Discussion Slide
10
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?
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10
Consumer Promotions
Chapter Overview
• • • • Types of consumer promotions Planning for consumer promotions Business-to-business promotions International consumer promotions
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FIGURE
10 .1
Types of Consumer Promotions
• • • • • • •
Coupons Premiums Contests and sweepstakes Refunds and rebates Sampling Bonus packs Price-offs
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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
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FIGURE
10 .2
Percentage of Consumers and Coupon Usage
Never 24.6%
Always 20.7%
Rarely 17.0% Sometimes 37.7%
Source: Karen Holt, “Coupon Crimes,” Promo, Vol. 17, No. 5 (April 2004), pp. 23-29. © 2007 by Prentice Hall
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A coupon accompanies this informational Gold Bond advertisement.
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Influencing Brand Purchases
On a scale of 1 to 10, the following are the top five influences on the brand purchased by a consumer.
• • • • •
Sampling Word-of-mouth Coupons Advertising Contests
7.78 7.18 5.91 5.61 1.24
Source: The Second Annual Survey of Consumer Preferences for Product Sampling, Santella & Associates (Http://www.santella.com/marketing.htm).
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Percentage of Sales with a Coupon
Product category % of sales using manufacturer’s coupon
• • • • • • • •
Disposable diapers Detergents Meal starters Dough products (refrigerated) Cereal Wrapping materials, bags Oral hygiene products Household cleaners
17.1% 15.0% 14.2% 13.6% 13.4% 12.8% 11.7% 11.7%
Source: AC Nielson Scantrack, Santella & Associates
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FIGURE
10.3
Methods of Distributing Coupons • 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
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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
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Types of Coupons
• • • • • Instant redemption Scanner-delivered Cross-ruffing Response offer E-coupons
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Coupon Redemption Rates
Type of coupon • Instant redeemable • Bounce-back • Instant redeemable – cross ruff • Electronic shelf • Electronic checkout • In-pack • On-pack • Direct mail • Handout • Free-standing inserts
Source: Santella & Associates
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Percent Redeemed 39.3% 17.2% 17.1% 10.2% 7.8% 5.8% 4.7% 3.5% 3.1% 1.3%
Problems with Coupons
$500 million illegally redeemed
• Reduced revenues
• Brand preference – 80%
• Mass cutting • Counterfeiting
• Internet distribution
• Misredemption
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Factors Affecting Coupon Effectiveness
• Face value of coupon • Distribution method • Coupon for preferred brand or brand in evoked set
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Types of Premiums
• Free-in-the-mail • In- or on-package • Store or manufacturer • Self-liquidating
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Fisher Boy
Free, in-the-mail premium
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Premium Offer
An ad by Haik Humble Eye Center offering a premium with the purchase of custom pair of eye glasses.
Click picture for video.
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Problems with Premiums
• Time factor
• Tend to have short life spans • Popularity important
• Cost
• Related to interest in premium • Exclusive premiums
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FIGURE
10.4
Keys to Successful 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 shortterm profits.
Source: Based on Don Jagoda, “The Seven Habits of Highly Successful Premiums,” Incentive, (August 1999), Vol. 173, Issue 8, pp. 104-105. © 2007 by Prentice Hall 10-19
Fast-food chains are well known for their in-store premiums.
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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
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Contests and Sweepstakes Problems
• Costs • Consumer indifference • Clutter
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Creating Successful Contests 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.
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Contests and Sweepstakes Goals
• Encourage customer traffic • Increase brand awareness • Boost sales
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Rebates and Refunds
• Refunds – soft goods • Rebates – hard goods • Redemption rates
• 30% overall • 65% for rebates over $50
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Rebate/Refund Programs
• Problems
• Costs • Paperwork • Diminished effectiveness
• Creating effective programs
• Visibility • Perceived newness • Impact
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FIGURE 10.5 Types of Sampling
• • • • • • •
In-store distribution Direct sampling Response sampling Cross-ruff sampling Media sampling Professional sampling Selective sampling
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Sampling Programs
• Target audience
• Business-to-business • Women • Men
• FSI distribution • Internet-based response sampling
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Experiment Impact of In-Store Sampling
Product Previous 4 weeks Sampling Week Following 4 weeks
• • • • • •
Meat product A Meat product B Meat product C Bread product Biscuit product A Biscuit product B
100% 100% 100% 100% 100% 100%
430% 590% 185% 170% 359% 201%
110% 123% 100% 90% 64% 49%
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. © 2007 by Prentice Hall 10-29
Experiment Impact of In-Store Sampling on Competitors
Product
Previous 4 week
Sampling week
Following 4 weeks
• • • •
Bread product Competitor A Competitor B Competitor C
100% 100% 100% 100%
170% 106% 79% 78%
90% 105% 93% 86%
Source: Michelle Lawson, Dalton McGuinness and Don Esslemont, “The Effect of InStore Sampling on the Sale of Food Products,” Marketing Bulletin, 1990, Vol. 1, pp 16. © 2007 by Prentice Hall
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Sampling Programs
• Problems
• Cost • Distribution
• Effective sampling
• Component of IMC plan • Stimulate trial usage • Target audience of sample
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Discussion Slide
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
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FIGURE
10.6
Reasons for Using Bonus Packs
• Increase usage of the product • Match or preempt competitive actions • Stockpile the product • Develop customer loyalty • Attract new users • Encourage brand switching
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Bonus Packs
• • • • Bonuses range from 20% - 100% 30% bonus most common Used by current customers Brand switching
• if used by consumer previously
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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
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Price-Offs
• • • • • • Temporary price reduction Stimulating sales Reduces financial risk Brand switching Manufacturer’s usage Retailer usage
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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) © 2007 by Prentice Hall
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Price-Offs
Problems
• 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
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Price-Offs
Effective Use
• • • • Increase store traffic Generate sales Work best with higher markup items Reasons for success
• Consumers view as monetary savings • Reward is immediate
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Promotion Combinations • Overlay • Intra-company tie-in • Inter-company tie-in
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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
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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
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International Consumer Promotions
• Difficult to centralize consumer promotion programs. • Laws vary across countries. • Difference in distribution rates. • Requires an experienced international sales promotion coordinator.
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Redemption Rates Distribution Methods
Redemption Rate Media Newspaper Magazine Door to door In/on pack In store FSI Mailing Overall average England 1.9% 2.8% 11.0% 25.1% 27.7% 12.0% ----6.8% Italy ----1.4% 13.7% 20.3% 32.3% ----6.6% 14.3% Spain 1.4% 1.4% 12.9% 30.7% 28.2% --------16.0% U.S. 0.8.% 0.3% ----9.2% 6.8% 1.4% 3.6% 2.0% England 26% 13% 18% 15% 19% 1% ----Distribution Method Italy ----5.7% 2.0% 63.2% 22.1% ----6.5% Spain 10.0% 14.7% 43.0% 25.2% 5.5% --------U.S. 1.9% 4.2% ----2.5% 1.9% 85.4% 1.1%
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.
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