New Dollar Coin
Marketing Campaign Raised Public Awareness but Not Widespread Use
Gao ID: GAO-02-896 September 13, 2002
If the public used the dollar coin rather than the dollar note, the government could potentially save up to $500 million annually. The Mint spent $67.1 million to promote the new dollar coin from 1998 to 2001, including expenditures for a marketing and advertising program; public relations and publicity programs; 23 partnerships with banking, entertainment retail, grocery and restaurant chains; and promotional events with transit agencies. Most of the $67.1 million was used for a national advertising campaign to build public awareness, generate acceptance, and encourage use of the new dollar coin. The Mint also worked with contractors to stimulate the new dollar coin's use in state and local government operations and used its own staff for marketing activities in federal government facilities, but it did not track the costs for the use of Mint staff. According to the Mint, between January 2000 and December 2001, the new dollar coin had generated $1.1 billion in revenue and $968 million in seigniorage. The Mint faces several barriers in its efforts to increase the new dollar coin. The most substantial barrier is the current widespread use of the dollar bill in everyday transactions and public resistance to begin using the new dollar coin. Other barriers that hinder wider circulation include (1) negative perceptions the public may have of the coin after two failed introductions, (2) lack of public information about the savings to the government from using the new coin, (3) lack of public awareness about the comparative advantages of the dollar coin over the dollar bill, and (4) the idea that the ease of carrying the bill is more beneficial than the durability of the dollar coin. In general, the Mint's marketing plan describes a program that is much smaller in scope than the marketing campaign used to launch the new dollar coin in 2000. The Mint plans to address some, but not all, of the barriers to increasing use and recognizes that successfully achieving widespread use of the new dollar coin will be difficult if the dollar bill cocirculates with the new dollar coin. The Mint's 2001 report to Congress did not fully and accurately describe the costs of the marketing campaign, the results obtained, and problems encountered. The 2002 report gave more details on marketing costs and a fuller description of the problems encountered.
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GAO-02-896, New Dollar Coin: Marketing Campaign Raised Public Awareness but Not Widespread Use
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Report to the Subcommittee on Treasury and General Government,
Committee on Appropriations, U.S. Senate:
September 2002:
New Dollar Coin:
Marketing Campaign Raised Public Awareness but Not Widespread Use:
GAO-02-896:
Contents:
Letter:
Results in Brief:
Background:
New Dollar Coin Marketing Program Cost $67.1 Million and Generated $968
Million in Seigniorage, but the Coin Is Not Widely Circulated:
Public Resistance Is the Greatest Barrier to Increased Use of the New
Dollar Coin:
The Mint‘s Marketing Plan Identifies but Does Not Provide Details on
How It Will Address Barriers to Increased Coin Use:
The 2001 and 2002 Mint Reports to Congress Did Not Fully Describe the
Marketing Program, Results, or Problems Encountered:
Conclusions:
Recommendations for Executive Actions:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: State and Local Governments: Dollar Coin Use Data in the
Largest Transit Systems and Toll Roads:
Appendix III: Comments from the United States Mint:
Appendix IV: Comments from the Federal Reserve Board of Governors:
Tables:
Table 1: Marketing Program Contractors as of December 2001:
Table 2: Mint Promotions Distributing New Dollar Coins, Ranked by
Number
of New Dollar Coins to Be Distributed:
Table 3: Number of Dollar Coins that the Mint Shipped to Federal
Reserve
Banks, Fiscal Years 1998-2000:
Table 4: Circulation of Highest Value Coins and Lowest Value Notes in
G-
7 Countries:
Table 5: New Dollar Coin Distribution Problems Identified in Telephone
Calls to the Mint from January to August 2001:
Table 6: Summary of Actions in Mint Marketing Plan to Address Barriers:
Table 7: Transit Agencies Accepting the New Dollar coin, as of April
2002:
Table 8: Dollar Coin Use in Toll Road Operators, as of December 2001:
Figure:
Figure 1: Federal Reserve Net Payout of Susan B. Anthony and New Dollar
Coins, 1998-2002:
Abbreviations:
HDTV: high-definition television:
NASCAR: National Association for Stock Car Auto Racing:
TSI: The Source International:
Letter:
September 13, 2002:
The Honorable Byron L. Dorgan
Chairman
The Honorable Ben Nighthorse Campbell
Ranking Member
Subcommittee on Treasury
and General Government
Committee on Appropriations
United States Senate:
If the public uses the dollar coin rather than the dollar note, the
government could potentially save up to $500 million annually,
depending on the amount of use. This report responds to your request
that we study the United States Mint‘s (the Mint) marketing program for
the new Sacagawea dollar coin, which was required by the United States
$1 Coin Act of 1997.[Footnote 1]
As agreed with your offices, our objectives were to (1) describe the
Mint‘s new dollar coin marketing program costs, the contracts and
promotional programs in which the Mint engaged, and the revenues that
were generated; (2) assess the barriers the Mint may face in increasing
the public‘s use of the new dollar coin; (3) describe the Mint‘s future
plans to promote the new dollar coin and the extent that these plans
address the barriers; and (4) assess the extent that the Mint‘s 2001
and 2002 reports to Congress on the marketing of the new dollar coin
fully and accurately described the marketing programs, the results
obtained, and the problems encountered.[Footnote 2]
To address our first objective, we obtained and reviewed Mint
contracts, progress reports, plans, and other related documents to
develop information on the Mint‘s new dollar coin marketing program
costs; the contracts and promotional programs in which the Mint
engaged; and the revenues that were generated. To obtain information on
and assess the barriers the Mint faces in increasing the public‘s use
of the new dollar coin, we analyzed Mint documents; interviewed
officials from the Mint, its contractors, and trade associations; and
surveyed the Mint‘s promotional partners, asking them about any
problems they encountered during their promotions. We interviewed
officials at the Mint, the Federal Reserve Board, and various trade
associations and reviewed Mint documents and the 2002 new dollar coin
marketing plan to obtain information on the Mint‘s plans to overcome
barriers to increasing commercial use of the new dollar coin. To assess
the extent that the Mint‘s 2001 and 2002 reports to Congress fully and
accurately described the marketing of the new dollar coin, results
obtained, and problems encountered, we analyzed the reports and
compared the information in them with the information we obtained in
addressing our other objectives. We also reviewed information on the
introduction and circulation of the Susan B. Anthony dollar coin,
including hearing transcripts and our previous reports on new dollar
coin proposals.[Footnote 3] Appendix I provides further details about
our objectives, scope, and methodology.
We requested comments on a draft of this report from the Secretary of
the Treasury, the Director of the Mint, and the Chairman of the Board
of Governors of the Federal Reserve System. The comments we received
are discussed near the end of this letter and reproduced in appendixes
III and IV. We did our work in Washington, D.C., between September 2001
and September 2002 in accordance with generally accepted government
auditing standards.
Results in Brief:
The Mint spent at least $67.1 million to promote the new dollar coin
from 1998 to 2001, including expenditures for a marketing and
advertising program; public relations and publicity programs; 23
partnerships with banking, entertainment, retail, grocery, and
restaurant chains; and promotional events with transit agencies. Most
of the $67.1 million was used for a $40.5 million national advertising
campaign featuring an image of George Washington that was designed to
build public awareness, generate acceptance, and encourage the new
dollar coin‘s use. The Mint also worked with contractors to stimulate
the new dollar coin‘s use in state and local government operations and
used its own staff for marketing activities in federal government
facilities, but the Mint did not track the costs for the use of Mint
staff. According to the Mint, between January 2000 and December 2001,
the new dollar coin had generated approximately $1.1 billion in revenue
and $968 million in seigniorage.[Footnote 4]
The Mint faces several barriers in its efforts to increase the public‘s
use of the new dollar coin. The most substantial barrier is the current
widespread use of the dollar bill in everyday transactions and public
resistance to begin using the dollar coin. As we have reported in the
past, until individuals can see that the coin is widely used by others
and that the government intends to replace the dollar bill with the
dollar coin, they will be unlikely to use the coin in everyday
transactions. Increasing use of the coin is especially difficult
because retailers will not stock the dollar coin until they see the
public using it, the public is unlikely to use the coin until they see
retailers stocking it, and banks and armored carriers are reluctant to
invest in new equipment to handle the coin until there is wide demand
for it. This interdependency of demand, which economists call the
’network effect,“ will be difficult to overcome. Other barriers that
hinder wider circulation of the new dollar coin include the following:
(1) negative perceptions the public may have of the coin after two
failed introductions, (2) lack of public information about the savings
to the government from using the new coin, (3) lack of public awareness
about the comparative advantages of the dollar coin over the dollar
bill, and (4) some people consider the ease of carrying the bill to be
more beneficial than the durability of the dollar coin. In addition,
firms that promoted the new dollar coin in partnership with the Mint
and other commercial users have reported problems with the way that the
new dollar coin is distributed, such as (1) the unavailability of the
coin at all banks, (2) supplies of new dollar coins that were
commingled with the Susan B. Anthony dollar coin, (3) packaging
concerns such as coins that are not available in rolls, and (4) higher
fees for delivery of new dollar coins compared with dollar notes.
The April 2002 Mint marketing plan for the new dollar coin requested
$0.5 to $1.0 million for the remainder of fiscal year 2002 for
researching consumer and distribution barriers and continuing existing
promotional efforts, followed by $10 to $15 million in fiscal year 2003
for marketing activities to increase use of the new dollar coin. In
general, the Mint‘s marketing plan describes a program that is much
smaller in scope than the marketing campaign used to launch the new
dollar coin in 2000. The Mint plan addresses some but not all of the
barriers to increasing use and recognizes that successfully achieving
widespread use of the new dollar coin will be difficult if the dollar
bill cocirculates with the new dollar coin. Although the Mint plan
identified the key barriers in distribution--such as the unavailability
of new dollar coins, commingling, lack of availability of new dollar
coins in rolls, and additional fees charged by armored carriers--the
plan does not specifically outline how those barriers will be dealt
with, other than to conduct research. The plan also notes that recent
negative media coverage following a Department of the Treasury‘s Office
of Inspector General report recommendation to temporarily suspend the
coin‘s production will be a significant challenge for the Mint‘s
marketing communications and public relations programs, but it does not
provide details on how the Mint will counter this negative press.
The Mint‘s 2001 report to Congress did not fully and accurately
describe the costs of the marketing campaign, the results obtained, and
problems encountered. The 2002 report gave more details on marketing
costs and a fuller description of the problems encountered. However, in
the 2002 report, the Mint did not provide a comprehensive analysis of
the outcomes and progress in industry sectors in which the Mint
promoted the new dollar coin, and the plan did not establish measurable
future goals for these sectors.
Overall, although the Mint‘s marketing program raised awareness of the
coin, the new dollar coin is not widely used by the public in everyday
transactions. Since the Mint does not have data showing that additional
marketing and promotion efforts would have a long-term positive effect
on dollar coin use, we are recommending that, aside from honoring its
existing promotion agreements and conducting planned research on public
acceptance and distribution barriers, the Mint suspend further
expenditures for marketing and promoting the new dollar coin until it
completes its research and can demonstrate that such expenditures are
likely to produce a sustained increase in the coin‘s use over the long
term and/or are necessary to achieve Congress‘s desire for
cocirculation. We are further recommending that the Mint revise its
marketing plan to reflect such an approach and work with Congress to
reach agreement on an appropriate funding level. We provided a copy of
a draft of this report to the Mint and the Federal Reserve, and they
agreed with our recommendations.
Background:
The United States $1 Coin Act of 1997 authorized the new dollar coin to
replace the Susan B. Anthony dollar coin, which began production in
1979. Even though the Anthony coin was never widely circulated, it
became clear by 1997 that the government‘s supply of Anthony coins
would soon be exhausted. In addition to giving the Mint authority to
develop a new dollar coin, the act also specified that the coin be
golden in color and have a distinctive edge and tactile and visual
features to make it easier to distinguish from the quarter-dollar coin.
To ensure that the new dollar coin would be recognized by vending
machines and other coin-operated equipment designed for the Anthony
dollar coin, the new dollar coin is the same size and has a similar
electromagnetic signature[Footnote 5] that is similar to the Anthony
dollar coin.
