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Premiums: Offers Consumers Can’t Refuse

By Cynthia Ironson

Fact: The success of your brand depends on whether consumers buy your product or service. And it's your job to motivate them to do so. Well-designed, coordinated premium promotions are powerful motivators that can simultaneously provide the impetus to buy and reward consumers for buying. They also stimulate consumer participation in the brand. Technology makes it feasible to create highly targeted interactive programs. Premiums can play a key role in what spurs people to collect points for merchandise, register on a Web site or listen to a promotional message.

As premium programs are now easier to monitor and track, the actual selection of premiums available has expanded. Both factors can help marketers build more effective promotions.

The Basics
Simply stated, consumer premium promotions use gifts, often imprinted, to get buyers to try, buy or remain loyal to a particular brand. There are several vehicles:
  • In-pack, on-pack, near-pack: The gift is packaged in, on, or near a product. (e.g., a free razor with shaving cream).

  • Self-liquidator/free mail-in: Consumers can either buy the gift at a low cost (the sponsor breaks even) or receive it free by mail as a reward for using the brand.

  • Continuity/frequency program: A gift to loyal consumers as a reward for repeat business.

  • Gift with purchase: An item that prompts people to make or increase purchases at the point of sale.

  • Sweepstakes/contests/games: Promotions with prizes to get customer attention and generate increased response.

  • Other examples include traffic-builders, door-openers, direct mail and online programs.
Premium Power
Creative premium promotions can deliver brand-enhancing, sales-building results. An article in Promo magazine perhaps stated it best: "If brands are reacquainting themselves with the full promotional arsenal, marketers can't continue to overlook a workhorse like premiums."

Consumer premium programs are strong for three reasons:
  • Immediacy. Many promotions are instantaneous rewards that provide immediate gratification.

  • Impact. A premium is a tangible and long-lasting, as opposed to cash, that too easily disappears into a wallet.

  • Measurability. When marketers know their costs, the campaign's scope and its objectives, a consumer premium becomes a highly measurable marketing tool.
Premium Promos In Action
In their definitive book, Incentives in Marketing & Motivation, George Meredith and Robert Fried note that the first true consumer premium promotion was a frequency program done in 1851 by Babbitt's soap. Buyers could redeem 25 soap wrappers for a color lithograph.

These days, the climate for premium promotions is favorable. Consumer premium programs are more conspicuous. For instance, many snack food and candy companies offer redemption programs for logoed apparel, small electronics, and other items. Tic Tac, for one, launched "Incredible Stuff." Consumers saved Tic Tac labels and collected points, which could be redeemed for products such as a logoed backpack, beach towel, raft, CD holder, watch, T-shirt or water bottle.

All sorts of firms use consumer premiums for all sorts of reasons: brand awareness, customer retention, new product intros, stimulate multiple-unit purchases, build repeat purchase, enhance image, reinforce brand claim/promise/mission, create goodwill, etc. They're used by, among others, tobacco companies, hotel chains, pharmaceutical firms, cosmetics manufacturers, insurance companies and oil companies.

Among the most ardent users are cereal companies, which discovered the hard way that there's a direct correlation between premiums and sales. "They [stopped] using them and saw sales suffer as a result," says promotional consultant Kevin Hess. "But in the past few years, every cereal box has some kind of … offer, especially kids' cereals."

Typical of this, Kellogg Co. leveraged the timeless appeal of Sesame Street to add impact to its in-packs. After signing a licensing agreement, it inserted Sesame Street Mini Beans, a line of plush beanbag toys, into 25 million boxes of eight cereal brands. The inside of the boxes featured games, quizzes, and cutout activities. This program not only marked Kellogg's return to in-packs (it had stopped in 1995) but it was the highest-value premium in the firm's history.

Significant Trends
Consumer premium promos are also proving effective in today's techno-savvy marketplace. By stimulating brand participation, companies can collect data on buyers and tailor future promotions to them, trying to make the relationship interactive.

Premiums offer marketers a tool to drive traffic to a Web site. Gifts used for online promotions provide a tangible reward from cyberspace. Digital premiums, such as screensavers and other downloadables, are coming into their own. For example, to push its Pampers brand of diapers, Procter & Gamble offered parents a digital baby book for registering on its Web site. This opened the door for ongoing e-mail dialog.

The Net can also help manage and track incentive and premium transactions. Digibates, a payment processing system, allows sponsoring firms to manage all rebate, incentive and refund transactions on a single platform. As it supports cash and non-cash awards, a sponsoring firm can track which awards work best for each customer.

Many firms are also getting involved in co-branding. "They [can] share budget and lower overall costs, double the sales impact, and create a newsworthy event," says counselor Paul Kiewiet. Licensed properties also tend to be hot - sports teams, cartoons, rock groups etc.

For instance, to make the most of the re-release of E.T., Kraft Foods decided on in-pack premiums and a sweepstakes.

The Payoff
Estimating the cost of a consumer premium is complicated, but the potential payoff is high. Remember to factor in costs for the product, packaging, displays, logistics, collateral materials, promotion, distribution, fulfillment/mailing, tracking, administration and evaluation. It's important to consider all elements carefully. Trial and error can produce a flop. Remember; your counselor can help you with nearly every aspect.

Hows, Whys
Your counselor can show you hundreds of thousands of items to choose from. Premiums can also be custom-designed for a brand-specific promo. Then ask, low-end or high-end? Should you use brand-name goods? Does the premium support the brand's image? Does it add value to the brand? Will it appeal to the target audience?

Hess suggests some guidelines - Offer premiums that enhance the brand; Capitalize on the equity of your brand's logo/mascot by incorporating it into the premium item.

Avoid generic items that are readily available at retail. Choose items especially suited to the brand.

Legal End
Legal regulations, safety, and FDA compliance can come into play with consumer premiums. Postal regulations are key. "The big one is the FTC's mail-order rule, which states that if you make an offer to the consumer you must fulfill it within 30 days unless you specify otherwise," says Kiewiet. "That's why so many offers say, 'Allow six to eight weeks for delivery.'"

Premium laws vary from state to state. "Certain states are tougher than others," says Hess. "Some require simply labeling the package if the premium is not suited for all ages. Others settle for any notification on the package. Other states require notification on every part."

If appropriate, safety testing can be done by one of the two major testing agencies, ACTS and STR, which specialize in premium promotions. "It takes as little as a week and usually costs under $2,000," Hess says.

All told, consumer premiums can help you be successful. Just remember to play by the rules.

COPYRIGHT © 2002 The Advertising Specialty Institute. All rights reserved.
Cynthia Ironson is a contributing editor to Imprint.

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