Premium (marketing)
Encyclopedia
Premiums are promotional items—toys, collectables, souvenirs and household products—that are linked to a product, and often require box tops, tokens or proofs of purchase
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.
, started giving out tokens made of copper when a customer made a purchase in 1793. The customer could then exchange the tokens for products in the store. This practice caught on and was used by many merchants throughout the 19th Century. Sweet Home laundry soap, a product of the B. A. Babbit Company, came with certificates that could be collected and redeemed for color lithographs
. Beginning in 1872, the Grand Union Tea Company gave tickets to customers that could be exchanged for merchandise in the company catalog of Grand Union stores. The first trading stamps were introduced in 1891, the Blue Stamp Trading System, where stamps affixed to booklets could be redeemed for store products.
, was the first third-party provider of trading stamps for various companies, including dry goods dealers, gas stations
and later supermarket
s. S&H Green Stamps
, as the company was commonly called, opened its first redemption center in 1897. Customers could take their filled booklets of "green stamps" and redeem them for household products, kitchen items, and personal items. World War II
put the trading stamps premium business on hold for awhile, but when the G.I.s returned, the economy was robust, and the trading stamps business took off like a storm when numerous third-party companies created their own trading stamp programs to offer to supermarkets and other retailers. The bottom fell out of the trading stamp business in 1965, when supermarkets stopped issuing stamps altogether and started spending more money to advertise lower prices. Trading stamps have gone by the wayside of the modern retail marketing method of loyalty cards used widely in supermarkets where, instead of premiums, customers benefit from savings and convenience through coupon-free discounts.
had the first cereal
premium with The Funny Jungleland Moving Pictures Book. The book was originally available as a prize
that was given to the customer in the store with the purchase two packages of the cereal. But in 1909, Kelloggs changed the book give-away to a premium mail-in offer for the cost of a dime
. Over 2.5 million copies of the book were distributed in different editions over a period of 23 years.
At the beginning of the Second World War, radio was a big player in the promotion and distribution of premiums, usually toys that were closely related to the radio program. There were many radio shows
that offered premiums to their listeners, but Captain Midnight
was one of the best known. The early sponsor of Captain Midnight was Skelly Oil
, and parents could get forms to mail-in for radio premiums at the gas stations. Later, Ovaltine
became the sponsor of Captain Midnight, and it continued the premiums through advertising on the labels and foil tops of Ovaltine that could be collected to exchange for Captain Midnight premiums and offering membership to the "Secret Squadron".
products, owned by General Mills
, had one of the best-known premium programs when the company started inserting coupon
s in bags of flour in 1929 which consumers could collect and use to purchase Oneida flatware
at a reduced price. In 1932, the popular coupon program was improved so that consumers could redeem coupons for an entire set of flatware
— the pattern was called "Friendship". Beginning in 1937, the coupons were printed on the outside of the box with point values and could be redeemed through the Betty Crocker Catalog in exchange for cookbook
s, kitchenwares, and home accessories, as the box tops stated, for 25 to 75 percent savings. To avoid confusion with cents-off coupons, the premium program was renamed "Betty Crocker Catalog Points" in 1992. General Mills retired the Betty Crocker Catalog in December 2006 and ended the premium program after 75 years. (Now that the premium program is no longer in effect, consumers can clip "Box Tops for Education" that are printed on Betty Crocker products to help schools pay for educational supplies.)
and the United Kingdom
governing premiums is relatively lax, it is comparatively stricter in several other countries. Belgium
, Germany
, and Scandinavia
have strict consumer protection laws
regulating the use of premiums. In Argentina
, Austria
, Norway
, and Venezuela
, the law governing premiums is so strict that they are effectively banned. In Japan
, the value of a premium is restricted to being no more than 10% of the value of the product that is purchased in order to obtain it. In Finland
, it is illegal to describe a premium as a free gift. In France
, premiums may not be made conditional upon the purchase of a third product.
Proof of purchase
Proof of purchase is often required for sales promotions and manufacturer rebates as evidence that the customer purchased the product. When multiple purchases are required to redeem these rewards, it is referred to as a premium incentive or collector mechanic.Traditional proof of purchase systems...
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
Prize (marketing)
Prizes are promotional items—small toys, games, trading cards, collectables, and other small items of nominal value—found in packages of brand-name retail products that are included in the price of the product with the intent to boost sales...
" 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.
Early premiums
A merchant in Sudbury, New HampshireNew Hampshire
New Hampshire is a state in the New England region of the northeastern United States of America. The state was named after the southern English county of Hampshire. It is bordered by Massachusetts to the south, Vermont to the west, Maine and the Atlantic Ocean to the east, and the Canadian...