The $1 Coin Act authorized the Secretary of the Treasury, in
consultation with Congress, to select the design of the new coin. In
May 1998, the Secretary established a Dollar Coin Advisory Committee to
consider alternatives and recommend a design concept for the obverse
(heads) side of the coin. The final design selected was an artist‘s
rendition of Sacagawea, a Shoshone interpreter who assisted the Lewis
and Clark expedition of 1804-06 to the Pacific Ocean.
The act also required the Secretary to create a marketing program to
promote the use of the new dollar coin by commercial enterprises; mass
transit authorities; and federal, state, and local government agencies.
The Mint marketing program had three major components, including
research to identify market opportunities, a national public awareness
and education program that included a national advertising campaign,
and a business marketing program that was designed to increase
commercial use of the new dollar coin in targeted sectors. According to
the Mint, the first shipments of the new dollars were sent to the
Federal Reserve on January 18, 2000, and the Federal Reserve sent
shipments to financial institutions beginning January 26, 2000. The
Mint also shipped new dollar coins directly to Wal-Mart stores to
support a large, nationwide promotion of the coin that began on January
30, 2000.[Footnote 6]
While authorizing the production of a new dollar coin, the $1 Coin Act
also provided that the dollar note should not be removed from
circulation on the basis of provisions in the act. In authorizing the
circulation of both the dollar note and dollar coin, the act did not
establish a goal for the number of new dollar coins or establish a
level of dollar coin circulation compared with the dollar note. The act
also required the Secretary to conduct a study on the progress of new
dollar coin marketing program and submit a report to Congress on the
results of the study no later than March 31, 2001. The Mint submitted a
March 30, 2001, report to Congress.[Footnote 7]
In reports accompanying the 2002 Treasury and General Government
Appropriations Bill, the Senate and House Committees on Appropriations
expressed concern that the Mint‘s 2001 report to Congress did not
adequately describe the nature and extent to which the new dollar coin
was being used in commerce. The House report directed the Mint to
submit a new report by March 31, 2002.[Footnote 8] In addition, the
Senate report accompanying the 2002 Treasury and General Government
Appropriations Bill also expressed concern that it had not received
information on the contracts and agreements secured between the Mint
and nongovernment entities and public relations firms mentioned in the
Mint‘s March 30, 2001, report. The Mint submitted its second report on
March 29, 2002.[Footnote 9]
A Senate committee report and the Conference Report accompanying the
2002 Treasury and General Government Appropriations Bill further
directed the Mint to submit a marketing plan to the Appropriations
Committees and stipulated that the plan must be approved by the
committees before the Mint could draw additional funds from the Mint
Public Enterprise Fund to promote the new dollar coin. The Mint
submitted its plan, the ’Golden Dollar Coin Marketing Plan for
Congress,“ on April 24, 2002.
In March 2002, coins of all denominations made up 5 percent, or $32.1
billion, of the $642 billion in currency and coins that were in
circulation. The demand for coins from businesses and the general
public fluctuates, and the Mint and the Federal Reserve monitor several
factors, such as economic growth, coin collection activity, and Reserve
Bank coin inventories, to determine the number of coins that will be
produced and shipped to the Federal Reserve. The Mint receives orders
for coins from Federal Reserve Banks on a monthly basis and normally
ships coins directly to Reserve Bank offices. The Federal Reserve
provides coins to over 11,000 of the 20,000 U.S. depository
institutions, such as banks, savings and loans, and credit unions.
Smaller banks that do not order their cash and coins directly from the
Federal Reserve obtain cash services through many of the larger banks.
In addition to Federal Reserve offices, Reserve Banks use over 100 coin
terminals generally operated by armored carriers to store and
distribute coins. Besides functioning as Federal Reserve coin terminal
operators, the armored carriers wrap and deliver coins for a fee to
banks and retail customers to meet public demand. Reserve Banks
normally fill coin orders from banks by first paying out previously
circulated coin until this inventory is depleted and then by using new
coin inventories to meet demand.
To support the introduction and promotion of the new dollar coin, the
Federal Reserve departed from its normal policy and held all previously
circulated Anthony dollar coins received by Reserve Banks and filled
orders only with new dollar coins. However, in January 2002, Reserve
Banks returned to their normal practice of filling orders with
previously circulated coins. Nevertheless, Reserve Banks will continue
filling requests for new dollar coins until their inventories of new
dollar coins are depleted. On the basis of the public demand for the
dollar coin, the Federal Reserve estimated that, at the end of April
2002, it had over a 1-year supply of dollar coins. Since the older
Anthony and new dollar coin have a similar electronic signature and
neither the Reserve Banks nor armored carriers have equipment to
separate them, the supply of circulated coins consists largely of
commingled Anthony and new dollar coins. The Federal Reserve estimated
that, as of April 2002, 70 percent of the dollar coin inventory is
commingled Anthony and new dollar coins and about 30 percent is new
dollar coins. In its response to a March 2002 Treasury Office of
Inspector General report, the Mint said it would temporarily suspend
production of the new dollar coin on March 31, 2002, and reevaluate the
need for producing coins for general circulation in the first quarter
of fiscal year 2003.[Footnote 10]
In our May 1990 report on proposals to introduce a new dollar coin in
the United States, we noted that the government did not successfully
manage the introduction of the Anthony dollar coin because the dollar
note was not simultaneously eliminated, the coin too closely resembled
the quarter, and the coin was not effectively promoted. We identified
several key ingredients for a successful conversion, including a
reasonable transition period, a well-designed dollar coin, a public
awareness campaign, support from the administration and Congress, and
withdrawal of the dollar note from circulation.[Footnote 11] We
estimated in April 2000 that replacing the dollar note with a coin
would save the government an average of $500 million a year, because
coins last much longer than currency and there are lower government
costs to distribute coins than currency.[Footnote 12]
The new dollar coin is profitable on a per unit basis. While it costs
the Mint about $0.12 to produce the coin, the government receives $1.00
of spending power for each coin, thereby leaving a margin of $0.88 per
coin.
New Dollar Coin Marketing Program Cost $67.1 Million and Generated $968
Million in Seigniorage, but the Coin Is Not Widely Circulated:
The Mint spent at least $67.1 million to promote the new dollar coin
from 1998 to 2001, including $62.3 million for four contracts involved
with creating the marketing program and advertisements. Of the
remaining $4.8 million, the Mint spent $0.4 million to conduct public
relations events and programs to publicize the new dollar coin‘s launch
that distributed 1,251,000 coins; $4.4 million for 23 promotion
partnerships with banking, entertainment, retail, grocery, and
restaurant chains that distributed an estimated 132 million dollar
coins; and $36,000 to conduct promotional events with transit systems
that distributed 36,000 coins. Most of the $62.3 million in contracts
for creating the marketing program and advertisements was used for a
$40.5 million national advertising campaign featuring George Washington
that was designed to build public awareness, generate acceptance, and
encourage the new dollar coin‘s use. The Mint also worked with
contractors to stimulate the new dollar coin‘s use in state and local
government operations and used its own staff for marketing activities
in federal government facilities. However, the Mint did not track the
costs for the use of Mint staff for these efforts.
Though initial public awareness generated by the advertising was
strong, the new dollar coin, like the Anthony dollar coin, has failed
to achieve widespread use. Federal Reserve data show a net
payout[Footnote 13] of 558 million new dollar coins in 2000, the year
the dollar coin was introduced. But, in 2001, demand and public
interest in collecting the new dollar coin dropped, and the net payout
decreased by 65 percent to 194 million coins and remained at lower
levels in the first half of 2002. In May 2002, the Federal Reserve
estimated an annualized figure of $120 million in new dollar coin net
payout for 2002. The Mint has estimated that people use the dollar coin
in 4 percent of dollar transactions, but Mint data from July 2001 show
it to be about 1 percent.
Marketing Contractors Conducted Key Components of the New Dollar Coin
Marketing Program:
To create and execute the new dollar coin marketing program, the Mint
contracted with outside firms for the three major components of the
program: research, business marketing, and a public awareness campaign.
The research component, designed to help identify target markets for
the new dollar coin before its January 2000 launch, was conducted under
a $1.5 million contract with Marketbridge, a marketing services
company. To provide the Mint with the necessary market research data,
Marketbridge first analyzed existing Anthony dollar coin use in various
industry sectors. Marketbridge also analyzed each industry for
potential new dollar coin use by looking at several factors, such as
the size of the industry, the average transaction size, and the current
coin equipment capability in that industry. Using this market analysis,
Marketbridge determined that certain industry sectors, such as food and
drink vending, postal machines, transit systems, and car washes, had
the highest potential for new dollar coin use. Table 1 provides
information on the Mint‘s marketing program contractors.
Table 1: Marketing Program Contractors as of December 2001:
[See PDF for image]
[A] The Mint determined it was not satisfied and terminated the Double
Eagle contract in June 2000. :
Source: U.S. Mint.
[End of table]
The Mint contracted with Double Eagle in April 1999 to perform business
marketing activities that concentrated on outreach to businesses in
certain industry sectors to increase the commercial use of the coin.
Double Eagle focused its marketing efforts on businesses with a high
potential for using the coin. To persuade these businesses, such as
food and drink vending, transit, postal, car wash, and retail
industries, to use the new dollar coin, Double Eagle conducted various
business marketing activities, including personal sales visits and
telephone calls to decision-makers, and attended conventions and
meetings. The Double Eagle contract totaled $8 million. In June 2000,
the Mint determined that it was not satisfied with Double Eagle‘s
progress and terminated the contract. In October 2000, the Mint
contracted with Fleishman Hillard for $4 million, to take over the
responsibilities for business marketing.
The Mint also secured the services of the Fleishman Hillard
communications firm in May 1999 to create and implement the public
awareness and education campaign. Fleishman Hillard first conducted
public opinion polls and focus groups before the new dollar coin‘s
launch in January 2000 to assess consumer attitudes and create and test
the advertising campaign. In tests of potential advertising campaigns,
focus group participants generally preferred the ’Golden Dollar“ to the
Sacagawea or Millennium dollar coin. To budget ad dollars and to reach
those more likely to use coin-operated technology, such as vending
machines and public transit, the Mint established the primary target
audience as 18-to 49-year-old adults who live in urban and suburban
areas.
The $40.5 million paid advertising campaign that was developed to
communicate to this target audience included 11 weeks of ads on
television nationwide and print, radio, transit, and Internet ads. The
paid advertising campaign, which began in March 2000, accounted for
approximately two-thirds of the contracted new dollar coin marketing
program expenditures between 1998 and 2002. The media plan for the
advertising campaign featuring an image of George Washington was
designed to build positive awareness, generate acceptance, and
encourage the coin‘s use. The television ads reached an estimated 92
percent of the target audience an average of 15 times.
The ad featured the image of George Washington from the dollar bill;
however, the Mint reported that, according to Treasury officials, it
could not point directly to the advantages of the dollar coin over the
dollar bill in its television advertising campaign. One television ad
proposal, for example, had a scene showing a dollar bill being rejected
from a vending machine. According to Mint officials, that part of the
ad was not approved and was never aired because some Treasury officials
thought that it negatively portrayed the dollar bill. Current Mint
officials said that a former Mint Director participated in the meeting
in which the ad was discussed, and that they do not know which Treasury
officials were at the meeting. Current Mint officials also said the
policy to avoid direct comparisons of the dollar coin to the dollar
bill was not a formal written policy. According to a current Treasury
official, the $1 Coin Act authorizing the new dollar coin called for
both the dollar coin and the dollar note to cocirculate and Treasury
interprets that to mean that it should not favor the coin or the note.
The Treasury official said that the Mint and the Bureau of Engraving
and Printing are sister agencies that can create public awareness
campaigns for new coins and notes without directly comparing the
advantages and disadvantages of each.
As part of the marketing program, the Mint and Fleishman Hillard also
developed a public relations campaign to support the new dollar coin‘s
launch, which included a float in the Macy‘s Day Parade in November
1999. The new dollar coin was also featured in promotions with
Coinstar, a company that operates supermarket-based coin-counting
machines; the Wheel of Fortune game show; and General Mills‘s Cheerios.
These promotions resulted in the distribution of 1,251,000 coins and
cost $413,500, according to Mint data.
