ADDIS ABABA MEDICAL AND BUSINESS

COLLEGE

Nursing Assistance
Level III

LEARNING GUIDE #04

Unit of Competence: IMPROVE BUSINESS
PRACTICE
Title: IMPROVING BUSINESS PRACTICE
LG Code : HLT NUA3 14 0611
TTLM Code : HLT NUA14 0611 V1

LO4- Develop marketing and business promotional plans

LO5- Develop business growth plans
LO6- IMPLEMENT AND MONITOR PLANS

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LO4- Develop marketing and business promotional plans

INSTRUCTION SHEET LEARNING GUIDE #04

This learning guide is developed to provide you the necessary information regarding the
Following content coverage and topics –
4.1 Review of vision, objective, target of business statement
Objectives should be ‘SMART’, that is
 Specific

 Measurable
 Achievable
 Realistic
 Time defined
1.2 conducting market research
 Market research data includes:
 Data about existing clients
 Data about possible new clients
 Data from internal sources
 Data from external sources such as:
 Trade associations/journals
 Yellow Pages small business surveys
 Libraries
 Internet
 Chamber of Commerce
 Industry data
 Secondary market research
 Primary market research such as:

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 Telephone surveys
 Personal interviews
 Mail surveys
1.3 Definition of market

4.3.1 Obtain market research data

4.3.2 Identifying target market

4.3.3 Developing market position

Market position should include data on:
 Product
 The good or service provided
 Product mix
 The core product - what is bought
 The tangible product - what is perceived
 The augmented product - total package of consumer
 Features/benefits
 Product differentiation from competitive products
 New/changed products
 Price and pricing strategies (cost plus, supply/demand, ability to pay, etc.)
 Pricing objectives (profit, market penetration, etc.)
 Cost components
 Market position Distribution strategies
 Marketing channels
 Promotion
 Promotional strategies
 Target audience
 Communication
 Promotion budget

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 4.3.4 Developing product brand practice

Practice brand may include:

 Practice image
 Practice logo/letter head/signage
 Phone answering protocol
 Facility decor
 Slogans
 Templates for communication/invoicing
 Style guide
 Writing style
 AIDA (attention, interest, desire, action)

4.3.5 Benefits of product or service practice

Benefits may include:
 Features as perceived by the client
 Benefits as perceived by the client
4.3.6 Developing or selecting promotional tools
Promotion tools include:
 Networking and referrals
 Seminars
 Advertising
 Press releases
 Publicity and sponsorship
 Brochures
 Newsletters (print and/or electronic)
 Websites
 Direct mail
 Telemarketing/cold calling
4.4 The Competitive Environment
4.4.1. Definition of competition
4.4.2 Assessing the nature of competition
Competitor analysis includes-
 Competitor offerings
 Competitor promotion strategies and activities

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  Competitor profile in the market place


4.4.3. Competitive strategies and competitive advantages

4.4.4 Types of competitive strategies
4.4.5. The five forces that determine industrial profitability

Learning Activities

1. Read the information written in the “Information Sheets”.

2. If you earned a satisfactory evaluation proceed to next module. However, if your rating is

unsatisfactory, see your teacher for further instructions.

3. Read the “Operation Sheet” and try to understand the procedures discussed.

4. Practice the steps or procedures as illustrated in the operation sheet. Go to your teacher if you

need clarification or you want answers to your questions or you need assistance in understanding

a particular step or procedure

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 Information Sheet – 1 Review of vision, objective, target of business statement

Learning Objectives

After completing this chapter, the student should be able to:

1. Review the vision, objective, target of business statement.

2. Understand How to conduct market research.
3. Describe definition of market research.
4. Understand the competitive environment.
5. Understand the concept of competitive advantage and its importance
6. Be familiar with Michael Porter’s Five-Forces Model of competition
7. Know the benefits and limitations of each of the basic forms of competitive advantages
8. Understand the effect of competition on business
9. Assess the forces of competition
10. Examine the dimensions of competitive strategies
11. Learn how to cope up with a competitive environment.

4.1 Review of vision, objective, target of business statement

The objectives should be "SMART." They should be:

Specific: clear about what, where, when, and how the situation will be changed;
Measurable: able to quantify the targets and benefits;
Achievable: able to attain the objectives (Knowing the resources and capacities at the disposal
of the community)
Realistic: able to obtain the level of change reflected in the objective; and
Time bound: stating the time period in which they will each be accomplished.

To achieve the objectives of a project, it is essential to assess the resources available within the
community and those that can be accessed from external sources...

The planners, implementers and community members should also identify the constraints they
may face in executing the project and how they can overcome them. Based on the extent of the

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constraints and positive forces, the implementers may decide to continue with the project or to
drop it.

The goals and objectives provide the basis for monitoring and evaluating a project. They are the
yardsticks upon which project success or failure is measured.

4.2 conducting market research

You may have a great idea for a product or service, but before you go any further, first make sure
there's a market for it.

So you have a great idea for a product--something that's bound to capture the hearts and minds
(and wallets) of consumers everywhere. Or perhaps you have stumbled on a service that isn't
being offered by anyone else--one that is desperately needed. This is your opportunity! Don't
hesitate . . . don't look back . . . jump right into it and . . .

Wait! Before you shift into high gear, you must determine whether there really is a market for
your product or service. Not only that, you need to ascertain what--if any--fine-tuning is needed.
Quite simply, you must conduct market research.

Many business owners neglect this crucial step in product development for the sole reason that
they don't want to hear any negative feedback. They are convinced their product or service is
perfect just the way it is, and they don't want to risk tampering with it.

Other entrepreneurs bypass market research because they fear it will be too expensive. With all
the other startup costs you're facing, it's not easy to justify spending money on research that will
only prove what you knew all along: Your product is a winner.

Regardless of the reason, failing to do market research can amount to a death sentence for your
product. "A lot of companies skim over the important background information because they're so
interested in getting their product to market," says Donna Barson, president and owner of Barson
Marketing Inc., a marketing, advertising and public relations consulting firm. "But the
companies that do the best are the ones that do their homework."

Market Research Methods

in conducting your market research, you will gather two types of data: primary and secondary.

Primary research is information that comes directly from the source--that is, potential
customers. You can compile this information yourself or hire someone else to gather it for you
via surveys, focus groups and other methods. Secondary research involves gathering statistics,
reports, studies and other data from organizations such as government agencies, trade
associations and your local chamber of commerce.

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Secondary Research
The vast majority of research you can find will be secondary research. While large companies
spend huge amounts of money on market research, the good news is that plenty of information is
available for free to entrepreneurs on a tight budget. The best places to start? Your local library
and the internet
 Market research data includes:

1. Data about existing clients

Customer- a person who purchases goods or services from another…

Client- a person or group that uses the professional advice or services of a lawyer, accountant,
advertising agency, architect, etc.”
Definition of 'Client Base'

A company's primary source of business. A client base consists of the current customers paying
for the products, or services, as well as potential customers which have a high likelihood of
becoming customers. Businesses rely on this group for most of the business sales, and focus on
them for developing new products, or advertising. A client base is usually defined using
demographics such as age, location or gender, and can change over time.

'Client Base'

Developing, maintaining and expanding its client base is a major concern for any business, since
without clients, the business cannot earn revenue. Strategies companies use to increase this base
include networking, word-of-mouth marketing and referrals, developing a specialty or area of
expertise, staying in touch with existing clients, showing appreciation for clients and consistently
meeting or exceeding expectations.

Don't forget your existing customers

In days of old, the sales focus of a company was about maximising the number of products or
services they sold, at all costs. This antiquated approach of ‘transaction marketing’ was often to
the detriment of building long-term customer relationships, and failed to maximise the potential
of their client base. It was a short-term, limited communication strategy focusing on individual
sales, and was inevitable counterproductive.

Nowadays, the paradigm is very different. The hard and fast sell approach reminiscent of the
second-hand car dealer is a business dinosaur that has become extinct. The most effective
organisations are those that realise the true direct value of nurturing lasting relationships with
customers, and reaping the tremendous advantages as a result. They have learnt the value of
relationship based selling, and discovered that it not only increases revenue but decreases

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marketing costs, resulting in a strong bottom line.

Never has this lesson been more valuable. In today’s fast-paced and competitive environment,
and in the face of a global economic downturn, win-win is the only game to play. Companies
that grasp this concept fully, and maximise the potential of technology in their marketing
strategies, will survive and thrive.

Any organisation that needs a health check in terms of their customer relationship model ought
to implement policies, procedures and measures along these lines:

- Regular and quality communication is maintained with their existing customers

- Measures are taken to show true commitment to meeting their customers needs

- Stringent customer service policies designed to exceed expectations

- Ensuring sales approaches are benefit driven

- Building long term relationship strategies

Consumers will always choose to buy from companies who make them feel valued. By showing
a strong commitment in the core principles of service and relationship building, companies will
often not have to be the most competitive on price or lead time. The net result will be higher
profits and a true win-win.

It’s important to emphasise that we have been talking about sales and marketing strategy with
existing clients. Many businesses make two significant and common mistakes; they spend huge
amounts in an incessant and cyclical drive to find new customers, and don’t spend enough time
and money keeping the best ones they already have.

Many organisations recognise the need to shift or increase their marketing focus. Some invest in
training their in-house staff through seminars and training schemes to improve individual’s skills
and development. However, this can be a costly exercise, and the individuals involved typically
don’t have the time resources available to put into practice their new learning.

Other organisations are increasingly looking for specialist help in maximising the revenue
potential of their client base, by outsourcing to specialist companies. Often, this will be in the
form of outbound telemarketing companies, who are purely dedicated to a core set of goals and
have specific professional experience in getting the most of customers, not necessarily having to
involve a direct sale.

Here are some key ways an outbound telemarketing company can help you unlock the potential
of your existing client base, and some simple examples:

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Follow up calls –

This may range from simply checking that your client has received requested information, to
getting an update on a sales quote. Customers enjoy regular and seemingly inoffensive contact; it
heightens their experience of dealing with your company, and creates a good impression.

Customer Care Strategies –

This may be as simple as checking in with your customer to see how they are, to actively
providing them with a great post sales service. The customer experience doesn’t end when they
receive your unit of product or service, you can find out how their getting on with it, and
discover whether you can make their next purchase experience even better. This is also a great
platform to implement pro-active customer care initiatives such as loyalty or reward schemes.

You may also want to use the opportunity to find out afresh what the customer feels is your
organisation’s strengths and weaknesses, what makes them choose you over others, and discover
what else they may benefit from, which you could provide.

Database updating and Data Mining -

Information is power, and old data and information on your client’s company can be
embarrassing to yours. Also, this is a great opportunity to find out more information about your
client that can be later used for a targeted marketing campaign.

Knowing which questions to ask can help a company identify their optimum customer profile.
Remember Pareto’s 80/20 rule; eighty percent of a company sales and profit revenue derives
from twenty percent of its customer. If you can identify a profile pattern within that twenty
percent cash cow, you’re ideally equipped to find new customers that are similar.

Surveys and Focus Groups -

Perhaps you are looking into a new product or service, and need to test the market. By carrying
out surveys and organising focus groups you can get critical feedback which may substantially
change your product or service package; you’ll know what works, what doesn’t and may even
discover completely new ideas or enhancements.

New Product Sales Campaigns –

Much time and money is invested in the launching of new products, yet all too often the
marketing focus is on pushing it on new potential clients. Your existing clients really would gain
from knowing what new things you have to offer, and hearing about how it can benefit them.

Lead Generation -

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This is the traditional bread and butter fare of most telemarketing companies. It’s easy to get
complacent with existing clients, and forget to sell to them. Let’s be clear, it should be easier to
sell to someone you already deal with than someone you don’t. It’s a mistake to assume that
they’ll come to you when they need something; sometimes a customer needs prompting to send a
new purchase order or quote request. Your best customers will sometimes pro actively look
within their organisation for a new opportunity for you on your behalf!

Customer Retention -

If you’ve noticed a decline in order values from your customers, or worse are in danger of losing
them, steps can be taken to find out exactly what’s lacking in the client’s experience, and what it
would take to turn things around. Not only will this help with retention, but it will also inform
your management as to how to take better preventative measures in the future.

Seminar organization –

Once a seminar is devised and a venue booked, calls can be made to discuss its benefits with
your clients, arrange attendance and disseminate literature and relevant information. They can
then call the clients after the event to get a true measure of the seminars success.

All these examples discussed will help you meet your goals. Whatever approach you decide to
take when ensuring your business is customer relationship focused, you will find that nurturing
your long-standing client base will have a reciprocal effect and ensuring the longevity and
profitability of your business.

Ten Tips for Marketing to Existing Clients and Customers

No doubt you're familiar with the adage about a bird in the hand being worth two in the bush.
Well, this old saw is especially appropriate when talking about customers. But you'll have to
adjust the math: on average, finding a new customer costs five times as much as keeping an
existing one!

That's reason enough right there to start marketing to your existing customer base. Here are 10
expert strategies to motivate your customers to keep coming back.

1. Talk to them. How you communicate with your customers isn't that important; what's
important is that you do it! Stay in touch with email newsletters, mailings, or a blog.
These methods remind your clients and customers that you're around when they need
you. You can even call them to let them know about a sale, a new service you are
offering, or just to ask if there's anything else you can do for them.
2. Get personal. If you want your company name to be the first thing people think of when
they need your product or service, you need to build personal relationships with your

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 customers. That's why it's helpful to call or send a card on special occasions — like
birthdays, anniversaries, or promotions.
3. Show your appreciation. Letting them know you appreciate them builds a personal link
and can help keep clients loyal. Something simple like sending a $5 gift certificate to a
coffee chain and saying “Have a drink on me” goes a long way in relationship building.
You may consider thank you notes to be no-brainers, but you'd be surprised at how many
entrepreneurs neglect to write them. Take the time to show your customers that you
genuinely appreciate their business, and they'll remember your thoughtfulness.
4. Bring people together. Linking up your clients and referring them business is a powerful
way to encourage loyalty. People never forget who referred them, and by helping them
grow their business, they in turn might need your services and products more as well.
5. Take them out. Regular face-to-face contact is critical. Get together over coffee or lunch
regularly, and try to spend time in a non-sales capacity. Entertaining clients at home with
a networking cocktail party, where you can introduce them to others who also might help
their businesses, gives clients a sense of belonging to your business community.
6. Manage your reputation. Just as an unhappy customer can cause a lot of damage to
your business reputation, good customer service keeps people coming back and brings in
new customers over the long term.
7. Spread the good news. If an article is written about your business or you are quoted in a
newspaper or magazine, send copies to your existing customers and clients. This will
keep you in mind, bolster their confidence in you, and encourage them to recommend you
to others.
8. Ask for feedback. Ask your existing customers if there are ways you can improve your
product or service. When you ask customers for feedback and take their concerns
seriously, they feel a sense of ownership in what you're doing and thus become more
loyal to your products and services.
9. Follow up. You can't reach out to someone once and have a customer for life; you need
to reach out to them regularly. Like anything worthwhile, consistent follow-up requires a
lot of effort, but over time you'll reap the benefits of a steady stream of repeat business
and referrals.
10. Get involved. It's important to demonstrate your commitment to your community. If a
client has a particular charitable venture, consider contributing time, money, or goods to
the cause.

1. Data about possible new clients

3. Data from internal sources
The term “internal data” is used here to denote any information useful to the decision-making
process found within the company. Internal data are usually derived from six sources the
accounting system, sales reports, the client list, a Web site “hits” report, company staff, and
previous studies. It should be pointed out that a survey or study performed by the company is
considered primary data gathering at the time of the study, but that the report retained as a file
then becomes part of the internal data. These are all valuable tools for measuring the
performance of cultural organizations.

The accounting system can furnish a great deal of interesting information – for example, the
break-even point for the company as a whole or for each company -product individually. It also

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enables the marketing manager to measure how profitable corporate marketing efforts have been.
An analysis of the data supplied by the accounting system can orient the firm and the gathering
of primary and secondary data.

Companies can also use data drawn from sales reports generated by the box office or customer
billings. Box-office data enable the marketing manager to plot the sales curve of a particular
event, compare it to previous years, and decide, if necessary, what measures to take. These
measures may affect one or several variables in the marketing mix. For example, if there is
always a drop in sales a few weeks after the start of an event, it might be worth increasing the
promotion budget for this period in order to maintain or increase attendance figures.

Such data enable a company to correct a strategy, based on the results obtained. Over the years,
company standards may develop as guidelines not only for analyzing or forecasting sales figures
but also for enhancing the marketing planning process.

The client, subscriber, or donor list of an organization, be it commercial or non-profit, is a mine

of interesting information. The geographic location of customers, for example, is actually a
company’s trading area. As seen in Chapter 8, this is a simple method used to measure a
company’s penetration in a specific region or neighbor hood.

For other useful information, the marketing manager need look no further than the staff members
who actually come into contact with the customers. These include telephone operators, ticket
agents, ushers, security guards, guide-interpreters, and restaurant and bar personnel. Employees
in communications or sales can collect data that may prove highly relevant to those making the
final decisions.

Of course, every analyst must be well acquainted with previous studies or surveys. Although the
information may have become outdated, it can provide important clues on how to analyze the
current situation. It might even be worthwhile repeating the experiment to compare the new data
with the old.

Finally, thanks to the proliferation of Web sites, it is relatively easy for a company to obtain
information on a particular industry. For example, all professional associations in the arts and
cultural sector have an Internet site, many of which provide direct links to the association’s
member organizations.

4. Data from external sources such as:

a. Trade associations/journals

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Trade association

A trade association, also known as an industry trade group, business association or sector
association is an organization founded and funded by businesses that operate in a specific
industry. An industry trade association participates in public relations activities such as
advertising, education, political donations, lobbying and publishing, but its main focus is
collaboration between companies, or standardization. Associations may offer other services, such
as producing conferences, networking or charitable events or offering classes or educational
materials. Many associations are non-profit organizations governed by bylaws and directed by
officers who are also members.

In countries with a social market economy the role of trade associations is often taken by
employers' organizations which also have a role in the social dialogue.

Trade Journals

Trade Journals can be a key source of information about people, businesses and industries, but it
can be tricky to find the right journal for your research, and even then it can be tricky to get
articles from that journal. Here's some direction on how to tackle these tasks.

b. Yellow Pages small business surveys

Yellow pages refer to a telephone directory of businesses, organized by category, rather than
alphabetically by business name and in which advertising is sold. As the name suggests, such
directories were originally printed on yellow paper, as opposed to white pages for non-
commercial listings. The traditional term yellow pages is now also applied to online directories
of businesses.

In many countries, including Canada, the United Kingdom, Australia, and elsewhere, "Yellow
Pages" (and/or any applicable local translations), as well as the "Walking Fingers" logo first
introduced in the 1970s by the Bell System-era AT&T, are registered trademarks, though the
owner varies from country to country, usually being held by the main national telephone
company (or a subsidiary or spinoff thereof).[1][2] However, in the United States, neither the name
nor the logo were registered as trademarks by AT&T, and are freely used by several publishers. [3]

The Yellow Pages® Small Business IndexTM is an ongoing series of surveys designed to track
confidence and
behaviour in the small business sector.
The primary objectives of the Index are to track small business activity over the past three
months; expectations
over both the next three and 12 months; and to measure overall confidence within the small
business community.
A second purpose is to provide an independent, objective channel for reporting proprietors'
experience and
attitudes on key issues.

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c. Libraries
A library (from French "librairie"; Latin "liber" = book) is an organized collection of
resources made accessible to a defined community for reference or borrowing. It provides
physical or digital access to material, and may be a physical building or room, or a virtual
space, or both.[1] A library's collection can include books, periodicals, newspapers,
manuscripts, films, maps, prints, documents, microform, CDs, cassettes, videotapes, DVDs,
e-books, audiobooks, databases, and other formats. Libraries range in size from a few shelves
of books to several million items. In Latin and Greek, the idea of bookcase is represented by
Bibliotheca and Bibliothēkē (Greek: βιβλιοθήκη): derivatives of these mean library in many
modern languages, e.g. French bibliothèque.

d. Internet

What Is the 'Internet'? Is It the Same as the 'Web'?

Question: What Is the 'Internet'? Is It the Same as the 'Web'?

Answer: The Internet is a massive public spider web of computer connections. The Internet
connects personal computers, mainframes, cell phones, GPS units, music players, soda pop
machines, car alarms, and even dog collars. All of these computer connections exist for the sake
of free information sharing. The Internet is a broadcast medium for the everyperson. Built
with the same freedom-of-messaging motivation as HAM radio of the 1970's, the modern
Internet is a daily tool for millions of people to trade signals with each other.

The Internet (or 'Net') is built on a chaotic mishmash of hardware, governed by minimal
standards and even fewer rules. Thousands of different software packages broadcast on the Net,
connecting millions of users each day. During the Clinton administration, the Internet was
nicknamed "The Information Superhighway", a term which has now become grossly inadequate
to describe the sheer magnitude of the Internet's reach today.

The Internet's hardware is vast: it is a chaotic combination of high-speed optic fiber cables,
regular network cables, wireless transmitters, and satellite connections. No single organization
owns the Internet's hardware, no single organization governs its use. The Internet truly is a
marvel of free broadcasting and amateur publishing.

Anyone can use the Internet. As long as you have a computer, cell phone, or other internet-
enabled device, you simply find a free or paid place to connect to the Internet. Once you are
connected (sometimes called 'logged on'), you can broadcast and receive all kinds of signals.

