Next to the gallows: Newspaper coupons

The best reason that some newspapers have to stay in print — at least a few days a week — is to distribute coupons and circulars (free-standing inserts, or FSIs, in the jargon). But as newspaper circulation declines below critical mass and as digital means of delivery of coupons and bargains catch on, the FSI line of business is the next to fall over the cliff for papers.

Rick Edmonds at Poynter writes about an NAA study that says the coupon business for newspapers is under siege. Meanwhile, Coupons.com brags that the growth of digital coupons is surging; printouts of deals at Coupons.com alone equaled $858 million last year. This comes as coupon use in America is growing overall for the first time in 17 years; we redeemed 3.3 billion last year, a 27% jump over 2008. Sunday coupons still account for the lion’s share of the business, but online is growing fast.

Newspapers defined themselves and their barrier to entry by their production — we already know what is happening to paper — and distribution — now we see what is to become of that.

It’s not just coupons that are affected. When I visited the very smart people at Best Buy a few months ago, I came to see that their circular is media as well; it provides value to manufacturers and consumers. Large retailers, like manufacturers, need effective distribution and as newspapers shrink, they will need to look at alternatives.

Is that the Postal Service? Well, they, too, are losing a fortune (more on that soon). Most of what the Post Office delivers today is advertising and I certainly don’t want to subsidize that with my stamps or taxes, so I’d expect advertising postal rates to rise, which will also put pressure on coupon and circular advertisers, motivating them even more to find ways to make digital work.

The problem with digital coupons and circulars has been portability: the extra and inconvenient step of printing out supresses use. But now enter the smart phone and the long-fabled day of the smart, mobile coupon may actually arrive. If I can check into a flight with a scan of my iPhone shouldn’t I be able to buy toilet paper with it? The value of that redemption is greater for the advertiser because (a) it may cost them nothing — no need to use media as a middleman if I receive deals directly and (b) the advertiser will know a lot more about me; that data itself is terribly valuable and (c) this allows the advertiser to target with far greater relevance, which (d) is better for us customers.

I think there’s a short-term opportunity here for someone to craigslist (as a verb) the newspaper distribution business, creating the means to deliver in key markets with greater reach and better Zip code targeting, drastically undercutting both newspapers and the Postal Service. As coupons do move to mobile and digital, this business will go away, too, but it won’t have much in the way of shut-down cost so there’s a way to disrupt the last dying ember of an industry and get some nice cash flow. If I were a coupon company — and News Corp. is — I’d do it myself.

The point: expect the coupon and FSI business to head over a cliff and with it, another important revenue stream for print papers, giving them more reason to abandon print.

ONE MORE THING: I’ve told this first part of this story before: When I was Sunday editor of the NY Daily News and we came back from a strike, we didn’t have coupons because Murdoch was feuding with our new owner, Robert Maxwell. When they did return, our circ went up 100k. Those people were buying coupons more than the paper.

Now the second part: I later proposed to a publisher starting a coupon magazine that would be sold at supermarket checkout. Yes, I said sold. I wasn’t going to charge readers for content. I was going to charge them for advertising. Didn’t happen, sadly. Still think it was a good idea.

  • http://thesimpler.net Tim Valenta

    I can easily say that I don’t use coupons at all. Ever. Not because I’m opposed, but because I don’t care enough to foot the bill and upkeep for a crappy printer. I’m too digitally committed to want to put a printer in the picture.

    I’d be sold, though, for digital coupons I could swipe or have scanned. You’re point (d) is a critical piece of realization, despite whatever aid our consumer data gives to the advertiser.

  • Jeff Smith

    Here’s a model, Jeff:

    Start with an increasingly common existing retailer infrastructure: the “rewards card” that is scanned at the register each time you check out.

    Now create a web component to the program where you “earn” coupons, i.e. specific discounts for specific products at specific retailers, by simply viewing advertising. The more engaged the interaction required to “earn” the discount, the more valuable the advertising becomes.

    This could be the beginning of a new way to think about online display advertising: measuring and monetizing the attention paid to ads.

  • http://frogblog.biz Fred H Schlegel

    Dominick’s in Chicago allows you to load coupons directly onto your club card. They are automatically applied when you buy the product. No more dead trees.

