In-pack, on-pack, and near-pack premium promotions are potent marketing tools. Though they require front-end work and attention to detail, they're a sure way to create enthusiasm for your brand.

OVERVIEW

The shopper stands in the store aisle, looking at all the products on the shelves. Let's face it, she's more than a little jaded. After all, every type of advertising message has passed her ears and eyes. So how does she go about choosing between brands?

Perhaps the message, "Free Gift Enclosed," jumps out at her from your brand's package, or an attractive aisle display lets her know about your product's special premium offer. Will the offer convince her to buy the product? If you've done your homework and chosen the right premium, there's a high probability it will.

In-pack, on-pack, and near-pack premium promotions offer the consumer a compelling reason to pick a brand. Summed up in four words, they're value-added instant gratification. "They provide a value-added reason for the consumer to buy now," says Paul Kiewiet, president of Promotion Concepts Inc., a Kalamazoo, MI, sales promotion firm. "There's no delay, nothing to collect, lose, forget about, stuff, or stamp."

Often used in consumer packaged goods, in-packs, on-packs, and near-packs can also function as trade promotions. And they can also be applied to promotions for agricultural, office, and health-care products, to name a few. In step with the Internet era, package premiums are being used successfully to promote Web sites.

Apart from instant gratification, in-packs, on-packs, and near-packs inspire curiosity and make shopping fun. For example, children, who exert great influence on parents' purchase decisions, want to see the temporary tattoos packaged inside their six-packs of pudding cups. There's a practical side to these premiums, too. Such items as containers, cookie cutters, spatulas, forks, cups, or even a razor holder offer convenience, because they make it easier to prepare, serve, use, store, or transport the product.

HISTORY AND DEFINITIONS

In their definitive book, Incentives in Marketing & Motivation, George Meredith and Robert P. Fried note that in the mid-1800s and early 1900s shopkeepers began to offer small gifts to keep customers satisfied. Direct premiums of the basic, unattached kind were common until the 1930s when the self-liquidating premium, offered primarily by mail, grew in popularity. After World War II, a twist on the idea, called "factory packs," gained favor, say the authors, because many users sought a compromise between "the cumbersome separate premium and the slow and remote mail self-liquidator." Today, there are three basic types:

in-pack--a premium item enclosed in a product's packaging; a variation of this is the container pack, where a receptacle (the premium) holds or displays the brand.
on-pack-- a premium attached to, or made part of, the exterior of a product's packaging.
near-pack--a premium offered free or for a discounted price with the retail purchase of another product, positioned near (but not touching) the product at point-of-sale (POS).

THOSE POWERFUL PACKS

According to a study by the Incentive Federation at the end of the year 2000, the incentive industry is enjoying steady growth. The study found that total expenditures for merchandise and travel items used by U.S. companies in incentive programs increased to $26.9 billion in 2000 from $22.8 billion in 1996.

Of the 32 percent of respondents who reported using merchandise or travel incentives, 44 percent reported using them for consumer/user promotion, second only to the 64 percent of respondents who used them as sales incentives.

"Increasingly, the gimmicks are gone," says one respondent to a survey conducted by Promo magazine and the Promotion Marketing Association (PMA) in 2000. "We must all step up to the challenge of adding real, brand-based value with promotion—the kind that sparks genuine consumer, retailer, and client interest."

To spark that interest, brand marketers have the powerful weapons of in-packs, on-packs, and near-packs in their arsenal. Kevin Hess, president of Skokie, IL-based Milmour Products Inc., a manufacturer of custom-molded plastic premiums, cites the benefits:

Premium in pack

• Impacts the consumer at POS, causes the packaging to stand out
• Adds value, no discounting/debasement of the brand's perceived value as might occur with coupons
• Requires no change in shelf facings, package size, or distribution system
• Revitalizes mature brands
• Promotes multiple purchases ("Collect all four …")
• Targeted universal delivery

Premium on pack

• High visibility, stands out at POS
• Promotes impulse purchases
• Differentiates the brand from competition
• Creates retailer excitement for the brand
• Promotes trial of a new brand
• No back-end redemption/couponing cost

Premium near pack

• Promotes impulse purchases and gets consumer's attention
• Promotes multiple purchases by offering a premium with two or more brand purchases
• Increases consumption of the brand
• Accommodates larger premiums
• Retail package/production is unaffected.

