What Are the Differences Between Consumer and Trade Promotions?

Coupons
Coupons offer a price reduction to the consumer. It may be a percentage off of the retail price, or absolute amount.

Coupons can be delivered in a variety of ways. Freestanding inserts are the most common. They can also be distributed through direct mail. They can be placed on- or inside packages. They can be in the store on shelves. Coupons can be digital or they can be delivered by employees.

Coupons can be divided through

Instant redemption coupons

• Typically placed on the outside of a package or attached to a store shelf
• Can be redeemed immediately
• Encourage trial purchases since the discount is immediate

Bounce-back coupons

• Inside a package
• Encourage repeat purchases because they cannot be used until the package is opened

Scanner-delivered coupons

• Triggered by an item purchased
• Encourage brand switching on the next trip to the store

Cross-ruffing coupons

• Placed on one item for another item (e.g coupon for dip placed on a bag of potato chips)
• The products should often purchase and consume simultaneously
• Encourage consumers to purchase within same brand or family of products

Disadvantage of using coupons:

• Reduced revenues ➔ companies earn less money
• 80% of coupons are used by brand preference consumers. The coupon just offers it to them cheaper.
• Necessary evils to stay in business because customers expect coupons. Competitors use them so companies have to use them to keep competitors from taking sales away.

Premium

Premiums are prizes, gifts, or other special offers consumers receive when purchasing a product. The key to premiums is that consumers pay full price for the product.

premiums can be distributed through

Free-in-the-mail premiums are free to consumers who mail in X number of box tops or labels.

In-or on-package premiums are located in or on the package and are received upon purchase.

Store or manufacturer’s premiums can vary in how they are delivered. They can be prizes in kid’s meals at a fast food restaurant.

Self-liquidating require a small amount of money with the proof-of-purchase. The amount paid usually covers the cost of the item and may even pay for shipping.

Matching the premium to the target market is important. It needs to be something the target market wants. Try for exclusivity and avoid fads. The premium should reinforce the firm’s products and image, not distract from it. It helps to integrate the premium offer with other IMC tools, such as advertising and POP displays. While premiums can attract customers, don’t expect it to boost short-term profits. In fact, in most cases, companies will loose money on premiums.

Contests and sweepstakes

Contests require some type of activity or skill. They can require a purchase to enter.

Sweepstakes rely on random chance. Laws require the odds of winning each prize to be printed in advance and made available at every location where the sweepstake can be entered. Companies cannot require a purchase to enter, although they can limit people to one entry per visit.

People enter contests and sweepstake because they find them interesting. A few will enter because of the prizes. Consumers are selective on which ones they enter. They do not enter every contest or sweepstake they see.

Extrinsic value is the attractiveness of the prize. The more attractive, the more likely to enter. Intrinsic value is the fun or skill of playing. This is more important in contests than sweepstakes. Small, incremental rewards given sporadically will encourage people to keep participating. Scratch-and-win tickets are popular because people know instantly if they won.

The Internet and social media have become popular venues for sweepstakes and contests. The Internet allows for interactive games, which increases the intrinsic value of playing. Companies can capture data from individuals who play, which can be analyzed and used to plan marketing programs. The Internet is also cheaper. The goals are to encourage traffic to a website or to a retail location. It is doubtful it will boost sales, but it will create awareness and exposure. It is the intrinsic rewards that usually draw people back, not the extrinsic.

Refunds and rebates are used interchangeably, but do have different meanings.

Refunds are for soft goods, rebates are for hard goods. People do not like refunds and rebates because typically they are a hassle to redeem and they have to wait 6-8 weeks for the check. Automobiles and computer printers are two products people now want a rebate to make a purchase. Redemption rates are low.

Sampling

Delivery of a free good or service in small portion to arouse person or business to like the brand and purchase it on the next trip or the next time the product is needed. Businesses use sampling extensively to encourage prospects to try the brand and compare it to the brand they are currently using. People who tried a sample – 33% made a purchase of the brand during that shopping trip, 58% would buy it again, and 25% bought the sample instead of intended brand.

Samples can be distributed through

In-store distribution. They can be sent in the mail or delivered as a result of a request. An example of a cross-ruffing sample would be a dryer sheet in a box of detergent or attached to the detergent box. Media samples are distributed through the media, such as the newspapers. Small items, such as perfume, can be attached inside of a magazine to a page. Professional sampling would be a drug company delivering samples to doctors. Selective sampling normally occurs at special events, such as a rodeo or state fair, where a company may distribute a sample of its drink for people to try. Response-sampling requires customers to mail-and-slip the note to the company to exchange for sample.

Advantage

Excellent means of introducing a new product

Can generate interest and leads, especially for B-to-B operations.

A way of collecting information, especially for response sampling.

Can boost sales through people buying the brand immediately, or on their next trip.

Encourage trial purchases

Successful sampling programs are a central part of an IMC plan. It is an excellent means of encouraging trial purchases. It is most effective for new products, new versions of products, and current products to new markets. It is important to target the right audience at the right venue to ensure success. Mass sampling is not cost effective. Firms need to target their sampling programs.

Bonus pack

An additional or extra number of items are placed in a special package.

Advantages

It can be used to increase usage of the product. If consumers have extra potato chips, they are likely to eat more. It can be used to match or preempt the competition. Consumers can stockpile the item so an offer by a competitor is no longer attractive. It can enhance brand loyalty, especially if consumers feel they are getting a good deal with the bonus pack. It can attract new users, but most likely these are individuals who have tried the brand in the past and have a favorable attitude towards the brand. It can also encourage brand switching, but under the same scenario as a new user.

Price-off

Temporary price reduction. It can be marked on the item or its package, or displayed on the shelf or near the item.

Price-off promotions are the best and quickest method to stimulate sales. A price reduction can also entice consumers to try a product because the financial risk has been reduced. With the lower price, it can encourage brand switching and stockpiling the item. The benefit of customers stockpiling is they may consume more of the product.

The major disadvantage is that a price-off will reduce profits. It encourages greater price sensitivity. Consumers become reluctant to pay full price for the item. Long-term, it can have a negative impact on brand image.