Thursday, August 18, 2005

Understanding Money and Banking

business essentials -- part 14 -- summary

Money

Any item that is portable, divisible, durable, and stable satisfies the four basic characteristics of money. The money also serves three functions: it is a medium of exchange, a store of value, and a unit of account. The nation's money supply is often determined by two measures. M-1 includes liquid (or spendable) forms of money: currency (bills and coins), demand deposits,and other checkable deposits (such as ATM account balances and NOW accounts). M-2 includes M-1 plus items that cannot be directly spent but can be converted easily into spendable forms: time deposits, money market funds, and savings deposits. Credit must also be considered as a factor in the money supply.

Financial institutions

The U.S. financial system includes federal and state chartered commercial banks, savings and loan associations, mutual savings banks, credit unions, and non deposit institutions such as pension funds and insurance companies. Commercial banks accept deposits that they used to make loans and earn profits. Savings and loan associations also accept deposits and make loans, primarily for home mortgages. In mutual savings banks, all depositors are owners of the bank, and all profits are divided proportionately among them. In credit unions, deposits are excepted only from members.

Numerous other organizations called non deposit institutions -- pension funds, insurance companies, finance companies, and securities investment dealers -- take in money, provide interest or other services, and make loans. In the competitive finance business, most commercial banks offer a wide range of special services: (1) pension and trust services, (2) international services, (3) financial advice and brokerage services, and (4) automated teller machines (ATMs).

Creating Money

The money supply expands because banks can loan out most (although not all) of the money they take in from deposits. Out of a deposit of $100, the Bank may hold $10 in reserve and loan 90% to borrowers. There will still be $100 on deposit, and borrowers will also deposit the $90 loan in their banks. Now the borrowers banks have $81 (90% of $90) available for new loans. Banks, therefore, have turned the original $100 into $271 ($100 + $90 + $81).

The government regulates commercial banks to ensure a sound financial system. The Federal Deposit Insurance Corporation (FDIC) insures deposit and guarantees, through its Bank Insurance Fund (BIF), the safety of all deposits up to the current maximum of $100,000. It also examines the activities and accounts of all member banks.

The Federal Reserve System

The Federal Reserve System (or the Fed) is the nation's central bank. As the governments bank and, the Fed produces currency and lends money to the government. As the bankers bank of, it lends money (at interest) to member banks, stores required reserve funds for banks, and clears checks for them. The Fed is empowered to audit member banks and sets U.S. monetary policy by controlling the country's money supply. To control the money supply, the Fed specifies reserve requirements (the percentage of its deposits databank must hold with the Fed). It sets the discount rate at which it lends money to banks and conducts open market operations to buy and sell securities. It also exerts influence through selective credit controls (such as margin requirements governing the credit granted to buyers by securities brokers).

Changes in the financial industry

Deregulation
the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 and subsequent laws promote competition by eliminating many restrictions on banking services.

Interstate banking
The Interstate Banking Efficiency Act (1994) allows banks to operate across state lines.

Electronic technologies
Banks are increasingly investing in technology as a way to improve efficiency and customer service: (1) debit cards allow the transfer of money between accounts and can be used to make retail purchases at point-of-sale (POS) terminals, which relate purchase information directly to the banks computer system for automatic transfer to the stores account. (2) the smartcard can be programmed with electronic money at ATM machines. (3) E-cash is money that moves along multiple channels via digital electronic transmissions. It is outside the established network of banks, checks, and paper currency overseen by the Fed. Traditional currency is used to buy electronic funds, which are downloaded over phone lines, cable, or satellite into a PC or a portable "electronic wallet" that can store and transmit e-cash. The online shopper pays by sending digital money into the sellers e-cash funds, which are instantaneously updated.

International banking

Electronic technologies now permits the global financial transactions to support the growing importance of international finance. The country to country transactions are conducted according to an international payment process that moves money between buyers and sellers in different nations. The payment process recognizes the current exchange rates of currencies for all countries involved in an international exchange.

Two United Nations agencies help to finance international trade: (1) the World Bank funds national improvements by making loans to build roads, schools, and so forth. The improvements enable borrowers to increasing productive capacity and international trade. (2) to the in the International Monetary Fund (IMF), some 150 nations have combined resources for the following purposes: (a) to promote the stability of exchange rates; (b) to provide temporary, short-term loans to member countries; (c) to encourage cooperation on international monetary issues; and (d) to encourage development of a system for international payments.

Understanding Money and Banking -- terms

business essentials -- part 14 -- terms

money -- any object that is portable, divisible, durable, stable and serves as a medium of exchange, a store of value, and a unit of account
M-1 -- measure of the money supply that includes only the most liquid (spendable) forms of money
currency -- government issued paper money and metal cloins
check -- demand deposit order instructing a bank to pay a given sum to a specified payee
M-2 -- measure of all the money supply that includes all the components of M-1 plus the forms of money that can be easily converted into spendable form
time deposit -- bank funds that cannot be withdrawn without notice or transferred by check
money market mutual fund -- fund of short-term, low risk financial securities purchased with the assets of investor owners pooled by a nonbank institution
commercial bank -- federal or state-chartered financial institution excepting deposits that it uses to make loans and earn profits
prime rate -- interest rate available to a bank's most creditworthy customers
savings and loan association (S&L) -- financial institution excepting deposits and making loans primarily for home mortgages
mutual savings bank -- financial institution whose depositors are owners sharing in its profits
credit union -- financial institution that accept deposits from, and makes lloans to, only its members, usually employees of a particular organization
pension fund -- nondeposit pool of funds managed to provide retirement income for its members
insurance company -- nondeposit institution that invests the funds collected as premiums charged for insurance coverage
finance company -- nondeposit institution that specializes in making loans to businesses and consumers
security and investment dealer (broker) -- nondeposit institution that buys and sells stocks and bonds both for investors and for its own accounts
individual retirement account (IRA) -- tax-deferred pension fund with with wage earners supplement their retirement funds
trust services -- bank management of an individual's investments, payments, or estate
letter of credit -- bank promise, issued for a buyer, to pay a designated firm a certain amount of money is specified conditions are met
bankers acceptance -- bank promise, issued for a buyer, to pay a designated firm a specified amount at a future date
automated teller machine (ATM) -- electronic machine that allows customers to conduct account related activities 24 hours a day, seven days a week
electronic funds transfer (EFT) -- communication of fund transfer information over wire, cable, or microwave
Federal Deposit Insurance Corporation (FDIC) -- federal agency that guarantees the safety of all deposits up to $100,000 in the financial institutions that insures
Federal Reserve System (the Fed) -- Central Bank of the United States, which acts as the government bank, serves member commercial banks, and controls the nation's money supply
float -- total amount of checks written but not yet cleared through the Federal Reserve
monetary policy -- policies by which the Federal Reserve manages the nation's money supply and interest rates
reserve requirement -- percentage of its deposits that a bank must hold in cash or on deposit with the Federal Reserve
discount rate -- interest rate at which member banks can borrow money from the Federal Reserve
open market operations -- the Federal Reserves sales and purchases of securities in the open market
selective credit controls -- Federal Reserve authority to set both margin requirements for consumer stock purchases and credit rules for other consumer purchases
debit card -- plastic card that allows an individual to transfer money between accounts
point-of-sale (POS) terminal -- electronic device that allows customers to pay for retail purchases with debit cards
smart card -- credit card size plastic card with an embedded computer chip that can be programmed with electronic money
e-cash -- electronic money that moves between consumers and businesses via digital electronic transmissions
World Bank -- United Nations agency that provides a limited scope of financial services, such as funding national improvements and undeveloped countries
International Monetary Fund (IMF) -- United Nations agency consisting of a about 150 nations that have combined resources to promote stable exchange rates, provide temporary short-term loans, and serve other purposes

Wednesday, August 17, 2005

Marketing in Society

Social Responsibility and Marketing Ethics

A marketing system should sense, serve, and satisfy consumer needs and improve the quality of consumers lives. In working to meet consumer needs, marketers may take some actions that are not to everyone's liking or benefit. Marketing managers should be aware of the main criticisms of marketing.

