Marketing Biscuit, Business study guide

Marketing Plan

noreply@blogger.com (seo webdesigner) — Thu, 10 Sep 2009 11:08:00 +0000

The information for this article was derived from many sources, including Michael Porter's book Competitive Advantage and the works of Philip Kotler. Concepts addressed include 'generic' strategies and strategies for pricing, distribution, promotion, advertising and market segmentation. Factors such as market penetration, market share, profit margins, budgets, financial analysis, capital investment, government actions, demographic changes, emerging technology and cultural trends are also addressed.

There are two major components to your marketing strategy:

how your enterprise will address the competitive marketplace
how you will implement and support your day to day operations.

In today's very competitive marketplace a strategy that insures a consistent approach to offering your product or service in a way that will outsell the competition is critical. However, in concert with defining the marketing strategy you must also have a well defined methodology for the day to day process of implementing it. It is of little value to have a strategy if you lack either the resources or the expertise to implement it.

In the process of creating a marketing strategy you must consider many factors. Of those many factors, some are more important than others. Because each strategy must address some unique considerations, it is not reasonable to identify 'every' important factor at a generic level. However, many are common to all marketing strategies. Some of the more critical are described below.

You begin the creation of your strategy by deciding what the overall objective of your enterprise should be. In general this falls into one of four categories:

If the market is very attractive and your enterprise is one of the strongest in the industry you will want to invest your best resources in support of your offering.
If the market is very attractive but your enterprise is one of the weaker ones in the industry you must concentrate on strengthening the enterprise, using your offering as a stepping stone toward this objective.
If the market is not especially attractive, but your enterprise is one of the strongest in the industry then an effective marketing and sales effort for your offering will be good for generating near term profits.
If the market is not especially attractive and your enterprise is one of the weaker ones in the industry you should promote this offering only if it supports a more profitable part of your business (for instance, if this segment completes a product line range) or if it absorbs some of the overhead costs of a more profitable segment. Otherwise, you should determine the most cost effective way to divest your enterprise of this offering.

Having selected the direction most beneficial for the overall interests of the enterprise, the next step is to choose a strategy for the offering that will be most effective in the market. This means choosing one of the following 'generic' strategies (first described by Michael Porter in his work, Competitive Advantage).

A COST LEADERSHIP STRATEGY is based on the concept that you can produce and market a good quality product or service at a lower cost than your competitors. These low costs should translate to profit margins that are higher than the industry average. Some of the conditions that should exist to support a cost leadership strategy include an on-going availability of operating capital, good process engineering skills, close management of labor, products designed for ease of manufacturing and low cost distribution.
A DIFFERENTIATION STRATEGY is one of creating a product or service that is perceived as being unique "throughout the industry". The emphasis can be on brand image, proprietary technology, special features, superior service, a strong distributor network or other aspects that might be specific to your industry. This uniqueness should also translate to profit margins that are higher than the industry average. In addition, some of the conditions that should exist to support a differentiation strategy include strong marketing abilities, effective product engineering, creative personnel, the ability to perform basic research and a good reputation.
A FOCUS STRATEGY may be the most sophisticated of the generic strategies, in that it is a more 'intense' form of either the cost leadership or differentiation strategy. It is designed to address a "focused" segment of the marketplace, product form or cost management process and is usually employed when it isn't appropriate to attempt an 'across the board' application of cost leadership or differentiation. It is based on the concept of serving a particular target in such an exceptional manner, that others cannot compete. Usually this means addressing a substantially smaller market segment than others in the industry, but because of minimal competition, profit margins can be very high.

Pricing
Having defined the overall offering objective and selecting the generic strategy you must then decide on a variety of closely related operational strategies. One of these is how you will price the offering. A pricing strategy is mostly influenced by your requirement for net income and your objectives for long term market control. There are three basic strategies you can consider.

A SKIMMING STRATEGY
If your offering has enough differentiation to justify a high price and you desire quick cash and have minimal desires for significant market penetration and control, then you set your prices very high.
A MARKET PENETRATION STRATEGY
If near term income is not so critical and rapid market penetration for eventual market control is desired, then you set your prices very low.
A COMPARABLE PRICING STRATEGY
If you are not the market leader in your industry then the leaders will most likely have created a 'price expectation' in the minds of the marketplace. In this case you can price your offering comparably to those of your competitors.

Promotion
To sell an offering you must effectively promote and advertise it. There are two basic promotion strategies, PUSH and PULL.

The PUSH STRATEGY maximizes the use of all available channels of distribution to "push" the offering into the marketplace. This usually requires generous discounts to achieve the objective of giving the channels incentive to promote the offering, thus minimizing your need for advertising.
The PULL STRATEGY requires direct interface with the end user of the offering. Use of channels of distribution is minimized during the first stages of promotion and a major commitment to advertising is required. The objective is to "pull" the prospects into the various channel outlets creating a demand the channels cannot ignore.

There are many strategies for advertising an offering. Some of these include:

Product Comparison advertising
In a market where your offering is one of several providing similar capabilities, if your offering stacks up well when comparing features then a product comparison ad can be beneficial.
Product Benefits advertising
When you want to promote your offering without comparison to competitors, the product benefits ad is the correct approach. This is especially beneficial when you have introduced a new approach to solving a user need and comparison to the old approaches is inappropriate.
Product Family advertising
If your offering is part of a group or family of offerings that can be of benefit to the customer as a set, then the product family ad can be of benefit.
Corporate advertising
When you have a variety of offerings and your audience is fairly broad, it is often beneficial to promote your enterprise identity rather than a specific offering.

Distribution
You must also select the distribution method(s) you will use to get the offering into the hands of the customer. These include:

On-premise Sales involves the sale of your offering using a field sales organization that visits the prospect's facilities to make the sale.
Direct Sales involves the sale of your offering using a direct, in-house sales organization that does all selling through the Internet, telephone or mail order contact.
Wholesale Sales involves the sale of your offering using intermediaries or "middle-men" to distribute your product or service to the retailers.
Self-service Retail Sales involves the sale of your offering using self service retail methods of distribution.
Full-service Retail Sales involves the sale of your offering through a full service retail distribution channel.

Of course, making a decision about pricing, promotion and distribution is heavily influenced by some key factors in the industry and marketplace. These factors should be analyzed initially to create the strategy and then regularly monitored for changes. If any of them change substantially the strategy should be reevaluated.

The Environment
Environmental factors positively or negatively impact the industry and the market growth potential of your product/service. Factors to consider include:

Government actions - Government actions (current or under consideration) can support or detract from your strategy. Consider subsidies, safety, efficacy and operational regulations, licensing requirements, materials access restrictions and price controls.
Demographic changes - Anticipated demographic changes may support or negatively impact the growth potential of your industry and market. This includes factors such as education, age, income and geographic location.
Emerging technology - Technological changes that are occurring may or may not favor the actions of your enterprise.
Cultural trends - Cultural changes such as fashion trends and life style trends may or may not support your offering's penetration of the market

The Prospect
It is essential to understand the market segment(s) as defined by the prospect characteristics you have selected as the target for your offering. Factors to consider include:

The potential for market penetration involves whether you are selling to past customers or a new prospect, how aware the prospects are of what you are offering, competition, growth rate of the industry and demographics.
The prospect's willingness to pay higher price because your offering provides a better solution to their problem.
The amount of time it will take the prospect to make a purchase decision is affected by the prospects confidence in your offering, the number and quality of competitive offerings, the number of people involved in the decision, the urgency of the need for your offering and the risk involved in making the purchase decision.
The prospect's willingness to pay for product value is determined by their knowledge of competitive pricing, their ability to pay and their need for characteristics such as quality, durability, reliability, ease of use, uniformity and dependability.
Likelihood of adoption by the prospect is based on the criticality of the prospect's need, their attitude about change, the significance of the benefits, barriers that exist to incorporating the offering into daily usage and the credibility of the offering.

The Product/Service
You should be thoroughly familiar with the factors that establish products/services as strong contenders in the marketplace. Factors to consider include:

Whether some or all of the technology for the offering is proprietary to the enterprise.
The benefits the prospect will derive from use of the offering.
The extent to which the offering is differentiated from the competition.
The extent to which common introduction problems can be avoided such as lack of adherence to industry standards, unavailability of materials, poor quality control, regulatory problems and the inability to explain the benefits of the offering to the prospect.
The potential for product obsolescence as affected by the enterprise's commitment to product development, the product's proximity to physical limits, the ongoing potential for product improvements, the ability of the enterprise to react to technological change and the likelihood of substitute solutions to the prospect's needs.
Impact on customer's business as measured by costs of trying out your offering, how quickly the customer can realize a return from their investment in your offering, how disruptive the introduction of your offering is to the customer's operations and the costs to switch to your offering.
The complexity of your offering as measured by the existence of standard interfaces, difficulty of installation, number of options, requirement for support devices, training and technical support and the requirement for complementary product interface.

The Competition
It is essential to know who the competition is and to understand their strengths and weaknesses. Factors to consider include:

Each of your competitor's experience, staying power, market position, strength, predictability and freedom to abandon the market must be evaluated.

Your Enterprise
An honest appraisal of the strength of your enterprise is a critical factor in the development of your strategy. Factors to consider include:

Enterprise capacity to be leader in low-cost production considering cost control infrastructure, cost of materials, economies of scale, management skills, availability of personnel and compatibility of manufacturing resources with offering requirements.
The enterprise's ability to construct entry barriers to competition such as the creation of high switching costs, gaining substantial benefit from economies of scale, exclusive access to or clogging of distribution channels and the ability to clearly differentiate your offering from the competition.
The enterprise's ability to sustain its market position is determined by the potential for competitive imitation, resistance to inflation, ability to maintain high prices, the potential for product obsolescence and the 'learning curve' faced by the prospect.
The prominence of the enterprise.
The competence of the management team.
The adequacy of the enterprise's infrastructure in terms of organization, recruiting capabilities, employee benefit programs, customer support facilities and logistical capabilities.
The freedom of the enterprise to make critical business decisions without undue influence from distributors, suppliers, unions, creditors, investors and other outside influences.
Freedom from having to deal with legal problems.

Development
A review of the strength and viability of the product/service development program will heavily influence the direction of your strategy. Factors to consider include:

The strength of the development manager including experience with personnel management, current and new technologies, complex projects and the equipment and tools used by the development personnel.
Personnel who understand the relevant technologies and are able to perform the tasks necessary to meet the development objectives.
Adequacy and appropriateness of the development tools and equipment.
The necessary funding to achieve the development objectives.
Design specifications that are manageable.

Production
You should review your enterprise's production organization with respect to their ability to cost effectively produce products/services. The following factors are considered:

The strength of production manager including experience with personnel management, current and new technologies, complex projects and the equipment and tools used by the manufacturing personnel.
Economies of scale allowing the sharing of operations, sharing of production and the potential for vertical integration.
Technology and production experience
The necessary production personnel skill level and/or the enterprise's ability to hire or train qualified personnel.
The ability of the enterprise to limit suppliers bargaining power.
The ability of the enterprise to control the quality of raw materials and production.
Adequate access to raw materials and sub-assembly production.

Marketing/Sales
The marketing and sales organization is analyzed for its strengths and current activities. Factors to consider include:

Experience of Marketing/Sales manager including contacts in the industry (prospects, distribution channels, media), familiarity with advertising and promotion, personal selling capabilities, general management skills and a history of profit and loss responsibilities.
The ability to generate good publicity as measured by past successes, contacts in the press, quality of promotional literature and market education capabilities.
Sales promotion techniques such as trade allowances, special pricing and contests.
The effectiveness of your distribution channels as measured by history of relations, the extent of channel utilization, financial stability, reputation, access to prospects and familiarity with your offering.
Advertising capabilities including media relationships, advertising budget, past experience, how easily the offering can be advertised and commitment to advertising.
Sales capabilities including availability of personnel, quality of personnel, location of sales outlets, ability to generate sales leads, relationship with distributors, ability to demonstrate the benefits of the offering and necessary sales support capabilities.
The appropriateness of the pricing of your offering as it relates to competition, price sensitivity of the prospect, prospect's familiarity with the offering and the current market life cycle stage.

Customer Services
The strength of the customer service function has a strong influence on long term market success. Factors to consider include:

Experience of the Customer Service manager in the areas of similar offerings and customers, quality control, technical support, product documentation, sales and marketing.
The availability of technical support to service your offering after it is purchased.
One or more factors that causes your customer support to stand out as unique in the eyes of the customer.
Accessibility of service outlets for the customer.
The reputation of the enterprise for customer service.

Conclusion
After defining your strategy you must use the information you have gathered to determine whether this strategy will achieve the objective of making your enterprise competitive in the marketplace. Two of the most important assessments are described below.
Cost To Enter Market
This is an analysis of the factors that will influence your costs to achieve significant market penetration. Factors to consider include:

Your marketing strength.
Access to low cost materials and effective production.
The experience of your enterprise.
The complexity of introduction problems such as lack of adherence to industry standards, unavailability of materials, poor quality control, regulatory problems and the inability to explain the benefits of the offering to the prospect.
The effectiveness of the enterprise infrastructure in terms of organization, recruiting capabilities, employee benefit programs, customer support facilities and logistical capabilities.
Distribution effectiveness as measured by history of relations, the extent of channel utilization, financial stability, reputation, access to prospects and familiarity with your offering.
Technological efforts likely to be successful as measured by the strength of the development organization.
The availability of adequate operating capital.

Profit Potential
This is an analysis of the factors that could influence the potential for generating and maintaining profits over an extended period. Factors to consider include:

Potential for competitive retaliation is based on the competitors resources, commitment to the industry, cash position and predictability as well as the status of the market.
The enterprise's ability to construct entry barriers to competition such as the creation of high switching costs, gaining substantial benefit from economies of scale, exclusive access to or clogging of distribution channels and the ability to clearly differentiate your offering from the competition.
The intensity of competitive rivalry as measured by the size and number of competitors, limitations on exiting the market, differentiation between offerings and the rapidity of market growth.
The ability of the enterprise to limit suppliers bargaining power.
The enterprise's ability to sustain its market position is determined by the potential for competitive imitation, resistance to inflation, ability to maintain high prices, the potential for product obsolescence and the 'learning curve' faced by the prospect.
The availability of substitute solutions to the prospect's need.
The prospect's bargaining power as measured by the ease of switching to an alternative, the cost to look at alternatives, the cost of the offering, the differentiation between your offering and the competition and the degree of the prospect's need.
Market potential for new products considering market growth, prospect's need for your offering, the benefits of the offering, the number of barriers to immediate use, the credibility of the offering and the impact on the customer's daily operations.
The freedom of the enterprise to make critical business decisions without undue influence from distributors, suppliers, unions, investors and other outside influences.

via: businessplan

Dubai Economy

noreply@blogger.com (seo webdesigner) — Thu, 27 Aug 2009 20:36:00 +0000

Dubai Economy
Dubai has changed dramatically over the last three decades, becoming a major business centre with a more dynamic and diversified economy. Dubai enjoys a strategic location and serves as the biggest re-exporting centre in the Middle East.

Its low logistical and operational costs and excellent infrastructure, international outlook and liberal government policies are attracting investors in a big way. Activities such as trade, transport, tourism, industry and finance have shown steady growth and helped the economy to achieve a high degree of expansion and diversification.

In order to assist those interested in obtaining further details about the Dubai economy , pages have been provided below with the latest data for key socio-economic indicators. They contain tables on Dubai Economic Statistics extracted from the "Dubai Socio-Economic Development Indicators" including a wide range of current data on the Dubai economy and society. Also, other pages contain the Quarterly Indicators as well as information about Investment in Dubai, industrial projects and commercial/ business centers.

Why Choose Dubai As An Investment Location?

The Dubai economy enjoys a competitive combination of cost, market and environmental advantages that create an ideal and attractive investment climate for local and expatriate businesses alike. In fact, these advantages not only rank Dubai as the Arabian Gulf’s leading multi-purpose business center and regional hub city, but they place it at the forefront of the globe’s, dynamic and emerging market economies.
Dubai, with its ancient commercial and seafaring traditions, has long been recognized as the Middle East region’s leading trading hub and has emerged as its key re-export center. In more recent years, the Emirate has become a major venue for a number of growing, profitable industries and activities:

• Meetings, conferences, exhibitions
• Tourism
• Corporate regional headquarters
• Regional transport, distribution and logistics center
• Banking, finance and insurance
• Business and industrial consulting
• Information and Communications Technology
• Light and medium manufacturing

This all became possible due to Dubai’s warm, welcoming people, world class facilities and infrastructure and farsighted, open and liberal economic policies. Finally, committed to a progressive vision of itself, keen to diversify its economy and diminish its reliance upon shrinking oil revenues, Dubai has begun to develop into the Arabian Gulf’s premier international business center. Consider the factors that contribute to this ongoing success story.

