Corporate Appraisal
October 25, 2007
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A Corporate appraisal of the enterprise’s current strength and weakness is an important first step in the planning process. It provides an opportunity to critically examine established beliefs, operations and practices.
The major aspects of a corporate appraisal are:-
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Trends of results:
The organization historical pattern of performance i.e. it should cover profit, sales, capital employed as well as other financial ratios that can be used to measure efficiency and performance. It gives the overall picture whether the organization is declining or improving. A declining company may impose tighter constraints on developments and may expect quicker returns.
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Risk
This is the examination of the risk associated with the organization’s source of profit e.g. if they are dependent on one product or a few clients or suppliers. Thus effective Information systems is critical to such high risk markets, in that the damaging effect of detrimental changes can be quickly identified and corrective action done.
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Organisation and Management
Assessment of the organization’ structure, culture and management should be done so that the analyst can know how changes will affect and be viewed by employees.
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Financial Resources
This involves organization’s capital, resources and current project cash flow. This issue affects the economic feasibility in that it determines how the system development is funded.
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Available Resources
Various resources should be identified i.e. people, money, equipments etc. This may show how the system will be developed and supported.
REFERENCES
Valuing a Business : The Analysis and Appraisal of Closely Held Companies (3rd Edition)
Capital Budgeting: Financial Appraisal of Investment Projects
Investment Appraisal (M & E Series)
Investment Appraisal and Financial Decisions
Valuation and Investment Appraisal (Financial World/Association of Corporate Treasurers)
Techniques for Project Appraisal under Uncertainty (World Bank)
Corporate Valuation: Tools for Effective Appraisal and Decision-Making
A Basic Guide for Valuing a Company, 2nd Edition
Six Sigma Business Scorecard : Creating a Comprehensive Corporate Performance Measurement System
Process and data modeling
October 25, 2007
System Analysis is primarily concerned with:
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Finding facts that will permit the understanding of the present system and aid the design of any successor.
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Using fact finding techniques that will enable the finding of system requirements.
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Organizing the facts into a rigorous set of documentation.
In-order to gain proper understanding of these facts, various techniques, tools and methods are used.
Modeling
A model is an abstraction, a representation of part of the real world. It may concern a representation of one aspect of the present or proposed Information system.
Emphasis in Information System has been placed on process modeling and data modeling.
All these modeling techniques help in occupying and design the new/future Information System.
Process Modeling
Although there are many process modeling techniques, all of them have as their unifying elements emphasis on the process and the basic technique of functional decomposition. Some of these techniques associated with structured Analysis & Design and functional decomposition are:
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Decision trees
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Decision tables
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Data flow diagrams
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Data structure diagrams
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Structured English.
The techniques and tools of process modeling help in understanding the real world processes and communicating the knowledge acquired.
They communicate these through their tools. Most of them are graphical and this encourages user involvement. Data flow diagramming are particularly useful in communicating the analyst’s understanding of the option.
DFD provides a means of achieving structure in systems; in that it enables a system to be partitioned into smaller or desirable size so that the system can be understood easily.
DFD provides information in a graphical and concise manner. The graphical aspect means that DFD can be used as a static piece of documentation and a communication tool, enabling communication of all levels i.e. Analyst to user, Analyst to programmer, Analyst to Analyst etc
The fact that users can readily understand DFD means that it can be easily validated for corrections and thus increases the chance of a successful Information system.
DFD is concise in that it allows for a system to be examined at the highest level i.e. an overview and still allows it to be viewed in detail, whilst maintaining the links and interfaces at the different levels.
DFD provides the analyst with the ability to specify the system at a logical level, thereby providing independence between the logical and the physical implementation of the system, thereby allowing the users to specify their requirements without restrictions of physical implementation.
A logical DFD represents logical information of what flows into the system whether its customer credits. It does not bother with how it flows e.g. by twisted copper.
Data Modeling:
Data modeling concentrates on understanding and documenting data. Data is considered as the fundamental building blocks of systems. The Data model is a result of data analysis, and it is oriented towards that part of the real world that it represents i.e. org, dept. etc.
The data model should always be implementation independent in that the data model and the data analysis that derives it is suitable, whether the principal model is a database, file card etc.
The success of a data model comes about with the systematic way in which it identifies the data in organizations and the relationships between them i.e. data structures.
