OVERVIEW
The shopper stands in the store aisle, looking at all the products on the shelves. Let's face it, she's more than a little jaded. After all, every type of advertising message has passed her ears and eyes. So how does she go about choosing between brands?

Perhaps the message... "Free Gift Enclosed," jumps out at her from your brand's package, or an attractive aisle display lets her know about your product's special premium offer. Will the offer convince her to buy the product? If you’ve done your homework and chosen the right premium, there's a high probability it will.

In-pack, on-pack, and near-pack premium promotions offer the consumer a compelling reason to pick a brand. Summed up in four words, they're value-added instant gratification. "They provide a value-added reason for the consumer to buy now," says Paul Kiewiet, president of Promotion Concepts Inc., a Kalamazoo, MI, sales promotion firm. "There's no delay, nothing to collect, lose, forget about, stuff, or stamp."

Often used in consumer packaged goods, in-packs, on-packs, and near-packs can also function as trade promotions. And they can also be applied to promotions for agricultural, office, and health-care products, to name a few.

Apart from instant gratification, in-packs, on-packs, and near-packs inspire curiosity and make shopping fun. For example, children, who exert great influence on parents' purchase decisions, want to see the temporary tattoos packaged inside their six-packs of pudding cups. There's a practical side to these premiums, too. Such items as containers, cookie cutters, spatulas, forks, cups, or even a razor holder offer convenience, because they make it easier to prepare, serve, use, store, or transport the product.

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HISTORY AND DEFINITIONS
In their definitive book, Incentives in Marketing & Motivation, George Meredith and Robert P. Fried note that in the mid-1800s and early 1900s shopkeepers began to offer small gifts to keep customers satisfied. Direct premiums of the basic, unattached kind were common until the 1930s when the self-liquidating premium, offered primarily by mail, grew in popularity. After World War II, a twist on the idea, called "factory packs," gained favor, say the authors, because many users sought a compromise between "the cumbersome separate premium and the slow and remote mail self-liquidator." Today, there are three basic types:
In-pack—a premium item enclosed in a products packaging; a variation of this is the container pack, where a receptacle (the premium) holds or displays the brand.
On-pack—a premium attached to, or made part of, the exterior of a product's packaging.
Near-pack—a premium offered free or for a discounted price with the retail purchase of another product, positioned near (but not touching) the product at point-of-sale (POS).

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THOSE POWERFUL PACKS
According to Promotion Trends 2000, a survey conducted by Promo magazine and the Promotion Marketing Association (PMA), marketers spend a quarter of their budgets on consumer promotions. The PMA's 1999 report shows that the use of consumer premiums grew 8.3 percent in 1999 compared to the previous year, and overall in-store promotional activities were up 8.7 percent. (In the same period, use of business-to-business incentives rose 4.5 percent.)

"Increasingly, the gimmicks are gone," says one respondent quoted in Promotion Trends 2000. "We must all step up to the challenge of adding real, brand-based value with promotion - the kind that sparks genuine consumer, retailer, and client interest." To spark that interest, brand marketers have the powerful weapons of in-packs, on-packs, and near-packs in their arsenals. Kevin Hess, president of Skokie, IL-based Milmour Products Inc., a manufacturer of custom-molded plastic premiums, cites the benefits:

Premium in pack

• Impacts the consumer at POS, causes the packaging to stand out
• Adds value, no discounting/debasement of the brand's perceived value as might occur with coupons
• Requires no change in shelf facings, package size, or distribution system
• Revitalizes mature brands
• Promotes multiple purchases ("Collect all four")
• Targeted universal delivery

Premium on pack

• High visibility, stands out at POS
• Promotes impulse purchases
• Differentiates the brand from competition
• Creates retailer excitement for the brand
• Promotes trial of a new brand
• No back-end redemption/couponing cost

Premium near pack

• Promotes impulse purchases and gets consumer's attention
• Promotes multiple purchases by offering a premium with two or more brand purchases
• Increases consumption of the brand
• Accommodates larger premiums
• Retail package/production is unaffected

Premiums that complement or enhance the product drive incremental sales because they increase brand consumption. Says Hess, "Everyone in promotion thinks, to a fault, in terms of short-term lift. [The struggle is] how can I drive sales that I would not have otherwise? Near-pack is an outstanding way of doing that, and one that's excellent for impulse buying."

In-pack premiums can entice the consumer who's already made a category purchase decision. "They're excellent at differentiating and adding value to a brand versus another product within a category," Hess says.

