Every woman loves GWP... how about U ?

In popular usage, "marketing" is the promotion of products, especially advertising and branding. However, in professional usage the term has a wider meaning, which recognizes that marketing is customer centered. E. Jerome McCarthy divided marketing into four general sets of activities. His typology has become so universally recognized that his four activity sets, the Four Ps, have passed into the language. The four Ps are: Product, Price, Promotion and Place. Well in recent times marketer extended this mix with an additional 3 Ps, namely People, Process & Physical. As if this is not enough someone invented the 8th Ps - Philosophy.

This lens is about just one small aspect of one of the Ps above - Promotion. GWP is one of the most frequently used, most evergreen, most effective and most powerful of all point of sales promotion tactics - because GWP is all about being customer centered, focusing on what the customers want - really.

I believe that the first lesson every marketer should master should be "What customer want - really". Unfortunately our schools don't really teach marketing this way. In short we should always focus on what the consumers want. Understanding consumer's perception, their way of thinking and how they buy. The movie "What Women Want" directed by Nancy Meyers and starring Mel Gibson and Helen Hunt achieved enormous success with a domestic gross of $182,811,707 and a worldwide gross of $374,111,707. I believe that one of the reason why the movie is successful because the marketing guys really know what consumers want - really.

Who was the first marketer who invented the GWPs? Well GWP was used as early as the 1900's and is as old as the often-used promotion tatctics of discounting. It was Estee Lauder who first used GWP in the US, and later made famous by Clinique with its Bonus Time, and introduced to the UK by Aramis. Today GWP is a key marketing technique in the field of promotional merchandising.

Today GWPs are adopted not only by cosmetics companies, but also applied effectively by many super-markets, teleco, Internet companies, malls and many others B2C businesses, big or small. In recent times GWP have also been used effectively by some B2B companies.

Now how can one apply the GWP mechanics? All GWP are not created equal. To apply GWP effectively one has to understand the science and art of using GWPs, for it is not simply giving freebies to attract sales. There are many cases whereby GWP was not applied effectively and thus a failed campaign. Since I'm not a very good writer and do have a bad command of grammar, I'll keep this lens short and to the point.

The first science of GWPs is the concept of values. There are 2 types of values - one is the real values (intrinsic as it is sometimes known) and the other is the perceived values. Branding is sometimes known as creating perceived values. To read more about real and perceived values I offer some links below:

Perceived Value: When considering value, perception can be as important as reality

Positioning your product or service Perceived value

It's the public's perceived value that justifies the network

Perceived Value: the 'real' basis for negotiation

Creating Perceived Value

Now in most circumstances, the product (which you are selling) represent the real values whereas the G (gift) as the perceived values, i.e. consumers pay money for the product and not the gift(s). So for any GWP campaign to work effectively the product must have some real values either something a person would have (1) a need to buy and/or (2) desire to buy. Necessity is the mother of all inventions. The main driver is still necessity (needs or wants). ( There are some exceptions to this rule especially when the perceived values of the G far out-weights any lack of real values of the main product.)

Next the Gs must to able to create a perceived value higher than the real values of the product in the eyes of the consumers. The most effective way is to offer great values for both the product and the G. However in most circumstances if the main product already is attractive enough one would not need the Gs. Thus in most cases the attraction is the Gs. This means that you must have the art to choose the right Gs for your campaign.

Finally every Gs have its cost and every marketer must factor the cost into the budget. As a benchmark the cost should range from between 10% to 15% of the selling price of the product. However this is not an absolute rule of thumb depending on the price values and nature of the product itself, as well as cultures and countries.

The science part of GWP is easy because once you've got the formulas you'll always get it right. It's like math. As long as you know the steps you'll never get the wrong answers. And even if you got the formulas wrong initially, Professor Utonium still got the Powerpuff Girls. The Art of GWP is a little complicated but is something one can master with practice and with experiments. The best way to learn about art is not by reading books but by drawing. Thus I encourage you to apply the Action-Learning methods - learning by doing ( Optimizing the Power of Action Learning: Solving Problems And Building Leaders In Real Time)

Firstly you have to define what you'll like to do with your campaign. Is it to increase sales? Or to encourage multiple sales such as cross selling, or to clear your old stocks, to gain market share or build brand loyalty, or simply in response to your competitor's offer? Each objective would require different GWP programs and the value of G used would also be different. For example if you are using GWP to clear away your old stocks you might used some of the old stocks as the Gs. But if your objectives are to increase sales you should consider a G with high-perceived values in the eyes of the buying consumers.

Remember - customers are the ones who decides on the values, especially perceived values. You can create but they are the judge.

Some questions to ponder before you start:

What are you selling?
What are your products unique selling propositions?
Why are customers buying and why they are not?
What are the real values of your products?
Who are you selling to?
Who are already buying?
What are the reasons they buy?
Who are you targeting with your GWP promotion?

Consider the following: Will the customer buy even if there are no GWP? If the answer is "YES", then there's no need for you to give away 10-15% of your product's margin to someone who are already prepared to buy even without the Gs. Examples are current users of your products or services. However if your objectives are to catch the buying fever ( e.g. Christmas seasons) you could use GWPs to encourage your current users to buy forward. This is the reason why you have to start by defining your objectives.

If the answer is "NO" then GWPs could be an effective tactic, especially when you want to sell or promote your products to non-users. Another example is the launching of a new product; you could use GWPs to encourage the early adopters to try. Or you might use GWP to encourage users to switch.

