Sales Promotion - Bobby Andersson.pdf

8/12/2019 Sales Promotion - Bobby Andersson.pdf

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2007:202

B A C H E L O R T H E S I S

Sales Promotionin a B2B Setting

Bobby Andersson

Aman Hailemariam

Lule University of Technology

Bachelor thesis

Business AdministrationDepartment of Business Administration and Social Sciences

Division of Industrial marketing and e-commerce

2007:202 - ISSN: 1402-1773 - ISRN: LTU-CUPP--07/202--SE


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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 andinfluenced the way we look at research and sales promotion. Today, when the writing of thethesis finally has come to an end we hope that our thesis can contribute to fellow students

better understanding of sales promotion in B2B settings.

We would like to express appreciation to people who helped and supported us during ourthesis writing.

Thank you, Mr. Lars Vikstrm at Minelco AB for reserving time for an interview as well asproviding us with valuable information regarding sales promotion in a B2B setting. Finallywe would like to thank our supervisor Mr Tim Foster for his support and active supervisionthrough the whole time we were working with our thesis.

Aman Haile-Mariam Bobby Andersson

Lule University of Technology 2007-05-23


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Abstract

Abstract

Sales promotion has been in constantly growth since the 1960s and have today become oneof the key factors in the promotional mix. The methods used have become more sophisticatedand 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 usedin B2B setting. In order to reach this purpose, research questions focusing on the objectivesof sales promotion, as well as which sales promotion tools that were used were stated. Basedon these research questions, a review of the relevant literature was conducted, resulting in aconceptual framework, which was used to guide this study's data collection.

A qualitative, case study approach was used, using interviewing at an industrial company inSweden as the primary data collection tool. The findings indicate that, although theindividual objectives of the tools can be different they can still be used overall to lead to thesame overall goal. It was also found that the focus is not always on using sales promotiontools to generate sales, but to improve relationships. As for the tools used, it was found thatthere are commonly used sales promotional tools in B2B settings. More specifically, giftgiving can be deemed inappropriate in certain contexts and should be used carefully.


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Sammanfattning

Sammanfattning

Frsljningsfrmjande aktiviteter har sedan 1960 befunnit sig i ett vxande stadium och haridag kommit att bli en av de viktigaste faktorerna i marknadsfring. Metoderna som anvnds

har blivit allt mer sofistikerade och ett vxande antal fretag inser vikten av en vlstruktureradfrsljningsfrmjande strategi.

Syftet med denna uppsats r att frbttra frstelsen angende hur frsljningsfrmjandetgrder anvnds i Industriella sammanhang. Fr att kunna uppn detta syfte, s togsforskningsfrgor fram som nmnde mlen med frsljningsfrmjande verksamhet samt deolika frsljningsfrmjande tgrderna. Baserat p dessa forskningsfrgor, s togs en listafram p relevant litteratur, som resulterade i ett konceptuell ram, vilket fungerade som guidenr data skulle samlas in till denna studie.

En kvalitativ forskningsmetod i form utav intervjuer som tillmpades p ett Industrielltfretagi Sverige anvndes som frmsta data insamlingsmetod. Slutsatserna indikerar att trots de olikafrsljningsfrmjande tgrdernas olika syften s kan de generellt amvndas fr att n sammaml. Det var ocks funnet att frsljningsfrmjande tgrder inte bara anvnds fr att kafrsljningen utan ven fr att frbttra relationer. Fr verktygen som anvndes s visade detsig att det finns verktyg som r mer vanliga vid frsljningsfrmjande tgrder i industriellasammanhang. Mer specifikt, att ge bort gvor kan ses som opassande vid srskildasammanhang och br noggrant verses.


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Table of Contents

TABLE OF CONTENTS

1. INTRODUCTION .............................................................................................................1

1.1 Background......................................................................................................................................1

1.1.1 B2B....................................................................................................................................................1

1.1.2 B2B Sales Promotion.......................................................................................................................2

1.2 Problem Discussion ............................................................................................................................2

1.3 Purpose& Research Questions......................................................................................................4

1.4 Outline of the Thesis .......................................................................................................................4

2. LITERATURE REVIEW.................................................................................................. 6

2.1 Objectives of Sales Promotional Tools .........................................................................................62.1.1 Gift Giving .........................................................................................................................................6

2.1.2 Cause-related Promotions/Sponsorship.........................................................................................6

2.1.3 Price Discounts ................................................................................................................................7

2.1.4 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 ....................................................................................................8

2.2 Sales Promot ional Tools.................................................................................................................8

2.2.1 Gift Giving .........................................................................................................................................8

2.2.2 Cause-related Sales Promotions/Sponsorship ..............................................................................9

2.2.3 Price Discounts ................................................................................................................................92.2.4 Events ...............................................................................................................................................9

2.2.5 Free Trials.........................................................................................................................................9

2.3 Conceptual Framework ...................................................................................................................9

2.3.1 Conceptualization objectives of sales promotion.........................................................................9

2.3.1 Conceptualization Sales promotional tools ................................................................................11

2.4 Frame of Refer ences ..............................................................................................................12

3. METHODOLOGY .......................................................................................................... 13

3.1 Research Purpose .........................................................................................................................13

3.1.1 Exploratory......................................................................................................................................13

3.1.1 Descriptive Research.....................................................................................................................13

3.1.2 Explanatory Research ...................................................................................................................14

3.2 Research Approach: Qualitative..................................................................................................14

3.3 Research Strategy : Case Study ...................................................................................................14

3.4 Data Collection..............................................................................................................................15

3.5 Sample Selection ...........................................................................................................................15

3.6 Data Analysis .................................................................................................................................16


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Table of Contents

3.7 Validity and reliabilit y....................................................................................................................16

