Promotions and Sponsorships 2
Anchoring
Before finding out the actual pricing of products, expose them to a significantly higher price
History of Continuity Programs
Betty Crocker: (1929-2006) coupons worth points on outside of package. Redeem for merchandise from catalog. S&H Green Stamps (1930-1980) collect stamps from retailers. Redeem stamp books for merchandise. American Airlines Advantage (1981) First major airline to offer flyer miles accumulated worldwide.
Coupon Issues- Multiple Purchase Requirements
Buy one, get one free; multiple units of same brand; different, related products (27% of 2003 coupons). Impact on target and redemption rates.
Coupon Issues - Misredemption
Carelessness at check out (less risk with scanners). Fraud: theft and collusions with retailers, fake coupons printed through home computers, sale in bulk via on line auction sites.
Planning Continuity Programs- Type of Proof Required
Company Tracking, Punch Cards or Stamps, Labels, Coupons, Etc.
Brand Loyalty
Consumer Behavior Definition: the degree to which a consumer consistently purchases the same brand within a product class. Sales Promotion Definition: the situation in which a consumer generally buys the same manufacturer-originated product or service repeatedly over time rather than buying from multiple suppliers within the category.
Spurious Loyalty
Consumers may repurchase a brand due to situational constraints.E.g.: 1. Vendor Lock In 2. Lack of viable alternatives 3. Convenience
Bonus Pack - Disadvantages
Cost of packaging and handling, Retailer dislike.
Premium Offers
Costs: Monetary requirement and/or proofs of purchase. Postage (customer usually pays). Packaging and handling. Promotional materials included with shipment. Promoting the Premium. Offer and Order Bank Response: Response rate and order fills (~1%). Other goals.
Through the Mail Premiums- Advantages
Create attention and excitement, Reinforce brand image and usage, Encourage stocking up or switching, Make customers feel good, Build database.
Default Matters
Default options- an option that is selected automatically unless an alternative is specified. Option to "subscribe to replies" by default action.
Why marketers like coupons
Deliver a temporary price cot to consumers, May encourage trial, Differentiate between price-sensitive and price-insensitive consumers, Enable targeting to geographic segments, May influence retailers to carry product.
Bonus - Disadvantages
Difficult and expensive to administer, Minimal impact on sales, Risk (difficult to predict demand), Retailer reluctance to stock different packages.
Benefits for Members of Continuity Programs
Discounted Products or Services, Integrated Business Services, Customer Sales for their Business, Learning Opportunities, Networking, Convenience, Provide Experience.
Prive Value Relationship - Lowering the Price
Discounts Coupons Buy one, get one
Common Types of Sales Promotions
Discounts (price deals), Coupons, Sweepstakes/Contests, Buy-on get- one, Gift with Purchase, Incentive/Frequent Buyers, Holiday/ Themed Promotions, Others: (in store displays, sampling, bundling, rebates, trade-ins, free trial/demo)
Coupon Issues- Costs
Distribution. Redemption: face value, retailer handling, clearinghouse.
Price- Value Relationship
Every product or service has an established perceived price or value, Sales promotions change this price-value relationship by increasing the value and/or lowering the price. Drive impulse purchases. Create attention and excitement for particular products.
Price Value Relationship
Every product or service has established perceived price or value. Sales Promotions change this price-value relationship by increasing the value and/or lowering the price.
True Brand Loyalty
Exists when customers have: A high relative attitude toward the brand which is then exhibited through repurchase behavior. Great Asset to Firm: Customers -Willing to pay higher prices -Cost less to serve - Bring new customers From Marketers Viewpoint: loyalty a key factor in terms of consumer usage.
Coupon Problems
Expensive and inefficient, Excessive to use may erode brand loyalty, Lost profits when used by those who would buy at full price, Create uneven demand, Fraud.
In or On Pack Premiums- Disadvantages
Expensive to product, Retailer refusal and pilferage.
