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In recent years, firms have shifted more of their communications budget from advertising to trade and sales promotions. Trade promotions refer to offers made to businesses, whereas sales promotions are offers given to end-users or consumers. Over 60% of all communication dollars now being spent are in the area of trade and sale promotions compared to 40% fifteen years ago. This shift toward greater use of promotions has occurred for several reasons. First, trade and sales promotions normally have an immediate impact on sales, whereas advertising takes a longer period of time. This impact is often quite dramatic in terms of increased sales. A second reason for the shift to more sales promotions is increasing brand proliferation and parity among service firms. Consumers have more choices today than ever before in their selection of a service. Consumers see very few differences among firms. For example, in the fast-food industry, consumers may prefer one particular chain, but they will patronize almost any of them and will occasionally switch just for variety. A third reason for the increase of sales promotions is greater consumer acceptance of promotions and in some instances their demand for promotions. The airline industry still struggles financially as travelers have become: accustomed to price wars and low fares. Many travelers will postpone travel until prices are reduced. A fourth reason for the increase in sales promotions is due to the declining impact of advertising. With remote controls and VCRs, consumers are zapping out many commercials. Those they do watch, view, or hear are quickly forgotten due to the high number of commercials they are exposed to each day. In addition, many consumers watch movies on cable channels that are commercial free. Firms have eight different sales promotion options available. These sales promotions are listed in Figure 13.3. Although sales promotions are often the best means of stimulating sales, over-reliance on sales promotions can damage firm and brand equity. Service organizations must carefully weigh the advantages and disadvantages of each promotion and choose only those that fit their operational position, firm image, customer value package, and sustainable competitive advantage
Coupons are an excellent strategy for stimulating sales, especially in the short run. However, coupons cannot be used as a long-run strategy. Overuse tends to reduce a firm’s image and brand equity. It is an excellent strategy for organizations operating in the cost efficiency operational position. Customers expect low prices and often look for coupon discounts. It is not a good strategy for firms in the service quality or customization operational positions because of the potential negative impact on firm image. Couponing has increased from 17 billion coupons in 1970 to over 310 billion today. That equates to over 1,200 coupons for every man, woman, and child. Thus, a family of four would, on the average, receive close to 5,000 coupons each year either through the mail or in some form of print media such as newspapers. Approximately 95% of American consumers redeem coupons although most are not avid coupon clippers. Only a small percentage of consumers use coupons on a regular basis. Consumers who are concerned with saving money are the most inclined to use coupons. To attract these individuals, firms should use simple, straightforward presentations of cost savings. The coupon explosion demonstrates that coupons are an effective means of swaying purchase consumption. For services in the cost efficiency operational position, this is especially true. The lack of brand loyalty makes coupons an effective means of persuading consumers to switch brands. They said. .. Bargain: something you can't use at a price you can't resi st. Franklin P. Jones (1887-1929). American Lawyer
For example. brand and firm equity are not adversely affected. Stocking up on a service would make coupons from competitors less attractive. they will encourage current customers to stay with the salon rather than switch to another firm offering a coupon. Sweepstake s Tie-ins Sampling Frequency Programs Figure 13. If a firm wants to reward customers for their loyalty. For example. Premiums are used almost exclusively by regular customers of a service. A business premium may be a set of free indoor plants with the purchase of a lawn service contract.Coupons Rebates. premiums tend to support both. Premiums can also be used to encourage customers to stock up. the Seattle Mariners might offer the first 10. brand and firm equity are important. if SunGloTannning Salon offers consumers two free tans with the purchase of ten tanning sessions they will accomplish two major goals. First. With both of these operational strategies. Second. offering premiums is one way of accomplishing this goal.000 fans at a game a free baseball cap with the purchase of a ticket. Premiums offer a major benefit not possible with coupons. With premiums. It is not as effective as coupons in encouraging trial purchases. they will get full price for the ten sessions. . Refunds Premiums Price-offs One Dollar Contests. customers will always pay full price for the service. Unless overused. Therefore. premiums are a good strategy for firms using either the service quality or customization operational approach.3 Sales promotion options Premiums Premiums offer consumers free merchandise or services for purchasing the service. Because customers pay full price for the service.
