Sales Promotion

2007:202 BACHELOR THESIS Sales Promotion in a B2B Setting Bobby Andersson Aman Hailemariam Lulea University of Technology Bachelor thesis B usiness Administration D epartment of Business Administration and Social Sciences Division of Industrial marketing and e-commerce 2007:202 – ISSN: 1402-1773 – ISRN: LTU-CUPP–07/202–SE Acknowledgments Acknowledgements The last ten weeks we have been writing a bachelors thesis, a time full of both expected and unexpected challenges. The thesis work have brought us lots of new impressions and influenced the way we look at research and sales promotion.

Today, when the writing of the thesis finally has come to an end we hope that our thesis can contribute to fellow student’s better understanding of sales promotion in B2B settings. We would like to express appreciation to people who helped and supported us during our thesis writing. Thank you, Mr. Lars Vikstrom at Minelco AB for reserving time for an interview as well as providing us with valuable information regarding sales promotion in a B2B setting. Finally we would like to thank our supervisor Mr Tim Foster for his support and active supervision through the whole time we were working with our thesis. Aman Haile-Mariam

Lulea University of Technology 2007-05-23 Bobby Andersson Abstract Abstract Sales promotion has been in constantly growth since the 1960’s and have today become one of the key factors in the promotional mix. The methods used have become more sophisticated and an increasing number of companies are realizing the importance of a well structured promotion strategy. The purpose of this thesis is to provide a better understanding on how sales promotion is used in B2B setting. In order to reach this purpose, research questions focusing on the objectives of sales promotion, as well as which sales promotion tools that were used were stated.

Based on these research questions, a review of the relevant literature was conducted, resulting in a conceptual framework, which was used to guide this study’s data collection. A qualitative, case study approach was used, using interviewing at an industrial company in Sweden as the primary data collection tool. The findings indicate that, although the individual objectives of the tools can be different they can still be used overall to lead to the same overall goal. It was also found that the focus is not always on using sales promotion tools to generate sales, but to improve relationships.

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As for the tools used, it was found that there are commonly used sales promotional tools in B2B settings. More specifically, gift giving can be deemed inappropriate in certain contexts and should be used carefully. Sammanfattning Sammanfattning Forsaljningsframjande aktiviteter har sedan 1960 befunnit sig i ett vaxande stadium och har idag kommit att bli en av de viktigaste faktorerna i marknadsforing. Metoderna som anvands har blivit allt mer sofistikerade och ett vaxande antal foretag inser vikten av en valstrukturerad forsaljningsframjande strategi.

Syftet med denna uppsats ar att forbattra forstaelsen angaende hur forsaljningsframjande atgarder anvands i Industriella sammanhang. For att kunna uppna detta syfte, sa togs forskningsfragor fram som namnde malen med forsaljningsframjande verksamhet samt de olika forsaljningsframjande atgarderna. Baserat pa dessa forskningsfragor, sa togs en lista fram pa relevant litteratur, som resulterade i ett konceptuell ram, vilket fungerade som guide nar data skulle samlas in till denna studie. En kvalitativ forskningsmetod i form utav intervjuer som tillampades pa ett Industrielltforetag i Sverige anvandes som framsta data insamlingsmetod.

Slutsatserna indikerar att trots de olika forsaljningsframjande atgardernas olika syften sa kan de generellt amvandas for att na samma mal. Det var ocksa funnet att forsaljningsframjande atgarder inte bara anvands for att oka forsaljningen utan aven for att forbattra relationer. For verktygen som anvandes sa visade det sig att det finns verktyg som ar mer vanliga vid forsaljningsframjande atgarder i industriella sammanhang. Mer specifikt, att ge bort gavor kan ses som opassande vid sarskilda sammanhang och bor noggrant overses. Table of Contents TABLE OF CONTENTS 1.