In short it is crucial for you to know your products and know your market (customers).

On the cost of the Gs usually I'll set the benchmark at between 10-15% of selling price of the product. However do bear in mind the following points :

1.) It should be relative to the price value of the selling product. For example if your product is retailing at $100, a Gs which cost $10 is reasonable. On the other hand if the retailing price of your product is $1000, than maybe the cost of the Gs should be about 3% to 5% of the selling price. Anyway it's an art not science thus there's no absolute rule of thumb.

2.) The cost should relate to the value of achieving your objective.

3.) You should also consider cultural differences if you are doing international marketing.

However in some cases there may be other factors that influence the amount you are prepared to allocate. Don't forget that your budget should allow for every aspect of the promotion - from the cost of the gift and any packaging changes, right down to delivery into store or fulfillment if required.

The point is - you're in the business to make money. Therefore do not be over excited by giving away expensive Gs that you find that at the end of the GWP campaign sales increased at the expenses of margins.

The key success factors to note are to choose Gs that:

1.) has a high perceived value
2.) appeals to your target market

Other factors to note (although not critical) are:

3.) supports usage of your brand
4.) reinforces your brand attributes
5.) reinforces your promotional theme
6.) has lasting value to your brand

Very often Gs with high perceived values are not necessary very costly and could still meet your budget of 10-15% of product's selling price. The main key is to create high-perceived values in the eyes of the consumers.

For those of you who have taken the trouble to read this lens thus far - here's my GWP for you. My own 2 secret Da Vinci code on how you can create a high perceived values on the Gs :

1.) Always create a tag price for the Gs, example this antique lamp cost $39.99 etc. Thus the price tag is the perceived value.

2.) Create something "exclusive" or "limited edition" or as "collectables". I've used this Da Vinci code over and over again for the past 16 years and never once it have failed me.

What does a USA hamburger and a Japanese soft toy have in common?

When McDonalds launched the 40 days Hello Kitty collectables toys GWP campaign it created such an instant success that spark a queuing frenzy by tens of thousands of people, many of them who paid the meals just for the collectables toys. The campaign finally ignited public concerns about safety and debates about the GWP promotions as well as the unruly response of Singaporeans that ensued. (read this story McDonald's Hello Kitty toy promotion National Library, Singapore).

Where and how your product are distributed and sold will affect your choice of GWP. In general it is easier for a brick and mortar business to implement the GWP tactics. Things to consider include products profit margins, retailer policies, shelf space, delivery methods, shelf life etc. Also consider the practical limitations, for example if you sell online and to international customers, how about possible custom duties, extra shipping charges and your return policies etc.

Next you'll need to plan and forecast. There are 2 forecast - the sales and inventories (main product) which relates to your Gs stock-up forecast. Over stock of the Gs will cost you margins while too little you loose sales. Three important points to note :

1.) Every GWP campaign must have a period (start and end) so as to create a sense of urgency to buy immediately.

2.) Always have a "While Stocks Last" disclaimer in case you run short of Gs

3.) Remember your ultimate goal is to sell your main product to increase market share, and grow your business, to encourage adoptions, or switch, in short to get new users. You are not in the business of "selling" the Gs. Thus it is advisable to have a "limit to one per customer" terms & condition.

Side note : I have on some occasion adopted what I coined it as a "Reversed GWP" strategy in which the Gs is actually my core product that I wanted to sell. Unknown to consumers they got it as a G, for free when they buy an item which is not my core products. Thus I've managed to created new users for my core product unknow to the consumers - it's a kind of unconscious adoption and switching by customers.

You might like to work in alliances with suppliers on a returnable basis. However in circumstances where you offer "exclusive" or 'collectables" items as Gs, you might and most certainly have to custom design and custom produce the Gs. Anyway try to start with an outline then build in costs and timing - and involve your whole team to ensure that everything from gift sourcing and packaging to advertising and point of sales runs smoothly, on time and on budget.

Lesson 7 is the last on the Art of GWP.

If you have reached thus far, congratulations!! You are now on your way to create your own powerful, effective, proven and evergreen GWP campaign. But wait!! Who cares? Yes any GWP campaign no matter how well it is planned, how attractive the Gs are, will never take off until you announce the campaign to the right audience - your target market. By whatever methods even if you have to lie all your way. And not only are all marketers liars - they have to be a damn good liars.

Here's what you have to lie about:

1.) Tell your retailers that you have invested a lot of money to plan the GWP campaign and that the Gs cost X much or Y much of the selling price of the product and that you expected XX% or XXX% increase in sales. So that they could consider (a) reduce their regular discounts and/or (b) co-fund the advertising and/or (c) print out the point of sales and/or (d) advertise in their catalogue for free and/or (e) give you the best shelf space etc. The point is get the help and support of your suppliers and retailers.

2.) Tell your customers and potential customers about the value of your product as well as about how great the Gs is, the high perceived values etc. Here's a case study: Ulta Cosmetics' GWP is a very soft fashionable women's robe in three colors ($39.99 retail) to be given free for $25 purchase of their Spa products. Ulta's ad ran for 2 weeks, generating over 100,000 robe giveaways in 150 stores during the ad's run (image on right - the very soft fashionable woman's robe.)

That is why every woman loves GWP

We have finally come to the end of this lens. I do hope that my point of views would be of help to you. I've some recommended readings, books which I've read and which I found interesting and stimulating. Finally do leave me a note on anything you wish to talk about - as I put it - Your Talk Show. Thanks for visiting.