Premiums

Last Updated on Thu, 29 Jun 2023 | Marketing Communications

Premiums are a sales promotion device used by many marketers. A premium is an offer of an item of merchandise or service either free or at a low price that is an extra incentive for purchasers. Many marketers are eliminating toys and gimmicks in favor of value-added premiums that reflect the quality of the product and are consistent with its image and positioning in the market. Marketers spend over $4 billion a year on value-added premium incentives targeted at the consumer market. The two basic types of offers are the free premium and the self-liquidating premium.

Free Premi ums Free premiums are usually small gifts or merchandise included in the product package or sent to consumers who mail in a request along with a proof of purchase. In/on-package free premiums include toys, balls, trading cards, or other items included in cereal packages, as well as samples of one product included with another. Surveys have shown that in/on-package premiums are consumers' favorite type of promotion.36

Package-carried premiums have high impulse value and can provide an extra incentive to buy the product. However, several problems are associated with their use. First,

Premiums Marketing

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Readers' Questions

  • DEREK
    What are premiums in marketing?
    7 months ago
    • In marketing, premiums refer to promotional items that are offered to customers as an incentive to purchase a product or service. These items are typically branded with the company's logo or message and are given away for free or at a discounted price when a customer makes a specific purchase or meets certain criteria. Premiums can take various forms, such as:
    1. Free gifts: These are additional items that are given away at no cost to the customer, often with the purchase of a specific product or reaching a certain spending threshold. Examples include free samples, t-shirts, tote bags, or keychains.
    2. Discounts: Premiums can also be offered as discounted prices on a product or service. This can be in the form of a limited-time offer, exclusive pricing for loyal customers, or special discounts for specific segments of the target audience.
    3. Rebates: Some companies offer premium incentives in the form of cash-back offers or rebates, where customers receive a partial refund after purchasing a product or service.
    4. Loyalty programs: Premiums can be a part of loyalty programs where customers earn points or rewards based on their purchases, which can be redeemed for additional products, discounts, or exclusive experiences.
      5. The goal of offering premiums in marketing is to attract new customers, retain existing ones, and encourage repeat purchases. By providing additional value or incentives, premiums help create a favorable perception of the brand, increase customer loyalty, and drive sales.