4. EMPIRICAL DATA ........................................................................................................ 18

4.1 Case Presentation Minelco AB..................................................................................................18

4.2 RQ1- Objectives of Sales Promotions .........................................................................................18

4.2.1 Gift giving ........................................................................................................................................18

4.2.2 Price Discounts ..............................................................................................................................19

4.2.3 Events .............................................................................................................................................19

4.2.4 Free Trial ........................................................................................................................................20

4.2.5 Education ........................................................................................................................................20

4.3 RQ2- Tools of Sales Promotions.................................................................................................20

4.3.1 Gift giving ........................................................................................................................................20

4.3.2 Price Discounts ..............................................................................................................................22

4.3.3 Events .............................................................................................................................................22

4.3.4 Free Trial ........................................................................................................................................22

5. DATA ANALYSIS ......................................................................................................... 24

5.1 Data Analysis- Sales Promotional Objectives ............................................................................24When analysing and comparing data collected from previous studies with the empirical datagathered 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 ..............................................................................................................................24

5.1.3 Events .............................................................................................................................................25

5.1.4 Free Trials.......................................................................................................................................25

5.1.5 Education ........................................................................................................................................26

5.2 Data analysis- Sales Promotional Tools ..............................................................................26

5.2.1 Gift Giving .......................................................................................................................................26

5.2.2 Price Discounts ..............................................................................................................................26

5.2.3 Events .............................................................................................................................................26

5.2.4 Free Trials.......................................................................................................................................27

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 carefullyconsidered before given. ....................................................................................................................30

Price discrimination is not appropriate to use in B2B settings since it could hurt businessrelationships. .......................................................................................................................................30

6.3 Implications ....................................................................................................................................30

6.3.1 Implications of Theory....................................................................................................................31

6.3.2 Implications for Practitioners .........................................................................................................31

6.3.3 Implications for Future Research ..................................................................................................31

LIST OF REFERENCES ...................................................................................................... 33


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Table of Contents

APPENDIX A ........................................................................................................................... 2

Sales promotion....................................................................................................................................2

Sales promotional objectives/benefits ................................................................................................2

APPENDIX B ........................................................................................................................... 2


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List of Figures

1

LIST OF FIGURES

Figure 1.1: Customer learning curve.4

Figure 1.2: Outline of the Thesis.5

Figure 2.1: Frame of reference...12

Figure 3.1: Schematic Presentation of Chapter 3.13

Figure 4.1: Volume Incitement Graph......14


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Introduction

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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 andbusiness 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 isoffering. The promotional mix is the combination of the different channels that can be used tocommunicate the promotional message to the customers. The channels to be used are;

advertising, direct marketing, public relations and publicity, personal selling, sponsorship andsales promotion. (Rowley, 1998)

The importance of sales promotion has increased since the 1960sand also the sophisticationof 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 structuredprogram for sales promotion. All businesses need to communicate to the customer what theyhave 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 businesscustomer is also more important to the economical situation of the company; unhappycustomers can affect the business marketers business in a noteworthy way. (Ibid) Accordingto Fill and Fill (2005) the B2B market for goods and services bought and sold is far largerthan the consumer market. The business market includes many different types and sizes oforganizations 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 othercompanies, 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 tocustomers 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)


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Introduction

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The factors that are significant for business markets are the, nature of demand, the buyingprocess, international dimensions and the importance of development and improvement of therelationship between organizations in the buying and selling process (Ibid).

1.1.2 B2B Sales Promotion

Sales promotion are marketing and communication activities that change the price/value ofa 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 non-monetary. These two types of sales promotion are separated and categorized by theirsignificant differences: Monetary sales promotion are transactional and recognized for

providing immediate rewards to the customer, e.g. discounts, coupons, rebates and pricepacks; non monetary sales promotion are recognized for providing delayed rewards and beingrelationship-based, e.g. sweepstakes, free gifts and loyalty programs. (Ibid)

Shultz, et al. (1998) says that sales promotion generally works on a direct behavioral basisrather 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 long-term effectiveness, thismeans that that sales promotion generally has less long-term effects and creates moreimmediate results. (Ibid)

The extensive use of sales promotion has led to considerable debates concerning whether ornot it is effective. Critics mean that sales promotion are ineffective in the long run and lead toloss 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 increasedsales and profit. (Kwok & Uncles, 2005)

1.2 Problem Discussion

According to Low & Mohr (2000) manufacturers continue to spend a large amount from theircommunication budget on sales promotion. They allocate around 75 percent of theirmarketing communication budgets to sales promotion.

Blattberg & Neslin (1990) states that sales promotion activities conducted by manufacturersand retailers can be divided into three categories:

Consumer promotions

Trade promotions

Retailer promotions.

Consumer promotions (e.g. coupons, samples, contests, sweepstakes, and price packs) aretypically directed by manufacturers to increase the incitement for purchases by consumers.Trade promotions, such as case allowances and bill-backs, are designed by manufacturers toinspire 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 in-

store purchasing. (Ibid)


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Introduction

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The sales promotional tools companies are using are divided in value increasing and valueadding tools. Value increasing tools are such as price deals, coupons and refund offers whilevalue 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 pricewars. Trying to put effort on value adding and value increasing promotions often lead tosuccess but there is no guarantee. The main difficulty for companies trying to be competitivethrough the use of sales promotions is to choose the tool most appropriate to the companys

brand and to the market where the companys products exist. (ibid)

Alvarez & Casielles (2005) say that sales promotion is a stimulus that is offered from time totime, 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 buyingbehavior. 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 activitywill be headed, then the results will not be as successful.

