© 2007 by Prentice Hall 10-1 Coupons How often do you use coupons? What products do you tend to use coupons to purchase? Will a coupon affect which

© 2007 by Prentice Hall 10-1

Coupons How often do you use

coupons? What products do you tend to

use coupons to purchase? Will a coupon affect which

brand you buy? Why do you think companies

offer so many coupons to consumers?

Discussion Slide

10


Chapter Overview

• Types of consumer promotions• Planning for consumer promotions• Business-to-business promotions• International consumer promotions

10 Consumer Promotions


• Coupons• Premiums• Contests and sweepstakes• Refunds and rebates• Sampling• Bonus packs• Price-offs

F I G U R E 1 0 . 1Types of Consumer Promotions


Coupons• 336 billion distributed• 3.7 billion redeemed (1.1%)• Average value was 81 cents• Savings of $3 billion• Coupon usage

• 78% of households use• 64% willing to switch brands


F I G U R E 1 0 . 2Percentage of Consumers and Coupon Usage

Always20.7%

Sometimes37.7%

Rarely17.0%

Never24.6%

Source: Karen Holt, “Coupon Crimes,” Promo, Vol. 17, No. 5 (April 2004), pp. 23-29.


A coupon accompanies this informational Gold Bond advertisement.


Influencing Brand Purchases

• Sampling 7.78• Word-of-mouth 7.18• Coupons 5.91• Advertising 5.61• Contests 1.24

On a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer.

Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella & Associates (Http://www.santella.com/marketing.htm).


Percentage of Sales with a Coupon

• Disposable diapers 17.1%• Detergents 15.0%• Meal starters 14.2%• Dough products (refrigerated) 13.6%• Cereal 13.4%• Wrapping materials, bags 12.8%• Oral hygiene products 11.7%• Household cleaners 11.7%

Product category % of sales using manufacturer’s coupon

Source: AC Nielson Scantrack, Santella & Associates


• Print media (90%)• FSI (84%)

• Direct mail (4%) • On, in, or near package (3%)

• Cross-ruff

• Other methods (3%)• In-store• Sampling• Scanner-delivered• Response offer• Internet• Fax• Sales staff

F I G U R E 1 0 . 3Methods of Distributing Coupons


Reason for Using FSI

• Consumers must make conscious effort to clip coupon

• Creates brand awareness• Must purchase brand on next trip to

retailer• More likely to recall brand name


Types of Coupons

• Instant redemption• Scanner-delivered• Cross-ruffing• Response offer• E-coupons


Coupon Redemption Rates

• Instant redeemable 39.3%• Bounce-back 17.2%• Instant redeemable – cross ruff 17.1%• Electronic shelf 10.2%• Electronic checkout 7.8%• In-pack 5.8%• On-pack 4.7%• Direct mail 3.5%• Handout 3.1%• Free-standing inserts 1.3%

Type of coupon Percent Redeemed

Source: Santella & Associates


Problems with Coupons

• Reduced revenues• Brand preference – 80%

• Mass cutting• Counterfeiting

• Internet distribution• Misredemption

$500 million illegally redeemed


Factors Affecting Coupon Effectiveness

• Face value of coupon• Distribution method• Coupon for preferred brand or

brand in evoked set


Types of Premiums

• Free-in-the-mail• In- or on-package• Store or manufacturer• Self-liquidating


Fisher Boy

Free, in-the-mail premium

http://www.fisherboy.com/


Premium Offer

Click picture for video.

An ad by Haik Humble Eye Center offering a premium with the purchase of custom pair of eye glasses.


Problems with Premiums

• Time factor• Tend to have short life spans• Popularity important

• Cost• Related to interest in premium• Exclusive premiums


• Match the premium to the target market.• Carefully select the premiums

(Avoid fads, try for exclusivity).

• Pick a premium that reinforces the firm’s product and image.

• Integrate the premium with other IMC tools (especially advertising and POP displays).

• Don’t expect premiums to increase short-term 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 1 0 . 4

Keys to Successful Premiums


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


Contests and Sweepstakes

• Contests – require activity, skill• Can require purchase to enter

• Some states illegal

• Sweepstakes – random chance• Must publish odds of winning• Cannot require purchase

• Rewards• Extrinsic• Intrinsic


Contests and SweepstakesProblems

• Costs• Consumer indifference• Clutter


Creating SuccessfulContests and Sweepstakes

• Know the legal restrictions.• Find the right combination of prizes.• Consider extrinsic and intrinsic value.• Use special events or tie-ins with other

companies.• Use Internet.• Coordinate with POP displays and other

marketing tools.


