Consumer Sales Promotion: Premiums and Other Promotions

1. Consumer Sales Promotion: Premiums and Other Promotions

2. Chapter Objectives After reading this chapter you should be able to: • Understand the role of premiums, the types of premiums, and the developments in premium practice. • Recognize the role of price-off promotions and bonus packages. • Be aware of the role of rebates and refund offers.

3. Chapter Objectives (cont’d) • Know the differences among sweepstakes, contests, and games, and the reasons for using each form of promotion. • Understand the role of continuity promotions. • Appreciate retailer-driven promotions. • Evaluate the potential effectiveness of sales promotion ideas, and appraise the effectiveness of completed promotional programs.

4. Whopper Sacrifice: Is an Online Premium Worth 10 Friends?

5. Classification of Major Consumer-Oriented Promotions

6. Premiums Defined Premiums Articles of merchandise or service offered as a form of gift by manufacturers to induce action on the part of the sales force, trade representatives, and/or consumers.

7. Figure 20.1: Illustration of a Mail-in Premium

8. Price-Offs • Price-off promotions: a reduction in a brand’s regular price. • A price-off is clearly labeled as such on a package. • Effective when a marketer’s objective is to: • Reward present brand users • Get consumers to purchase larger quantities of a brand than they normally would • Establish a repeat-purchase pattern • Ensure that promotional dollars reach consumers • Obtain off-shelf display space • Provide the sales force with an incentive to obtain retailer support • Bonus packs: Extra quantities of a product that a company makes available to consumers at the regular price. • Sometimes used as an alternative to price-offs

9. FTC Price-Off Regulations(as a result of the 1966 Fair Packaging and Labeling Act) • Only used on brands with established retail prices • Limit to three per year per brand size • Must be hiatus period (at least 30 days) between promotions • No more than 50% of volume comes from promotion • Manufacturer must provide display materials • Dealer required to show regular and promotion price

10. Games • Games represent a growing form of promotion that is being increasingly used in lieu of sweepstakes and contests • Provide an instant reward • Encourage repeat purchasing from existing brand users

11. Avoiding Snafus • PepsiCo game snafu in the Philippines would have made the company liable for $18 billion • Beatrice Company's Monday Night Football promotion was foiled by a P&G salesman who broke their code and turned in cards worth $21 million in prize money • A security employee for the supplier of McDonald’s Monopoly game pieces stole winning tickets and distributed them to friends who obtained $13 million in prize money • Moral: Promotional games can go awry and brand mangers must go to extreme lengths to protect the integrity of their games

12. Refunds and Rebates Refund Cash reimbursement for purchasing consumer packaged goods. Rebate Cash reimbursement for purchasing a durable good.

13. Figure 20.2: Illustration of a Rebate Offer

14. Phantom Discounts and Rebate Fraud • Phantom Discounts • Many consumers never bother to redeem rebates • At the time of brand choice, consumers tend to exaggerate the benefit to be obtained from a rebate relative to the future effort required to redeem a rebate-offer • Rebate Fraud • Can occur when rebate offers are promoted, but are not fulfilled • Consumers can commit fraud by submitting phony receipts

15. Sweepstakes and Contests • Primarily to enhance a brand’s image • Sweepstakes are preferred because they are relatively inexpensive and simple to execute

16. Figure 20.3: Illustration of a Sweepstakes Offer

17. Figure 20.4: Illustration of Another Sweepstakes Offer

18. Figure 20.5: Illustration of Promotional Contests

19. Overlay and Tie-In Promotions • Overlay Promotions: Combines two or more promotion techniques together (e.g., premium offer and a coupon in a FSI). • Increases the likelihood that consumers will attend a promotional message • Tie-In Promotions: Simultaneous promotion of multiple brands in a promotion (e.g., intra-company tie-in or inter-company tie-in). • Intra-company (between different companies) • Inter-company (within the same company) • Tie-ins are cost-effective, but lead time is lengthened • The partners’ images should reinforce each other

20. Figure 20.6: Illustration of an Overlay Program

21. Figure 20.7: Illustration of an Intercompany Tie-In Promotion

22. Overlay and Tie-In Implementation Problems • Promotion lead time is lengthened • Creative conflicts and convoluted messages may result from each partner trying to receive primary attention • To reduce problems, it is important that: • The profiles of each partner’s customers be similar • The partners’ images reinforce each other • The partners be willing to cooperate

23. Continuity Promotions • Reward consumers’ repeat purchasing of a particular brand • Often referred to as reward, loyalty, or, point programs • Example:Frequent-flyer programs • Encourage consumers to stick with a particular airline or hotel to accumulate points to use toward free flights and lodging

24. Retailer Promotions • To increase store traffic, offer shoppers attractive price discounts or other deals, and build customer loyalty: • Retail Coupons • Frequent-Shopper Programs • Special Price Deals • Samples, Premiums, and Games

25. Example of a Store-Sponsored Game

26. Evaluating Sales Promotion Ideas • Step 1: Identify the Objectives • Step 2: Achieve Agreement • Step 3: Evaluation System • Is the idea a good one? • Will the promotions idea appeal to the target market? • Is the idea unique? • Is the promotion presented clearly? • Is the proposed idea cost-effective?

27. Postmortem Analysis • Judging five characteristics: • Expense • Efficiency • Execution Ease • Equity Enhancement • Effectiveness • Weighting the individual factors: • Program j’s Score =

28. Evaluation of Three Completed Promotional Programs