, started giving out tokens made of copper when a customer made a purchase in 1793. The customer could then exchange the tokens for products in the store. This practice caught on and was used by many merchants throughout the 19th Century. Sweet Home laundry soap, a product of the B. A. Babbit Company, came with certificates that could be collected and redeemed for color lithographs
Lithography
Lithography is a method for printing using a stone or a metal plate with a completely smooth surface...
. Beginning in 1872, the Grand Union Tea Company gave tickets to customers that could be exchanged for merchandise in the company catalog of Grand Union stores. The first trading stamps were introduced in 1891, the Blue Stamp Trading System, where stamps affixed to booklets could be redeemed for store products.
The business of premium redemption
The Sperry and Hutchinson Company, started in 1896 in Jackson, MichiganJackson, Michigan
Jackson is a city located along Interstate 94 in the south central area of the U.S. state of Michigan, about west of Ann Arbor and south of Lansing. It is the county seat of Jackson County. As of the 2010 census, the city population was 33,534...
, was the first third-party provider of trading stamps for various companies, including dry goods dealers, gas stations
Filling station
A filling station, also known as a fueling station, garage, gasbar , gas station , petrol bunk , petrol pump , petrol garage, petrol kiosk , petrol station "'servo"' in Australia or service station, is a facility which sells fuel and lubricants...
and later supermarket
Supermarket
A supermarket, a form of grocery store, is a self-service store offering a wide variety of food and household merchandise, organized into departments...
s. S&H Green Stamps
S&H Green Stamps
S&H Green Stamps were trading stamps popular in the United States from the 1930s until the late 1980s. They were distributed as part of a rewards program operated by the Sperry and Hutchinson company , founded in 1896 by Thomas Sperry and Shelly Hutchinson...
, as the company was commonly called, opened its first redemption center in 1897. Customers could take their filled booklets of "green stamps" and redeem them for household products, kitchen items, and personal items. World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
put the trading stamps premium business on hold for awhile, but when the G.I.s returned, the economy was robust, and the trading stamps business took off like a storm when numerous third-party companies created their own trading stamp programs to offer to supermarkets and other retailers. The bottom fell out of the trading stamp business in 1965, when supermarkets stopped issuing stamps altogether and started spending more money to advertise lower prices. Trading stamps have gone by the wayside of the modern retail marketing method of loyalty cards used widely in supermarkets where, instead of premiums, customers benefit from savings and convenience through coupon-free discounts.
Childrens premiums
Kellogg's Corn FlakesCorn flakes
Corn flakes are a popular breakfast cereal originally manufactured by Kellogg's through the treatment of maize. A patent for the product was filed on May 31, 1895, and issued on April 14, 1896.-History:...
had the first cereal
Breakfast cereal
A breakfast cereal is a food made from processed grains that is often, but not always, eaten with the first meal of the day. It is often eaten cold, usually mixed with milk , water, or yogurt, and sometimes fruit but sometimes eaten dry. Some cereals, such as oatmeal, may be served hot as porridge...
premium with The Funny Jungleland Moving Pictures Book. The book was originally available as a prize
Prize (marketing)
Prizes are promotional items—small toys, games, trading cards, collectables, and other small items of nominal value—found in packages of brand-name retail products that are included in the price of the product with the intent to boost sales...
that was given to the customer in the store with the purchase two packages of the cereal. But in 1909, Kelloggs changed the book give-away to a premium mail-in offer for the cost of a dime
Dime (United States coin)
The dime is a coin 10 cents, one tenth of a United States dollar, labeled formally as "one dime". The denomination was first authorized by the Coinage Act of 1792. The dime is the smallest in diameter and is the thinnest of all U.S...
. Over 2.5 million copies of the book were distributed in different editions over a period of 23 years.
At the beginning of the Second World War, radio was a big player in the promotion and distribution of premiums, usually toys that were closely related to the radio program. There were many radio shows
Radio programming
Radio programming is the Broadcast programming of a Radio format or content that is organized for Commercial broadcasting and Public broadcasting radio stations....
that offered premiums to their listeners, but Captain Midnight
Captain Midnight
Captain Midnight is a U.S. adventure franchise first broadcast as a radio serial from 1938 to 1949. Sponsored by the Skelly Oil Company, the radio program was the creation of radio scripters Wilfred G. Moore and Robert M...
was one of the best known. The early sponsor of Captain Midnight was Skelly Oil
Skelly Oil
Skelly Oil Company was a medium sized "major" oil company founded in 1919 by William Grove Skelly, Chesley Coleman Herndon and Frederick A. Pielsticker in Tulsa, Oklahoma. Previously, about 1915, Mr. Skelly had formed Skelly Sanky Oil Company in Duncan, Oklahoma. Mr...