Dubai’s Key Advantages

I. Strategic Location: Dubai is a time zone bridge between the Far East and Europe on the East-West axis and the CIS and Africa on the north-south axis. It is a gateway to a market that can be characterized as:
• Large - well established trading links exist with the greater than 1.5 billion people in the neighboring region covering the Gulf, Middle East/Eastern Mediterranean, CIS, Central Asia, Africa and the Asian sub-continent;
• Growing - Dubai’s total international trade has grown on average by over 11% per year since 1988 and regional economic growth and liberalization should boost demand further;
• Prosperous - a buoyant local economy strategically located in the midst of one of the world’s richest regions and well endowed with ample supplies of cheap energy and primary aluminum; also adjacent to major regional suppliers of vital agro-export commodities;
• Diversified - varied and significant import requirements generate opportunities for product suppliers and re-exporters;
• Accessible - served by over 120 shipping lines and linked via 85 airlines to over 130 global destinations;
• Open - no exchange controls, quotas or trade barriers.

II. Political And Economic Stability: Dubai is part of the UAE which is a low-crime and politically-stable country. Also, the UAE enjoys financial and monetary stability. Its well-developed, sophisticated banking system features extensive credit facilities and ample liquidity. The Emirate’s emerging capital markets are built on a basis of leading-edge technologies and sound regulatory systems. The government has a long, consistent commitment to pro-business, liberal economic policies including the protection of intellectual property rights. The UAE benefits from stable and harmonious industrial relations. Finally, there is a well defined, sound legal framework for business and a clear set of ownership rules. Foreigners are permitted ownership rights of up to 49% for limited liability companies established within the Emirate of Dubai and up to 100% for professional companies, branches and representative offices of foreign companies and free zones enterprises. All of these factors reflect positively in Dubai’s being assigned an investment grade rating for fixed income investment by Moody’s Investors Service.

III. Open And Free Economic System: Dubai’s economy has been kept open and free to attract investors and business. Government control and regulation of private sector activities has been kept to a minimum. There are no direct taxes on corporate profits or personal income (except for oil companies that pay a flat rate of 55% and branches of foreign banks that pay a flat rate of 20% on net profit generated within Dubai). Customs duties are low at 4% with many exemptions, 100% repatriation of capital and profits is permitted, there are no foreign exchange controls, trade quotas or barriers and a stable exchange rate exists between the US Dollar and the UAE Dirham (US$1.00=AED 3.678). Liberal visa policies permit easy importation of expatriate labor of various skill levels from almost all over the world.

IV. World Class Infrastructure and Service Sector: Dubai’s deliberate policy of investing heavily in transport, telecommunications, energy and industrial infrastructure has enabled it to have one of the best infrastructure facilities in the world; it also contributed significantly both to its ongoing prosperity and attractiveness to international business. The Emirate features a network of seven industrial areas, one business park and three highly successful, specialized free zones of international distinction, two world class seaports, a major international airport and cargo village, a modern highway network, state-of-the-art telecommunications and reliable power and utilities all of which deliver efficiency, flexibility, reliability, reasonable cost and size.Complementing its world class infrastructure is a sophisticated service sector that features leading regional and international freight forwarders, shipping companies, insurers plus major international hotels, banks and financial service firms, lawyers, accounting firms, consultants, advertising agencies, top international exhibition and conference facilities, high quality office and residential accommodation, first class hospitals, schools, shopping centers and recreational facilities. Free Zones Websites: Dubai Airport Free Zone Jebel Ali Free Zone Dubai Media City Dubai Internet City

V. Competitive Cost Structure: International companies setting up in Dubai can obtain significant cost advantages not generally available internationally. The major factors are:

• No foreign exchange controls,
• No trade barriers or quotas,
• Competitive import duties (4% with many exemptions),
• Competitive labor costs – labor force is multi-lingual and skilled,
• Competitive energy costs,
• Competitive real estate costs,
• Competitive financing costs and high levels of liquidity,
• No corporate profit or personal income taxes (except for oil companies and branches of foreign banks). You can refer to the tables under the "Cost of Doing Business" section.

VI. High Quality of Life, Excellent Living Conditions: Dubai’s private sector has invested heavily in real estate such as hotels, residential and commercial properties, recreational and leisure facilities. In addition, a number of factors have contributed to the Emirate’s high quality of life and superior living conditions making it a model location for many to emulate. Those factors include excellent infrastructural facilities, low crime, clean environment, tolerance and cultural diversity, cosmopolitan life style, modern public administration, availability of a wide range of consumer goods and services, mild winters and clean, palm fringed beaches.

VII. Strong Local Commercial Tradition and Wide Choice of Potential Business Partners: The local business class has a long tradition of trading activity and wide exposure to international business practices and state-of-the-art technologies. Local entrepreneurs have already gained successful experience with international partnerships in franchising, licensing, joint ventures, etc, in various sectors of the economy.

VIII. Extensive Foreign Trade Network & Major Achievements in Export and Re-Export Performance: Dubai boasts an extensive foreign trade network extending to 179 states thus offering the investor an extensive choice of potential global marketing outlets for a diverse portfolio of goods and services. As a member of the UAE federation, Dubai is also part of the world’s third-largest export and re-export center after Hong Kong and Singapore.

IX. Rapidly Developing Manufacturing Sector Producing a Wide Range of High Quality, Competitive Export Products: Major gains have already been made in the profitable manufacture and export of aluminum ingots, fabricated metal products, textiles and ready-made garments, gold and jewelry, prepared foodstuffs, consumer electronics, refined petroleum, chemical and non-metallic mineral products. Supportive commercial, industrial, political and economic factors are currently in place that make possible the extension of these gains to other manufacturing sub-sectors.

Intro to Consumer Behavior

noreply@blogger.com (seo webdesigner) — Wed, 26 Aug 2009 19:47:00 +0000

Consumer behavior--what is it?
Applications
Consumer Behavior and Strategy
Elements of strategy
Consumer Analysis
Consumer behavior outcomes

Consumer Psychology in a Recession

noreply@blogger.com (seo webdesigner) — Wed, 01 Apr 2009 20:37:00 +0000

An interview with John Quelch, Professor, Harvard Business School. In a tough economy, companies can succeed if they understand their customers' evolving consumption patterns and fine-tune their ma...

The Coming Economic Collapse

noreply@blogger.com (seo webdesigner) — Sat, 24 Jan 2009 17:13:00 +0000

Is there a coming economic collapse? When will this happen? How will this affect us?

Many wonder what the future is for the global economy. Over the last few years economists have been expressing increasing concerns about the direction the global economy is going in, and the possibility of a worldwide depression. They have been warning about the growing global imbalances in the world economy, and the consequences if not corrected.

Yet we live in a time where the global economy is booming, especially in the Anglo-Saxon and Asian economies. Consumer spending is up. House prices around the world have risen dramatically. Unemployment remains low. The global economy has experienced the longest period of sustained economic growth in recent history. The US$ continues to remain stable.

Why has the global economy experienced such strong growth? Will this growth continue? What does the future hold?

Interestingly, some of the stimulus for the growth the global economy has recently experienced is a result of decisions made following Sept 11th. Already, prior to Sept 11th the US Federal Reserve was maintaining a loose fiscal policy in an effort to stimulate economic growth in the US economy, which had slowed down following years of strong growth during the Clinton administration. Then along came Sept 11th, which threatened to destabilize the American banking system. To prevent this happening, the Fed injected billions into the banking system to provide sufficient liquidity to prevent a run on the dollar and the banks.

Meanwhile, Japan since the late Eighties had been wrestling with a stagnant economy, deflation, and a rising currency. The Bank of Japan was already printing money prior to Sept 11th
to support its own debt-ridden banks and to stimulate the domestic economy, and has continued with this policy ever since: printing yen to purchase American dollars. Japan has been able avoid inflation through having high domestic savings, and by investing heavily outside the country. This has kept the Yen from appreciating against the dollar, enabled Japan's export sector to remain competitive, and kept interest rates at near zero. As much of Japan's external investments have been in the USA, it has resulted in Japan holding assets worth trillions of US dollars, many of which are invested in US Treasury Bonds and Mutual Funds.

Printing money to solve a nation's economic problem can never be sustained. Eventually, it will lead to the debasing of a nations currency and run-away inflation. Yet for a short period, it can create an artificial prosperity, deluding the masses into believing this new prosperity can be sustained. The long-term consequences of inflating their money supply will spell disaster for America and Japan, and have dire consequences for the global economy.

The rapid increase in the money supply of US dollars is the number one reason America's wealth has shifted from the US to Asia and Europe. In particular, China has benefited enormously from the inflow of dollars which has financed the rapid growth of its economy, providing the capital to develop their competitive export sector. The Asian economies high rates of personal savings have financed their domestic growth as well as finance the US deficits. This has continued to allow the USA to maintain its privileged position of retaining the $US dollar as the world's reserve currency; and allowing it to retain its global military and political dominance.

It has become popular by American politicians to blame China for the decline in America's production base. This is totally unfair, and shows both their ignorance and a failure to accept responsibility by the American leadership. Actually, it is through China being able to supply America with cheap consumer goods, and lend the capital to purchase these goods which has allowed the US to contain inflation, benefiting the American consumer. Germany, which is now the world's number one export nation and which has a wage structure higher than the US, has had to cope with a rising currency, but has still been able to expand its exports between 10-20% per annum, and continues to have an expanding large trade and current account surpluses. German manufactures also have to compete with their Asian competitors just as those from America, yet have a 160.5 billion trade surplus.

The reason why America has such large trade and current deficits is because of the expansion of its money supply, without the corresponding expansion of its productive capacity to produce the wealth to sustain the increase in money in circulation. The lack of domestic savings to provide the investment capital into new manufacturing capacity is also a contributing factor. The cost of maintaining a large military establishment and the decline in the social fabric of society are also significant contributing factors, both of which consume resources that should be invested in the manufacturing sector for a nation to remain internationally competitive.

So it would appear in the short-term, the loose monetary policies of America and Japan appear to have benefited everyone. Expanding the money supply has provided the capital to support the growth of the expanding Asian economies, especially those of India and China. Inflation (if you exclude property) has been contained (normally a consequences of a loose money policy) because of China and India being able to produce consumer goods and services cheaply for the global markets, preventing manufactures in the Anglo-Saxon economies from raising their prices.

The increase in the supply of US dollars has been able to finance the growth in global trade. It has also provided the liquidity to finance the trade in oil, even as its price continues to escalate.

But what are the long-term consequences of such fiscal policies?

1 The rise in property prices. The value of property is one of the first commodities to rise in value when the supply of money increases rapidly. In the short-term this makes property owners believe they have suddenly struck it rich, but in reality it is the decline in the value of their money. It also places an increased financial burden upon the population, who end up paying an increased percentage of their income on housing, unless their incomes also rise. The burden of servicing this new mortgage debt is riskier today, as much of the capital to finance the growth in mortgage debt has come from short-term borrowings through the banking system from Asian investors, with the interest being remitted back to these lenders, rather than retained in the local economy. The real danger is that if the Asian investors withdraw their capital from the Anglo-Saxon nations, it would cause a collapse of the property sector and threaten the survival of their banking system.

2 The shift of the productive manufacturing base from the Anglo-Saxon nations to low-cost Asian economies. The outflow of printed dollars from the USA to Asia has provided the capital to allow these countries to rapidly expand their manufacturing sector, and under-cut the higher cost Anglo-Saxon producers. Yet the increase of the money supply has allowed the Anglo-Saxon consumer to still have retained their ability to purchase consumer goods manufactured from Asia, often financed through borrowing from the same Asians, even as their income from the productive sector declines.

3 The increase in the money supply has resulted in the rapid growth in consummation of non-renewable resources in newly emerging economies in both the Anglo-Saxon countries and especially China and India. This growth in demand for these essential commodities can not be sustained. Without the supply of cheap energy our standard of living will not be maintained. Eventually the availability of energy will become limited to only those nations with currencies strong enough to purchase them.

4 Damage to the global environment the increase of the money supply has stimulated economic growth to where the planet can no longer cope with the damage done to the environment. For the sake of short-term prosperity, we are destroying the ability of the planet to sustain life.

5 It has enabled the American, Japanese and UK Governments to finance their enormous budget deficits though borrowing the money they have printed. In the case of America and Britain is that they are also borrowing increasingly from nations that were their former enemies. In all these countries the national debt has grown to such an extent, that a tightening of the money supply resulting in higher interest rates, could increase their budget deficits to such an extent it would bankrupt them.

6 Funding of wars America has been able to finance its wars in the Middle East on borrowed money printed money now controlled from Asia. This has left the American economy extremely vulnerable and open to collapse if this money is with-drawn for geo-political reasons. Amazingly, the US does not even include the war in Iraq or Afghanistan in its budget.