Distribution Methods
Free Standing Inserts (89%), Handouts, Newspaper and magazine ads, In-pack and on-pack, Direct mail, Internet (1.5% and growing), Others (e.g. mobile phones)
Through the Mail Premiums
Free of self-liquidating or hybrid.
Near Pack Premiums- Advantages
Generate store traffic or interest in dull category, Get special display space in store, Flexibility in types of gifts.
In or On Pack Premiums- Advantages
Get attention at point of sale, Appeal to specific target, Encourage additional use, Budget control.
Bonus Packs - Advantages
Get attention at point of sale, Take consumers out of market for longer time, Build additional volume.
Special Containers- Advantages
Get attention at point of sale. Brand name reminder when reuse.
Internet/Mobile Coupons
Growing in polarity 2009 distributions = 92% vs. 2008 2009 redemptions= 360% vs. 2008
Special Containers- Disadvantages
Handling, storing shelving at retail outlet. Negative sales impact if unattractive.
Point of Purchase - Disadvantages
High costs, Not available at all stores, Consumer dislike, No ad message, Fraud.
Developing Programs- Advantages
Increase loyalty, Take customers out of the market, Develop good database.
Problems with Sales Promotion
Ineffective at build ______, Negative impact on attitudes toward the brand, Sales increase may not be very profitable, Implementation costs and risks, Short term orientation
High Coupon Usage Categories
Inexpensive items, Low-involvement, Parity product, Product categories subject to brand switching.
Target Audience
Is your customer sensitive to the price/value relationship that exists in your category? Sales promotions can often encourage trial usage which lead to brand affinity, but you must deliver on the quality.
Reasons for Growth in Promotions and Sponsorships
It produces results, Results occur quickly, It is easy and inexpensive to implement, Retailer demands
Coupons
Key Objective: with a coupon promotion is to maximize the redemption rate. Measure short term vs long term sales impact. Coupon promotions are aften used to encourage sales or existing products that are slowing down.
Systems You Need to have in Place for Continuity Programs
Levels, Loss Prevention, Gifts/Welcome Package, Teases to Ascension, Prices, Active Engagement, Pain of Disconnection, Relevance.
Through the Mail Premiums- Disadvantages
Limited appeal, low impact on sales, Hard to predict demand.
Continuity Programs- Residual Value
Little effect on brand equity: "bribe" rather than influence perceptions of brand benefits. Matched by other company. Difficult to discontinue. Learn more about customers -> special programs. Works best for large firms.
Planning Continuity Programs- Duration of Offer
Long enough for average customer to quality, Deadline or ongoing.
Direct Mail - Disadvantages
Long expiration dates needed, Special packaging.
Developing Programs- Disadvantages
Long time period needed, Legal liability, Can be expensive to administer, Not a substitute for other brand building activities.
Free Standing Inserts -Advantages
Low Price, Vivid. Broad distribution at relatively low price, Good targeting color, Consumers like them, Retailers respond to them,
Free Standing Inserts - Disadvantages
Low usage rate, may not reach precise target. Low redemption rates, May not reach intended target, Limits on availability and long lead time.
When to use Sales Promotion
Marketing Budget, Product Life Cycle Stage (new vs. old), Competition in the Market, Target Audience, Type of Product
Sales Promotions (and 3 goals)
Media and non-media marketing pressure applied for a predetermined, limited period of time in order to. 1. Stimulate Trial 2. Increase Consumer Demand 3. Improve Product Quality
Problems of Continuity Programs
Member retention- 3 months, Information Overload, Relevance, Competition, Need for Community sense- events, Create Desire.
Types of Online Continuity Programs
Membership sites, Book Clubs, Monthly Newsletters, Licensed Websites, Software Subscriptions, Subscription based service, Subscription based training.
Offline Programs
Mileage Membership Frequency Card Goal: to create customer satisfaction, cognitive and emotional brand loyalty.
Premiums
Non-monetary incentive to purchase the brand. In-pack or on-pack: small gift or sample. On pack premiums usually related product. Near Pack: Used when premium is too large to fit in/on package. Free or low price relative to real value.
