Everyone likes to get something for free. That's one of the prime reasons for the long-standing use of gift-with-purchase promotions. This article explains how to make your program successful and tells where to find more information about the subject.

OVERVIEW

The gift-with-purchase offer is one of the oldest promotions going, probably even older than the venerable Cracker Jack prize-in-the-box promotions, which began in the early 1900s. What's more, the concept still works. Walk down any supermarket aisle, drop by any fast-food restaurant, or thumb though any Sunday advertising supplement, and you'll find that gift-with-purchase strategies are still getting a heavy workout. Sometimes the gifts are substantial, as in sales blitzes for cars or other big-ticket items. In some industries, notably cosmetics, the tactic is so widespread that virtually no product moves without the promise of a gift.

Among the questions to consider when implementing a gift-with-purchase promotion are:

• Is it the right technique for your promotion objectives?
• Is the gift right for the target audience?
• Do you have the budget to support an effective gift-with-purchase program?
• Should you use a brand-name product for your program?
• Does the gift fit with your product's brand positioning and audience?
• Will the gift promote usage of your product?
• How do you intend to support your program with advertising and point-of-purchase material?

PLANNING YOUR PROGRAM

Here are some of the important issues you should consider when planning your gift-with-purchase promotion:

1. Determine your program objectives. These should be spelled out in specific terms. Is it to rejuvenate sluggish sales? To maintain share during a competitive product introduction? To reach a new group of consumers? The simpler you can keep your objectives the more measurable they will be.
   
   
2. Review your company's history with gift-with-purchase programs. What worked? What didn't work as well? What kind of results can you expect?
   
   
3. Determine your budget. In general terms, your expenditures should be tied to anticipated incremental sales. Some companies set aside a certain percentage of overall sales for promotional spending, but there is no hard-and-fast rule for determining this percentage.
   
   
4. Identify a gift-with-purchase premium that reinforces use of your product, appeals to your target audience, and has a high perceived value relative to the cost of your product (see Choosing a Gift-with-Purchase Premium).
   
   
5. Determine your need for outside specialists. Who will supply the gift? Will you need a fulfillment specialist to see that the gift gets to the retail site or to the consumer? Will you support your promotion with point-of-purchase materials?
   
   
6. Put together your game plan. Plan your start and finish dates and determine who will be responsible for each step of the program. Most gift programs are limited-time promotions. Even Cracker Jack offers a specific gift for a specific period of time to maintain continued consumer interest.
   
   
7. Determine how you will measure results. And make sure you have a system in place to track those results.
   
   
8. Engage the support of everyone responsible for the success of your program, from employees to middlemen to retailers. Communicate regularly with all parties involved and see how the program might be supported through your sales and/or dealer incentive programs.
   
   
9. Evaluate the results. Be objective about the results of your program and how it worked. Keep a record of your results and observations for use in planning future programs.

MEASURING YOUR RESULTS

Increased sales is, of course, the major factor you will use to measure the success of your gift-with-purchase promotion, but other factors you might look at include:

• Increased customer goodwill;
• Retail and employee excitement about your product and offer;
• Generation of repeat store visits or purchases;
• Faster sell-through.

MAJOR BUDGET CONSIDERATIONS

The cost of the gift can range from a few cents per item for small toy products like cereal-box gifts to hundreds of dollars for gifts that might be tied to new-car purchases or other high-ticket items. Perhaps more important is the cost versus the perceived value of the gift. Branded products often have a higher perceived value than nonbranded products. Other cost considerations include:

• Advertising and point-of-sale materials;
• Getting the gifts and supporting point-of-sale materials to the stores and onto shelves;
• The cost of staff or outside service firms dedicated to the execution of the program;
• Any packaging changes that might be necessary.

Keep in mind that the costs should be balanced against your expected return on investment for the promotion. This calculation should include a factor for repeat business that might be generated as a result of the gift.

There are ways to trim the budget if costs start to run too high. One option, for instance, is to cut back on advertising by running only print ads or by investing primarily in in-store advertising and point-of-purchase materials. A factor often overlooked in budgeting: If the gift promotion is an unusual one, there may also be some opportunities for generating publicity.

Beware of cutbacks that may jeopardize the impact of the program. For example, you can save some money by using nonbranded gift products, but there's a chance that this might affect the perceived value of the gift and diminish the returns of the program.

If you're a manufacturer, look for ways to share the costs of the program with retailers. Similarly, a retailer that initiates a program might try to get manufacturers to chip in. There may also be some opportunities for promotional tie-ins to offset costs (see Case Histories).

CHOOSING A GIFT-WITH-PURCHASE PREMIUM

Choosing the right gift to include with your offer is perhaps the most important issue connected with this type of program, say promotion specialists. Questions that you might ask yourself include:

• Does the gift fit in with my product's brand positioning? The wrong gift could possibly do more harm than good to an established brand image by sending a mixed message to consumers. Some experts also warn that the gift-with-purchase strategy is not particularly useful for new product introductions, because it splits the focus of the consumer. That is particularly true if the gift involves a recognized brand: There's a danger that the consumer will perceive the new product as the gift.
  
