Chapter Nineteen
Consumer-Oriented
Promotions: Premiums
and Other Promotional
Methods
 2007 Thomson South-Western
Chapter Nineteen Objectives
• Explain 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 programs.
Chapter Nineteen Objectives
• Appreciate retailer-driven promotions.
• Evaluate the potential effectiveness of sales
promotion ideas, and appraise the
effectiveness of completed promotional
programs.
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
Premiums
Free with-purchase
• Delayed reward to
premiums
consumers primarily
designed to generate trial
purchases.
Mail-in offers
• The perceived value of a
premium item, or gift,
In-, On-, and near
depends on the value of
pack premiums
the brand that is offering
the gift.
Self-Liquidating
Premiums
Free with-purchase
premiums
Mail-in offers
In-, On-, and near
pack premiums
Self-Liquidating
• Delayed reward to
consumers primarily
designed to generate trial
purchases.
• As few as 2 to 4 percent of
consumers who are
exposed to free mail-in
offers take advantage of
the opportunities.
Premiums
Free-with-purchase
premiums
Mail-In Offers
In-, On-, and near
pack premiums
Self-Liquidating
• 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
• Near-pack is less
expensive due to no
additional packaging
Premiums
Free with-purchase
premiums
Mail-In Offers
In-, On-, and
Near- Pack Premiums
Self Liquidating
• Consumer mails in a
proof of purchase along
with sufficient money to
receive the premium item
• The premium should be
appealing and represent
a value
Phone Cards
Phone Cards
• Repeat-purchasing
objective
• Delayed reward
• Commonly, a preset
amount of long-distance
calling time
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
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
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
Games
• Provide an instant reward
• Create excitement, stimulate brand
interest, and reinforce brand loyalty
• Important to avoid snafus!
Rebates/Refunds
Manufacturers give cash discounts or
reimbursements to consumers who
submit (mail) proofs of purchase
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.
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.
Sweepstakes and Contests
• Primarily to enhance a brand’s image
• Sweepstakes are preferred because it’s
relatively inexpensive and simple to
execute
Sweepstakes
Contest
purely on the basis of
chance, no need for
proofs of purchase
Solve the specific
contest problem and
may need proofs of
purchase
Continuity Promotions
• Reward consumers’ repeat purchasing
• “Loyalty programs,” “point programs”
• Serve to cement a relationship with the
consumer
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
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
Implementation Problems
• To reduce the potential of problems in tieins, it is important that:
– The profiles of each partner’s customer’s be
similar with regard to pertinent demographics
– The partner’s images should reinforce each
other
– The partners must be willing to cooperate
rather than imposing their own interests to the
detriment of the other partner’s welfare.
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
Evaluating Sales Promotion Ideas
Step 1: Identify the
objectives
Step 2: Achieve
agreement
Step 3: Evaluation
system
Postmortem Analysis
Evaluating after implementation—five
characteristics:
• Expense
• Efficiency
• Execution Ease
• Equity Enhancement
• Effectiveness
Combining the Individual Factors