The Art of Gaining and Retaining Customers - Is Sales Promotion the Key to Succesful Marketing?


Bachelor Thesis, 2005

69 Pages, Grade: 1,7 (85%)


Excerpt

Table of Contents

Abstract

Table of Figures

1 Introduction
1.1 Background
1.2 Problem formulation
1.3 Aim of the study
1.4 Limitations
1.5 Disposition

2 Marketing Concepts and the Customer
2.1 Sales Promotion
2.1.1 Purpose and Objectives
2.1.3 Tool box
2.2 Relationship Marketing
2.2.1 Relationship vs. Transactional Marketing
2.2.2 Benefits and Inadequacy
2.3 The Customer
2.3.1 Purchase decision-making process
2.3.2 Deal proneness
2.4 Former research
2.4.1 In general
2.4.2 Sales Promotion in Germany
2.5 The research model

3 Method
3.1 Research design
3.1.1 Approach
3.1.2 Strategy
3.1.3 Questionnaire
3.1.4 Sampling
3.2 Research quality
3.2.1 Reliability
3.2.2 Validity

4 Analysis of the empirical findings
4.1 Demographics
4.2 Effectiveness of promotion tools
4.2.1 Samples
4.2.2 Premiums
4.2.3 Coupons
4.2.4 Loyalty Cards
4.2.5 Sweepstakes
4.2.6 Customer’s preferences
4.3 Effects on the decision-making process
4.3.1 Problem/Need recognition
4.3.2 Information search
4.3.3 Evaluating alternatives
4.3.4 Making the decision
4.3.5 Post-purchase evaluation

5 Discussion
5.1 Consequences for companies
5.1.1 General attitudes
5.1.2 Attitudes towards promotion
5.2 Conclusions
5.2.1 Effectiveness and influences of sales promotion on the decision-making process
5.2.2 Is long-term customer relation appreciated?
5.2.3 Combining sales promotion and relationship marketing
5.2.4 Achievement of aims
5.3 Outlook

References

Appendix A
I – Questionnaire (English version)
II – Fragebogen (German version)

Appendix B
I – Results
II – Filters

Table of Figures

Figure 1: Purchase decision-making process

Figure 2: Research model

Figure 3: From primary data to the descriptive approach

Figure 4: From the descriptive approach to an online-questionnaire

Figure 7: Question 4 – Purchase probability

Figure 8: Question 13 – Reasons for usage of loyalty cards

Figure 9: Question 25 – Ranking of promotion tools

Figure 10: Question 14 – Opinion direct mailing

Figure 12: Question 1 – Packaging

Figure 13: Question 1 – Brands

Figure 14: Question 17 – Filter for very annoyed

Abstract

Due to the keen competition nowadays, companies are increasingly attaching more importance to sales promotion to attract consumers and to relationship marketing to retain them as loyal clients. It is crucial for enterprises to know people’s reactions towards marketing tools in order to implement them successfully. Therefore, this study analyses the impact of these two concepts, with an emphasis on sales promotion, on the customers’ purchase decision-making process by investigating consumers’ points of view towards these instruments. These attitudes will be explained by the notion of deal-proneness. An online survey has been conducted in Germany with 471 respondents. The aim was not just to examine financial advantages but also material incentives which make people buy a certain product, as economic savings are not the only benefit of purchasing a product. Hence, we concentrated on five sales promotion tools, namely samples, coupons, premiums, loyalty cards and sweepstakes. The results, among others, show that samples and coupons are the customer’s favourite actions whereas sweepstakes do not achieve the desired effects for the company. Furthermore, this research states possibilities to connect short-term promotion tools with the long-ranging relationship approach.

1 Introduction

“Sales Promotions are unique in their ability to respond in quick, focused and flexible ways to motivate consumer […]. These flexible-rapid response, market targeting characteristics of sales promotions are particularly well suited promotional tools for this technological age of worldwide communication, rapid innovations in technology and intense competition.”[1]

1.1 Background

Since the beginning of the industrialization, the worldwide economy has been steadily growing. During this process, single national markets have converted into intertwined multinational exchanges with arising difficulties for companies in finding and maintaining their place in the global economy. This development on the one hand opened up several opportunities concerning new potential customers and cheaper production or supply facilities, but on the other hand enforced fierce competition between providers of goods and services.