  
• Does the gift make sense for my target market? Banks and other financial institutions that use free gift promotions often offer small household appliances, such as toasters or mixers, with the idea of attracting young people who are just setting up housekeeping. Marketers of food products targeted toward children--cereals and candies, for instance--often use toys as gifts.
  
  
• Does the gift support usage of the brand you are promoting? Will it generate goodwill to aid in a repeat sale? If you're promoting donuts, for example, a coffee mug would support future use of the product. If you're promoting toothpaste, a toothbrush makes perfect sense.
  
  
• Does the gift tie in well with your overall promotional theme? A beach umbrella would work better than a rain umbrella for a "Fun in the Sun" promotional theme.

VARIATIONS AND ALTERNATIVES

While a long history underscores the success that gift-with-purchase promotions have enjoyed, companies with a limited promotion budget may use similar, but less expensive, approaches. To keep costs down, companies often use these other value-added promotions:

Self-liquidators. Instead of an outright gift, the company offers consumers an item at a substantially reduced price, recovering some, or all, of the costs.

Sweepstakes. The gift or premium is offered as a sweepstakes prize. Purchasers are entered into a sweepstakes with the possibility of winning a prize or prizes. Obviously, more expensive prizes can be offered to enhance the perceived value and increase consumer participation in the sweepstakes.

Continuity programs. The gift is offered for a specified number of repeat purchases or store visits to build customer loyalty and repeat business.

Gift coupons. The "gift" can be a dollars-off coupon for a product or service with a high perceived retail value. Purchasers of Windows '98 software (an $89.90 purchase), for instance, are offered discount coupons totaling $392 off hotel accommodations, car rentals, and airline tickets.

PACKAGING AND MERCHANDISING

Most consumer purchase decisions are made at the point of sale. That makes packaging and merchandising critical to the success of many, but not all, gift-with-purchase promotions. Effective execution can make the difference between mediocre results and spectacular results. This includes such things as making sure the product and the gift (or gift-redemption coupon) are in the stores and on the shelf and that point-of-purchase support materials have been set up. Obtaining extra shelf space or display space is also a critical element in many gift-with-purchase programs, as are graphics and package design that will get your offer noticed.

In-pack/on-pack gift promotions. In many cases, the gift can be included inside the package, as cereal makers have traditionally done. In-pack gifts need to be specially promoted on the product packaging to draw attention to the offer. Prepacked display shippers can also help ensure that your offer gets the attention it needs with minimum effort on the part of retailers. On-pack gifts, on the other hand, might require special packaging (and packaging equipment) and special handling in stores. That could add significantly to the cost of a program.

Container promotions. In some cases, the packaging itself is the gift. Jelly companies sometimes sell their product in packaging that can be reused as everyday glassware. Such brands as Log Cabin Syrup and Quaker Oats occasionally offer product packaging that is designed to be saved as collectibles.

CAVEATS

Gift-with-purchase offers can give less-than-anticipated results if the gift fails to appeal to the target audience or offers a low perceived value in relation to the cost of the product. (Offering a free road map for the purchase of a new car would be an extreme example of the latter). In addition, if the product has enough stand-alone value, as is often the case with an eagerly anticipated software package or video, a gift-with-purchase offer may not significantly increase sales.

Some gift promotions, such as Cracker Jack and McDonald's Happy Meals, seem destined to go on forever. But be aware that it is possible to overuse gift-with-purchase. If a program goes on too long, consumers may come to expect a free gift, and they can be annoyed when the program is concluded. Consumers might also respond negatively if the gift is not perceived as being as valuable as a previous gift offer. Also, a predictable schedule for a company's gift promotions may "train" consumers to time their purchases so that they tend to buy only when a gift promotion is on. Example: virtually the entire cosmetics industry.

CASE HISTORIES

While gift-with-purchase offers traditionally have been confined to promoting sales of a product, their role is expanding. Today, they may be used in conjunction with other promotional devices not only to build sales but to grow customer loyalty and help build customer databases. Two examples:

Ray-Ban offers a Gift-with-Purchase Certificate redeemable for an Official Ray-Ban Hat by consumers who participate in its Virtual Preview promotion. This Internet-based promotion invites people to preview sunglasses by sending their photo to Ray-Ban. The company e-mails the consumer an access code by which he or she can view the photo on Ray-Ban's Web site and "try on" Ray-Ban's entire selection of sunglasses. To those who send in a photo, the company e-mails the Gift-with-Purchase Certificate, which is redeemable for the hat when mailed in with a UPC label and a proof-of-purchase. The promotion is designed not only to spur sales, but to build customer loyalty through participation in the Ray-Ban Web site and to generate valuable information about consumers and their preferences for the company's database.

Ralston Foods, Inc. At a time when many cereal companies were using price cuts to entice customers, the Chex brand went the value-added route. Consumers were offered a free computer game within every box of Chex (now a General Mills property) in a promotion that won a Reggie Award from the Promotion Marketing Association. The game, Chex Quest, created by the Waters Molitor agency, was designed to perk up sales and give the product a contemporary appeal. Targeted at kids nine and over, it included five playing levels, full animation and sound effects, and 3-D graphics that put it on par with retail games that sell for $30 or more. The CD-ROM also had software for America Online and an AOL subscription offer for 50 free hours. This partnership helped offset the game's production costs. The company followed up with a sequel, available through a Chex Web site, that could be played only by consumers who had the original game.

