Sales Promotion Options

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
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 firms 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

Coupons Rebates, Refunds Premiums

Price-offs

One Dollar

Contests, Sweepstake s

Tie-ins Sampling

Frequency Programs

Figure 13.3 Sales promotion options

Premiums
Premiums offer consumers free merchandise or services for purchasing the service. With premiums, customers will always pay full price for the service. For example, the Seattle Mariners might offer the first 10.000 fans at a game a free baseball cap with the purchase of a ticket. A business premium may be a set of free indoor plants with the purchase of a lawn service contract. Premiums offer a major benefit not possible with coupons. Because customers pay full price for the service, brand and firm equity are not adversely affected. Therefore, premiums are a good strategy for firms using either the service quality or customization operational approach. With both of these operational strategies, brand and firm equity are important. Unless overused, premiums tend to support both. Premiums are used almost exclusively by regular customers of a service. It is not as effective as coupons in encouraging trial purchases. If a firm wants to reward customers for their loyalty, offering premiums is one way of accomplishing this goal. Premiums can also be used to encourage customers to stock up. Stocking up on a service would make coupons from competitors less attractive. For example, if SunGloTannning Salon offers consumers two free tans with the purchase of ten tanning sessions they will accomplish two major goals. First, they will get full price for the ten sessions. Second, they will encourage current customers to stay with the salon rather than switch to another firm offering a coupon.

To be effective, premiums must be attractive to the customer. If a free gift is being offered, the gift must be an item that is desirable. The gift must reinforce the image of the firm. For example, a firm using the customization approach may want to offer a personalized gift such as an attach case with the customer's name inscribed on it.

Contests and Sweepstakes

Both contests and sweepstakes allow consumers an opportunity to win prizes. The difference between contests and sweepstakes is what a consumer must do to win. In a contest consumers may be required to perform an activity or to make a purchase to be eligible to win. In a sweepstake consumers do not need to make a purchase and the winners are determined by a drawing. Both contests and sweepstakes are effective means for building customer traffic. Many firms will use them at a grand opening to encourage consumers to stop by and visit the facility. A recent sweepstake by McDonald's where customers collected monopoly pieces and had to complete a set of properties was very popular. In many McDonald's locations, the sweepstake was so popular that stores ran out of the monopoly pieces. Both sales and profits were up as a result of the sweepstake. To be effective, firms cannot overuse contests or sweepstakes. When used too often, customers lose interest and the sweepstake or contest will not be an effective means of increasing sales or customer traffic. Contests and sweepstakes tend not to have the negative impact on brand and firm equity that coupons do, unless they are overused. While coupons appeal to price-conscious consumers, contests and sweepstakes appeal to individuals who enjoy high levels of excitement and stimulation. Price-conscious consumers may not participate in contests and sweepstakes because they see the contest or sweepstake as increasing the cost of the service. To increase the effectiveness of a sweepstake or contest, firms should emphasize fun, fantasy, and stimulation. Consumers enter contests and sweepstakes for the experience as well as the hope of winning. Contests should be structured to provide participants a challenge as well as excitement. 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. Excitement grew as the number of different pieces collected increased. With each purchase, consumers experienced the anticipation that inside may be the one piece they need to complete a set and win a prize. To increase usage of its pay telephones and calling cards during the Christmas holiday season, Ameritech developed a sweepstake called "Play Jingle Bells. The sweepstake ran in the six major Ameritech markets of Chicago, Cleveland, Columbus, Indianapolis, Detroit, and Milwaukee. Random consumers using Ameritech's pay phones received an immediate call back awarding them prizes up to $5,000 each. Customers using Ameritech's calling card were automatically entered into the drawing for prizes with each phone call they made using the card. To support the sweepstake, Ameritech run commercials on radio and had ads made for billboards and transit buses.