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  • http://www.tradewithdave.com Dave Harrison

    Jeff:

    Just being right doesn’t make it a good business idea. If your publisher had printed a coupon-only magazine and even if he charged for it, he/she would have been acknowledging the “secret sauce.” Of course he knew that people were buying the newspaper for the coupons, but that doesn’t mean that he wants his advertisers, his editors and the world to know that fact. Sure, he can simply have a new title, a new name for the coupon magazine business, but as you well know, people find out pretty quickly.

    Stockholders can never rely on the staff to admit that “the emperor has no clothes” and how many CEO’s do you know that are willing to risk everything on an idea for a new pardigm for their business. It’s much less risky for them to standby… wait for some entrepreneur to prove the new model…. then swoop in and buy the company.

    Who wants to be the first newspaper publisher to stand in front of a big web press they bought ten years ago and say “I made a mistake.” It’s so much easier to keep blaming it on the advertisers and subscribers and refer the problems to the bankruptcy court. In my opinion where people are confused is that they think the problem is with newspapers. The problem is not with newspapers, the problem is with paper. Fix the paper (i.e. kindle, Ipad, etc.) and you’ve fixed the problem, the distribution cost, the black fingers from ink and the overstuffed trash can. Then newspapers can get back to what they are really good at. Reporting the news. Oh… I almost forgot. They fired the great reporters. Maybe I’ll hire them, and they’ll write interesting stories about the county-wide basketball championship, including video and sell advertising and downloadable coupons – all without the cost of the printing and distribution. Wait a minute. People like BackFence tried that already and John Sculley tried to launch the Iphone/Ipad/Kindle/Blackberry twenty years ago at apple with the Newton. Timing is everything. tradewithdave.com

  • http://dullardmush.blogspot.com Anon Guy

    I think Entertainment Book took your idea up. Yearly coupon book for $35.

  • Nasarius

    Coupons are really just a form of advertising, right? And ideally, advertisers would like you to see their coupons but not actually use them. Just like mail-in rebates.

    That’s the trouble with the idea of making coupons more efficient. It’s nice for the consumer; it’s probably not attractive to the advertiser.

  • http://www.myselectioncriteria.com.au Dustin

    I never really thought about print paper as being a Coupon distributer, very interesting angle.

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  • Paul

    I used a Jiffy Lube coupon on my cell phone the other day. I did a SMS message responding to an ad and they sent the coupon to my phone. They scanned it at the store.

  • cm

    Here in NZ, internet trading has **boosted** the postal service.

    While email etc might erode document and advertising delivery, The upswing in online trading increases use of postal service to deliver goods (it’s probably a few centuries before teleporting really works).

  • http://www.amarketsquarehero.com Dennis Robaugh

    My 26-year-old CPA cousin and his girlfriend get the Sunday metro paper ONLY for the coupons … and an obligatory civic duty, as he says, “to support the local paper somewhat.” But he wonders how long he’ll do this because he doesn’t read 90 percent of the paper. His news comes to him entirely through digital means. Without coupons, another huge chunk of readership is going to fall away for newspapers. My former publisher has lost many inserts in recent years as circulation has plummeted, and readers have noticed.

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  • Eric Gauvin

    What will “coupon-clippers” do without something to clip?

    I’m not a coupon-clipper, but from from what I’ve observed, part of the “fun” of being a coupon-clipper is finding, clipping and collecting the coupons and feeling frugal. As someone else mentioned this is a way for consumers to engage and interact with advertising almost as a hobby.

    I think if you take way the paper part of coupons eventually the concept will eventually fade away completely. Take away the clipping and coupons are just ads.

    This relates to a point I’ve made about newspapers before. If someone can solve the “reading satisfaction” component of newspapers, they’ll make a fortune. Perhaps iPad. I don’t know if that will take off…

    • http://thesimpler.net Tim Valenta

      I’m not sure that paper coupons should stick around for the sake of coupon clippers. I mean… look… animals and plant life go extinct. It just happens. So do certainly hobbies and business models :) Sure, we can look back nostalgically at the dinosaurs and how much fun it would be if we still had them. But we’ve gotten on without them :)

      • Eric Gauvin

        Huh?

  • http://www.blog.cgsm.com Mark Kolier

    Jeff it’s interesting that there are a number of focus groups of one weighing in on their personal use of coupons. Coupons are more relevant than in recent memory and the distribution of same is what’s under consideration. Electronic coupons are immediate, relevant and will only get easier. The USPS has again missed an opportunity to be the e-provider of couponing. Coupons.com has an edge but they do not appear to know how to leverage that as yet.