Hess describes on-packs as a hybrid of the other two. "Because the premium is physically visible to the consumer, it has certain impulse sales appeal," he says. "It also has the in-pack benefit of differentiating your brand at POS." Consumers can see, and sometimes touch, the premium before purchase.

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KEY TRENDS
Due to increasing product diversification, marketers have an overwhelming number of
premiums to choose from. They can select small electronics, plastic products, utensils,
temporary tattoos, pins and jewelry, CD-ROMs, phone cards, inflatables, puzzles and
games, bean bag toys, and much more. Some current trends:

• Licensed products, particularly tie-ins with popular music and entertainment, are hot.
• Promotions to build Web site traffic are exploding. For instance, digital premium products, like screensavers, calendar programs, and even electronic photo albums, can be downloaded from the company's site. A card that bears a Web address and an access code can be inserted in packaging or attached to the outside of a product's package. The aim is to lead the consumer to the URL to retrieve the premium and register on the site.
• Retailers are requesting display-ready pallets (DRPs) for near-pack promotions.They benefit retailers because they simplify set-up. Just wheel the pallet into the aisle, open the top, and the brand and premium are ready for shoppers.

WHAT'S YOUR OBJECTIVE?
The first step in creating an in-pack, on-pack, or near-pack promotion is determining realistic goals for the promotion. "Have your brand's promotional objectives drive the premium promotion, not vice versa," Hess says. "So often I see premium items where it's obvious that someone fell in love with an item and tried to build a promotion around it. That's the wrong order in which to do this." Objectives determine which premium makes the most sense and which delivery vehicle to use.

When pinpointing objectives, brand managers should evaluate:

• the product's market position and the demographics of the target audience;
• what the competition is up to;
• seasonal purchase patterns and other factors that could affect sales during the promotion;
• effectiveness of past promotions and problems encountered.

"The brand must test and research to ensure that only broadly appealing premiums are used," says Kiewiet of Promotion Concepts. "The broadness and intensity of the appeal are the controlling criteria which will determine its success or failure." Choosing the wrong premium can hurt sales because consumers will become prejudiced against a product, he warns. To guard against that, try out some premiums on consumer focus groups before making your decision.

Besides examining the demographic profile of the target market, analyzing the product's usage and associated activities can provide ideas. For instance, bath and body products, often used during a relaxing bath, might be packaged with an inflatable bath pillow. Another important consideration: whether or not to imprint your premium with the company logo.

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STEPS TO ACTION
Creating an in-pack, on-pack, or near-pack promotion requires coordinating many details. The following will assist marketers with the process:

• Start early; lead time is critical.
• Form a committee involving people from the sales, marketing, production, packaging, and distribution departments to help assess every element of the promotion.
  
• Contact vendors that specialize in these programs.
  
• Determine your budget.
• Brainstorm some creative ideas (vendors will customarily render three or four ideas for the committee to scrutinize).
• Have your legal department review the promotion.
• Set timetables and benchmarks.
• Bring in your advertising or marketing agency to determine how to integrate other promotional vehicles, such as free-standing inserts (FSIs) or direct mail.
• Field test or do a regional rollout.
• Launch the promotion and monitor it. Look for production problems and bottlenecks.

After the promotion, assess and evaluate sales and logistics. Document complaints and
problems.

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CONCERNS AND PITFALLS
Cost. Budget is often a stumbling block for in-packs, on-packs, and near-packs, because in addition to the direct cost of the premium, there are production, packaging, and distribution costs. For instance, a plastic premium's price might be 25 cents, but the cost of making the prototype mold can run $2,500 to $5,000. You're buying an entire program, so it's best to estimate the entire cost before committing yourself.

Lead time. Sufficient lead time is essential. Large companies start planning a year-and-a-half to two years out. Don Jagoda, president of Don Jagoda Associates, a Melville, NY, promotion agency, says obtaining the premium might take more time than you think. "If this is an item that's going to be produced overseas or manufactured to order, [lead time should be] a good 12 months easily," he says.

Testing and safety. Product contamination and child safety are two of the more important reasons to test premiums. After Milmour makes a model of the plastic premium and it's approved, special testing labs must test it. Says Hess, "These are international testing companies for everything from heavy metals and toxicity to child safety to FDA compliance to use-and-abuse testing. They test every aspect of the item to make sure it's suitable for the application." Most companies request testing, Hess says. "The last thing you need is a simple little premium promotion causing some horrific incident that ends your brand in a lawsuit or terrible PR."

