All techniques and tools of sales promotion are fairly simple and can be reduce to twelve in number. Almost all promotions make use of one or more of these tools, alone or in some carefully developed combination.
i. Price deals (price-off, price-cut, cents-off, denote the same thing)
ii. Bonus-packs (price-pack)
iii. Refunds and rebates (both terms are used interchangeably)
v. Contests and sweepstakes
a. In-packs, on-packs, near packs and container premiums
b. Free – in-mail premiums
c. Self-liquidating premiums
viii. Continuity plans
ix. Trade coupons
x. Trade allowances and deals
xi. Exchange offers
xii. Displays, trade fairs, exhibitions, and even sponsorship
The list apparently appears to be short; however, considering the possible combinations, the figure reaches to about eight million different approaches. In most cases a combination of two or more techniques will combine the strengths and compensate for the weaknesses and will produce better results compared to either technique used alone.
Promotions directed at the ultimate consumers are called consumer promotions. These promotions can be developed for durable as well as non-durable goods. Most of these products are typically used by individuals or households and are generally sold by retails stores.
Same techniques, which are used for consumer promotions are also used to promote products to business users, such as stationary, computer systems and consumables, machinery, automobiles, and many other products. Most of these techniques can be used both for consumer as well as trade promotions. There is plenty of variety, flexibility, and motivation to action.
A judicious combination of techniques can be used to achieve almost any promotion objective. The flexibility of sales promotion has the potential of being used by small and large companies, selling goods or services, and by profit and non-profit organizations. Customers are motivated, stimulated, and influenced to respond in a predictable manner to sales promotions.
Sales Promotion Tool # 1. Price Deals:
Price deals are probably the most commonly used promotional techniques. A price deal for customers means a reduction in the price of promoted product and the customer saves money on purchase. Such a deal is designed to stimulate customers to try a new product, to encourage new users to try an existing product, or to encourage customers to continue product patronage, increase purchase quantity, purchase multiple units, and accelerate usage rate, etc.
Such deals are suitable when the brand loyalty is low, product category is considered a commodity, and price is the primary consideration by the customers.
A price discount can be used as a defensive as well as an offensive tool. More often discounts are offered to match or beat the competitor’s prices. When used as an offensive weapon, the objective is to generate additional sales and increase market share and long run profits. Price discounts (also called cents-off deals) are communicated to the consumers through advertising, at the point-of-purchase by listing the reduced price on the package or signs near the product or window display, or by the sales people.
Such discounts may appear in newspapers, magazines, and television advertisements. Similar discounts are often advertised by retailers in local media (called feature advertising) and by manufactures in national print and audio-visual media. Manufacturers often offer extra incentives to retailers to gain their cooperation.
Retailers may announce price discounts for a variety of reasons. By announcing a price discount on some popular consumer item, the retailer’s intention is to increase store-traffic. Whenever the store-traffic increases, customers visiting the store not only buy promoted product, but some of tern buy other products as well.
It is also possible that the retailer bought excessive stocks when the manufacturer offered trade deal and to clear this excess inventory the retailer offers a price discount to consumers. Yet another reason can be that when retailer feels threatened, then the only way to respond to competitive situation is to offer a price discount to consumers to move the product off the shelves.
The basic advantages that price discounts offer include the flexibility and convenience of implementation. They can be sued to retain present customer as well. Such discounts offer immediate value and hence produce stronger consumer response.
These discounts can lead to accelerated purchases (buying more than the immediate requirement) because they are for a limited period, and keep the consumer out of the market for a longer period, thereby discouraging the competitors.
Price discount offers are announced for the consumers (pull strategy) and hence pass through of savings to consumers is assured at the time of purchase. Such consumer discounts when combined with similar type of incentive (push strategy) for the re-sellers produce remarkable results.
Often competitive products are displayed next to or near each other, a properly displayed price can set the promoted brand quite apart from the competition. This combination is quite strong for the retailers, more so if the promoted brand happens to be a popular product.
A discount offer may rapidly lose its advantage if competitors announced a similar offer. In fact, competitors are very likely to retaliate, leading to the danger of triggering a promotion war, in which no one benefits except the consumer (Prisoner’s Dilemma). Such discounts are short-term and are unlikely to produce any long-term gains because the incentive is to purchase now by creating a sense of urgency.
When the discount is withdrawn the sales may fall below the level of pre-promotion period level. The consumers are encouraged to switch brands and these posses’ problems in sales forecasting. Many consumers have strong perceptions regarding price-quality relationship.
