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NPD: Customers hungry for freebies, Internet coupons

NPD: Customers hungry for freebies, Internet coupons

As the recession lingers, the types of deals prompting consumers to eat out at restaurants are changing, according to new data from The NPD Group.

Once content to nab a fast-food double cheeseburger for a dollar, a daily special at a discount or a downsized entrée at a reduced price, cash-strapped consumers are now looking for high-quality, full-sized meals for little or nothing. As a result, daily specials, dollar menus and discount-priced menu items, once the main drivers of deal growth, have taken a back seat to freebies and Internet coupons, said officials of the Port Washington, N.Y.-based market research firm.

“There are certain types of deals that are growing very strongly,” NPD analyst Bonnie Riggs said of free deals and online coupons. “These are the types of deals resonating most strongly with consumers.”

Deal traffic was flat in the June-ended quarter after growing 7 percent in the year-earlier quarter, according to NPD. But while overall growth in dealing basically came to a halt, consumers still reported using a deal on 3.7 million visits in the most recent quarter.

“[There are] still a lot of deals out there consumers are still taking advantage of,” Riggs said. “I think it’s about getting something free.”

Clipped, ripped or printed, coupons are among the most rapidly growing deals, NPD found. In the most recent quarter, visits prompted by a coupon accounted for 14 percent of all deal visits and were up 11 percent. Coupon visits include those received on the Internet, by regular mail, at a restaurant, from a newspaper or a magazine or from an entertainment book.

Of all deals, coupons received from the Internet are growing fastest. The data found that 3 percent of all deals are coupons retrieved from the Internet, up from just 2 percent a year ago. In the quarter ended in June, use of Internet coupons grew by double digits. In contrast, during the same period the use of traditional coupons clipped from a newspaper or magazine were down 2 percent, while those torn out of the Entertainment book were down 6 percent.

Buy-some-get-some-free deals and combined-item specials also are experiencing growth, NPD found. In the quarter ended in June, visits on a buy-some-get-some-free deal, which accounted for 7 percent of all deal visits, were up by double digits over a year ago, and visits on a combined-item special, which accounted for 20 percent of all deal visits, were up by 3 percent.

“While overall coupon usage is up…it has been Internet coupons that have been a huge driver…growing at double-digit rates over the last five quarters,” Riggs said. “In addition to Internet coupons, coupons received at the restaurant and those received in the mail have also been more popular with consumers.”

Though nearly everyone is looking for a free lunch these days, only certain consumers are taking full advantage of Internet deals. According to the data, families with kids and adults aged 25 to 34 are the heaviest users of Internet coupons. These two groups had above-average tendency to use Internet coupons, NPD discovered. In addition, while coupon usage has traditionally skewed toward women, the data reveal that men are more likely than women to take advantage of Internet coupons.

While dollar menus, steep price discounts and downsized versions of popular items at low prices have been popular, consumers now say they want regular, full-sized menu items at a significant discount or something for free. In a recent NPD report, “What To Expect When Economic Recovery Begins,” 31 percent of consumers reported that price discounts on regular menu items would entice them to visit restaurants more often, while 24 percent said they could be enticed by a coupon for a free item.

“The Internet as a coupon vehicle has been around about 10 years, and it’s continuing to grow,” said Charles Brown, a marketing expert and co-chair of the New York City-based Promotion Marketing Association’s Coupon Council. “With the economy being what it is, consumers are seeking out coupons more than normal.”

While the council doesn’t track restaurant coupons, it does track coupon usage for consumer packaged goods, which can often be an indicator of what will eventually happen in the restaurant industry, Brown noted.

According to the council, last year 300 billion coupons were distributed for consumer packaged goods. Though just 0.7 percent of those coupons were distributed on the Internet, the number grew by 80 percent, up from 0.4 percent a year earlier.

Internet couponing is great for both consumers and marketers, Brown said.

“To the consumer it’s easy,” Brown said. “They can select the things they’re interested in. [For marketers], it’s more targeted, more specific to people. You send out less and get more.”

A growing number of restaurant operators are finding online coupons an effective tool for driving traffic and cost-effectively building their brands in tough times.

To reach an array of consumers despite a limited media budget, in January Lexington, Ky.-based chain Fazoli’s launched , a mini website featuring weekly buy-some-get-some-free coupons. The 250-unit Italian quick-service brand’s first foray into online couponing has proven to be a huge success in driving traffic among both existing and new customers, officials said.

“We want to fight for our share of business,” said Fazoli’s brand manager Stacy Hettich. “The coupons have allowed our guests to still visit Fazoli’s on a more regular basis. From a restaurant standpoint, it’s a very low-cost way to get things out.”

Hettich said Fazoli’s online coupons have been showing a more-than-15-percent redemption rate, versus the usual 2 percent to 4 percent recorded with traditional coupons.

“The biggest reason we’ve seen success with it is it’s making something available that [consumers are] only going to print if [they] want it,” Hettich said. “Other programs have lots of waste and drop to those who are not interested.”

Carpinteria, Calif.-based CKE Restaurants, which owns the Carl’s Jr. and Hardee’s quick-service brands, believes in the future of online couponing so strongly that it recently created a new digital-marketing position. Brad Rosenberg is the company’s manager of digital strategy and marketing for the Carl’s Jr. and Hardee’s brands.

“Internet couponing allows us to stay on our broad target…young hungry guys…but also specialize and target [other] consumers without our traditional market ever seeing it,” Rosenberg said.

So far the company’s digital efforts have included everything from printable coupons on its websites and in e-mail blasts to YouTube videos that include downloadable discounts. The offers have largely been dollar-off limited-time offers on new product launches.

“This is the very beginning for us,” Rosenberg said. “We’re really excited about the results we’re seeing.”

While Internet couponing is growing fast, operators shouldn’t fire their print marketing managers or toss out their traditional couponing strategies yet, observers said.

“You can’t just go one way or the other; you have to have a mix of media to reach people,” Brown said of using print versus online coupons. “I don’t think it’s going to be one replacing the other…just different ways to reach different consumers.”

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