Consumer Sales Promotion: Sampling and Couponing

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Consumer Sales Promotion:

Sampling and Couponing

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Chapter Objectives

After reading this chapter you should be able to:1. Appreciate the objectives and classification 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.

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Groupon: A New Model for Couponing

What challenges does Groupon face?

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Brand Management Objectives and Consumer Rewards• Brand Management Objectives (influencing consumer behavior):

• Generate purchase trial and retrial (new customers)• Encourage repeat purchases (current customers)• Reinforce brand images

• Consumer Rewards (encouraging behavior) • Can be classified as an immediate or delayed reward• Consumer rewards also can be both utilitarian and hedonic• Utilitarian

• Monetary savings• Reduced search and decision costs• Improved product quality

• Hedonic• Sense of being a wise shopper• Achieve a need for stimulation and variety• Obtain entertainment value• Being viewed as “tech-savvy”• Socializing with others on a deal

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Classification of Major Consumer-Oriented Promotions

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Sampling Defined

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 Distribution Methods

Direct mail• For example:

Direct mail• Mailed directly to

households• Targeted by

demographic characteristics or geo-demographics

Newspapers and magazines

Door to door by special distribution crews

On- or in-pack sampling

High-traffic locations/unique venues

In-store sampling

Online sampling

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Online Sampling

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Figure 19.1: Sampling Charmin via a Fleet of Tractor Trailers

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Calculating the ROI for a Sampling Investment

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Examples of Targeted Sampling

•A company that specializes in targeted sample distribution developed a program that connected with teenage males by distributing gift packages of product samples (such as shaving cream, razors, mouthwash, and candy) at tuxedo rental shops

•Warner-Lambert came up with the clever idea of sampling Benadryl anti-itch cream at KOA Kampground locations where people are outdoors, and…itch

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When Should Sampling Be Used?

•New or improved brand is demonstrably superior/has distinct relative advantages

•Product concept is so innovative that it is difficult to communicate by advertising alone

•Promotional budgets can afford to generate consumer trial quickly

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Sampling Problems

•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 Defined

Coupon

A promotional device that rewards consumers for purchasing the coupon-

offering brand by providing cents-off or dollars-off savings.

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Figure 19.2: Illustration of Coupon Offers

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Coupon Distribution Methods• Freestanding Inserts (FSIs) (89.4% of all

coupons)• In stores (shelf delivered, instant, handout,

scanner delivered) • Direct Mail• Magazines• Newspapers• In- and On-Package• Online

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Full Coupon Cost

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Coupon Redemption Rates by Distribution Method

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Point of Purchase Couponing

•Instant Redeemable Coupons• Peelable from the package at the point of

purchase• Represent an immediate reward • An alternative to price-off deals• Redemption rate 19.5%

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Point of Purchase Couponing

•Shelf-Delivered Coupons• Instant Coupon Machines, Smart SourceTM

• Machines are attached to the shelf alongside coupon-sponsoring brands

• Redemption rate about 9.1%

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Point of Purchase Couponing

•Scanner-Delivered Coupons• Catalina Marketing Corp. offers two programs• Reward is delayed with the Checkout Coupon• Potentially very effective because they provide a

way to carefully target coupon distribution• Redemption rate about 4%

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Point of Purchase Couponing

•Mobile Phone Coupons• Using mobile phones to aid grocery shopping is of

interest to 40% of consumers• Multiple grocers are developing technology, or

finding partner firms, to allow shoppers to scan groceries and redeem targeted coupons

• Redemption rate about 10.0%

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Mail- and Media-Delivered Coupons

•Highest household penetration (95%)

•*Highest redemption rate of all mass-delivered coupons (3.5%)

• Increase the amount of product purchases

Mail-Delivered Coupons

• Relatively expensive• Inefficient and expensive

for brands enjoying a high market share

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Mail- and Media-Delivered Coupons

•89.4% of all coupons distributed via Sunday newspaper freestanding inserts

•Broad exposure•Relatively cheaper•Reminder function•Advertising function

• Redemption rate is very low (1%)

• Don’t generate much trade interest

• Susceptible to misredemption

• Declining readership

FSIs and Other Media-Delivered Coupons

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In- and On-Pack Coupons

• Included either inside a product's package or as a part of the package’s exterior

•Affords consumers with a delayed reward that is designed more for encouraging repeat than trial purchases

•A coupon for one brand is often promoted by another brand (cross-ruff)

•Advantage: virtually no distribution costs•Redemption rates: 4.4 to 5.0%•Limitations: delayed reward, do not reach nonusers,

do not leverage trade interest

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Online and Social Couponing

•Are distributed by many online sites (e.g., www.coupons.com; www.groupon.com; http://www.livingsocial.com)

•Allows consumers to print their own coupons, at no additional cost to the advertiser

•Has potential for fraud in that criminals can alter their printed coupons

•Can be distributed wirelessly

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Groupon• Social group coupons have exploded onto the scene in the last

several years• Estimated redemption rates range from 78% - 82% once the

coupon is purchased• In Q4 2011, revenues doubled to over $500 million• Yet, Groupon posted a $37 million loss in Q1 2012• Criticisms:

• Successful deals might swamp small businesses with too many customers

• Deals merely attract one-time bargain hunters• An estimated seven out of eight deals suggested by merchants are

rejected

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Figure 19.3: Coupon Redemption and Misredemption Process

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A Coupon Fraud Case: The “Bait” is a Fictitious Coupon (“Broach”)

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The Role of Promotion Agencies

•Specialized Promotion Agencies• Work with brand managers to formulate promotion

strategies and implement tactical programs.•The Rise of the Online Promotion Agency

• A new generation of promotion agencies emphasize online promotions—coupons, sweepstakes offers, online promotional games, free sample offerings, and online continuity programs.