A detailed explanation of the Internet follows here:

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1: The Internet is a Big Collection of Computers and Cables.

The Internet is named for "interconnection of computer networks". It is a massive hardware

combination of millions of personal, business, and governmental computers, all connected like
roads and highways. The Internet started in the 1960's under the original name "ARPAnet".
ARPAnet was originally an experiment in how the US military could maintain communications
in case of a possible nuclear strike. With time, ARPAnet became a civilian experiment,
connecting university mainframe computers for academic purposes. As personal computers
became more mainstream in the 1980's and 1990's, the Internet grew exponentially as more users
plugged their computers into the massive network. Today, the Internet has grown into a public
spiderweb of millions of personal, government, and commercial computers, all connected by
cables and by wireless signals.

No single person owns the Internet. No single government has authority over its operations.
Some technical rules and hardware/software standards enforce how people plug into the Internet,
but for the most part, the Internet is a free and open broadcast medium of hardware networking.

2: The Web Is a Big Collection of HTML Pages on the Internet.

The World Wide Web, or "Web" for short, is that large software subset of the Internet dedicated
to broadcasting HTML pages. The Web is viewed by using free software called web browsers.
Born in 1989, the Web is based on hypertext transfer protocol, the language which allows you
and me to "jump" (hyperlink) to any other public web page. There are over 40 billion public web
pages on the Web today.

E.Chamber of Commerce- A chamber of commerce (also referred to in some circles as a

board of trade) is a form of business network, e.g., a local organization of businesses whose
goal is to further the interests of businesses. Business owners in towns and cities form these local
societies to advocate on behalf of the business community. Local businesses are members, and
they elect a board of directors or executive council to set policy for the chamber. The board or
council then hires a President, CEO or Executive Director, plus staffing appropriate to size, to
run the organization.

The first chamber of commerce was founded in 1599 in Marseille, France. It would be followed
65 years later by another official chamber of commerce, probably in Brugge, then part of the
Spanish Netherlands.[5]

The world's oldest English-speaking chamber of commerce is that of New York City, which was
established in 1768.[6] The oldest known existing chamber in the English-speaking world with
continuous records is the Glasgow Chamber of Commerce,[7] which was founded in 1783.
However, Leeds Chamber of Commerce[8] is the UK's oldest, followed by Belfast, Northern
Ireland.

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A chamber of commerce is not a governmental body or institution, and has no direct role in the
writing and passage of laws and regulations that affect businesses. It may however, act as a lobby
in an attempt to get laws passed that are favorable to businesses.

f. Customer survey:
Customer Surveys assess how customers think, feel, behave, and what to do about it. This can
provide management with valuable input on both short-term and long-term decision-making. It
can offer critical operational and strategic advantages over the competition. A customer survey
helps to get to the heart of the critical relationships in ways that help to move the business
forward. The satisfaction, loyalty, and reference-ability of the customers directly affect growth
and profitability.

Client surveys- Customer polling to identify their level of satisfaction with an existing product,
and to discover their express and hidden needs and expectations for new or proposed product(s)

G.Industry reports-

The Current Industrial Report (CIR) program has been providing monthly, quarterly, and annual
measures of industrial activity for many years. The primary objective of the CIR program is to
produce timely, accurate data on production and shipments of selected products. The data are
used to satisfy economic policy needs and for market analysis, forecasting, and decision-making
in the private sector.

H. Secondary market research

Definition: Market research that's already compiled and organized for you. Examples of
secondary information include reports and studies by government agencies, trade associations or
other businesses within your industry.

Secondary research uses outside information assembled by government agencies, industry and
trade associations, labor unions, media sources, chambers of commerce, and so on. It's usually
published in pamphlets, newsletters, trade publications, magazines, and newspapers. Secondary
sources include the following:

 Public sources. These are usually free, often offer a lot of good information, and include
government departments, business departments of public libraries, and so on.
 Commercial sources. These are valuable, but usually involve cost factors such as
subscription and association fees. Commercial sources include research and trade
associations, such as Dun & Bradstreet and Robert Morris & Associates, banks and other
financial institutions, and publicly traded corporations.

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  Educational institutions. These are frequently overlooked as valuable information
sources even though more research is conducted in colleges, universities, and technical
institutes than virtually any sector of the business community.

I. Primary market research such as:

a. Telephone surveys
A telephone survey is a systematic collection of data from a sample population using a
standardized questionnaire. A telephone survey is a method of public opinion polling where
telephone numbers are used to contact potential respondents, either from the general
population or from a known sample (for example, license buyers or members of an
organization). Of all the methods employed in public opinion polling, telephone surveys are
the preferred choice to maximize response rates, as well as to maintain control over the
quality of the data. Telephones are an effective method for obtaining public opinion because
nearly all residents of the U.S. have access to a telephone. Also, telephone surveys allow for
data to be collected in a complete and accurate format at the time of the interview by trained
professional interviewers.

Advantages of telephone surveys for market research

1. Large scale accessibility - 96% of Americans have a telephone in their household.

Although Internet usage is growing, one cannot argue with the superiority of coverage via
telephone. This is especially true when trying to reach minorities and lower income
consumers.
2. Rapid Data Collection - With the integration of CATI (computer assisted telephone
interviewing) systems, information can be collected and processed extremely rapidly
today. Clients can receive real-time data, as well as see how it compares to past data.
3. Quality Control - When interviewers are trained properly, they can elicit complete
responses from respondents and gauge how a respondent truly feels about a certain
subject matter. When recorded, the analyst has access to a respondent's inflection when
asked about new concepts or when discussing controversial issues. This valuable type of
information is lost when conducting online market research or mail-out surveys.
4. Anonymity - In some situations the client and/or the respondent would like their
opinions to be confidential. When conducting a telephone survey through a third party

17
 source, an interviewer can assure a respondent that their responses will not be associated
with their name, thus yielding a more accurate picture of the topic at hand.
5. Flexibility - When exploring a new product concept or complex issue, and interviewer
can answer confusing facts about the product information. The interviewer can provide
clarification about a question when needed thereby obtaining a more accurate opinion
about the product or concept as well as getting the respondent to elaborate more fully
when probed.

Disadvantages of telephone surveys

1. Lack of visual materials - Telephone surveys are obviously limiting when the
respondent needs to see the product to fully understand the concept. Typically, if a
product really needs to be shown and quantitative data needs to be gathered, for say a
new packaging concept, an online survey approach would yield better results.
2. Call screening is common - Unlike other methodologies, certain respondents may be
hard to reach due to gatekeepers or screening. For example, reaching credit-challenged
individuals is difficult because they screen their calls for creditors and unknown callers.
A group like this can eventually be reached, but it can be an arduous process in which
extra time needs to be allowed.
3. Limited open-end questions or time constraints - The typical calling window often
times interrupts a potential respondent's personal or family time. Thus, questionnaires
cannot exceed 15 minutes in length. When limiting questionnaire length, open-ended
questions that prove lengthy often need to be replaced with shorter closed-ended
questions.
4. Wariness - Sales calls are often posed as "research" calls. They can make potential
respondents more wary of true research callers thus lowering the call incidence rate.
However, with a well trained interviewer these types of issues can be drastically
minimized.
5. Inattentiveness - Because phone calls often interrupt a respondent's routine, it may be
difficult to obtain a respondent's full attention. Again, a properly written questionnaire
and a well trained interviewer are the best ways to engage the respondent and quickly
obtain the desired information.

Although telephone interviewing is not the newest, hippest methodology in market research

18
today, it should not be regarded as antiquated or old fashioned. This tried and proven
methodology will yield high quality, accurate results in the right situation. Experienced
researchers can guide a client on when this method is the best approach for their objectives.
Newer isn't always better.

b. Personal interviews

Marketing research data is essentially of two types, that have already been defined: secondary
and primary. With respect to primary research, the foremost tool is the personal interview. The
face-to-face contact between researcher and respondent is not equal in terms of the potential
quality of data that can be obtained. In the face-to-face interview it is possible to record more
than the verbal responses of the interviewee, which are often superficial. When human beings
communicate directly with each other much more information is communicated between them.
When two people face one another, the dialogue is conducted on several levels. It goes beyond
verbal expression. The nature of words used, facial expressions and body language all
communicate what the other party means. This chapter explains the role of personal interviews in
marketing research Types of personal interview

The two main types of interviews conducted in marketing research are structured and
unstructured.

Unstructured informal interview

The unstructured informal interview is normally conducted as a preliminary step in the research
process to generate ideas/hypotheses about the subject being investigated so that these might be
tested later in the survey proper. Such interviews are entirely informal and are not controlled by a
specific set of detailed questions. Rather the interviewer is guided by a pre-defined list of issues.
These interviews amount to an informal conversation about the subject.

Informal interviewing is not concerned with discovering 'how many' respondents think in a
particular way on an issue (this is what the final survey itself will discover). The aim is to find
out how people think and how they react to issues, so that the ultimate survey questionnaire can
be framed along the lines of thought that will be most natural to respondents.

The respondent is encouraged to talk freely about the subject, but is kept to the point on issues of
interest to the researcher. The respondent is encouraged to reveal everything that he/she feels and
thinks about these points. The interviewer must note (or tape-record) all remarks that may be
relevant and pursue them until he/she is satisfied that there is no more to be gained by further
probing. Properly conducted, informal interviews can give the researcher an accurate feel for the
subject to be surveyed. Focus groups, discussed later in this chapter, make use of relatively
unstructured interviews.

Structured standardized interview

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With structured standardised interviews, the format is entirely different. A structured interview
follows a specific questionnaire and this research instrument is usually used as the basis for most
quantitative surveys. A standardised structured questionnaire is administered where specific
questions are asked in a set order and in a set manner to ensure no variation between interviews.

Respondents' answers are recorded on a questionnaire form (usually with pre-specified response
formats) during the interview process, and the completed questionnaires are most often analysed
quantitatively. The structured interview usually denies the interviewer the opportunity to either
add or remove questions, change their sequence or alter the wording of questions.

Depth interviews

Depth interviews are one-to-one encounters in which the interviewer makes use of an
unstructured or semi-structured set of issues/topics to guide the discussion. The object of the
exercises is to explore and uncover deep-seated emotions, motivations and attitudes. They are
most often employed when dealing with sensitive matters and respondents are likely to give
evasive or even misleading answers when directly questioned. Most of the techniques used in the
conduct of depth interviews have been borrowed from the field of psychoanalysis. Depth
interview are usually only successful when conducted by a well trained and highly skilled
interviewer.

Other instances when depth interviewers can be particularly effective are: where the study
involves an investigation of complex behaviour or decision-making processes; when the target
respondents are difficult to gather together for group interviewers (e.g. farmers, veterinary
surgeons, haulage contractors, government officials); and where the interviewee is prepared to
become an informant only if he/she is able to preserve his/her anonymity.

Dillon et al1. believe that to be effective, the interviewer must adhere to six fundamental rules.
These are:

· He/she must avoid appearing superior or condescending and make use of only familiar words

· He/she must put question indirectly and informatively

· He/she must remain detached and objective

· He/she must avoid questions and questions structure that encourage 'yes' or 'no' answers

· He/she must probe until all relevant details, emotions and attitudes are revealed

· He/she must provide an atmosphere that encourages the respondent to speak freely, yet keeping
the conservation focused on the issue(s) being researched

Depth interviews involve a heavy time commitment, especially on the part of the marketing
researcher. Interview transcripts have to be painstakingly recovered, if they are to be accurate,
either from terse interview notes or from tape-recordings of the interviews. This can take many

20
hours of often laborious work. The transcripts then have to be read and re-read, possibly several
times, before the researcher is able to begin the taxing process of analysing and interpreting the
data.

C. Mail surveys

Mail surveys are a quantitative marketing research data collection method in which
respondents complete questionnaires on paper and return them via the mail. Market Street
Research handles all aspects of mail surveys, including questionnaire design, data collection,
and analysis of results. We work closely with clients to identify critical information needs and
design mail surveys that will best inform business or organizational decisions.

Pros and Cons of Mail Surveys

Some marketing research companies specialize in a particular marketing research methodology,

and tend to recommend that method for any or all situations. Market Street Research picks
marketing research methods depending on the information needed by our clients or the decisions
our clients are making. Mail surveys are an appropriate methodology for businesses and
organizations to identify:

 Customer satisfaction or member satisfaction

 Improvements and changes customers would like to see
 Customer reaction to an organization's future plans
 Time-sensitive issues, such as customer complaints or problems
The costs for mail surveys tend to be lower than those for telephone surveys, and mail surveys
are a good strategy for obtaining feedback from people who are dissatisfied with a service or
have strong concerns.

The main disadvantages of mail surveys are:

 The possibility of bias due to response rates, which are typically very low for mail
surveys
 Problems reaching people who lack proficiency in English (the costs for translating into
languages other than English, and for data entry and analysis of these responses, can be
significant)
 Lower quality of information collected, since people tend to avoid open-ended questions
are do not always follow directions or write legibly

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Response rates are a shortcoming with mail surveys, and there is no way to guarantee that
people will respond to a mail survey. While this is also an issue for telephone surveys, response
rates for telephone surveys tend to be higher. Low response rates mean results may not fully
reflect the characteristics of the population being studied. MSR works to minimize these
concerns by designing high-quality questionnaires; ensuring mailing lists are accurate and
complete; and sending people reminders or making follow-up telephone calls to encourage them
to return their questionnaire if they have not already done so. Finally, there are groups for whom
mail surveys are either inappropriate or ineffective. These groups include:

 Very young children (although MSR has surveyed kindergarten and elementary school
children with considerable success using a self-administered format-these children
require a great deal of support in order to participate in such surveys, however, and the
forms must be carefully designed with literacy in mind. Children's spelling and
handwriting is often unpredictable, so these surveys also require extra time for data entry
and analysis)
 People with illnesses or disabilities that preclude reading or responding in writing
 People who do not speak or understand the language(s) in which the questions are
written, or who cannot write in that language
 People who are marginally literate or illiterate
 Professionals without individual mailboxes (such as staff in some large corporations and
hospitals)
 Homeless adolescents and adults
 People in institutional settings, such as hospitals or jails
 Immigrants whose countries of origin used written confession as a form of terror or
coercion, such as certain former Soviet and southeast Asian nations. These adults rarely
agree to respond to mail surveys and it is considered unethical (and is ineffective) to ask
them to do so
 Cultural groups that consider mail surveys to be inappropriate (such as some American
Indian tribes and members of certain technical professions)

Market Street Research has been conducting mail surveys for over 30 years for a wide array of
organizations, including chambers of commerce, retail and manufacturing companies, hospitals,
banks, and educational institutions.

Surveying by mail is a recommended option when your desired sample consists of respondents
with higher educational and literacy levels, and people with an interest in the subject being
surveyed. In addition, special mailing lists are available to assist you in reaching your target
population. It is also possible to have a larger universe (sample of respondents) with a mail
survey because it does not require personal contact between the respondents and the researcher.

Advantages of this method include: it is easy and relatively low-cost to let the postal service do
the leg work of delivering the surveys; mailing costs are geographically uniform; respondents
can answer at their leisure; and any potential interviewer bias may be reduced due to lack of
contact with the interviewer.

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Disadvantages of this method include: response rates from individuals with lower literacy
levels are often too small to be useful, thereby eliminating immigrant populations in many areas
that represent substantial markets; overall response rates are historically very low, averaging
approximately 20% (see related article) and, depending on your target population, sending
surveys only to people with high literacy levels or with specialized interests could result in a
biased sample.

4.3 Definition of market

A regular gathering of people for the purchase and sale of provisions, livestock, and other
commodities.

4.3.1 Obtain market research data

Market Research

Definition: The process of gathering, analyzing and interpreting information about a market,
about a product or service to be offered for sale in that market, and about the past, present and
potential customers for the product or service; research into the characteristics, spending habits,
location and needs of your business's target market, the industry as a whole, and the particular
competitors you face.

Accurate and thorough information is the foundation of all successful business ventures because
it provides a wealth of information about prospective and existing customers, the competition,
and the industry in general. It allows business owners to determine the feasibility of a business
before committing substantial resources to the venture.

Market research provides relevant data to help solve marketing challenges that a business will
most likely face--an integral part of the business planning process. In fact, strategies such as
market segmentation (identifying specific groups within a market) and product differentiation
(creating an identity for a product or service that separates it from those of the competitors) are
impossible to develop without market research.

Market research involves two types of data:

 Primary information. This is research you compile yourself or hire someone to gather
for you.
 Secondary information. This type of research is already compiled and organized for
you. Examples of secondary information include reports and studies by government
agencies, trade associations or other businesses within your industry. Most of the research
you gather will most likely be secondary.

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When conducting primary research, you can gather two basic types of information: exploratory
or specific. Exploratory research is open-ended, helps you define a specific problem, and usually
involves detailed, unstructured interviews in which lengthy answers are solicited from a small
group of respondents. Specific research, on the other hand, is precise in scope and is used to
solve a problem that exploratory research has identified. Interviews are structured and formal in
approach. Of the two, specific research is the more expensive.

When conducting primary research using your own resources, first decide how you'll question
your targeted group: by direct mail, telephone, or personal interviews.

If you choose a direct-mail questionnaire, the following guidelines will increase your response
rate:

 Questions that are short and to the point

 A questionnaire that is addressed to specific individuals and is of interest to the
respondent
 A questionnaire of no more than two pages
 A professionally-prepared cover letter that adequately explains why you're doing this
questionnaire
 A postage-paid, self-addressed envelope to return the questionnaire in. Postage-paid
envelopes are available from the post office
 An incentive, such as "10 percent off your next purchase," to complete the questionnaire

Even following these guidelines, mail response is typically low. A return rate of 3 percent is
typical; 5 percent is considered very good. Phone surveys are generally the most cost-effective.
Here are some telephone survey guidelines:

 Have a script and memorize it--don't read it.

 Confirm the name of the respondent at the beginning of the conversation.
 Avoid pauses because respondent interest can quickly drop.
 Ask if a follow-up call is possible in case you require additional information.

In addition to being cost-effective, speed is another advantage of telephone interviews. A rate of

five or six interviews per hour is typical, but experienced interviewers may be able to conduct
more. Phone interviews also can cover a wide geographic range relatively inexpensively. Phone
costs can be reduced by taking advantage of less expensive rates during certain hours.

One of the most effective forms of marketing research is the personal interview. They can be
either of these types:

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  A group survey. Used mostly by big business, group interviews or focus groups are
useful brainstorming tools for getting information on product ideas, buying preferences,
and purchasing decisions among certain populations.
 The in-depth interview. These one-on-one interviews are either focused or nondirective.
Focused interviews are based on questions selected ahead of time, while nondirective
interviews encourage respondents to address certain topics with minimal questioning.

Secondary research uses outside information assembled by government agencies, industry and
trade associations, labor unions, media sources, chambers of commerce, and so on. It's usually
published in pamphlets, newsletters, trade publications, magazines, and newspapers. Secondary
sources include the following:

 Public sources. These are usually free, often offer a lot of good information, and include
government departments, business departments of public libraries, and so on.
 Commercial sources. These are valuable, but usually involve cost factors such as
subscription and association fees. Commercial sources include research and trade
associations, such as Dun & Bradstreet and Robert Morris & Associates, banks and other
financial institutions, and publicly traded corporations.
 Educational institutions. These are frequently overlooked as valuable information
sources even though more research is conducted in colleges, universities, and technical
institutes than virtually any sector of the business community.

4.3.2 Identifying target market

A target market is the group of people or businesses that a business wants to focus its selling and
marketing efforts on. In most cases, research is done to determine which group of people or
businesses will be most likely to benefit from the product or service offered. Once the target
market is determined, the four P's of marketing -- price, product, place and promotion -- are used
to best market the product or service to that group.

Target Market Example

Once the target market for a product or service has been determined, promotional efforts must
reflect that market. For example, Tide is a major laundry detergent, and research by Tide's
owner, Procter and Gamble, goes into establishing its target market and its needs. Proctor and
Gamble's research yielded information used to create marketing that was targeted toward middle
class mothers who wanted to remove stains and lengthen the life of their clothing. By

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capitalizing on this, Tide became one of the most famous laundry detergent brands on the
market.

Price

With the knowledge of how price is perceived by a target market, a pricing strategy can be
created. In the Tide example, price is perceived as a quality marker. The higher the price, the
more effective the product is in the eyes of the consumer. So, Tide is one of the higher priced
laundry detergents on the market, as of the date of publication. Proctor and Gamble has many
laundry detergent brands available on the market, each with different prices and which appeal to
different target markets. By knowing each target market's pricing mentality, Proctor and Gamble
can create a pricing strategy to reflect its marketing style.

Promotion

Marketing is often considered promotion, or advertising. Commercials must speak to the target
market and reflect the target market's values in order to create a resulting purchase. In our
example of Tide, the promotions speak to mothers who want to create clean, stain-free clothing
for their families. Graphics depicting stains lifting off of shirts in the wash directly show the
consumer the product producing its desired effect.

Place

Knowledge of a target market helps a company to determine the best place for a product to be
sold. This is more than simply choosing the right stores for distribution; it is also a study of
where the product should be placed in the store itself. Many large retail stores place a premium
price on end-cap placements. This means that if a product wants to be in the most popular place
in the store, it must give the store a more favorable wholesale price. In our example of Tide, in
most stores the detergent will be found at eye level so that moms can easily spot it and reach it
without having to search the aisle for their favorite detergent.

