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Consumer Consumer Promotions Promotions

Consumer Promotions

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Page 1: Consumer Promotions

Consumer Consumer PromotionsPromotions

Page 2: Consumer Promotions

Consumer promotions are incentives aimed at a Consumer promotions are incentives aimed at a firm’s customers who may be end users of goods firm’s customers who may be end users of goods or services. These are directed at individuals or or services. These are directed at individuals or firms that use the product and do not sell it to firms that use the product and do not sell it to another business. These are used in B2C and B2B another business. These are used in B2C and B2B markets. Primary goal of consumer promotion is markets. Primary goal of consumer promotion is to make the customer enact the final act; to make the customer enact the final act; purchase the product/service. purchase the product/service.

Page 3: Consumer Promotions

Two General Categories of Two General Categories of Promotions Promotions

Consumer promotions programs Consumer promotions programs are effective in bringing traffic into are effective in bringing traffic into a store and generate brand loyalty.a store and generate brand loyalty.

1.1. Consumer franchise building Consumer franchise building promotionpromotion – designed to increase – designed to increase awareness of and loyalty to a awareness of and loyalty to a brand. brand.

Page 4: Consumer Promotions

The goal is to build The goal is to build a favorable image by a favorable image by pointing out unique pointing out unique features and features and selling selling points , with the points , with the focus on reduced focus on reduced reliance on incentives reliance on incentives

and discounts. and discounts.

Page 5: Consumer Promotions

2. 2. Sales building promotionsSales building promotions focus on focus on immediate sales, rather than brand immediate sales, rather than brand equity or loyalty, through equity or loyalty, through discounts, prizes, or other discounts, prizes, or other enticements. enticements.

Page 6: Consumer Promotions

Coupons Coupons

A price reduction offer to consumer – it may be a A price reduction offer to consumer – it may be a percentage of the retail price or Rs.10 off an absolute percentage of the retail price or Rs.10 off an absolute amount. Most of coupons are issued by manufacturers amount. Most of coupons are issued by manufacturers and most of them are offered through print media. and most of them are offered through print media. Coupons are also issued through “free standing inserts” Coupons are also issued through “free standing inserts” (FSIs) issued along with newspapers, primarily on (FSIs) issued along with newspapers, primarily on Sundays, etc. Sundays, etc.

Page 7: Consumer Promotions

Types of Coupons Types of Coupons

• Instant redemption coupons – distributed in retail Instant redemption coupons – distributed in retail storesstores

• Bounce-back-coupons- placed inside packages so Bounce-back-coupons- placed inside packages so that consumers can not use them immediatelythat consumers can not use them immediately

• Cross-ruffing – placement of a coupon for one Cross-ruffing – placement of a coupon for one product on another product. Cross-ruff coupons product on another product. Cross-ruff coupons should be on products that fit together and those should be on products that fit together and those are purchased and consumed simultaneously. are purchased and consumed simultaneously.

• Response offer coupons – are issued following Response offer coupons – are issued following requests by consumers. Coupons are then mailed, requests by consumers. Coupons are then mailed, faxed, or sent by Internet to the consumerfaxed, or sent by Internet to the consumer

• Another form of coupon is electronically deliveredAnother form of coupon is electronically delivered

Page 8: Consumer Promotions

Problems with coupons Problems with coupons

Reduced revenues Reduced revenues

Mass-cutting – Mass-cutting – coupons coupons

are redeemed through are redeemed through non- non-

existent retail outletsexistent retail outlets

CounterfeitingCounterfeiting

Misredemptions – Misredemptions – using coupons for larger quantities such as for 200 using coupons for larger quantities such as for 200 Grams rather than for 500 Grams of coffee powderGrams rather than for 500 Grams of coffee powder

Page 9: Consumer Promotions

Tactics to improve coupon Tactics to improve coupon effectivenesseffectiveness

• A higher face valueA higher face value makes the coupon makes the coupon attractive attractive

