|
55. This company memorandum recommends that Excelsior conduct a temporary sales promotion for its new brand of coffee that includes offering free samples, price reductions, and discount coupons. This recommendation is based on the fact that Superior, the leading coffee company, used just such a promotion to introduce the newest brand in its line of coffees. This argument is unconvincing because it relies on three questionable assumptions. First of all, the argument rests on the assumption that a promotional strategy that works for one company will work for another. However, Excelsior and Superior may not be sufficiently similar to warrant this assumption. Promotional techniques that work for a leader with established name recognition for its brand of coffees may be ineffective for a company with no similar name recognition new to the brand coffee market. Accordingly, Excelsior might be better advised to employ some other strategy, such as a media advertising plan, to first attain broad name recognition. The argument also depends on the assumption that Excelsior can afford a promotional plan similar to Superiors. However, free samples, price reductions, and discounts all reduce profits and may actually result in temporary losses. While a leading company with other profitable products in the same line can absorb a temporary loss, for a fledgling competitor this strategy might be very risky and may even result in business failure. | 
