© 2010 South-Western, a part of Cengage Learning All rights reserved. PowerPoint Presentation by Charlie Cook The University of West Alabama Eighth Edition Sampling and Couponing CHAPTER 16 1. Appreciate the objectives of consumer-oriented sales promotions. 2. Recognize that many forms of promotions perform different objectives for marketers. 3. Know the role of sampling, the forms of sampling, and the trends in sampling practice. 4. Be aware of the role of couponing, the types of coupons, and the developments in couponing practice. 5. Understand the coupon redemption process and misredemption. 6. Appreciate the role of promotion agencies. Chapter Objecves After reading this chapter you should be able to: © 2010 South-Western, a part of Cengage Learning. All rights reserved. 16–2 © 2010 South-Western, a part of Cengage Learning. All rights reserved. 16–3 Why Use Consumer Promotions? Why Use Consumer Promotions? • Promotions Promotions  Accomplish goals that advertising by itself cannot Accomplish goals that advertising by itself cannot  Induce consumers to buy now rather than later Induce consumers to buy now rather than later  Encourage the buying of one brand rather than a Encourage the buying of one brand rather than a competitor competitor  Encourage consumers to buy more and more Encourage consumers to buy more and more frequently frequently © 2010 South-Western, a part of Cengage Learning. All rights reserved. 16–4 Brand Management Objectives Brand Management Objectives • Brand Management Brand Management  Is directed at influencing consumer behavior rather Is directed at influencing consumer behavior rather than initiating trade or sales-force action than initiating trade or sales-force action  Objectives are: Objectives are:  Generating purchase trial and retrial Generating purchase trial and retrial  Encouraging repeat purchases Encouraging repeat purchases  Reinforcing brand images Reinforcing brand images © 2010 South-Western, a part of Cengage Learning. All rights reserved. 16–5 Consumer Rewards Consumer Rewards • Utilitarian (Functional) Benefits of Rewards Utilitarian (Functional) Benefits of Rewards  Obtaining monetary savings (e.g., when using Obtaining monetary savings (e.g., when using coupons) coupons)  Reducing search and decision costs (e.g., by availing Reducing search and decision costs (e.g., by availing of a promotional offer, consumers do not have to think of a promotional offer, consumers do not have to think about other alternatives) about other alternatives)  Obtaining improved product quality made possible by Obtaining improved product quality made possible by a price reduction that allows consumers to buy a price reduction that allows consumers to buy superior brands they might not otherwise purchase. superior brands they might not otherwise purchase. © 2010 South-Western, a part of Cengage Learning. All rights reserved. 16–6 Consumer Rewards (cont’d) Consumer Rewards (cont’d) • Hedonic Benefits of Rewards Hedonic Benefits of Rewards  Accomplishing a sense of being a wise shopper when Accomplishing a sense of being a wise shopper when taking advantage of sales promotions taking advantage of sales promotions  Achieving a need for stimulation and variety when Achieving a need for stimulation and variety when trying a brand that might not purchased if it were not trying a brand that might not purchased if it were not for an attractive promotion for an attractive promotion  Obtaining entertainment value when, for example, the Obtaining entertainment value when, for example, the consumer competes in a promotional contest or consumer competes in a promotional contest or participates in a sweepstakes participates in a sweepstakes © 2010 South-Western, a part of Cengage Learning. All rights reserved. 16–7 Consumer Rewards (cont’d) Consumer Rewards (cont’d) • Other Rewards Other Rewards  Consumer promotions perform an informational Consumer promotions perform an informational function by influencing consumer beliefs about a function by influencing consumer beliefs about a brand brand • Timing of Rewards Timing of Rewards  An An immediate reward immediate reward delivers monetary savings or delivers monetary savings or some other form of benefit as soon as the consumer some other form of benefit as soon as the consumer performs a marketer-specified behavior performs a marketer-specified behavior  Delayed rewards Delayed rewards are those that follow the desired are those that follow the desired behavior by a period of days, weeks, or even longer behavior by a period of days, weeks, or even longer © 2010 South-Western, a part of Cengage Learning. All rights reserved. 16–8 Major Consumer-Oriented Promotions Table 16.1 © 2010 South-Western, a part of Cengage Learning. All rights reserved. 16–9 Notes on Table 16.1 Notes on Table 16.1 • The classification of promotional tools is The classification of promotional tools is necessarily simplified necessarily simplified • Promotions are capable of accomplishing more Promotions are capable of accomplishing more than a single objective than a single objective • Manufacturers use consumer-oriented sales also Manufacturers use consumer-oriented sales also to leverage trade support to leverage trade support • Coupons and premiums achieve different Coupons and premiums achieve different objectives depending on the specific form of objectives depending on the specific form of delivery vehicle delivery vehicle © 2010 South-Western, a part of Cengage Learning. All rights reserved. 