Noticeably, the consumer behaviour in developed countries has also changed in this economic process. First of all, because the majority of his material needs, such as having a full-equipped household, cars and clothes have been satisfied; and secondly, the customer now has the possibility to choose from a wide range of products offered by various providers to satisfy the daily needs for perishables as well as occasional needs for renewals, replacements and product innovations.

As a result of this increasing market saturation it is getting harder for companies to meet their sales objectives and with that ensure the survival of the enterprise. On top of that, it is becoming more and more complicated to attract the today’s customers’ attention, as they are daily exposed to a huge quantity of impulses. People “are bombarded with many hundreds of advertisements every day”[2], this means it is nearly impossible to perceive all given information and they therefore only filter out the important one and ignore the rest.

At this point emerges the challenge for Marketing, namely to arise the stimulus satiated customer’s interest in the product. The traditional tool of advertising has lost parts of its effectiveness over the years as consumers have learned to be more attentive. “They have unprecedented access to information and are less likely to swallow what they hear from marketers.”[3] Hence, the growing tendency towards two alternative methods, Sales Promotion and Relationship Marketing, is to be found. Companies are shifting shares within the promotion budget from mass media advertising to promotional in-and-out-store campaigns and lay stronger emphasis on binding the customer on the long run.

1.2 Problem formulation

To find out if this current tendency is recommendable, we asked ourselves how consumers react to these methods, especially towards sales promotion. Are they really interested in the product when they receive a sample or do they rather like the idea of obtaining something for free? How do brand-loyal customers react on promotions?

Knowing peoples’ attitudes can help companies to divide their advertising budget more efficiently and to save money. We therefore would like to detect

1) If Sales Promotion really is an effective instrument to influence the customer in his decision-making process.
2) If the creation of a long-lasting relationship between a company and a customer is appreciated or seen as rather annoying by the clients.
3) Whether it is possible to connect the short-term Sales Promotion instruments with the long-term Relationship Marketing approach in an effective way.

1.3 Aim of the study

With our thesis we would mainly like to investigate today’s effectiveness of sales promotion tools in Germany by exploring consumers’ attitudes towards them. We would like to call attention to the effective implementation of promotion tools and relationship marketing concerning their impact on the customer’s decision-making process. Furthermore, we aim to search for possible connection strategies linking short-and-long-term marketing methods and analyse their popularity.

1.4 Limitations

In the course of our work we will only treat promotion methods targeted at end-consumers in order to avoid an overload of information, which would have been caused by considering sales promotion aimed at retailers as well. Furthermore, we will concentrate on a selection of tools, which seemed most suitable in respect to our research purpose.

1.5 Disposition

After introducing our research topic, including the research problem and its delimitations in Chapter 1, the second Chapter delivers the theoretical basis for our study.

Chapter 2 is divided into five parts. It starts with a general overview and definition of sales promotion, describes its purpose and objectives and shows a selection of different promotion methods related to our research questions, as well as their advantages and disadvantages. Further, the concept of relationship marketing is introduced and compared to transactional marketing. In addition, its benefits and situations of inadequacy are stated. The third part contains the variables which are determining the customer’s purchase-decision-making process and effects that marketing can have on it. The term deal-proneness is explained in order to understand customers’ affinity towards certain promotions. Former research on this topic is presented and last but not least, our research model was developed on the basis of its shortcomings.

In the 3rd Chapter we will describe our research design including the approach, the strategy and our data collection method. Further, the reliability and validity of our study are discussed. Chapter 4 will provide the reader with our empirical findings, which will then be analysed and compared to the theory. Finally, in Chapter 5 we will discuss the results and present our conclusion. An outlook for further research will be given at the end of this thesis.

2 Marketing Concepts and the Customer

As we have seen before, in the current market situation it is not that easy to conquer customers. Companies cannot afford to waste money for unnecessary and ineffective campaigns; an efficient implementation of marketing activities is imperative.

The traditional marketing concept embraces four main tools, namely the 4 P’s: product – including features as packaging and design – price, place (distribution channels) and promotion activities as advertising or sales promotion.[4] This kind of marketing is rather orientated towards transactions than towards relations with the customers. Therefore new concepts are developed to retain consumers on the long run. However, still the first obstacle that has to be overcome is to convince the consumer to try our product in order to win him over as a client and keep him afterwards.