Premiums that complement or enhance the product drive incremental sales because they increase brand consumption. Says Hess, "Everyone in promotion thinks, to a fault, in terms of short-term lift. [The struggle is] how can I drive sales that I would not have otherwise? Near-pack is an outstanding way of doing that, and one that's excellent for impulse buying."

In-pack premiums can entice the consumer who's already made a category purchase decision. "They're excellent at differentiating and adding value to a brand versus another product within a category," Hess says.

Hess describes on-packs as a hybrid of the other two. "Because the premium is physically visible to the consumer, it has certain impulse sales appeal," he says. "It also has the in-pack benefit of differentiating your brand at POS." Consumers can see, and sometimes touch, the premium before purchase.

KEY TRENDS

Due to increasing product diversification, marketers have an overwhelming number of premiums to choose from. They can select everything from small electronics, plastic products, utensils, temporary tattoos, and jewelry, to CDs, phone cards, inflatables, puzzles, games, and bean bag toys. Premiums can also be custom-designed to promote a brand. Some current trends:

• Patriotic themes. The terrorist attacks of September 11, 2001, created something of a boom in American flags and other patriotic items. Len Daykin, senior vice president of Don Jagoda Associates, a Melville, NY, promotion agency, says that such patriotic items as flag decals and small cloth flags came into great demand. "Since most of it is also low-cost, it can represent a very cost-effective way to add value and national pride to products," he says.
  
  
• Licensed products, particularly tie-ins with popular music and entertainment, are hot. For instance, to herald the re-release of E.T. The Extraterrestrial, Kraft's Post Cereals division decided to in-pack finger flashlights and collectable phone cards.
  
  
• Web site promotion. Premiums are being used increasingly to draw Web site traffic. For instance, digital premium products, such as screensavers, calendar programs, and even electronic photo albums, can be downloaded from a company's site. A card that bears a Web address and an access code can be inserted inside packaging or attached to the outside of a product's package. The aim is to lead the consumer to the URL to retrieve the premium and register on the site.
  
  A new development: companies are turning to in-pack games that can be played online, according to Kiewiet of Promotion Concepts. E-certificates can be used for instant-win sweepstakes where consumers enter a number at a Web site to find out if they've won a prize. Or, a card imprinted with a number can be packed inside a product so a consumer can register a purchase online and save up proofs of purchase for a free-in-the-mail or self-liquidating premium offer. Says Kiewiet: "It takes this promotion tactic out of the paper world and turns it into a cyber-process, providing great consumer convenience and much lower handling costs."
  
  
• Retailers are requesting display-ready pallets (DRPs) for near-pack promotions. They benefit retailers because they simplify setup. Just wheel the pallet into the aisle, open the top, and the brand and premium are ready for shoppers.

WHAT'S YOUR OBJECTIVE?

The first step in creating an in-pack, on-pack, or near-pack promotion is determining realistic goals for the promotion. "Have your brand's promotional objectives drive the premium promotion, not vice versa," Hess says. "So often I see premium items where it's obvious that someone fell in love with an item and tried to build a promotion around it. That's the wrong order in which to do this." Objectives determine which premium makes the most sense and which delivery vehicle to use.

When pinpointing objectives, brand managers should evaluate:

• the product's market position and the demographics of the target audience;
• what the competition is up to;
• seasonal purchase patterns and other factors that could affect sales during the promotion;
• effectiveness of past promotions and problems encountered.

"The brand must test and research to ensure that only broadly appealing premiums are used," says Kiewiet. "The broadness and intensity of the appeal are the controlling criteria which will determine its success or failure." Choosing the wrong premium can hurt sales because consumers will become prejudiced against a product, he warns. To guard against that, try out some premiums on consumer focus groups before making your decision.

Besides examining the demographic profile of the target market, analyzing the product's usage and activities associated with its use can provide ideas. For instance, bath and body products, often used during a relaxing bath, might be packaged with an inflatable bath pillow. Another important consideration: whether or not to imprint your premium with the company logo.

