Premiums Handbook

Premiums HandBook

Nestec Advertising and Sales Promotion Service Nestle Products Technical Assistance Co. Ltd La Tour-de-Peilz Switzerland

Index Types of premium offers Deal Loaders Free Mail-Ins Self-Liquidating Mail-In In-or On-Package Near Packs Reusable Containers (Premium Packs) Premium Incentives

1 1.1 1.2 1.3 1.4 1.5 1.6 1.7

Premium Development

2

Advertising and Promoting Premiums Trade Advertising Own Sales Force Point of Sale Advertising Display

3 3.1 3.2 3.3

Pre-Testing Research Methods: Ballot Test Show Test Side-by-Side in-Store Tests

4

Evaluation Consumers Panels Ad-hoc Studies Nielsen-type Retail Audits

5 5.1 5.2 5.3

Summary

6

4.1 4.2 4.3

Objectives Being a merchandise incitement, a premium will help to attain most sales promotion objectives. However, there are certain promotional problems, which can be more easily overcome by premiums than others. For example: 1. To step up frequency of consumer purchase. 2. To maintain brand loyalty. 3. To offset price competition. 4. To improve off-season sales. 5. To increase or reduce trade inventories. 6. To activate slow moving products. 7. To secure display space. 8. To increase store traffic. 9. To help consumers use the product correctly. 10. To create a new use for the product. 11. To maintain consumer buying habits. 12. To improve advertising interest and readership. 13. To speed up consumers buying response to advertising. Experience in the marketing of food products has indicated that premiums are more successful in attaining an objective if they are used with a product, which is already well known to the consumers. In other words, a premium promotion is not a type of promotion, which one would use when introducing a new product, or a new flavour, etc.

1.

Types of premium offers

There are a number of methods of offering premiums, all of them differing in certain respects such as: importance of the promotion, to whom the premium is to be directed, the flexibility of the promotion, the redemption rate and most important, the total cost. The most common uses of premiums are as follows: Each participating store received a box of Frisbees which converted into an Instant Display.

1.1.

Deal Loaders

Definition A type of merchandise pak, which is intended to produce a higher incidence of promotion display. For instance, Milo, Nigeria, gave the trade a Frisbee, which was intended to be the central focal point of a display. The premium is offered free to the consumer. For proofs of purchase (2 inner seals).

Advantages  Generate increased merchandising/display activity in store.  Give the company sales force something “new” to talk about.  Relatively low budget method to “fill-out” and vary the promotion calendar. Disadvantages  In-store personnel or consumers may steal the premiums.  Some large food chains have a policy of not accepting dealer loader promotions.  They are only marginally effective against the consumer unless there is a strong on-pack promotion in addition to the dealer loader. Most common uses  To increase promotion “noise level” with a low budget.  As “overlays” with other basic on-pack events such as “cents-off” packs, on-pack premiums, bonus product packs, etc.  As a method of gaining distribution and merchandising or pre-packed display shippers. Consensus Will continue to be used by low budget brands to create interest and excitement. Brands with higher budgets will continue to use them as “overlays” to more basic promotions. Cost considerations Dealer loaders usually run $2-$5($4-$15 retail value) incremental to the cost of the display. With this type of dollar expenditure, it is critical to:  Develop a unique idea.  Use a broad appeal item.  Get the trade’s assessment on a casual basis to avoid a disaster.  Maker sure the premium is of high quality.  If mechanical, be sure of a good manufacturer guarantee.

1.2.

Free Mail-INS

Definition A free, in-the-mail premium is a promotion in which the consumer receives a premium for submitting the required number of proofs-of-purchase. It is used frequently in certain markets where it is too expensive to use in or on-pack premium due to the product’s high turnover rate and wide distribution.

