Consumer and Trade Promotions Chapter 12 Consumer Promotions

Consumer and Trade Promotions Chapter 12

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

Types of Consumer Promotions n Coupons n Premiums n Contests and sweepstakes n Refunds and rebates n Sampling n Bonus packs n 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. n Sampling n Word-of-mouth n Coupons n Advertising n Contests 7. 78 7. 18 5. 91 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 three ways: n Promotion prone consumers n Brand loyal consumers n Price sensitive consumers Take a look at question 8, on page 350. discuss with classmates seated close to you.

F I G U R E 1 2. 6 Types of Sampling n In-store distribution n Direct sampling n Response sampling n Cross-ruff sampling n Media sampling n Professional sampling n Selective sampling

What’s Happening? n http: //www. dreamvending. com/2009/07/diji-touch- interesting-vending-tech. html

Sampling n How effective would sampling be for the goods and services listed on the right? n How would you design a sampling program that would be effective, yet not too costly? n What type of consumers would you target for the sampling? n n n Fitness center Ice cream Dental service Clothing manufacturer Auto repair service Office supply store

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

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

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

Do Coupons have an Impact? In 2007 in the United States: n 323 billion distributed n 3 billion redeemed (0. 93%) n Average value was 89 cents n Savings of $3. 47 billion n Coupon usage 78% of households use n 64% willing to switch brands n

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

A coupon accompanies this informational Gold Bond advertisement

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

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

FIGURE 1 2. 5 Keys to Successful Premiums n Match the premium to the target market. n Carefully select the premiums (Avoid fads, try for exclusivity). n Pick a premium that reinforces the firm’s product and image. n Integrate the premium with other IMC tools (Especially advertising and POP displays). n 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 n Know the legal restrictions. n Must overcome clutter. n Find the right combination of prizes. n Must consider extrinsic and intrinsic value. n Look for tie-in opportunities with special events or other companies. n Must be coordinated with POP Displays and other marketing tools.

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

FIGURE 12. 7 Reasons for Using Bonus Packs n Increase usage of the product n Match or pre-empt n n competitive actions. Stockpiling of product. Develop customer loyalty. Attract new users. Encourage brand switching.

Price-Offs n Temporary reduction in price. n Excellent for boosting shortn n 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 n Overlay – two or more consumer promotions as part of a single campaign n Intra-company tie-in – a consumer promotion with another product within the company n 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 n Corporate reward structure due to sales quotas n Used for short-term sales goals n Tend to be used outside of IMC Plans in many cases n Costs n Over-reliance to push merchandise n Difficult to reduce – competitive pressures n Potential erosion of brand image