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.
A merchant in Sudbury, New Hampshire,[clarification needed] 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.
The business of premium redemption
The Sperry and Hutchinson Company, started in 1896 in Jackson, Michigan, was the first third-party provider of trading stamps for various companies, including dry goods dealers, gas stations and later supermarkets. 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 a while, 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.
Kellogg's Corn Flakes 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".
Premiums hit home
Betty Crocker products, owned by General Mills, had one of the best-known premium programs when the company started inserting coupons 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 cookbooks, 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.)
Whilst the law in the United States 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.
- Loyalty marketing – premiums are a type of loyalty marketing, although premiums predate the term "loyalty marketing" by decades.
- Pepsi Stuff – a premium loyalty program of the 1990s and 2000s where consumers could trade Pepsi Points for premiums.
- Radio premium – a popular advertising method in the early days of radio targeting children in order to sell to their parents.
- Trading stamp – a historical premium marketing program conducted through a third-party company.
- Lamb, Hair & McDaniel 2008, pp. 540.
- Kotler & Armstrong 2010, pp. 504.
- Lonto 2004a.
- Lonto 2004b.
- Lonto 2004c.
- Digital Academy
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- "Kellogg's Offers First Cereal Premium Prize". Timelines.com. Retrieved 2010-12-27.
- Widner 1998.
- Fred Reichheld (1996) The Loyalty Effect, Harvard Business School Press, Boston, 1996.
- General Mills: 75 Years of Innovation, Invention, Food and Fun
- Wilcoxen 2006.
- "General Mills Coupons". Boxtops4education.com. Retrieved 2010-12-27.
- Onkvisit & Shaw 2008, pp. 526.
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- Lonto, Jeff R. (2004a). "THE TRADING STAMP STORY (or When Trading Stamps Stuck) Part 1". STUDIO Z•7 PUBLISHING.
- Lonto, Jeff R. (2004b). "THE TRADING STAMP STORY (or When Trading Stamps Stuck) Part 2". STUDIO Z•7 PUBLISHING.
- Lonto, Jeff R. (2004c). "THE TRADING STAMP STORY (or When Trading Stamps Stuck) Part 3". STUDIO Z•7 PUBLISHING.
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- Smith, Andrew F. (2006). Encyclopedia of Junk Food and Fast Food. Westport, CT, USA: Greenwood Press. ISBN 0-313-33527-3.
- Wilcoxen, William (2006-12-14). "Betty Crocker retires her catalog". Minnesota Public Radio.
- Widner, James F. (1998). "Captain Midnight — History". Old Time Radio.