Tie-Ins
Promotional tie-ins include two or more goods or services within the same promotional offer. The tie-ins can be either intra-company or inter-company. Intra-company tie-ins are those involving two or more distinct services within the same company. For example, Pepsico, which owns Kentucky Fried Chicken, could place a 20% discount coupon for KFC on their six-pack soft drink package. Intercompany tie-ins involve two different companies offering complementary-type services. For example, the St. 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. Tie-ins can be an excellent means of stimulating demand for a particular service. Demand is stimulated by tying a high-demand service to a low-demand service. The best approach is to offer consumers some type of promotional incentive for the high-demand service if the low-demand service is

purchased. Another approach is to offer a combination ticket where the consumer gets two services for a reduced price. For example, tourists can save $10 with a combination ticket that allows them into both Busch Gardens and Adventure Island. Inter-company tie-ins are more difficult to coordinate because two firms have to agree to the promotion. More lead time is needed since both companies will have to approve each detail of the joint promotion. Each company must feel they are benefiting from the joint venture. One recent venture that was successful was the sale of selected Walt Disney videos, such as the Lion King, at a reduced price at McDonald's restaurants. Walt Disney benefited by increasing sales of their videos. McDonald's benefited as customers came in to buy the videos. Although a purchase was not required, most individuals who purchased the video made a purchase of one or more meals. Tie-ins between hotels and restaurants have seen considerable recent growth. To reduce operating costs, hotel chains such as Howard Johnson, Days Inn, Ramada, Super 8, and Park Inn have signed tie-in agreements with Pizza Hut, McDonald's, and other fast-food-type restaurants. In exchange for a small commission, hotels are putting the phone number of their tie-in on the table tent in each room. To get food delivered to their rooms, guests merely dial the number listed. 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. In addition to tie-ins with restaurants, hotels such as Travelodge, Holiday Inn, and Sheraton are offering FTD flower specials, car rental discounts, and other perks to attract business customers.

Frequency Programs
Most sales promotion programs are of short duration. Most encourage brand switching. A few will encourage repeat purchase behavior. Few build brand loyalty and the impact on brand and firm equity is questionable. In an attempt to correct these negative aspects of sales promotions, service firms have developed frequency marketing programs. 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. Although premiums offer customers a free gift or a price reduction on additional purchases, they are not a frequency program. Frequency programs have the following four characteristics: 1. They require multiple purchases over a period of time. 2. There is a formal method for accumulating points or credits for purchases. 3. There is a standardized redemption process 4. Rewards come in the form of additional goods, services, discounts, or cash when a certain number of points are accumulated. A side benefit of a frequency marketing program is the development of a database of a firm's current customers. This database can be used to develop promotions that best target the needs of each customer. It can also be used to develop a relationship marketing program for a firm's best customers. Frequency marketing programs can be either open-ended or fixed-time. Open-ended frequency programs have no time limit on usage and accumulation of points. Fixed-time frequency programs have a specific end to the program. All points or credits must be redeemed within the specified period of time. The two most popular frequency programs are the long-distance telephone calling plans and the frequent-flier air passenger programs. AT&T, MCI, and Sprint each have a long-distance plan that rewards customers for using their service. For example, AT&T customers receive a discount on all longdistance calls that exceed a minimum amount. In addition, customers receive points that can be redeemed in several ways. The points can be used for merchandise at a Walt Disney store, for car rentals at Alamo Rental Car, for hotel reservations at Marriott Resorts, Holiday Inn, and Crowne Plaza, or to build frequent-flyer miles at airlines such as Delta, United, and U.S. Air. Since the reward is tied to long-distance usage, 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. Services in Action 13.2 demonstrates some of the