INTRODUCTION ………………………………………………………………………………………………. 1 1. 1 Background …………………………………………………………………………………………………………………….. 1 1. 1. 1 B2B…………………………………………………………………………………………………………………………………. 1 1. 1. 2 B2B Sales Promotion ……………………………………………………………………………………………………….. 1. 2 Problem Discussion ……………………………………………………………………………………………………………. 2 1. 3 Purpose& Research Questions ………………………………………………………………………………………… 4 1. 4 Outline of the Thesis ……………………………………………………………………………………………………….. 4 2. LITERATURE REVIEW …………………………………………………………………………………….. 6 2. Objectives of Sales Promotional Tools …………………………………………………………………………….. 6 2. 1. 1 Gift Giving ……………………………………………………………………………………………………………………….. 6 2. 1. 2 Cause-related Promotions/Sponsorship…………………………………………………………………………….. 6 2. 1. 3 Price Discounts ……………………………………………………………………………………………………………….. 7 2. 1. Events …………………………………………………………………………………………………………………………….. 7 2. 1. 5 Free Trials……………………………………………………………………………………………………………………….. 7 2. 1. 6 Short-term vs. Long-term effects ………………………………………………………………………………………. 7 2. 1. 7 Intrinsic vs. Extrinsic Promotions ………………………………………………………………………………………. 2. 2 Sales Promotional Tools………………………………………………………………………………………………….. 8 2. 2. 1 Gift Giving ……………………………………………………………………………………………………………………….. 8 2. 2. 2 Cause-related Sales Promotions/Sponsorship …………………………………………………………………… 9 2. 2. 3 Price Discounts ……………………………………………………………………………………………………………….. 9 2. . 4 Events …………………………………………………………………………………………………………………………….. 9 2. 2. 5 Free Trials……………………………………………………………………………………………………………………….. 9 2. 3 Conceptual Framework ……………………………………………………………………………………………………. 9 2. 3. 1 Conceptualization –objectives of sales promotion………………………………………………………………. 2. 3. 1 Conceptualization– Sales promotional tools …………………………………………………………………….. 11 2. 4 3. Frame of References ……………………………………………………………………………………………….. 12 METHODOLOGY ………………………………………………………………….. ……………………….. 13 3. 1 Research Purpose …………………………………………………………………………………………………………. 13 3. 1. Exploratory…………………………………………………………………………………………………………………….. 13 3. 1. 1 Descriptive Research ……………………………………………………………………………………………………… 13 3. 1. 2 Explanatory Research ……………………………………………………………………………………………………. 14 3. 2 Research Approach: Qualitative …………………………………………………………………………………….. 14 3. Research Strategy: Case Study ……………………………………………………………………………………… 14 3. 4 Data Collection ……………………………………………………………………………………………………………… 15 3. 5 Sample Selection …………………………………………………………………………………………………………… 15 3. 6 Data Analysis ………………………………………………………………………………………………………………… 6 Table of Contents 3. 7 Validity and reliability…………………………………………………………………………………………………….. 16 4. EMPIRICAL DATA ………………………………………………………………………………………….. 18 4. 1 Case Presentation –Minelco AB …………………………………………………………………………………….. 18 4. 2 RQ1- Objectives of Sales Promotions …………………………………………………………………………….. 18 4. 2. Gift giving ………………………………………………………………………………………………………………………. 18 4. 2. 2 Price Discounts ……………………………………………………………………………………………………………… 19 4. 2. 3 Events …………………………………………………………………………………………………………………………… 19 4. 2. 4 Free Trial ………………………………………………………………………………………………………………………. 0 4. 2. 5 Education ………………………………………………………………………………………………………………………. 20 4. 3 RQ2- Tools of Sales Promotions ……………………………………………………………………………………. 20 4. 3. 1 Gift giving ………………………………………………………………………………………………………………………. 20 4. 3. 2 Price Discounts ……………………………………………………………………………………………………………… 2 4. 3. 3 Events …………………………………………………………………………………………………………………………… 22 4. 3. 4 Free Trial ………………………………………………………………………………………………………………………. 22 5. DATA ANALYSIS …………………………………………………………………………………………… 24 5. 1 Data Analysis- Sales Promotional Objectives …………………………………………………………………. 4 When analysing and comparing data collected from previous studies with the empirical data gathered from the case study of Minelco, one can see that the within case study and the theories discussed by several researchers do to some parts fit with each other ………………………………………. 24 5. 1. 1 Gift Giving ……………………………………………………………………………………………………………………… 24 5. 1. 2 Price Discounts ……………………………………………………………………………………………………………… 4 5. 1. 3 Events …………………………………………………………………………………………………………………………… 25 5. 1. 4 Free Trials……………………………………………………………………………………………………………………… 25 5. 1. 5 Education ………………………………………………………………………………………………………………………. 26 5. 2 Data analysis- Sales Promotional Tools …………………………………………………………………… 26 5. 2. Gift Giving ……………………………………………………………………………………………………………………… 26 5. 2. 2 Price Discounts ……………………………………………………………………………………………………………… 26 5. 2. 3 Events …………………………………………………………………………………………………………………………… 26 5. 2. 4 Free Trials……………………………………………………………………………………………………………………… 7 6. FINDINGS AND CONCLUSIONS …………………………………………………………………… 28 6. 1 Which are the objectives of sales promotion in a B2B setting? ………………………………………. 28 6. 2 Which sales promotional tools are commonly used in B2B settings? ……………………………… 29 ? Gift giving could be inappropriate in western business context and should be carefully considered before given. …………………………………………………………………………………………………….. 0 ? Price discrimination is not appropriate to use in B2B settings since it could hurt business relationships. ……………………………………………………………………………………………………………………… 30 6. 3 Implications …………………………………………………………………………………………………………………… 30 6. 3. 1 Implications of Theory…………………………………………………………………………………………………….. 31 6. 3. Implications for Practitioners …………………………………………………………………………………………… 31 6. 3. 3 Implications for Future Research …………………………………………………………………………………….. 31 LIST OF REFERENCES ………………………………………………………………………………………… 33 Table of Contents APPENDIX A …………………………………………………………………………………………………………… Sales promotion …………………………………………………………………………………………………………………… 2 Sales promotional objectives/benefits …………………………………………………………………………………… 2 APPENDIX B …………………………………………………………………………………………………………… 2 List of Figures LIST OF FIGURES Figure 1. 1: Customer learning curve………………………………………………………………………. 4 Figure 1. 2: Outline of the Thesis……………………………………………………………………………. Figure 2. 1: Frame of reference……………………………………………………………………………… 12 Figure 3. 1: Schematic Presentation of Chapter 3………………………………………………………. 13 Figure 4. 1: Volume Incitement Graph……………………………………………………………………… 14 1 Introduction 1. Introduction The first chapter will introduce the the research area and provide the thesis with a background. First the background will briefly discuss the concepts; sales promotion and business to business (B2B) marketing, leading to the research area; sales promotion in business to business markets within the problem discussion.

The problem discussion will be the fundament for the research purpose and research questions. 1. 1 Background Promotion is one of the key factors in the marketing mix and has a key role in market success. Promotion is used to ensure that customers are aware of the products that the organization is offering. The promotional mix is the combination of the different channels that can be used to communicate the promotional message to the customers. The channels to be used are; advertising, direct marketing, public relations and publicity, personal selling, sponsorship and sales promotion. (Rowley, 1998)

The importance of sales promotion has increased since the 1960’s and also the sophistication of methods used. Sales promotion is sometimes considered as an activity of less importance but companies increasingly realize the importance of having a well planed and structured program for sales promotion. All businesses need to communicate to the customer what they have to offer. (Jobber & Lancaster, 2006) Dwyer & Tanner (2006) states that Business customers are larger than individual customers; meaning that each business customers is more important to the economic situation of the business marketers company.

