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54,080
Words On
A
Practical, Theoretical and Creative View of Marketing
By
David Alderoty
May,
2008
Phone
(212) 581-3740
E-mail RunDavid@Verizon.net
Scroll down to read this e-book using the down arrow
key or the mouse
This
electronic book functions just like a conventional website, except most of it
is contained in one very long webpage.
You can move to different sections of this long webpage, by scrolling up
or down, with the arrow keys on the keyboard, or with the mouse.
The blue
words, below, is a hyperlink table of contents. Left click on any word and you will be
taken to the corresponding section of the book.
This e-book also contains a large number of links that will take you
automatically to various websites when you click on them, assuming you are
connected to the Internet. To return
to this book, after viewing one of these websites, click on the left arrow 
on the upper, left portion of your
screen, one or more time, until you are back to the book. Clicking on the left arrow can also
return you to the table of contents, from various sections of the book.
Table of
Contents
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following
About This Multimedia Electronic Book
This
Electronic Book Functions Similar To a Conventional Website
LINKS TO WEBSITES AND SEARCH ENGINES
The
Book Is Linked To a Large Number of Websites
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the following:
Chapter 1 Marketing a General View
DEFINITIONS AND BASIC CONCEPTS
Are
There Other Definitions Of Marketing?
Websites
with Marketing Definitions, and Related Concepts
4à
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Websites
on Understanding Your Market and Related Concepts
5à
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A
Note on the Relativity of a Market, and Market Segment
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the following:
Chapter 2 the Size of a Business in Relation
to Appropriate Marketing Techniques and Strategies
MARKETING
ACTIVITIES IN SMALL AND LARGE BUSINESSES
Is
There A Difference In Marketing Strategies Of Small And Large Companies?
A
Useful Definition: Micro-Business.
7à
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Chapter 3
Significant Markets and Market Segments, and Related Concepts
WHAT
IS A SIGNIFICANT MARKET OR MARKET SEGMENT?
Is
Race, Age, Social Class A Valid Way To Delineate A Market or A Market Segment?
Culture:
Markets, and Market Segments
Markets,
and Markets Segments and Advertising
METHODS OF DELINEATING RELEVANT MARKETS AND
MARKET SEGMENTS
Are
There Any Good Methods Of Defining Markets And Market Segments?
Behavior:
Buying Habits and History
Delineating
a Market or Market Segment Based on Needs
Consumer
Evaluations Methods to Delineate Relevant markets and Market Segments
Defining
Market Segments in a Small Business
8à Click on this hyperlink for a sound file of
the following:
Chapter 4 the
Marketing Mix, And Related Concepts
THE MARKETING MIX, PRODUCT, PRICE, PLACE,
PROMOTION
The
Concept of the 4 Ps, Product, Price, Place, Promotion
The
Product is Anything that can be Sold or Marketed
Promotion: Any Type of Publicity, Advertising or
Communication That Relates To Selling a Product
9à
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A CRITICAL LOOK AT THE CONCEPT: THE UTILITY AND LIMITATION OF THE MARKETING
MIX, AND IT 4PS
Websites
on Marketing Mix, And Related Concepts
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following:
Chapter 5
PRODUCT, IN RELATION TO MARKETING MIX
A
Highly Productive Strategy Is To Meet the Needs of the Consumers in Your Market
The
Idea To Keep In Mind Is The Product And Market Must Be Appropriate For Each
Other.
11à Click on this hyperlink for a sound file of
the following:
Chapter 6 Price,
In Relation To Marketing Mix
Consumers
Make Evaluations on Whether To-Buy or Not-to-buy, Partly Based on Price
The
Relationships of Price, Profit and Rate of Sales
Is
Pricing A Product For The Maximum Rate Of Sales Always Profitable?
When
is Pricing a Product for the Maximum Rate of Sales (The Lowest Possible Price)
Sensible?
In
Certain Situations Consumers Judge the Value and Quality of a Product by its
Price
12à Click on this hyperlink for a sound file of
the following:
Chapter 7 Place, In Relation To Marketing Mix
DISTRIBUTION CHANNELS AND RELATED CONCEPTS
Shipping
Products to the Right Place
A
Mathematical Formula to Evaluate Shipping Costs, Relative to the Price of the
Product
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following:
Chapter 8
Promotion, In Relation To Marketing Mix
ADVERTISING AND RELATED CONCEPTS
The
Advantages Of: Advertising, As a Form of Publicity
The
Disadvantages of Advertising, As a Form of Publicity
14à
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The
Advantages of: Face-to-Face Sales Talk to Individual Consumers, as a Form of
Publicity
The
Disadvantages of: Face-to-Face Sales Talk to Individual Consumers, as a Form of
Publicity
Websites
on Selling and Salesmanship, and Related Concepts
The
Advantages of: Word-of-Mouth Publicity
Positive
Word-Of-Mouth Publicity
The
Disadvantages of: Word-of-Mouth Publicity
Websites
on Word-Of-Mouth Publicity
Introduction
to Mass Meteor Publicity
There
are a Number of Ways of Deliberately Creating Publicity for a Company or
Product
Parades,
Fireworks Displays, Publicity Stunts and Other Techniques to Obtain Mass Media
Publicity
The
Primary Advantages of Mass Media Publicity
The
Disadvantages of Mass Media Publicity
Avoiding
or Minimizing Adverse Publicity
15à
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INTERNET PROMOTIONAL STRATEGIES
Uploading
Videos on Pre-Existing Websites
Websites
on Internet Marketing and E-Commerce
16à Click on this hyperlink for a sound file of
the following:
Summing
Up Environmental Factors
Behavioral
Factors of Management and Staff
17à Click on this hyperlink for a sound file of
the following:
Chapter 10
Unusual Aspects of Marketing
What
are Unusual Aspects of Marketing?
An
Introduction to Modern Barter
Barter
Companies and the Techniques they Use
My
Concluding Thoughts on Modern Barter
THE MARKETING OF A POLITICAL CANDIDATE
Introduction
to Marketing of Political Candidates
How
is Marketing of a Political Candidate Different than Marketing other Products?
Marketing
Methods Used By Political Candidates
Requests
for Money by Charities for Adverse Conditions That Might Strike you and Your
Relatives
Requests
for Volunteers by Charities
Requests
for Various Types of Items by Charities
Websites
0n the Marketing and Charities
18à Click on this hyperlink for a sound file of
the following:
Chapter-11: Object-Dynamic Model of Marketing, Involves:
Objects, and their Dynamics and Mathematics
Introductory Note on This Chapter
What Does Objects Mean, from the
Perspective of the Object-Dynamics Model of Marketing?
What Does Dynamics Mean, From the
Perspective of the Object-Dynamics Model of Marketing
What Does Mathematics Mean From the
Perspective of the Object-Dynamics Model of Marketing?
OBJECT-DYNAMICS MODEL OF MARKETING FROM THE
PERSPECTIVE OF LANGUAGE
THE
UTILITY OF THE OBJECT-DYNAMICS MODEL OF MARKETING AND RELATED CONCEPTS
The Utility of the Object-Dynamics Model of
Marketing and Conceptual Models in General
Applying the Object Dynamics Model of
Marketing
Websites on Conceptual Models of Marketing,
and Related Concepts
19à Click on this hyperlink for a sound file of
the following:
PRODUCT LIFE CYCLE AND RELATED CONCEPTS?
What
Does Product Life cycle mean?
1)
The Initial Engineering of the Product
3)
The Growth, in Terms of Increasing Rates of Sales
4)
Maturity, Where the Rate of Sales is Stabilized
Strategies
to Deal with the Declining Stages of a Product
Concluding
Ideas on the Concept of the Product Life cycle
Websites
on the Product Life cycle
20à Click on this hyperlink for a sound file of
the following:
Chapter 13 an Evolutionary
Theory of Business and Marketing
Summing
Up the Concept, and its Potential Utility
21-Click on
this hyperlink for a sound file of the following:
Chapter-14
Marketing, Pricing, and Mathematics, and Related Concepts
SOFTWARE AND BUSINESS AND MARKETING
CALCULATIONS
HTML/Javascript Programs can be Created to
Perform Specific Types of Business Calculations
Websites on Software for Marketing and
Business
22à
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THE CONCEPT OF RATE AS IT APPLIES TO
BUSINESS AND MARKETING
Introduction:
Factors Involved With Pricing
Markups
Based on the Percentage of Manufacturing or Wholesale Costs
There
are a Number of Factors that Influence the Level of Markup
A
Note on Fixed Cost and Variable Costs, and Related Concepts
Calculating
the Breakeven Quantity and Determining an Appropriate Price for a Product
A
Modification of the Breakeven Formula, to Calculate a Profit Greater than Zero
THE CONCEPT OF RATE, AS IT APPLIES TO
BUSINESS AND MARKETING
The Rate of Transporting the Product to the
Selling Outlets
Rate of Profit in Terms of Percentage of
Investment or the Rate of Return on Investment
Calculating Profit and Rates of Profit for
a New Business
23à Click on this hyperlink for a sound file of
the following:
Chapter 15
Factors that Have a Tendency to Influence Pricing
The
Quality of the Product and Pricing
The
Brand-Name Associated With the Product and Pricing
The
Location, or Market that a Product is Sold in Can Influence the Price that
Consumers Will Pay
The
Price the Consumer is willing to Pay for a Product Can be Influenced by the
Packaging
The
Quantity and Quality of the Advertising Can Affect the Pricing of a Product
Competition
Can Influence Pricing of a Product
Competition
and Pricing in Relation to a Small Business
Websites
on pricing, marketing, and related concepts
24à Click on this hyperlink for a sound file of
the following:
Chapter 16 the
Pricing of Products that are Obtained from Nature
Supply
and Demand can determine or Influence the Price of a Product obtained from
nature
Products
from Hunting and Gathering, Farming, and Mining
Raw
Materials Come From Hunting and Gathering, Farming and Mining
The
Market Usually Controls the Price of Raw Materials Based on Supply and Demand
and other Factors
Products
That Are the Result of Hunting and Gathering
Products
That Are the Result of Farming
Products
That Are the Result of Mining
25à Click on this hyperlink for a sound file of
the following:
Chapter 17 the
Marketing of Services, with a Focus on the Individual Service Provider
Skilled
and Unskilled Service Providers
There
Are Many Important Differences between Services and Other Types of Products
With
a Few Exceptions, Service Providers Often Have a Market that is Limited to a
Geographical Area
Why
are Unskilled Service Providers Usually Paid Low Wages and Fees?
Marketing
Strategies for Individual Service Providers
Good
Relationships with Clients Can Reduce the Chances of Lawsuits and Getting Fired
Websites
on Marketing Services and Related Concepts
26à Click on this hyperlink for a sound file of
the following:
Chapter 18
Mass-Production, Versus Small Scale Production in Relation to Marketing
MARKETABILITY IN RELATION TO PRODUCTION
METHODS IS A VERY IMPORTANT CONCEPT.
Introduction:
Marketability in Relation to Mass Production, Versus Small Scale Production
The
Concept of the Niche Market, without Mass Production, is Useful for Small
Business Owners
A
More Advanced Look at Production Techniques, which Ranges from Super Mass
Production, to Hand Work
Websites
on Niche Markets, Production Techniques and Related Concepts
27à Click on this hyperlink for a sound file of
the following:
A CONSUMER BASED MARKETING PHILOSOPHY
Satisfying
the Needs of the Consumer
EVALUATING MARKETS AND MARKET SEGMENTS:
PERIODIC ASSESSMENT OF A MARKET OR MARKET SEGMENT
Introduction:
Methods of evaluating
Structured
and Unstructured Interviews
Psychological
Evaluations in Relation to Marketing
A
Simplified Version of a Focus Group for a Small Business?
Websites
on Market Evaluations and Related Concepts
28à
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EVALUATING MARKETS AND MARKET SEGMENTS:
ONGOING EVALUATION OF A MARKET, OR MARKET SEGMENTS
What
is Ongoing Assessment in Relation to Marketing?
Computerized
Cash Registers, that Scan Barcodes on Products
Ongoing
Assessment by Telephone Questionnaires and Interviews
Ongoing
Assessment with Questionnaires on the Internet
Ongoing
Assessment Based on the Number of Sales from a Department or Salesperson
Ongoing
Marketing Assessment of a Small Business
A
REPRESENTATIVE SAMPLE OF INDIVIDUALS, TO EVALUATE A MARKET
What
exactly is a Representative Sample of a Market?
What
is Relevant to Your Market Evaluation, In Terms of Subgroups and Demographics?
DATA, AND INFORMATION, IS THERE A DIFFERENCE?
How
Demographics Can be Used in Marketing
Erroneous
Assumptions Based on Demographic Data
Websites
on Demographics and Related Concepts
29à Click on this hyperlink for a sound file of
the following:
USEFUL OR UNUSUAL WEBSITES ON MARKETING, BUSINESS AND
RELATED CONCEPTS
2à Click on this hyperlink for sound file of the
following
About This Multimedia Electronic Book
The table of contents consists of
hyperlinks. When you left click on
any word in the table of contents, it will automatically take you to the
corresponding sections of this book.
The chapters in this book are
essentially self-contained units or articles. This means that you can read them in any
order you choose, and you will probably understand them. Most of the sections, WRITTEN
IN CAPITALIZED UNDERLINED BOLD TYPE, within a chapter are also, more
or less, independent units, and in most cases, you will probably understand
them no matter what order you read them in. The subsections, Written in Underlined, Italicize, Bold Type, May NOT always be understandable if you
read them out of sequence. However,
if you already have some background in marketing, you will probably understand
most of the subsections even if you read them out of sequence.
This Electronic Book Functions Similar To a Conventional Website
This electronic book behaves very
similar to a conventional website, except most of it is contained in one very
long webpage. You can move to
different sections of this long webpage, by scrolling up or down, with the
arrow keys on the keyboard, or with the mouse.
When viewing this book, you can
use the exact same controls and techniques you use when you open any
conventional webpage on the Internet.
This includes the arrow functions, on your upper left corner of your
screen, which you see when you open your Internet browser.
These arrows return you to locations on this document, or the Internet,
that you hyperlinked to. That is,
when you left click on the left arrow it returns you to the section of this
document, or to a webpage, that you were previously viewing. The left arrow key moves you towards
your original starting point. When
you left click on the right arrow it will reverse, any changes that were made
that resulted from clicking on the left arrow. The arrows are only functional when
they turn blue. All of this is
the standard functionality that applies to most, if not all, websites.
The backspace key, on the
keyboard, essentially provides the same functionality as the left arrow. You can use the backspace key to return
to any section of this document that you were previously at, if you used
hyperlinks. The backspace key is
especially useful when you view a webpage link to this document. You can simply return to the document by
pressing on the backspace key, one or more times.
The book opens in Internet
Explorer version 5 or later, Netscape, Firefox, and other modern browsers. However, the book and its components
might NOT function optimally in some browsers if they do not
have the ability to handle multimedia components, sound files, and JavaScript.
LINKS TO WEBSITES AND
SEARCH ENGINES
This e-book contains a large number of hyperlinks, which are displayed in
blue on most computers. When you
click on any of these hyperlinks, you will be taken to specific sections in
this book, or to websites on the Internet, created by other authors. In some cases, the hyperlinks will open
files, calculating devices, Excel worksheets, folders, or sound recordings that
are incorporated into this e-book.
The Book Is Linked To a Large Number of Websites
The book is linked directly, and
indirectly, to millions of websites.
If a website link does not function, use the words next to the link as a
search phrase. Place the search
phrase, in the same search engine that was used for the original search. In most cases, this is listed on top of
the list of websites, such as: Search phrase with Google:
The search engines that were used
to find most of the websites in this book are Google, Google scholar, and
Yahoo. You can access these search
engines by left clicking on the following Web addresses:
http://scholar.google.com/schhp
3à Click on this hyperlink for a
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Chapter 1
Marketing a General View
DEFINITIONS AND BASIC CONCEPTS
The most effective way of defining major terminology is to use one or
more paragraphs, as opposed to a single sentence. I am using this technique to define
marketing in the following three paragraphs.
I am defining marketing as the set of activities
involved with selling a product. The activities include:
·
Creating and implementing a
plan to sell a product
·
The application of promotional strategies, such as advertising, and
attempts to obtain free publicity from the mass media
·
Packaging
·
Distribution
·
Determining the optimum price for a product
·
Organizing, and managing a sales force
·
Face to face selling, carried out by sales personnel
·
Surveys to evaluate consumers buying habits and needs
·
Organizing and running focus groups to evaluate consumer’s opinions
and emotional reactions to products
·
Designing or obtaining products that meet the needs of the consumer
·
Evaluating feedback (the results) of prior efforts to sell a product
·
And any other action that is used to sell a product.
The word selling has a general meaning in this definition. It includes the exchange of goods and
services for money, the services provided free by social service organizations,
and the trading provided by barter companies. (I will discuss barter companies later on in this
book.)
The term product in the above definition means
anything that can be sold, such as goods and services. This includes items that are least or
rented. Transportation is also a
product when it is offered for sale.
Any facility or geographical area that is advertised or requires rent or
a fee to visit is also a product.
Bank loans, savings accounts, and credit cards are also products. Even entities that are offered for free,
by social service agencies, such as vaccinations, healthcare, and financial
assistance are also products. In
general, any entity that can be offered by way of advertising, mass media
publicity, or by direct selling methods is a product.
Are There Other Definitions Of Marketing?
There are a large number of other
definitions of marketing. However, most of them delineate approximately the
same concept, as above, but with different words. Many are less precise than the above
definition. However, some
definitions express a specific marketing philosophy, or methodology, and they
usually contain descriptions of marketing that is somewhat different than
conventional definitions. You can
see all of this in the following list of websites.
Websites with Marketing Definitions, and Related Concepts
At the end of this paragraph,
there is a list of websites that contain marketing definitions. Some
of these websites also contain a great deal of information on other aspects of
marketing, as well as links to other interesting websites.
Search
phrase with Google: What Is a Market? http://www.google.com/search?hl=en&q=What+Is+A+Market%3F
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.google.com/search?hl=en&defl=en&q=define:market&sa=X&oi=glossary_definition&ct=title
Words on website: Definitions of market on the Web
http://www.knowthis.com/tutorials/principles-of-marketing/targeting-markets/what-is-a-market.htm Words on website: Principles of
Marketing what is a Market?
Search
phrase with Google: Definition marketing http://www.google.com/search?q=Definition+marketing&hl=en&start=10&sa=N This website consists of one or more search
pages, with many links to other websites.
If you do not find what you want on this website, you can change the
search phrase that will appear in a dialog box, after you click on the above
web address. After changing the
search phrase, press the enter key, and you will see a different set of
websites.
http://www.bitpipe.com/tlist/Database-Marketing.html
Words on website: Database Marketing
http://www.google.com/search?hl=en&defl=en&q=define:Marketing&sa=X&oi=glossary_definition&ct=title
Words on website: Definitions of Marketing on the Web
http://www.marketingpower.com/content4620.php
Words on website: What are the definitions of marketing and marketing
research?
http://www.websitemarketingplan.com/marketing_management/marketing_change.htm
Words on website: The Definition of Marketing. Has It Changed?
http://www.marketingpower.com/mg-dictionary.php?SearchFor=marketing&Searched=1
Words on website: Dictionary of Marketing Terms
http://www.customerthink.com/blog/definition_marketing
Words on website: The Definition of Marketing
4à
Click on this hyperlink for a sound file of the following:
Market means the set of people and organizations
who are consumers, or potential consumers of a product, or a product
category. The phrase product
category in this definition means a set of products that are often sold by
the same company, or retailer, such as hardware, groceries, furniture,
clothing, sporting goods, etc.
A market sometimes (but not
always) can consist of most of the people in a geographical area. An example is a grocery store that
serves the people in a neighborhood.
A mail order list of individuals, who purchased camping supplies in the
last two years is a market, for a camping supplies store that sells through the
mail, even if the people on the list live all over the world.
A major challenge for a business
is to understand its market(s).
This involves determining what population segments constitute a market
for a specific product, or product category. It also involves an understanding of all
the factors that relate to selling the product(s) to the population segments
that represent the company's market(s).
This can include many factors, including social, cultural, economic, and
educational level of the consumers that comprise the market. This concept will be discussed in more
detail in various sections of this book.
You can also obtain additional information from the following websites.
Websites on Understanding Your Market and Related Concepts
Search phrase with Google Scholar How to evaluate and understand your market http://scholar.google.com/scholar?hl=en&lr=&q=How+to+evaluate+and+understand+your+market&btnG=Search This website consists of one or more search pages, with many links to other websites. If you do not find what you want on this website, you can change the search phrase that will appear in a dialog box, after you click on the above web address. After changing the search phrase, press the enter key, and you will see a different set of websites.
http://books.google.com/books?hl=en&lr=&id=2V9FV6wQQ_AC&oi=fnd&pg=PR11&dq=How+to+evaluate+and+understand+your+market&ots=pTxgx5Ce08&sig=b898P5Ss1Fzy9sNOH7Z_koZRUEY
Words on website: The Discipline of Market Leaders: Choose Your Customers,
Narrow Your
Search phrase with Yahoo Search: How to evaluate and
understand your market
http://pandecta.com/market.html
Words on website: Market Research Tutorial How To Understand Your Customers
The following website contains a large amount of
useful information, which will probably be valuable to students, entrepreneurs,
and sales managers. http://www.innovators.net/entrepreneur_resources/estimate.html Words on website:
5à Click on this hyperlink for a sound file of
the following:
A market segment is a subset of consumers within a
market that have certain similarities, especially in relation to the potential
or actual purchase of a product, or product category. For example, a market segment for a
supermarket is housewives with babies that live close enough to shop at the
store. This market segment can be
significant to the supermarket, because it provides the opportunity to sell supplies,
such as disposable diapers, and baby food.
A Note on the Relativity of a Market, and Market Segment
The concept of market, and
market segment in some cases might be unclear, or blurred. These concepts are essentially relative
concepts. For example, if you have
a group of consumers in a geographical area that are likely to be interested in
your product, you can consider that a market. If you divide this group into two
segments, based on two sets of characteristics based on the purchase of your
product, you have two groups of consumers, group-A and group-B. In this case, group-A and group-B can be
defined as market segments.
However, if you were initially selling your product to group-A only,
this group would be your market (market-A). If you eventually discovered that
group-B would be interested in your product also, if you advertise in Spanish,
then you found another market for your product, which is market-B.
Because of the relative nature of
the terminology, you can consider the terms market, and market
segment as interchangeable, in relation to some of the topics in this book.
6à Click on this hyperlink for a sound file of
the following:
Chapter 2 the
Size of a Business in Relation to Appropriate Marketing Techniques and
Strategies
MARKETING ACTIVITIES IN SMALL AND LARGE BUSINESSES
Is There A Difference In Marketing Strategies Of Small And Large
Companies?
Of course, marketing efforts do
not always involve all of the activities mentioned in the definition at the
beginning of chapter 1. The
marketing activities that are used by some businesses, are few in number, and
are carried out in a simplified and informal way. This is usually seen in very small
businesses, such as individual entrepreneurs, and mom-and-pop stores. The owner, and employees, might use
intuition, casual observations of customer behavior, conversations with
customers, the selling rate of various products, instead of formal market
evaluations and surveys.
Advertising might be limited to displays of products in the store
window, and signs.
Large businesses are more likely
to engage in most of the activities listed in the definition of marketing
(presented in the beginning of chapter 1).
They usually have the financial resources needed for formal market
surveys, test marketing, focus groups, and advertising in the mass media. These activities might not be
cost-effective for a small business, but they often are for large companies.
Most of the course material, books, websites and research that I have
encountered on marketing and business do not deal with small businesses. Even when small businesses are
mentioned, I have found that after reading for a while, it becomes apparent
they are talking about businesses that have 40 to 500 employees. From the perspective of the huge
organizations, such as Fortune 500 companies, businesses with 40-500 employees
are relatively small. However,
businesses with 40 to 500 employees, often involve millions in investment, and
starting a business of this size is out of the reach of many Americans.
The Small Business Administration considers a manufacturing
facility with 500 or less employees as a small business. They also consider a wholesale business
(“Wholesale Trade”) with 100 employees or less to be a small
business. They have their own
criteria to evaluate the size of a business. If you want to see the details involved
with their definition left click on the following hyperlink, which will take
you to a Small Business Administration webpage http://www.sba.gov/services/contractingopportunities/sizestandardstopics/summarywhatis/index.html
A Useful Definition: Micro-Business
When we talk about small
business, we need some precise terminology and definitions. I have found precise terminology, at a
number of websites, including http://usgovinfo.about.com/library/weekly/aa120201a.htm. Instead of using the term small
business, better terminology is micro-business, which means a business
with five or less employees.
However, I am modifying this definition, to make it even more precise,
as follows. A micro-business
is a business with five or less employees,
with salaries
and profits totaling less than one half million
dollars a year. I provided this modification
because there are some businesses with five a less employees that produce tens
of millions of dollars in profit a year.
For example, famous movie stars, expert business consultants, and, top
level professional athletes, essentially have a small business, marketing their
services, which may result in many millions of dollars of profit each
year. It is necessary to
distinguish this from mom-and-pop stores, and two-person partnerships, and tiny
family-owned businesses that usually have very limited financial
resources. These limited resources
will greatly limit their marketing strategies.
No doubt, micro-businesses
are somewhat limited in terms of marketing when compared to larger
businesses. There is simply much
more that can be done in large businesses.
They usually can afford to spend millions on experimenting with various
aspects of product development and marketing. Risking a few million in such
experimentation may not be much of a problem for a large company, even if the
results are not always fruitful.
Even businesses with 40 to 500 employees may spend hundreds of thousands
a year on new marketing campaigns.
Probably because of the above,
there is more research and information on large businesses, then on
micro-businesses. Good techniques and
scientific research for micro-businesses are lacking. Techniques and research are needed that
can be used by individual entrepreneurs, mom-and-pop stores, and small
partnerships, that cannot afford a team of marketing experts.
However, the above does not imply
that there is no information, or help for micro-businesses. Three paragraphs below, there are a list
of websites that provide information and assistance for individuals that operate, or
want to start, micro-businesses. In
addition, some of the techniques used in large businesses, can be modified in
various ways to make them useful for micro-businesses. I attempt to do this in some of the
sections of this book, when it is feasible.
The above discussion suggests
some interesting ideas on marketing, in relation to the size of a
business. As implied in the
previous discussion, the size of a business can be very ambiguous. The best way to define size (in my
opinion) is in terms of the profits, and salaries paid to
employees. That is the sum
of the profits and salaries equals the size of
the business, with
this assessment method. For
example, a small business owner, who employs one individual, for $40,000 a
year, and makes 50,000 a year in profit, would have a $90,000-per-year-
business. If an individual, sets up
a stand on the city streets, during the weekends, makes $5,000 a year in
profit, she would have a $5,000-per-year-business. This method can also be used when a
business did not make a profit, or when there is a net loss at the end of the
year, by just calculating the salaries paid to employees. This method can be used to estimate the
amount of money that can be invested in new marketing strategies, such as
marketing assistance from experts, advertising, test marketing, etc. For example, 10% of the yearly gross of
profits and salaries might be a reasonable investment for new marketing
strategies. A $90,000-per-year-business
might be able to risk $9,000 a year on new marketing strategies. This can be, an additional expenditure,
over the regular marketing budget of a company.
There are of course many other
methods, in addition to the above, of assessing the size of a business. Some of these methods can be seen at the
following websites.
Search phrase with Google: "Business size" http://www.google.com/search?hl=en&q=%22Business+size%22+
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.wikitextbook.co.uk/index.php/Measuring_business_size Words on website: The market share of the business The level of sales turnover The number of employees The value of the business The value of capital employed
http://www.census.gov/epcd/www/smallbus.html
Words on website: Statistics about Business Size (including Small Business)
from the
The following list of websites
provides information, as well as various forms of assistance for
micro-businesses. This includes
expert advice, financial assistance, and bank loans. The exact information and services
provided will differ with each of these websites.
Search phrase with Google: Micro-Businesses http://www.google.com/search?hl=en&q=Micro-Businesses&btnG=Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
The following website and related organization, (NYC
Business Solutions) is very useful.
They offer free classes, for starting and/or operating a small
business. (I have taken some of
these classes, and they provide interesting and useful information.) NYC Business Solutions also
offers some individual business advice.
They provide information on various types of business loans, including
where, and how they can be obtained.
They also provide information on legal requirements and licensing for
businesses in
http://www.sba.gov/ Words on website: Programs and
services to help you start, grow and succeed
http://www.business.gov/ The following list of topics is from
this website:
Info on Popular Business Topics
Find Small Business Grants and Loans
Choose a Business Name (DBA/Fictitious Name)
Start a Home-Based Business
Obtain Tax Information and Forms
Get Started in Government Contracting
Learn Ten Steps to Hiring a New Employee
http://usgovinfo.about.com/library/weekly/aa120201a.htm
Words on website: American business with five or fewer employees will now have
access to training and technical assistance to help them start or grow under a
new program funded by the
http://www.smallbusiness.com/wiki/Microbusinesses Words on website: A microbusiness is generally
defined as a small business employing fewer than five persons.
http://www.nase.org/
Words on website: National Association for the self-employed
http://www.consumer-action.org/english/articles/micro_business_basics_english/
Words on website: Micro Business Basics
http://answers.google.com/answers/threadview?id=508349 Words on website: Micro-Businesses
The following website is an e-book that is over
300 pages. This book might take a
minute or two to load with some systems.
http://srdc.msstate.edu/publications/194.pdf Words on
website: HOME-BASED & MICRO BUSINESSES RESOURCE DIRECTORY
http://www.4ql.co.uk/
Words on website: Helping Micro Businesses Use the Internet
Search phrase with Google: "
http://www.isquare.com/newsletter_archives/apr98.cfm
Words on website: A subscription to The Small Business
Advisor Newsletter is free.
http://www.consumer-action.org/english/articles/micro_business_leaders_guide/
Words on website: Micro Business - Leader’s Guide
Search phrase with Google: Micro-Businesses in
Search phrase with Google: “Marketing
strategies" for Micro-Businesses
http://www.google.com/search?q=%E2%80%9CMarketing+strategies%22+for+Micro-Businesses&hl=en&start=0&sa=N
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.speakingandmarketingtips.com/Small-Business-Marketing.html Words on website: A Monthly
Newsletter About Small Business Marketing Strategies
http://www.dartmouth.edu/~jzinman/Papers/Zinman_Pro-Poor%20Growth%20&%20Microfinance_Apr05.ppt
Words on website: Pro-Poor Growth & Microfinance:
Some Related Evidence, and a Research Agenda
http://articles.in/?caid=Computers-and-internet.27547
Words on website: Internet Marking for Micro Business
Search phrase with Google: Small business help http://www.google.com/search?hl=en&q=Small+business+help&btnG=Google+Search
http://www.score.org/index.html
Words on website:
Ask score for business advice
7à Click on this hyperlink for a sound file
of the following:
Chapter 3 Significant Markets and Market Segments,
and Related Concepts
WHAT IS A SIGNIFICANT MARKET OR MARKET SEGMENT?
