Consumer and Trade Promotions Chapter 12

Consumer Promotions Defined An incentive or an enticement that encourages a consumer to either select or purchase a product.

Types of Consumer Promotions Coupons Premiums Contests and sweepstakes Refunds and rebates Sampling Bonus packs Price-offs

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 (

Consumers and Sales Promotions Targeted consumers are classified three ways: Promotion prone consumers Brand loyal consumers Price sensitive consumers Take a look at question 8, on page 350. discuss with classmates seated close to you.

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

What’s Happening? interesting-vending-tech.html interesting-vending-tech.html

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? n Fitness center n Ice cream n Dental service n Clothing manufacturer n Auto repair service n Office supply store

Sampling Most effective when used to introduce a new product or a new version of a product. Primary purpose is to encourage trial use by a customer. Sampling is a very effective IMC tool when used correctly. The two key drawbacks to sampling programs are: Cost Customers discarding the sample without trying it (waste).

Types of Coupons Instant redemption Scanner-delivered Cross-ruffing/Co- branding Response offer E-coupons Bounce-back/return coupon

Print media (90%) FSI (88%) Direct mail On- or in-package In-store Sampling Scanner-delivered Cross-ruffing Response offer Internet Fax Sales staff F I G U R E Methods of Distributing Coupons

Do Coupons have an Impact? In 2007 in the United States: 323 billion distributed 3 billion redeemed (0.93%) Average value was 89 cents Savings of $3.47 billion Coupon usage 78% of households use 64% willing to switch brands

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

A coupon accompanies this informational Gold Bond advertisement

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

Types of Premiums Free-in-th In or on-package Store or manufacturer Self-liquidating

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 F I G U R E Keys to Successful Premiums

Creating Successful Contests and Sweepstakes Know the legal restrictions. Must overcome clutter. Find the right combination of prizes. Must consider extrinsic and intrinsic value. Look for tie-in opportunities with special events or other companies. Must be coordinated with POP Displays and other marketing tools.

Successful Rebate/Refund Programs Visibility. Encourages customers to act. Not be too complicated. Avoid becoming a permanent component of the purchase decision (automobile rebates) Profitable for retailers to handle.

Increase usage of the product Match or pre-empt competitive actions. Stockpiling of product. Develop customer loyalty. Attract new users. Encourage brand switching. F I G U R E 12.7 Reasons for Using Bonus Packs

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.

Promotion Combinations Overlay – two or more consumer promotions as part of a single campaign Intra-company tie-in – a consumer promotion with another product within the company Inter-company tie-in – a consumer promotion with another organization

Trade Promotions Account for 70% of marketing budget Often 2 nd largest expense Account for 17.4% of gross sales Trade Promotions Trade Allowances Trade Incentives Trade Contests Trade Shows

Concerns about Trade Promotions Corporate reward structure due to sales quotas Used for short-term sales goals Tend to be used outside of IMC Plans in many cases Costs Over-reliance to push merchandise Difficult to reduce – competitive pressures Potential erosion of brand image