CHAPTER 2010 SouthWestern a part of Cengage Learning

CHAPTER © 2010 South-Western, a part of Cengage Learning All rights reserved. 17 Premiums and Other Promotions Eighth Edition Power. Point Presentation by Charlie Cook The University of West Alabama

Chapter Objectives After reading this chapter you should be able to: 1. Understand the role of premiums, the types of premiums, and the developments in premium practice. 2. Recognize the role of price-off promotions and bonus packages. 3. Be aware of the role of rebates and refund offers. 4. Know the differences among sweepstakes, contests, and games, and the reasons for using each form of promotion. 5. Understand the role of continuity promotions. © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 2

Chapter Objectives (cont’d) After reading this chapter you should be able to: 6. Appreciate retailer-driven promotions. 7. Evaluate the potential effectiveness of sales promotion ideas, and appraise the effectiveness of completed promotional programs. © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 3

Premiums • Premiums Ø Are articles of merchandise or services offered as a gift to induce action by consumers, retailers, and the sales force Ø Represent versatile promotional tools that generate trial purchases, encourage repeat purchasing, and reinforce brand images Ø Are provide to increase consumer brand loyalty and to motivate new purchases © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 4

Table 17. 1 Major Consumer-Oriented Promotions © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 5

Premiums Free-with. Purchase Premiums • Delayed reward to consumers primarily designed to generate trial purchases • Perceived value of a premium item, or gift, depends on the value of brand offering gift Mail-In Offers • Delayed reward to consumers primarily designed to generate trial purchases. • Few consumers exposed to free mail-in offers take advantage of the opportunities In-, On-, and Near-Pack Premiums • Offer a free item of immediate value inside or attached • Provide the retail trade with premium item that retailers then give to consumers • Are less expensive due to no additional packaging © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 6

Figure 17. 1 Illustration of a Mail-in Premium © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 7

Premiums “Buy X, Get 1 Free” Offers • Represents an immediate reward to consumers, and, for manufacturers • Rewards a brand’s loyal customers or encourages trial from purchasers of competitive brands who are willing to switch in order to save money Self Liquidating • Consumer mails in proof-of-purchase with sufficient money to receive the premium item • Premium should be appealing and represent a value Phone Cards • Repeat-purchasing objective • Delayed reward • Preset amount of calling time © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 8

What Makes a Good Premium Offer? • Attractive Premiums Ø The choice of premium object and delivery method based on an explicit detailing of what is to be accomplished Ø Premium items must be compatible with the brand’s image and appropriate for the target market © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 9

Price-Offs • Price-Offs’ Marketing Objectives: Ø To reward present brand users Ø To get consumers to purchase larger quantities than normal Ø To establish repeat purchases Ø To ensure promotion dollars reach consumers Ø To obtain off-shelf display space Ø To provide the sales force with incentives © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 10

Price-Offs (cont’d) • Federal Trade Commission (FTC) Price-Off Regulations Ø Price-off labels can only used on distributed brands with established retail prices Ø Limit to three price-off labels per year per brand size Ø Required hiatus period (at least 30 days) between price-off promotions Ø No more than 50% of annual volume from promotion Ø Manufacturer must provide display materials Ø Dealer required to show regular and promotion prices © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 11

Bonus Packs • Bonus Packs Ø Are extra quantities of a product that are offered for the same price Ø Offer an alternative to price-off deals Ø Will be purchased by regular customers who would have purchased the brand anyway Ø Load current users; thereby removing them from the market © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 12

Games • Promotional Games Ø Provide an instant reward Ø Create excitement, stimulate brand interest, and reinforce brand loyalty Ø Must avoid snafus that threaten consumer confidence in the security of game operations and the integrity of game outcomes © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 13

Rebates and Refunds • Rebate (also Refund) Ø Refers to the practice in which manufacturers give cash discounts or reimbursements to consumers who submit proofs of purchase Ø Offers consumers delayed rather than immediate value, since the consumer must wait to receive the reimbursement Ø That goes unredeemed is a “phantom rebate” Ø Can attract switchers from competitive brands who avail themselves of attractive discount offers © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 14