A price discount can make them suspicious about the quality of the item and they may reject the product. Many experts are of the opinion that price discounting is the primary cause of decrease in brand loyalty. Once there is doubt in the consumers’ mind about the price -quality relationship of some brand, the trust in that brand takes a nosedive.
Price-packs are also called value-packs. This may take any of the two forms, bonus pack and banded pack. In case of bonus pack offer, an additional quantity of the same product is offered free when the standard pack size of the product is purchased at the regular price. This type of deal is often seen in case of laundry products, food products, and personal care products, etc. This is a way to reward the present consumers and may not have any impact on the users of competitive brands.
A variation of this offer, and more commonly observed, is when the marketer develops special packs of the product containing more quantity, but the price is proportionately low. For example, the regular price of a standard pack of a product is Rs. 50 and the quantity contained in the pack is 100 gms. For the purpose of sales promotion the company offers a special pack containing 150 gms, and the price is Rs. 62 only. This is a method to “load” the consumer up with the product. This technique is often used to introduce a new large size of the product, or to encourage continued usage, and also to increase consumption.
Many offers of this type are seen in consumer non-durable products consumed on daily basis. It is termed as banded pack offer when two or more units of a product are sold at a reduced price compared to the regular price (couple of months ago, Lux International offered a similar deal. The pack contained four cakes of soap at the price of three). The products are generally banded together physically, or put together in a blister pack, such as razor-and-blade, toothpaste and tooth-brush, or a smaller size of the same product may be attached to the regular size.
Sales Promotion Tool # 2. Bonus-Packs:
Bonus packs are generally limited to low bulk, low-price products, however, of late exceptions, such as Akai offer have been observed. Additional quantity of the same product or additional unit of the product is appreciated as a reward by the consumer. This also offers consumers the satisfaction of being “smart shopper”.
Such offers are generally effective in converting product tries into users. Extra product may encourage increased usage and help sustain the habit. Among other similar brands, bonus packs stand out at the point-of-sale. Extra quantity is an incentive and reward. In consume durable products, as in the example of Akai colour television, an additional 14″ television is a big incentive to the buyer and as the deal is for a short period it may induce a sense of urgency.
Consumers, who buy bonus packs of consumable, stay out of the market and are exposed to competitors’ offers.
The cost of additional product may be small to the manufacturer but the cost of larger new pack may make the offer expensive. When bonus packs are branded together, in certain instances, retailers break the banding and sell the bonus product at regular price if the product happens to enjoy brand strength. In such a situation, the purposes of promotion are defeated, as the offer does not reach the consumer. In case of consumer durable, such a deal is quite likely to hurt the brand image and disrupt price-quality perceptions of customers.
Sales Promotion Tool # 3. Refunds and Rebates:
The terms refund and rebate are used as meaning the same thing/long ago, the term the term rebate was made popular by the automobile industry in the developed countries. There is a subtle difference between these two terms. The Random House Dictionary defines a refund as repayment of money, and a rebate as a return of part of the original payment for some service or merchandise.
This means a refund is repayment of total money paid for purchase, while the rebate represents repayment of only of part of the money paid for purchase. However, both these terms are used interchangeably in the real world of marketing. A promotion offering refund or rebate by a marketer is a promise to give back a certain amount of money after the purchase.
The offer may be for a product purchase alone or in combination with other products. Depending on the objectives, refund offers are used to encourage trial of a new product, purchase of increased quantity. Or increasing the frequency of purchase, or to encourage the customer to purchase those products whose purchases can be postponed, such as refrigerators, microwave ovens, air-conditioners, and other consumer durable products.
Refund offers seem to work very well in guaranteeing the trial of a product or service, since there is no risk involved for the customer because of the promise of total refund of the purchase amount. Evidence suggests that customers look at refunds as rewards for purchase. This appears to build brand loyalty rather than diminish it.
For example, Maruti announced a gift cheque of Rs. 1,30,000 as a loyalty reward on purchase of a Maruti Esteem car, if the family already owned any other Maruti car. The offer was valid for a month only. Gillette announced a refund offer.
A customer was required to buy a pack of & 7’Oclock P II for Rs. 55.50. On returning the empty pack, the customer gets Rs. 55.50 off on Gillette Sensor excel. A computer magazine, “Chip”, offered a refund of Rs. 350 on sending one-year subscription, which the customer can use to purchase special issues of the magazine.
