ads on the mail side, and freestanding inserts.”
“There is no pricing study, that I know of. Pricing is negotiated between the companies and CPG companies
because it’s complicated. They’re bundling in-store and freestanding inserts with online and shared mail, all
combined in a package.”
“The success of Groupon is that it’s a great offer that ends at the retailer. The retailer sponsors that [discount].
For most manufacturer coupons, there’s a payment from the manufacturer to retailer. So Groupon is good for
small independents, gourmet shops; a quick hit for the retailer. In the CPG environment, I don’t see it having the
same kind of impact. I know manufacturers who’ve looked into Groupon and things like it, and don’t see how
they can fit.”
Vice president of marketing for a promotion marketing association
Grocery chains used to be the single highest user, taking most of the top five slots, but are declining in use. Meanwhile,
consumer packaged goods and drugstore chains are gaining in coupon usage.
§ “Certainly, the recession has pushed coupons back into the forefront. Even though we’re presumably in a postrecession period, they’re dropping a bit but not dramatically.”
§ “Approximately 88.6% of consumers reported using coupons in 2007, pre-recession, and they were at 93.9% in
2010.”
§ “The largest share is in grocery, but it’s declining. Others are growing. Mass merchandise was up 3% in 2010,
drug was up 2%, while grocery was down 5%.”
§ “Of the top 10 retail redeemers, No. 1 was Wal-Mart, followed by [The] Kroger [Co./KR], Target [Corp./TGT],
Publix [Super Markets Inc.] and Walgreen [Co./WAG]. That’s a huge difference; it used to be pure grocery. But
2010 is the first year a drugstore was in the top five, and national grocery chain Supervalu [Inc./SVU] was way
down, from No. 3 in 2009 to No. 7 in 2010. So drugs and mass merchandise are more the places where
coupons are being used.”
Secondary Sources
Six secondary sources focusing on the coupon business showed
showed that Valassis and News America have partnered to expand
each other’
other’s digital coupon base, digital coupons were 2010’s fastest growing coupon segment, a new company focused on
digital
digital coupons tied to store loyalty cards, Valassis is among the best freestanding
freestanding coupon publishers, and Groupon’
Groupon’s success
has led to a new market of Groupon resellers.
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321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
March 4 article in DrugStoreNews
Valassis’ RedPlum has joined forces with News America’s SmartSource in an attempt to expand one another’s digital
coupon base. The article also shed light on the significant increases in coupon use over the last four years.
http://www.drugstorenews.com/article/crazy-coupons-redplum-smartsource-join-forces
§ “Consumers always want more, whether it is a thinner, lighter iPad, a faster car or a muffin with more
blueberries. The same is true in the world of coupons, where a stumbling national economy caused shoppers to
demand more coupons from consumer packaged goods companies.”
§ “While the number of coupons issued, the average face value and the overall redemption rate hit new highs last
year, the era of the digital coupon has arrived. There perhaps is no better evidence of this than the recent
announcement that two of the biggest names in the world of conventional coupon distribution have joined
forces on a cross-publishing agreement that would result in the expansion of digital offers on both companies’
websites.”
§ “The deal involves Valassis and its RedPlum coupon distribution brand and News America Marketing’s
SmartSource coupon distribution brand allowing digital coupons to appear on each others’ sites. It is said to
greatly expand the offers available to deal-seeking consumers.”
§ “The RedPlum and SmartSource names are well-known to shoppers because the collection of coupons
contained in their branded products often fall out of the Sunday newspaper at the same time. They also operate
websites where consumers can sign up to receive coupons based on their interests. RedPlum operates
Redplum.com and Save.com, while News America has its SmartSource.com site.”
§ “‘This is a unique relationship that will result in a significant increase in the number of coupons available to
shoppers on both sites,’ said John Lieblang, president of Valassis Digital Media. ‘We are focused on delivering
the greatest value possible on the brands consumers want most, which has led to agreements, such as this one,
that puts more deal in shoppers’ hands.’”
§ “The cross-publishing arrangement is the first time Valassis and News America have worked together, and the
winners in this case obviously are the consumers who get more, but also the consumer goods companies that
are able to share their incentive offers with a broader market.”
