|Marketing Communication and Personal Selling
Chips and dips are hardly big-ticket items. Most people don’t think twice about the bag of chips or cheese snacks that they throw into their shopping carts. Consumers just know that the Frito-Lay name and its brands mean good-quality, good-tasting salty snacks. Revenues at Frito-Lay, a subsidiary of PepsiCo, grew by more than $600 million—6 percent—in one year alone. Annual worldwide sales of Frito-Lay snacks are over $10 billion. Imagine selling billions of dollars in chips a year!
Americans know Frito-Lay brands at sight: Doritos, Fritos, Lay’s, Cheetos, Ruffles, Rold Gold, and Baked Lay’s, to name its most popular. But how did Frito-Lay get where it is today? How has the company developed such astounding sales and loyalty among chip aficionados? Much of it has to do with Frito-Lay’s promotional plan, encompassing advertising, sales promotion, public relations, and personal selling.
With a $30 million a year U.S. ad budget, Frito-Lay has plenty of opportunity to get its message of great-tasting snacks across to consumers. Frito-Lay has been a long-time repeat advertiser during the annual Super Bowl telecast, shelling out more than a million dollars for just one ad during the program. The vast audience provided by the Super Bowl telecast has proved to be an excellent launching pad for Frito-Lay’s new brands, such as Baked Lay’s Potato Crisps in 1995 and Lay’s Deli Style Potato Chips in 1998. Baked Lay’s went on to become the most successful new food product launch in the 1990s and the biggest-selling salty snack product ever.
Realizing the natural link between salty snacks and beer and soda, Frito-Lay continues its successful sales promotional strategy of offering supermarket-friendly promotions with Pepsi-Cola products, its sister company, and Anheuser-Busch beer brands. Its combined promotion with Pepsi included a “Halloween House Party” with joint Pepsi and Frito-Lay displays at retailers, special packaging, and coupons offer-ing $1 off a purchase of Doritos with the purchase of Pepsi. In a combined sales promotion with Anheuser-Busch, Frito-Lay linked Ruffles and Lay’s with Budweiser beer through joint in-store displays. The displays offered instantly redeemable $1 discounts with the purchase of both products.
Kids’ lunches represent a sizable opportunity for Frito-Lay snacks. Research shows that kids aged one to twelve brown-bag 2.5 billion meals a year, yet less than a quarter of those lunches include a salty snack. As a result, Frito-Lay developed the Planet Lunch program specifically targeted to kids and teens. Planet Lunch focuses on single-serving variety packs of its chips and snacks promoted through some fifteen thousand in-store displays, including a continuity program offering kids “Planet Points” redeemable for Frito-Lay merchandise like Chester Cheetah posters and mini radios.
The introduction of its Wow! fat-free snacks, made with the controversial fat substitute olestra, created a formidable public relations task for Frito-Lay. Fat calories from foods fried with olestra, developed by Procter & Gamble under the brand name Olean, are not digested by the human body because the additive’s fat molecules are too large. Therefore, consumers get the taste of fat without the added baggage of unwanted calories. Although the Wow! brand was supported by a national advertising campaign and sales promotion activities such as free samples in grocery store aisles and through mass mailings, the brand had to overcome opposition from groups who insisted that olestra caused gastrointestinal problems and posed potentially serious health risks. Prior to its national release, P&G and Frito-Lay held several news conferences with the media and dispatched scientists to meet with dieticians and health professionals. P&G also offers a toll-free number and a Web site with links to medical groups like the American Dietetic Association, which describes olestra as “one of the many acceptable ways to reduce the amount of fat and calories in your diet.” The companies have also released countless press releases that back up its research into the safety of olestra and detail the Food & Drug Administration’s approval of the additive. To date, the public relations plan seems to be working. Since olestra’s approval, tens of millions of people have eaten over a half-billion servings of the new snacks made with olestra with relatively few complaints.
Given all of Frito-Lay’s advertising, promotional, and public relations activities that consumers are familiar with, its backbone lies in the behind-the-scenes work of its eighteen-thousand-strong sales force, voted one of the best sales forces by Sales & Marketing Management magazine in 1998. Senior executives at Frito-Lay understand that continued growth is not only the result of good advertising campaigns but also the culmination of thousands of five-minute, face-to-face conversations their individual sales reps have daily with store managers at supermarkets and convenience stores. Frito-Lay’s route service reps (RSRs) use technology and selling skills to convince store managers to stock more Frito-Lay products and position them prominently on their shelves. With handheld computers, RSRs track how products are selling in each store. The company does a monthly analysis of which sizes and flavors sell well in each sales territory. It knows, for instance, that spicier snacks are popular in the South and Cheetos sell well in large cities. Frito-Lay then uses these data to optimize what they stock on shelves, as well as to plan promotions tied around certain brands. RSRs visit small accounts at least three times a week and visit large stores like Kroger and Wal-Mart daily. With this frequency, RSRs can closely monitor sales and assist store managers with promotional ideas.1
As you can see, Frito-Lay places considerable emphasis on promotion in its marketing mix. What is the role of promotion in the marketing mix? What types of promotional tools are available to companies and what factors influence the choice of tool? How is the promotion plan created? The rest of the chapter answers these questions.
