Consumer-Oriented Promotions: Sampling and Couponing

1. Chapter Eighteen Consumer-Oriented Promotions: Sampling and Couponing

2. Chapter Eighteen Objectives • Appreciate the objectives of consumer-oriented sales promotions. • Recognize that many forms of promotions perform different objectives for marketers. • Know the role of sampling, the forms of sampling, and the trends in sampling practice.

3. Chapter Eighteen Objectives • Be aware of the role of couponing, the types of coupons, and the developments in coupon practices • Understand the coupon redemption process and misredemption. • Appreciate the role of promotion agencies.

4. Why Use Consumer Promotions? Promotions accomplish goals that advertising by itself cannot. Consumers often need to be induced to buy now rather than later, to buy your brand rather than a competitor's, to buy more and to buy frequently.

5. Brand Management Objectives and Consumer Rewards Three general categories of objectives (1) Generating trial purchases (2) Encouraging repeat purchases (3) Reinforcing brand images

6. Marketer Objectives and Consumer Rewards Consumer Rewards • All promotion techniques provide consumers with rewards • Typically in the form of cash savings or free gifts • Consumers are more responsive to immediate than delayed rewards

7. Classifications of Promotion Methods

8. Caution is in Order! • The classification of promotional tools is necessarily simplified • Promotions are capable of accomplishing more than a single objective • Manufacturers use consumer-oriented sales also to leverage trade support • Coupons and premiums achieve different objectives depending on the specific form of delivery vehicle

9. Sampling Sampling The premier sales-promotion device for generating trial usage by delivering an actual- or trial-sized product to consumers

10. Sampling • Mailed directly to households • Targeted by demographic characteristics or geodemographics Direct mail Newspapers and magazines Door to door by special distribution crews On- or in-pack sampling High-traffic locations In-store sampling Internet sampling

11. Sampling • The Sunday newspaper is an increasingly attractive medium for broad-scale sampling Direct mail Newspapers and magazines Door to door by special distribution crews On- or in-pack sampling High-traffic locations In-store sampling Internet sampling

12. Sampling • Allows considerable targeting • Lower cost than in-store or direct-mail sampling • Short lead times Direct mail Newspapers and magazines Door to door by special distribution crews On- or in-pack sampling High-traffic locations In-store sampling Internet sampling

13. Sampling • Uses the package of another product to serve as the sample carrier Direct mail Newspapers and magazines Door to door by special distribution crews On- or in-pack sampling High-traffic locations In-store sampling Internet sampling

14. Sampling On- or In-pack Sampling

15. Sampling • Shopping centers, movie theaters, airports, or special events Direct mail Newspapers and magazines Door to door by special distribution crews On- or in-pack sampling High-traffic locations In-store sampling Internet sampling

16. Sampling • Provide product samples in grocery stores and other retail outlets for trial while consumers are shopping • The most frequent form Direct mail Newspapers and magazines Door to door by special distribution crews On- or in-pack sampling High-traffic locations In-store sampling Internet sampling

17. Sampling • Brand managers are increasingly distributing samples online • Specialized online sample delivery firms aid this process Direct mail Newspapers and magazines Door to door by special distribution crews On- or in-pack sampling High-traffic locations In-store sampling Internet sampling

18. Major Sampling Practices • Targeting rather than mass distributing samples. • Using innovative distribution methods where appropriate • Undertaking efforts to measure sampling’s return on investment

19. How Effective is Sampling?: Estimating ROI

20. When Should Sampling Be Used? • Brand is demonstrably superior/has distinct relative advantages • Concept is difficult to communicate by advertising alone • Can afford to generate consumer trial quickly

21. Problems with Sampling • Expensive • Mishandling in distribution • Distributed to the wrong market • In- or on-package samples do not capture current non-consumers • Can fail to reach sufficient numbers of consumers to justify its expense • May be misused by customers • Pilferage

22. Couponing Coupon A promotional device that provides cents-off to consumers upon its redemption

23. A Buy One Get One Free Coupon Offer

24. Couponing Background • Around 250 billion coupons are distributed annually in the United States. • Cost to U.S. marketers is about $7 billion a year.