§ “Henri Lellouche, SVP SmartSource iGroup, said the arrangement will
help consumers save time and money, and that ‘it’s a decision that
Last year, for the second year
makes good business sense, while also helping the American shopper
in a row, total coupon
at a time when household budgets continue to be tighter than ever.’”
distribution
volume
by
§ “Americans have been tightening their belts ever since the economy
consumer
goods
companies
headed south a few years ago, which explains the trends occurring in
the coupon world. Last year, for the second year in a row, total coupon
reached a record level with 332
distribution volume by consumer goods companies reached a record
billion coupons distributed.
distributed.
level with 332 billion coupons distributed, according to NCH Marketing
DrugStoreNews Article
Services annual ‘Coupon Facts’ report. Most of those coupons, roughly
88%, were distributed via the familiar freestanding insert, also known
as the Sunday circular.”
§ “Meanwhile, the average coupon face value in 2010 increased to $1.46 from $1.37 in 2009, and the dollar
value of redeemed coupons ticked up to $3.3 billion last year, compared with $3.2 billion the prior year. Both
figures are a marked increased from 2006 through 2008 when redemption volume was steady at $2.6 billion
annually.”
§ “The increasing prevalence of digital coupons and their broader availability— courtesy of cross-publishing
agreements of the type between Valassis and News America— should only cause redemption volume to grow in
the coming year. It has never been easier to access coupons, and saving money is an enduring desire of
shoppers.”
Feb. 8 Coupons.com press release
Digital coupons represented the fastest growing coupon segment in 2010.
http://www.couponsinc.com/Corporate/OurCompany/PressReleases/2011.aspx?udt_542_param_detail=127
§ “The Trend Report indicates that more than $1.2 billion in digital coupons savings was issued in 2010,
representing a 41 percent growth over the year before. Compared to growth metrics for coupons distributed in
newspapers of 7 percent, digital coupons dramatically outpaced the growth of their newspaper counterparts,
approximately 6 to 1.”
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Valassis Communications Inc.
§
§
§
§
§
§
§
§
§
“Recent data shows that users of digital coupons have higher household incomes and are better educated than
users of newspaper coupons and the general population overall, dispelling the perceived low-brow stigma of
couponing.”
“The consumer who prints digital coupons has an average household income of $105,000, a 26 percent higher
income level than the U.S average. 36 percent of those who use digital coupons have a college degree,
compared to 28 percent of those who use newspaper coupons and 26 percent of the general populace.”
“Interestingly, adults with household income of over $100,000 are
twice as likely to have redeemed coupons printed from an online
source than adults with household income less than $35,000. Also,
The consumer who prints
adults with college degrees are almost twice as likely to have used
digital coupons has an average
coupons in the prior six months as those who didn’t graduate from high
household
income
of
school.”
“Cereal was by far the most popular coupon category in 2010, followed
$105,000, a 26 percent higher
by Yogurt (No. 2), Refrigerated Dough (No. 3), Portable Snacks (No. 4),
income level than the U.S
and Vegetables (No. 5). Baby Products: Other, including bottles, car
average. 36 percent of those
seats and diaper pails, also topped the list at No. 6, followed by Soup
who use digital coupons have a
(No. 7), Air, Rug & Fabric Care (No. 8), Cheese (No. 9) and Lunch Meats
(No. 10).”
college degree, compared to
“Increasingly, consumers are taking advantage of mobile devices to
28 percent of those who use
use
access, print and save coupons.”
newspaper coupons and 26
“Weak economic conditions have been a primary factor driving the use
percent
of
the
general
of coupons overall. U.S. consumers appear to have an insatiable desire
populace.
populace.
for deals and savings, as is evident by the increased popularity of the
broad range of saving offers, such as digital coupons, daily deals, flash
Coupons.com Press Release
buying and online coupon codes. Consumer interest in savings is
expected to remain steadfast regardless of economic recovery signs,
with many reports predicting that buyer behavior around savings is here to stay. In fact, research consistently
shows that even when economic conditions improve, 8 out of 10 U.S. adults plan to continue to engage in
couponing activities.”
“In addition, food prices are predicted to rise during 2011, putting pressure on consumer budgets while, at the
same time, driving manufacturers to use creative vehicles to move product off the shelves.”
“Other factors influencing the growth of digital coupons include increased Internet and mobile adoption by
consumers, increased comfort with technology by mainstream consumers, and decreasing reach of traditional
newspapers. Digital coupons are expected to continue to show up in new places across the digital domain,
including social media, consumer electronics, home appliances and in-store kiosks and shopping carts.”
“In the longer term, with changes expected at point-of-sale checkout with new technologies like RFID (radio
frequency identification) and NFC (near field communications) and increased use of mobile apps, coupons will
be saved to mobile devices and redeemed without the actual scanning of the mobile screen. U.S. penetration of
smart phones is expected to exceed basic phones (i.e. “feature” phones) in by the end of 2011.”