Alvarez & Casielles (2005) continues by saying that because the sales promotion is conductedfrom time to time, this is not something done on impulse, sales promotion activates have to bewell prepared, organized and integrated in the companys marketing plan. It is also crucial forthe companies to decide what the objectives for the sales promotion are. When the objectivesare decided, the choice of promotion technique can be decided. The sales promotion activitieschosen 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 ina strategically and well organized way. (Ndubisi & Moi, 2005)

Any successful B2B strategy has to help the customer to be loyal and supportive to the firmand its products. The customer do not just get a need, the B2B marketer have to help thecustomer 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 B2Bcustomers, they have to find a solution to the problems with purchase barriers. First some keyquestions 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 beenanswered then the type of promotional strategy can be chosen and the sales promotionaltechnique derived will be depending on the companys objectives. (Hellman, 2005)

In order to develop a successful sales promotion strategy a clear definition of the targetedmarket 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. Tounderstand the customers mental process the Customer learning curve can be of importance(see figure 1.1).


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Introduction

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1. Need2. Awareness3. Access

4. Motivation5. Purchase6. Know-how7. Experience value8. Retention/loyalty

Figur 1. 1: Customer learning curveSource: 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 andvalue added to the brand in different ways. (Srinivasan & Anderson, 1998)

Therefore, it is appropriate to study sales promotion from a B2B perspective and furtherinvestigate 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 usedin 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?

1.4 Outline of the Thesis

As shown in figure 1.2; this study consists of six chapters. The first chapter provides thebackground of the thesis subject which leads to the problem discussion. From the foundationof the problem discussion; purpose and research questions are formed. Chapter two provideswith theories presented in previous research related to the area of B2B sales promotion. Themethods we used to conduct our research are presented in chapter three. In Chapter fourempirical data collected from our case study are presented. Chapter five will go within thecase and compare the empirical data to theories discussed in the conceptual framework.Finally, Chapter six will present findings and conclusions of the thesis.


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Introduction

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Figur 1. 2: Outline of the Thesis


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Literature Review

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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. Thischapter 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 increasesales 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 brands 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 recipients perceived sense of obligation to returnthe 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 wouldwithout this gift incitements. (Fan, 2006)

Other objectives with corporate gift giving can be to give the customer a feeling of reward forpast 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 areclosely related since both provide the contributing firm with the right to promote anassociation with the recipient.

Cause-related sales promotion program donations or sponsorships are based on exchanges thatprovide value to the donor as well, i.e. sales. A specific objective for all cause-relatedactivities is to generate sales, and the sales promotional activity is undertaken to leverage theassociation with the cause-related action, through i.e. advertising. (Polonsky & Speed, 2000)

Cause-related promotions may also make the customer more prone to conduct businessthrough the opportunity to contribute to the solution of a problem through doing business withthe 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.


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Literature Review

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2.1.3 Price Discounts

Price reductions are offered to the customer for a variety of reasons. The most commonreason is that the corporation wants to clear their inventory of excess merchandise. Discountsare 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 pricereduced product also will buy some other products to an ordinary price. The most obviousbenefit of discounts is that it influences the customer in the buying-process at the point ofpurchase. 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 aproduct with a lowered price. A promotion signal can be defined as a sign, marker or otherindicator of a price promoted brand to attract the attention of the customer. Past research hasshown 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 apositive effect in the short term and possibly in the long term as well. Continuously it is saidthat there is no evidence showing that price promotion has a long-term positive effect, themarket 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 brandand 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 strongattitudes and beliefs toward a brand, this to a greater extent than advertising and other indirectsources. (Kempf & Laczniak, 2001)

Attention to, and memory of these experiences should be rather high, this because of thatcustomers are in an evaluative mind-set under trial periods and they are motivated toremember 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 short-term sales figures. This justifies the tendency of corporations to invest large portions of their

budget into sales promotion. (Alvarez, 2005)


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Literature Review

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A sale promotion that attracted some new users can have positive after-effects if the new usersrepeatedly repurchase later. However there is evidence speaking for no long-term favorableeffects for established brands. The prime reason is that price promotion most of the timesattract infrequent buyers and that the small number of attracted new buyers has a lowtendency to repeat the purchase. (Dawes, 2004)

Analysis of total sales data commonly suggests no negative after-effect on brand sales frompromotions. Although there has been shown that more advanced analysis can reveal sucheffects, 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 theexpense of other brands, due to brand substitution. Studies have shown that 85 percent of theshort-term effect of price promotions is due to brand switching which leaves 15 percent thatwas temporary category expansion. Similar studies have shown that 75 percent of the effectsof 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 ofthe promotional activity may later go back to their favorite brand when purchasing a productlater.

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 brandacquire it because of an attraction of the sales promotion. (Alvarez, 2005)

Sales promotional activities where the product in question is critical to a prospects businesscan be centralized on the product itself. Promotions like this could be free samples, visits to afactory, free value-added training, etc. These different activities are known as intrinsicmotivator and are the most direct, economical and effective approach, this because a productmakes the strongest sales pitch for itself. (Hellman, 2005)

Sales promotional activities where the product or service lacks the power to intrinsicallymotivate 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 themunfavorable in many situations. (Ibid)

2.2 Sales Promotional Tools2.2.1 Gift Giving

According to Fan (2006) a corporate gift can be anything from regular trip to an all-inclusiveCaribbean holiday for two. Gift giving can be used to create or maintain relationships withkey customers as well as create goodwill, and promote companies. In order to show gratitudeof business accomplished a gift can be given. (Ibid)

There are three common categories that cover most of the variety of reasons for giving gifts asa part of conducting business. Gifts are used to show gratitude for such things as pastrelationships, placing a new order, referrals to other clients, etc. In some cases gifts are givenwith the intention to create a good first impression, which could help to establish a businessrelationship. (Ibid)


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Literature Review

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2.2.2 Cause-related Sales Promotions/Sponsorship