Contests and SweepstakesGoals

• Encourage customer traffic• Increase brand awareness• Boost sales


Rebates and Refunds

• Refunds – soft goods• Rebates – hard goods• Redemption rates

• 30% overall

• 65% for rebates over $50


Rebate/Refund Programs

• Problems• Costs• Paperwork• Diminished effectiveness

• Creating effective programs• Visibility• Perceived newness• Impact


• In-store distribution• Direct sampling• Response sampling• Cross-ruff sampling• Media sampling• Professional sampling• Selective sampling

F I G U R E 1 0 . 5

Types of Sampling


Sampling Programs

• Target audience• Business-to-business• Women• Men

• FSI distribution• Internet-based response sampling


ExperimentImpact of In-Store Sampling

• Meat product A 100% 430% 110%• Meat product B 100% 590% 123%• Meat product C 100% 185% 100%• Bread product 100% 170% 90%• Biscuit product A 100% 359% 64%• Biscuit product B 100% 201% 49%

Product Previous 4 weeks Sampling Week Following 4 weeks

Source: Michelle Lawson, Dalton McGuinness and Don Esslemont, “The Effect of In-Store Sampling on the Sale of Food Products,” Marketing Bulletin, 1990, Vol. 1, pp 1-6.


ExperimentImpact of In-Store Sampling on Competitors

• Bread product 100% 170% 90%• Competitor A 100% 106% 105%• Competitor B 100% 79% 93%• Competitor C 100% 78% 86%

Product Previous 4 week Sampling week Following 4 weeks

Source: Michelle Lawson, Dalton McGuinness and Don Esslemont, “The Effect of In-Store Sampling on the Sale of Food Products,” Marketing Bulletin, 1990, Vol. 1, pp 1-6.


Sampling Programs

• Problems• Cost• Distribution

• Effective sampling• Component of IMC plan• Stimulate trial usage• Target audience of sample


Sampling• How effective would

sampling be for the goods and services listed on the right?

• How would you design a sampling program that would be effective, yet not too costly?

• What type of consumers would you target for the sampling?

• Fitness center• Ice cream• Dental service• Clothing manufacturer• Auto repair service• Office supply store• B-to-B consulting service• B-to-B supplier of raw

materials such as sugar, flour, etc., to bakeries

Discussion Slide


• Increase usage of the product

• Match or preempt competitive actions

• Stockpile the product• Develop customer loyalty• Attract new users• Encourage brand

switching

F I G U R E 1 0 . 6Reasons for Using Bonus Packs


Bonus Packs• Bonuses range from 20% - 100%• 30% bonus most common• Used by current customers• Brand switching

• if used by consumer previously


Bonus Packs• Problems

• Size of bonus pack• Too small – Too large

• Cost of bonus• Cash flow due to stockpiling

• Effective bonus packs• Brand switching, stockpiling, lower unit costs• Manufacturers• Retailers• Customers


Price-Offs

• Temporary price reduction• Stimulating sales• Reduces financial risk• Brand switching• Manufacturer’s usage• Retailer usage


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%

http://www.santella.com/coupon.htm


Price-OffsProblems

• Increase sales, but decrease profits• 20% increase in sales to offset a 5%

price reduction• Consumers become more price

sensitive• 25% of consumers base purchase

decision on price• Competitive pressure to use price-offs


Price-OffsEffective Use

• Increase store traffic• Generate sales• Work best with higher markup items• Reasons for success

• Consumers view as monetary savings• Reward is immediate


Promotion Combinations

• Overlay• Intra-company tie-in• Inter-company tie-in


Planning Consumer Promotions

• Types of consumers• Promotion-prone consumers• Brand-loyal consumers• Price-sensitive consumers

• Retailer incentives• Increase store traffic• Increase store sales• Attract new customers• Increase the basket size

• IMC plan


Business-to-Business Consumer Promotions

• 18.7% of B-to-B marketing budgets spent on sales promotions.

• Coupons• Premiums• Sweepstakes and contests• Sampling• Bonus packs


InternationalConsumer Promotions

• Difficult to centralize consumer promotion programs.

• Laws vary across countries.• Difference in distribution rates.• Requires an experienced international sales

promotion coordinator.


Redemption Rates Distribution Methods

Media Redemption Rate Distribution Method

England Italy Spain U.S. England Italy Spain U.S.

Newspaper 1.9% ----- 1.4% 0.8.% 26% ----- 10.0% 1.9%

Magazine 2.8% 1.4% 1.4% 0.3% 13% 5.7% 14.7% 4.2%

Door to door 11.0% 13.7% 12.9% ----- 18% 2.0% 43.0% -----

In/on pack 25.1% 20.3% 30.7% 9.2% 15% 63.2% 25.2% 2.5%

In store 27.7% 32.3% 28.2% 6.8% 19% 22.1% 5.5% 1.9%

FSI 12.0% ----- ----- 1.4% 1% ----- ----- 85.4%

Mailing ----- 6.6% ----- 3.6% ----- 6.5% ----- 1.1%

Overall average 6.8% 14.3% 16.0% 2.0%

Sources: "International Coupon Trends," Direct Marketing, Volume 56, Issue 4 (August 1993),pp. 47-49; "FSI Coupon Redemption Rate for Frozen Foods," Frozen Food Age, Volume 47,Issue 3 (October 1998), p. 70.

Documents

© 2007 by Prentice Hall 10-1 Coupons How often do you use coupons? What products do you tend to use coupons to purchase? Will a coupon affect which