1. © 2007 by Prentice Hall 10-1 Coupons  How often do you use coupons?  What products do you tend to use coupons to purchase?  Will a coupon affect which brand you buy?  Why do you think companies offer so many coupons to consumers? Discussion Slide 10

2. © 2007 by Prentice Hall 10-2 Chapter Overview Types of consumer promotions Planning for consumer promotions Business-to-business promotions International consumer promotions 10 Consumer Promotions

3. © 2007 by Prentice Hall 10-3 Coupons Premiums Contests and sweepstakes Refunds and rebates Sampling Bonus packs Price-offs F I G U R E 1 0. 1 Types of Consumer Promotions

4. © 2007 by Prentice Hall 10-4 Coupons 336 billion distributed 3.7 billion redeemed (1.1%) Average value was 81 cents Savings of $3 billion Coupon usage 78% of households use 64% willing to switch brands

5. © 2007 by Prentice Hall 10-5 F I G U R E 1 0. 2 Percentage of Consumers and Coupon Usage Source: Karen Holt, “Coupon Crimes,” Promo, Vol. 17, No. 5 (April 2004), pp. 23-29.

6. © 2007 by Prentice Hall 10-6 A coupon accompanies this informational Gold Bond advertisement.

7. © 2007 by Prentice Hall 10-7 Influencing Brand Purchases Sampling7.78 Word-of-mouth7.18 Coupons5.91 Advertising5.61 Contests1.24 On a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer. Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella & Associates (Http://www.santella.com/marketing.htm).

8. © 2007 by Prentice Hall 10-8 Percentage of Sales with a Coupon Disposable diapers17.1% Detergents15.0% Meal starters14.2% Dough products (refrigerated)13.6% Cereal13.4% Wrapping materials, bags12.8% Oral hygiene products11.7% Household cleaners11.7% Product category % of sales using manufacturer’s coupon Source: AC Nielson Scantrack, Santella & Associates

9. © 2007 by Prentice Hall 10-9 Print media (90%) FSI (84%) Direct mail (4%) On, in, or near package (3%) Cross-ruff Other methods (3%) In-store Sampling Scanner-delivered Response offer Internet Fax Sales staff F I G U R E 1 0. 3 Methods of Distributing Coupons

10. © 2007 by Prentice Hall 10-10 Reason for Using FSI Consumers must make conscious effort to clip coupon Creates brand awareness Must purchase brand on next trip to retailer More likely to recall brand name

11. © 2007 by Prentice Hall 10-11 Types of Coupons Instant redemption Scanner-delivered Cross-ruffing Response offer E-coupons

12. © 2007 by Prentice Hall 10-12 Coupon Redemption Rates Instant redeemable39.3% Bounce-back17.2% Instant redeemable – cross ruff17.1% Electronic shelf10.2% Electronic checkout 7.8% In-pack 5.8% On-pack 4.7% Direct mail 3.5% Handout 3.1% Free-standing inserts 1.3% Type of couponPercent Redeemed Source: Santella & Associates

13. © 2007 by Prentice Hall 10-13 Problems with Coupons Reduced revenues Brand preference – 80% Mass cutting Counterfeiting Internet distribution Misredemption $500 million illegally redeemed

14. © 2007 by Prentice Hall 10-14 Factors Affecting Coupon Effectiveness Face value of coupon Distribution method Coupon for preferred brand or brand in evoked set

15. © 2007 by Prentice Hall 10-15 Types of Premiums Free-in-the-mail In- or on-package Store or manufacturer Self-liquidating

16. © 2007 by Prentice Hall 10-16 Fisher Boy Free, in-the-mail premium

17. © 2007 by Prentice Hall 10-17 Premium Offer Click picture for video. An ad by Haik Humble Eye Center offering a premium with the purchase of custom pair of eye glasses.

18. © 2007 by Prentice Hall 10-18 Problems with Premiums Time factor Tend to have short life spans Popularity important Cost Related to interest in premium Exclusive premiums

19. © 2007 by Prentice Hall 10-19 Match the premium to the target market. Carefully select the premiums (Avoid fads, try for exclusivity). Pick a premium that reinforces the firm’s product and image. Integrate the premium with other IMC tools (especially advertising and POP displays). Don’t expect premiums to increase short- term profits. Source: Based on Don Jagoda, “The Seven Habits of Highly Successful Premiums,” Incentive, (August 1999), Vol. 173, Issue 8, pp. 104-105. F I G U R E 1 0. 4 Keys to Successful Premiums

20. © 2007 by Prentice Hall 10-20 Fast-food chains are well known for their in-store premiums.

21. © 2007 by Prentice Hall 10-21 Contests and Sweepstakes Contests – require activity, skill Can require purchase to enter Some states illegal Sweepstakes – random chance Must publish odds of winning Cannot require purchase Rewards Extrinsic Intrinsic

22. © 2007 by Prentice Hall 10-22 Contests and Sweepstakes Problems Costs Consumer indifference Clutter

23. © 2007 by Prentice Hall 10-23 Creating Successful Contests and Sweepstakes Know the legal restrictions. Find the right combination of prizes. Consider extrinsic and intrinsic value. Use special events or tie-ins with other companies. Use Internet. Coordinate with POP displays and other marketing tools.