Cause-related marketing is a marketing strategy implemented by corporations to link theirname to and get associated with a particular good cause, e.g. charitable or environmentalorganizations. (Endacott, 2004)


Price discounts give the customer an immediate reduction on the price of the product orservice at the point of purchase. Discounts given by industrial companies are called price-offsand provides a differentiating factor to the customer when considering a purchase. Price-offsis a very flexible tool for industrial companies since it is easy to control it by increasing ordecreasing 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 ofpromoting 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 ownfinanced or sponsored event

where the target group is gathered, and parties get the opportunity to share experiences, andalso 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 andassociations 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 customers first usage experience with a brand. This trialperiod is a critical factor in determining beliefs, attitudes and purchase intention towards thebrand. Trial is unique compared with other forms of promotional tools since it provide thecustomer with a direct and sensory contact with the product. The trail starts when acombination of any data from visual, tactile, olfactory, auditory and/or taste experiences arechanneled 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 B2Bperspective. The purpose of this question is to provide information of the benefits companies


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Literature Review

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seeks and obtain through sales promotion. In order to answer this question a number oftheories presented in the previous literature review are going to be considered. The differenttheories are all connected to benefits and objectives of sales promotion. Reliance will be takenon several studies presented in the literature review since there is no entire study in thespecific 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 salespromotional tools will be looked at:

Gift giving

- Gift giving is used to increase sales, enhance brand, create awareness, and increasecustomer 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 witha 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)


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Literature Review

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- 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, strongerthen with advertising and other indirect sources. (Kempf & Laczniak, 2001)

- The trustworthiness of information gained by trail is generally high, this because ofthat 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 effectsif the promotion attracted new buyers that repeatedly repurchase the product. Even thoughthere is a possibility for positive after-effects the evidence speaks for no favorable after-effects for established brands.

2.3.1 Conceptualization Sales promotional tools

The first research question concerns how different sales promotional tools are used in a B2Bcontext. 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 inprevious section discussed five different sales promotional theories.

The five theories answering research question one, all describes how B2B companies can usedifferent types of sales promotional tools. The tools are mentioned and discussed by manyauthors 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 ofthe subject and because of the will to increase objectivity. Furthermore to answer this researchquestion this are the sales promotional tools that will be investigated.


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Gift giving could be exemplified as

- Regular trips, holiday trips, traditional merchandise, vouchers, electronics, stationery, orcomputer 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 andKushner 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 questionand facilitate the development of an interview guide. An illustration of the conceptualizationis presented which will provide an overview of how the research questions fit together (seefigure 2.1). The figure shows how sales promotional tools can be used to reach certain

objectives.

Figur 2. 1: Frame of reference


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Methodology

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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 3Source: Adapted from foster (1998) p. 81

3.1 Research Purpose

We can conclude that our study is mainly descriptive. However the study will also includesome exploratory and explanatory stages. According to our purpose that we base this study onthe purpose of this study is to provide a better understanding on how sales promotion is usedin 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 answerhow and why questions what can be learned from a study of an effective school? This sortof questions is often used when researchers work with exploratory studies (ibid).

3.1.1 ExploratoryAccording to Eriksson & WiedersheimPaul (2001) exploratory studies are sufficient whenno clear theory exists, and when there are no or very limited demarcations and when maincharacteristics are hard to determine.

3.1.1 Descriptive Research

The objective of the descriptive stage is to describe features that were suspected during theexploratory stage .The idea is developing inter subjective descriptions. When thisgeneralizations start to appear they become worth to explain, that could lead to theoryimprovement or development in the long run. Eriksson & WiedersheimPaul (2001) mentionthat descriptive research is most sufficient when the problem is well organized and structuredand when researcher does not want to find any connections between causes and symptoms.


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3.1.2 Explanatory Research

According to Reynolds (1971), the main purpose of the explanatory stage is to develop aprecise theory that can be used to explain empirical generalizations that the researchers getfrom the descriptive stage.

3.2 Research Approach: Qualitative

Since the purpose with this study is to provide better knowledge and understanding in thespecific 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 quantitativestrategy, 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 fornot 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 &Skrvad, 1992)

A qualitative research type is a small-scale study which aims to provide a betterunderstanding of the studied area. (Holme & Solvang, 1991) Qualitative research containsdata collected that heritages from non-quantifiable sources such as attitudes, values and

perceptions. (Lundahl & Skrvad, 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 isthe most appropriate research strategy in our case. This since us as researchers did not haveany control over the behavioural events because we were simply interviewers. The study alsofocuses on a current issue and is conducted right now; therefore we see the study ascontemporary.

According to (Saunders, et al. 2003) a research strategy is a general plan guiding theresearcher to the answer of the research questions.

There are different criterias when choosing research strategies, these are three criterias

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 insocial science research: case studies, surveys and experiments.


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Methodology

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According to Holme & Solvang (1997) getting in contact with the right respondent is crucialfor the research, if not it may turn out to be invalid or insignificant. To secure the validity ofthis study the the interwiew had to be done with an employee with the most accurateknowledge in the research area. When contacting the company, the first person spoked with;the sales manager of Minelco; Mr. Lars Vikstrm declared himself appropriate to anwer to

questions conserning the subject of this thesis. Due to this the interviewee was chosen to beMr. Vikstrm.

3.6 Data Analysis

When the empirical data had been collected the process of data analyzing started. Accordingto Miles & Huberman (1994) qualitative data analysis focus on data in forms of words, andthat the analysis consists of three simultaneously different activities. This study focus on andimplements number one and three of the three activities. This since the study only have twosources of information to compare, this reduces the purpose of data display.