Product

Knowing a target market well can help a company cater its product to its market. As well as
create additional products that would appeal to that same market. In the case of Tide, various
varieties such as a free and clear version were created to help meet the more specific needs of
certain allergy sensitive members of its target market.

Target Market Identification

A narrowly defined target market allows a company to focus its efforts.

In business, it is impossible to be all things to all consumers. A Toyota, for example, will not
appeal to every car buyer no matter how good the pricing or upscale the features. Every person is
different. Each has his own preferences, price sensitivity, desire for luxury items and amount of

26
expendable income, making it impossible to appeal to everyone. Instead, companies concentrate
their efforts on a narrow slice of the population, called the “target market.”

Characteristics

Members of a target market share common needs and characteristics. These similarities are
typically explained in terms of their demographic information and the specific need the company
hopes to fill. Common target market characteristics identified include age, gender, income,
education and location. For instance, a target market for a neighborhood coffee shop could be
well-educated people age 25 to 55 who live or work within a three block radius from the shop
and have high paying, white collar jobs.

Importance

Identifying the target market is important for a company because doing so allows it to tailor its
advertising, pricing and promotions to appeal directly to the targeted audience. In contrast, a
company that does not define its target market narrowly could end up with promotions and
products that do not fully meet most customers needs. Further, when a company fails to establish
a target audience, it does not give itself the opportunity to compete directly with its competitors,
such as the laptop company that comes on the market offering a super low cost laptop. In this
case, because it did not try to address any specific needs other than cost, cost becomes its only
basis for competition and likely its eventual undoing.

Process

Companies determine who to target by looking at segments of the population and comparing
them based on their size and relative growth. A good example of this is examining age groups,
although segments maybe identified through a combination of factors, such as single
professional female. Next, companies look at each segment’s attractiveness. To use the example
of the coffee shop, a neighborhood may have a large concentration of high school and college
students, but if that population is not likely to stick around, targeting students could be a mistake.
Older people may start to classify that place as a place students hang out and choose a different
coffee shop to frequent as a result; when the students move away, the coffee shop would have to
try to win back its older clientele; clientele that may have already developed a strong preference
for another coffee shop.

Considerations

Lastly, the company has to look at its own objectives, capabilities and resources, carefully
examining the profit to be had by targeting a particular audience. For example, the baby boomer
generation may be the largest segment of the population by age, but they are also less willing to
spend on luxury items than their younger counterparts. For a luxury retailer, this is an important
distinction; it needs to target the segment that is likely to spend the most on its products.
Likewise, if a company cannot compete with the low-price providers, it is not going to target
customers focused solely on the bottom line, but may instead try to demonstrate value or feature
desirability.

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Target Market Positioning:

 Brand loyalty also plays a role in market positioning since a business with high brand
loyalty will have a stronger position than one without. The overall strategic plan of the
business also affects its market positioning since modifications can result in a change of
product attributes, quality, target market and product class.

 Use all the means available to you that are suitable for your target demographic. Product
perception is another integral part of marketing position strategy. No matter what your
product or service is, you want it to convey an impressive message to prospective
customers or clients.

4.3.3 Developing market position

Market position should include data on:
1. Product

What is a Product?

In marketing, the term “product” is often used as a catch-all word to identify solutions a marketer
provides to its target market. We will follow this approach and permit the term “product” to
cover offerings that fall into one of the following categories:

Goods – Something is considered a good if it is a tangible item. That is, it is something that is
felt, tasted, heard, smelled or seen. For example, bicycles, cellphones, and donuts are all
examples of tangible goods. In some cases there is a fine line between items that affect the senses
and whether these are considered tangible or intangible. We often see this with digital goods
accessed via the Internet, such as listening to music online or visiting an information website. In
these cases there does not appear to be anything that is tangible or real since it is essentially
computer code that is proving the solution. However, for our purposes, we distinguish these as
goods since these products are built (albeit using computer code), are stored (e.g., on a computer
hard drive), and generally offer the same benefits each time (e.g., quality of the download song is
always the same).

Services – Something is considered a service if it is an offering a customer obtains through the

work or labor of someone else. Services can result in the creation of tangible goods (e.g., a
publisher of business magazines hires a freelance writer to write an article) but the main solution
being purchased is the service. Unlike goods, services are not stored, they are only available at

28
the time of use (e.g., hair salon) and the consistency of the benefit offered can vary from one
purchaser to another (e.g., not exactly the same hair styling each time).

Ideas – Something falls into the category of an idea if the marketer attempts to convince the
customer to alter their behavior or their perception in some way. Marketing ideas is often a
solution put forth by non-profit groups or governments in order to get targeted groups to avoid or
change certain behavior. This is seen with public service announcements directed toward such
activity as youth smoking, automobile safety, and illegal drug use.

While in some cases a marketer offers solutions that provide both tangible and intangible
attributes, for most organizations their primary offering -- the thing that is the main focus of the
marketing effort -- is concentrated in one area. So while a manufacturer may offer intangible
services or a service firm provides certain tangible equipment, these are often used as add-ons
that augment the organization’s main product.

1. A good, idea, method, information, object, or service that is the end result of a process and
serves as a need or want satisfier. It is usually a bundle of tangible and intangibleattributes
(benefits, features, functions, uses) that a seller offers to a buyer for purchase.

2. Law: A commercially distributed good that is (1) Tangible personal property, (2) Output or
result of a fabrication, manufacturing, or production process, and (3) Passes through a
distribution channel before being consumed or used.

3. Marketing: A good or service that most closely meets the requirements of a particular market
or segment and yield enough profit to justify its continued existence.

In general, the product is defined as a "thing produced by labor or effort" [1] or the "result of an
act or a process",[2] and stems from the verb produce, from the Latin prōdūce(re) '(to) lead or
bring forth'. Since 1575, the word "product" has referred to anything produced. [3] Since 1695, the
word has referred to "thing or things produced".[4]

In economics and commerce, products belong to a broader category of goods. The economic
meaning of product was first used by political economist Adam Smith.

In marketing, a product is anything that can be offered to a market that might satisfy a want or
need.[5] In retailing, products are called merchandise. In manufacturing, products are purchased
as raw materials and sold as finished goods. Commodities are usually raw materials such as
metals and agricultural products, but a commodity can also be anything widely available in the
open market. In project management, products are the formal definition of the project
deliverables that make up or contribute to delivering the objectives of the project. In insurance,

29
the policies are considered products offered for sale by the insurance company that created the
contract.

A related concept is subproduct, a secondary but useful result of a production process.

Dangerous products, particularly physical ones, that cause injuries to consumers or bystanders
may be subject to product liability.

2. The good or service provided

In economics, economic output is divided into physical goods and intangible services.
Consumption of goods and services is assumed to produce utility. It is often used when referring
to a Goods and Services Tax.

We satisfy our needs and wants by buying goods and services. Goods are items you can see and
touch, such as a book, a pen, salt, shoes, hats, a folder etc. Services are provided for you by other
people, such as; a doctor, a lawn mower worker, a dentist, haircut and eating in restaurants.

3. Product mix
A range of associated products that yields larger sales revenue when marketed together than if
they were marketed individually or in isolation from others.

Product mix, also known as product assortment, refers to the total number of product lines that a
company offers to its customers. For example, a small company may sell multiple lines of
products. Sometimes, these product lines are fairly similar, such as dish washing liquid and bar
soap, which are used for cleaning and use similar technologies. Other times, the product lines are
vastly different, such as diapers and razors. The four dimensions to a company's product mix
include width, length, depth and consistency.

Width

The width of a company's product mix pertains to the number of product lines that a company
sells. For example, if a company has two product lines, its product mix width is two. Small and
upstart businesses will usually not have a wide product mix. It is more practical to start with
some basic products and build market share. Later on, a company's technology may allow the
company to diversify into other industries and build the width of the product mix.

Length

Product mix length pertains to the number of total products or items in a company's product mix,
according to Philip Kotler's textbook "Marketing Management: Analysis, Planning,
Implementation and Control." For example, ABC company may have two product lines, and five

30
brands within each product line. Thus, ABC's product mix length would be 10. Companies that
have multiple product lines will sometimes keep track of their average length per product line. In
the above case, the average length of an ABC Company's product line is five.

Depth

Depth of a product mix pertains to the total number of variations for each product. Variations can
include size, flavor and any other distinguishing characteristic. For example, if a company sells
three sizes and two flavors of toothpaste, that particular brand of toothpaste has a depth of six.
Just like length, companies sometimes report the average depth of their product lines; or the
depth of a specific product line.

Consistency

Product mix consistency pertains to how closely related product lines are to one another--in
terms of use, production and distribution. A company's product mix may be consistent in
distribution but vastly different in use. For example, a small company may sell its health bars and
health magazine in retail stores. However, one product is edible and the other is not. The
production consistency of these products would vary as well.

Product Market Mix Strategy

Small companies usually start out with a product mix limited in width, depth and length; and
have a high level of consistency. However, over time, the company may want to differentiate
products or acquire new ones to enter new markets. A company can also sell the existing
products to new markets by coming up with new uses for their product.

4. The core product - what is bought?

A core product is not the actual product but can be defined as the benefit of the product that
makes it useful to the purchaser. This benefit might be an intangible idea or concept connected
with convenience, status or the ability to achieve a certain task quickly. This benefit gives the
product value and meets the needs of the intended customer. The core product should be
distinguished from the actual product and from the augmented product, which includes added
value such as after-sales service and warranty.

Taking as an example a camera, the core product would be the ability to take a high quality
picture conveniently, quickly and in a variety of circumstances. This solves the main problem for
the buyer. The actual product bought by the customer also includes attributes such as brand, style
and color. The augmented product would include customer service and warranty in addition to
the other features.

The development of the core product is linked to the core competencies of the company and the
skills of its staff. Specialized teams within the company might concentrate on developing the
core competencies. These competencies solve the main problem and are the source of benefit for
the consumer. They might be utilized to make a number of actual products that differ in their

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other attributes. These end products contain the core product and present it in different ways, but
they all solve a similar problem for the consumer.

A company must maintain its core competencies and consider the main benefits for customers
when developing its product offering. End products might be developed on the basis of the core
competencies, and the features of the actual products, such as style, shape or color, might be
changed according to taste and fashion. When a company varies its product offering, it should be
careful not to drift away from the core product and the benefits offered to customers. Product
diversification must be carefully planned with the core benefits to customers kept in mind to
avoid diluting the product offering.

The concept of the core product is important in the marketing of the goods made by a company.
The benefit received by the customer must be emphasized in any marketing campaign that is
aimed at selling the flagship products. The core benefit to the customer, such as convenience,
cost-effectiveness or the ability to get a job done quickly and efficiently, must be featured
prominently in any advertising for the actual product. The company must convince the customer
that its products can provide a better solution to his or her problem than goods made by the
company's competitors.

5. The tangible product - what is perceived?

It means it can be touched, or to be specific, a tangible product is something that is palpable
or can be touched physically or smelled, or something that can be felt with the fingertips. For
instance, you can see a picture of a bottle of perfume on the Internet but it's not tangible until
you actually order it and receive it in the mail, then you can actually hold the bottle in your
hand, feel the coolness of the glass and smell the contents. Another good example would be a
set of Cd's that you purchase through the mail would be tangible, but one that you can
download on the Internet would not be.

6. The augmented product - total package of consumer

Product Components: Augmented Product

Marketers often surround their actual products with goods and services that provide additional
value to the customer’s purchase. While these factors may not be key reasons leading customers

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to purchase (i.e., not core benefits), for some the inclusion of these items strengthens the
purchase decision while for others failure to include these may cause the customer not to buy.
Items considered part of the augmented product include:

 Guarantee – This provides a level of assurance that the product will perform up to
expectations and if not the company marketing the product will support the customer’s
decision to replace, have it repaired or return for a refund.
 Warranty – This offers customers a level of protection that often extends past the
guarantee period to cover repair or replacement of certain product components.
 Customer Service – This consists of additional services that support the customer’s needs
including offering training and assistance via telephone or online.
 Complementary Products – The value of some product purchases can be enhanced with
add-on products, such as items that make the main product easier to use (e.g., laptop
carrybag), enhance styling (e.g., cellphone face plates) or extend functionality (e.g.,
portable keyboard for PDAs).
 Accessibility – How customers obtain the product can affect its perceived value depending
on such considerations as how easy it is to obtain (e.g., stocked at nearby store, delivered
directly to office), the speed at which it can be obtained, and the likelihood it will be
available when needed.

7. Features/benefits

What are Features and Benefits?

Features and Benefits – features are what makes your product stand out from the crowd – they
describe what it is, what makes it valuable, extraordinary or essential for the consumer.
Describing a benefit shows the reader what a particular feature can do for them, tells them why
they should buy the product.

1) Features

Definition: A feature is a sentence that describes a part of a product or service.

Example: The Features of coffee mug.

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 The coffee mug is made of porcelain

It comes in many colors

It has a handle

It can hold 2 cups of liquid

It is Durable

Explanation: In most cases where people wrote their copy or content themselves, their sales
pages are populated with features. There’s nothing wrong with features, they’re important for
informing customers. But features will not sell even half as well as benefits do. Let’s see what
benefits are.

2) Benefits

Definition: A benefit is a sentence that sums up how a product/service will directly offer a user
a solution.
Example: The Benefits of a coffee mug

 The porcelain mug resists germs, so you can be sure your drink is Safe
 Express your personality through one of the many available Colors
 Convenient handle Prevents dropping and makes for Easy grip
 Can Easily hold more than 2 cups of your food or drink
 The Sturdy design makes it shatter proof ensuring this mug will last you a long time.
 Get a lot More use out of your cup with it’s durable design

Explanation: As you can see, the benefits draw the person into the product. Rather than looking
at features passively, the benefits draw the customer right in, helping them picture themselves
with the product and all the problems the product will solve for them.
When you want to inform, you list features; when you want to sell, you list benefits.

8. Product differentiation from competitive products

In economics and marketing, product differentiation (also known simply as "differentiation") is

the process of distinguishing a product or offering from others, to make it more attractive to a
particular target market. This involves differentiating it from competitors' products as well as a
firm's own product offerings. The concept was proposed by Edward Chamberlin in his 1933
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Theory of Monopolistic Differentiation can be a source of competitive advantage. Although
research in a niche market may result in changing a product in order to improve differentiation,
the changes themselves are not differentiation. Marketing or product differentiation is the
process of describing the differences between products or services, or the resulting list of
differences. This is done in order to demonstrate the unique aspects of a firm's product and create
a sense of value. Marketing textbooks are firm on the point that any differentiation must be
valued by buyers (e.g.[1]). The term unique selling proposition refers to advertising to
communicate a product's differentiation.[2]

In economics, successful product differentiation leads to monopolistic competition and is

inconsistent with the conditions for perfect competition, which include the requirement that the
products of competing firms should be perfect substitutes. There are three types of product
differentiation: 1. Simple: based on a variety of characteristics 2. Horizontal : based on a single
characteristic but consumers are not clear on quality 3. Vertical : based on a single characteristic
and consumers are clear on its quality [3]

The brand differences are usually minor; they can be merely a difference in packaging or an
advertising theme. The physical product need not change, but it could. Differentiation is due to
buyers perceiving a difference, hence causes of differentiation may be functional aspects of the
product or service, how it is distributed and marketed, or who buys it. The major sources of
product differentiation are as follows.

 Differences in quality which are usually accompanied by differences in price

 Differences in functional features or design
 Ignorance of buyers regarding the essential characteristics and qualities of goods they are
purchasing
 Sales promotion activities of sellers and, in particular, advertising
 Differences in availability (e.g. timing and location).

The objective of differentiation is to develop a position that potential customers see as unique.
The term is used frequently when dealing with freemium business models, in which businesses
market a free and paid version of a given product. Given they target a same group of customers,
it is imperative that free and paid versions be effectively differentiated.

Differentiation primarily impacts performance through reducing directness of competition: As

the product becomes more different, categorization becomes more difficult and hence draws
fewer comparisons with its competition. A successful product differentiation strategy will move
your product from competing based primarily on price to competing on non-price factors (such
as product characteristics, distribution strategy, or promotional variables).

Most people would say that the implication of differentiation is the possibility of charging a price
premium; however, this is a gross simplification. If customers value the firm's offer, they will be
less sensitive to aspects of competing offers; price may not be one of these aspects.

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Differentiation makes customers in a given segment have a lower sensitivity to other features
(non-price) of the product.[4

9. New/changed products
In business and engineering, new product development (NPD) is the complete process of
bringing a new product to market. A product is a set of benefits offered for exchange and can be
tangible (that is, something physical you can touch) or intangible (like a service, experience, or
belief). There are two parallel paths involved in the NPD process: one involves the idea
generation,product design and detail engineering; the other involves market research
and marketing analysis. Companies typically see new product development as the first stage in
generating and commercializing new product within the overall strategic process of product life
cycle management used to maintain or grow their market share.

10. Price and pricing strategies (cost plus, supply/demand, ability to pay, etc.)

 Price-the sum or amount of money at which a thing is valued, or the value which a seller
sets on his goods in market; that for which something is bought or sold, or offered for
sale; equivalent in money or other means of exchange; current value or rate paid or
demanded in market or in barter; cost.
 Pricing strategies for products or services encompass three main ways to improve
profits. These are that the business owner can cut costs or sell more, or find more profit
with a better pricing strategy. When costs are already at their lowest and sales are hard to
find, adopting a better pricing strategy is a key option to stay viable.

Merely raising prices is not always the answer, especially in a poor economy. Too many
businesses have been lost because they priced themselves out of the marketplace. On the other
hand, too many business and sales staff leave "money on the table". One strategy does not fit all,
so adopting a pricing strategy is a learning curve when studying the needs and behaviors of
customers and clients.[1] Models of pricing

Cost-plus pricing is the simplest pricing method. The firm calculates the cost of producing the
product and adds on a percentage (profit) to that price to give the selling price. This method
although simple has two flaws; it takes no account of demand and there is no way of determining
if potential customers will purchase the product at the calculated price.

This appears in two forms, Full cost pricing which takes into consideration both variable and
fixed costs and adds a % markup. The other is Direct cost pricing which is variable costs plus a
% markup, the latter is only used in periods of high competition as this method usually leads to a
loss in the long run.

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Creaming or skimming

In most skimming, goods are sold at higher prices so that fewer sales are needed to break even.
Selling a product at a high price, sacrificing high sales to gain a high profit is therefore
"skimming" the market. Skimming is usually employed to reimburse the cost of investment of
the original research into the product: commonly used in electronic markets when a new range,
such as DVD players, are firstly dispatched into the market at a high price. This strategy is often
used to target "early adopters" of a product or service. Early adopters generally have a relatively
lower price-sensitivity - this can be attributed to: their need for the product outweighing their
need to economise; a greater understanding of the product's value; or simply having a higher
disposable income.

This strategy is employed only for a limited duration to recover most of the investment made to
build the product. To gain further market share, a seller must use other pricing tactics such as
economy or penetration. This method can have some setbacks as it could leave the product at a
high price against the competition.[2]

Limit pricing

A limit price is the price set by a monopolist to discourage economic entry into a market, and is
illegal in many countries. The limit price is the price that the entrant would face upon entering as
long as the incumbent firm did not decrease output. The limit price is often lower than the
average cost of production or just low enough to make entering not profitable. The quantity
produced by the incumbent firm to act as a deterrent to entry is usually larger than would be
optimal for a monopolist, but might still produce higher economic profits than would be earned
under perfect competition.

The problem with limit pricing as a strategy is that once the entrant has entered the market, the
quantity used as a threat to deter entry is no longer the incumbent firm's best response. This
means that for limit pricing to be an effective deterrent to entry, the threat must in some way be
made credible. A way to achieve this is for the incumbent firm to constrain itself to produce a
certain quantity whether entry occurs or not. An example of this would be if the firm signed a
union contract to employ a certain (high) level of labor for a long period of time. In this strategy
price of the product become limit according to budget.

Loss leader

A loss leader or leader is a product sold at a low price (i.e. at cost or below cost) to stimulate
other profitable sales. This would help the companies to expand its market share as a whole.

Market-oriented pricing

Setting a price based upon analysis and research compiled from the target market. This means
that marketers will set prices depending on the results from the research. For instance if the
competitors are pricing their products at a lower price, then it's up to them to either price their
goods at an above price or below, depending on what the company wants to achieve .

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Penetration pricing

Setting the price low in order to attract customers and gain market share. The price will be raised
later once this market share is gained.[3]

Price discrimination

Setting a different price for the same product in different segments to the market. For example,
this can be for different classes, such as ages, or for different opening times.

Premium pricing

Premium pricing is the practice of keeping the price of a product or service artificially high in
order to encourage favorable perceptions among buyers, based solely on the price. The practice
is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that
expensive items enjoy an exceptional reputation, are more reliable or desirable, or represent
exceptional quality and distinction.

Predatory pricing

Aggressive pricing (also known as "undercutting") intended to drive out competitors from a
market. It is illegal in some countries.

Contribution margin-based pricing

Contribution margin-based pricing maximizes the profit derived from an individual product,
based on the difference between the product's price and variable costs (the product's contribution
margin per unit), and on one’s assumptions regarding the relationship between the product’s
price and the number of units that can be sold at that price. The product's contribution to total
firm profit (i.e. to operating income) is maximized when a price is chosen that maximizes the
following: (contribution margin per unit) X (number of units sold)..

Psychological pricing

Pricing designed to have a positive psychological impact. For example, selling a product at $3.95
or $3.99, rather than $4.00.