The Mint also formed a retail partnership with Wal-Mart to distribute
the dollar coin as change at its 2,900 Wal-Mart and Sam‘s Club stores
throughout the United States beginning in January 2000. In addition to
the Wal-Mart agreement, between 2000 and 2001, the Mint created a
number of promotion partnerships in many of the targeted industry
sectors with potential dollar coin circulation. As table 2 indicates,
the Mint formed 23 promotion partnerships to stimulate use of the new
dollar coin. Most of the estimated 132 million dollar coins distributed
during the promotions were to customers in the retail, banking,
entertainment, restaurant, and grocery industries.
Table 2: Mint Promotions Distributing New Dollar Coins, Ranked by
Number of New Dollar Coins to Be Distributed:
[See PDF for image]
Note: According to the Mint, three of the minor league baseball teams,
the New Orleans Zephyrs, the Ogden Raptors, and the Norfolk Tides have
promotions for the new dollar coin that extended into the 2002 season.
[A] These data were developed on the basis of the Mint‘s dollar coin
distribution goal from each promotion agreement. Many promotion
agreements required the promotion partner to submit reports to the Mint
on the number of coins distributed, but the Mint did not keep track of
these reports or verify the number of new dollar coins distributed
during each promotion.
Source: U.S. Mint.
[End of table]
In general, the Mint said it tried to achieve a ratio of 10 new dollar
coins distributed for every dollar in marketing costs. The Mint
reported that the promotions, on average, distributed 30 dollar coins
for every dollar in marketing cost. However, the actual number of new
dollar coins distributed may have been more or less than the number
shown, because the Mint did not track the actual number of coins
distributed by each promotion partner.
The Mint also marketed to state, local, and federal governments to
increase the use of the new dollar coin. For example, the Mint and
Fleishman Hillard conducted promotional events to increase the use of
the coin in the transit systems in New York, Chicago, Philadelphia, and
San Diego. The promotional events included a giveaway of free new
dollar coins to transit riders for fare card purchases and radio and
newspaper coverage of the promotions. The transit promotions resulted
in the distribution of about 36,000 new dollar coins to transit riders.
According to the Mint, the transit promotions cost $36,000 in media and
promotional items. In addition, as part of the Mint marketing effort
targeting state and local governments, the Mint also worked with bridge
and road authorities to increase the use of the new dollar coin in
tollbooths and encouraged cities to convert parking meters to accept
the coin. The Mint also conducted marketing events using its own staff
to stimulate use in the federal government facilities‘ retail
operations, such as cafeterias. For example, the Mint conducted a new
dollar coin day‘s event at the Pentagon during which about 56,000 new
dollar coins were distributed, but the Mint did not track the
associated costs for the use of Mint staff.
The total cost of the new dollar coin marketing contracts, 23
partnerships, and launch and transit promotions was $67.1 million,
excluding costs associated with using Mint staff.
The Mint‘s Marketing Program Did Not Result in Wide Circulation:
The Mint‘s new dollar coin marketing program raised public awareness of
the new coin but did not produce long-term increases in circulation.
Regular surveys conducted by Fleishman Hillard to monitor the impact of
the new dollar coin marketing program indicated that the advertising
campaign and other marketing activities considerably increased public
awareness. According to the surveys, about 27 percent of the public was
aware of a new dollar coin in July 1999, shortly after the final dollar
coin design was announced. By July 2000, after the national advertising
campaign, awareness had increased to 91 percent. A December 2001 poll,
which is the latest available public opinion poll on new dollar coin
awareness, showed that public awareness of the dollar coin remained
relatively high, about 83 percent.[Footnote 14]
As shown in figure 1, the demand for dollar coins as measured by net
payout to banks from the Federal Reserve peaked during the year that
the new dollar coin was introduced and has since decreased
significantly. Net payout of the Anthony dollar coin from the Federal
Reserve was $72 million in 1999, the year before the new dollar coin‘s
release. However, with the introduction of the new dollar coin in 2000,
net payout and demand for dollar coins increased sharply to $558
million. But, in 2001, demand and public interest in collecting the new
dollar coin dropped, and net payout decreased by 65 percent to $194
million and remained at lower levels in the first half of 2002. In May
2002, the Federal Reserve estimated an annualized figure of $120
million in new dollar coin net payout for 2002.
Figure 1: Federal Reserve Net Payout of Susan B. Anthony and New Dollar
Coins, 1998-2002:
[See PDF for image]
Note: To meet demand for dollar coins before the new dollar coin was
available in January 2000, the Mint produced 33 million Anthony dollar
coins in late 1999 and 40 million Anthony dollar coins in early 2000.
Source: Federal Reserve.
[End of figure]
As of January 2002, the Mint said that it had produced 1.4 billion new
dollar coins and had about 300 million in inventory. According to the
Mint, from January 2000 to December 2001, it released approximately 1.1
billion new dollar coins into circulation that generated approximately
$968 million in seigniorage after subtracting costs. According to the
Federal Reserve, it received approximately 980 million and paid out 964
million new dollar coins during this period.[Footnote 15] The Federal
Reserve held about 248 million dollar coins in inventory as of December
2001.[Footnote 16] As indicated in table 3, the number of dollar coins
shipped to the Federal Reserve peaked with the coin‘s introduction in
2000 and dropped significantly during the following 2 fiscal years.
Table 3: Number of Dollar Coins that the Mint Shipped to Federal
Reserve Banks, Fiscal Years 1998-2000:
Numbers in millions.
[See PDF for image]
Source: Department of the Treasury, Office of Inspector General, The
Mint Suspends Its FY2002 Planned Production of Golden Dollar Coins,
OIG-022-066 (Washington, D.C.: Mar. 19, 2002).
[End of table]
Public Resistance Is the Greatest Barrier to Increased Use of the New
Dollar Coin:
The Mint faces a number of barriers in its efforts to increase public
use of the new dollar coin, the most substantial of which is the
widespread use of the dollar bill in everyday transactions and public
resistance to start using the dollar coin. Encouraging people to switch
to using the dollar coin is especially difficult because retailers will
not stock the dollar coin until they see the public using it; the
public is unlikely to use the coin until they see retailers stocking
it; and banks and armored carriers are reluctant to invest in new
equipment to handle the coin until there is wide demand for it. This
interdependency of demand, which economists call the ’network effect,“
will be difficult to overcome. Other countries, such as Australia,
Canada, and Japan and many European countries, have successfully
introduced a similar denomination coin but only by phasing out the note
of the same value. Other barriers that hinder wider circulation of the
new dollar coin by the public include potentially negative public
perceptions of a dollar coin after two failed introductions,
insufficient public understanding of dollar coin savings to the
government and other advantages of the dollar coin‘s use, and the
weight and bulk of the coin. For commercial users, additional barriers
limit the coin‘s use. Among these are commingling with the Anthony
dollar coin, the coin‘s unavailability at some banks, packaging
concerns, and higher delivery fees. Problems unique to individual
promotion partners also created barriers to the new dollar coin‘s use.
Public Resistance to Using New Dollar Coin Is the Most Substantial
Barrier:
Our previous work and the early experience with the new dollar coin
have shown that the most substantial barrier is public resistance to
switch to using the dollar coin rather than the dollar bill in everyday
transactions. To overcome this resistance, the Mint will have to
persuade businesses, consumers, and suppliers to change at the same
time. Increasing the coin‘s use is especially difficult because of the
network effects previously discussed, which will be difficult, if not
impossible, to overcome with the dollar bill in circulation.
Economists have noted that this phenomenon is not limited to dollar
bills and coins. For example, researchers noted in a February 1998
Federal Reserve paper that network effects may help explain why the
public, despite apparent advantages, was switching so slowly from
paper-based forms of payment to electronic forms of payment.[Footnote
17] Network effects may also help explain the country‘s slow adoption
of high-definition television (HDTV). Until demand reaches a certain
level, television stations are reluctant to make the investments in the
new equipment that is necessary to transmit HDTV; consumers, in turn,
are reluctant to purchase HDTV sets until more stations are
transmitting HDTV signals. Similarly, until a sufficient number of new
dollar coins are in circulation, retailers and other businesses that
handle a lot of coins may not be willing to spend the time and money
needed to carry them.[Footnote 18]
We have reported public resistance to new dollar coins in previous
studies. For example, in May 1990, we evaluated the acceptability of
the dollar coin to replace the dollar note by reviewing survey data and
interviewing the public and industry associations.[Footnote 19] In this
study, we found public resistance to a dollar coin in the United
States. Nearly all of the general public and private-sector respondents
indicated that the dollar note would have to be eliminated for a dollar
coin to circulate successfully. These respondents uniformly believed
that if a dollar note and dollar coin were both available at the same
time, the public would choose to use the note.
For our May 1990 report, we also contacted officials in other
industrialized countries and found that most of the countries that had
introduced high-denomination coins faced public resistance to the
change. Officials in these countries said that a high-denomination coin
could not be introduced successfully unless the note of similar value
was withdrawn. For example, officials in the United Kingdom said that
as long as the equivalent note circulates, the public would resist new
coins. Similarly, French officials said the public accepted their new
coin only when the note was demonetized. Mint, Bureau of Engraving and
Printing, and Treasury officials said, in our 1990 report, that the
experience of many of the European countries in successfully replacing
a note with a coin of similar value might not be a valid indicator of
the prospects the United States would have in mandating a dollar coin.
These officials said that because of basic differences in these
countries, such as a parliamentary form of government that made it
easier to impose unpopular changes on the public, a central banking
system with more control over banks, and a smaller scale of coin and
currency, it would be much harder for the United States to successfully
replace a dollar coin with a dollar note.
More recently, four of the European countries we reviewed in our 1990
report joined eight other European Union countries on January 1, 2002,
and introduced 56 billion new euro coins into circulation, which
included 1-euro and 2-euro coins and a 5-euro note. (For more
information on the euro coins, see table 4.):
In a March 1993 report on the dollar coin, we described Canada‘s
experience in introducing a dollar coin in June 1987.[Footnote 20]
Canada stopped issuing the equivalent dollar note in June 1989. We
reported that the public resisted the coin initially, but 3 years after
the note was withdrawn, according to public opinion survey data, only
18 percent disapproved of the coin. Similarly, businesses and
associations we surveyed in the grocery, transit, and vending
industries said that the majority of public resistance lasted from 3
months to 2 years. Officials in Canada said that the decision to
withdraw the dollar note from circulation was based on the experiences
of other countries, including the United Kingdom and Australia, as well
as on the failed introduction of the Anthony dollar coin in the United
States.
More recently, we analyzed the use of coins and notes in countries that
make up the G-7 (see table 4) and found that the United States is
unique in attempting to cocirculate a high-denomination coin and note
of the same value. Consumers in Germany, France, and Italy have the
choice of 1-euro and 2-euro coins, but there is not a note of equal
value to compete with the coins. The lowest value euro note is the 5-
euro note. Japan, the United Kingdom, and Canada have succeeded in
introducing high-denomination coins by withdrawing the note of similar
value.
Table 4: Circulation of Highest Value Coins and Lowest Value Notes in
G-7 Countries:
Value in U.S. dollars.
[See PDF for image]
Source: GAO analysis of currency conversion rates, June 27, 2002.
[End of table]
Other Barriers Limit the Public‘s Use of the New Dollar Coin:
Another barrier to wider circulation is the potential negative public
perception of the dollar coin because the government has tried and
failed to introduce successfully both the Anthony and the new dollar
coin. A March 2002 Treasury Inspector General report recommending that
the Mint temporarily suspend production of the coin resulted in
additional negative media stories. The Mint said that some of these
reports incorrectly concluded that the Mint had ceased to produce all
new dollar coins.
Another obstacle is that the Mint, in its advertising, did not fully
explain to the public dollar coin savings to the government. A December
2001 survey, the latest available, showed that the public would more
strongly favor the dollar coin when the savings were
explained.[Footnote 21] When asked if they would be in favor of
replacing the dollar bill with the new dollar coin, 68 percent of the
respondents who opposed such a plan said they would favor the
replacement if doing so would save the government and taxpayers $500
million a year.