1. Data reduction- The phase where data is focused, selected, abstracted, simplified andtransformed. The purpose of this phase is to organize the data so conclusions can beverified and drawn. (Ibid)

2. Data display- The phase where the data is reduced and organized in a compressed wayto make it easier to draw conclusions. (Ibid)

3. Conclusion drawing and verification- The phase where the researcher starts to makecomments and explain what thing means. This is done by noting regulations, patterns,explanations, configurations, casual flows and propositions. The researcher shallalthough 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 collecteddata; within-case analysis where data is compared with theories used and; cross-case analysiswhere 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 andthe theories presented in the conceptualization which by Yin (1994) also is described aswithin-case analysis. To increase the validity of the study the empirical data were comparedwith theories from several sources. Finally, after having completed the within-case analysis,

conclusions are drawn and presented. Comparsion and analysis of data was made withneutrality in consideration and different theories from different sources were used. This tomake the analyis more valid. Based on the conclusions and verifications each researchquestion are re-stated and answered.

3.7 Validity and reliability

According to Saunders et a.lValidity and reliability are used by researchers when deciding onthe quality of the research.


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Methodology

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Validity

When testing our construct validity we used two mainly sources of evidence interviews andcorporate documents. To test our construct validity we had citations to all sources wherematerial and evidence were collected from, we also briefly described the particular

circumstances where our main data were collected from. Our supervisor reviewed ourinterview guide, and then gave approval for the interview. We also had friends reading ourpaper 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 personalinterviews 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 inthe research and the methods used in the research are precise correct and accurate. Accordingto Yin (2003) there are three kinds of validity, construct, internal and external. The construct

validity establishes correct operational measures for the concept being studied. Externalvalidity is about how the conclusions from the case studies can lead to further generalizationsbeyond the particular case study.

Reliability

When conducting the interview with Mr. Lars Vikstrm at Minelco, we tried to cloth and actas neutral as possible to avoid biasing Mr. Vikstrm answers. We were also conscious aboutthe 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, inthis and in every other chapter. We also designed an interview guide, which shows whatquestions we asked the interviewee. However we tried to be as neutral as possible both in wayof 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 bediscussed and taken into consideration.

Denscombe (2000) states reliability as a measurement on what extent a study can bereproduced with the similar results. He also states that variations in results are fully dependingon 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 avoidthe interview effect. (Denscombe 2000)


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4. Empirical Data

This chapter will present the empirical data which have been collected from the interview

with Mr. Lars Vikstrm, Sales manager at Minelco AB. In addition to the interview baseddata 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 marketleading position in several product applications. Minelco is part of the Swedish companyLKAB, 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 in1890 and is an international, high technology minerals group that has strong commitment tonew technology, research and development

The Minelco personnel are highly educated and updated, as a knowledge based company, theMinelco 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. Minelcos experiencedand skilled people work all over the world, the expertise in materials and processes comesfrom people that are working in different parts of the world and in LKAB's research anddevelopment operations.

Minelco works with development, markets and produces chosen minerals, adapted forparticular industries all over the world. Combination of world-class resources creates a stabileground 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 internationalgroup with many sided expertise in industrial minerals. Minelcos main idea is that they adaptquality 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 Minelcos corporate culture is their highly efficient logistics.Minelco also has a very strong control of material, from source to end user, to guaranteequality and reliability

4.2 RQ1- Objectives of Sales Promotions

4.2.1 Gift giving

Mr. Vikstrm says that gifts are given to in some extent improve or maintain the customerrelationship, 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 thisare that the customer shall place the gift where many can see it and hopefully show it to their


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Empirical Data

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Vikstrm believes that it is highly important to verify that the products are working and thinkstatements of dependent and independent researchers make the customer more confident intheir purchase decision.

4.2.4 Free Trial

Mr. Vikstrm explains that Free Trials are necessary in many perspectives. The customerfeels more confident in purchasing a product if getting to test it first. In many cases the clientare able to perform a more sophisticated product test customized to their specific usage andcan by that verify that the product will serve their specific purpose. He continues by sayingthat it is common that Minelco and the customer divide the cost of the free trial between them.If the customers invest in the relationship they often become more prone in evaluating the

product which increases the probability for a purchase.

4.2.5 Education

Mr. Vikstrm is saying that educational programs are a vital part when conducting business.In cases where the customers possess no or little knowledge in the area educational programscan be offered. In educational programs the customer is educated to ensure that the customeruses the product correctly. According to Mr. Vikstrm the objective with educational

programs is to eliminate product failure due to poor usage. He says that product failure due topoor usage could lead to an end of a relationship but it could also hurt the company image. Abad reputation on the market could lead to the loss of future business partners while a goodreputation could lead to increased sales. Mr. Vikstrm also says that educational programs can

be used as a value adding tool when negotiating contracts.

4.3 RQ2- Tools of Sales Promotions

Minelco describes their business to business marketing, as focused on consulting and helpingbusiness customers with information about how the minerals are working in different processcontexts. The customers are demanding different characteristics from the minerals forinstance some customers look for coated pipelines to create synthetic fuel, therefore theMinelco employees need technical competence so they can support and satisfy the customer,when they are looking for information and consultation in different sales contexts.

According to the sales manager of Minelco, Mr. Vikstrm the company also competes in the

industrial mineral market through pricing on the open commodity market.At the beginning when a deal is close Minelco gives away free trials and they also subsidy thetransport costs for their customers. In a longer perspective Minelco usually shares the costswith their customers, for instance transport from their Mines to the customer; sometimes theyalso share their costs and profits through joint venture.

4.3.1 Gift giving

Minelco usually are very careful with gift giving. In Western Europe gift giving amongcompanies are very restricted and can easily be seen as bribery. Because of the same reasonMinelco is also careful with gift giving in event contexts.


