TEN (10) STEPS BEFORE LAUNCHING ANY MARKETING PROMOTIONAL TACTIC

There are a number of steps you should go through, even if you think you already know what you’re doing, to ensure success each and every time. In doing so, you may be surprised by what you will learn about your business, the people you’ve hired to work for you, and your role and perception in the community.

✹ Determine objectives.
Is your goal to stimulate trial purchases by new customers or to stimulate more frequent purchases by current customers? Are you aiming to increase your average transaction, enhance your image, boost employee productivity or morale, stimulate community awareness, or a combination of these? These are all important goals, but you need to determine which ones you want to achieve first, second, and so on, and which are most easily and effectively executed.

✹ Be specific.
If your objective is to get new customers to try you out, what is a reasonable goal—an increase in new customers of 5 percent, 10 percent, or 15 percent? Would it be reasonable to shoot for an increase in customer frequency from three purchases a month to four? If your objective is to increase your average sale, what is a reasonable increase based on your current pricing? If your objective is employee morale, how much can you reduce employee turnover by running this promotion?

✹ Be realistic in your goals.
Success is rarely achieved in one fell swoop. Remember, this is a way of life. Each incremental improvement builds on the last. If you get too ambitious, you and your staff will quickly become frustrated and disappointed, and you will be less enthusiastic next time. Set your goals high enough to make a difference and low enough to have the best chance of success.

✹ Set your strategy.
Once you’ve established your objectives and selected some tactics, you must decide how to make those tactics successful. What can you afford, and how can you maximize your results?

✹ Consider various aspects.
Consider such aspects as timing; frequency; capitalizing on local events; seasonal population variations; competitive challenges that call for extra effort; variable costs of materials, labor, and real estate; and other factors that are unique to your situation.

✹ Create a plan.
Create a carefully thought-out plan for each promotion, and make sure that each promotion is slotted into its proper place in your long-term objectives.

✹ Zero in on your target.
What type of customer does your business attract—upscale, blue-collar, families, singles, ethnic groups? Ideally, the group or groups that are predominant in your neighborhood (within a 10-minute drive of your front door) should be most attracted to your concept. Once you’ve zeroed in on your target audience, review your tactical options and pick those that would most appeal to that audience and would be the most appropriate.

✹ Calculate your payout.
Almost every promotional tactic that is intended to increase sales should have a measurable result and produce a profit. You should know how many new customers you need in order to cover the costs of your promotion. How many of those new customers must you convert to regular customers to consider the promotion a success? If you do your homework ahead of time, you’ll be able to tell how realistic your objectives are and what, if any, adjustments are necessary for next time.

Improving employee morale or improving the image of your business is more difficult, but not impossible, to measure. Ask yourself, or your bookkeeper or accountant, “What does it cost us to hire and train a new employee?” or “How much traffic will an improved image generate?” In most cases, you can find a way to track the results of a promotion.

Remember, if you can measure it, you can manage it. Or, as Yogi Berra once said, “If you don’t know where you’re going, you might end up someplace else!”

✹ Check the calendar.
You shouldn’t be mailing announcements today for a promotion that starts tomorrow. You don’t need New Year’s noisemakers delivered in January. Leave extra time to make sure that each element of your promotion is in place in time. Leave time for creating, producing, and implementing each element. Make a promotion calendar or schedule showing each phase, and pad the time a little to allow for the inevitable changes and delays.

✹ Refine your products and services.
Be sure that the service or product you offer is right for your target customers—that you’re offering
the right varieties, with the most customer appeal, the right
pricing, and the right presentation. Keep track of what is most
popular, what’s producing the most sales, and what’s producing
the largest profit margin.
Compare what you know with what your competitors are offering.
Survey your customers by questionnaire or one-on-one conversations.
Take the temperature of your market, and be a good listener by leaving
your ego and your preconceived ideas out of it.