7 Increasing the money supply to the extent that has happened, will eventually lead to the erosion in the value of the purchasing power of the currency, and a lack of confidence in its value.

~~~~~~~~~~~~~~~~~~~

But what of the long-term consequences for the world if there is a collapse of existing economic system? What will be the future to the global economy of the loose money policies of the last few years? Does economic disaster now loom over the horizon? What will trigger off a lack of confidence by America's creditors in continuing to invest in the USA and support the $US?

There could be any-one of a number of factors that would lead to international confidence in the American economy and the US dollar such as:

* 1 Switch from accepting payment in oil from dollars to Euro by OPEC.
* 2 A major national disaster, such as an earthquake in Tokyo, a cyclone in America, a terrorist attack.
* 3 A military defeat in Iraq.
* 4 A further blow-out in the US twin deficits.
* 5 Rising interest rates in other parts of the world.
* 6 Lack of confidence in America's ability to service its debts.
* 7 Major economic calamities in the US, such as run on the banking system, fall in the share-market, or a collapse of major corporations.
* 8 A major disease epidemic, such as bird flu.

The world has experienced some of the greatest shift of wealth in recent history, from the Anglo-Saxon nations who have dominated the global economy for the last 200 years, to Asia and Continental Europe. This shift in wealth will shortly result in the economic collapse of the Anglo-Saxon nations their money will become worthless, and their economies will disintegrate into anarchy and poverty. This collapse will also have disastrous consequences to the Asian economies, which have become depended on exporting to the North American market to support their domestic growth. While the Asian economies will be severely affected from the collapse of the Anglo-Saxon economies, they will survive and recover.

The region in the world which will fill the vacuum from the coming collapse of the $US will be the Eurozone. The Euro will replace the dollar as the world's reserve currency, propelling the Eurozone nations into the most influential global economic power. To support filling the monetary vacuum following the collapse of the dollar, Europeans will have to resolve their constitutional differences and form a political union. Those nations that accept the EU Constitution will form a United States of Europe, but it is unlikely that all existing EU members will agree to be a part of such a political union.

The future for the Anglo-Saxon people looks bleak. The sudden withdrawal of overseas investment will see their economies go into free-fall. Their currencies will become worthless. Property prices will collapse. Businesses will fail. Disease will become wide-spread, made worse without the drugs to control that many that is now depended upon. Farmers without the money to purchase fuel and chemicals will no longer have the ability to mass produce food. Starvation and anarchy will prevail. There will be little governments can do to save their people from death and destruction.

Meanwhile, America's over-stretched military will no longer have the financial resources to continue its futile Middle East wars, and to sustain its bases that circumnavigate the globe, will be forced to with-draw back to the USA.

Few can comprehend of the fate that lies ahead for the Anglo-Saxon group of nations. It will be a time of human suffering greater than ever experienced. Two thirds will die those who survive will be taken into slavery. After 200 years of global dominance, their defeat will result in some of the most dreadful suffering mankind has experienced. Yet all this could be avoided if they had not rejected the Law of God. It is only by returning to following God's Law and the teachings of Jesus Christ that this looming disaster can be avoided.

source:rense

The world of FMCG-UNILEVER

noreply@blogger.com (seo webdesigner) — Mon, 07 Apr 2008 08:13:00 +0000

The world of FMCG

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Around the world people's lifestyles are changing fast. Advances in technology, new ways of working and the many social and economic changes affecting family and home life are just some of the reasons why.

->Speed is key

In the Fast Moving Consumer Goods (FMCG) sector, we have to act fast to translate ideas into new products. Our job is to identify how lives are changing so that we can create products that people enjoy, trust and use as part of their daily lives. Advertising and marketing have a vital role to play and we're constantly exploring new ways to use developing business channels, like the Internet.

We have deep roots in many countries and are actively involved in the societies in which we operate. Our companies are predominately run by local people who understand the needs and values of their communities. This helps us develop products that play a useful role in everyday life and help people look and feel good, whatever their tastes, culture or nationality. Many of our brands have international appeal while others are leaders in local markets.

Being part of our team means helping create products that 150 million people reach for every day. And it means having the resources and support to make an impact on a global and local scale.

Unilever at a glance

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Our mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good, and get more out of life.

Key facts

In 2005 our worldwide turnover was €40 billion

We employ 179 000 people in around 100 countries worldwide

Every day, 160 million people choose our brands to feed their families and to clean themselves and their homes

Over half of our sales are generated by our twelve €1bn brands: Knorr, Flora/Becel, Hellmann's, Lipton, Omo, Surf, Lux, Dove, Blue Band/Rama, Sunsilk, Rexona and our Heart ice cream brand

We are the global market leader in all the Food categories in which we operate:

Savoury and Dressings, Spreads, Weight Management, Tea, and Ice Cream

We are also global market leader in Skin and Deodorants, and have very strong positions in other Home and Personal Care categories

By 2006, we invested around €1 billion in research and development, for example at the Unilever Food and Health Research Institute, which has a worldwide reputation for scientific excellence

In 2005 we spent over €78 million on a wide range of community projects

We have 317 manufacturing sites across six continents, all of which strive for improved performance on safety, efficiency, quality and environmental impacts, working to global Unilever standards and management systems

We invested €5 billion in advertising and promotions in 2006

via: unilever

Public Relations - A Career Profile

noreply@blogger.com (seo webdesigner) — Wed, 26 Mar 2008 18:30:00 +0000

A Day in the Life

A public relations specialist is an image shaper. Their job is to generate positive publicity for their client and enhance their reputation. The client can be a company, an individual or a government. In the government PR people are called press secretaries. They keep the public informed about the activity of government agencies, explain policy, and manage political campaigns. Public relations people working for a company may handle consumer relations, or the relationship between parts of the company such as the managers and employees, or different branch offices. Though the job often involves the dissemination of information, some view this cynically as "spin doctoring." There is an old saying about PR that 'Advertisers lie about the product. Public relations people lie about the company.' Regardless, the successful PR person must be a good communicator-in print, in person and on the phone. They cultivate and maintain contacts with journalists, set up speaking engagements, write executive speeches and annual reports, respond to inquiries and speak directly to the press on behalf of their client. They must keep lines of communication open between the many groups affected by a company's product and policies: consumers, shareholders, employees, and the managing body. Public relations people also write press releases and may be involved in producing sales or marketing material. Public relations is a good career for the generalist. A PR person must keep abreast of current events and be well versed in pop culture to understand what stories will get the publics' attention. It takes a combination of analysis and creative problem solving to get your client in the public eye. The content of the work is constantly changing and unforeseen challenges arise every day. As one public relations person explained, "In addition to the standard duties, a PR person might have to shepherd an alcoholic and half-mad (but brilliant) author through a twenty-city interview tour or try to put a warm 'n fuzzy spin on the company's latest oil-spill."

Paying Your Dues

Though some colleges offer a degree in public relations, most industry professionals agree it's unnecessary. Since public relations requires familiarity with a wide variety of topics, a broad education is the best preparation. Any major that teaches you how to read and write intelligently will lay good foundation for a career in public relations. Or, as one PR person put it "if you can write a thesis on Dante, you should be able to write a press release." Internships are a common way to get some practical experience and break into the field.

Associated Careers

Because public relations people work so closely with the media there is often a great deal of exchange between these fields. Many PR people become journalists to exercise more creativity; a number of journalists turn to public relations for better money. PR people also often go into marketing, particularly at the more senior levels.

Strategies for Expanding Your Email Programs

noreply@blogger.com (seo webdesigner) — Wed, 19 Mar 2008 07:44:00 +0000

In order to survive, any business needs to expand and diversify. In email marketing, increasing the frequency of your mailings can be a tricky proposition, especially if you start peppering your subscriber with more messages on different topics than they opted in for at the start.
You're probably thinking, "What's the big deal here?" You already have permission to mail to your current subscribers. So what's the harm in increasing frequency by adding a newsletter, sales flyer or new-product info? After all, you need to expand your program if you want to build your business, and you know these people already want to hear from you.
It's not that simple, though.

Welcome to the place where the rock of your email program goals meets the hard place of subscriber expectations and preferences. The typical email marketing program has a built-in tension: You need to get as much use out of your subscriber database as possible in order to get the most return on member acquisition costs. But you risk irritating your current subscribers, who didn't necessarily sign up for your new information, and prompting a flood of unsubscribes or spam complaints or just indifference.
Your subscribers’ permission is the most valuable asset that you have – and the easiest to abuse. Remember these three principles when you think about increasing how frequently you email your list with new message categories:

1. "Interest" and "permission" are not interchangeable.

Sure, you have no better audience to market your new email messages than the database of people who gave you permission to email them. That doesn't automatically mean that they want to receive anything else from you for which they didn't specifically sign up. Never assume you have permission to email them anything they didn't request.
2. Each message must deliver high value.
If you merely want to increase frequency, rather than introduce a new product or email message, do you have enough content to make each message valuable to subscribers? Moving from a bi-weekly to a weekly message means you will need to have twice as much content so that subscribers don't assume they're receiving duplicate mailings several times a week.
3. Subscribers still retain the control.
Relevance is the holy grail of targeted marketing. If you can't send out highly targeted mailings because you don't have the database capability to segment your list, you can make up for it somewhat by adding more specialized email publications to your current offerings.What you can't do is impose your will on subscribers. You can lead them to your new content by making it as enticing as possible, but you shouldn't send it to them without permission first.
The trick is to introduce your expanded marketing program to your current customers in such a way that you don't violate their expectations or your original permission grant and respect their interests.

The Right or Wrong Way?

Here are two real-life examples where online companies expanded their email product offerings. One is the wrong way; the other is the right way. Can you tell which is which?
Example A: Floral Retailer
An online floral retailer issues a weekly sales newsletter promoting special values on cut flowers and arrangements, as well as one-off sales flyers near seasonal events and special occasions. After the company acquires a mail-order gourmet food business, it begins sending out a separate weekly sales newsletter to its floral database but under the new business' brand name.
Example B: Cable-TV network
This entertainment company specializing in food and lifestyle shows publishes a weekly email newsletter promoting show content, hosts and special guests. When the Christmas/holiday baking season approaches, the newsletter includes a special promotion urging subscribers to sign up separately for a 12-day series sharing one cookie recipe each day. This secondary mailing ceases after the 12th recipe is sent out.
Why is B a great example of adding new content and increasing frequency the right way while A

comes close to spamming its own subscribers?

1. It promoted the new offering in existing newsletter space, whereas the floral retailer simply began mailing the new newsletter to its existing database and assumed permission and interest.

2. It left the opt-in decision up to the individual subscriber. The floral retailer forced subscribers who didn't request the additional email and who didn't want it to unsubscribe. Although the floral retailer followed the letter of the CAN-SPAM law, it forced uninterested recipients to opt out. The cable-TV network example gave their readers the choice up-front, and delivered the new content only to those who requested it.

3. The cookie series was relevant to the original newsletter's content. Flowers and gourmet food might occupy the same general niche in the consumable-product department, but they don't have that direct tie-in or association that you have between general food news and specific cookie recipes. Don’t assume that consumers will be interested in a related area – ask and give them the option to opt in.

Strategies for Increasing Subscriber Contacts

As these examples show, there are right and wrong ways to expand your email program. Consider these strategies when developing your game-plan:

1. Calculate the cost of increased frequency

Technically, we should file this discussion under "increasing frequency," because at the heart of it, that's what you'll be doing. You might think each kind of email message belongs in a different category but your subscribers might not distinguish between a regular weekly newsletter and an on-the-fly solo offer. To your subscribers, each email you send comes from you, regarding of the category. If you are simply sending them more email, it may be more than they wanted or requested at sign-up.
You can find more strategies and recommendations, as well as several formulas that can help you assess whether you would gain enough in sales, registrations or other relevant metrics to cover the costs of more frequent mailings, in Loren McDonald’s "Calculating the Cost of Increased E-Mail Frequency," parts one and two.

2. Promote from within first.

You can safely upsell existing subscribers using three message channels already open to you. The fourth is a little trickier but can pay off if you do it right.

1. Regularly scheduled mailings

When you need to upsell your current subscribers, always start by promoting the message category in emails they already receive. In the cable-TV network example above, the limited-run newsletter was advertised within the existing newsletter, where subscribers were given a separate link to sign up.

2. Transactional messages

Many marketers fail to mine gold from transactional messages, which come as close to guaranteed opens as you'll get in email. If buyers fail to sign up for your email program during the buying process, take advantage of the transactional email you send out to confirm the purchase to promote your newsletter.

3. Welcome emails

Because new subscribers are usually the most enthusiastic, you should capitalize on eagerness to read your content by listing in your welcome letter other email offerings that may not have been chosen at sign-up. Keep it brief by focusing on the benefit, and link directly to the subscriber's preference page where they can edit their sign-up choices.

4. One-off sample issues

This is where upselling can get tricky. Any food marketer will tell you that sampling a new product in the supermarket is the best way to drive sales. Email is different, though. If you think sending a sample issue will get you the most attention, go for it. But, follow these guidelines to

avoid even a whiff of in-house spamming:

Test the sample first on a relevant segment of your list, such as recent buyers, new subscribers, or subscribers who have not responded to mailings in a certain time period.
State clearly near the top that the mailing is a sample only and that subscribers will continue to receive it only if they sign up for it, and link to the preference page.

Final Thoughts

To grow your business or your email program – and to appeal to as many subscribers across the spectrum as possible – you'll need to branch out and diversify your email holdings. You'll find your greatest success when you let subscribers retain control over their inboxes and promote the mailings using the channel for which you already have permission.
via:emaillabs

Marketing In Your Business

noreply@blogger.com (seo webdesigner) — Wed, 19 Mar 2008 07:31:00 +0000

Well another question came in by email and I figured I’d give my advice on it, actually it is 3 separate questions and in reality there is no right or wrong answer in it, there are only best assumptions made by organizations so here we go.

#1) How does Marketing help the organization to meet its organizational goals?

There are so many reasons this is going to be a decent size question to address. It could also help if I knew what type of marketing but basically the whole goal of marketing in an organization is to determine what potential customers want and then build or promote a product or service around it.
However two major factors of marketing are recruiting new customers and the expansion of relationships with existing customers. Without marketing your business wouldn’t have any customers, no one would know about you and your brand would never get recognized.
So in my response the answer to how important marketing is to an organization is huge, without marketing you wouldn’t know what your target audience is, you wouldn’t be able to acquire new customers or hold on to existing ones, your new products or your brand would never get recognized because marketing handles TV, Radio, Online, and it simply puts the products in front of the people who want them.

#2) When should Strategic Planning be done in an organization?

This question is simple and it should be done before anything else considering Strategic Planning is described as an organizations process of laying out its strategy and making decisions on the resources required to pull it off.
Basically Strategic Planning can be answered in three separate questions those questions are as follows.

1. What do we do?
2. For whom do we do it?
3. How do we excel?

However the third question is more interpreted as how can we beat or avoid competition? Without a solid plan laid out the separate sections of an organization wouldn’t be able to succeed, no one would know when to tell the marketing department to do there job, they wouldn’t know what products to get ready for, they would be running blind in the dark, so strategic planning in any organization is one of the first things it will do and some organizations even lay out a 20 year plan but most are in the range of 2 to 3 years.

Why a Mission Statement is needed for an organization?

Well this can be answered as what is a mission statement and as you may or may not know a mission statement is an organizations brief summary of its goal but some companies refer to there mission statement as there advertising slogan.
The mission statement is needed to show each department what the final goal of the company is, all this is laid out in detail in the strategic planning area but once completed an overall goal is just set out an example of a mission statement would be as follows.
Organize the world’s information and make it universally accessible and useful. Which believe it or not was Google’s mission statement at one time or the other. So I hope this gives you some more insight into what these three questions are and what they mean in an organization but keep in mind this is not even close to being a fully detailed list of each question.

Marketing Basics: A Thesis In Marketing Strategies, Three Strategies Can Produce 101 Marketing Strategies

noreply@blogger.com (seo webdesigner) — Sun, 16 Mar 2008 07:43:00 +0000

There are only three marketing strategies needed to grow a business: (1) Increase the number of customers (2) Increase the average transaction amount, and (3) Increase the frequency of repurchase. Every marketing strategy should be measured by it's ability to directly impact and improve upon each of these three factors. Increasing only one factor will produce linear business growth. Increasing all three factors will produce geometric business growth.

Marketing Strategy #1. Increase the number of customers

