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Part Five Developing the Integrated Marketing Communications Program
Belch: Advertising and
Promotion, Sixth Edition
Exhibit 16-18 McDonald’s
Happy Meals use toys to
help attract children
Exhibit 16-19 American
Airlines promotes the value
of AAdvantage miles as a
purchase incentive
V. Developing the
Integrated Marketing
Communications Program
16. Sales Promotion © The McGraw−Hill
Companies, 2003
there is the cost factor, which results from the premium
itself as well as from extra packaging that may be needed.
Finding desirable premiums at reasonable costs can be
difficult, particularly for adult markets, and using a poor
premium may do more harm than good.
Another problem with these premiums is possible
restrictions from regulatory agencies such as the Federal
Trade Commission and the Food and Drug Administration
or from industry codes regarding the type of premium
used. The National Association of Broadcasters has strict
guidelines regarding the advertising of premium offers to
children. There is concern that premium offers will entice
children to request a brand to get the promoted item and
then never consume the product. The networks’ policy on
children’s advertising is that a premium offer cannot
exceed 15 seconds of a 30-second spot, and the emphasis
must be on the product, not the premium.
Since most free mail-in premium offers require the consumer to send in more than
one proof of purchase, they encourage repeat purchase and reward brand loyalty. But a
major drawback of mail-in premiums is that they do not offer immediate reinforcement
or reward to the purchaser, so they may not provide enough incentive to purchase
the brand. Few consumers take advantage of mail-in premium offers; the average
redemption rate is only 2 to 4 percent. 37
Free premiums have become very popular in the restaurant industry, particularly
among fast-food chains such as McDonald’s and Burger King, which use premium
offers in their kids’ meals to attract children. 38 McDonald’s has become the world’s
largest toymaker on a unit basis, commissioning about 750 million toys per year for its
Happy Meals (Exhibit 16-18). Many of the premium offers used by the fast-food
giants have cross-promotional tie-ins with popular movies and can be very effective at
generating incremental sales. McDonald’s gained a major competitive advantage in
the movie tie-in premium wars in 1996 when it signed an agreement with Disney giving
McDonald’s exclusive rights to promotional tie-ins with Disney movies for 10
years. 39
One of the fastest-growing types of incentive offers being used by marketers is airline
miles, which have literally become a promotional currency. U.S. airlines make
more than an estimated $2 billion each year selling miles to other marketers. Consumers
are now choosing credit-card services, phone services, hotels, and many other
products and services on the basis of mileage premiums for major frequent-flyer
programs such as American Airlines’ AAdvantage program
or United Airlines’ Mileage Plus program. Exhibit 16-19 shows
a trade ad run by American Airlines promoting the value of AAdvantage
miles as a promotional incentive that companies can offer their
customers to help generate sales.
Self-Liquidating Premiums Self-liquidating premiums
require the consumer to pay some or all of the cost of the premium
plus handling and mailing costs. The marketer usually purchases items
used as self-liquidating premiums in large quantities and offers them
to consumers at lower-than-retail prices. The goal is not to make a
profit on the premium item but rather just to cover costs and offer a
value to the consumer.
In addition to cost savings, self-liquidating premiums offer several
advantages to marketers. Offering values to consumers through the
premium products can create interest in the brand and goodwill that
enhances the brand’s image. These premiums can also encourage trade
support and gain in-store displays for the brand and the premium offer.
Self-liquidating premiums are often tied directly to the advertising
campaign, so they extend the advertising message and contribute to
consumer franchise building for a brand. For example, Philip Morris