Consumer Promotions: Coupons, Premiums, Contests, and More

1. Chapter 9 Sales Promotions

2. Consumer Promotions Defined • An incentive or an enticement that encourages a consumer or end user to either select or purchase a product.

4. F I G U R E 9 . 1 Types of Consumer Promotions • Coupons • Premiums • Contests and sweepstakes • Refunds and rebates • Sampling • Bonus packs • Price-offs • Point of Purchase (POP)

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

6. A coupon accompanies this informational Gold Bond advertisement

7. Extreme Couponing • http://www.youtube.com/watch?v=9ITQ1aTcoAo • http://www.youtube.com/watch?v=ZdSxnGn4XSU • http://www.youtube.com/watch?v=623LK3MHyCk

8. F I G U R E 9 . 2 Percentage of Consumers and Coupon Usage

9. Problems with Coupons • Reduced revenues • Used by brand preference consumers (80%) • Counterfeiting • Misredemptions

10. Premiums • Premiums are prizes, gifts, or other special offers consumers receive when purchasing products and services.

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

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

13. Brands like Budweiser often feature premiums found in packages of beer

14. F I G U R E 9.5 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.

15. Contests • Can bevery effective if usedcorrectly, for exampleTim Horton’s Roll-up the Rim. Effective Contests: • Coordinate with other marketing tactics • Encourage customer traffic • Have intrinsic rewards that draws customers back • Have extrinsic rewards that are attractive to consumers • Increase in brand awareness

16. Heinz encourages dialogue with consumers through the use of contests

17. Creating Successful Contests • 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

18. Refunds and Rebates • Cash returnsoffered to consumers or businesses following the purchase of a product or service. • Can be a hassle for consumers to redeem. • Only 30% of all rebates are claimed, howeverthis figure raises to 65% when the value of the rebateis over $50.00.

19. 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.

20. 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).

21. F I G U R E 9 .6 Types of Sampling • In-store distribution • Direct sampling • Response sampling • Cross-ruff sampling • Media sampling • Professional sampling • Selective sampling

22. Benefits of Sampling • Introduce new products • Generate interest • Generate leads • Collect information • Boost sales

23. Bonus Packs • Additional or extra number of items placed in a special product package • Buying four bars of soap for the price of three • Bonus packs can lead to brand switching • Bonus packs are effective for products with high competition

24. F I G U R E 9 . 7 Reasons for Using Bonus Packs • Increase usage of a product • Match or preempt competition • Stockpile the product • Develop customer loyalty • Attract new users • Encourage brand switching

25. Concerns with Bonus Packs • Rarely attracts new customers • Some consumers skeptical • Small bonus – price not changed • Large bonus – price increased first

26. Price-offs • Can be defined as a temporary price reduction • Benefits include: • Stimulates sales • Reduces financial risk for the end user • Can help promote brand switching

27. Price-offs • Proven to be successful • Appeal of monetary savings • Reward is immediate • Problems • Can have a negative impact on profit • Encourages consumers to become more price-sensitive • Potential image on brand image

28. Impact of Price-off on Consumer Purchase Consumer purchased because of sale price 9% Consumer unaware item was on sale. 51% Consumer would have purchased item anyway 40% Source: “Studies Indicate Coupons are an Effective Promotional Tool,” Santella & Associates (http://www.santella.com/coupon.htm)

29. Point-of-Purchase (POP) • Any form of special display that promotes mechandise • Often located near cash registers, store entryways, end of aisles, etc. • A highly effective tool for increasing sales • In many cases, POP displays influence purchase decisions.

30. Effective POP Displays

31. How Can Sales Promotions Be Effective • Economic Effects • Informational Effects • Affective Effects

32. Strengths of Sales Promotions • Provides Extra Incentive to Act • Creates Sense of Immediacy • Stimulates Trial • Increases Purchase or Usage Frequency • Builds Databases

33. Weaknesses of Sales Promotions • Addsclutter • Sets False RetailPrices • PromotesForwardBuying • May affect quality perception of brand, product or service