In
marketing
Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emph ...
, premiums are
promotional items — toys,
collectables, souvenirs and household products — that are linked to a product, and often require
proofs of purchase such as box tops or tokens to acquire. The consumer generally has to pay at least the shipping and handling costs to receive the premium. Premiums are sometimes referred to as prizes, although historically the word "
prize
A prize is an award to be given to a person or a group of people (such as sporting teams and organizations) to recognize and reward their actions and achievements. " has been used to denote (as opposed to a premium) an item that is packaged with the product (or available from the retailer at the time of purchase) and requires no additional payment over the cost of the product.
Premiums predominantly fall into three categories, free premiums, self-liquidating premiums and in-or on-package premiums. Free premiums are sales promotions that involve the consumer purchasing a product in order to receive a free gift or reward. An example of this is the ‘buy a coffee and receive a free muffin’ campaign used by some coffee houses. Self-liquidating premiums are when a consumer is expected to pay a designated monetary value for a gift or item. New World's Little Shopper Campaign is an example of this: consumers were required to spend a minimum amount of money in order to receive a free collectible item. The in-or out-package premium is where small gifts are included with the package. The All Black collectors’ cards found in Sanitarium Weet Bix boxes are a good example of this.
A successful premium campaign is beneficial to a company as it aids in establishing effective consumer relationships. A good campaign will:
* strengthen early-stage
consumer relationships
* encourage continued repeat business
* assist with targeting a specific audience or cohort of your target market
* create an emotional connection with your consumer by serving as a motivational driver to investigate further or purchase a product.
It's also important not to confuse premiums with other forms of sales promotions as there are a number of ways in which retailers can entice consumers.
History
Early premiums
A merchant in
Sudbury,
New Hampshire
New Hampshire is a state in the New England region of the northeastern United States. It is bordered by Massachusetts to the south, Vermont to the west, Maine and the Gulf of Maine to the east, and the Canadian province of Quebec to the nor ...
, started giving out tokens made of copper when a customer made a purchase in 1793. The customer could then exchange the tokens for products in the store. This practice caught on and was used by many merchants throughout the 19th and 20th Century. Sweet Home laundry soap, a product of the B. A. Babbit Company, came with certificates that could be collected and redeemed for color
lithographs
Lithography () is a planographic method of printing originally based on the immiscibility of oil and water. The printing is from a stone (lithographic limestone) or a metal plate with a smooth surface. It was invented in 1796 by the German a ...
. Beginning in 1872, the
Grand Union Tea Company gave tickets to customers that could be exchanged for
merchandise in the company catalog of Grand Union stores. The first trading stamps were introduced in 1891, the Blue Stamp Trading System, where stamps affixed to booklets could be redeemed for store products.
The business of premium redemption
The Sperry and Hutchinson Company, started in 1896 in
Jackson, Michigan, was the first third-party provider of trading stamps for various companies, including dry goods dealers,
gas stations
A filling station, also known as a gas station () or petrol station (), is a facility that sells fuel and engine lubricants for motor vehicles. The most common fuels sold in the 2010s were gasoline (or petrol) and diesel fuel.
Gaso ...
and later
supermarkets.
S&H Green Stamps
S&H Green Stamps was a line of trading stamps popular in the United States from 1896 until the late 1980s. They were distributed as part of a rewards program operated by the Sperry & Hutchinson company (S&H), founded in 1896 by Thomas Sperry a ...
, as the company was commonly called, opened its first redemption center in 1897. Customers could take their filled booklets of "green stamps" and redeem them for household products, kitchen items, and personal items.
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposing ...
put the trading stamps premium business on hold for a while, but when the G.I.s returned, the economy was robust, and the trading stamps business took off like a storm when numerous third-party companies created their own trading stamp programs to offer to supermarkets and other retailers. The bottom fell out of the trading stamp business in 1965, when supermarkets stopped issuing stamps altogether and started spending more money to advertise lower prices. Trading stamps have gone by the wayside of the modern retail marketing method of
loyalty cards used widely in supermarkets where, instead of premiums, customers benefit from savings and convenience through coupon-free discounts.
Children's premiums
Kellogg's Corn Flakes
Corn flakes, or cornflakes, are a breakfast cereal made from toasting flakes of corn (maize). The cereal, originally made with wheat, was created by Will Kellogg in 1894 for patients at the Battle Creek Sanitarium where he worked with his bro ...
had the first
cereal premium with ''The Funny Jungleland Moving Pictures Book''. The book was originally available as a
prize
A prize is an award to be given to a person or a group of people (such as sporting teams and organizations) to recognize and reward their actions and achievements. that was given to the customer in the store with the purchase of two packages of the cereal. But in 1909, Kellogg's changed the book give-away to a premium mail-in offer for the cost of a
dime. Over 2.5 million copies of the book were distributed in different editions over a period of 23 years.