Data analysis techniques attempt to identify the data elements and analyze the structure and meaning of data in the organization. This can be achieved by interviewing people in the organization.
Studying documents, observation, questionnaires etc and formalizing the results through a process called Entity Modeling. Graphical documentation aids in the process of data analysis.
Data analysis is used to help in understanding aspects of a complex organization. Good data models can be used as discussion documents for understanding aspects of the organization and the process as well as improving the effectiveness of the role of data and information in an organization.
Data model/analysis is stressed by many methodologies mainly because data is more stable than processes, also because:
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The data model is not computer-orientated i.e. it is not biased by any particular physical storage structure that may be used because it provides for logical/physical independence i.e. the model stays the same whether the storage structures are held in the magnetic tape, disk or mini storage.
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The data model is a model that is understandable by everyone i.e. the users, developers etc. This is a very easy to understand it and validate.
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A data model is able to reflect a variety of different view of data across departmental or section areas.
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A data model is readily transformable into other models such as relational, hierarchical or network which are mostly used to represent data structures in a DBMS.
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Available data modeling/analysis techniques allow a choice of alternative methods to be used where appropriate thus one technique can be used to cross check another.
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Data modeling/analysis is rule based which means the result of one analyst’s work can be followed and proven. Data model can be adapted to appear in different forms for different users it can also appear as a whole
There are various approaches to data analysis; some are the data collection approach (i.e. document driven analysis). The documents used in a department or organization are analyzed in a bottom-up manner. These documents include reports, forms etc.
The analysis of each document will in turn lead to the formation and then improvement, of the data model showing the data and the relationship between these data.
Another approach is entity modeling. This approach gains its information by interviewing people in the organization. Entities such as customers, suppliers and their relationship are ascertained and represented as a graphical presentation
Feasibility Study:
October 25, 2007
Feasibility Study:
This phase or study presents an analyst with all opportunity to “firm up” or consolidate his/her knowledge of the system and to form ideas about the scope and cost of possible solutions.
This study is usually undertaken within time constraints and produces a written or oral feasibility study report. The content of this report will be used as a basis for deciding whether to continue or to postpone or cancel the project. Feasibility study is usually done in 3 phases or stages. These are:
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Technical Feasibility
This is concerned with specifying equipment and software that will successfully support the tasks required. Some of the technical needs might include:
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A facility to produce outputs in a given time.
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A facility to input large amounts of documents in a given time.
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The ability to provide certain response times under certain conditions.
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The ability to process certain volume of transactions at a certain speed.
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The facility to communicate data to different locations.
In examining technical feasibility it is the configuration of the system that is initially more important than the actual hardware make.
The configuration should show the system’s requirements i.e. how many workstations are needed, how the units operate and communicate, the input/output speeds.
This is then used as a basis for tender documents against which dealers can make their equipment bids.
It is possible at the feasibility stage to pursue two different configurations which satisfy the key technical requirements, but which represent different levels of ambitions as costs.
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Operational Feasibility
This is concerned with human, organizational and political aspects. Among the issued to be examined are:
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The job changes the system should bring.
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The organizational structure that will be absorbed/changed.
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The new skills that will be required.
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Economic Feasibility
This is concerned with evaluating a project on the basis on economic returns. In that the project must show financial returns that outweigh the costs. For this reason management tend to give more weight to economic feasibility than the others.
Approaches to carrying out economic feasibility include:
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Least Cost: It is based on the principle that costs are easier to identify and control than benefits and the one with least costs is selected.
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Payback: This is the time it takes a project to payback its investment. The alternative that pays investment i.e. quickest return on initial investment is selected.
Disadvantages:
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This method ignores the system’s long term profitability in that it only considers the time taken to payback its investment.
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The method doesn’t recognize the time value of money in that benefits that occur in the future are not worth as much as those that occur presently, but payback doesn’t recognize that.
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Net present value.
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Break Even Analysis.
The Feasibility Report
The content of this report includes:
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Introduction: i.e. project background and layout of the presented report.
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Term of reference
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Existing system
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System requirements.
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Proposed logical system i.e. selecting from various business system options.
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Proposed physical system: i.e. outlining technical solutions and technical implementation.
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Development Plan: ie a project plan for detailed analysis and design.
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Cost Benefit Analysis.
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Alternatives considered.