ASSOCIATIONS

Promotion Marketing Association (PMA) is the main association for companies that handle gift-with-purchase programs. Its members are mainly companies dealing in promotion services, sales incentives, and premium merchandise. Other members include advertising agencies and consultants. PMA offers seminars and conventions throughout the year, a membership directory, and legal information services, as well as two newsletters, "The Legal Bulletin" and "Outlook." Call 212-420-1100; fax 212-533-7622; go to http://www.pmalink.org.

Promotional Products Association International (PPA) can provide information on suppliers to the premium/incentive market. Call 972-252-0404; fax 972-258-3004; go to http://www.telepro.com.

A new trade association, the Incentive Marketing Association (IMA), was formed in 1998. IMA's mission is to promote high standards of professionalism in the incentive field, create greater corporate awareness of incentives, and help its members prosper in a changing business environment through education, training, and research. Call 630-369-7780. Go to http://www.incentivemarketing.com.

PROMAX is a nonprofit, member-owned association of over 2,000 companies and individuals in 43 countries. Members are promotion and marketing professionals in the electronic media. The association's mission is to advance the role of electronic media in increasing the effectiveness of promotion and marketing within the industry, related industries, and the academic community. Membership includes PROMAXFAX, a weekly promotion and marketing newsletter, which is faxed to members directly and is also available on their Web site. Membership also includes Image Magazine, published once a year, and features members and their ideas about concepts and opportunities on building businesses in the promotion and marketing industries. Lastly, benefits of membership also include a member directory, and discounts on events and videotapes. Call 310-788-7600. Go to their Web site at http://www.promax.org/.

TRADE SHOWS

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

SUPPLIER DIRECTORIES

Promotion Marketing Association, Inc. provides a membership directory in which one can find lawyers, marketing companies, and fulfillment houses. Call 212-420-1100; fax 212-533-7622.

Incentive magazine publishes a list of promotion agencies in the Annual Supplier Directory, published in its March issue. Call 212-592-6263.

Promo magazine publishes its Annual Sourcebook. It lists promotion agencies and suppliers and provides surveys, charts, graphs, and indexes on the industry. Call 203-358-4351.

Potentials magazine offers a list of promotion agencies in its Annual Supplier Directory published in December. Call 612-333-0471 or 800-707-7749.

Promotion Finders helps volume users track down specific promotional products or services; it gets a commission from suppliers if there's a deal. Call 809-725-3355.

To find a supplier, go to #9520, Supplier Finder.

BOOKS

The Dartnell Sales Promotion Handbook,edited by Tamara Brezen Block and William Robinson. More than 30 of the world's leading sales promotion authorities share their marketing wisdom in this book, which is filled with sales promotion plans and tactics that prestigious companies have found successful. Available through Amazon.com, $69.95.

The Only Sales Promotion Techniques You'll Ever Need, edited by Tamara Brezen Block. Explains the basics of a wide range of sales promotion techniques and makes suggestions for effective implementation. Available through Amazon.com, $39.95.

Promotional Marketing: Ideas & Techniques for Success in Sales Promotion, by William A. Robinson and Christine Hauri, details the challenges of promotional marketing through a chronological history starting in the 1950s. The last section looks to the future. Available through Amazon.com, $23.95.

Sales Promotion Essentials: The 10 Basic Sales Promotion Techniques . . . and How to Use Them, by Don E. Schultz, William A. Robinson, and Lisa A. Petrison. A comprehensive treatment of ten key sales promotion techniques: how each one works, pros and cons, how each can be used alone or as part of a long-term sales promotion or marketing plan. Especially useful is the description of the varying degrees of consumer loyalty and recommendations for which consumer groups are most responsive to which type of sales promotion. $19.95. Available through Amazon.com, $15.96.

PUBLICATIONS

Promo is a monthly magazine designed for people who make promotion marketing a regular part of their jobs. 12 issues, Call 203-358-4351 for general information, 800-463-4054 to subscribe. Go to http://www.promomagazine.com.

Advertising Age. Although the traditional focus of this weekly is on advertising, it includes a lot of news on promotion marketing. 52 issues. Call 212-210-0100 for general information, 800-678-9595 for subscriptions. Go to http://www.adage.com.

Brandweek, a weekly, bills itself as the publication of brand management and covers promotion marketing from the perspective of product managers. 47 issues. Call 800-722-6658. Go to http://www.brandweek.com.

Potentials, a monthly, covers a range of subjects related to promotion marketing. Free to qualified users, otherwise, 12 issues. Call 612-333-0471. Go to http://www.potentialsmag.com/.

ONLINE SERVICES

• Adweek/Brandweek/Mediaweek. All three publications can be accessed at this site. Subscribe here, search the Articles archive for all articles published since 1991, and download articles for a small fee. Go to http://www.adweek.com/.

RELATED SMN ARTICLES

For information related to gift-with-purchase programs, click on #3035, Promotion Law.