March 28 AdAge.com
AdAge.com article
Valassis is watching the growth of Groupon carefully, but its sweet-spot of consumer packaged goods and mass retailers
are not yet markets Groupon and Groupon subscribers are actively seeking out.
http://adage.com/article/news/groupon-means-grandma-s-coupons/149581/
§ “Groupon never set out to take over the traditional couponing space. Nor is it discernibly taking any business yet
from the leaders in national newspaper-distributed coupon books -- Valassis Communications or News Corp.'s
SmartSource.”
§ “But there's something about spurning a $6 billion takeout offer from Google and spawning rumors of an initial
public offering priced at $25 billion that gets people's attention. One of those people is Rupert Murdoch. The
News Corp. chairman-CEO has asked executives at his SmartSource unit what Groupon means to the company,
said Henri Lellouche, senior VP of the unit.”
§ “The short answer, at least for Mr. Lellouche, is ‘not much.’ But the longer answer is that Groupon has so taken
the promotion world by storm that it can't be ignored. ‘I think about Groupon all the time,’ Mr. Lellouche said,
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Valassis Communications Inc.
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§
§
§
§
§
§
§
§
§
§
§
§
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before adding that he's not actually getting any requests from clients to do Groupon-type deals, including from
Unilever, whose executives he'd just met with last week.”
“Yet who can blame Mr. Murdoch for asking? In two years, Groupon has generated enough business, combined
perhaps with enough hype, to walk away from a buyout offer four times the size of the $1.4 billion market cap it
took Valassis 41 years to amass. At $25 billion, Groupon would be valued at 16 times Valassis and more than
half what News Corp. as a whole commands.”
“It's all the more remarkable given that so far Groupon has gotten its close to 80 million global members to buy
fewer than 33 million Groupons so far. That's only one hundredth the volume of 3.3 billion coupons redeemed
last year in the U.S. alone by users of Valassis, SmartSource and other more conventional print and digital
coupons. In terms of value, it's a little closer, with Groupon users having saved people more than $2 billion over
two years, while more conventional coupons saved consumers $3.7 billion just in the U.S. last year, according to
NCH Marketing Services, a unit of Valassis.”
“‘Groupon has done a very nice job of creating a new way of going to market and a new channel of promotion,’
said Suzie Brown, chief marketing officer of Valassis. ‘Everybody's curious about it, but our core customer base
doesn't really lend itself to the kind of promotional model they have.’”
“Consumer packaged goods, mass retailers and many other national advertisers often don't have the fat
margins or lack of brand recognition that makes deep-discounted Groupon deals attractive or necessary for
local restaurants, specialty retailers and service providers who are Groupon's customer base, Ms. Brown said.”
“Even so, she believes it's almost inevitable a big CPG player and/or mass retailer will try Groupon, as the Gap
and Barnes & Noble already have done. ‘It's such a big deal and it seems to have connected so well with
consumers that all anybody wants to talk to me about is how do we do Groupons for CPG or Groupons for food,
drug or mass retailers,’ said David Diamond, a former Catalina Marketing executive who's now an industry
consultant.”
“Groupon brought promotion something it hasn't had in a long time: a truly new idea. It's not a coupon at all, Mr.
Diamond said. Consumers must buy in advance, so redemption rates are more like 85% to 90% rather than the
1% or so typical for cents-off cereal coupons distributed in newspapers, he said.”
“A Groupon also typically requires a minimum number of people to participate and often comes with limits on
how many can be purchased, limiting liability -- a feature CPG and mass retail coupons typically don't have.”
“CPG, mass retail and national fast-feeders aren't markets Groupon is actively seeking out, said spokeswoman
Julie Mossler. The greatest relevance of Groupon has been to local merchants, she said, because ‘with
traditional coupons, it was impossible for local businesses to find customers online and have that translate into
real-world traffic through their doors.’”
“The bigger threat Groupon poses may be to the likes of local shopper publications such as those run or
franchised by Cox Target Media's Valpak, with one person close to Groupon saying it could do for such vehicles
what Craigslist did to newspaper classified advertising -- though unlike Craigslist, Groupon charges for its
services. A spokeswoman for Cox didn't return calls for comment.”
“Frankly, packaged goods may just not be exciting enough for Groupon subscribers. ‘Packaged goods -- that's
not why people look to us,’ Ms. Mossler said. ‘They look to us because they want to get up off their couch and do
something, whether at a restaurant or skydiving.’ But she later added: ‘I would never say never.’”
