Marketing Communications - Chapter 16 pptx

© 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
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–11
Sampling Methods and Media
Sampling Methods and Media
Direct Mail

Direct Mail
•
Mailed directly to households targeted by
Mailed directly to households targeted by
demographic characteristics or
demographic characteristics or
geodemographics
geodemographics
Newspapers
Newspapers
and Magazines
and Magazines
•
Samples included in magazines and
Samples included in magazines and
newspapers 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 considerable targeting and has
Allows considerable targeting and has
advantages of lower cost and short lead times
advantages of lower cost and short lead times
between a sampling request and when the
between a sampling request and when the

samples are delivered to targeted households
samples are delivered to targeted households
On- or In-pack
On- or In-pack
Sampling
Sampling
•
Uses the package of another product to serve
Uses the package of another product to serve
as the sample carrier
as the sample carrier
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–12
Sampling Methods and Media
Sampling Methods and Media
High-Traffic
High-Traffic
Locations
Locations
•
Shopping centers, movie theaters, airports, and
Shopping centers, movie theaters, airports, and
special events offer valuable forums for sample
special events offer valuable forums for sample
distribution
distribution
In-Store
In-Store

Sampling
Sampling
•
Providing samples in grocery stores and other
Providing samples in grocery stores and other
retail outlets for trial while consumers are
retail outlets for trial while consumers are
shopping
shopping
Sampling at
Sampling at
Unique Venues
Unique Venues
•
Choosing unique locations for sampling
Choosing unique locations for sampling
products appropriate for people at a certain
products appropriate for people at a certain
stage of life, referred to as c
stage of life, referred to as c
hange-point
hange-point
sampling
sampling
Internet
Internet
Sampling
Sampling
•
Distributing samples online through the services

Distributing samples online through the services
of companies that specialize in online sample
of companies that specialize in online sample
delivery
delivery
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–13
Sampling Charmin
via a Fleet of
Tractor Trailers
Figure 16.1
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–14
Major Sampling Practices
Major Sampling Practices
Targeting rather than
mass distributing
samples
Using innovative
distribution methods
where appropriate
Undertaking efforts to
measure sampling’s
return on investment
Prudent Sampling
Practices

© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–15
Calculating the ROI for a Sampling Investment
Table 16.2
Step 1: Determine the total cost of sampling, which includes the cost of the sample goods plus the
costs of distribution—mailing, door-to-door distribution, and so on. Assume, for example, that
the cost of distributing a trial-sized unit is $0.60 and that 15,000,000 units are distributed;
hence, the total cost is $9 million.
Step 2: Calculate the profit per unit by determining the average number of annual uses of the
product and multiplying this by the per-unit profit. Assume, for example, that on average six
units of the sampled product are purchased per year and that the profit per unit is $1. Thus,
each user promises the company a profit potential of $6 when they become users of the
sampled brand.
Step 3: Calculate the number of converters needed for the sampling program to break even.
(Converters are individuals who after sampling a brand become users.) Given the cost of the
sampling program ($9 million) and the profit potential per user ($6), the number of
conversions needed in this case to break even is 1,500,000 (i.e., $9 million divided by $6).
This number represents a 10 percent conversion rate just to break even (i.e., 1,500,000
divided by 15,000,000).
Step 4: Determine the effectiveness of the sampling. For a sampling to be 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
Cengage Learning. All rights
reserved.
16–16

When Should Sampling Be Used?
When Should Sampling Be Used?
1.
1.
When the new or improved brand is
When the new or improved brand is
demonstrably superior or has distinct relative
demonstrably superior or has distinct relative
advantages
advantages
2.
2.
When an innovative product concept is difficult
When an innovative product concept is difficult
to communicate by advertising alone
to communicate by advertising alone
3.
3.
When promotional budgets can afford to
When promotional budgets can afford to
generate consumer trial quickly
generate consumer trial quickly
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–17
Sampling Challenges and Problems
Sampling Challenges and Problems
•
Expensive to implement

Expensive to implement
•
Mishandling of mailing by distributors
Mishandling of mailing by distributors
•
Distribution to the wrong 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 sufficient
Distribution does not reach sufficient
numbers of consumers to justify its expense
numbers of consumers to justify its expense
•
Misuse of samples by customers
Misuse of samples by customers
•
Subject to mail pilferage
Subject to mail pilferage
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–18
Couponing
Couponing
•

Coupon
Coupon

A promotional device that rewards consumers for
A promotional device that rewards consumers for
purchasing 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- or media-delivered coupons
•
Couponing Background
Couponing Background

Nearly 280 billion coupons are distributed annually in
Nearly 280 billion coupons are distributed annually in
the United States.
the United States.