Increasing the total number of customers is the first step most business owners and managers take to grow their business. Losses can occur when inexperienced sales personnel are put in charge of designing and implementing a marketing program - investing corporate resources to find more customers. Executed correctly, basic marketing strategies cost efficiently produce new prospects who are ready, willing and able to buy products or services. The main purpose of a marketing strategy is to give sales personnel prospects to convert into paying customers. Rewarding existing customers for referring new ones is one easy step business owners can take to increase their total number of customers.

Marketing Strategy #2. Increase the average transaction amount

Owners and managers spend most of their time operating their business and searching for new customers. They often overlook the customers they see regularly. These repeat customers are usually taken for granted and left to conduct entire transactions without ever being asked if they would like to buy more product or service. Complacency, expecting customers to buy a minimum amount of product or service without ever being asked to buy more, can be the undoing of a business. This attitude can eventually cause customers to spend less money. Customers who arenï¿½t continuously offered compelling reasons to keep buying more of the same products and services from one business will look for new reasons to buy from another. Cross selling and upselling, systematically offering customers more value via additional products or services at the point of sale, are two simple steps business owners can take to increase their average transaction amount.

Marketing Strategy #3. Increase the frequency of repurchase

In an established business, an average customer purchasing pattern develops and (like the average transaction amount) is usually taken for granted and rarely improved upon. A customer's repeat business is earned by the business who gives the customer what they want. Without having basic marketing strategies or processes for consistently offering customers more of what they want, repeat business is earned less frequently. Frequently communicating news and offers to past and present customers via telephone or mail generally increases their frequency of repurchase and is one more step owners can take to grow their business.
via:marketingprinciples

Food Advertising Strategies

noreply@blogger.com (seo webdesigner) — Wed, 13 Feb 2008 11:53:00 +0000

Advertisers have many methods to try and get you to buy their products. Lots of times, what they are selling is a lifestyle, or an image, rather than the product. Here are some tricks of the trade.

Ideal Kids (or families) - always seem perfect. The kids are really hip looking, with the hottest fashions and haircuts, and toys. Ideal families are all attractive and pleasant looking - and everyone seems to get along! Ideal kids and families represent the types of people that kids watching the ad would like themselves or their families to be.

Family Fun - a product is shown as something that brings families together, or helps them have fun together; all it takes is for mum or dad to bring home the "right" food, and a ho-hum dinner turns into a family party.

Excitement - who could ever have imagined that food could be so much fun? One bite of a snack food and you're surfing in California, or soaring on your skateboard!

Star Power - your favorite sports star or celebrity is telling you that their product is the best! Kids listen, not realizing that the star is being paid to promote the product.

Bandwagon - join the crowd! Don't be left out! Everyone is buying the latest snack food: aren't you?

Scale - is when advertisers make a product look bigger or smaller than it actually is.

Put Downs - are when you put down your competition's product to make your own product seem better.

Facts and Figures - are when you use facts and statistics to enhance your product's credibility.

Repetition - advertisers hope that if you see a product, or hear it's name over and over again, you will be more likely to buy it. Sometimes the same commercial will be repeated
over and over again.

Heart Strings - are ads that draw you into a story and make you feel good, like the McDonalds commercial where the dad and his son are shoveling their driveway and the son treats his poor old dad to lunch at McDonalds when they are done.

Sounds Good - music and other sound effects add to the excitement of commercials, especially commercials aimed at kids. Those little jingles, that you just can't get out of your head, are another type of music used to make you think of a product. Have you ever noticed that the volume of commercials is higher than the sound for the program that follows?

Cartoon Characters- Tony the Tiger sells cereal and the Nestlés Quick Bunny sells chocolate milk. Cartoon like these make kids identify with products.

Weasel Words - by law, advertisers have to tell the truth, but sometimes, they use words that can mislead viewers. Look for words in commercials like: "Part of..." "The taste of real..." "Natural..." "New, better tasting....." "Because we care..." There are hundreds of these deceptive sayings - how many more can you think of?

Omission - is where advertisers don't give you the full story about their product. For example, when a Pop Tart claims to be "part" of a healthy breakfast, it doesn't mention that the breakfast might still be healthy whether this product is there or not.

Are You Cool Enough? - this is when advertisers try to convince you that if you don't use their products, you are a nerd. Usually advertisers do this by showing people that look uncool trying a product and then suddenly becoming hip looking and doing cool things.

Introduction to Decision Making

noreply@blogger.com (seo webdesigner) — Tue, 15 Jan 2008 15:29:00 +0000

We all make decisions of varying importance every day, so the idea that decision making can be a rather sophisticated art may at first seem strange. However, studies have shown that most people are much poorer at decision making than they think. An understanding of what decision making involves, together with a few effective techniques, will help produce better decisions.

What is Decision Making?

Some Definitions

A good place to start is with some standard definitions of decision making.

1. Decision making is the study of identifying and choosing alternatives based on the values and preferences of the decision maker. Making a decision implies that there are alternative choices to be considered, and in such a case we want not only to identify as many of these alternatives as possible but to choose the one that best fits with our goals, desires, lifestyle, values, and so on.

2. Decision making is the process of sufficiently reducing uncertainty and doubt about alternatives to allow a reasonable choice to be made from among them. This definition stresses the information gathering function of decision making. It should be noted here that uncertainty is reduced rather than eliminated. Very few decisions are made with absolute certainty because complete knowledge about all the alternatives is seldom possible. Thus, every decision involves a certain amount of risk.

Kinds of Decisions

There are several basic kinds of decisions.

1. Decisions whether. This is the yes/no, either/or decision that must be made before we proceed with the selection of an alternative. Should I buy a new TV? Should I travel this summer? Decisions whether are made by weighing reasons pro and con. The PMI technique discussed in the next chapter is ideal for this kind of decision.

It is important to be aware of having made a decision whether, since too often we assume that decision making begins with the identification of alternatives, assuming that the decision to choose one has already been made.

2. Decisions which. These decisions involve a choice of one or more alternatives from among a set of possibilities, the choice being based on how well each alternative measures up to a set of predefined criteria.

3. Contingent decisions. These are decisions that have been made but put on hold until some condition is met.

For example, I have decided to buy that car if I can get it for the right price; I have decided to write that article if I can work the necessary time for it into my schedule.

Most people carry around a set of already made, contingent decisions, just waiting for the right conditions or opportunity to arise. Time, energy, price, availability, opportunity, encouragement--all these factors can figure into the necessary conditions that need to be met before we can act on our decision.

Decision Making is a Recursive Process

A critical factor that decision theorists sometimes neglect to emphasize is that in spite of the way the process is presented on paper, decision making is a nonlinear, recursive process. That is, most decisions are made by moving back and forth between the choice of criteria (the characteristics we want our choice to meet) and the identification of alternatives (the possibilities we can choose from among). The alternatives available influence the criteria we apply to them, and similarly the criteria we establish influence the alternatives we will consider. Let's look at an example to clarify this.

Suppose someone wants to decide, Should I get married? Notice that this is a decision whether. A linear approach to decision making would be to decide this question by weighing the reasons pro and con (what are the benefits and drawbacks of getting married) and then to move to the next part of the process, the identification of criteria (supportive, easy going, competent, affectionate, etc.). Next, we would identify alternatives likely to have these criteria (Kathy, Jennifer, Michelle, Julie, etc.). Finally we would evaluate each alternative according to the criteria and choose the one that best meets the criteria. We would thus have a scheme like this:

decision whether ... select criteria ... identify alternatives ... make choice

However, the fact is that our decision whether to get married may really be a contingent decision. "I'll get married if I can find the right person." It will thus be influenced by the identification of alternatives, which we usually think of as a later step in the process. Similarly, suppose we have arrived at the "identify alternatives" stage of the process when we discover that Jennifer (one of the girls identified as an alternative) has a wonderful personality characteristic that we had not even thought of before, but that we now really want to have in a wife. We immediately add that characteristic to our criteria. Thus, the decision making process continues to move back and forth, around and around as it progresses in what will eventually be a linear direction but which in its actual workings is highly recursive.

The Components of Decision Making

The Decision Environment

Every decision is made within a decision environment, which is defined as the collection of information, alternatives, values, and preferences available at the time of the decision. An ideal decision environment would include all possible information, all of it accurate, and every possible alternative. However, both information and alternatives are constrained because time and effort to gain information or identify alternatives are limited. The time constraint simply means that a decision must be made by a certain time. The effort constraint reflects the limits of manpower, money, and priorities. (You wouldn't want to spend three hours and half a tank of gas trying to find the very best parking place at the mall.) Since decisions must be made within this constrained environment, we can say that the major challenge of decision making is uncertainty, and a major goal of decision analysis is to reduce uncertainty. We can almost never have all information needed to make a decision with certainty, so most decisions involve an undeniable amount of risk.

The fact that decisions must be made within a limiting decision environment suggests two things. First, it explains why hindsight is so much more accurate and better at making decisions that foresight. As time passes, the decision environment continues to grow and expand. New information and new alternatives appear--even after the decision must be made. Armed with new information after the fact, the hindsighters can many times look back and make a much better decision than the original maker, because the decision environment has continued to expand.

The second thing suggested by the decision-within-an-environment idea follows from the above point. Since the decision environment continues to expand as time passes, it is often advisable to put off making a decision until close to the deadline. Information and alternatives continue to grow as time passes, so to have access to the most information and to the best alternatives, do not make the decision too soon. Now, since we are dealing with real life, it is obvious that some alternatives might no longer be available if too much time passes; that is a tension we have to work with, a tension that helps to shape the cutoff date for the decision.

Delaying a decision as long as reasonably possible, then, provides three benefits:

1. The decision environment will be larger, providing more information. There is also time for more thoughtful and extended analysis.
2. New alternatives might be recognized or created.
3. The decision maker's preferences might change. With further thought, wisdom, maturity, you may decide not to buy car X and instead to buy car Y.

The Effects of Quantity on Decision Making

Many decision makers have a tendency to seek more information than required to make a good decision. When too much information is sought and obtained, one or more of several problems can arise. (1) A delay in the decision occurs because of the time required to obtain and process the extra information. This delay could impair the effectiveness of the decision or solution. (2) Information overload will occur. In this state, so much information is available that decision-making ability actually declines because the information in its entirety can no longer be managed or assessed appropriately. A major problem caused by information overload is forgetfulness. When too much information is taken into memory, especially in a short period of time, some of the information (often that received early on) will be pushed out.

The example is sometimes given of the man who spent the day at an information-heavy seminar. At the end of the day, he was not only unable to remember the first half of the seminar but he had also forgotten where he parked his car that morning.

(3) Selective use of the information will occur. That is, the decision maker will choose from among all the information available only those facts which support a preconceived solution or position. (4) Mental fatigue occurs, which results in slower work or poor quality work. (5) Decision fatigue occurs, where the decision maker tires of making decisions. Often the result is fast, careless decisions or even decision paralysis--no decisions are made at all.

The quantity of information that can be processed by the human mind is limited. Unless information is consciously selected, processing will be biased toward the first part of the information received. After that, the mind tires and begins to ignore subsequent information or forget earlier information.

Decision Streams

A common misconception about decision making is that decisions are made in isolation from each other: you gather information, explore alternatives, and make a choice, without regard to anything that has gone before. The fact is, decisions are made in a context of other decisions. The typical metaphor used to explain this is that of a stream. There is a stream of decisions surrounding a given decision, many decisions made earlier have led up to this decision and made it both possible and limited. Many other decisions will follow from it.

Another way to describe this situation is to say that most decisions involve a choice from a group of preselected alternatives, made available to us from the universe of alternatives by the previous decisions we have made. Previous decisions have "activated" or "made operable" certain alternatives and "deactivated" or "made inoperable" others.

For example, when you decide to go to the park, your decision has been enabled by many previous decisions. You had to decide to live near the park; you had to decide to buy a car or learn about bus routes, and so on. And your previous decisions have constrained your subsequent ones: you can't decide to go to a park this afternoon if it is three states away. By deciding to live where you do, you have both enabled and disabled a whole series of other decisions.

As another example, when you enter a store to buy a VCR or TV, you are faced with the preselected alternatives stocked by the store. There may be 200 models available in the universe of models, but you will be choosing from, say, only a dozen. In this case, your decision has been constrained by the decisions made by others about which models to carry.

We might say, then, that every decision (1) follows from previous decisions, (2) enables many future decisions, and (3) prevents other future decisions. People who have trouble making decisions are sometimes trapped by the constraining nature of decision making. Every decision you make precludes other decisions, and therefore might be said to cause a loss of freedom. If you decide to marry Terry, you no longer can decide to marry Shawn. However, just as making a decision causes a loss of freedom, it also creates new freedom, new choices and new possibilities. So making a decision is liberating as well as constraining. And a decision left unmade will often result in a decision by default or a decision being made for you.

It is important to realize that every decision you make affects the decision stream and the collections of alternatives available to you both immediately and in the future. In other words, decisions have far reaching consequences.

Concepts and Definitions

1. Information. This is knowledge about the decision, the effects of its alternatives, the probability of each alternative, and so forth. A major point to make here is that while substantial information is desirable, the statement that "the more information, the better" is not true. Too much information can actually reduce the quality of a decision. See the discussion on The Effects of Quantity on Decision Making above.

2. Alternatives. These are the possibilities one has to choose from. Alternatives can be identified (that is, searched for and located) or even developed (created where they did not previously exist). Merely searching for preexisting alternatives will result in less effective decision making.

3. Criteria. These are the characteristics or requirements that each alternative must possess to a greater or lesser extent. Usually the alternatives are rated on how well they possess each criterion. For example, alternative Toyota ranks an 8 on the criterion of economy, while alternative Buick ranks a 6 on the same criterion.

4. Goals. What is it you want to accomplish? Strangely enough, many decision makers collect a bunch of alternatives (say cars to buy or people to marry) and then ask, "Which should I choose?" without thinking first of what their goals are, what overall objective they want to achieve. Next time you find yourself asking, "What should I do? What should I choose?" ask yourself first, "What are my goals?"

A component of goal identification should be included in every instance of decision analysis.

5. Value. Value refers to how desirable a particular outcome is, the value of the alternative, whether in dollars, satisfaction, or other benefit.

6. Preferences. These reflect the philosophy and moral hierarchy of the decision maker. We could say that they are the decision maker's "values," but that might be confusing with the other use of the word, above. If we could use that word here, we would say that personal values dictate preferences. Some people prefer excitement to calmness, certainty to risk, efficiency to esthetics, quality to quantity, and so on. Thus, when one person chooses to ride the wildest roller coaster in the park and another chooses a mild ride, both may be making good decisions, if based on their individual preferences.

7. Decision Quality. This is a rating of whether a decision is good or bad. A good decision is a logical one based on the available information and reflecting the preferences of the decision maker.

The important concept to grasp here is that the quality of a decision is not related to its outcome: a good decision can have either a good or a bad outcome. Similarly, a bad decision (one not based on adequate information or not reflecting the decision maker's preferences) can still have a good outcome.

For example, if you do extensive analysis and carefully decide on a certain investment based on what you know about its risks and your preferences, then your decision is a good one, even though you may lose money on the investment. Similarly, if you throw a dart at a listing of stocks and buy the one the dart hits, your decision is a bad one, even though the stock may go up in value.

Good decisions that result in bad outcomes should thus not be cause for guilt or recrimination. If you decide to take the scenic route based on what you know of the road (reasonably safe, not heavily traveled) and your preferences (minimal risk, prefer scenery over early arrival), then your decision is a good one, even though you might happen to get in an accident, or have a flat tire in the middle of nowhere. It is not justified to say, "Well, this was a bad decision."

In judging the quality of a decision, in addition to the concerns of logic, use of information and alternatives, three other considerations come into play:

A. The decision must meet the stated objectives most thoroughly and completely. How well does the alternative chosen meet the goals identified?

B. The decision must meet the stated objectives most efficiently, with concern over cost, energy, side effects. Are there negative consequences to the alternative that make that choice less desirable? We sometimes overlook this consideration in our search for thrills.

C. The decision must take into account valuable byproducts or indirect advantages. A new employee candidate may also have extra abilities not directly related to the job but valuable to the company nonetheless. These should be taken into account.

8. Acceptance. Those who must implement the decision or who will be affected by it must accept it both intellectually and emotionally.

Acceptance is a critical factor because it occasionally conflicts with one of the quality criteria. In such cases, the best thing to do may be to choose a lesser quality solution that has greater acceptance.