Channels of Distribution
October 24, 2007
Channels of Distribution:
A channel of distribution is an organized network of agencies and institutions which, in combination perform all the activities required to link producers with users to accomplish a marketing task.
Resellers in a distribution channel are called intermediaries or middlemen.To understand the possible ways to make products available to potential users, the marketer needs to know the ways most distribution channels are organized.
There are possible ways to organize a channel these are:
a) Channel for Consumer Goods:
The channel is further subdivided into 4 channels these are:
(i) Channel A: In this channel there are no intermediaries. This channel is called direct marketing.
(ii) Channel B: In this channel goods move from producers to retailers to consumers
(iii) Channel C: This is the most common. In this channel the producer sells to wholesalers, who sell to retailer who in turn sell to consumers.
(iv) Channel D: This is the most indirect channel. Goods pass from producers to agents then to wholesalers to retailers and then to customers. Agents coordinate a large supply of goods when they are many small manufacturers and retails. Small manufacturers lack the capital for their own sales force and thus use agents to serve as independent sales force.
Channel A Producer – Consumer
Channel B Producer – retailer – consumer
Channel C Producer – wholesaler – retailer – consumer
Channel D Producer – agent – wholesaler – retailer – consumer
b) Channels for Organizational Goods:
Organizational buyers are usually a small number and also they are more concentrated geographically and usually buy in large quantities. The distribution channel for these goods is usually shorter than those for consumer goods.
The channels are
(i) Channel A: This is a direct channel from a producer to organizational buyers – a direct channel is often efficient when buyers are large and well defined – when selling requires extensive service and support.
(ii) Channel B: Goods flow from producer to a distributor using a distributor is efficient for producers of products targeted to a large number of organizations that buy in small quantities eg software packages.
(iii) Channel C: The goods flow from the producer to agents instead of intermediaries. This happens when the producers marketing department is small or it wants to introduce a new product or enter a new market e.g Manufacturers of food processing equipment.
(iv) Channel D: This brings together producers and organizational distributors. The agent seeks a market for the producers output and locates sources of supply for a buyer.
c) Channels of Services
Most services are produced and consumed at the same time. Services are distributed through short channels. So to buy financial advice you go to the people providing these services so the most common channel is A (Direct one).
When services use intermediaries they are usually agents or brokers e.g. Insurance and Airline services.
Service Provider – Service user
Service Provider – Agent – Service User
Producer – Agents – Organization buyers
Producer – Agents – Distributors – Organization Buyers
Variations of the Basic Channels:
Sometimes the distribution strategy that meets marketing objectives include:
a) Multiple Distribution Channels:
To reach a diverse market, a producer may use several channels of distribution for a single product. A producer might use one marketing channel to serve customers to serve organization buyers.
Sometimes organizations use multiple channels to fit a multibrand strategy i.e. under one brand name, the product is distributed through one channel and another brand name, the product is distributed through another channel.
The use of two or more distribution channel to provide the same basic product to a target market is called dual distribution. Producers use dual distribution to cover or maximize coverage of the market place.
b)Strategic Channel Alliances
This involves building a close relationship between channel members to meet mutual needs. The needs might be to reduce the time spent building a channel of distribution.
c) Reverse Channels
This is a distribution channel from the end user to the producer instead of the other way round e.g. taking apart a computer and selling the semi conductor to parts wholesalers and maintenance shops.
Reverse channels have gained attention due to the growth of recycling efforts and consumer interest in the environment.
Another type of reverse channel is recalls i.e. if a manufacturer discovers a problem with their product to the seller for a refund or a replacement.
Structure of Channels
Structure of a channel depends on the members of that channel and the extent of their relationship. Theses structures are;
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Traditional Distribution Channels
In this structure, all members of the channel enter into formal or informal agreements with the one another. The member provide for total quality to marketing in that the customers finds the product easy to purchase.
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Horizontal integration
This involves the organization combining with other organization at the same stage in the distribution channel. Often this involves buying or merging with these orgs. This might improve the orgs position in the market place but it might not improve distribution.
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Vertical integration
This involves members at different levels of a distribution channel coordinating their efforts to reach the desired market. This is called vertical channel integration.
A vertical marketing system (vms) is a centrally managed distribution channel that is designed to achieve efficiency with maximum marketing impact.
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Franchising
This is a contractual distribution system in which a parent company gives franchisers the right to operate the business according to the franchiser marketing plan and to use its trademark.