Another barrier, an informal Treasury restriction on the Mint
prohibiting it from comparing the advantages of the dollar coin
directly with the dollar bill in consumer advertisements, hindered the
Mint in explaining to consumers why they should switch to the dollar
coin. One television ad proposal, for example, showed a person at a
vending machine reacting to a dollar bill being rejected. According to
Mint officials, that part of the ad was not approved and was never
aired because some Treasury officials thought that it negatively
portrayed the dollar bill. Current Mint officials said that they did
not participate in the meeting in which the ad was discussed, and that
although the policy to avoid direct comparisons to the dollar bill is
not a formal written policy, they believe that the policy is still in
effect. According to a current Treasury official, the $1 Coin Act
authorizing the new dollar coin called for both the dollar coin and the
dollar note to cocirculate, and Treasury interprets that to mean that
it should not favor the coin or the note. A Treasury official said that
the Mint and the Bureau of Engraving and Printing are sister agencies
that can create public awareness campaigns for new coins and notes
without directly comparing the advantages and disadvantages of each.
The Mint faces another barrier in convincing the public that the
durability and other benefits of the new dollar coin outweigh the ease
of carrying the dollar bill. As we reported in 1990, focus groups
recognized the durability of a dollar coin but cited negative aspects
of the coin, such as the bulk in transporting the coin. We further
noted that consumer associations said the coin would be bulky and would
add weight to wallets and pockets. In the last available public survey
conducted by the Mint in July 2001, 1-1/2 years after the new dollar
coin was introduced, respondents said they were much more likely to use
the dollar bill. They also said they were more likely to keep or save
the dollar coin, show it to friends or family, or give it as a gift
than spend it on everyday items.[Footnote 22]:
Distribution Problems Limit Use and Hinder the Promotion of the New
Dollar Coin:
In addition to public resistance, the Mint also faces barriers in
distributing the new dollar coin. Promotion partners and other
commercial users reported that supplies of new dollar coins are
commingled with Anthony dollar coins. This commingling of the Anthony
and new dollar coin, which occurred more frequently in 2001 and 2002,
adversely affected some promotions that prominently featured the new
dollar coin. For example, in 2001, a national restaurant chain changed
all of its menus to feature a menu item called the ’Golden Dollar“
pancake, but, in some cities, the restaurant chain had difficulty
obtaining supplies of the coin to support the promotion. In some cases,
the banks had a supply of dollar coins, but half of the coins were new
golden dollar coins and half were silver-colored Anthony dollar coins.
Commingling occurs when Anthony and new dollar coins are used in
commerce and later are processed by Federal Reserve Banks and armored
carriers. Machines used in the coin distribution system are not able to
separate the two coins because they have a similar electromagnetic
signature.
Businesses also reported difficulty in obtaining a reliable supply of
new dollar coins. For example, in its assessment of a large new dollar
coin promotion with a national grocery chain, Marketbridge noted that
the coin was not always available from armored carriers. Some of the
distribution problems occurred because some armored carriers lack
adequate equipment. According to the Mint, to handle high volumes of
new dollar coins, Brinks, a large armored carrier, would have to invest
$40,000 for coin-rolling machines in many of its 154 branch office
locations around the country. Other armored carriers, according to the
Mint, would also likely need to upgrade equipment to handle high
volumes if the dollar coin became popular.
Although the Wal-Mart promotion served to distribute over 90 million
new dollar coins, there were also early reports of availability
problems related to the promotion. In their discussions with the Mint
in late 1999, banks asked the Mint to delay the launch of the new
dollar coin until March 2000 because expected year 2000 problems would
require the banks to concentrate on these problems in January and
February, 2000. The Mint agreed to delay the launch of the new dollar
coin until March. However, in December 1999, the Mint announced the
partnership with Wal-Mart and began to distribute the coins to Wal-Mart
in January 2000. The publicity surrounding this launch created public
demand for the coin at banks throughout the country. Bank customers who
requested the coin could not always find them, and soon the banks had a
significant backlog of orders for the coin with the Federal Reserve.
The Mint and the Federal Reserve, responding to delays in the new
dollar coin‘s distribution to banks, such as community banks, credit
unions, and savings and loans, set up a temporary Direct Shipment
Program beginning March 1, 2000. The program gave banks the ability to
place orders on the Internet for up to 2,000 new dollar coins in rolls
and have them shipped directly from the Mint. However, according to the
Mint, only a small percentage of the banks that received a letter on
the direct ship program had ordered coins a month after the program
began. Bank officials said that these initial shortage problems were
limited to the first few months of the new dollar coin‘s launch in
2000.
According to the Mint, some businesses were also reluctant to order
dollar coins because they were charged higher delivery fees by the
armored carriers. The armored carriers generally charge additional
amounts to retailers and other businesses for delivery of dollar coins
because they weigh more than paper dollars. For example, some carriers
charged $2 per $1,000 box to deliver rolled dollar coins compared with
$0.25 cents for the equivalent value in dollar bills.
A Marketbridge report also noted that some businesses wanted a greater
choice of coin packaging options and quantities. While large-volume
coin-operated businesses, such as car washes, might want coins in large
bags, and other businesses might want a full box of 1,000 coins,
smaller businesses attempted to obtain coins wrapped in rolls of 25
dollar coins, but could not always find them. To make rolls of dollar
coins more available and reduce the cost to businesses for obtaining
coins, the Mint, from August to December, 2000, contracted with outside
companies to have 282,240,000 dollar coins wrapped in rolls at a cost
of $927,982. These Mint-wrapped rolls were to be provided to businesses
by armored carriers and financial institutions without those businesses
being charged for wrapping. Though the coin-wrapping contract increased
the supply of new dollar coins in rolls, the Mint found that some
businesses were still subject to other armored carrier fees such as for
moving and storing the coin. Some Mint officials said that the wrapping
of dollar coins in rolls by Mint contractors might have created more
problems because the armored carriers were not forced to develop a
rolling capability. Without proof of demand for the new dollar coin,
armored carriers were reluctant to invest in new equipment to roll
dollar coins, even when demand for the coin was high in the first half
of 2000.
Many of these distribution barriers were identified in a Marketbridge
promotion progress report in August 2001. As table 5 indicates, of the
distribution problems identified by Marketbridge, commingling and
difficulty in finding coins were the most common by far.
Table 5: New Dollar Coin Distribution Problems Identified in Telephone
Calls to the Mint from January to August 2001:
Problem reported: New dollar coin commingled with Anthony dollar coin;
Percentage reported: 44.
Problem reported: New dollar coin not available when requested;
Percentage reported: 43.
Problem reported: Excess fees charged for new dollar coin delivery;
Percentage reported: 5.
Problem reported: Late delivery or no delivery of new dollar coin;
Percentage reported: 5.
Problem reported: Wrong coins delivered; Percentage reported: 3.
Problem reported: Total; Percentage reported: 100.
Source: Marketbridge analysis of telephone calls made by Mint promotion
partners to Fleishman Hillard.
[End of table]
To evaluate the extent that these barriers affected promotion partners,
we sent surveys to 10 large promotion partners that had agreements with
the Mint to promote the new dollar coin. In our survey of these large
promotion partners, we attempted to obtain information on the extent
that barriers such as commingling hindered the success of their new
dollar coin promotions. Seven promotion partners completed the survey.
When asked the extent that commingling hindered the success of their
promotions while they were in progress, 2 of the partners said to a
very great extent, 1 said to a great extent, and 4 said to no extent.
When asked if commingling hindered the use of the new dollar coin in
their business after the promotion, when dollar coin use became less
frequent, only 1 said to a very great extent, 1 said to a great extent,
3 said to no extent, and 2 did not know or said not applicable because
the promotion was still in progress at the time of the survey. In
contrast to public reports, only 2 promotion partners said that they
had difficulty obtaining new dollar coins for their promotions. In
general, when asked the extent that coin-wrapping fees and shipping
costs hindered their promotions, most of the survey respondents said
these problems had little or no effect.
Our promotion partner survey also indicated that while the promotions
distributed new dollar coins, it is unlikely that they had resulted in
a long-term increase in the coin‘s use. We asked the 7 firms how
frequently customers used the new dollar coin to make purchases during
the promotion. One of the promotion partners said very frequently, 1
said frequently, 3 said sometimes, and 2 said very infrequently. The
survey indicated even lower levels of use after the promotion. When
asked if customers were using the coin to make purchases after the
promotion, 1 said sometimes, 3 said infrequently, 2 said very
infrequently, and 1 did not know or said not applicable because the
promotion was still in progress at the time of the survey. No promotion
partner said customers were using the coin to make purchases frequently
or very frequently after the promotion. A majority of promotion
partners agreed that the dollar bill would need to be eliminated for
the public and businesses to accept and regularly use the new dollar
coin.
In addition, in its promotion program assessments, Marketbridge found
indications that use of the new dollar coin was not sustained in these
businesses during and after the promotions. For example, in its
assessment of a national grocery chain promotion, Marketbridge noted
that the average number of dollar coins distributed decreased over time
from 3,600 per month at the beginning of the promotion, to 1,400 per
month 60 days into the promotion, to 600 per month toward the end of
the promotion. About 8 months after the promotion began, the average
number of dollar coins distributed had dropped to 340 per
month.[Footnote 23]
Results of Marketing Efforts in Government Sector Were Mixed:
The Mint promoted the use of the new dollar coin in the government
sector, but the results of these efforts were mixed. For example, the
Mint contacted local transit authorities to increase awareness of the
new dollar coin and increase the number of transit systems using it. As
part of this transit marketing effort, the Mint, working with Fleishman
Hillard in selected cities, created promotional events that included a
giveaway of free new dollar coins to transit riders, radio promotions,
media coverage, and attendance by local officials. For example, the
Mint distributed about 12,000 new dollar coins to transit riders in New
York; 12,000 coins in Chicago; 6,000 coins in Philadelphia; and 6,000
coins in San Diego.
The Mint said that many of the largest transit systems retrofitted or
purchased new equipment and have the capability to use the dollar coin.
In April 2002, the U.S. Federal Transit Administration reported that 19
of the largest 20 transit system agencies accept the dollar coin in
either their bus or rail systems.[Footnote 24] The Federal Transit
Administration found that buses in the Washington Metropolitan Area
Transit Authority, the fifth largest transit system, accepted dollar
coins in buses but the subway system did not. The Federal Transit
Administration also found that the Bay Area Rapid Transit system, the
twelfth largest transit system, did not accept the dollar coin in
either bus or rail. Mint officials said that they were not able to make
progress in increasing the use of the dollar coin in these two transit
systems. The Mint also worked with state and local bridge and road
authorities to increase the use of the new dollar coin in tollbooths
and encouraged cities to convert parking meters to accept the coin.
(For more information on the use of the dollar coin in state and local
government transit systems and tollbooths, see app. II.):
According to Mint officials, the Mint used its own staff to conduct
marketing events to stimulate the new dollar coin‘s use in retail
operations, such as cafeterias within federal facilities. For example,
the Mint conducted a new dollar coin event at the Pentagon. According
to the Mint, this promotion distributed about 56,000 new dollar coins.
Mint officials also met with officials on military bases to discuss the
dollar coin‘s use, but these meetings did not result in formal
promotional programs or increase new dollar coin circulation.
As part of its federal government marketing efforts, the Mint also
sought to increase the number of postal vending machines using the new
dollar coin but had limited success. In December 1998, before the
coin‘s launch, a Mint contractor study noted that the U.S. Postal
Service had approximately 11,000 stamp vending machines that
distributed dollar coins. However, in April 2002, over 2 years since
the introduction of the new dollar coin, the Postal Service still had
only 12,000 of its 34,000 vending machines able to distribute the
dollar coin as change. The Postal Service said that it was only able to
upgrade an additional 1,000 vending machines between 1998 and 2002
because it lacked the funds to upgrade or replace the older machines.
Despite the lack of progress, the Mint said that the Postal Service is
still the largest distributor of dollar coins. In general, the Mint did
not track the costs for the use of its own staff for marketing efforts
to federal government agencies.
