Premiums and Other Promotions

1. CHAPTER17 Premiums and Other Promotions © 2010 South-Western, a part of Cengage LearningAll rights reserved.

2. Chapter ObjectivesAfter 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. • Know the differences among sweepstakes, contests, and games, and the reasons for using each form of promotion. • Understand the role of continuity promotions. © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17–2

3. Chapter Objectives (cont’d)After reading this chapter you should be able to: • Appreciate retailer-driven promotions. • Evaluate the potential effectiveness of sales promotion ideas, and appraise the effectiveness of completed promotional programs. © 2010 South-Western, a part of Cengage Learning. All rights reserved. 17–3

4. Premiums • Premiums • Are articles of merchandise or services offered as a gift to induce action by consumers, retailers, and the sales force • Represent versatile promotional tools that generate trial purchases, encourage repeat purchasing, and reinforce brand images • Are provide to increase consumer brand loyalty and to motivate new purchases © 2010 South-Western, a part of Cengage Learning. All rights reserved.

5. Table 17.1 Major Consumer-Oriented Promotions © 2010 South-Western, a part of Cengage Learning. All rights reserved.

6. Premiums © 2010 South-Western, a part of Cengage Learning. All rights reserved.

7. Figure 17.1 Illustration of a Mail-in Premium © 2010 South-Western, a part of Cengage Learning. All rights reserved.

8. Premiums © 2010 South-Western, a part of Cengage Learning. All rights reserved.

9. What Makes a Good Premium Offer? • Attractive Premiums • The choice of premium object and delivery method based on an explicit detailing of what is to be accomplished • Premium items must be compatible with the brand’s image and appropriate for the target market © 2010 South-Western, a part of Cengage Learning. All rights reserved.

10. Price-Offs • Price-Offs’ Marketing Objectives: • To reward present brand users • To get consumers to purchase larger quantities than normal • To establish repeat purchases • To ensure promotion dollars reach consumers • To obtain off-shelf display space • To provide the sales force with incentives © 2010 South-Western, a part of Cengage Learning. All rights reserved.

11. Price-Offs (cont’d) • Federal Trade Commission (FTC) Price-Off Regulations • Price-off labels can only used on distributed brands with established retail prices • Limit to three price-off labels per year per brand size • Required hiatus period (at least 30 days) between price-off promotions • No more than 50% of annual volume from promotion • Manufacturer must provide display materials • Dealer required to show regular and promotion prices © 2010 South-Western, a part of Cengage Learning. All rights reserved.

12. Bonus Packs • Bonus Packs • Are extra quantities of a product that are offered for the same price • Offer an alternative to price-off deals • Will be purchased by regular customers who would have purchased the brand anyway • Load current users; thereby removing them from the market © 2010 South-Western, a part of Cengage Learning. All rights reserved.

13. Games • Promotional Games • Provide an instant reward • Create excitement, stimulate brand interest, and reinforce brand loyalty • Must avoid snafus that threaten consumer confidence in the security of game operations and the integrity of game outcomes © 2010 South-Western, a part of Cengage Learning. All rights reserved.

14. Rebates and Refunds • Rebate (also Refund) • Refers to the practice in which manufacturers give cash discounts or reimbursements to consumers who submit proofs of purchase • Offers consumers delayed rather than immediate value, since the consumer must wait to receive the reimbursement • That goes unredeemed is a “phantom rebate” • Can attract switchers from competitive brands who avail themselves of attractive discount offers © 2010 South-Western, a part of Cengage Learning. All rights reserved.

15. Figure 17.2 Illustration of a Rebate Offer © 2010 South-Western, a part of Cengage Learning. All rights reserved.

16. Rebate Fraud Sources of Rebate Fraud Manufacturers Retailers Consumers © 2010 South-Western, a part of Cengage Learning. All rights reserved.