Marketing its impact on individual consumer welfare has been criticized for its high prices, deceptive practices, high-pressure selling, shoddy or unsafe products, planned obsolescences, and poor service to disadvantaged consumers. Marketing's impact on society has been criticized for creating false wants and too much materialism, too few social goods, cultural pollution, and too much political power. Critics have also criticized marketing impact on other businesses for harming competitors and reducing competition through acquisitions, practices that create barriers to entry, and unfair competitive marketing practices.

Concerns about the marketing system have led to citizen action movements. Consumerism is an organized social movement intended to strengthen the rights and power of consumers relative to sellers. Alert marketers view it as an opportunity to serve consumers better by providing more consumer information, education, and protection. Environmentalism is an organized social movement seeking to minimize the harm done to the environment and quality of life by marketing practices. The first wave of modern environmentalism was driven by environmental groups and concern consumers, whereas the second wave was driven by government, which passed laws and regulations governing industrial practices that have an impact on the environment. Moving into the 21st century, the first to environmentalism waves are merging into a third and stronger wave in which companies are accepting responsibility for doing no environmental harm. Companies now are adopting policies of environmental sustainability -- developing strategies that both sustain the environment and produce profits for the company.

Social Responsibility

Many companies originally opposed the social movements and laws, but most of them now recognize a need for positive consumer information, education, and protection. Some companies have followed a policy of enlightened marketing, which holds that a company's marketing should support the best long run performance of the marketing system. Enlightened marketing consists of five principles: consumer oriented marketing, innovative marketing, value marketing, sense of mission marketing, and societal marketing.

Ethics in Marketing

Increasingly, companies are responding to the need to provide company policies and guidelines to help their managers deal with questions of marketing ethics. Of course even the best guidelines cannot result all the difficult ethical decisions that individuals and firms must make. But there are some principles among which marketers can choose. One principal states that such issues should be decided by the free market and legal system. A second, and more enlightened principal, puts responsibility not in the system buy in the hands of individual companies and managers. Each firm in marketing manager must work out a philosophy of socially responsible and ethical behavior. Under the societal marketing concept, managers must look beyond what is legal and allowable and develop standards based on personal integrity, corporate consscience, and long-term consumer welfare.

Because business standards and practices very from country to country, the issue of ethics poses special challenges for international marketers. The growing consensus among today's marketers is that it is important to make a commitment to a common set of shared standards worldwide.

Marketing and Society -- terms

marketing fundamentals -- part 16 -- terms

Social Responsibility and Marketing Ethics

Consumerism -- an organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers
environmentalism -- an organized movement of concerned citizens and government agencies to protect and improve peoples living environment
environmental sustainability -- a management approach that involves developing strategies that both sustain the environment and produce profits for the company
enlightened marketing -- a marketing philosophy holding that a companys marketing should support the best long-run performance of the marketing system; its five principles include customer oriented marketing, innovative marketing, value marketing, sense of mission marketing, and societal marketing
consumer oriented marketing -- the philosophy of enlightened marketing that holds that the company should view and organize its marketing activities from the consumers point of view
value marketing -- a principal of enlightened marketing that holds that a company should put most of its resources into value building marketing investments
sense of mission marketing -- a principal of enlightened marketing that holds that a company should define its mission in broad social terms rather than narrow product terms
societal marketing -- a principal of enlightened marketing that holds that a company should make marketing decisions by considering consumers wants, the companies requirements, consumers long run interests, and societies long run interests
deficient products -- products that have neither immediate appeal nor long run benefits
pleasing products -- products that give high immediate satisfaction but may hurt consumers in the long run
salutary products -- products that have little appeal but may benefit consumers in the long run
desirable products -- products they give both high immediate satisfaction and long run benefits

Tuesday, August 16, 2005

The Global Marketplace

marketing fundamentals -- part 15 -- summary

Companies today can no longer afford to pay attention only to their domestic market, regardless of its size. Many industries are global industries, and firms to operate globally achieve lower costs and higher brand awareness. At the same time, global marketing is risky because of variable exchange rates, unstable governments, protectionist terrorists and trade barriers, and several other factors. Given the potential gains and risks of international marketing, companies need a systematic way to make their global marketing decisions.

A company must understand the global marketing environment, especially the international trade system. It must assess each foreign markets economic, political/legal, and cultural characteristics. The company must then decide whether it wants to go abroad and consider the potential risks and benefits. It must decide on the volume of international sales it wants, how many countries it wants to market in, and which specific markets it wants to enter. This decision calls for weighing the problem rate of return on investment against the level of risk.

Entering International Markets

The company must decide how to enter each chosen market -- whether through exporting, joint venturing, or direct investment. Many companies start as exporters, move to joint ventures, and finally make a direct investment in foreign markets. In exporting, the company enters a foreign market by sending and selling products through international marketing intermediaries (indirect exporting) or the company's own department, branch, or sales representative or agents (direct exporting). When establishing a joint venture, a company enters foreign markets by joining with foreign companies to produce or market a product or service. In licensing, the company enters a foreign market by contracting with the licensee in the foreign market, offering the right to use a manufacturing process, trademark, patent, trade secret, or other item of value or a fee or royalty.

Companies must also decide how much their products, promotion, price, and channels should be adapted for each foreign market. At one extreme, global companies use a standardized marketing mix worldwide. Others use an adaptive marketing mix, in which they adjust the marketing mix to each target market, bearing more costs but hoping for a larger market share in return.

The company must develop an effective organization for international marketing. Most firms start with an export department and graduate to an international division. A few become global organizations, with worldwide marketing play and in managed by the top officers of the company. Global organizations view the entire world as a single, borderless market.

The Global Marketplace -- terms

marketing fundamentals -- part 15 -- terms

global firm -- a firm that, by operating in more than one country, gains R&D, production, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors
tariff -- a tax levied by a government against certain imported products. Tariffs are these online to raise revenue or to protect domestic firms
quota -- a limit on the amount of goods that importing country will accept in certain product categories; it is designed to conserve on foreign exchange and to protect local industry and employment
embargo -- a ban on the import of a certain product
exchange controls -- government limits on the amount of foreign exchange with other countries and on the exchange rate against other currencies
nontariff trade barriers -- nonmonetary barriers to foreign products, such as biases against a foreign companies bids or product standards that go against a foreign companies product features
economic community -- a group of nations organized to work toward common goals in the regulation of international trade
countertrade -- international trade involving the direct or indirect exchange of goods for other goods instead of cash
exporting -- entering a foreign market by selling goods produced in the companies home country, often with little modification
joint venturing -- entering foreign markets by joining with foreign companies to produce or market a product or service
licensing -- a method of entering a foreign market in which the company enters into an agreement with a licensee in the foreign market, offering the right to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty
contract manufacturing -- a joint venture in which accompany contracts with manufacturers in a foreign market to produce the product or provide its service
management contracting -- a joint venture in which the domestic firm supplies the management know-how to a foreign company that supplies the capital; the domestic firm exports management services rather than products
joint ownership -- a joint venture in which a company joint investors in a foreign market to create a local business in which the company shares joint ownership in control
direct investment -- entering a foreign market by developing form based assembly or manufacturing facilities
standardized marketing mix -- an international marketing strategy for using basically the same product, advertising, distribution channels, and other elements of the marketing mix in all the companies international markets or
adapted marketing mix -- an international marketing strategy for adjusting the marketing mix elements to each international target market, bearing more costs but hoping for a larger market share and return
straight product extension -- marketing a product in a foreign market without any change
product adaptation -- adapting a product to meet local conditions or wants in foreign markets
product invention -- creating new products or services for foreign markets
communication adaptation -- a global communications strategy of fully adapting advertising messages to local markets
whole-channel view -- the signing international channels that take into account all the necessary links in distributing the seller's products to final buyers, including the seller's headquarters organization, channels among nations, and channels within nations

Sunday, August 14, 2005

Marketing in a Digital Age

marketing fundamentals -- part 14 -- summary

The Digital Age

Four major forces underlie the digital age:
  1. digitalization and connectivity
  2. the explosion of the Internet
  3. new types of intermediaries
  4. and customization and customerization

Much of today's business operates on digital information, which flows through connected networks. Intranets, extranets, and the Internet now connect people and companies with each other and important information. The Internet has grown explosively to become the revolutionary technology of the new millennium, empowering consumers and businesses alike with the blessings of connectivity.