Excitement grew as the number of different pieces collected increased. Contests should be structured to provide participants a challenge as well as excitement. Intercompany tie-ins involve two different companies offering complementary-type services. firms should emphasize fun. In many McDonald's locations. Cleveland. which owns Kentucky Fried Chicken. If a free gift is being offered. Indianapolis. Ameritech run commercials on radio and had ads made for billboards and transit buses. The tie-ins can be either intra-company or inter-company. the St. For example. premiums must be attractive to the customer. For example. fantasy. consumers experienced the anticipation that inside may be the one piece they need to complete a set and win a prize. Detroit. customers lose interest and the sweepstake or contest will not be an effective means of increasing sales or customer traffic. and stimulation. Random consumers using Ameritech's pay phones received an immediate call back awarding them prizes up to $5. In a sweepstake consumers do not need to make a purchase and the winners are determined by a drawing.000 each. Ameritech developed a sweepstake called "Play Jingle Bells”. To support the sweepstake. could place a 20% discount coupon for KFC on their six-pack soft drink package. While coupons appeal to price-conscious consumers. When used too often. To increase usage of its pay telephones and calling cards during the Christmas holiday season. To increase the effectiveness of a sweepstake or contest. a firm using the customization approach may want to offer a personalized gift such as an attaché case with the customer's name inscribed on it. the sweepstake was so popular that stores ran out of the monopoly pieces. Columbus. Both contests and sweepstakes are effective means for building customer traffic. Louis Cardinals baseball team could provide a 50% off coupon to the nearby Gateway Arch with the purchase of an adult ticket to a Cardinals game. The sweepstake ran in the six major Ameritech markets of Chicago. The gift must reinforce the image of the firm. Customers using Ameritech's calling card were automatically entered into the drawing for prizes with each phone call they made using the card. the gift must be an item that is desirable. A recent sweepstake by McDonald's where customers collected monopoly pieces and had to complete a set of properties was very popular. For example. The difference between contests and sweepstakes is what a consumer must do to win. Contests and Sweepstakes Both contests and sweepstakes allow consumers an opportunity to win prizes. Demand is stimulated by tying a high-demand service to a low-demand service. Pepsico. In a contest consumers may be required to perform an activity or to make a purchase to be eligible to win. With each purchase. and Milwaukee. Both sales and profits were up as a result of the sweepstake. Many firms will use them at a grand opening to encourage consumers to stop by and visit the facility. Consumers enter contests and sweepstakes for the experience as well as the hope of winning. Price-conscious consumers may not participate in contests and sweepstakes because they see the contest or sweepstake as increasing the cost of the service. Tie-ins can be an excellent means of stimulating demand for a particular service. contests and sweepstakes appeal to individuals who enjoy high levels of excitement and stimulation. McDonald's monopoly sweepstake was successful because consumers enjoyed collecting the different pieces of property and sticking them on their small McDonald's monopoly board. Intra-company tie-ins are those involving two or more distinct services within the same company. Contests and sweepstakes tend not to have the negative impact on brand and firm equity that coupons do. The best approach is to offer consumers some type of promotional incentive for the high-demand service if the low-demand service is . Tie-Ins Promotional tie-ins include two or more goods or services within the same promotional offer. To be effective. firms cannot overuse contests or sweepstakes.To be effective. unless they are overused.
The two most popular frequency programs are the long-distance telephone calling plans and the frequent-flier air passenger programs. Although premiums offer customers a free gift or a price reduction on additional purchases. hotel chains such as Howard Johnson. guests merely dial the number listed. All points or credits must be redeemed within the specified period of time. most individuals who purchased the video made a purchase of one or more meals. There is a standardized redemption process 4. 2. Holiday Inn. These tie-ins are also part of a trend in the hospitality industry to add value to the lodging service by offering additional services rather than focusing entirely on price. Services in Action 13. Walt Disney benefited by increasing sales of their videos. Another approach is to offer a combination ticket where the consumer gets two services for a reduced price. AT&T. A side benefit of a frequency marketing program is the development of a database of a firm's current customers. In addition to tie-ins with restaurants. 3. A few will encourage repeat purchase behavior. such as the Lion King. service firms have developed frequency marketing programs. The points can be used for merchandise at a Walt Disney store. and Sheraton are offering FTD flower specials. for car rentals at Alamo Rental Car. they are not a frequency program. hotels are putting the phone number of their tie-in on the table tent in each room. Tie-ins between hotels and restaurants have seen considerable recent growth. Open-ended frequency programs have no time limit on usage and accumulation of points. and Park Inn have signed tie-in agreements with Pizza Hut. Super 8. Although a purchase was not required. Air. In an attempt to correct these negative aspects of sales promotions. To reduce operating costs.purchased.2 demonstrates some of the . There is a formal method for accumulating points or credits for purchases.S. In addition. hotels such as Travelodge. MCI. or to build frequent-flyer miles at airlines such as Delta. and other fast-food-type restaurants. tourists can save $10 with a combination ticket that allows them into both Busch Gardens and Adventure Island. McDonald's. Inter-company tie-ins are more difficult to