CONSUMER PROMOTIONS 383Cash refunds are discounts off ered to the consumer by means of refunding part of the
purchase price aft er sending a proof of purchase. Th e refund is transferred to the customer’s
bank account. A cash refund is very similar to couponing in that it is mainly a trial-inducing
promotion technique in which the consumer receives a price discount. Normally, cash
refunds result in a more substantial discount than coupons. Th erefore, the resulting trial
purchases tend to be higher. Furthermore, in contrast to direct price cuts and couponing, the
consumer has to pay the full price at the checkout. As a result, the consumer is less easily
conditioned to expect lower prices, and price expectations are less easily adjusted. As in the
case of coupons, cash refund actions can be put in place very rapidly. Th e main advantage
for manufacturers is that the redemption of proofs of purchase enables them to build up a
customer database. An advantage for the retailer is that refunds do not result in extra work at
the checkout.
Similar to couponing, it is diffi cult for the manufacturer to predict the success of a
refund action, and hence the budget required. Again, there is the risk that existing cus-
tomers will be subsidised instead of new customers being attracted. Th e main disadvantage
for the consumer is that it takes more trouble to get the discount, especially if it means
saving a number of proofs of purchase before part of the price is refunded. Misunderstand-
ings may occur if the consumer expects an immediate discount at the checkout or if it is not
clear what part of the package the consumer has to send back to obtain the refund. Th e
retailer may run the risk that the ‘old’ packages, of which no part of the price is refunded, are
diffi cult to sell.
Monetary incentives may also be off ered on the basis of repeat purchases. Savings
cards , possibly combined with trading stamps, are promotion techniques on the basis
of which customers receive a discount provided they have bought a number of units of
the brand during a specifi c period of time, e.g. ‘buy 10 items during one year, and you get a
20% discount when you buy the 11th item’, or when trading stamps are handed in at the
moment of purchase. Th is tool is oft en used by shops to stimulate store loyalty. A disadvan-
tage for the consumer is that it may take a long time before the consumer experiences the
benefi ts of loyalty. An advantage of the system is that the consumer is not conditioned to an
immediate lower price. Moreover, promotions of this type (retention promotions) are very
suitable for generating brand or store loyalty. A fi nal advantage is that the retailer can build a
consumer database. Store cards, combined with scanning of barcodes of goods purchased,
lead to powerful databases which improve the ability of the retailer to understand consumer
behaviour.Contests, sweepstakes and lotteries
Contests diff er from sweepstakes and lotteries in that in the former the participant can infl u-
ence the outcome of the game. Creating a slogan or an advertising headline, recognising a
voice or a piece of music, estimating how many people will send back a coupon, etc., are
examples of contests. Lotteries and sweepstakes are based purely on chance. In a sweepstake,
consumers receive a (set of ) number(s), the winning ones of which are decided on in
advance. Th is means that, if only 10% of the customers having received a set of numbers
participate by buying a product, only 10% of the prizes have to be awarded.
Chance games are easy to organise and relatively cheap. However, the benefi t for the con-
sumers is not unconditional or immediate. Th ey have to participate actively to have a chance
of winning. Chance games and lotteries are also plagued by ‘professional players’, a group of
consumers obsessed by the possibility of winning something, and who therefore participate
in all campaigns. Th ere is only a very slim chance that this type of consumer will ever become
loyal to the promoted brand. Furthermore, contests and lotteries are seldom capable of gen-
erating trial purchases. Retailers are not particularly inclined to co-operate in promotions of
this type since they do not generate long-term benefi ts for the store either. Finally, in most
countries legal restrictions on contests and gambling exist, which result in either straight-
forward, and thus not so creative, contests or near-illegal situations.M12_PELS3221_05_SE_C12.indd 383M12_PELS3221_05_SE_C12.indd 383 5/6/13 2:58 PM5/6/13 2:58 PM