Chapter
12
Sales Promotions
Consumer Promotions
The two most general categories of consumer promotions are:
1. Franchise building, which are designed to increase awareness and loyalty.
2. Nonfranchise building, which focus on immediate sales.
Figure 12.1 displays the types of consumer promotions including:
1. Coupons
2. Premiums
3. Contests and sweepstakes
4. Refunds and rebates
5. Sampling
6. Bonus packs
7. Price-offs
Coupons
A coupon is a price reduction offer to a consumer. It may be a percentage off the retail price
such as 25% or 40%, or an absolute amount (50 cents or $1.00).
The percentage of consumer use for coupons is shown in Figure 12.2.
The methods used to distribute coupons are displayed in Figure 12.3.
Nearly manufacturers distribute 80% of all coupons. A total of 88% of all coupons are sent out
through print media with 80% being distributed through free standing inserts (FSI), which are
sheets of coupons distributed in newspapers, primarily on Sunday.
Problems with Coupons
The drawbacks to the use of coupons as a promotional tactic include:
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Reduced revenues. result from a lower ultimate price being charged.
Mass cutting, which occurs when coupons are “redeemed” through a fraudulent retail
outlet that does not exist, except at a mail box set up by an illegal “coupon ring.”
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Counterfeiting, when coupons are copied and then sent back to the manufacturer for
reimbursement.
Misredemptions, when coupons are redeemed for an incorrect size for which the
discount applies, or when clerks honor coupons for merchandise that was not
purchased, which can be an error or they can be intentional.
Premiums
Premiums are prizes, gifts, or other special offers consumers receive when purchasing
products. When a premium is offered, the consumer pays full price for the goods or service.
Types of Premiums
There are four major types of premiums, as summarized in Figure 12.4
1. Free-in-the-mail premiums, which are gifts individuals receive for purchasing
products. To receive the gift, the customer must mail in a proof-of-purchase to the
manufacturer who then mails the gift back to the consumer.
2. In- or on-package premiums are usually small gifts, such as toys in cereal boxes
(or Cracker Jacks).
3. Store or manufacturer premiums are gifts given by either the retail store or
manufacturer when the customer purchases a product.
Keys to Successful Premium Programs
In building successful premium programs the following items are important, as summarized
by Figure 12.5.
 Match the premium to the target market.
 The best premiums are those that reinforce the firm’s image. They should not be
cheap trinkets.
 Premiums are more likely to succeed when they are tied into the firm’s products
and related in some manner.
 It is important to integrate premiums with the other components of the IMC
program.
Contests and Sweepstakes
Contests and sweepstakes are used in consumer markets as well as business markets. A
primary factor in the success of this type of appeal is the prize list.
Contests
Contests normally require the participant to perform some type of activity in order to enter.
Sweepstakes
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No purchase can be required to enter a sweepstakes, and consumers may enter as many times
as they wish.
Components of Prizes
The perceived value of a prize has two components:
1. Extrinsic value, or the actual attractiveness of the item.
2. Intrinsic value, or those associated with playing or participating.
Goals of Contests and Sweepstakes
To create successful contests and sweepstakes, it is important to coordinate the contest
promotion with the advertising, POP displays, and other marketing tools.
The primary goals of contests and sweepstakes are often to increase customer traffic and boost
sales.
Brand awareness also increases with multiple exposures to an advertisement or contest.
Refunds and Rebates
Refunds and rebates are cash returns offered to consumers or businesses following the
purchase of a product.
A refund is a cash return on what are called “soft goods,” such as food or clothing.
Rebates are cash returns on “hard goods,” which are major ticket items such as automobiles
and major appliances.
Problems with these programs include:
 Costs (lost revenue)
 The paperwork involved (to file for the money and process the claim)
 Diminished effectiveness, because people expect them
Successful refund or rebate program, must offer a perceived newness or originality. They
should generate an impact, or enough to cause an action.
Sampling
Sampling is the actual delivery of a product to consumers for their use or consumption.
Normally, samples are provided free-of-charge. In business-to-business markets, companies
often provide samples of products to potential clients. Sampling can also be used in the service
sector.
Types of Samples
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Types of sampling, as shown in Figure 12.6, include:
 In-store distribution, where they are given out in stores.
 Direct sampling, in which samples are mailed or delivered door-to-door to
consumers.
 Response samples are those made available to individuals or businesses that
respond to a media offer on television, the Internet, from a magazine, or some
other source.
 Cross-ruff sampling provides samples of one product on another. A laundry
detergent with a free dryer sheet attached to the package is a cross-ruff sample.