24. © 2007 by Prentice Hall 10-24 Contests and Sweepstakes Goals Encourage customer traffic Increase brand awareness Boost sales

25. © 2007 by Prentice Hall 10-25 Rebates and Refunds Refunds – soft goods Rebates – hard goods Redemption rates 30% overall 65% for rebates over $50

26. © 2007 by Prentice Hall 10-26 Rebate/Refund Programs Problems Costs Paperwork Diminished effectiveness Creating effective programs Visibility Perceived newness Impact

27. © 2007 by Prentice Hall 10-27 In-store distribution Direct sampling Response sampling Cross-ruff sampling Media sampling Professional sampling Selective sampling F I G U R E 1 0. 5 Types of Sampling

28. © 2007 by Prentice Hall 10-28 Sampling Programs Target audience Business-to-business Women Men FSI distribution Internet-based response sampling

29. © 2007 by Prentice Hall 10-29 Experiment Impact of In-Store Sampling Meat product A100%430%110% Meat product B100%590%123% Meat product C100%185%100% Bread product100%170% 90% Biscuit product A100%359% 64% Biscuit product B100%201% 49% Product Previous 4 weeks Sampling Week Following 4 weeks Source: Michelle Lawson, Dalton McGuinness and Don Esslemont, “The Effect of In-Store Sampling on the Sale of Food Products,” Marketing Bulletin, 1990, Vol. 1, pp 1-6.

30. © 2007 by Prentice Hall 10-30 Experiment Impact of In-Store Sampling on Competitors Bread product100%170% 90% Competitor A100%106%105% Competitor B100% 79% 93% Competitor C100% 78% 86% Product Previous 4 week Sampling week Following 4 weeks Source: Michelle Lawson, Dalton McGuinness and Don Esslemont, “The Effect of In- Store Sampling on the Sale of Food Products,” Marketing Bulletin, 1990, Vol. 1, pp 1- 6.

31. © 2007 by Prentice Hall 10-31 Sampling Programs Problems Cost Distribution Effective sampling Component of IMC plan Stimulate trial usage Target audience of sample

32. © 2007 by Prentice Hall 10-32 Sampling How effective would sampling be for the goods and services listed on the right? How would you design a sampling program that would be effective, yet not too costly? What type of consumers would you target for the sampling? Fitness center Ice cream Dental service Clothing manufacturer Auto repair service Office supply store B-to-B consulting service B-to-B supplier of raw materials such as sugar, flour, etc., to bakeries Discussion Slide

33. © 2007 by Prentice Hall 10-33 Increase usage of the product Match or preempt competitive actions Stockpile the product Develop customer loyalty Attract new users Encourage brand switching F I G U R E 1 0. 6 Reasons for Using Bonus Packs

34. © 2007 by Prentice Hall 10-34 Bonus Packs Bonuses range from 20% - 100% 30% bonus most common Used by current customers Brand switching if used by consumer previously

35. © 2007 by Prentice Hall 10-35 Bonus Packs Problems Size of bonus pack Too small – Too large Cost of bonus Cash flow due to stockpiling Effective bonus packs Brand switching, stockpiling, lower unit costs Manufacturers Retailers Customers

36. © 2007 by Prentice Hall 10-36 Price-Offs Temporary price reduction Stimulating sales Reduces financial risk Brand switching Manufacturer’s usage Retailer usage

37. © 2007 by Prentice Hall 10-37 Impact of Price-off on Consumer Purchase Source: “Studies Indicate Coupons are an Effective Promotional Tool,” Santella & Associates (http://www.santella.com/coupon.htm)http://www.santella.com/coupon.htm Consumer unaware item was on sale. 51% Consumer purchased because of sale price 9% Consumer would have purchased item anyway 40%

38. © 2007 by Prentice Hall 10-38 Price-Offs Problems Increase sales, but decrease profits 20% increase in sales to offset a 5% price reduction Consumers become more price sensitive 25% of consumers base purchase decision on price Competitive pressure to use price-offs

39. © 2007 by Prentice Hall 10-39 Price-Offs Effective Use Increase store traffic Generate sales Work best with higher markup items Reasons for success Consumers view as monetary savings Reward is immediate

40. © 2007 by Prentice Hall 10-40 Promotion Combinations Overlay Intra-company tie-in Inter-company tie-in

41. © 2007 by Prentice Hall 10-41 Planning Consumer Promotions Types of consumers Promotion-prone consumers Brand-loyal consumers Price-sensitive consumers Retailer incentives Increase store traffic Increase store sales Attract new customers Increase the basket size IMC plan

42. © 2007 by Prentice Hall 10-42 Business-to-Business Consumer Promotions 18.7% of B-to-B marketing budgets spent on sales promotions. Coupons Premiums Sweepstakes and contests Sampling Bonus packs

43. © 2007 by Prentice Hall 10-43 International Consumer Promotions Difficult to centralize consumer promotion programs. Laws vary across countries. Difference in distribution rates. Requires an experienced international sales promotion coordinator.

44. © 2007 by Prentice Hall 10-44 Redemption Rates Distribution Methods