The Mint‘s Marketing Plan Identifies but Does Not Provide Details on
How It Will Address Barriers to Increased Coin Use:
In general, the Mint‘s April 24, 2002, marketing plan for fiscal years
2002 and 2003 describes a program that is much smaller in scope than
the marketing campaign used to launch the new dollar coin in 2000. The
Mint plan provides a listing of most of the barriers to increasing new
dollar coin use. In addition, the plan notes the importance of
conducting research and gives a description of planned research
regarding consumer resistance, distribution barriers, and sustaining
use of the coin by businesses. Although the plan estimates that the
dollar coin is used in 4 percent of dollar transactions, the plan does
not lay out a specific market share or net payout goal for fiscal year
2003. As is consistent with previous studies, the Mint plan also notes
that successfully achieving widespread use of the new dollar coin will
be difficult if it cocirculates with the dollar bill. However, the plan
does not discuss specifically how to address interdependent demand or
network effects. The plan also notes that the recent negative media
coverage of the new dollar coin will be a significant challenge for the
Mint‘s marketing communications and public relations programs, but the
Mint does not explain in detail how it will counter this challenge.
Although the plan notes potential government savings, it does not
provide a strategy for explaining dollar coin government savings to the
public or for directly comparing the advantages of the dollar coin with
those of the dollar bill.
A key element of the new marketing plan is a description of the
barriers that hinder the distribution and circulation of the new dollar
coin. Although the Mint‘s plan identifies the key barriers in the
distribution channel, such as the unavailability of coins, commingling,
the lack of availability of new dollar coins in rolls, and additional
fees charged by armored carriers, the marketing plan does not
specifically outline how the Mint will address those barriers. Instead,
the Mint calls for research on barriers in the first phase of the new
plan that would be conducted in collaboration with the Federal Reserve
Bank System, banks, armored carriers, and commercial users.
Although the Mint plan notes that cocirculation with the dollar bill is
a barrier, the Mint does not provide much detail on the nature and
extent of the barrier or how it will attempt to overcome public
resistance. In addition, the Mint does not fully describe previous
attempts in other countries to cocirculate a high-denomination note and
coin. The plan does not include any information on network effects or
indicate how an understanding of the network effects in currency and
coins and other payment systems could improve future marketing
strategy.
The Mint plan includes some future programs to market to consumers that
are designed to increase public demand for the coin. However, the plan
does not describe how these programs will help the Mint overcome
specific barriers and increase new dollar coin circulation. For
example, included in the plan section on increasing sustained
circulation is a description of a licensing agreement with The Source
International (TSI). The intent of the agreement is to build brand
awareness for the Mint and the new dollar coin among National
Association for Stock Car Auto Racing (NASCAR) fans. Under the TSI
agreement, in the 2002 Cadillac Grand Prix in July and in one race each
year from 2003 to 2008, TSI will have one car with an image of the new
dollar coin on the hood and a Web site address for the Mint on the rear
spoiler. The agreement also calls for TSI to sell die cast replica
models of the new dollar coin racing car. The Mint also said the
agreement would require no outlay of funds and the Mint will receive
royalty payments from each new dollar coin model car sold.[Footnote 25]
The Mint said that TSI will also make an attempt to have new dollar
coins dispensed as change to spectators for cash purchases during each
race. While the TSI agreement could increase new dollar coin brand
recognition and awareness at one race each year and with model car
sales, the plan does not describe how the agreement would contribute to
an increase in the coin‘s widespread use and circulation.
The Mint also has an existing product licensing program that encourages
the placement of products related to coin collection into the retail
market. In addition, the Mint plans to work with the Department of the
Army‘s Corps of Engineers on new dollar coin promotion activities such
as placing a new dollar coin image on brochures associated with the
Lewis and Clark Bicentennial activities that will occur along the
expedition‘s route from 2003 to 2006. Although these programs could
increase awareness of the new dollar coin among coin collectors or
those visiting Corps of Engineer facilities, the Mint plan does not
provide much detail on how these marketing programs would increase the
public‘s use of the coin in everyday transactions.
Unlike the earlier new dollar coin marketing program, the new plan does
not envision a large national advertising campaign directed at the
public. The plan calls for research on public resistance to the new
dollar coin before a full marketing program is implemented to stimulate
consumer use of the new dollar coin. The Mint plan requests $0.5 to
$1.0 million in fiscal year 2002 followed by $10 to $15 million in
fiscal year 2003 for a program to maintain the new dollar coin‘s
presence in the marketplace. The plan calls for a continuation of
ongoing promotions and, following research, the identification of key
target markets before marketing activities are implemented. Mint
officials said that transit and vending, in addition to governments,
are likely markets to target.
The Mint plan does include some plans for a public relations and a
media outreach program to overcome negative consumer perception.
However, the plan does not provide any specifics on how it will
overcome recent negative media coverage or the public‘s impression that
the coin may have been discontinued. The plan does not address the
advantages of including a description of dollar coin savings to the
government in its marketing communications or discuss any restrictions
on directly comparing the advantages of the dollar coin with those of
the dollar bill. Mint officials said that the official policy is for
cocirculation of both the dollar coin and note and that the Mint did
not describe dollar coin savings to the government in its marketing
because the savings could only occur if the dollar bill were withdrawn
from circulation. Treasury said that it interprets cocirculation to
mean that marketing programs for the coin or note should not directly
compare the advantages of the dollar coin with those of the dollar
note.
A key element of the plan is an assessment by the Mint of the progress
made in new dollar coin circulation. The Mint plan attempts to first
establish the existing level of dollar coin circulation by comparing
the number of new dollar coins in circulation with the number of dollar
bills in circulation. The Mint marketing plan estimates that people
used the dollar coin in about 4 percent of dollar transactions.
[Footnote 26] To arrive at this number, the Mint took data from a
public
opinion poll[Footnote 27] and then estimated that about one-third of
the
850 million coins distributed to the public, or about 300 million
coins,
were actually used and in circulation. The Mint‘s estimate of 300
million
coins in ’circulation“ was then calculated to be about 4 percent of the
7.5 billion in dollar bills in circulation.
Other Mint surveys indicate that the new dollar coin market share as a
percentage of all dollar transactions may be lower. For example, a July
2001 public opinion survey was conducted by the Mint to test the impact
of the new dollar coin marketing program. Among other survey questions,
respondents were asked the number of dollar bills and dollar coins they
received and spent in the last few days. Respondents said that in July
2001, they received 25 and spent 24 dollar bills. In contrast,
respondents said they received 0.2 new dollar coins and spent 0.3 new
dollar coins. This equates to a new dollar coin share of about 1
percent of all dollar transactions. The Mint plan does not set goals in
market share, net payout, or number of dollar coins for fiscal year
2003.
The increase in the number of dollar coins shipped to the Federal
Reserve from 1999 to 2000 did not have a measurable effect on the
number of dollar notes in circulation. The Federal Reserve said that
the number of dollar notes in circulation increased from 1999 to 2000
at the same time that dollar coin shipments were increasing and that
changes in demand for dollar notes is normally due to fluctuations in
economic activity. The Federal Reserve said that it was unlikely that
the slight decrease in the number of dollar notes in circulation, from
7.65 billion in 2000 to 7.64 billion in 2001, could be attributed to
the new dollar coin, and that the decline was more likely due to a drop
in economic activity in 2001.
The Mint plan includes some actions to promote the use of the new
dollar coin in certain targeted markets. For example, the Mint plan
indicates it will try to increase circulation of the new dollar coin in
federal agencies and on military bases, but the plan does not explain
the lack of success in increasing the use of the new dollar coin in
federal agencies or provide specific objectives or programs for how the
Mint will increase circulation. The plan also states that the Mint
intends to honor existing agreements with several minor league baseball
teams. The Mint lists the teams and notes that the agreements with
minor league teams distributed over 1 million coins. Despite the noted
potential in dollar coin distribution and past promotions with baseball
teams, beyond honoring several existing agreements, the Mint does not
include additional baseball team marketing activities in its future
marketing plan.
The Mint plan also states that it will explore opportunities in parking
meters, toll roads, and transit systems but no data are given on how
the Mint chose these as potential markets or how much each of these
markets might yield in increased new dollar coin circulation or at what
cost. Although the Mint through its contractors, previously evaluated
and identified the markets with a high potential for new dollar coin
use, the plan does not fully incorporate this information into its
analysis.
Another key element of the new marketing plan is a description of the
barriers that hinder the distribution of the new dollar coin. The Mint
has identified the key barriers in the distribution channel, which
moves the dollar coin through the Federal Reserve Bank System, banks,
and armored carriers to commercial users, such as retailers. It states
that unavailability of the coins at banks, commingling, and the lack of
availability of new dollar coins in the right mix of bags and rolls are
obstacles to stimulating commercial use of the new dollar coin. In
addition, the Mint identifies other distribution barriers, such as the
additional fees charged by armored carriers for coins compared with
fees charged for bills, and other perceived barriers, such as the lack
of room in the cash drawer.
To address distribution barriers, the plan calls for research. Research
on barriers in the distribution of the new dollar coin would be
conducted in collaboration with the Federal Reserve Bank System, banks,
armored carriers, and commercial users. In addition, the plan calls for
a collaborative study with the Federal Reserve on the feasibility of
using machines to separate the Anthony and new dollar coins that are
commingled. The plan states that the research on distribution barriers
is intended to help the Mint validate its understanding of the barriers
and identify ways to overcome them. However, the plan does not indicate
what effect the removal of barriers would have on circulation. For
example, if the Mint resolved the commingling problem, the plan does
not indicate whether this would lead to an increase in use of the
dollar coin. Table 6 shows a summary of the Mint‘s plans to address the
key barriers.
Table 6: Summary of Actions in Mint Marketing Plan to Address Barriers :
Barrier: Consumer resistance; Planned actions: * Research consumer new
dollar coin attitudes and behavior.; * Conduct media outreach to change
negative public perception.; * Honor existing promotions with sports
teams in three minor league cities.; * Encourage use in industries in
which coins are used, such as in vending and transit.; * Stimulate use
in federal, state, and local governments.; * Feature new dollar coin in
one NASCAR race each year until 2008.; * Promote the new dollar coin
with the Army‘s Corps of Engineers during Lewis and Clark Bicentennial
from 2003-06..
Barrier: Distribution channel problems; Planned actions: * Collaborate
with Federal Reserve and armored carriers to address commingling issue
and other problems such as upgrading coin processing equipment and
higher coin delivery fees.; * Address commingling by conducting a study
on ways to separate Anthony and new dollar coins..
Source: Mint Marketing Plan, April 2002.
[End of table]
The 2001 and 2002 Mint Reports to Congress Did Not Fully Describe the
Marketing Program, Results, or Problems Encountered:
As required by the $1 Coin Act of 1997, which authorized the new dollar
coin, the Mint provided a report on the progress of the marketing of
the new dollar coin on March 30, 2001.[Footnote 28] However, the Mint‘s
2001 report did not provide details on the nature and extent to which
the new dollar coin was being used in commerce; provide full
information on contracts and agreements that the Mint had engaged in to
market the new dollar coin, including the costs of the marketing
campaign; or give a detailed description of the barriers that the Mint
encountered. The 2002 report, which was directed by the House report
accompanying the Treasury‘s 2002 appropriations act, gave more
information on demand for the coin, contracts and promotional
agreements with nongovernment entities, marketing costs, and a fuller
description of the distribution and other problems
encountered.[Footnote 29] However, in the 2002 report, the Mint did not
provide a comprehensive analysis of the nature and extent of coin use,
describe the outcomes and progress made in increasing Federal Reserve
net payout in all of the industry sectors in which marketing efforts
were targeted, or establish measurable future goals for these sectors.
The 2001 Mint Report Did Not Contain Information on Use of the Coin:
The Mint‘s March 2001 report provided an overview of the public
awareness and business marketing programs during 2000, but the report
did not fully describe the nature and extent of the new dollar coin‘s
use in commerce, all of the promotional efforts used by the Mint, or
the barriers encountered. According to the 2001 report, in the first
year of the coin‘s production, the Mint produced over 1.2 billion new
dollar coins and released into circulation over 700 million of these
coins. However, there is no information in the 2001 report that shows
how many of these coins were actually used in commerce.
The 2001 report noted that the Mint collects information on a regular
basis to quantify marketing program progress, but the report did not
provide an analysis of this information. The Mint report also said that
the growing list of promotional agreements is evidence that the public
is using the new dollar coin, and that people are collecting the coin,
but the 2001 report did not quantify the amount of sustained increases
in circulation generated by the promotions.