Refund offers can induce excitement in consumers at relatively low cost. A higher percentage of customers forget to claim the refund, unless the amount is very significant. This phenomenon of forgetting is called “slippage”, .and hence an attractive offer can be made but the cost will still be low. SLIPPAGE is an interesting aspect associated with refund offers.
Some refund offers are associated with only one purchase, while others may require multiple purchases, in both types of cases, proof-of-purchase is required to claim the refund, this ensures that the marketer pays only when the product is purchased. Besides the value of refund, slippage varies depending on the number of purchase proofs required and the procedure of calming the refund.
The reasons that consumers cite for failing to claim the refund are that they forgot, they lost the claim form , and the procedure for claiming the refund seemed to be cumbersome. Consumers generally perceive refund offers as the rewards and the brand loyalty increases. Requirement of multiple purchase helps load the customer at a relatively low cost. Refund offers, when combined with some trade incentive, can help gain in-store displays.
If the refund offer is not large enough to increase sales significantly, the profitability may be hurt badly. Refund offers are used often by consumers who would have not otherwise purchase the product. For immediate sales response, refunds are not very helpful. The difficulty in collecting the proof of multiple purchases often discourages participation.
Sales Promotion Tool # 4. Cashback Reward Programmes:
A cashback reward program is an incentive programme operated by credit card companies where a percentage of the amount spent is paid back to the card holder. Many credit card issuers, particularly those in the United Kingdom and United States, run programs to encourage use of the card where the card holder is given points, air miles or a monetary amount.
This last benefit, a monetary amount, is usually known as cashback or cash back reward. Where a card issuer operates such a scheme, card holders typically receive between 0.5% and 2% of their net expenditure (purchases minus refunds) as an annual rebate, which is either credited to the credit card account or paid to the card holder separately.
When accepting payment by credit card, merchants typically pay a percentage of the transaction amount in commission to their bank or merchant services provider. Merchants are often not allowed to charge a higher price when a credit card is used as opposed to other methods of payment, so there is no penalty for a card holder to use their credit card.
The credit card issuer is sharing some of this commission with the card holder to incentivise them to use the credit card when making a payment.
Rewards based credit card products like cash back are more beneficial to consumers who pay their credit card statement off every month. Rewards based products generally have higher Annual percentage rate. If the balance were not paid in full every month the extra interest would eclipse any rewards earned. Most consumers do not know that their rewards-based credit cards charge higher fees to the vendors who accept them without vendors having any notification.
Coupons can be considered as certificates offered by retailers or manufacturers that entitle the owner to some stated savings or claim the specified thing. Coupons bear a date of expiry and cannot be redeemed after the cutoff date. Offer of a coupon is a very versatile technique and can be used to achieve many different sales promotion objectives.
When coupons are offered by the manufacturer all the costs associated with advertising and distributing the coupons, redeeming their face values, and paying retailers a fee for handling, is borne by the manufacturer. When retailers offer coupons of their own, they have to bear all the above mentioned costs themselves.
Coupons originating from the manufacturers are redeemable at any retail shop that carries the promoted product. The retailers serve as the agents of manufacturer in accepting and redeeming the coupons and send the collected to the concerned manufacturer along with their claims of reimbursement. Retailer-originated coupons are redeemable only at a particular store or a group of stores (for example, a chain store having many outlets).
The retailer- originated coupons generally have one objective, to encourage the consumer to shop at a particular store. Their interest is not tied up with any brand or manufacturer, unless there has been an agreement with the marketer of some co-operative venture. In such as a case the objective would be to encourage shopping at a particular store and buy a certain manufacturer’s brand. Coupons are particularly attractive to consumes who are price sensitive.
Research has Shown that the Tendency to Use Coupons Rises under Certain Conditions:
a) When consumers perceive that there is need to control the budget
b) Consumers are inclined to experiment with new products or service
c) Consumes use coupons products which are consumed regularly, such as tea, coffee, laundry products, etc.
Consumers who are strongly loyal to brands, or those who consider that collecting coupons is not worth the effort, are least likely to use coupons. Coupons generally attract older, better educated, urban, middle-income families. Comparatively, coupons seem not to be so popular with young, less educated, unmarried individuals. In case the coupons happen to be related to some current fashion or fad, then younger, middle-income individuals are likely to be attracted. Examples- ADV. 3.1, 3.2 and 3.3.
Manufacturers distribute their coupons by using print media, direct mail, product packages, or through retailers. Some manufacturers and service providers also distribute coupons during trade fairs (some internet access time). Media distributed coupons are common as part of an advertiser’s print ads, or a more effective vehicle, “free-standing insert” FSI), is sometimes used. A ‘free-standing insert’ is a leaflet inserted in a newspaper. When the reader opens the pages, the FSI falls out.