Product Life Cycle Stage (new vs. old)
Often used in the growth maturity states to stimulate consumers to choose the product over the compeition rather than in the introduction stage when building awareness (via Ad/PR) is usually more important.
Planning Continuity Programs- Number and Cost of Premiums/Rewards
One reward or many, One time only or repeat opportunities, Value of reward (real and perceived), Availability, One level or multiple levels.
Sales Promotions vs. Advertising/PR
Operates on a shorter time line, Uses more rational appeal, Returns a tangible or real value, Fosters an immediate sale, Contributes highly to profitability
Point-of-purchase Coupons
Point of purchase tied to scanner data, catalina coupons.
Direct Mail
Postal Service or alternative delivery system. Individual coupons, with samples, or co-op.
Continuity Programs
Programs designed to create and reward brand loyalty. Primarily used in product or service categories with lower inter-brand differentiation. Rewards -> good will -> data collection ->ability to identify best customers -> additional rewards.
How to Apply the Decoy Effect
Put a similar but slightly inferior product at the same price as the product that you want to sell
Near Pack Premiums- Disadvantages
Retailer concerns, Theft.
Special Containers
Reusable container- decorative or functional
Type of Product
Sales promotions tend to work best when applied to impulse items whose features can be judged at the point of sale, rather than more complex items that might require a longer purchase cycle (research/comparisons) or a hand-on demonstration.
Planning Continuity Programs- Objectives
Target, Intended Effects.
Coupons History
The first coupon was created in 1887 by Asa Chandler, on the the partners at Coca-Cola. By 1931, it's estimated that 1 in 9 Americans had received one of these free Colas.
Decoy Effect
The phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated.
Main Goal of Contest and Sweepstakes
To gain attention.
Role of Sale Promotions 2 Views
Traditional View, New View
Coupon Issues
Value, Message, Misredemption, Multiple purchase requirements, Expiration dates, Costs
The Power of Free Will
When the consumer has a choice between options, they will choose the option that has something free with it
Point of Purchase - Advantages
good targeting, high response rates, short lead times, retailer relationships
Customers need "__________" (rebates) to start thinking about the brands and their choice options.
motivation
New View of Sales Promotion
need for strategic focus, consider both short and long-term effects.
Sweepstakes vs. Contests (Contests)
o A contest may be required to make a purchase of a product o Attracts fewer entries/more effort and interests per person o May receive media attention o May generate useful ideas o Collect fewer entries overall o Require perception of fairness and judging o Winning numbers are not necessarily selected in advance o Takes longer time
Refunds and Residual Market Value
• A high value rebate offer can persuade consumers to try a product • Most appropriately used by companies trying to build market share for new products or for products currently used by a relatively small percentage of the population • Multiple purchases requirement may create value
Redemption
• About 1 to 2 percent of the media circulation of the offer o E.g. if the refund offer was made in newsapers with a combined circulation of 1,000,000, the refunds redemption does not exceed 10,000 to 20,000 • Refund redemption rates may vary by media • Generally, the closer the offer is to the actual product, the higher the redemption rate o E.g. on-pack refund offers do better than tear-off pads, which do better than media offers
Refunds- Psychological Advantages
• Better able to remember the brand than with other offers • Sometimes prompt response from consumers who are not affected by coupons o 44% of nonusers of coupons claim to have sent in a proof of purchase in order to obtain a refund check • Decrease perceived price of the product and increase perceived value of the product • Decrease perceived consumer barrier and create a motivation to purchase the product
Sales Force Contests
• Company contests to encourage sales force to exceed quotas or push particular product lines • Retail sales force contests sponsored by manufacturer to encourage recommendations
Cost Calculation