problems, however, that can occur when companies compete for customers using promotional incentives. SERVICES IN ACTION 13.2 SPINNERS AND SURFERS To entice customers to switch, AT&T MCI, Sprint, and other long distance companies are offering consumers larger and larger sales promotion incentives. Individuals who switch companies on regular basis, two to three times per year, can earn or save up to $400 a year. These individuals have become known by the long-distance carriers as 'spinners" or "surfers". Ruth Holder is a spinner. She spends over $100 a month in long-distance phone calls to Florida; Ohio, and the Virgin Islands. She was originally an AT&T customer, then switched to MCI to join the Friends and Family calling circle. To get her to switch, MCI had offered her free frequent flier miles, which AT&T did not offer at that time. 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. In addition to the cash and the discount, Ruth makes the new company pay the switching cost. In one year Ruth saved $ 445. An estimated 16 million households (or 16,5 %) change long-distance carriers annually. Approximately 100.000 change carriers four or more times a year. AT&T estimates they handle around 27 million switches a year. Special incentives to get customers to switch range from cash to free calls, Walt Disney merchandise, travel discounts, and airplane tickets. AT&T, MCI, and Sprint have over 90% of the long distance market. AT&T promotes the True Savings and True USA plans. MCI offers New Friends and Family calling circles. Sprint offers the 10 percent-per-minute rate. The fight over customers and the large incentives being offered are being financed primarily by customers who cant afford to make long-distance calls. About 30 % of households with telephones make less than $10 a month in long-distance calls. These customers do not qualify for nay type of savings plan; therefore the pay full retail rate for long distance calls. These higher margins make it possible for the long distance carriers to offer incentive to keep customers and entice competitors customers to switch. As the stakes and incentives increase, more and more customers will become spinners and surfers. The frequent-flier clubs used by airlines are similar but the results have been more devastating. The cost of continuing the program has become so large that it has adversely affected profits. Yet no airline can discontinue the frequent-flier programs because airline passengers now expect it. Airlines now consider it a part of doing business and an expense item. The first airline to launch a frequent-flier program was American Airlines. In 1981 they launched the AAdvantage. The other airlines quickly countered with their versions so as not to be at a competitive disadvantage. At first, the idea seemed great. Airlines gave away free seats. Minimal additional costs were accrued since the seats they gave away would have been empty any way. The frequent-flier programs turned out to be more popular than was ever expected. Over 22 million travelers have been enrolled in some type of frequent-flier program. On the average, each traveler has joined 2.26 programs resulting in over 50 million members. It is estimated that 70% of all business travelers are in one or more frequent-flier clubs. Before instituting a frequency program, a firm should carefully analyze the long- term cost. Will the anticipated benefits outweigh the cost of the communications, maintaining the database, and the awards given? Careful consideration should be given to the award that will be offered. Customers must see it as a value-added benefit. The larger the award, the more popular the program will be. However, with increased participation, costs to support the program will increase. What starts out as a benefit may end up to be an additional cost of doing business, as was illustrated by the airlines. Many carriers would like to discontinue their frequent-flier programs, but cannot because of negative reactions by travelers. Another factor to consider is the ease of implementing the program. The easier it Is to implement, the lower the cost, but the easier it is for the competition to copy. The more difficult the

implementation, the longer it will take the competition to copy, but the more costly it will be to administer. An example of a frequency program that would be difficult to imitate is a restaurant that gives away tickets to a local sporting event. If an exclusive contract can be signed with the sports team, then the restaurant can offer free tickets in exchange for repeated usage. The last issue is whether the program should be open-ended or for a fixed time. Open-ended programs are the most popular with customers since they can use the service anytime and collect the award at any time. The fixed-time program is liked the best by firms because it allows an unsuccessful program to be terminated without adverse reactions. It also allows a firm to locate problems that can be remedied in subsequent programs. A frequency program that is proving to be successful is a frequent-diner program offered by Unique Restaurant Corporation, which manages the upscale restaurants of Morel's, Sebastian's Grill, Trattoria Bruschetta, and America. Monday through Thursday is an especially slow time for the Unique Corporation's restaurants so a double point offer was mailed to the 30,000 frequent-diner members. Business immediately picked up. There are two major reasons for Unique's success with the frequent-diner program. First, the program is seen as a bonus, a reward for current customers. It is not used to attract new customers, but is a means of thanking current customers for their patronage. Second, to keep customers coming back, the restaurant realizes it must continue providing great food and service. For joining Unique's frequent-diner club, customers receive free tortes on their birthday and their spouse's birthday. They receive free champagne on their anniversary. They also receive notification by mail of any specials during the year. Customers who earn 150 points can receive a $10 Unique Restaurant gift certificate. For 1,000 points, a customer can receive a full four-course dinner for two at one of their restaurants. A total of 5,000 points can earn customers a free round-trip coach ticket from Northwest Airlines or a chauffeured night on the town that includes dinner, theater, and after-theater dessert and drinks. For 20,000 points, members can receive a five-course dinner for eight served at the frequent-diner's home.

Sampling
Sampling is a sales promotion used extensively in the consumer goods area, but seldom by service firms. However, within the last decade, more service firms have tried sampling as a means of attracting new customers. Sampling is the free delivery of an actual service or portion of a service to consumers. Today, many attorneys offer free initial visits Potential clients can describe their case and discuss their legal options. Many who make this initial visit will later retain the attorney to represent them. This sampling technique is especially prevalent in the area of injury liability suits. In the businessto-business sector, some consulting and financial service companies have made the same type of offer to potential clients. Sampling is sometimes used at grand openings to attract visitors to a business. A new fast-food restaurant may offer free soft drinks or perhaps a free sandwich to everyone who comes in the first day. Most customers will order something else to go along with the free item. Sampling can be used to reduce purchase risk by getting the consumer to try the service. A suntanning salon may offer a free tanning session. These free sessions are scheduled at low-demand times when the tanning beds are most likely to be idle. Health clubs have membership drives where they offer individuals a free initial trial period of one month.

