Premium Pizza Inc.

Posted on 21/10/2011 The 1980s saw a sharp increase in the use of promotions (coupons, cents-off deals marked on the package, free gifts, and so on) because of their manifest success at increasing short-term purchase behavior. In fact, sales promotion is now estimated to account for over one-half of the typical promotion budget, while advertising accounts for less than half. In many industries, however, the initial benefit of increased sales has resulted in long-term escalation of competition. As firms are forced to fight fire with fire, special offer follows special offer in a never-ending spiral of promotional deals. The fast-food industry has been one of the most strongly affected by this trend. Pizzas come two for the price of one; burgers are promoted in the context of a double-deal involving cuddly toys for the kids; tacos are reduced in price some days, but not others. It is within this fiercely competitive, erratic environment that Premium Pizza Corporation has grown from a small local chain into an extensive Midwestern network with national aspirations. Over the past few years, Jim Battaglia, vice president of marketing, has introduced a number of promotional offers, and Premium Pizza parlors have continued to flourish. Nevertheless, as the company contemplates further expansion, Jim is concerned that he knows very little about how his customers response to his promotional deals. He believes that he needs a long-term strategy aimed at maximizing the effectiveness of dollars spent on promotions. And, as a first step, he thinks that it is important to assess the effectiveness of his existing offers. Specific Objectives In the past, Jim has favored the use of five types of coupons, and he now wishes to determine their independent appeal, together with their relation to several identifiable characteristics of fast-food consumers. The five promotional concepts are listed in Table 3.5.1. The consumer characteristics that Jims experience tells him warrant investigation include number of children living at home, age of youngest child, propensity to eat fast food, propensity to eat Premium Pizza in particular, preference for slices over pies, propensity to use coupons, and occupation. The specific objectives of the research study can therefore be summarized as follows: 1. To evaluate the independent appeal of the five promotional deals to determine which deals are most preferred. 2. To gain insight into the reasons that certain deals are preferred. 3. To examine the relationships between the appeal of each promotional concept and various consumer characteristics. Table3.5.1 Five PromotionalConcepts

Coupon A Coupon B Coupon C bar. Coupon D Coupon E

Get a medium soft drink for 5 cents with the purchase of any slice. Buy a slice and get a second slice of comparable value free. Save 50 cents on the purchase of any slice and receive one free trip to the salad Buy a slice and a large soft drink and get a second slice free. Get a single-topping slice for only 99 cents.

Proposed Methodology After much discussion, Jims research team finally decided that the desired information could best be gathered by means of personal interviews, using a combination of open-ended and closed questions. A medium-sized shopping mall on the outskirts of a metropolitan area in the Midwest was selected as the research site. Shoppers were intercepted by professional interviewers while walking in the mall and asked to participate in a survey requiring five minutes of their time. The sampling procedure employed a convenience sample in which interviewers were instructed to approach anyone passing by, providing that they met certain criteria (see Figure 3.5.1). In sum, the sample of respondents was restricted to adult men and women between the ages of 18 and 49 who had both purchased lunch, dinner, or carryout food at a fast-food restaurant in the past seven days and had eaten restaurant pizza within the last 30 days, either at a restaurant or delivered to the home. In addition, interviewers were warned not to exercise any bias during the selection process, as they would do, for example, if they approached only those people who looked particularly agreeable or attractive. Finally, interviewers were asked to obtain as close as possible to a 50-50 split of male and female participants. The questionnaire was organized into three sections (see Figure 3.5.2). The first section contained the screening questions aimed at ensuring that respondents qualified for the sample. In the second section, respondents were asked to evaluate on 10-point scales the appeal of each of the five promotional concepts based on two factors: perceived value and likelihood of use. After they had evaluated a concept, interviewees were asked to give reasons for their likelihood-of-use rating. The third and final section consisted of the questions on consumer characteristics that Jim believed to be pertinent. The questionnaire was to be completed by the interviewer based on the respondents comments. In other words, the interviewer read the questions aloud and wrote down the answer given in each case by the interviewee. It was decided to show respondents an example of each coupon before they rated it. For this purpose, enlarged photographs of each coupon were produced. It was also thought necessary to depict the 10-point scales that consumers should use to evaluate the promotional offer. Coupons and scales were therefore assembled in a booklet so that, as the interviewer showed each double-page spread, the respondent would see the scales on the top page and the coupon in question on the bottom page (see Figure 3.5.3).

Because the researcher wished to counterbalance the order in which the coupons were viewed and rated, the five coupons were organized into booklets of six different sequences. Each sequence was subsequently bound in one of six distinctly colored binders. A total of 96 questionnaires were then printed in six different colors to match the binder. In this way, there were 16 questionnaires of each color, and the color of the respondents questionnaire indicated the sequence that he or she had seen. The questionnaire and procedure were pretested at a mall similar to the target mall and were found to be satisfactory. Figure 3.5.1 Interviewer Instructions

Below are suggestions for addressing each question. Please read all the instructions before you begin questioning people. Interviewer Instructions Approach shoppers who appear to be between 18 and 49 years of age. Since we would like equal numbers of respondents in each age category and a 50 percent male-female ratio, please do not select respondents based on their appeal to you. The interview should take approximately five minutes. When reading questions, read answer choices if indicated. Question 1: Terminate any respondent who has not eaten lunch or dinner from any fast-food restaurant in the last seven days. Question 2: Terminate any respondent who has not eaten pizza within the last 30 days. This includes carry-out, drive-thru, or dining in. Question 3: Terminate respondent if not between 18 and 49 years of age. If between 18 and 49, circle the appropriate number answer. For this question, please read the question and the answer choices. After completing questions 1 through 3, hand respondent the coupon booklet. Make sure that the booklet and the response sheets are the same color. Also check to see that the coupon booklet number indicated on the upper right-hand corner of the response sheet matches the coupon book number. Question 4: Ask the respondent to open the coupon booklet and read the first coupon concept. Read the first section of Question 4 showing the respondent that the scales are provided on the page above the coupon concept. Enter his or her answer in the box provided. Read the second section of the question and enter respondents answer in the second box provided. When asking the respondent, Why did you respond as you did for use, please record the first reason mentioned and use the lines provided to probe and clarify the reasons.

This set of instructions applies to Questions 5 through 8. Periodically remind the respondent to look at the scales provided on the page above the coupon concept that he or she is looking at. Question 9: Enter number of children living at home. If none, enter the number zero and proceed to Question 11. Question 10: Enter age of youngest child living at home in the box provided. Question 11 Read the question and each answer slowly. Circle the number corresponding to the appropriate answer. Question 12: Read the question and each answer slowly. Circle the number corresponding to the appropriate answer. If answer is never, proceed to Question 14. Otherwise, continue to Question 13. Question 13: Circle the number corresponding to the appropriate answer. Do not read answer choices. Question 14: Circle the number corresponding to the appropriate answer. Do not read answer choices. Question 15: Read the question and each answer slowly. Circle the number corresponding to the appropriate answer. Question 16: Read the question and each answer slowly. Circle the number corresponding to the appropriate answer. Question 17: If an explanation is requested for occupation, please tell respondent that we are looking for a broad category or title. No occupation is not an acceptable answer. If this should happen, please probe to see if the person is a student, homemaker, retired, unemployed, etc. At the end of the questionnaire, you are asked to indicate whether the respondent was male or female. Please circle the appropriate answer. This is not a question for the respondent.