✹ Polish the brass. Go a step beyond your regular maintenance procedures.
Make sure that your selling, operating, and customer areas are attractive; that your physical space is clean and tidy; that any background music appeals to your audience; that unpleasant sounds or odors are neutralized; that fading paint, broken door handles, and any other flaws are corrected. It all sells, even sparkling bathrooms. You may not see the grimy windows or the litter because you pass them every day and they’ve become invisible, but your customers will.

✹ Check the logistics.
You can execute your tactics with minimum difficulty by making sure that you have the technical know-how, the space, and the resources to handle the promotion without disrupting customer service or staff efficiency. Plenty of otherwise successful promotions have been ruined by insufficient or poorly trained staff, poor product quality, or equipment failure. Practice run-throughs, when appropriate, to help iron out any kinks and increase the chances of a smooth promotion.

✹ Cheerlead.
Hold a team meeting of all your employees and explain the objectives, the rationale, the implementation, and the fun of your upcoming promotion. Let employees know what is expected of them, what is in it for them personally, and how much you care about their job satisfaction and feedback. They are your customers, too, and you should work just as hard to earn their loyalty. It’s the right thing to do, and it pays.

✹ Plan your analysis.
Successful promotional activity is a learning process. You take lessons away from each effort, and you build on them. Setting specific objectives allows you to measure the success of your promotion. For example, before your promotion even begins, you might prepare brief customer and employee questionnaires that you can use afterward to solicit reactions. Review every aspect of your promotion, and gather the information you need to make your next promotion even more effective.

WHAT IS A SHARE OF STOCK? STOCKS BASIC INFORMATION AND TUTORIALS

WHAT IS A SHARE OF STOCK ONCE AGAIN???

We’re not talking about livestock! Actually, the word stock originally did come from the word livestock. Instead of trading cows and sheep, however, we trade pieces of paper that represent ownership—shares— in a corporation.

You may also hear people refer to stocks as equities or securities. Most people just call them stocks, which means supply. (After all, the entire stock market is based on the economic theory of supply and demand.)

When you buy shares of stock in a corporation, you are commonly referred to as an investor or a shareholder. When you own a share of stock, you are sharing in the success of the business, and you actually become a part owner of the corporation.

When you buy a stock, you get one vote for each share of stock you own. The more shares you own, therefore, the more of the corporation you control.

Most shareholders own a tiny sliver of the corporation, with little control over how the corporation is run and no ability to boss anyone in the corporation around. You’d have to own millions of shares of stock to become a primary owner of a corporation whose stock is publicly traded.

In summary, a corporation issues shares of stock so that it can attract money. Investors are willing to buy stock in a corporation in order to receive the opportunity to sell the stock at a higher price.

If the corporation does well, the stock you own will probably go up in price, and you’ll make money. If the corporation does poorly, the stock you own will probably go down in price, and you’ll lose money (if you sell, that is).

WHY WE BUY STOCKS???

You Buy Stocks for Only One Reason: To Make Money

The stock market is all about making money. Quite simply, if you buy stock in a corporation that is doing well and making profits, then the stock you own should go up in price. (By the way, the profits you make from a stock are called capital gains, which are the difference between what you paid for a stock and what you sold it for. If you lose money, it is called a capital loss.)

You make money in the stock market by buying a stock at one price and selling it at a higher price. It’s that simple. There is no guarantee, of course, that you’ll make money. Even the stocks of good corporations can sometimes go down.

If you buy stocks in corporations that do well, you should be rewarded with a higher stock price. It doesn’t always work out that way, but that is the risk you take when you participate in the market.

CUSTOMER PROFITABILITY ANALYSIS BASIC INFORMATION AND TUTORIALS

A profitable customer is a person, household, or company that over time yields a revenue stream exceeding by an acceptable amount the company’s cost stream for attracting, selling, and serving that customer. Note the emphasis is on the lifetime stream of revenue and cost, not the profit from a particular transaction. Marketers can assess customer profitability individually, by market segment, or by channel.