Advantages  Offers can be effective business-building promotion techniques if a valuable, appealing premium is offered.  An appealing item and multiple purchase requirements will force repeat purchase.  Offers can be executed relatively simply at the factory since only a label change is required.  With multiple proof-of-purchase offers, many consumers start to collect proofs but never finish the redemption process (slippage). Disadvantages  Offers the consumers a delayed value rather than one which is immediately available at point-ofpurchase.  They have limited appeal for the group of consumers who seldom or never take advantage of mail-in-offers.  The selection of strong, appealing, mail-in items is a time-consuming task.  The trade is generally unresponsive to mail-in promotions because of the delayed nature of the offer.  If you underestimate the redemption and exhaust the premium supply, the substitution of other premiums or cash may not satisfy the consumer. Most common uses  As a means of encouraging repeat purchase of the product by requiring multiple proofs-ofpurchase.  As a promotional change-of-pace following use of other promotional techniques. Consensus Like premium packs, the appeal and effectiveness of free mail-in offers varies directly with the specific gift offered to the consumer. The strongest free mail-in offers are often equal in appeal to label packs (if the mail-in offer is made on the brand packages).

Cost considerations The cost of a free mail-in promotion is based on three factors:  Cost of the premium.  Cost of handling and postage for each premium.  Number of premiums mailed, depends upon: 1. overall appeal of the item, 2. number of proofs-of-purchase required (if any), 3. number of offers made through special packages and/or print advertising, 4. volume of the promoted brand. Free mail-ins have redeemed in a range of less than 1% up to 25%. Generally, offers made through print advertising alone redeem much lower than those who announce the offer on the pack or use a combination of both. In addition, the greater the number of special offer pack produced, the lower the percent redemption, since beyond a certain point, the offer begins to reach the same homes a second or third time. In establishing free mail-in values and liabilities, it is important to note that the brand can usually afford a mail-in offer, which is several times as valuable as a normal on-pack savings because not all offers will be redeemed. For example, a brand which normally offers a “20¢ Off” label pack can usually offer a “Free 79¢ Glass Mail-in” at a lower cost per package packed, as shown in the following table:

Value of Glass Cost of Glass No. of Packages Packed Redemption Percentage Total Cost

“20¢ Off” 5 100% $1

“Free Glass” 79¢ 50¢ 5 20% 50¢

Obviously, the above is a key factor in determining the available funds and accordingly, the appeal and value of the mail-in offer. 1.3.

Self Liquidating Mail-In

Definition A self-liquidating mail-in offer, is a low-cost or no-cost variation of a free mail-in promotion in which the cost of the promotion is passed on to the consumer. The consumer is required to mail in the stipulated number of proofs-of-purchase, along with sufficient money to cover buying, handling and mailing in return for receiving the merchandise item. The consumer value offered by this promotion technique is based on the promoted brand’s ability to offer an item at 30% - 50% of its regular retail price on a completely self-liquidating basis.

Advantages  They can usually be run at little or (preferably) no cost to promote the brand.  They can be used as justification for a dealer loader to encourage trade support for the brand.  They can be executed relatively simply at the factory since only a label change is required.  They can encourage increased in-store merchandising.  They can create sales force excitement and enthusiasm.

Disadvantages  They are of limited value in building extra consumer business.  Their value to the consumer is delayed.  They have little appeal to the group of consumers who never respond to mail-in offers.  They suffer from overuse by a wide variety of brands.  Trade support is usually poor due to the weak and delayed nature of the offer.  Consumers can be alienated by slow delivery (fulfillment).

Most common uses  To achieve dramatic in-store display.  As the basic promotion tool for low budget periods, particularly for mature brands wanting to hold on to regular users as long as possible.  To build a pattern of repeat purchase by using continuous self-liquidating promotion offers on set-building items. Consensus If the objective is to achieve display, it is unimportant how many premiums are self-liquidated. Their prime function is to gain attention.

Cost considerations As implied by the name, self-liquidating mail-in offer promotions require little or no out-of-pocket cost. The premium cost to the consumer generally covers: 1. the cost of the premium, 2. the cost of special handling and postage, and 3. any additional costs for label or package artwork. However, the cost of any special promotion display material or advertising usually cannot be liquidated and this can significantly increase the total cost of the promotion. Remarks Pick premiums based on their ability to create trade interest and off-shelf display. Chances are you don’t have to manufacture the premium, so don’t worry how many you will sell. Concentrate on the trade. Confine your advertising for premiums to the back of your package. It is difficult to justify using media dollars to push self-liquidators. Make sure the premium encourages use of the product. At least 80% of today’s premiums are not related to the product. They do nothing to encourage brand loyalty. There is a tendency in many markets where this type of premium offer has become commonplace to upgrade the quality and value of the premiums. However, in trying for an appearance of good value, the self-liquidators appeal must not be weakened by exaggerating the claims regarding the retail value, for