In the following, sales promotion – as a part of the 4th P to attract new customers – and relationship marketing as a new approach to maintain them will be introduced. Furthermore, we will present an overview of consumer’s behaviour and attitudes – the purchase decision-making process and deal proneness – with the purpose of revealing the influence of the two marketing methods on the customer.

2.1 Sales Promotion

The notion sales promotion belongs together with advertising to the generic term of promotion, which “keeps the product in the minds of the customer and helps stimulate demand for the product. Promotion involves ongoing advertising and publicity (mention in the press). The ongoing activities of advertising, sales and public relations are often considered aspects of promotions.“[5] Advertising then again is defined as “bringing a product (or service) to the attention of potential and current customers. Advertising is typically done with signs, brochures, commercials, direct mailings or e-mail messages, etc.“[6] In order to distinguish sales promotion from advertising, it should be said that while advertising “appeals to the mind and emotions to give the consumer a reason to buy, sales promotion […] provides an incentive for purchasing a brand”[7], namely an added value, which is mostly of material or financial nature.

In general, we can classify sales promotion into three types depending on the initiator and the target of the promotion.[8] The first one, Trade Promotion, refers to manufacturers’ activities towards retailers, whereas Retailer Promotion and Consumer Promotion embrace actions directed to the end-consumer deriving from both, the retailer and the manufacturer. As above-mentioned, we will concentrate on the latter ones.

To give a concise definition, “sales promotion consists of a diverse collection of incentive tools, mostly short-term, designed to stimulate quicker or greater purchase of particular products or services by consumers”[9] and should not be seen as “a separate aspect of the promotion category of tools, but rather an underpinning bridge”[10] combining promotion with the variables product, price and place. It may change the packaging or reduce the price of a product and have effects on the participants of the distribution channel.

Companies more than ever focus on sales promotion activities to maximize their sales volume yet that advertising helps to transmit the brand image but not necessarily makes the audience buy the product immediately. Belch et al. speak of a decline in advertising expenditures from 43% of the marketing budget in 1981 to 25% in 1993.[11] Kotler supports this data, saying that nowadays sales promotion accounts for up to 75% of the marketing budget.[12]

2.1.1 Purpose and Objectives

Companies have to implement their promotion activities effectively to meet their sales objectives. Effectiveness “means the capability of, or success in, achieving a given goal”[13]. The main objectives manufacturers and retailers are striving to achieve are:

- attract new customers
- increase brand awareness and
- increase sales to present customers.[14]

Kotler replaces the objective increasing brand awareness by rewarding loyal customers for their steady consume.[15] A different source tells us that in researches effectuated during the early 1990s eight out of ten people were already loyal customers to a product and would have bought the product anyway.[16] Furthermore, Kotler states that within the group of new triers, promotion activities often attract brand switchers who are primarily looking for a favourable offer and probably will not turn into loyal users, as they do not care about brands in general. True customers of brands or product categories seldom react on competitor’s promotion as they either do not perceive it or they are not interested in a change.

While trying to meet the aims, one has to be aware that sales promotions, if used too often, bear the risk of weakening brand loyalty as clients for example could get used to the lower price of the product and as a consequence only buy it when it is promoted. However, before deciding on the frequency one has to choose the matching tool for his purposes.

2.1.3 Tool box

In the following we will exemplify those sales promotion tools that seemed to us as the most relevant in view of the short-term vs. long-term contacts with consumers. First we chose samples and coupons, as they are classical and wide-spread promotion tools; second premiums and loyalty cards, combining short-term incentives like little gifts with long-term relationship strategies as e.g. loyalty points; and third sweepstakes as a special way of promoting a brand as the aim is not to increase sales figures on the short but on the long run.

Samples are offers of a free amount of a product or service to make prospective customers try it[17]. They are often attached to other articles, distributed in stores, e.g. food products and those articles that need explanation, or handed out directly to a special target group like students, who often receive a bag full of samples at the semester start.

In general, sampling is the best method to make people try new products or brands as it is for free and without obligation[18]. Not all consumers are open for innovations, partly due to doubts they have concerning quality or taste, partly simply dominate the shopping habits. Prospective customers can experience the brand directly – often in a private atmosphere – which may make them feel more comfortable. Imagine you are given a sports car 24 hours to try it. What will your friends say? Can you renounce the car that easily? Lest companies waste unnecessary budget for customers trying but not buying the product, an efficient distribution is essential. Furthermore, companies have to think about an adjunct to stimulate repurchase to bind the customer.