Coupons can be delivered direct to consumers by hiring a team of promoters. Coupons can also be distributed to consumers at a point where the product demonstration has been arranged, at retail stores, check-out counters, passengers in an airline flight, in a club, in schools, exhibition or trade fair, and by direct mail, etc. The marketers have the flexibility to be very selective with the target market on the basis of some selected criteria.
Direct distribution is quite effective to ensure rate of coupon redemption. By using direct mail, a large population can be reached in India in urban and small towns. In some western countries 90% of the population can be reached by using direct mail. Coupon distribution by using direct mail or door-to-door promoters is quite expensive.
Coupons are included in ads appearing in newspaper, magazines, FSI, etc. Coupons that are distributed by a single advertiser are called “solo” and where two or more non-competing manufacturers join hands for several brand, they are called “co-op-coupons”. Newspaper distributed coupons cost much less to the marketer. Based on the choice newspaper, some selectivity can be exercised.
For example, in India and other countries some newspapers are national, or regional in character. Some other newspapers cater to the needs of those who prefer a particular language (for example, in India, besides national newspapers, there are regional and local ones in Hindi, Urdu, Sindhi, Bengali, Tamil, Telugu, Malayalam, and Kannada, etc.) newspapers coupons offer flexibility in terms of size, shape, location, and timing of distribution, and all this can be done with limited lead time.
This is an effective method to mass distribute the coupons, however, the redemption rates are generally low and there can be much wasted circulation.
Product distributed coupons .are delivered with the product. They can be “in-pack”, or “on-pack”. In-pack coupons are inserted within the product package. There may be an attention-getting message on the package informing consumers about the coupon. On-pack coupons are attached to the outside of the product pack some way. The coupon may be printed as part of the carton or wrapper.
A type of coupons, called “cross-ruff’, is sometimes used. This coupon can be for a related or totally unrelated product. For instance, inside the pack of a shaving cream there could be a coupon for razor blades, a perfume, or a totally new product to encourage trial. One major advantage of in-pack coupon is that it involves no extra distribution costs; the product bought by the consumer becomes the vehicle.
Another advantage is that such coupons get distributed only to those who purchase the product. These coupons can be used to reward the consumers and encourage repeat purchase, trial of a related or new product. When such coupons are combined with a likely draw or sweepstakes, they can create much excitement and enhance repeat purchase of the vehicle product. It is also possible to control the areas of distribution and reach the desired customer segment in a geographic area.
Coupons that encourage brands users to by buy the same brand on the next purchase occasion produce slower sales response, because the coupon may get redeemed only after the usual inter-purchase interval. In-pack or on- pack coupons generally do not attract substantial number of new triers.
Each type of coupons irrespective of its face value or distribution method, can offer some specific advantages. In India, the use of coupons as a tool of safes promotion is growing at a rapid pace. Coupons can be used to achieve diverse consumer and trade sales promotion objectives. Some important promotion objectives that can be achieved by using coupons are discussed in brief.
Coupons’ Use to Serve Many Objectives:
To Encourage Product or Service Trial:
A consumer who has not tried an existing product or service, or none who tries a new product or service can be considered as a tries. A coupon can enhance the chances that such a consumer will make an initial purchase of the product, more so if such an offer is combined with a lucky draw. Effective advertising, through a variety of emotional and rational appeals, tries to motivate consumes to purchase the product.
Despite this, consumers face uncertainty and hesitate to purchase an untried brand. They may be uncertain as to how the brand will perform and the related consequences if the brand performs badly. A coupon can compensate the consumer in reducing the risk to some extent. If the consumer makes use of the coupon, it meets the objectives of inducing trial and also helps in communicating the reference price to the consumer.
A free sample, in contrast, fails to develop reference price in the consumer’s mind. Research shows that coupons help in inducing trial, particularly direct mail coupons. Heavy users of coupons are more likely to try new and different product.
To Encourage Brand Switching:
Coupons are a direct economic incentive to encourage brand switching, the consumer feels exclusive and important, a smart shopper, and these are important economic and psychological reasons to encourage a switch. A coupon is a more tangible, believable proof of price cut than just a “heavy discount on list prices” as this dowses does not communicate anything tangible.
To Encourage Repeat Purchase:
Coupons can serve to achieve a long-term promotion objective by increasing repeat purchase of the brand by regular consumers, new triers, or infrequent users. It is believed that if the product category happens to be low-involvement, a coupon would encourage the repeat purchase.