“One question is whether Groupon will have to lure more national advertisers to fuel its rapid growth and
convince investors its lofty valuation won't fade like yesterday's deal. The new U.S. markets it has entered this
year are such places as San Angelo, Tex., and Macon, Ga., which are unlikely to create much of a bump for a
company that generated $760 million in revenue last year.”
“Late last year, Groupon added a national sales manager, and the opportunity to cash in on growing interest
from traditional advertisers may be too hard to ignore.”
“‘What's really fueling our growth is partnering with those local businesses, not just in the U.S. but all over the
world,’ Ms. Mossler said. ‘But there is some value in working with a national merchant or an online merchant.’”
“Meanwhile, the big national coupon powers are focusing more on the older threat -- or opportunity -- of digital
and mobile coupons. Valassis joined with AOL earlier this year on its Shortcuts program that loads packagedgoods offers on shoppers' loyalty-card accounts for redemption at checkouts and with rival SmartSource to
share its coupon content on its websites -- SmartSource.com and Redplum.com.”
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321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
April 20 NECN.com article and video
A Massachusetts company is looking to make traditional coupons obsolete by using digital coupons that tie customers’
store loyalty cards to online accounts and smartphone applications.
http://www.necn.com/04/20/11/Mass-company-looks-to-make-traditionalc/landing_scitech.html?blockID=507583&feedID=4213
§ “Lots of us are looking for savings, and a new Massachusetts company is looking to help us do that.”
§ “Saving Star CEO David Rochon explains how he's trying to transform the coupon business. The Waltham, Mass.based company ties people's store loyalty cards to online accounts or iPhone or Android applications.”
§ “The coupons can help people save on just about everything that you buy in the supermarket -- everyday items
that you would see in a Sunday newspaper. You just click on the item you want, and can use the coupon at
Shaws, Stop & Shop, or CVS.”
April 14 San Francisco Chronicle article
This article highlighted the growth of a market for reselling Groupons.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/04/14/BUIA1IVU11.DTL
§ “Because she regularly visits family in Arizona, Sara Jones picked up a Groupon last year, $79 for a three-hour
limo ride in Phoenix. But during her latest trip, she couldn’t find time for it.”
§ “‘It was a really good deal, but I couldn’t use it,’ the Concord resident said.”
§ “Jones posted the Groupon for sale on Lifesta, an online marketplace for Groupons and other local daily deals,
and found a buyer a few months ago. She was able to recoup most of the cost of the coupon.”
§ “‘It offers someone who buys things peace of mind,’ said Jones, who has also sold Groupons for San Francisco
restaurants and horseback riding on Lifesta. ‘If you aren’t able to use what you have, you can sell them.’”
§ “Since its launch in November 2008, Groupon has sparked a daily-deals phenomenon. Groupon alone has sold
22 million Groupons in North America and reportedly turned down a $6 billion bid from Google last year. In
addition, nearly 500 other sites, such as Plum District and Town Hog, both based in San Francisco, and Living
Social, offer daily deals, from discounted whale-watching excursions to half off for two dozen cupcakes.”
§ “Now its success is inspiring a secondary market: Lifesta and CoupRecoup, both headquartered in San
Francisco, let users buy and sell unused daily deals. CityPockets helps users manage all the coupons they’ve
purchased.”
§ “Yipit aggregates deals from more than 460 sites and matches them to users based on their location and
preferences. And many more are helping build a daily-deals ecosystem.”
§ “‘With more and more companies getting into the space, I don’t think daily deals are a fad,’ said Yael Gavish, cofounder of Lifesta. ‘It’s just going to become a mainstream advertising and marketing outlet just like Google ads
or newspaper ads.’”
§ “Lifesta was founded in July 2010 after Gavish saw her friend struggle to unload a Groupon she couldn’t use.
The site lets users post their unused deals for sale.”
§ “Sellers set their price and, if their coupon sells, Lifesta charges 99 cents and keeps 8 percent of the sale. The
site addresses a common occurrence with daily deals: An estimated 10 to 20 percent of daily deals purchased
aren’t redeemed before they expire.”
§ “‘It’s a no-brainer situation for most people,’ she said. ‘If you have a Groupon collecting dust, now you can sell
it.’”
§ “For buyers, they have a chance to pick up a bargain they may have missed. And unlike with daily deals, which
are only available for a limited time, shoppers have the luxury of browsing. Lifesta also offers a 60-day
guarantee: If there is something wrong with the coupon they purchased, they get their money back.”
