Behaviour Change

PROPAGANDA FOR CHANGE is a project created by the students of Behaviour Change (ps359) and Professor Thomas Hills at the Psychology Department of the University of Warwick. This work was supported by funding from Warwick's Institute for Advanced Teaching and Learning.

Thursday, January 22, 2015

Hurray its free…. but wait till you see the bill after!



The above video shows ,one variation of the coca cola free sample marketing strategy, a ‘happiness vending machine’ that amazingly gives free cokes to all those who interact with the vending machine!  In fact after a while the machine gives out a wide array of goodies like pizza, baguettes and so on all with the complimentary coke bottle.  Another variation of the ad (on YouTube) shows the vending machine basically doing the same job of providing free bottles of coke but the consumers have to hug the machine to get a coke! Both free sample giving machines inevitably prompt a lot of excitement in a very short time period …’Oh look aren't COKE really awesome… They’re literally giving themselves away, I must tell (insert random name here…)’!

This marketing technique effectively demonstrates the loss leader business model ( also effectively pioneered by Gillette and Costco) wherein the product price is so cheap that it is actually sold at a loss or given away for free initially but then afterwards the sales of said product increase and become profitable. In other words the free samples become short and long-term sale boosters.

The power of the free sample and its effects on product sales has been further demonstrated by Bawa and Shoemaker (2004). In this study 4000 households were split into 2 conditions: one with free samples and the other with no free sample- promotion (control group), matched equally on rates of who already bought the target product before. Target products were things such as hand soap, soft drinks, toothpaste etc that all family members could use. Before the experimental manipulation both groups’ buying patterns were monitored over a year (pre-promotion buying figures) and then in week 1 of the second year the promotion/ free sample was delivered to the free sample group after which post-promotion buying figures were calculated.



In Table 1 Column 2  shows the average change in sales volume (post sample-period minus pre-sample period) per household that made at least one purchase of the new brand. Looking at the figures one can see a significant difference between the increases in volume per brand- they are much greater for the test group than for the control group (0.176 vs - 0.375). The free sample promotion produced a significant increase in sales relative to the control group for 22 weeks or longer. Overall the total incremental sales in the post period alone represented an 18% increase.

From this experiment and various follow-ups Bawa and Shoemaker (2004) came up with 3 types of effects of free samples on brand buying:
1) Acceleration effect – Consumers begin repurchasing of sampling brand earlier than they would have done without the free sample – those people who got free cokes are more likely to buy coke in the following weeks rather than later.
2) Cannibalization effect – free samples reduces the no of one –off trial paid purchases of the brand (the free sample becomes the trial of taste etc.)
3) Expansion effect – Induces purchasing by customers who didn't consider buying the brand before the sample (the free sample machine can been used effectively to introduce/ re-introduce Coke to many regions)


So Coke in the long run from this marketing campaign of free samples giving would have increased their sales from those people who received free cokes but also after being shared on social media sites and talked about through word of mouth would've seen a rise in sales of coke from others too! When done right, giving away free stuff can lead to a huge boost in sales. And no one does it better and generates sheer excitement from it than our ‘good friend Coke’… (well played Coca Cola, well played…) 


References:

Bawa, K., & Shoemaker, R. (2004). The effects of free sample promotions on incremental brand sales. Marketing Science, 23(3), 345-363.  



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