There are also fewer business customers, so each business customer is also more important to the economical situation of the company; unhappy customers can affect the business marketers business in a noteworthy way. (Ibid) According to Fill and Fill (2005) the B2B market for goods and services bought and sold is far larger than the consumer market. The business market includes many different types and sizes of organizations that cooperate and create relationships of different importance and duration. (Ibid) 1. 1. 1 B2B

Today, there are several definitions explaining the concept of B2B marketing; Dwyer and Tanner (2006) states that business marketing is about marketing services or products to other companies, governments institutions, and other organizations. The B2B marketing concept is also explained by Brierty, Eckles, & Reeder (1998) as; “Business marketing consists of all activities required to provide goods and services to customers these customers include producers of both natural and fabricated products, government agencies and service producing organizations including institutions, wholesalers and retailers.

These diverse customers can use products and services to fabricate their own end products or to facilitate the operation of their business”. B2B marketing is totally differentiated from consumer marketing because the business buyers are not acting as consumers consuming the products themselves. (Fill & Fill, 2005) 1 Introduction The factors that are significant for business markets are the, nature of demand, the buying process, international dimensions and the importance of development and improvement of the relationship between organizations in the buying and selling process (Ibid). . 1. 2 B2B Sales Promotion “Sales promotion are marketing and communication activities that change the price/value of a product or service perceived by the target, thereby (1) generating immediate sales and (2) altering long-term brand value”. (Shultz, Robinson, & Petrison, 1998) According to Kwok (2005) there are two types of sales promotion; monetary and nonmonetary. These two types of sales promotion are separated and categorized by their significant differences: Monetary sales promotion are transactional and recognized for providing immediate rewards to the customer, e. . discounts, coupons, rebates and price packs; non monetary sales promotion are recognized for providing delayed rewards and being relationship-based, e. g. sweepstakes, free gifts and loyalty programs. (Ibid) Shultz, et al. (1998) says that sales promotion generally works on a direct behavioral basis rather than effecting awareness or attitude. It is continuously said that most types of sales promotions affect the decision-making and purchasing stages of the buying-process directly. Compared with other tactics sales promotion generally has less ong-term effectiveness, this means that that sales promotion generally has less long-term effects and creates more immediate results. (Ibid) The extensive use of sales promotion has led to considerable debates concerning whether or not it is effective. Critics mean that sales promotion are ineffective in the long run and lead to loss in market share since it makes the consumers promotion prone. Other researchers have shown the opposite; that sales promotion is effective in the long-run since it leads to increased sales and profit. (Kwok & Uncles, 2005) 1. 2 Problem Discussion

According to Low & Mohr (2000) manufacturers continue to spend a large amount from their communication budget on sales promotion. They allocate around 75 percent of their marketing communication budgets to sales promotion. Blattberg & Neslin (1990) states that sales promotion activities conducted by manufacturers and retailers can be divided into three categories: ? Consumer promotions ? Trade promotions ? Retailer promotions. Consumer promotions (e. g. coupons, samples, contests, sweepstakes, and price packs) are typically directed by manufacturers to increase the incitement for purchases by consumers.

Trade promotions, such as case allowances and bill-backs, are designed by manufacturers to inspire marketing intermediaries or channel members to stock and promote products. Retailer promotions (e. g. price cuts, store displays), are started by retailers to attract shoppers and instore purchasing. (Ibid) 2 Introduction The sales promotional tools companies are using are divided in value increasing and value adding tools. Value increasing tools are such as price deals, coupons and refund offers while value adding promotions are leaving the price and quantity of the core product untouched.

Instead value are added to the product, for instance a free gift could be added. (Peattie & Peattie, 1995) The advantage of value adding is that they do not risk being involved or starting any price wars. Trying to put effort on value adding and value increasing promotions often lead to success but there is no guarantee. The main difficulty for companies trying to be competitive through the use of sales promotions is to choose the tool most appropriate to the company’s brand and to the market where the company’s products exist. ibid) Alvarez & Casielles (2005) say that sales promotion is a stimulus that is offered from time to time, and encourage publicity that will lead to action for purchase of a certain product. Sales promotion techniques are techniques that immediately try to affect customers buying behavior. Research is telling that sales promotion activities should be done infrequently, when the customers do not expect it. If the customers are aware when the sales promotion activity will be headed, then the results will not be as successful.

Alvarez & Casielles (2005) continues by saying that because the sales promotion is conducted from time to time, this is not something done on impulse, sales promotion activates have to be well prepared, organized and integrated in the company’s marketing plan. It is also crucial for the companies to decide what the objectives for the sales promotion are. When the objectives are decided, the choice of promotion technique can be decided. The sales promotion activities chosen will depend on the objectives.

However no matter what sales promotional tool one company will choose it will increase brand awareness and it will also encourage customers to try new goods if they are managed in a strategically and well organized way. (Ndubisi & Moi, 2005) Any successful B2B strategy has to help the customer to be loyal and supportive to the firm and its products. The customer do not just get a need, the B2B marketer have to help the customer though getting him to feel a need and then buy the product and finally become loyal. (Hellman, 2005)

When a B2B marketer wants to develop strategy driven promotions that motivate B2B customers, they have to find a solution to the problems with purchase barriers. First some key questions have to be answered; who is the true decision-maker at the targeted company; what excites the decision-maker; what is holding the buyer back. When these questions have been answered then the type of promotional strategy can be chosen and the sales promotional technique derived will be depending on the company’s objectives. (Hellman, 2005) In order to develop a successful sales promotion strategy a clear definition of the targeted market must be included.

