1. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 1 Consumer Sales Promotion: Sampling and Couponing

2. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter Objectives After reading this chapter you should be able to: 1.Appreciate the objectives and classification of consumer- oriented sales promotions. 2.Recognize that many forms of promotions perform different objectives for marketers. 3.Know the role of sampling, the forms of sampling, and the trends in sampling practice. 4.Be aware of the role of couponing, the types of coupons, and the developments in couponing practice. 5.Understand the coupon redemption process and misredemption. 6.Appreciate the role of promotion agencies. 2

3. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Groupon: A New Model for Couponing 3 What challenges does Groupon face?

4. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Brand Management Objectives and Consumer Rewards Brand Management Objectives (influencing consumer behavior): Generate purchase trial and retrial (new customers) Encourage repeat purchases (current customers) Reinforce brand images Consumer Rewards (encouraging behavior) Can be classified as an immediate or delayed reward Consumer rewards also can be both utilitarian and hedonic Utilitarian Monetary savings Reduced search and decision costs Improved product quality Hedonic Sense of being a wise shopper Achieve a need for stimulation and variety Obtain entertainment value Being viewed as “tech-savvy” Socializing with others on a deal 4

5. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Classification of Major Consumer-Oriented Promotions 5

6. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Sampling Defined Sampling The premier sales-promotion device for generating trial usage by delivering an actual- or trial-sized product to consumers 6

7. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Sampling Distribution Methods Direct mail For example: Direct mail Mailed directly to households Targeted by demographic characteristics or geo-demographics Newspapers and magazines Door to door by special distribution crews On- or in-pack samplingHigh-traffic locations/unique venuesIn-store samplingOnline sampling 7

8. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Online Sampling 8

9. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 19.1: Sampling Charmin via a Fleet of Tractor Trailers 9

10. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Calculating the ROI for a Sampling Investment 10

11. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Examples of Targeted Sampling A company that specializes in targeted sample distribution developed a program that connected with teenage males by distributing gift packages of product samples (such as shaving cream, razors, mouthwash, and candy) at tuxedo rental shops Warner-Lambert came up with the clever idea of sampling Benadryl anti-itch cream at KOA Kampground locations where people are outdoors, and…itch 11

12. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. When Should Sampling Be Used? New or improved brand is demonstrably superior/has distinct relative advantages Product concept is so innovative that it is difficult to communicate by advertising alone Promotional budgets can afford to generate consumer trial quickly 12

13. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Sampling Problems 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 13

14. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Couponing Defined Coupon A promotional device that rewards consumers for purchasing the coupon- offering brand by providing cents-off or dollars-off savings. 14

15. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 19.2: Illustration of Coupon Offers 15

16. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Coupon Distribution Methods Freestanding Inserts (FSIs) (89.4% of all coupons) In stores (shelf delivered, instant, handout, scanner delivered) Direct Mail Magazines Newspapers In- and On-Package Online 16

17. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Full Coupon Cost 17

18. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Coupon Redemption Rates by Distribution Method 18

19. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Point of Purchase Couponing Instant Redeemable Coupons Peelable from the package at the point of purchase Represent an immediate reward An alternative to price-off deals Redemption rate 19.5% 19

20. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Point of Purchase Couponing Shelf-Delivered Coupons Instant Coupon Machines, Smart Source TM Machines are attached to the shelf alongside coupon-sponsoring brands Redemption rate about 9.1% 20

21. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Point of Purchase Couponing Scanner-Delivered Coupons Catalina Marketing Corp. offers two programs Reward is delayed with the Checkout Coupon Potentially very effective because they provide a way to carefully target coupon distribution Redemption rate about 4% 21

22. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Point of Purchase Couponing Mobile Phone Coupons Using mobile phones to aid grocery shopping is of interest to 40% of consumers Multiple grocers are developing technology, or finding partner firms, to allow shoppers to scan groceries and redeem targeted coupons Redemption rate about 10.0% 22

23. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Mail- and Media-Delivered Coupons Highest household penetration (95%) *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 23

24. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Mail- and Media-Delivered Coupons 89.4% of all coupons distributed via Sunday newspaper freestanding inserts Broad exposure Relatively cheaper Reminder function Advertising function Redemption rate is very low (1%) Don’t generate much trade interest Susceptible to misredemption Declining readership FSIs and Other Media-Delivered Coupons 24

25. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. In- and On-Pack Coupons Included either inside a product's package or as a part of the package’s exterior Affords consumers with a delayed reward that is designed more for encouraging repeat than trial purchases A coupon for one brand is often promoted by another brand (cross-ruff) Advantage: virtually no distribution costs Redemption rates: 4.4 to 5.0% Limitations: delayed reward, do not reach nonusers, do not leverage trade interest 25

26. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Online and Social Couponing Are distributed by many online sites (e.g., www.coupons.com; www.groupon.com; http://www.livingsocial.com) www.coupons.comwww.groupon.com http://www.livingsocial.com Allows consumers to print their own coupons, at no additional cost to the advertiser Has potential for fraud in that criminals can alter their printed coupons Can be distributed wirelessly 26

27. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Groupon Social group coupons have exploded onto the scene in the last several years Estimated redemption rates range from 78% - 82% once the coupon is purchased In Q4 2011, revenues doubled to over $500 million Yet, Groupon posted a $37 million loss in Q1 2012 Criticisms: Successful deals might swamp small businesses with too many customers Deals merely attract one-time bargain hunters An estimated seven out of eight deals suggested by merchants are rejected 27

28. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 19.3: Coupon Redemption and Misredemption Process 28

29. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Coupon Fraud Case: The “Bait” is a Fictitious Coupon (“Broach”) 29

30. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Role of Promotion Agencies Specialized Promotion Agencies Work with brand managers to formulate promotion strategies and implement tactical programs. The Rise of the Online Promotion Agency A new generation of promotion agencies emphasize online promotions—coupons, sweepstakes offers, online promotional games, free sample offerings, and online continuity programs. 30