coordinate because two firms have to agree to the promotion. discounts. Most encourage brand switching. United. car rental discounts. For example. In exchange for a small commission. Holiday Inn. customers receive points that can be redeemed in several ways. the program rewards the firm's best customers. The rewards offered by the major telephone companies for usage have gradually increased since the inception of their programs. for hotel reservations at Marriott Resorts. and other perks to attract business customers. Frequency programs have the following four characteristics: 1. One recent venture that was successful was the sale of selected Walt Disney videos. AT&T customers receive a discount on all longdistance calls that exceed a minimum amount. Since the reward is tied to long-distance usage. This database can be used to develop promotions that best target the needs of each customer. McDonald's benefited as customers came in to buy the videos. at a reduced price at McDonald's restaurants. Frequency Programs Most sales promotion programs are of short duration. services. To get food delivered to their rooms. Rewards come in the form of additional goods. Fixed-time frequency programs have a specific end to the program. Ramada. Few build brand loyalty and the impact on brand and firm equity is questionable. Days Inn. They require multiple purchases over a period of time. and Crowne Plaza. Frequency marketing programs can be either open-ended or fixed-time. Each company must feel they are benefiting from the joint venture. or cash when a certain number of points are accumulated. For example. More lead time is needed since both companies will have to approve each detail of the joint promotion. and U. Frequency programs are sales promotions aimed at current customers that are designed to build repeat purchase behavior and brand loyalty by rewarding customers for their patronage. It can also be used to develop a relationship marketing program for a firm's best customers. and Sprint each have a long-distance plan that rewards customers for using their service.
On the average. The fight over customers and the large incentives being offered are being financed primarily by customers who can’t afford to make long-distance calls. Approximately 100. These customers do not qualify for nay type of savings plan. Special incentives to get customers to switch range from cash to free calls. In one year Ruth saved $ 445. Another factor to consider is the ease of implementing the program. each traveler has joined 2. travel discounts. with increased participation. The easier it Is to implement. Sprint offers the 10 percent-per-minute rate. Over 22 million travelers have been enrolled in some type of frequent-flier program.term cost. and airplane tickets. AT&T estimates they handle around 27 million switches a year. the lower the cost. therefore the pay full retail rate for long distance calls. The other airlines quickly countered with their versions so as not to be at a competitive disadvantage. MCI offers New Friends and Family calling circles. and the awards given? Careful consideration should be given to the award that will be offered.000 change carriers four or more times a year. An estimated 16 million households (or 16. What starts out as a benefit may end up to be an additional cost of doing business. Ruth makes the new company pay the switching cost. and other long distance companies are offering consumers larger and larger sales promotion incentives. as was illustrated by the airlines. She returned to AT&T when she was mailed a $75 check and an offer for 50% off all of her long-distance calls for six months. Customers must see it as a value-added benefit. AT&T promotes the True Savings and True USA plans. Airlines gave away free seats. These higher margins make it possible for the long distance carriers to offer incentive to keep customers and entice competitors’ customers to switch. The cost of continuing the program has become so large that it has adversely affected profits. The more difficult the . Airlines now consider it a part of doing business and an expense item. MCI. Sprint. however. She was originally an AT&T customer.problems. To get her to switch. However. and Sprint have over 90% of the long distance market. As the stakes and incentives increase. Yet no airline can discontinue the frequent-flier programs because airline passengers now expect it. but the easier it is for the competition to copy. can earn or save up to $400 a year. costs to support the program will increase. AT&T. In 1981 they launched the AAdvantage. the more popular the program will be. The larger the award. SERVICES IN ACTION 13. Many carriers would like to discontinue their frequent-flier programs. a firm should carefully analyze the long. Ruth Holder is a spinner. which AT&T did not offer at that time. In addition to the cash and the discount. MCI had offered her free frequent flier miles. and the Virgin Islands. About 30 % of households with telephones make less than $10 a month in long-distance calls. that can occur when companies compete for customers using promotional incentives. AT&T MCI. At first.26 programs resulting in over 50 million members.5 %) change long-distance carriers annually.2 SPINNERS AND SURFERS To entice customers to switch. Individuals who switch companies on regular basis. the idea seemed great. then switched to MCI to join the Friends and Family calling circle. The frequent-flier clubs used by airlines are similar but the results have been more devastating. two to three times per year. maintaining the database. Walt Disney merchandise. but cannot because of negative reactions by travelers. Will the anticipated benefits outweigh the cost of the communications. The first airline to launch a frequent-flier program was American Airlines. more and more customers will become spinners and surfers. Ohio. It is estimated that 70% of all business travelers are in one or more frequent-flier clubs. These individuals have become known by the long-distance carriers as 'spinners" or "surfers". Minimal additional costs were accrued since the seats they gave away would have been empty any way. Before instituting a frequency program. She spends over $100 a month in long-distance phone calls to Florida. The frequent-flier programs turned out to be more popular than was ever expected.
