Consumer-Oriented Promotions: Sampling and Couponing

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Chapter Eighteen
Consumer-Oriented Promotions Sampling and
Couponing
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Chapter Eighteen Objectives

• Appreciate the objectives of consumer-oriented
  sales promotions.
• Recognize that many forms of promotions perform
  different objectives for marketers.
• Know the role of sampling, the forms of sampling,
  and the trends in sampling practice.

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Chapter Eighteen Objectives

• Be aware of the role of couponing, the types of
  coupons, and the developments in coupon practices
• Understand the coupon redemption process and
  misredemption.
• Appreciate the role of promotion agencies.

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Why Use Consumer Promotions?

• Promotions accomplish goals that advertising by
  itself cannot. Consumers often need to be induced
  to buy now rather than later, to buy your brand
  rather than a competitor's, to buy more and to
  buy frequently.

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Brand Management Objectives and Consumer Rewards
Three general categories of objectives

• (1) Generating trial purchases
• (2) Encouraging repeat purchases
• (3) Reinforcing brand images

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Marketer Objectives and Consumer Rewards
Consumer Rewards

• All promotion techniques provide consumers with
  rewards
• Typically in the form of cash savings or free
  gifts
• Consumers are more responsive to immediate than
  delayed rewards

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Classifications of Promotion Methods
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Caution is in Order!

• The classification of promotional tools is
  necessarily simplified
• Promotions are capable of accomplishing more than
  a single objective
• Manufacturers use consumer-oriented sales also to
  leverage trade support
• Coupons and premiums achieve different objectives
  depending on the specific form of delivery vehicle

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Sampling

• Sampling
• The premier sales-promotion device for
• generating trial usage by delivering an
• actual- or trial-sized product to consumers

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Sampling

• Mailed directly to households
• Targeted by demographic characteristics or
  geodemographics

• Direct mail

Newspapers and magazines
Door to door by special distribution crews
On- or in-pack sampling
High-traffic locations
In-store sampling
Internet sampling
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Sampling

• The Sunday newspaper is an increasingly
  attractive medium for broad-scale sampling

• Direct mail

Newspapers and magazines
Door to door by special distribution crews
On- or in-pack sampling
High-traffic locations
In-store sampling
Internet sampling
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Sampling

• Allows considerable targeting
• Lower cost than in-store or direct-mail sampling
• Short lead times

• Direct mail

Newspapers and magazines
Door to door by special distribution crews
On- or in-pack sampling
High-traffic locations
In-store sampling
Internet sampling
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Sampling

• Uses the package of another product to serve as
  the sample carrier

• Direct mail

Newspapers and magazines
Door to door by special distribution crews
On- or in-pack sampling
High-traffic locations
In-store sampling
Internet sampling
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Sampling

• On- or In-pack
• Sampling

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Sampling

• Shopping centers, movie theaters, airports, or
  special events

• Direct mail

Newspapers and magazines
Door to door by special distribution crews
On- or in-pack sampling
High-traffic locations
In-store sampling
Internet sampling
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Sampling

• Provide product samples in grocery stores and
  other retail outlets for trial while consumers
  are shopping
• The most frequent form

Direct mail
Newspapers and magazines
Door to door by special distribution crews
On- or in-pack sampling
High-traffic locations
In-store sampling
Internet sampling
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Sampling

• Brand managers are increasingly distributing
  samples online
• Specialized online sample delivery firms aid this
  process

Direct mail
Newspapers and magazines
Door to door by special distribution crews
On- or in-pack sampling
High-traffic locations
In-store sampling
Internet sampling
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Major Sampling Practices

• Targeting rather than mass distributing samples.
• Using innovative distribution methods where
  appropriate
• Undertaking efforts to measure samplings return
  on investment

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How Effective is Sampling? Estimating ROI
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When Should Sampling Be Used?

• Brand is demonstrably superior/has distinct
  relative advantages
• Concept is difficult to communicate by
  advertising alone
• Can afford to generate consumer trial quickly

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Problems with Sampling

• Expensive
• Mishandling in distribution
• Distributed to the wrong market
• In- or on-package samples do not capture current
  non-consumers
• Can fail to reach sufficient numbers of consumers
  to justify its expense
• May be misused by customers
• Pilferage

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Couponing

• Coupon
• A promotional device that provides
• cents-off to consumers upon its
• redemption

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A Buy One Get One Free Coupon Offer
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Couponing Background

• Around 250 billion coupons are distributed
  annually in the United States.
• Cost to U.S. marketers is about 7 billion a
  year.

