CHAPTER 12

Consumer and Trade Promotions

Consumer Promotions Defined

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

Types of Consumer Promotions

CouponsPremiumsContests and sweepstakesRefunds and rebatesSamplingBonus packsPrice-offs

Influencing Brand Purchases

Sampling 7.78Word-of-mouth 7.18Coupons 5.91Advertising 5.61Contests 1.24

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 (Http://www.santella.com/marketing.htm).

Consumers and Sales Promotions

Targeted consumers are classified four ways:

Promotion prone consumersBrand loyal consumersPrice sensitive consumersBrand preference

In-store distributionDirect samplingResponse samplingCross-ruff samplingMedia samplingProfessional samplingSelective sampling

F I G U R E 1 2.6Types of 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?

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 redemptionScanner-deliveredCross-ruffing/Co-

brandingResponse offerE-couponsBounce-back/return

coupon

Example of a Response Offer

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 1 2 . 3Methods of Distributing Coupons

What’s Happening?

http://www.youtube.com/watch?v=WUFSHzT2xuY

http://www.youtube.com/watch?v=7DR4jkMFfRg&feature=youtube_gdata_player

Do Coupons have an Impact?

In 2007 in the United States:323 billion distributed3 billion redeemed (0.93%)Average value was 89 centsSavings of $3.47 billionCoupon usage

78% of households use 64% willing to switch brands http://www.youtube.com/watch?v=9ITQ1aTcoAo

Coupon Redemption Rates

Instant redeemable 39.3% Bounce-back 17.2% Instant redeemable – cross ruff 17.1% Electronic shelf 10.2% 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 coupon Percent Redeemed

Source: Santella & Associates

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-mailIn or on-packageStore or manufacturerSelf-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. 104-105.

F I G U R E 1 2.5Keys 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.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.

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 12.7Reasons 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 2nd largest expense• Account for 17.4% of gross sales

For Manufacturers

TradePromotions

Trade Allowances

Trade Incentives

Trade Contests

Trade Shows

Concerns about Trade Promotions

Corporate reward structure due to sales quotas

Used for short-term sales goalsTend to be used outside of IMC Plans in many

casesCostsOver-reliance to push merchandiseDifficult to reduce – competitive pressuresPotential erosion of brand image