For example, when cake mixes first were put on the market, manufacturers put everything into the mix--the highest quality and most efficient solution. Only water had to be added. However, the mixes didn't sell well--they weren't accepted. After investigation, the makers discovered that women didn't like the mixes because using the mixes made them feel guilty: they weren't good wives because they were taking a shortcut to making a cake. The solution was to take the egg and sometimes the milk out of the mix so that the women would have something to do to "make" the cake other than just adding water. Now they had to add egg and perhaps milk, making them feel more useful. The need to feel useful and a contributor is one of the most basic of human needs. Thus, while the new solution was less efficient in theoretical terms, it was much more acceptable. Cake mixes with the new formula became quite popular.

Thus, the inferior method may produce greater results if the inferior one has greater support. One of the most important considerations in decision making, then, is the people factor. Always consider a decision in light of the people implementation.

A decision that may be technologically brilliant but that is sociologically stupid will not work. Only decisions that are implemented, and implemented with thoroughness (and preferably enthusiasm) will work the way they are intended to.

Approaches to Decision Making

There are two major approaches to decision making in an organization, the authoritarian method in which an executive figure makes a decision for the group and the group method in which the group decides what to do.

1. Authoritarian. The manager makes the decision based on the knowledge he can gather. He then must explain the decision to the group and gain their acceptance of it. In some studies, the time breakdown for a typical operating decision is something like this:

make decision, 5 min.; explain decision, 30 min.; gain acceptance, 30 min.

2. Group. The group shares ideas and analyses, and agrees upon a decision to implement. Studies show that the group often has values, feelings, and reactions quite different from those the manager supposes they have. No one knows the group and its tastes and preferences as well as the group itself. And, interestingly, the time breakdown is something like this:

group makes decision, 30 min.; explain decision, 0 min.; gain acceptance, 0 min.

Clearly, just from an efficiency standpoint, group decision making is better. More than this, it has been shown many times that people prefer to implement the ideas they themselves think of. They will work harder and more energetically to implement their own idea than they would to implement an idea imposed on them by others. We all have a love for our own ideas and solutions, and we will always work harder on a solution supported by our own vision and our own ego than we will on a solution we have little creative involvement with.

There are two types of group decision making sessions. First is free discussion in which the problem is simply put on the table for the group to talk about. For example, Joe has been offered a job change from shift supervisor to maintenance foreman. Should he take the job?

The other kind of group decision making is developmental discussion or structured discussion. Here the problem is broken down into steps, smaller parts with specific goals. For example, instead of asking generally whether Joe should take the job, the group works on sub questions: What are Joe's skills? What skills does the new job require? How does Joe rate on each of the skills required? Notice that these questions seek specific information rather than more general impressionistic opinions.

Developmental discussion (1) insures systematic coverage of a topic and (2) insures that all members of the group are talking about the same aspect of the problem at the same time.

Some Decision Making Strategies

As you know, there are often many solutions to a given problem, and the decision maker's task is to choose one of them. The task of choosing can be as simple or as complex as the importance of the decision warrants, and the number and quality of alternatives can also be adjusted according to importance, time, resources and so on. There are several strategies used for choosing. Among them are the following:

1. Optimizing. This is the strategy of choosing the best possible solution to the problem, discovering as many alternatives as possible and choosing the very best. How thoroughly optimizing can be done is dependent on

A. importance of the problem
B. time available for solving it
C. cost involved with alternative solutions
D. availability of resources, knowledge
E. personal psychology, values

Note that the collection of complete information and the consideration of all alternatives is seldom possible for most major decisions, so that limitations must be placed on alternatives.

2. Satisficing. In this strategy, the first satisfactory alternative is chosen rather than the best alternative. If you are very hungry, you might choose to stop at the first decent looking restaurant in the next town rather than attempting to choose the best restaurant from among all (the optimizing strategy). The word satisficing was coined by combining satisfactory and sufficient. For many small decisions, such as where to park, what to drink, which pen to use, which tie to wear, and so on, the satisficing strategy is perfect.

3. Maximax. This stands for "maximize the maximums." This strategy focuses on evaluating and then choosing the alternatives based on their maximum possible payoff. This is sometimes described as the strategy of the optimist, because favorable outcomes and high potentials are the areas of concern. It is a good strategy for use when risk taking is most acceptable, when the go-for-broke philosophy is reigning freely.

4. Maximin. This stands for "maximize the minimums." In this strategy, that of the pessimist, the worst possible outcome of each decision is considered and the decision with the highest minimum is chosen. The Maximin orientation is good when the consequences of a failed decision are particularly harmful or undesirable. Maximin concentrates on the salvage value of a decision, or of the guaranteed return of the decision. It's the philosophy behind the saying, "A bird in the hand is worth two in the bush."

Quiz shows exploit the uncertainty many people feel when they are not quite sure whether to go with a maximax strategy or a maximin one: "Okay, Mrs. Freen, you can now choose to take what you've already won and go home, or risk losing it all and find out what's behind door number three."

Example: I could put my $10,000 in a genetic engineering company, and if it creates and patents a new bacteria that helps plants resist frost, I could make $50,000. But I could also lose the whole $10,000. But if I invest in a soap company, I might make only $20,000, but if the company goes completely broke and gets liquidated, I'll still get back $7,000 of my investment, based on its book value.

Example: It's fourth down and ten yards to go on your twenty yard line. Do you go for a long pass or punt? Maximax would be to pass; Maximin would be to punt.

Decision Making Procedure

As you read this procedure, remember our discussion earlier about the recursive nature of decision making. In a typical decision making situation, as you move from step to step here, you will probably find yourself moving back and forth also.

1. Identify the decision to be made together with the goals it should achieve. Determine the scope and limitations of the decision. Is the new job to be permanent or temporary or is that not yet known (thus requiring another decision later)? Is the new package for the product to be put into all markets or just into a test market? How might the scope of the decision be changed--that is, what are its possible parameters?

When thinking about the decision, be sure to include a clarification of goals: We must decide whom to hire for our new secretary, one who will be able to create an efficient and organized office. Or, We must decide where to go on vacation, where we can relax and get some rest from the fast pace of society.

2. Get the facts. But remember that you cannot get all the facts. Get as many facts as possible about a decision within the limits of time imposed on you and your ability to process them, but remember that virtually every decision must be made in partial ignorance. Lack of complete information must not be allowed to paralyze your decision. A decision based on partial knowledge is usually better than not making the decision when a decision is really needed. The proverb that "any decision is better than no decision," while perhaps extreme, shows the importance of choosing. When you are racing toward a bridge support, you must decide to turn away to the right or to the left. Which way you turn is less important than the fact that you do indeed turn.

As part of your collection of facts, list your feelings, hunches, and intuitive urges. Many decisions must ultimately rely on or be influenced by intuition because of the remaining degree of uncertainty involved in the situation.

Also as part of your collection of facts, consult those who will be affected by and who will have to implement your decision. Input from these people not only helps supply you with information and help in making the decision but it begins to produce the acceptance necessary in the implementers because they feel that they are part of the decision making process. As Russell Ackoff noted in The Art of Problem Solving, not consulting people involved in a decision is often perceived as an act of aggression.

3. Develop alternatives. Make a list of all the possible choices you have, including the choice of doing nothing. Not choosing one of the candidates or one of the building sites is in itself a decision. Often a non decision is harmful as we mentioned above--not choosing to turn either right or left is to choose to drive into the bridge. But sometimes the decision to do nothing is useful or at least better than the alternatives, so it should always be consciously included in the decision making process.

Also be sure to think about not just identifying available alternatives but creating alternatives that don't yet exist. For example, if you want to choose which major to pursue in college, think not only of the available ones in the catalog, but of designing your own course of study.

4. Rate each alternative. This is the evaluation of the value of each alternative. Consider the negative of each alternative (cost, consequences, problems created, time needed, etc.) and the positive of each (money saved, time saved, added creativity or happiness to company or employees, etc.). Remember here that the alternative that you might like best or that would in the best of all possible worlds be an obvious choice will, however, not be functional in the real world because of too much cost, time, or lack of acceptance by others.

Also don't forget to include indirect factors in the rating. If you are deciding between machines X, Y, and Z and you already have an employee who knows how to operate machine Z, that fact should be considered. If you are choosing an investigative team to send to Japan to look at plant sites and you have very qualified candidates A, B, and C, the fact that B is a very fast typist, a superior photographer or has some other side benefit in addition to being a qualified team member, should be considered. In fact, what you put on your hobbies and interests line on your resume can be quite important when you apply for a job just because employers are interested in getting people with a good collection of additional abilities.

5. Rate the risk of each alternative. In problem solving, you hunt around for a solution that best solves a particular problem, and by such a hunt you are pretty sure that the solution will work. In decision making, however, there is always some degree of uncertainty in any choice. Will Bill really work out as the new supervisor? If we decide to expand into Canada, will our sales and profits really increase? If we let Jane date Fred at age fifteen, will the experience be good? If you decide to marry person X or buy car Y or go to school Z, will that be the best or at least a successful choice?

Risks can be rated as percentages, ratios, rankings, grades or in any other form that allows them to be compared. See the section on risk evaluation for more details on risking.

6. Make the decision. If you are making an individual decision, apply your preferences (which may take into account the preferences of others). Choose the path to follow, whether it includes one of the alternatives, more than one of them (a multiple decision) or the decision to choose none.

And of course, don't forget to implement the decision and then evaluate the implementation, just as you would in a problem solving experience.

One important item often overlooked in implementation is that when explaining the decision to those involved in carrying it out or those who will be affected by it, don't just list the projected benefits: frankly explain the risks and the drawbacks involved and tell why you believe the proposed benefits outweigh the negatives. Implementers are much more willing to support decisions when they (1) understand the risks and (2) believe that they are being treated with honesty and like adults.

Remember also that very few decisions are irrevocable. Don't cancel a decision prematurely because many new plans require time to work--it may take years for your new branch office in Paris to get profitable--but don't hesitate to change directions if a particular decision clearly is not working out or is being somehow harmful. You can always make another decision to do something else.

Risking

Because making decisions involves a degree of risk, it would be helpful to examine risk and risk analysis in this chapter in order to gain an understanding of what is involved. Risk and uncertainty create anxiety, yet they are necessary components of an active life.

General Comments on Risk Taking

1. Only the risk takers are truly free. All decisions of consequence involve risk. Without taking risks, you cannot grow or improve or even live.

2. There is really no such thing as permanent security in anything on earth. Not taking risks is really not more secure than taking them, for your present state can always be changed without action on your part. If you don't take the risk of dying by driving to the store, your house could collapse on you and kill you anyway.

3. You are supposed to be afraid when you risk. Admit your fears--of loss, of rejection, of failure.

4. Risking normally involves a degree of separation anxiety--the anxiety you feel whenever you are removed from something that makes you feel secure. Many children feel this when they first leave their parents for school. Some college students feel this when they go off to college. Travelers sometimes feel it when they get homesick. The way to overcome separation anxiety is to build a bridge between the familiar and secure and the new. Find out what the new place--school or country--is like and how its elements compare to familiar and secure things at home. Take familiar things with you--books, teddy bear, popcorn popper, whatever.

The same is true of all risks. Make the opportunity as familiar as possible and learn as much about it as you can before you release the security of the old. Find out about the new job, its location, the lifestyle of those who live there, and so on.

The Orthodox Theory of Risk Evaluation

The traditional strategy for evaluating risks is to use an expected value calculation, based on the simple idea that the expected value of a risk is the value of the possible outcome discounted by the probability of its realization. The formula is EV=PR or expected value equals prize times risk (or chance). Thus, if you have one chance in a million of winning a million dollars, your expected value is one dollar (which is one millionth of a million dollars). Expected value calculations are often used when comparing an amount of money to be invested with the probable payoff. (Note: if the risk is, for example, one in twenty, you can divide the prize by twenty, which is the same as multiplying the prize by one twentieth.)

Let's take a typical state lottery, for example. The investment for a ticket is a dollar. The usual prize is about $6,500,000 and the chance of winning is about one in 14,800,000. By discounting the possible outcome by the chance of winning (dividing $6.5 million by 14.8 million), we discover that the expected value of the lottery ticket is about 43.9 cents. Since a ticket costs $1.00 (more than twice as much as its expected value), we would conclude that this is a poor risk. Only when the expected value meets or exceeds the required expense is the risk considered worth taking, according to this theory.

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Try It Yourself

Expected Value. Calculate the expected value of each of the following risks. Divide the prize by the chance, and compared the answer with the cost of the ticket to decide whether the risk is worth taking.

1. Irish Sweepstakes. Ticket: $2.50 Prize: $100,000,000 Chance: 1 in 60,000,000
2. State Lottery. Ticket: $1.00 Prize: $42,300,000 Chance: 1 in 14,800,000 (Note: Calculate the expected value for just a single winner and for the number of winners you'd expect based on 80,000,000 entries.)
3. Reader's Digest Sweepstakes. Ticket: 32 cent stamp to return the entry Prize: $6,000,000 Chance: 1 in 256,000,000
4. Publisher's Clearinghouse Sweepstakes. Ticket: 32 cent stamp to return the entry Prize: $10,000,000 Chance: 1 in 140,000,000
5. Charity Raffle. Ticket: $5.00 Prize: $12,400 (new car) Chance: 1 in 3,000
6. Vegas Roulette #1. Ticket: $20 bet Prize: $380 Chance: 1 in 35
7. Reno Roulette #2 Ticket: $25 bet Prize: $975 Chance: 1 in 35
8. Pearl in Oyster Ticket: $10 Prize: $50 Chance: 1 in 8
9. Extended Warranty Ticket (Price of Extended Warranty): $45 Prize (Cost of average covered warranty repair): $180 Chance: 1 in 12
10. In Your Dreams Ticket: $1.00 Prize: $500,000 Chance: 1 in 250
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Many risks have multiple possible outcomes, each outcome with its own probability of occurrence and its own value. The expected value of a given decision in such cases is the sum of all the values of each outcome, each diminished by its individual probability. The formula is

EV = sumn (pn x rn)

where p is the probability and r is the reward or value of the risk. Note in the following examples that the value of an outcome is represented numerically, but it does not need to represent dollars, or even physical units. A 10 could be units of happiness, pleasure, pain, embarrassment, and so forth, as well as dollars.

Example: Should I go scuba diving this weekend? If I do, there is a ninety percent probability that I will have a lot of fun. I quantify this great fun as 10 fun points. There is also a ten percent probability that I will get hurt, which I quantify as minus 20 fun points. If I make the other decision, to stay home, there is a ninety-nine percent probability that I will be bored, represented by a minus 2 fun points, and a one percent probability that something exciting will happen, which I represent as five fun points (half as exciting as going scuba diving). Our expected value worksheet looks like this:

Here we see that the expected value of going diving is 7, which is much higher than the expected value of staying home, which is a negative 1.93.

As another example, suppose I'm trying to decide whether or not to attempt a repair on my computer or whether to have a dealer fix it. If I attempt the repair, there are three possible outcomes. One is that I'll succeed, which I value both financially, experientially, and egotistically, so I give that a +10. Second is that I will increase the cost of repairing the computer by damaging something. This I rate at -8. The third possibility is that I will ruin the computer and be totally humiliated. This I rate at -20. The probability I see for each of these possibilities is, in order, 50%, 30%, and 20%. Do note that for any given decision, the probabilities of all possible outcomes must add up to 100%.

On the other hand, if I have a dealer repair the computer, there are two possibilities. One is that it will cost a modest amount of money, which I rate at a -2, since I will be out a few bucks and will have to haul the computer into the shop and back. The other possibility is that the repair will cost major money, which I rate at a -9. The probabilities for each of these I predict at 20% for a cheap repair and 80% for an expensive one. Our EV worksheet would then look like this:

Probability Reward
_____ .5 x +10 = +5
|
|_____ .3 x -8 = -2.4
|
|_____ .2 x -20 = -4
Y|
Me Fix?_| Total -1.4
N|
|_____ .8 x -9 = -7.2
|
|_____ .2 x -2 = -0.4
Total -7.6

Here we see that both expected values are negative, meaning that this decision will probably result in discomfort either way. However, the expected value for doing the repair is "higher" (less negative) than that for having the dealer do it, so that is the way our calculations tell us to go. Note, of course, that if we decide our probabilities are different, or if we decide that our rewards are different, the expected values will change.

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Try It Yourself

Expected Value. Work out each of these for expected value and determine which decision is best.

1. You want to decide whether or not to take the freeway home from an event you've attended. From experience, you calculate that if you take the freeway, you will either speed home, which you rate at a +8 on the happiness scale, or you will get into a traffic jam, which you rate at a -6 on the happiness scale. If you take the side streets, you will either get home okay, which is a +4 on the happiness scale (since it's only half as fast as the freeway) or you will hit another traffic jam, which you rate as a -7, slightly worse than a jam on the freeway. The probability of a freeway jam is 60% (you'll have to figure out the probability for speeding home). The probability for getting home okay on the side streets is 30%.

2. Your crop of cotton is infested with insects and you want to decide which pesticide to use. Some of the insects are probably resistant to the different available pesticides, so you sit down and figure out the following probabilities. If you use ToxiBug, there is a 22% probability that it will kill 95% of the bugs on your crops. There is a 49% probability that it will kill only 71% of the bugs, and a 29% probability that it will kill only 43% of the bugs. (Use the bug percentages as reward numbers, so that 95% is a reward of 95.)
