Front-loaded and Rear-loaded incentives in marketing
Posted September 14, 2011on:
In marketing, there are different types of promotions that are provided to consumers and trade partners. Broadly, they are divided into two categories: front-loaded promotions and rear-loaded promotions.For example, when using price packs, direct mail coupons, FSI coupons or peel-off coupons, consumers obtain an immediate benefit upon purchase or a front-loaded incentive. However, when buying products with in-pack coupons or products affiliated with loyalty programs, promotion incentives are obtained on the next purchase occasion or later, i.e., a rear-loaded incentive.
The decision of whether to go for a front-loaded incentive or a rear-loaded incentive is dependent on the innate choice process of consumers in a market (variety-seeking or inertia). While in both variety-seeking and inertial markets, the sales impact and the sales on discount are higher for front-loaded promotions than for rear-loaded promotions, from a profitability perspective, rear-loaded promotions may be better than front-loaded promotions. Research has shown that in markets with high variety-seeking it is more profitable for a firm to rear-load, and in markets with high inertia it is more profitable to front-load.