DATE: April 5, 2012
PROBLEM: Given the vast expense associated with BusinesSuites’ (BSS)current marketing tactics such as the Broker Referral Fee and Broker Tour programs,what is the most viable, cost-effective sales promotion strategy that woulddifferentiate BusinesSuites from its competitors and generate new business?
SYMPTOMS: (1) Real estate market competition (2) economy(3) broker saturation
CRITICAL FACTORS:
(1) Objectives (a) expand clientele (b) increase overall revenue by 8%
(2) Total budget for all marketing efforts-$432,541 (a) brokercommissions/referrals- $82,847 (b) client goodwill and promotions-$61,685 (c)advertising and marketing-$288,009
(3) Commercial real estate brokers as significant potential source of new, regularoffice clients (a) middle-aged (b) area resident- familiar with area (c) severalyears of broker experience
(4) Promotional offers to brokers - (a) broker referral fee program (b) brokertour program.
(5) Current BSS marketing efforts: client goodwill and promotions, direct mail,pay-per-click advertising, referrals, billboards, print advertising in businesspublications, etc...
(6) BSS was projected to have total revenue of approximately $14,500,000 a)office rentals accounted for 78% b) services accounted for 22% c) 10.2% oftotal revenue was from VO clients
(7) Industry Competition: Price point that is 25% less than BSS in terms ofrevenue per occupied office
(8) Current clientele: 1,188 clients - (a) 589 regular office clients; 599 VOclients
(9) Company Size and Locations - (a) 4 centers in Maryland; 7 centers in Texas;2 centers in Virginia; 1 center in Nevada. (b) 829 tangible offices availableamongst the total 14 locations.
(10) BSS Brand Image: “The Freedom to Succeed”.
ALTERNATIVES:
ALTERNATIVE 1: Brokers are to be commissioned on a sliding scale, dependenton their level of signees. The scale is built up throughout the fiscal year,and starts over at the beginning of the next year. Since BSS is offering ahigher commission, they should omit the $50 incentive, and employ an emailmarketing campaign to notify brokers about the office space. PRO: (1)Elimination of $50 saves overhead cost (2, 4). (2) Brokers aremotivated to sell more in order to earn a higher commission (3, 4).(3) Could help increase occupancy to maximum potential (1, 6, 8, 9).
CON:(1) Sliding scale could get expensive, as big firms would likely dominatethe sales and earn a very high percentage commission. Could deter independentbrokers from participating (3, 4). (2) Elimination of the $50incentive could reduce number of brokers who have knowledge of BSS (1, 3,4, 5, 10). (3)Focus on price undermines brand equity (4,5,6,7,10).(4) Competitors could implement higher commission scale (4, 5, 7).
ALTERNATIVE 2: Change marketing strategy: re-allotment of the commission. Wewould keep the $1,000 commission for the brokers and create an incentive fornew tenants by giving them a $1,000.00 credit on their first month expenses. PRO:(1) This combined pull and push sales promotion effort could help maximize ROI (1,2, 5, 6). (2) Motivates tenants to sign with BSS (1, 6, 7, 8, 9).(3) Appealing for a broader audience: tenants and brokers (1, 3, 8,).(4) Aligns with BSS’ past marketing efforts (1, 5).
CON: (1) Using price as an incentive can diminish brand value (5, 7, 10).(2) This option is more expensive than past efforts (2, 4, 5). (3) Compensation of client may upset broker (2, 3, 4, 5, 6). (4) Current clients may request a similar compensation, and could lookinto using competitors’ services (2, 4, 5, 6, 7, 8).
ALTERNATIVE 3: Implement a company-wide contest which awards brokers forreaching specified levels of sales and outstanding performance of fillingoffice space. In addition to 3% commission on leases, the highest performingbroker each year has a choice between an Alaskan Cruise, an all-inclusiveHawaiian resort, or a California Wine Tour for up to four members. An emailmarketing campaign will advertise the contest.
PRO: (1) Contests stimulate sales that would not have occurred in their absence (1, 4, 5, 6) . (2) Is an engaging, cost-effective way to increaseperformance because it eliminates the need for monetary incentives from tours (1,2, 4, 5). (3) Easily measurable results (1, 4, 5, 9). (4)Encourages brokers to compete with one another for a family-friendly incentive (3,4, 5). (5) Email marketing is a highly effective means of communication,especially for notifying our brokers of the contest (1, 2, 4, 5).