, and parents could get forms to mail-in for radio premiums at the gas stations. Later, Ovaltine
Ovaltine
Ovaltine is a brand of milk flavoring product made with malt extract , sugar , cocoa, and whey...
became the sponsor of Captain Midnight, and it continued the premiums through advertising on the labels and foil tops of Ovaltine that could be collected to exchange for Captain Midnight premiums and offering membership to the "Secret Squadron".
Premiums hit home
Betty CrockerBetty Crocker
Betty Crocker AKA: batter witch is a cultural icon, as well as brand name and trademark of American Fortune 500 corporation General Mills. The name was first developed by the Washburn Crosby Company in 1921 as a way to give a personalized response to consumer product questions. The name Betty was...
products, owned by General Mills
General Mills
General Mills, Inc. is an American Fortune 500 corporation, primarily concerned with food products, which is headquartered in Golden Valley, Minnesota, a suburb of Minneapolis. The company markets many well-known brands, such as Betty Crocker, Yoplait, Colombo, Totinos, Jeno's, Pillsbury, Green...
, had one of the best-known premium programs when the company started inserting coupon
Coupon
In marketing, a coupon is a ticket or document that can be exchanged for a financial discount or rebate when purchasing a product. Customarily, coupons are issued by manufacturers of consumer packaged goods or by retailers, to be used in retail stores as a part of sales promotions...
s in bags of flour in 1929 which consumers could collect and use to purchase Oneida flatware
Oneida Limited
Oneida Limited is one of the world's largest marketers of stainless steel flatware, and offers a range of tabletop products. Its operations in the United States, Canada, Mexico, the United Kingdom and Australia market stainless, silverplated, and sterling flatware products, china dinnerware, and...
at a reduced price. In 1932, the popular coupon program was improved so that consumers could redeem coupons for an entire set of flatware
Cutlery
Cutlery refers to any hand implement used in preparing, serving, and especially eating food in the Western world. It is more usually known as silverware or flatware in the United States, where cutlery can have the more specific meaning of knives and other cutting instruments. This is probably the...
— the pattern was called "Friendship". Beginning in 1937, the coupons were printed on the outside of the box with point values and could be redeemed through the Betty Crocker Catalog in exchange for cookbook
Cookbook
A cookbook is a kitchen reference that typically contains a collection of recipes. Modern versions may also include colorful illustrations and advice on purchasing quality ingredients or making substitutions...
s, kitchenwares, and home accessories, as the box tops stated, for 25 to 75 percent savings. To avoid confusion with cents-off coupons, the premium program was renamed "Betty Crocker Catalog Points" in 1992. General Mills retired the Betty Crocker Catalog in December 2006 and ended the premium program after 75 years. (Now that the premium program is no longer in effect, consumers can clip "Box Tops for Education" that are printed on Betty Crocker products to help schools pay for educational supplies.)
Legality
Whilst the law in the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
governing premiums is relatively lax, it is comparatively stricter in several other countries. Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
, Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, and Scandinavia
Scandinavia
Scandinavia is a cultural, historical and ethno-linguistic region in northern Europe that includes the three kingdoms of Denmark, Norway and Sweden, characterized by their common ethno-cultural heritage and language. Modern Norway and Sweden proper are situated on the Scandinavian Peninsula,...
have strict consumer protection laws
Consumer protection
Consumer protection laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional...
regulating the use of premiums. In Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
, Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
, Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
, and Venezuela
Venezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
, the law governing premiums is so strict that they are effectively banned. In Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, the value of a premium is restricted to being no more than 10% of the value of the product that is purchased in order to obtain it. In Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
, it is illegal to describe a premium as a free gift. In France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, premiums may not be made conditional upon the purchase of a third product.
See also
- Loyalty marketingLoyalty marketingLoyalty marketing is an approach to marketing, based on strategic management, in which a company focuses on growing and retaining existing customers through incentives...
– premiums are a type of loyalty marketing, although premiums predate the term "loyalty marketing" by decades. - Pepsi StuffPepsi StuffPepsi Stuff was a major loyalty program launched by PepsiCo, first in North America on March 28, 1996 and then around the world, featuring premiums — such as T-shirts, hats, denim and leather jackets, bags and mountain bikes — that could be purchased with Pepsi Points through the Pepsi Stuff...
– a premium loyalty program of the 1990s and 2000s where consumers could trade Pepsi Points for premiums. - Radio premiumRadio premiumDuring the time that radio programs were the dominant medium in the United States, some programs advertised "souvenirs" of the various shows, which were sometimes called radio premiums...
– a popular advertising method in the early days of radio targeting children in order to sell to their parents. - Trading stampTrading stampTrading stamps are small paper coupons given to customers by merchants in loyalty marketing programs that predate the modern loyalty card. These stamps had no value individually, but when a customer accumulated a number of them, they could be exchanged with the trading stamp company for premiums,...
– a historical premium marketing program conducted through a third-party company.