The Internet and other technologies have changed the ways that companies serve their markets. New Internet marketers and channel relationships have arisen to replace some types of traditional marketers. The new technologies are also helping marketers to tailor their offers effectively to targeted customers were even to help customers customize their own marketing offers. Finally, the New Economy technologies are blurring the boundaries between industries, allowing companies to pursue opportunities that lie at the convergence of two or more industries.

E-business

Conducting business in the New Economy will call for a new model of marketing strategy and practice. Companies need to retain most of the skills and practices that have worked in the past. However, they must also add major new competencies and practices if they hope to grow and prosper in the New Economy. E-business is the use of electronic platforms to conduct a companies business. E-commerce involves buying and selling processes supported by a electronic means, primarily the Internet. It includes e-marketing (the selling side of e-commerce) and E-purchasing (the buying side of e-commerce).

E-commerce benefits both buyers and sellers. For buyers, e-commerce makes buying convenient and private, provides greater product access and selection, and makes available a wealth of product and buying information. It is interactive and immediate and gives the consumer a greater measure of control over the buying process. For sellers, e-commerce is a powerful tool for building customer relationships. It also increases the sellers speed and efficiency, helping to reduce selling costs. E-commerce also offers great flexibility and better access to global markets.

Companies of all types are now engaged in e-commerce. The Internet gave birth to the click-only dot-coms, which operate only online. In addition, many traditional brick and mortar companies have now added e-marketing operations, transforming themselves into click and mortar competitors. Many click and mortar companies are now having more online success than their click only competitors.

Companies can conduct e-marketing in any of four ways:
  1. creating a web site
  2. placing ads and promotions online
  3. setting up or participating in Web communities
  4. or using online e-mail or webcasting

The first that typically is to set up a web site. Corporate Web sites are designed to build customer goodwill into supplement other sales channels, rather than sell the company's products directly. Marketing web sites engage consumers in and interaction that will move them closer to a direct purchase or other marketing out come. Beyond simply setting up a site, companies must make their sites engaging, EZ to use, and useful in order to attract visitors, hold them, and bring them back again.

E-marketers can use various forms of online advertising to build their Internet brands or to attract visitors to their web sites. Beyond online advertising, other forms of online marketing include content sponsorships, microsites, and viral marketing.

E-commerce continues to offer great promise for the future. For most companies, online marketing will become an important part of a fully integrated marketing mix. For others, it will be a major means by which they serve the market. Eventually, the "e" will fall away from e-business or e-marketing as companies become more adapt at integrating e-commerce with their everyday strategies and tactics. However, e-commerce also faces many challenges. One challenge is Web profitability -- surprisingly few companies are using the Web profitably. The other challenge concerns legal and ethical issues -- issues of online privacy and security, Internet fraud, and the Digital Divide. Despite these challenges, companies large and small are quickly integrating online marketing into their marketing strategies and mixes.

Marketing in the Digital Age -- terms

marketing fundamentals -- part 14 -- terms

intranet -- a network that connects people within a company to each other into the company network
extranet -- a network that connects a company with its suppliers and distributors
Internet -- a vast public web of computer networks that connects users of all types all around the world to each other and an amazingly large "information repository"
customerization -- leaving it to individual customers to design the marketing offering -- allowing customers to be first prosumers rather than only consumers
E-business -- they use of electronic platforms -- intranets, extranets, in the Internet -- to conduct the company's business
E-commerce -- buying and selling processes supported by electronic means, primarily the Internet
E-marketing -- the marketing side of the e-commerce -- company efforts to communicate about, promote, and sell products and services over the Internet
B2C (business-to-consumer) e-commerce -- the online selling of goods and services to final consumers
B2B (business-to-business) e-commerce -- firms using B2B trading networks, auction sites, spot exchanges, online product catalogs, barter sites, and other online resources to reach new customers, serve current customers more effectively, and obtain buying efficiencies and better prices
open trading exchanges -- huge e-marketspaces in which B2B buyers and sellers find each other online, share information, and complete transactions efficiently
private trading networks (PTNs) -- B2B trading networks that link a particular seller with its own trading partners
C2C (consumer-to-consumer) e-commerce -- online exchanges of goods and information between final consumers
C2B (consumer-to-business) e-commerce -- online exchanges in which consumers search out sellers, learn about their offers, and initiate purchases, sometimes even driving transaction terms
click-only companies -- the so-called dot-coms, which operate only online, without any brick and mortar market presence
click-and-mortar companies -- traditional brick and mortar companies that have added e-marketing to their operations
corporate Web site -- a web site design to build customer goodwill and to supplement other sales channels, rather then to sell the company's products directly
marketing Web site -- a web site that engages consumers in interactions that will move them closer to a direct purchase or other marketing out come
online advertising -- advertising that appears while consumers are surfing the Web, including banner and kicker adds, skyscrapers, and other forms
viral marketing -- the Internet version of word-of-mouth marketing -- e-mail messages or other marketing events that are so infectious customers will want to pass them along to friends
Web communities -- Web sites were members can congregate online and exchange views on issues of common interest
spam -- unsolicited, unwanted commercial e-mail messages

Saturday, August 13, 2005

Company and Marketing Strategy

marketing fundamentals -- part 2 -- summary

Partnering to Build Customer Relationships

Companywide Strategic Planning

Strategic planning sets the stage for the rest of the company's planning. Marketing contributes to strategic planning, and the overall plan defines marketing's role in the company. Although formal planning offers a variety of benefits to companies, not all companies use it or use it well. Although many discussions of strategic planning focus on large corporations, small businesses also can benefit greatly from sound strategic planning.

Strategic planning involves developing a strategy for long-term survival and growth. It consists of four steps: defining the companies mission, setting the objectives and goals, developing a business portfolio, and developing functional plans. Defining a clear company mission begins with drafting a formal mission statement, which should be market-oriented, realistic, specific, motivating, and consistent with the marketing environment. The mission is then transformed into detailed supporting goals and objectives to guide the entire company. Based on those goals and objectives, headquarters designs a business portfolio, deciding which businesses and products should receive more or fewer resources. In turn, each business and product unit must develop detailed marketing plan's in line with a companywide plan. Comprehensive and sound marketing plans support company strategic planning by detailing specific opportunities.

Business Portfolios

Guided by the companies mission statement and objectives, management plans its business portfolio, or the collection of businesses and products that make up the company. The firm wants to produce a business portfolio that best fits its strengths and weaknesses to opportunities in the environment. To do this, it must analyze and adjust its current business portfolio and development growth in downsizing strategies for adjusting the future portfolio. The company might use a formal portfolio planning method. But many companies are now designing more customized portfolio planning approaches that better suit their unique situations. The product/market expansion grid suggest for possible growth paths: market penetration, market development, product development, and diversification.

Marketers Partners

Under the strategic plan, the major functional departments -- marketing, finance, accounting, purchasing, operations, information systems, human resources, and others -- must work together to accomplish strategic objectives. Marketing plays a key role in the companies strategic planning by providing a marketing concept philosophy and inputs regarding attractive market opportunities. Within individual business units, marketing designs strategies for reaching the units objectives and helps to carry them out profitably.

Marketers alone cannot produce superior value for customers. It can be only a partner in attracting, keeping, and growing customers. A company's success depends on how well each department performs its customer value adding activities and how well the departments work together to serve the customer. Thus, marketers must practice partner relationship management. They must work closely with partners and other company departments to form an effective value chain that serves the customer. And they must partner effectively with other companies in the marketing system to form a competitively superior value delivery network.

Customer driven marketing strategy and mix

Consumer relationships are at the center of marketing strategy and programs. Through market segmentation, target marketing, and market positioning, the company divides the total market into smaller segments it can serve best, and besides how it wants to bring value to target consumers. It then designs a marketing mix to produce the response it wants in the target market. The marketing mix consists of product, price, place, and promotion decisions.

Marketing Management Functions

To find the best strategy and mix and to put them into action, the company engages in marketing analysis, planning, implementation, and control. The main components of a marketing plan are the executive summary, current marketing situation, threats and opportunities, objectives and issues, marketing strategies, action programs, budgets, and controls. To plan good strategies is often easier than to carry them out. To be successful, companies must also be effective at implementation -- turning marketing strategies into marketing actions.