Ethics in Marketing
Pull Strategy for Prescription Drugs Puts Doctors in the Hot Seat
During the diet-drug debacle, doctors wrote millions of prescriptions for the fen-phen drug combination for patients wanting to lose weight, despite little hard scientific evidence. Doctors also prescribed Redux, a drug intended only for the dangerously obese patients, to many patients who wanted to trim ten or twenty pounds. And they wrote some fifteen thousand to twenty thousand prescriptions for the impotency drug Viagra when it first appeared on the market for many men who were not clinically impotent but wanted a boost. Fen-phen and Redux were eventually called off the market, whereas Viagra was found to be potentially dangerous for men with certain types of heart disease.
In the fallout, doctors are under attack for prescribing the drugs too much, too readily, and to the wrong patients. Doctors contend it isn’t all their fault. Prodded by an explosion in direct-to-consumer advertising of prescription drugs, patients pressure their physicians for quick treatments. Prozac, the most widely prescribed drug in the world, is often prescribed to patients who are only mildly depressed. Likewise, many patients pressure their family physicians and pediatricians for antibiotics to treat flu symptoms, even though antibiotics are ineffective against viral-type infections.
Prescription drug advertising has become a billion-dollar consumer media tidal wave since the Food and Drug Administration loosened its rules on pharmaceutical advertising. The biggest boom came after the FDA allowed drug companies to advertise on television as long as the ad mentioned major side effects and directed viewers to a print ad and Web site for detailed disclosures. In the early 1990s, prescription drug marketers spent only about $160 million on direct-to-consumer advertising, mostly in consumer magazines. That figure jumped to $350 million in 1995 to match industry spending on advertising directed to physicians. By 1998, pharmaceutical companies’ tdectoir consumer advertising spending was close to $1 billion due to fewer restrictions. As a result, direct-to-consumer advertising today confronts the public with such squeamish subjects as herpes, HIV, impotence, and toenail fungus, as well as more mainstream treatment information for allergies, high cholesterol, and migraines.
Many physicians dislike the increase in advertising directed at their patients, saying that the information is given to patients in limited form. Patients then diagnose themselves and come to their physicians with a particular therapy in mind without knowing its drawbacks or even if the drug is right for them. Drug advertising also tends to present the pharmaceutical products as wonder drugs. Ads for allergy medicine are particularly dramatic, offering allergy sufferers visions of happiness and serenity.
On the other hand, many believe the benefits of direct-to-consumer advertising of prescription drugs far outweigh its disadvantages. Drug advertising leads to more informed patients who are able to ask better questions while with their physicians. Further, consumers are presented with information concerning treatments they might have never known existed. Drug ads may also help consumers determine whether they have a medical problem. Many serious medical conditions remain undiagnosed because Americans don’t know about the symptoms or don’t regularly see a doctor. For instance, it is estimated that only half of the 16 million Americans with diabetes know they have the disease. In the end, proponents claim, the doctor makes the prescribing decision based on what is best for the patient.16
What is your opinion on direct-to-consumer advertising of prescription drugs? Do you believe there should be restrictions on what drug advertisers can do? How can doctors cope with the increased pressure from patients due to drug advertising?
Web Service Helps Buyers Get Right Price at the Expense of Relationships
A new type of commerce is emerging on the Internet that is endangering the traditional buyer–seller relationship in personal selling.
FreeMarkets Online (www. freemarkets.com), a Pittsburgh-based Internet bidding service, helps buyers of industrial products find the best possible suppliers. These suppliers then must bid to get the business. Founded in 1995 by two former McKinsey & Company consultants, Geln Meakem and Sam Kinney, the service aims to put more power in the hands of buyers.
Here’s how it works: FreeMarkets Online consultants work with purchasing managers and agents to develop a comprehensive request for quotation (RFQ). Then potential suppliers respond to the RFQ in order to be considered in the bidding process. After being qualified, suppliers, usually between four and six, are invited by FreeMarkets to participate in an on-line bidding event that takes place during a specified four- to six-hour period on a secure extranet. Without identifying themselves, suppliers submit their bids for the business and watch as their rivals undercut their prices. Suppliers can respond with lower and lower bids. The result is usually 15 percent savings for purchasers.
Electronic bidding helps companies save millions on their supply purchases by cutting out the salesperson. For manufacturers that use FreeMarkets’ RFQ and on-line bidding technology, the advantages include decreasing the cost of procuring parts and offering customers the best value on finished goods. Electronic bidding not only expands buyers’ available universe of potential suppliers, but it also forces those suppliers to be more efficient so they can bid the lowest possible price. It also optimizes time by cutting out the hassles of lengthy and potentially acrimonious negotiations with suppliers.