Is Race, Age, Social Class A Valid Way To Delineate A Market or A
Market Segment?
Sometimes, seniors, Afro-Americans, Caucasians, Orientals, and people in
different age groups, and social classes are considered markets, or market
segments. However, this might
represent a meaningless set of consumers, in relation to the purchase of a specific product. This is likely to be the case when
stereotypical assumptions are used, as opposed to scientific methods of
evaluation. Thus, the above
categories may or may NOT relate to a difference in
purchasing habits, or the need for a specific product.
Culture: Markets, and Market Segments
However, markets and market
segments based on culture can be quite meaningful and significant. That is a set of consumers that share
the same culture might represent a significant market or market segment, in relation
to the potential or actual purchase of a product. For example, Orientals might not
represent a meaningful market segment for a product, but people who retained their Oriental culture might be a significant market
segment. The reason for this is people often purchase items that relate to
their culture. This can
include food, clothing, religious articles, and many other items. It can also include books, magazines,
and newspapers that relate to the culture.
This is especially the case when the culture involves a foreign
language.
When a market or market segment
comprises people that speak a language other than English, it might be
necessary to hire salespeople that speak that language, and ideally share the
same culture as the customers.
Advertising will have to be written in the foreign language, with an
understanding and sensitivity of the culture of the potential and actual
consumers. This is especially the
case when the customers live in foreign countries.
Markets, and Markets Segments and Advertising
The concept of a market, or
market segment, can be useful when creating advertisements. This can involve creating a number of
advertisements, for the same product, or product category, aimed at different
markets, or market segments. For
example, if you are selling computers, you can create advertising for
non-technical people, and a different set of advertisements for
technicians. We can use culture as
another example. If you are selling
a product to two or more cultural groups, you can create advertising aimed at
each cultural group. This involves
understanding the cultures, and it may also require advertisements in foreign
languages.
For more information see the
following websites
Search phrase with Google: “Marketing and
culture” http://www.google.com/search?hl=en&q=%E2%80%9CMarketing+and+culture%E2%80%9D&btnG=Google+Search This
website consists of one or more search pages, with many links to other
websites. If you do not find what
you want on this website, you can change the search phrase that will appear in
a dialog box, after you click on the above web address. After changing the search phrase, press
the enter key, and you will see a different set of websites.
http://www.marketingteacher.com/Lessons/lesson_international_marketing_culture.htm
Words on website: International Marketing and Culture what is the influence of
culture on international marketing?
http://jmk.sagepub.com/cgi/content/abstract/27/2/138 Words on website: Here, There, and
Everywhere: Place Branding and Gastronomical Globalization in a Macromarketing
Perspective
http://books.google.com/books?id=zZxVj01q2CgC&pg=PA8&lpg=PA8&dq=%22marketing+and+culture%22&source=web&ots=vcqtC08liG&sig=9Kt-7yTZL8NUywufk7Ki-Lfbk5I
Words on website: Hispanic Marketing: A
Cultural Perspective
http://www.marketingteacher.com/Lessons/answer_international_marketing_culture.htm Words on website: Answer - International
Marketing and Culture. A Cultural Analysis of
http://www.aeaconsulting.com/site/platform1i5b.html Words on website: Nobrow: The Culture of
Marketing - The Marketing of Culture
http://www.studyoverseas.com/america/usaed/crosscultural.htm
Words on website: Marketing in the 21st Century Cross-cultural Issues
Words on website: Handbook of Cross-Cultural Marketing By
Paul A. Herbig
METHODS OF DELINEATING
RELEVANT MARKETS AND MARKET SEGMENTS
Are There Any Good Methods Of Defining Markets And Market Segments?
The previous paragraphs suggest the question: What is the best way to define a market or market segment? I discussed this in the following paragraphs.
Behavior: Buying Habits and History
The ideal way to define a market,
or market segment, is to base it on the history of purchases made by a set of
consumers. For example, if you have
a mailing list of technicians who frequently purchased high-end computer
equipment, you can consider that a market, or market segment, which would be
relevant to a computer supply store.
Essentially, this involves defining a market or market segment based on
the purchasing behavior of a set of consumers.
Delineating a Market or Market Segment Based on Needs
You can also delineate a market
or market segment, by understanding the needs of a set of consumers. For example, you can consider farmers a
market, or market segment, if you sell heavy machinery, such as tractors, and
plows, because they need this equipment. You can also consider construction
companies a market, or market segment, because they use tractors and other
heavy equipment. That is heavy
equipment is needed in both the farming and construction industries.
We can also use a culture as an
example, for delineating markets and market segments based on needs. If people from a specific culture or
subculture have a special need for a specific product, you can consider
that a relevant market or market segment, for the product. This is assuming of course that the
people comprising the culture have the willingness and financial means to buy
the product.
Consumer Evaluations Methods to Delineate Relevant markets and Market
Segments
There are a number of evaluation
methods, based on interviews and surveys that are used to evaluate consumer
needs, preferences, and emotional responses to products. (These methods will be discussed in
detail in a separate chapter Evaluating
Markets and Market Segments.) Some
of these methods include demographic evaluations, surveys, interviews, focus
groups, and various types of psychological testing. Results from these evaluation methods,
can sometimes be useful in delineating markets and market segments. They can also provide erroneous results,
which might not be noticeable, until the inadequate rate of sales is apparent.
Defining Market Segments in a Small Business
In a small business, the owner
might simply observe the behavior of her customers. She may notice that approximately half
of her customers regularly purchase products X and Y. I will call these consumers the X, Y,
customers. The X, Y,
customers can be defined as a relevant market segment, for our hypothetical
business owner. The business owner
can study the purchasing behavior and needs of the X, Y, market segment,
by observation. She can also study
the market segment, with face-to-face conversations with the X, Y-customers, to
determine if they have needs for products that are not currently sold in the store.
That is, if you are a small
business owner, it is necessary to become sensitive to the needs, preferences
and emotional responses to your customers, and to respond accordingly. The greater your sensitivity to your
customers, and your ability and willingness to respond to their needs and
preferences, the greater will be your chances of developing and maintaining a
successful business. This involves
observation of your customers purchasing behavior, and face-to-face
conversations to determine their needs.
Another good strategy for the
small business owner is to try to develop acquaintanceships with potential
customers. This involves finding
consumers that are not customers, and having discussions with them, to determine
their needs and preferences, in relation to the products you sell. Providing potential customers, after the
discussion, with a substantial discount coupon, worth at least five or $10,
might convert them into permanent customers.
8à Click on this hyperlink for a sound file
of the following:
Chapter 4 the Marketing Mix, And Related Concepts
THE MARKETING MIX,
PRODUCT, PRICE, PLACE, PROMOTION
The Concept of the 4 Ps, Product, Price, Place, Promotion
There are many factors that relate to the marketing process, four of the
most important are the product, the price, the place, and promotion. In the marketing literature, this is
known as the 4Ps. It is more useful
to think of the 4Ps as four general categories, because there are many factors,
and the huge amount of information that relates product, the price, the place, and promotion. An entire book can easily be written on
each of these concepts. I have
written four separate chapters that follow this one, on product, price, place, and promotion, as well as a
number of discussions about these concepts throughout the book. In this chapter, I provide a relatively
brief description of the 4Ps.
The Product is Anything that can be Sold or Marketed
For a product to be successfully
marketed it must meet the needs of the consumers. More precisely, the consumers must
perceive the need, utility, and advantages in buying the product. For a business to succeed, it is
necessary to obtain products that meet the needs of its market(s), as perceived
from the point of view of the consumers.
Alternatively, a company can search for markets and market segments that
need its products.
The price of a product for a
profit-making organization must be high enough to make a profit. However, the price of a product
generally must be at a level that is perceived as appropriate by the consumers. Generally, when consumers make
purchases, they consciously or unconsciously weigh the value of the product,
against its price. Often, the lower
the price, the greater the sales volume will be, but this is not always
true. Sometimes, a low a price
conveys to consumers inferior quality.
With luxury items, a low a price might reduce the status, or snob
appeal, of the product, which might reduce the rate of sales.
Products must be sold where they
are needed, and where there are consumers that are willing and able
to pay for it. This by itself
can determine the success or failure of a product. Some products are sold by the
manufacturer directly to the consumer.
This is especially the case for handcrafted items, created by small
businesses. However, most products
are sold from the manufacturer to a large retail outlet, such as a department
store, or to a wholesaler. Wholesalers
generally sell their merchandise to small and medium-size retailers.
The method of shipping and the
cost of shipping can be very significant with large objects, especially if they
are relatively inexpensive.
Shipping costs are less important for small lightweight items,
especially if they are relatively expensive.
Promotion: Any Type of Publicity, Advertising or
Communication That Relates To Selling a Product
The most obvious example of
promotion is advertising. However,
there are other types of promotion, such as face-to-face sales talk to
individual consumers, word-of-mouth publicity, and mass meteor
publicity. Mass media publicity is
obtained when companies provide news releases, about the organization or its
products. Publicity stunts,
parades, and fireworks are additional methods that are sometimes used by large
retailers, to obtain publicity.
9à
Click on this hyperlink for a sound file of the following:
A CRITICAL LOOK AT THE
CONCEPT: THE UTILITY AND LIMITATION OF
THE MARKETING MIX, AND IT 4PS
The concept of the marketing mix
has utility in planning marketing strategies, and creating marketing
plans. That is the way the four
components, (product, price, place, promotion) are configured can determine the
degree of success or failure of a business and its products. It is sometimes possible to rectify a
failing business, by manipulating the 4Ps, in various ways. When a product is not successful,
manipulating price, place, and promotional strategies, can increase sales and
profit, sometimes. By
manipulating product, price, place, and promotion it is sometimes possible to make
an already successful business or product even more successful.
The questions to consider when
managing a business is how are the 4Ps affecting profits? Can product, price, place,
and promotion be modified to produce a greater rate of profit? How are the 4Ps affecting sales
volume? Can product, price, place, and promotion be manipulated to increase the
rate of sales?
It can be argued that the concept of the marketing mix is an
oversimplification. I present such
an argument in the following paragraph, which is followed by a counterargument
under the next subheading.
Marketing involves a large number
of factors, and the 4Ps involved with the marketing mix concept
is an oversimplification. This
becomes obvious, if you examine the contents of this book, and the website
links it contains. Marketing is an
extremely complex subject that involves psychology, sociology, economics,
organizational behavior, management theory, culture, methods of production and
distribution, as well as various aspects of the law. In some cases, the economy and even the
weather can determine the level of sales of a product. From the above, a very
large number of factors can be obtained that relate to marketing.
It is important to understand
that there are factors that are unique to a specific company and its
products. The unique factors can
determine the success or failure of a business, and the marketability of its products. For example, sometimes the personality
and knowledge of a CEO can be the primary factor in determining the success or
failure of a company. The physical
and mental health of the CEO, and/or other top managers, can also have a
significant impact on the success or failure of the company. This applies to both small and large
organizations, but it is probably more significant with small businesses.
Unique factors that apply to some
products are unpredictability of the price and availability of raw materials
needed in the manufacturing process, parish ability, and risks of lawsuits.
The concept of the marketing mix
and the 4Ps do not deal with any of the above factors. Thus, it should be
apparent that the concept does not deal with a large number of other factors
that relate to marketing and business.
The oversimplified concept of the
marketing mix and its 4Ps, are probably useful for students that are studying
marketing. However, the
oversimplified concept might lead to financial disasters for some companies,
when such students become marketing managers and executives. This can happen because CEOs, managers,
and business owners are not necessarily experts on marketing. They may be experts in other fields, and
they may have forgotten, or never learned, that the marketing mix is an
oversimplified concept.
For additional criticisms on the
concept of the marketing mix, and the 4Ps, see the following websites:
http://www.artrm.com/retail/marketing-mix.htm Words on website: There are two types of criticisms leveled at the marketing mix:
criticism of the concept of the marketing mix, and criticism of particular
examples of marketing mix models (for example the four P's).
http://techtics.co.uk/8.html Words on website: Criticism of the 4Ps
‘Marketing Mix’ Model
http://www.businessknowledgesource.com/marketing/the_criticisms_of_a_marketing_mix_approach_to_marketing_025228.html
Words
on website: The criticisms of a
marketing mix approach to marketing
http://www.reference.com/browse/wiki/Marketing_mix
Words
on website: Marketing mix
When the components of the
marketing mix concept, product, price, place, and promotion
are used as
general categories, the concept is not oversimplified. When used in this way, you compile and
assess all the relevant factors that relate to the functionality of a business,
and the marketability of its products.
Then you can divide the factors into the four categories: product, price, place, and promotion. This involves placing each factor
under the closest matching category.
When necessary, some additional categories can be included with the 4Ps,
such as miscellaneous, fixed costs, production costs, environmental
factors, etc. Categories can
also be added for personality and health factors of management, and staff if
that is affecting the company.
When the concept of the marketing
mix, is used as described above, its 4Ps does not limit thinking, creativity
and problem-solving. However, if
the marketing mix concept is used as a four step formula, in a real business,
it might lead to financial disaster.
Websites on
Marketing Mix, And Related Concepts
Below there
is a list of websites that provide additional information on the marketing mix
and other aspects of marketing and business.
Search phrase with Google: “Marketing mix” http://www.google.com/search?hl=en&q=%E2%80%9CMarketing+mix%E2%80%9D&btnG=Google+Search This
website consists of one or more search pages, with many links to other
websites. If you do not find what
you want on this website, you can change the search phrase that will appear in
a dialog box, after you click on the above web address. After changing the search phrase, press
the enter key, and you will see a different set of websites.
http://en.wikipedia.org/wiki/Marketing_mix
Words
on website: From Wikipedia, the free encyclopedia The marketing mix is generally
accepted as the use and specification of the 4 Ps describing the strategic
position of a product in the marketplace.
http://www.netmba.com/marketing/mix/ Words on website: Marketing Mix (The
4P’s of Marketing)
http://www.quickmba.com/marketing/mix/
Words on website: Marketing Mix
http://www.marketingteacher.com/Lessons/lesson_marketing_mix.htm
Words on website: The marketing mix is probably the most famous marketing
term.
http://www.valuebasedmanagement.net/methods_marketing_mix.html
Words on website: Marketing Mix 4P’s model
http://www.marketingmixblog.com/
Words on website: Small Business Summit in NY
http://marketing.about.com/od/marketingplanandstrategy/a/marketingmix.htm
Words on website: Developing Your Marketing Mix
http://www.thetimes100.co.uk/theory/theory--marketing-mix-(price-place-promotion-product)--243.php Words on website: Marketing mix
(Price, Place, Promotion, Product)
http://www.consultancymarketing.co.uk/marketing-mix.htm
Words on website: Marketing mix
http://www.themarketingsite.com/live/mmix/index.php?
Welcome to Marketing
http://www.copernicusmarketing.com/consult/e.shtml
Words on website:
Applications of the Copernican Discovery™ Marketing Mix Model
http://www.bized.co.uk/learn/business/marketing/mix/index.htm
Words on website:
Theory Explanations and Notes
Search phrase with Google: Place, in Relation to
Marketing Mix
http://www.google.com/search?hl=en&q=Place%2C+in+Relation+to+marketing+Mix
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.bized.co.uk/educators/16-19/business/marketing/activity/mix.htm
Words on website: The marketing mix is the combination
of elements that frame the marketing strategy for a company in relation to
their products and services, in order to help them achieve their marketing
objectives. Traditionally, the marketing mix has focussed on four elements:
Price Product Promotion Place
http://www.marketingmixblog.com/blog/publicitypr/index.html Words on website: Marketing
http://www.thetimes100.co.uk/theory/theory--the-extended-marketing-mix-(7ps)--319.php Words on website: The extended
marketing mix (7Ps)
http://www.thetimes100.co.uk/theory/theory--marketing-mix-%28price-place-promotion-product%29--243.php
Words
on website: Marketing mix (Price, Place, Promotion, Product)
10à Click on this hyperlink for a sound file
of the following:
Chapter 5 PRODUCT, IN RELATION TO MARKETING MIX
The product is anything that is
sold, including any type of goods or services. The product must meet the needs of a set
of consumers that are able and willing to buy the product. In some cases, the consumers are not
expected to pay for the product, but they generally must do something to obtain
the product, and/or meet certain eligibility requirements. Examples are free vaccinations provided
by public health agencies, and assistance provided for the poor by charities
and social welfare agencies.
A Highly Productive Strategy Is To Meet the Needs of the Consumers in
Your Market
A very important principle that
applies to any type of product is it must meet the needs and emotional desires
of the consumers in your market.
This involves designing, manufacturing, packaging, pricing and selling
products to meet the needs and emotional desires of a specific set of
consumers. The above can be summed
up by asking yourself: What do the consumers need in my market area? After answering this question, supply
products that meet the market needs.
I explain an approach just the opposite of this in the next paragraph.
Sometimes, manufacturers and
sellers are in a position to choose their markets and market segments. When this is the case, the correct
markets and/or market segments can be chosen for the product. This can involve asking the question:
What are the correct markets and market segments for my goods or services. This question can simply be restated as:
What groups of consumers need my product, and are able and willing to pay
for it? This can suggest the
need to conduct searches and experimentation to find the optimal markets and
market segments for a product. This
approach is quite feasible, especially with the Internet and other modern
technologies. It is possible to
find markets and market segments that need a product in any location in the
world, if the product can be delivered at a reasonable cost.
The Idea To Keep In Mind Is The Product And Market Must Be Appropriate
For Each Other.
Often, the very value of a
product is determined by the needs, values, philosophy, culture, and
perceptions of the people comprising a market. A product that has little value, or
cannot be sold at all, in one market, might have substantial value in another
market.
Regardless of the market or
market segments, the perception of the product in the minds of the consumers is
very important. That is, the
consumers must perceive the need, utility or advantage in having a product, if
we want them to purchase it. That
is the perception of the product in the mind of the consumer is a
primary factor.
To maximize the perceived quality
and utility of a product, you should target appropriate market segments,
produce a quality product, that is needed by the consumer you are
targeting. Services that are
provided in relation to the product are also very important, such as sales
assistance, exchange or refund policies, technical support, warranties, and
repair service. In addition, you
should inform, educate and persuade the consumers within the targeted market
segments about the benefits and utility of the product.
11à Click on this hyperlink for a sound file
of the following:
Chapter 6 Price, In Relation To Marketing Mix
There are a large number of
factors that are involved with the pricing of a product. Some of the material on pricing involves
mathematics, and it is presented in a separate chapter. This chapter focuses on pricing from the
concept of marketing mix. Some of
this information is not presented in the chapter that deals with pricing from a
mathematical perspective.
Consumers Make Evaluations on Whether To-Buy or Not-to-buy, Partly
Based on Price
The price of a product is usually
very important. When most consumers
examine a product, they probably consciously or unconsciously evaluate the
utility, pleasure, and emotional satisfaction, in owning the product, against
the price of the product. This
involves an evaluation of the benefits or gain by purchasing the product, and
the loss, (the expenditure of money) represented by the price of the
product. Spending money on one
product often results in a financial inability, or decision not to purchase
another product. At some level,
spending money involves a sacrifice for most consumers, except perhaps for the
very wealthy, and the higher the price the greater the sacrifice.
The Relationships of Price, Profit and Rate of Sales
Generally, the higher the price
the greater the profit will be per-unit, but the total profit may or
may not be greater, than with a lower price. When all other relevant factors are
maintained at the same level usually the higher the price the lower the sales
volume will be, and vice a versa. This
relationship certainly does not always hold true. For example, lowering the price of a
luxury product might convey a lower quality product. It might also reduce the emotional
satisfaction associated with buying an expensive product that is intended for
wealthy and successful people.
Question, if you are operating a
business, which of the three pricing strategies, stated in the above
subheadings do you think is appropriate for your products and goals? The three strategies are discussed in
the following paragraphs.
The
maximum profit per unit, (or the maximum price that can be obtained for a
product) generally means a very high price. However, this may not be very
profitable, because very few units may be sold. For example, if a supermarket raised its
prices to a level that was several times higher than the competition, it would
make a very high profit on each product that it sells. However, this would probably result in a
very low rate of sales, and the money obtained from sales would probably be
inadequate to cover the fixed costs of running the supermarket, such as for
salaries, rent and insurance. This
could result in financial losses.
When a large number of consumers
want to buy a product, but the product is available in very limited numbers,
the most profitable strategy would be to sell the product at the highest price
that can be obtained. However, this
pricing strategy may require more time and effort to sell the product, but in
certain situations it is a very sensible pricing strategy. For example, famous artworks are
generally one-of-a-kind, and they are usually sold at the highest price that
can be obtained for the product.
When you are selling only one, or perhaps a few units of a product that
hundreds, thousands or millions of consumers want to purchase, the rate of
sales is generally not important.
Any extra time and effort to sell the product, is usually offset by the
financial gain obtained, when seeking the maximum obtainable price.
The above concept also applies to
services of famous people. They can
usually sell their services at the highest price the market can bear. This is because there time is limited,
and there services represent a product that is very limited in quantity, and is
in very great demand.
Is Pricing A Product For The Maximum Rate Of Sales Always Profitable?
Products
can be priced for the maximum rate of sales, which is generally a very low
price. When this is done the result
can be a small profit, or a financial loss. In general, the rate of sales, does not
always relate to the rate of profit.
Thus, maximizing the rate of sales by reducing prices may not be very
profitable. There are many other
methods of increasing sales that are usually quite profitable.
When is Pricing a Product for the Maximum Rate of Sales (The Lowest
Possible Price) Sensible?
Pricing a product very low to
maximize the rate of sales is sensible when the goal does not involve a
profit. For example, public health
agencies provide low-cost or free vaccinations to prevent disease. The low price or free vaccine will most
likely maximize the number of people who get vaccinated. Another example, is selling a product at
a very low price, to attract new customers to a store. This is generally called a loss leader,
such as selling bread below the wholesale cost, to attract customers to a
supermarket.
In many situations the higher the
price, the lower the rate of sales will be, and the lower the price, the higher
the rate of sales. In between these
two extremes, there is usually a medium price that will result in a medium rate
of sales, but a maximum rate of profit.
Rate
of Profit is the amount of profit that is obtained divided by time. For example, if you had a computer
supply shop, and you sold 10 computers in one month, and obtained $100 profit
on each computer, you earned 10 times 100 which is $1000. To obtain the rate of profit, the $1000
is divided by one month, which equals a rate of profit of $1000 per month. However, if you sold the 10 computers in
10 months, your rate of profit would be $1000 divided by 10 months, which is a
rate of profit of $100 per month.
Now let us assume you sold the 10 computers at a discount, and you only
earned $50 on each computer.
However, if you sold the computers in one quarter of a month, your
profit would be $50 multiplied by 10 which equals $500. To obtain the rate, the $500 is divided
by one fourth of a month, which is a rate of profit of $2000 a month. If the price of the computers in the
above example were increased, so the profit was $300 on each computer, if you
only sold five computers in a month, your profit would be $300 multiplied by
five, which is $1500. Dividing
$1500 by one month equals a rate of profit of $1500 per month.
Sometimes lowering the price
increases the rate of profit, and at other times raising the price increases
the rate of profit.
In Certain Situations Consumers Judge the Value and Quality of a
Product by its Price
Sometimes consumers simply judge
the quality of a product by its price.
This is more likely to be the case when the consumers do not have other
ways of judging the product, such as when they do not have adequate product
information, or needed technical knowledge to make a judgment. Thus, in some cases, lowering the price
of a product might result in convincing the consumer that the product is of
lower quality and value, and this can sometimes result in a decrease in
sales. This is more likely to be
the case with luxury items, when a high price of a product conveys social and
economic status.
Perhaps the best strategy is to
emphasize the quality of the product, and the high social status that it
conveys in advertisements, especially if the selling price is reduced. However, with luxury products that are
primarily intended for very wealthy consumers, reducing the selling price, even
during a sale might be counterproductive.
With some luxury products, the best strategy may be to increase the
price, and provide additional services with the product, to justify the price
increase. For example, increasing
the price of a top-of-the-line luxury car, and providing a 6 year unconditional
service contract on the vehicle, might increase the rate of sales and
profit. Another alternative is to
increase the quality of the luxury product, during the manufacturing process,
which can justify a price increase.
Introducing
new technologies with relatively high prices is a common strategy. Manufactures often do this with new
electronic devices and medications.
This might be quite sensible, because the manufacture is trying to recover
research and development costs. In
addition, products in this category may be in short supply when they are first
introduced. After, a period of time
the manufacture may reduce the prices.
This can range from weeks to months, for electronic products, and
sometimes years for medications.
Generally, products in this category must be reduced in price when
competitors develop similar products.
However, price reductions are usually quite feasible when more efficient
production methods and facilities are created for technology-based products.
New
products that are relatively inexpensive, such as laundry detergent,
toothpaste, and soap might be introduced into the market at a reduced
price. This
can involve coupons to obtain a partial refund, and labels on the product that
indicate a temporary price reduction, such as $0.50 off.
The idea to keep in mind is that
there are various theoretical relationships between price, profit, and rate of
sales. However, in actual practice there is no fixed
or absolutely predictable relationship between these factors that can be
generalized to all situations. It is necessary to determine the
relationships between price, profit, rate of sales, and rate of profit, in each
situation, such as by test marketing, or informal trial and error. When such relationships are determined
you can price the product for the maximum rate of profit.
12à
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Chapter 7 Place,
In Relation To Marketing Mix
Where and how a product is
distributed can determine its success or failure. For product to succeed it must be
ultimately delivered to the location where there are consumers that are
interested in purchasing the product.
This may or may not involve specific geographical locations of retail
selling outlets. For example,
delivering luxury items to stores that cater to upper class and wealthy people
throughout the country involves specific geographical locations. However, selling such items with mail
order catalogs, and/or through the Internet, does not involve bulk shipments to
a store.
The important idea to keep in
mind is to be certain that the product is presented to consumers that will most
likely be interested in making a purchase.
This can involve shipments to specific geographical locations, and/or
advertisements focused on specified localities. However, it does not matter if this
involves a physical place, a series of geographical locations, or cyberspace on
the Internet. The important idea is
simply to target segments of consumers that are likely to be interested in
purchasing the product, by making the product available in all the right
places.
DISTRIBUTION CHANNELS AND
RELATED CONCEPTS
Another important concept is the
method of distribution to the consumer.
This can involve a manufacture selling large quantities of the product
to wholesalers, who in turn sell it to appropriate retailers. However, another way of distributing
products to the right place, where consumers are likely to make a purchase, is
to sell directly to large retail outlets, such as department stores, and chain
stores. The Internet and mail-order
methods of distribution can often be used to distribute goods directly from the
manufacturer to the consumer.
However, often the Internet and mail-order sales involve a large
retailer, who purchases directly from the manufacturer.
The Internet as a method of
distributing products is potentially very useful for both small and large
businesses. It is especially useful
for distributing and selling products that are in a digital format, which can
be downloaded from a website to any computer in the world. Products in this category include
software, e-books, music, videos, and anything else that can be recorded in the
digital format.
The Internet is also potentially
useful for selling and distributing certain types of services that involve the
production of software, spreadsheets, documents, technical reports, and
graphics. This includes services of
computer programmers, engineers, mathematicians, writers, news reporters,
graphic artists and photographers that work in a digital format. With all of these examples, the end
result of the services can be transmitted through the Internet by e-mail, or by
downloading from a website. Such
material can also be returned to the service provider for modifications or
corrections by the above methods.
Transmitting any type of digital
media through the Internet is very inexpensive. Transmission by e-mail is free. Placing material on a website for
downloading is sometimes also free, and when there is a charge it is usually a
relatively small charge for a large amount of websites space. However, setting up a website can be
expensive, if you need professional assistance, but if you can do the work
yourself, it is inexpensive.
The Internet is also a place where physical
objects can be sold throughout the world.
This involves taking orders for products through the Internet. The products are generally paid for over
the Internet when the consumer enters a credit card number. The products are shipped to the consumer
by mail, UPS, FedEx, or similar shipping providers.
The disadvantage with selling physical objects
through the Internet is of course the shipping costs. In addition, the products must be
carefully wrapped to prevent damage while shipping, but this applies to all the
other distribution methods to varying degrees.
An important concept to understand about the
Internet is it is not necessarily a form of mass communication, like television
or radio. Many people simply do not
understand this, and may mistakenly think that websites are a form of mass
communication. That is, a website
on the Internet is in a certain sense similar to a telephone number. Everybody in the world can call the
phone number. Obviously, this does not happen, unless the telephone number is
extensively advertised worldwide, and a useful product is obtainable by calling
the number. The same idea applies
to a website. If a useful product
is sold through the website, and large sums of money are invested in
advertising, the website might in fact become a form of mass communication,
with tens of thousands of visitors each month. This is likely to happen with large
retail outlets that have established a positive reputation in the minds of
millions of consumers.
