Sunday, February 14, 2010

Allowances - Trade-in Allowances

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According to the book, an allowance is “promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way” (Kotler 274). Trade-in allowances are “price reductions given for turning in an old item when buying a new one” (Kotler 274).

As the book mentioned, this is a prominent promotion in the automobile industry; however, it is also seen in retail industries. M-A-C Cosmetics does a “Back to MAC” allowance. This program rewards customers for bringing back 6 empty containers of their makeup products (eye shadows, mascara, eyeliner, etc.) in return for a new lipstick. The company then recycles the containers efficiently, and the customer has something to show for their effort.

This program has multiple benefits for customer and company. It promotes customer loyalty, by rewarding customers for purchasing and using multiple containers of their product. When the customers come in to return their old containers it also gets the customer into the store, where they are likely to buy more than just the free lipstick the promotion promises. On another note, it is positive marketing for the company because it shows their commitment to “going green”. Environmental responsibility is important to many people, and to some customers this may be enough to get them to purchase M-A-C products over their competitors (e.g. Sephora, Clinique, etc.).

Back to M-A-C

Sam Bowman, Section E

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