Apart from the right to operate the business, the franchise receives marketing, management and technical services.
The advantage is that to the franchiser, there is a ready source of funds for expansion coupled with ability to establish policies for each franchise and for franchisee is greater name recognition, better prices from supplier, business advise e.t.c.
Disadvantage; it is hard to find qualified franchisees, harder to control the franchiser.
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Direct Marketing
This is using the direct channel of distribution. The usual method for direct marketing is to offer products through mail, by telephone, door to door e.t.c. direct mail is not the most efficient channel of distribution.
Marketing Mix: Marketing Program (The 4 Ps)
October 24, 2007
Marketing Mix: Marketing Program (The 4 Ps)
International organizations must decide how much to adopt their marketing strategy to local conditions. At one extreme are organizations that use a globally standardized marketing mix worldwide.
Standardisation of the product, advertising and distribution channels promise low cost. At the other extreme is an adapted marketing mix where the producer adjusts the marketing mix elements to each target market.
Most brands are adapted to some extent. These marketing mix i.e. product, promotion, price, place (distribution channels)
1) Product:
There are 5 distinguished adoption strategies of product and promotion to a foreign market. These are indicated below:
a) In straight extension, it means that a product is introduced into a foreign market without any change to it. This has been successful with cameras, electronics and machine tools, but disastrous with food products
Straight extension is tempting because it involves no additional R&D expenses, manufacturing, retraining, or promotional modification, but it can be costly in the long run.
b) Product adaptation: In this strategy, you alter the product to meet local conditions or preferences. There are several levels of adaptation, a company can produce an (i) regional version of its product e.g NOKIA customized its 6100 series for its every market (major market)
(ii) A country version
(iii) A city version
(iv) Retailer version
c)Product Invention: This involves creating something new. It can take 2 forms backward invention i.e. re-introducing earlier product forms that are well adapted to foreign country’s needs.
Forward invention, i.e. creating a new product to meet the needs in another country. Product invention is costly strategy, but payoffs can be great particularly if a company can portray a product innovation to other countries.
2. Promotion:
Companies can run the same advertising and promotion campaigns used in the home market or change them for each local market. This process is called communication adaptation. If it adapts both product and communication, the company engages in dual adaptation.
One can use the same message everywhere varying only the language, name and colours to fit into particular foreign markets. Second, one can use the same theme globally but adapt the copy to each local market.
Thirdly one can use an approach that consist of developing a global pool of ads from which each country selects the most appropriate e.g Cocacola.
Fourthly one can allow the country managers to create their own country specific ads within guidelines.
3. Price:
Multinationals face several pricing problems when selling abroad. These are:
a) Price escalation problem: a Mercedes may sell for about $10,000 in US but it will cost over 7 million in Kenya, this is because of cost of transportation, tariffs, importer margin, wholesaler margin and retailer margin to its factory price.
Because of the cost escalation, organizations face the problem of how to set prices in different countries. Organisations have 3 choices
- Set uniform prices everywhere: This strategy would result in prices being high in poor countries and not high enough in the rich countries.
- Set a market based price in each country: This strategy would force an organization to change what each country can afford. It ignores differences in the actual costs from country to country and it can make intermediaries to re-ship the products to high price countries.
- Set a cost based on each country: Here an organization would use standard markup of its cost everywhere.
b) Another problem would be when an organization sets a transfer price (i.e. the price it charges another unit in the organization) for goods it strips to its foreign subsidiaries. If an organization charges too high to its subsidiary it may end up paying high tariffs and if a company charges too low a price it can be charged with dumping.
c) Dumping is another problem, it occurs when an organization charges either less that its cost or less than it charges in its home market in order to enter or win the market.
4) Place (Distribution Channels):
A multinational organization should pay attention to how the product moves within the foreign country. This distribution channel involves 3 steps.
The first link is the sellers international market headquarters where decision of channels and other marketing mix elements are made.
The 2nd link is the channel between nations, this involves getting the products to the borders of the foreign nation. The decision made include the type of intermediaries (agents, trading companies) that will be used, the type of transportation (air, sea) and financing and risk arrangements.
The 3rd link is channel within foreign nations. This involves getting the product from their entry points to final buyers and users.