If you use Bug-O-Kill, there is a 71% probability that it will kill 90% of the bugs, a 24% probability that it will kill 11% of the bugs, and a 5% probability that it will kill 19% of the bugs.
If you use MegaDeath Bug Viability Terminator, there is a 90% chance that 60% of the bugs will be killed, and a 10% chance that 5% will be killed.

3. You have been retained by Amalgamated Pencil Sharpeners, Inc. to help determine whether the company should export its new sharpener model XT-S to Brazil. If APS does export, there are three foreseen possibilities. First, there is a 25% probability that the product will sell well, earning the company (after startup costs) $280,000. Second, there is a 40% probability that the sharpeners will have only modest performance, earning the company a net of only $15,000. Lastly, the product might be rejected, causing the company to lose its startup costs of $175,000. The probability for this is 35%.
If the company decides not to export the sharpeners, it could invest the startup money with a 90% probability of making a net of $18,000 and a 10% probability of losing a net of $27,000.
What should the company do?

4. As a diving buff, you have been asked to help salvage a sunken treasure ship off the coast of Florida. Your only problem is an abundance of riches: There are three ships to choose from. And, to make life interesting, there is a little uncertainty about whether each has already been salvaged. (If the ship has already been salvaged, there will be no treasure at all left, and the attempt will result in a net loss equal to the cost of mounting the expedition.) Judging by the records of each ship's inventory and the probability of previous salvaging, you have this information:

If you salvage the Jacques D'Ambois, there is a 60% probability of finding the $20,000,000 in gold and silver bars on board. Cost of salvaging this wreck is $5,000,000.

If you salvage the Acana, there is a 75% probability of finding $11,000,000 in doubloons and jewels. Cost of salvaging this wreck is $3,000,000.

If you salvage the Princess Avanti, there is a 20% probability of finding $30,000,000 in gold and a 25% probability of finding only $15,000,000. Cost of salvaging this wreck is $4,000,000.

Hint: Subtract the cost of salvaging from the hoped for return in each case. Subtract the probability of success from 100% to find the probability of failure. Failure results in the expense of salvaging (a net loss).
Which ship should be salvaged?

5. Penelope has a serious illness for which doctors have recommended surgery. If she has the operation, there is a 60% chance she will recover and live another 50 years. There is a 20% chance she will live only 20 more years. And there is a 20% percent chance that she will die on the operating table or shortly thereafter. If she does not have the operation, there is a 60% chance that she will live only five years. There is a 15% percent chance that she will live 15 years. And there is a 25% chance that she will spontaneously recover and live 50 years. For each case, let the number of years to live equal the possible reward. For the possibility of dying on the operating table, make that equal to a negative of the expected value of not having the operation at all (so calculate the not having the operation EV first).
Should she have the operation?

6. You have $250,000 to invest for a year. If you put it in stocks, there is a 50 percent chance that you will net a return of $40,000. There is, however a 20 percent chance that you'll lose $2,000 and a 30 percent chance that the market will really decline and you'll lose $50,000.

If you put the money in the bank, there is a 95 percent chance that you'll earn $17,500 in interest. There is, however, just a small chance--5 percent--that the bank will go broke, and since the FDIC insurance covers only $100,000, you would lose $150,000.
Which investment has the highest expected value?

7. You are trying to decide between three used cars, all of which are priced the same. If you buy used car number one, there is a 70 percent probability that you'll have to spend $400 to get the engine back in shape. However, there is a 30 percent probability that the engine will have to be replaced, which will cost you $2,000.

If you choose car number 2, there is a 50 percent probability that you won't have to spend any money at all, a 30 percent probability that emission repairs will cost only $200, but there is a 20 percent chance that the car will require a California smog conversion (since it may be a European import that hasn't been built for California). This will cost you $5000.

If you choose car number three, you will face a 60 percent probability of an $800 transmission repair, a 35 percent probability of a small transmission adjustment, and a 5 percent possibility that you'll need to spend $1600 to fix the engine and the transmission.
Which car should you buy? Consider the costs as negative values and choose the one with the lowest negative total.

8. Your true love comes up to you and says, "Darling, I can't decide whether we should go to the beach or to a movie, because while the beach would be twice as much fun if it doesn't rain, there is a 30 percent chance of rain today. And if it rains, the beach would be no fun at all." You smile knowingly and reply, "Well, sweetheart, I just happen to know how to calculate expected values. I'll solve the problem for us." If the fun you would have at the beach is a 10, what should you decision be?

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Advice on Risking

1. Decide whether the risk is necessary or desirable. Spend some careful thought before acting, so that you will not end up taking unnecessary risks.
2. Risk for the right reasons and when you are calm and thoughtful. Don't take a risk because you are angry, hurt, depressed, desperate, or frightened. Don't take risks just to get revenge or to harm someone else. Don't risk when you are incapable of rational thought.
3. Have a goal. When you take a risk, have a clear purpose in mind so that you will know, after the fact, whether you succeeded or not. What will taking the risk accomplish?
4. Determine the possible loss as well as the gain. That is, know exactly what the consequences of failure will be. Unless you know pretty accurately what both loss and gain will be, you do not understand the risk. There is a tendency either to underestimate or to overestimate the consequences of risk. Underestimation can result in surprising damage, cost, setbacks, pain, whatever. But overestimation is just as problematic, because it can keep us from taking the risks we should be taking. Many times, upon reflection, the worst case event of a failed risk is much less harmful or negative that we originally believed.
It's a good idea in fact to list all the good expected effects of a successful outcome and all the bad expected effects of an unsuccessful outcome.
5. Try to make an accurate estimate about the probability of each case. Is the probability of success one in two, one in ten, one in a hundred, one in a million? This can be sometimes difficult to do, but usually you can guess the probability within an order of magnitude.
6. When possible, take one risk at a time. Divide your actions or goals wherever possible so that you are not combining risks unless absolutely necessary. Simultaneous risking increases anxiety, creates confusion, and makes failure analysis very difficult.
7. Use imaging or role playing to work through the various possibilities, successes and failures, so that you will be mentally prepared for any outcome. Think about what can go right and what can go wrong and how you will respond to or adjust to each possibility.
8. Use a plan. Set up a timetable with a list of steps to take. Use the plan as a guideline, but be flexible.
9. Act decisively. When you have evaluated the risk and decided that it's worth it, act. Go for it. Don't hesitate at the threshold or halfway through. Once you get going, be courageous. Grit your teeth and move forward. Don't procrastinate and don't act half heartedly.
10. Don't expect complete success. You may get it, of course, but chances are the result of your risk will not be exactly what you had imagined and there will be more a degree of success than absolute success or failure.

Risk Management Strategies

In order of precedence, the strategies are:

1. Dismiss extremely remote or unrealistic possibilities. For example, in the decision, Shall I go to the store? there are risks like dying on the freeway, being shot by robbers, buying poisoned food, and so forth, but these should not normally enter into the risk evaluation because they are highly if not extremely improbable. Remember that all life is accompanied by risk. Ten thousand television sets catch fire each year, a hundred thousand people walk through plate glass each year, 125,000 do-it-yourselfers injure themselves with power tools each year, 70,000 children are injured by toys each year, ten thousand people are poisoned by aspirin each year. But what are we willing to give up? Some of these are not really remote, but we are willing to take the risk. E.g. automobile deaths. 1 chance in 4000 each year of dying.

And of course whenever you trust someone, you risk betrayal; when you open yourself, you risk exploitation or ridicule; whenever you hand over a dollar, you risk being defrauded.

2. Insofar as possible, avoid catastrophes. If there is a small but significant chance for catastrophe, then the regular expected value calculations may not apply.

A major principle of risk management is to avoid any real risk of catastrophe at any reasonable cost. The difficulty of applying this principle comes from the uncertainty of what is a real risk and what is a reasonable cost.

3. Recognize the tradeoffs. Remember that every action of life has some risk to it. Even when we don't take the risk upon ourselves, risk is often put upon us by the nature of life and society. Eating you risk food poisoning or choking, but you have to eat or you'll die. Socializing you risk disease, driving or flying you risk crashing, but in some sense you have to socialize and travel. Lying in the sun you risk skin cancer; smoking you risk lung cancer; eating French fries you risk heart disease.

Don't deny the risks involved in living and don't worry excessively about the consequences of modern life.

4. Maximize Expected Values. Normally, the expected value of each alternative shows its relative preferability. That is, you are opting for the greatest probability of the greatest good. Remember, though, that these calculations are guides, and are based on what may be very subjective probabilities and rewards. You are not "required by law" to choose any particular alternative. If you believe that the alternative with the highest EV is a poor choice, you should reconsider the probabilities and rewards you have assigned to all the alternatives.

With these ideas in mind, you'll better understand why some people pursue dangerous sports like skiing, sky diving, race car driving and so forth. The risk/benefit ratio is acceptable to them. It may be useful to note here, too, that most people are not rational risk takers. They take some risks all out of proportion to any expected return and avoid other risks that have a large expected value compared to the risk.

via: virtualsalt

Questionnaire Design

noreply@blogger.com (seo webdesigner) — Tue, 15 Jan 2008 15:27:00 +0000

The questionnaire is a structured technique for collecting primary data in a marketing survey. It is a series of written or verbal questions for which the respondent provides answers. A well-designed questionnaire motivates the respondent to provide complete and accurate information.

The survey questionnaire should not be viewed as a stand-alone tool. Along with the questionnaire there is field work, rewards for the respondents, and communication aids, all of which are important components of the questionnaire process.

Steps to Developing a Questionnaire

The following are steps to developing a questionnaire - the exact order may vary somewhat.

Determine which information is being sought.

Choose a question type (structure and amount of disguise) and method of administration (for example, written form, email or web form, telephone interview, verbal interview).

Determine the general question content needed to obtain the desired information.

Determine the form of response.

Choose the exact question wording.

Arrange the questions into an effective sequence.

Specify the physical characteristics of the questionnaire (paper type, number of questions per page, etc.)

Test the questionnaire and revise it as needed.

Required Information

To determine exactly which information is needed, it is useful to construct tables into which the data will be placed once it is collected. The tables will help to define what data is needed and what is not needed.

Question Type and Administration Method

Some question types include fixed alternative, open ended, and projective:

Fixed-alternative questions provide multiple-choice answers. These types of questions are good when the possible replies are few and clear-cut, such as age, car ownership, etc.

Open-ended questions allow the respondent to better express his/her answer, but are more difficult to administer and analyze. Often, open-ended questions are administered in a depth interview. This technique is most appropriate for exploratory research.

Projective methods use a vague question or stimulus and attempt to project a person's attitudes from the response. The questionnaire could use techniques such as word associations and fill-in-the-blank sentences. Projective methods are difficult to analyze and are better suited for exploratory research than for descriptive or causal research.

There are three commonly used rating scales: graphic, itemized, and comparative.

Graphic - simply a line on which one marks an X anywhere between the extremes with an infinite number of places where the X can be placed.

Itemized - similar to graphic except there are a limited number of categories that can be marked.

Comparative - the respondent compares one attribute to others. Examples include the Q-sort technique and the constant sum method, which requires one to divide a fixed number of points among the alternatives.

Questionnaires typically are administered via a personal or telephone interview or via a mail questionnaire. Newer methods include e-mail and the Web.

Question Content

Each question should have a specific purpose or should not be included in the questionnaire. The goal of the questions is to obtain the required information. This is not to say that all questions directly must ask for the desired data. In some cases questions can be used to establish rapport with the respondent, especially when sensitive information is being sought.

Sensitive questions can be posed in ways to increase response likelihood and to facilitate more honest responses. Some techniques are:

Place the question in a series of less personal questions.

State that the behavior or attitude is not so unusual.

Phrase the question in terms of other people, not the respondent.

Provide response choices that specify ranges, not exact numbers.

Use a randomized response model giving the respondent pairs of questions with a randomly assigned one to answer. The interviewer does not know which question the person is answering, but the overall percentage of people assigned to the sensitive question is known and statistics can be calculated.

Form of Question Response

Questions can be designed for open-ended, dichotomous, or multichotomous responses.

Open-ended responses are difficult to evaluate, but are useful early in the research process for determining the possible range of responses.

Dichotomous questions have two possible opposing responses, for example, "Yes" and "No".

Multichotomous questions have a range of responses as in a multiple choice test.

The questionnaire designer should consider that respondents may not be able to answer some questions accurately. Two types of error are telescoping error and recall loss.

Telescoping error is an error resulting from the tendency of people to remember events as occurring more recently than they actually did.

Recall loss occurs when people forget that an event even occurred. For recent events, telescoping error dominates; for events that happened in the distant past, recall loss dominates.

Question Wording

The questions should be worded so that they are unambiguous and easily understood. The wording should consider the full context of the respondent's situation. In particular, consider the who, what, when, where, why, and how dimensions of the question.

For example, the question,

"Which brand of toothpaste do you use?"

might seem clear at first. However, the respondent may consider "you" to be the family as a whole rather than he or she personally. If the respondent recently changed brands, the "when" dimension of the question may be relevant. If the respondent uses a different, more compact tube of toothpaste when traveling, the "where" aspect of the question will matter.

A better wording of the question might be,

"Which brand of toothpaste have you used personally at home during the past 6 months? If you have used more than one brand, please list each of them."

When asking about the frequency of use, the questions should avoid ambiguous words such as "sometimes", "occasionally", or "regularly". Rather, more specific terms such as "once per day" and "2-3 times per week" should be used.

Sequence the Questions

Some neutral questions should be placed at the beginning of the questionnaire in order to establish rapport and put the respondent at ease. Effective opening questions are simple and non-threatening.

When sequencing the questions, keep in mind that their order can affect the response. One way to correct for this effect is to distribute half of the questionnaires with one order, and the other half with another order.

Physical Characteristics of the Questionnaire

Physical aspects such as the page layout, font type and size, question spacing, and type of paper should be considered. In order to eliminate the need to flip back and forth between pages, the layout should be designed so that a question at the bottom of the page does not need to be continued onto the next page. The font should be readable by respondents who have less-than-perfect visual acuity. The paper stock should be good quality to project the image that the questionnaire is important enough to warrant the respondents' time. Each questionnaire should have a unique number in order to better account for it and to know if any have been lost.

Test and Revise the Questionnaire

The questionnaire should be pre-tested in two stages before distributing. In the first stage, it should be administered using personal interviews in order to get better feedback on problems such as ambiguous questions. Then, it should be tested in the same way it will be administered. The data from the test should be analyzed the same way the administered data is to be analyzed in order to uncover any unanticipated shortcomings.

Different respondents will answer the same questionnaire differently. One hopes that the differences are due to real differences in the measured characteristics, but that often is not the case. Some sources of the differences between scores of different respondents are:

True differences in the characteristic being measured.

Differences in other characteristics such as response styles.

Differences in transient personal factors such as fatigue, etc.

Differences in situation, such as whether spouse is present.

Differences in the administration, such as interviewer tone of voice.

Differences resulting from sampling of items relevant toward the characteristic being measured.

Differences resulting from lack of clarity of the question - may mean different things to different people.

Differences caused by mechanical factors such as space to answer, inadvertent check marks, etc.

via: quickmba

Market Share

noreply@blogger.com (seo webdesigner) — Tue, 15 Jan 2008 15:24:00 +0000

Sales figures do not necessarily indicate how a firm is performing relative to its competitors. Rather, changes in sales simply may reflect changes in the market size or changes in economic conditions.

The firm's performance relative to competitors can be measured by the proportion of the market that the firm is able to capture. This proportion is referred to as the firm's market share and is calculated as follows:

Market Share = Firm's Sales / Total Market Sales

Sales may be determined on a value basis (sales price multiplied by volume) or on a unit basis (number of units shipped or number of customers served).

While the firm's own sales figures are readily available, total market sales are more difficult to determine. Usually, this information is available from trade associations and market research firms.

Reasons to Increase Market Share

Market share often is associated with profitability and thus many firms seek to increase their sales relative to competitors. Here are some specific reasons that a firm may seek to increase its market share:

Economies of scale - higher volume can be instrumental in developing a cost advantage.

Sales growth in a stagnant industry - when the industry is not growing, the firm still can grow its sales by increasing its market share.

Reputation - market leaders have clout that they can use to their advantage.

Increased bargaining power - a larger player has an advantage in negotiations with suppliers and channel members.

Ways to Increase Market Share

The market share of a product can be modeled as:

Share of Market = Share of Preference x Share of Voice x Share of Distribution

According to this model, there are three drivers of market share:

Share of preference - can be increased through product, pricing, and promotional changes.

Share of voice - the firm's proportion of total promotional expenditures in the market. Thus, share of voice can be increased by increasing advertising expenditures.

Share of distribution - can be increased through more intensive distribution.

From these drivers we see that market share can be increased by changing the variables of the marketing mix.

Product - the product attributes can be changed to provide more value to the customer, for example, by improving product quality.