CON: (1) Sales promotions may not stimulate repeat purchases after thepromotion has ended (1,4,7,8). (2) This incentive may not be enoughto stimulate an increase in contracts (1, 4, 5, 6). (3) Salespromotional devices do not focus on stirring brand loyalty (5, 7, 10).(4) By attracting only brokers for this contest, BSS is not appealing totenants; has the potential to alienate others (1, 3, 4, 5). (5)In time, implementing this contest company-wide is costly (1, 2, 4, 5).
(4) RECOMMENDATION: Alternative 3: Company-wide contest; email marketingand cost-per-click campaigns.
The main objective for this approach is to increase office space occupancy to arate of 75%. This will be achieved by incentivizing our target market ofbrokers with sales promotion tactics. Additionally, BSS will stimulate aconversation around their company and their locations as the national contestgoes underway. The contest will be announced via email marketing campaignstargeted directly to regional brokers and firms in all the city locations ofBSS. According to Vertical Response Marketing, email marketing is trendingupward “with click and open rates increasing and in some cases rates at 30%higher than other tactics.” Email marketing is a low-cost and sure means toinstill brand knowledge about BSS and their promotional means of engagement.Moreover, in regard to the purpose behind an incentive-based contest tostimulate leasing, we consider a contest to be a performance based goalorientation, which leads those engaging in it to work more diligently.According to a study in the Journal of Marketing: “A performance goal orients[salespeople] to achieve a positive evaluation of their current abilities andperformance from important others.” Basically, this study substantiates thefact that by offering the brokers a goal to work toward, in this case theopportunity of winning the vacation getaway contest, BSS will have a higherturnout. It will drive brokers to work harder and smarter in order to achievetheir goal. Further, a study by Carnegie Mellon University on the effects of contestsand sweepstakes states that if contestants are risk-neutral, then the contestmust utilize a value-maximizing award, such as a single grand prize, whereas ifthe current users are risk-averse, then the award should consist of multiple"large" prizes. Our target of brokers, by their very nature, take onhuge amounts of risk as dictated by their commission-based career and would bemore inclined to want to work toward the larger, exclusive grand prize. Inaddition to this, recognizing the BSS contest winner on the NationalAssociation of Realtors website is another option to consider as a means ofenticing realtors to participate in the contest.
(5) ADDITIONAL COMMENTS:
According to Table 10.1.1, both Year 1 and Year 2 had lead-to-win conversionrates of 13.7%. This does not include tour statistics. If we assume that thereis no overlap between the lead counts and tour counts columns, and incorporateboth, then the total lead-to-win conversions would be 7.5% for year 1, and 6.1%for year 2. This means that despite the fact that there were 170 more leads inthe second year, BSS’s ability to convert those leads into new businessactually declined. Based on the BusinesSuites(A) case study, 15% of theadvertising and marketing budget of $288,009 is spent on direct mail. Thisnumber tallies up to $43,201.35. According to the same study, less than 5% ofthe total value of new business actually comes from direct mail sent to thesepotential clients. Even though direct, personalized mail has proven effectivefor other companies, this statistic does not represent a good return on BSS’sadvertising dollars, which is why we chose to discontinue the use of directmail. This is money that can be allocated toward other successful investmentssuch as pay-per-click campaigns and SEO, which, in the process, may allow for apotential rise in new business from online brokers and referral services aswell. PPC has already proven itself valuable to generating new business, soinvesting even more money in online advertising is the best way to informbrokers of BusinesSuites’ new promotions, including contests.
Works Cited
Learning Orientation, Working Smart, and Effective Selling. Journal of Marketing , Vol. 58, No.3, pp. 39-52. American Marketing Association.
http://www.jstor.org/stable/1252309
Critical success factors in the personal selling process: An empiricalinvestigation of Ecuadorian salespeople in the banking industry. InternationalJournal of Bank Marketing, Vol. 22 Iss: 1, pp.9 - 25 http://www.emeraldinsight.com.ezproxy.lib.utexas.edu/journals.htm?articleid=855100&show=abstract
Mintel Marketing to Affluent Consumers - July 2010- US http://academic.mintel.com/sinatra/oxygen_academic/my_reports/display/id=482735&anchor=atom#atom0
AttitudesToward Traditional Media Advertising and Promotional Marketing-August 2009-US
http://academic.mintel.com/sinatra/oxygen_academic/my_reports/display/id=393597&anchor=atom#atom0
Word of Mouth and Viral Marketing-April 2009 US http://academic.mintel.com/sinatra/oxygen_academic/my_reports/display/id=393514&anchor=atom#atom0
Consumer Value-Maximizing Sweepstakes& Contests: A Theoretical and Experimental Investigation
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=310895
PROBLEM: Given the vast expense associated with BusinesSuites’ (BSS)current marketing tactics such as the Broker Referral Fee and Broker Tour programs,what is the most viable, cost-effective sales promotion strategy that woulddifferentiate BusinesSuites from its competitors and generate new business?
