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CHAPTER 12 Consumer and Trade Promotions

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

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Types of Consumer Promotions Coupons Premiums Contests and sweepstakes Refunds and rebates Sampling Bonus packs Price-offs

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Influencing Brand Purchases Sampling7.78 Word-of-mouth7.18 Coupons5.91 Advertising5.61 Contests1.24 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).

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Consumers and Sales Promotions Targeted consumers are classified four ways: Promotion prone consumers Brand loyal consumers Price sensitive consumers Brand preference

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In-store distribution Direct sampling Response sampling Cross-ruff sampling Media sampling Professional sampling Selective sampling F I G U R E 1 2.6 Types of Sampling

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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? n Fitness center n Ice cream n Dental service n Clothing manufacturer n Auto repair service n Office supply store

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Discussion Question Page 334, Question 7

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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).

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

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Example of a Response Offer

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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. 3 Methods of Distributing Coupons

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Whats Happening? http://www.youtube.com/watch?v=WUFSHzT2x uY http://www.youtube.com/watch?v=WUFSHzT2x uY http://www.youtube.com/watch?v=7DR4jkMFfR g&feature=youtube_gdata_player http://www.youtube.com/watch?v=7DR4jkMFfR g&feature=youtube_gdata_player

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Do Coupons have an Impact? In 2007 in the United States: 323 billion distributed 3 billion redeemed (0.93%) Average value was 89 cents Savings of $3.47 billion Coupon usage 78% of households use 64% willing to switch brands http://www.youtube.com/watch?v=9ITQ1aTcoAo http://www.youtube.com/watch?v=9ITQ1aTcoAo

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Coupon Redemption Rates Instant redeemable39.3% Bounce-back17.2% Instant redeemable cross ruff17.1% Electronic shelf10.2% 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 couponPercent Redeemed Source: Santella & Associates

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A coupon accompanies this informational Gold Bond advertisement

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Premiums Prizes or gifts that consumers receive for purchasing products and services

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

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

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Match the premium to the target market. Carefully select the premiums (Avoid fads, try for exclusivity). Pick a premium that reinforces the firms product and image. Integrate the premium with other IMC tools (Especially advertising and POP displays). Dont 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 2.5 Keys to Successful Premiums

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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

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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.

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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 12.7 Reasons for Using Bonus Packs

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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.

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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

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Trade Promotions Account for 70% of marketing budget Often 2 nd largest expense Account for 17.4% of gross sales Trade Promotions Trade Allowances Trade Incentives Trade Contests Trade Shows

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Concerns about Trade Promotions Corporate reward structure due to sales quotas Used for short-term sales goals Tend to be used outside of IMC Plans in many cases Costs Over-reliance to push merchandise Difficult to reduce competitive pressures Potential erosion of brand image