There is a very limited citing of survey data that might provide some
insight into public acceptance and use in the 2001 report. The report
cited survey data showing that, rather than using the coin, 66 percent
of the public said that they were saving the coins. The report briefly
noted that, in late 2000, 29 percent of the surveyed adults said that
they would prefer to receive the coin in change instead of the dollar
bill. The survey data on preference for receiving change is somewhat
useful, but they do not give any indication of what portion of these
people will use the coin once they have received it as change. The 2001
report also noted that a May 2000 survey showed that 57 percent of the
public would likely use the new dollar coin for everyday transactions
as the coin becomes commonly circulated. This is one of a number of
indicators collected in the survey; however, this is information that
was, at the time, almost a year old, and the survey is limited because
it shows the likelihood of use when the coin at some point in the
future becomes ’commonly circulated.“ The same Mint survey had
information that indicated low public use of the coin, but these data
were not included in the 2001 report. For example, the survey showed
that in May 2000, 33 percent of those surveyed had received the coin
and, of these, only 21 percent were at least somewhat likely to spend
the new dollar coin on everyday items.
The 2001 report provided an overview of the public awareness program,
but it did not provide information describing the details of the use of
contractors for advertising and public relations or the costs for these
contracted activities. The report noted that the Mint had targeted
eight industries and had entered into partnership agreements with
commercial entities to promote the new dollar coin. However, although
the report provided examples of these promotion agreements, it did not
provide a comprehensive list of the promotion agreements, the promotion
target for the number of new dollar coins to distribute, or the cost to
the Mint for each promotion.
The 2001 report provided a generally positive picture of the new dollar
coin and made only a brief mention of the barriers to increasing its
use. For example, the Mint noted the challenges presented by the
failure of the Anthony dollar coin and also noted that some banks and
financial institutions were reluctant to order the new dollar coin.
The 2002 Report Was More Detailed but Did Not Explain What Needs to Be
Done to Increase Coin Circulation:
The Senate committee report and the conference report for the
Treasury‘s fiscal year 2002 appropriations directed the Mint to submit
a marketing plan concerning its promotional efforts relating to the new
dollar coin to the Appropriations Committees and stipulated that the
plan must be approved by the committees before the Mint could draw
additional funds from the Mint Public Enterprise Fund to promote the
dollar coin. The Mint‘s March 2002 report provided an overview of the
public awareness and business marketing programs, but there was still
limited information on the nature and extent of the coin‘s use in
commerce. The Mint did provide an estimate of the percentage of new
dollar coins used compared with the dollar bill. As previously noted,
the Mint has stated that, on the basis of survey estimates and the
number of new dollar coins in circulation, people use the dollar coin
in 4 percent of dollar transactions. This figure is a very rough
estimate, and it does not give a full evaluation of dollar coin use
that can be used to make future decisions on marketing programs. The
Mint, however, through contractors, collected information in public
surveys on a regular basis that was not used in the 2002 report, and
these survey data may have been more useful. For example, one of these
surveys was conducted in May 2000 and May and July, 2001, to help the
Mint assess a number of key questions, such as consumers‘ likelihood
for saving and using the dollar coin as well as the number of new
dollar coins used relative to the dollar bill. Respondents to the
July 2001 survey indicated that they used the dollar coin in about
1 percent of dollar transactions.[Footnote 30]
The 2002 report gave a much more comprehensive description of the use
of nongovernmental contractors for advertising and public relations and
the costs for these contracted activities. Unlike the 2001 report, the
2002 report provided an appendix, which contained a list of promotion
agreements with commercial entities in which the Mint engaged. In
addition, the Mint provided, for each promotion agreement, the goal for
the number of new dollar coins to distribute and the cost to the Mint
to implement each promotion. As previously mentioned, the Mint did not
consistently monitor the actual number of coins distributed, therefore,
we were not able to substantiate the exact number of coins that were
actually distributed.
Unlike the 2001 report in which the Mint provided a generally positive
picture of the new dollar coin, the 2002 report described in more
detail the barriers to increasing use of the new dollar coin. For
example, the Mint described commingling of the Anthony and new dollar
coins as a significant barrier. But, the plan did not indicate what
effect on circulation would result from resolving the commingling
issue. The 2002 report also gave additional information on other
reported barriers, such as the availability of rolls of new dollar
coins, extra fees for delivery and handling, and public resistance to
switch to using the new dollar coin instead of the dollar bill.
However, the 2002 report did not provide information on how it will
overcome these barriers or what effect on overall circulation could
result from removing the barriers.
Conclusions:
Although the Mint‘s $67.1 million marketing and advertising program to
promote the new dollar coin to the public significantly raised
awareness of the coin, it is not widely used by consumers in everyday
transactions. In addition, the Mint does not have data showing that
increased marketing and promotion efforts would have a long-term
positive effect on dollar coin use as long as the coin cocirculates
with the dollar note.
While the Mint said it could assist armored carriers in purchasing
equipment to roll dollar coins or pay for directly shipping to
businesses new dollar coins that are not commingled with Anthony coins,
this would not necessarily mean that the public would demand or use the
coin. As a result, continuing to spend funds for these programs may not
result in increased use of the new dollar coin. However, recognizing
Congress‘s desire for cocirculation of the dollar coin and the dollar
note, it appears reasonable for the Mint to conduct planned research to
further assess distribution barriers and determine the appropriate
steps and costs that are necessary to resolve these barriers.
Recommendations for Executive Actions:
Because the Mint does not know whether additional marketing is likely
to increase use and past efforts have had limited effects, we recommend
that aside from honoring existing promotion agreements and conducting
planned research on public acceptance and distribution barriers, the
Director of the Mint suspend further expenditures for marketing and
promoting the new dollar coin until research is completed and the Mint
can demonstrate that such efforts are likely to increase long-term coin
circulation and/or are necessary to achieve Congress‘s desire for
cocirculation. We further recommend that the Mint revise the marketing
plan it submitted to Congress to reflect such an approach and work with
Congress to reach an agreement on an appropriate amount of funds to use
for these activities.
Agency Comments and Our Evaluation:
We provided copies of the draft of this report for comment to the
Secretary of the Treasury; the Director of the Mint; and the Chairman,
Board of Governors of the Federal Reserve System. On August 30, 2002,
we received written comments from the Director of the Mint, which are
reprinted in appendix III, and on August 23, 2002, we received written
comments from the Director of the Division of Reserve Bank Operations,
Federal Reserve Board, which are reprinted in appendix IV. The
Secretary did not provide comments.
The Director of the Mint said that the Mint generally concurred with
the findings and recommendation in our report. The Mint Director also
offered some additional comments on the barriers that we identified and
how the Mint plans to address them. The Mint Director said the Mint
agrees that there is no available evidence that the elimination of
distribution barriers would have a long-term positive effect on dollar
coin use. She said the Mint would examine several possible research
approaches to study the removal of distribution barriers, but it would
not invest substantial funds until it can support the expenditures. The
Mint Director also said the Mint will conduct research to identify and
further assess the barriers to the new dollar coin‘s use in daily
commerce. The Director said the Mint would incorporate the results of
that research and an understanding of network effects into a revised
new dollar coin marketing plan, as we recommended.
The Mint Director also commented on the different approaches our report
discussed that were used to calculate the level of new dollar coin
circulation. The Director noted that the Mint‘s 4 percent figure is
based on the number of dollar coins issued as a percentage of the
number of dollars issued and the other measure cited in our report is
based on the number of new dollar coins used in financial transactions
as a percentage of the number of dollars used in financial
transactions. We believe that the latter estimate of 1 percent may be a
more representative measure of the coin‘s actual use by the public
because it is based on a nationally representative public poll
conducted for the Mint that asked questions specifically about the
number of dollar coins and notes used in transactions in the past few
days. Nevertheless, while we recognize that there are various measures
with which to gauge the public‘s use of the new dollar coin, neither
approach cited in the report indicated widespread use.
In addition, the Director said that a major deficiency of the Anthony
dollar coin was that people avoided using it because they were unable
to distinguish it from a quarter-dollar coin. In our past reports, we
cited this as one barrier, but also reported that the continued
circulation of the dollar bill was the most substantial barrier to the
Anthony dollar coin‘s use.
The Director of the Division of Reserve Bank Operations, Federal
Reserve Board, said that the Federal Reserve concurred with our
recommendations.
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Banking, Housing, and Urban
Affairs; the House Committee on Financial Services; and the
Subcommittee on Treasury, Postal Service, and General Government, House
Committee on Appropriations; the Secretary of the Treasury; the
Chairman of the Board of Governors of the Federal Reserve System; and
other interested parties. We will also make copies available to others
on request. In addition, this report will be available at no charge on
the GAO Web site at http://www.gao.gov.
Major contributors to this report were Brad Dubbs, John S. Baldwin,
Emily Dolan, Bess Eisenstadt, Susan Michal-Smith, Walter Vance, and
Greg Wilmoth. If you or your staff have any questions, please contact
me on (202) 512-2834 or at ungarb@gao.gov.
Bernard L. Ungar
Director, Physical Infrastructure Issues:
Signed by Bernard L. Ungar:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
In studying the United States Mint‘s marketing of the new dollar coin,
our objectives were to (1) describe the Mint‘s new dollar coin
marketing program costs, the contracts and promotional programs in
which the Mint engaged, and the revenues that were generated; (2)
assess the barriers the Mint faces in increasing the public‘s use of
the new dollar coin; (3) describe the Mint‘s future plans to promote
the new dollar coin and the extent that these plans address the
barriers; and (4) assess the extent that the Mint‘s 2001 and 2002
reports to Congress on the marketing of the new dollar coin fully and
accurately described the marketing programs, the results obtained, and
the problems encountered.[Footnote 31]
To obtain information regarding marketing program contracts,
promotional programs, costs, and revenues, we interviewed officials
from the Mint and the Federal Reserve System and managers from the
marketing program contractors. We also collected and reviewed marketing
program contracts, progress reports, plans, promotion agreements, press
releases, and other related documents from the Mint and contractors. In
addition, we requested information from the U.S. Postal Service on
dollar coin use in vending machines and reviewed a Department of
Transportation report on dollar coin use in transit systems and toll
roads, but we did not independently verify the data from those
agencies. Although we reviewed signed promotion agreements to determine
the number of promotions the Mint conducted, the Mint did not provide
documentation that would enable us to verify the actual number of coins
distributed during each of the promotions. Our review did not include a
financial audit of the marketing program. Also, we did not conduct an
audit of paid advertising expenditures or audit the media to determine
if all of the ads ran as planned. We also did not conduct a review of
the contract award process or a review of how internal controls were
applied during contract management.
To evaluate the barriers to increasing dollar coin circulation, we
reviewed our previous reports, and the laws and congressional hearings
related to the new dollar coin; interviewed officials from the Mint,
Mint contractors, and the Federal Reserve; examined Mint and contractor
marketing documents, reports, and surveys; obtained information on
high-denomination coins and notes from industrialized countries; and
interviewed businesses and trade associations. We also sent
questionnaires regarding barriers to increased circulation to 10
promotion partners that distributed new dollar coins. We focused on
these large promotion partners because these firms represent all of the
targeted industry sectors and make up 99 percent of the total promotion
partner distribution goal. Seven of the 10 promotion partners responded
to our survey. We did not survey the other promotion partners because
of resource limitations and because most of the other promotions were
with minor league baseball teams in smaller cities that had coin
distribution goals of under 300,000 dollar coins. In interviewing
businesses and associations, we contacted those we believed were most
affected by the introduction of a new dollar coin, including bank trade
associations, a trade association representing coin-operated
businesses, and armored carriers. We also reviewed articles on the
Susan B. Anthony dollar coin and interviewed the authors of these
articles. Further, we obtained data on the highest value coins and
lowest value notes used by the G-7 countries as of June 27, 2002.
To obtain information on the Mint‘s plans to overcome the barriers to
increased dollar coin circulation, we interviewed officials from the
Mint, Federal Reserve, Mint contractors, and trade associations and
reviewed Mint documents and the 2002 new dollar coin marketing plan. We
also reviewed our previous reports and studies on the dollar coin. We
then identified specific actions in the Mint plan and analyzed the
extent that these actions address the barriers identified in our
review.