It is important to understand why the potential customers are not buying the products and develop a specific program to overcome these barriers. To understand the customers mental process the Customer learning curve can be of importance (see figure 1. 1). 3 Introduction 1. 2. 3. 4. 5. 6. 7. 8. Need Awareness Access Motivation Purchase Know-how Experience value Retention/loyalty Figur 1. 1: Customer learning curve Source: Journal of business & Industrial Marketing, Vol. 20, number 1, 2005, p. 4-11 There are different types of sales promotional tools and they affect sales, profitability and value added to the brand in different ways. Srinivasan & Anderson, 1998) Therefore, it is appropriate to study sales promotion from a B2B perspective and further investigate the impact that different sales promotional tools have in an industrial market. 1. 3 Purpose& Research Questions The purpose of this study is to provide a better understanding on how sales promotion is used in a B2B setting. Based on the problem discusson the following research questions are stated: RQ2. Which are the objectives of sales promotion in B2B settings? RQ1. Which sales promotional tools are commonly used in B2B settings? . 4 Outline of the Thesis As shown in figure 1. 2; this study consists of six chapters. The first chapter provides the background of the thesis subject which leads to the problem discussion. From the foundation of the problem discussion; purpose and research questions are formed. Chapter two provides with theories presented in previous research related to the area of B2B sales promotion. The methods we used to conduct our research are presented in chapter three. In Chapter four empirical data collected from our case study are presented.

Chapter five will go within the case and compare the empirical data to theories discussed in the conceptual framework. Finally, Chapter six will present findings and conclusions of the thesis. 4 Introduction ? Figur 1. 2: Outline of the Thesis 5 Literature Review 2. Literature Review The previous chapter introduced the area of B2B sales promotion as an essential part in B2B marketing, finally the chapter was finished by stating purpose and research questions. This chapter will review studies that are significant considering our research questions and purpose.

The first section of this chapter will cover the different types of sales promotion within the limitation followed by sales promotional objectives. 2. 1 Objectives of Sales Promotional Tools 2. 1. 1 Gift Giving According to Kendrick (1990) gift promotion cannot simply be described as a tool to increase sales volume. Even though increased sales are shown to be a reasonable objective for a gift promotion the tool has several other objectives including; ? ? ? Enhancing the brand by using attractive branded gifts Providing a reminder of the brand’s existence for the customer Promoting loyalty and commitment from customers

According to Beltramini (2000) gift giving is built on the foundation of reciprocity theory, which speaks for that giving can lead to a recipient’s perceived sense of obligation to return the favor. Corporate gifts can decrease the purchasing decision time, the time for introduction and acceptance of new services, and also get customers to take action faster than they would without this gift incitements. (Fan, 2006) Other objectives with corporate gift giving can be to give the customer a feeling of reward for past business, but also tactfully stimulate continuous business conductions. Beltramini, 2000) 2. 1. 2 Cause-related Promotions/Sponsorship According to Polonsky and Speed (2000) Cause-related promotions and sponsorship are closely related since both provide the contributing firm with the right to promote an association with the recipient. Cause-related sales promotion program donations or sponsorships are based on exchanges that provide value to the donor as well, i. e. sales. A specific objective for all cause-related activities is to generate sales, and the sales promotional activity is undertaken to leverage the association with the cause-related action, through i. . advertising. (Polonsky & Speed, 2000) Cause-related promotions may also make the customer more prone to conduct business through the opportunity to contribute to the solution of a problem through doing business with the corporation with the specific good cause promotional program. (Endacott, 2004) Polonsky and Speed (2000) are saying that sponsorship can be used to; counter adverse publicity; increase company, product or brand awareness; reinforce or alter brand perceptions; identify the brand with a specific segment, and through these actions indirectly increase sales. 6

Literature Review 2. 1. 3 Price Discounts Price reductions are offered to the customer for a variety of reasons. The most common reason is that the corporation wants to clear their inventory of excess merchandise. Discounts are also used to attract new customers and by that increase the market share. Another incitement for using discount is the expectation that customers who purchase the price reduced product also will buy some other products to an ordinary price. The most obvious benefit of discounts is that it influences the customer in the buying-process at the point of purchase.

The drop of price is likely to catch the attention of the customer. (Schultz, Robinson & Petrison, 1998) According to Inman, McAlister and Hoyer (1998) customers are more prone to purchase a product with a lowered price. A promotion signal can be defined as a sign, marker or other indicator of a price promoted brand to attract the attention of the customer. Past research has shown that these kinds of promotions can generate a considerable increase in sales of the promoted brand. This increase in sales generally occurs because the customer evaluates the promoted brand favorable which alters their brand choice behavior. Ibid) According to Lal (1990) the most common held belief about price promotion is that it has a positive effect in the short term and possibly in the long term as well. Continuously it is said that there is no evidence showing that price promotion has a long-term positive effect, the market share may remain the same since the increase in amount purchased is offset in the period followed by the promotion. (Ibid) 2. 1. 4 Events Corporations are using event marketing in order to accomplish a variety of objectives.

The most common objectives are higher brand awareness, increased sales and image enhancement. Event marketing also offers the advantages to actively engage the customer with the brand and its personality and provide the targeted market with hands-on experiences. (Close, Finney, Lacey, & Sneath, 2006) 2. 1. 5 Free Trials Previous research have shown that free trials have a positive effect in generating strong attitudes and beliefs toward a brand, this to a greater extent than advertising and other indirect sources. (Kempf & Laczniak, 2001)

Attention to, and memory of these experiences should be rather high, this because of that customers are in an evaluative mind-set under trial periods and they are motivated to remember information. The trustworthiness of information gained by trail is generally high, this because of that the information is self-gathered and there for reliable. (Kempf & Smith, 1998 2. 1. 6 Short-term vs. Long-term effects The implementation of an adequate sales promotion may guarantee an increase in the shortterm sales figures. This justifies the tendency of corporations to invest large portions of their budget into sales promotion. Alvarez, 2005) 7 Literature Review A sale promotion that attracted some new users can have positive after-effects if the new users repeatedly repurchase later. However there is evidence speaking for no long-term favorable effects for established brands. The prime reason is that price promotion most of the times attract infrequent buyers and that the small number of attracted new buyers has a low tendency to repeat the purchase. (Dawes, 2004) Analysis of total sales data commonly suggests no negative after-effect on brand sales from promotions.

