Premium (marketing)

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.

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:

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.

A merchant in Sudbury, New Hampshire, 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 and 20th 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.

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Wikipedia