• Distributed via magazine ad in Parents: $98,700 (circulation 2.3 million) • Face value = $.35 • Redemption rate 1.2% = 27,000 predicted number of redeemed coupons (circulation x redeption rate= 23 million x 0.12) @ $.35 = $9,660 • Retailer handling @ $.08 (27,600 x 0.08)= $ 2,208 • Clearinghouse @ $55 per thousand = $1,518 • Total = $ 13,384
Key Factors in Sweepstakes and Contests
• Entry Frequency o Single/daily/ 24-hour/ unlimited/ weekly / Monthly/ Other • Prizes o books and magazines, cash, electronics, stc. • Different types o Instant wins o Ongoing sweeps o Blogs o Referral entries o Contest o Online games
Contests
• Games in which the winner is chosen on the bases of some skill or talent
Sweepstakes
• Games in which the winner is determined solely by chance among entrants • Without plan; accidently
Refunds Checklist
• Keep the offer simple • State clearly how many proofs of purchase are required • Require the standard proof of purchase- nothing esoteric • Require the respondent's zip code • Allow 4 weeks for delivery • Choose shorter expiration dates for media offers and longer ones for offers made on point of purchase materials and in-pack or on-pack • Put the expiration data in bold type and make it easy to find • Limit the refund offer to one per family
Sweepstakes and Contests- Appeal to Targets
• Loyal Users o Reinforce sales, get additional sales, promote cross-product sales • Competitive Loyals o May get attention of inertia buyers, trial for contest requiring purchase • Switchers o Some appeal to value or variety buyers • Price Buyers o Purchase only when contest prize is very desirable and attainable • Nonusers o May generate some sales • Long-term Value o By increasing awareness
Refunds- Cost Consideration
• Media advertising to support the offer • Point of purchase materials, order pads, or other display materials for use at retail • Handling fees by the fulfillment house; postage, envelopes, labor, and related costs • If a coupon is used, the clearinghouse fees for handling, plus the usual handling fee to the retailer
More than any other element of marketing, sales promotion is about _________.
Action. It's about stimulating customers to buy a product.
Bonus Packs
Additional Volume or multiple unites for same or lower price. Used for low cost, high velocity products.
Magazine - Advantages and Disadvantages
Advantages - higher reproduction quality, good targeting. Disadvantages - narrow reach, timing problems, lack of favor among consumers.
Newspaper - Advantages and Disadvantages
Advantages- any day of the week. Disadvantages- limited targeting, lower redemption, expensive.
Coupon Issues - Message
Appearance and shape. Clear, obvious offer and restrictions. Selling message.
Planning Continuity Programs- Handling Fulfillment
At the point of purchase or through the mail, Company or specialist.
Coupon Issues - Value
Average face value $1.44 in 2009 vs. 93 cents in 2004 High value gets better response, is better at reaching competitive users. Consumer perceptions and expectations.
Coupon Issues - Expiration Dates
Average is under 2 months (~ 10 wks) Consumers dislike short dates.
How many coupons were issued in 2012
305 billion
Price Value Relationship - Increasing the Values
sweepstakes/contests gift with purchase incentive/frequent buyers holiday/themed
Developing Premium Offers
Selections: Reinforce brand name, benefits or usage. Desirable. Appeal to target. Value/cost. Delivery: Timeliness. Explanation for delay. In good condition.
Direct Mail - Advantages
Selectivity (geographic and demographic targeting) one coupon per HH, Good redemption rates, Reach non-subscribers, Secrecy.
Types of Refunds
Single Purchase Multiple Purchase
Bonus
Something in addition to what is expected or strictly due. May reinforce brand image and usage habits, May lead to additional purchases or brand switching, May increase long-term value of brand.
Special Packs and Premiums- Residual Value
Special packs reward the customer, Encourage greater usage in future, Remind consumers of the brand, Croff-ruff premiums --> trial, future purchases of other products, Promote good feelings about the brand, Gain Attention.
Rewards: True Brand Loyalty vs. Spurious Loyalty
Spurious loyalty does not bring any emotional and cognitive connections to loyal customers. Spurious loyalty does not increase perceived product value or decrease perceived product price.