At the beginning of the Second World War,
radio
Radio is the technology of signaling and communicating using radio waves. Radio waves are electromagnetic waves of frequency between 30 hertz (Hz) and 300 gigahertz (GHz). They are generated by an electronic device called a transmi ...
was a big player in the promotion and distribution of premiums, usually toys that were closely related to the radio program. There were many
radio shows that offered premiums to their listeners, but ''
Captain Midnight'' was one of the best known. The early sponsor of Captain Midnight was
Skelly Oil
Skelly Oil Company was a medium-sized oil company founded in 1919 by William Grove (Bill) Skelly, Chesley Coleman Herndon and Frederick A. Pielsticker in Tulsa, Oklahoma. J. Paul Getty acquired control of the company during the 1930s. It b ...
, and parents could get forms to mail-in for radio premiums at the gas stations. Later,
Ovaltine
Ovaltine (also known by its original name Ovomaltine) is a brand of milk flavoring product made with malt extract (except in the blue packaging in the United States), sugar (except in Switzerland), and whey. Some flavors also have cocoa. Ovalt ...
became the sponsor of ''Captain Midnight'', and it continued the premiums through advertising on the labels and foil tops of Ovaltine that could be collected to exchange for ''Captain Midnight'' premiums and offering membership to the "Secret Squadron".
Premiums hit home
Betty Crocker products, owned by
General Mills
General Mills, Inc., is an American multinational manufacturer and marketer of branded processed consumer foods sold through retail stores. Founded on the banks of the Mississippi River at Saint Anthony Falls in Minneapolis, the company orig ...
, had one of the best-known premium programs when the company started inserting
coupon
In marketing, a coupon is a ticket or document that can be redeemed for a financial discount or rebate when purchasing a product.
Customarily, coupons are issued by manufacturers of consumer packaged goods
or by retailers, to be used in r ...
s in bags of flour in 1929 which consumers could collect and use to purchase
Oneida flatware at a reduced price. In 1932, the popular coupon program was improved so that consumers could redeem coupons for an entire set of
flatware — the pattern was called "Friendship". Beginning in 1937, the coupons were printed on the outside of the box with point values and could be redeemed through the ''Betty Crocker Catalog'' in exchange for
cookbooks, kitchenwares, and home accessories, as the box tops stated, for 25 to 75 percent savings.
Fred Reichheld
Fred may refer to:
People
* Fred (name), including a list of people and characters with the name
Mononym
* Fred (cartoonist) (1931–2013), pen name of Fred Othon Aristidès, French
* Fred (footballer, born 1949) (1949–2022), Frederico Rodr ...
(1996) ''The Loyalty Effect'', Harvard Business School Press, Boston, 1996. To avoid confusion with cents-off coupons, the premium program was renamed "Betty Crocker Catalog Points" in 1992. General Mills retired the ''Betty Crocker Catalog'' in December 2006 and ended the premium program after 75 years. (Now that the premium program is no longer in effect, consumers can clip "Box Tops for Education" that are printed on Betty Crocker products to help schools pay for educational supplies.)
Premiums in the 21st century
Premiums have come a long way since the 19th century and although they are rarely referred to as “premium campaigns”, the concept itself is still very much relevant to today's marketing professionals. Let's look at New World's Little Shopper promotion implemented by Foodstaffs in 201. The promotion called for customers to spend a minimum of $40 in store, in order to receive one of 44 free mini grocery items. The grocery items were identical, miniature replicas of actual products found within the supermarket. The brands of the products in which were represented in the campaign had paid Foodstaffs to be included.
[Stop Press NZ. (2013, 12 3). ''Little Shop of dollars: New World celebrates the success of its tiny promotion''. Retrieved from Stop Press NZ: http://stoppress.co.nz/news/little-shop-dollars-new-world-celebrates-success-its-tiny-promotion]
In taking this approach, Foodstaffs created an opportunity for its suppliers to also take advantage of brand encounters targeting consumers who may not have necessarily been aware of their products. The use of persuasive communication techniques, i.e., television and radio advertisements created positive attitude changes amongst shoppers who may not have necessarily been loyal to a particular supermarket, aiding the company to expand their consumer reach and market share. The Little Shopper promotion also created a buzz amongst the younger generations with reports of parents succumbing to the ‘pester-powers’ of their child's fear of missing out.
[Edwards, J. (2015, 8 28). ''How the collectables craze is turning children into brand-savvy shoppers''. Retrieved from Stuff.co.nz: http://www.stuff.co.nz/business/better-business/71450282/how-the-collectables-craze-is-turning-children-into-brandsavvy-shopper]
The return on investment for the Little Shoppers ‘premiums’ campaign was as much tangible as it was financial. It also left a lasting impression on consumers even after the campaign had closed. Media reported on countless social media posts and TradeMe listings from consumers attempting to buy or swap the collectables in order to complete their set.