§ “CoupRecoup is another marketplace for daily deals. It operates like Craigslist: Sellers post their coupon and
price and interested buyers contact them directly through the website. Users don’t have to set up an account
and the site doesn’t take a cut of the sale. For the past three months, the site has seen the number of posts and
inquiries double each month.”
§ “‘There’s been a heightened interest in the resale market,’ said Aren Sandersen, co-founder of CoupRecoup. ‘It
seems people who got into the Groupon craze six months ago are realizing they purchased Groupons they
probably aren’t going to use and were a little too impulsive, and they’re looking to sell it and recoup the money
they put in.’”
§ “Meanwhile, for those still hunting for a bargain, they can turn to aggregator services such as the Dealmap of
Menlo Park, Redeemio and Yipit.”
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321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com
Valassis Communications Inc.
§
§
§
§
§
“Yipit tracks more than 460 sites and adds about 15,000 deals a month. Subscribers to the site indicate their
location and interests, such as health and beauty and restaurants and clubs. When Yipit sees a matching deal, it
sends an e-mail. If the subscriber buys it, Yipit earns a commission.”
“Yipit also crunches the data it finds. In San Francisco, for example, Yipit has a database of nearly 5,000 offers
since March 2010, drawn from the 43 sites that cater to the Bay Area, said Jim Moran, co-founder of Yipit.”
“It has found that the average daily deal in San Francisco cost $58 and is worth $131, and that the top revenue
generating categories in the region are wine, skydiving, teeth whitening and chiropractic services.”
“It isn’t clear how large the daily-deals market will become, but shoppers have already started to change how
they make purchases, said Lou Kerner, social media analyst for Wedbush Securities.”
“‘We believe daily deals are going to be pervasive,’ he said. ‘We believe every website you go to will have a daily
deal, and it’s going to become part of the expectations of a lot of shoppers.’”
Post on TheGroceryGame.com
This blogger wrote that Valassis and SmartSource publish the best freestanding insert coupons.
http://www.thegrocerygame.com/smartsource/
§ “Two companies, Smartsource (or Smart Source) and Valassis, publish the majority of coupons. Smartsource
and Valassis coupons may be found in the Sunday paper.”
§ “The best coupons are published by Smartsource and Valassis. Smartsource and Valassis each publish one
section of coupons per paper. These coupon sections are color and have a glossy finish. Sometimes
Smartsource and Valassis will publish an additional section. Each week, we will tell you how many sections you
should find for Smartsource and Valassis.”
§ “On some holidays, Smartsource and Valassis will not issue coupons. We will let you know if there are no
sections for Smartsource and Valassis.”
§ “The manufacturers issue their best deals through these coupon inserts in the Sunday paper. By comparison,
coupons that you may print off of the internet will most often be sub-standard in terms of dollar value.”
Next Steps
Blueshift’
reassess
determine
Blueshift’s next report on the coupon industry will re
assess growth in coupon usage and de
termine if shared mail will
continue to grow at the expense of FSIs.
FSIs. We will learn if sources are hearing about or experiencing higher prices from
Valassis, and how they are responding. We also will monitor the growth of digital marketing and Valassis’
Valassis’ position
position therein.
therein. We
will determine Valassis’ success with online coupons and the possibility of establishing itself as a leader in the growth of clickclicktoto-card coupons. Finally, we will see if Groupon is making any inroads in attracting businesses that use shared
shared mail or FSIs.
Additional research by Seth Agulnick and Dann Maurno
The Author(s) of this research report certify that all of the views expressed in the report accurately reflect their personal views about any and all of the subject securities
and that no part of the Author(s) compensation was, is or will be, directly or indirectly, related to the specific recommendations or views in this report. The Author does not
own securities in any of the aforementioned companies.
OTA Financial Group LP has a membership interest in Blueshift Research LLC. OTA LLC, an SEC registered broker dealer subsidiary of OTA Financial Group LP, has both
market making and proprietary trading operations on several exchanges and alternative trading systems. The affiliated companies of the OTA Financial Group LP, including
OTA LLC, its principals, employees or clients may have an interest in the securities discussed herein, in securities of other issuers in other industries, may provide bids and
offers of the subject companies and may act as principal in connection with such transactions. Craig Gordon, the founder of Blueshift, has an investment in OTA Financial
Group LP.
© 2011 Blueshift Research LLC. All rights reserved. This transmission was produced for the exclusive use of Blueshift Research LLC, and may not be reproduced or relied
upon, in whole or in part, without Blueshift’s written consent. The information herein is not intended to be a complete analysis of every material fact in respect to any
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17
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