Marketing mix for services
October 24, 2007
Service Economy
A service is a product that is purely or mostly intangible. The size and growth of the service sector makes marketing important, but in the service sector marketing has been slowly taken up. This is because of :
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Limited competition:
Many service industries have been regulated i.e. banking, public utilities etc and thus they have faced little competition
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Lack of creative management:
Most service industry leaders have been accused of lacking creativity.
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No obsolescence:
Many services are not subject to obsolence unlike goods. This reduces urgency to make changes.
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Lack of innovation in the distribution service
Characteristics of Services:
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Intangibility
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Inseparability
Since services are intangible, this leads to them being produced and marketed simultaneously. Inseparability means that customers not only want a particular type of service, they want it to be provided by particular people or group of people.
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Involvement of the customer:This is caused by inseparability in that customers are involved to a relatively greater degree in the production and marketing of many kinds of services.
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Variability of Quality
The quality of services vary due to the fact that they are produced and consumed at the same time.
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Perishability
Its important to plan for fluctuation in demand of the service e.g if no one makes an appointment to see a doctor at 4.00 pm then the service is perishable
Categories of Service mix:
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Developing and targeting the service: The organization must tailor these services to the needs of specific customers
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Pricing the service
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Distribution channels for the service
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Communication about the service
The service mix for the service industry is much like the product mix of the products.
Marketing mix for services
The characteristics of services give rise to special needs in preparing the market mix.
Developing and targeting the services through
1. Quality:
To provide quality service, organizations must tailor these products to the needs of specific customers. A marketer should ensure that the organization employees are providing quality service time after time. An org should include quality measures in the org performance standards.
The org should also have its employees practice focusing on quality by setting the standard that each employee must satisfy his or her internal customers.
Another approach to improving standards of service is empowering the employee to satisfy customers. This allows employees to make effective decisions thus providing quality service to employees.
Lack of patent protection
Marketers of service should continually innovate and improve so as to distinguish themselves from competition.
Managing fluctuating demand
When demand for a service is low, this leads to staff being idle so an organization should pay staff on commission so as to help to keep costs in line with sales.
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Pricing the service
Prices influence a buyer to buy particular products thus an organization should make sure it understands the various costs also the org must understand which customers want.
Customers are usually happy when they look at an itemized bill and see the value for their money. Services are perishable thus marketers use price to limit idle time i.e. the organization might use off-peak pricing, this includes charging different prices during different times in order to stimulate demand during slow periods.
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Distribution demands for the service
Since production and mixing a service are difficult to separate distribution emphasis finding convenient ways to provide the services to customers. Distribution strategy can help to attract more clients and help a service provider position itself. A common strategy for distribution of services to a broad consumer market is through franchising.
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Communicating about the service.
Communication tries to explain what the service is and how it will affect the buyer. Advertising is one of the strategies here, an organization can advertise its service to the consumer through the media.
Another strategy is personal selling i.e. a sales person can advertise its service to a buyer, he can reassure prospective buyers by providing customer testimonials e.g. real estates agents.
Market Segmentation process
October 24, 2007
Process of Market Segmentation:
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identify possible Market Segments
The marketer first explores various ways to divide the market into segments. In identifying segments a marketer should make decisions that support the organization’s mission and objectives e.g. a retailer who aims or whose objective is to sell goods at the lowest price, will tend to segment the market on the
Product Mix:
Marketers evaluate the organizations product mix by considering its width, depth and consistency. Width of the product refers to the number of product lines handled by the organization.Depth refers to the average number in each product line. Consistency refers to the similarity of product lines.
A narrow and consistent product mix lets the organization specialize in some types of products. Such an organization can build a reputation as an expert in a particular area. A wider product line can be useful when an organization wants to increase sales by serving more customers. Offering many kinds of products can protect the organization from a big drop in sales if customers use interest in one product.
However when there are many choices within a single product line, the organization runs a greater risk of cannibalization in one product taking sales away from another product mix. A product mix is a group of products related in some way.
IBM PC organization has 3 product lines i.e
- entry level computers branded PS/1
- high and personal computers branded PS/2
- aggressively priced value pointline positioned between PS/1 and PS/2. This can be considered to have a narrow product line.
However carbon companies have a wide product line in that they have a large network of travel agents and they encourage clients to stay at their hotels and resorts and also offer varied marketing service through their carbon marketing group. Line extension is a strategy where one ads a new product to an existing product line.e.g Omo with powerfoam.