Price-Off.
Price-offs involve a reduction in a service's retail price. Price-offs are used to attract consumers to a service. The price-off will reduce purchase risk. It will increase the probability of purchase. Like coupons, however, price-offs will attract many of the current customers who would have paid full price for the service. If a service develops a reputation for offering price-offs on a regular basis, consumers

will wait until a price-off to make the purchase. Instead of coupons, many airlines will offer price-offs to attract customers to their firm. Knowing this will occur, some travelers wait until there is a pricereduction before they will purchase airline tickets. The same occurs at recreational theme parks that offer price-offs on tickets throughout the year. Price-offs can help shift demand from high- to low-demand periods. By offering price-offs during the week, a recreational theme park may be able to transfer some heavy weekend demand to week days. In addition, the price-off may also stimulate new demand from individuals who originally had not planned to go to the theme park. 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. Companies have to be careful that the promotional price used in the price-off does not replace the regular retail price. Airlines have found that numerous price reductions cause many leisure travelers to be outraged at the regular price. Seldom will a leisure traveler pay full, retail fare. Most will wait until a price reduction occurs or postpone their trip so they can take advantage of a lower price.

Rebates and Refunds

Rather than use coupons to reduce the price of services, some firms will use a rebate or refund. Rebates and refunds refer to a cash reimbursement to a consumer paid with a proof of purchase. Technically the rebate refers to reimbursements in the durable goods sector while refunds refer to reimbursement in the soft goods or consumer service sector. However, the words are often used interchangeably today, Refunds and rebates are given to buyers upon proof of purchase. The primary objective of the sales promotion is to reward individuals for using the service. It is also an attempt to prevent brand switching. The credit card industry has been the most successful service at using this sales promotion. The Discover card offers customers money back based on their usage of the card. General Motors has a similar plan for the credit card but instead of cash back, customers get to apply the rebate toward the purchase of a new GM car or truck. GM's program has been so successful that they signed up over five million accounts in their first year.

Sales Promotional Strategies

Table 13.2 identifies the relative merits of each major sales promotion in achieving the nine communication objectives. To reduce purchase risk, the best sales promotions are coupons, sampling, and price-offs. The coupons and price-offs allow consumers to purchase the service at a lower price, reducing financial risk. Sampling allows customers to see what the service is like prior to purchasing it, reducing performance risk. Tie-ins can be used to reduce purchase risk. However, these sales promotion techniques normally do not succeed as well as coupons, sampling, and price-offs. The two sales promotions that cannot reduce risk are the contest and sweepstakes promotions and the frequency programs. If a firm wants to increase the probability of purchase by a consumer, then coupons, sampling and price-off are the best sales promotions. Since coupons and price-offs reduce the financial cost of a service, consumers are more likely to buy. Since sampling allows consumer to try the service prior to purchasing, the likelihood of purchasing the service increases. Tie-ins and frequency programs are also good methods of increasing purchase probability. Tieins such as McDonald's with Disney are effective in getting consumers attention. 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. Frequency programs are primarily aimed at getting current customers to make additional purchases. The probability of making a purchase increases since customers have incentives to do so.