then the restaurant can offer free tickets in exchange for repeated usage. Second. a reward for current customers.implementation. It also allows a firm to locate problems that can be remedied in subsequent programs. These free sessions are scheduled at low-demand times when the tanning beds are most likely to be idle. The fixed-time program is liked the best by firms because it allows an unsuccessful program to be terminated without adverse reactions.000 points can earn customers a free round-trip coach ticket from Northwest Airlines or a chauffeured night on the town that includes dinner. within the last decade. Most customers will order something else to go along with the free item. A new fast-food restaurant may offer free soft drinks or perhaps a free sandwich to everyone who comes in the first day. Trattoria Bruschetta. Open-ended programs are the most popular with customers since they can use the service anytime and collect the award at any time. customers receive free tortes on their birthday and their spouse's birthday.000 points. Price-offs involve a reduction in a service's retail price. many attorneys offer free initial visits Potential clients can describe their case and discuss their legal options. They also receive notification by mail of any specials during the year. a customer can receive a full four-course dinner for two at one of their restaurants. Sebastian's Grill. however. An example of a frequency program that would be difficult to imitate is a restaurant that gives away tickets to a local sporting event. In the businessto-business sector. some consulting and financial service companies have made the same type of offer to potential clients. but is a means of thanking current customers for their patronage. A suntanning salon may offer a free tanning session. Price-offs are used to attract consumers to a service. Monday through Thursday is an especially slow time for the Unique Corporation's restaurants so a double point offer was mailed to the 30. However. For joining Unique's frequent-diner club. more service firms have tried sampling as a means of attracting new customers. which manages the upscale restaurants of Morel's. They receive free champagne on their anniversary. There are two major reasons for Unique's success with the frequent-diner program. but the more costly it will be to administer. the restaurant realizes it must continue providing great food and service. If a service develops a reputation for offering price-offs on a regular basis. the longer it will take the competition to copy. A frequency program that is proving to be successful is a frequent-diner program offered by Unique Restaurant Corporation. The price-off will reduce purchase risk. the program is seen as a bonus. Today. First. but seldom by service firms. members can receive a five-course dinner for eight served at the frequent-diner's home. Health clubs have membership drives where they offer individuals a free initial trial period of one month.000 points. If an exclusive contract can be signed with the sports team. This sampling technique is especially prevalent in the area of injury liability suits. to keep customers coming back. The last issue is whether the program should be open-ended or for a fixed time. and after-theater dessert and drinks. Customers who earn 150 points can receive a $10 Unique Restaurant gift certificate. It will increase the probability of purchase. consumers . Sampling Sampling is a sales promotion used extensively in the consumer goods area. It is not used to attract new customers. price-offs will attract many of the current customers who would have paid full price for the service. Business immediately picked up. For 1. A total of 5. Price-Off.000 frequent-diner members. For 20. Many who make this initial visit will later retain the attorney to represent them. Sampling is sometimes used at grand openings to attract visitors to a business. Like coupons. Sampling can be used to reduce purchase risk by getting the consumer to try the service. Sampling is the free delivery of an actual service or portion of a service to consumers. theater. and America.