Dynamic pricing

A flexible pricing mechanism made possible by advances in information technology, and

employed mostly by Internet based companies. By responding to market fluctuations or large
amounts of data gathered from customers - ranging from where they live to what they buy to
how much they have spent on past purchases - dynamic pricing allows online companies to
adjust the prices of identical goods to correspond to a customer’s willingness to pay. The airline
industry is often cited asicing success story. In fact, it employs the technique so artfully that most
of the passengers on any given airplane have paid different ticket prices for the same flight. [4]

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Price leadership

An observation made of oligopolistic business behavior in which one company, usually the
dominant competitor among several, leads the way in determining prices, the others soon
following. The context is a state of limited competition, in which a market is shared by a small
number of producers or sellers.

Target pricing

Pricing method whereby the selling price of a product is calculated to produce a particular rate of
return on investment for a specific volume of production. The target pricing method is used most
often by public utilities, like electric and gas companies, and companies whose capital
investment is high, like automobile manufacturers.

Target pricing is not useful for companies whose capital investment is low because, according to
this formula, the selling price will be understated. Also the target pricing method is not keyed to
the demand for the product, and if the entire volume is not sold, a company might sustain an
overall budgetary loss on the product.

Absorption pricing

Method of pricing in which all costs are recovered. The price of the product includes the variable
cost of each item plus a proportionate amount of the fixed costs and is a form of cost-plus pricing

High-low pricing

Method of pricing for an organization where the goods or services offered by the organization
are regularly priced higher than competitors, but through promotions, advertisements, and or
coupons, lower prices are offered on key items. The lower promotional prices are designed to
bring customers to the organization where the customer is offered the promotional product as
well as the regular higher priced products.[5]

Premium decoy pricing

Method of pricing where an organization artificially sets one product price high, in order to boost
sales of a lower priced product.

Marginal-cost pricing

In business, the practice of setting the price of a product to equal the extra cost of producing an
extra unit of output. By this policy, a producer charges, for each product unit sold, only the
addition to total cost resulting from materials and direct labor. Businesses often set prices close
to marginal cost during periods of poor sales. If, for example, an item has a marginal cost of
$1.00 and a normal selling price is $2.00, the firm selling the item might wish to lower the price
to $1.10 if demand has waned. The business would choose this approach because the incremental
profit of 10 cents from the transaction is better than no sale at all.

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Value-based pricing

Pricing a product based on the value the product has for the customer and not on its costs of
production or any other factor

Pay what you want

Pay what you want is a pricing system where buyers pay any desired amount for a given
commodity, sometimes including zero. In some cases, a minimum (floor) price may be set,
and/or a suggested price may be indicated as guidance for the buyer. The buyer can also select an
amount higher than the standard price for the commodity.

Giving buyers the freedom to pay what they want may seem to not make much sense for a seller,
but in some situations it can be very successful. While most uses of pay what you want have
been at the margins of the economy, or for special promotions, there are emerging efforts to
expand its utility to broader and more regular use.

Freemium

Freemium is a business model that works by offering a product or service free of charge
(typically digital offerings such as software, content, games, web services or other) while
charging a premium for advanced features, functionality, or related products and services. The
word "freemium" is a portmanteau combining the two aspects of the business model: "free" and
"premium". It has become a highly popular model, with notable success.

Odd pricing

In this type of pricing, the seller tends to fix a price whose last digits are odd numbers. This is
done so as to give the buyers/consumers no gap for bargaining as the prices seem to be less and
yet in an actual sense are too high. A good example of this can be noticed in most supermarkets
where instead of pricing at $10, it would be written as $9.99. This pricing policy is common in
economies using the free market policy.

Nine Laws of Price Sensitivity and Consumer Psychology

In their book, The Strategy and Tactics of Pricing, Thomas Nagle and Reed Holden outline nine
"laws" or factors that influence how a consumer perceives a given price and how price-sensitive
they are likely to be with respect to different purchase decisions.

They are:

1. Reference Price Effect – buyer’s price sensitivity for a given product increases the
higher the product’s price relative to perceived alternatives. Perceived alternatives can
vary by buyer segment, by occasion, and other factors.
2. Difficult Comparison Effect – buyers are less sensitive to the price of a known or more
reputable product when they have difficulty comparing it to potential alternatives.

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 3. Switching Costs Effect – the higher the product-specific investment a buyer must make
to switch suppliers, the less price sensitive that buyer is when choosing between
alternatives.
4. Price-Quality Effect – buyers are less sensitive to price the more that higher prices
signal higher quality. Products for which this effect is particularly relevant include: image
products, exclusive products, and products with minimal cues for quality.
5. Expenditure Effect – buyers are more price sensitive when the expense accounts for a
large percentage of buyers’ available income or budget.
6. End-Benefit Effect – the effect refers to the relationship a given purchase has to a larger
overall benefit, and is divided into two parts: Derived demand: The more sensitive buyers
are to the price of the end benefit, the more sensitive they will be to the prices of those
products that contribute to that benefit. Price proportion cost: The price proportion cost
refers to the percent of the total cost of the end benefit accounted for by a given
component that helps to produce the end benefit (e.g., think CPU and PCs). The smaller
the given components share of the total cost of the end benefit, the less sensitive buyers
will be to the component's price.
7. Shared-cost Effect – the smaller the portion of the purchase price buyers must pay for
themselves, the less price sensitive they will be.
8. Fairness Effect – buyers are more sensitive to the price of a product when the price is
outside the range they perceive as “fair” or “reasonable” given the purchase context.
9. The Framing Effect – buyers are more price sensitive when they perceive the price as a
loss rather than a forgone gain, and they have greater price sensitivity when the price is
paid separately rather than as part of a bundle.

 COST

An amount that has to be paid or given up in order to get something.

In business, cost is usually a monetaryvaluation of (1) effort, (2) material, (3) resources, (4) time
and utilities consumed, (5) risks incurred, and (6) opportunity forgone in production and delivery
of a good or service. All expenses are costs, but not all costs (such as those incurred in
acquisition of an income-generating asset) are expenses.

 Supply/demand, ability to pay, etc.)

What is “supply”?

The total amount of a product (good or service) available for purchase at any specified price.
Supply is determined by: (1) Price: producers will try to obtain the highest possible price
whereas the buyers will try to pay the lowest possible price both settling at the equilibrium
price where supply equals demand. (2) Cost of inputs: the lower the input price the higher
the profit at a price level and more product will be offered at that price. (3) Price of other goods:
lower prices of competing goods will reduce the price and the supplier may switch to switch to
more profitable products thus reducing the supply.

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 What Is "Demand"?

"Demand" is the market's appetite for a certain product. As more of a product is desired, more
supply is required. If more supply is not available the price generally goes up.

ability to pay

Economics concept that those who have more resources (wealth), or earn higher incomes,
should pay more taxes. The ability to pay taxes (such as income tax or tax on luxury goods) are
used as means of income redistribution. Also called ability to pay tax.

Pricing objectives (profit, market penetration, etc.)

Definition of 'Profit'

A financial benefit that is realized when the amount of revenue gained from a business activity
exceeds the expenses, costs and taxes needed to sustain the activity. Any profit that is gained
goes to the business's owners, who may or may not decide to spend it on the business.

Calculated as:

Profit is the money a business makes after accounting for all the expenses. Regardless of whether
the business is a couple of kids running a lemonade stand or a publicly traded multinational
company, consistently earning profit is every company's goal.

The path toward profitability can be long. For example, online bookseller Amazon.com was
founded in 1994 and did not produce its first annual profit until 2003. Many start ups and new
businesses fail when the owners run out of capital to sustain the business.

Market penetration
1. The activity or fact of increasing the market share of an existing product, or promoting a new
product, through strategies such as bundling, advertising, lower prices, or volume discounts.

2. A measure of the extent of a product's sales volume relative to the total sales volume
of all competing products, expressed as a percentage. Formula: Sales volume of a product x 100
÷ Total sales volume of all competing products.

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Market penetration is one of the four growth strategies of the Product-Market Growth
Matrix as defined by Ansoff. Market penetration occurs when a company penetrates a market in
which current or similar products already exist. The best way [citation needed] to achieve this is by
gaining competitors' customers (part of their market share). Other ways include attracting non-
users of your product or convincing current clients to use more of your product/service (by
advertising etc.). Ansoff developed the Product-Market Growth Matrix to help firms recognize if
there was any advantage of entering a market. The other three growth strategies in the Product-
Market Growth Matrix are:

 Product development (existing markets, new products): McDonalds is always within the fast-
food industry, but frequently markets new burgers.
 Market development (new markets, existing products): Lucozade was first marketed for sick
children and then rebranded to target athletes.
 Diversification (new markets, new products): Mohen A.S, Bion Products, Selectron Ltd, bk
"Penetration is a measure of brand or category popularity. It is defined as the number of people
who buy a specific brand or a category of goods at least once in a given period, divided by the
size of the relevant market population."
Cost components

The four main components of costs are: (a) Prime Cost, (b) Works Cost, (c) Office Cost and (d)
Total Cost.

Prime Cost

It consists of costs of direct material, direct labour and direct expense specifically attributable to
the job. This is also known as flat, direct or basic cost.

Works Cost

It comprises of prime cost and factory overheads, (cost of indirect material, indirect labour and
indirect expenses related to factory works). This cost is also known as factory cost, production or
manufacturing cost.

Cost of Production (Office Cost)

It is the sum total of works cost and office and administrative overheads <Cost of indirect
material, indirect labour and indirect expenses related to office works). This cost is known as
office cost.

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Cost of Production = Works Cost + Office and Administrative Overheads

Total Cost

It comprises of cost of production and selling and distribution overheads (Cost of indirect
material, indirect labour and indirect expenses for selling and distribution activities).

Total Cost = Cost of Production + Selling and Distribution Overheads

13. Market position- Market positioning is the manipulation of a brand or family of brands to
create a positive perception in the eyes of the public. If a product is well positioned, it will have
strong sales, and it may become the go-to brand for people who need that particular product.
Poor positioning, on the other hand, can lead to bad sales and a dubious reputation. A number of
things are involved in market positioning, with entire firms specializing in this activity and
working with clients to position their products effectively.

When a product is released, the company needs to think beyond what the product is for when it
comes to positioning. It also thinks about the kinds of people it wants to buy the product. For
example, a luxury car manufacturer might be less interested in promoting reliability, and more
interested in promoting drivability, appealing to people who are looking for high-end cars which
are enjoyable and exciting to drive. Conversely, a company making mouthwash might want to go
for the bottom end of the market with an appealing low price, accompanied by claims asking
consumers to “compare to the leading brand” so that they can see that the product contains the
same active ingredients as a famous brand, at a much lower price.

Market positioning is a tricky process. Companies need to see how consumers perceive their
product, and how differences in presentation can impact perception. Periodically, companies may
reposition, trying to adjust their perception among the public. For example, a company might
redesign product packaging, start a new ad campaign, or engage in similar activities to capture a
new share of the market.

Companies also engage in depositioning, in which they attempt to alter the perception of other
brands. While outright attacks on rival brands are frowned upon and may be illegal unless they
are framed very carefully, companies can use language like “compared to the leading brand” or
“we're not like those other brands.” A television ad, for example, might contrast two paper
towels: the brand being advertised, and a “generic” with a package which looks suspiciously
similar to a popular brand of paper towels, but isn't quite identical.

Developing a market positioning strategy is an important part of the research and development
process. The marketing department may provide notes during product development which are
designed to enhance the product's position, and they also determine the price, where the product
should be sold, and how it should be advertised. Every aspect of the product's presentation will
be carefully calculated to maximize its position, with the goal of market positioning being
domination.

1. Distribution strategies

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 For product-focused companies, establishing the most appropriate distribution strategies is a
major key to success, defined as maximizing sales and profits. Unfortunately, many of these
companies often fail to establish or maintain the most effective distribution strategies.
Problems that we have identified include:

 Unwillingness to establish different distribution channels for different products

 Fear of utilizing multiple channels, especially including direct or semi-direct sales, due to
concerns about erosion of distributor loyalty or inter-channel cannibalization
 Failure to periodically re-visit and update distribution strategies
 Lack of creativity and resistance to change

To be fair, there can be sound reasons for these perceived weaknesses. More typically,
however, they are due to failings such as simple inertia, lack of understanding of the ultimate
customers and their preferences, or a failure to acknowledge the importance of a distribution
strategy and invest sufficient resources in understanding it.

“Now” is absolutely NOT the time to blindly continue the status quo with your distribution
strategies. The Internet is creating sea-changes in terms of traditional manufacturer-distributor
relations. It has seen significant waves of disintermediation in multiple product lines, and can
facilitate cost-effective broadening of distribution channels. Meanwhile, improvements in
supply chain management technologies must also be factored into choice of distribution
partners.

Info Trends can help your company improve its distribution strategies by:

 Mapping your products to the end-user

 Determining customers’ channel preferences and comparing these preferences with actual
availability
 Recommending new channels, and why
 Examining competitors’ strategies and comparing them and their effectiveness with
your own

Confidential interviews with your distribution partners to identify areas for improvement, as
well as existing strengths to be encouraged Contact Info Trends to discuss how we can we
help you better understand and improve your distribution strategies.

15. Marketing channels

Definition of Marketing Channel

A marketing channel is consists of individuals and firms involved in the process of making a
product or service available for use or consumption by consumers or industrial users. Consists of

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individuals and firms involved in the process of making a product or service available for use or
consumption by consumers or industrial users.

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 Avenues used by marketers to make products available to consumers. Wholesalers,
distributors, sales agents, retailers, and all other sources used in getting the product to
consumers are included in the category of marketing channels.

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There are two major types of market research – qualitative and quantitative.

 Qualitative research is used to probe issues, develop a detailed understanding of

complex issues, and determine why people feel the way they do about certain issues. The
most common qualitative techniques are personal interviews and focus groups.
 Quantitative research is used to determine and predict the attitudes, opinions, and
behavior of the market based on a scientific sampling. Web/e-mail and telephone surveys
fall into this category.

Projects often combine qualitative and quantitative methods to define issues and develop insights
that can be projected to the market for better business decisions.

Web-Based Surveys

Web-based surveys involve sending an e-mail invitation with a link to participate in a survey.
Respondents click on the link to start the survey and, depending on their answers, determine if
they qualify.

Benefits:

 Responses are instantaneous

 Low-cost

Telephone Surveys

Telephone interviews involve a team of interviewers calling potential respondents and soliciting
their participation in a survey. Telephone interviewing is often used when a Web-based survey
cannot be conducted.

Benefits:

 Interviewers can navigate an organization to target the most appropriate respondents for
the survey.

Personal Interviews

Personal interviews capture extensive insights to the business process, customer behavior and
attitudes, and overall industry trends.

Benefits:

 Obtain extensive insight on business processes, customer behavior, and attitudes

 Ability to probe issues in a dynamic setting based on comments from the respondent

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Focus Groups

A focus group is a group discussion among five to eight individuals, typically lasting one to two
hours. Groups generally contain a homogeneous selection of participants, screened to have one
or more characteristics in common.

Benefits:

 Client has direct observation of the group

 The ability to send on-the-spot questions as the discussion progresses
 Especially valuable for evaluating visuals and packaging that requires sensory feedback

16. Promotion

Promotion is how of the market mix elements, and a term used frequently in marketing. The
specification of five promotional mix or promotional plan. These elements are personal selling,
advertising, sales promotion, direct marketing, and publicity.[1] A promotional mix specifies how
much attention to pay to each of the five subcategories, and how much money to budget for each.
A promotional plan can have a wide range of objectives, including: sales increases, new product
acceptance, creation of brand equity, positioning, competitive retaliations, or creation of a
corporate image. Fundamentally, however there are three basic objectives of promotion. These
are:[2]

1. To present information to consumers as well as others.

2. To increase demand.
3. To differentiate a product.

There are different ways to promote a product in different areas of media. Promoters use internet
advertisement, special events, endorsements, and newspapers to advertise their product. Many
times with the purchase of a product there is an incentive like discounts, free items, or a contest.
This is to increase the sales of a given product.

The term "promotion" is usually an "in" expression used internally by the marketing company,
but not normally to the public or the market - phrases like "special offer" are more common. An
example of a fully integrated, long-term, large-scale promotion are My Coke Rewards and Pepsi
Stuff. The UK version of My Coke Rewards is Coke Zone.

1. Promotional strategies

Promotion is one of the key elements of the marketing mix, and deals with any one or two-way
communication that takes place with the consumer. This article concentrates is a high level
introduction to developing a promotional strategy for your business focusing on advertising and
other 'pull' tactics.

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Developing a promotional strategy

Deciding on a marketing communications strategy is one of the primary roles of the marketing
manager and this process involves some key decisions about how who the customer is, how to
contact the consumer them, and what the message should be. These questions can be answered
using a three stage process, which is equally relevant for all elements of the marketing mix:

Segmentation – dividing the marketing into distinct groups

Targeting – deciding which of these groups to communicate with, and how to talk to them

Positioning – how the product or brand should be perceived by the target groups

Messaging - delivering a specific message in order to influence the target groups

1. Segmentation

Dividing potential customers into discrete groups is vital if you want to increase the success rate
of any communications message. If you don't know who you are talking to, it's unlikely you will
get much of a response. Who are the potential customers? How many sub-groups should you
divide them into? How do these groups differ? Hopefully, most of this information will be
readily available from your market research.

Once you have an idea of the customer, you should further drill down to explore them in more
detail.
What are their media consumption habits? What are their expectations and aspirations? What are
their priorities? How much disposable income do they have? What are their buying habits? Are
they likely to have children? How many holidays to they take a year? How much money do they
give to charity? How can you help them?

This information can be obtained in a variety of ways, from commissioning a specialist market
research agency, to examining sales patterns or social media interactions.

Commonly used market research methods include:

 Sales analysis and buying patterns

 Questionnaires
 Desk research
 Website statistics, especially social media
 Focus groups

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  Face-to-face interviews
 Specialist market research companies

Once you have built up an accurate picture of your customer, it's time to get their attention…

2. Targeting

For the purposes of advertising, targeting is the process of communicating with the right
segment(s) and ensuring the best possible response rate. The methods you use to target your
audience must relate to your marketing plan objectives - are you trying to generate awareness of
a new product, or attract business away from a competitor?

Methods of marketing communications

Advertising is just one element of the marketing communication arsenal, which can be divided
into the following areas:

Advertising – a mass media approach to promotion

 Outdoor
 Business directories
 Magazines / newspapers
 TV / cinema
 Radio
 Newsagent windows

Sales promotion - price / money related communications

 Coupons
 Discounts
 Competitions
 Loyalty incentives

Public relations - using the press to your advantage

 Press launches
 PR events
 Press releases

Personal selling – one to one communication with a potential buyer

 Salesmen
 Experiential marketing
 Dealer or showroom sales activities
 Exhibitions
 Trade shows

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Direct marketing - taking the message directly to the consumer

 Mail order catalogues

 Bulk mail
 Personalized letters
 Email
 Telemarketing
 Point of sale displays
 Packaging design

Digital marketing – new channels are emerging constantly

 Company websites
 Social media applications such as Facebook or Twitter
 Blogging
 Mobile phone promotions using technology such as bluetooth
 YouTube
 E-commerce

Deciding which media channel to use

In nature, evolution occurs most rapidly when competition for resources is intense. The same
process is now occurring with promotional media. All traditional media channels are now
saturated, and competition for consumer attention is intense. At the same time, the impact of any
one medium is becoming diluted. There are many more TV and radio channels, consumer have
the ability to skip adverts and free information is now much more accessible. As a result,
companies are becoming increasingly innovative in their approach to communications and a host
of new media channels have emerged. As a result, media choice is becoming a tricky task, which
is why detailed segmentation is so important - it's no use starting a Twitter campaign if none of
your target market are regular users of the site.

Highly targeted communications often lead to better results. You can usually expect a response
rate of under 1% for a relatively generic mass mailing. However, personal letters to a handful of
your most loyal customers would lead to a dramatically increased rate of return. When deciding
which media to use consider the reach, frequency, media impact and what you can expect for
your budget but most of all, ensure your target customer will see the message in the first place.

Ensuring your message reflects the stages of the purchasing funnel

Once you have made the audience aware of your brand, work doesn't stop there. The customer
needs to be guided through the purchasing process. This means identifying the key stages in the
customer journey and ensuring communications messages are personalised and relevant.

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Integrated marketing communications

Once you have decided which media channel to concentrate on, the next step is to ensure an
integrated approach is taken. Regardless of whether you are promoting a new product or raising
awareness, it's important that all ads across all media work together towards a common goal by
using similar messaging and 'look and feel'. An integrated approach can dramatically increase the
effectiveness of any campaign and will help create your brand image.

Getting the best response

To get the best response from your target market, you need ensuring the message is relevant and
clear – once you've managed to gain the valuable attention of your customer the last thing you
want is for them to be confused about what you're saying. Determine the objectives of the advert
and ensure these aims are addressed clearly. Think about the next steps you would like the
audience to take, whether this is visiting a website, ringing a number, or being able to recall your
brand when they are next in the shops.

3. Positioning

Positioning is the process of developing an image for your company or product. This can be
achieved partially through branding, but it's important to realise that all elements of the
marketing mix combine to provide the full picture. You must ensure that all areas of your
business live up to expectations in order to successfully position yourself in the way you hope.
Positioning also considers the competition, and you need to explain why you are unique in the
marketplace and better than the other products on the shelf.