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When Minelco give gifts they do not just send gifts randomly to customers, most times it iswhen they have invited a customer to their facilities. The gift is just a part of relationshipcreating activities; other relationship creating activities could be dinner and invitation to theIce Hotel. In this context gifts can be given, often a simple and symbolic gift such as a photo

book of Lule or other cultural expressing gifts. According to Mr. Vikstrm companies that

constantly work with promoting new product use gifts and events as a tool.

Each deal or business transaction includes an agreement, and the way of reaching thisagreement can differ. There are a lot of different ways or methods to reach a businessagreement, the mostly used one are negotiations based on volume incitement (see figure 4.2).

Figure 4.1: Volume Incitement Graph

Long term incitement is also common in Minelcos sales promotional portfolio. For instance;if one company signs a contract saying that they will use Minelcos products for a three years

period they will get a lower price because of their willingness to show loyalty towardsMinelco.

However Minelco do not adapt the price to the customers potential to pay. They instead try toavoid doing business with customers in labile areas and that do not have the right buying

power.

Minelco do not have any fixed prices and customers far away from the inventories pays moredue to the logistic costs. But Mr. Vikstrm is telling us it is very important to clarify thatMinelco do not favour any customer because of their geographical location.

Minelco says that they have got pricing models that stimulates long term relationships. Weasked if Minelco used price models related to the amount the customers bought fromMinelcos stocked products. But Mr. Vikstrm told us that Minelco did not have any issueswith quick selling from the stocked products. Because their products do not gets out of date. Ithappened that Minelco closed their facilities when they tried to sell the entire inventory in one

particular facility, but that is an exception.


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Minelco do not use rebates or price discounts to attract new customers or to increase their

sales. Mr. Vikstrm does not believe that is a good idea, he says that Minelco tries to markettheir products as qualitative. And if they use rebates or price discounts companies will alwaysbe waiting for this discounts and if there is no discount they will not buy the product or theywill buy and store the product in their inventory.

4.3.3 Events

Minelco do not see event as a crucial part of their sales promotional tools, however Minelcoparticipates in relevant events but they have decreased the time and money spent on events,for instance they participate in some big trade fairs, directly relevant to the industrial Mineralmarket where Minelco are specialized.

When Minelco participates on trade fairs and events they are actively informing about theirnew products and they also verify why industrial customers should buy their products.

They verify their products and their information through top qualitative and world knownresearch often presented by respected researchers.

The verifying process depends on the customers knowledge, if the customer are familiar withMinelcos products or are repurchasing a product, then the verifying process do not have thesame importance and strength as if the customer is newly introduced or do not haveknowledge about Minelco and their products.

When the customers already are familiar with Minelcos products Minelco do not need to putmuch effort in marketing their products, again the marketing and the verifying process aremainly for the newly introduced customers or potentially customers that Minelco have notreach yet.

Minelco also participates and work with other types of events such as social events. Whenparticipating in social events, one or more representatives of Minelco have dinner withrepresentatives from other companies. Most times the potential customer is invited to anexclusive dinner. Sometimes the customer also is invited to the Minelco office where Minelcohave an internal event, where business issues are discussed and products are presented.

They also use to hold closer technical information meetings in their mines and sometimescustomers are invited to the Jukkasjrvi Ice Hotel. The events and activities created for thecustomer depends on the customers importance and potential to in the future become animportant business partner. The events are most times directly connected to a business dealsor with new product developments.

4.3.4 Free Trial

The free trials could also be seen as cultural phenomena, when doing business with customersfrom different cultures they also have different expectations on the free trial offers they aregiven by Minelco. Mr. Vikstrm discusses that customers get of products to check the product

quality. He also says in most B2B setting customers are provided with free trials when a dealis close. However most times the customers that order Minelcos products do know what they


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are ordering due to the fact that business customers are more updated and informed than thecustomers in the consumer market

4.3.5 Cause related sales promotion

Minelco told us that they do not conduct any cause related sales promotion such as sponsoringcharity or sports events on their own. That is because Minelco is a subsidiary to LKAB andthe mother company is responsible for donations and sponsoring


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Data Analysis

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5. Data Analysis

In this chapter the empirical data will be compared with existing theories presented in the

conceptualization. It will be investigated if some connections can be made between theoriesand empirical data. This will help to create a foundation for conclusions in the next chapter.

An analysis of the first research question will first be presented, followed by an analysis of the

second research question.

5.1 Data Analysis- Sales Promotional Objectives

When analysing and comparing data collected from previous studies with the empirical datagathered from the case study of Minelco, one can see that the within case study and thetheories discussed by several researchers do to some parts fit with each other

5.1.1 Gift Giving

According to Kendrick (1998) gifts are used in order to increase sales, enhance brand, createawareness and increase the loyalty among customers. Mr. Vikstrm says that the few giftsthat are given away are in the purpose of showing gratitude and maintain relationships. Thisstatement can be connected to the mentioned theory about customer loyalty but also toincreased sales since Mr. Vikstrm also says that a good relationship generate sales. Mr.Vikstrm is very clear about that no gifts are given in order to create some obligation ofreturning the favor. This speaks against the theory of Beltramini (2000), which says that thisis an objective for gift giving.

Fan (2006) is stating that shortening of the purchase decision time is an incitement for giftgiving. Mr. Vikstrm does not confirm this, but it improves the relationship which is thecentral part in doing business.

Mr. Vikstrm says that most activates have the objective to increase sales, either direct orindirect. Gifts could be an indirect action to generate sales, since it improves the relationshipwhich leads to sales. This somewhat confirms the theory of Beltramini (2000), whichdescribes gift giving to be used as a tool to tactfully stimulate the partner to conduct businesscontinuously


Schultz et al.(1998) are describing the need to clear the inventory from excess merchandiseas an objective for discounts. According to Mr. Vikstrm industrial companies working with

products without expire dates, clearing of the inventory is unnecessary. He does says thatthere can be certain times when room has to be made for newly developed product and inthese certain occasions; discounts could be considered.