Types of Refunds- Single Purchase
o Increasing desire for a quick gratification- relatively high response rates o Act as selective sampling program • To create trial for a new product in a competitive, high-margin category • Work best for better quality product for relatively small percentage of the target market o High-Priced Items • To attract consumer attention and provide a sales boost fro the brand • In the case of high-priced items, such as automobiles, rebates may total $1,000 or $2,000 or more • Makers of some higher-priced packaged good, such as Butterball Turkeys, may total $1-$2 refunds in exchange for a single proof of purchase.
Types of Refunds- Multiple Purchase
o Refunds make on multiple purchases of a brand • Tend to be used in categories where product is purchased often and brand loyalty is low, resulting in frequent switching • E.g. an orange juice manufacturer may offer a refund of $1 on six cans of frozen juice
Sweepstakes Vs. Contests (Sweepstakes)
o Sweepstakes should be open to both buyers and non-buyers o Attracts more entries o Attract "professional" entrants o Receive multiple entries o Require no purchase o Random selection from entry forms o Winning numbers selected in advance o Instant win scratch or peel game pieces with list at retailer or at other site o Electronic (online)
Types of Refunds- Others
o Tie several products together into single rebate offer • More cost-efficient to distribute to the consumer • May give a boost to weaker products in the line • A lower response rate than other o Refund offer with their own brand and another related product in order to attract consumer attention and suggest a use for the brand • The tow companies might split the cost of the promotion o Pair a particular brand with a related generic item, such as Oreo cookies and vanilla ice cream • To suggest new usage ideas that may be repeated in the future.
Marketing Budget
sales promotions are particularly attractive alternatives when the marketing budget is limited, as it is for many small businesses.
Traditional View of Sales Promotion
short term incentive to purchase a product or service, changes behavior by altering the price/value relationship, tactically driven discipline
Uses of Refunds
• Originated in the food business • But often used today on more expensive items o Why? Consumers are more reluctant to make a decision for expensive items • Delivery Methods o Usually delivered to consumers through the mail o Other stores and services • New Packaged-goods products or on brand with low market shares o Need an expert and professional communication skills • Brand priced higher than the competition, in order to induce trial without a price cut • Particularly effective in generating trial for fairly expensive, high-margin products that are purchased frequently by consumers, such as batteries, pet food, or liquor o Large amount refunds are more attractive o Trigger repurchase • Getting consumers to buy slow-moving, parity-type, impulse products that are used up quickly • Direct-to-consumer refunds o Direct to consumer refunds since they retailers that carry these products often do not accept coupons, refunds can provide a good way to manufacturers to give a discount on their product directly to consumers
Refund, Rebates and Incentives
• Refunds can be viewed as coupons that offer delayed gratification to the consumers • Refunds offers allow consumers to buy a product and then, later on, to get back a portion of the purchase price • A refund (or rebate) is simply an offer by a manufacturer to return a certain amount of money to the consumer when a particular product or group of products is purchased • Purchase → we appreciate → send proof → get refund
Refunds- Disadvantages
• Rising postage costs • Busy consumers • Discourage by the need to wait weeks for the refund to arrive o Many consumers have become brand switchers o Difficult to make an attractive refund offers to consumers on low-priced products (manufacturer margins are low on most grocery items)
Planning Sweepstakes and Contests
• Set objectives • Design rules for entry o Fit current trends o Appropriate for target • Select Prizes o Number and value o Appeal to target • Costs o Prizes o Media (ads) to promote the event o Entry blanks, P-O-P, trade support o Judging or selecting and notification • Legal Restrictions o Description of prizes and how awards will be made o Entry requirements, qualifications
Loyal Users
• The consumers lost likely to take advantage of refund offers • Result in overall increased profits- questionable o Infrequently purchased, impulse-type items - create extra sales • Purchase timing may also be affected by refund offers o E.g. a loyal drive or a Honda accord
Refunds- Advantages
• To deliver to the consumer a substantial discount without the major misredemption problems that can often company the use of high-value coupons. • Attract attention to brand at the point of purchase at relatively low expense • Budge reluctant consumer by providing " a reason" • Speed up a product usage to get a rebate