 2007 Thomson South-Western Consumer-Oriented Promotions: Sampling and Couponing Chapter Eighteen

Chapter Eighteen Objectives Appreciate the objectives of consumer- oriented sales promotions. Recognize that many forms of promotions perform different objectives for marketers. Know the role of sampling, the forms of sampling, and the trends in sampling practice.

Chapter Eighteen Objectives Be aware of the role of couponing, the types of coupons, and the developments in coupon practices Understand the coupon redemption process and misredemption. Appreciate the role of promotion agencies.

Why Use Consumer Promotions? Promotions accomplish goals that advertising by itself cannot. Consumers often need to be induced to buy now rather than later, to buy your brand rather than a competitor's, to buy more and to buy frequently.

Brand Management Objectives and Consumer Rewards (1) Generating trial purchases (2) Encouraging repeat purchases (3) Reinforcing brand images Three general categories of objectives

Marketer Objectives and Consumer Rewards All promotion techniques provide consumers with rewards Typically in the form of cash savings or free gifts Consumers are more responsive to immediate than delayed rewards Consumer Rewards

Sampling The premier sales-promotion device for generating trial usage by delivering an actual- or trial-sized product to consumers

Sampling Direct mail Newspapers and magazines Door to door by special distribution crews On- or in-pack sampling High-traffic locations In-store sampling Internet sampling Targeted by demographic characteristics or geodemographics Sunday newspaper an increasingly attractive medium for broad-scale sampling Allows considerable targeting; Lower cost than in-store or direct-mail; sampling; short lead times Uses package of another product to serve as the sample carrier Shopping centers, movie theaters, airports, or special events Provide product samples in grocery stores and other retail outlets for trial while consumers are shopping; most frequent form Brand managers increasingly distribute samples online; specialized online sample delivery firms aid this process

When Should Sampling Be Used? Brand is demonstrably superior/has distinct relative advantages Concept is difficult to communicate by advertising alone Can afford to generate consumer trial quickly

Problems with Sampling Expensive Mishandling in distribution Distributed to the wrong market In- or on-package samples do not capture current non-consumers Can fail to reach sufficient numbers of consumers to justify its expense May be misused by customers Pilferage

Couponing Coupon –A promotional device that provides cents-off to consumers upon its redemption Coupon Distribution Methods –Freestanding insert (FSI) is preferred Valassis Inserts, News America Marketing –The establishment of cooperative coupon programs Val-Pak Direct Marketing Systems

Economic Impact Face Value$1.00 Distribution and postage cost.40 Handling charge.08 Consumer misredemption cost.07 Internal prep and processing cost.02 Redemption cost.02 Total Cost$1.59

Point of Purchase Couponing Peelable from the package at the point of purchase Represent an immediate reward An alternative to price-off deals Redemption rate about 30% Instantly Redeemable Coupons Shelf- Delivered Coupons Scanner- Delivered Coupons

Point of Purchase Couponing Instant Coupon Machines, Smart Source TM Machines are attached to the shelf alongside coupon-sponsoring brands Redemption rate about 11% Instantly Redeemable Coupons Shelf- Delivered Coupons Scanner- Delivered Coupons

Point of Purchase Couponing Catalina Marketing Corp. offers two programs Reward is delayed Potentially very effective because they provide a way to carefully target coupon distribution Instantly Redeemable Coupons Shelf- Delivered Coupons Scanner- Delivered Coupons

Point of Purchase Couponing Delivers coupons based on the particular brands a shopper has purchased Directed at competitive-brand users Redemption rate about 9% Scanner- Delivered Coupons Checkout CouponCheckout Direct

Point of Purchase Couponing A coupon for the sponsoring manufacturer’s brand is automatically dispensed for use on the shopper’s next purchase occasion Directed at users who satisfy a manufacturer’s prescribed demographic or product-usage requirements Scanner- Delivered Coupons Checkout CouponCheckout Direct

Mail/Media Delivered Coupons Highest household penetration Highest redemption rate of all mass-delivered coupons (3.5%) Increase the amount of product purchases Mail-Delivered Coupons Relatively expensive Inefficient and expensive for brands enjoying a high market share

Mail/Media Delivered Coupons 87% of all coupons distributed via Sunday newspaper freestanding inserts Broad exposure Relatively cheaper Reminder function Advertising function FSIs and Other Media-Delivered Coupons Redemption rate is very low Don’t generate much trade interest Susceptible to misredemption

In- and On- Pack Coupons Included in- or on- product’s package Cannot be removed at the point of purchase; It’s for next purchase A coupon for one brand is promoted by another brand (crossruffing) Has bounce-back value No distribution costs Redemption rates are higher Delayed value to consumers Don’t reach nonusers of the carrying brand

Online Couponing A number of Internet sites now distribute coupons. Consumers print their own coupons, at no additional cost to the advertiser. There is a great potential for fraud with these coupons that consumers can print themselves so it remains to be seen how popular this method will remain

Misredemption Participants Consumers present coupons that have expired, for items not purchased, or for a smaller size than specified by the coupon. Clerks take the coupons to the store and exchange them for cash without making a purchase. Store Management: retailers may boost profits by submitting extra coupons in addition to those redeemed legitimately. Shady Clearinghouses engage in misredemption by combining illegally purchased coupons with real ones and certifying the batch as legitimate.

The Role of Promotion Agencies Agencies that work with brand managers to formulate promotion strategies and implement tactical programs. A new generation of promotion agencies emphasize online promotions.