© 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

© 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

© 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 Types of Consumer Promotions

© 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

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

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

© 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 (

© 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

© 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 Methods of Distributing Coupons

© 2007 by Prentice Hall 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

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

© 2007 by Prentice Hall 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

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

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

© 2007 by Prentice Hall Types of Premiums Free-in-th In- or on-package Store or manufacturer Self-liquidating

© 2007 by Prentice Hall Fisher Boy Free, in-th premium

© 2007 by Prentice Hall 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.

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

© 2007 by Prentice Hall 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 F I G U R E Keys to Successful Premiums

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

© 2007 by Prentice Hall 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

© 2007 by Prentice Hall Contests and Sweepstakes Problems Costs Consumer indifference Clutter

© 2007 by Prentice Hall 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.

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

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

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

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

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

© 2007 by Prentice Hall 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.

© 2007 by Prentice Hall 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.

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

© 2007 by Prentice Hall 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

© 2007 by Prentice Hall 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 Reasons for Using Bonus Packs

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

© 2007 by Prentice Hall 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

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

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

© 2007 by Prentice Hall 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

© 2007 by Prentice Hall 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

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

© 2007 by Prentice Hall 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

© 2007 by Prentice Hall 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

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

© 2007 by Prentice Hall Redemption Rates Distribution Methods