For many consumers, coupons serve as a reward to keep on using the brand as per the “instrumental conditioning” theory of learning, a rewarded behaviour gets reinforced and is likely to be sustained in the long-term.
To Defend Market Share:
When the product category is fairly crowded with many existing brands, every brand is vulnerable to the competitive moves. Most marketers are generally concerned with at least maintaining their market share of the brand. Coupons are a sure way to reward and retain he loyal consumers.
Coupons also serve as a preemptive promotional move to make it tough to snatch away the loyal users of the brand. Consumers who are brand switchers or heavy coupon users are particularly attracted. A firm’s objective to defend the market share can be seen in the light of “prisoner’s dilemma”.
Market share of a company’s brand can be affected when a coupon promotion is offered by competitors. The realization makes them to act in anticipation of competitors move, or in response to competitor’s move. However, the result is that competing firms succeed only in protecting the market share, but sacrifice part of their profits.
To Supplement Print Media Advertising:
Unless the ad is noticed and read, it does not serve the purpose. A coupon included in a print advertisement increases the attention getting power of the advertisement. Research indicates that advertisements appearing in print, including a coupon are more likely to be noticed and recalled by consumers than the same ads without a coupon.
Consumers are also more likely to read the headline and copy as a result of their attention and interest in the coupon. This is understandable because the advertising clutter it is too much. The consumer is bombarded by advertising messages at home, on road, and in the market area. In fact, in almost any conceivable palace, there is some ad waiting to be noticed. Insertion of a coupon in an ad stands a reasonably better chance to be noticed.
Manufactures of existing brands can make effective use of coupons to preempt competition. When a competitor introduces a new product in the market, it is backed with high-powered advertising and, in some cases, sales promotion as well. To keep its brand loyal consumers out of the market for a period of time, the marketer of the existing brand can ‘load up’ the consumer on the brand by distributing coupons. The requirements for such a move to be successful are that the product should not be long. For example, toilet soaps, toothpaste, and laundry products etc., can fit the bill.
The marketer can make the decision to load up consumer if there is reliable information about the timing of the competitor’s move. In case of some consumer products, such as razor blades or shaving cream, the inter-purchase interval would be fairly long, these products are not bulky, and the unit price is low.
Depending on whether the product is seasonal or non-seasonal, some decision can be made about the timing of coupon distribution. Such an offer can motivate many consumers to purchase more than the immediate requirement and they would not be in the market to purchase similar products. This often proves to be a successful technique to dampen the competition.
To Stimulate Trial for Another Product:
The marketer can made use of the packages of a fast moving brand to carry the coupons of a related or unrelated produce, or a less popular product. The major advantage is that consumers may form favourable impression about the new product because of its association with an important brand. Such coupons are called “cross-puff and are distributed without incurring any expenses on distributing the coupons.
To Reach Suitable Target Audience:
Manufacturers can use direct-mail coupons to reach selected geographical areas or professional groups. Coupons can be placed in magazines meant for ladies, computer enthusiasts, sports people, or other in special interest magazines. This can reduce waste distribution and coupons would reach only the target group.
To Take of the Attention from Price:
A price increase may often produce adverse effects for the concerned brand. A coupon distribution may weaken the negative effects of price increase, provided the programme is implemented intelligently. The new price may be much higher than the present reference price the consumers have, and hence the product may be perceived as unjustifiably expensive.
To avoid the rejection of the product by the consumers, the marketer may issue a coupon of the value that would reduce the price to a level that is between the consumers’ current reference price and the new price.
The consumers get adapted to the new price and when the coupon is withdrawn, the new price does not appear to be high relative to the new reference price of the consumers. The timings of coupon distribution should be such that the loyal consumers do not get enough time to switch to a different brand because of the price increase. The coupon should be of immediate value, preferably on the package so that the consumers get an immediate reduction on the price.
To Use Price Discrimination:
Price discrimination produces a positive effect on total sale. The strategy is to charge different prices for the same product. Consumers who happen to be more price-sensitive are motivate to use coupons and pay less. Another group of consumers, who do not make the efforts to redeem the coupon, pay a higher price for the same product.
In another situation, where the coupons have been distributed selectively, only coupon owners have the advantage f buying the product at less than the list price, and all others buy the product at the normal list price. Coupons can be used as a highly effective tool to use price discrimination.
