Premiums in marketing refer to a promotional strategy, where customers receive an additional reward for making a purchase. This method, dating back to 1793, was first introduced by a merchant in Sudbury, New Hampshire who used copper tokens for product exchange. Over the years, the approach evolved and was adopted by numerous companies, which used certificates, tickets, and trading stamps as premiums. In the early 20th century, popular programs included those launched by Kellogg’s Corn Flakes and Betty Crocker, offering premiums like books and coupons. Today, premiums continue to play a significant role in marketing, enticing customers with miniature replicas and brand[1] exposure. The technique is particularly popular among younger generations, who are drawn to the buzz created by persuasive communication techniques used in promotions.
In marketing, premiums are promotional items — toys, collectables, souvenirs and household products — that are linked to a product, and often require proofs of purchase such as box tops or tokens to acquire. The consumer generally has to pay at least the shipping and handling costs to receive the premium. Premiums are sometimes referred to as prizes, although historically the word "prize" has been used to denote (as opposed to a premium) an item that is packaged with the product (or available from the retailer at the time of purchase) and requires no additional payment over the cost of the product.[citation needed]
Premiums predominantly fall into three categories, free premiums, self-liquidating premiums and in-or on-package premiums. Free premiums are sales promotions that involve the consumer purchasing a product in order to receive a free gift or reward. An example of this is the ‘buy a coffee and receive a free muffin’ campaign used by some coffee houses. Self-liquidating premiums are when a consumer is expected to pay a designated monetary value for a gift or item. New World's Little Shopper Campaign is an example of this: consumers were required to spend a minimum amount of money in order to receive a free collectible item. The in-or out-package premium is where small gifts are included with the package. The All Black collectors’ cards found in Sanitarium Weet Bix boxes are a good example of this.
A successful premium campaign is beneficial to a company as it aids in establishing effective consumer relationships. A good campaign will:
- strengthen early-stage consumer relationships
- encourage continued repeat business
- assist with targeting a specific audience or cohort of your target market
- create an emotional connection with your consumer by serving as a motivational driver to investigate further or purchase a product.
It's also important not to confuse premiums with other forms of sales promotions as there are a number of ways in which retailers can entice consumers.
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