I’ve often wondered if and when the Internet would become a major distribution medium for cents-off coupons issued by CPG manufacturers. Sure, I realize that there are concerns about the possibility of fraud if hackers figured out some way to print millions of coupons and some unscrupulous retailer tried to submit them for redemption. But, since the gang-clipping of coupons from newspapers appears to have been stymied, I figured that it was just a matter of time before manufacturers got to the point where they felt comfortable using the Internet. Today, I’m wondering if we’ve reached that point.

To begin, here are some interesting – even remarkable -- statistics about coupons. PROMO magazine reported that CPG manufacturers distributed 302 billion coupons in 2007, up 6% and representing a whopping 16 billion more coupons relative to 2006. The face value of the coupons was $387 Billion, a big increase of 16% over the $337 Billion in 2006 and representing a 9% increase in face value. Free-standing inserts in newspapers continued to lead the ways in which marketers distribute coupons (88%), followed by handouts (5%), direct mail (2%), magazines (2%), newspapers (1%), in/on-pack (1%) and the Internet (0.4%), according to NCH Marketing.

According to CMS, a promotions logistics company, the boost in value and sheer number of coupons available helped improve redemption in 2007. Consumers turned in $2.8 billion of the total $387 billion in available coupon value. That added up to 2.6 billion coupons redeemed in 2007, the first time since 1992 that redemption volume did not decline.

Economic pressures and consumer-friendly tactics combined to guarantee continued consumer and manufacturer engagement with cents-off offers in 2007. In fact, comparing coupon response to key economic indicators over time has shown a strong link between the economy and coupon redemption. Most notably, as unemployment and prices rise, coupon redemption increases. So, with today’s challenging economic conditions, I don’t think we should be surprised if coupon redemption increases again this year and next.

So, what’s been happening to the use of coupons online? Well, it certainly appears that surfing for coupons is growing in popularity. comScore’s data show that 27 million people visited coupon sites in October, up 33% from a year earlier (that’s 18% of the 148 million Americans who use any coupons in a year). The number of searches conducted using coupon terms also increased by 100% from January to September of this year. On a global basis, we saw a 42% increase in the number of pages viewed at coupon sites, so it’s certainly not just a U.S. trend.

It’s also very interesting to look at the income segments where the growth is occurring:

Coupon Sites: Average Monthly Unique Visitor Growth Q3 2008 Vs. Yr Ago

At first blush, it might seem counter-intuitive to see the strongest growth occurring in the mid-to-upper income households. But, this might reflect the reality that offline coupon redeemers tend to be better educated and have higher household income than non-redeemers. Several reasons have been put forward to explain this phenomenon, including the fact that the distribution vehicles used by coupon marketers tend to reach higher rather than lower income households and more expensive brands tend to run more coupon promotions. Whatever the real reason, I think it’s encouraging for marketers to see such high online growth rates in the mid-to-upper income households where substantial purchasing power resides.

So, what does the future hold? I believe we’re likely to see an explosion in the use of electronic coupons by CPG manufacturers. There are a number of reasons why I think this will happen. First, I believe that the rapid growth in consumers’ willingness to use the Internet to obtain coupons, coupled with a continued decline in print newspaper readership, will force manufacturers and retailers to reconsider their distribution strategies that today are so dependent on the use of newspaper FSIs. By distributing coupons online, retailers can reach a large audience and realize large savings relative to the cost of newspaper distribution. Second, retailers are increasingly looking at the opportunity to link online coupons to the use of their loyalty cards in a seamless and efficient manner. To get these electronic discounts, shoppers simply have to type in their loyalty-card ID numbers on a store Web site (or other site) and click to load the coupons to their card account. The discounts are subtracted at the retail store after those items are scanned at checkout and the consumers have shown their loyalty card.

Now, that’s a simple and cost effective solution that provides benefits to the manufacturer, the retailer and the consumer.