Premium (marketing)
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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 empha ...
, premiums are promotional items — toys,
collectable A collectable (collectible or collector's item) is any object regarded as being of value or interest to a collector. Collectable items are not necessarily monetarily valuable or uncommon. There are numerous types of collectables and terms t ...
s, 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 An award, sometimes called a distinction, is something given to a recipient as a token of recognition of excellence in a certain field. When the token is a medal A medal or medallion is a small portable artistic ...
" 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 U.S. state, 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 t ...
, 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 Planographic printing means printing from a flat surface, as opposed to a raised surface (as with relief printing) or incised surface (as with intaglio (printmaking), intaglio printing). Lithography and off ...
. Beginning in 1872, the Grand Union Tea Company gave tickets to customers that could be exchanged for
merchandise Merchandising is any practice which contributes to the sale of Product (business), products to a retail consumer. At a retail in-store level, merchandising refers to displaying products that are for sale in a creative way that entices customer ...
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 Jackson is the only city and county seat A county seat is an administrative center, seat of government, or capital city of a county or parish (administrative division), civil parish. The term is in use in Canada, China, Hungary, Romania, Taiwan ...
, 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 A fuel is any material that can be made to react with other substances so that it releases energy as thermal energy or to be used ...
and later
supermarket A supermarket is a self-service Retail#Types of outlets, shop offering a wide variety of food, Drink, beverages and Household goods, household products, organized into sections. This kind of store is larger and has a wider selection than earli ...
s.
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 and ...
, 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 World War II by country, vast majority of the world's countries—including all of the great power ...
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 card A loyalty program is a marketing strategy Marketing strategy allows Organizational structure, organizations to focus limited resources on best opportunities to increase sales and achieve a competitive advantage in the market. Strategic marke ...
s 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 Keith Kellogg, Will Kellogg in 1894 for patients at the Battle Creek Sanitarium where he wo ...
had the first
cereal A cereal is any Poaceae, grass cultivated for the edible components of its grain (botanically, a type of fruit called a caryopsis), composed of the endosperm, Cereal germ, germ, and bran. Cereal Grain, grain crops are grown in greater quantit ...
premium with ''The Funny Jungleland Moving Pictures Book''. The book was originally available as a
prize A prize is an award An award, sometimes called a distinction, is something given to a recipient as a token of recognition of excellence in a certain field. When the token is a medal A medal or medallion is a small portable artistic ...
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 telecommunication, 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 ...
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 ''Captain Midnight'' (later rebranded on television as ''Jet Jackson, Flying Commando'') is a United States, U.S. adventure franchise first broadcast as a radio serial from 1938 to 1949. The character's popularity throughout the 1940s and into ...
'' 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 solids, c ...
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 Betty Crocker is a brand and fictional character used in advertising campaigns for food and recipes. The character was originally created by the General Mills, Washburn-Crosby Company in 1921 following a contest in the ''Saturday Evening Post' ...
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 Minneap ...
, 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 discounts and allowances, discount or rebate (marketing), rebate when purchasing a product (business), product. Customarily, coupons are issued by manufacturers ...
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
cookbook A cookbook or cookery book is a kitchen reference containing recipes. Cookbooks may be general, or may specialize in a particular cuisine or category of food. Recipes in cookbooks are organized in various ways: by course (appetizer, first cou ...
s, kitchenwares, and home accessories, as the box tops stated, for 25 to 75 percent savings.
Fred Reichheld Frederick F. Reichheld (born 1952, Cleveland, US) is an American New York Times best-selling author, speaker and business strategist. He is best known for his research and writing on the loyalty business model and loyalty marketing Loyalty mark ...
(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 merit, artistic value or Ecosy ...
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 Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
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 the ...
,
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 between ...
, and
Scandinavia Scandinavia; Sámi languages: /. ( ) is a subregion#Europe, subregion in Northern Europe, with strong historical, cultural, and linguistic ties between its constituent peoples. In English usage, ''Scandinavia'' most commonly refers to Denmark, ...
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 A marketplace or market place is a location where people regularly gather for the purchase and ...
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 List of South American countries by area, second-largest ...
,
Austria The Republic of Austria, commonly just Austria, , bar, Östareich is a country in the southern part of Central Europe, lying in the Eastern Alps. It is a federation of nine States of Austria, states, one of which is the capital, Vienna, ...
,
Norway Norway, officially the Kingdom of Norway, is a Nordic countries, 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 ...
, 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 Federal Dependencies of V ...
, the law governing premiums is so strict that they are effectively banned. In
Japan Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north ...
, 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 Russia (, , ), or the Ru ...
, 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 France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
, premiums may not be made conditional upon the purchase of a third product.


See also

*
Loyalty marketing Loyalty marketing is an approach to 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; s ...
*
Pepsi Stuff Pepsi Stuff was a major loyalty program A loyalty program is a marketing strategy designed to encourage customers to continue to shop at or use the services of a business associated with the program. Today, such programs cover most types of c ...
*
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