Coupons re considered as a very versatility promotion tool. Coupons can help in inducing trial of an existing or new product. A marketer can use coupons to encourage those who have tried a brand to become regular users. It is fairly convenient to reach a large number of prospects with coupons in a short time. Coupons can help to load-up the consumers and this may help in blocking the moves of competitors when there is reliable information. Line extension products can be introduced easily by enclosing or banding the coupon with the vehicle product.
One major disadvantage of coupons is wrong redemption. This happens when the retailer by mistake or with intent pays the consumer the face value of the coupon even through the product for which the coupon is meant is not purchased (the consumer, in connivance with the retailer buys some other product of the coupon’s value).
This type of redemption leads to wasted costs and adversely affects the achievement of objectives. Response to coupon promotion may be unpredictable because of factors, such as media, timing, value, brand share, and competitive moves, etc.
In-pack or on-pack coupons generally do not attract new tries. Coupons for products, whose value is unknown, generally are not quite as effective as for known and established brands Louis J. Hague, Advertising Age, 1979, has developed some suggestions:
These are part of Interest promotion because such sales promotions create not only interest but also produce excitement and enthusiasm in consumers. There seems to be quite a bit of confusion in understanding these terms. A contest requires the participants to perform some task.
For example, the participants may be required to write a slogan, choose a name, or create a design, etc. To decide which entries are first second, or third, etc. an expert or a panel of experts examines the entries and judges the winning ones. The prizes, depending on the announced number of prizes, are declared. A contest is based on testing the skill or ability and may not involve the proof-of- purchase (this is called a “consideration”) to enter the contests.
A sweepstakes is a random drawing and is sometimes called a chance contest. This too many may or may not involve the purchase of any product or service. A lottery prize is decided on the basis of chance and requires a “consideration” for entry that may be proof-of-purchase of ticket or a product.
According to the American association of advertising agencies, “A contest is an event that invites the customer to apply skill to solve or complete a special problem”. The same agency says. “A sweepstakes does not call for the application of skill on the part of the consumer. Winners are determined by a drawing from all entry forms. In other words, prizes are awarded on the basis of chance”.
Often a combination of contest and sweepstakes is employed in some promotions. The winners are decided in two stages. The first part involves a contest in terms of skill, or knowledge. If more correct entries are received, the second stage then involves a draw of chance to decide the winners. A well-known television programme in India, “Surabhi”, is an example of this type of promotion.
Anyone can send the answers to the questions on a postcard. Generally correct entries, running in thousands, are received. Out of these correct entries depending on the number of prizes to be given some are picked up on a random basis to declare the winner. In India, contests and sweepstakes are very popular promotional techniques and are frequently used in diverse product categories and services.
The range covers low as well as high- involvement products. Starting from such low-priced product as “Pan Masala” or expensive products such as Cars and almost everything in between including sporting events use contests and sweepstakes. Among all the sales promotional devices, probably the most exciting and highly rewarding are the contests and sweepstakes. Every imaginable prize or reward is used to excite and attract customers to participate. The prizes may be gold or silver jewellery, hefty sums of money, cars, two-wheeler autos, colour televisions, computers, music systems, free air tickets, stay in five star hotels, holiday in health resorts, and anything else depending on the imagination of the marketer.
To add an element of extreme urgency and speed up the response, early bird prizes and announced for the first 25 to 50 or 100 entries. In certain case all those who furnish the proof-of-purchase are given some specified premium. Experience shows that everyone concerned, consumers, trades people, and sales force, get a share of excitement when the contest or sweepstakes is well planned and executed.
The prizes seem to be much larger to contestants than the money spent by the manufacturer plans to distribute fee samples of a product, it can cost far more than the total money spent by the manufacturer for the prizes contests and sweepstakes generate considerable interest and awareness, and can be used to gain large sales increases.
The success or otherwise of a contest or sweepstakes depends largely on the selection of prizes and prize structure. In most cases the structure represents a typical pyramid that is there is a bumper prize of very high value. For instance, a car worth Rs. 300,000 or more, or jewellery of the same value, then a number of prizes in the immediate value range, a large number of prizes of small value, and a larger number of consolation prizes.
To make the contest or sweepstakes more tempting, there may be more than one winner of first prize (such as 10 first prizes for ten lucky winners). Different combinations of prizes are evolving. The duration of contest and sweepstakes varies considerably, depending on the objectives set sales promotion
Contests and sweepstakes can create high level of awareness, build or reinforce the image of the product or service. Consumers may associate the impressive prizes with the product or service. The promotions are more successful in getting the print advertisement read, or the audio-visual ad seen. This is becoming an increasingly difficult task because of audience boredom, apathy, disinterest, or even irritation toward adversity in general. Contest and sweepstakes can help gain store displays, generate store traffic and encourage the trial of a product if the prizes are sufficiently attractive.