Product Mix:
Product mix is the total collection of products sold by an organization. It is also referred to as product assortment or product portfolio.
To manages the product mix, marketer can
(i) Modify Products
This involves modifying any aspect of a product, including features of the product, packaging or services provided to customers. modification is important when a product is still profitable but some changes in environment (eg new safety standards, environmental standards etc) make the product less optimal.
(ii) Discontinuing Products:
A marketer should use this strategy if there is no other strategy to be used. The marketer should analyse if the sales and profits are likely to improve, where the product is in the lifecycle.
Deciding to discontinue is difficult because such a decision has potentially great impact i.e. customers of the product will be disappointed, you may have to retrench the production staff.
Discontinuing a product may allow the organization to focus its resources to more profitable products.
(iii) Adding products:
Adding a new product to the product mix may improve sales and the organizations profitability. The new products may be line extension or a whole new product.
Market Segmentation
October 24, 2007
Market Segmentation
Market segmentation is the process of subdividing a market into distinct subsets of customers that behave in the same way or have similar needs.
These individuals or organizations in each subset or market segment have common needs and similar responses to a particular marketing effort.
Business use thus information to determine or decide which or what segments of the market they can serve most profitably while non-profit organization use this info to determine what segments they can serve most efficiently and effectively.
Strategies for segmentation
There are two types of strategies for segmentation. These are:
Single product Strategies (Niche Marketing)
Multi-product Strategies (Differentiated Marketing)
Single Product Strategy
When an organization has a single product or service, it may carry out a survey to establish which categories of individuals or organization are most likely to be interested in the product. Thus the organization will focus on that single product segment and tailor the elements of the marketing mix to attract that segment (niche marketing)
Niche marketing can be done successfully with a relatively small investment thus its an attractive strategy for small organizations.
It also allows a firm to achieve strong sales from loyal customers by specializing in serving their specific needs.Niche marketing is however relatively rising in that a change in demand of the single market segment can cause the organization’s overall sales to plummet.
Multiproduct Strategies (Differentiated Marketing)
This happens when organizations sell multiple versions of a product, each designed to appeal to different market segment. In variations of this strategy, organizations adjust other elements of the marketing mix to reach several market segments e.g. an organization may use different advertising messages and media to reach customers in different market segments.
By meeting the needs of various segments, a differentiated strategy should produce great sales.
However serving a variety of market segments is more difficult and expensive than producing a single product intended for everyone.
Basis for segmenting consumer markets. In allowing a basis for segmentation, the marketer relies on this or her existing knowledge about the market, the current trends in purchases and his/her west judgement.
For consumer products, marketers can be two basic categories of segmentation. They can segment the market according to characteristics that describe consumers. (such as demographic or psychographic data).
They may also use segmentation based on consumers relationship to the product (e.g. what benefits they are working for, how much they buy e.t.c.)
Demographic Segmentation
This is the most common way to segment the consumer market. It involves division of the market on the basis of population characteristics.
It segments consumers according to variables such as gender, age, race or ethnicity, income level, occupation, education level and threshold size and consumption.
Segmentation by Gender
This is appropriate when the product is likely to appeal more to one gender than the other or when members of each gender are likely to respond differently to other aspects of a marketing mix.
Segmentation by Age
People’s needs and taste change as they grow older. Marketers are interested in knowing which age groups are increasing in population and which are declining.
Segmentation by race/ethnicity
This is based on segmenting the markets according to race or ethnic group taking into consideration their behaviour and traditions.
Segmentation by socioeconomic variables
Segmentation by income levels helps marketers determine which consumers are likely to respond to a particular combination, price, style and quality. Presumably low income earners (consumers will be especially interested in bargains where as, high income earners will be willing to spend extra for prestigious or high quality products)
Segmentation by income levels
helps marketers determine which consumers are likely to respond to a particular combination, price, style and quality. Presumably low income earners (consumers will be especially interested in bargains where as, high income earners will be willing to spend extra for prestigious or high quality products)
Segmentation by family values
Finally values or households size, composition or stage in the family lifecycle. Example large families are likely to be attracted by big boxes of laundry detergents e.t.C
Geographic Segmentation
The market segmentation, marketers can compare the size and needs of markets in various countries, then selecting countries that can be profitably served e.g. People selling high-tech electronic equipment to organizations would want to target countries that have the reliable electricity and trained personnel necessary to use the equipment.