The promotion also led to creative spin-offs with consumers
upcycling
Upcycling, also known as creative reuse, is the process of transforming by-products, waste materials, useless, or unwanted products into new materials or products perceived to be of greater quality, such as artistic value or environmental value ...
the miniature products for wearable art competitions, again expanding Foodstaffs consumer reach.
The Little Farmers of Kissanpur is another highly successful premium campaign run by the Indian Ketchup brand Kissan. The campaign placed 22nd on the 2015 WARC list of the world's 100 best marketing campaigns. The brands tagline ‘made with real tomatoes’ was brought to life inside the consumer's home. By redesigning the products packaging to be more effective and of use to the consumer, the company designed a new bottle top. The new bottle top included tomato seeds in which consumers were encouraged to plant in order to grow their own Kissan tomato plant. In addition to providing the means to grow your own plant, Kissan followed up with a competition giving children who grew the best plants the opportunity to feature on the bottles. WARC reported that consumption of the brand grew to over 2.5 times the rate of the category.
[WARC. (2015). ''WARC Top 100''. Retrieved from WARC: http://www.warc.com/Rankings.100?DataType=Top100Campaign&Year=2015#]
Legality
Whilst the law in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
and the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...
governing premiums is relatively lax, it is comparatively stricter in several other countries.
Belgium
Belgium, ; french: Belgique ; german: Belgien officially the Kingdom of Belgium, is a country in Northwestern Europe. The country is bordered by the Netherlands to the north, Germany to the east, Luxembourg to the southeast, France to th ...
,
Germany
Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
, and
Scandinavia
Scandinavia; Sámi languages: /. ( ) is a subregion in Northern Europe, with strong historical, cultural, and linguistic ties between its constituent peoples. In English usage, ''Scandinavia'' most commonly refers to Denmark, Norway, and Swe ...
have strict
consumer protection laws
Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace. Consumer protection measures are often established by law. Such laws are intended to prevent business ...
regulating the use of premiums. In
Argentina
Argentina (), officially the Argentine Republic ( es, link=no, República Argentina), is a country in the southern half of South America. Argentina covers an area of , making it the second-largest country in South America after Brazil, th ...
,
Austria
Austria, , bar, Östareich officially the Republic of Austria, is a country in the southern part of Central Europe, lying in the Eastern Alps. It is a federation of nine states, one of which is the capital, Vienna, the most populous ...
,
Norway
Norway, officially the Kingdom of Norway, is a Nordic country in Northern Europe, the mainland territory of which comprises the western and northernmost portion of the Scandinavian Peninsula. The remote Arctic island of Jan Mayen and the ...
, and
Venezuela
Venezuela (; ), officially the Bolivarian Republic of Venezuela ( es, link=no, República Bolivariana de Venezuela), is a country on the northern coast of South America, consisting of a continental landmass and many islands and islets in th ...
, the law governing premiums is so strict that they are effectively banned. In
Japan, the value of a premium is restricted to being no more than 10% of the value of the product that is purchased in order to obtain it. In
Finland
Finland ( fi, Suomi ; sv, Finland ), officially the Republic of Finland (; ), is a Nordic country in Northern Europe. It shares land borders with Sweden to the northwest, Norway to the north, and Russia to the east, with the Gulf of B ...
, it is illegal to describe a premium as a ''free'' gift. In
France
France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of overseas regions and territories in the Americas and the Atlantic, Pacific and Indian Oceans. Its metropolitan area ...
, premiums may not be made conditional upon the purchase of a third product.
See also
*
Loyalty marketing
Loyalty marketing is an approach to marketing, based on strategic management, in which a company focuses on growing and retaining existing customers through incentives. Branding, product marketing, and loyalty marketing all form part of the c ...
*
Pepsi Stuff
Pepsi Stuff was a major loyalty program launched by PepsiCo, first in North America on March 28, 1996 and then around the world, featuring premiums — such as T-shirts, hats, denim and leather jackets, bags, and mountain bikes — that could b ...
*
Radio premium During the time that radio programs were the dominant medium in the United States, some programs advertised "souvenirs" of the various shows, which were sometimes called radio premiums. The first of these were generally cast photographs and the lik ...
*
Trading stamp
Trading stamps are small paper stamps given to customers by merchants in loyalty programs that predate the modern loyalty card. Like the similarly-issued retailer coupons, these stamps only had a minimal cash value of a few mils (thousandths of a ...
References
Bibliography
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Further reading
* {{cite journal, title=The Premium Lure
, first=Elaine, last=Underwood
, date=1992-05-11, journal=Adweek's Marketing Week
, pages=26–27
, issn=0892-8274
Marketing techniques
Customer loyalty programs