Contests and sweepstakes generally are not effective in generating trial of a new product. Heavy media expenditure is often required to make these events successful. It is generally not possible to pre-test a contest or sweepstakes programme, and could, prove to be quite risky.
The promoter has to check thoroughly the rules and regulations that may vary from state to state. Designing a contest or sweepstakes requires lengthy lead-time. This may entail the risk that competitors may come to know about the event sufficiently in advance and may take steps to defeat the efforts.
A premium (gift) is a reward given to the consumer for performing a particular act, generally purchasing a product or service. The premium may be free or available to the consumer by paying a price well below the regular market price.
Getting a printer free with the purchase of a computer, or getting a bar of detergent free with the purchase of four cakes of toilet soap, of getting a Swiss knife well below the market when the consumer purchases a microwave oven, are typical examples of premium. Marketers choose premiums that have much appeal to consumers, or products that are related in some way to the products of the marketer.
For example, Kellogg’s Choices packs contained small plastic toys like different types of dinosaur replicas or sometimes, a plastic lunch box. As the product is primarily targeted at kids, these premiums had great appeal to them. Computer magazines often include a compact disc with each issue.
There are many varieties of premiums and are sometimes referred as direct premiums and mail premiums. Direct premiums are used to reward the customers immediately at the time of purchase, and mail premiums require the customers to take some action, such as mailing the proof of multiple purchases to the marketer. After the receipt of the proof, the marketer sends the premium to the consumer.
These various terms of for premiums are primarily used to distinguish the difference in methods of rewarding the consumers. Such premiums are attached either to the product, enclosed with the product, or otherwise available with the product when the consumer buys the product. The premiums can be used to solve a competitive price advantage or to counter the competitor’s coupon promotion.
Depending on the consumers’ value perception of the premium, the consumers may even be agreeable to purchase the product at a slightly high total price for the combination of the product and the premium. When all similar products in a certain price range are perceived as basically alike, a premium offer with the purchase of the product is quite an effective method to gain shelf space or even display.
Premium offers provide a point of difference, more so when the product category is fairly crowded. These are all different approaches to offer immediate reward to the consumer at the time of purchase. The premium is likely to offer a reason and an incentive to buy the product.
a. In-Pack Premium:
The premium is enclosed inside the product pack. Such premiums are generally small and low priced, such as a toy, steel or bowl, face towel, and many other items. These in-back premiums are often used by manufacturers of ready to eat cereals; health and beauty aid products, or incense packs, etc.
b. On-Pack Premium:
As the name suggest, on-pack premium is attached to the outsides of the product package or to the product itself if no outer package is used. The premium might be banded with a cell-tape, rubber band, or it could be blister pack. It is also sometimes referred as banded premium. At time these are related to the product, such as toothbrush with toothpaste, blades with razor, compact disk with computer magazine, etc.
c. Near-Pack Premium:
The premium is bulky in size and hence cannot be enclosed inside the pack or put on the pack. It is kept near the promoted product and the consumer takes one with the purchased product. For example, with the purchase of 4kg. pack of Surf, a fourteen-liter plastic bucket was given as premium.
In case of certain products, thought the premium is not bulky compared to the product on promotion, yet the premium is kept near the pack. For example, near the five-liter pack of a certain brand of sunflower cooking-oil was kept a pack of mosquito repellent product containing the electrical plug-in gadget and refill tablets.
In this type of premium the product itself is packed inside the premium. The product is packed inside a container, and this container can be used to some other purpose after the product has been consumed. For example, in a promotion, Bournvita was offered in an attractive glass mug, Nescafe was available in good looking crystal jars, similarly tea and many other consumable items are offered in PET Jars.
A brand of tea was offered in decanters. After the product is consumed, the container is used as water jug, and PET jars are used to store other consumable items, such as pulses, or sugar, etc. these reusable containers are put to other uses at no extra cost to consumers and serve to keep open reminding about the product long after the product has been consumed.
Premiums are widely used to reward the consumers. They serve as a powerful means of differentiating the offer at the point of purchase where all the products are similar and competition is at parity. Depending on the preferences, premiums can be selected to appeal the target groups in a market.
For example, container premiums are quite popular among house ladies in middle class homes. If the target group is children, certain type of premium such as toy or chocolate is likely to be more useful. Likewise, if the target group is women, then a totally different type of premium would be more attractive.
