2007 Thomson South-Western

Consumer-Oriented Promotions: Premiums and Other Promotional

Methods

Chapter Nineteen

Chapter Nineteen Objectives

• Explain the role of premiums, the types of premiums, and the developments in premium practice.

• Recognize the role of price-off promotions and bonus packages.

• Be aware of the role of rebates and refund offers.

• Know the differences among sweepstakes, contests, and games, and the reasons for using each form of promotion.

• Understand the role of continuity programs.

Chapter Nineteen Objectives

• Appreciate retailer-driven promotions.

• Evaluate the potential effectiveness of sales promotion ideas, and appraise the effectiveness of completed promotional programs.

Premiums

Premiums

Articles of merchandise or service

offered as a form of gift by manufacturers to induce action on the part of the sales

force, trade representatives, or consumers

PremiumsFree with-purchase

premiums

Mail-in offersMail-in offers

In-, On-, and nearIn-, On-, and near pack premiumspack premiums

• Delayed reward to consumers primarily designed to generate trial purchases.

• The perceived value of a premium item, or gift, depends on the value of the brand that is offering the gift.

Self-LiquidatingSelf-Liquidating

Premiums

In-, On-, and near In-, On-, and near pack premiumspack premiums

• Delayed reward to consumers primarily designed to generate trial purchases.

• As few as 2 to 4 percent of consumers who are exposed to free mail-in offers take advantage of the opportunities.

Self-LiquidatingSelf-Liquidating

Mail-in offers

Free with-purchase Free with-purchase premiumspremiums

Premiums

• Offer a free item inside or attached

• Immediate value• Near-pack premium

provide the retail trade with premium item that retailers then give to consumers

• Near-pack is less expensive due to no additional packaging

Free-with-purchase Free-with-purchase premiumspremiums

In-, On-, and near pack premiums

Mail-In Offers Mail-In Offers

Self-LiquidatingSelf-Liquidating

Premiums

• Consumer mails in a proof of purchase along with sufficient money to receive the premium item

• The premium should be appealing and represent a value

Free with-purchase Free with-purchase premiumspremiums

Mail-In OffersMail-In Offers

Self Liquidating

In-, On-, and In-, On-, and

Near- Pack PremiumsNear- Pack Premiums

Phone Cards

• Repeat-purchasing objective

• Delayed reward

• Commonly, a preset amount of long-distance calling time

Phone Cards

Price-OffsEffective for certain objectives

• Reward present users

• Get consumers to purchase larger quantities than normal

• Establish repeat purchase

• Ensure promotion dollars reach consumers

• Obtain off-shelf display space

• Provide the sales force with incentive

FTC Price-Off Regulations• Only used on brand with established retail

prices• Limit to three per year per brand size• Must be hiatus period (at least 30 days)

between promotions• No more than 50% of volume comes from

promotion• Manufacturer must provide display materials• Dealer required to show regular and

promotion price

Bonus Packs

• Extra quantities of a product that are offered for the same price

• Alternative to price-off deals

• Many bonus-packs will be purchased by regular customers who would have purchased the brand anyway

Games

• Provide an instant reward

• Create excitement, stimulate brand interest, and reinforce brand loyalty

• Important to avoid snafus!

Rebates/Refunds

Manufacturers give cash discounts or

reimbursements to consumers who

submit (mail) proofs of purchase

Phantom Discounts

• Rebate offers benefit manufacturers by stimulating purchases.

• However, many consumers never bother to redeem them– Research shows that consumers tend to

exaggerate the benefit to be obtained from a rebate relative to the effort involved to get their money back.

Rebate Fraud

• Rebate fraud occurs by manufacturers, retailers and consumers themselves.

• Manufacturers might fail to fulfill rebate requests or might take months to send the money. They might also attach parameters to the rebate but not tell the consumer about it.

• “Professional” rebaters make bogus claims.

Sweepstakes and Contests

• Primarily to enhance a brand’s image

• Sweepstakes are preferred because it’s relatively inexpensive and simple to execute

Sweepstakes

purely on the basis of chance, no need for proofs of purchase

Contest

Solve the specific contest problem and may need proofs of

purchase

Continuity Promotions

• Reward consumers’ repeat purchasing

• “Loyalty programs,” “point programs”

• Serve to cement a relationship with the consumer

Overlay and Tie-In Promotions

• Or combination program• Combines two or more promotion techniques• Increases the likelihood that consumers will

attend a promotional message

OverlayProgram

Tie-inPromotion

Overlay and Tie-In Promotions

• Or joint promotion• Simultaneous promotion of multiple brands• Cost-effective, but lead time is lengthened• The partners’ images should reinforce each

other other

OverlayProgram

Tie-inPromotion

Implementation Problems

• To reduce the potential of problems in tie-ins, it is important that: – The profiles of each partner’s customer’s be

similar with regard to pertinent demographics– The partner’s images should reinforce each

other – The partners must be willing to cooperate

rather than imposing their own interests to the detriment of the other partner’s welfare.

Retailer Promotions

• To increase store traffic, offer shoppers attractive price discounts or other deals, and build customer loyalty:

–Retail Coupons–Frequent-shopper programs–Special Price Deals–Samples and Premiums

Evaluating Sales Promotion Ideas

Step 1: Identify the objectives

Step 2: Achieve agreement

Step 3: Evaluation system

Postmortem Analysis

Evaluating after implementation—five characteristics:

• Expense

• Efficiency

• Execution Ease

• Equity Enhancement

• Effectiveness

Combining the Individual Factors