some firms will use a rebate or refund. By offering price-offs during the week. The probability of making a purchase increases since customers have incentives to do so. some travelers wait until there is a pricereduction before they will purchase airline tickets. However. the price-off may also stimulate new demand from individuals who originally had not planned to go to the theme park. Children especially want to purchase items such as the Pocahontas drinking glasses and the Snow White videos that McDonald's has offered at a reduced price. However. a recreational theme park may be able to transfer some heavy weekend demand to week days. the best sales promotions are coupons. and price-offs. Since sampling allows consumer to try the service prior to purchasing. Refunds and rebates are given to buyers upon proof of purchase. If a firm wants to increase the probability of purchase by a consumer. sampling and price-off are the best sales promotions. many airlines will offer price-offs to attract customers to their firm. The primary objective of the sales promotion is to reward individuals for using the service. It is also an attempt to prevent brand switching. reducing financial risk. retail fare. The same occurs at recreational theme parks that offer price-offs on tickets throughout the year.to low-demand periods. Tieins such as McDonald's with Disney are effective in getting consumers’ attention. To reduce purchase risk. Frequency programs are primarily aimed at getting current customers to make additional purchases. Seldom will a leisure traveler pay full. Most will wait until a price reduction occurs or postpone their trip so they can take advantage of a lower price. Sampling allows customers to see what the service is like prior to purchasing it. Price-offs can help shift demand from high. Tie-ins and frequency programs are also good methods of increasing purchase probability. Tie-ins can be used to reduce purchase risk.2 identifies the relative merits of each major sales promotion in achieving the nine communication objectives. Rebates and Refunds Rather than use coupons to reduce the price of services. Since coupons and price-offs reduce the financial cost of a service. then coupons. Sales Promotional Strategies Table 13. sampling. The effect of the price-offs can be increased further by using the priceoffs in the early spring and late fall when demand is even slower due to children and teenagers being in school. Knowing this will occur. The coupons and price-offs allow consumers to purchase the service at a lower price. Technically the rebate refers to reimbursements in the durable goods sector while refunds refer to reimbursement in the soft goods or consumer service sector. the likelihood of purchasing the service increases. The Discover card offers customers money back based on their usage of the card. Instead of coupons. customers get to apply the rebate toward the purchase of a new GM car or truck. and price-offs. Rebates and refunds refer to a cash reimbursement to a consumer paid with a proof of purchase. . consumers are more likely to buy. In addition. the words are often used interchangeably today. these sales promotion techniques normally do not succeed as well as coupons. sampling. Airlines have found that numerous price reductions cause many leisure travelers to be outraged at the regular price. The two sales promotions that cannot reduce risk are the contest and sweepstakes promotions and the frequency programs.will wait until a price-off to make the purchase. reducing performance risk. The credit card industry has been the most successful service at using this sales promotion. Companies have to be careful that the promotional price used in the price-off does not replace the regular retail price. GM's program has been so successful that they signed up over five million accounts in their first year. General Motors has a similar plan for the credit card but instead of cash back.
Cognitive dissonance occurs when consumers have doubts about the purchase and wonder if they made a good decision. For example.Developing corporate image and building brand equity are difficult to accomplish with sales promotions. Having sampled the service first. Sales promotions are not highly effective in enhancing customer satisfaction during the service encounter. Sampling and tie-ins may develop the firm's image and build brand equity if the firm is careful in how it is done. premiums. frequency programs.2 Use of Sales Promotions in Meeting Communication Objectives Coupon s Reduce purchase risk Increase purchase probability Develop corporate image Build brand equity Increase awareness Enhance customer satisfaction Increase repeat purchases Reduce cognitive dissonance Stimulate positive W-o-M Excell Excell No No Poor Poor Excell No Poor Premiu ms Poor Fair Good Good Poor Good Excell Good Good Contest. To increase awareness of the firm and services offered. Contests and sweepstakes tend to highlight the firm itself. TABLE 13. The only sales promotion that can have any hope of success is a premium. both will motivate them to repurchase. If the gift or award is prized by the customer. To increase repeat purchases by current customers. Sampling enhances customer satisfaction through clarifying what a consumer can expect from a service. The frequency programs offer consumers a motive for repeat purchases and a reward for past purchases. Both are aimed toward current customers. are the best. or additional services at a reduced price. sweepst akes No Fair Maybe Poor Excell No Maybe No Poor Tie-ins Good Good Maybe Maybe Good No Maybe Poor Poor Frequen cy No Good Good Good Fair Fair Excell Fair Good Sample s Excell Excell Maybe Maybe Good Good No No No Priceoffs Excell Excell Poor Poor Poor Poor Excell Poor Poor Rebates and Refunds Poor Fair Fair Poor Poor No Good Poor Fair Premiums and frequency programs can be used to develop corporate image and brand equity. it may become strong justification and proof that he or she made a good decision. Someone given a month's free membership at Jenny's Gym and Fitness Center will know what to expect when he or she purchases a membership. contests and sweepstake. and price-offs. Advertising works much better for these two objectives. customer satisfaction with the restaurant will normally be enhanced. This negative impact is especially true if sales promotions are used extensively. . Firms must be very careful not to rely on sales promotions as their primary communications tool. A free initial consultation with an attorney that offers good advice and is not a sales pitch would be beneficial in developing the service provider's image. The premium offers consumers a gift or a reduction in the price of future purchases. Publishers Clearing House is probably better known for its sweepstake than it is for being a magazine subscription service. Premiums and frequency programs offer customers free merchandise. it can be beneficial in terms of brand and firm equity. When a firm such as McDonald's ties in with highly successful Walt Disney films and characters. the consumer is more likely to be satisfied with the service when it is purchased. Advertising and interaction with the service staff are the best means of reducing cognitive dissonance. free additional services. services can use coupons. Both require customers to pay full price for the service. Coupons and price-offs reduce the monetary investment so consumers have a lower risk to repurchase. If the customer was satisfied with the service. if you receive free ice cream with the purchase of a meal. Premiums can provide some enhancement if the gift is given during the service encounter. All are excellent means of getting current "customers to return. Reducing cognitive dissonance is difficult to do with sales promotions. Sales promotions tend to reduce brand equity and corporate image rather than enhance it.
