Consumer-Oriented Promotions: Premiums and Other Promotional Methods

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Consumer-Oriented Promotions Premiums and Other
Promotional Methods
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Major Consumer-Oriented Promotions
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Premiums

• Premiums
• Articles of merchandise or service
• offered as a form of gift by manufacturers to
  induce action on the part of the sales force,
  trade representatives, or consumers

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Premiums

• Free with-purchase premiums

• Instant reward to consumers primarily designed to
  generate trial purchases.
• Volkswagen Beetle and Apple I Pods
• Michelin tires and emergency roadside kit
• Sun City offered free golf carts to retirees who
  purchased a home within 18 days of the offer

Mail-in offers
In-, On-, and near pack premiums
Self-Liquidating
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Premiums

• Perceived value of the premium item depends on
  the value of the brand offering the gift.
• Lower with a low-priced item
• Higher with a high-priced item
• Signal of product quality and value

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Premiums

• Delayed reward to consumers primarily designed to
  generate
• Trial purchases
• Repeat purchases
• E.g. Kelloggs Frosted Flakes and a childrens
  book by mail
• E.g. The Soviet Union Going Out of Business
  Sale
• As few as 2 to 4 percent of consumers who are
  exposed to free mail-in offers take advantage of
  the opportunities.

Free with-purchase premiums
Mail-in offers
In-, On-, and near pack premiums
Self-Liquidating
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Premiums

• Illustration of a
• Mail-in
• Premium

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Premiums

• Offer a free item inside or attached
• Immediate value
• Near-pack premium provide the retail trade with
  premium item that retailers then give to
  consumers
• Ford Fusion, Target and Kelloggs cereal
• Ralston Purina and Corvettes

• Free-with-purchase premiums

Mail-In Offers
In-, On-, and near pack premiums
Self-Liquidating
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Premiums

• Consumer mails in a proof of purchase along with
  sufficient money to receive the premium item
• Cost to consumers should be less than the retail
  value
• The premium should be appealing and represent a
  value
• E.g. 12 Gerber baby foods purchase, 8.95 and the
  Keepsake Millennium Cup

• Free with-purchase premiums

Mail-In Offers
In-, On-, and Near- Pack Premiums
Self Liquidating
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Buy X get 1 free offers

• The gift is another unit of the same brand
• Immediate reward
• Serves to induce trial and reward loyal customers
• Very attractive as savings can be as high as 50

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Premiums

• Illustration of both In-Pack and Self-Liquidating
• Premium Offers

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What Makes a Good Premium Offer?

• The choice of premium object and delivery method
  should be based on an explicit detailing of what
  is to be accomplished.
• Premium items should be congenial with the
  brands image and appropriate for the target
  market.

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Price-Offs

• Effective for certain objectives
• Reward present users
• Get consumers to purchase larger quantities than
  normal
• Establish repeat purchase
• Ensure promotion dollars reach consumers
• Obtain off-shelf display space
• Provide the sales force with incentive

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FTC Price-Off Regulations

• Only used on brand with established retail prices
• Limit to three per year per brand size
• Must be hiatus period (at least 30 days) between
  promotions
• No more than 50 of volume comes from promotion
• Manufacturer must provide display materials
• Dealer required to show regular and promotion
  price

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Bonus Packs

• Extra quantities of a product that are offered
  for the same price
• Alternative to price-off deals
• Many bonus-packs will be purchased by regular
  customers who would have purchased the brand
  anyway

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Games

• Provide an instant reward
• Create excitement, stimulate brand interest, and
  reinforce brand loyalty

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Games

• Illustration
• Of a
• Game
• Promotion

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Avoiding problems

• PepsiCo game problem in the Philippines would
  have made the company liable for 18 billion.
• Beatrice Company's Monday Night Football
  promotion was foiled by a PG salesman who broke
  their code and turned in cards worth 21 million
  in prize money.
• An employee for McDonalds marketing company
  stole winning tickets and distributed them to
  friends who obtained 13 million in prize money.
• Moral Promotional games can go awry and brand
  mangers must go to extreme lengths to protect the
  integrity of their games.

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Rebates/Refunds

• Manufacturers give cash discounts or
• reimbursements to consumers who
• submit (mail) proofs of purchase

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Phantom Discounts

• Rebate offers benefit manufacturers by
  stimulating purchases.
• However, many consumers never bother to redeem
  them
• Research shows that consumers tend to exaggerate
  the benefit to be obtained from a rebate relative
  to the effort involved to get their money back.

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Illustration of a Rebate Offer
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Rebate Fraud

• Rebate fraud occurs by manufacturers, retailers
  and consumers themselves.
• Manufacturers might fail to fulfill rebate
  requests or might take months to send the money.
  They might also attach parameters to the rebate
  but not tell the consumer about it.
• Professional rebaters make bogus claims.

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Sweepstakes and Contests

• Primarily to enhance a brands image
• Sweepstakes are preferred because its relatively
  inexpensive and simple to execute

Sweepstakes purely on the basis of chance, no
need for proofs of purchase
Contest Solve the specific contest problem and
may need proofs of purchase
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Contests and Sweepstakes
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Illustration of a Promotional Contest
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Online Sweeps and Contests

• Online promotional events are growing in
  importance
• Most companies direct consumers to register
  online to participate in sweeps or contests.
• Benefits are they create brand awareness, build
  consumer interaction with the brand, and enable
  the expansion of a brands opt-in e-mail
  database.

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Continuity Promotions

• Reward consumers repeat purchasing
• Loyalty programs, point programs
• Serve to cement a relationship with the consumer

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Overlay and Tie-In Promotions
Overlay Program
Tie-in Promotion

• Or combination program
• Combines two or more promotion techniques
• Increases the likelihood that consumers will
  attend a promotional message

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Overlay and Tie-In Promotions
Overlay Program
Tie-in Promotion

• Or joint promotion
• Simultaneous promotion of multiple brands
• Cost-effective, but lead time is lengthened
• The partners images should reinforce each other
  other

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• Illustration of a
• Tie-In Promotion

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• An Intra-company Tie-In

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Implementation Problems

• Tie-in promotions come with some potential
  problems. To reduce the potential of problems, it
  is important that
• The profiles of each partners customers be
  similar with regard to pertinent demographics
• The partners images should reinforce each other
• The partners must be willing to cooperate rather
  than imposing their own interests to the
  detriment of the other partners welfare.

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Retailer Promotions

• To increase store traffic, offer shoppers
  attractive price discounts or other deals, and
  build customer loyalty
• Retail Coupons
• Frequent-shopper programs
• Special Price Deals
• Samples and Premiums

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• Illustration of a Retailers
• Loyalty Card Program