the consumer who accepts such an offer is likely to be disappointed and permanently disenchanted with the product, which offered the item. A successful promotion of this type depends upon strong trade support. For these reasons, an error can be costly. Therefore, most users of self-liquidating premiums test their items in some way before going into a full-scale promotion. Certain markets have been very successful in obtaining special display activity at the retail level. 1.4.

In Or On Package

Definition Premium packs offer the consumer the opportunity to obtain a premium packed inside or attached to the package with the purchase of the promoted brand. Generally, the premium is offered “free” with the purchase of the product. The basis for the existence of premium packs is related to the fact that most household, cosmetic or utility items can be purchased in large quantities at 30% - 40% of their retail value. Accordingly, a brand that customarily spends 15¢ per package for a promotion can generally offer up to a 40¢ retail value item free with the purchase of the product (spending 10¢ on the premium and allocating 5¢ for extra packaging expenses). In recent years a wide variety of economical premium packaging techniques and equipment have been produced, so it is now feasible for the majority of brands to use premium pack promotions if sufficient development time is allowed.

Advantages  An effective business-building promotion technique.  Effective and efficient on both 1) new and established brands 2) growing, stable and declining brands.  Offers an immediate consumer value that is readily apparent throughout the period the promotion pack is in distribution.  Premium packs are extremely difficult for competition to duplicate quickly.  Trade reaction to premium packs is generally good and its recognition of them as strong promotion techniques is growing.  The use of the right premium item (ideally, product related) can encourage increased product consumption.  They sell the product by giving a plus at the point of sale.  They attract attention to the product on the store shelf.  They obtain an increase of display activity at the point of sale.  They are a good selling point for the salespersons.

Disadvantages  Requires a relatively long time (up to 12 months) to develop, test and sell nationally.  It is difficult to select and test successfully enough premiums to provide a constant backlog of strong items.  Frequently require extra manufacturing and packaging effort at the factory.  Can be mutilated on the shelf thus rendering the package unsalable.  Often experience shipping problems.  If the premium does not perform to the expectation of the consumer, it can have a negative influence on the brand itself.  Slow moving premium packs are a present reminder to the trade of failure. In some cases, they must be exchanged at store level, which is an expensive procedure.  If not positioned properly, the consumer may believe she is paying “extra” for the premium.

Most common uses  When a brand needs a strong, effective promotion, assuming that an adequately tested premium pack promotion is available.  As a promotional change-of-pace, following frequent use of other promotion techniques.  When a brand needs a particularly strong trial device. Consensus A premium pack can be more effective than “cents-off” label pack if the proper premium item is used. However, unlike label packs, which have some appeal to almost all consumers, premium items generally have appeal to a more limited group. Care must be taken to ensure that selected premiums have substantial appeal to a significant number of consumers. It is thus essential that all premium packs be thoroughly tested before broad-scale use.