To determine the extent that the 2001 and 2002 Mint reports to Congress
fully and accurately described the marketing of the new dollar coin,
results obtained, and problems encountered, we interviewed Mint
officials and reviewed the reports. We also reviewed marketing program
contracts, progress reports, plans, promotion agreements, and other
related documents from the Mint, contractors, and the Federal Reserve.
We then compared the information on marketing programs, costs,
barriers, and use in the 2001 and 2002 reports with the information
obtained in our review. We used some of the data on awareness and use
from regular Mint surveys conducted during the marketing of the new
dollar coin; however, we did not conduct a comprehensive review of the
methodology used in these surveys. Our review did not include an audit
of the contracts or promotion partner agreements noted in the Mint
reports.
We did our work from September 2001 to September 2002 in Washington,
D.C., in accordance with generally accepted government auditing
standards.
[End of section]
Appendix II: State and Local Governments: Dollar Coin Use Data in the
Largest Transit Systems and Toll Roads:
From market research, the Mint and its contractors determined that
within the state and local government sectors, transit system
authorities and toll roads had good potential for dollar coin use. As
shown in table 7, in April 2002, 19 out of the 20 largest transit
systems accepted new dollar coins in either bus or rail modes.
Table 7: Transit Agencies Accepting the New Dollar coin, as of April
2002:
Rank: 1; Transit agency: Metropolitan Transportation Authority;
Urbanized area: New York, N.Y.; Accepts dollar coin: yes.
Rank: 2; Transit agency: Regional Transportation Authority; Urbanized
area: Chicago, Ill.; Accepts dollar coin: yes.
Rank: 3; Transit agency: Los Angeles County Metropolitan Transit
Authority; Urbanized area: Los Angeles, Calif.; Accepts dollar coin:
yes.
Rank: 4; Transit agency: Massachusetts Bay Transport; Urbanized area:
Boston, Mass.; Accepts dollar coin: yes.
Rank: 5; Transit agency: Washington-Metro; Urbanized area: Washington,
D.C.; Accepts dollar coin: Bus only.
Rank: 6; Transit agency: Southeastern Pennsylvania Transportation
Authority; Urbanized area: Philadelphia, Pa.; Accepts dollar coin: yes.
Rank: 7; Transit agency: San Francisco Municipal Rail; Urbanized area:
San Francisco, Calif.; Accepts dollar coin: yes.
Rank: 8; Transit agency: New Jersey Transit; Urbanized area: New York,
N.Y.; Accepts dollar coin: yes.
Rank: 9; Transit agency: Metro Atlanta Rapid Transit Authority;
Urbanized area: Atlanta, Ga.; Accepts dollar coin: yes.
Rank: 10; Transit agency: Maryland Mass Transit; Urbanized area:
Baltimore, Md.; Accepts dollar coin: yes.
Rank: 11; Transit agency: King County Department of Transportation;
Urbanized area: Seattle, Wash.; Accepts dollar coin: yes.
Rank: 12; Transit agency: Bay Area Rapid Transit; Urbanized area: San
Francisco, Calif.; Accepts dollar coin: Not accepted.
Rank: 13; Transit agency: Metro Transit - Harris County; Urbanized
area: Houston, Tex.; Accepts dollar coin: yes.
Rank: 14; Transit agency: Tri-County Metro District; Urbanized area:
Portland, Oreg. & Vancouver, Wash.; Accepts dollar coin: yes.
Rank: 15; Transit agency: Metro-Dade Transit Agency; Urbanized area:
Miami, Fla.; Accepts dollar coin: yes.
Rank: 16; Transit agency: Port Authority of New York; Urbanized area:
New York, N.Y.; Accepts dollar coin: yes.
Rank: 17; Transit agency: The Greenbus Company; Urbanized area: New
York, N.Y.; Accepts dollar coin: yes.
Rank: 18; Transit agency: Regional Transportation District; Urbanized
area: Denver, Colo.; Accepts dollar coin: yes.
Rank: 19; Transit agency: Port Authority of Allegheny County; Urbanized
area: Pittsburgh, Pa.; Accepts dollar coin: yes.
Rank: 20; Transit agency: Metro Transit; Urbanized area: Minneapolis,
Minn.; Accepts dollar coin: yes.
Note: Transit agencies‘ ranking from Federal Transit Administration
data, National Transit Database 2000.
Source: Federal Transit Administration and the U.S. Mint.
[End of table]
The Mint also targeted toll roads for some of its marketing efforts.
Table 8 shows some data on dollar coin use in 20 large toll road
operators as of December 2001.
Table 8: Dollar Coin Use in Toll Road Operators, as of December 2001:
Rank: 1; Name of toll operator: Florida Department of Transportation
Turnpike; City, state: Tallahassee, Fla.; Total toll lanes: 693;
Actively distribute in manual lanes: No; If operate ACMs, do
they accept?: No.
Rank: 2; Name of toll operator: Illinois State Toll Highway Authority;
City, state: Downers Grove, Ill.; Total toll lanes: 484;
Actively distribute in manual lanes: No; If operate ACMs, do they
accept?: Yes.
Rank: 3; Name of toll operator: New York State Thruway Authority; City,
state: Albany, N.Y.; Total toll lanes: 357; Actively
distribute in manual lanes: Yes; If operate ACMs, do they accept?: No.
Rank: 4; Name of toll operator: New Jersey Highway Authority; City,
state: Woodbridge, N.J.; Total toll lanes: 324; Actively
distribute in manual lanes: No; If operate ACMs, do they accept?: No.
Rank: 5; Name of toll operator: Oklahoma Turnpike Authority; City,
state: Oklahoma City, Okla.; Total toll lanes: 284; Actively
distribute in manual lanes: No; If operate ACMs, do they accept?: Yes.
Rank: 6; Name of toll operator: Mass. Turnpike Authority; City, state:
Boston, Mass.; Total toll lanes: 236; Actively distribute in
manual lanes: No; If operate ACMs, do they accept?: No.
Rank: 7; Name of toll operator: Harris County Toll Road Authority;
City, state: Houston, Tex.; Total toll lanes: 218; Actively
distribute in manual lanes: Yes; If operate ACMs, do they accept?: Yes.
Rank: 8; Name of toll operator: Orlando-Orange County Expressway
Authority; City, state: Orlando, Fla.; Total toll lanes: 185;
Actively distribute in manual lanes: Yes; If operate ACMs, do they
accept?: Yes.
Rank: 9; Name of toll operator: MTA Bridges and Tunnels; City, state:
New York, N.Y.; Total toll lanes: 150; Actively distribute in
manual lanes: Yes; If operate ACMs, do they accept?: N/A.
Rank: 10; Name of toll operator: Transportation Corridor Agencies;
City, state: Santa Ana, Calif.; Total toll lanes: 126;
Actively distribute in manual lanes: No; If operate ACMs, do they
accept?: Yes.
Rank: 11; Name of toll operator: Ohio Turnpike Commission; City, state:
Berea, Ohio; Total toll lanes: 118; Actively distribute in
manual lanes: Yes; If operate ACMs, do they accept?: N/A.
Rank: 12; Name of toll operator: Maine Turnpike Authority; City, state:
Portland, Maine; Total toll lanes: 88; Actively distribute in
manual lanes: Yes; If operate ACMs, do they accept?: Yes.
Rank: 13; Name of toll operator: Port Authority of NY & NJ; City,
state: New York, N.Y.; Total toll lanes: 65; Actively
distribute in manual lanes: No; If operate ACMs, do they accept?: N/A.
Rank: 14; Name of toll operator: South Jersey Transit Authority; City,
state: Hammonton, N.J.; Total toll lanes: 52; Actively
distribute in manual lanes: No; If operate ACMs, do they accept?: No.
Rank: 15; Name of toll operator: Delaware Turnpike Administration;
City, state: Newark, Del.; Total toll lanes: 43; Actively
distribute in manual lanes: No; If operate ACMs, do they accept?: N/A.
Rank: 16; Name of toll operator: Dulles Greenway (TRIP II); City,
state: Sterling, Va.; Total toll lanes: 30; Actively
distribute in manual lanes: No; If operate ACMs, do they accept?: N/A.
Rank: 17; Name of toll operator: Detroit International Bridge Co.;
City, state: Detroit, Mich.; Total toll lanes: 27; Actively
distribute in manual lanes: Yes; If operate ACMs, do they accept?: N/A.
Rank: 18; Name of toll operator: Indiana Department of Transportation-
-Toll Road Division; City, state: Granger, Ind.; Total toll lanes: 20;
Actively distribute in manual lanes: Yes; If operate ACMs, do
they accept?: No.
Rank: 19; Name of toll operator: Delaware River Port Authority; City,
state: Camden, N.J.; Total toll lanes: 16; Actively distribute
in manual lanes: No; If operate ACMs, do they accept?: N/A.
Rank: 20; Name of toll operator: Delaware River & Bay Authority; City,
state: New Castle, Del.; Total toll lanes: 13; Actively
distribute in manual lanes: No; If operate ACMs, do they accept?: N/A.
Legend:
ACM: Automatic Coin Machine:
N/A: Not Applicable:
Source: U.S. Mint contractor analysis.
[End of section]
Appendix III: Comments from the United States Mint:
DEPARTMENT OF THE TREASURY:
UNITED STATES MINT WASHINGTON, D.C. 20220:
August 30, 2002:
Bernard L. Ungar:
Director, Physical Infrastructure Issues United States General
Accounting Office Room 2A10:
441 G Street, N.W. Washington, D.C. 20548:
Dear Mr. Ungar:
We have reviewed the General Accounting Office‘s (GAO) draft report,
’New Dollar Coin, Marketing Campaign Raised Awareness but Not
Widespread Use,“ and generally concur with its findings.
The report recommends that the United States Mint suspend further
expenditures to market and promote the Golden Dollar until it has
performed research and analysis that can support a plan that is likely
to increase the coin‘s long-term circulation or is necessary to achieve
Congress‘s desire for co-circulation. We believe that this
recommendation is consistent with the Senate Committee Report‘s
expectation that the Mint would not draw funds from its Public
Enterprise Fund to promote the Golden Dollar until the Mint has an
approved marketing plan. We generally agree that it would be
inappropriate to expend public funds on such endeavors until we have
performed the market research, completed the necessary analysis,
coordinated proposed strategies and funding levels with the Department
and Congress, and revised the plan we laid out in our June 17, 2002,
Report to Congress, entitled ’Golden Dollar: Overcoming Barriers to
Circulation“ (Golden Dollar Plan) accordingly.
The report also specifically identifies several major concerns in the
Golden Dollar program that are within the scope of the Mint‘s authority
to address, either on its own or in collaboration with other public or
commercial entities. These concerns, and the United States Mint‘s
responses to them, are as follows:
* Constraints posed by barriers against the supply of the dollar coin.
The GAO report confirms the existence of barriers on the supply side of
the dollar coin circulation model. In particular, it noted that (1) the
coin is not readily available at banks; (2) the Golden Dollar and the
quarter-like Susan B. Anthony dollar coin (SBA) are regularly
commingled, which effectively nullifies the deficiencies in the SBA
that the Golden Dollar was designed to overcome;* (3) currency
ordering systems do not facilitate the ordering of dollar coins; and
(4) the wrapping, handling, and shipping costs associated with using
the dollar coin can make it considerably more expensive than the paper
dollar for some commercial users.
United States Mint Response: As the GAO report confirms, there is ample
evidence of the existence of these barriers. The United States Mint
acknowledges that it has no empirical evidence to suggest that the
elimination of these barriers will actually increase circulation of the
Golden Dollar coin. However, some increase in demand for the Golden
Dollar might result if the United States Mint were to increase the
coin‘s availability through the elimination of these barriers. For
instance, if the United States Mint worked with the Federal Reserve
Banks to remove SBAs from inventories and deposits, the availability of
the Golden Dollar might increase because the Federal Reserve Banks
would have to order additional Golden Dollars to meet dollar coin
demand. Still, we cannot predict the magnitude of any such increase in
demand, nor whether such an increase in demand would result in a
sustained growth in dollar coin use.