SYMPTOMS: (1) Real estate market competition (2) economy(3) broker saturation
CRITICAL FACTORS:
(1) Objectives (a) expand clientele (b) increase overall revenue by 8%
(2) Total budget for all marketing efforts-$432,541 (a) brokercommissions/referrals- $82,847 (b) client goodwill and promotions-$61,685 (c)advertising and marketing-$288,009
(3) Commercial real estate brokers as significant potential source of new, regularoffice clients (a) middle-aged (b) area resident- familiar with area (c) severalyears of broker experience
(4) Promotional offers to brokers - (a) broker referral fee program (b) brokertour program.
(5) Current BSS marketing efforts: client goodwill and promotions, direct mail,pay-per-click advertising, referrals, billboards, print advertising in businesspublications, etc...
(6) BSS was projected to have total revenue of approximately $14,500,000 a)office rentals accounted for 78% b) services accounted for 22% c) 10.2% oftotal revenue was from VO clients
(7) Industry Competition: Price point that is 25% less than BSS in terms ofrevenue per occupied office
(8) Current clientele: 1,188 clients - (a) 589 regular office clients; 599 VOclients
(9) Company Size and Locations - (a) 4 centers in Maryland; 7 centers in Texas;2 centers in Virginia; 1 center in Nevada. (b) 829 tangible offices availableamongst the total 14 locations.
(10) BSS Brand Image: “The Freedom to Succeed”.
ALTERNATIVES:
ALTERNATIVE 1: Brokers are to be commissioned on a sliding scale, dependenton their level of signees. The scale is built up throughout the fiscal year,and starts over at the beginning of the next year. Since BSS is offering ahigher commission, they should omit the $50 incentive, and employ an emailmarketing campaign to notify brokers about the office space. PRO: (1)Elimination of $50 saves overhead cost (2, 4). (2) Brokers aremotivated to sell more in order to earn a higher commission (3, 4).(3) Could help increase occupancy to maximum potential (1, 6, 8, 9).
CON:(1) Sliding scale could get expensive, as big firms would likely dominatethe sales and earn a very high percentage commission. Could deter independentbrokers from participating (3, 4). (2) Elimination of the $50incentive could reduce number of brokers who have knowledge of BSS (1, 3,4, 5, 10). (3)Focus on price undermines brand equity (4,5,6,7,10).(4) Competitors could implement higher commission scale (4, 5, 7).
ALTERNATIVE 2: Change marketing strategy: re-allotment of the commission. Wewould keep the $1,000 commission for the brokers and create an incentive fornew tenants by giving them a $1,000.00 credit on their first month expenses. PRO:(1) This combined pull and push sales promotion effort could help maximize ROI (1,2, 5, 6). (2) Motivates tenants to sign with BSS (1, 6, 7, 8, 9).(3) Appealing for a broader audience: tenants and brokers (1, 3, 8,).(4) Aligns with BSS’ past marketing efforts (1, 5).
CON: (1) Using price as an incentive can diminish brand value (5, 7, 10).(2) This option is more expensive than past efforts (2, 4, 5). (3) Compensation of client may upset broker (2, 3, 4, 5, 6). (4) Current clients may request a similar compensation, and could lookinto using competitors’ services (2, 4, 5, 6, 7, 8).
ALTERNATIVE 3: Implement a company-wide contest which awards brokers forreaching specified levels of sales and outstanding performance of fillingoffice space. In addition to 3% commission on leases, the highest performingbroker each year has a choice between an Alaskan Cruise, an all-inclusiveHawaiian resort, or a California Wine Tour for up to four members. An emailmarketing campaign will advertise the contest.
PRO: (1) Contests stimulate sales that would not have occurred in their absence (1, 4, 5, 6) . (2) Is an engaging, cost-effective way to increaseperformance because it eliminates the need for monetary incentives from tours (1,2, 4, 5). (3) Easily measurable results (1, 4, 5, 9). (4)Encourages brokers to compete with one another for a family-friendly incentive (3,4, 5). (5) Email marketing is a highly effective means of communication,especially for notifying our brokers of the contest (1, 2, 4, 5).