Cost considerations For “free” premium packs, the trade list price remains the same as on regular stock; the trade continues to make the same dollar and percent profit. For premium packs on which the consumer is charged an additional amount (to partially defray the premium cost), the trade list price is increased by the amount of this charge minus normal trade percent profit on this charge. Thus, the trade receives its normal percent profit on the total value of the pack, increasing its dollar profit, as shown in the following example: Regular Free Premium Stock Premium Stock for 10¢ Stock Retail Price/Pkg $0.75 $0.75 $0.85 Trade Cost/Pkg $0.60 $0.60 $0.68 Trade Profit/Pkg $0.15 $0.15 $0.17 * 20% 20% 20% * Trade profit is generally computed by the trade based on retail price rather than trade cost. The use of premium packs on which the consumer is charged an additional amount enables the brand to: 1. offer an item of greater value than would normally be affordable or 2. offer an item of normal value at a reduced cost to the brand. However, it is important to use caution in considering this device, since: 1. “free” is a very appealing and compelling word which can add substantially to the strength of any pack and 2. a pack involving additional payment for the premium can actually slow brand consumer movement if the item does not have broad appeal, since consumers who do not want to obtain the item must still pay for it in order to obtain the brand. Remarks Free premium packs are usually prepared at the factory, as the name implies, although some premiums of this type are joined to the product by the salesperson or at times even the retailer. This is not recommended. When the premium is in the package there are certain advantages, such as, it is well protected, it cannot be stolen and it does not take up extra shelf space. However, the premium is not seen and therefore the package requires a special label to announce the offer and furthermore, changes on the factory packing lines are often required to place the premium inside the package. An important point with in-pack premiums is that care must be taken to meet all requirements of the local food and drug regulations. E.g. non-toxic and odourless materials, for e.g. foreign materials should never be permitted to come into immediate contact with food products. Select your premium with great care. A good in-or-on-pack premium can create more new triers than a price-off deal, because consumers see that you’re giving more value. But if your premium is bad, it will actually kill sales. Homemakers abhor the idea of throwing away anything new, even if it is free! Try to force off-shelf display. Advertising does not accomplish much for premium packs. However, offshelf display can boost market share. 1.5.

Near Packs

Definition Unique types of merchandise offers intended to produce more displays in stores participating in the promotion. They usually provide the trade with free consumer premiums packed in special display pieces. The trade then offers the consumer a free gift with the required purchased of the promoted product.

This type of promotion is presented to the trade on the basis of one free premium with one or more units of the promoted product, which the trade purchases and agrees to display. Once the order is placed, the appropriate numbers of premiums – prepackaged in display pieces – are delivered directly to the retail trade for in-store displays. In many instances both the premium and product are pre-packed in self-shipping display containers that results in overcoming many logistical problems when they are packed and shipped separately.

Advantages  Help assure displays in accounts that participate fully in the promotion.  Are effective in building sales in those stores putting up displays.  Are a relatively new a unused promotion technique for many product categories.  Offer an immediate, apparent consumer value.  Are difficult for competition to duplicate quickly.  Do not require special packaging devices.  Can be less expensive than on-packs because packaging is not required. Disadvantages  They are much more susceptible to consumer and trade pilferage than other forms of premium redemption promotions.  They are difficult to handle and supervise to ensure proper usage in all stores that accept the offer.  The product is completely un-promoted in those stores that did not participate.  The effective limits of the promotion period are determined by the length of time the trade is willing to maintain the display. Generally, this is no more than two weeks versus four to six weeks for alternate types of on-package promotions. Most common uses  When no feasible method can be developed to pack a strong premium item on a product. With low per store volume and an extended purchase cycle.  As a promotional change-of-pace after repeated use of other display oriented promotion techniques. Consensus Near-pack promotions can be used effectively to produce display if: 1) the basic volume/purchase cycle parameters of the brand are low enough, and 2) the logistics of display building take into account sales resources.

Cost considerations The cost of a near-pack promotion depends on three factors: -

Cost of Premiums:

The cost of premium and the number of premiums used represent the largest single promotion expense. This cost varies widely, depending on the type of premium offered and the sales volume of the product, since both factors directly affect the number of consumers who will take advantage of the offer. -

Cost of Delivery Premiums to the trade:

The second major cost factor in a near-pack promotion is the expense of delivering the premiums to the trade. Again, this varies depending upon the weight of the premium and the number of units shipped. -

Cost of Display Material:

Frequently, near-pack premiums are shipped in a specially produced display bin to ensure a more effective in-store display. While the cost of these display pieces will vary, depending on the size and construction of the display piece used, they must be included in the total promotion budget.

1.6.

Reusable Containers (Premium packs)

Definition Basically, a container pack promotion involves packing the product, either in bulk of in its standard package, inside a reusable container (e.g. carafe, canister, refrigerator dish). This combination is then sold either at the product’s regular price or at a higher price to offset the extra cost of the reusable container. One of the particular strengths of the container pack concept is that the cost of the product’s regular container (frequently a significant amount) can be then be applied to the cost of the reusable container. This, plus the per package sum usually spent on a promotion, can often turn up sufficient funds for the brand to offer an appealing item at no extra cost to the consumer.