Developing corporate image and building brand equity are difficult to accomplish with sales promotions. Advertising works much better for these two objectives. Sales promotions tend to reduce brand equity and corporate image rather than enhance it. 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.
TABLE 13.2 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, 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. Both are aimed toward current customers. Both require customers to pay full price for the service. The premium offers consumers a gift or a reduction in the price of future purchases. The frequency programs offer consumers a motive for repeat purchases and a reward for past purchases. Sampling and tie-ins may develop the firm's image and build brand equity if the firm is careful in how it is done. 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. When a firm such as McDonald's ties in with highly successful Walt Disney films and characters, it can be beneficial in terms of brand and firm equity. To increase awareness of the firm and services offered, contests and sweepstake, are the best. Contests and sweepstakes tend to highlight the firm itself. Publishers Clearing House is probably better known for its sweepstake than it is for being a magazine subscription service. Sales promotions are not highly effective in enhancing customer satisfaction during the service encounter. Premiums can provide some enhancement if the gift is given during the service encounter. For example, if you receive free ice cream with the purchase of a meal, customer satisfaction with the restaurant will normally be enhanced. Sampling enhances customer satisfaction through clarifying what a consumer can expect from a service. 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. Having sampled the service first, the consumer is more likely to be satisfied with the service when it is purchased. To increase repeat purchases by current customers, services can use coupons, premiums, frequency programs, and price-offs. All are excellent means of getting current "customers to return. Coupons and price-offs reduce the monetary investment so consumers have a lower risk to repurchase. Premiums and frequency programs offer customers free merchandise, free additional services, or additional services at a reduced price. If the customer was satisfied with the service, both will motivate them to repurchase. Reducing cognitive dissonance is difficult to do with sales promotions. Cognitive dissonance occurs when consumers have doubts about the purchase and wonder if they made a good decision. Advertising and interaction with the service staff are the best means of reducing cognitive dissonance. The only sales promotion that can have any hope of success is a premium. If the gift or award is prized by the customer, it may become strong justification and proof that he or she made a good decision.

Sales promotions are not good at stimulating positive word-of-mouth communications. The only sales promotions that can possibly be used to do this are premiums and frequency programs. Both reward the customer for purchasing the service.

Sales Promotions and Operational Positions

The operational position of the firm has an impact on which sales promotion should be used. Recall from Chapter 5 that firms have four possible operational positions: cost efficiency, technical service quality, functional service quality, and customization. Although all the sales promotions can be used by firms in each of the operational positions, certain promotions work better than others. Table 13.3 identifies the relative effectiveness of each sales promotion in terms of the four operational positions. Firms using the cost efficiency operational approach will emphasize price in their marketing plan. Therefore, the best sales promotions are those that offer the consumer some type of price incentive. Coupons and price-offs both reduce the purchase price for the customer and are effective. Other sales promotions rated excellent would be contests, sweepstakes, tie-ins, and samples. Contests and sweepstakes offer consumer the possibility of winning prizes. As mentioned earlier, contests and sweepstakes should be fun and enjoyable for the customers. Tie-ins are good if they emphasize price and price savings for consumers. If videos can be purchased at McDonalds during tie-in promotion more cheaply than at a video rental store, consumers feel they are getting bargain. Because customers of firms operating in the cost-efficiency sector are price conscious, 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. For example, AT&T offers a discount to long-distance customers who make more than $ 25 in longdistance calls each month. Airlines offer a free airline ticket when a passenger accumulates a certain number of frequent-flyer miles. 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. If sales promotions are used, the use must be limited and of high quality. Premiums and sampling are two sales promotions that van be used by firms with the technical service quality position. Premiums require customers to pay full price for the service. This strategy affirms high quality. The gift or award given with the premium should also be of high quality. A cheap award would destroy the benefits of using a premium. Sampling allows customers to experience the high technical quality produced by a firm prior to purchase. Other sales promotional strategies a firm in a technical service quality operational position can use include tie-ins and frequency programs. To be successful, none of these sales promotions should focus on price. Tie-ins should be with that are considered to have high-quality goods or services.
Table 13.3 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, 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, the emphasis is on rewarding customers for their patronage. Firms using the functional service quality approach have to be even more careful in using sales promotions. Since the thrust of the firm is to provide high-quality interaction between customers and service personnel, using sales promotions can damage this relationship since the emphasis would shift. Premiums and frequency

programs can be used as long as the emphasis is either on enhancing customer relationships or rewarding current customers. The same situation is true for firms using the customization approach. The operating strategy is to design the service to meet each customer's needs. Sales promotions tend to distract from this goal. Again, the only sales promotions that can fit into this type of strategy are the premiums and frequency programs. As with the functional service quality strategy, the purpose of the sales promotions should be to reward current customers for their patronage.

Personal Selling
Sales representatives serve a very important role in the service organization. They are the connecting link between the customer and the selling organization. Salespeople represent the firm to the customer and serve as a customer contact employee for the selling organization. In some situations, the salesperson is the only employee the consumer or buying organization will ever see. Sales personnel can be used to accomplish all nine communication objectives. The two-way communication salespeople have with customers makes personal selling an excellent method of meeting these objectives.