Branding and messaging

Branding is a powerful tool for positioning your product. Branding is used on almost all
customer facing elements of a product, from the packaging design to the style of writing used on
posters. Every communication a customer received adds up to form a mental picture of your
brand and can influence the price they are willing to pay for your products. This ability to charge
more due to the positioning of your product is known as 'brand equity'. Your branding also needs
to consider your unique selling points (USPs) and ensure these are easily recognised through
your messaging – is your product the best value, longest lasting, sweetest smelling or fastest?

Corporate identity

A corporate identity is a useful tool to ensure that your branding is used in a consistent way
throughout the company. This detailed document runs through almost every conceivable
customer touch point and provides guidance on the presentation and style which should be used.
This could include use of logos, colours, tag lines, uniform and the type of coffee to serve guests.
A CI guide is particularly useful if any creative work it outsourced to agencies or freelancers or
if you have many offices worldwide. The most powerful brands can be identified by many
elements of their communications material, not just a by their logo or slogan and this is due to

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successful implementation of a recognisable corporate identity. Recognition is a key part of any
purchase decision so a corporate identity should for a core element of your advertising strategy.

4. Development of the advertising message

Once you have determined the positioning for your brand, it's time to develop the message in
order to influence your target groups. Advertising objectives should be directly linked to your
marketing plan, and tend to fit into the following generic categories:

 Inform - raising awareness of your brand & products, establishing a competitive

advantage
 Persuade - generating an instant response (usually driving sales)
 Remind - to maintain interest and enthusiasm for a product or service

It's a documented fact that creative, well branded, distinctive advertising generates the best
results so ensure you use the best possible creative team you can get your hands on, and give
them a detailed brief. Remember that a message will only be successful if it appeals to the target
audience, so constantly refer back to the customer and tailor the ads to them.

Final words

Almost every business in the world will deal in advertising at some point, whether it is a listing
in the Yellow Pages, or a billboard in Times Square. Whatever you're planning, the strategic
thinking behind all advertising is essentially the same – get to know your audience, target them
efficiently and position your brand in the way that will benefit your business.

18. Target audience

In marketing and advertising, a target audience, is a specific group of people within the target
market at which a product or the marketing message of a product is aimed at. (Kotler 2000)... For
example, if a company sells new diet programs for men with heart disease problems (target
market) the communication may be aimed at the spouse (target audience) who takes care of the
nutrition plan of her husband and child.

A target audience can be formed of people of a certain age group, gender, marital status, etc., e.g.
teenagers, females, single people, etc. A combination of factors, e.g. men aged 20–30 is a
common target audience. Other groups, although not the main focus, may also be interested.
Discovering the appropriate target market(s)and determining the target audience is one of the
most important activities in marketing management (Niewenhuizen et al. 2000). The biggest
mistake it's possible to make in targeting is trying to reach everybody and ending up appealing to
no-one.

Target market

A target market is a group of customers that the business has decided to aim its marketing efforts
and ultimately its merchandise. A well-defined target market is the first element to a marketing

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strategy. The target market and the marketing mix variables of product, place(distribution),
promotion and price are the four elements of a marketing mix strategy that determine the success
of a product in the marketplace.

Once these distinct customers have been defined, a marketing mix strategy of product,
distribution, promotion and price can be built by the business to satisfy the target market.

Strategies for reaching target markets

Marketers have outlined four basic strategies to satisfy target markets:

1. Undifferentiated marketing or mass marketing

2. Differentiated marketing

3. Concentrated marketing and

4. Micromarketing/ niche marketing.

Mass marketing is a market coverage strategy in which a firm decides to ignore market segment
differences and go after the whole market with one offer. It is type of marketing (or attempting to
sell through persuasion) of a product to a wide audience. The idea is to broadcast a message that
will reach the largest number of people possible. Traditionally mass marketing has focused on
radio, television and newspapers as the medium used to reach this broad audience.

For sales teams, one way to reach out to target markets is through direct marketing. This is done
by buying consumer database based on the segmentation profiles you have defined. These
database usually comes with consumer contacts (e.g. email, mobile no., home no., etc.). Caution
is recommended when undertaking direct marketing efforts — check the targeted country's direct
marketing laws.

Target audiences are formed from different groups, for example: adults, teens, children, mid-
teens, pre-schoolers, men, women.

To market to any given audience effectively, it is essential to become familiar with your target
market; their habits, behaviors, likes, and dislikes. Markets differ in size, assortment, geographic
scale, locality, types of communities, and in the different types of merchandise sold. Because of
the many variations included in a market it is essential, since you cannot accommodate
everyone’s preferences, to know exactly who you are marketing to.

To better become acquainted with the ins and outs of your designated target market legend, a
market analysis must be completed. A market analysis is a documented examination of a market
that is used to enlighten a business’s preparation activities surrounding decisions of inventory,
purchase, workforce expansion/contraction, facility expansion, purchases of capital equipment,
promotional activities, improvement of daily operations and many other aspects.

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19. Communication

Communication is a process of exchanging information, ideas, thoughts, feelings and emotions

through speech, signals, writing, or behavior. In communication process, a sender(encoder)
encodes a message and then using a medium/channel sends it to the receiver (decoder) who
decodes the message and after processing information, sends back appropriate feedback/reply
using a medium/channel.

Types of Communication

People communicate with each other in a number of ways that depend upon the message and its
context in which it is being sent. Choice of communication channel and your style of
communicating also affects communication. So, there is variety of types of communication.

Types of communication based on the communication channels used are:

1. Verbal Communication
2. Nonverbal Communication

1. Verbal Communication

Verbal communication refers to the the form of communication in which message is transmitted
verbally; communication is done by word of mouth and a piece of writing. Objective of every
communication is to have people understand what we are trying to convey. In verbal
communication remember the acronym KISS (keep it short and simple).

When we talk to others, we assume that others understand what we are saying because we know
what we are saying. But this is not the case. usually people bring their own attitude, perception,
emotions and thoughts about the topic and hence creates barrier in delivering the right meaning.

So in order to deliver the right message, you must put yourself on the other side of the table and
think from your receiver’s point of view. Would he understand the message? how it would sound
on the other side of the table

Verbal Communication is further divided into:

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  Oral Communication
 Written Communication

Oral Communication

In oral communication, Spoken words are used. It includes face-to-face conversations, speech,
telephonic conversation, video, radio, television, voice over internet. In oral communication,
communication is influence by pitch, volume, speed and clarity of speaking.

Advantages of Oral communication are:

It brings quick feedback.

In a face-to-face conversation, by reading facial expression and body language one can guess
whether he/she should trust what’s being said or not.

Disadvantage of oral communication

In face-to-face discussion, user is unable to deeply think about what he is delivering, so this can
be counted as a Written Communication

In written communication, written signs or symbols are used to communicate. A written message
may be printed or hand written. In written communication message can be transmitted via email,
letter, report, memo etc. Message, in written communication, is influenced by the vocabulary &
grammar used, writing style, precision and clarity of the language used.

Written Communication is most common form of communication being used in business.

So, it is considered core among business skills.

Memos, reports, bulletins, job descriptions, employee manuals, and electronic mail are the types
of written communication used for internal communication. For communicating with external
environment in writing, electronic mail, Internet Web sites, letters, proposals, telegrams, faxes,
postcards, contracts, advertisements, brochures, and news releases are used.

Advantages of written communication includes:

Messages can be edited and revised many time before it is actually sent.

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Written communication provide record for every message sent and can be saved for later study.
A written message enables receiver to fully understand it and send appropriate feedback.

Disadvantages of written communication includes:

Unlike oral communication, Written communication doesn’t bring instant feedback. It takes
more time in composing a written message as compared to word-of-mouth and number of people
struggles for writing ability.

2. Nonverbal Communication

Nonverbal communication is the sending or receiving of wordless messages. We can say that
communication other than oral and written, such as gesture, body language, posture, tone of
voice or facial expressions, is called nonverbal communication. Nonverbal communication
is all about the body language of speaker.

Nonverbal communication helps receiver in interpreting the message received. Often,

nonverbal signals reflects the situation more accurately than verbal messages. Sometimes
nonverbal response contradicts verbal communication and hence affect the effectiveness
of message.

Nonverbal communication has the following three elements:

Appearance

Speaker: clothing, hairstyle, neatness, use of cosmetics

Surrounding: room size, lighting, decorations, furnishings

Body Language
facial expressions, gestures, postures

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Sounds
Voice Tone, Volume, Speech rate

Types of Communication Based on Purpose and Style

Based on style and purpose, there are two main categories of communication and they both bears
their own characteristics. Communication types based on style and purpose are:

1. Formal Communication
2. Informal Communication

1. Formal Communication

In formal communication, certain rules, conventions and principles are followed while
communicating message. Formal communication occurs in formal and official style.
Usually professional settings, corporate meetings, conferences undergoes in formal
pattern.

In formal communication, use of slang and foul language is avoided and correct
pronunciation is required. Authority lines are needed to be followed in formal
communication.

2. Informal Communication

Informal communication is done using channels that are in contrast with formal
communication channels. It’s just a casual talk. It is established for societal affiliations of
members in an organization and face-to-face discussions. It happens among friends and
family. In informal communication use of slang words, foul language is not
restricted. Usually. informal communication is done orally and using gestures.

Informal communication, Unlike formal communication, doesn’t follow authority

lines. In an organization, it helps in finding out staff grievances as people express more
when talking informally. Informal communication helps in building relationships.

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 20. Promotion budget
A specified amount of money set aside to promote a business' or organization's products or
beliefs. Promotional budgets are created to anticipate the essential costs associated with growing
a business or maintaining a brand name. The budget is often set according to a percentage of
sales or profits in order to maintain the intended growth rate.

Advertising and promotion of a business is a cost which most businesses have a tough time
predicting, which is why a percentage method might be used. If new product lines are set to
release in the near future, the budget could be increased. High promotional budgets cut into
profits in the period of use and are intended to increase sales or awareness in the future.

A promotions budget identifies what promotional activities you´re going to spend money on and
how much money you´re going to spend on each.

The Promotion Budget

Learning Objectives

1. Understand different ways in which promotion budgets can be set.

2. Understand how the budget can be allocated among different media.

An offering’s budget is a critical factor when it comes to deciding which message strategies to
pursue. Several methods can be used to determine the promotion budget. The simplest method
for determining the promotion budget is often merely using a percentage of last year’s sales or
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the projected sales for the next year. This method does not take into account any changes in the
market or unexpected circumstances. However, many firms use this method because it is simple
and straightforward.

The affordable methodA budgeting technique whereby companies spend what they think they
can afford promoting a product., or what you think you can afford, is a method used often by
small businesses. Unfortunately, things often cost more than anticipated, and you may not have
enough money. Many small businesses think they’re going to have money for promotion, but
they run out and cannot spend as much on promotion as they had hoped. Such a situation may
have happened to you when you planned a weekend trip based on what you thought you could
afford, and you did not have enough money. As a result, you had to modify your plans and not
do everything you planned.

Key Takeaway

Companies can determine how much to spend on promotion several different ways. The percent
of sales method, in which companies use a set percentage of sales for their promotion, is often
the easiest method to use. Small companies may focus on what they think they can afford while
other organizations may try to keep their promotions relatively equal to their competitors’. The
objective and task approach takes objectives into consideration and the costs of the tasks
necessary to accomplish objectives in order to determine the promotion budget.

Review Questions

1. Explain four different ways to set a product’s promotion budget.

2. What is mobile marketing?

4.3.4 Developing product brand practice

Branding has become one of the most important aspects of business strategy. Yet it is also one of
the most misunderstood. Branding is sometimes considered to be merely an advertising function.
And many managers and business writers hold the view that branding is about the management
of product image, a supplementary task that can be isolated from the main business of product
management. This note provides an alternative perspective, arguing that:
• Branding is a strategic point of view, not a select set of activities.
• Branding is central to creating customer value, not just images.
• Branding is a key tool for creating and maintaining competitive advantage.
• Brands are cultures that circulate in society as conventional stories.
• Effective brand strategies must address the four distinct components of brand value.
• Brand strategies must be “engineered” into the marketing mix.
This note develops a set of concepts and frameworks to guide the design of brand strategies.

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The Benefits of Branding Your Product or Service

Brands are so numerous and common- place today that we are inclined to take their significance
for granted.
Branding refers to the use of a name, a term, a symbol or a design to identify goods or services of
a seller and to distinguish them from those of other sellers. A good brand name can make a big
difference in your success. Your brand name may be the single most important decision you can
make about your company, product or service name. Branding is advantageous because it...

1. Creates an Image or Personality. A brand name can project an expectation of its

performance and an emotion or feeling about it.

2. May Help Segment Markets. Virtually identical products could be sold in different
distribution channels under different brand names and positioning.

3. Makes Purchasing Easier. After making a satisfactory brand decision for the first time,
customers are likely to make repeat purchases without major reconsideration. Therefore, a good
brand speeds up shopping.

4. May Develop a Customer Franchise. Achieving brand loyalty among your customers will
protect you from competition and give you greater control over your marketing mix.
Brand name selection is still an art, but there are a number of general rules that should be
observed. Your brand should help communicate something important about your product or
service – like its core concept or reason for being. It should be short, memorable, pronounceable
and distinguishable from competition. If you are involved in exporting, you need to be concerned
with its foreign meaning (many firms have been embarrassed on this one).
Once you have a great brand name, branding can make your promotion more effective and
efficient. Persistent promotion of your brand can create various levels of Brand Familiarity
such as brand recognition, preference, insistence or advocacy.

Brand Recognition is when target customers remember having seen or heard of the brand. This
is critically important, basic prospect education for new companies, products or services.

Brand Preference is when target customers will choose the brand out of habit or past
experience. If your customers are satisfied with the products or services, they will buy your
brand again if available.

Brand Insistence is when target customers insist upon a product and would be willing to search
extensively for it.
Your customer is so satisfied that your competitors don't have a chance to take the business away
from you (competitive insulation).

Brand Advocacy is when the satisfied customer tells everyone whom they know how great your
product or service is. They become your best salesperson.

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Nine Branding Principles

I have identified nine fundamental qualities of a good branding program. I'm sure there are more,
but these are my favorites:
1. Keep It Simple: one big idea is best.
2. Mass-produced word of mouth (PR) builds brands.
3. Focused brands are more powerful than diffused brands.
4. Somehow, some way, you have to be different.
5. The first brand in a category has a huge advantage.
6. Avoid sub-brands at all cost.
7. Quality is important, but not as important as the perception of quality.
8. Be consistent and patient. Building a strong brand takes time.
9. Put your brand definition in writing, otherwise you'll get off course.

Practice brand may include:

1. Practice image
2. Practice logo/letter head/signage
3. Phone answering protocol
4. Facility decor
5. Slogans
6. Templates for communication/invoicing
7. Style guide
8. Writing style
9. AIDA (attention, interest, désires, action)
4.3.5 Benefits of product or service practice

Benefits may include:

1. Features as perceived by the client
2. Benefits as perceived by the client

4.3.6 Developing or selecting promotional tools

Promotion tools include:
1. Networking and referrals
2. Seminars
3. Advertising

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 4. Press releases
5. Publicity and sponsorship
6. Brochures
7. Newsletters (print and/or electronic)
8. Websites
9. Direct mail
10. Telemarketing/cold calling

4.4 The Competitive Environment

4.4.1. Definition of competition

Competition is simply a situation in which organizations compete with each other for
something that not everyone can have. In case of business, the things over which companies
are competing are profits and market shares. This competitive environment often affects a
company’s marketing efforts and its success in reaching a target market. Thus, a firm should
assess its industry structure and examine competitors in terms of marketing strategies,
domestic or foreign firms, size, generic competition, and channel competition.

4.4.2 Assessing the nature of competition

Competitor analysis includes-

 Competitor offerings
An automated competitor offering analysis system including a competitor offer compiler
configured to retrieve at least one competitor offering from a source of competitor offerings,
identify any of the competitor offerings that correspond to any offering in a set of monitored
offerings, and create a set of competitor offerings including any of the corresponding offerings,
and a monitor engine configured to compare any of the offerings in the set of monitored
offerings to any of the corresponding offerings in the set of competitor offerings, and calculate at
least one score for the compared offering in the set of monitored offerings in accordance with at
least one predefined scoring function, where the score indicates the competitiveness of the
compared monitored offering with respect to the compared competitor offering.

 Competitor promotion strategies and activities

 Competitor profile in the market place

Competition Structures

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A company could operate under one of four possible competitive structures: monopoly,
oligopoly, monopolistic competition and pure computation.
A) Monopoly
It is characterized by:
o Single supplier (seller) of a given good/ service
o A seller is price maker
o There is different barriers to entry
o This type of competition is rare in operation
o There is price discrimination
B) Oligopoly
It is characterized by:
- The market consists of a few sellers.
- Sellers are highly sensitive to each other’s pricing and marketing
strategies
- Products may be uniform or non-uniform
- Examples: steel manufacturing and car manufacturing respectively.
- It is difficult for entry
A) Monopolistic competition
It is characterized by:
- There are several firms in an industry
- Firms compete with substitute products
- Competition may be in price or non- price
Example: competition of tea and coffee.
B) Pure competition
It is characterized by:
- Many firms sell identical goods or services
- Firms are unable to create differential advantages.
- Firms are price takers rather than price makers.
- There are free entry and exit.
- There is perfect knowledge of market information.
4.4.3. Competitive strategies and competitive advantages

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Competitive strategy
Long-term action plan that is devised to help a company gain a competitive
advantage over its rival. This type of strategy is often used in advertising campaigns by
somehow discrediting the competition's product or service. Competitive strategies are
essential to companies competing in markets that are heavily saturated with alternatives
for consumers.

Competitive Advantage

4.4.4 Types of competitive strategies

Business strategies are usually rooted either directly or indirectly in Porter’s generic competitive
strategy framework. Porter's framework is taught in many university business and economics
courses as a primary method of categorizing overall competitive strategy. Porter's generic
competitive strategies build on the themes of competitive advantage and competitive scope to
achieve one of four primary competitive models.

Lower-Cost, Broad-Target Strategy

The lower-cost, broad-target strategy is the business strategy most commonly associated with
large retail chains such as grocery stores and department retailers. Businesses adopting this
strategy strive to set their place in the market as the lowest-cost producer or distributor of a given
product or class of products. The broad-target aspect of the strategy means the business offers a
wide range of products, attempting to tap into the largest possible customer base. These
businesses obtain preferential access to products in the form of discounted bulk purchasing. The
downside to this strategy is that when two companies are using this model, a price war ensues,
diminishing profits for both lower-cost, broad-target businesses.

Lower-Cost, Narrow-Target Strategy

The lower-cost, narrow-target strategy is typically found in genre-specific retailers. These

retailers use the same bulk-purchasing and cost-reduction technique as larger generalist stores,
but focus their inventory selection and marketing efforts on a more specialized market segment.

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A store focusing exclusively on audio and video equipment would be an example of a lower-
cost, narrow-target strategy endeavor. The chief advantage of this strategy is it makes the
business a premier destination for obtaining goods of that particular category, but at the cost of
excluding all other types of business.

Broad-Target, Differentiation Strategy

A broad-target, differentiation strategy focuses on building brand power and prestige for the
company and its broadly appealing product lines. An example of a business using a broad-target
differentiation strategy could be a designer electronics store specializing in a single brand name.
The marketing focus and differentiation aspect of the company is placed on the uniquely valued
attributes on which the retailer places special emphasis when compared with the broader
competition. Some businesses using a broad-target differentiation strategy focus on the aesthetic
qualities of their product, while others focus on performance and engineering.

Narrow-Target, Differentiation Strategy

A narrow-target, differentiation strategy also focuses on building brand prestige, but taps a more
select niche of the overall market. An example of a narrow-target, differentiation strategy-based
business would be a premium handcrafted furniture showroom or a premium-quality jewelery
store. This business model focuses on building a small base of elite clientele to whom they offer
the best available products in their given specialization. The chief advantage to a narrow-strategy
business is that it can command the highest prices, and therefore often the highest markup in its
niche. The downside is a smaller, more defined customer base. A major economic shift in a
region, such as a recession or natural disaster, can cause great difficulty for narrow-target,
differentiation strategy-based businesses, as such hardships might neutralize demand for their
premium goods.

4.4.5. The five forces that determine industrial profitability

The Five-Force Model of Competition

Even though competitive pressures in various industries are never precisely the same, the
competitive process works similarly enough to use a common analytical framework in gauging
the nature and intensity of competitive forces. As Professor Michael Porter of the Harvard
Business School has convincingly demonstrated, the state of competition in an industry is a
composite of five competitive forces:

1. The Rivalry among competing sellers

2. The Competitive force of potential entry
3. Competitive pressures from substitute products
4. The power of suppliers

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5. The power of buyers (customers) Firms in other Industries
Offering substitute
products

Suppliers of key inputs Buyers

Rivalry among
competing sellers

Potential New Entrants

Figure 2-3 the Five-Force model of Competition

Porter’s Five-Force model, as depicted in figure 2-3, is a powerful tool for systematically
diagnosing the chief competitive pressures in a market and assessing how strong and important
each is. Not only is it the most widely used technique of competition analysis but, it is also
relatively easy to understand and apply.