This kind of matching is possible with careful selection. If the promotion objective is to increase usage, some product related premium would be more useful. For instance, to increase the usage of condensed milk in families, a rec9ipdddd recipe book to prepare different types of desserts can be attached.
With packs of coffee or tea a mug can be given as a premium, which perhaps may increase the consumption. If the premium is chosen with care, its appeal is generally greater than a discount. In consumers’ assessment the value for the premium is more because of its market price, though the cost of the premium item is less for the marketer.
If the premium selection is poor, it may hurt the product sales. The appeal to the consumer is an important factor and this aspect must be pretested in some way. This would add to the cost of promotion. Even regular consumers may shy away from the product if the premium does not measure up to their likes.
This fact should not be overlooked that the consumer might have had a bad experience with this type of premium. Too frequent use of premium with any product is likely to lessen the importance of the product in the eyes of the consumer. Near-pack premiums may face failure if the retailers do not co-operate, and enough advertising back up is not provided to inform the consumers. Often consumers see the premium as part of the total offer and so, if they don’t want the product either.
i. Premium selection should be based on pre-testing in some way.
ii. The premium appeal strength is important to encourage consumers for unplanned purchase.
iii. The premium preferably should be a known brand name.
iv. Premium should communicate its good quality and value.
v. If possible, the premium should be related to the promoted product or the promotion theme.
vi. Premium should be as distinctive as possible; otherwise in the present day clutter of advertising and promotion, consumers are unlikely to take any notice.
Free-in-mail premiums are unique because the promotion objectives may be quite different. In mail premiums do not provide an immediate reward at the time of purchase, as do the premiums already discussed. Consumers have to take some action to claim the premium such as sending the proof of a single or multiple purchases and wait for some period of time for the delivery of the premium through mail or courier.
When consumers do not perceive any meaningful persuasive differentiation between brands and the market is competitive, such promotions work very well. The motivation to purchase and continue purchasing the product gets shifted to the incentive of premium as the purchase situation is one of total low-involvement as far as the product category is concerned.
Considerable brand switching is possible if only one proof-of-purchase is to be sent to the marketer. Another factor that may contribute to brand switching is the attractiveness and value of the premium as perceived by the consumers. Where multiple purchases are involved as proof of purchase, generally the usual inter-purchases interval is more, and consumers are more likely to stay with the brand.
If the premium is particularly attractive, there would be a number of consumers who would want the premium in a hurry and make the required number of purchases. This would help to load-up the consumer. Or, there may be some flexibility in conditions, such as the consumers may have the option to send one, two, or more proofs of purchase along with a specified sum of money to obtain the premium quickly. Much depends on the ingenuity of promotion planner.
Free-in mail premiums reward present consumers and encourage them to stay brand loyal and may also increase usage. Consumers will be less tempted to switch brand as they would be collecting required number of purchase proofs to get the premium. If the objective is to encourage multiple purchases, free-in-mail premiums could prove to be quite effective because the consumers will have to build up stocks in collecting multiple proofs of purchase to get the premium quickly.
Rate of redemption is generally low in this type of promotion and hence more expensive premium can be offered. Low redemption occurs because of “slippage” effect. Free-in-mail premiums also increase the attention getting capability of the advertisements. Attractiveness for the premium may motivate consumers to read the advertisement with more attention.
These premiums can serve as “dealer-loader”. A “dealer-loader” is a premium that is kept as display in the store and after the promotion is over, this “dealer-loader” is given to the store manager/owner free. The purpose is to reward the dealer to stock the promoted product. To set up and manage such promotions is relatively easy.
As soon as the required proof of purchase is received, the premium is mailed to the consumer. Often the arrangements is made with the distributors or dealers (if the premium is bulky) in cities and towns to hand over the premium to consumers whose names are sent by the company and the concerned consumers are informed and requested to collect the premium.
It is not possible to measure the sales increase, which can be directly attributed to such a sales promotion because the redemption rates are usually- low. In some cases the company may be left with more residual stocks of the premium. There is need to make some agreement with the premium supplier to accept surplus stocks otherwise the cost of promotion would be unnecessarily high.
There is also the possibility that the premium stocks may fail short of the demand, and unless some arrangement has been made with the supplier for such an emergency, there would be problems. Multiple proofs of purchase do not encourage new consumers only existing consumer are attracted. To pre-test such a premium promotion is extremely difficult because no one can tell accurately in advance as to how they will react to multiple proof of purchase to get the premium.