 Media sampling means the sample is included in the media outlet. For example, a
small sample of perfume may be included in a magazine advertisement.
 Professional samples are delivered by professionals, such as when a
pharmaceutical company provides doctors with free drug samples.
 Selective samples are samples distributed at a site such as a state fair, parade,
hospital, restaurant, or sporting event.
Benefits of Sampling
The benefits of sampling include the ability to introduce new products, generate interest in
products, and collect information about consumers.
Problems with Sampling
The primary disadvantage of this form of promotion is the cost. Also, many times people
simply discard the sample without even trying the product.
Successful Sampling Programs
Sampling must be a central part of the IMC plan. The primary purpose of sampling is to
encourage a trial use by a consumer or by a business. Sampling is most effective when it is
used to introduce a new product or a new version of a product to a market.
Price-Offs
A price-off is a temporary reduction in the price of a product to the consumer. Price-offs are
normally used to stimulate sales of an existing product. Price-offs are easy to implement and
can have a sudden impact on sales.
Benefits of Price-Offs
Price-offs can stimulate sales. They can encourage brand switching. They provide and
immediate reward to customers.
Problems with Price-Off Promotions
The primary problems that occur with price-off promotions include:
 It normally takes at least a 20% increase in sales to offset each 5% price reduction.
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Consequently, although a price-off offer may have a large impact on sales, it can
be devastating for profit margins.
Price-off programs can encourage consumers to become more price sensitive.
Too many price-off offers can create a detrimental impact on the firm’s image.
REVIEW QUESTIONS
1.
What problems are associated with coupon programs?
Problems associated with coupon programs are reduced revenues, mass cutting,
counterfeiting, and misredemption. The first problem, reduced revenues, occurs when
a consumer that is already brand loyal uses a coupon on the next purchase. Mass
cutting occurs when coupons are redeemed through a fraudulent retail outlet that does
not exist, except at a mail box set up by an illegal coupon ring. Counterfeiting occurs
when coupons are copied and then sent back to the manufacturer for reimbursement.
Misredemptions can occur by retailers and by clearing houses and is caused when the
coupon was redeemed for the wrong product or the wrong size of the package.
2.
What is a premium? What four types of premium programs can companies use?
A premium is a prize, gift, or any other special offer consumers receive when
purchasing products. The four types of premium programs available are: free-in-themail, in- or on-package, and store or manufacturer. Free-in-the-mail premiums are
gifts individuals receive for purchasing products. In- or on-package premiums are
usually small gifts attached or inside a package. Store or manufacturer premiums are
gifts given by either the retail store or manufacturer when the customer purchases a
product.
3.
What are the keys to successful premium programs?
Companies can enhance the odds of success by several key factors, which are:
 Matching the premium to the target market
 Carefully selecting the premium
 Picking a premium that reinforces the firm’s product and image
 Integrating the premium with other IMC tools
 Using premiums to build loyalty more than short term profit
4.
What is the difference between a contest and a sweepstakes?
Contests normally require the participant to perform some type of activity. A
sweepstakes is simply an entry into a drawing and does not even require a purchase.
5.
How is a refund different from a rebate?
A refund is a cash return on “soft goods” such as food or clothing. A rebate is a cash
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return on “hard goods,” such as a washing machine or automobile. Rebates can be
given on services.
6.
What are the primary types of samples?
Types of sampling programs include:
 Direct sampling is a program in which samples are mailed or delivered doorto-door to consumers.
 Response samples are those made to individuals or businesses that respond to
a media offer.
 Cross-ruffing sample plans provide samples of one product on another. A
laundry detergent with a free dryer sheet attached to the package is a cross-ruff
sample.
 Media sampling means the sample is included in the media outlet. For
example, a small sample of perfume may be included in a magazine
advertisement.
 Professional samples are delivered by professionals, such as when a
pharmaceutical company provides doctors with free drug samples.
 Selective samples are samples distributed at a site such as a state fair, parade,
hospital, restaurant, or sporting event.
7.
What disadvantages are there to sampling programs?
The benefits of sampling are that they allow a company to introduce a new product,
generate interest in a product, and collect information about consumers. The primary
disadvantage to sampling programs is the cost involved.
8.
What are the benefits and problems associated with price-off programs?
Price-off programs can stimulate sales and encourage new customers to try the
product. One disadvantage of a price-off program is that although it may increase
sales, it will take at least a 20% increase in sales to offset each 5% price reduction. The
programs also encourage consumers to become more price sensitive, which means
they will begin to expect a discount and may more regularly switch to the brand that is
on sale.
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