CON: (1) Sales promotions may not stimulate repeat purchases after thepromotion has ended (1,4,7,8). (2) This incentive may not be enoughto stimulate an increase in contracts (1, 4, 5, 6). (3) Salespromotional devices do not focus on stirring brand loyalty (5, 7, 10).(4) By attracting only brokers for this contest, BSS is not appealing totenants; has the potential to alienate others (1, 3, 4, 5). (5)In time, implementing this contest company-wide is costly (1, 2, 4, 5).
(4) RECOMMENDATION: Alternative 3: Company-wide contest; email marketingand cost-per-click campaigns.
The main objective for this approach is to increase office space occupancy to arate of 75%. This will be achieved by incentivizing our target market ofbrokers with sales promotion tactics. Additionally, BSS will stimulate aconversation around their company and their locations as the national contestgoes underway. The contest will be announced via email marketing campaignstargeted directly to regional brokers and firms in all the city locations ofBSS. According to Vertical Response Marketing, email marketing is trendingupward “with click and open rates increasing and in some cases rates at 30%higher than other tactics.” Email marketing is a low-cost and sure means toinstill brand knowledge about BSS and their promotional means of engagement.Moreover, in regard to the purpose behind an incentive-based contest tostimulate leasing, we consider a contest to be a performance based goalorientation, which leads those engaging in it to work more diligently.According to a study in the Journal of Marketing: “A performance goal orients[salespeople] to achieve a positive evaluation of their current abilities andperformance from important others.” Basically, this study substantiates thefact that by offering the brokers a goal to work toward, in this case theopportunity of winning the vacation getaway contest, BSS will have a higherturnout. It will drive brokers to work harder and smarter in order to achievetheir goal. Further, a study by Carnegie Mellon University on the effects of contestsand sweepstakes states that if contestants are risk-neutral, then the contestmust utilize a value-maximizing award, such as a single grand prize, whereas ifthe current users are risk-averse, then the award should consist of multiple"large" prizes. Our target of brokers, by their very nature, take onhuge amounts of risk as dictated by their commission-based career and would bemore inclined to want to work toward the larger, exclusive grand prize. Inaddition to this, recognizing the BSS contest winner on the NationalAssociation of Realtors website is another option to consider as a means ofenticing realtors to participate in the contest.
(5) ADDITIONAL COMMENTS:
According to Table 10.1.1, both Year 1 and Year 2 had lead-to-win conversionrates of 13.7%. This does not include tour statistics. If we assume that thereis no overlap between the lead counts and tour counts columns, and incorporateboth, then the total lead-to-win conversions would be 7.5% for year 1, and 6.1%for year 2. This means that despite the fact that there were 170 more leads inthe second year, BSS’s ability to convert those leads into new businessactually declined. Based on the BusinesSuites(A) case study, 15% of theadvertising and marketing budget of $288,009 is spent on direct mail. Thisnumber tallies up to $43,201.35. According to the same study, less than 5% ofthe total value of new business actually comes from direct mail sent to thesepotential clients. Even though direct, personalized mail has proven effectivefor other companies, this statistic does not represent a good return on BSS’sadvertising dollars, which is why we chose to discontinue the use of directmail. This is money that can be allocated toward other successful investmentssuch as pay-per-click campaigns and SEO, which, in the process, may allow for apotential rise in new business from online brokers and referral services aswell. PPC has already proven itself valuable to generating new business, soinvesting even more money in online advertising is the best way to informbrokers of BusinesSuites’ new promotions, including contests.
Works Cited
Learning Orientation, Working Smart, and Effective Selling. Journal of Marketing , Vol. 58, No.3, pp. 39-52. American Marketing Association.
http://www.jstor.org/stable/1252309
Critical success factors in the personal selling process: An empiricalinvestigation of Ecuadorian salespeople in the banking industry. InternationalJournal of Bank Marketing, Vol. 22 Iss: 1, pp.9 - 25 http://www.emeraldinsight.com.ezproxy.lib.utexas.edu/journals.htm?articleid=855100&show=abstract
Mintel Marketing to Affluent Consumers - July 2010- US http://academic.mintel.com/sinatra/oxygen_academic/my_reports/display/id=482735&anchor=atom#atom0
AttitudesToward Traditional Media Advertising and Promotional Marketing-August 2009-US
http://academic.mintel.com/sinatra/oxygen_academic/my_reports/display/id=393597&anchor=atom#atom0
Word of Mouth and Viral Marketing-April 2009 US http://academic.mintel.com/sinatra/oxygen_academic/my_reports/display/id=393514&anchor=atom#atom0
Consumer Value-Maximizing Sweepstakes& Contests: A Theoretical and Experimental Investigation
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=310895