Advantages - Can be an effective business-building promotion technique. - They are effective on both 1) new and established brands and 2) growing, stable, or declining brands. - They offer the consumer an immediate, apparent value on the shelf during the entire period when in distribution. - They cannot be quickly duplicated by competition. - These packs are often voluntarily displayed off the shelf, thus increasing their exposure in the store to the consumer. - A container related to the use of the product can have long-range benefits in increasing home consumption rate of the product.

Disadvantages - Container packs require a relatively long time to develop, test and produce for national use. - It is difficult to find items suitable for container pack use, compatible with cost, factory feasibility and handling limitations. - They frequently require major modifications in factory handling and packaging. - They have been known to pose extensive shipping problems. Most common uses - Whenever a brand needs a strong, effective consumer promotion, assuming that an adequately tested container pack promotion is available. - To supplement the basic appeal of the product by offering a quality reusable container (or related). Consensus Container packs are equally as strong as or stronger than off-label and merchandise packs. As discussed relative to premium packs, it is important that reusable containers be selected and tested carefully to ensure that a strong, appealing container is used. Cost considerations see in or on-package. Remarks Container packs are not easy to design, manufacture and put into implementation. Therefore, extreme caution must always be exercised before this type of promotion is instigated. In addition, the manufacturer must make sure that the premium pack is acceptable to the majority of the consumers of this product. To do this, research and market testing is essential.

1.7.

Premium Incentives

Definition A trade premium promotion offers the account and/or the individual buyer a gift as an incentive to provide specified support for the promoted brand. In some trade premium promotions, the trade is given the gift for buying, displaying or advertising the promoted brand. In other instances, the premium is included as part of a promotion display piece (e.g. as a sample of an accompanying consumer offer) which becomes the property of the trade once it is used. Trade premium promotions are usually a minor part of a brand’s total promotion programme and represent a small portion of the promotion’s total cost. Advantages - Trade premium promotions are relatively inexpensive. - They can lead to increase trade support, if properly executed. - They can positively affect distribution and display. Disadvantages - It is against many retail policies for buyers to accept trade premiums. Most common uses - As a supplementary promotion offer designed to secure additional trade support. - To include distribution in direct accounts. Consensus The use of premium incentives can effectively influence both large and small retailers. Cost considerations Cost of trade premiums and prizes must be determined locally. Each premium being considered has its maximum costs determined by 1) the number of dealers to be covered and 2) available funds for this type of supplementary trade effort.

2.

Premium Development

Premiums are very versatile and extremely effective. However, they require a great deal of development and testing to assure success. The improper use of a premium can be very costly from a financial standpoint and can ruin a brand’s franchise. For the purpose of this discussion, it is assumed that an unbranded premium has been selected and that is available from a number of competing suppliers. Of course, if the premium selected has a well-known brand name (Philips radios, Kodak camera) or is available from one source only, due to patent ownership, the supplier question is far less complicated – although some of the same screening principles unquestionably still apply. Experience indicated that effective dealings with suppliers involve four basic steps. These are:

a)

Initial Survey:

At the outset, a questionnaire should be mailed to a number of potential suppliers (preferably at least 3) to gain factual information about their operations. Key points to cover include: - Standard prices; - Term of sale; - Bank references; - Customer references; - Suppliers of raw materials; - Location of manufacturing facilities; - F.O.B point for shipping; - Production capacity and feasibility; - Annual sales (and the percentage represent by the premium business).

b)

Reference Check:

The second is to check references: customers, credit card and bank. Key questions to at this point are: - Are the prospective suppliers capable of handling a promotion of this size and complexity? - Do they have a good experience record for delivering premiums on time and in the desired quantities? - How competent and helpful are their personnel? - Is their credit sound and are they financially secure?

c)

Personal Interviews:

The next step is to visit the premises of all remaining candidates and interview key personnel. Points to discuss include: - Union contracts and labour relations. Make sure no strikes are pending. - Quality standards and control procedures. Are their normal standards of performance as high as your requirements? - Their dealings with their own suppliers, including delivery, lead times, potential suppliers’ union problems, etc. - Warehousing procedures, including inventory levels, stock rotation, etc. - Services provided. Most importantly, do they solve problems or just complain about them? After this third step, the number of potential suppliers has generally been narrowed down and the time has come to start final negotiations.

