As we discuss in our Planning with the Product Life Cycle tutorial, marketers face a highly active market in the Growth stage of the PLC. During this phase many companies are introducing new products and the promotional "noise" occurring is extremely intense.
With so much promotional activity taking place marketers often must look beyond advertising and find other promotions that will capture customers' attention. One key way of doing this is to utilize sales promotions, such as coupons and "on-sale" promotional pricing.
Another type of sales promotion that is available, but tends to be underutilized, is the trade-in. This promotion, where customers exchange a current product they own for a price reduction on a new product, is seeing more usage across many industries.
For customers, the trade-in is a nice way to feel they are getting extra value from a previous purchase and, consequently, they perceive they are giving up less to obtain a newer product. For marketers, the trade-in not only makes their customers happier but the marketer gets the added benefit of not actually appearing to lower the product price. Instead, the marketer positions this promotion as a form of payment rather than a price reduction. Additionally, for some products the trade-in may enable the marketer to obtain certain public relations advantages. For instance, they may be able demonstrate how their trade-in promotion can be used to support environmental causes, such as explaining how they are recycling what customers trade-in or showing how they are offering a positive contribution to economically depressed regions by giving away what has been traded in.
In this story, we get a very good perspective of trade-in promotions and see two market situations in which these are particularly effective. First, this type of promotion may work in markets that tend to experience relatively short life cycles including consumer electronics and fashion. In these markets customers are often still very aware of the investment they made when they first purchased the product and may be reluctant to purchase the latest offerings unless they can obtain some value for the older model.
Trade-in promotions also work well in markets that may have an extended life cycle where customers are likely to hold onto a product for a long time. Of course, the classic example is the automobile purchase, though there are many other industries in which the trade-in is also widely used including the purchase of business equipment.
Finally, this story provides examples of how trade-in promotions are used by marketers throughout the world.
French label A.P.C. launched the Butler Worn-Out series, where customers who brought in used jeans could trade them for a new pair at half price. The used jeans were repaired, stitched with the initials of the previous owner and resold. The range is so-called because 19th century English aristocrats would have their butlers wear their clothes first, to break them in.
What type of research must the marketer engage in to ensure the trade-in promotion is worth offering?
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