25. Coupon Distribution Methods • Freestanding insert (FSI) is preferred • Valassis Inserts, News America Marketing • The establishment of cooperative coupon programs • Val-Pak Direct Marketing Systems

26. Economic Impact Face Value $1.00 Distribution and postage cost .40 Handling charge .08 Consumer misredemption cost .07 Internal prep and processing cost .02 Redemption cost .02 Total Cost $1.59

27. Is Couponing Profitable? • Households most likely to redeem coupons were also the most likely to buy the brand in the first place • However, companies have to offer coupons to prevent losing consumers to other brands that do offer coupons

28. Point of Purchase Couponing Instantly Redeemable Coupons • Peelable from the package at the point of purchase • Represent an immediate reward • An alternative to price-off deals • Redemption rate about 30% Shelf- Delivered Coupons Scanner- Delivered Coupons

29. Point of Purchase Couponing Instantly Redeemable Coupons • Instant Coupon Machines, Smart SourceTM • Machines are attached to the shelf alongside coupon-sponsoring brands • Redemption rate about 11% Shelf- Delivered Coupons Scanner- Delivered Coupons

30. Shelf-Delivered Coupons Instant coupon machine (so called SmartSource)

31. Point of Purchase Couponing Instantly Redeemable Coupons • Catalina Marketing Corp. offers two programs • Reward is delayed • Potentially very effective because they provide a way to carefully target coupon distribution Shelf- Delivered Coupons Scanner- Delivered Coupons

32. Point of Purchase Couponing Scanner- Delivered Coupons • Delivers coupons based on the particular brands a shopper has purchased • Directed at competitive-brand users • Redemption rate about 9% Checkout Coupon Checkout Direct

33. Point of Purchase Couponing Scanner- Delivered Coupons • A coupon for the sponsoring manufacturer’s brand is automatically dispensed for use on the shopper’s next purchase occasion • Directed at users who satisfy a manufacturer’s prescribed demographic or product-usage requirements Checkout Coupon Checkout Direct

34. Mail/Media Delivered Coupons Mail-Delivered Coupons • Highest household penetration • Highest redemption rate of all mass-delivered coupons (3.5%) • Increase the amount of product purchases • Relatively expensive • Inefficient and expensive for brands enjoying a high market share

35. Mail/Media Delivered Coupons FSIs and Other Media-Delivered Coupons • 87% of all coupons distributed via Sunday newspaper freestanding inserts • Broad exposure • Relatively cheaper • Reminder function • Advertising function • Redemption rate is very low • Don’t generate much trade interest • Susceptible to misredemption

36. In- and On- Pack Coupons • Included in- or on- product’s package • Cannot be removed at the point of purchase; It’s for next purchase • A coupon for one brand is promoted by another brand (crossruffing) • Has bounce-back value • No distribution costs • Redemption rates are higher • Delayed value to consumers • Don’t reach nonusers of the carrying brand

37. Online Couponing • A number of Internet sites now distribute coupons. • Consumers print their own coupons, at no additional cost to the advertiser. • There is a great potential for fraud with these coupons that consumers can print themselves so it remains to be seen how popular this method will remain

38. Redemption Process and Misredemption (F) Redemption Center Manufacturer (E) (A) (D) (B) (C) Consumers Retailers Clearinghouse (M) * Organized criminals * Terrorists * Media employees * Crooked retailers M: misredemption

39. The Consequences Estimates of the misredemption have ranged from a low of 15% to a high of 40%. True misredemption rate is about 3 or 4% representing millions of dollars lost by manufacturers.

40. The Participants • Consumers present coupons that have expired, for items not purchased, or for a smaller size than specified by the coupon. • Clerks take the coupons to the store and exchange them for cash without making a purchase. • Store Management: retailers may boost profits by submitting extra coupons in addition to those redeemed legitimately. • Shady Clearinghouses engage in misredemption by combining illegally purchased coupons with real ones and certifying the batch as legitimate.

41. The Role of Promotion Agencies Agencies that work with brand managers to formulate promotion strategies and implement tactical programs. A new generation of promotion agencies emphasize online promotions.