122 Direct Marketing and Sales Promotion

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CAM Diploma

122 – Direct Marketing and Sales Promotion

Academic Session December 2012

Examination Marking Scheme

This marking scheme has been prepared by the Senior Examiner for the

purpose of giving guidance to the CAM marking teams. It should be noted,

however, that the marking scheme is just one element of guidance that is

given to markers and therefore must not be treated as the definitive guide to

how marks are allocated.

This marking scheme is issued to

TUTORS ONLY

as additional support to

assist with the delivery of CAM programmes and to enable tutors to enhance

feedback and guidance they give to candidates.

THIS MARKING SCHEME MUST NOT BE DISTRIBUTED AND THE

CONTENTS MUST NOT BE DISCLOSED TO ANY PERSON OTHER THAN

TUTORS FROM CAM ACCREDITED CENTRES.

Please also note that the marking schemes for individual units will differ in

style and format because as stated, these are guidance documents used by

the unit examination team.

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DIRECT MARKETING AND SALES PROMOTION

PART A – Compulsory

Case Study: Chillberries Background

Chillberries opened in October 2012 in Knutsford, Cheshire, in northern England. It is located just a short walk from Tatton Park, the historic mansion that hosts the Royal Horticultural Society (RHS) Tatton Park Flower Show. This show annually attracts 85,000 visitors, of whom are 71% female and ABC1 profile (www.rhs.org.uk). Chillberries is a funky, cow-themed shop, complete with rustic beams and fake-turf flooring, and provides a fun environment for all, selling frozen yoghurt, hot and cold drinks and hot snacks.

Product

Among the most popular products on offer are the frozen yoghurts, which come in a variety of flavours and with a large range of toppings, from juicy strawberries to deluxe brownie pieces. The yoghurt is fat-free and locally sourced, as well as being pro-biotic, pre-biotic and counts towards one of your five-a-day – the British government’s recommended five helpings of fruit and vegetables a day.

In addition, Chillberries sells a variety of hot and cold drinks. It also has a Winter Warmers Menu, which includes Winter punch, Turkish Apple Tea and a range of hot snacks such as pancakes and fruit toast, intended for cold winter days.

Customers

Pauline Coffey, the owner, said, “We now have the most incredible space, a stunning, characterful and beautiful frozen yogurt shop.”

“Mums can come and relax before or after dropping off children, or bring children with them who can play upstairs in a safe fun stimulating environment. Teenagers can come and chill with mates, watch some MTV and the best bit of all is our delicious frozen yogurt.”

Market

Frozen yoghurt is a relatively new concept for the UK, although it has been established in other countries for many years because of its role as a zero-fat alternative to other snacks. The frozen yoghurt category is worth $700m in the US. Although it has been slow to take off in the UK, it does have a major retail presence with Ben & Jerry's among the leading

manufacturers in the category (quoted from The Grocer, October 2010).

Frozen yoghurt bars are not just intended to be a place for people who fancy some dessert; they also want to take a slice of business away from coffee shops and juice bars. They are intended to be a casual place for groups of friends to hang out and they have been carefully designed to look sleek, trendy and inviting, somewhere you wouldn't mind spending a few hours. Customers are encouraged to believe they are tapping into a lifestyle choice; hence they are ‘bars’ rather than ‘parlours’. Tristan Pestana, the co-owner of UK's leading frozen yoghurt chain, Snog, says: “Everyone's getting a bit tired of the whole café culture and this is definitely going to be the next big thing.” (quoted from The Independent, July 14, 2011) Currently, the owner is building awareness and customer loyalty, but requires a significant direct marketing campaign that will maximise sales and awareness for the peak selling period of spring and summer.

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PART A – Compulsory

It is recommended that you spend approximately ONE hour on Part A.

Question One

Your agency has recently been retained to assist with developing a new marketing strategy for Chillberries. Currently, the owner is building awareness and customer loyalty, but requires a significant direct marketing campaign for the peak selling period (spring and summer) that will maximise sales and increase awareness.

Write a report that:

a. outlines your proposals for a direct marketing plan that will maximise sales and increase awareness for Chillberries

(25 marks)

b. recommends TWO types of sales promotion that could be used to increase customer retention

(10 marks)

c. advises Chillberries of the implications of ONE existing regulation in relation to the promotional activities you have recommended.

(15 marks) (Total 50 marks)

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Question One – Mark scheme

Question One (a)

The answer requires a good understanding of the components of a direct marketing plan and candidates should consider the steps involved in developing a plan (SOSTAC).

Each stage should be explained – an actual plan is NOT

required. However, there should be contextualisation to Chillberries and recognition of the need to recruit new customers and create awareness.

 Objectives – SMART and relate to awareness and acquisition of new customers.

 Targets – demographic and lifestyle variables.

 Tactics – emails with offers information, direct mail restating benefits, text alerts around key events, Twitter feeds.

 Indicative budget.

 Monitor and evaluation – numbers of new customers recruited and retained, focus groups, codes.

2 marks report format 4 marks context 10 marks knowledge 9 marks application (Total 25 marks) Question One (b)

Sales promotions should relate to increasing customer retention and loyalty.

 Competitions.

 Free gifts/extra quantity based on loyalty.

 Simple loyalty scheme, eg Café Nero.

 Free face painting for repeat children’s party booking.

 Refer a friend discount.

2 x 5 marks

(Total 10 marks) Question One (c)

Candidates can discuss one aspect of regulation, eg Data Protection Act in relation to direct marketing activities. Here candidates should discuss the act and and explain the implications for Chillberries, such as permission to use information, storage.

They may elect to discuss the CAP Code Sales Promotion and implications, eg reasonable forecast of demand for free gifts to ensure that offer is fulfilled.