the emphasis is on rewarding customers for their patronage. Firms using the service quality operational position and the customization operational position must be extremely careful in using sales promotions since most sales promotions tend to focus on some aspect of price. Because customers of firms operating in the cost-efficiency sector are price conscious. none of these sales promotions should focus on price. Sampling allows customers to experience the high technical quality produced by a firm prior to purchase. This strategy affirms high quality. Table 13. technical service quality. For example. functional service quality. Premiums require customers to pay full price for the service. and customization. Tie-ins are good if they emphasize price and price savings for consumers. sweepstakes. Since the thrust of the firm is to provide high-quality interaction between customers and service personnel.3 identifies the relative effectiveness of each sales promotion in terms of the four operational positions. Tie-ins should be with that are considered to have high-quality goods or services. Recall from Chapter 5 that firms have four possible operational positions: cost efficiency. If sales promotions are used. Table 13. certain promotions work better than others. Both reward the customer for purchasing the service. Coupons and price-offs both reduce the purchase price for the customer and are effective. using sales promotions can damage this relationship since the emphasis would shift. Airlines offer a free airline ticket when a passenger accumulates a certain number of frequent-flyer miles. Sales Promotions and Operational Positions The operational position of the firm has an impact on which sales promotion should be used. contests and sweepstakes should be fun and enjoyable for the customers. and samples. Contests and sweepstakes offer consumer the possibility of winning prizes. A cheap award would destroy the benefits of using a premium. tie-ins. The only sales promotions that can possibly be used to do this are premiums and frequency programs. Although all the sales promotions can be used by firms in each of the operational positions. If videos can be purchased at McDonald’s during tie-in promotion more cheaply than at a video rental store. The gift or award given with the premium should also be of high quality. Premiums and frequency .Sales promotions are not good at stimulating positive word-of-mouth communications.3 Use of Sale Promotions and Service Operational Positions Operational Position Cost Efficiency Technical Service Quality Functional Service quality Customization Coupon s Excell Poor Poor Poor Premiu ms Fair Excell Good Good Contest. As mentioned earlier. Firms using the functional service quality approach have to be even more careful in using sales promotions. the use must be limited and of high quality. consumers feel they are getting bargain. To be successful. offering them a free sample is an attractive promotion. Frequency programs can be used by firms using the cost efficiency approach if the awards can be tied to some type of price savings. sweepst akes Excell Poor Fair Poor Tie-ins Excell Good Poor Poor Frequen cy Good Good Good Good Sample s Excell Excell Good Poor Priceoffs Excell Poor Poor Poor Rebates and Refunds Poor Fair Fair Fair Although frequency programs offer a free service after reaching a certain level of repeat purchases. AT&T offers a discount to long-distance customers who make more than $ 25 in longdistance calls each month. Therefore. Other sales promotions rated excellent would be contests. the best sales promotions are those that offer the consumer some type of price incentive. Premiums and sampling are two sales promotions that van be used by firms with the technical service quality position. Other sales promotional strategies a firm in a technical service quality operational position can use include tie-ins and frequency programs. Firms using the cost efficiency operational approach will emphasize price in their marketing plan.