• Better distribution methodBetter distribution method for coupons – for coupons – free standing inserts (FSIs) are attractive to free standing inserts (FSIs) are attractive to consumers as they are received in the consumers as they are received in the privacy of homes and can be decided upon. privacy of homes and can be decided upon. In-store coupons are less attractive as the In-store coupons are less attractive as the shoppers need to process information while shoppers need to process information while in the store in the store

• Third attractiveness is whether the coupon Third attractiveness is whether the coupon is for is for a preferred brand or a brand that has a preferred brand or a brand that has good recallgood recall

Page 10: Consumer Promotions

Premiums Premiums

Premiums are prizes, gifts, or other special Premiums are prizes, gifts, or other special offers consumers receive when purchasing offers consumers receive when purchasing goods or services. During premium goods or services. During premium promotions consumers pay full promotions consumers pay full prices unlike in the prices unlike in the case case of coupons of coupons through price through price reductions. The key reductions. The key is to pick the is to pick the right right type of premiums. type of premiums.

Page 11: Consumer Promotions

Different forms of Different forms of premiums premiums

1.1. Free-in-the-mailFree-in-the-mail – when customer mail in – when customer mail in a proof of purchase to the manufacturer a proof of purchase to the manufacturer who sends a gift to the buyer – credit who sends a gift to the buyer – credit card companies use premiums to entice card companies use premiums to entice individuals to sign up for credits – the individuals to sign up for credits – the gift may be in the form of cash back on gift may be in the form of cash back on purchases and frequent flier miles. purchases and frequent flier miles.

2.2. In- or on-package premiumsIn- or on-package premiums are usually are usually small gifts in the form of toys in cereal small gifts in the form of toys in cereal boxes or baby food boxes or baby food

Page 12: Consumer Promotions

3.3. Store or manufacturer premiumsStore or manufacturer premiums – gifts given by – gifts given by manufacturer or retail outlets when the customer manufacturer or retail outlets when the customer purchases a product – A Maruti 800 given away purchases a product – A Maruti 800 given away as gift by a construction company to a customer as gift by a construction company to a customer when buying Rs. 15 Lakhs worth apartmentwhen buying Rs. 15 Lakhs worth apartment

4.4. Self-liquidating premiumSelf-liquidating premium – these require – these require customers to pay a sum of money for a gift or customers to pay a sum of money for a gift or item. Example: Two rolls of Kodak Film may be item. Example: Two rolls of Kodak Film may be offered for Rs. 175 plus shipping and handling offered for Rs. 175 plus shipping and handling and a proof of purchase of a Kodak camera and a proof of purchase of a Kodak camera costing Rs. 3000. The premium is called self-costing Rs. 3000. The premium is called self-liquidating because Rs. 175 meets the cost of the liquidating because Rs. 175 meets the cost of the premium. premium.

Page 13: Consumer Promotions

Problems with PremiumsProblems with Premiums• (1) The time factor and (2)the cost (1) The time factor and (2)the cost • Premiums tend to have short life spans. Premiums tend to have short life spans.

Companies may select items that are in Companies may select items that are in demand and of current fashion. But by the demand and of current fashion. But by the time these things arrive at the stores, the time these things arrive at the stores, the items might have lost appeal or attraction to items might have lost appeal or attraction to the customers. the customers.

• A premium exclusively offered may raise the A premium exclusively offered may raise the demand for the product. A tie-in offered demand for the product. A tie-in offered exclusively through a particular outlet like a exclusively through a particular outlet like a restaurant or supermarket chain may have to restaurant or supermarket chain may have to be ultimately offered through other outlets. be ultimately offered through other outlets. This would raise the price of the item and cost This would raise the price of the item and cost to the firm. to the firm.