d)

Negotiations:

Although negotiations actually begin the moment when contact with a potential supplier is first made, the final stages are by far the most important. The ultimate terms of agreement depend on the experience and capabilities of the people involved and prevailing conditions of supply and demand. Some additional points to cover include: - Unit cost and quantity discounts. - Payment terms. - Tooling and die cost policies. - Exclusive use of the premium during the promotional period with some carry-over. - Timing and place of delivery. - Penalty clauses for late delivery. - Quality guarantees. - Replacement procedures and policies concerning defective units. - Packaging on delivery: in bulk, in individual mailing containers, etc. - Concessions for advertising and point-of-purchase materials featuring the premium item when major and expensive prizes – offered in limited quantities – are a consideration in planning a promotion, it may be possible to negotiate favorably with their manufacturers by stressing the trade-out publicity, the supplier company will receive throughout the campaign period. For example, if the promotion premium centers on such major items as cars, air travel of similar premiums, is can be pointed out during negotiations that the supplier will benefit importantly by receiving a significant degree of public attention without significant increase in advertising expenditures. When a premium promotion of any nature is under consideration, these points should be studied: -

Determine the specific objectives that are hoped to be achieved by utilizing a premium. Establish the markets to be influenced. Determine the age group of the consumers the premium is to influence. Then decide if a self-liquidator, in-pack, on-pack, continuity coupon plan, etc best accomplish the objectives. Consider the amount and type of media, which is to be used to promote the premium.

Once the promotion has been completely planned and is under way, it is necessary at this stage to set up a system of measurement to measure the effectiveness of the activity. There are three areas where this is of importance: -

-

Stock Controls: So as to be in position to anticipate re-orders quickly if the original order or subsequent re-orders are running low. Reporting procedures on returns: These are indicative on how the promotion is being accepted not only on a national or regional basis but also on a sales area as well as by consumers and retail trade. This information is necessary to make a proper evaluation of the results. At the end of a promotion, it is necessary to analyse the results in terms of the objectives achieved with the premium as well as relationship to the budgeted cost.

3.

Advertising & Promotions Premiums

Media vehicles Newspapers, radio, TV, magazines, direct mailers. The package -

Special copy is used on the package sides or back panel. Inside of fold-up cartons. Special stick-ons or attached strips. Package inserts. Die-cut tags that dealers or salespersons can attach to merchandise already in stock.

There are four other areas where promoting a premium is important: 3.1.

Trade Advertising

Do not underestimate the importance of merchandising the premium to wholesale and retail distributors. Co-operation and goodwill are won by telling them of your activity through: - business papers, direct mailers, house magazines, special sales kits used by salesmen or furnishing jobber salesmen with special enclosures for their own sales kits. 3.2.

Own Sales Force

A premium plan or special offer gives salespersons something to talk about. These points should be considered: - Give the offer an attractive name. - Play up the significance of the premium deal at special sales meetings. - Merchandise the advertising drive that will be put behind the offer. - Have a contest based on sales volume obtained during a special period. - Give salespersons samples of the premium offered, so they may show or give them to distributors. 3.3.

Point of Sale Advertising

Advertising premium offers at the retail point of sale is very important. It is at this level that the effect of the media advertising is catalyzed. It is best that the advertiser arranges to have a variety of display pieces that fit different store needs. 3.4.

Display

Whenever possible, the actual premium should be displayed at the retail level. This can be done in the following ways: - As part of a window display. - Mounted on a window display. - Mounted on a counter display. - As part of a counter display. - As part of a floor display - When sold as a unit with the package.

4.

Pre-Testing

There is a lot which is still unknown about the usage and benefits of premiums. However, the risk of failure is diminished and an increase in success can be achieved if decisions are based to a much greater degree on facts obtained by sound objective research. These comments are especially relevant if one considers that pre-testing and evaluating premium activity is probably easier and less costly than carrying similar activity on any other promotional method. In certain of our markets, just the size, scope and investment of premium activity is ample ground for providing the same caliber of research as we do for media advertising. This section provides an overview of the principle research techniques, which can be applied to pre-test premium offer.