Shipping
Products to the
The shipment of products can be
expensive. However, when a product
is expensive, and weighs very little, such as gold jewelry, and diamonds, the
transportation costs may not be very significant. With products in this category, the
transportation cost is a relatively small percentage of the price of the
product. However, just the opposite
is the case, with products that are relatively inexpensive, and heavy and/or
bulky. Some products in this
category are fruits and vegetables, gasoline, crude oil, coal, and iron
ore. With products in this category
it is necessary to use the most economical transportation methods that are
feasible. This usually involves
transportation by ships or freight trains.
When necessary, trucks may be used, but they are generally more
expensive than the above.
Many consumer products are in
between the two extremes mentioned above.
For example, computers, books, clothing, are not very heavy, and they
are generally moderate in price, relative to transportation costs. With products in this category,
transportation costs can be a moderate, but significant, amount when compared
to the price of the product. For
example, a textbook that cost $50 might have a five dollars shipping fee, which
represents 10% of the cost of the product.
A Mathematical Formula to Evaluate Shipping Costs, Relative to the
Price of the Product
A good way to evaluate shipping
costs relative to the price of a product is with the following formula. In words it is: Shipping cost divided by
the price of the product multiplied by 100% equals the percentage of the price
of the product for shipping.
Some examples will illustrate how this formula can be used. Let us assume, you have a $100,000
diamond that weighs a half a pound when wrapped in heavy protective wrapping,
and to ship it with insurance it is $50.
If we use the above formula, we obtain the following: 100% times $50 divided by 100,000 equals
0.05% of the selling price.
The calculated result of 0.05% is a very small percentage of the cost of
the product, the diamond.
If we were shipping a desk that cost $100 and it cost $50 to ship, the
calculations would be 100% times $50 divided by $100 equals 50% of the selling
price.
In this case the shipping cost is 50% of the cost of the product, the
desk, which is quite high.
The important idea to understand
here is that it is necessary to use the cheapest shipping methods with products
that are inexpensive and heavy, and the safest shipping methods with products
that are very expensive, such as diamonds.
13à Click on this hyperlink for a sound file
of the following:
Chapter 8 Promotion, In Relation To Marketing Mix
Promotion can be thought of as a
method of communicating to consumers, and persuading them to purchase a
product. I am dividing promotion
into five categories, for this chapter, which are advertising, face-to-face
sales talk to individual consumers, word-of-mouth
publicity, mass
meteor publicity, and internet
promotional strategies. These promotional methods
are discussed under the following headings.
ADVERTISING AND RELATED
CONCEPTS
The Advantages Of: Advertising, As a Form of Publicity
The
seller has almost complete control over advertisements, which is not the case
with other forms of publicity. They
can present their products in just about any way they see fit, as long as they
are not making claims that violate the law. They can discuss the advantages of their
product, and they usually do not have to discuss the disadvantages, unless they
are selling a product that requires such disclosure by law. They can emphasize, and even exaggerate
the superiority of their products.
They can present their products surrounded by attractive imagery and
sounds.
The
seller can repeat the advertisements as many times as he chooses. Advertisements can also be presented in
multiple formats, such as television, radio, newspapers, magazines, flyers,
direct mail, and the Internet.
Advertising
can be carried out in an economical way by distributing flyers, in geographical
locations where there are potential customers. Advertising in a small local newspaper,
or the use of signs can also be used to target a specific locality. Using advertisements in specific types
of newspapers and magazines can be used to target specific types of consumers. For example, if you are selling
professional level camera equipment, you can advertise in photography magazines
that are written for photographers.
With
advertisements you can create ads for each market segment. For example, if you
are selling computer equipment, you can create one ad for teenagers, another
for adult users, and another for technicians.
The Disadvantages of
Advertising, As a Form of Publicity
In
spite of its advantages, advertising has many disadvantages over other methods
of promoting a product. The
disadvantage of advertising is it is usually expensive, and most consumers are
justifiably suspicious of most advertisements. They realize that a manufacture or
retailer is generally trying to make money, by persuading them to buy a
product. Most, consumers are
confronted with a large number of advertisements each day, as a result they
learned to ignore advertising.
Advertisers
might be wasting their money in some cases, as a result of all of the
above. In general, the value of
advertising might be far less than most people think. When an advertisement from a large
company is not cost-effective, the management may be unaware of it. For example, if they spend $30,000 on a
large sign in
The
reason large companies might have great difficulty in determining which
advertisements a cost-effective, is because they have many advertisements, and
publicity from many sources. They can of course measure changes in the rate of
sales, but they might not have any precise way of knowing what caused an
increase in sales. For example, a
soft drink company may notice an increase in the rate of sales, but they may
not be able to determine if it is the result of a television advertisement, a
series of newspaper ads, or excessively warm weather.
All
of the above does not apply to very small companies, such as
micro-businesses. That is when a
small business advertises, it is usually relatively easy to determine if the
advertisement was successful. The
small business owner can ask any new customers a few questions to make a
determination.
Providing
discount coupons with an advertisement can sometimes be used to determine if
the promotional effort is increasing sales. This is simply done by counting the
number of coupons that were redeemed for the discount. This method can work for both small and
large companies.
Search phrase with Google: Advertising http://www.google.com/search?hl=en&q=Advertising&btnG=Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.advertising.com/index.php Words own website: Advertising.com
http://en.wikipedia.org/wiki/Advertising
Words own website: Advertising from Wikipedia
Words own website: Advertise your business on Google
http://www.adgridwork.com/ Words own website: adgridwork is a
Free Advertising Network and Text Link Exchange
http://www.interbath.com/ Words own website: Internet Based Advertising Theory
http://www.ciadvertising.org/student_account/fall_00/adv382j/christiana/theory/banner.html Words own website: Advertising
on the Web
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-8616.1996.tb00111.x Words own website: Business
Strategy Review
http://university-essays.tripod.com/advertising.html Words own website: Guide on
How to Write University Essays, Courseworks, Assignments and Dissertations
14à Click on this hyperlink for a sound file
of the following:
The Advantages of: Face-to-Face Sales Talk to Individual Consumers, as
a Form of Publicity
The
sales talk of a salesman or saleswoman is no doubt more personal than
advertising. Under, ideal
conditions, the salesperson tries to evaluate the needs of the consumer, and
suggest products that will satisfy those needs.
The
use of skilled sales personnel will probably be most successful, when products
are relatively expensive and complex, such as computers, high-end electronic
equipment, automobiles, trucks, boats, industrial equipment, and new
technologies. Consumers buying
products in this category often need assistance, to learn how the product
works, its utility, its limitations, and how to use it to satisfy their needs. This information can be provided by
other means, but this may not increase sales. If the consumer is unsure about many
aspects of the product, he or she may simply not buy the product. A salesperson can, focus on the
individual needs and uncertainties of each consumer. This involves a feedback process, which
allows the salesperson to use language that the consumer understands.
Good
sales personnel will also avoid disappointing consumers. This involves revealing product
limitations when such information is relevant, and informing the consumer when
a product cannot satisfy their needs.
From the seller's point of view, all of this is important, because a
disappointed or unsatisfied consumer can lead to return of products, bad
word-of-mouth publicity, the loss of a regular customer, and even lawsuits.
The Disadvantages of: Face-to-Face Sales Talk to Individual Consumers,
as a Form of Publicity
Sales
personnel can sometimes be an annoyance to consumers, and they might be
counterproductive in some cases, especially if they are not highly
skilled. In some situations, the salesperson
knows little about the products that are being sold in the store. You can often find this situation in
large department stores and discount stores, which probably cannot afford to
hire highly skilled sales personnel.
Good salesman and saleswomen are expensive, and maybe only
cost-effective when very expensive products are sold. The expense of hiring skilled sales
personnel is probably the biggest this advantage of face-to-face sales
techniques.
Unlike
advertising, the owner or manager of a selling outlet do not have total control
of what sales personnel tell consumers.
Under less ideal conditions, the salespeople may be focusing on their
need to make a sale, and provide the consumer with inaccurate or deceptive
information. This can involve attempts
to persuade the consumer to buy unneeded products, which can lead to returns of
merchandise, conflict with customers, adverse word-of-mouth publicity, and
other problems.
Websites on Selling and Salesmanship, and Related Concepts
Search phrase with Google: Salesmanship http://www.google.com/search?hl=en&q=Salesmanship&btnG=Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.central-station.com/sales.htm Words own website: BASIC
SALESMANSHIP
http://www.dmoz.org/Business/Marketing_and_Advertising/Salesmanship/Education_and_Training/ Words own website: Top:
Business: Marketing and Advertising: Salesmanship: Education and Training
The Advantages of: Word-of-Mouth Publicity
One of the major advantages of word-of-mouth publicity is
believability. That is information
about a product that is transmitted by friends, family, and acquaintances is
probably more likely to be believed in most cases, than information conveyed by
advertising or sales personnel.
Another advantage is sometimes word-of-mouth publicity can cost
little or nothing. However,
positive word-of-mouth publicity is usually obtained with an investment of both
money and effort to satisfy customers.
Positive Word-Of-Mouth Publicity
Positive word-of-mouth publicity
about a product is the result of satisfied consumers. Usually this requires an investment in
producing a good product, and providing good services with the product. Honest and helpful advertising and sales
personnel can facilitate positive word-of-mouth publicity. Leaflets that provide advertisements
with useful information, in adequate detail, might be helpful in facilitating
positive word-of-mouth publicity.
This can work when satisfied consumers give leaflets to their friends
and relatives.
The Disadvantages of: Word-of-Mouth Publicity
One of the disadvantages of
word-of-mouth publicity is lack of control, by business owners and
managers. That is the word-of-mouth
publicity can be negative. In some cases
it can involve the transmission of unfairly negative or inaccurate information
about a product, or a retail outlet.
It can also sometimes be expensive and difficult to establish positive
word-of-mouth publicity, because to do so often requires paid advertisements,
to educate the consumers about a product.
This might include expensive advertising campaigns, as well as high
quality products, sold at relatively low prices.
Websites on Word-Of-Mouth Publicity
Search phrase with Google: Word-of-mouth publicity http://www.google.com/search?hl=en&q=Word-of-mouth+publicity&btnG=Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://en.wikipedia.org/wiki/Word_of_mouth
Word of mouth From Wikipedia
http://www.adendum.com/search_engines/word_of_mouth.htm
Words on website: Word of mouth, publicity
http://www.internetbasedmoms.com/word-of-mouth/
Words on website: Word of Mouth Marketing
http://101publicrelations.com/blog/_how_to_create_word_of_mouth_in_print_000145.html
Words on website: How To Create "Word of Mouth" In Print
Search phrase with Google: “Word-of-mouth
marketing” http://www.google.com/search?hl=en&q=%E2%80%9CWord-of-mouth+marketing%E2%80%9D&btnG=Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://womma.org/wom101/ Words on website: An Introduction to
Word of Mouth Marketing
Introduction to Mass
Meteor Publicity
Mass
meteor publicity is obtained when the news media, publishes a news story about
a company or its products. Mass
media publicity can sometimes also be obtained when a television show or motion
picture, uses a product as a prop or mentions the name of a product, or the
company that manufactures or distributes it. For example, when a brand name
automobile, or a well-known brand of soda, are used as props in a television or
movie video, millions of consumers will see it surrounded by movie stars and
other positive imagery. When retail
stores, vacation spots, and hotels are used to film television and movie
videos, publicity may result for the facilities. The publicity can be favorable or
unfavorable, and the company involved does not have direct control over the
publicity.
There are a Number of Ways of
Deliberately Creating Publicity for a Company or Product
Often
companies deliberately create publicity about their products by submitting news
releases to the mass media. This
can be an effective strategy, but it is necessary to provide information that
is newsworthy. If the information
released has minimal news value, it may be ignored by the news media, or it may
be reported at a minimum level, such as in a tiny article in the last pages of
a newspaper.
Skillfully
creating material for mass media publicity can sometimes be a highly effective
strategy to sell a product. There
are many ways that this can be done.
Companies that produce new technologies, often have information of value
to the news media, every time they create a new product. This especially applies to drug
companies that create new medications, which sometimes results in major news
stories. However, even less
dramatic information released by a business can be newsworthy, and it may be
reported to at least some degree.
For example, opening a new selling outlet, especially if it involves a
celebration, can result in at least some mass media publicity. This may even work to some degree when a
small business is opened, which might result in a news story in a small local
newspaper.
Providing
goods or services for free, or at a very low course, can sometimes get some
publicity from the news media. This
is especially the case for nonprofit organizations. However, this usually will result in a
tiny article, or a few words in a section of the newspaper that is devoted to
freebies.
Parades, Fireworks Displays,
Publicity Stunts and Other Techniques to Obtain Mass Media Publicity
The
general principle involved with obtaining publicity is to attract attention of
the news media and the public, in relation to a company or its products. This can be done many ways, as will
become apparent in the following paragraphs.
Various
types of celebrations can be used to obtain publicity, such as parades,
fireworks displays, and large parties especially if celebrities attend. A good
example of publicity with parades and fireworks, involves Macy's department
store. Macy's carries out Saint
Patrick day’s parades and Fourth of July fireworks displays each
year. This is seen by many millions
of people, in person and on television throughout the
A
publicity stunt is another way of obtaining publicity. This basically involves an unusual
activity, behavior, or interesting or dangerous stunt. The publicity stunt must be carried out
in a way that it brings public attention to a company or its products.
The Primary Advantages of
Mass Media Publicity
The
primary advantages of mass meteor publicity are it is free, but there can be
indirect expenditures involved.
Another advantage is consumers are probably more likely to believe mass
media, then advertisements or sales talk.
With certain types of mass media publicity, the concept of believability
is not even relevant, because the publicity transmit names and images of the
organization and/or its products.
Good examples of this are parades, fireworks displays, and publicity
stunts, all of which can be used to increase public awareness about a product
or company.
The Disadvantages of Mass
Media Publicity
The
primary disadvantage of publicity is it can be negative, or even extremely
negative. The company that obtains
publicity has no direct control the statements from mass media. The mass media can interpret or
misinterpret information released by the company, and they can emphasize or
over emphasize problems with products.
Avoiding or Minimizing
Adverse Publicity
Large
organizations often have public-relations departments, and other internal
control mechanisms to avoid or minimize adverse publicity. However, in certain situations it can be
unethical or unlawful to conceal information from the public that would result
in adverse publicity. For example,
when a company discovers a dangerous defect in their product, they are
obligated to release this information to the public. Often, the best strategy is to minimize
or reduce the damage from adverse publicity. This might involve giving honest
explanations to the public, and publicizing any relevant corrective
action. For example, when an
industrial accident occurs, with this strategy, explain how the accident
occurred, and publicizing the corrective action that are to be taken to prevent
accidents in the future.
Websites
on Mass Media Publicity
Search
phrase with Google: How to obtain free mass media publicity http://www.google.com/search?hl=en&q=How+to+obtain+free+mass+media+publicity&btnG=Google+Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.e-zinez.com/handbook/media1.html
Words on website: The Handbook of Ezine Publishing
http://www.digital-women.com/media-publicity.html
Words on website: Media Publicity and How to Get It
Search
phrase with Google: “How to write a news release” http://www.google.com/search?hl=en&q=%E2%80%9CHow+to+write+a+news+release%E2%80%9D
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.barbarabrabec.com/CraftsMarketing/write_a_news_release.htm Words on website: How to Write a News
Release–and Where to Send It
http://www.russpage.net/utah-jazz-show-how-to-write-a-news-release/ Words on website:
15à Click on this hyperlink for a sound file
of the following:
INTERNET
PROMOTIONAL STRATEGIES
To answer this question, I
will first explain what mass media advertising is on the Internet. Mass media advertising strategies on the
Internet are more or less similar to other media, such as newspapers and
television. For example, if a
well-known department store, such as Wal-Mart, or Macy's, creates a website
this would represent a mass media advertising strategy, because hundreds of
thousands of people throughout the world would most likely visit the
website. This is especially the
case if the website is advertised on television, and in newspapers.
However,
the Internet is not a true mass media format, like television, magazines and
newspapers. A website on the
Internet is more or less similar to a telephone number. Theoretically, everyone in the world can
call the number, but generally this does not happen. Even if you have a listed telephone
number, you will most likely obtain very few phone calls, except from your
friends and family. The same idea
applies to a website on the Internet.
Unless it is advertised you will have very few visitors, except perhaps
from your friends and family.
However,
the Internet can be used by small and large companies in a number of ways with
a focus on small groups of consumers.
Many small groups of consumers can add up to relatively large
numbers. There are a number of
techniques that are useful with this type of advertising, and I am calling
these techniques small-scale Internet advertising strategies.
The
most obvious small-scale Internet advertising strategy is ideal for small
businesses, and it involves setting up a website. A website of this kind will not attract
hundreds of thousands, like Macy's or Wal-Marts websites. However, this becomes a productive
strategy when the regular customers are informed of the website, and when the
website is publicized along with advertisements for the products sold by the
business. The website can have
pictures of inventory, and a method of payment with credit cards. The above, is a very obvious technique,
and at this point it is essentially common sense.
Another
technique is to obtain free or low-cost advertising on a pre-existing
website. However, there are often
limitations on the type of advertisement that may be allowed, especially if it
is free. Some of these sites might
not allow a business to advertise.
See the websites on the end of this section for examples.
There
are of course advertisement outlets that charge a moderate to high fee, which
may or may not be cost-effective.
One of the best examples is Google, where advertisements are displayed
in search results. See Google
advertising https://adwords.google.com/select/Signup1/index.html Another example is the website below,
which provides advertising services for a number of search engines. http://www.wpromote.com/quicklist/landing/?gclid=CNfbxZSy8JICFRCCGgodFjlk4g
Uploading Videos on
Pre-Existing Websites
One
of the most interesting Small-scale Internet marketing techniques that I have
seen is involves upload videos on one of the Internet video sharing sites, such
as YouTube. This is generally free
in most cases. There are two ways
that the video can be constructed for this type of advertising. One is to have an entire video that
discusses a product or service.
This is likely to work well, if the product that you are selling is
interesting. The video does not
necessarily have to directly indicate that you are selling anything. For example, if you are selling your
professional services, such as law, psychotherapy, medicine, interior
decorating, you can simply create videos that deal with problems that relate to
your discipline, and upload them.
This is especially useful for video sites that do not allow free
commercials. When this is done you
of course must provide adequate contact information, such as your phone number,
the address of your place of business, your e-mail address, and if you have a
website your Web address.
Another
way that Internet videos are used for advertisements on the Internet is similar
to a conventional television commercial, but of course in most cases you will
be dealing with a relatively small numbers of viewers. In most cases this service probably
requires a substantial fee. This
technique is even being used by some large companies, but they often choose
websites that have very large audiences, such as www.CBSnews.com. The following is one of their videos
with the commercial. http://www.cbsnews.com/sections/i_video/main500251.shtml?source=nav_video. This video may or may not remain
available for an extended period of time, but there are many other videos on www.CBSnews.com with commercials.
Another
method that is obvious is to use e-mail.
However, this technique will probably not be very effective if mass
numbers of e-mails are sent out indiscriminately. E-mail might be effective if people
request information on a website, or they request information about a product
on the phone, or through e-mail.
Websites
on Internet Marketing and E-Commerce
Search
phrase with Google: Internet
Marketing http://www.google.com/search?hl=en&q=Internet+Marketing&btnG=Google+Search This website consists of one or more search
pages, with many links to other websites.
If you do not find what you want on this website, you can change the
search phrase that will appear in a dialog box, after you click on the above
web address. After changing the
search phrase, press the enter key, and you will see a different set of
websites.
http://en.wikipedia.org/wiki/Online_marketing
Words of website: From Wikipedia
http://homebusiness.about.com/od/marketingadvertising/a/IMarketing101.htm
Words of website: Internet Marketing 101
Search
phrase with Google: How to set up websites for e-commerce http://www.google.com/search?hl=en&q=e-commerce&btnG=Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
Search phrase with Google: How to set up websites for e-commerce
http://www.google.com/search?hl=en&q=How+to+set+up+websites+for+e-commerce
This website consists of one or more
search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.managementhelp.org/infomgnt/e_cmmrce/e_cmmrce.htm Words of website: Basic Guide to
E-Commerce (Doing Business Over the Internet/Web)
http://www.websitesource.com/articles/ecommerce-five-steps.shtml
Words of website: Five Steps to Ecommerce
Search
phrase with Google: Free advertising on the Internet http://www.google.com/search?hl=en&q=Free+advertising+on+the+Internet&btnG=Search
This website consists of one or more
search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.inetgiant.com/ Words of
website:For Free Ads, Free Classifieds, Free Advertising
http://www.ad2go.com/ Words of website: Directory of Free
Advertising and The 1,000 Free Advertising Project
16à Click on this hyperlink for a sound file
of the following:
All
businesses, including profit and nonprofit organizations are affected by
environmental factors, as well as internal behavioral factors. All of this can affect the entire
functionality of a business, the quality of its products, and the ability to
market products successfully.
Environmental factors and internal behavior factors will be discussed
under the following two headings.
Environmental factors involve
dynamics and components that the organization usually has little or no control
over. Some examples are the
weather, war, the functioning or malfunctioning of the economy, and the laws of
the nations they are dealing with.
Various types of trends and styles are also examples of environmental
factors.
Some large companies can
sometimes influence some environmental factors, but usually to a very modest
degree. For example, some companies
can influence fashion trends for clothing styles. Sometimes large companies can influence
some of the political factors of a nation.
This was probably more significant in the past, when a large company
would dominate a small nation. However, the strategy that is usually most
practical when dealing with environmental factors is to adjust to them, in such
a way that it maximizes the goals and profitability of the organization.
Sometimes even adverse
environmental factors are financially lucrative for an organization, especially
if it makes appropriate adjustments.
For example, war might be financially advantageous to companies that
manufacture military equipment, especially if they adjust by expanding
production facilities. However,
after the war is over, they may have to readjust again, by cutting production
and laying-off employees.
Alternatively, they may be able to sell military equipment to other
nations, or transform their manufacturing to products for the general consumer,
such as automobiles and electronic equipment.
In general, there are many
adjustments that organizations must make to maintain their business, and
overall functionality. The
adjustments can involve cutting expenses, when the rate of sales is low. This can involve a reduction in
production, and laying-off employees.
When demand for the products increase expanding production facilities
and hiring additional employees will probably be lucrative.
A general principle that usually
holds true is environmental factors varies significantly over time, often
within a five a 10 year period.
This holds true for the
The idea to keep in mind is there
are a large number of variations that take place over time that may
significantly affect an organization, and the sales of its products. Many of these variations more or less
appear to go in a regular cycle.
This involves the repetition of various environmental conditions over
time. The best example of this is
the economy and the business cycle.
A less obvious example is war.
The
With this understanding it is
possible to prepare an organization and its marketing strategy to deal with the
repetitive environmental occurrences, as well as unusual and unpredictable
events. For example, when a product
is in high demand as a result of environmental factors, production and
marketing plans can be made based on the assumption that the demand will most
likely drop when the environmental conditions change. To illustrate further, a plan to deal
with a permanent increase in demand for a product may justify expansion of
production facilities and the hiring of new employees. However, increase in demand for a
product that is due to environmental conditions that are likely to change may
require a different type of planning.
That is, expansion of production facilities may not be cost-effective,
and it may result in financial losses in the long run. Thus, it might be more cost-effective to
outsource some of the production process, when dealing with a demand that is
likely to diminish as a result of changes in the environment.
Summing Up Environmental Factors
The idea to keep in mind is that
the external environment is constantly changing, and for a business to be
successful, it must be prepared to deal with the environmental variations that
take place over time. This involves
creating plans, and contingency plans, to deal with predictable and
unpredictable environmental changes.
Many of the environmental changes happen periodically, more or less in
cycles, and they are essentially predictable, but it is usually not possible to
predict precisely when an occurrence will happen. For example, over the next 50 years, we
can assume that the
Behavioral Factors of Management and Staff
Most of the literature I have
come across on marketing, organizational behavior, general business operation,
and management theory, did not provide an adequate discussion of the material I
am presenting in this section.
Specifically, this discussion is about behavioral factors of staff and
management that affect the functioning of a business, either positively or
adversely. Such behavioral factors
can sometimes be extremely significant for a specific business, and it can
result in a highly profitable and growing organization, or a failed business
that goes into bankruptcy. An
example is a CEO who poorly manages an organization, as a result of his heavy
drinking. Another example is a CEO,
who is very successful in managing his organization, because of his dedication
and great knowledge and skill. The
behavioral factors that I am discussing affect the organization by definition. A CEO that is an alcoholic, but his
behavior does not affect the functioning of his organization, would not be
involved with the concept that I am discussing here.
I am primarily focusing on
adverse behavioral factors because problematic areas of an organization
represent areas that can be improved.
Focusing on highly functional behavioral factors of an organization,
will not reveal areas where improvements can be easily made.
It is important to understand
that personal problems and liabilities, as well as abilities and assets do not
necessarily affect the functioning of a business. People often know how to keep their
personal problems away from the work environment. In addition, there may be other staff
members that compensate for the personal weakness of other workers so the
organization is not affected adversely.
As far as abilities and assets of
staff and management, they are not always recognized and utilized, by the
organization, and they may not even be relevant to the operation of a specific
business. An example is a foreman
of a construction crew, who has a great deal of skill in marketing. These skills, even if they were
recognized, they would generally not be of any value to a foreman.
The impact of abilities and
behavioral factors of individuals in an organization will generally depend on
their occupation and their position.
For example, a CEO that is too ill to carry out his job effectively will
have more impact on the organization than a lower level employee, such as a
file clerk that is performing in adequately because of illness. Some employees have more impact on an
organization as a result of the nature of their work. The CEO runs the company, and the clerk
files papers, perhaps with a team of other clerks. At the lower occupational levels there
are usually a number of individuals doing identical jobs. This lowers the impact of inadequate
performance of one or even several employees. If one employee is doing an inadequate
job, the other employees with similar job titles will probably compensate for
the inadequacies of the worker. In
addition, in many organizations, the lower level employees that are doing
inadequate work can easily be fired, and replaced. At the higher occupational levels this
may be far less feasible. For
example, the CEO that is performing poorly for whatever reason, might own
controlling shares in the company, or he may be the sole owner of the
facility.
Behavioral factors of management
and staff might have more of an impact on small businesses, especially
micro-businesses with, five or less employees. For example, if the owner of a small
business becomes seriously ill, the facility may have to be closed until he
recovers. Any type of illness,
family problems, can interfere with the tasks needed to carry out the functions
of a small business at an optimum level.
I have noticed that the appearance, and functionality of a small store,
sometimes appears to reflect the physical and psychological state of the owner.
There are a number of types of
problems that might interfere with the functionality of an organization,
especially when it affects the CEO, or higher-level managers. Some of these problems may also be
significant when a large percentage of lower level employees have the
difficulties. These problems are
summarized below:
Medical problems of a
physiological nature
Psychological disorders and
mental health problems
Emotional problems and reactions
that are not necessarily psychological disorders
Personality problems, and
personality conflicts, that are not necessarily psychological disorders
Prejudicial judgments and
treatment of people that relate to the work environment
Lack of skill, knowledge and/or
experience in areas that are relevant to the work environment
The behavioral factors mentioned
above, can not only affect the organization, it can also affect employees. That is, it is not unusual for an
employee, or even a student, to encounter a superior, that is having major life
problems. This can range from a
superior with medical problems to psychological difficulties. These difficulties can also involve
financial problems, family conflict, divorce, and death in the family. Problems of this nature are not uncommon,
but they become problems for employees, and sometimes for students, if it
affects the judgment, tolerance, and social skills of the superior. This can involve a superior with one or
more of the above problems, who is repeatedly getting into conflicts with
others, especially with lower-level employees. This can involve a superior that is
frequently yelling at employees, and threatening to fire them.
Of course, there are people at
all levels in an organization, including managers, that have problems, but
their judgment and tolerance, and their interaction with the lower level
employees are not affected. These
individuals have developed the skill of separating their personal problems,
from the problems and dynamics of the work environment. Simply put, some people know how to
leave their problems at home.
The idea here is to develop an
awareness of the concept and problems presented above, with the goal of
circumventing or alleviating the difficulty. How this is done, depends on your
position in the organization, and many other factors.
17à Click on this hyperlink for a sound file
of the following:
Chapter 10 Unusual Aspects of Marketing
What are Unusual Aspects of Marketing?
In most of
this book, I have been discussing the typical marketing methods and principles
that apply to our modern world.
However, there are many unusual types of marketing that I did not
discuss, but I will discuss them in this chapter. Some of these unusual marketing methods
do not even involve money, and they may not even be thought of as marketing, by
most people. However, they
essentially fit the general definition of marketing, or they relate to
marketing in some way.
Religion, political candidates,
and charities might not be thought of as products by many people. However, they are products that are
marketed from the perspective presented in this book. They require persuading the consumer to
except a service. For example,
politicians are offering their political services, if the voters are willing to
put him or her in power. Religion,
is also offering services, which can involve sermons, religious studies, the guidance
of a religious leader, which may be offered simply for attendance at a
religious temple, or for contribution of money, or even for a fixed fee.
Most people assume that marketing
involves the exchange of money.
However, there are exchanges of goods and services, by means of barter,
which is a type of marketing, based on the concepts presented in this book.
There are marketing efforts that
persuade consumers to use less of a product, or to stop using a product. This may sound quite unusual, but when
you read the section on demarketing, you will see that it is quite common.
I will discuss all of the above
in this chapter, under the following headings.
MARKETING AND BARTER
An Introduction
to Modern Barter
When we think of marketing we
generally think of an exchange of goods and services for money. Generally speaking, modern economic
systems are based on money. Of
course, this was not always the case.
The first systems of exchange were based on barter. This involves exchanging one product for
another. For example, an individual
that was a good hunter, in the Stone Age, might have informed his neighbors,
that he was willing to exchange animal meat and skins, for the implements
needed for hunting, and other handcrafted items needed for survival. This is more or less a simple form of
marketing, and it involves barter.
The same concept may have developed with services, where one service,
was exchange for another, and/or a service exchange for a physical item.
All of the above of course is
speculation, but we do know that both the concepts of barter and marketing did
develop from a primitive form to the modern concepts. In modern society there exist various
forms of barter. Most of the modern
barter methods are far more complex than a simple exchange. However, modern barter methods are not
widely known or used. Nevertheless,
there are barter companies that use various techniques involving exchange. There are also personal ads and related
websites that deal with barter between individual consumers. This will be discussed in the following
paragraphs.