Coupons are certificates entitling the bearer to a stated saving on the purchase of a specific product and can be spread by mail, attached to other products or can be obtained by the customer e.g. at the point of sale or personal promoters[19]. Besides the samples, this tool is used to generate early trial as it reduces the perceived risk of trying something unknown. Many new products include coupons inside the package to provide an incentive for repurchase.

The biggest advantage of coupons is the possibility to offer a price reduction without reducing it for everyone, but only to those customers who are price sensitive[20]. A further one is that it represents a chance for two types of brands: expensive ones might be affordable by everyone and mature or forgotten brands can stimulate repurchase. Within the disadvantages we can figure out that it often reduces profit margins as it mainly attracts loyal customers and does not provoke new trial to that degree than samples do. Since the response to a coupon is rarely immediate, it is difficult to estimate the extent and herewith the costs of use in advance. Another fact that can make us doubt the efficiency of coupons is the abuse, as for example employees tend to exchange them for cash and/or redeem them without buying the product.

Premiums are merchandise offered free or at a relatively low cost as an incentive to purchase a particular product[21]. Beside others, we find with-pack premium, like little gifts, inside the package or a free-in-the-mail premium on sending in a proof of one’s purchase, for example fidelity points. A big advantage of this tool is the high impulse value, as people like to receive presents, which can positively influence the attitude towards a company[22].

Premiums are defined as consumer’s favourite type of promotion and often encourage repeat purchase, which finally can lead to brand loyalty[23]. Another benefit for the enterprise is that they get to know the clients address in case of sending in loyalty points, which can be used for promotion purposes afterwards. A big difficulty is finding desirable gifts for adults at reasonable prices that add value to the brand. Poor premiums can even harm it. In addition, there are probably a lot of customers lacking the effort to collect and mail back the bonus points.

Loyalty or Club Cards are plastic cards identifying the customer in certain retail stores as prerequisite to grant a discount right away or to collect points that can be used for future purchase[24]. It can be seen as a mixture of discounts, coupons and premiums.

Emitting these cards is a current trend due to its obvious advantages: The customer provides the company voluntarily with his address and with his shopping habits. This data can afterwards be used for internal statistics, as a basis for relationship marketing or for direct promotion purposes. For the customer it is more convenient not to have to cut out coupons or collect receipts as proof for a special offer.[25] A critique is that people feel observed because they are the target of a lot of direct mail advertising as a result of the marketing effort on the revealed information and they lose their interest in these cards[26]. One can also observe an increasing overload of these cards, which can confuse the customer.

Contests/Sweepstakes: A contest requires consumer’s abilities and skills as their entry submitted will be examined and judged, whereas sweepstakes only call for participation via postcard or email. These kinds of promotion have a special appeal and glamour and can even provoke excitement as it attracts people with amazing prizes or funny games[27]. In both cases purchase is not a prerequisite for participation, hence they cannot be used as a quick sales-fix but only to improve the image of the company.

Sweepstakes are more favourable than contests as they are easier to enter for the customer and cheaper for the manufacturer, as they do not have to evaluate every entry[28]. Nevertheless, in a contest the involvement is usually higher and therefore the possibility to create brand awareness. In both cases the supplier is provided with the customer’s address and maybe more personal information like special interests, which can be used for marketing purposes afterwards. However, there is still the danger that people are only interested in the prize and not in the emitting company, as there are a lot of hobby sweepstakers. Furthermore, we have to cope with abuse e.g. by hackers who might crack the winning code.

Having presented the five chosen sales promotion tools, which are rather short-term orientated, the relationship marketing approach will be defined as follows, putting emphasis on creating a bond between customer and company on the long run.