Much of the responsibility for implementation goes to the companies marketing department. Modern marketing departments can be organized in one or combination of ways: functional marketing organization, geographic organization, product management organization, or market management organization. In this age of customer relationships, more and more companies are now changing their organizational focus from product or territory management to customer relationship management. Marketing organizations carry out marketing control, both operating control and strategic control. They use marketing audits to determine marketing opportunities and problems, recommending short run and long run actions to improve overall marketing performance. Through these activities, the company watches and adapts to the marketing environment.

Company and Marketing Strategy - terms

marketing fundamentals -- part 2 -- terms

Partnering to Build Customer Relationships

Strategic planning -- the process of developing and maintaining a strategic fit between the organization's goals and capabilities and it's changing marketing opportunities. It involves defining a clear company mission, setting supporting objectives, designing a sound business portfolio, and coordinating functional strategies.
Mission statement -- a statement of the organization's purpose -- what it wants to accomplish in the larger environment
business portfolio -- a collection of businesses and products that make up the company
portfolio analysis -- a tool by which management identifies and evaluates the various businesses making up the company
growth-share matrix -- a portfolio planning method that evaluates a companies strategic business units in terms of their market growth rate in relative market share. SBU's are classified as stars, cash cows, question marks, or dogs
stars -- stars are high-growth, by sheer businesses or products
cash cows -- low growth, high share business or products. They need less investment to hold their market share
question marks -- low share business units in high-growth markets. They require a lot of cash to hold their share, let alone increased it
dogs -- low growth, low share businesses and products. They may generate enough cash to maintain themselves that do not promised to be large sources of income
products/market expansion grid -- a portfolio planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification
market penetration -- a strategy for company growth by increasing sales of current products to current market segments without changing the product
market development -- a strategy for company growth by identifying and developing new market segments for current company products
product development -- a strategy for company growth by offering modified or new products to current market segments
diversification -- a strategy for company growth through starting up or requiring businesses outside the companys current products and markets
downsizing -- reducing the business portfolio by eliminating products or business units that are not profitable or that no longer fit the company's overall strategy
value chain -- the series of departments that carry out value creating activities to design, produce, market, deliver, and support a firm's products
marketing strategy -- the marketing logic by which the company hopes to achieve strong and profitable customer relationships. It involves deciding which customers to serve a (segmentation and targeting) and with what value proposition (differentiation and positioning)
market segmentation -- defining a market into distinct groups of buyers who have distinct needs, characteristics, or behaviors and that might require separate products or marketing mixes
market segment -- a group of consumers to respond in a similar way to a given set of marketing efforts
target marketing -- the process of evaluating each market segment attractiveness and selecting one or more segments to enter
market positioning -- arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers
marketing mix -- just set of controllable tactical marketing tools -- product, price, place, and promotion -- that the firm blends to produce the response it wants in the target market
marketing plan -- a detailed plan for product or brand that assesses the current marketing situation and outlines marketing objectives, a marketing strategy, action programs, budgets, and controls
marketing implementation -- the process that turns marketing strategies and plans into marketing actions in order to accomplish strategic marketing objectives
marketing control -- the process of measuring in evaluating the results of marketing strategies and plans, and taking corrective action to ensure that objectives are achieved
marketing audit -- a comprehensive, systematic, independent, and periodic examination of company's environment, objectives, strategies, and activities to determine problem areas and opportunities in to recommend a plan of action to improve the company's marketing performance

Understanding Principles of Accounting

business essentials -- part 13 -- summary

Accounting is a comprehensive system for collecting, analyzing, and communicating financial information. It measures business performance and translates the results into information for management decisions. It also prepares performance reports for owners, the public, and regulatory agencies, thereby providing an accurate picture of the firm's financial health.

There are two main fields and accounting: (1) financial accounting deals with external information users (consumer groups, unions, stockholders, and government agencies). It prepares income statements, balance sheets, and other financial reports published for shareholders in the public. (2) managerial (or management) to accounting serves internal users, such as managers at all levels.

Certified public accountants (CPAs) are licensed professional to provide auditing, tax, and management advisory services for other firms and individuals. CPAs are always independent of the firms they audit. Many businesses hire their own salaried employees -- private accountants -- to perform internal accounting activities. Certified management accountants (CMAs) are certified professionals who provide services to support manager's in such areas as taxation, budgeting, internal auditing, and cost analysis.

CPA Vision Project

The Vision Project is a profession wide assessment to see what the future of the accounting profession will be like. It was initiated because of the declining number of students entering the accounting profession and because of rapid changes in the business world. Practicing CPAs and other industry leaders participated in identifying key forces that are affecting the profession. Then they developed recommendations for change, including a set of core services that the profession should offer clients and a set of core competencies that CPAs should possess. Overall, the new vision reflects changes in this CPAs culture and professional lifestyle.

Accounting Concepts

Accountants use the following equation to balance the data pertaining to financial transactions:

Assets = liabilities + owners equity

We can rewrite the accounting equation to show the value of the firm to the owners:

Assets - liabilities = owners equity

In the accounting equation, if assets exceed liabilities, owners equity is positive; if the firm goes out of business, owners will receive some cash (a gain) after selling assets and paying off liabilities. If liabilities outweigh assets, owners equity is negative; assets aren't enough to pay off debt. If the company goes under, owners will get a cash and some creditors won't get paid.

Because every transaction affects two accounts, accountants use a double entry accounting system to record the dual effects. Because the double entry system requires at least two bookkeeping entries for each transaction, it keeps the accounting equation in balance. These tools serve as double checks for counting errors.

Financial Statements

Accounting summarizes the results of the firm's transactions and issues reports to help managers make informed decisions. The class of reports known as financial statements is divided into three categories.
(1) balance sheets -- sometimes called statement of financial position, supply detailed information about the accounting equation factors such as assets, liabilities, and owners equity, ask a given point in time.
(2) the income statement -- sometimes called a profit-and-loss statement, describes revenues and expenses to show a firm's annual profit or loss.
(3) a statement of cash flows -- is a publicly traded statement which describes its yearly cash receipts and payments. It shows the effects on cash of three activities: (1) Cash flows from operations, (2) Cash flows from investing, and (3) Cash flows from financing.

Accountants follow standard reporting practices and principles when they prepare financial statements. Otherwise, users wouldn't be able to compare information from different companies, and they might misunderstand -- or be led to misconstrue -- a company's true financial status. The following are three of the most important standard reporting practices and principles:
(1) revenue recognition is the formal recording and reporting of revenues in the financial statements. All firms burned revenues continuously as they make sales, the earnings are not reported until the earnings cycle is completed. This cycle is complete under two conditions: (a) the sale is complete and the product delivered; (b) the sale price has been collected or is collectible. This practice assures interested parties that the statement gives a fair comparison of what was gained for the resources that were given up.
(2) the matching principal states that expenses will be matched with revenues to determine net income. It permits users to see how much net gain resulted from the assets that had to be given up in order to generate revenues.
(3) because they have inside knowledge, management prepares additional information that explain certain events or transactions, or discloses the circumstances behind certain results. Full disclosure means that financial statements include management interpretations and explanations to help external users understand information contained in statements.

Financial Ratios

Financial statements provide data that can be applied to ratios (comparative numbers). Ratios can then be used to analyze the financial health of one or more companies. Ratios can help creditors, investors, and managers assess the firm's finances. They can also be used to check a firm's progress by comparing current and past statements.

Solvency ratios, such as the current ratio, estimate risk by measuring the ability to meet current obligations out of current assets. Long-term solvency ratios, such as the debt to owners equity ratio (or debt-to-equity ratio), described the extent to which a firm is financed through borrowed money. High indebtedness can be risky because it requires payment of interest and repayment of borrowed funds. Profitability ratios -- return on equity and earnings per share -- measure potential earnings. Activity ratios reflect management's use of assets by measuring the efficiency in with which a firm uses its resources. The inventory turnover ratio, for example, measures the average number of times the inventory is sold in restocked annually -- that is, how quickly it is produced and sold. A high inventory turnover ratio means a efficient operations: because a smaller amount of investment is tied up in the inventory, the firm's funds can be put to work elsewhere to earn greater returns.

