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 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

Major Consumer Oriented-Promotions: An Overview

Premiums Free with-purchase premiums Mail-in offers In-, On-, and near pack 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-Liquidating

Premiums In-, On-, and near pack 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-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 Near-pack is less expensive due to no additional packaging 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 The premium should be appealing and represent a value Free with-purchase premiums Mail-In Offers Self Liquidating In-, On-, and Near- Pack Premiums

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

Phone Cards Repeat-purchasing objective Delayed reward Commonly, a preset amount of long-distance calling time Phone Cards

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 Important to avoid snafus!

Games Illustration Of a Game Promotion

Avoiding Snafus PepsiCo game snafu 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.

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 A Sweepstakes Offer for a Durable Good Brand

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 Intercompany 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

Evaluating Sales Promotion Ideas Step 1: Identify the objectives Step 2: Achieve agreement Step 3: Evaluation system –Good general idea? –Appeal to target? –Unique? –Clear? –Cost-Effective?

Postmortem Analysis Evaluating after implementation—five characteristics: Expense—sum of the direct outlays Efficiency—cost-per-unit moved Execution Ease—total time and effort involved Equity Enhancement—subjective assessment of enhanced brand image Effectiveness—total units sold of the promoted product in that period

Combining the Individual Factors Program j = A just completed promotional program (one of many potential promotional programs that have been run and subsequently evaluated. E ij = Evaluation of the jth promotional program on the ith evaluation factor (i.e. the efficiency factor, the executional ease factor, etc.). W i = Weight, or relative importance of the ith factor in determining promotion success.

Evaluation of Three Completed Promotional Programs