Schultz et al.(1998) and Inman et al. (1990) are in their studies saying that price discounts areused to get the attention of and attract new customers. According to Mr. Vikstrm this theorycannot be descriptive for the way Minelco works to attract new customers. Minelco do not usethe price as an incitement to attract new customers. There are some price models used in order

to close deals, but the price is never used to attract new customers, for that they use argumentfor high qualitative products. Mr. Vikstrm says when companies frequently use price


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Data Analysis

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discounts their customers get used to low prices and are not that prone to purchase a productto ordinary price. Customers will then instead wait for next discount period and thenstockpile.

Inman et al.(1990) are stating that discount leads to increased sales. Mr. Vikstrm agrees to

that volume discount increases sales since it create incitement to buy a larger volume or sign along-term contract.

5.1.3 Events

As mentioned in the previous conceptualization Close et al.(2006) are describing events as asales promotional activity performed to increase the awareness of the company brand,generate more sales and strengthen the image. They further continue by saying that events arean opportunity to engage the customer with the product so the customer can get a hand-onexperience. The main objective for Minelco holding events are to further develop existing or

potential relationships. Such events as field trips to the mines, visits at cultural areas such as

the Ice Hotel are all connected with the maintenance and creation of relationship and inaddition combining pleasure with business by holding some kind of business meeting orproduct introduction. These events could have influence on the areas Close et al. (2006)describes, but events seem mostly to be used for already existing business partners. This can

be seen as an activity to simulate future purchases, and it probably does, but Mr. Vikstrmlikes to express it as an activity that improves relationships, and that it is the relationship andnot the event that increases the sales.

Behrer & Larson (1998) pointing out that events are an opportunity to share experiences andcommunicate messages. This theory can be more closely connected to which Mr. Vikstrmhas pointed out the objectives to be. The business meetings and product introductions

combined with social delighters could very closely be associated with the theory of sharingexperiences and communicate messages. Another activity that matches the last mentionedtheory is the conferences that are held. The presentations by the researchers where thecustomers get to gain more knowledge about Minelcos products can be seen as experiencesharing and message communicating. The conferences can also be linked to Close et al.(2006) previous mentioned theory that declare objectives as higher brand awareness,increased sales and image enhancement.

It is not known to what extent the customers get the opportunity to have a physical contact inthese certain contexts. But since the product is industrial minerals the importance lies in the

performance. Thus, it can be assumed that the statements of researchers weigh more than a

hand-on experience by the customer. Which Close et al. (2006) described as an objective forevents.

5.1.4 Free Trials

Kempf and Laczniak (2001) are saying that free trials can be used to strengthen attitudes andbelieves towards the brand. According to Mr. Vikstrm it is important that customers get totest the product to verify that it performs well in their process. He continues by saying thatfree trials are necessary since the customer feels more confident in purchasing a product ifgetting to test it first. Kempf and Smith (1998) says that the trustworthiness of informationgained by the customer during a trial period generally is high, this because of that the

information is self gathered.


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5.1.5 Education

The sales promotional tool; education is not covered in the conceptual framework, so notheories are available to be connected and compared with the empirical data found. But Mr.Vikstrm is stating that educational programs can be used as a sales generating instrument.

5.2 Data analysis- Sales Promotional Tools

5.2.1 Gift Giving

There are three common categories that cover most of the variety of reasons for giving giftsasa part of conducting business. First, gifts are used to show gratitude for such things as pastrelationships, placing a new order, referrals to other clients, etc. In some cases gifts are givewith the intention to create a good first impression, which could help to establish a businessrelationship (Fan, 2006).

Minelco usually are very careful with gift giving, in Western Europe gift giving amongcompanies are very restricted and can easily be seen as bribery. Because of the same reasonMinelco is also careful with gifts giving in event contexts.

When Minelco give gifts they do no just send gifts randomly to customers, most times it iswhen they have invited a customer to their facilities, the gift is just a part of relationshipcreating activities, the others could be dinner and invitation to the ice hotel in Jukkasjrvi, inthis context gifts can be given, often a simple and symbolical gift such as a photo book aboutLule or similar. According to Mr Vikstrm companies that often introduce new productsoften use gift giving.

The data we have gathered and the existing theory fits to some extent, when discussing giftgiving. Both Mr Vikstrm at Minelco and Fan (2006) says that gifts are given to establishrelationships. But Fan (2006) also further discusses gift giving as a tool to show gratitude for

past business, or for customer to place a new order.


Different researchers have mentioned price discount as a sale promotional tools in B2Bsettings, such researchers are Lal (1990) and Inman, McAlister & Hoyer (1990). According toInman, McAlister & Hoyer (1990) price discounts are seen as an incitement for customers to

purchase a product. They believe that these types of pricing activities can attract the attention

of the customer. They also discusses that past research shown that these kinds of promotionscan generate a considerable increase in sales of the promoted brand.

5.2.3 Events

According to Behrer & Larsson (1998) and Erickson & Kushner (1999) B2B companies usedifferent types of events. They mention own financed, sponsored and public events ascommonly used events in B2B contexts. However Mr. Lars Vikstrm at Minelco had anotherview on this issue, from his and Minelcos perspective, he agreed that it is common withdifferent types of events in the B2B world. But he said that Minelco do not see event as acrucial part of their sales promotional tools. However Minelco participates in relevant events

but nowadays they have decreased the time and money spent on events. For instance theyparticipate in some big trade fairs, directly relevant to the industrial Mineral market whereMinelco are specialized.