Cost to U.S. marketers is about $7 billion a year
Cost to U.S. marketers is about $7 billion a year
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–19

Illustration of Cents-Off Coupon Offers
Figure 16.2
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–20
Coupon Distribution Methods
Coupon Distribution Methods
•
Freestanding Inserts (FSIs)
Freestanding Inserts (FSIs)
•
Handouts in stores
Handouts in stores
•
Direct Mail
Direct Mail
•
Magazines
Magazines
•
Newspapers
Newspapers
•
In- and On-Package
In- and On-Package
•
Internet
Internet
© 2010 South-Western, a part of

Cengage Learning. All rights
reserved.
16–21
Full Coupon Cost
Table 16.3
1. Face value $1.00
2. Distribution and postage cost 0.40
3. Handling charge 0.08
4. Consumer fraud (misredemption) cost 0.07
5. Internal preparation and processing cost 0.02
6. Redemption cost 0.02
Total Cost $1.59
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–22
Couponing (cont’d)
Couponing (cont’d)
•
Is Couponing Profitable?
Is Couponing Profitable?

Most coupons are redeemed by current brand users
Most coupons are redeemed by current brand users

Households most likely to redeem coupons are also
Households most likely to redeem coupons are also
the most likely to buy the brand in the first place
the most likely to buy the brand in the first place


Companies have to offer coupons to prevent losing
Companies have to offer coupons to prevent losing
consumers to other brands that do offer coupons
consumers to other brands that do offer coupons
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–23
Point-of-Purchase Couponing
Point-of-Purchase Couponing
Instantly Redeemable
Coupons
Shelf-Delivered
Coupons
Scanner-Delivered
Coupons
Point-of-Purchase
Coupons
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–24
Mail- and Media-Delivered Coupons
Mail- and Media-Delivered Coupons
Mail-Delivered
Mail-Delivered
Coupons
Coupons
•
Have 95% household penetration rate

Have 95% household penetration rate
•
Have highest redemption rate of all mass-delivered
Have highest redemption rate of all mass-delivered
coupons (3.5%)
coupons (3.5%)
•
Increase the amount of product purchases
Increase the amount of product purchases
•
Are relatively expensive
Are relatively expensive
•
Are Inefficient and expensive for brands enjoying a
Are Inefficient and expensive for brands enjoying a
high market share
high market share
FSIs and Other
FSIs and Other
Media-Delivered
Media-Delivered
Coupons
Coupons
•
88% of all coupons distributed via Sunday newspaper
88% of all coupons distributed via Sunday newspaper
freestanding inserts
freestanding inserts
•
Provides broad exposure

Provides broad exposure
•
Is relatively cheaper
Is relatively cheaper
•
Serves both reminder and advertising functions
Serves both reminder and advertising functions
•
Redemption rate is very low
Redemption rate is very low
•
Don’t generate much trade interest
Don’t generate much trade interest
•
Susceptible to misredemption
Susceptible to misredemption
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved.
16–25
In- and On-Pack Coupons
In- and On-Pack Coupons
•
Are Included either in or on the product’s package
Are Included either in or on the product’s package
•
Cannot be removed at the point of purchase; it’s for next
Cannot be removed at the point of purchase; it’s for next
purchase
purchase

•
May use a coupon to promote one brand by another
May use a coupon to promote one brand by another
brand (crossruffing)
brand (crossruffing)
•
Have bounce-back value
Have bounce-back value
•
Have no distribution costs
Have no distribution costs
•
Have higher redemption rates
Have higher redemption rates
•
Offer delayed value to consumers
Offer delayed value to consumers
•
Don’t reach nonusers of the carrying brand
Don’t reach nonusers of the carrying brand