Although there has been shown that more advanced analysis can reveal such effects, especially in categories in which it is easy to stockpile. (Ibid) Research evidence suggests that the increase in sales of a promoted brand primarily is at the expense of other brands, due to brand substitution. Studies have shown that 85 percent of the short-term effect of price promotions is due to brand switching which leaves 15 percent that was temporary category expansion. Similar studies have shown that 75 percent of the effects of price promotion are due to brand switching and 25 percent due to purchase acceleration. (Ibid)

According to Alvarez (2005) customers who purchase the promoted brand due to attraction of the promotional activity may later go back to their favorite brand when purchasing a product later. 2. 1. 7 Intrinsic vs. Extrinsic Promotions The effects of the sales promotion will vary depending on the attractiveness of the product, but on the other hand there is a possibility that customers who usually not would by the brand acquire it because of an attraction of the sales promotion. (Alvarez, 2005) Sales promotional activities where the product in question is critical to a prospect’s business can be centralized on the product itself.

Promotions like this could be free samples, visits to a factory, free value-added training, etc. These different activities are known as intrinsic motivator and are the most direct, economical and effective approach, this because a product makes the strongest sales pitch for itself. (Hellman, 2005) Sales promotional activities where the product or service lacks the power to intrinsically motivate the buyer extrinsic motivators can be used. The most common extrinsic motivator is price cutting. Price cuts or discounts are expensive and have hidden cost that makes them unfavorable in many situations. (Ibid) 2. Sales Promotional Tools 2. 2. 1 Gift Giving According to Fan (2006) a corporate gift can be anything from regular trip to an all-inclusive Caribbean holiday for two. Gift giving can be used to create or maintain relationships with key customers as well as create goodwill, and promote companies. In order to show gratitude of business accomplished a gift can be given. (Ibid) There are three common categories that cover most of the variety of reasons for giving gifts as a part of conducting business. Gifts are used to show gratitude for such things as past relationships, placing a new order, referrals to other clients, etc.

In some cases gifts are given with the intention to create a good first impression, which could help to establish a business relationship. (Ibid) 8 Literature Review 2. 2. 2 Cause-related Sales Promotions/Sponsorship Cause-related marketing is a marketing strategy implemented by corporations to link their name to and get associated with a particular good cause, e. g. charitable or environmental organizations. (Endacott, 2004) 2. 2. 3 Price Discounts Price discounts give the customer an immediate reduction on the price of the product or service at the point of purchase.

Discounts given by industrial companies are called price-offs and provides a differentiating factor to the customer when considering a purchase. Price-offs is a very flexible tool for industrial companies since it is easy to control it by increasing or decreasing the number of promoted products offered. (Schultz, Robinson & Petrison, 1998) 2. 2. 4 Events Event marketing can according Van Heerden (2001) be described as “the practice of promoting the interests of an organization and its brands by associating the organization with a specific activity. Event marketing as an approach to create communication through an own financed or sponsored event where the target group is gathered, and parties get the opportunity to share experiences, and also a possibility to communicate their messages. (Behrer & Larsson, 1998) Through product, corporate or service related actions companies shall offer cognitive, emotional and physical stimuli, trigger actions and communicate messages, information and associations which are directed by the company. This will make a positive contribution to the process when building the company brand and value. Nufers, 2002) 2. 2. 5 Free Trials Free Trial is defined as a potential customer’s first usage experience with a brand. This trial period is a critical factor in determining beliefs, attitudes and purchase intention towards the brand. Trial is unique compared with other forms of promotional tools since it provide the customer with a direct and sensory contact with the product. The trail starts when a combination of any data from visual, tactile, olfactory, auditory and/or taste experiences are channeled to the sense register. (Kempf & Smith, 1998)

According to Kotler (2000) free trials can be exemplified as free test driving of automobiles or free test period of company software. 2. 3 Conceptual Framework To specifically answer research questions in chapter one it is important and necessary to explain how each research question is conceptualized. According to Miles & Huberman (1994), conceptualization is a method for deciding on what parts should be the fundament for the research. This could be described graphically or in narrative forms of words 2. 3. 1 Conceptualization –objectives of sales promotion

The second research question concerns the objectives of sales promotion from a B2B perspective. The purpose of this question is to provide information of the benefits companies 9 Literature Review seeks and obtain through sales promotion. In order to answer this question a number of theories presented in the previous literature review are going to be considered. The different theories are all connected to benefits and objectives of sales promotion. Reliance will be taken on several studies presented in the literature review since there is no entire study in the specific area.