During the Prepurchase Phase

To reduce purchase risk, salespeople can effectively reduce either the uncertainty of receiving bad service or the consequences of a bad outcome. To reduce the uncertainty component of risk, salespeople can convey information that will assure the potential buyer that the probability of receiving bad service is low. Reducing uncertainty involves developing a trust relationship between the buyer and seller. This relationship may take time to develop and may require multiple visits. 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. The consequence component can be reduced by offering buying organizations guarantees and warranties. The guarantee offered by Bugs Burger Bug Killers (BBBK) in Chapter 12 virtually eliminates the consequences of poor service. If any type of pest .is seen on the premise, BBBK will pay all fines, make restitution to customers, and pay for a new vendor to come in and eradicate the problem. Salespeople can tailor sales information to the specific needs of each customer. To a restaurant that has been closed down or fined by the health department due to pests, a salesperson for BBBK can stress the guarantee portion of their service. To a hotel that is more concerned about the reaction of guests who normally will not inform management, a BBBK salesperson can stress the reduction of uncertainty. The salesperson can show the low number of guarantees that have been invoked by BBBK customers. Sales personnel are an effective means of accomplishing the communications objective of increasing the probability of purchase. In addition to being able to tailor the sales presentation to meet the needs of each prospective buyer, salespeople can answer objections. The more skillfully objections can be answered; the greater the probability the prospect will buy the service. Unlike the other communications tools, salespeople have the opportunity to close a sale. Personal selling can be used to enhance corporate image and build brand equity. For both of these communications objectives, individuals called missionary' salespeople are often used. The primary purpose of the missionary salesperson is to establish a relationship with prospective buying organization. Part of this relationship is building a strong firm image and brand equity. Developing corporate image and brand equity are especially important for firms operating in the service quality and customization operational positions. Personal selling is not normally used to increase awareness of a firm due to the high cost per contact. Sales representatives can be used to make current customers aware of new services. However, in most of these situations, the salesperson will be attempting to make a sale rather than increasing awareness.

During the Consumption Phase

The two communications objectives of the consumption phase are best met by the service personnel performing the service. However, in a number of services, the only personnel the customer may see are the salespeople. The customer is not present when the service is performed. For example, the manager of a large office building may contract with a local janitorial company to clean their facility. Since the cleaning of the facility is done after operating hours, the only contact the manager of the facility may have with the service company is through the sales representative. Customer satisfaction can be enhanced by clarifying customer expectations. Salespeople through their sales presentation will create certain expectations. If sales representatives overpromise in order to get a sale, it will be more difficult for the service personnel to perform the service. In most cases where the service is sold by overpromising, customers end up being unhappy. Salespeople can enhance customer satisfaction by providing a clear, precise understanding of what to expect. When this approach is followed, customers' satisfaction increases because their expectations are met. When customers' expectations are met and they are satisfied with the service, the probability of getting repeat patronage is improved.

During the Postpurchase Phase

Sales personnel can be used effectively to accomplish the communications objectives of the postpurchase phase. Salespeople can reduce the level of cognitive dissonance experienced by buying organizations. Salespeople can be instrumental in developing positive word-of-mouth communications from buying organizations to other companies. Good postpurchase servicing of accounts by the salespeople will be instrumental in stimulating repeat purchases. Postpurchase communication between the selling firm and the buyer is vital for a long-term relationship. The sale does not stop when the buyer signs on the dotted line. Sales personnel must make sure the customer receives the service that was promised. Effective communication after the sale will ensure the customer will buy again. It will also increase the probability that the customer will tell other organizations about the seller. In large contracts or purchases, selling organizations must recognize that the buying firm will experience some cognitive dissonance. The higher the cost and the greater the importance of the purchase, the greater will be the level of cognitive dissonance. It is natural for buying organizations to wonder if they made a good decision. Salespeople need to reassure the buyer that a good decision was made. This reassurance can take place in three ways. First, through personal communication, the buyer can be reassured the decision was good. Second, the salesperson can inquire about service quality and whether the service is meeting the buyer's expectations. Third, the selling organization can make sure that the personnel performing the service are meeting the expectations of the buyer.

