Question

The objective(s) of using premiums is/are to:

a. encourage customers to return frequently or to use more of the product, and to build goodwill.
b. increase trial and retaliate against competitors' actions.
c. encourage present customers to buy more; minimize brand switching behaviour.
d. encourage new product trial.
e. encourage repeat purchases.

Answer 1

The objectives of using premiums include encouraging repeat business, building goodwill, increasing product trials, and retaliating against competitors. Companies aim to establish a good reputation to assure customers of product quality and justify premium pricing, and may offer money-back guarantees to foster further trust, especially in non-physical sales environments.

Step-by-step explanation:

The objectives of using premiums are to:

1. Encourage customers to return frequently or to use more of the product and to build goodwill.
2. Increase trial and retaliate against competitors' actions.
3. Encourage present customers to buy more; minimize brand switching behavior.
4. Encourage new product trial.
5. Encourage repeat purchases.

These policies highlight the importance for firms to gain repeat customers and build a good reputation. A company concerned with its reputation is seen as trustworthy, leading to customers worrying less about the quality of the product. This is exemplified by established grocery stores being able to command higher prices compared to temporary stands due to their reputations.

Moreover, the use of money-back guarantees, which serve as a promise of quality, is crucial for companies that sell products where the customer cannot physically inspect the items before purchase, such as in mail-order catalogs or online sales. This strategy fosters consumer confidence and encourages purchases.