Segmentation based on Customer type.
Different types of buyers will want different types of products and services. Different types of users within the organization often have different needs and preferences.
Segmentation by size
One can segment different types of organization by looking at their size. A big organization tends to place bigger orders.
Segmentation by end user.
The way customers will use a particular product is another basis for segmenting organizational markets e.g. plastics are used for packaging industrial products and consumer products.
In general, to carry out market segmentation an organization has to identify what the possible market segments are then gather information about the level of demand in each segment. After that the organization decides which segment (s) it can best serve.
Marketing plan
October 24, 2007
Contents of a marketing plan
Executive Summary:
This sums up the contents of the marketing plan in a maximum of three pages. It’s useful if one wants to be familiar with the report. It should state the best opportunity identified and the overall strategy for taking advantage of that opportunity.
Table of contents
1. Introduction
This provides the background necessary to understand the marketing plan. It explains the product concept and the reason it is expected to succeed. For an existing product or strategic business unit, the intro summarizes the products recent performance.
Situation Analysis This describes the relevant conditions in the environment. It describes where the organization is now. The discussion discusses or includes “industry analysis” which describes the competitive environment. The industry analysis covers areas like who the competitors are, what market share each competitor holds, what strategies and weaknesses each competitor has e.t.c.
2. Marketing planning
This section includes plans for marketing research. It also covers marketing objectives, target markets and marketing mix and it also describes the rationale for the above issues.
After the objectives and strategy comes a description of how the marketing plan will be implemented and controlled. It should provide the effort and timetable.
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Summary
This is similar to executive summary
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Appendix
In this section, a financial analysis of the marketing plan may appear in the appendix. This should contain atleast sales forecast on an estimate of the marketing cost involved in configuring out the plan.
Marketing Plan Outline
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Executive Summary
- Introduction
- Situation Analysis
- Industry Analysis
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Marketing Planning
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Marketing Objective
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Target Marketers
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Implementation and control
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Summary
Appendix: Financial Analysis
Sales Forecast
Budget
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Reference
Forecasting future demands
October 24, 2007
Forecasting future demands
There are several techniques available for sales forecasts. They can be divided into two: these are qualitative and quantitative.
Qualitative: This technique is based on judgment or opinion while quantitative is based on statistical analysis of historical data.
Qualitative techniques are:
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Jury of Executive opinion
This technique seeks the outlook of the organization’s executive. This strategy provides insights from people working in the variety of areas of finance, marketing, production. The marketer can average the estimates to arrive at a single forecast.
This method is quick and it’s useful for a new or innovative products. The drawback is that data must be broken down by product, region. It also consumes time of executives.
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Delphi technique
In this approach, the marketing department sends out a survey to experts outside and inside the organization asking them to provide a forecast.
The results are averaged and sent to the experts along with another questionnaire asking then to review the results and provide another forecast. This process is repeated until the experts reach a concensus.
The advantage of this method is that estimates are likely to succumb to group pressure. The disadvantage is that it is time consuming and expensive.
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Survey of buyer intentions.
One can forecast by asking the customers, by conducting a survey of the buying intentions of a sample of the target market. This approach assumes the actual buying patterns will match the stated plans of the survey sample. The advantage of this method is that it provides detailed information.
It also provides buyers thinking and can be used for new products. The disadvantage is that its time consuming and expensive.
Quantitative Methods
Some of the techniques used in quantitative methods are:
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Trend Analysis
This is the use of past data to predict future outcomes. It assumes that demand favours a pattern over time. The analyst looks for pattern in data, then uses it to predict future demand. Trend analysis is quick, cheap and effective when demand and environmental factors are stable. The limitation is that it does not consider changes in environment and is not useful for new or innovative products.
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Exponential Smoothing.
This is a form of time series analysis that gives more weight to more recent data and less to older data by assigning a weight to each year’s data. It is also quick, inexpensive. Its limitation is the same as trend analysis.
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Market Test
This involves offering the product in a few test market, assuming the response will be similar when the product is offered to the total target market.
The benefits of this method is that it provides more realistic information because based on actual purchases rather than intent to buy. It permits assessment of effects of marketing plan. Its limitation is that it is time consuming, expensive, alerts competition to orgs plan.