1. The Rivalry among competing sellers

The strongest of the five competitive forces is usually the jockeying for position and buyer favor
that goes on among rival firms. In some industries, rivalry is centered around price competition-
sometimes resulting in prices below the level of unit costs and forcing losses on most rivals. In
other industries, price competition is minimal and rivalry is focused on such factors as
performance feature, new product innovation, quality and durability, warranties, after the sale
service, and brand image.
Competitive jockeying among rivals heats up when one or more competitors sees an
opportunity to better meet customer needs or is under pressure to improve its performance. The
intensity of rivalry among competing sellers is a function of how vigorously they employ such
tactics as lower prices, snazzier features, expanded customer services, longer warranties special

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promotions, and new product introductions. Rivalry can range from friendly to cutthroat,
depending on how frequently and how aggressively companies undertake fresh moves that
threaten rivals profitability. Ordinarily, industry rivals are clever at adding new wrinkles to their
product offerings that enhance buyer appeal, and they persist in trying to exploit weaknesses in
each others market approaches.
Whether rivalry is lukewarm or heated, every company has to craft a successful strategy for
competing ideally, one that produces a competitive edge over rivals and strangeness its position
with buyers. The big complication in most industries is that the success of any one firm’s
strategy hinges partly on what offensive and defensive maneuvers its rivals employ and the
resources rivals are willing and able to put behind their strategic efforts. The “ best” strategy for
one firm in its maneuvering for competitive advantage depends, in other words, on the
competitive capabilities and strategies of rival companies. Thus, whenever one firm makes a
strategic move, its rivals often retaliate with offensive or defensive countermoves. This pattern of
action and reaction makes competitive rivalry a “war-games” type of contest conducted
according to the rules of fair competition. Indeed, from a strategy making perspective,
competitive markets are economic battlefields, with the ebb and flow of the competitive battle
varying with the latest strategic moves of the players. In practice, the market out come is almost
always shaped by the strategies of the leading players.
Not only do competitive contests among rival sellers assume different intensities but the kinds of
competitive pressures that emerge from cross-company rivalry also vary over time. The relative
emphasis that rival companies put on price, quality, performance features, customer service,
warranties, advertising, dealer networks, new product innovation, and so on shifts as they try
different tactics to catch buyers attention and as competitors launch fresh offensive and defensive
maneuvers. Rivalry is thus dynamic; the current competitive scene is ever changing as
companies act and react, sometimes in rapid–fire order and sometimes methodically, and as they
swing form one mix of competitive tactics to another.
Regardless of the industry, several common factors seem to influence the tempo of rivalry
among competing sellers are:
2. Rivalry intensifies as the number of competitors’ increases and as competitors become
more equal in size and capacity.
3. Rivalry is usually stronger when demand for the product is growing slowly

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 4. Rivalry is more intense when industry conditions tempt competitors to use price cuts or
other competitive weapons to boost unit volume.
5. Rivalry is stronger when consumer’s costs to switch brands are low.
6. Rivalry is stronger when one or more competitors is dissatisfied with its market position
and launches moves to bolster its standing at the expense of rivals.
7. Rivalry increases in proportion to the size of the pay-off from a successful strategic
move.
8. Rivalry tends to be more vigorous when it costs more to get out of a business than to stay
in and compete.
9. Rivalry becomes more volatile and unpredictable the more diverse competitors are in
terms of their visions, strategic intents, objectives, strategies, resources, and countries of
origin.
10. Rivalry increases when strong companies outside the industry acquire weak firms in the
industry and launch aggressive, well- funded moves to firms in the industry acquire weak
firms in the industry and launch aggressive, well- funded moves to transform their newly
acquired competitors in to major market contenders.

2. The Competitive Force of Potential Entry.

New entrants to a market bring new production capacity, the desire to establish a secure place in
the market, and sometimes-substantial resources. Just how serious the competitive threat of entry
is in a particular market depends on two classes of factors:
i) Barriers to entry
ii) The expected reaction of incumbent firms to new entry.
A barrier to entry exists whenever it is hard for a newcomer to break in to the market and/or
economic factors put a potential entrant at a disadvantage. There are several types of entry
barriers:

1. Economic of scale-scale economies deter entry because they force potential competitors
either to enter on a large-scale basis (a costly and perhaps risky move) or to accept a cost
disadvantage (and lower profitability). Trying to overcome scale economies by entering
on a large-scale basis at the outset can result in long-term overcapacity problems for the

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 new entrants (until sales volume builds up), they retaliate aggressively (with price cuts,
increased advertising and sales promotion, and similar blocking actions). Either way, a
potential entrant is discouraged by the prospects of lower profits. Entrants may encounter
scale- related barriers not just in production, but in advertising, marketing and
distribution, financing, after-sale customer service, raw materials purchasing, and R&D
as well.

2. Inability to gain access to technology and specialized know- how- many industries
requires technological capability and skills not readily available to newcomer. Key
patents can effectively bar entry as can lack of technically skilled personnel and an
inability to excute complicated manufacturing techniques. Existing firms often carefully
guard know-how that gives them an edge. Unless new entrants can gain access to such
proprietary knowledge, they will lack the capability to compete on a level playing field.

3. The existence of learning and experience curve effects- when lower unit cost are partly
or mostly a result of experience in producing the product and other learning curve
benefits, new entrants face a cost disadvantage competing against firms with more know-
how.
4. Brand preferences and customer loyalty-buyers are often attached to established
brands. High brand loyalty means that a potential entrant must build a network of
distributors and dealer, then be prepared to spend enough money on advertising and sales
promotion to overcome customer loyalties and build it own clientele. Establishing brand
recognition and building customer loyalty can be slow and costly process. In addition, if
it is difficult or costly for a customer to switch to a new brand, a new entrant must
persuade buyers that its brand is worth the costs. To overcome the switching- cost barrier,
new entrants may have to offer buyers a discounted price or extra margin of quality or
service. All this can mean lower profit margins for new entrants.

5. Resource requirements-the larger the total investment and other resource requirements
needed to enter the market successfully, the more limited the pool of potential entrants.
The most obvious capital requirements are associated with manufacturing plant and

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 equipment, distribution facilities working capital to finance inventories and customer
credit, introductory advertising and sales promotion to establish a clientele and cash
reserves to cover start-up losses.
6. Cost disadvantages independent of size-existing firms may have cost advantages not
available to potential entrants. These advantages can include access to the best and the
cheapest raw materials, patents and proprietary technology, the benefits of learning and
experience curve effects, existing plants built and equipped years earlier at lower costs,
favorable locations, and lower borrowing costs.
7. Access to distribution channels- in the case of customer goods, potential entrants may
face the barrier of gaining access to product that lacks buyer recognitions.
8. Regulatory policies- government agencies can limit or even entry by requiring licenses
and permits.
9. Tariffs and international trade restrictions-national governments commonly use tariffs
and trade restriction to raise entry barriers for foreign firms.

In a nut sheu the principle of competitive markets states that the threat of entry is stronger when
entry barriers and law when there is a sizable pool of entry candidate, when in cum bent firms
are unable or unwilling to vigorously contest a new comer’s effort to gain a market foothold, and
when a new comer can expect to earn attractive profits.
3. Competitive Pressures from Substitute Products
Firms in one industry are, quite often, in close competition with firms in another industry
because their products are good substitutes. For example the producers of wood stoves compete
with such substitutes as kerosene heaters and portable electric heater. Just how strong the
competitive pressures are from substitute products depends on three factors:
iii) When the attractively priced substitutes are available,
iv) How satisfactory the substitutes are in terms of quality, performance, and other
relevant attributes, and
v) The ease with which buyers can switch to substitutes.
In summary, the principle of competitive markets states that the competitive threat posed by
substitute products is strong when substitutes are readily available and attractively price, buyers
believe substitutes have comparable or better features, and buyers’ switching cost are low.

4. The Power of Suppliers

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Whether the suppliers to an industry are a weak or strong competitive force depends on market
conditions in the supplier industry and the significance of the item they supply. Supplier related
competitive pressures tend to be minimal whenever the items supplied are standard commodities
available on the open market from a large number of suppliers with ample capability. Then it is
simple to obtain whatever is needed from a list of capable suppliers, perhaps dividing purchases
among several to promote competition for orders. In such cases, suppliers have market power
only when supplies become tight and users are so eager to secure what they need that agree to
terms more favorable to suppliers. Suppliers are also relegated to a weak bargaining position
whenever there are good substitute inputs and switching is neither costly nor difficult. For
example, soft-drink bottlers can check the bargaining power of aluminum can suppliers on price
or delivery by using more plastic containers and glass bottles.
Suppliers also tend to have less leverage to bargain over price and other terms of sale when the
industry they are supplying is a major customer. In such cases, the wellbeing of suppliers is
closely tied to the will–being of other major customers. Suppliers’ then have a big incentive to
protect and enhance their customers’ competitiveness via reasonable prices, exceptional quality,
and organizing advances in the technology and performance of the items supplied.

On the other hand, when the item accounts for a sizable fraction of the costs of and industry’s
product, is crucial to the industry’s production process, and/ or significantly affects the quality of
the industry’s product, suppliers have great companies control most of the available supplies and
have pricing leverage the most of the available supplies and have pricing leverage. Likewise, a
supplier has bargaining leverage the more difficult or costly it is for users to switch to alternate
suppliers. Big supplies with good reputations and growing demand for their output are harder to
wring concessions from than struggling suppliers striving to broaden their customer base or more
fully utilize their production capacity.
Finally, the principle of competitive markets states that the suppliers to a group of rival firms are
a strong competitive force whenever they have sufficient bargaining power to put certain rivals at
a competitive disadvantage based on the prices they can command, the quality and performance
of the items they supply or the reliability of their deliveries.

5. The Power of Byers

Just as with suppliers, the competitive strength of buyers can range from strong to weak.. Buyers
have substantial bargaining leverage in a number of situations. The most obvious is when buyers
are large and purchase much of the industry’s output. Typically, purchasing in large quantities
gives a buyer enough leverage to obtain price concessions and other favorable terms. Retailers
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often have negotiating leverage in purchasing products because of manufacturers’ need for broad
retail exposure and favorable shelf space. “Prestige” buyers have a degree of clout in negotiating
with sellers because a seller’s reputation is enhanced by having prestige buyers on its customer
lists.
Even if buyers do not purchase in large quantities or offer a seller important market exposure or
prestige, they may still have some degree of bargaining leverage in the following circumstances:
I. If buyers’ costs of switching to competing brands of substitutes are relatively low.
II. If the number of buyers is small.
III. If buyers are well informed about sellers’ products, prices, and costs.
IV. If buyers pose a credible threat of backward integrating in to the business of
sellers.
V. If buyers have discretion in whether they purchase the product.
At the end, the principle of competitive market states that buyers are a strong competitive force
when they are able to exercise bargaining leverage over price, quality, service, or other terms of
sale.

Competitive Advantages

To be successful over the long term, a business must hold some advantage relative to its
competition. In the simplest terms, such a competitive advantage can take one of three forms that
reflect basic customer’s values: customers want goods and services as:
1. Better
2. Cheaper, and
3. Faster
We refer to these forms of competitive advantages as differentiation, cost leadership and quick
responses, respectively. Differentiation refers to the extent to which the customer finds the firm’s
goods or services unique in some way that makes them more attractive and therefore worth a
premium price. Alternatively, the firm may be in a position of cost leadership that allows it to

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charge similar (or even lower) prices while realizing better- than- average margins. These two
forms of competitive advantage have provided the basis for studying business-level strategy.
Recently, however, another form of competitive advantage has emerged: the ability to recognize,
adopt to and react to changing customer needs faster than competitors do, what is called quick
response.
A firm that holds more than of these advantages is in a particularly strong competitive position.
But a business that does not excel in at least one of these three sources of competitive advantage
does not offer customers a superior option along any of the three dimensions of value, and it will
consequently fare poorly in a competitive market.

1. Differentiation
In pursuing a competitive advantage based on differentiation, firms attempt to create unique
boundless of goods and /or services that will be highly valued by customer. Following are some
attributes that can differentiate products.

 Product features – the physical characteristics or capabilities of a product may be an

important form of differentiation. For example, Philips developed a television that can be
display two channels on the same screen.
 After-sales service – convenience and quality of service may be critical factors in
deciding among alternative products.
 Desirable image- these is the obvious basis of virtually all fashion products, ranging
from clothing and shoe to jewelry.
 Technological innovation- technology provides the basis of competitive advantages
for a broad rang of firms.
 Reputation- a distinguished reputation can be an important source of sales.
 Manufacturing consistency- this is especially important in making components that
must mesh with others to produce a finished good.
 Status symbol- Luxury automobiles and limited edition sports cars are well-
recognized examples. A vehicle that costs more than some houses do is obviously
purchased for reasons other than just transportation.

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A successful differentiation strategy allows a business to addressthe five environmental forces in
such a way that the firm enjoys higher-than-typical returns:
 Competitive rivalry may be lessened as firms successfully distinguish themselves. In
this way, firms in the same industry may avoid head- to- head confrontations.
 Brand-loyal customers are less sensitive to prices. As a result, if a firms suppliers
raise their prices, the firm can more easily pass along the resulting cost hike to its
customers. In fact, many firms that are successful differentiators are also premium pricers-
that is, their customers pay the highest prices in the industry.
 New entrants or firms offering product substitutes must over come barriers to entry
established by brand loyalty.
Though the potential advantages of differentiation are clear, there are also risks in following
a strategy based on this competitive advantage.
 If several competitors pursue similar differentiation tactics, they may all be perceived
as equals. If such “me, too” behavior goes for enough, competitors can become virtually
indistinguishable and competition may be reduced to price wars.
 Specialists operating in niche markets may be more successful at differentiation.
Firms that attempt to offer differentiated products to large segments of market may
discover they cannot tailor their products to specific customer needs as well as specialized
competitors can.
 Attempts to stay a step ahead of the competition may result in “gold plating”. This
refers to the addition of features that are not valued enough by customers for a company to
be able to charge premium prices to offset the features’ costs.
In summary, success based on a differentiation strategy depends on:
1. Understanding what customers value
2. Being uniquely able to provide that valve, and
3. Being able to charge a premium price for it

2. Cost Leadership
The competitive advantage called cost leadership requires achieving a low- cost position
relative to one’s competition. Because costs can usually be lowered as a product becomes more
standardized, low-cost manufacturing firms strive for long production runs and low –cost

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 service firms after uniform packages. By targeting broadly defined markets with standard
products, mass production techniques with standard the greatest possible benefits from
economies of scale and expenses curve effects. A firm aiming for low –cost production will
typically spend less on R&D than will competitors who follow a differentiation strategy. A
large portion of its total R&D might be directed toward making the products easier and cheaper
to produce. Advertising will often be minimal, with promotional that efforts stress price
comparison.
If successful, a low-cost strategy also allows firms to address the five forces in their competitive
environment so they can realize higher- than- normal profits. Following are some examples of
how cost leadership addresses competitive forces.
 Holding the low-cost position convince rivals not to enter a price war. Price wars can
be ruinous to all competitors involved. Thus, a cost advantage that is great enough to serve,
as a deterrent may be an important “peace keeping” weapon.
 Low-cost producers are protected from customer pressure to lower prices.
Competitors cannot consistently price below what is known as their survival price, that
which allows profit margins just adequate to maintain a business. By definition, the low-
cost leader has a lower survival price than any other competitors does, so customer will not
able to play one competing supplier against another to force price below a level at which
the cost leader can still make profits.
 Because of their higher margins, low-cost producers are better able to with stand
increases in their costs from suppliers. In some industries, the costs of key suppliers are
volatile. In this case, the lowest-cost producer may be the only one that comes near to
making a profit.
 New entrants competing on the basis of price must face the low-cost leader with out
having the experience necessary to be come efficient. As a company’s cumulative volume
of production increases and the company gains experience in providing a particular good or
service, production costs tend to decrease the so-called experience curve effects. To the
extent that experience affects costs in a particular industry, the low-cost leader is likely to
have already moved far down its experience curve. New entrants lacking this experience
will not enjoy a comparable cost reduction benefits and may be forced to enter the market
using some competitive advantage not related to low pricing.

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  Low cost producer are in the best position to use pricing to compete with substitute
products.
Disadvantages of cost leadership
 Cost leadership is likely to be an “all–or-noting” strategy. In competitive markets for
commodity like products, the number one competitor in terms of low cost may be able
price its products at a level that will not allow less efficient producers to remain demand
will naturally seek the lowest price, leaving even the second most cost efficient producer in
an undesirable position.
 Cost cutting that leads to loss of desirable product attributes can be ruinous.
 Many cost–saving tactics are easily duplicated by competitors. Even competitors
pursuing high-differentiation positions for their flagship product line may choose to offer a
low-cost line of products often producing them with the same facilities as their top of the
line products.
 Dedication to cost cutting often limits a firm’s abilities to remain competitive in other
way. In particular, an emphasis on cost control frequently precludes investment in
innovation. This leaves a firm vulnerable to technical advances that might make its product
obsolete, regardless of any price cuts the firm can offer.
In summary, use of cost as an effective competitive advantage depends on careful monitoring
of firm’s internal operations and its customers’ needs. In some ways, competing on the basis
of differentiation because there are so many ways of differentiating goods and services.
However, in practice, maintaining a competitive advantage based on cost leadership is
difficult: there are many costs to manage, and each has the potential to affect the product’s
desirability both positively and negatively.

4. Quick Response
Quick response is more than just another aspect of differentiation, though the two are obviously
complementary. Quick Response refers to the speed with which a new product, a product
improvement or even a managerial decision that affects the customer can be made, rather than the
firms relative level of differentiation or low cost. Just as a high cost or unattractive features can
diminish the desirability of a product, a company’s slow response to customers’ needs may force
them to choose alternatives. Quick response is really a way of looking at a firm’s flexibility.

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Virtually all firms can eventually make the same changes quick responders make, but slower firms
are not flexible enough to adjust what they do as rapidly as quick- response competitors do.

Advantage of Quick Response

 Developing new products-perhaps the most obvious form of quick response is the
time it takes a firm to develop a new product. Companies from a wide range of industries
have been able to reduce their product development times by half, making the speed of new
product development an important dimension of competition.
 Customizing products- the speed with which firms can offer custom- designed
products has increased rapidly with advances in new production technology.
 Improving existing products- one of the many factors accounting for most consumer
electronics firms’ success is the speed with which they continually upgrade their products.
 Delivery of ordered products- firms have found that response time has an important
impact for off- the –shelf products as well.
 Adjusting marketing efforts
 Answering customers’ questions-simply getting an answer for a customer can be the
basis of real competitive advantage.

How does superior response time affect a firm’s ability to face the five forces?
 Firms with quick response can avoid head- to- head rivaly. If a firm can develop or
improve new products quickly, its competitors will lag behind in producing comparable
products.
 Faster firms can charge premium prices. A company’s speed in bringing innovations
to market means its products are often a generation a head of its competition’s. The
company reasonably expects to charge premium prices for its “new and improved”
products. In other words, faster firms earn the right to charge premium price not by
introducing new types of products but simply delivering comparable products faster than
competitors do.
 Faster firms may encourage quick responses from suppliers. Supplier-producer
coordination is essential to quick productive of new products, and a quick- response
strategy might appear to place more bargaining power in the hands of suppliers. However,

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 in practice, aggressive suppliers realize that by working with innovative companies, they
can remain more innovative themselves and, indirectly, for their suppliers. Furthermore,
any supplier must realize that if it does not cooperate, sales may be lost to a competing
supplier. Quick responders deal with the threats of new entrants and substitute products by
leading in innovations them selves. The fastest competitors in a given market are some
times the most capable of making timely advances in products. By remaining leaders in
innovation, these firms stay a step ahead of new entrants and substitute products.

Limitations of Quick Response

 The organization may not have the systems available that make competion on
the basis of response time feasible. The technological and human systems required to
produce fast response are different from those required to produce, say, low-cost, mass-
produced items. Attempts to force speed out of an organization not- designed to deliver it
will probably result in damaging the business rather than improving it. Those that have
trouble just walking should not try running.
 Speed is not equally important to all markets or customers application of the ideas
presented above is not always appropriate. In stable markets, in which the way of doing
business has not changed for year, there may be little hope of competing successfully on
the basis of response times.
 Speed creates stress. The pace of life inside organizations that compete on the basis of
speed is likely to be hectic, and managers may not have the luxury of unhurried decisions.
 Speed for speed’s sake does not create a competitive advantage. Unless the firm is
faster at offering its customers something they value, something that will improve its
position in terms of differentiation or cost, speed is of little value as a competitive weapon.
Faster is not better unless it creates the customer value that is required to be a superior
competitor.

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 Self-Check LO-4 Written Test

Part-I Short Answer Questions

1. How to conduct market research?

2. What are the market research methods?
3. What are trade associations?
4. Define what a product is?
5. Define the term market penetration?

Part –II Matching

A B

1. Segmentation A. how the product or brand should be perceived by the target groups

2. Targeting B. deciding which of these groups to communicate with, and how to

talk to them

3. Positioning C.Delivering a specific message in order to influence the target group

4. Messaging D. dividing the market in distinct groups

 Note: Satisfactory rating - 15 points

 Unsatisfactory - below 15 points
You can ask you teacher for the copy of the correct answers.

Score = ___________

Rating: ____________

Name: _________________________ Date: _______________

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 Short Answer Questions

Part I

1. You may have a great idea for a product or service, but before you go any further, first make
sure there's a market for it.
2. A) primary research

B) Secondary research

3. A trade association, also known as an industry trade group, business association or sector
association is an organization founded and funded by businesses that operate in a specific
industry.

4. In marketing, the term “product” is often used as a catch-all word to identify solutions a
marketer provides to its target market

5. The activity or fact of increasing the market share of an existing product, or promoting a new
product, through strategies such as bundling, advertising, lower prices, or volume discounts.