The two-way communication salespeople have with customers makes personal selling an excellent method of meeting these objectives. The more skillfully objections can be answered. Part of this relationship is building a strong firm image and brand equity. As with the functional service quality strategy. Personal selling is not normally used to increase awareness of a firm due to the high cost per contact. in most of these situations. make restitution to customers. BBBK will pay all fines. Sales personnel are an effective means of accomplishing the communications objective of increasing the probability of purchase. a BBBK salesperson can stress the reduction of uncertainty. This relationship may take time to develop and may require multiple visits. the greater the probability the prospect will buy the service. The guarantee offered by Bugs Burger Bug Killers (BBBK) in Chapter 12 virtually eliminates the consequences of poor service. salespeople can effectively reduce either the uncertainty of receiving bad service or the consequences of a bad outcome. The consequence component can be reduced by offering buying organizations guarantees and warranties. In addition to being able to tailor the sales presentation to meet the needs of each prospective buyer. The salesperson can show the low number of guarantees that have been invoked by BBBK customers. Sales promotions tend to distract from this goal. salespeople can answer objections. salespeople can convey information that will assure the potential buyer that the probability of receiving bad service is low. They are the connecting link between the customer and the selling organization. Sales personnel can be used to accomplish all nine communication objectives. the purpose of the sales promotions should be to reward current customers for their patronage. and pay for a new vendor to come in and eradicate the problem. Again. the salesperson will be attempting to make a sale rather than increasing awareness. the salesperson is the only employee the consumer or buying organization will ever see. If any type of pest . Salespeople can tailor sales information to the specific needs of each customer. The same situation is true for firms using the customization approach. Sales representatives can be used to make current customers aware of new services. the only sales promotions that can fit into this type of strategy are the premiums and frequency programs. In some situations. To reduce the uncertainty component of risk.programs can be used as long as the emphasis is either on enhancing customer relationships or rewarding current customers. Personal selling can be used to enhance corporate image and build brand equity.is seen on the premise. . Reducing uncertainty involves developing a trust relationship between the buyer and seller. Salespeople represent the firm to the customer and serve as a customer contact employee for the selling organization. Unlike the other communications tools. The operating strategy is to design the service to meet each customer's needs. For both of these communications objectives. Developing corporate image and brand equity are especially important for firms operating in the service quality and customization operational positions. To a hotel that is more concerned about the reaction of guests who normally will not inform management. During the Prepurchase Phase To reduce purchase risk. However. individuals called missionary' salespeople are often used. salespeople have the opportunity to close a sale. The primary purpose of the missionary salesperson is to establish a relationship with prospective buying organization. Personal Selling Sales representatives serve a very important role in the service organization. To a restaurant that has been closed down or fined by the health department due to pests. Reducing the consequence component of risk requires salespeople to convince the buying organization that the consequence of receiving poor service is not as bad as they believe. a salesperson for BBBK can stress the guarantee portion of their service.
During the Consumption Phase The two communications objectives of the consumption phase are best met by the service personnel performing the service. The higher the cost and the greater the importance of the purchase. Salespeople can be instrumental in developing positive word-of-mouth communications from buying organizations to other companies. Since the cleaning of the facility is done after operating hours. Sales personnel must make sure the customer receives the service that was promised. the salesperson can inquire about service quality and whether the service is meeting the buyer's expectations. However. selling organizations must recognize that the buying firm will experience some cognitive dissonance. customers' satisfaction increases because their expectations are met. Firms with the cost efficiency operational position will focus on price. The emphasis in the customization operational approach will be customizing the service to meet the needs of the buyer. customers end up being unhappy. Good postpurchase servicing of accounts by the salespeople will be instrumental in stimulating repeat purchases. in a number of services. the buyer can be reassured the decision was good. the selling organization can make sure that the personnel performing the service are meeting the expectations of the buyer. Salespeople can reduce the level of cognitive dissonance experienced by buying organizations. the only personnel the customer may see are the salespeople. through personal communication. It is natural for buying organizations to wonder if they made a good decision. Effective communication after the sale will ensure the customer will buy again. If sales representatives overpromise in order to get a sale. Personal Selling and Operational Position The orientation of the sales presentation will vary depending upon which operational position the selling organization has chosen. Firms with the functional service quality approach will focus on developing a long-term relationship with the customer. the only contact the manager of the facility may have with the service company is through the sales representative. First. Second. Customer satisfaction can be enhanced by clarifying customer expectations. the greater will be the level of cognitive dissonance. it will be more difficult for the service personnel to perform the service. precise understanding of what to expect. Salespeople can enhance customer satisfaction by providing a clear. During the Postpurchase Phase Sales personnel can be used effectively to accomplish the communications objectives of the postpurchase phase. When this approach is followed. When customers' expectations are met and they are satisfied with the service. These salespeople will spend more time getting to know the people in the buying organization and more time servicing the account. Firms with the technical service quality position will focus on the high quality of service the buyer can expect. These salespeople will spend more time finding out what these needs are and designing the service accordingly. In most cases where the service is sold by overpromising. the manager of a large office building may contract with a local janitorial company to clean their facility. This reassurance can take place in three ways. It will also increase the probability that the customer will tell other organizations about the seller. Salespeople through their sales presentation will create certain expectations. Salespeople need to reassure the buyer that a good decision was made. . For example. The sale does not stop when the buyer signs on the dotted line. Postpurchase communication between the selling firm and the buyer is vital for a long-term relationship. Third. In large contracts or purchases. The customer is not present when the service is performed. the probability of getting repeat patronage is improved.