2.2 Relationship Marketing

“Relationship marketing is the on-going process of identifying and creating new value with individual customers and then sharing the benefits of this over a lifetime of association.”[29]

This marketing concept depends on communication, as the aim is to bind the customer on the long run by satisfying completely his demands. In today’s business world it is important to retain existing customers because they can choose from a wide offer of providers and establishments and a lost client might never come back. An essential aspect of the relationship approach is the recruitment and training of employees in order to treat the customers according to their needs without harassing them to buy. As a motivated personnel is more likely to please clients, one model implemented in this context is empowerment, giving employees more responsibility e.g. a certain freedom in decision-making.[30]

2.2.1 Relationship vs. Transactional Marketing

While the transactional focus with its 4Ps basically consists of single sales operations and discontinuous customer contacts, relationship marketing adds a fifth dimension, namely people, and focuses on customer retention and stable customer contacts. It is not an entirely new concept but rather builds up on traditional marketing, strengthening the aspect of achieving and providing an “extra” for the clients through the effort of the whole company and not only the marketing division.

According to Grönroos, transactional marketing makes no, or only little, distinction between first-time and long-standing customers as everyone is treated as a prospect for canvassing, even if they have already traded and established a bond.[31] In contrary, the relationship approach is based on interaction. The aim is to identify the individual customers, collect data concerning their habits, preferences, needs and interests and to act upon these answers. Complaints are seen as opportunities to improve the systems and services, and with that the customer’s satisfaction.

2.2.2 Benefits and Inadequacy

The benefits of relationship marketing are first of all lower costs of recruiting customers. While in the traditional approach the advertising budget is spend to attract consumers and to convince them to buy the product, the new strategy works with a selection of already satisfied clients and directs the investment more efficiently to promotion according to the identified needs.[32] Furthermore, it is known that pleased customers get more profitable as they are likely to purchase superior quantities in the course of time. Due to their satisfaction, they also become less price-sensitive and enable the supplier to raise his prices without losing the customer immediately. Content clients can as well function as a competitive advantage for a company since they are less driven to switch the supplier and could present an entry barrier to emerging competitors. Another advantage is that long-term customers are prone to initiate positive word-of-mouth and recommend the company to others, which can be seen as one of the most effective ways of advertising and should be aimed for by every enterprise.[33]

However, there are also situations in which relationship marketing on the first sight seems not very suitable. For example for commodity product providers it is quite difficult to adopt a relationship marketing strategy because their customers have little reason to remain loyal to a single provider. They routinely search for the most accessible lowest-cost product supplier.[34] Nevertheless, more and more commodity product companies are trying to gain customer’s loyalty by well-directed mailings or by special reward programs like loyalty-cards. As one can see, the relationship approach also has an influence on the promotional tools.

According to Kotler, whether a relationship approach is adequate or not depends on three dimensions: the product, the provider and the customer. Products that require a high customer involvement are more suitable while those, whose changes do neither imply risks or uncertainties are less appropriate. The provider who is laying emphasis on differentiation and value-creation is obviously more adequate for implementing relationship marketing than the one whose competitive advantage is only based on costs. Concerning the customer, it is important to know whether he is valuing exchanges and relationships or if his orientation is only towards transactions and short-term business. In the next subchapter we are going to take a closer look on him.

2.3 The Customer

The customer is the centre of all economic action; therefore a detailed analysis of his characteristics and preferences is the prerequisite for economic success and the survival of an enterprise. Hence, companies not only have to investigate the purchase actions, namely sales figures, but to include consumer’s pre-and post purchase evaluation as part of the buying process.

2.3.1 Purchase decision-making process

A basic model of consumer decision-making is to be found in Belch et al (1995).

illustration not visible in this excerpt

Figure 1: Purchase decision-making process

The decision-making process consists of five phases, which are always carried out but to a lesser or greater degree regarding to the importance or the value of the goods in question. In the course to come to a decision, the consumer is influenced by internal and external factors.[35] Whereas internal ones deal with individual and psychological issues, the latter ones are composed of the macro environment as e.g. technology on one hand and of the social environment as culture, social class or reference groups as friends or family members on the other hand. For sure, the marketing also exerts influence on the consumer.

Going closer into the process, the consumer first of all has to be aware of his desires and needs, which vary, among other things, according to one’s personality and lifestyle.[36] Furthermore, he has to be motivated to change his current situation into the desired one, if not, no buying action will take place. Therefore, the marketing department has to think of target-specific advertising to arise attention and create awareness of a need among these individuals. In the first step, companies can make use of the synergy effects between advertising and sales promotion as a campaign informs the consumer about the existence of a product and e.g. samples reduce the fear factor of trying something new. These two tools together will probably help activating the consumer’s need and to motivate him to reflect on the acquisition of the product.