Part –II

1. D

2. B

3. A

4. C

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 LEARNING GUIDE #05

Unit of Competence: IMPROVE BUSINESS PRACTICE

Title : IMPROVING BUSINESS PRACTICE
LG Code : HLT NUA3 14 0912
TTLM Code: HLT NUA14 0912 v1

LO5- Develop business growth plans

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LO5- Develop business growth plans
INSTRUCTION SHEET LEARNING GUIDE #5

This learning guide is developed to provide you the necessary information regarding the
Following content coverage and topics –
5. Customer growth
5.1. Developing plans to increase yield per existing client

Yield per the existing client may be increased by:

 Raising charge out rates/fees
 Packaging fees
 Reduce discounts
 Sell more services to existing clients

5.2. Ethical principles of business deals

5.1.1. Statutory obligation compliance

5.1.2. Consequences of illegal business and corruption

5.1.3. Analyzing consequences of illegal business

5.3.Market growth and relative market share

5.3.1 Alternative approaches of marketing

5.3.2. Rate of market growth
5.3.3. Relative market share
5.3.4 Time, reason and place for team work

Learning Activities
1. Read the information written in the “Information Sheets”.

2. If you earned a satisfactory evaluation proceed to next module. However, if your rating is
unsatisfactory, see your teacher for further instructions.

3. Read the “Operation Sheet” and try to understand the procedures discussed.

4. Practice the steps or procedures as illustrated in the operation sheet. Go to your teacher if you
need clarification or you want answers to your questions or you need assistance in understanding
a particular step or procedure.

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 Customer Growth
Information Sheet – 1

After completing this chapter, the student should be able to:

1. Describe Customer growth.

2. Understand how to develop plans for a business deals.
3. Understand ethical principles for business deals.
4. Understand what market growth & relative market share.

5. Customer Growth- is a full-service agency that bridges the worlds of direct marketing and
brand advertising. Unlike many direct marketers, we don’t fall back on repetitive, formulaic
messages. Unlike many brand advertisers, we don’t pitch campaigns that defy measurable
results. The end result is creativity that’s proven effective in the marketplace. What we provide:

 Innovation, Not Imitation. We research customer needs and attitudes to develop

compelling new messages that stand out amidst an imitative, “me-too” marketing clutter.
 Accountability. Our background is direct marketing. We win our business by winning
tests. New media or old, every campaign we do elicits a measurable response from a
highly targeted audience. You get 100% accountability from your agency.
 Depth of Thinking. Our partners are industry leaders. Throughout our agency, you’ll
find strategic thinkers who execute flawlessly using proprietary methods like our
Creative Continuum®, which enables us to deliver more and better ideas for your agency
dollar.
 Customer Life-Cycle Strategies. We plan new direct & relationship marketing
programs, as well as strategies to improve existing programs, across the entire customer
life-cycle: acquisition, conversion, retention, cross-selling, loyalty & more.
 A Total Solution. We execute campaigns across a full range of integrated
media/channels, including direct mail, e-mail, web, print, DRTV & telemarketing.

Yield per the existing client may be increased by:

 Raising charge out rates/fees

 Packaging fees

Packaging is the science, art, and technology of enclosing or protecting products for
distribution, storage, sale, and use. Packaging also refers to the process of design, evaluation, and
production of packages. Packaging can be described as a coordinated system of preparing goods
for transport, warehousing, logistics, sale, and end use. Packaging contains, protects, preserves,

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transports, informs, and sells.[1] In many countries it is fully integrated into government, business,
and institutional, industrial, and personal use.

Reduce discounts

Offering discounts often tends to reduce customer loyalty

“Oh yes, we love you and your product. This is just perfect for us, and we would like to do
business with you, but your price is too high. Can’t you do something so we can give you our
business?” How many times have you heard something like that? Do salespeople get nervous and
worry about losing such a piece of business?

Honestly, I think most of us try to get the prospect to focus on the price/value relationship. What
usually happens, however, is we try to find out how much the prospect would be willing to pay
and then negotiate the price down to almost that level. When I ask this question of overcoming
price objection, most salespeople I know respond to it by trying to find out how much the
prospect is willing to pay.

Price discounting might have an opposite effect

People get suspicious when they want to buy something and they are offered a discount without
much reason. Think about it, offering discounts-far from building customer loyalty-often tends to
reduce it. Still, many businesses think that they can get the sales if they lower the price. When
people object to finalizing the sale, they may say it’s the price that’s keeping them from buying.
However, it could well be something else. They may even be willing to pay the price, but by
objecting, they feel they might get a better deal.

 Sell more services to existing clients

Selling more to existing customers

One of the best - and easiest - ways to increase your revenue and profitability is to sell more to
your existing customers. Many customers only know about the products they have bought from
you. Simply telling your customers about all the products in your range can bring in more
business.

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Cross-selling and up-selling is all about relevance. Look at what your customers have bought
before and offer them other relevant goods and services that might be useful. They will see this
as good customer care, rather than an intrusive sales pitch.

Timing is everything. Where possible, focus on cross-selling and up-selling at the point of sale
when customers are ready to buy. Offering upgrades, special deals and free gifts (such as three
for two) is a great way to convince customers to spend a little more.

How to approach existing customers

Never underestimate the importance of your existing satisfied customers. It costs less to sell to
them than it does to find new business. What's more, they are loyal, they tell you what you are
doing right and wrong, they recommend you to their friends and, compared to new customers,
they are less price-sensitive.

Selling to existing customers is quite different to approaching new prospects. You don't need to
establish your reputation, skills or the quality of your products. The customer is already
convinced. The fact that you're telling them about other useful products or services shows that
you understand their needs and care about their satisfaction.

Your sales approach should reflect the fact that you already have a good relationship. Listen to
your customers and let them give you feedback before you make your pitch. As long as you tell
your customers about something that's appropriate to them, they will appreciate the offer.

Don't assume your customers know your products as well as you do. Most people are focused on
one thing when they make a purchase. Has a customer ever said to you 'I didn't know you did
that'? Customers are often unaware of everything that a business can provide.

Take advantage of every customer touch point to show them what you can offer as part of your
routine customer-care processes. You can also send newsletters and emails telling them about
new products and special offers. After a sale, a courtesy call is a good opportunity to offer other
goods and services. You can send reminders when services or check-ups are due. When shipping
a product to a customer, include a flyer highlighting other items which they might be interested
in.

How to cross-sell

Cross-selling is an established sales technique that works. In a chemist, you'll find mouthwash,
dental floss and toothpaste next to the toothbrushes. On websites like Amazon, you'll find other
recommendations next to the book you are buying.

Maximize the potential for cross-selling by positioning related items together, whether in your
shop, on your website or in your brochure. Educate shoppers on the depth and variety of what
your business offers. At the same time, ensure your employees are trained in cross-selling
techniques, based on offering customers relevant products and services.

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Incentives can be the best way to achieve extra sales and it's very effective to bundle together
related products in a package deal. If you run a carpet-cleaning business, don't forget to mention
that you clean curtains too. You can also use endorsement to make a sale - recommendations
from experts or other customers can convince customers to add more products to their basket.

How to up-sell

Getting customers to buy a more expensive product can be difficult. However, by encouraging
your customers to spend a little more, you can significantly boost your sales.

There are two main ways to up-sell. The first method involves an in-depth understanding of your
customer's requirements. The second approach is based on incentives and rewards for spending
more. If you can combine both, you have a good chance of successfully up-selling.

Take a car sales pitch, for example. A customer comes in and is sure about the model they want

to buy. The sales person asks a series of questions to find out more about their requirements.

Then they show the customer the original model and a more expensive model that gives them

everything they want. The customer likes the more expensive car but is concerned about the

price. The sales person offers a discount and the deal is sealed.

5.2. Ethical principles of business deals

Business ethics

Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that
examines ethical principles and moral or ethical problems that arise in a business environment. It
applies to all aspects of business conduct and is relevant to the conduct of individuals and entire
organizations.

According to Dr. Jill Young, an instructor in South University’s College of Business, integrity
is the most important ethical concept because it covers such a broad area. “If you act with
integrity, ethical behavior is just a natural progression,” she says. “Those who have integrity are
guided by a set of core principles that influences their decisions and behaviors.”

People with integrity value other principles, including honesty, respect, personal responsibility,
compassion, and dependability.

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These qualities are integrated into the Six Pillars of Character offered by the Josephson
Institute, a nonprofit organization that develops and delivers services and materials to increase
ethical commitment.

The pillars are:

 Trustworthiness
 Respect
 Responsibility
 Fairness
 Caring
 Citizenship

Business Ethics for Executives

In addition to the Six Pillars of Character, the Josephson Institute offers

12 Ethical Principles for Business Executives:

 Honesty
 Integrity
 Promise-Keeping & Trustworthiness
 Loyalty
 Fairness
 Concern for Others
 Respect for Others
 Law Abiding
 Commitment to Excellence
 Leadership
 Reputation & Morale
 Accountability

3.1.2. Statutory obligation compliance

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With reference to your query, i would like to intimate you that statutory obligations are the
formulates which are required to be done by an origination under various labour laws. the way in
which all these obligations are done are called compliance. There are lot of compliance required
to be done by an origination under labour laws. So many enactments are here applicable under
the head of labour laws. so obligations are the statutory rules which are required to be fulfill by
an employer and an employee.

Statutory obligation is the law for a certain industry, a region or territory; for an instance we
may take the example of banking industry in a country, those banks operating under statutory
obligation or laws of the central bank of that country. Meanwhile there can be specific law or
regulation for a particular territory or province and if a company operates in that particular
territory must compliance with those rules & regulations.

1.1.2. Consequences of illegal business and corruption

What are the consequences of illegal business practices?

Illegal business practices will result in legal consequence for business. This may include large
fines the loss of the business. Legislation also protects consumers, competitors and society from
unethical practices of a business.

What is corruption?

Corruption is often defined as the misuse of entrusted authority for personal benefit.
The authority is usually public or political.

Business corruption

This form of corruption is defined by the involvement of private companies, and is usually
motivated by corporate profits. In contrast to the term ‘political corruption’, or ‘petty corruption’,
where we focus on the interests of politicians or civil servants, we usually emphasize the
perspective and the interests of the bribers when applying the term business corruption.

 Consequences of business corruption

Corruption is commonly defined as the misuse of entrusted power for personal or private gain.
Common examples of corruption include cash or other payments to secure a governmental or
commercial contract (bribery), improper political or charitable contributions (political financing),
kickbacks, excessive gifts and extortion.

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 A good practical rule of thumb for business operations is that if you wouldn’t want others to
know about a payment, it probably shouldn’t be made.
So what are the consequences of corruption?
Individuals

 results in costly fines, penalties and jail terms

 ruins careers and reputations
 erodes the quality of life

Businesses

 causes loss of business reputation

 increases cost of doing business
 undermines innovation since bribes, instead of performance, determine project award
 jeopardises mergers & acquisitions and inhibits ability to conduct capital market transactions
 debars firms/businesses from tenders (government, development banks)

Governments / markets

 undermines democracy and the rule of law

 hampers the development of markets and drives away investments
 leads to loss of confidence in institutions and the de-legitimisation of government
 increases costs of services/products and lowers the quality of services as contracts are not
ordinarily awarded to the appropriate bidder
 allows organised crime, terrorism and other threats to human security to flourish

Fighting corruption is a collective effort. Publicly communicating company standards and

policies will help employees and business partners to resist bribery, and encourage the reporting
of bribe incidents.

5.3 Market growth and relative market share

Market growth rates -are a key indicator of the health of your company. Going back to our air
craft pilot analogy, market growth rates can be likened to a tail wind. The tail wind can create a
large difference between ground speed and air speed. If the pilot were to use air speed alone he
would miss his destination. Assume your revenues are growing at 15 percent per year. On the
surface, this appears impressive. If, however, market revenues are expanding at an average of 25
percent per annum, you have a serious problem. Relative to the "speed" of the overall market,
you are foundering. Obviously, you are missing out on the benefit of some "tail wind" that your
competitors are enjoying.

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The market growth rate concept is simple enough on the surface. However, it is extremely
important to remain aware of the specifics underlying the measurement. Some typical market
parameters are described below.

Market Parameters

 What are your product groups?

 What is your time period?
 What are your geographic areas?
 What are your measurement units?
 Production values: Units, Currency
 What are your customer segments?
 Do you intend to adjust for inflation?
5.3.3. Relative market share

This indicates likely cash generation, because the higher the share the more cash will be
generated. As a result of 'economies of scale' (a basic assumption of the BCG Matrix), it is
assumed that these earnings will grow faster the higher the share. The exact measure is the
brand's share relative to its largest competitor. Thus, if the brand had a share of 20 percent, and
the largest competitor had the same, the ratio would be 1:1. If the largest competitor had a share
of 60 percent; however, the ratio would be 1:3, implying that the organization's brand was in a
relatively weak position. If the largest competitor only had a share of 5 percent, the ratio would
be 4:1, implying that the brand owned was in a relatively strong position, which might be
reflected in profits and cash flows. If this technique is used in practice, this scale is logarithmic,
not linear.

On the other hand, exactly what is a high relative share is a matter of some debate. The best
evidence is that the most stable position (at least in Fast Moving Consumer Goods FMCG
markets) is for the brand leader to have a share double that of the second brand, and triple that of
the third. Brand leaders in this position tend to be very stable—and profitable; the Rule of 123.[3]

The reason for choosing relative market share, rather than just profits, is that it carries more
information than just cash flow. It shows where the brand is positioned against its main
competitors, and indicates where it might be likely to go in the future. It can also show what type
of marketing activities might be expected to be effective.

5.3.1 Alternative approaches of marketing

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 5.3.2. Rate of market growth

Growth-share matrix

The BCG matrix (aka B-Box, B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix,
Boston Consulting Group analysis, portfolio diagram) is a chart that had been created by Bruce
Henderson for the Boston Consulting Group in 1970 to help corporations with analyzing their
business units or product lines. This helps the company allocate resources and is used as an
analytical tool in brand marketing, product management, strategic management, and portfolio
analysis.[1] Analysis of market performance by firms using its principles has called its usefulness
into question, and it has been removed from some major marketing textbooks. [2]

Chart

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BCG Matrix

To use the chart, analysts plot a scatter graph to rank the business units (or products) on the basis
of their relative market shares and growth rates.

 Cash cows are units with high market share in a slow-growing industry. These units typically
generate cash in excess of the amount of cash needed to maintain the business. They are
regarded as staid and boring, in a "mature" market, and every corporation would be thrilled to
own as many as possible. They are to be "milked" continuously with as little investment as
possible, since such investment would be wasted in an industry with low growth.

 Dogs, or more charitably called pets, are units with low market share in a mature, slow-
growing industry. These units typically "break even", generating barely enough cash to
maintain the business's market share. Though owning a break-even unit provides the social
benefit of providing jobs and possible synergies that assist other business units, from an
accounting point of view such a unit is worthless, not generating cash for the company. They

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 depress a profitable company's return on assets ratio, used by many investors to judge how
well a company is being managed. Dogs, it is thought, should be sold off

 Question marks (also known as problem children) are growing rapidly and thus consume
large amounts of cash, but because they have low market shares they do not generate much
cash. The result is a large net cash consumption. A question mark has the potential to gain
market share and become a star, and eventually a cash cow when the market growth slows. If
the question mark does not succeed in becoming the market leader, then after perhaps years
of cash consumption it will degenerate into a dog when the market growth declines. Question
marks must be analyzed carefully in order to determine whether they are worth the
investment required to grow market share.

 Stars are units with a high market share in a fast-growing industry. The hope is that stars
become the next cash cows. Sustaining the business unit's market leadership may require
extra cash, but this is worthwhile if that's what it takes for the unit to remain a leader. When
growth slows, stars become cash cows if they have been able to maintain their category
leadership, or they move from brief stardom to dogdom.[citation needed]

As a particular industry matures and its growth slows, all business units become either cash cows
or dogs. The natural cycle for most business units is that they start as question marks, then turn
into stars. Eventually the market stops growing thus the business unit becomes a cash cow. At
the end of the cycle the cash cow turns into a dog.

The overall goal of this ranking was to help corporate analysts decide which of their business
units to fund, and how much; and which units to sell. Managers were supposed to gain
perspective from this analysis that allowed them to plan with confidence to use money generated
by the cash cows to fund the stars and, possibly, the question marks. As the BCG stated in 1970:

Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on
its growth opportunities. The balanced portfolio has:

 stars whose high share and high growth assure the future;
 cash cows that supply funds for that future growth; and
 Question marks to be converted into stars with the added funds.

Practical use of the BCG Matrix

For each product or service, the 'area' of the circle represents the value of its sales. The BCG
Matrix thus offers a 'map' of the organization's product (or service) strengths and weaknesses, at
least in terms of current profitability, as well as the likely cashflows.

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The need which prompted this idea was, indeed, that of managing cash-flow. It was reasoned that
one of the main indicators of cash generation was relative market share, and one which pointed
to cash usage was that of market growth rate.

Derivatives can also be used to create a 'product portfolio' analysis of services. So Information
System services can be treated accordingly.[citation needed]

Relative market share

This indicates likely cash generation, because the higher the share the more cash will be
generated. As a result of 'economies of scale' (a basic assumption of the BCG Matrix), it is
assumed that these earnings will grow faster the higher the share. The exact measure is the
brand's share relative to its largest competitor. Thus, if the brand had a share of 20 percent, and
the largest competitor had the same, the ratio would be 1:1. If the largest competitor had a share
of 60 percent; however, the ratio would be 1:3, implying that the organization's brand was in a
relatively weak position. If the largest competitor only had a share of 5 percent, the ratio would
be 4:1, implying that the brand owned was in a relatively strong position, which might be
reflected in profits and cash flows. If this technique is used in practice, this scale is logarithmic,
not linear.

On the other hand, exactly what is a high relative share is a matter of some debate. The best
evidence is that the most stable position (at least in Fast Moving Consumer Goods FMCG
markets) is for the brand leader to have a share double that of the second brand, and triple that of
the third. Brand leaders in this position tend to be very stable—and profitable; the Rule of 123.[3]

The reason for choosing relative market share, rather than just profits, is that it carries more
information than just cash flow. It shows where the brand is positioned against its main
competitors, and indicates where it might be likely to go in the future. It can also show what type
of marketing activities might be expected to be effective.[citation needed]

Market growth rate

Rapidly growing in rapidly growing markets, are what organizations strive for; but, as we have
seen, the penalty is that they are usually net cash users - they require investment. The reason for
this is often because the growth is being 'bought' by the high investment, in the reasonable
expectation that a high market share will eventually turn into a sound investment in future
profits. The theory behind the matrix assumes, therefore, that a higher growth rate is indicative of
accompanying demands on investment. The cut-off point is usually chosen as 10 per cent per
annum. Determining this cut-off point, the rate above which the growth is deemed to be
significant (and likely to lead to extra demands on cash) is a critical requirement of the
technique; and one that, again, makes the use of the BCG Matrix problematical in some product
areas. What is more, the evidence, [3] from FMCG markets at least, is that the most typical pattern
is of very low growth, less than 1 per cent per annum. This is outside the range normally
considered in BCG Matrix work, which may make application of this form of analysis
unworkable in many markets.[citation needed]

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Where it can be applied, however, the market growth rate says more about the brand position
than just its cash flow. It is a good indicator of that market's strength, of its future potential (of its
'maturity' in terms of the market life-cycle), and also of its attractiveness to future competitors. It
can also be used in growth analysis.

5.3.4 Time, reason and place for team work

 What is team work?

The process of working collaboratively with a group of people in order to achieve a goal.
Teamwork is often a crucial part of a business, as it is often necessary
for colleagues to work well together, trying their best in any circumstance. Teamwork means that
people will try to cooperate, using their individual skills and providing constructive feedback,
despite any personal conflict between individuals.

Teamwork is the definition of cooperative members of a same group working together to obtain
the same goal.

When people listen carefully to each other, when they seek and take seriously each other's
opinions, when they make use of each other’s competencies and expertise, they are involved in
teamwork.

Reason for team work

Writ
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 Self-check Lo-5 ten test

Part –I Short answer questions

1. What is packaging?

2. What is business ethics?

3. What are the consequences of illegal business practices?

4. What is corruption?

Note: Satisfactory rating - 20 points Unsatisfactory - below 20 points

You can ask your teacher for the copy of the correct answers.

Score = ___________
Rating: ____________

Name: _________________________ Date: _______________

Short Answer Questions

1. Packaging is the science, art, and technology of enclosing or protecting products for distribution,
storage, sale, and use
2. Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines
ethical principles and moral or ethical problems that arise in a business environment.

3. Illegal business practices will result in legal consequence for business. This may include large fines the
loss of the business.

4. Corruption is often defined as the misuse of entrusted authority for personal benefitthe authority is
usually public or political.

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 LEARNING GUIDE #06

Unit of Competence: IMPROVE BUSINESS

PRACTICE
Title : IMPROVING BUSINESS
PRACTICE
LG Code : HLT NUA3 14 0611
TTLM Code : HLT NUA14 0611 v1

LO6- IMPLEMENT AND MONITOR PLANS

LO6- IMPLEMENT AND MONITOR PLANS

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 INSTRUCTION SHEET LEARNING GUIDE#06

This learning guide is developed to provide you the necessary information regarding the
Following content coverage and topics –
6.1 Developing ways of implementing plans with relevant stakeholders
6.2 Identifying the key success to a plan
6.3 Monitoring implementation of the plan with the agreed indicators
6.4 Adjusting the required implementation

Learning Activities

1. Read the information written in the “Information Sheets”.

2. If you earned a satisfactory evaluation proceed to next module. However, if your rating is

unsatisfactory, see your teacher for further instructions.