Barter Companies and the Techniques they Use
One of the techniques that are
used with modern barter is primarily focused on businesses, as opposed to the
general consumer. This can involve
a barter company that acts as a middleman, between the exchanging parties. The exchange takes place between the
clients that the barter company serves.
The barter company essentially keeps a record of the value of products
that a company submits for barter.
Generally, the value of products is measured in modern currency, such as
dollars, but it may be converted to another format, such as barter dollars, or
barter credits. The exact details
of how a specific barter company operates can differ with each company, and it
can be complex.
Below, there is a Web address of
a barter company (Barter Business Exchange) that carries out exchanges
between businesses. They use a
concept they call barter dollars.
The yellow box, in quotation marks, is part of the statement found on
their website. I suggest you look
at this website, by clicking on the hyperlinked web address.
http://www.ncbarter.com/howbbeworks.html
“THE CONCEPT
The Barter Business Exchange (BBE)
will refer new customers to your company. The new customers we send will pay
for your products and services with barter dollars which you can use with any
other participating business in the Barter Business Exchange. The barter
dollars earned from these customers can be used to eliminate your current cash
expenses. We currently have over 600 participating businesses.”
There are barter companies that
use an exchange method that involves essentially a type of credit or debit
card. The company that is listed
below calls its card Bartercard.
The company name is Bartercard International. This, like the method above, avoids the
direct exchange of goods, and it is also for businesses. The exchanges are carried out through
the barter company, with the aid of their Bartercard. For more information click on their web
address below, and examine their website. http://www.bartercard.com/ The yellow box bellow, with the
quotation marks, is a statement from their website.
“Bartercard is unlike any
other credit or debit card because you fund our card with your own goods and
services...NOT CASH. Bartercard currently helps over 55,000 smart businesses in
13 countries around the world (over 23,000 in
The following web address is for a company (Intertrade Capital Group)
that deals with barter for large companies, including foreign companies and
governments, according to the statements on their website.
http://www.intertradecapital.com/overview.html The yellow
box bellow contains quote from the above website.
“Intertrade Capital Group is a
global alliance organization set to enable barter, trade, countertrade, asset
management and alternative capital and financial transactions for Fortune 500
and Global 3000 companies, governments, and barter exchanges. The company
enables execution of traditional and online trade transactions that greatly
expand liquidity and bottom line profitability.”
There are some barter organizations that are designed for individual
consumers. Below, there is a Web
address of such an organization, called SwapTreasures. Basically, they allow users to place ads
on their website, to exchange individual items for other items, and/or to sell
for money. Buyers can make an offer
for any product on their website for exchange of another item (barter), or for
money, which may or may not be accepted by the seller. There are many items on this website,
such as old computers, clothing, automobiles, boats, antiques, books, etc. They also have a section for services. http://www.swaptreasures.com/
The yellow box bellow contains quote from the above website.
SwapTreasures is an online swap
community where members can swap, barter, buy, and sell goods and services.
Save money by swapping your unwanted stuff with other members.
My Concluding
Thoughts on Modern Barter
Modern barter is not very common or popular. I do not know any individual or business
owner that dealt with the barter methods discussed above. No doubt, most companies, as well as
their employees, want money for their goods and services, not barter
credits.
However the modern barter concept might be helpful for companies, and
even nations, that are deficient in money and credit, and who have an excess of
products that they can exchange for barter credits. The barter credits can be exchanged for
needed goods and services. However,
the difficulty here is they have to find suppliers that are willing to accept
the barter credits for the needed goods and services. Generally, the company that issues the
barter credits will attempt to provide suppliers that are barter clients, and
are willing to accept barter credits.
From the above, it should be apparent that modern barter is quite
different than a simple exchange of items between two people. The barter credits or barter dollars, is
more or less a different form of money.
Barter credits can be calculated in dollars, euros, or any other type of
money. In theory, it is possible to
calculate the barter credits using the most stable form of money, or it can be
based on the value of a precious metal, such as gold. Modern barter and the concept of barter
credits can be helpful for companies and nations that do not have money, and
which are productive, and have products to exchange.
The concept of barter credits is in a certain sense a form of money. The concept of modern barter might
gradually evolve into a new method of exchange, which could be international. In theory, international barter credits,
could be protected from the less than optimal economies of most nations,
especially in terms of inflation and deflation, if it was based on a very
stable currency, a precious metal, or the average value of several precious metals
or currencies. Perhaps
someday in the very distant future, everyone will have a debit or credit card
for barter credits. However, I do
not think that the concept will evolve to this level, but it is possible.
For more information on barter see the following websites.
Websites on Barter and Related Concepts
Search phrase with Google: Barter Companies and the Techniques
they Use http://www.google.com/search?hl=en&q=Barter+Companies+and+the+Techniques+they+Use This
website consists of one or more search pages, with many links to other
websites. If you do not find what
you want on this website, you can change the search phrase that will appear in
a dialog box, after you click on the above web address. After changing the search phrase, press
the enter key, and you will see a different set of websites.
http://www.barternews.com/think_barter_grow_richer.htm
Words on website: Barter News
http://www.barterbart.com/?gclid=CP3WyIDh35ACFQSOFQoddl0UWQ
Words on website: Welcome. This is a FREE barter auction site!
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1745-493X.1994.tb00189.x?cookieSet=1&journalCode=jscm
Words on website:
The Journal of Supply Chain Management Abstract Barter: An
Alternative to Traditional Methods of Purchasing
http://www.microsoft.com/smallbusiness/resources/startups/budgeting-expenses/bartering-can-boost-your-budget-and-business.aspx
Words on website: Microsoft Small Business Center Bartering
can boost your budget and business
http://answers.google.com/answers/threadview?id=538802
Words on website: Q: Comprehensive report of
barter exchange business models and networks (sites)
http://books.google.com/books?id=QLFqKzXwq20C&pg=PA181&lpg=PA181&dq=barter+companies+and+the+techniques+they+use&source=web&ots=OWJNE-UIgy&sig=C578l6X3eOna_DN1OGB7YuFHwDQ Words on website: The Tax-Free Exchange Loophole: How Real Estate Investors Can Profit
http://findarticles.com/p/articles/mi_m0EIN/is_2004_Sept_8/ai_n6185337
Words on website: Bentley Commerce forms Strategic
http://www.bxiarizona.com/aboutus/abouthist.asp
Words on website: Barter History
http://www.barternews.com/mappage/default.htm
Words on website: USA Barter Companies
http://www.ncbarter.com/ Words on website: Thank you for
trading with the LARGEST bartering network for smart business owners in NC!
The Barter Business Exchange,
http://www.ncbarter.com/index.html
Words on website: Thank you for trading with the LARGEST bartering network
for smart business owners in NC!
http://www.intertradecapital.com/
Words on website: ALTERNATIVE CAPITAL SOLUTIONS
http://www.highwayhome.com/corporate/barter/barter_companies.html
Words on website: Barter Companies Description
Location Telephone
Demarketing can be thought of as
negative marketing, or the actions and efforts focused on reducing or
eliminating the consumption of a specific product. Some products that have been demarketed
to varying degrees, over the last few years, include electricity, cigarettes,
gasoline, and welfare services. A
more detailed definition of demarketing is presented below:
Demarketing can be defined as the set of activities
involved with persuading people NOT to use a product, or to USE LESS of a product. The activities can be similar to the
activities associated with marketing, but the goal is to reduce or eliminate
consumption of a product.
·
Creating and implementing a
plan to reduce or eliminate the demand for a product
·
The application of various types of promotional methods, such as
advertising, free publicity from the mass media, to convince consumers to
reduce or eliminate the consumption of a product.
·
Surveys to evaluate consumers habits and needs, focused on ways of
reducing or eliminating the consumption of a product.
·
Making it more difficult or expensive to obtain the product, such as
taxing cigarettes, or increasing paperwork, and raising requirements to obtain
public assistance
·
And any other action that is used to reduce or eliminate the demand for a
product.
Why are Some Products Demarketed?
From the examples that were given
at the beginning of this section, the answer to the above question is probably
obvious. A product may be
demarketed if it is dangerous or unhealthy such as cigarettes. Some products have been demarketed to
varying degrees because they are harmful to the environment, such as gasoline,
heating oil, and electricity.
Electricity was also demarketed because it is sometimes in relatively
short supply, and it is very expensive for the electric companies to build new
power plants. Various welfare
services have been demarketed in
For more information about
demarketing see the following websites:
Search phrase with Google: Demarketing http://www.google.com/search?hl=en&q=Demarketing
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase, that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.iveybusinessjournal.com/view_article.asp?intArticle_ID=625 Words on website: Relationship
demarketing: Managing wasteful or worthless consumer relationships
http://www.ingentaconnect.com/content/routledg/rmle/1998/00000003/00000003/art00002 Words on website: Demarketing in park
and recreation management
http://www.thefreelibrary.com/Consumer+awareness+and+successful+demarketing+of+public+goods:+a...-a0172010688 Words on website: Consumer awareness
and successful demarketing of public goods: a study of residential water
conservation behavior
http://www.multilingual-atters.net/cit/006/0309/cit0060309.pdf
Words on website: Demarketing Gambling to Encourage Local
Tourism
How does
Many religions are essentially
large business organizations that own huge amounts of real estate, and have
huge financial resources. The most obvious example is the Catholic Church. This church and other religious
organizations often spend their funds to maintain their facilities, and to
provide assistance, such as food, and medication for needy individuals
throughout the world. The fact that
they are spending money, certainly suggests the need for marketing.
Some religious leaders might deny
that they are marketing their religious beliefs and philosophy. However, most religions are marketed
deliberately and perhaps inadvertently.
The deliberate efforts of
marketing religion can often be seen on the streets of large cities. This involves a preacher giving a speech
on the street, and/or the distribution of leaflets that provide persuasion and
information that encourages the consumer to attend a religious temple, usually
a Christian church. The Jewish
religion does not market its services to all consumers. This religion focuses its marketing
efforts on people from a Jewish background that abandoned the Jewish religion
and culture.
The inadvertent methods of
marketing religion may or may not be truly inadvertent, but they probably were
very successful at one time. These
methods of marketing religion involve a belief system involving heaven and
hell, and the belief that God rewards the fateful, and punishes unfaithful
sinners. This can include an
opportunity to be saved from your sins, and avoid hell by becoming a fateful
member of the religion. The concept
and threat of hell includes burning in fire, for a period of time, Purgatory,
or forever.
The concepts of heaven and hell,
and reward and punishment from God, probably at one time were a very powerful
marketing strategy, especially before the scientific developments of modern
times. Before the great advancements
in science, starting from the 18 hundredths to the present day, people did not
have any plausible explanation for the realities that they experienced
throughout life. This includes
birth, death, human awareness and consciousness, nature, animals, plants,
mountains, and the stars in the night sky.
Thus, they were probably very susceptible to a marketing strategy that
explained the entire universe, and also provided the opportunity to avoid hell,
go to heaven, and experience eternal life.
This marketing strategy is probably why of very large percentage of the
world’s population are from religious backgrounds.
Most religions also market
ethics, and they encourage ethical behavior, sometimes with statements
suggesting rewards of heaven for ethical behavior, and the punishment of hell
for sinful or unethical behavior.
Some religions also market for contributions from their followers.
For more information see the
following websites
Search phrase with Google: “The marketing of
religion” http://www.google.com/search?q=%22The+marketing+of+religion%22&hl=en&start=10&sa=N
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.marketingreligion.net/?page_id=3
Words on website: About Brands of Faith
http://www.alexleduc.com/2005/12/religious-marketing.html
Words on website: Religious Marketing
THE MARKETING OF A
POLITICAL CANDIDATE
Introduction to Marketing of Political Candidates
Political candidates, especially
in modern times, are engaged in fierce competition with their competitors. At one time, this competition could
involve physical conflict, and war between the followers of different
leaders. This is still the case
today in some of the less developed countries. In modern times, in the developed
countries the competition is more or less based on marketing strategies. The candidate with the best marketing
skills and the best marketing team will have a significant advantage, in
winning an election. The
philosophy, skills and experience of the candidates might also be quite important,
but the marketing strategies used might be determining the results of at least
some if not all elections.
Skilled marketing strategies for
political candidates ideally will involve a revealing of the candidate’s
actual abilities, skills, experience, political philosophy, and how he or she
plans to deal with relevant problems.
This is an honest approach, and also an ideal approach, to marketing,
which may or may not help the candidate win the election. For example, if the candidate plans to
initiate policies that would be adverse to some people, revealing this in
detail will most likely result in a loss of votes, and possibly the loss of the
election.
How is Marketing of a Political Candidate Different than Marketing
other Products?
Many elections are won or lost by
15% of the votes or less. Sometimes elections are very close, and the loss of a
small number of voters, such as two or 3%, can result in the loss of an
election. A small error in
marketing strategy can result in the loss of an election. This is quite different than other types
of marketing. For example, if you
are marketing soap, computers, or automobiles, a marketing error can usually be
corrected. Losing a few percentage
points in terms of market share a product usually does not have very great
significance for a company. Even if
the loss in sales cannot be rectified, the company can still make a profit, and
if it cannot, the product can be discontinued. In addition, most companies have many
products, and if some are not very profitable, other items it sells might
compensate for the low profit or loss.
All of the above boils down to,
is political marketing is all or nothing; the candidate either wins or
loses. Conventional marketing of a
product is not all or nothing, it involves market share. Even a company that obtains a very small
percentage of the market share can be quite successful, providing its expenses
are low enough to make a high rate of profit.
Marketing Methods Used By Political Candidates
Political candidates use
primarily three categories of promotion, which are paid advertising, free
publicity, and speeches and face-to-face talks. Speeches and face-to-face talks
(that are not covered by the mass media) are probably only significant and
effective in small town elections, where the candidate can contact the majority
of the voters, in lecture halls, or on a face-to-face basis. Paid advertising is probably less
effective than most people think, and it probably has a small to moderate
impact on the election, in most cases.
Most voters that encounter a paid political advertisement are probably
aware that it is staged, or contrive to persuade them to vote in favor of a
candidate. Free publicity, usually
from the news media, probably has the most impact on an election. However, this type of publicity may or
may not be favorable to a specific candidate.
An important skill is the ability
of the candidate, and his or her support team to obtain news media
publicity. Candidates often do this
by making speeches and public appearances, in strategic places where they can
obtain much news coverage. When
candidates are running for a major office, such as President, Senator,
Governor, or a mayor of a large city, it is relatively easy to get news
coverage. Candidates that are
running for lower level positions, such as a mayor of a small town, will
probably not get very much news coverage, except perhaps from the local
newspaper. However, this may not be
important for small town elections.
For more information, on
marketing of political candidates, see the following websites.
Search phrase with Google: “The marketing of
political candidates” http://www.google.com/search?hl=en&q=%E2%80%9CThe+marketing+of+political+candidates%E2%80%9D&btnG=Google+Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.springerlink.com/content/q68926523ww0888w/
Words on website: Journal Article
http://www.springerlink.com/content/p7174q4ux0434273/
Words on website: Journal Article
Search phrase with Google: Marketing to win an election
http://www.google.com/search?hl=en&q=Marketing+to+win+an+election
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.directoryone.com/blog/search-engine-optimization/who%E2%80%99d-win-if-election-was-based-on-search-engine-position-analysis/ Words on website: Who’d Win if
Election Was Based on Search Engine Position Analysis? Author: Eric Brantner
http://www.washingtonpost.com/wp-dyn/content/article/2007/04/01/AR2007040100973.html
Words on website: The Decoy Effect, or How to Win an Election
Organized Charities are Essentially a Type of Business.
Charities are of course nonprofit organizations, but they are often money
making entities for the employees.
They usually have paid employees, and sometimes management and a CEO
that are paid quite well.
Generally, a portion of the money that is contributed to a charity is
used to pay the salaries. Another
portion of the contributed money may be invested in marketing, such as printed
leaflets, ads in newspapers, and television and radio advertisements. In general, there are many people and
organizations that make a considerable amount of money from charities. This includes the employees mentioned
above, the people that create the advertisements, and the newspapers, radio and
television stations that carry their advertisements. However, sometimes charities are given
free advertising time on television and radio.
The fact
that people make money off charities does not imply that they are in any way
illegitimate, or devious. However,
does suggest that charities are businesses that require marketing strategies,
just like other organizations.
Charities engage in marketing to
obtain contributions from the general public, from organizations, and from the
government. There appeals are
essentially a marketing strategy.
Four common types of appeals from charities, involve requests for
money for the unfortunate, and requests for money for adverse conditions
that might strike you and your relatives, requests for volunteers,
and requests for various types of items. This is discussed under the following
three subheadings.
Requests for Money by Charities for the Unfortunate
Appeals for contributions for the
unfortunate may inadvertently perhaps imply that you, the contributor, are
amongst the fortunate. This type of
appeal may be for financial or medical assistance for people in the less
developed countries. Appeals of
this nature can also be for the poor in our country. These types of advertisements are
generally presented in all types of media, including print, radio and
television, as well as the Internet.
Requests for Money by Charities for Adverse Conditions That Might
Strike you and Your Relatives
There are appeals for contributions that involve adverse conditions that
can strike anyone, such as cancer, heart attacks, and kidney disease. Appeals of this type may imply,
intentionally or unintentionally, that the requested contribution is for you
and your family. This is not necessarily deceptive, for example, the medical
conditions mentioned above could strike anyone. Some of these appeals imply that the
money is going to be invested in scientific research, to find a cure or an
effective treatment.
Requests for Volunteers by Charities
One of the best examples of an organization that advertises to obtain
volunteers is the American Red Cross.
Their advertisements imply that the assistance they are requesting from
you is for you and your neighbors.
They do provide assistance for various types of misfortunes that are
relatively common, such as people that become temporarily homeless because of
fires, floods, tornadoes and hurricanes.
There are of course a large number of other charities that seek
volunteers. For a list of these organizations, see http://www.charitablechoices.org/Charities/Volunteer_List.asp
Requests for Various Types of Items by Charities
There are a number of charities that advertise on the radio, requesting
old cars. The commercials that I
heard did not reveal precisely what they were going to do with the cars, but
their claims imply that they would obtain funding for their charity as a result
of the donation.
There are also charities that
request various body parts after your death. This includes requests for kidneys, eye
corneas and hearts see the websites below for more information.
National Kidney Foundation
http://www.kidney.org/news/newsroom/fsitem.cfm?id=30
The Eye Bank
American Heart Association
https://donate.americanheart.org/ecommerce/aha/aha_index.jsp
For
additional information on the marketing of charities see the following websites
Websites 0n the Marketing and Charities
There is much more material on marketing and charities then I covet in
this section. This material can be
found on the following websites.
Search phrase with Google: The marketing of charities http://www.google.com/search?hl=en&q=The+marketing+of+charities&btnG=Search
http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=203
Words on website:Hunting for Cause Related Marketing's Charitable Impact
http://www.jamicharity.com/ Words on website: Charity Brands
marketing
http://www.frugalmarketing.com/dtb/charity.shtml
Words on website: Charity Marketing: Growing Your Business Through
Charitable Giving
http://www.cass.city.ac.uk/cce/pdf_files/charity_mktg_survey.pdf
Words on website:
18à Click on this hyperlink for a sound file
of the following:
Chapter-11:
Object-Dynamic Model of Marketing, Involves: Objects, and their Dynamics and
Mathematics
Introductory Note on This
Chapter
In this chapter, I discuss a
conceptualization of marketing from my perspective, which is somewhat focused
on the physical sciences and mathematics.
This involves a conceptual model of marketing that does not contradict
any of the generally accepted principles, but it does show marketing from a
different perspective. Looking at
any subject from multiple perspectives often leads to creative insights, which
may result in new methods and solutions to problems.
Objects, dynamics,
and mathematics are essentially fundamental categories, which apply to
the physical and social sciences, including marketing. I am calling this the object-dynamics
model, and when applied to marketing, the object-dynamics model of
marketing. I define objects,
dynamics, and mathematics, from the perspective of this model in the under the
following three subheadings.
What Does Objects Mean, from the
Perspective of the Object-Dynamics Model of Marketing?
An Object
is any physical or nonphysical entity.
For marketing, this includes the manufacturing and transportation
facilities and equipment of a business, as well as its employees,
consumers, products, and financial resources. Markets, market segments, money,
stock, goods, services, and anything that can be sold are
also objects. The nature, quality,
and quantity of these objects can determine the relative degree of success or
failure of a business.
What Does Dynamics Mean, From
the Perspective of the Object-Dynamics Model of Marketing
Dynamics is anything that can be used to manipulate, change, move
or make an object. For marketing this is all the activities associated with marketing. That is, dynamics means actions, and it
includes the act of: designing products, manufacturing, advertising, selling,
writing advertisements, creating marketing and business plans, and any other
action associated with business or marketing.
The
quality, quantity, and timing, or scheduling of the dynamics can determine the
relative degree of success or failure of a business. Actually, the timing or scheduling of
dynamics (actions and activities) can be extremely important.
What Does Mathematics Mean From
the Perspective of the Object-Dynamics Model of Marketing?
For this
model, mathematics means
anything that can be calculated, measured, or estimated in terms of numbers, in
relation to objects and dynamics. This includes any type of measurement,
and calculation or estimation involving quantitative relationships of objects and dynamics.
The
mathematics involves answering a question in relation to objects and dynamics,
such as: How many objects are in a set?
How much does the object, weigh, and cost. What is the direction and speed of motion of the object? What are the probabilities involved with
this object and its related dynamics?
What is the rate of velocity, or change of velocity of the object?
For
marketing, and business some relevant questions that can be answered with
mathematics (involving calculations or estimations) includes what is the: rate
of manufacturing, the rate of sales, the rate of profit, rate
of return on the investment and the degree of financial risk with the
marketing of new products, as well as many other calculations and
estimates.
OBJECT-DYNAMICS MODEL OF MARKETING FROM THE PERSPECTIVE OF LANGUAGE
The three components of the
Object-Dynamics model of marketing can be examined from the perspective of
language. That is objects are always nouns, such as production facilities,
products, salesman, saleswomen, money, etc. Dynamics
are verbs, and include the activities associated with marketing, such as
advertising, selling, shipping, planning, managing, etc. The mathematics, generally involves a
question, such as the following examples:
What is the rate of sales?
What is the rate of profit?
What is the rate of return on our investment? How many items must we sell to
breakeven? What are the chances
that the consumers will buy this new product in sufficient quantity to make a
profit? All of the above can be
answered with calculations and measurements, except for the last question.
The last question can only be
answered by estimating, taking an educated guess, testing, feedback evaluation,
or formal experimentation. This is
usually the case when the question involves predictions and probabilities of
consumer behavior, risks of product related accidents, and risks of product
liability. All of this is discussed
in more detail under the next heading.
THE UTILITY OF THE
OBJECT-DYNAMICS MODEL OF MARKETING AND RELATED CONCEPTS
The model does not provide a
method of predicting human behavior.
Generally, when you are dealing with predictions and dynamics of human
behavior, you cannot perform precise measurements and calculations, in the way
that you can with nonliving objects.
However, there are many methods that can be used to estimate the possible
outcomes that involve human behavior.
This includes intuition, common sense, educated guesses, market surveys,
interviews and/or psychological testing of a sample of consumers.
Thus, human behavior cannot be
precisely predicted, but it is often relatively easy to measure the dynamics
and results of human
behavior. This does not involve what
will happen; it involves what has happened. For example, you cannot predict the selling rate of a
product before it is marketed, but you can precisely measure and calculate the
selling rate of a product after it is marketed, based on the actual sales that
took place. Calculations of this
type, can be done periodically, and used to estimate future sales.
The Utility of the
Object-Dynamics Model of Marketing and Conceptual Models in General
The
object-dynamics model of marketing, as well as all other conceptual models or
problem-solving techniques, may not be useful when they are used as a sole
technique, with unrealistic expectations.
This generally applies to just about all methodologies. However, conceptual models, of
marketing, business, or anything else, often are useful when they are used to
analyze and evaluate real-life situations, with the goal of stimulating the
thought processes. This can lead to
insights and creative solutions to problems, and innovations. It might not matter if the model you are
using is perfect or not. This is because the goal is to stimulate your mind,
especially towards problem solving, creative thinking and actions. This should of course be coupled with
testing and experimentation to determine if you obtained the true solution.
The idea
is to learn to apply many different conceptual models, techniques, and
methodologies to marketing, business, and everything else in life. This should be done with the goal of
examining situations from different perspectives. The objective is to stimulate your
mind to develop new insights, new solutions, and creative plans that can be
tested out and improved by experimentation and trial and error.
Applying the Object Dynamics
Model of Marketing
A
business can be analyzed and evaluated in terms of its objects, dynamics,
and mathematics, involving calculations or estimations. When this is
done you are looking at the business from a somewhat unusual perspective, which
may suggest new or creative ways of improving the business, and its marketing
strategies. The following list of
questions can help you do this:
Questions
to Evaluate and Improve the Objects That Comprise Your Business and Marketing
What are
the relevant objects in your business? Make a list of all the relevant objects,
especially those that involve problems or objects that can be improved. This includes manufacturing facilities,
sales outlets, management, employees, etc.
Do you
have any problems with any of your relevant objects that comprise your
business? If so, what are the
problems, the relevant objects, and what are all the possible solutions?
Add a
list of your own questions that relate to the objects of your business and
marketing efforts, and then try to answer them.
What are
all the activities that are relevant to your business and marketing
efforts? Make a list of all the
activities including tasks of any kind that are relevant. Are there any problems with any of the
activities? Are there any problems
completing tasks successfully? Is
scheduling and timing adequate for the tasks that relate to your business and
marketing efforts? What are all the
possible ways that you can improve the activities, timing and scheduling that
relate to your business and marketing efforts?
Add a
list of your own questions that relate to the dynamics of your business and
marketing efforts, and try to answer them.
Questions
To Evaluate And Improve The Mathematics Including Estimates And Calculations
That Relate To Your Business And Marketing Efforts.
What are
all the relevant calculations and estimations that relate to your business and
marketing efforts? Make a list of
the calculations and estimations that relate to your business? Are there any ways you can improve the
precision of the calculations, or more importantly the precision and accuracy
of estimations. Are there any
additional calculations or estimations that you can carry out that would
improve your business or marketing efforts?
Add a
list of your own questions that relate to the mathematics, including
calculations and estimations that relate to your business and marketing
efforts, and then try to answer them.
What are
all the weak points, deficiencies and problems in your business or marketing efforts? Make a list of these weak points,
deficiencies and problems. What are
all the possible ways that you can make improvements for the items on your
list? Are there any ways that you
can solve or circumvent any of the problems on your list? Make a list of all the possible
solutions for the weaknesses and problems that relate to your business, and
test the solutions.
What are
all the possible ways that you can improve your business and marketing
efforts? Make a list of all the
possible ways and test out the feasible solutions to find the optimal
approaches that work for your business.
What are
all the possible ways that you might be able to increase the rate of sales and
the rate of profit from your products?
Make a list of all the possible ways and test out the feasible solutions
to find the optimal approaches that work for your business.
Websites on Conceptual Models of
Marketing, and Related Concepts
There
are of course many other conceptual models of marketing besides the one
presented above. The following list
of websites will lead you to some of these models, and other concepts on
business and marketing.
Search phrase with Google: Models on marketing http://www.google.com/search?hl=en&q=Models+on+marketing
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://agb.poly.asu.edu/jmm/from_the_editor.htm
Words on website: Journal of Macromarketing
http://search.sabinet.co.za/images/ejour/psyc/psyc_v26_n2_a3.pdf
Words on website: MENTALMODELSASMODERATING VARIABLE IN 360 DEGREE
COMPETENCYASSESSMENTS
http://www.msi.org/publications/MSI_Review2006f.pdf
Words on website: MARKETING SCIENCE INSTITUTE
http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8R-41NCXWT-J&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=5d19d7e00a8e6dee6b19204797751725
words on website: Models for marketing decisions: Postscriptum
http://www.12manage.com/i_m.html
Words own website: Marketing, Methods Models and Theories
http://marketing.byu.edu/htmlpages/courses/693r/modelsbook/chapter6.html
Words own website: INTRODUCTION TO MARKETING MODELS
http://marketing.byu.edu/htmlpages/courses/693r/modelsbook.html
Words on website: Marketing Models
19à
Click on this hyperlink for a sound file of the following:
PRODUCT LIFE CYCLE AND RELATED
CONCEPTS?
What Does Product Life cycle mean?
Product life cycle is the series of stages a
product goes through overtime in terms of variations in the rate of sales. More precisely, products more or less go
through five stages, starting from the initial design of the product, and
ending with the decline in demand and a reduction or elimination of
profitability. The five stages of
the product life cycle are as follows:
1) The initial engineering of the product, where the rate of sales is
zero. (Some sources might not include this
stage)
2) The introduction of the product into the market, where the rate of
sales is usually relatively low.
3) The growth, in terms of increasing rates of sales
4) Maturity, where the rate of sales reaches a peak and it is
stabilized. This is usually the
most profitable stage in the product lifecycle
5) Decline, Where the Rate of Sales and Profit Diminish
These five stages will be
discussed in detail under the following subheadings.
1) The Initial Engineering of the Product
At this stage the product is
being designed, and then factory facilities, must be set up. A marketing plan, with an outline of
planned advertising and distribution channels should also be involved. All of this involves investment, and at
this stage there of courses no profit (or a negative profit) and the rate of
sales is of course zero. This stage of the product life cycle can be thought of
as the zero point.
Sometimes, during this stage the
manufacturer may obtain publicity for the product, by providing news releases
to the mass media. This often
happens with the development of new medications and technology.
2) The Introduction of the Product into the Market
At this point the rate of sales
is usually relatively low, because the consumers may not be familiar with the
product. There will probably be no profit at this point, because it takes time
and many sales to recover the development costs.
The price of the product might be
relatively high when it is introduced, especially if the manufacture is trying
to recover high research and development costs, such as for a new medication,
or an electronic technology.