17. Sweepstakes • Sweepstakes (Sweeps) • A promotion in which winners are determined purely on the basis of chance—proofs of purchase cannot be required as a condition for entry • Sweepstakes as a Promotional Tool • Are relatively inexpensive and simple to execute • Reinforce brand positioning and image • Attract attention to advertisements • Promote increase brand distribution at retail • Foster sales force enthusiasm • Can reach special groups © 2010 South-Western, a part of Cengage Learning. All rights reserved.

18. Figure 17.3 Illustration of a SweepstakesOffer © 2010 South-Western, a part of Cengage Learning. All rights reserved.

19. Figure 17.4 Illustration of another Sweepstakes Offer © 2010 South-Western, a part of Cengage Learning. All rights reserved.

20. Contests • Contests • A promotion in which participants must act according to the rules of the contest and may or may not be required to submit proofs-of-purchase • Online Sweeps and Contests • Are growing in importance • Direct consumers to register online to participate in sweeps or contests • Create brand awareness, build consumer interaction with a brand, and enable expansion of a brand’s opt-in e-mail database © 2010 South-Western, a part of Cengage Learning. All rights reserved.

21. Figure 17.5 Illustration of a PromotionalContest © 2010 South-Western, a part of Cengage Learning. All rights reserved.

22. Continuity Promotions • Continuity Promotions • Reward consumers’ repeat purchasing behaviors • Loyalty programs • Point programs • Serve to cement a long-term relationship with the consumer © 2010 South-Western, a part of Cengage Learning. All rights reserved.

23. Overlay and Tie-In Promotions • Overlay (Combination) Program • Is the simultaneous use of multiple promotion tools to promote a brand or to promote brands cooperatively from different firms • Printed coupon with an mail-in entry contest form • Increases the likelihood that consumers will attend a promotional message that cuts through clutter © 2010 South-Western, a part of Cengage Learning. All rights reserved.

24. Overlay and Tie-In Promotions (cont’d) • Tie-in (Group) Promotion • Is the simultaneous promotion of multiple brands in a single intracompany or intercompany (joint) promotional effort • Branded pizza and branded soft drink combination offers • Is cost-effective, but lead time is lengthened • Should reinforce partners’ images of each other © 2010 South-Western, a part of Cengage Learning. All rights reserved.

25. Figure 17.6 Illustration of an Intracompany Tie-In © 2010 South-Western, a part of Cengage Learning. All rights reserved.

26. Figure 17.7 Illustration of anIntercompany Tie-In Promotion © 2010 South-Western, a part of Cengage Learning. All rights reserved.

27. Implementation Problems for Tie-in Promotions • To reduce potential problems: • The profiles of each partner’s customer’s must be similar with regard to demographics • The partner’s images must reinforce each other • The partners must be willing to cooperate rather than imposing their own interests © 2010 South-Western, a part of Cengage Learning. All rights reserved.

28. Purposes of Retailer Promotions Increasestore traffic Offer pricediscountsand deals Build customerloyalty Retailer Promotions © 2010 South-Western, a part of Cengage Learning. All rights reserved.

29. Retailer Promotions Types of Retailer Promotions Retail Coupons Frequent-shopperPrograms Special PriceDeals Samples andpremiums © 2010 South-Western, a part of Cengage Learning. All rights reserved.

30. Evaluating Sales Promotion Ideas • Procedure for Evaluating Promotion Ideas • Identify specific objectives for the promotion • Achieve agreement on objectives • Evaluate (rate) the idea: • Is it a good one? Does it meet objectives? • Does it appeal to its target market? • Is it unique and different from the competition? • Is the idea presented clearly to its market? • Is it cost-effective? © 2010 South-Western, a part of Cengage Learning. All rights reserved.

31. Efficiency Expense Effectiveness Equity Enhancement Execution Ease Postmortem Analysis © 2010 South-Western, a part of Cengage Learning. All rights reserved.

32. Table 17.2 Evaluation of Three Completed Promotional Programs Program j= A just-completed promotional program Eij = Evaluation of the jth promotional program on the ith evaluation factor (i.e., the efficiency factor, the executional ease factor, etc.) Wi = Weight, or relative importance, of the ith factor in determining promotion success © 2010 South-Western, a part of Cengage Learning. All rights reserved.