Figure 17. 2 Illustration of a Rebate Offer © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 15

Rebate Fraud Sources of Rebate Fraud Manufacturers Retailers © 2010 South-Western, a part of Cengage Learning. All rights reserved. Consumers 17– 16

Sweepstakes • Sweepstakes (Sweeps) Ø A promotion in which winners are determined purely on the basis of chance—proofs of purchase cannot be required as a condition for entry • Sweepstakes as a Promotional Tool Ø Are relatively inexpensive and simple to execute Ø Reinforce brand positioning and image Ø Attract attention to advertisements Ø Promote increase brand distribution at retail Ø Foster sales force enthusiasm Ø Can reach special groups © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 17

Figure 17. 3 Illustration of a Sweepstakes Offer © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 18

Figure 17. 4 Illustration of another Sweepstakes Offer © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 19

Contests • Contests Ø A promotion in which participants must according to the rules of the contest and may or may not be required to submit proofs-of-purchase • Online Sweeps and Contests Ø Are growing in importance Ø Direct consumers to register online to participate in sweeps or contests Ø Create brand awareness, build consumer interaction with a brand, and enable expansion of a brand’s optin e-mail database © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 20

Figure 17. 5 Illustration of a Promotional Contest © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 21

Continuity Promotions • Continuity Promotions Ø Reward consumers’ repeat purchasing behaviors v Loyalty programs v Point programs Ø Serve to cement a long-term relationship with the consumer © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 22

Overlay and Tie-In Promotions • Overlay (Combination) Program Ø Is the simultaneous use of multiple promotion tools to promote a brand or to promote brands cooperatively from different firms v Printed coupon with an mail-in entry contest form Ø Increases the likelihood that consumers will attend a promotional message that cuts through clutter © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 23

Overlay and Tie-In Promotions (cont’d) • Tie-in (Group) Promotion Ø Is the simultaneous promotion of multiple brands in a single intracompany or intercompany (joint) promotional effort v Branded pizza and branded soft drink combination offers Ø Is cost-effective, but lead time is lengthened Ø Should reinforce partners’ images of each other © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 24

Figure 17. 6 Illustration of an Intracompany Tie-In © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 25

Figure 17. 7 Illustration of an Intercompany Tie-In Promotion © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 26

Implementation Problems for Tie-in Promotions • To reduce potential problems: Ø The profiles of each partner’s customer’s must be similar with regard to demographics Ø The partner’s images must reinforce each other Ø The partners must be willing to cooperate rather than imposing their own interests © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 27

Retailer Promotions Purposes of Retailer Promotions Increase store traffic Offer price discounts and deals © 2010 South-Western, a part of Cengage Learning. All rights reserved. Build customer loyalty 17– 28

Retailer Promotions Types of Retailer Promotions Retail Coupons Frequentshopper Programs © 2010 South-Western, a part of Cengage Learning. All rights reserved. Special Price Deals Samples and premiums 17– 29

Evaluating Sales Promotion Ideas • Procedure for Evaluating Promotion Ideas 1. Identify specific objectives for the promotion 2. Achieve agreement on objectives 3. Evaluate (rate) the idea: v Is it a good one? Does it meet objectives? v Does it appeal to its target market? v Is it unique and different from the competition? v Is the idea presented clearly to its market? v Is it cost-effective? © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 30

Postmortem Analysis Expense Execution Ease Efficiency Equity Enhancement © 2010 South-Western, a part of Cengage Learning. All rights reserved. Effectiveness 17– 31

Table 17. 2 Evaluation of Three Completed Promotional Programs Program j =A just-completed promotional program Eij = Evaluation of the jth promotional program on the ith evaluation factor (i. e. , the efficiency factor, the executional ease factor, etc. ) Wi =Weight, or relative importance, of the ith factor in determining promotion success © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17– 32