Consumer-Oriented Promotions: Premiums and Other Promotional Methods

Major Consumer-Oriented Promotions

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

Premiums Free with-purchase premiums Mail-in offers In-, On-, and near pack premiums Instant reward to consumers primarily designed to generate trial purchases. Volkswagen Beetle and Apple I Pods Michelin tires and emergency roadside kit Sun City offered free golf carts to retirees who purchased a home within 18 days of the offer Self-Liquidating

Premiums Perceived value of the premium item depends on the value of the brand offering the gift. –Lower with a low-priced item –Higher with a high-priced item Signal of product quality and value

Premiums In-, On-, and near pack premiums Delayed reward to consumers primarily designed to generate Trial purchases Repeat purchases E.g. Kelloggs Frosted Flakes and a children’s book by mail E.g. “The Soviet Union Going Out of Business Sale” As few as 2 to 4 percent of consumers who are exposed to free mail-in offers take advantage of the opportunities. Self-Liquidating Mail-in offers Free with-purchase premiums

Premiums Illustration of a Mail-in Premium

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 Ford Fusion, Target and Kelloggs cereal Ralston Purina and Corvettes Free-with-purchase premiums In-, On-, and near pack premiums Mail-In Offers Self-Liquidating

Premiums Consumer mails in a proof of purchase along with sufficient money to receive the premium item Cost to consumers should be less than the retail value The premium should be appealing and represent a value E.g. 12 Gerber baby foods purchase, $8.95 and the Keepsake Millennium Cup Free with-purchase premiums Mail-In Offers Self Liquidating In-, On-, and Near- Pack Premiums

Buy X get 1 free offers The gift is another unit of the same brand Immediate reward Serves to induce trial and reward loyal customers Very attractive as savings can be as high as 50%

Premiums Illustration of both In-Pack and Self- Liquidating Premium Offers

What Makes a Good Premium Offer? The choice of premium object and delivery method should be based on an explicit detailing of what is to be accomplished. Premium items should be congenial with the brand’s image and appropriate for the target market.

Price-Offs Effective 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

Games Illustration Of a Game Promotion

Avoiding problems PepsiCo game problem in the Philippines would have made the company liable for $18 billion. Beatrice Company's Monday Night Football promotion was foiled by a P&G salesman who broke their code and turned in cards worth $21 million in prize money. An employee for McDonald’s marketing company stole winning tickets and distributed them to friends who obtained $13 million in prize money. Moral: Promotional games can go awry and brand mangers must go to extreme lengths to protect the integrity of their games.

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.

Illustration of a Rebate Offer

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

Contests and Sweepstakes

Illustration of a Promotional Contest

Online Sweeps and Contests Online promotional events are growing in importance Most companies direct consumers to register online to participate in sweeps or contests. Benefits are they create brand awareness, build consumer interaction with the brand, and enable the expansion of a brand’s opt- in database.

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 Overlay Program Tie-in Promotion

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 Overlay Program Tie-in Promotion

Illustration of a Tie-In Promotion

An Intra-company Tie-In

Implementation Problems Tie-in promotions come with some potential problems. To reduce the potential of problems, 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

Illustration of a Retailer’s Loyalty Card Program