Final answer:
The correct response is personal selling, which is best for a smaller set of customers due to direct, individual communication, contrasting with advertising that targets a larger audience.
Step-by-step explanation:
The element of the promotional mix referred to in the question is personal selling, which is characterized by being paid for by the firm and involves direct, personal appeals through two-way communication. Compared to the other elements of the promotional mix, personal selling is typically more effective for a smaller set of customers because it allows for a personalized approach and immediate feedback.
Advertising, on the other hand, is more suitable for a larger set of customers as it involves communicating with a mass audience to influence their perception and behavior towards a product or service. Successful advertising can make a firm's perceived demand curve more inelastic (steeper) or increase the demand by shifting the perceived demand curve to the right, which allows the firm to potentially sell a greater quantity, charge a higher price, or both, to increase profits.
The promotional element that is paid for by the firm and uses direct, personal appeals in the form of a two-way flow of communication is Personal selling. This promotional element typically works best for a smaller set of customers.