Page 14: Consumer Promotions

Building Successful Building Successful Premium ProgramsPremium Programs

Match the premium to the target audience Match the premium to the target audience Carefully select the premiums (avoid fads, try Carefully select the premiums (avoid fads, try

for exclusivity)for exclusivity) Pick a premium that reinforces the firm’s Pick a premium that reinforces the firm’s

product and imageproduct and image Integrate the premium with other IMC tools Integrate the premium with other IMC tools

(especially advertising and POP displays)(especially advertising and POP displays) Don’t expect premiums to increase short-term Don’t expect premiums to increase short-term

profitsprofits Although premiums may provide value and Although premiums may provide value and

enhance brand, they may not increase profits. enhance brand, they may not increase profits.

Page 15: Consumer Promotions

Contests and Contests and Sweepstakes Sweepstakes

Contest and Sweepstakes are Contest and Sweepstakes are

used both in consumer and used both in consumer and

business markets. The primary business markets. The primary

success depends upon the success depends upon the

appeal and desirability of the appeal and desirability of the

prize list. A prize that is perceived prize list. A prize that is perceived to be of low or no value may not work. Words, to be of low or no value may not work. Words, contests and sweepstakes are often seen contests and sweepstakes are often seen interchangeably used; but differ primarily on legal interchangeably used; but differ primarily on legal terms.terms.

Page 16: Consumer Promotions

• Contests require the participants to Contests require the participants to perform some activity; winner is perform some activity; winner is decided on who performs best or comes decided on who performs best or comes first, etc. Sometimes it may be found first, etc. Sometimes it may be found illegal to force a contestant to purchase illegal to force a contestant to purchase an item. an item.

• No purchase is required to enter a No purchase is required to enter a sweepstakes. Consumers may enter as sweepstakes. Consumers may enter as many times as they wish. The chances of many times as they wish. The chances of winning a sweepstakes are based on a winning a sweepstakes are based on a probability factor. probability factor.

Page 17: Consumer Promotions

Problems with Contests and Problems with Contests and SweepstakesSweepstakes

• CostsCosts

• Consumer indifferenceConsumer indifference

• ClutterClutter

Page 18: Consumer Promotions

Refunds and RebatesRefunds and Rebates Refunds and rebates are Refunds and rebates are cash returns offered to cash returns offered to consumers and businesses consumers and businesses after purchases. A refund after purchases. A refund is a cash return on ‘soft is a cash return on ‘soft

goods’ goods’ like food or clothing. like food or clothing. Rebates are given on sale of ‘hard goods’ like appliances and Rebates are given on sale of ‘hard goods’ like appliances and

automobiles. Normally refunds are smaller and rebates automobiles. Normally refunds are smaller and rebates larger. Rebates are common in the computer and electronics larger. Rebates are common in the computer and electronics industries. Computer retailers tend to reduce advertising industries. Computer retailers tend to reduce advertising costs by resorting to more and more rebates. costs by resorting to more and more rebates.

Page 19: Consumer Promotions

The problems associated with refunds The problems associated with refunds and rebates include costs, and rebates include costs, the paperwork, and diminished the paperwork, and diminished effectiveness. The retail effectiveness. The retail outlet must carefully outlet must carefully document document manufacturer rebates. To hold down paperwork, manufacturer rebates. To hold down paperwork, manufacturers may assign to dealers the manufacturers may assign to dealers the responsibility of giving rebates by deducting them responsibility of giving rebates by deducting them from the sales price. Many rebate programs suffer from the sales price. Many rebate programs suffer from diminished effectiveness as consumers have from diminished effectiveness as consumers have over a period of time come to expect them. For over a period of time come to expect them. For example, many car dealers note that customers example, many car dealers note that customers may not buy cars unless rebates are offered. may not buy cars unless rebates are offered.

Page 20: Consumer Promotions

To generate an effective refund-To generate an effective refund-rebate programs, the offer must rebate programs, the offer must have:have:

VisibilityVisibilityPerceived newnessPerceived newnessAn impact An impact

Page 21: Consumer Promotions

SamplingSampling• Sampling is to encourage Sampling is to encourage consumers to try a new consumers to try a new product or improved product or improved product. It is the actual product. It is the actual delivery of a product to delivery of a product to consumers for their use consumers for their use

or or consumption. Most consumption. Most samples are provided free samples are provided free

of cost. A coupon or price-off incentive is often of cost. A coupon or price-off incentive is often given along with the free sample to encourage given along with the free sample to encourage the consumer to buy a full-size pack. the consumer to buy a full-size pack.