Second, he will search for information about the product including features like brand and price.[37] If the already known data is not sufficient, he will make an effort to receive more details from external sources. The customer now perceives promotion instruments regarding the desired good more consciously – therefore flyers and coupons, which formerly might have been thrown away, will be studied carefully. The marketing department has to plan well where and how to distribute these instruments.

Once provided with all the facts needed, the consumer will evaluate the alternatives looking for the maximum benefit according to his desires.[38] Here, attitudes are formed upon former promotional tools, personal experience and word-of-mouth. The customer creates an evoked set of all the brands he is aware of and which are identified as purchase options.[39] At this point, relationship marketing can help to make one’s product resistant against competitor’s promotion attacks. Precisely this step is of interest for psychologists and marketers as heuristics loom large. Heuristics are mental shortcuts that help us to evaluate information faster and easier.[40] An example would be, that we associate expensive products with high quality. This connection between the price and the quality of a product is very delicate, as customers might also devalue the quality of an item, which is promoted too often.

Now, the consumer is prepared for the big step number four: the decision. Although he may know exactly what he is going to buy, additional considerations like where and when to buy and how much money to spend might be necessary.[41] One has to keep in mind that the consumer can still be persuaded by marketing tools at this stage of the process, mainly by in-store promotion, as a purchase decision is not yet an actual purchase. Loyalty cards and relationship marketing can influence in the choice of the establishment. Accordingly, companies should not forget about the importance of friendly, competent and collaborative personnel.

The buying process does not end with the purchase. After the act of buying, there is still an important step left: the post purchase evaluation. While consuming or using the product, one judges the meeting of expectations and the satisfaction of the purchase.[42] Attitudes are either confirmed or have to be reformed. Therefore, special emphasis has to be put on quality and reliability of products since poor samples or cheap gifts can lead to negative word-of-mouth, which can be destructive for an enterprise. In contrary, a satisfied customer is the best advertising and is disposed to influence positively the opinion of his fellow men and above all will probably repurchase the product.

The challenge for the marketing department is to influence the consumer as often and as intensive as possible in the single phases of the decision-making process in order to convince him to buy, and above all, re-buy a product. However, the promotion efforts can be high but still depend, at last instance, on the attitude of the consumer towards them.

2.3.2 Deal proneness

Deal proneness can be defined as “a consumer's general inclination to use promotional deals such as buying on sale or using coupons.”[43] Knowing about the degree of customers’ deal proneness towards certain marketing tools is essential for companies in order to implement them more efficiently.

We can say that deal-prone consumers are those, who alter their buying behaviour to gain the benefits of the promotion’s incentive.[44] The proneness is determined by economic or functional values like savings and quality on the one hand and by hedonic benefits like entertainment or self-expression on the other hand.[45] The degree of the advantage depends on the people’s personality and environment. Some may enjoy shopping and look for innovations and variety; these consumers are a good target for samples or premiums. Others are loyal to brands and establishments and are likely to collect fidelity points or use loyalty cards. Some may have financial or storage constraints, who will react more intensively on out-store promotions and again others are quality conscious, so they will probably appreciate free trials.

Furthermore, we can distinguish between active and passive proneness.[46] As the term already reveals, active proneness is connected with the inclination of the consumer’s action in cutting out coupons or search interesting promotion. Passive proneness though refers more to in-store promotion, which is a good opportunity regarding people with lack of time. People only have to decide at the shelf if they want to make use of the promotion or not.

2.4 Former research

Once defined the three main fields of our study, we searched for articles treating these topics with a clear emphasis on sales promotion in order to get an overview about already existing studies. We selected five articles presenting a general picture on sales promotion, whereby two were targeted at the German market. A further article concerning brand loyalty in Germany was chosen to detect its effects on promotion. The 7th study treats the effects of consumer’s psychographic values upon deal proneness. This should then help us to motivate our own study by picking up their shortcomings and embracing them into our research model.

2.4.1 In general

Out of several research-articles that treat the efficiency of Sales Promotion, the majority deals with the financial revenues for companies deriving from single promotion activities. Here the effects were measured through sales data before, during and after promotion activities, primarily using the checkout scanners in supermarkets. The results turned out to be positive, at least on a short-term perspective. Bawa & Shoemaker’s study concerning samples, also “strongly supports the notion that free samples can generate long-term sales increases for new brands”[47]. A second one from Lewis on loyalty cards found out that “loyalty programs with cumulative point systems work better at generating future sales and retaining customers than a series of independent promotions”[48]

However, these articles are lacking the customer’s point of view. Well obviously, the authors have measured consumer response but rather in terms of figures than on personality traits. In this respect, some additional and to us more important articles, which take psychological aspects of customer behaviour into account, could be identified. Their approaches and results are briefly going to be illustrated in the following.