Price - if the price elasticity of demand is elastic (that is, > 1), a decrease in price will increase sales revenue. This tactic may not succeed if competitors are willing and able to meet any price cuts.

Distribution - add new distribution channels or increase the intensity of distribution in each channel.

Promotion - increasing advertising expenditures can increase market share, unless competitors respond with similar increases.

Reasons Not to Increase Market Share

An increase in market share is not always desirable. For example:

If the firm is near its production capacity, an increase in market share might necessitate investment in additional capacity. If this capacity is underutilized, higher costs will result.

Overall profits may decline if market share is gained by increasing promotional expenditures or by decreasing prices.

A price war might be provoked if competitors attempt to regain their share by lowering prices.

A small niche player may be tolerated if it captures only a small share of the market. If that share increases, a larger, more capable competitor may decide to enter the niche.

Antitrust issues may arise if a firm dominates its market.

In some cases it may be advantageous to decrease market share. For example, if a firm is able to identify certain customers that are unprofitable, it may drop those customers and lose market share while improving profitability.

via: quickmba

Direct Marketing- Boosts Business Results Through Systematically Winning You Quality Customers

noreply@blogger.com (seo webdesigner) — Tue, 15 Jan 2008 15:20:00 +0000

Direct marketing addresses some of the biggest challenges in marketing a business - lead generation, converting those leads into high quality customers, and then systematically growing customer profitability. Marketing experts estimate that your prospects and customers are bombarded with more than 3000 marketing messages (direct mail, email marketing, radio/tv advertising, billboards) – every day. Direct marketing helps you get through the ‘marketing noise’, and delivers a high return on investment for your marketing spend.

With prospects being presented with so many choices, they seldom, if ever, buy at the first contact. In fact, it can take anything from 9 to 15 contacts before they have sufficient trust in you to finally buy your product.

Little wonder that so many entrepreneurs and sales people hate cold calling as the chances of early success are dismally low.

An alternative to the pain of cold calling is a consistent set of processes that attracts qualified leads to your business, and then keeps them ‘in the loop’ until they convert into customers.

Systematic Direct Marketing is that set of processes - a marketing strategy based on direct marketing methods which will deliver an immediate and sustainable sales improvement.

By improvements we mean:

your lead generation costs will drop,
converting leads into sales will not be due to profit-killing price discounts, and
your quality clients will form enduring relationships - providing you with profitable repeat sales

The Highly Effective Cycle of Systematic Direct Marketing

In order to attract, retain and nurture a list of highly profitable customers, you need to craft your direct marketing strategy around a number of marketing activities that can start in a fairly simple way, but over time develop into a fairly sophisticated set of direct marketing processes.

If you cycle through the following direct marketing activities you will experience an unprecedented improvement in your business’s results:

Each direct marketing cycle will create a set of clients who can start providing you with referrals. These ‘lowest cost’ prospects will supplement the prospects that you attract through your normal ongoing lead generation techniques, yielding an ever-increasing prospect base for you to convert into customers.

If this is the solution, why isn’t everybody
adopting this Direct Marketing Strategy?

For starters, many business executives get seduced by glamour advertising – where advertising agencies vie to see how ‘creative’ they can be with your advertising budget. Sadly this approach is both expensive and ineffective. Even worse, no measurement criteria are established to track the effectiveness of these expensive adverts. Literally a case of pay and pray.

Possibly the main reason that many businesses don’t base their marketing strategy around direct marketing is that it requires setting up several interlinked marketing processes, and many smaller business owners don’t have the direct marketing know-how to do this.

The good news is that most of these marketing ‘systems’ are not too difficult to set up, and many are relatively inexpensive to implement. The smart approach to systematic direct marketing is to introduce the easy / low-cost approaches first, and then use the newly-generated additional cash flow to fund the more sophisticated and more expensive methods.

via: systematicdirectmarketing

Workforce Diversity-Changing the Way You Do Business

noreply@blogger.com (seo webdesigner) — Thu, 10 Jan 2008 18:40:00 +0000

By: R. McInnes, Diversity WorldPublished in Focus

As we enter the 21st century, workforce diversity has become an essential business concern. In the so-called information age, the greatest assets of most companies are now on two feet (or a set of wheels). Undeniably, there is a talent war raging. No company can afford to unnecessarily restrict its ability to attract and retain the very best employees available.
Generally speaking, the term “Workforce Diversity” refers to policies and practices that seek to include people within a workforce who are considered to be, in some way, different from those in the prevailing constituency. In this context, here is a quick overview of seven predominant factors that motivate companies, large and small, to diversify their workforces:

As a Social Responsibility

Because many of the beneficiaries of good diversity practices are from groups of people that are “disadvantaged” in our communities, there is certainly good reason to consider workforce diversity as an exercise in good corporate responsibility. By diversifying our workforces, we can give individuals the “break” they need to earn a living and achieve their dreams.

As an Economic Payback

Many groups of people who have been excluded from workplaces are consequently reliant on tax-supported social service programs. Diversifying the workforce, particularly through initiatives like welfare-to-work, can effectively turn tax users into tax payers.

As a Resource Imperative

The changing demographics in the workforce, that were heralded a decade ago, are now upon us. Today’s labor pool is dramatically different than in the past. No longer dominated by a homogenous group of white males, available talent is now overwhelmingly represented by people from a vast array of backgrounds and life experiences. Competitive companies cannot allow discriminatory preferences and practices to impede them from attracting the best available talent within that pool.

As a Legal Requirement

Many companies are under legislative mandates to be non-discriminatory in their employment practices. Non-compliance with Equal Employment Opportunity or Affirmative Action legislation can result in fines and/or loss of contracts with government agencies. In the context of such legislation, it makes good business sense to utilize a diverse workforce.

As a Marketing Strategy

Buying power, particularly in today’s global economy, is represented by people from all walks of life (ethnicities, races, ages, abilities, genders, sexual orientations, etc.) To ensure that their products and services are designed to appeal to this diverse customer base, “smart” companies, are hiring people, from those walks of life - for their specialized insights and knowledge. Similarly, companies who interact directly with the public are finding increasingly important to have the makeup of their workforces reflect the makeup of their customer base.

As a Business Communications Strategy

All companies are seeing a growing diversity in the workforces around them - their vendors, partners and customers. Companies that choose to retain homogenous workforces will likely find themselves increasingly ineffective in their external interactions and communications.

As a Capacity-building Strategy

Tumultuous change is the norm in the business climate of the 21st century. Companies that prosper have the capacity to effectively solve problems, rapidly adapt to new situations, readily identify new opportunities and quickly capitalize on them. This capacity can be measured by the range of talent, experience, knowledge, insight, and imagination available in their workforces. In recruiting employees, successful companies recognize conformity to the status quo as a distinct disadvantage. In addition to their job-specific abilities, employees are increasingly valued for the unique qualities and perspectives that they can also bring to the table. According to Dr. Santiago Rodriguez, Director of Diversity for Microsoft, true diversity is exemplified by companies that “hire people who are different – knowing and valuing that they will change the way you do business.”
For whichever of these reasons that motivates them, it is clear that companies that diversify their workforces will have a distinct competitive advantage over those that don’t. Further, it is clear that the greatest benefits of workforce diversity will be experienced, not by the companies that that have learned to employ people in spite of their differences, but by the companies that have learned to employ people because of them.

Marketing PDF Books

noreply@blogger.com (seo webdesigner) — Sun, 06 Jan 2008 14:19:00 +0000

>> Sales strategy

Sales Strategy

MBA marketing- Power point resourses/presentations

noreply@blogger.com (seo webdesigner) — Thu, 03 Jan 2008 17:22:00 +0000

Marketing PowerPoint.

This section contains via :Marketing Teacher's FREE PowerPoint. Selections are based upon the most popular marketing topics, and could potentially support a number of marketing modules and courses. They work best if they are integrated with lessons from our free Lessonstore.

Marketing Principles PowerPoint

1.Introduction To Marketing
Definitions of marketing
Implications of marketing
The marketing concept
The marketing management process

2.Marketing Planning
Objectives of a marketing plan
Structure and contents of a marketing plan
Behavioural problems when managing the process

3.Marketing Research
Terminology of marketing research
The marketing research process
The components of MkIS

4.The Marketing Environment
SWOT analysis
PEST analysis
Five Forces analysis

5.Buyer Behavior
Consumer buying process
Maslow's hierarchy of needs
Organizational buyer behavior

6.Strategic Development
Introduction to Product Life Cycle (PLC)
Bowman's strategy clock
New product development process

7.Product
Product Life Cycle (PLC)
Boston Matrix
Ansoff's Matrix

8.Price
Pricing strategies
Winkler - 10 ways to increase price without increasing price!

9.Place (Distribution/Logistics)
Channel intermediaries
Six basic channel decisions
Potential influence strategies (Sheth 1989)

10.Promotion
Elements of the communication process
Promotions mix
Promotions objectives

11.Implementation
The implementation process
Total quality and marketing
The organizational/stakeholder interface
Relationship marketing

via: marketingteacher

SWOT Analysis Nike, Inc.

noreply@blogger.com (seo webdesigner) — Thu, 03 Jan 2008 17:10:00 +0000

Strengths.

Nike is a very competitive organization. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.' Nike has a healthy dislike of is competitors. At the Atlanta Olympics, Reebok went to the expense of sponsoring the games. Nike did not. However Nike sponsored the top athletes and gained valuable coverage.
Nike has no factories. It does not tie up cash in buildings and manufacturing workers. This makes a very lean organization. Nike is strong at research and development, as is evidenced by its evolving and innovative product range. They then manufacture wherever they can produce high quality product at the lowest possible price. If prices rise, and products can be made more cheaply elsewhere (to the same or better specification), Nike will move production.
Nike is a global brand. It is the number one sports brand in the World. Its famous 'Swoosh' is instantly recognisable, and Phil Knight even has it tattooed on his ankle.

Weaknesses.

The organization does have a diversified range of sports products. However, the income of the business is still heavily dependent upon its share of the footwear market. This may leave it vulnerable if for any reason its market share erodes.
The retail sector is very price sensitive. Nike does have its own retailer in Nike Town. However, most of its income is derived from selling into retailers. Retailers tend to offer a very similar experience to the consumer. Can you tell one sports retailer from another? So margins tend to get squeezed as retailers try to pass some of the low price competition pressure onto Nike.

Opportunities.

Product development offers Nike many opportunities. The brand is fiercely defended by its owners whom truly believe that Nike is not a fashion brand. However, like it or not, consumers that wear Nike product do not always buy it to participate in sport. Some would argue that in youth culture especially, Nike is a fashion brand. This creates its own opportunities, since product could become unfashionable before it wears out i.e. consumers need to replace shoes.
There is also the opportunity to develop products such as sport wear, sunglasses and jewellery. Such high value items do tend to have associated with them, high profits.
The business could also be developed internationally, building upon its strong global brand recognition. There are many markets that have the disposable income to spend on high value sports goods. For example, emerging markets such as China and India have a new richer generation of consumers. There are also global marketing events that can be utilised to support the brand such as the World Cup (soccer) and The Olympics.

Threats.

Nike is exposed to the international nature of trade. It buys and sells in different currencies and so costs and margins are not stable over long periods of time. Such an exposure could mean that Nike may be manufacturing and/or selling at a loss. This is an issue that faces all global brands.
The market for sports shoes and garments is very competitive. The model developed by Phil Knight in his Stamford Business School days (high value branded product manufactured at a low cost) is now commonly used and to an extent is no longer a basis for sustainable competitive advantage. Competitors are developing alternative brands to take away Nike's market share.
As discussed above in weaknesses, the retail sector is becoming price competitive. This ultimately means that consumers are shopping around for a better deal. So if one store charges a price for a pair of sports shoes, the consumer could go to the store along the street to compare prices for the exactly the same item, and buy the cheaper of the two. Such consumer price sensitivity is a potential external threat to Nike.

Disclaimer: This case study has been compiled from information freely available from public sources. It is merely intended to be used for educational purposes only.

via: marketingteacher

The Business Vision and Company Mission Statement

noreply@blogger.com (seo webdesigner) — Sat, 29 Dec 2007 11:12:00 +0000

While a business must continually adapt to its competitive environment, there are certain core ideals that remain relatively steady and provide guidance in the process of strategic decision-making. These unchanging ideals form the business vision and are expressed in the company mission statement.

In their 1996 article entitled Building Your Company's Vision, James Collins and Jerry Porras provided a framework for understanding business vision and articulating it in a mission statement.

The mission statement communicates the firm's core ideology and visionary goals, generally consisting of the following three components:

Core values to which the firm is committed

Core purpose of the firm

Visionary goals the firm will pursue to fulfill its mission

The firm's core values and purpose constitute its core ideology and remain relatively constant. They are independent of industry structure and the product life cycle.

The core ideology is not created in a mission statement; rather, the mission statement is simply an expression of what already exists. The specific phrasing of the ideology may change with the times, but the underlying ideology remains constant.

The three components of the business vision can be portrayed as follows:

Core
Values

Core
Purpose

Business
Vision

Visionary
Goals

Core Values

The core values are a few values (no more than five or so) that are central to the firm. Core values reflect the deeply held values of the organization and are independent of the current industry environment and management fads.

One way to determine whether a value is a core value to ask whether it would continue to be supported if circumstances changed and caused it to be seen as a liability. If the answer is that it would be kept, then it is core value. Another way to determine which values are core is to imagine the firm moving into a totally different industry. The values that would be carried with it into the new industry are the core values of the firm.

Core values will not change even if the industry in which the company operates changes. If the industry changes such that the core values are not appreciated, then the firm should seek new markets where its core values are viewed as an asset.

For example, if innovation is a core value but then 10 years down the road innovation is no longer valued by the current customers, rather than change its values the firm should seek new markets where innovation is advantageous.

The following are a few examples of values that some firms has chosen to be in their core:

excellent customer service

pioneering technology

creativity

integrity

social responsibility

Core Purpose

The core purpose is the reason that the firm exists. This core purpose is expressed in a carefully formulated mission statement. Like the core values, the core purpose is relatively unchanging and for many firms endures for decades or even centuries. This purpose sets the firm apart from other firms in its industry and sets the direction in which the firm will proceed.

The core purpose is an idealistic reason for being. While firms exist to earn a profit, the profit motive should not be highlighted in the mission statement since it provides little direction to the firm's employees. What is more important is how the firm will earn its profit since the "how" is what defines the firm.

Initial attempts at stating a core purpose often result in too specific of a statement that focuses on a product or service. To isolate the core purpose, it is useful to ask "why" in response to first-pass, product-oriented mission statements. For example, if a market research firm initially states that its purpose is to provide market research data to its customers, asking "why" leads to the fact that the data is to help customers better understand their markets. Continuing to ask "why" may lead to the revelation that the firm's core purpose is to assist its clients in reaching their objectives by helping them to better understand their markets.

The core purpose and values of the firm are not selected - they are discovered. The stated ideology should not be a goal or aspiration but rather, it should portray the firm as it really is. Any attempt to state a value that is not already held by the firm's employees is likely to not be taken seriously.

Visionary Goals

The visionary goals are the lofty objectives that the firm's management decides to pursue. This vision describes some milestone that the firm will reach in the future and may require a decade or more to achieve. In contrast to the core ideology that the firm discovers, visionary goals are selected.

These visionary goals are longer term and more challenging than strategic or tactical goals. There may be only a 50% chance of realizing the vision, but the firm must believe that it can do so. Collins and Porras describe these lofty objectives as "Big, Hairy, Audacious Goals." These goals should be challenging enough so that people nearly gasp when they learn of them and realize the effort that will be required to reach them.

Most visionary goals fall into one of the following categories:

Target - quantitative or qualitative goals such as a sales target or Ford's goal to "democratize the automobile."

Common enemy - centered on overtaking a specific firm such as the 1950's goal of Philip-Morris to displace RJR.

Role model - to become like another firm in a different industry or market. For example, a cycling accessories firm might strive to become "the Nike of the cycling industry."

Internal transformation - especially appropriate for very large corporations. For example, GE set the goal of becoming number one or number two in every market it serves.

While visionary goals may require significant stretching to achieve, many visionary companies have succeeded in reaching them. Once such a goal is reached, it needs to be replaced; otherwise, it is unlikely that the organization will continue to be successful. For example, Ford succeeded in placing the automobile within the reach of everyday people, but did not replace this goal with a better one and General Motors overtook Ford in the 1930's.

via: quickmba

SWOT Analysis

noreply@blogger.com (seo webdesigner) — Sat, 29 Dec 2007 11:10:00 +0000

A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan:

SWOT Analysis Framework

Environmental Scan
/	\
Internal Analysis	External Analysis
/ \	/ \
Strengths Weaknesses	Opportunities Threats
\|
SWOT Matrix

Strengths

A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:

patents

strong brand names

good reputation among customers

cost advantages from proprietary know-how

exclusive access to high grade natural resources

favorable access to distribution networks

Weaknesses

The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:

lack of patent protection

a weak brand name

poor reputation among customers

high cost structure

lack of access to the best natural resources

lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.

Opportunities

The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:

an unfulfilled customer need

arrival of new technologies

loosening of regulations

removal of international trade barriers

Threats

Changes in the external environmental also may present threats to the firm. Some examples of such threats include:

shifts in consumer tastes away from the firm's products

emergence of substitute products

new regulations

increased trade barriers

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity.

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:

SWOT / TOWS Matrix

	Strengths	Weaknesses
Opportunities	S-O strategies	W-O strategies
Threats	S-T strategies	W-T strategies

S-O strategies pursue opportunities that are a good fit to the company's strengths.

W-O strategies overcome weaknesses to pursue opportunities.

S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats.

W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats.

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The Strategic Planning Process

noreply@blogger.com (seo webdesigner) — Fri, 28 Dec 2007 14:54:00 +0000

In today's highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper. The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.

A simplified view of the strategic planning process is shown by the following diagram:

The Strategic Planning Process

Mission &
Objectives

Environmental
Scanning

Strategy
Formulation

Strategy
Implementation

Evaluation
& Control

Mission and Objectives

The mission statement describes the company's business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities.

Guided by the business vision, the firm's leaders can define measurable financial and strategic objectives. Financial objectives involve measures such as sales targets and earnings growth. Strategic objectives are related to the firm's business position, and may include measures such as market share and reputation.

Environmental Scan

The environmental scan includes the following components:

Internal analysis of the firm

Analysis of the firm's industry (task environment)

External macroenvironment (PEST analysis)

The internal analysis can identify the firm's strengths and weaknesses and the external analysis reveals opportunities and threats. A profile of the strengths, weaknesses, opportunities, and threats is generated by means of a SWOT analysis

An industry analysis can be performed using a framework developed by Michael Porter known as Porter's five forces. This framework evaluates entry barriers, suppliers, customers, substitute products, and industry rivalry.

Strategy Formulation

Given the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats.

To attain superior profitability, the firm seeks to develop a competitive advantage over its rivals. A competitive advantage can be based on cost or differentiation. Michael Porter identified three industry-independent generic strategies from which the firm can choose.

Strategy Implementation

The selected strategy is implemented by means of programs, budgets, and procedures. Implementation involves organization of the firm's resources and motivation of the staff to achieve objectives.

The way in which the strategy is implemented can have a significant impact on whether it will be successful. In a large company, those who implement the strategy likely will be different people from those who formulated it. For this reason, care must be taken to communicate the strategy and the reasoning behind it. Otherwise, the implementation might not succeed if the strategy is misunderstood or if lower-level managers resist its implementation because they do not understand why the particular strategy was selected.

Evaluation & Control

The implementation of the strategy must be monitored and adjustments made as needed.

Evaluation and control consists of the following steps:

Define parameters to be measured

Define target values for those parameters

Perform measurements

Compare measured results to the pre-defined standard

Make necessary changes

via: quickmba

Positioning-As Popularized by Al Ries and Jack Trout

noreply@blogger.com (seo webdesigner) — Fri, 28 Dec 2007 14:51:00 +0000

In their 1981 book, Positioning: The Battle for your Mind, Al Ries and Jack Trout describe how positioning is used as a communication tool to reach target customers in a crowded marketplace. Jack Trout published an article on positioning in 1969, and regular use of the term dates back to 1972 when Ries and Trout published a series of articles in Advertising Age called "The Positioning Era." Not long thereafter, Madison Avenue advertising executives began to develop positioning slogans for their clients and positioning became a key aspect of marketing communications.

Positioning: The Battle for your Mind has become a classic in the field of marketing. The following is a summary of the key points made by Ries and Trout in their book.

Information Overload

Ries and Trout explain that while positioning begins with a product, the concept really is about positioning that product in the mind of the customer. This approach is needed because consumers are bombarded with a continuous stream of advertising, with advertisers spending several hundred dollars annually per consumer in the U.S. The consumer's mind reacts to this high volume of advertising by accepting only what is consistent with prior knowledge or experience.

It is quite difficult to change a consumer's impression once it is formed. Consumers cope with information overload by oversimplifying and are likely to shut out anything inconsistent with their knowledge and experience. In an over-communicated environment, the advertiser should present a simplified message and make that message consistent with what the consumer already believes by focusing on the perceptions of the consumer rather than on the reality of the product.

Getting Into the Mind of the Consumer

The easiest way of getting into someone's mind is to be first. It is very easy to remember who is first, and much more difficult to remember who is second. Even if the second entrant offers a better product, the first mover has a large advantage that can make up for other shortcomings.

However, all is not lost for products that are not the first. By being the first to claim a unique position in the mind the consumer, a firm effectively can cut through the noise level of other products. For example, Miller Lite was not the first light beer, but it was the first to be positioned as a light beer, complete with a name to support that position. Similarly, Lowenbrau was the most popular German beer sold in America, but Beck's Beer successfully carved a unique position using the advertising,

"You've tasted the German beer that's the most popular in America. Now taste the German beer that's the most popular in Germany."

Consumers rank brands in their minds. If a brand is not number one, then to be successful it somehow must relate itself to the number one brand. A campaign that pretends that the market leader does not exist is likely to fail. Avis tried unsuccessfully for years to win customers, pretending that the number one Hertz did not exist. Finally, it began using the line,

"Avis in only No. 2 in rent-a-cars, so why go with us? We try harder."

After launching the campaign, Avis quickly became profitable. Whether Avis actually tried harder was not particularly relevant to their success. Rather, consumers finally were able to relate Avis to Hertz, which was number one in their minds.

Another example is that of the soft-drink 7-Up, which was No. 3 behind Coke and Pepsi. By relating itself to Coke and Pepsi as the "Uncola", 7-Up was able to establish itself in the mind of the consumer as a desirable alternative to the standard colas.

When there is a clear market leader in the mind of the consumer, it can be nearly impossible to displace the leader, especially in the short-term. On the other hand, a firm usually can find a way to position itself in relation to the market leader so that it can increase its market share. It usually is a mistake, however, to challenge the leader head-on and try to displace it.

Positioning of a Leader

Historically, the top three brands in a product category occupy market share in a ratio of 4:2:1. That is, the number one brand has twice the market share of number two, which has twice the market share of number three. Ries and Trout argue that the success of a brand is not due to the high level of marketing acumen of the company itself, but rather, it is due to the fact that the company was first in the product category. They use the case of Xerox to make this point. Xerox was the first plain-paper copier and was able to sustain its leadership position. However, time after time the company failed in other product categories in which it was not first.

Similarly, IBM failed when it tried to compete with Xerox in the copier market, and Coca-Cola failed in its effort to use Mr. Pibb to take on Dr. Pepper. These examples support the point that the success of a brand usually is due to its being first in the market rather than the marketing abilities of the company. The power of the company comes from the power of its brand, not the other way around.

With this point in mind, there are certain things that a market leader should do to maintain the leadership position. First, Ries and Trout emphasize what it should not do, and that is boast about being number one. If a firm does so, then customers will think that the firm is insecure in its position if it must reinforce it by saying so.

If a firm was the first to introduce a product, then the advertising campaign should reinforce this fact. Coca-Cola's "the real thing" does just that, and implies that other colas are just imitations.

Another strategy that a leader can follow to maintain its position is the multibrand strategy. This strategy is to introduce multiple brands rather than changing existing ones that hold leadership positions. It often is easier and cheaper to introduce a new brand rather than change the positioning of an existing brand. Ries and Trout call this strategy a single-position strategy because each brand occupies a single, unchanging position in the mind of the consumer.

Finally, change is inevitable and a leader must be willing to embrace change rather than resist it. When new technology opens the possibility of a new market that may threaten the existing one, a successful firm should consider entering the new market so that it will have the first-mover advantage in it. For example, in the past century the New York Central Railroad lost its leadership as air travel became possible. The company might have been able to maintain its leadership position had it used its resources to form an airline division.

Sometimes it is necessary to adopt a broader name in order to adapt to change. For example, Haloid changed its name to Haloid Xerox and later to simply Xerox. This is a typical pattern of changing Name 1 to an expanded Name 1 - Name 2, and later to just Name 2.

Positioning of a Follower

Second-place companies often are late because they have chosen to spend valuable time improving their product before launching it. According to Ries and Trout, it is better to be first and establish leadership.

If a product is not going to be first, it then must find an unoccupied position in which it can be first. At a time when larger cars were popular, Volkswagen introduced the Beetle with the slogan "Think small." Volkswagen was not the first small car, but they were the first to claim that position in the mind of the consumer.

Other positions that firms successfully have claimed include:

age (Geritol)

high price (Mobil 1 synthetic engine lubricant)

gender (Virginia Slims)

time of day (Nyquil night-time cold remedy)

place of distribution (L'eggs in supermarkets)

quantity (Schaefer - "the one beer to have when you're having more than one.")

It most likely is a mistake to build a brand by trying to appeal to everyone. There are too many brands that already have claimed a position and have become entrenched leaders in their positions. A product that seeks to be everything to everyone will end up being nothing to everyone.

Repositioning the Competition

Sometimes there are no unique positions to carve out. In such cases, Ries and Trout suggest repositioning a competitor by convincing consumers to view the competitor in a different way. Tylenol successfully repositioned aspirin by running advertisements explaining the negative side effects of aspirin.

Consumers tend to perceive the origin of a product by its name rather than reading the label to find out where it really is made. Such was the case with vodka when most vodka brands sold in the U.S. were made in the U.S. but had Russian names. Stolichnaya Russian vodka successfully repositioned its Russian-sounding competitors by exposing the fact that they all actually were made in the U.S., and that Stolichnaya was made in Leningrad, Russia.

When Pringle's new-fangled potato chips were introduced, they quickly gained market share. However, Wise potato chips successfully repositioned Pringle's in the mind of consumers by listing some of Pringle's non-natural ingredients that sounded like harsh chemicals, even though they were not. Wise potato chips of course, contained only "Potatoes. Vegetable oil. Salt." As a resulting of this advertising, Pringle's quickly lost market share, with consumers complaining that Pringle's tasted like cardboard, most likely as a consequence of their thinking about all those unnatural ingredients. Ries and Trout argue that is usually is a lost cause to try to bring a brand back into favor once it has gained a bad image, and that in such situations it is better to introduce an entirely new brand.

Repositioning a competitor is different from comparative advertising. Comparative advertising seeks to convince the consumer that one brand is simply better than another. Consumers are not likely to be receptive to such a tactic.

The Power of a Name

A brand's name is perhaps the most important factor affecting perceptions of it. In the past, before there was a wide range of brands available, a company could name a product just about anything. These days, however, it is necessary to have a memorable name that conjures up images that help to position the product.

Ries and Trout favor descriptive names rather than coined ones like Kodak or Xerox. Names like DieHard for a battery, Head & Shoulders for a shampoo, Close-Up for a toothpaste, People for a gossip magazine. While it is more difficult to protect a generic name under trademark law, Ries and Trout believe that in the long run it is worth the effort and risk. In their opinion, coined names may be appropriate for new products in which a company is first to market with a sought-after product, in which case the name is not so important.

Margarine is a name that does not very well position the product it is describing. The problem is that it sounds artificial and hides the true origin of the product. Ries and Trout propose that "soy butter" would have been a much better name for positioning the product as an alternative to the more common type of butter that is made from milk. While some people might see soy in a negative light, a promotional campaign could be developed to emphasize a sort of "pride of origin" for soy butter.

Another everyday is example is that of corn syrup, which is viewed by consumers as an inferior alternative to sugar. To improve the perceptions of corn syrup, one supplier began calling it "corn sugar", positioning it as an alternative to cane sugar or beet sugar.

Ries and Trout propose that selecting the right name is important for positioning just about anything, not just products. For example, the Clean Air Act has a name that is difficult to oppose, as do "fair trade" laws. Even a person's name impacts his or her success in life. One study showed that on average, schoolteachers grade essays written by children with names like David and Michael a full letter grade higher than those written by children with names like Hubert and Elmer.

Eastern Airlines was an example of a company limited by its name. Air travel passengers always viewed it as a regional airline that served the eastern U.S., even though it served a much wider area, including the west coast. Airlines such as American and United did not have such a perception problem. (Eastern Airlines ceased operations in 1991.)

Another problem that some companies face is confusion with another company that has a similar name. Consumers frequently confused the tire manufacturer B.F. Goodrich with Goodyear. The Goodyear blimp had made Goodyear tires well-known, and Goodyear frequently received credit by consumers for tire products that B.F. Goodrich has pioneered. (B.F. Goodrich eventually sold its tire business to Uniroyal.)

Other companies have changed their names to something more general, and as a result create confusion with other similar-sounding companies. Take for instance The Continental Group, Inc. and The Continental Corporation. Few people confidently can say which makes cans and which sells insurance.

The No-Name Trap

People tend use abbreviations when they have fewer syllables than the original term. GE is often used instead of General Electric. IBM instead of International Business Machines. In order to make their company names more general and easier to say, many corporations have changed their legal names to a series of two or three letters. Ries and Trout argue that such changes usually are unwise.

Companies having a broad recognition may be able to use the abbreviated names and consumers will make the translation in their minds. When they hear "GM", they think "General Motors". However, lesser known companies tend to lose their identity when they use such abbreviations. Most people don't know the types of business in which companies named USM or AMP are engaged.

The same applies to people's names as well. While some famous people are known by their initials (such as FDR and JFK), it is only after they become famous that they begin using their initials. Ries and Trout advise managers who aspire for name recognition to use an actual name rather then first and middle initials. The reason that initials do not lead to recognition is that the human mind works by sounds, not by spellings.

Most companies began selling a single product, and the name of the company usually reflected that product. As the successful firms grew in to conglomerates, their original names became limiting. Ries and Trout advise companies seeking more general names to select a shorter name made of words, not individual letters. For example, for Trans World Airlines, they favored truncating it simply to Trans World instead removing all words and using the letters TWA.

The Free-Ride Trap

A company introducing a new product often is tempted to use the brand name of an existing product, avoiding the need to build the brand from scratch. For example, Alka-Seltzer named a new product Alka-Seltzer Plus. Ries and Trout do not favor this strategy since the original name already in positioned in the consumer's mind. In fact, consumers viewed Alka-Seltzer Plus simply as a better Alka-Seltzer, and the sales of Alka-Seltzer Plus came at the expense of Alka-Seltzer, not from the market share of the competition.

Some firms have built a wide range of products on a single brand name. Others, such as Procter & Gamble have selected new names for each new product, carefully positioning the product in a different part of the consumer's mind. Ries and Trout maintain that a single brand name cannot hold multiple positions; either the new product will not be successful or the original product bearing the name will lose its leadership position.

Nonetheless, some companies do not want their new products to be anonymous with an unrecognized name. However, Ries and Trout propose that anonymity is not so bad; in fact, it is a resource. When the product eventually catches the attention of the media, it will have the advantage of being seen without any previous bias, and if a firm prepares for this event well, once under the spotlight the carefully designed positioning can be communicated exactly as intended. This moment of fame is a one-shot event and once it has passed, the product will not have a second chance to be fresh and new.

The Line Extension Trap

Line extensions are tempting for companies as a way to leverage an existing popular brand. However, if the brand name has become near generic so that consumers consider the name and the product to be one and the same, Ries and Trout generally do not believe that a line extension is a good idea.

Consider the case of Life Savers candy. To consumers, the brand name is synonymous with the hard round candy that has a hole in the middle. Nonetheless, the company introduced a Life Savers chewing gum. This use of the Life Savers name was not consistent with the consumer's view of it, and the Life Savers chewing gum brand failed. The company later introduced the first brand of soft bubble gum and gave it a new name: Bubble Yum. This product was very successful because it not only had a name different from the hard candy, it also had the the advantage of being the first soft bubble gum.

Ries and Trout cite many examples of failures due to line extensions. The consistent pattern in these cases is that either the new product does not succeed, or the original successful product loses market share as a result of its position being weakened by a diluted brand name.

When Line Extensions Can Work

Despite the disadvantages of line extensions, there are some cases in which it is not economically feasible to create a new brand and in which a line extension might work. Some of the cases provided by Ries and Trout include:

Low volume product - if the sales volume is not expected to be high.

Crowded market - if there is no unique position that the product can occupy.

Small ad budget - without strong advertising support, it might make sense to use the house name.

Commodity product - an undifferentiated commodity product has less need of its own name than does a breakthrough product.

Distribution by sales reps - products distributed through reps may not need a separate brand name. Those sold on store shelves benefit more from their own name.

Positioning Has Broad Applications

The concept of positioning applies to products in the broadest sense. Services, tourist destinations, countries, and even careers can benefit from a well-developed positioning strategy that focuses on a niche that is unoccupied in the mind of the consumer or decision-maker.

via: quickmba

Market Share

noreply@blogger.com (seo webdesigner) — Fri, 28 Dec 2007 14:50:00 +0000