However, certain products might be introduced into the market at a
relatively low price. This is especially
the case if there are competing products on the market, and the development
costs are low. This usually applies
to low-priced household item, such as a new brand of soap, toothpaste, or
mouthwash.
When a product is first
introduced a large amount of advertising might be necessary, to persuade the
consumer to try the product. If the
product is a new type of medicine or technology, the advertising might also
inform the consumer about the utility of the product. Sometimes, consumers do not even know
what a new product is used for, or what it does? In this regard, the advertising can educate
the consumer. If the product is
truly unique, the manufacture might be able to obtain free publicity from the
news media.
3) The Growth, in Terms of Increasing Rates of Sales
At the growth stage in the life
cycle of a product the rate of sales is increasing. If the initial development cost for the
product was low, there may also be some profit. However, for most products, this stage
is too early to recover the development costs, and there probably will not be
any true profit, even if the product is in great demand.
4) Maturity, Where the Rate of Sales is Stabilized
The maturity stage in the product
life cycle is a point where the rate of sales is stabilized, and if the product
is successful the rate of sales will be relatively high. By this stage there also might be a high
rate of profit, because the manufacture probably recovered the development
costs.
Advertising at this stage might
be focused on maintaining the high rate of sales. This might involve advertisements that
essentially remind the consumer of the existence and utility of the
product. That is, in the maturity
stage, the consumers are most likely quite familiar with the product, and it
may not be necessary to educate them about the utility of the product.
5) Decline, Where the Rate of Sales and Profit
Diminish
During the decline stage of the
product life cycle the rate of sales is declining, and profitability is
diminishing. This can happen for
many reasons, such as a great deal of competition from other companies, a
reduction in consumer demand as a result of changes in style or culture, and
the introduction of superior products or technology into the marketplace.
With medications the decline
stage can be partly the result of competition, after the patent right period
has expired. However, the
introduction of superior medications into the marketplace is probably the most
significant factor in the decline stage of most medications.
With various types of technology
the decline stage is often the result of the introduction of superior
technology. This is especially the
case with computers and other electronic equipment. However, the decline stage usually is
advantageous to the manufacturers and resellers, if they keep up to date with
the new technologies. The reason
for this is consumers usually one to purchase the new technologies, even if
their old equipment is still functioning well.
With clothing the decline stage
is very often the result of changes in style. However, unlike the above examples, the
decline stage may be intentionally precipitated by clothing designers and
manufacturers. The reason for this
is consumers often want to purchase the new styles, even if their old clothing
is in good condition. Some
consumers may feel that it is absolutely necessary to keep up with the latest
styles, and might feel obligated to buy the newest and most fashionable
clothing.
From the above, it should be
obvious that the decline stage can be advantageous to the manufacture and
resellers, if they can adjust to the changes in consumer demands. This may involve discontinuing the older
products, and manufacturing and selling the newer products. However, there are situations where it
is very difficult or impossible for a manufacture or reseller to adjust to a
changing marketplace. A good
example of this is the horse and buggy, which at one time was an extremely
popular product, and it was a primary means of transporting people, and
products from one point to another.
The automobile has almost totally replaced this product. However, there are still horse and
buggies used for recreational purposes, which can be seen in
Strategies to Deal with the Declining Stages of a Product
There are a number of strategies
to deal with the reduction in sales and profitability of a product in its
declining stages. As was explained
above, for some manufacturers and sellers, this is not a problem. They simply discontinue the old product,
and sell the new products that are in demand.
When the declining stage of a
product is problematic for a company, they can look for additional
markets. This can involve selling
the product to people in other nations throughout the world.
The simplest strategy to deal
with products in their declining stage, is to continue to sell them perhaps at
a lower price, until there is no more profit, then discontinued them. To do this optimally, production costs
should be minimized. This will
involve a reduction in the size of production facilities as sales decline. It may even involve outsourcing the
manufacturing of the product to a small company. When this is done, it is possible to
satisfy the needs of a very small market and still make a profit.
Another strategy is to modify the
old product. This can involve new
packaging and advertising, perhaps with a price reduction. It can also involve adding new features
to the product itself. This simply
involves making improvements in the old product.
Another strategy is to find niche
markets for the product that is in the declining stage. It may not always be feasible for a
company to do this, but when it is it might be quite lucrative. For example, the old products that have
been used for transportation for centuries, have reached their declining stage
from 1895 to 1910. This includes
horses, horse buggies, horseshoes and a number of other products. However, these products are still sold
today to niche markets. The same
situation applies to gas lamps and oil lamps. They reached their declining stage many
years ago, and have been considered obsolete after electricity and electric
light bulbs became widely available.
However, there are still niche markets that use these lamps for
decorative purposes.
Concluding Ideas on the Concept of the Product Life cycle
If we represent the product life
cycle on a graph it will start on zero rise upward reach a maximum height, then
decline, and it will eventually reach the zero point. This curve and the concept of the
product life cycle is an imperfect theoretical model. That is all products do not follow the
same variations in the rate of sales that is represented by the product life
cycle. Some products are introduced
into the market, with a low rate of sales that does not increase over
time. Products of this nature are
generally unprofitable, and are quickly discontinued. There are products that have many
fluctuations in the rate of sales over time. Actually, all products start from a zero
rate of sales, followed by fluctuations in the rate of sales, and the zero
point is reached when the product is discontinued. This is a more general and realistic
concept than the product life cycle.
However, the fluctuations in sales of a product very often do
approximate the concept of the product life cycle.
The durations involved with the
stages of a product life cycle, are generally not predictable. It is always possible of course to
estimate, make educated guesses, but as stated above, the concept of the
product life cycle is and in perfect theoretical model. This is primarily because the rate of
sales is dependent on human behavior.
That is a large number of individuals decide for many reasons to buy or
not to buy a product.
If you want more information on
the product life cycle see the following websites.
Websites on the Product Life cycle
Search phrase with Google: "Product life
cycle" http://www.google.com/search?hl=en&q=%22Product+life+cycle%22
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.quickmba.com/marketing/product/lifecycle/
Words on website: The Product Lifecycle
http://www.netmba.com/marketing/product/lifecycle/
Words on website: The Product Lifecycle
http://www-rohan.sdsu.edu/~renglish/370/notes/chapt11/index.htm
Words on website: PRODUCT LIFE CYCLE
http://encyclopedia.farlex.com/Product+life+cycle+management
Words on website:The stages
through which a product passes from development to being withdrawn from the
market.
http://www.12manage.com/methods_product_life_cycle.html
Words on website: The Product Lifecycle
20à Click on this hyperlink for a sound file
of the following:
Chapter 13 an Evolutionary Theory of Business and
Marketing
IN THIS CHAPTER I TOOK
There appears to be an evolutionary process involved with products and
companies. This process is more or
less similar to the evolutionary process described by Charles Darwin in
relation to the natural environment.
That is, in nature, various factors in the environment, (such as
competition from other living things, or weather conditions) favor certain
living things, and disfavor other living things. This results in the perpetuation of
certain species, as well as certain traits that maximize the chances of
survival and reproduction. As you
read through the following paragraphs, it will become apparent that a very
similar concept applies to business and marketing. However, for business and marketing, I
based the concept on the level of economic
*viability. This of course can very for
a company or a product, as a result of competition, and other factors, and it
usually determines whether a business or a product survives.
I use the word economically viable (or economic viability)
instead of profitable, because some organizations are not in business to make a
profit. Some of these organizations
obtain their funding from the government and/or from contributions. For conventional profit-making
companies, usually viability means profitability. However, there are profit-making
companies that do not make a profit for many years, but they are economically
viable. Companies in this category
may even be growing at a rapid rate, and they may be paying very high salaries
to top management, especially the CEO.
They may also be paying relatively high salaries to many of their
employees.
Evolutionary processes, of
products and companies, are based on a selection process based on economic viability. Economic viability is often determined
by the ability of a company or product to compete with other entities in the
environment. The competitors for a
company or a product can be other companies, other products, political and
social philosophies that may favor or disfavor a company or a product. For example, products that excessively
pollute the environment, such as gas guzzling automobiles, appear to be in
decline, because of social and political concerns about the environment.
Various factors or traits that
relate to companies and products are also selected based on economic viability. (The term traits are used here to
refer to methodologies,
techniques, policies, procedures, managerial philosophies and styles,
manufacturing methods, etc.) For example, a common trait that appears
to be going into decline is various employee benefits. This includes a readiness to lay off
employees during slack periods, as opposed to making an effort to retain them
as long as feasible. Employee
benefits and holding on to employees during short slack periods may have had
some advantages at one point in time, but the environment has changed. Competition appears to have increased in
many industries, and many alternatives to regular employees became available,
such as automated production facilities, manufacturing in less developed
countries with lower wage requirements, and outsourcing. Many services can now also be outsourced
electronically to employees working in less developed countries, for much lower
wages than American employees would demand. This includes technical telephone
support, software development, engineering, and anything that can be
transmitted in the form of data.
This represents a competing trait that is very economically viable for
the companies and consumers, but it is this advantageous for American
workers.
This trait, outsourcing
electronically, has a very strong survival advantage, and it might increase
very significantly, because there are a huge number of services that can be
outsourced electronically at very low cost. The primary competing force against
electronic outsourcing is the political force of the American workers who lose
their jobs, or obtain less money and benefits, as a result of this
practice.
Keep in mind when I am talking
about economic viability I am not talking about the economic viability of the
employees, or the nation as a whole.
I am just talking about economic viability in relation to the survival
and growth of a company, a product, or some type of trait that applies to a
company.
There are many other traits that
have been selected or rejected as a result of their economic viability. One of the traits that have declined is
handwork in relation to manufacturing products. This was replaced by a very viable set of
traits, which are various mass production techniques. Another example is routine mathematical
calculations, such as to calculate grocery receipts or electric bills. This was one time done with pencil and
paper techniques, then calculating machines were used, and now modern computer
technology is employed. All of this
is a result of environmental changes that resulted from scientific and
technological developments. Generally, methods and techniques, including the
equipment needed for the techniques, are selected or rejected, or deselected
after a period of time, based on economic viability.
Summing Up the Concept, and its Potential Utility
From the above, it should be
clear that companies, products, and their traits are selected or rejected, at
various points in time as a result of environmental conditions. Companies or
products that are not economically viable at inadequate level, go into decline,
and may go bankrupt, or simply go out of business.
The primary utility of the
evolutionary theory of business and marketing is insight. That is if you understand the material
presented above, you will have better understanding of the competitive forces
and their impact on various aspects of business and marketing. All of this
suggests that companies should be set up in a way that they can handle the
competitive forces and related environmental changes. Designing (or setting up) every aspect
of a company for competition and flexibility to deal with environmental changes
should provide a very strong survival advantage.
21-Click on this hyperlink for a sound file of the following:
Chapter-14 Marketing, Pricing, and Mathematics, and
Related Concepts
SOFTWARE AND BUSINESS AND
MARKETING CALCULATIONS
To use
the Excel templates in this section and the subsection that follows, you must
have Excel on your computer. To use
any of the templates, left click on hyperlinks that relate to Excel.
In
addition to the Excel templates, there are HTML/JavaScript programs that
perform various types of business calculations, in the books folder. There are hyperlinks to these programs
in various sections throughout this chapter.
Most
people that have computer skills are familiar with Microsoft Excel, especially
in terms of data entry. However,
few people know of the true versatility of this software. With Excel it is possible to create
specialized templates to deal with all types of business calculations. The templates are essentially separate
computer programs that run off Excel.
When templates of this type are carefully designed, they can save a
considerable amount of time and effort when performing various types of
business and marketing calculations.
The type of Excel template I am referring to should not be confused with
the conventional Excel worksheet, which are usually very time consuming when
used for most types of calculations.
Templates that are optimally designed are generally the easiest type of
software to use, but they still might require some effort to learn how to use
them. The ease of operation is seen
when the templates are designed to perform one type of calculation, or several
related mathematical operations from a minimal input of data. Conventional software is more difficult
to use than the templates, because they are usually designed to perform a large
number of diverse jobs. As a
result, they often require hundreds or even thousands of functions, listed on
menus. This can sometimes make
relatively simple tasks, such as calculating a budget, very difficult and
time-consuming.
In this
chapter there are a number of Excel templates, and JavaScript programs that I
created specifically for this book.
Most of these are relatively simple calculating devices, and they do not
demonstrate some of the more complex operations that can be done with this type
of software. Thus, I provided some 48
hyperlinks to various types of Excel templates that I created for other
purposes, before I started to write this book. Some of these templates are very
complex, and they do not all relate to marketing and business, but they are
quite interesting, and they demonstrate the versatility of Excel.
HTML/Javascript Programs can be
Created to Perform Specific Types of Business Calculations
HTML/JavaScript
programs can also be created to perform all types of business calculations, in
a way that is similar to the Excel templates discussed above. However, HTML/JavaScript programs do not
require additional software to operate, as long as you have a web browser that
handles JavaScript, such as Internet Explorer. If you do not have Internet Explorer,
you can download it for free from Microsoft.
Excel
templates have one major advantage over HTML/ JavaScript programs, which is the
production of a document with a permanent record of calculations. Generally, any data that was entered
into HTML/JavaScript program is lost when the program is shut down. It cannot be saved with the conventional
functions. However, it is possible
to take a screenshot of calculations that were performed with HTML/JavaScript
programs. This is done by pressing
the print screen button on the keyboard, and then pasting the image into a word
processor document by press Ctrl and v keys.
The idea
to keep in mind is Excel templates, and HTML/ JavaScript programs that are
properly design, can save a considerable amount of time with all types of
business and marketing calculations.
However,
creating specialized Excel templates or HTML/JavaScript programs is a skill
that is not easily acquired. It
takes a considerable investment in time and effort and practice to create
either of the above.
For many
businesses it may be worthwhile to have specialized Excel templates or other
software made to order, to perform the precise types of calculations needed. However, software that is made to order
for a business, is sometimes more difficult and time-consuming to use then
off-the-shelf software. This tends
to happen when the software is designed to perform many tasks. The easiest and efficient way is to
create one simple program, or template, for each task.
For more
information on software for business and marketing see the following websites,
and the Excel templates and HTML/JavaScript software in the next section of
this book.
Websites on Software for
Marketing and Business
There
are many different types of software that can be used for business
calculations. The software
mentioned above, Excel and JavaScript programs, are just two of many different
possible ways that software and computers can be used for calculations. However, software for business and
marketing is not only for calculations.
There is software to help would all types of business tasks, such as
creating business plans, and storing information. All of this will be seen in the following
websites.
http://business-calculations.suggestsoft.com/
Words on website: Business Calculations
http://www.brothersoft.com/downloads/business-calculator.html
Words on website: Software Search Forbusiness calculator
http://www.tucows.com/preview/152758
Words on website: Business
Calculator Software This calculator has about 165 national currencies.
http://www.downloadjunction.com/product/store/7410/index.html
Words on website: CalcPac RPN
Search phrase with Google: Software
for marketing and business http://www.google.com/search?q=Software+for+marketing+and+business&hl=en&start=10&sa=N
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.brs-inc.com/
Words on website: Intelligent Software for Business Planning
http://www.bplans.com/
Words on website: Business Planning Tools
http://www.bizplans.com/
Words on website: Business Plan Software and Tips
http://www.wampower.com/
Words on website: Email marketing is just the
beginning. Accelerate your online presence with WAM!
http://www.marketingsurvivalkit.com/
http://articles.bplans.com/index.php/business-articles/category/marketing-a-business Words on website: Marketing Tools
http://articles.bplans.com/index.php/business-articles/category/marketing-a-business Words on website: Marketing a Business
http://www.americaint.com/ Words on website: Bulk Email Software Superstore - Marketing your
business with outstanding results!
22à
Click on this hyperlink for a sound file of the following:
THE CONCEPT OF RATE AS IT
APPLIES TO BUSINESS AND MARKETING
PRICING AND RELATED CONCEPTS
Introduction: Factors Involved With Pricing
There are many concepts that
relate to pricing. Many of these
concepts are partly mathematical, because price represents a mathematical
quantity. This includes, fixed costs
(such as rent or mortgage, salaries, insurance) manufacturing or wholesale
costs, time, rate of sales, etc.
Some of the questions that involve pricing include the following: How much should a manufacture,
wholesaler, or retailer charge for a product? How many items do we have to manufacture
and sell each month to break even?
Is it possible to make a profit on this product, if we manufacture and
sell X units, for Y dollars, each week?
I will explain the factors that
relate to pricing in the following paragraphs, and I will show you how to
answer the questions that arise in relation to pricing with mathematical
calculations.
Generally, the manufacture
figures the total costs involved with production of a product. This can include research and
development costs, financial risks related to liability, rent or mortgage,
insurance, salaries, the cost of raw materials, energy costs related to
production, advertising, taxes, etc.
After considering the above, the manufacture, generally will price the
product so there will eventually be a profit. The wholesaler and retailer do something
very similar when they purchase and sell products. Exactly how the pricing is determined
can involve various mathematical formulas, such as those explained in the
following paragraphs. However, a
small business owner might simply use estimates, and intuition, and perhaps some
simple arithmetic, to determine pricing, as opposed to using mathematical
formulas.
This simple formula (Selling
Price equals Profit plus Costs per unit) does not really need
an explanation, but I will present a short example. A retailer bought key chains, for $1
each from a wholesaler. She wants
to make $0.50 profit on each key chain.
Then the calculations would be as follows:
Profit= $0.50
Costs per unit= $1
Selling Price= $0.50 + $1
Selling Price=$1.50
If you want to try an interactive
version of the above formula that will actually calculate, if you insert your
own numbers, click on the following link.
To return to this page, after you completed your calculations, click on
the left arrow key 
on the upper, left portion of your
screen.
If you have Excel in your computer left
clicks, on these words.
The Selling Price Minus the Manufacturing, or
Wholesale Costs, Equals the Profit.
With the previous formula we
decided on the amount of profit we wanted to make on each item, and then we
calculated the selling price. With
the formula in this subsection, we are assuming a selling price, and costs per
unit and calculating the profit.
The formula to do this is essentially an algebraic variation of the
previous formula, and it is as follows:
(Profit equals Selling Price minus Costs per unit)
The following example will show
how this formula can be used.
Selling Price= $2
Costs per unit= $1
Profit =$2-$1
Profit =$1
If you want to try an interactive version of the above formula that will
actually calculate, if you insert your own numbers, click on the following
link. To return to this page, after
you completed your calculations, click on the left arrow key on the upper, left portion of your
screen.
If
you have, Excel in your computer left click on these words.
Markups Based on the Percentage of Manufacturing or Wholesale Costs
Often, manufactures, wholesalers
and retailers determine the amount of profit they want to make in terms of a
markup based on a percentage of the manufacturing or wholesale cost. The following formula can be used to
calculate a markup based on percentage.
Selling
price
equals, Percent plus One multiplied by the Costs
per unit.
If we buy a box of hats from a wholesaler,
and it costs $1 for each hat, and we want a markup of 100%, we can calculate
the results as follows.
Percent=100%
Costs per unit=$1 (This is the wholesale price of each hat.)
Selling Price=(100%+1)($1)
100%=100/100=1
Selling Price=(1+1)($1)
Selling Price=$2
To clarify further, I will present another example with this formula:
Selling Price=(Percent+1)(Costs per unit)
Let us assume for this example we manufacture computers, for a cost of
$1000 for each device, and we want a 10% markup. The price is calculated as follows:
Percent=10%
Costs per unit=$1000 (This is the manufacturing costs for each computer.)
The calculations are as follows
Selling Price=(10%+1)($1000)
10%=10/100=0.1
Selling Price=(0.1+1)($1000)
Selling Price=(1.1)($1000)
Selling Price=$1100
If you want to try an interactive version of the above formula that will
actually calculate, if you insert your own numbers, click on the following
link. To return to this page, after
you completed your calculations, click on the left arrow key on the upper, left portion of your
screen.
This is an Excel hyperlink for
There are a Number of Factors that Influence the Level of Markup
It is important to understand
that some products have a relatively small markup, and others have moderate to
high markups. A number of factors
influence the level of markup. The
type of product is one of these factors.
For example, markups for groceries at the retail level can range from 5
to 20%. This is a relatively small
markup, which is probably because groceries are relatively easy to sell,
(inexpensive to sell). Groceries
are necessities that are always in high demand. Many items actually have a markup from
40 to 60%. The degree of
difficulty, in terms of expense, in selling a product, can influence the
markup. For example, if much
advertising is needed and skilled sales personnel are required, and the
wholesale price of the product is relatively low, a high markup would be
necessary to make a profit.
Businesses with high fixed costs,
such as rent, electric, employee salaries, and insurance may have a higher
markup on their products, to cover these fixed expenses. This is seen in certain parts of
The type of store and its
customers can also influence the markup.
For example, a fancy store catering to very wealthy people might have a
higher markup for the products it sells.
However, a bargain-basement store, catering to poor and working-class
people, might have a lower markup on its products. The fancy store will probably have a
much lower rate of sales than the bargain-basement store. If the bargain-basement store has a 10%
markup on its products it will probably do well, because of its high rate of
sales. The fancy store will
probably have a much lower rate of sales than the bargain-basement store, and
to cover its expenses it might have to have a 50% markup on its products. The higher prices will probably not
bother their customers because they are wealthy. However, if the
bargain-basement store raised its markup to 50% they would probably lose most
of their customers.
One of the most important
considerations in pricing is how much does the product cost to manufacture, or
purchase at wholesale prices. This
is a variable cost, because it varies with the number of items that are
manufactured or purchased. For
example, if a department store makes a wholesale purchase of hats, the prices
paid will very with the number of hats ordered. In addition to the variable costs, there
are expenditures that do not vary with the number of items manufactured or purchased. These are fixed costs, and they include
salaries, rent or mortgage payments, and insurance, or any expense that does NOT change as a result of the number
of items manufactured.
A Note on Fixed Cost and Variable Costs, and Related Concepts
The concept of fixed cost and
variable cost is somewhat oversimplified.
For example, salaries are generally considered a fixed cost, because the
assumption is they do not very with the number of units that are manufactured
or purchased. However, if very
large quantities of a product are manufactured, additional employees might have
to be hired. Additional space may
have to be rented for the employees and equipment needed to produce the high
quantities of the product. This
will probably require additional insurance also.
Just the opposite of the above is
also true. That is, when production
or sales are very low, most companies reduce the costs by laying-off
workers. If the reduction in demand
for a product is permanent or very prolonged, reducing the size of the
manufacturing facility may also be feasible, especially if the space is
rented.
The important idea to understand,
is fixed costs are not always fixed, but they generally do not very when the
production rate or rate of sales are within limits. For example, the profitable and feasible
limits of a manufacturing facility might be between 10,000 and 20,000 units per
month. This means that if the
production and sales rate reaches less than 10,000 units per month, management
may have to reduce the fixed costs to maintain profitability. However, if the production and sales
rate exceeds 20,000 units a month, additional employees and manufacturing
facilities are required, which will raise the fixed costs.
Companies
that are set up to easily very there fixed costs to fit the variations in
demand for their products have a very significant functional advantage. That is, if a company can quickly and
efficiently lower its fixed costs, when the rate of sales are low, will
probably be able to maintain profitability. A company that cannot make such
adjustments efficiently and quickly will probably lose money when the rate of
sales drops to low levels. The same
idea applies for periodic increases in the rates of sales. A flexible company can quickly increase
its production capacity to meet the demand. Companies that are less flexible may not
be able to meet a large increase in demand, especially if it is temporary.
All of the
above boils down to the concept of flexibility for a successful business. The idea here is to design and set up a
business, production facilities, management and everything else so it is
flexible, to deal with anticipated or unanticipated variations in demand for
products. For example, a company
that is faced with periodic increases in demand can outsource the additional
work when necessary. The amount of
work outsourced can be increased or decreased, as needed, which represents a
flexible design. An inflexible
design would consist of a company that invests money in new facilities to deal
with the temporary increases in demand.
This design is inflexible because the fixed costs cannot be easily
adjusted when demand declines, and it represents a risk of financial losses.
Calculating the Breakeven Quantity and Determining an Appropriate
Price for a Product
It is necessary to consider both
variable costs, and fixed costs when assessing how much to charge for a
product. Generally, there is no
profit until the fixed costs are covered with the sales of the product. That is, a certain number of units of
the product must be sold to pay the rent, salaries, insurance, just to
breakeven. After, paying the fixed
expenses, and reaching the break even point, profits can be made.
The formula to calculate the
break even quantity in words is:
Break even quantity equals the total
fixed costs, divided by the selling price minus the variable
costs per unit.
The formula is presented below in a mathematical format.
The following example will
clarify how this formula can be used:
We have a total fixed cost of $20,000 (such as for rent, salaries,
insurance)
We have a variable cost per unit of $1.00 (This is the amount of
money to manufacture a single item.)
Our selling price for each unit (one item) is $2
Now the question is how many units of the product we have to manufacture
and sell just too break even? This
question is answered with the formula, which indicates that we must sell 20,000
units, if we what to breakeven.
The same formula can of course
also be used by a retailer. If we
use the above example, we could assume that a retailer has a fixed expense of
$20,000, and he pays $1 wholesale for a product. He sells each of these items for $2, and
the calculations are of course the same as above. Keep in mind that the above formula only
indicates the point where there is no loss and no gain from the product.
If you want to try an interactive
version of the above formula that will actually calculate, if you insert your
own numbers, click on the following link. To return to this page, after you
completed your calculations, click on the left arrow key on the upper, left portion of your
screen.
If you have, Excel in your computer left
click on these words.
A Modification of the Breakeven Formula, to Calculate a Profit Greater
than Zero
The breakeven formula, presented
above is used to calculate the quantity of a product that needs to be sold to
breakeven, or to obtain a zero profit.
If we modify the breakeven formula, we can obtain a formula that
calculates the quantity of a product, needed to make a profit that is greater
than zero. Such a formula is very easily derived. In words the formula is:
The number of units, needed to make a desired level
of profit, is equal to the total fixed costs, plus the desired
profit
divided by the selling price minus the variable
costs per unit. This is presented in a
mathematical format below.
I will call this formula the break-even-plus-profit
formula. To demonstrate this
formula, I will use the same example as above, except in this case, let us
assume I want to make a profit of $10,000.
Total Fixed Cost= $20,000
Desired Profit= $10,000
Selling Price = $2
Variable Cost per unit=$1
Then the calculation is as
follows:
This means that we would have to manufacture and sell 30,000 units to
make a $10,000 profit.
If you want to try an interactive
version of the above formula that will actually calculate, if you insert your
own numbers, click on the following link.
To return to this page, after you completed your calculations, click on
the left arrow key on the upper, left portion of your
screen.
If you have, Excel in your computer left
click on these words.
The above concepts and examples
with the breakeven formula, and the break-even-plus-profit
formula, are
somewhat simplified. That is, when
you are dealing with fixed costs, such as rent, salaries, and insurance, there
is another factor involved, which is time.
That is rent, salaries, and insurance, must be paid at regular time
intervals, such as on a monthly basis.
Thus, with the above examples, (presented in the previous two
subheadings), let us assume that the fixed cost is $20,000 per
month,
instead of $20,000. If we sold the
required quantity of the product in one month the results we calculated would
be correct. However, if we needed
two months, to sell the product, are fixed cost would be $40,000, and the
results we calculated would be incorrect.
Thus, we can create a simple
formula to calculate fixed cost, in relation to time, which is fixed costs per
unit of time, multiplied by time to complete the sales of the product. This can be represented as
Fixed cost= ($ per unit of
time)(Time) The parentheses in this formula means multiply. For example, if the fixed cost is
$10,000 per month, and it takes us two months to obtain and sell the product in
sufficient quantity, to meet our objectives, such as to break even, then the
fixed costs would be $10,000 per month multiplied by two month, which is a
total fixed cost of $20,000.
All of the above is quite
important because the number of units sold per month may not cover the monthly
fixed costs. Thus, a company
could sell a very large number of units over time, and take in a considerable
amount of money, and still fail to break even, because the rate of expenses
exceeds the rate of money obtained from sales. This problem can sometimes be solved, by
figuring out ways of increasing the rate of production and/or the rate of
sales. Raising the price of the
product can also solve the problem.
This can be feasible, if there is no competition, or if the current
price of the product is substantially below the prices of the competition. When this is not the case, the
alternatives are to try to reduce production costs, such as with better
technology, and more efficient management.
Often, the best solution to a problem is to apply a little bit of all
the options. If this is not
feasible either, the best option might be to discontinue the product.
Thus, more realistic formulas
than the two, presented above, would be based on the rate of fixed costs,
and the rate of sales needed to break even. However, essentially the formulas would
be the same, except you must enter the rate of the total fixed costs, and you
will obtain the required rate of sales to breakeven.
The required rate of sales is equal to the rate of
fixed costs, divided by the selling price minus the variable
costs per unit.
The idea to keep in mind is it is
necessary to think in terms of the rate of fixed costs, and the rate
of required sales. This is
demonstrated in the following example:
Rate of Fixed Costs = $10,000 per
month
Variable Costs per unit= $1
Now the question is: What is the required rate of sales to break even? The answer is obtained from the
following formula, with the following calculations.
This calculation indicates that it would be necessary to sell the product
at a rate of 10,000 units per month to breakeven.
The second formula that was shown
above, the break-even-plus-profit formula can also be modified in terms of
rate, as follows:
The required rate of sales is equal to the rate of
fixed costs plus the desired rate of profit, divided by the selling
price minus
the variable costs per unit.
Note that the formula contains Rate
of Fixed Costs, Desired Rate of Profit, and Required Rate of
Sales. The following example
will present the utility of this concept.
Rate of Fixed Costs = $10,000 per
month
Desired Rate of Profit = $10,000
per month
Variable Costs per unit= $1
Selling Price= $2
Required Rate of Sales
Now, the question we want to
answer is: how many units do we have
to sell to earn $10,000 per month? The calculations are shown below.
Thus, to earn $10,000 per month,
we would have to sell 20,000 units per month. This can be restated as to maintain a
rate of profit of $10,000 per month it is necessary to sell 20,000 units per
month, if the variable cost is $1.00 per unit, and the selling price is $2.00
per unit.