Page 22: Consumer Promotions

Various sampling Various sampling methodsmethods

In-store distribution In-store distribution Direct sampling (mailing directly to Direct sampling (mailing directly to

consumers)consumers)Response sampling (sending the Response sampling (sending the

samples against requests from samples against requests from consumers in response to offers consumers in response to offers contained in ads. On TV, Internet, contained in ads. On TV, Internet, Print) . Print) .

Page 23: Consumer Promotions

Cross-ruff sampling (sample of one Cross-ruff sampling (sample of one product with another product)product with another product)

Media sampling (sample of a toilet soap Media sampling (sample of a toilet soap or perfume included in a magazine ad.)or perfume included in a magazine ad.)

Professional sampling (doctors Professional sampling (doctors providing free medicines to patients)providing free medicines to patients)

Selective sampling ( offered at Selective sampling ( offered at particular places like hospitals, trade particular places like hospitals, trade fairs, etc)fairs, etc)

Page 24: Consumer Promotions

Bonus Packs Bonus Packs • When an additional or extraWhen an additional or extra number of items are placed in a number of items are placed in a

special product package, its is called special product package, its is called a bonus pack. a bonus pack. If Kellogg increases If Kellogg increases the size of the pack the size of the pack by 25%, consumer may eat by 25%, consumer may eat more cereal; but if the size of the more cereal; but if the size of the Colgate container is Colgate container is increased by increased by 25%, the consumer may not use the 25%, the consumer may not use the paste more than in the ordinary case. But firms do paste more than in the ordinary case. But firms do offer such bonus packs to preempt the competition. offer such bonus packs to preempt the competition. . .

Page 25: Consumer Promotions

Bonus packs rarely attract new Bonus packs rarely attract new customers if the consumer had not customers if the consumer had not previously purchased the brand. previously purchased the brand.

Bonus packs can lead to brand Bonus packs can lead to brand switching if the consumer has used switching if the consumer has used the brand previously. Facing the brand previously. Facing purchase decisions, consumers may purchase decisions, consumers may opt for brands that offer bonus packs opt for brands that offer bonus packs at the regular price. at the regular price.

Page 26: Consumer Promotions

Advantage of Bonus Advantage of Bonus PacksPacks

Increase use of the productIncrease use of the productMatch or preempt competitive Match or preempt competitive

actionsactionsStockpile the product Stockpile the product Develop customer loyaltyDevelop customer loyaltyAttract new users Attract new users Encourage brand switching Encourage brand switching

Page 27: Consumer Promotions

Price-offsPrice-offs A price-off is a temporary reduction in A price-off is a temporary reduction in reduction in the price of a product to reduction in the price of a product to the to the consumer. Price-offs are the to the consumer. Price-offs are

. excellent at stimulating . excellent at stimulating sales of an sales of an

existing product. They can entice existing product. They can entice customers to try new products as customers to try new products as

lower lower prices may reduce the financial risk of prices may reduce the financial risk of making the purchase. making the purchase.

They can encourage customers to switch brands in brand parity They can encourage customers to switch brands in brand parity situations or when no strong brand loyalty exists. . situations or when no strong brand loyalty exists. .

Page 28: Consumer Promotions

Retail Price-offsRetail Price-offs

• The retailer can initiate a price-off The retailer can initiate a price-off promotion for drawing traffic into promotion for drawing traffic into the store. The idea is for customers the store. The idea is for customers to purchase additional items other to purchase additional items other than those on sale. During holidays than those on sale. During holidays and other seasons of the year, price-and other seasons of the year, price-offs sales are very common. offs sales are very common. Retailers advertise major price-off Retailers advertise major price-off sales at above occasions. sales at above occasions.