Consumer Promotions

Consumer promotions are incentives aimed at a firm’s

customers who may be end users of goods or services.
These are directed at individuals or firms that use the
product and do not sell it to another business. These
are used in B2C and B2B markets. Primary goal of
consumer promotion is to make the customer enact the
final act; purchase the product/service.
 Two General Categories of
Promotions
• Consumer promotions programs are effective
in bringing traffic into a store and generate
brand loyalty.
1. Consumer franchise building promotion –
designed to increase awareness of and
loyalty to a brand.
The goal is to build
a favorable image by
pointing out unique
features and selling
points , with the
focus on reduced
reliance on
incentives and
discounts.
2. Sales building promotions focus on
immediate sales, rather than brand equity or
loyalty, through discounts, prizes, or other
enticements.
 Coupons

A
price reduction offer to consumer – it may be a percentage of the
retail price or Rs.10 off an absolute amount. Most of coupons are
issued by manufacturers and most of them are offered through
print media. Coupons are also issued through “free standing
inserts” (FSIs) issued along with newspapers, primarily on
Sundays, etc.
 Types of Coupons
• Instant redemption coupons – distributed in retail stores
• Bounce-back-coupons- placed inside packages so that
consumers can not use them immediately
• Cross-ruffing – placement of a coupon for one product on
another product. Cross-ruff coupons should be on products
that fit together and those are purchased and consumed
simultaneously.
• Response offer coupons – are issued following requests by
consumers. Coupons are then mailed, faxed, or sent by
Internet to the consumer
• Another form of coupon is electronically delivered
 Problems with coupons
Reduced revenues
Mass-cutting – coupons
are redeemed through non-

existent retail outlets

Counterfeiting
Misredemptions – using
coupons for larger quantities such as for 200 Grams
rather than for 500 Grams of coffee powder
 Tactics to improve coupon
effectiveness
• A higher face value makes the coupon attractive
• Better distribution method for coupons – free
standing inserts (FSIs) are attractive to consumers
as they are received in the privacy of homes and
can be decided upon. In-store coupons are less
attractive as the shoppers need to process
information while in the store
• Third attractiveness is whether the coupon is for a
preferred brand or a brand that has good recall
 Premiums
Premiums are prizes, gifts, or other special offers
consumers receive when purchasing goods or
services. During premium promotions consumers
pay full
prices unlike in the
case of coupons
through price
reductions. The key
is to pick the right
type of premiums.
 Different forms of premiums
1. Free-in-the-mail – when customer mail in a proof of
purchase to the manufacturer who sends a gift to the
buyer – credit card companies use premiums to
entice individuals to sign up for credits – the gift
may be in the form of cash back on purchases and
frequent flier miles.
2. In- or on-package premiums are usually small gifts
in the form of toys in cereal boxes or baby food
3. Store or manufacturer premiums – gifts given by
manufacturer or retail outlets when the customer
purchases a product – A Maruti 800 given away as gift
by a construction company a customer when buying Rs.
15 Lakhs worth apartment
4. Self-liquidating premium – these require customers to
pay a sum of money for a gift or item. Example: Two
rolls of Kodak Film may be offered for Rs. 175 plus
shipping and handling and a proof of purchase of a
Kodak camera costing Rs. 3000. The premium is called
self-liquidating because Rs. 175 meets the cost of the
premium.
 Problems with Premiums
• (1) The time factor and (2)the cost
• Premiums tend to have short life spans. Companies
may select items that are in demand and of current
fashion. But by the time these things arrive at the
stores, the items might have lost appeal or attraction
to the customers.
• A premium exclusively offered may raise the demand
for the product. A tie-in offered exclusively through a
particular outlet like a restaurant or supermarket
chain may have to be ultimately offered through other
outlets. This would raise the price of the item and
cost to the firm.
 Building Successful Premium
Programs
 Match the premium to the target audience
 Carefully select the premiums (avoid fads, try for
exclusivity)
 Pick a premium that reinforces the firm’s product and
image
 Integrate the premium with other IMC tools
(especially advertising and POP displays)
 Don’t expect premiums to increase short-term profits
Although premiums may provide value and enhance
brand, they may not increase profits.
 Contests and Sweepstakes
Contest and Sweepstakes are
used both in consumer and
business markets. The primary
success depends upon the
appeal and desirability of the
prize list. A prize that is perceived to
be of low or no value may not work. Words, contests
and sweepstakes are often seen interchangeably used;
but differ primarily on legal terms.
• Contests require the participants to perform
some activity; winner is decided on who
performs best or comes first, etc. Sometimes it
may be found illegal to force a contestant to
purchase an item.
• No purchase is required to enter a
sweepstakes. Consumers may enter as many
times as they wish. The chances of winning a
sweepstakes are based on a probability factor.
 Problems with Contests and
Sweepstakes
• Costs

