Chapter 9 SALES PROMOTIONS Consumer Promotions Defined o

Chapter 9 SALES PROMOTIONS

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

FIGURE 9. 1 Types of Consumer Promotions o Coupons o Premiums o Contests and sweepstakes o Refunds and rebates o Sampling o Bonus packs o Price-offs o Point of Purchase (POP)

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

A coupon accompanies this informational Gold Bond advertisement

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FIGURE 9. 2 Percentage of Consumers and Coupon Usage

Problems with Coupons o Reduced revenues o Used by brand preference consumers (80%) o Counterfeiting o Misredemptions

Premiums o Premiums are prizes, gifts, or other special offers consumers receive when purchasing products and services.

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

Types of Premiums o Free-in-the-mail o In- or on-package o Store or manufacturer o Self-liquidating

Brands like Budweiser often feature premiums found in packages of beer

FIGURE 9. 5 Keys to Successful Premiums o Match the premium to the target market. o Carefully select the premiums (Avoid fads, try for exclusivity). o Pick a premium that reinforces the firm’s product and image. o Integrate the premium with other IMC tools (Especially advertising and POP displays). o 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.

Contests o Can be very effective if used correctly, for example Tim Horton’s Roll-up the Rim. Effective Contests: o Coordinate with other marketing tactics o Encourage customer traffic o Have intrinsic rewards that draws customers back o Have extrinsic rewards that are attractive to consumers o Increase in brand awareness

Heinz encourages dialogue with consumers through the use of contests

Creating Successful Contests o Know the legal restrictions. o Must overcome clutter. o Find the right combination of prizes. o Must consider extrinsic and intrinsic value. o Look for tie-in opportunities with special events or other companies. o Must be coordinated with POP Displays and other marketing tools. o One trend is to ignite a viral buzz around the brand, through the use of social media

Refunds and Rebates o Cash returns offered to consumers or businesses following the purchase of a product or service. o Can be a hassle for consumers to redeem. o Only 30% of all rebates are claimed, however this figure raises to 65% when the value of the rebate is over $50. 00.

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

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

FIGURE 9. 6 Types of Sampling o In-store distribution o Direct sampling o Response sampling o Cross-ruff sampling o Media sampling o Professional sampling o Selective sampling

Benefits of Sampling o Introduce new products o Generate interest o Generate leads o Collect information o Boost sales

Bonus Packs o Additional or extra number of items placed in a special product package o Buying four bars of soap for the price of three o Bonus packs can lead to brand switching o Bonus packs are effective for products with high competition

FIGURE 9. 7 Reasons for Using Bonus Packs o o o Increase usage of a product Match or preempt competition Stockpile the product Develop customer loyalty Attract new users Encourage brand switching

Concerns with Bonus Packs o Rarely attracts new customers o Some consumers skeptical o o Small bonus – price not changed Large bonus – price increased first

Price-offs o Can be defined as a temporary price reduction o Benefits include: o o o Stimulates sales Reduces financial risk for the end user Can help promote brand switching

Price-offs o Proven to be successful o o Appeal of monetary savings Reward is immediate o Problems o o o Can have a negative impact on profit Encourages consumers to become more price-sensitive Potential image on brand image

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)

Point-of-Purchase (POP) o Any form of special display that promotes mechandise o Often located near cash registers, store entryways, end of aisles, etc. o A highly effective tool for increasing sales o In many cases, POP displays influence purchase decisions.

Effective POP Displays

How Can Sales Promotions Be Effective o Economic Effects o Informational Effects o Affective Effects

Strengths of Sales Promotions o Provides Extra Incentive to Act o Creates Sense of Immediacy o Stimulates Trial o Increases Purchase or Usage Frequency o Builds Databases

Weaknesses of Sales Promotions o Adds clutter o Sets False Retail Prices o Promotes Forward Buying o May affect quality perception of brand, product or service