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Coupon Distribution Methods

• Freestanding insert (FSI) is preferred
• Valassis Inserts, News America Marketing
• The establishment of cooperative coupon programs
• Val-Pak Direct Marketing Systems

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Economic Impact
Face Value 1.00 Distribution and postage
cost .40 Handling charge .08 Consumer
misredemption cost .07 Internal prep and
processing cost .02 Redemption cost
.02 Total Cost 1.59
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Is Couponing Profitable?

• Households most likely to redeem coupons were
  also the most likely to buy the brand in the
  first place
• However, companies have to offer coupons to
  prevent losing consumers to other brands that do
  offer coupons

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Point of Purchase Couponing
Instantly Redeemable Coupons
Shelf- Delivered Coupons
Scanner- Delivered Coupons

• Peelable from the package at the point of
  purchase
• Represent an immediate reward
• An alternative to price-off deals
• Redemption rate about 30

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Point of Purchase Couponing
Instantly Redeemable Coupons
Shelf- Delivered Coupons
Scanner- Delivered Coupons

• Instant Coupon Machines, Smart SourceTM
• Machines are attached to the shelf alongside
  coupon-sponsoring brands
• Redemption rate about 11

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Shelf-Delivered Coupons

• Instant coupon machine
• (so called SmartSource)

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Point of Purchase Couponing
Instantly Redeemable Coupons
Shelf- Delivered Coupons
Scanner- Delivered Coupons

• Catalina Marketing Corp. offers two programs
• Reward is delayed
• Potentially very effective because they provide a
  way to carefully target coupon distribution

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Point of Purchase Couponing
Scanner- Delivered Coupons
Checkout Coupon
Checkout Direct

• Delivers coupons based on the particular brands a
  shopper has purchased
• Directed at competitive-brand users
• Redemption rate about 9

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Point of Purchase Couponing
Scanner- Delivered Coupons
Checkout Coupon
Checkout Direct

• A coupon for the sponsoring manufacturers brand
  is automatically dispensed for use on the
  shoppers next purchase occasion
• Directed at users who satisfy a manufacturers
  prescribed demographic or product-usage
  requirements

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Mail/Media Delivered Coupons
Mail-Delivered Coupons

• Highest household penetration
• Highest redemption rate of all mass-delivered
  coupons (3.5)
• Increase the amount of product purchases

• Relatively expensive
• Inefficient and expensive for brands enjoying a
  high market share

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Mail/Media Delivered Coupons
FSIs and Other Media-Delivered Coupons

• 87 of all coupons distributed via Sunday
  newspaper freestanding inserts
• Broad exposure
• Relatively cheaper
• Reminder function
• Advertising function

• Redemption rate is very low
• Dont generate much trade interest
• Susceptible to misredemption

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In- and On- Pack Coupons

• Included in- or on- products package
• Cannot be removed at the point of purchase Its
  for next purchase
• A coupon for one brand is promoted by another
  brand (crossruffing)
• Has bounce-back value
• No distribution costs
• Redemption rates are higher
• Delayed value to consumers
• Dont reach nonusers of the carrying brand

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Online Couponing

• A number of Internet sites now distribute
  coupons.
• Consumers print their own coupons, at no
  additional cost to the advertiser.

• There is a great potential for fraud with these
  coupons that consumers can print themselves so it
  remains to be seen how popular this method will
  remain

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Redemption Process and Misredemption
(F)

• Manufacturer

Redemption Center
(E)
(A)
(D)
(B)
(C)
Consumers
Retailers
Clearinghouse
(M)
Organized criminals Terrorists Media
employees Crooked retailers
M misredemption
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The Consequences

• Estimates of the misredemption have ranged from a
  low of 15 to a high of 40. True misredemption
  rate is about 3 or 4 representing millions of
  dollars lost by manufacturers.

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The Participants

• Consumers present coupons that have expired, for
  items not purchased, or for a smaller size than
  specified by the coupon.
• Clerks take the coupons to the store and exchange
  them for cash without making a purchase.
• Store Management retailers may boost profits by
  submitting extra coupons in addition to those
  redeemed legitimately.
• Shady Clearinghouses engage in misredemption by
  combining illegally purchased coupons with real
  ones and certifying the batch as legitimate.

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The Role of Promotion Agencies

• Agencies that work with brand managers to
  formulate promotion strategies and implement
  tactical programs.
• A new generation of promotion agencies emphasize
  online promotions.