11 Consumer Promotions Chapter Overview Types of consumer promotions Planning for consumer promotions Business-to-business promotions International consumer promotions

11 Coupons How often do you use coupons? Discussion Slide 11 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?

Contests and sweepstakes Refunds and rebates Sampling Bonus packs F I G U R E 1 1 . 1 Types of Consumer Promotions Coupons Premiums Contests and sweepstakes Refunds and rebates Sampling Bonus packs Price-offs Consumer Promotion = sales promotion Will discuss in the following OH’s

A coupon accompanies this informational Gold Bond advertisement

Influencing Brand Purchases On a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer. Sampling 7.78 Word-of-mouth 7.18 Coupons 5.91 Advertising 5.61 Contests 1.24 Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella & Associates (Http://www.santella.com/marketing.htm).

Percentage of Sales with a Coupon Product category % of sales using manufacturer’s coupon Disposable diapers 17.1% Detergents 15.0% Meal starters 14.2% Dough products (refrigerated) 13.6% Cereal 13.4% Wrapping materials, bags 12.8% Oral hygiene products 11.7% Household cleaners 11.7% Source: AC Nielson Scantrack, Santella & Associates

F I G U R E 1 1 . 2 Print media (88%) Direct mail (4%) Methods of Distributing Coupons Print media (88%) FSI (80%) Direct mail (4%) On, in or near package (3%) Cross-ruff Other methods (5%) In-store Sampling Scanner-delivered Response offer Internet Fax Sales staff

Types of Coupons Instant redemption Scanner-delivered Cross-ruffing Response offer U-pons

Coupon Redemption Rates Type of coupon Avg. Redemption Rate Instant redeemable 39.3% Bounce-back 17.2% Instant redeemable – cross ruff 17.1% Electronic shelf 10.2% Electronic checkout 7.8% In-pack 5.8% On-pack 4.7% Direct mail 3.5% Handout 3.1% Free standing inserts 1.3% In 1999, 300 billion coupons were distributed and only 4.8 billion were redeemed (1.6% redemption rate) Bounce back – coupon in side Cross ruff – e.g., coupon for chips on dip Electronic checkout – print coupons with receipt usually for competing product Source: Santella & Associates

Problems with Coupons Reduced revenues Mass cutting Counterfeiting Misredemption Dependency Reduced revenue- brand loyal customers redeem 80% of all coupons (these people would pay full price). Mass cutting – a “fake” store collects and redeems coupons Misredemption – e.g., take a coupon for a 12 oz box rather than 18 oz box of cereal Consumers come to depend on them – can’t buy a pizza without one

Factors Affecting Coupon Effectiveness Face value of coupon. Distribution method. Coupon for preferred brand or brand in evoked set. Value – higher is better Method – FSI is best Coupons for preferred or evoked are more attractive

INTEGRATED LEARNING EXPERIENCE STOP INTEGRATED LEARNING EXPERIENCE Coupon Distribution and Marketing Services Coupons.com, Inc. Http://www.coupons.com/Advertising.asp Coupon Country/Kaufman Advertising Http://www.couponcountry.com

Types of Premiums Free-in-the-mail In- or on-package Store or manufacturer Self-liquidating Mail – collect points, earn a prize Store – toy with happy meal Liquidating – 2 box tops and $3.99 for T-shirt (money pays for shirt and consumer also pays postage)

Fisher Boy Free, in-the-mail premium

Fast-food chains are well known for their in-store premiums.

F I G U R E 1 1 . 3 Match the premium to the target market. Keys to Successful Premiums 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 use premiums to increase profits. Source: Based on Don Jagoda, “The Seven Habits of Highly Successful Premiums,” Incentive, (August 1999), Vol. 173, Issue 8, pp. 104-105.