STEPS TO ACTION

Creating an in-pack, on-pack, or near-pack promotion requires juggling many details. The following will assist marketers with the process:

• Start early; lead time is critical.
  
  
• Form a committee involving people from the sales, marketing, production, packaging, and distribution departments to help assess every element of the promotion.
  
  
• Contact vendors that specialize in these programs.
  
  
• Determine your budget.
  
  
• Brainstorm some creative ideas (vendors will customarily render three or four ideas for the committee to scrutinize).
  
  
• Have your legal department review the promotion.
  
  
• Set timetables and benchmarks.
  
  
• Bring in your advertising or marketing agency to determine how to integrate other promotional vehicles, such as free-standing inserts (FSIs) or direct mail.
  
  
• Field test or do a regional rollout.
  
  
• Launch the promotion and monitor it. Look for production problems and bottlenecks.
  
  
• After the promotion, assess and evaluate sales and logistics. Document complaints and problems.

CONCERNS AND PITFALLS

Cost. Budget is often a stumbling block for in-packs, on-packs, and near-packs, because in addition to the direct cost of the premium, there are production, packaging, and distribution costs. For instance, a plastic premium's price might be 25 cents, but the cost of making the prototype mold can run $2,500 to $5,000. You're buying an entire program, so best to estimate the total cost before committing yourself.

Lead time. Sufficient lead time is essential. Large companies start planning a year-and-a-half to two years out. Don Jagoda, president of Don Jagoda Associates, says obtaining the premium might take more time than you think. "If this is an item that's going to be produced overseas or manufactured to order, [lead time should be] a good 12 months easily," he says.

Testing and safety. Product contamination and child safety are two of the more important reasons to test premiums. After Milmour makes a model of the plastic premium and it's approved, special testing labs must test it. Says Hess, "These are international testing companies for everything from heavy metals and toxicity to child safety to FDA compliance to use-and-abuse testing. They test every aspect of the item to make sure it's suitable for the application." Most companies request testing, Hess says. "The last thing you need is a simple little premium promotion causing some horrific incident that ends your brand in a law suit or terrible PR."

Pilferage. The possibility of stolen premiums and damaged packages concerns many marketers, especially with near-packs and on-packs. But Hess maintains that it's a small problem. "Less than 1 percent of the product ends up being pilfered," he notes. It almost never happens with in-packs. With on-packs, he recommends attaching the premium so that if it's removed it leaves a sellable product on the shelf. Promotional copy about the offer should be printed on the overwrap, not the product's box.

How about the stealing of near-packs? Some consumers may feel justified in taking a premium that's being given away with purchase. However, "stealing is stealing," Kiewiet says. "If a person isn't going to steal product off the shelf, they're not going to steal a free premium."

PRODUCTION ISSUES

Many times, production managers kill an in-pack, on-pack, or near-pack idea because it may interfere with production speed. "Sometimes people in marketing box themselves into a corner when they come up with a brilliant promotion," Don Jagoda says. "They spring it on [the director of] manufacturing, who says, 'I'm not going to do it. You're going to ruin my production.'"

Milmour routinely brings a few specialists to a facility to meet with the production manager. In the case of a cookie-cutter in-pack promotion for Pillsbury, the team brought in the equipment, set it up, and trained employees, all the while guaranteeing almost perfect insertion accuracy without slowing down production lines. Millions of cookie-cutters were successfully inserted into packages of flour.

Consider contracting out the work. "Promotions should be driven by what sells product versus what the internal manufacturing facility can produce," says Kenneth Surmacz, business development official for Smurfit-Stone, a Chicago contract packager. "Most branded open-stock SKUs run on high-speed production lines. Companies need to closely review the benefit of running their own promotion production or having a contract packager run their program. Typically a contract packager offers more flexibility and better costing for ever-changing promotions."

ACCOMMODATING THE TRADE

What kinds of promotional benefits appeal to retailers? They like something that builds a category, creates excitement, and increases store traffic.