Alvarez (2005), Dawes (2004), Hellman (2005), Finney, Lacey & Sneath (2006) Kempf & Laczniak (2001) Kempf & Smith (1998), Inman, McAlister and Hoyer (1990), Lal (1990), Polonsky and Speed (2000), Endacott (2004), Kendrick (1998), Beltramini (2000), and Fan (2006) are all contributing with theories that gives this study a foundation. In order to answer research question two benefits and objectives of the following sales promotional tools will be looked at: Gift giving – Gift giving is used to increase sales, enhance brand, create awareness, and increase customer loyalty. (Kendrick, 1998) Corporate gifts can be used to create a sense of obligation of returning the favor. (Beltramini, 2000) – In order to decrease the purchasing decision time gifts can be given to the corporation to influence the decision maker to make a fast commitment. (Fan, 2006) – Gifts are given to business partners to tactfully stimulate the partner to conduct business continuously. (Beltramini, 2000) Cause-related promotions/sponsorship – Cause-related promotions and sponsorships are used to associate the corporation with a good cause in order to build a positive image around the corporation. Polonsky & Speed, 2000) – All Cause-related activities are used to generate sales. (Polonsky & Speed, 2000) – Cause-related promotions make the customer more prone to conduct business since he then also contributes to a good cause. (Endacott, 2004) – Sponsorship and cause-related promotions can be used to; ? Counter adverse publicity ? Increase product or brand awareness ? Reinforce or alter brand perceptions ? Identify the brand with a specific segment (Polonsky & Speed, 2000) Price discount – Objectives for price discounts are to clear the inventory from excess merchandise and attract new customers. Schultz, Robinson & Petrison, 1998) 10 Literature Review – Price discounts are used to draw the attention of the customer to the company and its products. (Inman, McAlister & Hoyer, 1990) – Price discounts contribute to increased sales in products of ordinary price. (Schultz, Robinson & Petrison, 1998) – Price discounts have positive effects in the song-term and possibly in the long term even though evidence speaks for no long-term favorable effects. (Lal, 1990) Event – The most common objectives for events are higher brand awareness, increased sales and image enhancement. Close, Finney, Lacey & Sneath, 2006) – Other objectives for events are to engage the customer with the product and provide a hand-on experience. (Close, Finney, Lacey & Sneath, 2006) – An objective for event marketing is to share experiences and communicate. (Behrer & Larsson, 1998) Free Trials – Free Trial can be used to create strong attitudes and belief toward a brand, stronger then with advertising and other indirect sources. (Kempf & Laczniak, 2001) – The trustworthiness of information gained by trail is generally high, this because of that the information is self-gathered and there for reliable. Kempf & Smith, 1998) It is often discussed whether or not sales promotions have positive effects in the long term. (Dawes, 2004) presented a theory of that sales promotion could have some long-term effects if the promotion attracted new buyers that repeatedly repurchase the product. Even though there is a possibility for positive after-effects the evidence speaks for no favorable aftereffects for established brands. 2. 3. 1 Conceptualization– Sales promotional tools The first research question concerns how different sales promotional tools are used in a B2B context.

The purpose of this question is to explain how B2B companies use different sales promotional tools. In order to be able to answer the first research question we have in previous section discussed five different sales promotional theories. The five theories answering research question one, all describes how B2B companies can use different types of sales promotional tools. The tools are mentioned and discussed by many authors such as Behrer & Larsson (1998), Nufers (2002), Fan (2006), Beltramini (2000), Kempf and Smith (1998), Polonsky (2000) & Endacott (2004).

However this study will be based on all of these authors’ studies because of the complexity of the subject and because of the will to increase objectivity. Furthermore to answer this research question this are the sales promotional tools that will be investigated. 11 Literature Review Gift giving could be exemplified as – Regular trips, holiday trips, traditional merchandise, vouchers, electronics, stationery, or computer items. (Fan, 2006) Cause related Sales promotion/Sponsorship could be exemplified as – Donations, contributions, sponsorships. (Endacott, 2004) Price discounts could be exemplified as –

Off price, price discrimination. (Lal, 1990, Inman, McAlister and Hoyer, 1990) Events could be exemplified as – Own financed, sponsored, or public event. (Behrer & Larsson, 1998, Erickson and Kushner 1999) Free trials could be exemplified as – Free test-drives, free trial of software. (Kotler, 2000) 2. 4Frame of References The conceptual framework presented above will help to answer the thesis research question and facilitate the development of an interview guide. An illustration of the conceptualization is presented which will provide an overview of how the research questions fit together (see figure 2. ). The figure shows how sales promotional tools can be used to reach certain objectives. Figur 2. 1: Frame of reference 12 Methodology 3. Methodology In this chapter the methodology used in the thesis will be presented. This chapter will present how we are going to gather data in order to find the answers to our stated research questions. First the research purpose of the study will be presented followed by the research approach. Secondly the research strategy will be examined followed by data collection and sample selection.

Then the methods to increase validity and reliability are presented. A graphical illustration of the research methodology is presented below (see figure 3. 1). Figur 3. 1: Schematic Presentation of Chapter 3 Source: Adapted from foster (1998) p. 81 3. 1 Research Purpose We can conclude that our study is mainly descriptive. However the study will also include some exploratory and explanatory stages. According to our purpose that we base this study on the “purpose of this study is to provide a better understanding on how sales promotion is used in a B2B setting”.

There are several suggestions to use as research purposes, the most used are exploratory, descriptive and explanatory (Yin, 2003) . The purpose of the exploratory stage is to answer how and why questions “what can be learned from a study of an effective school? ” This sort of questions is often used when researchers work with exploratory studies (ibid). 3. 1. 1 Exploratory According to Eriksson & Wiedersheim–Paul (2001) exploratory studies are sufficient when no clear theory exists, and when there are no or very limited demarcations and when main characteristics are hard to determine. . 1. 1 Descriptive Research The objective of the descriptive stage is to describe features that were suspected during the exploratory stage . The idea is developing inter subjective descriptions. When this generalizations start to appear they become worth to explain, that could lead to theory improvement or development in the long run. Eriksson & Wiedersheim–Paul (2001) mention that descriptive research is most sufficient when the problem is well organized and structured and when researcher does not want to find any connections between causes and symptoms. 3 Methodology 3. 1. 2 Explanatory Research According to Reynolds (1971), the main purpose of the explanatory stage is to develop a precise theory that can be used to explain empirical generalizations that the researchers get from the descriptive stage. 3. 2 Research Approach: Qualitative Since the purpose with this study is to provide better knowledge and understanding in the specific area, the decision to approach the study with a qualitative research strategy seemed to be the best option.

