SALES PROMOTIONS

Chapter 9

Consumer Promotions Defined

o An incentive or an enticement that encourages a consumer or end user to either select or purchase a product.

o Couponso Premiumso Contests and sweepstakeso Refunds and rebateso Samplingo Bonus packso Price-offso Point of Purchase (POP)

F I G U R E 9 . 1Types of Consumer Promotions

Coupons

Types of coupons:o Instant redemptiono Scanner-deliveredo Cross-ruffing/Co-brandingo Response offero E-couponso Bounce-back/return coupon

Example of a Response Offer

A coupon accompanies this informational Gold Bond advertisement

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

Always20.7%

Sometimes37.7%

Rarely17.0%

Never24.6%

Problems with Coupons

o Reduced revenueso Used by brand preference consumers (80%)

o Mass cuttingo Counterfeitingo Misredemptions

Premiums

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

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

Types of Premiums

o Free-in-the-mailo In- or on-packageo Store or manufacturero Self-liquidating

Brands like Budweiser often feature premiums found in packages of beer

o Match the premium to the target market.o Carefully select the premiums (Avoid

fads, try for exclusivity).o Pick a premium that reinforces the firm’s

product and image.o Integrate the premium with other IMC

tools (Especially advertising and POP displays).

o 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.

F I G U R E 9.5Keys to Successful Premiums

Contests

o Can be very effective if used correctly, for example Tim Horton’s Roll-up the Rim.

Effective Contests:o Coordinate with other marketing tacticso Encourage customer traffico Have intrinsic rewards that draws customers backo Have extrinsic rewards that are attractive to

consumerso Increase in brand awareness

Heinz encourages dialogue with consumers through the use of contests

Creating Successful Contests

o Know the legal restrictions.o Must overcome clutter.o Find the right combination of prizes.o Must consider extrinsic and intrinsic value.o Look for tie-in opportunities with special events

or other companies.o Must be coordinated with POP Displays and

other marketing tools.o One trend is to ignite a viral buzz around the

brand, through the use of social media

Refunds and Rebates

o Cash returns offered to consumers or businesses following the purchase of a product or service.

o Can be a hassle for consumers to redeem. o Only 30% of all rebates are claimed, however

this figure raises to 65% when the value of the rebate is over $50.00.

Successful Rebate/Refund Programs

o Visibility.o Encourages customers to act.o Not be too complicated.o Avoid becoming a permanent component

of the purchase decision (automobile rebates)

o Profitable for retailers to handle.

What’s Happening?

http://www.yourjewishnews.com/2013/02/25775.html

http://www.youtube.com/watch?v=9ITQ1aTcoAo

http://www.youtube.com/watch?v=ZdSxnGn4XSU

Sampling

o Most effective when used to introduce a new product or a new version of a product.

o Primary purpose is to encourage trial use by a customer.

o Sampling is a very effective IMC tool when used correctly.

o The two key drawbacks to sampling programs are:o Cost o Customers discarding the sample without trying it

(waste).

o In-store distributiono Direct samplingo Response samplingo Cross-ruff samplingo Media samplingo Professional samplingo Selective sampling

F I G U R E 9 .6Types of Sampling

Benefits of Sampling

o Introduce new productso Generate interesto Generate leadso Collect informationo Boost sales

Bonus Packs

o Additional or extra number of items placed in a special product packageo Buying four bars of soap for the price of three

o Bonus packs can lead to brand switchingo Bonus packs are effective for products with

high competition

o Increase usage of a producto Match or preempt

competitiono Stockpile the producto Develop customer loyaltyo Attract new userso Encourage brand switching

F I G U R E 9 . 7Reasons for Using Bonus Packs

Concerns with Bonus Packs

o Rarely attracts new customerso Some consumers skeptical

o Small bonus – price not changedo Large bonus – price increased first

Price-offs

o Can be defined as a temporary price reduction

o Benefits include:o Stimulates saleso Reduces financial risk for the end usero Can help promote brand switching

Price-offs

o Proven to be successfulo Appeal of monetary savingso Reward is immediate

o Problemso Can have a negative impact on profito Encourages consumers to become more price-

sensitiveo Potential image on brand image

Impact of Price-off on Consumer Purchase

Source: “Studies Indicate Coupons are an Effective Promotional Tool,” Santella & Associates (http://www.santella.com/coupon.htm)

Consumer unaware item was on sale.51%

Consumer purchased because of sale price9%

Consumer would have purchased item anyway40%

Point-of-Purchase (POP)

o Any form of special display that promotes mechandise

o Often located near cash registers, store entryways, end of aisles, etc.

o A highly effective tool for increasing saleso In many cases, POP displays influence

purchase decisions.

Effective POP Displays

How Can Sales Promotions Be Effective

o Economic Effectso Informational Effectso Affective Effects

Strengths of Sales Promotions

o Provides Extra Incentive to Acto Creates Sense of Immediacyo Stimulates Trialo Increases Purchase or Usage Frequencyo Builds Databases

Weaknesses of Sales Promotions

o Adds cluttero Sets False Retail Priceso Promotes Forward Buyingo May affect quality perception of brand,

product or service