Marketers must be sensitive to the retailer and how much space the product will take in the warehouse and on the shelves. Stores generally are happy with promotions that move product, Jagoda says, but with on-packs "some retailers just out-and-out say, 'No, we've got this amount of space, we've got this amount of facings for your product. We won't be able to do it unless you want us to reduce the amount of facings that you have.'" The length, width, and depth of the package must not change, Surmacz says, or the brand will incur charges for slotting a new SKU on shelf as well as a new UPC code.

Retailers, especially the discount and warehouse stores, appreciate promotions that are just for their stores, because they avoid price wars with the competition. The same basic program components can be put together differently to create a promotion exclusive to each retail account.

"Wal-Mart, for example, is famous for getting manufacturers to provide all kinds of value-added freebies on their products as an account-specific promotion," says Daykin of Don Jagoda Associates. "More and more retailers are flexing their muscles à la Wal-Mart. After all, they control the retail real estate."

FINDING A VENDOR

Most experts recommend working with an experienced vendor on an in-pack, on-pack, or near-pack promotion. You can start by searching industry Web sites, consulting trade magazine directories, and contacting such professional associations as the Incentive Marketing Association. Ask questions of potential suppliers, but don't solicit ideas unless you've decided to work with them, Don Jagoda says. Possible questions include:

• What promotions have you done before?
• What are your capabilities and qualifications?
• What is your typical promotion quantity?
• May I see samples of, or literature about, previous work?
• What differentiates you from your competition?

CASE HISTORIES

Co-op promotion: ConAgra Foods and Sanyo North American Corp. Popcorn and microwave ovens are interdependent products these days, a fact that provided the synergy for a successful in-store co-op promotion. Sanyo wanted to increase sales of its microwave ovens at all Wal-Mart stores, and ConAgra wanted to sell more of its Orville Redenbacher microwave popcorn.

For the co-op promotion, a custom-made premium was created, a large plastic bowl imprinted with the Orville Redenbacher logo and the tag line, "Get Orvillized!" The bowl was filled with three bags of microwave popcorn and a coupon, and the whole package was packed into a Sanyo microwave. Consumers who purchased the microwave got the popcorn and bowl free. A total of 15,000 bowls were distributed, creating a great deal of consumer interest in the program.

Kraft General Foods. Milmour Products helped Jell-O create the "Jell-O Jigglers" promotion to increase sales during the back-to-school season. Free brand-related plastic cutters, one for each letter of the alphabet, were offered to retail consumers in near-pack, free-standing aisle displays. Children could use the cutters to shape Jell-O into alphabet letters.

Child safety testing was a top concern. The cutters needed to be sharp enough to cut Jell-O but safe for children to use. Four-color printed cards were included in the packaging of the premium. Compact packaging kept bulk to a minimum, which made for an efficient display and ensured that the promotion stayed within the brand's budget.

Consumers were required to buy four boxes of Jell-O to receive the premium. The high visibility of the freestanding display helped entice shoppers to stock up on the product, with the result that Jell-O's sales increased by 7 percent and its market share rose 5.5 percent.

ASSOCIATIONS

Promotion Marketing Association represents the promotion profession and promotes understanding of the importance of promotion in the marketing mix. Call 212-420-1100. Go to http://www.pmalink.org.

Promotional Products Association International represents the specialty advertising, premium, incentive, and gift industry. Members are suppliers or distributors of imprinted promotional advertising products. Call 972-252-0404. Go to http://www.ppa.org.

Incentive Marketing Association is the voice of suppliers in the incentive marketplace. Primary purpose is to increase corporate America's use of incentives. Call 630-369-7780. Go to http://www.incentivemarketing.org.

Association of Retail Marketing Services. ARMS is a market-information network for suppliers of premium and continuity plans, customer incentive programs, and motivation techniques for retail sales personnel. Call 732-842-5070. Go to http://www.goarms.com

Point-of-Purchase Advertising Institute. Members are producers, buyers, and users of signs and displays used at retail. Call 202-530-3000. Go to http://www.popai.com/.

TRADE SHOWS

For a list of Industry Events, go to #9510, Calendar of Industry Events.