If you want to try an interactive
version of the above formulas that will actually calculate, if you insert your
own numbers, click on the following links.
To return to this page, after you completed your calculations, click on
the left arrow key 
on the upper, left portion of your
screen.
This is an Excel hyperlink for
This is an Excel hyperlink for
THE CONCEPT OF RATE, AS IT
APPLIES TO BUSINESS AND MARKETING
Introduction
Rate is a very important concept
that is used in the physical sciences, especially in physics. In science, the concept of rate of
change of various factors is very important. Probably one of the best ways to
understand the concept of rate is two think of velocity. The velocity of an automobile represents
the rate of change in distance from a starting point. There is also the concept of
acceleration, which is the rate of change of velocity, or more generally, the
rate of change of a rate. That is
acceleration is an increase in a rate.
A decrease in rate is negative acceleration, or deceleration. These concepts can be applied to
business and marketing in a way that is theoretical as well as extremely
practical.
Various
mathematical formulas that involve rate can sometimes predict the probability
of business, marketing and financial problems. This type of mathematical warning can
sometimes prevent problems before they happen. The same concept than formulas can
sometimes also predict the probability of successful business and marketing
efforts. All of the above will become
apparent as you read the following paragraphs.
The Rate of Speed of
Manufacturing a Product
This is
essentially the number of units of a product that are manufactured divided by
time. See the following
formula.
This
formula can be used to calculate the rate production, by measuring the number
of units that were produced in a given interval of time. The calculated results with this formula
is number of units per time, such as 100 units per hour, or 800 units per day,
or 4000 units per week. Once you
have determined the rate of production, you can determine how many units will
be produced in a day, week, month, year, etc. This is done with the following
formula.
The Rate of Transporting the
Product to the Selling Outlets
This is
the number of units of the product that are shipped to the selling outlets,
divided by time. Calculations of
this type can answer the question: How long does it take to transport a
specific number of units of the product to the selling outlets. For example, calculated results can be
10,000 units per month, or 2500 units per week. See the following formula.
Once you
know the rate of transported units you can calculate how many units will be
transported in a day, a week, month or year, etc. This is done with the following formula.
Rate of
sales, or how many units of the product are sold in a given length of time, can
be an important calculation. This
calculation consists of the number of sales, divided by the time it took to
complete the sales. See the
following formula.
Calculations
of this type can indicate which salespeople or selling outlets have a higher
rate of sales and which ones have low rates of sales. This formula can also be used to
calculate the rate of sales of a product.
This can involve the entire market for the product, or it can involve
specific market segments.
Calculations of this type might indicate very low rates of sales for
some market segments, and high rates of sales for other segments. This can suggest a more focused
marketing plan, or perhaps advertising focused on raising the rate of sales in
low market segments. Some market
segments involve losses if transportation is expensive, and the rate of sales
is low.
The
algebraic conversion of the formula to the following, is also quite useful
This
formula can be used to predict the number of units that must be manufactured,
or purchased and stock. For
example, if your company sells computers at the average rate of 10 per week,
you may want to store enough for four weeks, or 40 computers. This may be especially the case if there
are delays in deliveries from manufacturing facilities, or delivery times are
uncertain.
The rate of profit is the amount
of profit divided by time. See the
following formula.
For example, if a company earned
$100,000 of profit in one year, its profit would be $100,000 per year, or
$8333.33 per month, or $273.97 per day.
It is
important to understand the difference between total profit, and rate of
profit. For an example let us
assume a small grocery store earned $50,000 in profit. Question: is the store doing well or is
it of failing business? The answer
to this question can be provided by calculating the rate of profit. Simply put, the question is how long did
it take for the grocery store to make $50,000 in profit. If it took 10 years to make the $50,000,
the rate of profit would be $5,000 per year. This would suggest a failing
business. However, if the $50,000
in profit was earned in 10 months, then the rate of profit would be $5,000 per
month. This is not bad for a small
grocery store. However, if the
$50,000 was earned in two month, the rate of profit would be $25,000 per
month.
The rate
of profit can even be calculated on an hourly basis. This may sound unusual at first glance,
but it is a common practice. That
is when wages are paid on an hourly basis, to an employee, such as $25 per hour
it represents the rate of profit for the employee.
It is
important not to confuse the rate of sales with the rate of profit. A high rate of sales does not
necessarily imply a high rate of profit, because there may be little or no
profit made on each sales. When
each item that is sold provides a good level of profit, a high rate of sales
will indicate a high rate of profit.
The rate of loss is the amount
of money lost divided by time, as expressed in this formula.
Sometimes
a product or a business loses money for a period of time, or continuously until
it leads to bankruptcy. In situations of this type, calculating the rate of
loss can be helpful in determining its significance and the time that is
available to solve the problem. For
an example, let us assume there is a business that has $100,000 in the bank,
and it is losing $10,000 per month on the average. This would suggest that the business
owner might have 10 months to solve the problem, more time if the problem is
partly alleviated and less time if it gets worse.
There
are situations where the goal of the organization does not involve a
profit. For example, social service
organizations of the government, may give away money to needy families. With these agencies, a high rate of
loss, as calculated with the above formula, might imply success, if the money
was properly distributed to qualified families and individuals.
Rate of Profit in Terms of
Percentage of Investment or the Rate of Return on Investment
The best
way to measure rate of profit in many situations, is in terms of the percentage
of investment, as presented in the following formula.
This is essentially the rate of
return on an investment. This is
similar to the interest received on an investment, such as money in a savings
account, and interest paid on a loan, but it is NOT compounded periodically. That is in a bank account you earn money
on the interest (or profit) and to calculate the return it is necessary to use
the compound interest formula. To prevent confusion with the compound interest
formula, I am calling this concept for this discussion, % rate of profit on
investment.
To use the above formula, and
calculate the % rate of profit on investment it is first necessary to
calculate the rate of profit, with the following formula.
That is this calculation can be
done in two steps. First the profit
is divided by time, such as in days, weeks, or months to obtain the rate of
profit. After this, the rate of
profit is divided by the investment, and then multiplied by 100% to produce a
percentage. For example, if a product
produced $1000 of profit, in one year, and it involved a $20,000 investment,
the profit would be 20%, of the investment per year. In terms of months this would be a rate
of return 1.667% per month. With
this example, the profit of $20,000 is very good. However, if the investment was
$10,000,000, with the $20,000 profit in one year, the profit would be only 0.2%
of the investment, per year. This
is not an adequate rate of return on a $10,000,000 investment. Putting the $10,000,000 in the bank would
yield a much greater rate of return.
The
above formula can also be applied to products. This would indicate which products are
truly the most profitable.
The
above formula can be modified so it calculates the percentage rate of profit on
investment in a single operation.
This simply involves some algebraic substitution with the rate of profit
formula, as presented below.
Substituted for rate of profit,
which results in the following
The above of course simplifies to the following formula.
Calculating Profit and Rates of
Profit for a New Business
Even the
smallest businesses usually cost over $100,000 to set up. For this reason, a new business may not
earn any true prophet for many years.
The question here is: How do you assess if such a businesses successful
or not? The answer is calculate the
profit, and rate of profit, without calculating the investment in the
business. When this is done, all
the operating expenses including debt repayment, costs of new products,
employee salaries, electric bills, and every other expense is calculated on a
monthly basis. This amount of money
(the total operating expenses) is subtracted from the total amount of money
that the business grossed in a month.
This concept is represented in the following formula.
Profit
for a month, without considering total investment in the business, is equal to
the gross receipts for a month, minus the total operating expenses for a
month. This can be represented in
mathematical notation as follows:
Any convenient time interval can
be used with this formula, such as a weak, a year, and even a day. I used a month because bills are often
paid monthly.
The
profit calculated with this formula can be used with the other formulas
discussed above, such as to calculate the rate of profit.
Total
profit and the rate of profit can be negative from a mathematical perspective,
when the operating expenses for the business including debt repayments, is
greater than the money that was taken in.
In general, if the numbers are negative or very low, it indicates a
failing business.
However,
it sometimes takes quite a while for a new business to build up an adequate
customer base, and before this is achieved, the rate of profit might be
negative or very low. (A negative
rate of profit is the same as the rate of loss.) If the rate of profit is increasing each
month, or the rate of losses is getting significantly lower each month, as a
result of obtaining new customers, the business might be headed for
success. However, if the rate of
profit is remaining the same, or declining the business is probably headed for
failure.
23à Click on this hyperlink for a sound file
of the following:
Chapter 15 Factors that Have a Tendency to
Influence Pricing
Introduction
There are many factors that
influence the price of a product.
Some of these factors were already discussed in different sections of
this book. In this chapter, I am
going to discuss some of the most significant and/or interesting factors that
can influence the price of a product.
Initial investments for designing
and engineering products and production facilities are usually quite
expensive. Research and development
is also required for innovative technologies and new medications. The amount of initial investment can
very greatly with the product and the business involved. This can range from hundreds of millions
especially for large companies, with new technologies and medications, to zero
for a tiny retailer that accepts a few new products on consignment.
In general, the initial
investment must be recovered for a company to make a true profit. The initial investment is ultimately
passed on to the consumer with most profit-making organizations. In general, the higher the initial
investment in a product, the higher the price will be.
One of the best examples where
initial investment is very high is in the pharmaceutical industry. It often requires hundreds of millions
to develop a new medication, and put it into production. Many attempts to
create new medications fail, and result in financial losses, but some new
scientific data might be gained.
All of this money must be recovered from the sale of successful
medications. As a result, new
prescription medications are often very expensive. Drug companies try to recoup their
investment in research and development, and make a profit before their patent
rights to the medication expires.
After the patent rights expire competitors can make the same medication,
called a generic drug. This competition
usually forces the company that originally created the drug to lower its
prices. Keep in mind that the
competitors that are making the generic drugs do not have to recover research
and development costs, which allows for lower prices.
For many medications, the
production costs per unit, (to make each pill) is relatively low, compared to
the research and development costs.
Another example where the initial
investment is relatively high, compared to production costs, is in the software
industry. A software product that
costs a few pennies or less to manufacture and distribute through the Internet,
sells for $25 to as high as several hundred dollars. The expense for creating the software
can be very substantial, which usually justifies the high price for
software. The actual production of
software-based products, distributed through the Internet, takes place when a
consumer clicks on a download icon on a website. This produces a digital recording of the
software on the consumer’s computer.
Even when software is sold in
retail stores on a CD format, the production costs are very low, but much
higher than distribution through the Internet.
Examples where initial investment
are usually moderate can be seen with the production of inexpensive items, such
as simple products made of plastic, metal, or glass. Products in this category generally do
not require research and development.
Initial investments, are needed to design the product, to create molding
apparatus, and to set up production facilities.
Examples where initial
investments are usually quite low are found in retail stores, when they add new
products to their inventory.
Usually, there is only a unit cost, and no other initial investment, as
was the case with the previous examples.
How Do You Calculate The Breakeven Quantity, When
There Are High Initial Investments, Such As For Research And Development?
All of the above raises the
question: How do you calculate the break even quantity, when initial
investments are a significant expense?
That is, do you consider initial investments, such as research and
development, fixed costs or variable costs? There are two ways of dealing with this
problem from a mathematical perspective, which will be discussed in the
following paragraphs, but I will first review the breakeven formula, which is
presented below.
The formula to calculate the break even quantity in words is: Break
even quantity equals the total fixed costs, divided by the selling
price minus
the variable costs per unit. In a mathematical format it is:
Initial investments include
research and development, designing, engineering and testing the product, as
well as expenditures to set up manufacturing facilities.
For the purposes of breakeven
calculations, initial investments can be considered as fixed costs, similar to
rent, insurance, and salaries. This
makes sense when the initial investment required a bank loan. That is the monthly repayments to the
bank, is similar to the monthly payments for rent, insurance and salaries. Keep in mind, just like rent, insurance,
and salaries, the bank loan for the initial investment, remains the same
regardless of the number of units produced. However, unlike rent, insurance, and
salaries, the bank loan for initial investments eventually gets paid off.
When the initial investment to
produce a product was not obtained from a loan of any kind, it can still be
calculated as a fixed cost. This
can involve treating the initial investment as if it was a loan, at least from
a mathematical perspective. This
involves dividing the initial investment into segments, and treating the
segments as if they were monthly payments to a bank.
Another alternative to calculate
the breakeven point, when initial investments are significant, is to
estimate, or perhaps guesstimate, the number of units that will be manufactured
and sold. This can be based on the
number of units that you expect to manufacture and sell in one year, two years,
three years, or any other time limit, including the expected lifetime of the product. After you have obtained your best
estimate, divide it by the initial investment, which will equal the initial
investment cost per unit. For
example, if the initial investment was $100,000, and you expect to produce and
sell 100,000 units, you will divide the $100,000 by 100,000 units, which will
equal an initial investment cost per unit of $1. With this method, the initial investment
per unit is treated as if it is a variable cost. For example, let us assume that the
variable cost is $1 per unit, and the initial investment cost per unit is also
$1. Then for the purposes of the
breakeven calculations, the veritable costs would be $2.
The Quality of the Product and Pricing
It is perhaps common sense that
high-quality products can be sold for a higher price. However, this is not always true. The important factor is far as
pricing is concerned is the perception of the consumers. If the consumers do not perceive the
high quality of a product, they probably will not be willing to pay a higher
price for it. This is especially
the case if there are alternative products that are readily available at lower
prices.
The important concept to
understand is the perception of the consumer is generally a primary
factor that affects the sales of the product. If the consumers perceive quality in a
product they will probably be willing to pay a higher price for it. This may even be the case even if the
product was in reality no better than competing products.
The ideal is to create high
quality products, and inform the consumers of the superior quality of the
product, with advertising, news media publicity when feasible, on product
packaging, and with face-to-face salesmanship.
The Brand-Name Associated With the Product and Pricing
Consumers can perceive products
with certain well-known brand names as superior to products with unfamiliar
brand names. Very often, successful
companies with well-known brand names have earned the trust of the consumer by
providing better quality products, backed up with better warranties and
service. Some of these companies
might charge more for their product as a result of the brand-name, but this is
certainly not always the case.
In the clothing industry,
products with well-known brand names usually sell for higher prices, then
similar products that do not have famous brand names. Extreme examples in this regard can be
seen with blue jeans. A used pair
of torn blue jeans, with a famous brand name, is considered fashionable by
certain market segments. This
allows the manufacture to sell the product at relatively high prices.
However, in the electronic
industry, I have not noticed much if any difference in pricing as a result of
well-known brand names. When there is a difference it is usually quite small,
and it may be the result of superior quality, and/or superior service. This might be the result of the high
degree of competition, and electronic devices might be assessed by the consumer
in terms of functionality and performance.
Clothing on the other hand probably has a very significant psychological
and social component associated with it.
If the consumer, and his or her friends, associates success and fame
with a pair of jeans or sneakers, with the well-known brand name, they may be
willing to pay more for the products.
From, a practical perspective, this perhaps can sometimes be quite
sensible, if the consumer gains prestige from friends and colleagues, as a
result of the purchase of a brand-name product. This is not only seen with clothing, it
is apparent with luxury automobiles, luxury restaurants, and many other
products.
From the point of view of a
business owner, or a marketing manager, establishing positive associations in
the minds of consumers is very beneficial.
This involves establishing a positive reputation of a company, based on
the quality of products and services.
This will most likely result in a higher level of sales, and possibly
permit a higher level of pricing for products.
The Location, or Market that a Product is Sold in Can Influence the
Price that Consumers Will Pay
Where a
product is sold can be very important as far as pricing is concerned. Extreme examples can be seen in various
sections of
The
important idea to keep in mind is certain desirable locations, will allow the
seller to charge higher prices.
However, the profits may or may not be higher as a result of the
desirable location. Usually the
desirable locations involved greater levels of expense for rent, mortgage, real
estate taxes, etc. The salaries
paid to employees are also sometimes considerably higher as a result of
location.
Sometimes selling products in
less desirable locations, where expenses are relatively low, can result in
higher profits. This is especially
the case if the product is sold in large quantity, or sold through the mail or
Internet.
The market,
or market segment, that a product is sold in does not necessarily imply a
physical location. For example, a
beauty salon can provide its services for wealthy individuals, or for
working-class people. If the beauty
salon sells its services to wealthy people it will probably have to have an
expensive looking décor, better quality service, and employees that
appear dignified with upper class mannerisms. All of this would allow the beauty salon
to price its services at relatively high levels. However, this does not guarantee a
higher profit, because marketing to wealthy consumers may cost more money. With this example, of the beauty salon,
it is apparent that the fancy décor, and the employees needed to produce
a higher level of service, would cost more money. If the beauty salon markets its services
for the working-class consumer, its expenses maybe substantially lower, but its
prices would have to be low enough for the working-class consumers. This may or may not be more profitable,
then marketing to wealthy people.
(The ideas presented here are
similar to the above, but they are also somewhat different as well.) If a product is sold in a fancy store,
with luxurious decorations, it can probably be sold for a higher price, than if
it was sold in an unattractive bargain-basement type store, even if the
locations of the stores are identical.
This is especially the case if the luxury store is selling many
expensive high quality items, meant to attract the interest of wealthy people. However, even if this is not the case,
the luxury looking store can still probably obtain somewhat higher prices from
working-class and middle-class consumers.
This idea can be stated from the
opposite perspective. That is, if
the same product were offered for sale in unattractive bargain-basement type
store, (as opposed to a luxurious store) the price would probably have to be
much lower to interest the customers.
Keep in mind, customers that frequent this type of retail outlet are
probably looking for bargains, and they might not be able to afford higher
prices.
A more extreme hypothetical
example might provide some additional insight into this general principle. If a street vendor attempted to sell an
expensive diamond ring on the street, he would probably have great difficulty
selling it. The vendor would probably
have to sell the diamond ring at a price much lower than its true value. However, if the same diamond ring was
sold in a fancy jewelry store that specialized in diamond rings, in the same
location as the street vendor, the selling price of the ring could be much
higher. There are rational and
emotional factors in the minds of consumers that relate to the facility that a
product is sold in. To illustrate
this, I will continue with the above hypothetical example, with the diamond
ring, and a street vendor. Most
likely, people dealing with the street vendor would be unsure of the true value
of the diamond ring. They may think
that the ring contains a piece of polished glass instead of the true
diamond. They may be unsure of the
honesty of the street vendor, and they may think that the ring was obtained by
theft. They may feel that dealing
with a street vendor selling a diamond ring, is a very risky gamble. All of this might force the street
vendor to offer the diamond at a very low price. With this hypothetical example, the
concerns of people dealing with the street vendor, is certainly valid. It probably is a risky gamble purchasing
any very expensive item from a street vendor.
Sometimes, the physical facility
that a product is sold in is important only for emotional reasons. For example, people will probably be
willing to pay more for food in a fancy restaurant, with dignified and polite
waiters, because it makes them feel good.
This can involve feelings of importance and wealth. Facilities of this type, especially
fancy restaurants, can also have a positive social impact, on guests that the
consumer takes to the facility.
This can allow a luxurious restaurant to charge higher prices for its
food, then a simple cafeteria, even if the food is not superior to the meals
served at the cafeteria.
The Price the Consumer is willing to Pay for a Product Can be
Influenced by the Packaging
The type of packaging used for a
product can convey the value of the product, in the eyes of the consumer. That is packaging can influence
perception. Certain types of
expensive looking packaging, will suggest that the product is an expensive
luxury item. Simple, unattractive,
but functional, packaging might suggest that the product is an economy
item. I have seen a good example of
this in the supermarket, with brown rice.
One brand was in a simple cellophane bag, and it was relatively
inexpensive. Another brand was in a
fancy plastic jar, and it was selling for more than three or four times the
price of the rice in the cellophane bag.
There did not appear to be any difference between the products, except
for the packaging.
Luxurious or fancy packaging is
probably most significant for relatively small products that are displayed on
store shelves in packaging. Items
such as electronics and furniture are not displayed in packaging, and the only
important factor of packaging is functionality. This generally involves plain looking or
even unattractive packaging that provides a good level of protection for the
product during shipping.
The Quantity and Quality of the Advertising Can Affect the Pricing of
a Product
Advertising can inform many
consumers of the existence of a product.
It can also inform the consumers about the utility and features of a
product, and where it can be purchased.
Advertising can influence the perceptions of the consumers, in terms of
the quality and desirability of a product. Thus, when a product is successfully
advertised it will increase the demand for the product. This, in theory at least, this can
sometimes give the manufacturer the option of raising prices. Sometimes the manufacture may in fact
have to sell products at higher prices to cover the costs of advertising.
However, sometimes advertising a
product allows the manufacture to reduce prices. The reason for this is larger sales
volumes, can reduces the manufactures production costs. This is especially the case, if the
sales volumes are high enough to justify the investment in very large scale
mass production techniques.
With a lower expenditures on
advertising, or with no advertising at all sales of the product will probably
be substantially lower than if it was advertised heavily. In such a case, the manufacturer or
reseller may be able to attract consumers to the product, by selling it at a
low price. This can sometimes be
quite feasible, when there is little or no expense for advertising. Little or no advertising might work well
with products that are already well known, or products that mimic well-known
brands. For example, the store
brands, sold in large chain stores, for mouthwash, toothpaste, and laundry
detergent may be sold at lower prices than competing well known brands. These lower prices might be feasible
partly because of lower expenditures on advertising, when compared to the
well-known brand.
Actually, store brands may gain
popularity when their competitors advertise their products. For example, a consumer may be convinced
by advertisements that Listerine is the best mouthwash. However, when the consumer goes to the
supermarket, she sees the store brand alongside Listerine, with the same color
and ingredients as Listerine, but with a lower price. This may result in the purchase of the
store brand, instead of the Listerine that was heavily advertised.
Competition Can Influence Pricing of a Product
Competition results when more
than one company is producing a similar product. For example, there are many companies
that manufacture computers, which results in competition to obtain customers. Competition for customers can force a
company to sell its products at the lowest possible price, with relatively low
profit margins. To do this, it is
often necessary to maintain highly efficient production facilities that can produce
high quality products at low cost.
Competition may also force retail outlets to sell their products in the
most efficient way possible, with relatively low profit margins.
Thus, the idea to keep in mind
when pricing any type of product is the competition. This includes the competitor’s prices,
and the services they provide with the product. It is also very important to consider
the quality of competing products.
Competition and Pricing in Relation to a Small Business
It is not always clear who the
competitors are for a business or its products. For example, a small computer store that
builds computers to the consumer's specifications, and provides personal
service and training, may not really be competing with the large computer
manufacturers. If it is, it should
modify its marketing strategy, and perhaps also the services and/or products it
offers for sale, to avoid competing with the large companies. This idea is useful for most small
businesses. That is, when competing
with large companies is unrealistic, the small business owner should devise
ways of avoiding such competition.
This can sometimes be done by providing friendly personalized service to
customers. Providing special products that are not sold by large competitors is
another useful strategy. Providing
quick service and selling products that are needed in a relatively small
geographical area, such as a neighborhood, can also be effective. Manufacturing and/or selling products
for niche markets, is still another way that a small business can avoid
competition with the large companies.
However, it is often very
difficult, or impossible for many small businesses to succeed, as a result of
the competitive forces of the large companies. This reality should be considered by
anyone that is contemplating the idea of starting a small business.
Pricing Strategies for New Products
There are a number of pricing
strategies that are often used by manufacturers for new products. Often the pricing strategy used depends
on the research and development costs, the competition from competing products,
as well as other factors. This will
be clarified in the following paragraphs.
One of the most common pricing
strategies for new products is to sell them at a lower price than competing
products. This can involve coupons,
or statements on the label indicating a price reduction. This pricing strategy is often used with
relatively inexpensive household products, such as laundry detergent, soap,
toothpaste, breakfast cereals, etc.
This pricing strategy might be productive for new products
when:
·
It is not a luxury item
·
When there is considerable competition from other products
·
When research and development costs for the product are low
·
When the product is a consumable item that will be repurchased
periodically, such as soap, shampoo, toothpaste, etc.
When research and development
costs for a new product are relatively high, and there is little competition
from other products, the pricing strategy described above may be
undesirable. The optimum strategy
for such products might be to introduce the product into the marketplace with a
relatively high price, with the goal of recovering research and development
costs. This pricing strategy is
often used for new technologies, such as newly developed medications,
electronics, and photographic equipment.
Consumers might be willing to pay
the high prices for products that are based on new technologies, especially
when there are no competing products available. In addition, some people enjoy the
latest technologies, and they are willing to pay the higher prices for such
products. Perhaps some people want
to be the first amongst their friends to try new technologies, and they are
willing to pay the price for it.
However, the manufacture may not
sell the new product in very large quantities, with the above pricing strategy,
because of the relatively high price.
However, this may not be much of a problem, because the manufacture may
not be able to meet the demand for the new product because, initially production
facilities may be relatively small.
As new production facilities are created for the new product, and after
some of the research and development costs have been recovered, the manufacture
may gradually lower the price of the product. This might be necessary also because of
competing products may have been developed by other manufacturers. This pricing strategy is very common
with all types of new technologies.
Most of us are quite a where of the high prices of new types of
technology, which are usually followed by significant reductions in prices
taking place over a period of time.
However, when this pricing
strategy is used for new medications, the price may stay relatively high for
many months or years, before it is reduced. This is because with new medications
there are usually no significant competing products, and the manufacture may
find it profitable to keep the price relatively high, until the patent rights
expire. After expiration of the
patent rights, other companies can manufacture the medication, which results in
competition. This may force the
original manufacture to lower the prices substantially.
Another pricing strategy for new
products is to simply charge a price that is not excessively low or high. This might be the optimum pricing
strategy, when there is only a small to moderate amount of competition from
competing products.
Another consideration in
determining the price of a product is how much the consumer will be willing to
pay for the product. This is
generally determined by all of the following:
The economic status of the
targeted consumers This is an important consideration when the product is marketed
primarily for a specific economic group, such as wealthy people.
Competition If other companies manufacture
or sell a product, there will be competitive forces that might determine the
price. If the price is higher than
the competition, for a similar quality product, few consumers will be
interested in it.
For more information on pricing
see the following websites, and other sections in this book.
Websites on pricing, marketing, and related concepts
The following list of websites
contains information on marketing, pricing and related principles.
Search phrase with Google: Markup for clothing http://www.google.com/search?hl=en&q=Markup+for+clothing
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.ericsink.com/bos/Product_Pricing.html
Words on website: Product Pricing Primer
The following website is very useful. It contains a large amount of
information and many hyperlinks for additional information about pricing, and
business in general.
http://en.allexperts.com/q/General-Retail-Business-2223/Retail-Clothing-Mark.htm
Words on website: General Retail Business Issues
http://findarticles.com/p/articles/mi_hb4298/is_198905/ai_n15003601
Words on website: Markup ... how high is too much? (clothing retail prices)
http://findarticles.com/p/articles/mi_hb4298/is_198812/ai_n14981838
Words on website: Keep markup ... but add value. (clothing retail trade)
Search phrase with Google: The "markups for
hardware" http://www.google.com/search?hl=en&q=The+%22markups+for+hardware%22
This website consists of one or more
search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
Search phrase with Google: The markups for luxury items
http://www.google.com/search?hl=en&q=The+markups+for+luxury+items&btnG=Google+Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
Words on website: Penetrate or Expand - Which Customer
Targeting Strategy Is For You http://marketingcomet.typepad.com/marketing_comet_small_bus/
Search phrase with Google: Markup for groceries http://www.google.com/search?hl=en&q=Markup+for+groceries
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://couponing.about.com/od/groceryzone/a/groceryanswerpg.htm
Words on website: Most grocery stores will fluctuate marking up prices
anywhere from 5 to 20 percent although giving the illusion that many more items
are falling in the 5 percent range.
Search phrase with Google: "Typical Markups" http://www.google.com/search?hl=en&q=%22typical+markups%22+&btnG=Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://retailindustry.about.com/library/uc/be/uc_be_pricing2.htm
Words on website: Pricing and Small Retailers: Questions to Consider
http://www.websters-online-dictionary.org/definition/MARKUP
Words on website: Specialty Definitions: Markup
http://www.answers.com/topic/markup?cat=biz-fin
Words on website: Business and Finance
24à Click on this hyperlink for a sound file
of the following:
Chapter 16 the Pricing of Products that are
Obtained from Nature
Supply and Demand can determine or Influence the Price of a Product
obtained from nature
Products from Hunting and Gathering, Farming, and Mining
When we hear the word marketing,
we often think of manufactured products or services. Most of the books and websites that I
have encountered focus on manufactured products. However, all products are not
manufactured. Some products are the
result of hunting and gathering, such as fish from the oceans,
and timber from the forest. Some
products are the result of farming, such as fruits, vegetables,
meat, poultry, and milk. Some
products are the result of mining, such as coal, crude oil, gold,
diamonds, and any type of ore.
Raw Materials Come From Hunting and Gathering, Farming and Mining
All of the raw materials that are
used for manufactured products come from the above categories. Thus, this discussion can also be
thought of as a discussion of marketing and pricing of raw materials, used to
manufacture all the products we have in our society.
The Market Usually Controls the Price of Raw Materials Based on Supply
and Demand and other Factors
The pricing of a product is not
always controlled by an individual, or by a company, as is the case with rule
materials. Sometimes the market
partly or totally determines the price.
When the market is controlling the price, supply and demand is the
primary factor in determining the price of the product. Estimates of future supply and demand
can also influence the price. Even
erroneous beliefs about the excess or shortage can affect prices of raw
materials, including crude oil, and agricultural products. In addition there may also be various
psychological and social factors that influence the price. All of this can involve various types of
purchases and bidding on a product obtained from nature. The idea here is no individual or
company determines the price.
However, sometimes governmental price supports and similar programs,
significantly affect the price, especially with agricultural products. Large companies, and some foreign
countries, might also have some influence on the price of raw materials, if
they make purchases that are large enough to affect supply and demand in a
significant way.
Products That Are the Result of Hunting and Gathering
Hunting-and-gathering is a method
of obtaining natural products. This method developed in the Stone Age. Hunting-and-gathering is used in
primitive societies, and it is also used by animals. This involves hunting wild animals, and
searching for edible or otherwise useful vegetation. This primitive method of obtaining
products is actually highly relevant to modern societies.