Accounting for foreign transactions involve special procedures, such as translating the values of different countries currencies and accounting for the effects of exchange rates. Moreover, currencies are subject to change: as they are traded each day around the world, their values are determined by market forces -- what buyers are willing to pay for them. The resulting values are foreign currency exchange rates, which can be fairly volatile.

International purchases, sales autocratic, and accounting for foreign subsidiaries all involve transactions affected by exchange rates. When a U.S. company imports a French product, it's accountant must be sure that its books reflect its true costs. The amount owed to the French seller changes daily along with the exchange rate between euros and dollars. The American accountant must therefore identified the actual rate on the day that payment in euros is made so that the correct U.S. dollar cost of the product is reported.

Friday, August 12, 2005

Understanding Principles of Accounting

business essentials -- part 13 -- terms

accounting -- comprehensive system for collecting, analyzing, and communicating financial information
bookkeeping -- recording of accounting transactions
accounting information system (AIS) -- organized means by which financial information is identified, measured, recorded, and retained for use in accounting statements and management reports
controller -- person who manages all of a firms accounting activities (chief accounting officer)
financial accounting system -- the field of accounting concerned with external users of a company's financial information
managerial (or management) accounting system -- field of accounting that's serves internal users of a company's financial information
certified public accountant (CPA) -- accountant licensed by the state and offering services to the public
audit -- systematic examination of the companies accounting system to determine whether its financial reports fairly represents its operations
generally accepted accounting principles (GAAP) -- excepted rules and procedures governing the content and form of financial reports
management advisory services -- specialized accounting services to help managers resolve a variety of business problems
private accountant -- salaried accountant hired by a business to carry out its day-to-day financial activities
certified management accountant (CMA) -- professional recognition of management qualifications awarded by the Institute of Management Accountants
asset -- any economic resource expected to benefit a firm or an individual who owns it
liability -- debt owned by a firm to an outside organization or individual
owners equity -- amount of money that owners would receive if they sold all of the firm's assets and paid all of its liabilities
double-entry accounting system -- bookkeeping system that balances the accounting equation by recording the dual effects of every financial transaction
financial statement -- any of several types of reports summarizing a company's financial status and measuring its financial health
balance sheet -- financial statement detailing a firm's assets, liabilities, and owners equity
current asset -- asset that can or will be converted into cash within the following year
liquidity -- ease of which which an asset can be converted into cash
accounts receivable -- amount due from a customer who has purchased goods on credit
merchandise inventory -- cost of merchandise that has been acquired for sale to customers and is still on hand
prepaid expenses -- expense, such as prepaid rent, that is paid before the upcoming period in which it is due
fixed asset -- assets with long-term use or value, such as land, buildings and equipment
depreciation -- process of distributing the cost of an asset over its life
intangible asset -- nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit
goodwill -- amount paid for an existing business above the value of its other assets
current liability -- debt that must be paid within the year
accounts payable -- current liability consisting of bills owed to suppliers, plus wages and taxes due within the upcoming year
long-term liability -- debt that is not due for more than one year
paid-in capital -- additional money, above proceeds from stock sale, paid directly to the firm by its owners
retained earnings -- earnings retained by a firm for its use rather than paid as dividends
income statement (or profit-and-loss statement) -- and financial statement listing a firm's annual revenues and expenses so that a bottom-line shows a annual profit or loss
revenues -- funds that flow into a business from the sale of goods or services
cost of goods sold -- total cost of obtaining materials for making the products sold by a firm during the year
gross profit (or gross margin) -- revenues obtained from goods sold minus cost of goods sold
operating expenses -- costs, other than the cost of goods sold, incurred in producing a good or service
operating income -- gross profit minus operating expenses
net income (or net profit or net earnings) -- gross profit minus operating expenses and income taxes
statement of cash flows -- financial statement describing a firm's yearly cash receipts and cash payments
budget -- detailed statement of estimated receipts and expenditures for a period of time in the future
solvency ratio -- financial ratio, either short or long-term, for estimating the risk in investing in a firm
profitability ratio -- financial ratio for measuring a firms potential earnings
activity ratio -- financial ratio for evaluating management's use of a firm's assets
liquidity ratio -- solvency ratio measuring a firm's ability to pay its immediate debts
current ratio -- solvency ratio that determines a firm's creditworthiness by measuring its ability to pay current liabilities
working capital -- difference between a firm's current assets and current liabilities
debt ratio -- solvency ratio measuring a firm's ability to meet its long-term debts
debt-to-owners equity ratio -- solvency ratio describing the extent to which a firm is financed through borrowing
debt -- a firm's total liabilities
leverage -- ability to finance an investment through borrowed funds
return on equity -- profitability ratio measuring income earned for each dollar invested
earnings per share -- profitability ratio measuring the size of the dividend that firm can pay shareholders
inventory turnover ratio -- activity ratio measuring the average number of times that inventory is sold and restocked during the year
foreign currency exchange rate -- value of a nations currency as determined by market forcesor

Thursday, August 11, 2005

Managing Information Systems and Communication Technology -- summary

business essentials -- part 12 -- summary

Businesses are faced with an overwhelming amount of data and information about customers, competitors, and their own operations, the ability to manage this resource can mean the difference between success and failure. The management of its information system is a core activity because all of a firm's business activities are linked to it. With intensified competition and expanded global and e-business operations, companies need more advanced data communication networks and new electronic information technologies (EIT's) -- information system applications based on telecommunications technologies. EITs use networks of devices(such as computers and satellites) to communicate information and enhance productivity by serving two functions: (1) by providing coordination and communication within the firm; and (2) by speeding up transactions with other firms.

Data communication networks

Data communication networks are global networks that use telecommunications systems to carry streams of digital data back and forth quickly and economically. The largest communications network, the Internet, is a system of networks serving millions of computers, offering a vast range of information, and providing communication flows among more than 170,000 separate networks. It allows PCs virtually anywhere to be linked and has also become the most important e-mail system in the world. Individuals cannot connect directly, but mostly usage fees permit them to subscribe to it via an Internet service provider (ISPs) -- a commercial firm that maintains a permanent connection to the net and sells temporary connections.

The World Wide Web (www or "the Web") lets users around the world communicate with little effort. The Web supports standards for storing, retrieving, formatting, and displaying information. It provides the "common language" that makes the Internet available to a general audience and not just technical users. Intranets allowing users to browse internal sites containing a firm's information. Only employees can get in by penetrating electronic firewalls -- hardware and software security systems that can't breached by outsiders.

Organizational design

Information networks are leading to leaner organizations -- businesses with fewer employees and simpler organizational structures -- because networked firms can maintain electronic, rather than just face-to-face or voice, information linkages among employees and customers. Operations are more flexible because electronic networks allow businesses to offer greater product variety and faster delivery cycles. Aided by intranets and the Internet, greater collaboration is possible, both among internal units and with outside firms. Geographic separation of the workplace in company headquarters is more common because electronic linkages are replacing the need for physical proximity between the company and its workstations. Improved management processes are feasible because managers have rapid access to more information about the current status of company activities and easier access to electronic tools for planning and decision-making.