Research Methods 4.1.

Ballot Test

These measures the relative appeal of alternative mail-in premium offers. Leaflets are prepared for each mail-in offer, which are then sent by post to matched groups of selected households and the redemption levels compared. Each offer has to be mailed to a relatively large sample of households (normally 500 or more per offer) to ensure a sufficient incidence of target group consumers and of actual redemptions. With such a test, it is useful to include a previously run promotion which has been successful, as a control item. This will help to assess what redemption level can be judged as satisfactory. This approach has the advantage of being relatively inexpensive to execute (although, of course, printing costs will be occurred). It permits the simultaneous screening of a number of alternative mail-in offers. 4.2.

Show Test

This measures the relative appeal of alternative premiums. The basic technique is to show the actual premiums or illustrations of them to a sample of 50 – 100 target group consumers. Respondents either evaluate each premium on a rating scale, ranging from “excellent” to “very poor” or rank order the items in terms of overall liking. The scores obtained for each item are compared. As in the case with ballot testing, the insertion of a control premium, which has already been used successfully, is advisable. This approach has the advantage of being inexpensive and speedy to implement. However, show tests only provide a rough indication of the relative consumer appeal of different premium items since they only measure claimed preferences in a rather artificial setting and not actual consumer behaviour. 4.3.

Side-by-Side in-Store Test

This measures the relative consumer appeal of one premium offer versus another of comparable kind and cost. Both offers are displayed side-by-side in the same group of 4 - 8 stores, normally for a one-totwo week period and the off-take of each is compared. This type of test is commonly used to test the interest in various types of on or in-pack premiums. This approach provides a more reliable indication of relative consumer appeal because the customer must actually buy the product of her choice rather than simple verbalise the choice as in a show-test. On the other hand, in-store research is expensive and requires the agreement of the store managers who are nowadays becoming more reluctant to give permission for this type of research. The marketing research guidelines N7 on sales promotion research also describes the application of matched retail panels and market tests for pre-testing alternative promotion ideas. These techniques

have the advantage of providing volume estimates for each promotion. However, they are very much more costly than the methods described above and would not normally be considered for premium testing.

5.

Evaluation

The evaluation of premium promotions has to be based specifically on the objectives set for the activity. Premiums are often used to attain frequency of consumption objectives, which could be “to improve off-season sales”, “to step up frequency of consumer purchase”, “to activate slow-moving products”. In this case, the measurement of success is based on the difference of consumption of a product due to the promotion. Success can be evaluated in a number of ways:  Incidence of trial and repeat purchase during and after the promotion (consumer panel or individual ad-hoc interviews)  Changes in total sale and brand share movements (retail audits) To obtain a true measurement of a premium promotion’s success in attaining one of these objectives, ideally it would be necessary to measure the number of people within the promotion sample taking up the offer and their repeat purchase in a matched control sample (where no sales promotion activity is being carried out). This is the most conclusive type of evaluation which can be done. However, it is not always necessary to go to these lengths and analyzing the sales trends of the product by size, region, etc, can frequently supply sufficient information to indicate whether the premium is successful or not. When premiums are used to attain distribution objectives, the evaluation which has to be made is the percentage distribution gained over a control sample or compared with previous distribution levels. The difference between these two factors will indicate the success of the promotion. If necessary, the information obtained can be worked down to a “cost of gaining a new loyal outlet” level. The information on distribution has to be obtained from store auditing. In markets where store audits on major products are already part of the research activity this presents no difficulty. However, if this is not the case, a special store audit on such a scale can prove to be relatively expensive. There are three possible research methods for determining the success of a promotion campaign. 5.1.

Consumer panels

Method: A consumer panel consists of a representative sample of several hundred individuals or households in key geographical areas. Normally by means of a diary or a dustbin (in which panel members place all the used packs of the grocery products they have purchased), the purchases of each panel member are monitored over time. Accordingly, a panel generates consumer-based information explaining what lies behind the shifts in total sales during and after a promotion, as well as the extend to which the promotion has reached our defined primary target groups for the promotion. Conclusions: This approach offers the most accurate means of assessing the effectiveness of a sales promotion campaign, in terms of both its short-term and longer-term implications. By monitoring purchasing patterns, before during and after promotion, a consumer panel can provide accurate data on:  Shifts in total sales during and after the promotion.  Where the new business comes from, new buyers, existing occasional or loyal buyers.  The incidence of repeat purchase during and after the promotion.  The extent to which current users have simple brought forward their purchases because of the sales promotion.