BOOKS

Incentives in Marketing & Motivation, by George Meredith and Robert P. Fried, contains a chapter on consumer premiums that provides historical information, case studies, and useful advice. It discusses the emergence of, and issues related to, in-pack, on-pack, and near-pack premium promotions. 1999. Kendall/Hunt Publishing Co. $28 through Amazon.com.

Dartnell's Sales Promotion Handbook, Eighth Edition, edited by Tamara Brezen Block and William A. Robinson. An all-in-one reference for marketers, divided into four parts with each part devoted to different aspects of sales promotion, from planning and techniques to strategies and issues. Each chapter is written by an expert with experience working in the field. Hundreds of examples and case histories are included. 1998. Dartnell Corp. $35, through Amazon.com.

Brand Leadership: Building Assets in the Information Society, by David A. Aaker and Erich Joachimsthaler, guides managers in the implementation of strategic brand leadership. Citing such brand-focused companies as Virgin, L.L. Bean, and Nike, the authors provide hundreds of case studies to support theories on building brand equity. 2000. Free Press. $30, through Amazon.com $21.

Sales Promotion Essentials: The Basic Sales Promotion Techniques… and How to Use Them, by Don E. Schultz, William A. Robinson, and Lisa A. Petrison. Introduces current trends in sales promotion and advises readers on planning programs and selecting promotional tools. 1997. NTC Business Books. $19.95, through Amazon.com $14.

Sales Promotion: Concepts, Methods and Strategies, by Robert C. Blattberg and Scott A. Neslin, deals extensively with sales promotion planning and analysis. Particularly good for marketers involved in packaged goods promotion. 1995. Prentice Hall. $33 through Amazon.com.

Advertising and Sales Promotion Strategy, by Gerard J. Tellis. A comprehensive handbook on advertising and sales promotion, covering strategic and tactical issues. Includes examples of creative advertising campaigns. 1997. Addison-Wesley Publishing Co. $115 through Amazon.com.

Advertising and Promotion: An Integrated Marketing Communications Perspective, by George E. Belch and Michael A. Belch. Explores how marketers must look beyond traditional media to communicate with consumers in the changing field of advertising and promotion. Describes the shift from conventional methods to implementation of an integrated marketing communications strategy and reviews the promotional tools available to help make the transition. 2000. Irwin Professional Publishing. $98 through Amazon.com.

Advertising, Communications & Promotion Management, revised with new sections, by John R. Rossiter and Larry Percy. The definitive advertising and promotion management text for students at the MBA level. Emphasizes corporate communications and business products/services in addition to the traditional focus on consumer packaged goods. 1997. McGraw-Hill Higher Education. $108 through Amazon.com.

PUBLICATIONS

Promo, monthly. PROMO defines promotion trends, presents critical "how-to" information and case studies about promotion, and serves as a meeting ground for companies and professionals in the industry. Free for qualified subscribers. Go to http://www.promomagazine.com.

Creative, bi-monthly. Published by Magazines/Creative Inc. Contains articles of interest to sales promotion and marketing executives who manage sales promotion programs, POP displays, and trade show exhibits. "Sales Promotion News" department contains brief case studies of in-pack, on-pack, and near-pack promotions. Go to http://www.creativemag.com.

Incentive, monthly. Published by Bill Communications Inc. Contains articles and news about the incentives, premiums, and promotional products. Its tagline is "Managing and marketing through motivation." Go to http://www.incentivemag.com.

Potentials, monthly. Published by Bill Communications. Contains ideas, products, and services for marketing, sales, advertising, and promotional professionals. Go to http://www.trainingsupersite.com/.

ONLINE RESOURCES

http://www.incentivecity.com offers an extensive proprietary collection of online tools connecting marketers to incentive suppliers.

http://www.promoart.com. Developed by the Advertising Specialty Institute and the Millstar Electronic Publishing Group, this site allows users to search an online promotional promotional products mall.

http://www.incentivesatwork.com. A joint initiative of Potentials and Incentive magazines, this is a one-stop center for incentive ideas, suppliers, and products.

http://www.incentivecentral.org, managed by the Incentive Federation Inc., provides management with objective information on all aspects of incentive programs, including lists of available resources.

RELATED SMN ARTICLES

For information related to this article, go to 3050, Premiums: Offers that Consumers Can't Refuse.