A Prepaid Card Good for ... One Full-Size Frozen Pizza?

Sampling Alternative Could Give Rise to New Categories, Reduced Fraud

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Young America, the Minnesota promotion-services company that has long been the locus for countless rebate-form submissions -- among other things -- is joining with Citi Prepaid Services to create a new wrinkle in product sampling: prepaid cards redeemable for full-size product samples at stores.

The idea is to open up sampling alternatives for product categories such as frozen foods, over-the-counter drugs and laundry detergent, where it's either impossible or impractical to send samples through the mail or insert them into newspapers, said Mark Lockwood, senior VP-payment services for Young America.

The prepaid cards are programmed to be redeemable only for specific SKUs and only up to the price of the item, Mr. Lockwood said. One advantage of using cards over using paper coupons for the same purpose is reducing the risk of redemption fraud, since such high-value coupons present a more tempting target than typical cents or dollar-off coupons. The novelty of getting a prepaid card vs. a coupon should also help the offer stand out, he said.

Other advantages include not having to pay to ship full items to homes, not having to manufacture a special sample size and the potential for tying sampling programs to shopper-marketing programs that can induce retailers to stock and prominently display the featured products, he said.

"People are creatures of habit," Mr. Lockwood said, so it also can pay to have them find the product on the store shelf so they'll know where to look next time, as opposed to just having a sample show up in the mail.

While couponing has been on the upswing in recent years, packaged-goods marketers distributed fewer coupons in the first half of 2011 than they did a year ago, breaking a three-year run of rising distribution. Pulling back on couponing amid rising commodity prices undoubtedly fueled part of that , but some marketers have been wary of couponing making consumers more price-sensitive and bargain-driven. Unlike coupons, samples get consumers to try products without training them to look for price deals.

Mr. Lockwood said Young America is in talks with several marketers on the tactic but hasn't signed any up yet.

Using the prepaid cards does appear to offer several advantages over coupons or traditional direct-to-consumer sampling, said Cindy Johnson, a former P&G sampling-promotion executive and now principal of Cincinnati-based research firm Sampling Effectiveness Advisors.

"A lot of consumers complain about the sample size not being big enough for them to notice the difference," she said, particularly with hair-care or skin-care products that may only be enough for one or two uses. So full-size samples can be preferable, even if more expensive, and she has seen instances of manufacturers distributing full-size samples, generally through retailers, as was the case with a P&G "Future Friendly" program in Walmart stores in April.

"The con is that the brand ends up paying the retailer price vs. the manufactured price," she said, which can be considerably higher.

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