Managing Information Systems and Communication Technology

business essentials -- part 12 -- terms

Information manager -- manager responsible for designing and implementing systems to gather, organize, and distribute information
information management -- internal operations for ranging a firm's information resources to support business performance and outcomes
information system (IS) -- system for transferring raw data into information that can be used in decision-making
data -- raw facts and figures
information -- meaningful, useful interpretation of data
electronic information technologies (EIT) -- information systems applications, based on telecommunications technologies, that use networks of appliances or devices to communicate information by electronic means
electronic conferencing -- computer-based system that allows people to communicate simultaneously from different locations via software or telephone
groupware -- software that connects members of a group for shared e-mail distribution, electronic meetings, appointments, and group writing
data communication network -- global network (such as the Internet) that permits users to send electronic messages and information quickly and economically
Internet -- global data communication networks serving millions of computers with information on a wide array of topics and providing communication flows along certain private networks
Internet service provider (ISP) -- commercial firm that maintains a permanent connection to the net and sells temporary connections to subscribers
World Wide Web -- subsystem of computers providing access to the Internet and offering multimedia and linking capabilities
Web server -- dedicated workstation customized for managing, maintaining, and supporting web sites
browser -- software supporting the graphics and linking capabilities necessary to navigate the World Wide Web
search engine -- tool that searches Web pages containing the user search terms and then displays pages that match
intranet -- private network of internal Web sites and other sources of information available to a company's employees
firewall -- software and hardware system that prevents outsiders from accessing a company's internal network
extranet -- Internet allowing outsiders access to a firm's internal information system
mass-customization -- flexible production process that generates customized products and high volumes at low-cost
enterprise resource planning (ERP) -- large information system for integrating all the activities of a company's business units
knowledge worker -- employee who uses information and knowledge as raw materials and relies on information technology to design new products or business systems
system operations personnel -- information systems employees who run a company's computer equipment
computer-aided design (CAD) -- computer-based electronic technology that assists in designing products by stimulating a real product and displaying it in three-dimensional graphics
computer-aided manufacturing (CAM) -- computer system used to design and control equipment needed in the manufacturing process
management information system (MIS) -- system used for transforming data into information for use in decision-making
decision support system (DSS) -- interactive computer-based system that locates and presents information needed to support decision-making
executive support system (ESS) -- quick reference information system application designed especially for instant access by upper-level managers
artificial intelligence (AI) -- computer system application that imitates human behavior by performing physical tasks, using thought processes, sensing, and learning
robotics -- combination of computers and industrial robots for use in manufacturing operations
expert system -- form of artificial intelligence that attempts to imitate the behavior of human experts in a particular field
computer network -- all the computer and information technology devices that, by working together, drive the flow of digital information throughout a system
hardware -- physical components of a computer system
software -- programs that instruct a computer in what to do
database -- centralized, organized collection of related data
system program -- software that tells the computer what resources to use and how to use them
application program -- software, such as Word for Windows, that processes data according to a user's special needs
word processing program -- applications program that allows computers to store, edit, and print letters and numbers for documents created by users
electronic spreadsheet -- applications program with a row-and-column format that allows users to store, manipulate, and compare numeric data
database management program -- applications program for creating, storing, searching, and manipulating an organized collection of data
computer graphics program -- applications program that converts numeric and character data into pictorial information such as graphs and charts
presentation graphics software -- applications that enable users to create visual presentations that can include animation and sound
desktop publishing -- process of combining word processing and graphics capability to produce virtually typeset quality text from personal computers
graphical user interface (GUI) -- software that provides a visual display to help users select applications
icon -- small image in a GUI that enables users to select applications or functions
multimedia communications system -- connected network of communication appliances (such as faxes or TVs) that may be linked to other forms of mass media (such as print publications or TV programming)
wide area network (WAN) -- network of computers and workstations located far from one another and linked by telephone wires or by satellite
local area network (LAN) -- network of computers and workstations, usually within a company, that are linked together by cable
client/server network -- information technology system consisting of clients (users) that are electronically linked to share network resources provided by a server, such as a host computer

Wednesday, August 10, 2005

Integrated Marketing Communication -- pt/3 summary

marketing fundamentals -- part 13 -- summary

Personal Selling and Direct Marketing

Personal selling and direct marketing are both direct tools for communicating with and persuading current and prospective customers. Selling is the interpersonal arm of the communications mix. To be successful in personal selling, a company must first build and then manage an effective sales force. Firms must also be good at direct marketing, the process of forming one-to-one connections with customers. Today, many companies are turning to direct marketing in an effort to reach carefully targeted customers more efficiently and to build stronger, more personal, one-to-one relationships with them.

Most companies use salespeople, and many companies assign them an important role in the marketing mix. For companies selling business products, the firm salespeople work directly with customers. Often, the sales force is the customers only direct contact with the company and therefore may be viewed by customers as representing the company itself. In contrast, for consumer product companies that sell through intermediaries, consumers usually do not meet salespeople or even know about them. The sales force works behind the scenes, dealing with wholesalers and retailers to obtain their support and helping them become effective in selling the firm's products.

As an element of the promotion mix, the sales force is very effective in achieving certain marketing objectives in carrying out activities such as prospecting, communicating, selling and servicing, and information gathering. But with companies becoming more market-oriented, a market focused sales force also works to produce both customer satisfaction and company profit. To accomplish these goals, the sales force needs skills in marketing analysis and planning in addition to the traditional selling skills.

Sales force management

High sales force costs necessitate an effective sales management process consisting of six steps:
designing sales force strategy and structure
recruiting and selecting
training
compensating
supervising
and evaluating salespeople

In designing a sales force, sales management must address issues such as what type of sales force structure work best (territorial, product, customer, or complex structure); how large the sales force should be; who will be involved in the selling effort; and how its various sales and sales support people will work together (inside or outside sales forces and team selling).

To hold down the high cost of hiring the wrong people, salespeople must be recruited and selected carefully. In recruiting salespeople, a company may look to job duties in the characteristics of its most successful salespeople to suggest the traits it wants in its salespeople and then look for applicants through recommendations of current salespeople, employment agencies, classified ads, the Internet and by contacting college students. In the selection process, the procedure can vary from a single informal interview to lengthy testing and interviewing. After the selection process is complete, training programs familiarize the new salespeople not only with the art of selling but also with the company's history, its products and policies, and the characteristics of its market and competitors.

The sales force compensation system helps to reward, motivate, and direct salespeople. In compensating salespeople, companies tried to have an appealing plan, usually close to the going rate for the type of sales job and needed skills. In addition to compensation, all salespeople need supervision, and many need continuous encouragement because they must make many decisions and face many frustrations. Periodically, the company must evaluate their performance to help them do a better job. In evaluating salespeople, the company relies on getting regular information gathered through sales reports, personal observations, customers letters and complaints, customer surveys, and conversations with other salespeople.

The art of selling involves a seven steps selling process:
prospecting and qualifying
preapproach
approach
presentation and demonstration
handling objections
closing
and follow-up

The steps help marketers close a specific sale and as such are transaction oriented. However, a sellers dealings with customers should be guided by the larger concept of relationship marketing. The company's sales force should help to orchestrate a whole company effort to develop profitable long-term relationships with key customers based on superior customer value and satisfaction.

Direct marketing consists of direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships. Using detailed databases, direct marketers tailor their efforts and communications to the needs of narrowly defined segments or even individual buyers.

For buyers, direct marketing is convenient, easy-to-use, and private. It gives them ready access to a wealth of products and information, at home or around the globe. Direct marketing is also immediate and interactive, allowing buyers to create exactly the configuration of information, products, or services they desire, then order them on the spot. For sellers, direct marketing is a powerful tool for building customer relationships. Using database marketing, today's marketers can target small groups or individual consumers, tailor offers to individual needs, and promote these offers to personalize communications. It also offers them at low-cost, efficient alternative for reaching their markets. As a result of these advantages to both buyers and sellers, direct marketing has become the fastest-growing form of marketing.

The main forms of direct marketing include:
personal selling
telephone marketing
direct-mail marketing
catalog marketing
direct response television marketing
kiosk marketing
and online marketing

Recently, three new forms of mail delivery have become popular -- fax mail, e-mail, and voicemail.

Integrated and Marketing Communications

marketing fundamentals -- part 13 -- terms

Personal Selling and Direct Marketing

salesperson -- an individual acting for a company by performing one or more of the following activities: prospecting, communicating, servicing, and information gathering
sales force management -- the analysis, planning, implementation, and control of sales force activities. It includes setting and designing sales force strategy and structure; recruiting, selecting, training, supervising, compensating, and evaluating the firms salespeople
territorial sales force structure -- a sales force organization that assigns each salesperson to an exclusive geographic territory in which that salesperson sells the companies full line
product sales force structure -- a sales force organization under which salespeople specialized in selling only a portion of the company's products or lines
customer sales force structure -- a sales force organization under which salespeople specialized in selling only to certain customers or industries
outside sales force (field sales force) -- outside salespeople who traveled to call on customers
inside sales force -- inside salespeople who can do business from their offices via telephone or visits from prospective buyers
team selling -- using teams of people from sales, marketing, engineering, finance, technical support, and even upper management to service large, complex accounts
sales quotas -- a standard that states the amount a salesperson should sell and how sales should be divided among the companies products
selling process -- the steps that the salesperson follows from selling, which include prospecting in qualifying, pre-approach, approach, presentation and demonstration, handling objections, closing, and follow-up
prospecting -- the step in the selling process in which the salesperson identifies qualified potential customers
preapproach --when the step in the selling process in which the salesperson learns as much as possible about a prospective customer before making a sales call
approach -- the step in the selling process in which the salesperson meets the customer for the first time
presentation -- the step in the selling process in which the salesperson tells the "product story" to the buyer, highlighting customer benefits
handling objections -- the step in the selling process in which the salesperson seeks out, clarifies, and overcomes customer objections to buying
closing -- the step in the selling process in which the salesperson asks the customer for an order
follow-up -- the last step in the selling process in which the salesperson follows up after the sales to ensure customer satisfaction and repeat business
direct marketing -- direct communications with carefully targeted individual consumers to obtain an immediate response to the
customer database -- an organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data
telephone marketing -- using the telephone to sell directly to customers
direct-mail marketing -- direct marketing through single mailings that include letters, adds, samples, foldouts, and other "sales people with wings" sent to prospects on mailing lists
catalog marketing -- direct marketing through print, video, or electronic catalogs that are mailed to select customers, made available in stores, or presented online
direct response television marketing -- direct marketing via television, including direct response television advertising (infomercials) and home shopping channels
integrated direct marketing -- direct marketing campaigns that use multiple vehicles and multiple stages to improve response rates and profits

