Consumer and Trade Promotions CHAPTER 12 Consumer Promotions

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 On a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer. � Sampling 7. 78 7. 18 5. 91 � Word-of-mouth � Coupons � Advertising � Contests 5. 61 1. 24 Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella & Associates (Http: //www. santella. com/marketing. htm).

Consumers and Sales Promotions Targeted consumers are classified four ways: �Promotion prone consumers �Brand loyal consumers �Price sensitive consumers �Brand preference

FIGURE 1 2. 6 Types of Sampling �In-store distribution �Direct sampling �Response sampling �Cross-ruff sampling �Media sampling �Professional sampling �Selective sampling

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

Discussion Question �Page 334, Question 7

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

Example of a Response Offer

FIGURE 12. 3 Methods of Distributing Coupons � Print media (90%) FSI (88%) � Direct mail � On- or in-package � In-store � Sampling � Scanner-delivered � Cross-ruffing � Response offer � Internet � Fax � Sales staff

What’s Happening? �http: //www. youtube. com/watch? v=WUFSHz. T 2 xu. Y �http: //www. youtube. com/watch? v=7 DR 4 jk. MFf. Rg&fe ature=youtube_gdata_player

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 http: //www. youtube. com/watch? v=9 ITQ 1 a. Tco. Ao

Coupon Redemption Rates Type of coupon Percent Redeemed � Instant redeemable � Bounce-back 39. 3% 17. 2% � Instant redeemable – cross ruff 17. 1% 10. 2% � Electronic shelf � Electronic checkout 7. 8% � In-pack 5. 8% 4. 7% 3. 5% 3. 1% � On-pack � Direct mail � Handout � Free-standing inserts Source: Santella & Associates 1. 3%

A coupon accompanies this informational Gold Bond advertisement

Premiums �Prizes or gifts that consumers receive for purchasing products and services

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

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

FIGURE 1 2. 5 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. �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. �One trend is to ignite a viral buzz around the brand, through the use of social media

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.

FIGURE 12. 7 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.

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 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 For Manufacturers • Account for 70% of marketing budget • Often 2 nd largest expense • Account for 17. 4% of gross sales Trade Allowances Trade Incentives Trade Promotions 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