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Data Analysis

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According to Mr. Vikstrm; every single deal or business transaction includes an agreement,and the way of conducting this agreement can differ. There are a lot of different ways ormethods to reach a business agreement, the most commonly used is volume incitement. Thatmeans that if you buy a larger volume the price will decrease therefore customers willconsider buying more.

However Minelco do not adapt the price to the customers potential to pay. They instead try toavoid doing business with customers in labile areas and that do not have the right buying

power. The payment system they are using is called a secured paying system.

5.2.4 Free Trials

According to previous research conducted by Kempf and Smith (1998) free trials are used toprovide the customer with a direct and sensory contact with the product. Kotler (2000)exemplifies free trials as free test driving automobiles or free test period of the company.

Mr Vikstrm discusses that customers getfree trialsof products to check the product qualityand at the same time get a direct contact with the product. He also says in most B2B settingcustomers are provided with free trials when a deal is close. However most times thecustomers that order Minelcos products do know what they are ordering due to the fact that

business customers are more updated and informed than the customers in the consumermarket. The free trials could also be seen as cultural phenomena, when doing business withcustomers from different cultures they also have different expectations on the free trial offersthey are given by Minelco.

5.2.5 Cause related sales promotion

Cause related sales promotion is a marketing strategy implemented by corporations to linktheir name to and get associated with a particular good cause, i.e. charitable or environmentalorganisations (Endacott, 2004). Cause related sales promotion could be exemplified asdonations, and other contributions (Polonsky, 2000).



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Findings and Conclusions

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only influencing the customer to purchase a product; it could also improve the relationshipsince it builds trust.

The following specific conclusions are made considering research question one:

Sales promotional tools are not only used in order to directly generate sales, but also toimprove relationships and through that increase sales.

Since the industrial market consists of fewer but larger customers in comparison to theconsumer market; the loss of a customer has a greater impact on the business. Thiscould be the reason why the focus of B2B companies is to stimulate the relationship ofalready existing customers by using sales promotion.

Events could be a good opportunity to both negotiating business deals and socializewith business partners to maintain and improve the relationship between them.

Gift giving is a suitable to use when trying to keep a positive atmosphere in therelationship, but it also works as a reminder to create awareness.

Regular price discounts are not the most preferable tool to use in order to attract newcustomer, it can instead be used when securing a contract.

Providing customers with free trial can be a gooc option when dealing with customersskeptical towards the product, the customer gets to evaluate the product through thefree trial.

6.2 Which sales promotional tools are commonly used in B2B settings?

The different sales promotional tools used in B2B settings are events, price discounts, freetrials, gift giving and cause related sales promotion. One important finding we have done isthat all of the above mentioned sales promotional tools we found when doing our practicalstudy, actually was used by a company in a B2B setting. The company within our case studyalso to some extent used all of the tools that we did a theory study on.

Some companies are very careful with gift giving and other to not have any restrictions theydo not feel uncomfortable at all when giving gifts. Companies working mainly in WesternEurope use to be careful with gift giving, because gifts can easily be seen as bribery inWestern Europe.

We also found out that some companies give gifts only to establish relationships and othersuse gift giving as a tool to show gratitude for past business, or for customer to place a neworder. We found out that this could depend on the geographical area where the company areconducting business, and to what extent companies are ready to compete for customers and bewilling to take risks to be called bribers.


We discovered that volume discounts are used as an incitement for customers to purchase aproduct. We believe that these types of pricing activities can attract the attention of the


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customer. The attention of the customer will increase because the customer many times wantsto buy as low priced items as possible in B2B markets in particular. Where there is no lowstatus to buy cheap products. By providing volume incitements companies can also reachdifferent types of business agreements. We also found out that in the past these kinds of

promotions can generate a considerable increase in sales of the promoted brand. One other

important conclusion that we could make were companies do not often adapt prices tocustomers potential to pay. Because some industrial companies do not want to use pricediscrimination, unsatisfied discriminated customers could lead a bad business climate.

We found that events are used in different types of ways and that there are different types ofevents. Many companies rely on traditional trade fairs events but our case study proved thatother events such as dinners, visits to mines and conferences also are commonly used events.We also found out that events have to be adapted to particular situations when increasingcustomer satisfaction.

Events is crucial part of Minelcos sales promotion, that is because of the alternative sales

promotional tools that could use instead, such as price discounts free trials etc. We also foundthat they could combine events with other sales promotional tools. Minelco did not use eventsas much as they did few years ago; we conclude that that is because of the high price,compared to the output in form of profit that they got. They also preferred to combine eventswith other sales promotional tools.

During our research we found out that customers get free trials of products to check theproduct quality and at the same time get a direct contact with the product. We also learnedthat in B2B contexts it is common that companies provide free trials when a deal is close.One can conclude that because when the customer shows interest and the deal is becomingcloser it is more economically affordable to send free trials to a customer who really shows

interest. However because B2B customers are more informed about the companys productsthan customer on the consumer markets, companies do not necessarily always need to givecustomer free trials.

The following specific conclusions are made considering research question two:

Gift giving could be inappropriate in western business context and should be carefullyconsidered before given.

Price discrimination is not appropriate to use in B2B settings since it could hurtbusiness relationships.

Traditional events such as trade fairs are not the only type of event used in todaysdynamic business world.

B2B companies in the same industry are familiar with each others products and donot always need free trials in the same extent as customers on the consumer market

6.3 Implications

In this section the implications for this thesis will be presented. The implication section

includes; Implications for Theory, Management, and Future Research.


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6.3.1 Implications of Theory

The purpose of this study is to provide a better understanding on how sales promotion is usedin B2B settings. Through comparing theories brought up in the conceptual framework to theempirical data; we have been able to answer the two research questions. The findings andconclusions concerning the two rese

Documents

Sales Promotion - Bobby Andersson.pdf