  • steve

    not once have i read in the comments here the most important feature an advertiser gets with an electronic coupon v. a carpet bombed paper one- data.

  • http://www.ursamajorassociates.com John Callan

    The most powerful use of printed coupons in my view is personalized customer retention, via register receipts. CVS is masterful at this. Having registered as a customer, I let them scan my card upon check out thus allowing them to know everything that I buy and they build a database on me accordingly. With almost every purchase I am offered printed discount coupons on the reverse side of the register receipt. The coupons are personalized, relevant and of real value to me. I keep them in my money clip and automatically return to CVS for all my pharmaceutical purchases. This is a perfect example of the power of personalization that keeps be coming back into anyone of their stores nationwide. I don’t have to print anything, nor shop online.

    The key to this success or any means of direct marketing is personalization. Regardless of the channel, it must be personal.

  • http://www.steussy.com/blog Peripatetic Entrepreneur

    I understand that the back office business of coupons — collecting physical coupons from stores, reimbursing the stores, shifting the coupons back to the issuing companies and getting those companies to pay — is fraught with fraud at every step of the way.

    I foresee two avenues to change. Either a young company starts itself as an alternative to past coupon distribution and shoulders the data collection/cash disbursements, or a young company sets itself up to give manufacturers a turnkey operation for themselves internally.

    The first is an easier sell, with more gravy for the enterpreneur. The second is the better solution.

  • Kevin

    The coupon is merely the vehicle to deliver the marketing message. The newspaper being the platfrom by which this vehicle travels. I am agnostic to the vehicle and the platform. What I am interested in is what delivers the best ROI. Newspaper, mobile, skywriting, could care less. Where should I invest my money which will provide the greatest return for my investment. This discussion is yet another example of the digital vs tradition marketing strategy. We are witnessing a truly a fascinating event which is unfolding and changing on a daily basis.

    There are three key attributes which the digital mediums offer which offer marketeers and the trillion dollar advertising and marketing business the Holy grail of quantifiable ROI: transparency, immediacy and personalization.

    Based on the research we have done and continue to do, the best return is provided via a mix of medium’s defined by the individual and personalized to the level which respects their individuality without violating their privacy. ( a delicate balance for sure) Solving the dilemma of last bastion of wasteful spending in the corporate world is upon us….Oh yeah and this includes Web, mobile, email and Print.

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  • http://couponsdealspromos.com/ coupons code

    The Post Office delivers today is advertising and it certainly don’t want to subsidize that with my stamps or taxes. we will use the coupons.

  • http://insightmarketdata.com/ Jim Wilson

    Paper is dead, I think this is the real future of coupons.

    http://www.insightmarketdata.com

    Targeted, real-time, customized, and competitive. Customers get the benefit of ease of acquisition and maximized savings, manufacturers get the benefit of perfect timing and control to reach and target shoppers.

  • Katie

    I would be very interested in finding out how to get coupon printing companies to submit to my local newspaper. It’s almost a necessity w/ today’s economy.

  • http://www.holdembonus.com Doyle

    The interesting thing is that within 20 years there will be less paper, im not saying dead, but less and the online media will have a much bigger proportion.

  • http://www.selectioncriteriaexampleswriter.com.au Chris Warburton | Selection Criteria Examples

    Hey Jeff, this is a very hot topic at the moment with all that’s been happening in the ‘coupon’ business. Groupon knocking back a massive Google offer. Here in Aus we had the sale of ReatilmeNot for a record price (can’t recall the figure but it was massive). Just wanting to know your thoughts on why you think Groupon knock back such a lucrative offer from Google? Thanks

  • http://www.blurty.com/talkpost.bml?journal=stonegolem788&itemid=1267 Thomasena

    Your post extremely created me think, have you ever any any reading you’d recommend beside your site http://buzzmachine.com/2010/02/17/next-to-the-gallows-newspaper-coupons/?

  • Jennifer Logoleo

    If it has a keyboard, then it’s not a tablet, it’s a netbook.

  • http://www.selection-criteria.com.au Stephen Criteria

    In Australia we hardly have any coupons at all. I’m not sure if its because its been tried and failed, or no one wants to give something away. The ‘deal a day’ websites are a dime a dozen though.