Tuesday, August 09, 2005

Integrated Marketing Communications

marketing fundamentals -- part 12 -- summary

Advertising, sales promotion, and public relations

Modern marketing calls for more than just developing a good product, pricing it attractively, and making it available to target customers. Companies also must communicate with current and prospective customers to inform them about product benefits and carefully position products in the consumers mind. To do this, they must blend five communication-mix tools, guided by a well-designed and well implemented integrated marketing communications strategy.

Recent shifts toward targeted one-to-one marketing, coupled with advances in information technology, have had a dramatic impact on marketing communications. As marketing communicators adapt richer but more fragmented media and promotion mixes to reach their diverse markets, they risk creating a communications hodgepodge for consumers. To prevent this, more companies are adapting the concept of integrated marketing communications (IMC). Guided by an overall IMC strategy, the company works out the roles that the various promotional tools will play and the extent to which each will be used. It carefully coordinates the promotional activities and the timing of when major campaigns take place. Finally, to help implement its integrated marketing strategy, the company appoints a marketing communications director who has overall responsibility for the company's communications efforts.

A companies total marketing communications mix -- also called its promotion mix -- consists of the specific blend of advertising, personal selling, sales promotion, public relations, and direct marketing tools that the company uses to pursue its advertising and marketing objectives. Advertising includes any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. In contrast, public relations focuses on building good relations with the company's various public's by obtaining favorable unpaid publicity. Personal selling is any form of personal presentation by the firm sales force for the purpose of making sales and building customer relationships. Firms use sales promotion to provide short-term incentives to encourage the purchase or sale of a product or service. Finally firms seeking immediate response from targeted individual customers use nonpersonal direct marketing tools to communicate with customers.

The company wants to create an integrated promotion mix. It can pursue a push or pull promotional strategy, or combination of the two. The best specific blend of promotion tools depends on the type of product/market and the product lifecycle stage. People at all levels of the organization must be aware of the many legal and ethical issues surrounding marketing communications.

Advertising -- the use of a media by a seller to inform, persuade, and remind consumers in the about its products or organization -- is a strong promotion tool that takes many forms and has many uses. Advertising decision-making involves decisions about the objectives, the budget, the message, the media, and, finally, the evaluation of results. Advertisers should set clear objectives as to whether the advertising is supposed to inform, persuade, or remind buyers. The advertising budget can be based on what is affordable, on sales, on competitors spending, or on the objectives and tasks. The message decision calls for planning a message strategy and executing it effectively, the media decision involves defining reach, frequency, and impact goals; choosing major media types; selecting media vehicles; and deciding on media timing. Message and media decisions must be closely coordinated for maximum campaign effectiveness. Finally, evaluation calls for evaluating the communication and sales effects of advertising before, during, and after the advertising is placed.

Sales promotion campaigns

Sales promotion covers a wide variety of short-term incentive tools -- coupons, premiums, contest, buying allowances -- designed to stimulate final and business consumers, the trade, and the companies and sales force. Sales promotion spending has been growing faster than advertising spending in recent years. A sales promotion campaign first calls for setting sales promotion objectives (in general, sales promotions should be consumer relationship building). It then calls for developing and implementing the sales promotion program by using consumer promotion tools (samples, coupons, cash refunds or rebates, price packs, premiums, advertising specialties, patronage rewards, and others); trade promotion tools (discounts, allowances, free goods, push money); and business promotion tools (conventions, trade shows, sales contests). The sales promotion effort should be coordinated carefully with the firms other promotional efforts.

Public relations

Public relations involves building good relations with the company's various publics. Its functions include press agency, product publicity, public affairs, lobbying, investor relations, and development. Public relations can have a strong impact on public awareness at a much lower cost than advertising can, and public relations results can sometimes be spectacular. Despite its potential strengths, however, public relations sometimes see only limited and scattered use.

Public relations tools include news, speeches, special event, buzz marketing, written materials, audiovisual materials, corporate identity materials, and public service activities. A company's Web site can be a good public relations vehicle. In considering when and how to use product public relations, management should set PR objectives, choose the PR messages in vehicles, implement the PR plan, and evaluate the results. Public relations should be blended smoothly with other promotion activities within the company's overall integrated marketing communications effort.

Integrated Marketing Communication -- terms

marketing fundamentals -- part 12 -- terms

Advertising, Sales Promotion, and Public Relations

marketing communications mix (promotion mix) -- the specific mix of advertising, personal selling, sales promotion, and public relations a company uses to pursue its advertising and marketing objectives
advertising -- any pain form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor
sales promotion -- and short-term incentives to encourage the purchase or sale of a product or service
public relations -- building good relations with the company's various publics by obtaining favorable publicity, building a good "corporate image," and handling or heading off unfavorable rumors, stories, and events
personal selling -- personal presentation by the firm's sales force for the purpose of making sales and building customer relationships
direct marketing -- direct connections with carefully targeted individual consumers to obtain an immediate response and cultivate lasting customer relationships -- the use of telephone, mail, fax, e-mail, the Internet, and other tools to communicate directly with specific consumers
integrated marketing communications (IMC) -- the concept under which a company carefully integrates and coordinates the many communications channels to deliver a clear, consistent, and compelling message about the organization and its products
push strategy -- a promotion strategy that calls for using the sales force and trade promotion to push the product through channels. The producer promotes the product to wholesalers, the wholesalers promotes to retailers, and the retailers promotes to consumers
pull strategy -- a promotion strategy that calls for spending alot on advertising and consumer promotion to build up consumer demand. If the strategy is successful, consumers will ask their retailers for the product, the retailers will ask wholesalers, and wholesalers will ask the producers
advertising objective -- a specific communication task to be accomplished with a specific target audience during a specific period of time
affordable method -- setting the promotion budget at the level management thinks the company can afford
percentage-of-sales method -- setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price
competitive-party method -- setting the promotion budget to match competitors outlays
objective-and-task method -- developing the promotion budget by (1) defining specific objectives; (2) determining the tasks that must be performed to achieve these objectives; and (3) estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget
advertising agency -- a marketing services firm that assists companies in planning, preparing, implementing, and evaluating all or portions of their advertising programs

Retailing and Wholesaling

marketing fundamentals -- part 11 -- summary

Although most retailing is conducted in retail stores, in recent years, nonstore retailing has increased rapidly. In addition, although many retail stores are independently owned, an increasing number are now banding together under some form of corporate or contractual organization. Wholesalers, too, have experienced resent environmental changes, most notably mounting competitive pressures. They have faced new sources of competition, more demanding customers, new technologies, and more direct buying programs on the part of large industrial, institutional, and retail buyers.

Retailers and wholesalers in the distribution channel

Retailing and wholesaling consist of many organizations bringing goods and services from the point of production to the point of use. Retailing includes all activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use. Wholesaling includes all the activities involved in selling goods or services to those who are buying for the purpose of resale or for business use. Wholesalers perform many functions, including selling, promoting, buying and an assortment building, bulk breaking, warehousing, transporting, financing, risk bearing, supplying market information, and providing management services and advice.