There are still many products
that are the result of hunting-and-gathering, based on the way I am using the
terminology in this discussion.
Examples are fish harvested from rivers and oceans, and wood harvested
from the forests. Obtaining wood or
any other vegetation from the natural environment is gathering. Fishing is actually a type of
hunting. There are other products
that are obtained in this way.
Historically, there were various
types of legal and illegal hunting of animals for their skins. Elephants were hunted for their tusks to
make ivory products. This type of
hunting and gathering has generally been outlawed in most parts of the world.
In modern times products that are
obtained from hunting and gathering are often refined before they are sold to
the ultimate consumer. For example,
logs are refined into a form of wood that is useful for construction. Fish is often sold to the ultimate
consumer after it has been cooked, and canned or frozen. Sometimes these products are sold with
little or no processing, such as fresh fish, and logs used in fireplaces.
Products obtained by the
hunting-and-gathering method, are often the result of supply and demand. When the product is perishable the
hunters that initially obtained the product, might have little control over the
price. A good example is fisherman
have little control over the price of fish. If they do not sell the product immediately
at the market price it will spoil.
If many fishing boats arrive at a marketplace with very large successful
catches, the price will generally go down.
In effect, the fishermen may get paid less money per pound of fish,
because they were very successful.
When the product obtained through
the hunting-and-gathering method is not perishable, it can be stored if the
market price is too low. A good
example is timber. Of course,
storage cost money, and stockpiling timber or anything else, with the hope that
market prices will increase, might result in losses.
Products That Are the
Result of Farming
Farming probably developed in the
late Stone Age, and it involves the raring of animals and vegetation. Products produced by farming are usually
perishable, and the price is generally determined by supply and demand. The greater the production of a farmed
product, the lower its price will be, regardless of production costs. That is, highly successful farming
efforts throughout the country, such as the result of optimum weather
conditions, can result in lower prices, and even financial losses in some
cases. This can put a farmer in a
very disadvantage situation. This
can be seen if we compare farmed and manufactured products. With manufactured products the price can
be determined by the production costs, plus a reasonable rate of profit. Farmers often have relatively high
production costs. Products from the
farm may have to be sold at the market price, no matter what the production
cost may be. The market price may
or may not provide a good profit, and in some cases it may not cover the production
costs. This same problem applies to
most natural products, but usually not to the same degree.
If the market price is too low
the farmer generally cannot store the products he or she produces until prices
go up. However, the product may be
purchased at market prices, and stored by a middleman, or manufacture that has
the facilities to process the product into a form that will not spoil, such as
canning, freezing or dehydrating.
Because of the above difficulties
with production costs and market prices, there are various government programs
to provide assistance. This includes various types of price supports, and other
types of subsidies. Examples of
these programs can be seen at the following websites
http://www.whitehouse.gov/omb/expectmore/summary/10002436.2006.html Words on website: Dairy Price Support
Program
http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?navid=PRICING_SUPPORT&parentnav=MARKETING_TRADE&navtype=RT
Words on website: USDA Price Support
Products That Are the Result of Mining
Mining might appear to be a form
of gathering, but it does not involve searches for vegetation, and it is
generally much more involved.
Mining, as the terminology is used here, generally involves searching
for locations that may contain a desired mineral or fossil related product
(petroleum, coal or natural gas).
Most material used for construction, such as steel and concrete,
ultimately are the result of Mining.
Metals ultimately come from mining of various types of ore including,
aluminum, chromium, nickel, copper, iron, etc.
In general, the products obtained
directly from nature, hunting and gathering, farming, and mining, are priced in
a bidding process. This can involve
formal bidding in an auction.
Certain farm products are sold in this way, such as cows. There are also bidding processes that
are more or less similar to the stock exchange. This can involve the purchases of shares
of a certain quantity of a product.
Also, there are shares that are purchased based on anticipated demand of
a product in the future. For
example, gold futures, tomato futures, livestock futures, crude
oil futures. The people that
purchase shares, or futures, of these natural products very often have no need
whatsoever for the product. Someone
may purchase several tons of tomato futures, with no place to put them, and no
need for tomatoes. However, these
people are speculators, and they purchase shares, and futures with the hope
that the price will go up. This
gives them the opportunity to sell their shares and futures at a higher price
than they paid for them, if the price goes up. However, prices also go down, and they
may have to sell their shares at a lower price than they paid for them. Thus, when we talk about supply and
demand, with the products of nature, we are also talking about the demand of
speculators, and there hunches about the way prices will change. Speculators might quickly sell their
shares and futures if they believe that the prices will drop drastically. In this case they are trying to minimize
their losses.
If you want more information on
this topic consult the following websites:
Search phrase with Google: Auctions and agricultural
products http://www.google.com/search?hl=en&q=Auctions+and+agricultural+products
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.cbot.com/cbot/pub/page/0,3181,949,00.html
This is the homepage of the
http://www.cbot.com/cbot/pub/page/0,3181,1213,00.html
Words on website:
Search phrase with Google: Auctioning agricultural
products http://www.google.com/search?hl=en&q=Auctioning+agricultural+products&btnG=Google+Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.zibb.com/all/theme/p/Agricultural+Auction+Services
Words on website: Agricultural Auction Services
http://www.accessmylibrary.com/coms2/summary_0286-25710064_ITM
Words on website:
Search phrase would Google: “Precious
metal futures” http://www.google.com/search?hl=en&q=%E2%80%9CPrecious+metal+futures%E2%80%9D&btnG=Google+Search
This
website consists of one or more search pages, with many links to other
websites. If you do not find what
you want on this website, you can change the search phrase that will appear in
a dialog box, after you click on the above web address. After changing the search phrase, press
the enter key, and you will see a different set of websites.
http://www.goldsheetlinks.com/markets.htm
Words
on website: GOLDSHEET Mining Directory
25à
Click on this hyperlink for a sound file of the following:
Chapter 17 the Marketing of Services, with a Focus
on the Individual Service Provider
Skilled and Unskilled Service Providers
From the perspective of this
discussion, service providers can be divided into two categories, which are
skilled, and unskilled. Skilled
service providers include professionals, physicians, lawyers, as well as,
electricians, plumbers, carpenters, and other professions and trades. The unskilled category includes
maintenance personnel, housekeepers, babysitters, day laborers, etc.
I will discuss various marketing
concepts and techniques that relate to service providers in the following
paragraphs.
There Are Many Important Differences between Services and Other Types
of Products
Services are very different than
other types of products, especially when they are provided by one
individual. Because these services
are provided by one individual, or sometimes a group of individuals, there is a
limitation on the number of clients that can be served. With regular products there is no such
limitation. For example, if a
manufacturing facility obtains an excessively large number of orders for its
product, it can hire more employees, purchase more equipment, and rent
additional space for a new production facility. The individual service provider is
selling his or her time and effort, which represents a very limited product.
Manufacturing facilities, and
large retail outlets, sometimes lower the price of their product to the point
where they are only earning a small profit. The tiny profit on each item sold, can
represent a very large financial gain.
This is especially the case if the products are quickly sold. The skilled service provider cannot lower
his or her prices in this way, and still earn a living.
With a Few Exceptions, Service Providers Often Have a Market that is
Limited to a Geographical Area
Another major difference between
skilled services and other products involves geographical limitations. That is, a manufacture or retailer of
non-service related products, can market products in many localities throughout
the
There are a few exceptions to the
above. That is there are some
skilled services that can be transmitted electronically, such as through the
Internet, or even by way of conventional mail. Any type of service that can be
converted to a data form can offer services throughout the world. This includes computer programmers,
engineers, architects, writers, graphic designers, etc. Of course, there are situations where
even the above services cannot be transmitted electronically. For example, engineering and architectural
services that include evaluation of a pre-existing structure cannot transmit
services. Examples are a house or
bridge that is to be renovated, which may require on-site evaluations.
Skilled service providers often
cater to people of specific socioeconomic levels, and there prices may be set
accordingly. Service providers
often set their prices based on the geographical area that they are
serving. A skilled service provider
might set his or her prices comparable to similar service providers. For example, an electrician that
provides service for small homeowners in a working-class community will most
likely set his prices roughly comparable to other electricians serving that
community.
Skilled service providers do not
appear to engage in the type of competition that is seen with other types of
products. For example, the
competition in the computer industry is so fierce that intentionally or
unintentionally, each company more or less tries to put the other companies out
of business. Alternatively, they
may try to take over their competitors by purchasing the companies or the stock
shares of their competition.
Service providers generally do not try to put each other out of
business.
The main reason for minimal
levels of competition is because most categories of service providers are in
relatively limited in numbers.
Generally, professional organizations, coupled with government licensing
procedures, limit the number of many service providers, such as doctors,
lawyers, and licensed electricians.
Unskilled service providers might be limited to some degree by the
undesirable nature of the work, and the low wages or fees that they
receive. Because service providers
are relatively limited in numbers there is no need for vigorous
competition. That is, there are
usually enough clients to keep most service providers busy.
However, there may be some degree
of competition among skilled service providers, but it usually appears to be
minimal. Physicians, lawyers, and
many other providers advertise their services.
Most service providers usually do
not have periodic price reductions, such as a department store running a
sale. However, there are some
exceptions. That is, there are
dentists that give away coupons that provide substantial price reductions, for
certain services, usually for a limited time. Some dentists, lawyers, psychologists,
plastic surgeons, and a number of other skilled service providers, offer a free
consultation to new clients. Most
service providers are interested in obtaining additional clients, and free
consultations, serves that function.
The free consultation also serves
the purpose of determining if the provider can deliver the services needed by
the client. The free consultation gives the service provider the opportunity to
explain the services she can provide.
In addition, the free consultation can also serve the purpose of
determining if the provider and client are compatible. This can be important, when skilled
services are provided on a one-to-one basis, such as medical care,
psychotherapy, and certain types of legal assistance.
Unskilled providers of services
Unskilled service providers,
include maintenance personnel, professional housekeepers, and babysitters. Most unskilled service providers are
paid relatively little for their services.
Some are even paid the minimum wage. Most unskilled service providers are
employed by organizations of various types. This can involve in-house services for a
large or medium-size company. There
are agencies that provide semiskilled and unskilled service providers to
individual consumers, in a way that is similar to other products. The agency gets paid a fee, for the
services, and the service provider might get a percentage of the fee.
There are unskilled service
providers that are self-employed.
The most common example is a babysitter. There are also unskilled service
providers that are employed by individual consumers. For example, there are many wealthy
people that employ a housekeeper to maintain the living quarters, and a nanny
to care for their children.
Why are Unskilled Service Providers Usually Paid Low Wages and Fees?
There are a number of reasons why
most semiskilled and unskilled service providers receive low wages or low
fees. One of the most obvious is
the work they do does not require specialized skills, and formal college training. In addition, there are many people that
can perform the tasks provided by these service providers. An individual consumer has the option of
hiring and unskilled service provider, or performing the task herself. With the professional and skilled
service providers this option is generally not feasible. Tradition, and possibly even prejudicial
attitudes, may also play a role in the pricing of unskilled service providers. Many unskilled service providers are
from minority groups or immigrants.
Marketing Strategies for Individual Service Providers
Individual service providers,
whether they are skilled or unskilled, must utilize special marketing
strategies. However, all the
conventional media for advertisements can be used for skilled service
providers, and some are also useful for the unskilled provider. For skilled service providers, radio,
television, and newspaper ads might be effective. Small classified ads especially in local
newspapers might also be useful for unskilled service providers, such as
housekeepers and babysitters. There
are some skilled service providers that present info-commercials in various
formats, such as for radio, the Internet, etc... This involves presenting interesting
and/or useful information, coupled with a commercial, about the service
provider. Writing articles, or
newsletters, might also be helpful for some skilled service providers.
Leaflets can be useful for all
types of service providers, whether they are skilled or unskilled. They are one of the most inexpensive
forms of advertising. Various types
of leaflets, made of paper or attractive cardboard, as well as business cards
are very useful in facilitating positive word-of-mouth publicity and
recommendations.
Word-of-mouth publicity can also
be facilitated for some skilled service providers by providing lectures at
various organizations. That is,
there are many profit and nonprofit organizations that seek out lecturers,
dealing with various topics. This
can provide good opportunities for promoting your services, if you are a
professional or other type of skilled service provider. When this is done, it is important to
present lectures that are interesting and appropriate for the audience. It is also important to present yourself
in a way that conveys your skills and compassion, and friendliness.
In general, facilitating
word-of-mouth promotion is an excellent strategy for all types of
providers. When clients speak
positively about a service provider, to their friends and relatives, there is a
good chance of obtaining new clients.
This can also involve direct recommendations from clients, or other
service providers. To obtain good
word-of-mouth publicity, it is important to satisfy your clients, to the
maximum feasible extent. This
involves providing high quality service, in an efficient and pleasant way. Providing some extra service that the
clients do not expect is also very useful.
However, all of the above, by
itself, may not be enough, to obtain good word-of-mouth publicity, and
recommendations from your clients.
Emotional Factors, Including Compassion, Sympathetic Understanding, and
Friendliness are Important for Obtaining Positive Word-Of-Mouth
Publicity and Retaining Your Clients.
The most important factors are
probably emotional in retaining clients and getting recommendations. The first idea is to try to avoid
creating negative emotional responses from your clients. To do this, avoid disappointing your
clients. Avoid unnecessary negative
or discouraging statements. The
only time that you should use negative statements is if it is necessary to
provide appropriate services or information to your clients. In such cases, you should convey
sympathy and understanding, along with the negative information, and suggest
any alternative solutions that might be feasible.
Always avoid actions or
statements that might insult or embarrass your clients. Avoid expressing anger or frustration,
even if it may be justified. There
might be some rare exceptions to this, where the expression of some anger or
frustration by the provider is necessary in the communication process, but
generally expressing anger or frustration is probably counterproductive.
Developing a friendly and
pleasant working relationship with your clients is also quite important. In general, try to avoid to the maximum
feasible extent anything that clients do not like. The goal should be to provide the best
service that is feasible, and to make your clients happy. This includes providing the best
possible experience for your clients.
All of the above will not only
facilitate good word-of-mouth publicity, it will help you keep your clients.
Good Relationships with Clients Can Reduce the Chances of Lawsuits and
Getting Fired
The following applies to all
types of service providers, skilled and unskilled. However, it especially applies to
professionals, who are likely to get sued for malpractice. It also applies to unskilled service
providers that are likely to get fired for errors that result in damages, while
they are providing services.
Unskilled service providers are probably less likely to get sued then
professionals, because they generally have little or no financial
resources. The unskilled provider
usually does not have any insurance that can pay for damages.
Professional service providers
can sometimes get sued for adverse outcomes, even if they are not truly
responsible for the undesirable results.
This can happen, when the client has even a slight suspicion that the
undesirable results were partly caused by the provider.
In general, most people make
errors. The idea really is to avoid
critical errors at all costs. However,
they are still likely to happen. Thus, the idea here is to learn how to
minimize damages, and prevent getting fired, losing clients, or getting sued.
Forming positive and friendly
working relationships with your clients can reduce the chances of lawsuits. That is if you make an error, or if your
client thinks you cause damages, a friendly relationship might reduce the
chances that he or she will sue you.
This is especially the case if you have a long history of providing
services in a compassionate and friendly manner to your client.
Probably, one of the most
important factors that contribute to lawsuits is anger. Getting your client angry over adverse
outcomes or over damages that he thinks you are responsible for, will probably
increase the chances of lawsuits.
Positive and friendly working
relationships with clients can also reduce the chances of getting fired, or
losing your clients. This applies to all types of service providers, skilled
and unskilled.
When your client confronts you
with a legitimate claim of damages, the best strategy might be to first offer
sympathetic apologies, and perhaps also explain how the problem happened. If
you are an unskilled service provider this is the best you can probably do.
However, you are a well-paid professional, perhaps with malpractice insurance;
you must go one step further, which is to try to settle the claim in a
sympathetic, kind and friendly way.
This generally means providing money for damages that you have
caused. Kindness and friendliness
might save you a considerable amount of time, effort and money in situations of
this type.
Websites on Marketing Services and Related Concepts
If you want more information on
marketing services consult the following websites.
Search phrase with Google:“Marketing for service
providers” http://www.google.com/search?hl=en&q=%E2%80%9CMarketing+for+service+providers%E2%80%9D&btnG=Google+Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.voip-news.com/whitepaper/novo1-voip-marketing/
Words on website: VoIP Marketing For Service Providers
http://marketingforservices.com/ Words on
website: Marketing for Services
Search phrase with Google: How to market services http://www.google.com/search?hl=en&q=How+to+market+services
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.businessknowhow.com/startup/sampmark.htm
Words on website: How to Successfully Market a Service
or Other Niche Business, and Enjoy the Process: Sample Marketing Plan
http://findarticles.com/p/articles/mi_m0DTI/is_5_33/ai_n13698133 Words on website: Service with a
smile: not sure how to market your service business?
http://jeffreymonaghan.wordpress.com/
Words on website: Marketing Key #3 - Being viewed as an
expert is key
26à
Click on this hyperlink for a sound file of the following:
Chapter 18 Mass-Production, Versus Small Scale
Production in Relation to Marketing
MARKETABILITY IN RELATION
TO PRODUCTION METHODS IS A VERY IMPORTANT CONCEPT.
Introduction: Marketability in Relation to Mass Production, Versus
Small Scale Production
When a product is produced in mass production facilities, it must be sold
in large quantities to cover the fixed expenses. This includes the costs associated with
the physical facilities (rent, mortgage) and expenses for machinery, and
salaries. This idea will be elaborated
on and clarified in the following example.
If a mass-produced item, (product
X) selling for $20 retail satisfies the needs of a couple of thousand
consumers, each year, it most likely will be considered a failure by the
manufacturer. However, the
consumers that use product-X might like it very much, and they might find it
extremely useful. The consumers
might consider the product a great success. However, from the manufactures point of
view product-X is a failure, because the sales of 2000 items each year would
not cover the costs of the mass production facilities. The manufacture would be losing money on
product-X.
However, if
product-X is produced and sold by a small company that does not use mass
production techniques, it might be considered very successful, if 2000 are sold
each year. Companies in this
category are usually relatively small, and cannot afford the large investment
needed to engage in large-scale mass production techniques. They will generally produce fewer units
of a product, and there prices may be higher when compared to mass-produced
products.
However, sometimes small
companies in this category can produce products that are no more expensive than
mass-produced items, because they may sell directly to the public. In addition, they may have little or no
expense for mass meteor advertising, and they almost certainly do not have to
pay high salaries to many levels of executives and managers. Companies in this category are usually
run by the owner, sometimes with family members. It may also involve a few
supervisors that guide the employees that are involved with the manufacturing
process. This can involve hand
work, assisted by motorized tools.
It might also involve a very small scale assembly line. Some facilities in this category may be
even smaller than the above, and it may consist of the boss and a few craftsman
making products to order, such as custom design furniture. Small companies in this category might
do quite well, without mass production facilities, mass media advertising, and
without a team of managers, executives, and marketing experts, if they can find
niche markets for their products.
Basically, a niche market is a
relatively small set of consumers that have needs that cannot be satisfied by conventional mass-produced products. They might be unusual in some way, such
as the following:
·
The niche market consumers may be very wealthy. They can afford to pay for very
expensive handmade items, such as clothes, and furniture made to their
specifications.
·
The niche market consumers may be individuals of modest means, but they
prefer economical items made to their own specifications. For example, there are small companies
that produce inexpensive furniture made with hand-operated tools, according to
the specifications of each consumer. There are no middlemen involved, so the
furniture may cost the same or even less than mass-produced furniture.
·
The niche market consumers may be from a very small religion, culture or
subculture. They may require unique items
that are based on their religion, culture or subculture.
·
The niche market consumers may speak a language that is known to very few
people. They may need reading material in their
language.
·
The niche market consumers may have an unusual hobby that very few people
engage in. They
may need unusual items or equipment for their hobby.
·
The niche market consumer may be in an unusual occupation that has
relatively few members. A good example of this, are
professional athletes who require very high quality protective equipment.
·
The niche market consumer may be physically handicapped. They may need equipment to deal with
their handicap that other consumers do not need, such as specially made
wheelchairs, automobiles with specialized staring devices, etc.
·
The niche market consumer can be a manufacture, who needs specialized
equipment, or components. Sometimes even mass production
manufacturer needs special equipment that must be made, or modified, to fit
their specifications.
·
The niche market consumer can be retail stores that sell handmade
products. This can involve large or small
resellers that sell unusual handmade items. This can include handmade furniture,
sculptures, pottery and various types of artwork.
The Concept of the Niche Market, without Mass Production, is Useful
for Small Business Owners
The above concept, and the niche
market, can be very important for some small business owners and individuals
that want to start their own business.
Generally, the small business owner cannot engage in mass production
techniques, and he will have great difficulty in competing with large
companies. However, if the small
business owner finds one or more niche markets for his products, he will avoid
the problem of competing with large companies.
The above ideas can also be
applied to retail sales, in some cases.
For example, a small retail convenience store might have a niche market
of customers who live, or work, within walking distance of the store. The customers may prefer the small store
over the larger retail outlets, because of its proximity, they know the owner,
and the store stocks the essential items they need, and they do not have to
search through thousands of items to find what they want to buy.
The above ideas can be clarified
for the small business owner by answering the following questions: What are all
the possible niche markets for my product(s)? What types of goods or services can I
provide to satisfy the needs of various niche markets? What advertising techniques can I use to
attract the niche market consumers that will be interested in my products? Are there any newspapers, magazines, or
trade journals that I can advertise in to attract niche market consumers?
A More Advanced Look at Production Techniques, which Ranges from Super
Mass Production, to Hand Work
Modern methods of producing
products in large quantities involve highly sophisticated mass production
techniques. This can involve very
expensive computerized robotic equipment and high-speed assembly lines that
produce products at extremely rapid rates.
I am calling these methods super mass production techniques. At the other extreme, there are of
course items that are still produced by hand, such as original works of
art. However, between these two
extremes (super mass production, and handwork) there are a large number of
production methods. A better way of
describing production methods is in terms of a range, as follows:
· Super mass production techniques. The equipment is very expensive,
and it is only cost-effective if very large numbers of a product are produced
and sold. The production costs of
each item might be lower than it would be with any other method, assuming the
product is sold in very large quantities.
· Conventional or older Mass
production techniques. The manufacturing equipment is less
sophisticated and less expensive than the above. This can involve an assembly line,
staffed by workers, as well as automatic and hand-operated machinery. This method of production is only cost-effective
if relatively high quantities of a product are produced and sold. This method might result in a higher
production cost per item then the super mass production techniques
described above. However, it is
possible to make a profit with a somewhat smaller sales volume than with super
mass production techniques. This is
because equipment and facilities are simpler and less expensive.
· A simpler, assembly line
production method then above, involving hand-operated machines. This method is still a type of mass
production, but it is less expensive than the two methods mentioned above. It is suitable for smaller companies,
and is probably cost-effective in most cases for smaller quantities of a
product, then the methods mentioned above.
For example, with the first method, it might be necessary to sell
millions of units, the second method might require hundreds of thousands of
units to make a profit, and this method might require tens of thousands of
units to make a profit.
· Small-scale assembly line or
batch production techniques for expensive items that are large For example, jet planes, trains,
buses, heavy construction equipment, are generally not produced in the
extremely large quantities produced by conventional mass production
techniques. Items in this category
may be produced in the range of dozens, hundreds, thousands, possibly in some
cases tens of thousands. Production
facilities of this type might be just as expensive as the most expensive super
mass production techniques.
However, since the products are extremely expensive, this makes sense
from an economic and marketing perspective.
· Small-scale Batch production
methods This
method involves the production of small quantities of a product this can be the
production of an expensive or exotic drug.
It can also be a small-scale factory that makes certain products to fit
the specifications of the consumer.
Perhaps this could involve a factory that builds furniture to order, or
builds race cars or automobiles to fit the specification of their
customers. A factory of this type
does not use an assembly line by definition, but they might move the product
being assembled on a cart from one workstation to another. Facilities of this type used tools that
are operated by hand, such as electric drills and saws, screwdrivers, pliers,
wrenches etc. A facility of this
type is much less expensive than the examples presented above. However, the employees will probably get
higher pay, because many of them would be skilled workers, such as technicians,
mechanics, and carpenters.
· Small-scale one-of-a-kind production
with Hand-operated machines, without an assembly line Examples of this type
of facility is a small privately owned cabinet shop, with a few employees or
less. This is a very inexpensive
production facility, and to make a profit they probably have to sell to a three
pieces of furniture per day.
· A single individual, creating
items with handwork In some cases this may involve simple machines, such as an electric
drill, or a sewing machine. Production
facilities of this type are much less expensive than any of the above. Examples of this type of production
facility are an artist’s or sculptures work facility. A clothing designer
or small tailor with a sewing machine is another example. Facilities of this type usually have to
sell very few products to make a profit.
Websites on Niche
Markets, Production Techniques and Related Concepts
Search phrase with Google:“How to find niche
markets for your products” http://www.google.com/search?hl=en&q=How+to+find+niche+markets+for+your+products&btnG=Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://marketing.about.com/od/strategytutorials/a/defineyourniche.htm Words on website: Defining Your Niche
Market
http://www.articlecity.com/articles/online_business/article_5384.shtml
Words on website: How To Find Hot Niche Markets by: Dan Farrell
Search phrase with Google: Mass production methods http://www.google.com/search?hl=en&q=Mass+production+methods&btnG=Search
This website consists of one or more
search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://en.wikipedia.org/wiki/Mass_production
Words on website: Mass production
http://www.wisegeek.com/what-is-mass-production.htm
Words on website: What is Mass Production?
http://www.spartacus.schoolnet.co.uk/USAmass.htm
Words on website: The production of long-runs of standardized goods for a
mass market was introduced into the
http://www.britannica.com/eb/article-68155/mass-production
Pioneers of mass production methods
http://www.willamette.edu/~fthompso/MgmtCon/Mass_Production.html
Words on website: Mass production is the name given to the method of
producing goods in large quantities at low cost per unit
Search phrase with Google: Small-scale production
methods http://www.google.com/search?q=Small-scale+production+methods&hl=en&start=70&sa=N
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.fao.org/docrep/003/x6556e/X6556E00.htm
Words on website: Small-scale sausage production
http://agalternatives.aers.psu.edu/livestock/small_scale_egg/small_scale_egg.pdf
Words on website: Small-Scale Egg Production
http://sciencelinks.jp/j-east/article/200018/000020001800A0243666.php
Words on website: Development of Small-scale Production Method for
Large-size Exterior Plastic Parts
http://www.uaex.edu/aquaculture2/FSA/FSA9077.htm
Words on website: Costs of Small-Scale Catfish Production
http://findarticles.com/p/articles/mi_qa5409/is_199910/ai_n21445055
Words on website: Small-scale production of high-protein food proving to be
cost-effective
http://www.zeton.com/ssplants.htm
Words on website: Small Scale Commercial Plants
27à Click on this hyperlink for a sound file
of the following:
A CONSUMER BASED MARKETING PHILOSOPHY
Satisfying the
Needs of the Consumer
Evaluating a
market or a market segment, involves measuring consumer needs, responses,
interests, and any other factor that relates to selling a product. Extensive use of this perspective,
especially when it is focused on the needs of the consumer, is a marketing
philosophy that many successful companies utilize. That is, instead of focusing on what the
company can do, the focus is on what the consumers want and need. For example, a company may be able to
manufacture a television set with many new features, which will increase the
price of the product. From the perspective
of a consumer based marketing philosophy, the objective would be to determine
what features the consumers want and need in their television sets. This might suggest that some planned
features should be eliminated, and some new features should be added to the
television set design to satisfy the needs and desires of the consumer.
The evaluation methods discussed in this chapter are primarily techniques
of determining what consumers need and want, as well as their behavioral and
emotional responses to products.
There are many methods of evaluating consumer's needs and the market for
a product. None of the methods are
perfect, because marketing is a social science that deals with the complex
thinking and behavior of human beings.
However, the less than perfect methods of evaluating markets, and market
segments, can be reasonably accurate and quite useful, especially if they are
properly carried out.
EVALUATING MARKETS AND MARKET SEGMENTS: PERIODIC
ASSESSMENT OF A MARKET OR MARKET SEGMENT
Introduction: Methods of evaluating
Periodic assessment of a market
or market segment involves one or more evaluations that are not carried out
continuously. It can involve any
method that can be used to obtain data from consumers and potential consumers
in relation to a product, a business, or an advertisement. The evaluations are often done with questionnaires,
interviews, focus groups, and test marketing. There are many variations of these
methods.
Questionnaires are the simplest
technique of obtaining data from consumers. This can consist of a series of
questions about a product, a business, or even an advertisement. It can involve rating scales of various
types. There are many ways that
questionnaires can be designed.
This can range from a very simple layout to a highly complex set of
questions. A few examples of
questions and rating scales that can appear on questionnaires are presented
below:
·
Rate this product on a scale from 1 to 10. 1 do not like the product
---to--- 10 like the product very much and I definitely will buy it.
·
Do you agree, disagree, or strongly disagree with the following
statements about product X. □Product X is very useful. □Product X saves me time. □I like product X very much, and I
will continue to buy it.
·
A Multiple-choice method involves a series of questions where the
consumer checks one phrase, such as: □This product is very useful, □Somewhat useful, or □Useless for me. This product is priced: □Low, □Moderate, or □Excessively high.
Structured and Unstructured Interviews
There are many types of
interviews that can be used to make evaluations about a product. One type is the highly structured
interview. This involves a set of
predetermined questions that the interviewer asks. The questions in a highly structured
interview may have simple answers, such as yes, no, I'm not
sure. This type of interview is similar to a
questionnaire. The interviewer
might actually fill out a questionnaire based on the answers provided by the
interviewee.
At the other extreme, there is
the highly unstructured interview.
The interviewer might have a few general questions to start the
conversation, but he will create questions that are appropriate to the
conversation. With this type of
interview, the interviewer may take notes, in an attempt to sum up the feelings
and attitude of the consumer, in relation to the product.