16–10 Sampling Sampling • Sampling Sampling  Any method used to deliver an actual- or trial-sized Any method used to deliver an actual- or trial-sized product to consumers product to consumers • Why Sampling Is Effective Why Sampling Is Effective  It gives consumers an opportunity to experience a It gives consumers an opportunity to experience a new brand personally new brand personally  It allows an active, hands-on interaction rather than a It allows an active, hands-on interaction rather than a passive encounter, as is the case with the receipt of passive encounter, as is the case with the receipt of promotional techniques such as coupons promotional techniques such as coupons  It is almost a necessity when introducing truly new It is almost a necessity when introducing truly new products that can afford this form of promotion products that can afford this form of promotion [...]... South-Western, a part of 16 22 Point-of-Purchase Couponing Point-of-Purchase Coupons Instantly Redeemable Coupons Shelf-Delivered Coupons © 2010 South-Western, a part of Scanner-Delivered Coupons 16 23 Mail- and Media-Delivered Coupons Mail-Delivered Coupons • Have 95% household penetration rate • Have highest redemption rate of all mass-delivered coupons (3.5%) • Increase the amount of product purchases... part of 16 17 Couponing • Coupon  A promotional device that rewards consumers for purchasing the coupon-offering brand by providing cents-off savings  Instant coupons  Mail- or media-delivered coupons • Couponing Background  Nearly 280 billion coupons are distributed annually in the United States  Cost to U.S marketers is about $7 billion a year © 2010 South-Western, a part of 16 18 Figure 16. 2 Illustration... year © 2010 South-Western, a part of 16 18 Figure 16. 2 Illustration of Cents-Off Coupon Offers © 2010 South-Western, a part of 16 19 Coupon Distribution Methods • Freestanding Inserts (FSIs) • Handouts in stores • Direct Mail • Magazines • Newspapers • In- and On-Package • Internet © 2010 South-Western, a part of 16 20 Table 16. 3 Full Coupon Cost 1 Face value $1.00 2 Distribution and postage cost 0.40... 2010 South-Western, a part of 16 12 Figure 16. 1 Sampling Charmin via a Fleet of Tractor Trailers © 2010 South-Western, a part of 16 13 Major Sampling Practices Prudent Sampling Practices Targeting rather than mass distributing samples Using innovative distribution methods where appropriate © 2010 South-Western, a part of Undertaking efforts to measure sampling’s return on investment 16 14 Table 16. 2 Calculating... 2010 South-Western, a part of 16 16 Sampling Challenges and Problems • Expensive to implement • Mishandling of mailing by distributors • Distribution to the wrong market • In- or on-package samples fail to capture current non-consumers • Distribution does not reach sufficient numbers of consumers to justify its expense • Misuse of samples by customers • Subject to mail pilferage © 2010 South-Western,... represent cost-efficient forms of sampling for reaching a mass audience Door-to-Door Distribution • Allows considerable targeting and has advantages of lower cost and short lead times between a sampling request and when the samples are delivered to targeted households On- or In-pack Sampling • Uses the package of another product to serve as the sample carrier © 2010 South-Western, a part of 16 11 Sampling... © 2010 South-Western, a part of $1.59 16 21 Couponing (cont’d) • Is Couponing Profitable?  Most coupons are redeemed by current brand users  Households most likely to redeem coupons are also the most likely to buy the brand in the first place  Companies have to offer coupons to prevent losing consumers to other brands that do offer coupons © 2010 South-Western, a part of 16 22 Point-of-Purchase Couponing... South-Western, a part of 16 26 Figure 16. 3 Coupon Redemption and Misredemption Process © 2010 South-Western, a part of 16 27 Misredemption • Consequences of Misredemption  The 3 to 4 percent misredemption rate represents millions of dollars in losses by manufacturers • Participants in Misredemption  Consumers  Clerks  Store management  Shady clearinghouses  Professional misredeemers © 2010 South-Western,... market share FSIs and Other Media-Delivered Coupons • 88% of all coupons distributed via Sunday newspaper freestanding inserts • Provides broad exposure • Is relatively cheaper • Serves both reminder and advertising functions • Redemption rate is very low • Don’t generate much trade interest • Susceptible to misredemption © 2010 South-Western, a part of 16 24 In- and On-Pack Coupons • Are Included either... successful, the conversion rate must exceed the break-even rate with gains in the 10 to 16 percent range In this case, this would mean a minimum of 1,650,000 people must become users after trying the sampled brand (i.e., 1,500,000 times 1.1) to justify the sampling cost and yield a reasonable profit from the sampling investment © 2010 South-Western, a part of 16 15 When Should Sampling Be Used? 1 When the . coupon-offering brand by providing purchasing the coupon-offering brand by providing cents-off savings cents-off savings  Instant coupons Instant coupons  Mail- or media-delivered coupons Mail-. represent cost-efficient forms of newspapers represent cost-efficient forms of sampling for reaching a mass audience sampling for reaching a mass audience Door-to-Door Door-to-Door Distribution Distribution • Allows. market Distribution to the wrong market • In- or on-package samples fail to capture In- or on-package samples fail to capture current non-consumers current non-consumers • Distribution does not reach