Consumer Promotions Chapter 11 with Duane Weaver

CONSUMER PROMOTIONS (a.k.a. sales promotions)…are the incentives aimed at a firms customers.

TYPES OF CONSUMER PROMOTIONS COUPONS –Types: Bounce Back Scanner Delivered Cross-Ruffing Response Offer –Issues: Reduces revenues (giving it away for no reason) Mass-cutting (fraud) Counterfeiting (pay for phoney coupons) Misredemptions (clearinghouse redeems even when customer does not)

TYPES OF CONSUMER PROMOTIONS PREMIUMS –Types: Free-in-th (gifts for buying) In/on-package (attached gifts… e.g.: toys) Store or manufacturer (provided at time of purchase from store or manufac.) Self-liquidating (premium sold at cost to consumer) –Issues: Time (short life spans – popularity wanes) Cost (exclusivity increases demand and thus higher prices for desired items)

TYPES OF CONSUMER PROMOTIONS CONTESTS AND SWEEPSTAKES Contest = participant must compete (activity needed)…often purchase needed to enter Sweepstake = no purchase required, chances of winning are probability driven (a random draw). May have restrictions of one entry per store, etc. Problems –Costs –Consumer Indifference –Clutter How to Succeed –The right prize –Take advantage of special event –Should be coordinated with advertising –Goal should be to encourage customer traffic and boost sales –NOTE: brand awareness increases with multiple exposures to ads or contests.

TYPES OF CONSUMER PROMOTIONS REFUNDS AND REBATES Cash returns offered after the purchase of a product. Problems –Costs (giving it up and admin. is up) –Paperwork (much more work) –Diminished Effectiveness (expected vs. reward) How to Succeed –Visibility –Perceived Newness –An Impact

TYPES OF CONSUMER PROMOTIONS SAMPLING Delivery of a product to consumers for their use and consumption, normally offered free of charge. Problems –Cost is high. (Try BUZZ marketing in lieu?) –Packaging must be congruent with full size version for product recognition. –Requires careful planning of distribution. How to Succeed –As part of IMC plan –Focus is to induce TRIAL USE –Most effective for NEW products or NEW versions –Can switch BRAND LOYALTY (up to 70%)

TYPES OF CONSUMER PROMOTIONS BONUS PACKS Additional or extra number of items included ( % more, average = 30% more). Problems –Consumers skeptical Small = not much added value Large = well it was priced too high to begin with –COSTLY (amounts, packaging, shipping) How to Succeed –If it is perceived as a bargain or value –For ongoing products with high competition, it can help maintain brand loyalty and reduce brand switching at minimal cost (again it might be giving it away too)

TYPES OF CONSUMER PROMOTIONS PRICE OFFS Temporary Reduction in price. Problems –Devastating to PROFITS –Can require at least 20% increase in sales to accommodate for only a 5% reduction in price. –Makes consumers more price sensitive (waiting to buy or brand switching is inspired) –It is a slippery slope! How to Succeed –Best on products/services not normally discounted. –Can increase store traffic and boost sales (E.G.: lost litre concept to drive higher margin items) –Appeals to customers Monetarily –Immediate Reward Appeal –Should be part of a more complete IMC plan, not stand- alone

Planning for Consumer Promotions Promotion plan should be relative to a specific Target Audience Promotion plan should support brand image and brand position Segmenting customers based on Sales Promotions: 1.Promotion prone customers –Coupons, price-off, or premium responsive 2.Brand-loyal customers –Ignore deals being offered from other brands, always stays loyal 3.Price-sensitive customers –Price is primary driver…favour any type of promotion that reduces price

THANK YOU!