Although the United States Mint can take measures to eliminate the four
barriers enumerated above, we believe that it will be difficult to
formulate a research methodology that could predict the likely results
in quantifiable terms. Therefore, we intend to explore several options
to address this problem. For instance, we will consider contracting the
services of an expert or consultant that has the professional acumen to
design such a methodology. Another potential alternative would be to
take an incremental approach-that is, we could seek to eliminate these
barriers in particular markets by employing pilot programs in which we
would closely monitor costs relative to measurable increases in dollar
coin circulation. An additional option is to compose a panel of
government, industry, and academic leaders to examine this issue. Any
of these approaches will cost some money to pursue. However, the Mint
generally concurs with the GAO report‘s recommendation and will not
make a substantial investment in any of these approaches until it has
developed a sound business case that supports such expenditures.
* Constraints posed by the public‘s attitude toward the dollar coin.
The report notes that there is a cultural bias against the use of a
dollar coin. It specifically concludes that (1) negative perceptions,
(2) lack of information about the cost and benefits of using the coin,
(3) lack of awareness of the coin‘s advantages, and (4) the ease of
carrying a paper equivalent of the same denomination foster this
cultural bias.
United States Mint Response: The United States Mint will procure the
services of a private firm to conduct an independent study to identify
and assess the barriers to utilizing a dollar coin in daily commerce.
Three target groups will be interviewed: consumers, commercial vendors,
and distribution channel personnel. We plan to have the contractor
begin this independent study in October and expect it to be completed
by the end of the calendar year. We will adjust the Golden Dollar Plan
in accordance with the results of this study.
* Constraints posed by lack of demand for the dollar coin.
The report recognizes the significance of the ’network effect“ and its
importance to the dollar coin‘s gaining a foothold in circulation. The
report specifically acknowledged the dilemma that the public is not
likely to demand the coin until it is more readily available.
United States Mint Response: Economists‘ and the GAO report‘s
acknowledgements of the validity of the ’network effect“ suggest that
one way to overcome the substantial public resistance to using the
dollar coin is to simultaneously persuade businesses, consumers, and
suppliers to change their procedures and usage habits. There must be
sustainable channels for successful distribution of the Golden Dollar.
Accordingly, in developing a marketing strategy to overcome the lack of
demand for the Golden Dollar, the Mint will modify its Golden Dollar
Plan to ensure that it also focuses on ways to take advantage of the
’network effect.“:
In addition to the concerns cited in the report, we agree with the
report‘s recommendation that the United States Mint should honor
existing promotional agreements that were aimed at encouraging
circulation of the new dollar coin. We also will consider entering into
new agreements that are consistent with the approved Golden Dollar Plan
when they are supported by strong business cases indicating that they
are likely to contribute to the Plan‘s objective to effect measurable,
sustainable, and long-term increases in Golden Dollar circulation, or
when they are necessary to achieve Congress‘s desire for co-
circulation. As outlined in the Golden Dollar Plan, the United States
Mint also will continue to pursue efforts with the Postal Service, the
military and transit agencies to facilitate the continued and expanded
use of the Golden Dollar in their retail and related financial
operations. We would welcome the Congress‘s support in these endeavors.
Finally, we wish to clarify one item in the GAO report: the distinction
between a currency‘s circulation and its velocity. The Mint has
reported that the Golden Dollar represents about four percent of the $1
currency now in circulation, while the report indicates that the Golden
Dollar represents only about one percent of the $1 currency‘s velocity.
The Mint‘s four percent circulation figure is based on the number of
dollar coins issued as a percentage of $1 currency issued. The report‘s
one percent velocity figure, on the other hand, presumably represents
the number of financial transactions in which a dollar coin is used as
a percentage of $1 currency used in all such transactions.
I would like to take this opportunity to extend our sincere
appreciation to you and your colleagues in the General Accounting
Office for their comprehensive assessment of the Golden Dollar program.
Sincerely,
Henrietta Holsman Fore:
Director:
United States Mint:
Signed by Henrietta Holsman Fore:
[End of section]
Appendix IV: Comments from the Federal Reserve Board of Governors:
BOARD OF GOVERNORS OF THE:
FEDERAL RESERVE SYSTEM WASHINGTON, D.C. 20551:
LOUISE L. ROSEMAN:
DIRECTOR DIVISION OF RESERVE BANK OPERATIONS AND PAYMENT SYSTEMS:
August 23, 2002:
Mr. Bernard L. Ungar:
Director, Physical Infrastructure Issues United States General
Accounting Office Washington, D.C. 20548:
Dear Mr. Ungar:
Thank you for the opportunity to comment on the General Accounting
Office‘s draft report New Dollar Coin Marketing Campaign Raised
Awareness but Not Widespread Use. The GAO recommended that marketing
expenditures for the golden dollar only be incurred if it can be
demonstrated that such efforts are likely to increase the coin‘s long-
term circulation. We believe this is a reasonable standard to also
apply to other significant expenditures that are intended to increase
the circulation of the golden dollar coin.
We have provided technical comments to the report under separate cover.
Sincerely,
Signed by Louise L Rosen:
[End of section]
FOOTNOTES
[1] 31 U.S.C. 5112 and note.
[2] U.S. Mint, Report to Congress: On the Marketing of the Golden
Dollar (Washington, D.C.: Mar. 30, 2001), and Report to Congress: The
Golden Dollar, Achievements and Challenges (Washington, D.C.: Mar. 29,
2002).
[3] U.S. General Accounting Office, New Dollar Coin: Public Prefers
Statue of Liberty Over Sacagawea, GAO/GGD-99-24 (Washington, D.C.: Jan.
22, 1999); Coin and Currency Production: Issues for Congressional
Consideration, GAO/T-GGD-97-146 (Washington, D.C.: June 26, 1997); A
Dollar Coin Could Save Millions, GAO/T-GGD-95-203 (Washington, D.C.:
July 13, 1995); 1-Dollar Coin: Reintroduction Could Save Millions If It
Replaced the 1-Dollar Note, GAO/T-GGD-95-146 (Washington, D.C.: May 3,
1995); 1-Dollar Coin: Reintroduction Could Save Millions If Properly
Managed, GAO/GGD-93-56 (Washington, D.C.: Mar. 11, 1993); A New Dollar
Coin Has Budgetary Savings Potential But Questionable Acceptability,
GAO/T-GGD-90-50 (Washington, D.C.: June 20, 1990); Limited Public
Demand for New Dollar Coin or Elimination of Penny, GAO/T-GGD-90-43
(Washington, D.C.: May 23, 1990); and National Coinage Proposals:
Limited Public Demand for New Dollar Coin or Elimination of Pennies,
GAO/GGD-90-88 (Washington, D.C.: May 23, 1990).
[4] Seigniorage is the difference between the face value of a coin and
the coin‘s cost of production.
[5] Coin mechanisms on vending machines use magnetic impulse to
distinguish coin denominations. This magnetic impulse is referred to as
the coin‘s electromagnetic signature. Coin mechanisms in many existing
vending and transit machines in the United States were already
programmed to accept the Anthony dollar coin. To avoid expensive
retrofitting costs and to ensure that the new dollar coin could be
readily used in vending and transit systems, the Mint developed an
alloy that was a different color than the Anthony dollar coin, but that
appeared to be the same as the Anthony coin to vending and transit coin
mechanisms. After testing over 20 different alloys, the Mint selected
an alloy for the new dollar coin that is 77 percent copper, 12 percent
zinc, 7 percent manganese, and 4 percent nickel.
[6] To meet the demand for dollar coins before the new dollar coin was
available in late January 2000, the Mint produced 33 million Anthony
dollar coins in fiscal year 1999 and 40 million Anthony coins in fiscal
year 2000.
[7] U.S. Mint, On the Marketing of the Golden Dollar.
[8] H.R. Conf. Rep. No. 107-253 at 55 (2001); S. Rep. No. 107-57 at 31
(2001); H.R. Rep. No. 107-152 at 30 (2001).
[9] U.S. Mint, The Golden Dollar: Achievements and Challenges.
[10] U.S. Department of the Treasury, Office of Inspector General, The
Mint Suspends Its FY 2002 Planned Production of Golden Dollar Coins,
OIG-022-066 (Washington, D.C.: Mar. 19, 2002). In a third quarter
fiscal year 2002 report to congress on operations, the Mint noted that,
because supplies of new dollar coins were sufficient to meet general
circulation demand, it had temporarily suspended production as of May
2002, and that production would resume as warranted by future
circulating demand. As of August 2002, the Mint had produced 7 million
2002-dated new dollar coins to meet coin collection demand from the
public and no 2002-dated coins for general circulation.
[11] GAO/GGD-90-88.
[12] U.S. General Accounting Office, Financial Impact of Issuing the
New $1 Coin, GAO/GGD-00-111R (Washington, D.C.: Apr. 7, 2000).
[13] Net payout is the difference between the number of circulating
coins paid out to depository institutions and number of circulating
coins returned from depository institutions.
[14] On the basis of the Coinstar National Currency Poll, December
2001. In survey awareness questions, the Mint asked respondents if they
had seen or heard of the new dollar coin, and the Coinstar survey asked
if they were familiar with the coin.
[15] During this period, the Mint shipped approximately 980 million new
dollar coins to the Federal Reserve system and another 117.7 million
directly to non-Federal Reserve locations such as Wal-Mart for a total
of 1,097,700,000 new dollar coins (we rounded this figure to 1.1
billion).
[16] Federal Reserve inventories include both Susan B. Anthony and new
dollar coins.
[17] Osterberg and Thomson, Federal Reserve Bank of Cleveland, ’Network
Externalities: The Catch-22 of Retail Payments Innovations,“ Economic
Commentary (Feb. 15, 1998).
[18] Mark Wynne, Federal Reserve Bank of Dallas, ’The Economics of One
Dollar,“ Southwest Economy (July/August 1997); Caskey and Laurent, ’The
Susan B. Anthony Dollar and the Theory of Coin/Note Substitutions,“
Journal of Money Credit and Banking (August 1994); Lotz and Rocheteau,
’On the Launching of a New Currency,“ Journal of Money Credit and
Banking (August 2002); and Gupta, Jain, and Sawhney, ’Modeling the
Evolution of Markets with Indirect Network Externalities: An
Application to Digital Television,“ Marketing Science (1999).
[19] GAO/GGD-90-88.
[20] GAO/GGD-93-56.
[21] Coinstar National Currency Poll, December 2001.
[22] Mint Survey, July 2001.
[23] Marketbridge interviewed 30 stores for the grocery chain promotion
assessment; however, this is not a statistically representative sample,
and the results cannot be projected to all 1,200 stores.
[24] U.S. Department of Transportation, On the Benefits and Feasibility
of Implementing Transit and Toll Road Fare Card Technology Capable of
Accepting the Sacagawea Dollar (Washington, D.C.: April 2002).
[25] Under an existing licensing program, the Mint currently receives
royalty payments for placing numismatic-related products, such as
storybooks, magnifiers, and coin albums, into the retail market. The
U.S. Forest Service is an example of a government agency with a
licensing program. It receives royalties for allowing private
enterprises to use the Smokey the Bear and Woodsy Owl images.
[26] As of January 2002, the Mint said that it had produced 1.4 billion
new dollar coins and had 300 million in inventory. The 1.1 billion
remaining new dollar coins were shipped to the Federal Reserve Banks.
Of these 1.1 billion new dollar coins, approximately 850 million were
distributed to banks and other depository institutions and 250 million
remained in Federal Reserve inventory.
[27] Hart and Teeter Poll cited in the Financial Times, September 8,
2001. The poll indicates that two-thirds of the public are holding onto
coins, but this is not the same as two-thirds of the dollar coins.
[28] U.S. Mint, On the Marketing of the Golden Dollar.
[29] U.S. Mint, The Golden Dollar, Achievements and Challenges.
[30] Results from the July 2001 survey were based on 1,018 interviews
with adults 18 years or older in the continental United States from
July 20-22. Respondents were asked whether they had received or spent
the new dollar coin and the dollar bill in the past few days. We did
not determine the quality of these data from the survey.
[31] U.S. Mint, Report to Congress: On the Marketing of the Golden
Dollar (Washington, D.C.: Mar. 30, 2001), and Report to Congress: The
Golden Dollar, Achievements and Challenges (Washington, D.C.: Mar. 29,
2002).
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