United Technologies Corporation is one manufacturer that has embraced on-line bidding as a means to help cut supply costs. UTC, which spends more than $10 billion a year with suppliers, was one of the first buying organizations to use FreeMarkets Online. With a goal of cutting costs by $750 million by the year 2000, UTC’s supply management group is meeting the challenge with a mix of traditional and nontraditional supply strategies, including heavy use of the Internet and related technologies.
However, the implications of electronic bidding can be especially frightening for companies that rely heavily on sales forces. In a recent electronic bidding event sponsored by FreeMarkets Online for 350 million pounds of a food ingredient, for instance, the incumbent supplier chose not to participate. Three weeks later the company was forced to close its plant as a result of having lost a relationship with one of its biggest customers. As this example illustrates, electronic bidding could easily jeopardize the success of salespeople who have long relied on the relationships they have painstakingly cultivated. While on-line bidding may actually help companies, especially smaller ones, in broadening their customer base, these same companies lose the opportunity to enhance the sale with a win-win relationship. Additionally, the buyer may give up the satisfaction of meeting with suppliers face-to-face.22
In this age of electronic commerce, has the salesperson become an endangered species? How can salespeople take advantage of this information technology that threatens their existence?
Global Dos and Don’ts in Selling
Most large companies with operations on foreign soil are employing locals to sell their products—international buyers are often cold to Americans trying to peddle their wares. So the American who finds him- or herself trying to sell internationally better be prepared.
Most selling skills that are successful in America also will work overseas. However, knowing how to act in certain cultures can be the difference between closing the deal and losing a customer. There are certain things Americans take for granted that could easily cost them a deal overseas. A simple thumbs-up sign that we give everyday could offend a customer in another country. Here, from many international business experts, are some things to watch out for in certain countries and regions around the world.
Arab Countries: Don’t use your left hand to hold, offer, or receive materials because Arabs use their left hand to touch toilet paper. If you must use your left hand to write, apologize for doing so. Handshakes in Arab countries are a bit limp and last longer than typical American handshakes.
China: Never talk business on the first meeting—it’s disrespectful. Don’t refuse tea during a business discussion. Always drink it, even if you’re offered a dozen cups a day. Never begin to eat or drink before your host does. Also, printed materials presented to Chinese business leaders should be in black and white, because colors have great significance for the Chinese. The Chinese tend to be extremely meticulous, looking to create long-term relationships with a supplier before agreeing to buy anything. Chinese are more intradependent and tend to include more people in on a deal. Most deals in China are finalized in a social setting, either over drinks or dinner. Additionally, getting to know the businessperson’s family will personalize and strengthen the relationship.
European Countries: Western and Eastern Europeans reshake hands whenever they’re apart for even a short period of time, for example, lunch.
France: Don’t schedule a breakfast meeting—the French tend not to meet until after 10 a.m. Since the French knowledge of wine is far greater than that of most Americans, avoid giving wine or wine-related gifts to French clients. The French also prefer gifts that are of French origin.
Germany: Don’t address a business associate by his or her first name, even if you’ve known each other for years. Always wait for an invitation to do so. Also, breakfast meetings are unheard of here, too. Salespeople should expect a sober, rigid business climate and negotiations that lack flexibility and compromise.
Central and South America: People here don’t take the clock too seriously—scheduling more than two appointments in one day can prove disastrous. Latin Americans also tend to use a lighter, lingering handshake. Negotiations with Central and South American customers typically include a great deal of bargaining. Personal relationships are also important in Central and South America, so salespeople should make face-to-face contact with their clients during meetings and presentations.
Japan: Don’t bring up business on the golf course—always wait for your host to take the initiative. Don’t cross your legs in Japan—showing the bottom of the foot is insulting. Japanese businesspeople shake hands with one firm gesture combined with a slight bow, which should be returned. Japanese prefer gifts from well-known American stores, such as Tiffany’s or Saks Fifth Avenue. Also, the higher the position of the recipient, the more elaborately wrapped the gift should be.
Mexico: Don’t send a bouquet of red or yellow flowers as a gift—Mexicans associate those colors with evil spirits and death. Instead, send a box of premium chocolates. Including a small gift for the client’s children creates a positive impression.
Vietnam: When meeting a Vietnamese woman, wait for her to extend a hand first—she may simply nod or bow slightly, the most common form of greeting in Vietnam. Vietnamese do not like to be touched or patted on the back or shoulders in social situations.
Miscellaneous: The thumbs-up gesture is considered offensive in the Middle East, rude in Australia, and a sign of “OK” in France. It’s rude to cross your arms while facing someone in Turkey. In the Middle East don’t ask, “How’s the family?”—it’s considered too personal. In most Asian countries, staring directly into a person’s eyes is considered discourteous.44