A huge logo of the Orange Bowl with the name FedEx is displayed at the 50-yard line. Cause-related marketing accomplishes several objectives. McDonalds sponsors the Ronald McDonald House. where the majority of advertisements go unnoticed. Cause-related marketing is the promotion of a social cause by a service organization in exchange for publicity rights. Sponsorship marketing should accomplish at least one of the following objectives: 1. Rather than going with the highest bidder. After the Oklahoma City bombing and the hurricane devastation in Florida. it is doubtful sales volume will be positively affected. Ad executives believe the causes for the decline are the new technologies that allow viewers to zap out commercials. In addition to the Olympics. and has been associated with it since 1990. Enhance corporate image. and newspapers.Sponsorship Marketing A recent trend in services marketing is the concept of sponsorships. However. One such adventure was the scaling of a 10. it should increase brand or firm awareness and it should enhance corporate image. In 1986. Among the sponsors were Federal Express and Penske Transportation. college football games are looking for sponsors with which they can develop a long-term relationship. radio. 2. AIDS research. and camps for disabled children. It enhances the image of the organization. Sales often increase. the logo is seen by millions of fans watching on television. unaided. To help defray the expenses of the Atlanta Olympics. Other promotional and communications efforts can be coordinated with the sponsored event to increase the impact. use of VCRs. companies have sponsored events such as golf tournaments. boat races. When he reached the top. If there has been any negative publicity. sponsoring a worthy cause may help to erase or reduce negative perceptions. he thanked his 70 corporate sponsors that donated $1. 64% of the people polled could. Increase sales volume. Viewers seem to be overwhelmed by the clutter of commercials on network. has found that the percentage of people who can name an outstanding TV ad has dropped over the past decade. Firms will often donate a certain percentage of their sales to a cause such as muscular dystrophy. magazines. That percentage now is less than 48%. Federal Express has been the only corporate sponsor of the Orange Bowl. Cause-Related Marketing A form of sponsorship marketing that has been used by some firms is cause-related marketing. allowing it to benefit in terms of strengthening its brand equity. . Increase brand or firm awareness.5 million for his expedition. Adventure marketing is the sponsorship of bizarre expeditions or competitive sports designed for the physically fearless. If the latter two objectives are not accomplished. rodeos. Numerous times during the game. For example. local. Cause-related marketing will normally increase brand and firm awareness. Inc. Paying money to sponsor an event will not always increase sales for a firm. or cancer research. especially if the cause is well publicized and consumers see it as a worthy one. A study by Video Storyboard Tests.000-foot Antarctic mountain by an 89-year-old man. and increased media clutter. Firms can pick events that are a good match with their own target markets. many firms raised money for the victims and their families through cause-related marketing. Sponsorship marketing is the paid support of an event by a corporation in exchange for publicity rights. a hospital for children. at least in the short-run. Adventure Marketing A sponsorship trend which has recently mushroomed is adventure marketing. sponsors were sought at a price tag of $40 million. A second reason for using sponsorship marketing is that it allows firms to reach various market segments. 3. A reason for using sponsorship marketing is that it avoids media clutter. The long-term relationship has made FedEx synonymous with the Orange Bowl. and cable TV. cite favorite ads.
Hilton found this out when the Earthwinds balloon they sponsored failed in four attempts to circumnavigate the globe. which is skydiving with a snowboard and a video camera attached. Such was the case in a recent round-the-world yachting event where a sailor died during the race. however. The greatest risk is the possibility of someone getting hurt or dying. and sky surfing.AT&T. Companies do. The primary reason companies invest in adventure marketing is for media exposure. face some risks in adventure marketing. sponsored an Olympic-style "extreme games. In addition. Such disasters may prove to be damaging instead of beneficial for the corporate image. The cost of sponsoring the eight-day event was $1 million per sponsor. an event that is not successful will not get much media exposure. . the year prior to the Atlanta Olympics. An event that is ignored by the media does not enhance the corporate image. Not all sponsored events will be well covered by the media." Events included activities such as downhill in-line skating.
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