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A Study of Trading Stamps in Memphis

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A Study of Trading Stamps in Memphis University of Tennessee, Knoxville TRACE: Tennessee Research and Creative Exchange Masters Theses Graduate School 8-1960 A Study of Trading Stamps in Memphis Walter P. Gorman III University of Tennessee, Knoxville Follow this and additional works at: https://trace.tennessee.edu/utk_gradthes Part of the Marketing Commons Recommended Citation Gorman, Walter P. III, "A Study of Trading Stamps in Memphis. " Master's Thesis, University of Tennessee, 1960. https://trace.tennessee.edu/utk_gradthes/4410 This Thesis is brought to you for free and open access by the Graduate School at TRACE: Tennessee Research and Creative Exchange. It has been accepted for inclusion in Masters Theses by an authorized administrator of TRACE: Tennessee Research and Creative Exchange. For more information, please contact [email protected]. To the Graduate Council: I am submitting herewith a thesis written by Walter P. Gorman III entitled "A Study of Trading Stamps in Memphis." I have examined the final electronic copy of this thesis for form and content and recommend that it be accepted in partial fulfillment of the equirr ements for the degree of Master of Science, with a major in Business Administration. E. Dille, Major Professor We have read this thesis and recommend its acceptance: E. E. Garrison, Charles P. White Accepted for the Council: Carolyn R. Hodges Vice Provost and Dean of the Graduate School (Original signatures are on file with official studentecor r ds.) August 2, 1960 To the Graduate Council: I am submitting herewith a thesis written by Walter P. Gorman III entitled "A Study of Trading Stamps in Memphis.n I recommend that it be accepted for nine quarter hours of credit in partial fulfillment of the req ,irements for the degree of Master of Science, with a major in Marketing. We have read this thesis and recommend its acceptance: Accepted for the Council: chool A STUDY OF TRADING STAMPS IN MEMPHIS A Thesis Presented to the Graduate Council of The University of Tennessee In Partial Fulfillment of the Requirements for the Degree Master of Science by Walter P. Gorman III August 1960 TABLE OF CONTENTS CHAPTER PAGE I. INTRODUCTION • • • • • • • • • • • • • • • • 1 Stat ement of the Problem. • • • • • • • • • 2 Importance of the Study • • • • • • • • • • 4 Definition of Terms • . 6 Scope •••••••• •••••••• ••• 7 Review of Related Li terature•• . • • • 8 Methods of Proce dure and Sources of Data •• 16 An alysis and Organization ••••••••• 17 II. HISTORY . • • • • • • • • • • • • • • • • • 19 Beginnings of the Industry . • • • • • • • 19 The Fi rst St amp Cycle • • • • • • • • • . 21 The Spread of Stamps Through the Nation • • 23 Reverses Due to War and Depression • ••• 25 Postwar Prosperity • • • • • • • • • • • • 27 History of the Memphis Area. • • • • • •• 30 A New Look at the St amp Cycle. • • • • • • 36 III. LEGAL DEVELOPMENTS • • • • • • • • • • • • • 38 Introduction • • • • • • • • • • • • • • • 38 Legal History Until 1955 • • • • • • • • • ,38 1955, A Key Year in Stamp Legal History. • 46 Legal History Aft er 1955 • • . • . • 48 47048:1. iii CHAPTER PAGE Laws Today . 51 Tennessee Legal History. • • • • • • • • • • 52 IV. .OPERATIONS • • • • • • • • • • • . • • • • • 58 Introduction • • • • • • • • • • • • • • . 58 Organ ization of a Typical Stamp Company. • • 59 Sellin g Procedure and Merchant Contact . • • 61 Consumer Contact • • • • • • • • • • • • • • 68 Altern ative Plans. • • • • • • • • • • • • • 70 Atypical St amp Plans • • • • • • • • • • • • 72 V. EXTRA STAMPING IN MEMPHIS • • • • • • • • • • 78 Introduction • • • • . 78 Methods of Procedure and Sources of Data . • 80 The Eff ects of Extra Stamping·. • • • • • • 83 Conclusion • • . • • • 106 VI. APPRAISAL • • . • • • • • • • • • • 108 Merchant Appraisal . • • • 109 Consumer Appraisal ••• . 122 Effects on Advertising . 128 Trading Stamps and the American Economy. • • 129 VII. SUMMARY AND CONCLUSIONS . • • • • • • • • • • 135 History • • • • • • • • • • • • • • • • • • • 135 Legality ••••••••••• ••• ••••• 136 iv CHAPrER PAGE Operations • . • . • • • 137 Extra Stamping . • • • • • . • • • . • • • 139 Appraisal • • • . • • • • • . • • • • • 141 Subjective Conclusion • . • • . • • 143 BIBLIOGRAPHY • • • • • • • • • • • • • • • • • • • 147 APPENDIX A • • . • . • • . • • • • • • • • • • • • 154 APPENDIX B • • • • • • • • • • . • • . • . • • . 157 LIST OF TABLES TABLE PAGE I. Anti-Trading Stamp Legislation Box S core • • • . 47 II. Number of Retail Grocers Who Extra Stamped Items in Ad dition to Those Appearing in Their Chains 1 Newspaper Ads • • • • • • • 85 III. Number of Grocers Who Thought the Result s of Extra Stamping Had Been sati sfactory. • 86 IV. Number of Grocers Who Fa vored the Intro­ duction of a New Food Product, a 50 Cent Seller, by Newspaper Coupon Worth 50 Extra Stamps Rather Than a Newspaper Coupon Worth 11 Cent s T award Purchase of the New Product ••••••• . 