Consumer and Trade Promotions Chapter 12
Consumer Promotions Defined An incentive or an enticement that encourages a consumer to either select or purchase a product.
Types of Consumer Promotions Coupons Premiums Contests and sweepstakes Refunds and rebates Sampling Bonus packs Price-offs
Influencing Brand Purchases Sampling 7.78 Word-of-mouth 7.18 Coupons 5.91 Advertising 5.61 Contests 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 consumers Brand loyal consumers Price sensitive consumers Brand preference
F I G U R E 1 2.6 Types of Sampling In-store distribution Direct sampling Response sampling Cross-ruff sampling Media sampling Professional sampling Selective 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 redemption Scanner-delivered Cross-ruffing/Co-branding Response offer E-coupons Bounce-back/return coupon
F I G U R E 1 2 . 3 Methods of Distributing Coupons • Print media (90%) • FSI (88%) • Direct mail • On- or in-package • In-store • Sampling • Scanner-delivered • Cross-ruffing • Response offer • Internet • Fax • Sales staff
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 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
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
Types of Premiums Free-in-the-mail In or on-package Store or manufacturer Self-liquidating
F I G U R E 1 2.5 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.
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.
F I G U R E 12.7 Reasons for Using Bonus Packs Increase usage of the product Match or pre-empt competitive actions. Stockpiling of product. Develop customer loyalty. Attract new users. Encourage brand switching.
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 For Manufacturers • Account for 70% of marketing budget • Often 2nd largest expense • Account for 17.4% of gross sales Trade Allowances Trade Promotions Trade Shows Trade Incentives Trade Contests
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