The researches deal with consumer demographics and lifestyles regarding their affinity and response to in-and-out-store promotion. Martinez and Montaner examine the effects of economic benefits, hedonic benefits and the costs of promotion (e.g. brand-loyalty, time pressure and storage space constraints) upon deal proneness.[49] Laroche et al. also treat the above-mentioned variables but furthermore take the cognitive dimension and its effect on deal sensitivity, meaning influences of information search and evaluation, into account.[50]

The outcomes were predominantly expected. Price conscious consumers for example are deal prone to any kind of promotion while quality conscious ones only react positive to a few ones. Customers who enjoy frequent brand switching are particularly attracted by in-store promotions and people who are brand loyal respond to “their” brands promotions but not to competitive ones. Time pressure seems to have a positive effect on promotions as they often shorten the time to make a decision. Persons with storage problems rather react upon out-store promotion. Additionally, information search plays a significant role in connection with coupons. Surprisingly, none of the articles could affirm any relation between customers’ financial situation and their attitudes towards promotion.

2.4.2 Sales Promotion in Germany

In addition to those international studies, we were able to find others, which describe current attitudes towards sales promotion and brand loyalty in Germany. For instance, one research from a marketing consulting agency located in Wiesbaden concerning point-of-sale marketing states that more than 75% of their interviewed customers react on in-store promotions.[51] While women are more prone to special offers, men prefer free-trials of a product offered by promoters. As information sources for shopping serve: people’s own experience (90%), special offers (86%), brand-name (63%), word-of-mouth (43%) and coupons (10%).

A second article, written by the Institution of Market-orientated Leadership (IMU), investigated the effectiveness of several promotion tools.[52] The prevailing usage of sales promotion by customers is ranging from 58% for samples, over bonus-packs, sweepstakes and premiums to 17% for coupons. Furthermore, the authors of this article found out that coupons have a better impact on customer recruiting than on additional acquisitions of a product, while samples are helpful to attract new customers, as well as brand-switchers and also encourage further purchase. However and above all, people see free samples as a fun-factor of their shopping trip. A similar result was obtained for sweepstakes as they are seen as entertaining by more than half of the consumers, but only 12.1% would buy a new product as a consequence of participating.

In Germany, brand-image seems to be more important to men than to women when a buying-decision has to be made.[53] At least this is what the third article regarding brand loyalty tells us. Common reasons for sticking with one brand are a good price-performance ratio (67.8%), own experience with the brand (64.9%), good quality (59%) and special services (4.4%). It was also discovered that brand-loyalty is rising with a higher net-income. This article was able to give us a first approach to examine the influence of the financial status on shopping behaviour.

2.5 The research model

After having presented the concepts of sales promotion - including the tools samples, coupons, premiums, loyalty cards and sweepstakes - relationship marketing and the customer’s buying habits, we searched for articles according to these fields with the aim to create an outline for our own research, comparing it to the theory. In all former studies mentioned we were able to detect a common shortcoming: they hardly question re-buy effects provoked by sales promotion methods. They mainly ask people about the usage of several promotion tools and about character-traits which lead to utilization, but not if for example consumers are likely to turn into clients after having received a sample of a new product. In addition, the emphasis is rather laid on financial than on psychological traits. Finally, none of the authors drew a connection between sales promotions and the purchase decision-making process or to relationship marketing.

Thus, we decided to collect primary data and developed the following research model:

illustration not visible in this excerpt

Figure 2: Research model

First, we were wondering whether it is possible to attract consumers and to enhance repurchase of an item with promotions that are offering primarily material incentives like samples, premiums or sweepstakes. We were curious to which degree customers are influenced by promotion in the early stages of the decision process e.g. by coupons, concerning where to buy and which brand to buy. As the emphasis of our research is laid on the effectiveness of sales promotion, the arrow is marked boldly. Second, we wanted to investigate the effects of relationship marketing on the final buying decision of end-consumers and third, its weight within promotion e.g. through loyalty-cards and direct mailings.