 The extend to which current users have simply brought forward their purchases because of the sales promotion.  Also, by comparing the cost of the promotion with the extra business generated (short and long term), a pay-out estimate can be arrived at. Normally, consumer panel data is flexible enough to be analysed in various ways. Special analyses to investigate a certain product field over a given period can be speedily implemented. The main practical difficulty is the complex nature of consumer purchasing behaviour, in that individual rates of buying a product and of brand switching may be changing continually, even in what appears to be a relatively static market. This means that the data has to be minutely analysed, with special attention being given to prepromotion purchasing patterns, against which changes during and after the promotion need to be assessed. 5.2.

Ad-hoc studies

Method: Types of promotional campaign e.g. mail-in offers, competitions, the names and addresses of people who have taken up the promotion may be known. A specific ad-hoc study can be instigated some weeks after the promotion (the exact time interval depending on the purchasing cycle within the product category) with a representative sample of these consumers to investigate their buying behaviour during and after the promotion. Interviewing can be carried our by mail, telephone or door-to-door. If personal interviews are selected, then the names and addresses have first to be grouped geographically to restrict fieldwork cost. Conclusions: This approach is an efficient way of evaluating certain types of promotion when names and addresses are known. However, as the results are based on claimed rather than actual consumer behaviour, ad-hoc studies provide less accurate results than consumer panels. 5.3.

Nielsen-type retail audits

Method: In essence, a representative sample of retail outlets are visited by auditors at predetermined intervals. At each visit, the auditors count the stock and record deliveries to the store since their last visit. Sales during the interval between visits are given by the calculation by past stocks + delivery – present stocks. Depending on the objectives set for the promotion, Nielsen-type retail audits can measure:  Changes in total sales and brand share movements during and after the promotional periods.  Distribution achieved by the promotional product in the retail outlet, i.e. the number of stores handling the product.  Shelf space achieved by the promoted product in relation to competitive brands.

Conclusions: Nielsen-type store research can be applied to evaluate the success at the trade level of both consumer and trade promotions. However, for assessing the success of promotions at the consumer level, Nielsen-type retail audits are second-best solution after consumer panels. The main limits are:  They provide no information on the consumer: who is buying, what are their buying patterns, etc.  The timing of the audit in the field spreads over a full 2-month period with some stores being checked at the beginning and some at the end of this measurement period. Accordingly, it is not possible to completely allocate audit sales data to the actual starting and finishing date of a promotion.  Retail audits are highly organized and inflexible. It may be impractical or very expensive to adapt an ongoing service to the specific needs of promotional assessment.

6.

Summary

There are a number of check points which should be kept in mind: 1. Plan the premium promotion well in advance. 2. Time your offer carefully. 3. Make sure your offer is fair. 4. Make it easy for the consumer to get the premium. 5. Whenever possible do not put your name or trademark on premiums as this cheapens the value of the premium in the eyes of the consumer. (Although we appreciate that this is a legal requirement in some markets, e.g. France.) 6. Personalize the premium is you can. 7. Whenever possible avoid any premium that competes with merchandise your retail outlets sell. 8. Do not make a profit on your premiums when cash is required as part of the offer. 9. Prevent the retail trade from splitting deals. By this, we mean the store owner taking an on-pack premium off the carrier product and selling it separately at a normal profit. 10. Make it easy for the retailer to handle your premium. 11. When calculating your premium cost, be sure to include the cost of handling, postage, claims and coverage. 12. Do not glorify the premium. Exaggerating the benefits of the item leads the consumer to expect more than she actually receives. 13. Show the premium in advertising, but do not exaggerate its size. 14. Do not exaggerate the value of the premium. If the premium is not worth 5 francs, do not say it is. Women, as well as children, have a keen sense of value.