The research questions could also be approached with a quantitative strategy, but since the time set for this study is limited a qualitative study was the best option. The data planed to be collected consists of such as values and perceptions, and are there for not quantifiable, therefore a qualitative research strategy is the most valid option. There are two terms used in social science to determine the approach from which direction researchers conduct their studies, these are; qualitative and quantitative research (Denscombe, 2000). The type to be used is determined by the type of information gathered. Lundahl & Skarvad, 1992) A qualitative research type is a small-scale study which aims to provide a better understanding of the studied area. (Holme & Solvang, 1991) Qualitative research contains data collected that heritages from non-quantifiable sources such as attitudes, values and perceptions. (Lundahl & Skarvad, 1992) 3. 3 Research Strategy: Case Study Case studies are only one alterative of three when one want to answer our research questions, but when considering criteria number two and three it become more clear that a case study is the most appropriate research strategy in our case.

This since us as researchers did not have any control over the behavioural events because we were simply interviewers. The study also focuses on a current issue and is conducted right now; therefore we see the study as contemporary. According to (Saunders, et al. 2003) a research strategy is a general plan guiding the researcher to the answer of the research questions. There are different criteria’s when choosing research strategies, these are three criteria’s 1. The type of research question posed: 2. The extent of control an investigator has over actual behavioural events 3.

The degree of focus on contemporary as opposed to behavioural events Eriksson and Wiedersheim-Paul (1997) mentions three research strategies that can be used in social science research: case studies, surveys and experiments. 14 Methodology 3. 4 Data Collection Because we wanted the information gathered to be focused on our specific research questions we decided to conduct an interview. To be able to find sufficient and describing data we also had to use secondary data. The study will be based on both secondary data and primarily data.

When a report is written the research can be based on primary or secondary data or both of them. Primary data is, data collected for the first time and for a specific purpose. Secondary data is information taken from other researchers. In this thesis an open ended interview has been used because of its ability to create discussions. Yin (1994) mention different types of interviews: open ended, structured and focused. The interview was conducted personally. During the interview we took notes and at the same time we were recording the interview with a tape recorder to more precisely record the data.

The main issues that would be discussed during the interview were sent the day before to give the interviewee time to be prepared with accurately and well motivated answers. The interview took around 50 minutes, the interview were conducted in Swedish, the person interviewed were Swedish therefore we tried to conduct the interview in his mother tongue Swedish to get a relaxed atmosphere. We knew that he could speak English and that our paper would be written in English, we could have saved time if we interviewed him in English but maybe would not have got the same accurately and well motivated answers.

Many times secondary data can be easier or more practical to use because of the availability of already existing information. (Lundahl & Skarvad, 1992). We used secondary data such as company brochures. According to Yin (2003) there is six different sources of information when conducting case studies; documentation, archival records, interviews, direct observations, participant observation and physical artefacts. According to Yin (1994) interviews are the most important way of collecting data when conducting case studies.

An interview is an interaction between an interviewer and a respondent, the interview could be conducted though telephone or by person (Eriksson & Wiedersheim-Paul, 1997). When specific and in depth data is needed then interviews are the ultimate data collection method. In this study that kind of data is needed therefore an interview is appropriate for this study. 3. 5 Sample Selection As stated earlier in this chapter; the intention of this study is to provide better knowledge and understanding of the usage of sales promotional tools in a B2B setting.

By having reed previous studies connected to the thesis of this study, the consideration of suitable case study companies started. Since this study aims to look at the use of sales promotions in a B2B setting; finding an industrial company that conducts business with other companies was essential. After having looked into a number of different companies that could be considered to be appropriate for this study and willing to be interviewed, the decision to chose Minelco AB was made.

The decision to interview Minelco was based on the facts that it is a company active in B2B, willing be interviewed and also on the fact that the head quarter was accessably located. 15 Methodology According to Holme & Solvang (1997) getting in contact with the right respondent is crucial for the research, if not it may turn out to be invalid or insignificant. To secure the validity of this study the the interwiew had to be done with an employee with the most accurate knowledge in the research area. When contacting the company, the first person spoked with; the sales manager of Minelco; Mr.

Lars Vikstrom declared himself appropriate to anwer to questions conserning the subject of this thesis. Due to this the interviewee was chosen to be Mr. Vikstrom. 3. 6 Data Analysis When the empirical data had been collected the process of data analyzing started. According to Miles & Huberman (1994) qualitative data analysis focus on data in forms of words, and that the analysis consists of three simultaneously different activities. This study focus on and implements number one and three of the three activities.

This since the study only have two sources of information to compare, this reduces the purpose of data display. 1. Data reduction- The phase where data is focused, selected, abstracted, simplified and transformed. The purpose of this phase is to organize the data so conclusions can be verified and drawn. (Ibid) 2. Data display- The phase where the data is reduced and organized in a compressed way to make it easier to draw conclusions. (Ibid) 3. Conclusion drawing and verification- The phase where the researcher starts to make comments and explain what thing means.

This is done by noting regulations, patterns, explanations, configurations, casual flows and propositions. The researcher shall although hold such comments and explanations lightly and make sure to maintain a sense of openness and degree skepticism. (Ibid) Yin (1994) describes two techniques that can be implemented in the analysis of the collected data; within-case analysis where data is compared with theories used and; cross-case analysis where data from two cases are compared. When analyzing the collected data the three activities described by Miles & Huberman (1994) were applied.