[...]


[1] http://www.emerald-library.com/Insight/viewContentItem.do?contentType=Article&contentId=857675

[2] Statt, David A., Understanding the Consumer, p. 47

[3] http://www.marketingtoday.com/marketing/0905/relevant_marketing.htm

[4] Berná Pastor, N., Comportamiento del Consumidor

[5] http://www.managementhelp.org/ad_prmot/defntion.htm

[6] ibid

[7] Belch, George & Michael, Introduction to Advertising & Promotion, p 476

[8] Persson, P.-G., Modeling the impact of Sales Promotion on store profits, p 2

[9] Blattberg and Neslin (1990), found in Persson, P.-G., Modeling the impact of Sales Promotion on store profits

[10] Varey, R., Marketing Communication

[11] ibid, p. 478

[12] Kotler, P., Marketing Management, p.597 ff.

[13] http://en.wikipedia.org/wiki/Effectiveness

[14] Blattberg and Neslin (1990), found in Persson, P.-G., Modeling the impact of Sales Promotion on store profits

[15] Kotler, P., Marketing Management

[16] Varey, R., Marketing Communication

[17] Kotler, P., Marketing Management

[18] Belch, George & Michael, Introduction to Advertising & Promotion

[19] Kotler, P., Marketing Management

[20] Belch, George & Michael, Introduction to Advertising & Promotion

[21] Kotler, P., Marketing Management

[22] ibid

[23] Belch, George & Michael, Introduction to Advertising & Promotion

[24] http://en.wikipedia.org/wiki/Loyalty_card

[25] http://www.democratandchronicle.com/apps/pbcs.dll/article?AID=/20041010/BUSINESS/410100329/1001

[26] ibid

[27] Kotler, P., Marketing Management

[28] Belch, George & Michael, Introduction to Advertising & Promotion

[29] http://www.converge.on.ca/itm00049.htm

[30] Payne, A. et al., Relationship Marketing for Competitive Advantage, Winning and Keeping Customers

[31] Grönroos (1990) found in Varey, R., Marketing Communication

[32] Varey, R. Marketing Communication

[33] Payne, Relationship Marketing for Competitive Advantage, Winning and Keeping Customers

[34] Kotler, 1991, found in Varey, R., Marketing Communication

[35] Belch, George & Michael, Introduction to Advertising & Promotion

[36] Berná Pastor, N., Comportamiento del Consumidor

[37] ibid

[38] Berná Pastor, N., Comportamiento del Consumidor

[39] Belch, George & Michael, Introduction to Advertising & Promotion

[40] Berná Pastor, N., Comportamiento del Consumidor

[41] Belch, George & Michael, Introduction to Advertising & Promotion

[42] Berná Pastor, N., Comportamiento del Consumidor

[43] http://www.marketingpower.com/mg-dictionary-view959.php

[44] Martinez and Montaner, The effect of consumer's psychographic variables upon deal-proneness

[45] ibid

[46] ibid

[47] Bawa K. and Shoemaker R., The Effects of Free Sample Promotions on Incremental Brand Sales

[48] Lewis M., The Influence of Loyalty Programs and Short-term Promotions on Customer Retention

[49] Martinez and Montaner, The effect of consumer's psychographic variables upon deal-proneness

[50] Laroche et al., A model of consumer response to two retail sales promotion techniques

[51] Wiesbadener Marketingberatung UGW: POS-Marketing Report 2004

[52] Institut für Marktorientierte Unternehmensführung (IMU): Effective Sales Promotion

[53] Dpm-team: Markentreue-Studie

Excerpt out of 69 pages

Details

Title
The Art of Gaining and Retaining Customers - Is Sales Promotion the Key to Succesful Marketing?
College
Mid Sweden University
Grade
1,7 (85%)
Authors
Year
2005
Pages
69
Catalog Number
V51655
ISBN (eBook)
9783638475662
File size
1827 KB
Language
English
Tags
Gaining, Retaining, Customers, Sales, Promotion, Succesful, Marketing
Quote paper
Vannessa Uhlein (Author)Neele Claussen (Author), 2005, The Art of Gaining and Retaining Customers - Is Sales Promotion the Key to Succesful Marketing?, Munich, GRIN Verlag, https://www.grin.com/document/51655

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