• Consumer indifference

• Clutter
 Refunds and Rebates
Refunds and rebates are
cash returns offered to
consumers and businesses
after purchases. A refund
is a cash return on ‘soft goods’

like food or clothing.

Rebates are given on sale of ‘hard goods’ like appliances and
automobiles. Normally refunds are smaller and rebates larger.
Rebates are common in the computer and electronics
industries. Computer retailers tend to reduce advertising costs
by resorting to more and more rebates.
The problems associated with refunds
and rebates include costs,
the paperwork, and diminished
effectiveness. The retail outlet
must carefully document
manufacturer rebates. To hold down paperwork,
manufacturers may assign to dealers the responsibility of
giving rebates by deducting them from the sales price.
Many rebate programs suffer from diminished effectiveness
as consumers have over a period of time come to expect
them. For example, many car dealers note that customers
may not buy cars unless rebates are offered.
 To generate an effective refund-rebate
programs, the offer must have:
Visibility
Perceived newness
An impact
 Sampling
• Sampling is to encourage
consumers to try a new
product or improved
product. It is the actual
delivery of a product to
consumers for their use or
consumption. Most
samples are provided free of cost.
A coupon or price-off incentive is often given along
with the free sample to encourage the consumer to buy
a full-size pack.
 Various sampling methods

 In-store distribution
 Direct sampling (mailing directly to
consumers)
 Response sampling (sending the samples
against requests from consumers in response to
offers contained in ads. On TV, Internet, Print)
.
 Cross-ruff sampling (sample of one product
with another product)
 Media sampling (sample of a toilet soap or
perfume included in a magazine ad.)
 Professional sampling (doctors providing free
medicines to patients)
 Selective sampling ( offered at particular
places like hospitals, trade fairs, etc)
 Bonus Packs
• When an additional or extra
number of items are placed in a
special product package, its is called
a bonus pack. If Kellogg
increases the size of the pack
by 25%, consumer may eat
more cereal; but if the size of
the Colgate container is
increased by
25%, the consumer may not use the paste more than
in the ordinary case. But firms do offer such bonus packs
to preempt the competition. .
 Bonus packs rarely attract new customers if
the consumer had not previously purchased the
brand.
 Bonus packs can lead to brand switching if the
consumer has used the brand previously.
Facing purchase decisions, consumers may opt
for brands that offer bonus packs at the regular
price.
 Advantage of Bonus Packs
 Increase use of the product
Match or preempt competitive actions
Stockpile the product
Develop customer loyalty
Attract new users
Encourage brand switching
 Price-offs
A price-off is a temporary reduction in
reduction in the price of a product to
the to the consumer. Price-offs are
. excellent at stimulating sales of an
existing product. They can entice
customers to try new products as lower
prices may reduce the financial risk of
making the purchase.

They can encourage customers to switch brands in brand parity

situations or when no strong brand loyalty exists. .
 Retail Price-offs
• The retailer can initiate a price-off promotion
for drawing traffic into the store. The idea is
for customers to purchase additional items
other than those on sale. During holidays and
other seasons of the year, price-offs sales are
very common. Retailers advertise major price-
off sales at above occasions.