The reduction was made through a comparison between the empirical data and the theories presented in the conceptualization which by Yin (1994) also is described as within-case analysis. To increase the validity of the study the empirical data were compared with theories from several sources. Finally, after having completed the within-case analysis, conclusions are drawn and presented. Comparsion and analysis of data was made with neutrality in consideration and different theories from different sources were used. This to make the analyis more valid.

Based on the conclusions and verifications each research question are re-stated and answered. 3. 7 Validity and reliability According to Saunders et a. l Validity and reliability are used by researchers when deciding on the quality of the research. 16 Methodology Validity When testing our construct validity we used two mainly sources of evidence interviews and corporate documents. To test our construct validity we had citations to all sources where material and evidence were collected from, we also briefly described the particular circumstances where our main data were collected from.

Our supervisor reviewed our interview guide, and then gave approval for the interview. We also had friends reading our paper to control to what extent and the methods used are precise, correct and accurate. To increase the external validity we gathered data from our sample company through personal interviews with the sample company. However because we did only one case study we believe that external generalizations should be done carefully. Denscombe (2000) presents validity as the measurement measuring to what extent the data in the research and the methods used in the research are precise correct and accurate.

According to Yin (2003) there are three kinds of validity, construct, internal and external. The construct validity establishes correct operational measures for the concept being studied. External validity is about how the conclusions from the case studies can lead to further generalizations beyond the particular case study. Reliability When conducting the interview with Mr. Lars Vikstrom at Minelco, we tried to cloth and act as neutral as possible to avoid biasing Mr. Vikstrom answers. We were also conscious about the type of questions we had and how we asked the questions.

During the interview we actively took notes at the same time as the interview were tape recorded. We have consequently explained and discussed the procedures of our research, in this and in every other chapter. We also designed an interview guide, which shows what questions we asked the interviewee. However we tried to be as neutral as possible both in way of talking, moving and clothing still there could have been personal biases involved , therefore the influence of our and the interviewees personal views and attitudes can be discussed and taken into consideration.

Denscombe (2000) states reliability as a measurement on what extent a study can be reproduced with the similar results. He also states that variations in results are fully depending on changes in the measured area and not in the instruments of measurement (ibid). Always when conducting interviews the interviewer has to be as neutral as possible to avoid the interview effect. (Denscombe 2000) 17 Empirical Data 4. Empirical Data This chapter will present the empirical data which have been collected from the interview with Mr.

Lars Vikstrom, Sales manager at Minelco AB. In addition to the interview based data corporate documents such as annual reports and fact sheets have been used as a source of information. In the beginning of this chapter a brief introduction of the case investigated will be presented. This followed by the findings connected to each research question one by one. 4. 1 Case Presentation –Minelco AB The Minelco Group is conducting business in the field of industrial minerals with a market leading position in several product applications.

Minelco is part of the Swedish company LKAB, one world leading producer of highly upgraded iron ore products. LKAB provide more than 20 million tonnes of iron ore to the world market a year. LKAB begun to operate in 1890 and is an international, high technology minerals group that has strong commitment to new technology, research and development The Minelco personnel are highly educated and updated, as a knowledge based company, the Minelco group put a lot of effort on emphasizing on skills development and human capital. Which they believe will lead to long time success for the company.

Minelco’s experienced and skilled people work all over the world, the expertise in materials and processes comes from people that are working in different parts of the world and in LKAB’s research and development operations. Minelco works with development, markets and produces chosen minerals, adapted for particular industries all over the world. Combination of world-class resources creates a stabile ground for long-term stability, and that makes Minelco a trustful and stabile partner. Minelco a company started in Sweden the year of 1989, the company became an international group with many sided expertise in industrial minerals.

Minelco’s main idea is that they adapt quality minerals after their customers’ preferences for use in industrial applications. “The idea of Minelco is to build growth on a foundation of high quality, world-class assets, and direct contacts with customers and in-depth application knowledge. ” Something very central in Minelco’s corporate culture is their highly efficient logistics. Minelco also has a very strong control of material, from source to end user, to guarantee quality and reliability 4. 2 RQ1- Objectives of Sales Promotions 4. 2. Gift giving Mr. Vikstrom says that gifts are given to in some extent improve or maintain the customer relationship, and good relationships lead to increased sales and fast business conductions. Gifts that can be considered to be within the frame of good manner like a book about the Swedish culture are given to improve the relationship. Further objectives with gifts like this are that the customer shall place the gift where many can see it and hopefully show it to their 18 Empirical Data business partners so they will become interested in Minelco.

In short terms gift giving are used to show appreciation and maintain and improve relationships but also to create awareness among other potential customers. Another type of gifts Minelco is using is small items like, pencils and bottle openers with their loge printed on to it. These items have the purpose to remind the customer of the company’s existence. The meaning is that the customer shall remember the company days, months and hopefully longer after having visited the company. 4. 2. 2 Price Discounts According to Mr.

Vikstrom; Minelco are not favoring discounts to stimulate sales, instead they focus on the product properties. The minerals have a certain value for each customer as a result of possible savings in the producing costs due to Minelco’s’ minerals, and that is what they are focusing on when selling products. Mr. Vikstrom do say that there can be some kind of discount involved when conducting a deal, but this because every customer wants to get the best possible deal. There are some price models to stimulate long contracts and to favor customers who purchase large quantities.

But price cuts are not used in order to attract customers, for that purpose they use the argument of a high quality product. Mr. Vikstrom is saying that clearing the inventory is not an objective for discounts. Minelco do not have to clear their inventories since their products can be stocked for a long time without affecting the performance of the product. He continues by saying that there can be some circumstances when a new product are developed and has to have a place to be stocked, and then discounts can be used. But it is not common. Mr. Vikstrom does not

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