Retailers can be classified as store retailers and nonstore retailers. Although most goods and services are sold through stores, nonstore retailing has been growing much faster than store retailing. Store retailers can be further classified by the amount of service they provide (self-service, limited service, or full-service), product lines sold in (specialty stores, department stores, supermarkets, convenience stores, superstores, and services business), and relative prices (discount stores and off-price retailers). Today, many retailers are banding together in corporate and contractual retail organizations (corporate chains, voluntary chains and retailer cooperatives, franchise organizations, and merchandising conglomerates).

Wholesalers fall into three groups. First, merchant wholesalers take possession of the goods. They include full-service wholesalers (wholesale merchants, industrial distributors) and limited service wholesalers (cash and carry wholesalers, truck wholesalers, drops her first, rack jobbers, producers cooperatives, and mail-order wholesalers ). Second, brokers and agents do not take possession of the goods but are paid a commission for assisting buying and selling. Finally, manufacturers sales branches and offices are wholesaling operations conducted by non-wholesalers to bypass the wholesalers.

Each retailer must make decisions about its target markets and positioning, product assortment and services, price, promotion, and place. Retailers need to choose target markets carefully and position themselves strongly. Today, wholesaling is holding its own in the economy. Progress of wholesalers are adapting their services to the needs of the target customers and are seeking cost reducing methods of doing business. Faced with slow growth in their domestic markets and development such as the North American Free Trade Association, many large wholesalers are now going global as well.

Retailing and Wholesaling -- terms

marketing fundamentals -- part 11 -- terms

retailing -- all activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use
retailer -- businesses whose sales, primarily from retailing
specialty store -- a retail store that carries a narrow product line with a deepassortment within that line
department store -- a retail organization that carries a wide variety of product lines -- typically clothing, home furnishings, and household goods. Each line is operated as a separate department managed by specialist buyers or merchandisers
supermarket -- large, low-cost, low margin, high-volume, self-service store that carries a wide variety of food, laundry, and household products
convenience store -- a small store, located near a residential area, that is open long hours seven days a week and carries a limited line of high turnover convenience goods
superstore -- a store much larger than a regular supermarket that carries a large assortment of routinely purchased. And nonfood items and offer services such as dry-cleaning, post offices, photofinishing, and the check-cashing, bill paying, lunch counters, car care, and pet care
category killer -- giant specialty store that carries and very deep assortment of the particular line and is staffed by knowledgeable employees
discount store -- a retail institution that sells standard merchandise at lower prices by excepting lower margins and selling higher volume
off-price retailer -- retailer that buys at less than regular wholesale prices and sells at less than retail. Examples are factory outlets, independents, and warehouse clubs
independent off-price retailer -- off-price retailer that is either owned and run by entrepreneurs or is a division of a larger retail corporation
factory outlet -- off-price retailing operation that is owned and operated by manufacturer and that normally carries the manufacturers surplus, discontinued, or irregular goods
warehouse club -- off-price retailer that sells a limited selection of brand-name grocery items, appliances, clothing, and a hodgepodge of other goods at deep discounts to members to pay annual membership fees
chain stores -- two or more outlets that are owned and controlled in common, have central buying and merchandising, and sells similar lines of merchandise
franchise -- a contractual association between a manufacturer, wholesaler, or service organization (a franchiser) and an independent businesspeople (franchisee) to buy the rights to own and operate one or more units in the franchise system
shopping center -- a group of retail businesses play and, developed, owned, and managed as a unit
wheel of retailing concept -- a concept of retailing that states that new types of retailers usually begin as low-margin, low-price, low-status operations but later evolve into higher priced, higher service operations, eventually becoming like the conventional retailers they replaced
wholesaling -- all activities involved in selling goods and services to those buying for resale or business use
wholesaler -- a firm engaged primarily in wholesaling activity
merchant wholesaler -- an independently owned business that takes title to the merchandise it handles
broker -- a wholesaler who does not take title to goods, his function is to bring buyers and sellers together and assist negotiation
agent -- a wholesaler who represents buyers or sell worse on a relatively permanent basis, performs only a few functions, and does not take title to goods

Marketing Channels and Supply Chain Management

marketing fundamentals -- part 10 -- summary

Marketing channel decisions are among the most important decisions that managers face. A company's channel decisions directly affect every other marketing decision. Each channel system creates a different level of revenues and costs and reaches a different segment of target consumers. Management must make channel decisions carefully, incorporating today's need to tomorrow's likely selling environment. Some companies pay too little attention to their distribution channels, the others have used to imaginative distribution systems to gain competitive advantage.

Most producers use intermediaries to bring their products to market. Then they try to forge a distribution channel -- a set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. Through their contacts, experience, specialization, and scale of operation, intermediaries usually offer the firm more than it can achieve on its own. Distribution channels perform many key functions. Some help complete transactions by gathering and distributing information needed for planning and aiding exchange; by developing and spreading persuasive communications about an offer; by performing contact work -- finding and communicating with prospective buyers: by matching -- shaping and fitting the offer to the buyers needs; and by entering into negotiation to reach an agreement on price and other terms of the offer so that ownership to be transferred. Other functions help to fulfill the completed transactions by offering physical distribution -- transporting and storing goods; financing -- acquiring in using funds to cover the costs of the channel work; and risk-taking -- assuming the risks of carrying out channel work.

channel members interaction

The channel will be most effective when each member is assigned the tasks they can do best. Ideally, because the success of individual channel members depends on overall channel success, all channel firms should work together smoothly. They should understand and except their roles, coordinate their goals activities, and cooperate to attain overall channel goals. By cooperating, they can more effectively sense, serve, and satisfy the target market. In a large company, the formal organization structure assigns roles and provide needed leadership. But in a distribution channel made up of independent firms, leadership and power are not formally set. Traditionally, distribution channels have lacked the leadership needed to assign roles and manage conflict. In recent years, however, new types of channel organizations have appeared that provide stronger leadership and improved performance.

Channel alternatives

Each firm identifies alternative ways to reach its market. The available means vary from direct selling to using 1,2,3, or more intermediary channel levels. Marketing channels face continuous and sometimes dramatic change. Three of the most important trends are the growth of vertical, horizontal, and hybrid marketing systems. The trends affect channel cooperation, conflict, and competition. Channel design begins with assessing customer channel service needs and company channel objectives and constraints. The company then identifies the major channel alternatives in terms of the types of intermediaries, the number of intermediaries, and the channel responsibilities of each. Each channel alternative must be evaluated according to economic, control, and adaptive criteria. Channel management calls for selecting qualified intermediaries and motivating them. Individual channel numbers must be evaluated regularly.

Channel members

Producers vary in their ability to attract qualified marketing intermediaries. Some producers have no trouble signing up channel members. Others have to work hard to lineup enough qualified intermediaries. When selecting intermediaries, the company should evaluate each channel members qualifications and select those who best fit its channel objectives. Once selected, channel members must be continuously motivated to do their best. The company must sell not only through the intermediaries but to them. They should work to forge long-term partnerships with their channel partners to create a marketing system that meets the needs of both the manufacturer and the partners. The company must also regularly check channel member performance against established performance standards, rewarding intermediaries who are performing well and assisting or replacing weaker ones.

Marketing logistics and integrated supply chain management

Just as firms are giving the marketing concept increased recognition, more business firms are paying attention to marketing logistics (or physical distribution). Logistics is an area of potentially high cost savings and improved customer satisfaction. The marketing logistics address not only outbound distribution but also inbound distribution and reverse distribution. That is, it involves entire supply chain management -- managing value added flows between suppliers, the company, resellers, and final users. No logistics system can both maximize customer service and minimize distribution costs. Instead, the goal of logistics management is to provide a targeted level of service at the least cost. The major logistics functions include order processing, warehousing, inventory management, and transportation.

The integrated supply chain management concept recognizes that improved logistics require teamwork in the form of close working relationships across functional areas inside the company and across various organizations in the supply chain. Companies can achieve logistics harmony among functions by creating cross-functional logistics teams, integrated supply manager positions, and senior-level logistics executives with cross-functional authority. Channel partnerships can take the form of cross-company teams, shared projects, and information sharing systems. Today, some companies are outsourcing their logistics functions to third party logistics providers to save costs, increase efficiency, and gain faster and more effective access to global markets.