5 marks to discuss the act/aspect of code 10 marks implications (Total 15 marks)

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PART B – Compulsory – Sales Promotion

It is recommended that you spend approximately HALF AN HOUR on Part B.

Answer EITHER Question Two OR Question Three

Question Two

Major retailing organisations such as the supermarket chain Asda, and bookseller and stationery chain WHSmith, have made the strategic decision not to adopt loyalty card marketing programmes. This is in considerable contrast to other major retailers, who have developed loyalty cards with millions of active and enthusiastic users.

a. Discuss the advantages and disadvantages of retail loyalty card marketing programmes.

(10 marks)

b. Explain how the various categories of data collected by retail organisations may contribute to effective relationship marketing programmes.

Question Two – Mark scheme

Question Two (a)

Candidates should discuss the advantages and disadvantages of loyalty card marketing programmes.

Advantages:

 customer loyalty

 retention, eg Sainsbury’s

 customer lifetime value

 reduction in attrition rates

 improvements in lifetime value of customer

 more positive word-of-mouth recommendation –advocates (ladder of loyalty)

 increased revenue Disadvantages:

 cost

 implementation

 loyalty scheme fatigue – are they glorified sales promotions

 actual added value derived and customer perception of this

 Regulation and compliance cost – if not adhered to may damage reputation

5 x 1 mark

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Question Two (b)

Candidates should identify and discuss the types of data.

Types of data-classification and geo-demographic data, average order value, pattern of shopping, items purchased – supermarket own brands or manufacturer brands.

Contribution to relationship marketing – tailoring specific offers to maximise effectiveness, maximising in-store offers on specific days of the week, segmentation of customers, tailoring other marketing communications, eg customer magazine with specific features for the audience.

7 marks

8 marks

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Question Three

An insurance company is considering a new sales promotion campaign and has asked you for advise on how to use marketing research to plan and manage this marketing activity more effectively.

Prepare a briefing paper that:

a. identifies TWO marketing research methods that would enable the insurance company to plan and develop a new sales promotional campaign

(15 marks)

b. outlines the role of the focus group in developing marketing research, and lists FOUR

questions that can be used in a focus group to assist with planning effective sales promotions for this insurance company.

Question Three – Mark scheme

Question Three (a)

Candidates should identify TWO types of research for sales promotional campaign development.

Desk research – audit previous promotions, competitor

promotions, sales data and tracking studies, trade magazines, special industry reports.

Field research – questionnaires, hall tests, focus groups, interviews.

15 marks

Question Three (b)

Focus groups – outline of their role in developing marketing research.

Questions to ask:

1. Which kind of sales promotion do you find most appealing? 2. What other brands would you like to be linked to us for the

purposes of joint promotions?

3. How would you like to be informed of promotions? 4. Which is the most convenient redemption method? 5. Do you think promotions devalue our brand?

2 marks

4 x 2 marks

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PART C – Compulsory – Direct Marketing

It is recommended that you spend approximately HALF AN HOUR on Part C.

Answer EITHER Question Four OR Question Five

Question Four

Bluestone Jewels is a jewellery manufacturer that has traditionally marketed its range through the retail channel. The range derives its uniqueness from the inclusion of a semi-precious stone that is only found in the region where the company has its manufacturing base. Recent PR coverage in the national press and a female fashion magazine has led to a huge increase in enquiries from across the nation, requesting either a catalogue or a website featuring the product range for direct orders.

Prepare a report that:

a. advises the company on the advantages and disadvantages of THREE media options it may consider to attract customers to its new website and place orders on-line

(15 marks)

b. justifies the media approach and provides recommendations on which media activities are likely to produce the best results.

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Question Four – Mark scheme

Question Four (a)

Candidates should discuss the advantages and disadvantages of three types of media.

Advantages of television:  mass market  segment by region-digital  multi-sensory Disadvantages of television:  cost  implementation

 measurement – need for DRTV Advantages of print:

 mass market

 segment by titles, eg Cheshire Life, Yorkshire Life, Red

 incorporate coupons etc which can be measured Disadvantages of print:

 cost

 implementation – long lead times

 readership Advantages of radio:

 relatively cheap

 segment by region – digital and analogue

 interactive

Disadvantages of radio:

 cannot store

 not as credible as other media

 measurement

15 marks

Question Four (b)

Candidates are to recommend the relevant media to drive consumers to the website. They should justify their choices and indicate why it will be effective for Bluestone Jewels. TV is unlikely to be an option because of cost. However, specialised magazines because of ability to segment, synergy with the product, could place classified ads, also could place ads with editorial content.

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Question Five

a. In the context of the Business-to-Consumer (B2C) sector, outline the strengths and weaknesses of telephone marketing, email and direct mail when used to develop customer value and customer relationships.

(15 marks)

b. Provide examples within the B2C sector where telephone marketing, emails and direct mail have been used effectively to retain and develop customer relationships.

Question Five – Mark scheme

Question Five (a)

Candidates are to discuss the advantages and disadvantages of :

email – cheap, can be instant, visual but may be lost in box, perceived as spam

telephone – can reach a wide market, cheap, international, but intrusive and regulation TPS (telephone preference system) needs to be adhered to

direct mail – can be retained, number of databases already in existence, technology reduces CPT (cost per thousand), but perceptions of junk mail, and regulation (extra cost) mean it needs to be high quality to be effective

3 x 5 marks

(Total 15 marks) Question Five (b)

Candidates are to provide a range of examples to support their discussion, eg Finding Nemo – TV buyers, 24 game, Pizza Express free Christmas gifts email campaign. Candidates should provide at least one example for each method and explain it.