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 cost efficiency operational position will focus on price. Firms with the technical service quality position will focus on the high quality of service the buyer can expect. Firms with the functional service quality approach will focus on developing a long-term relationship with the customer. These salespeople will spend more time getting to know the people in the buying organization and more time servicing the account. The emphasis in the customization operational approach will be customizing the service to meet the needs of the buyer. These salespeople will spend more time finding out what these needs are and designing the service accordingly.

Sponsorship Marketing
A recent trend in services marketing is the concept of sponsorships. Sponsorship marketing is the paid support of an event by a corporation in exchange for publicity rights. To help defray the expenses of the Atlanta Olympics, sponsors were sought at a price tag of $40 million. In addition to the Olympics, companies have sponsored events such as golf tournaments, rodeos, boat races, and camps for disabled children. Sponsorship marketing should accomplish at least one of the following objectives: 1. Increase sales volume. 2. Enhance corporate image. 3. Increase brand or firm awareness. Paying money to sponsor an event will not always increase sales for a firm, at least in the short-run. However, it should increase brand or firm awareness and it should enhance corporate image. If the latter two objectives are not accomplished, it is doubtful sales volume will be positively affected. A reason for using sponsorship marketing is that it avoids media clutter, where the majority of advertisements go unnoticed. A study by Video Storyboard Tests, Inc. has found that the percentage of people who can name an outstanding TV ad has dropped over the past decade. In 1986, 64% of the people polled could, unaided, cite favorite ads. That percentage now is less than 48%. Ad executives believe the causes for the decline are the new technologies that allow viewers to zap out commercials, use of VCRs, and increased media clutter. Viewers seem to be overwhelmed by the clutter of commercials on network, local, and cable TV, radio, magazines, and newspapers. A second reason for using sponsorship marketing is that it allows firms to reach various market segments. Firms can pick events that are a good match with their own target markets. Other promotional and communications efforts can be coordinated with the sponsored event to increase the impact. Rather than going with the highest bidder, college football games are looking for sponsors with which they can develop a long-term relationship. For example, Federal Express has been the only corporate sponsor of the Orange Bowl, and has been associated with it since 1990. The long-term relationship has made FedEx synonymous with the Orange Bowl, allowing it to benefit in terms of strengthening its brand equity. A huge logo of the Orange Bowl with the name FedEx is displayed at the 50-yard line. Numerous times during the game, the logo is seen by millions of fans watching on television.

Cause-Related Marketing
A form of sponsorship marketing that has been used by some firms is cause-related marketing. Cause-related marketing is the promotion of a social cause by a service organization in exchange for publicity rights. McDonalds sponsors the Ronald McDonald House, a hospital for children. Firms will often donate a certain percentage of their sales to a cause such as muscular dystrophy, AIDS research, or cancer research. After the Oklahoma City bombing and the hurricane devastation in Florida, many firms raised money for the victims and their families through cause-related marketing. Cause-related marketing accomplishes several objectives. It enhances the image of the organization. If there has been any negative publicity, sponsoring a worthy cause may help to erase or reduce negative perceptions. Cause-related marketing will normally increase brand and firm awareness. Sales often increase, especially if the cause is well publicized and consumers see it as a worthy one.

Adventure Marketing
A sponsorship trend which has recently mushroomed is adventure marketing. Adventure marketing is the sponsorship of bizarre expeditions or competitive sports designed for the physically fearless. One such adventure was the scaling of a 10,000-foot Antarctic mountain by an 89-year-old man. When he reached the top, he thanked his 70 corporate sponsors that donated $1.5 million for his expedition. Among the sponsors were Federal Express and Penske Transportation.

AT&T, the year prior to the Atlanta Olympics, sponsored an Olympic-style "extreme games." Events included activities such as downhill in-line skating, and sky surfing, which is skydiving with a snowboard and a video camera attached. The cost of sponsoring the eight-day event was $1 million per sponsor. Companies do, however, face some risks in adventure marketing. An event that is ignored by the media does not enhance the corporate image. The primary reason companies invest in adventure marketing is for media exposure. Not all sponsored events will be well covered by the media. In addition, an event that is not successful will not get much media exposure. Hilton found this out when the Earthwinds balloon they sponsored failed in four attempts to circumnavigate the globe. The greatest risk is the possibility of someone getting hurt or dying. Such disasters may prove to be damaging instead of beneficial for the corporate image. Such was the case in a recent round-the-world yachting event where a sailor died during the race.