3. Read the “Operation Sheet” and try to understand the procedures discussed.

4. Practice the steps or procedures as illustrated in the operation sheet. Go to your teacher if you

need clarification or you want answers to your questions or you need assistance in understanding

a particular step or proceed.

Information Sheet – 1
Developing ways of implementing plans with relevant stakeholders

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After completing this chapter, the student should be able to:

1. Describe the ways of implementing plans with relevant stake holders.

Introduction Purpose
The purpose of this guide is to help departments and agencies formulate robust implementation
plans that clearly articulate how new policies, programs, and services will be delivered on time,
on budget and to expectations. It is particularly important that plans explicitly identify and
address the implementation challenges and risks involved.

Departments and agencies are encouraged to monitor the implementation planning website for
updates and additional information including planned revision dates for these guidelines.

Why do Implementation Planning?

To ensure outcomes are delivered on decisions made by Government, implementation

planning must be carried out.

What is Implementation Planning?

Implementation Planning is the process of determining how a policy will be implemented in

sufficient detail for Cabinet to make informed judgments about whether to proceed in the light of
the risks and requirements involved.

Implementation planning has a strong management focus which requires best practice
approaches, skills and experience to be applied in the following seven areas:

1. Management Control and Program/Project Management

2. Governance and Accountability

3. Planning

4. Resource Management

5. Risk Management

6. Stakeholder Engagement

7. Review, Monitoring and Evaluation

Effective implementation planning requires a structured approach to thinking and

communicating in these seven areas. This will create a shared understanding among those
who will drive implementation, from the most senior leaders to the most junior managers,

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 and across boundaries between and within departments and agencies and non APS
bodies.

Note that implementation planning is not about “filling in an implementation plan template”:
rather the final implementation plan document should simply be a record of the structured
thinking and communication that has occurred between key leaders and managers
through face-to-face workshops, discussions and conversations. It must be underpinned
by consultation and research.

6.2 Stakeholder Engagement and Communication Plan

The Stakeholder Engagement and Communication Plan describes what will be
communicated, how it will be communicated, and by whom, during the program. It
facilitates engagement with stakeholders through the establishment of a controlled and bi-
directional flow of information. It should be defined and implemented as early as possible
and then maintained throughout the program.
The two key steps in developing a Stakeholder Engagement and Communication Plan are
identifying key stakeholders and developing strategies to engage with stakeholders.
Consider the purpose of communicating with each stakeholder. Is it to:

• build rapport?
• convey intentions?
• ask for feedback / input?
• provide them with information?
• build credibility?
• understand their perspective? and
• seek buy-in?

a) What commitment / input do you want from stakeholders and what messages do you need to
impart to them?
b) What nature and level of contact is necessary? Consider indirect and direct contact, and if the
latter, at what bureaucratic level is contact most appropriate? Would the measure benefit from a
Communications campaign? What tools and/or communications activities (i.e. newsletter,
website, public forums, and briefings to the Minister) should be used?

7. Review, Monitoring and Evaluation

7.1 Context

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The success of the implementation of a New Policy Proposal will be judged in terms of the
benefits delivered – i.e. the measurable improvements resulting from outcomes which are
perceived as an advantage by stakeholders.

7.2 Key Considerations

Implementation planning must identify who is accountable for the realization of benefits –
particularly if the stakeholders concerned are external to departments or agencies. You are
encouraged to consult the relevant policy area of PM&C in developing your approach to this.

Be mindful that the milestones, tracked through the CIU reporting process, will focus on
outcomes and benefits, such as the expected impacts or level of user take-up, as well as the
development of products, services and programmes and their roll-out.

7.3 Control Variables

As implementation progresses leaders and managers need to be able to refine and improve
delivery, minimize the impact of ambiguity and bring certainty wherever possible. To
achieve such control requires management mechanisms to monitor and compare actual
achievements against those planned. Implementation plans must therefore contain clear
targets against which progress can be measured, with agreed limits on how much forecast
deviation is permissible before problems are escalated (tolerances).
Implementation plans and management control mechanisms must focus on the following six
variables:
1. Time – plus or minus an amount of time on target completion dates;
2. Cost – plus or minus an amount of the planned budget;
3. Quality – plus or minus degrees off quality targets (e.g. concurrent users);

4. Scope – permissible variations of the plan’s outputs (e.g. mandatory requirements plus or
minus desirable requirements);

5. Risk – limits on the plan’s aggregated risks (e.g. costs of aggregated threats to remain less
than 10% of the plan’s budget) or limits on individual threats;

6. Benefit – plus or minus degrees off an improvement goal (e.g. 30-40% cost reduction).

An important aspect of project governance is setting up controls so that it immediately refers up

to the next management layer for a decision on how to proceed if, during the project, the
sponsoring agency forecasts that it will exceed these tolerances. This implementation of
‘management by exception’ provides for efficient use of senior management time.

Independent assurance may be required as part of control. Quality assurance means assuring the
integrity and probity of all processes undertaken to implement the policy on time and on budget.
It also involves monitoring progress against milestones and within budget.

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108
 Information sheet -2 Identifying the key success factors to a plan

After completing this chapter, the student should be able to:

1. Identifying the key success factors to plan.

2. Understand what the key success factors to plan are.

Key Success Factors in Business

Overview

Former U.S. President Calvin Coolidge said, "After all, the chief business of the American
people is business," according to QuotationsBook.com. Even today, this sentiment holds true.
The rugged individualism that expanded this nation's borders has become the motto of a country
proud of its professional accomplishments and the universal key factors to success that, when
implemented, mean brighter opportunities for your business.

Quality

One of the cornerstones of business success is offering a high-quality service or product. If a

popular item sells for a very low price, and it is poor quality, you will lose customers. The key is
to provide that which has value, as this will increase repeat patronage and word of mouth
advertising, building a good reputation for your business.

Marketing

Effective communication is one of the most important components of a successful business, and
staying in touch with consumers will drive your bottom line. Marketing accomplishes important
goals. First, it lets customers know that your product or service exists. When consumers see a
familiar brand, they will tend to gravitate toward it for their purchases. Marketing puts your
business on the short list of familiar options. Second, it gives you an opportunity to convince
consumers that your product is better. Advertisements highlight the benefits of what you're
offering or compare it to the competition, establishing a reason why customers should consider
you first.

Innovation

According to ThinkExist.co, St. Jerome said, "Good, better, best. Never let it rest. 'Till your good
is better and your better is best." This is the motto of any successful business. Perseverance and
dedication to improvement help ensure that your company stays competitive. Doing the same
over and over doesn't garner the best results, but innovation creates new products or changes in
service that will attract new customers and income opportunities.

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Integrity

Integrity has been revealed as a major aspect of business success. Being honest, open and
transparent with employees, consumers and shareholders will gain you respect and help you
retain talented workers and loyal customers. On the other hand, dishonesty can undo the
trustworthy image of a company.

Leadership

If a company wants to do well, it must have effective leadership, which provides motivation,
organization and direction to a company, allowing it to reach its full potential.

12 key success factors in business and in other areas of life

1. Study every day

One of the core messages that I learned during the weekend was, that you should study every day
at least 30 minutes.

How to apply:

Not only is it helpful to study material directly related to your topic where you operate (your
niche), but also it is beneficial, when it comes to growing yourself.

“Study every day for at least 30 minutes

2. Meditate and visualize

Mediation was seen as a way to improve the voice of intuition. Especially when you have to
make decision and you are not sure of which path to choose, you should follow your intuition.
The stronger the intuition, the easier it is to follow it.

Visualization was also one of the very important messages that we got across. If I remember
correctly, Sandra mentioned, that one should visualize two times per day (15 minutes sessions),
and focus on the outcome that you want to achieve.

How to apply:

Learn how to meditate and do it on a daily basis. Meditation doesn’t have to take long time if
you don’t want to. Just couple of minutes (at least in the beginning) is enough.

Spend some time on visualizing your goals every day too. This helps you to see the outcome and
you know much more vividly the goal you are reaching.

“Learn how to meditate and do it on a daily basis

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3. Positive thinking

It is very easy to get caught thinking negative thoughts which creates even more negative
thoughts and events to your everyday life. It is like a vicious cycle, where there is no way out.

How to apply:

Have you got any feedback lately that you felt negative about? Maybe you should see the other
side of the coin too by figuring out, is there a way to improve my business?

“If you focus on the positive side of things, you will start to see the possibilities around you.

4. Work towards your dreams without knowing the how

One of the key lessons I learned was, that if you have a dream, you don’t have to know how to
get there or how to do it – all the necessary elements and events will eventually fall into place,
which guide you in your journey.

How to apply:

There is a famous saying which goes like this: “When the student is ready, the teacher will
appear”. This has proved to be true for many times for me.

“If you have a dream, you don’t have to know how to get there or how to do it – all the
necessary elements and events will eventually fall into place

5. Aim higher

Many people move on by setting low goals, based on the previous performance they got. I have
to admit, that I have done the same. However, you should set big goals, because you are able to
reach them the same way as you would those smaller goals.

I know that the figure is just an arbitrary one and an outrageous even (yeah … call me crazy J),
but we will never see if it comes to reality or not – without setting a clear figure first and
knowing it is possible!

“Why limit yourself to small goals when you can dream big

6. Your attitude is the key to your success

This lesson was talked over and over again: it is your attitude dictates your success. Your attitude
is made of your thoughts, feelings and actions.

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Bob talked about this in his own separate lesson and this is the same topic that is being taught by
Earl Nightingale decades earlier. In fact, Earl has a great video about this on YouTube.

How to apply:

There is a great quote by Henry Ford and it goes like this:

“If you think you can do a thing or think you can’t do a thing, you’re right.”

Change your attitude and the success is closer than you ever thought!

“Your attitude dictates your success

7. Filter out bad messages

Although this lesson wasn’t brought up that much, I felt it was very important to include here.

“Filter out the bad messages which affects you mind

8. Don’t let anyone steal your dreams

Later in life you start hearing these comments which let you down, like: “Don’t be foolish” or
“Stop dreaming”. That’s when the kids “come to senses” and “start thinking realistic”.

The same happens in the adulthood as well. In fact, it seems that it is even more difficult to talk
about your dreams, without anyone putting you down. That’s why it is essential to do your thing,
be proud of it and do not let anyone steal your dreams.

“Be proud of your dream and don’t let anyone steal it

9. Faith

Many times we start working for something, but it turns into reality later in our life. Even if we
don’t get any concrete results in the beginning, we “know” that things are going to become
successful later down the road if we just keep on working. This “knowing” is faith.

“Faith means trusting something invisible – if you have a strong faith towards success, it will
come to reality at some point.

10. Progression is success

Oddmund talked about this topic and for me realizing this sentence, was quite a personal
sensation: Progression is success.

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The success is not necessarily reaching your goal – it is the progression that you make towards it.
So, every time you move forward on your path towards your goal, it is success.

“Progression is success

11. Change your paradigm

This was one of the fundamental things that Bob taught us. It is our paradigms that control
everything in our life: for example how we spend our time or how we earn money.

By changing your paradigms, new opportunities start to emerge and a whole new world opens in
front of us.

How to apply:

The best way to change your paradigms is to learn and study every day. Reading a book (or
joining a training program) gives new perspectives to a certain topic and you will see things
differently than in the beginning.

“Our paradigms that control everything’’

12. You can be anything you want

Bob was dropped out of high school after couple of months and barely had any money for living.
Now he is a millionaire, doing seminars and public speaking around the world. He said many
times, that “if I can do it, anyone can do it”.

Information sheet- 3 Monitoring implementation of the plan with the agreed

indicators

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After completing this chapter, the student should be able to:

1. Identifying the key factors in monitoring and implementation of the plan.

2. Understand what are the agreed indicators in monitoring and implementation of the plan.

MONITORING, PLANNING AND IMPLEMENTATION

Monitoring is an integral part of every project, from start to finish

A project is a series of activities (investments) that aim at solving particular problems within a
given time frame and in a particular location. The investments include time, money, human and
material resources. Before achieving the objectives, a project goes through several stages.
Monitoring should take place at and be integrated into all stages of the project cycle.

The three basic stages include::

 Project planning (situation analysis, problem identification, definition of the goal,

formulating strategies, designing a work plan, and budgeting);
 Project implementation (mobilization, utilization and control of resources and project
operation); and
 Project evaluation.

Monitoring should be executed by all individuals and institutions which have an interest (stake
holders) in the project. To efficiently implement a project, the people planning and implementing
it should plan for all the interrelated stages from the beginning.

In the "Handbook for Mobilizers," we said the key questions of planning and management were:

(1) What do we want?

(2) What do we have?

(3) How do we use what we have to get what we want? And

(4) What will happen when we do? They can be modified, using "where," instead of "what,"
while the principles are the same.

The questions become:

Where are we?

Where do we want to go?
How do we get there? and

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 What happens as we do?

Situation Analysis and Problem Definition:

This asks the question, "Where are we?" (What do we have?).

Situation analysis is a process through which the general characteristics and problems of the
community are identified. It involves the identification and definition of the characteristics and
problems specific to particular categories of people in the community. These could be people
with disabilities, women, youth, peasants, traders and artisans.

Situation analysis is done through collecting information necessary to understand the community
as a whole and individuals within the community. Information should be collected on what
happened in the past, what is currently happening, and what is expected to happen in the future,
based on the community's experiences.

Information necessary to understand the community includes, among others:

 Population characteristics (eg sex, age, tribe, religion and family sizes);
 Political and administrative structures (eg community committees and local councils);
 Economic activities (including agriculture, trade and fishing);
 Cultural traditions (eg inheritance and the clan system), transitions (eg marriages, funeral
rites), and rites of passage (eg circumcision);
 On-going projects like those of sub-county, district, central Government, non
Governmental organizations (NGOs), and community based organizations (CBOs);
 Socio-economic infrastructure or communal facilities, (eg schools, health units, and
access roads); and
 Community organizations (eg savings and credit groups, women groups, self-help groups
and burial groups), their functions and activities.

Information for situation analysis and problem definition should be collected with the
involvement of the community members using several techniques. This is to ensure valid,
reliable and comprehensive information about the community and its problems.

Some of the following techniques could be used:

 Documents review;
 Surveys;
 Discussions with individuals, specific groups and the community as a whole;
 Interviews;
 Observations;
 Listening to people;
 Brainstorming;
 Informal conversations;
 Making an inventory of community social resources, services and opportunities;

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  Transect walks, maps; and
 Problem tree.

Situation analysis is very important before any attempts to solve the problem because:

 It provides an opportunity to understand the dynamics of the community;

 It helps to clarify social, economic, cultural and political conditions;
 It provides an initial opportunity for people's participation in all project activities;
 It enables the definition of community problems and solutions; and
 It provides information needed to determine objectives, plan and implement.

Situation analysis should be continuous, in order to provide additional information during project
implementation, monitoring and re-planning. Situation analysis and problem identification
should be monitored to ensure that correct and up dated information is always available about the
community and its problems.

Since monitoring should be integrated into all aspects or phases of the process, let us go through
each phase and look at the monitoring concerns associated with each.

Setting Goals and Objectives:

Goal setting asks the question, "Where do we want to go?" (What do we want?).

Before any attempts to implement a project, the planners, implementers and beneficiaries should
set up goals and objectives. See Brainstorm for a participatory method to do this.

A goal is a general statement of what should be done to solve a problem. It defines broadly, what
is expected out of a project. A goal emerges from the problem that needs to be addressed and
signals the final destination of a project. Objectives are finite sub-sets of a goal and should be
specific, in order to be achievable.

The objectives should be "SMART." They should be:

Specific: clear about what, where, when, and how the situation will be changed;
Measurable: able to quantify the targets and benefits;
Achievable: able to attain the objectives
(knowing the resources and capacities at the disposal of the community)
Realistic: able to obtain the level of change reflected in the objective; and
Time bound: stating the time period in which they will each be accomplished.

To achieve the objectives of a project, it is essential to assess the resources available within the
community and those that can be accessed from external sources. See Revealing Hidden
Resources.

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The planners, implementors and community members should also identify the constraints they
may face in executing the project and how they can overcome them. Based on the extent of the
constraints and positive forces, the implementors may decide to continue with the project or to
drop it.

The goals and objectives provide the basis for monitoring and evaluating a project. They are the
yardsticks upon which project success or failure is measured.

Generating Structures and Strategies:

This aspect asks the third key question, "How do we get there?" (How do we get what we want
with what we have?).

The planners and implementors (communities and their enablers) should decide on how they are
going to implement a project, which is the strategy. Agreeing on the strategy involves
determining all items (inputs) that are needed to carry out the project, defining the different
groups or individuals and their particular roles they are to play in the project. These groups and
individuals that undertake particular roles in the project are called "actors."

Generating the structures and strategies therefore involves:

 Discussing and agreeing on the activities to be undertaken during implementation;

 Defining the different actors inside and outside the community, and their roles; and
 Defining and distributing costs and materials necessary to implement the project.

After establishing the appropriateness of the decisions, the executive should discuss and agree
with all actors on how the project will be implemented. This is called designing a work plan.
(How do we get what we want?). A work plan is a description of the necessary activities set out
in stages, with rough indication of the timing.

In order to draw a good work plan, the implementors should:

 List all the tasks required to implement a project;

 Put the tasks in the order in which they will be implemented;
 Show allocation of the responsibilities to the actors; and
 Give the timing of each activity.

The work plan is a guide to project implementation and a basis for project monitoring. It
therefore helps to:

 Finish the project in time;

 Do the right things in the right order;
 Identify who will be responsible for what activity; and
 Determine when to start project implementation.

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The implementers and planners have to agree on monitoring indicators. Monitoring indicators
are quantitative and qualitative signs (criteria) for measuring or assessing the achievement of
project activities and objectives. The indicators will show the extent to which the objectives of
every activity have been achieved. Monitoring indicators should be explicit, pertinent and
objectively verifiable.

Monitoring Indicators are of four types, namely;

 Input indicators: describe what goes on in the project (eg number of bricks brought on
site and amount of money spent);
 Output indicators: describe the project activity (eg number of classrooms built);
 Outcome indicators: describe the product of the activity (eg number of pupils attending
the school); and
 Impact indicators: measure change in conditions of the community (eg reduced
illiteracy in the community).

Writing down the structures and strategies helps in project monitoring because they specify what
will be done during project implementation. Planning must indicate what should be monitored,
who should monitor, and how monitoring should be undertaken.

Implementation:

Monitoring implementation asks the fourth key question "What happens when we do?"

Implementation is the stage where all the planned activities are put into action. Before the
implementation of a project, the implementors (spearheaded by the project committee or
executive) should identify their strength and weaknesses (internal forces), opportunities and
threats (external forces).

Summary of the Relationship:

The above illustrates the close relationship between monitoring, planning and implementation.
It demonstrates that:

 Planning describes ways which implementation and monitoring should be done;

 Implementation and monitoring are guided by the project work plan; and
 Monitoring provides information for project planning and implementation.

There is a close and mutually reinforcing (supportive) relationship between planning,

implementation and monitoring. One of the three cannot be done in isolation from the other two,
and when doing one of the three, the planners and implementors have to cater for the other

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Information sheet-4 Adjusting the required implementation

After completing this chapter, the student should be able to:

1. Knowing how to adjust the required implementations of a plan

Implementation is the carrying out, execution, or practice of a plan, a method, or any design for
doing something. As such, implementation is the action that must follow any preliminary
thinking in order for something to actually happen. In an information technology context,

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 implementation encompasses all the processes involved in getting new software or hardware
operating properly in its environment, including installation, configuration, running, testing, and
making necessary changes. The word deployment is sometimes used to mean the same thing.

Performance and Budget Planning Process

Implementation planning ensures that the detailed planning, resources, and performance
expectations are aligned to support the achievement of the NASA and Enterprise Strategic Plans.
Implementation planning is based on the previous cycle of NASA and Enterprise Strategic Plans,
capital investment planning, the 5-year Agency budget, and the results of the ongoing
performance evaluation process. Essential elements of implementation planning include program
planning to establish technical, schedule, and cost, as well as performance criteria at all
management levels. NASA's budget planning process is the vehicle for integrating these
implementation plans.

Self-Check LO-6 Written Test

Part-I Short Answer Questions

1. Why do Implementation Planning?

2. What is Implementation Planning?

3. What are the key success factors in business?

4. List down the monitoring indicators

 Note: Satisfactory rating - 15 points

 Unsatisfactory - below 15 points
You can ask you teacher for the copy of the correct answers.

Score = ___________

Rating: ____________

Name: _________________________ Date: _______________

Short answer questions

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1. To ensure outcomes are delivered on decisions made by Government,
implementation planning must be carried out.

2. Implementation Planning is the process of determining how a policy will be implemented in

sufficient detail for Cabinet to make informed judgments about whether to proceed in the light of
the risks and requirements involved.

3. A) Quality B) marketing C) Integrity D) Leadership

4. A) Input indicators: describe what goes on in the project (eg number of bricks brought on
site and amount of money spent);

B) Output indicators: describe the project activity (eg number of classrooms built);

C) Outcome indicators: describe the product of the activity (eg number of pupils attending the
school); and

D) Impact indicators: measure change in conditions of the community (eg reduced illiteracy in
the community).

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