Chapter 9
SALES PROMOTIONS
Consumer Promotions Defined
o An incentive or an enticement that encourages a
consumer or end user to either select or
purchase a product.
FIGURE
9.1
Types of Consumer Promotions
o Coupons
o Premiums
o Contests and sweepstakes
o Refunds and rebates
o Sampling
o Bonus packs
o Price-offs
o Point of Purchase (POP)
Coupons
Types of coupons:
o Instant redemption
o Scanner-delivered
o Cross-ruffing/Co-branding
o Response offer
o E-coupons
o Bounce-back/return coupon
A coupon accompanies this informational Gold Bond advertisement
Extreme Couponing
 http://www.youtube.com/watch?v=9ITQ1aTcoAo
 http://www.youtube.com/watch?v=ZdSxnGn4XSU
 http://www.youtube.com/watch?v=623LK3MHyCk
FIGURE
9.2
Percentage of Consumers and Coupon Usage
Never
24.6%
Always
20.7%
Rarely
17.0%
Sometimes
37.7%
Problems with Coupons
o Reduced revenues
o Used by brand preference consumers (80%)
o Counterfeiting
o 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-mail
o In- or on-package
o Store or manufacturer
o Self-liquidating
Brands like
Budweiser often
feature premiums
found in packages of
beer
FIGURE
9.5
Keys to Successful Premiums
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.
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 tactics
o Encourage customer traffic
o Have intrinsic rewards that draws customers back
o Have extrinsic rewards that are attractive to consumers
o 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.
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
o
Cost
Customers discarding the sample without trying it (waste).
FIGURE
9 .6
Types of Sampling
o In-store distribution
o Direct sampling
o Response sampling
o Cross-ruff sampling
o Media sampling
o Professional sampling
o Selective sampling
Benefits of Sampling
o Introduce new products
o Generate interest
o Generate leads
o Collect information
o Boost sales
Bonus Packs
o Additional or extra number of items placed in a
special product package
o
Buying four bars of soap for the price of three
o Bonus packs can lead to brand switching
o Bonus packs are effective for products with high
competition
FIGURE
9.7
Reasons for Using Bonus Packs
o Increase usage of a product
o Match or preempt
o
o
o
o
competition
Stockpile the product
Develop customer loyalty
Attract new users
Encourage brand switching
Concerns with Bonus Packs
o Rarely attracts new customers
o Some consumers skeptical
o Small bonus – price not changed
o Large bonus – price increased first
Price-offs
o Can be defined as a temporary price reduction
o Benefits include:
o Stimulates sales
o Reduces financial risk for the end user
o Can help promote brand switching
Price-offs
o Proven to be successful
o Appeal of monetary savings
o Reward is immediate
o Problems
o Can have a negative impact on profit
o Encourages consumers to become more price-sensitive
o Potential image on brand image
Impact of Price-off on Consumer Purchase
Consumer purchased because of sale price
9%
Consumer unaware item was on sale.
51%
Consumer would have purchased item anyway
40%
Source: “Studies Indicate Coupons are an Effective Promotional Tool,” Santella &
Associates (http://www.santella.com/coupon.htm)
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 sales
o In many cases, POP displays influence purchase
decisions.
Effective POP Displays
How Can Sales Promotions Be Effective
o Economic Effects
o Informational Effects
o Affective Effects
Strengths of Sales Promotions
o Provides Extra Incentive to Act
o Creates Sense of Immediacy
o Stimulates Trial
o Increases Purchase or Usage Frequency
o Builds Databases
Weaknesses of Sales Promotions
o Adds clutter
o Sets False Retail Prices
o Promotes Forward Buying
o May affect quality perception of brand, product or
service