Many types of marketing
interviews fall between the two extremes described above. They may consist of some structured
questions with yes no answers, coupled with unstructured questions.
The highly structured interview
might appear more scientific.
However, in many situations it will provide much less data than a less
structured interview. With the
highly structured interview, the data is limited by the predetermined
questions. For example, if the
interviewer asks the consumer: Do
you think you will buy product Y in the near future. The answer may be, yes or no. With the
unstructured interview the question may be: What do you think of product Y; do you
think you will buy it? This can
provide more data, because the answer can be conditional, such as if it was a
little less expensive, or if they sold the product in a smaller box.
However, unstructured interviews
can be very difficult to evaluate, and extract useful data. Generally, a computer cannot evaluate
the unstructured interview. This is
one of the major disadvantages of this type of interview. One of the major advantages of the
highly structured interview is it can be assessed by a computer, if the
interviewer placed the consumer’s answers on a questionnaire.
Psychological Evaluations in Relation to Marketing
A psychological evaluation of
consumers is another marketing assessment method. In some cases evaluations of this type
are not even focused on a product or company. The goal may be just too obtain various
psychological data that can be used to create more effective advertisements, or
to design products and their packaging so they will sell in larger
quantities. Sometimes data and
related conclusions of this type may be of questionable value for marketing.
However, psychological assessments can also be highly focused on a product, a
product line, or a company, which might provide more useful data for marketing.
Psychological assessments are
generally conducted by a psychologist, or perhaps a counselor or interviewer
that has formal expertise in psychology.
The psychological assessment will usually involve assessments of
emotional responses, as well as evaluations of statements made by the
consumer. For example, if a
psychologist were evaluating mouthwash with this technique, she might evaluate
the needs and concerns that the consumer has about bad breath. This can be useful in creating
advertisements. In addition, the
psychologist may evaluate the verbal and emotional responses to the mouthwash
itself. This can involve the way
the consumer looks at the bottle, holds it, as well as the way the consumer
responds to the taste of the mouthwash.
Does the consumer spit out the mouthwash immediately, such as because of
bad taste or burning sensations?
Or, does the consumer leave the mouthwash in her mouth for a while,
before spitting it out. Does the
consumer appear to like the taste of the mouthwash?
The psychologist may essentially
used to methods, one is to ask questions, and listened, and the other is to
observe responses. With the above
example, the psychologist may try to determine if the consumer likes the
mouthwash based on behavior and emotional responses. This may be coupled with questions about
the taste and suitability of the mouthwash. The idea is verbal responses do not
always coincide with emotional and behavioral responses to a product, a
company, or to anything else.
The disadvantage to psychological
assessments to obtain marketing data is the limited number of consumers that
can be evaluated. Psychological
assessments are generally time-consuming.
The professionals needed for psychological assessments are
expensive. There is no reason to
believe that psychological assessments for marketing, is any better then any
other method. It may be inferior to
other methods in many cases because of the small number of consumers that can
be evaluated. Perhaps, if a large
enough sample of consumers could be evaluated, psychological assessment might
produce superior data for marketing.
A difficulty with questionnaires,
interviews, focus groups, and similar techniques is whom do you survey? It is very easy to make the mistake of
surveying a representative sample of the population. This is done in scientific surveys to
obtain information about a population, such as to obtain cultural,
social, or demographic data. This
is not necessarily the way to obtain useful information about a market or
market segment. For example, if you
are selling oil well drilling equipment, a representative sample of the
population of the
The idea to keep in mind is to
survey a representative sample of your market, not a representative sample of
the population.
All of the above also applies to
focus groups. Generally, focus
groups should consist of a group of people that are a representative sample of
the market. Focus groups are
discussed in more detail under the following subheading.
A focus group is essentially a
discussion group with a facilitator who guides the discussion about a
product. Focus groups usually
consist of five to 10 people that are an approximate representative sample of
the market, and a professional facilitator. The facilitator usually starts the
conversation about a product, with a few open ended questions. This is done with the objective of
starting a group discussion about the product. The session usually lasts for one or two
hours, but it could last longer.
There are many variations of the concept of a focus group, some of which
might differ significantly from the general description given above.
A focus group can be more or less
similar to a psychological assessment, which was discussed above. That is, the facilitator of a focus
group might document and evaluate emotional and behavioral responses, as well
as the verbal statements made by the participants. The advantage of the focus
group is it can provide a large quantity of data. This includes attitudes and emotional
responses towards a product. If
there is anything that is offensive about a product, a label or an
advertisement, it might be revealed in a focus group. If there are any pleasant associations with
a product, label, or advertisement, it also may be revealed in the focus
group. The focus group can indicate
how a product, and its labeling and advertising can be improved.
There are of course some
disadvantages to focus groups. Generally, it is impossible to obtain a true
representative sample of a market, with five or 10 people. The individuals that participate in a
focus group may be a typical. Of
course, it is possible to have a number of focus groups, perhaps run by
different facilitators, which might increase the accuracy of the results, but
this can be expensive and time consuming.
The facilitator, as well as some of the more influential members of the
focus group itself, might influence the other members of the group. All of this could result in data that is
unique to the focus group, and does not represent the way the average consumer
will respond to a product, label or advertisement. However, this problem can be
significantly reduced by running a number of focus groups, dealing with the
same issue, but with different facilitators and participants.
A Simplified Version of a Focus Group for a Small Business?
Formal focus groups, as carried
out by large organizations, are usually carefully planned, and are led by
professional facilitators. The
results might be analyzed by experienced market experts and statisticians. This is of course quite expensive, and
far too difficult for a small business.
(I am using the term small business here to refer to businesses that
have less than 12 employees.) Thus,
focus groups are generally not used by small businesses.
In spite of the above, a simpler
version of a focus group might be quite economical and feasible for a small
business. For example, a business
owner can gather together a few of his customers, and have a discussion with
them. This can be done in a home, a
rented facility, or in the owner’s business facilities. The owner can act as the
facilitator. To induce customers to
attend the group, the owner can provide refreshments, and perhaps a party like
atmosphere. He can also provide
some discounts on purchases, for people that attend the focus group. This type of focus group will generally
cost very little or nothing. The
data obtained from such a focus group, might be very valid and useful, because
the small business involves a relatively small number of customers. This means that 10 people might
represent a significant sample of the customers. Another valuable advantage to this type
of focus group is it will probably strengthen the relationship between the
business owner, and his customers.
In general, this type of focus group will be effective for any type of
business or organization that has relatively few customers.
An even simpler and informal
version of the focus group could involve an informal conversation with a group
of customers at the business establishment. In the simplest form, this can simply
involve starting conversations with customers that are focused on products and
services. Discussions of this type
can sometimes develop into an informal group discussion.
Testing a Product by Giving Away Free Samples
This method simply involves
giving away free samples of a product, and asking the recipients whether or not
they like the product. This method
is especially useful with food, because it can be evaluated, in a few seconds,
by tasting the sample, and the samples of food are usually inexpensive. Free samples with other products, can
take much more time for an evaluation.
For example, a new brand of laundry detergent would require the consumer
to wash one or two bundle of clothes to make evaluation. However, with inexpensive household
items like laundry detergent, the method is still feasible.
This method is of course not
useful for expensive items such as electronic equipment, or furniture.
Test marketing is generally used to evaluate the marketability of a new
product. Test marketing can also be
used to evaluate the marketability of an established product in a new
locality. It involves selecting one
or more localities that are believed to be representative of a larger market,
such as the entire
Test marketing has many
advantages over the other techniques that were previously discussed. In a sense, it is an experiment, to
determine the level of marketability of a product.
One of the difficulties with test
marketing is to find localities that are truly representative of the entire
market. It is very easy to make the
error of choosing atypical cities, towns and neighborhoods, where the product
will sell very well, for a test market.
This will provide overly optimistic results, which probably will not
relate to the larger market area.
Just the opposite can sometimes also happen. Thus, the very purpose of test marketing
can be defeated by the wrong choice of test market localities.
Websites on
Market Evaluations and Related Concepts
Search phrase with Google: Market surveys http://www.google.com/search?hl=en&q=Market+surveys&btnG=Google+Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.infosurv.com/market_research_surveys.htm
Words on website: The trusted market research company for corporations and
government organizations
http://www.ehow.com/how_8597_create-market-survey.html
Words on website: How to Create a Market Survey
This website is very good. It has a large number of links for
information on creating surveys. It has video tutorials, and software for
creating surveys for the Internet. http://www.statpac.com/surveys/ words on
website: Survey & Questionnaire Design
28à Click on this hyperlink for a sound file
of the following:
EVALUATING MARKETS AND MARKET SEGMENTS: ONGOING EVALUATION
OF A MARKET, OR MARKET SEGMENTS
What is Ongoing Assessment in Relation to Marketing?
Methods of evaluating a market, or a market segment, can be divided into
two categories: ongoing assessment, and periodic
assessment. In this heading, I am explaining ongoing
assessment, and in the following heading, I will discuss periodic
assessment. Based on the way I'm
using the terminology, ongoing assessment involves a continuous
monitoring of one or more products, the entire inventory, the sales staff, or
the entire company. There are a
number of methods that can be used for an ongoing assessment, which are
explained in the following paragraphs.
Computerized Cash Registers, that Scan Barcodes on Products
The rate of sales of an item, or
the rate of profit obtained from the sale of a product, can be continuously
monitored. This can be done, with
the computerized checkouts system seen in many supermarkets and department
stores. This involves a barcode on
each item, which identifies the item when the cashier scans it. This calculates the bill, and it also
can keep track of each item that is sold.
With this information, the rate of sales, and the rate of profit, from a
product can be obtained.
It is also possible to evaluate
the amount of work performed by each cashier, on a continuous basis. This can indicate which cashiers should
be retained, and perhaps given a raise, and which cashiers to fire.
Another type of ongoing
assessment involves continuous surveys about a company, a product, and/or its
salespeople. This can involve
giving a customer a short questionnaire, each time a product is purchased. It can also involve giving
questionnaires randomly, on an ongoing basis, to a percentage of the customers,
such as 10%. This type of ongoing
assessment can be especially useful in identifying customer
dissatisfaction. An example is
identifying sales personnel that are unfriendly or hostile towards the
customers. It can also be used to
question the customers about their needs and desires for additional products. This information can be used to expand
the product line, based on the needs of the customers.
Ongoing Assessment by Telephone Questionnaires and Interviews
The above technique, of ongoing
assessment, involving a questionnaire, can be carried out on the
telephone. It can also be coupled
with a short interview, or a request for comments about goods or services that
the consumer received. With this
method, after the customer purchased goods or services, he or she is contacted
by telephone.
I have personally experienced
this type of ongoing survey, almost every time I used telephone tech support
from Microsoft, and Verizon’s Internet service. Generally, there were a number of
questions, with a rating scale.
Examples are was the telephone support technician helpful, courteous,
and did he solve your problem.
There is an advantage to both the company and the consumer with this
type of ongoing assessment. For
example, Microsoft's technical support is usually excellent, but I received
poor assistance with one technical issue.
When I was called for the telephone survey, I gave them a very poor
rating, for the service I received.
This resulted in additional calls from Microsoft, with more skilled
technicians offering high quality assistance. After this, I was called again by
Microsoft's telephone survey personnel, to determine if I was satisfied with
the improved service that they provided.
I was very satisfied, and I informed them of this.
Ongoing Assessment with Questionnaires on the Internet
There is a type of ongoing
assessment that is similar to the above, but it involves questionnaires on the
Internet, or in e-mail. If you
received technical support by e-mail, you might receive a questionnaire after
services have been provided. Amazon.com
usually sends a follow-up e-mail after books have been purchased. This involves a website link to a simple
questionnaire, to determine if the books have arrived, and if there are any
complaints.
Automatic Computerized Ongoing Assessment through
the Internet
This method is somewhat different than the above. Instead of talking to the consumer, it
involves ongoing assessment of the performance of a product. This method is used by Microsoft to
monitor problems with the Windows operating system. When there is a malfunction, or error,
caused by software, a dialog box appears on the computer screen, which asks the
consumer to permit the transmission of an error message to Microsoft. A large amount of technical information
is transmitted in a few seconds after the consumer clicks on the OK button. This type of assessment obviously is
only useful where computers can continuously monitor a product.
Ongoing Assessment Based
on the Number of Sales from a Department
or Salesperson
Another type of ongoing
assessment is the evaluation of the number of sales made by a department of a
large company, or by each sales person.
This can involve the number of sales made per unit of time, such as the
number of sales made per week. It
can also involve the profit made per unit of time. This can help management identify what
departments or sales personnel are productive, and it can indicate where
improvements are needed. It can
also suggest what personnel or departments should be terminated. This method can also indicate what
departments should be expanded, based on the rate of sales and the rate of
profit. It can also indicate
which salespeople are outstanding.
Ongoing Marketing Assessment of a Small Business
(Small business means here a
business with less than 12 employees.)
A small business owner might use methods similar to some of the methods,
mentioned above. This is generally
done without a computerized system, and without questionnaires. The small business owner might simply
use his observations, and his mental faculties. He may do ongoing assessments of the
selling rate of products by estimating in his mind, or calculating with pencil
and paper. Instead of using formal
questionnaires, he may have face-to-face conversations with his customers. These simple methods are probably far
more cost-effective for a small business, in most cases, then the methods
described above.
A REPRESENTATIVE SAMPLE OF INDIVIDUALS, TO EVALUATE A MARKET
There are many ways to evaluate a
market, such the methods discussed in the previous sections in this
chapter. This includes surveys with
questionnaires, face-to-face interviews, telephone surveys, focus groups,
etc. Most of the methods of
evaluating a market, including the above techniques, generally require a
representative sample of the potential market.
What exactly is a Representative Sample of a Market?
A representative sample of a
market involves obtaining a relatively small set of individuals that are
similar to all of the people in the market that you want to evaluate. How to use this concept can be somewhat
complicated, because there are many factors involved. However, I will explain what a
representative sample is and its utility in several paragraphs below. I will
use a hypothetical city of one million people, which will represent our market,
for a new brand of toothpaste. This will involve evaluations for the taste and
color of the toothpaste.
To evaluate this market of one
million people, (the entire city) to determine if they will buy this
toothpaste, we can calculate a percentage of the population, for our
representative sample. If we
calculate 0.01% of the population of one million, we obtain 100 people. However, if we use 0.1%, which would be
1000 people, our results will be more accurate, but the survey will cost
considerably more money. If we use
1%, which are 10,000 people, our results will be still more accurate. This of course will even be more
expensive. If we use 10%, which is
100,000 people, we well have a much more accurate result, but this might be
prohibitively expensive. If we use
100% of the population, one million people, we will have the most accurate
result, but this may be totally impractical because of the expense, and many
people may not want to participate.
In general, it is usually not
feasible to use more than a very small percentage of the population of a market
to obtain a representative sample for an evaluation. Let us assume that we are using 0.01% of
the population of our hypothetical city of one million, which are 100 people.
The next step would be to select
100 people for the market evaluation of the toothpaste. There are a number of ways that we can
do this. The simplest way is random
selection. This involves selecting
100 people randomly, which ideally should be done in different locations
throughout the city. A random
sample of consumers can also be obtained by randomly selecting individuals from
the telephone directory. However,
the telephone directory is not an ideal method, because it eliminates
individuals that have unlisted numbers, and people that do not have
phones. It is also possible to
place ads in newspapers to obtain paid volunteers for a representative
sample. However, the individuals
that volunteer might not be representative of all the people in the potential
market, the city. For example, they
may have less financial resources then the majority of the people in the city,
which motivated them to volunteer.
In general, selecting individuals randomly is usually not a perfect
method, but it can produce reasonably accurate results when a market evaluation
is carefully carried out.
Another method of obtaining a
representative sample is to study the demographics of the market, such as in
terms of age, gender, social status, educational level, etc. Let us assume, our hypothetical city of
one million, consists of 10% wealthy, 70% are middle-income, and 20% low
income, and 51% are females, 49% are males. In addition, 50% of the people in our
hypothetical city have a high school education, and 30% have a college
education. Then our sample of 100
people should have the same percentages in relation to the above. However, do these demographics relate to
the use of toothpaste?
However, since we are evaluating
toothpaste, in terms of taste and color, the above demographics may not be very
important. The demographic data
that might be most important is age, and perhaps also gender. This would involve a representative
sample of people that are likely to influence the purchase of toothpaste. This would have to include children,
perhaps from seven years old and up.
As well as adults in different age groups. This method still involves some random
selection, but you are selecting in terms of percent of various demographic
factors, that are likely to relate to purchase or rejection
of the toothpaste. That is we are dealing with
age, including children. Children
will strongly object to toothpaste that tastes bad, and they will most likely
be enthusiastic about tooth paste that tastes good. This will influence the parent’s
decision to buy or not to buy the toothpaste.
Let us assume that we selected a
representative sample of the city based on age and gender, including
children. Now that we covered the
methods of obtaining the sample of the market, we can proceed to the next step,
which is to carry out the study and evaluate the results.
Let us assume, that are sample of
100 people indicated that 30 liked the product, and plan to purchase it. That is 30% of our representative sample
plan to buy the product. The next
step is to make an inference about the entire market based on the results. In our hypothetical case of a city,
representing a market of one million, we can assume 30% of the people will
eventually purchase the product.
The potential customers for the toothpaste in this city, is 300,000
people.
Of course, in an actual
situation, the numbers would probably not be this favorable, and the results
might not be clear cut. The data
obtained from any type of market evaluation can be somewhat ambiguous, and/or
difficult to interpret.
The above of course is a simplified hypothetical example. The product used as an example,
simplified the explanation, because just about everyone uses tooth paste. This raises the question: How do you
evaluate the marketability of other types of products? Some products are only purchased by
individuals in certain categories.
This is explained in the following paragraphs.
If you are evaluating specialized
products, such as jet planes, industrial equipment, and laboratory apparatus,
it is necessary to evaluate a representative sample of the potential
market. The potential market, in
this case is a highly specialized population that is different than the general
population. That is, in the case of
jet planes, you would survey the top level executives from the airlines to determine
if they were interested in the product.
(In the case of top level airline executives, it may not even be
necessary to use a representative sample, because they are few in number, and
you probably can send all of them questionnaires, or even interview all of them
on the telephone.) If you are
evaluating industrial equipment, you will evaluate the opinions and feelings of
top level engineers and management of large companies. If you are selling laboratory apparatus,
you will evaluate a representative sample of scientists and laboratory technicians.
The above examples of a
specialized market are obvious. It
is highly unlikely that a marketing firm would make an error and survey a
representative sample of the general public for purchase of jet planes, or industrial
and laboratory equipment. However,
there are situations that are not so clear cut, and the wrong population can be
evaluated. For example, if you are selling a
moderately expensive automobile, it is easy to make the error and survey a
representative sample of the entire
In general, for a good market
evaluation, it is important to determine the type of individuals that can and
might purchase the product that you are evaluating. This can even be put on a survey
form. For example, in the case of
the automobile, you could ask do you have a driver’s license. What is your income level? Is it over $60,000 a year? Or is it
under $60,000 a year? When this is
done, you would not evaluate the survey data from people without driver’s
licenses or from individuals that make less than $60,000 a year. Of course, the most economical and
efficient method would simply be too target the right population (People with
drivers licenses that make over $60,000 a year.)
Another technique that can be
used with the above is to ask the people that you are surveying did they ever
purchase or use a similar product. You can also ask are you likely to purchase
a similar product in the future. If
the answer is no to all of the above, their opinions might be irrelevant to
your market evaluation. For example,
let us assume you are evaluating the marketability of a new brand of golf
clubs. You would ask the people in
your sample, did you ever use or purchase golf clubs. Are you likely to purchase golf clubs in
the future? If their answer is no,
to all of the above, there opinions about the golf clubs will probably be
irrelevant to your market evaluation.
What is Relevant to Your Market Evaluation, In Terms of Subgroups and
Demographics?
Market evaluations provide
data. The quality and relevance of
the data is determined by the design and overall quality of the market
evaluation. In general, it is
necessary to think in terms of relevance. This means using demographics that are
relevant to the product. It also
means evaluating a representative sample of relevant markets and populations. Repeating the above examples, for
toothpaste you can evaluate a general sample of the population, for the
potential purchase of jet planes you evaluate airline executives, and for
laboratory apparatus, you evaluate the population of laboratory technicians and
scientists.
The proper use of all of the above
concepts will determine if you obtain meaningful data from your market
evaluation. The above suggests a
very important question, which is what is data? Is data information or is there
a difference between these concepts.
I discuss this under the next heading.
DATA, AND INFORMATION, IS
THERE A DIFFERENCE?
Marketing Data and Marketing Information
Is there a difference between data and information? Well it depends on the way the terms are
defined. Information and data are
sometimes considered synonyms.
However, some sources use these terms for two different concepts. (Tech Writing by Design by Peggy J.
Heath http://www.stcwvc.org/galley/0209/c01tech_writing_by_design.htm
and Data and Information http://www.ssuet.edu.pk/taimoor/books/0-672-30637-9/vcl05.htm#E68E36
)
Specifically, data are building blocks that can be used to create information. Information can be created by organizing
or arranging data, into information.
For example, the text that you are reading on your computer screen is
information, and its building blocks are sentences. From the perspective of the computer,
the building blocks are sets of ones and zeros. With this example, we could think of the
sentences as data. The sets of ones
and zeros are data from the perspective of the computer.
The best way to think of data and
information is in terms of a jigsaw puzzle. The tiny pieces of the puzzle must be
properly arranged. These pieces can
be thought of as data. The
completed jigsaw puzzle, with its picture, represents information.
However, unlike a jigsaw puzzle,
sometimes data can be arranged a number of ways to form different types of
information, or even different conclusions. Another important concept is information
can sometimes be broken up into data, and this data can sometimes be used to
create new information.
When we want information to make
marketing decisions, about a product, we probably will start with data. This can be demographic data, or data
obtained using various market evaluation techniques, such as surveys and
interviews. When we obtain the
needed data, we have to organize it into useful information that will help us
make marketing decisions.
Demographics are a set of factors, or
characteristics that can be identified and measured in populations. Some of the factors that relate to
demographics are presented below:
·
The average age of the population
·
Average age of death in the population
·
Average income in the population
·
Average number of children per household
·
Average family size
·
The age distribution of the population expressed in terms of percentages
of each age group.
·
The percentage of people that are working
·
The percentages of people working at unskilled jobs, blue-collar skilled
jobs, white collar jobs, and high status white collar jobs paying over $70,000
a year.
·
The percentage of women in the population
·
The percentage of men in the population
·
Percentage of disabled individuals in the population
·
Native languages (first language) expressed in terms of percentages of
the population
·
Cultural backgrounds expressed in terms of percentage of the population
·
The racial makeup of a population expressed in terms of percentages
·
Religious affiliations expressed in terms of percentages of the
population
·
Educational levels expressed in terms of percentages of the population.
·
Income levels expressed in terms of percentages of the population
The above is not a complete list of all the possible factors that can be
classified as demographics. In
general, demographics can usually be presented in terms of averages (average
income) total numbers (100,000 women, 95,000 men) and percentages (40%
(Afro-American, 60% Caucasian).
Demographic characteristics
presented in terms of averages and/or percentages, can be especially useful for
social scientists. Percentages and averages make it easy to compare one
population with another, even if the two populations are of different sizes.
However, for the purposes of
marketing it is often much more important to know the actual numbers. For example, if you have demographic
data that indicates that 100% of the people on island-X are multimillionaires,
it may seem sensible to open an automobile showroom to sell expensive
Rolls-Royce cars on island-X. Let
us assume we determined that the average income on island X is $20 million a
year. This also certainly suggests
that we should open a new automobile showroom on this island. However, when the demographic data is
expressed in numbers we may find that there are only four people living on
island-X comprising one family.
This certainly presents a totally different picture than the percentages
or averages. Based on the total
numbers (four people, one family,) the logical conclusion is not to open an
automobile showroom on island-X.
Another example will provide even
further insight. (I am using hypothetical numbers in this example.) Let us assume we are contemplating
opening the Rolls-Royce automobile showroom in
Conclusion: for marketing focus
primarily on the numbers. This is
not to say that percentages and averages are of no value in marketing. There are situations where the percentages
are useful for determining the ratios that a product should be manufactured
in. For example, if you are going
to manufacture shoes, it is helpful to know the percentages of people in a
population with different shoe sizes.
The same applies to body built and weight if you are manufacturing
clothing. The various percentages
of age and gender will also be important in determining the ratio of the
different styles and sizes that you should manufacture. However, if you want to know how many
units of various sizes to produce, it is necessary to convert the percentages
into numbers. In general
demographic percentages are useful in determining many types of ratios that
relate to marketing.
How Demographics Can be Used in Marketing
Demographics can be used to
evaluate the feasibility of opening a profitable selling outlet in a
locality. Basically this involves
determining if there are an adequate number of potential customers in the
locality. This information can
sometimes be obtained from demographic data. The example, of the Rolls-Royce showroom
that was presented above, is a good example in this regard. As explained in the previous paragraph,
demographic data in terms of percentages can be used to calculate various
ratios of a market in a specific geographical area. The above examples of manufacturing
shoes and clothing are good illustrations of this utility. There are many other ways of using
demographic data in marketing.
Demographic data can sometimes
lead to hunches or assumptions about the marketability of a product in a
specific geographical location. For
example, if there are many babies in a geographical area, it would be a
reasonable assumption that it would be a good market for baby supplies. In general, demographic data can sometimes
be used to find markets, or market segments, for a product.
Ideally, conclusions that were
obtained from demographic data should be tested for validity by other methods,
when it involves a relatively large investment of money. This can involve surveys, telephone
interviews, face-to-face interviews, and test marketing in the relevant
geographical area. This will reduce
the chances of financial losses as a result of erroneous assumptions based on
demographic data.
Demographic data is sometimes
used by advertisers to reach different segments of a population in a
geographical area. For example, if
you want to advertise new hand soap in the
Erroneous Assumptions Based on Demographic Data
It is easy to come to erroneous
conclusions, when using demographic data.
This can happen when prejudicial assumptions, are applied to various age
groups, racial groups, and occupational and educational levels. Sometimes even assumptions that are
quite reasonable turn out to be erroneous, which may become apparent after a
product is introduced into a geographical area.
Websites on Demographics and Related Concepts
Search phrase with Google:
http://www.census.gov/ Words on website: US Census Bureau
http://factfinder.census.gov/home/saff/main.html?_lang=en
Words on website:
http://www.bls.gov/oco/ocos013.htm Words
on website: U.S. Department of Labor Bureau of Labor Statistics Market and
Survey Researchers
http://www.columbia.edu/cu/lweb/indiv/usgd/rref/census.html
Words on website: U.S. Government Documents Ready Reference Collection
http://labs.businessobjects.com/data_feed/default.asp
Words on website: Data Feed as a Universe
http://www.esri.com/software/bao/pdfs/market_profile.pdf
Words on website: Market
Profile Sample Age, Sex / Gender, Race/ Ethnicity, Education, Location of
residence, Socioeconomic status (SES), Income Employment status, Religion,
Marital status
Ownership (home, car, pet, etc.),, Language, Mobility
http://www.marketresearchterms.com/s.php
Words on website: Market Research Definitions
http://www.tourismplan.msu.edu/Resources/FinRepMtg/Research_Report.pdf
Words on website: Research
& Market Segmentation
29à Click on this hyperlink for a sound file
of the following:
USEFUL OR UNUSUAL WEBSITES ON
MARKETING, BUSINESS AND RELATED CONCEPTS
Search phrase with Google: Marketing in foreign countries
http://www.google.com/search?hl=en&q=Marketing+in+foreign+countries&btnG=Search
This website consists of one or more
search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://hbswk.hbs.edu/item/2153.html
Words on website: Marketing a Country: Promotion as a Tool for Attracting
Foreign Investment.
http://www.groupsplus.com/pages/abroad.htm
Words on website: Understanding Focus Group Research Abroad
The following website presents
some useful information about business and marketing, from a unique
perspective...
http://www.12manage.com/methods_abell_three_dimensional_business_definition.html
Words on website Three
Dimensional Business Definition
Search phrase with Google: Marketing
and law http://www.google.com/search?hl=en&q=Marketing+and+law&btnG=Search
This website consists
of one or more search pages, with many links to other websites. If you do not find what you want on this
website, you can change the search phrase that will appear in a dialog box,
after you click on the above web address.
After changing the search phrase, press the enter key, and you will see
a different set of websites.
http://www.marketingpower.com/bestpractices289.php
Words on website: Best Practices / Marketing Law
http://www.marketingtoday.com/marketinglaws/index.htm
Words on website: Marketing Law Resources
Search
phrase with Google:“Free Access” Delineating Markets
and Market Segments http://www.google.com/search?hl=en&q=%E2%80%9CFree+Access%E2%80%9D+Delineating+Markets+and+Market+Segments&btnG=Google+Search
This website consists of one or more search
pages, with many links to other websites.
If you do not find what you want on this website, you can change the
search phrase that will appear in a dialog box, after you click on the above
web address. After changing the
search phrase, press the enter key, and you will see a different set of
websites.
http://intl-iss.sagepub.com/cgi/content/abstract/2/2/107
Words on website:
Market Configurations: Toward a Framework for
Socio-Economic Studies\
http://www.nyc.gov/html/sbs/nycbiz/html/home/home.shtml
words are website: NYC Business Solutions
http://www.stern.nyu.edu/Sternbusiness/index.html
words on website: STERNbusiness
This is a search engine focused on business
http://www.business.com/directory/advertising_and_marketing/
http://www.themarketingsite.com
Words our website: Welcome to TheMarketingSite.com
http://www.themarketingsite.com/live/index.php
Welcome to TheMarketingSite.com
The following website is a very useful resource for
students, business owners, and marketing managers, especially in relation to
retailing. http://www.artrm.com/index.htm
The following website is essentially a search engine for
information on all aspects of marketing.
Unfortunately, most of the articles it provides require a fee.
http://www.debrief.co.uk/Default.asp?ID=1