87 V. Estimated Merchandise Movement Caused by 50 Extra Stamp Coupons in Newspaper Expressed in Per Cent of Average weekly Sales as Estimated on Average Item by Retail Grocers Interviewed . • • • • • • • • • • • • • • • 88 VI. First Choice s of Retail Grocers Interviewed of the Product They Would Prefer to Extra St amp • • • • • • • . 93 vi TABLE PAGE VII. Movements at Wholesale of Individual Products During and After Extra Stamping Expressed in Percentage Relationship to Average Movement. (Five Weeks Average Before Extra Stamps is Represented as 100 Per Cent). • • • • • • • • • • • • . 94 VIII. Movement at Retail (John Gray's Food Store) of Products During Extra Stamp ing Expressed in Relat ion to Average (Estimated) Movement ••• . 95 IX. Movement at Reta il (Pie Pac Food Store) of Products During Newspaper Ad vertisement Extra Stamping Expressed in Percentage Relation to Average (Estimated) Movement Without Extra Stamps • • • • • • • • • • • • 96 X. Extra Stamps (25, 50, or 100) Grocers Said They Would Put on an Average Item Selling for $.50 • •••• •.••••.• ••••• 98 XI. Extra Stamps (25, 50, or 100) Grocers Said They Would Put on an Average Item Selling for $1.00 . • • • • • • • • • • • • • • • • 99 CHAPl'ER I INTRODUCTION The tr ading stamp is a uniqu e promotional device used primarily by retailers to increas e sales volume. In reality, trading stamps are a form of premium coupon. Their use is not new, as stamps were in existence before 1900; 1 but never before have they enjoyed the distri­ bution and interest that th ey do to day. It is estimated that retailers pay some $500,000,000.00 for stamps and that over 50 per cent of famili es in the United States are saving them. 2 Both Life and Business week have recognized th e tremendous expansion in the industry, with articles describing the "boom." 3,4 The reason for this recent expansion has been the use of stamps in supermarkets and a favorable retail 1"100 Years of.' Premiums," Premium Practice, June, 1951, p. 40. 2Albert Haring and Wallace O. Yoder, Trading Stamp Practice and Pricing Policy, (Bloomington: Bureau of Business Research, Indiana University, 1958), p. 19. 3"Trading St amps: Bane or Boon'!," Business Week, May 19, 1956, p. 43. 4r•Trading Stamps Become a Sticky National Question," Life, March 4, 1957, pp. 114-116. 2 climate. 5 The widespread use of stamps in supermarkets enabled housewives to obtain premiums more rapidly and established stamps as more than a passing fad. The tightening of competition, the standardization of retail outlets, and a more mobile customer created a need for retailers to dif ferentiate their stores. Stamps answered this need as a highly effective -promotion. The growth of stamps in Memphis properly reflects this rapid nationwide expansion of the industry. In 19.54, a few discount gasoline companies used this type of premium coupon while groceries, drug stores, and cleaners used other promotions. Today, six years later, the market is nearly saturated with approximately three hundred retailers giving stamps. The merc hants in Me mphis are interested in learning more about the power and signi­ ficance of the promotion.6 I. STATEMENT OF THE PROBLEM The purpose of this study is to provide a better understanding of the status, usage, and effects of trading 5 Eugene R. Beem, "Who Profits from Trading Stamps?," Harvard Business Review, November-December, 1957, p. 124. 6J. R. Mann, Vice President of Quality Stamp Company, Personal Interview. 3 stamps in Memphis by synthesizing existing data and by contri buting original research on developments in the city, particularly the practice of extra stamping. Extra stamping is a relatively new procedure in food merchan­ di sing in Memphis and an area in which little research has been done. 7 Special emphasis will be given to the use and the effectiveness of extra stamping in promoting specific items or brands within a store and as a loss leader. This study of extra stamping will constitute perhaps the author's most important contribution to a better understanding of recent developments in the trading stamp field. Information will be presented whi ch should be valuable to merchants, consumers, stamp dealers, and other interested parties on the historical, legal, and economic forces that affect trading stamp status, the operati onal proce­ dures which channel stamps through the market, and the considerations necessary for manageri al decisions by retail merchants and other business interests affected by the promotion. Merchants especially need to understand (1) stamp company operations and selling techniques, (2) the 7Eugene R. Beem, Economist for The Sperry and Hutchinson Company, New York,
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