Creating Successful Contests and Sweepstakes Know the legal restrictions. Do we want losers? Must overcome clutter. Find the right combination of prizes. Look for tie-in opportunities with special events or other companies. Must be coordinated with POP Displays and other marketing tools. Contests require someone to perform an activity Clutter and indifference – lots of contests and lotteries – so what are the prizes? Is it worth my time? Prizes – Super Bowl tickets – things $ can’t always buy Tie-in – H&R Block contest – we’ll pay your taxes May not boost sales but can help with brand awareness over time

INTEGRATED LEARNING EXPERIENCE STOP INTEGRATED LEARNING EXPERIENCE How can these firms assist in the development of a contest or sweepstake? What other promotional services can they provide? What are the advantages and disadvantages of using one firm for multiple or all of the consumer promotions? Sweepstakes Builder Http://www.sweepstakesbuilder.com Promotions Activators, Inc. Http://www.promotionactivators.com ADPAC Corporation Http://www.adpaccorp.com

Successful Rebate/Refund Programs Visibility is necessary Encourages customers to act Should not be too complicated Avoid becoming a permanent component of the purchase decision (automobile rebates) Should be easy and profitable for retailers Redemption rates are 10-20% Allows manuf to hold retail price

In-store distribution Direct sampling Response sampling F I G U R E 1 1 . 4 Types of Sampling In-store distribution Direct sampling Response sampling Cross-ruff sampling Media sampling Professional sampling Selective sampling SAMPLING CAN BE COSTLY Direct – mail samples Response – consumer responds to ad to get sample sent to them Cross-ruff – e.g., conditioner with shampoo Media – e.g., perfume in magazine Prof – Dr. gives patient free drug trials (my knee) Selective – give away power bars at a basketball game

Experiment Impact of In-Store Sampling Product Previous 4 weeks Sampling Week Following 4 weeks Meat product A 100% 430% 110% Meat product B 100% 590% 123% Meat product C 100% 185% 100% Bread product 100% 170% 90% Biscuit product A 100% 359% 64% Biscuit product B 100% 201% 49% 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.

Experiment Impact of In-Store Sampling on Competitors Product Previous 4 week Sampling week Following 4 weeks Bread product 100% 170% 90% Competitor A 100% 106% 105% Competitor B 100% 79% 93% Competitor C 100% 78% 86% 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.

Discussion Slide 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.

F I G U R E 1 1 . 5 Increase usage of the product Reasons for Using Bonus Packs Increase usage of the product Match or pre-empt competitive actions Stockpiling of product Develop customer loyalty Attract new users Encourage brand switching Bonus – sell 6 pack of batteries with 8. 30% bonus is the most typical

Price-Offs Temporary reduction in price. Excellent for boosting short-term sales. Excellent for generating customer traffic. Can be implemented easily. Must be careful not to increase customer price sensitivity. Can have detrimental impact on brand and corporate image. Need a 20% increase in sales to offset a 5% price reduction. May result in more price sensitive customers.

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

Promotion Combinations Over-lay Intra-company tie-in Inter-company tie-in Overlay – e.g., sample and coupon

Types of Consumers Promotion prone consumers Brand loyal consumers Price sensitive consumers

INTEGRATED LEARNING EXPERIENCE STOP INTEGRATED LEARNING EXPERIENCE Consumer Promotions on the Internet What type of sales promotions are offered? What do you think are the objectives of the consumer promotions? Are the promotions offered on the Web site consistent with their advertising and promotions offered at retail outlets? Quaker State Http://www.quakerstate.com Taco Bell Http://www.tacobell.com Kraft Foods Http://www.kraft.com Jockey Http://www.jockey.com Avon Http://www.avon.com Lee Jeans Http://www.leejeans.com

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

International Consumer Promotions Difficult to centralize consumer promotion programs. Laws vary across countries. Difference in distribution rates Requires an experienced international sales promotion coordinator.

Redemption Rates Distribution Methods

Building Your IMC Campaign Choose the best promotions for your product and desired product image. Ensure there is a synergy between the advertising plan, trade promotions and consumer promotions. Select an agency to design and handle the consumer promotion program.