Pilferage. The possibility of stolen premiums and damaged packages concerns many marketers, especially with near-packs and on-packs. But Hess maintains that it's a small problem. "Less than 1 percent of the product ends up being pilfered," he notes. It almost never happens with in-packs. With on-packs, he recommends attaching the premium so that if it is removed it leaves a sellable product on the shelf. Promotional copy about the offer should be printed on the overwrap, not the product's box.

How about the stealing of near-packs? Some consumers may feel justified in taking a premium that’s being given away with purchase. However, "stealing is stealing," Kiewiet says. "If a person isn't going to steal product off the shelf, they're not going to steal a free premium."

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PRODUCTION ISSUES
Many times, production managers kill an in-pack, on-pack, or near-pack idea because it may interfere with production speed. "Sometimes people in marketing box themselves into a comer when they come up with a brilliant promotion," Jagoda says. "They spring it on [the director of] manufacturing, who says, 'I'm not going to do it. You're going to ruin my production.'"

Milmour routinely brings a few specialists to a facility to meet with the production manager. In the case of a cookie cutter in-pack promotion for Pillsbury, the team brought in the equipment, set it up, and trained employees, all the while guaranteeing almost perfect insertion accuracy without slowing down production lines. Millions of cookie cutters were successfully inserted into packages of flour.

Consider contracting out the work. "Promotions should be driven by what sells product versus what the internal manufacturing facility can produce," says Kenneth Surmacz, business development official for Smurfit-Stone, a Chicago contract packager. "Most branded open-stock SKUs run on high-speed production lines. Companies need to closely review the benefit of running their own promotion production or having a contract packager run their program. Typically a contract packager offers more flexibility and better costing for ever-changing promotions."

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ACCOMMODATING THE TRADE
What kinds of promotional benefits appeal to retailers? They like something that builds a category, creates excitement, and increases store traffic.

Marketers must be sensitive to the retailer and how much space the product will take in the warehouse and on the shelves. Often, stores are happy with promotions that move product, Jagoda says, but with on-packs "some retailers just out-and-out say, 'No, we've got this amount of space, we've got this amount of facings for your product. We won't be able to do it unless you want us to reduce the amount of facings that you have.'" The length, width, and depth of the package must not change, Surmacz says, or the brand will incur charges for slotting a new SKU on shelf as well as a new UPC code.

Retailers, especially the discount and warehouse stores, appreciate promotions that are just for their stores, because they avoid price wars with the competition. The same basic program components can be put together differently to create a promotion exclusive to each retail account.

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FINDING A VENDOR
Most experts recommend working with an experienced vendor on an in-pack, on-pack, or near-pack promotion. You can start by searching industry Web sites, consulting trade magazine directories, and contacting such professional associations as the Incentive Marketing Association. Ask questions of potential suppliers, but don't solicit ideas unless you've decided to work with them, Jagoda says. Possible questions include:

• What promotions have you done before?
• What are your capabilities and qualifications?
• What is your typical promotion quantity?
• May I see samples of, or literature about, previous work?
• What differentiates you from your competition?

CASE HISTORIES
General Mills took the traditional in-pack premium promotion used by cereal brands and gave it a technological edge. It enclosed a compelling premium, a CD-ROM video game called Chex Quest, inside 5 million boxes of its Chex cereals. The game, comparable to games that retail for $30, featured high-quality sound and graphics.

Chex Quest, which was developed to target the entire family, contained subtle messages about good nutrition. Although action-packed, it was nonviolent and received an "appropriate for all audiences" rating from the Recreational Software Advisory Council.

General Mills reported that grocers and consumers alike were excited by the promotion, and the game got excellent reviews from children. The game stimulated sales by differentiating the Chex brand at the point of sale and creating high value on the shelf. Though the promotion had no hard-and-fast time frame, boxes containing the CD-ROMs were wiped out three months after they hit the shelves.

Kraft General Foods. Milmour Products helped JELL-O® create the "JELL-O Jigglers" promotion to increase sales during the back-to-school season. Free brand-related plastic cutters, one for each letter of the alphabet, were offered to retail consumers in near-pack, free-standing aisle displays. Children could use the cutters to shape JELL-O into alphabet letters.

Child safety testing was a top concern. The cutters needed to be sharp enough to cut JELL-O but safe for children to use. Four-color printed cards were included in the packaging of the premium. Compact packaging kept bulk to a minimum, which made for an efficient display and ensured that the promotion stayed within the brand's budget.

Consumers were required to buy four boxes of JELL-O to receive the premium. The high visibility of the free-standing display helped entice shoppers to stock up on the product, with the result that JELL-O's sales increased by 7 percent and its market share rose 5.5 percent.

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