Many companies measure customer satisfaction, but few measure individual customer profitability. Banks claim this is a difficult task, because each customer uses different banking services and the transactions are logged in different departments.

However, the number of unprofitable customers in their customer base has appalled banks that have succeeded in linking customer transactions. Some report losing money on over 45 percent of their retail customers.

A useful type of profitability analysis is shown in figure below:

Customers are arrayed along the columns and products along the rows. Each cell contains a symbol representing the profitability of selling that product to that customer. Customer 1 is very profitable; he buys two profit-making products (P1 and P2).

Customer 2 yields mixed profitability; he buys one profitable product (P1) and one unprofitable product (P3). Customer 3 is a losing customer because he buys one profitable product (P1) and two unprofitable products (P3 and P4).

What can the company do about customers 2 and 3? (1) It can raise the price of its less profitable

products or eliminate them, or (2) it can try to sell customers 2 and 3 its profit-making products.

Unprofitable customers who defect should not concern the company. In fact, the company should encourage them to switch to competitors.

Customer profitability analysis (CPA) is best conducted with the tools of an accounting technique called activity-based costing (ABC). ABC accounting tries to identify the real costs associated with serving each customer—the costs of products and services based on the resources they consume.

The company estimates all revenue coming from the customer, less all costs. With ABC, the costs should include the cost not only of making and distributing the products and services, but also of taking phone calls from the customer, traveling to visit the customer, paying for entertainment and gifts—all the company’s resources that go into serving that customer.

ABC also allocates indirect costs like clerical costs, office expenses, supplies, and so on, to the activities that use them, rather than in some proportion to direct costs. Both variable and overhead costs are tagged back to each customer.

Companies that fail to measure their costs correctly are also not measuring their profit correctly and are likely to misallocate their marketing effort. The key to effectively employing ABC is to define and judge “activities” properly. One time-based solution calculates the cost of one minute of overhead and then decides how much of this cost each activity uses.

USES OF SECURITY MARKET INDEXES BASIC INFORMATION

Security market indexes have at least five specific uses. A primary application is to use the index values to compute total returns and risk for an aggregate market or some component of a market over a specified time period and use the rates of return and risk measures computed as a benchmark to judge the performance of individual portfolios.

A basic assumption when evaluating portfolio performance is that any investor should be able to experience a risk-adjusted rate of return comparable to the market by randomly selecting a large number of stocks or bonds from the total market; hence, a superior portfolio manager should consistently do better than the market.

Therefore, an aggregate stock or bond market index can be used as a benchmark to judge the performance of professional money managers. Indicator series are also used to develop an index portfolio.

As we will discuss later, it is difficult for most money managers to consistently outperform specified market indexes on a risk adjusted basis over time. If this is true, an obvious alternative is to invest in a portfolio that will emulate this market portfolio.

This notion led to the creation of index funds, whose purpose is to track the performance of the specified market series (index) over time. The original index fund concept was related to common stocks.

Subsequently, development of comprehensive, well specified bond market indexes and similar inferior performance relative to the bond market by most bond portfolio managers have led to a similar phenomenon in the fixed-income area (bond index funds).

Securities analysts, portfolio managers, and others use security market indexes to examine the factors that influence aggregate security price movements (that is, the indexes are used to measure aggregate market movements).

Another group interested in an aggregate market series is “technicians,” who believe past price changes can be used to predict future price movements. For example, to project future stock price movements, technicians would plot and analyze price and volume changes for a stock market series like the Dow Jones Industrial Average.

Finally, work in portfolio and capital market theory has implied that the relevant risk for an individual risky asset is its systematic risk, which is the relationship between the rates of return for a risky asset and the rates of return for a market portfolio of risky assets.

Therefore, in this case, an aggregate market index is used as a proxy for the market portfolio of risky assets. In summary, security market indexes are used:

➤ As benchmarks to evaluate the performance of professional money managers

➤ To create and monitor an index fund

➤ To measure market rates of return in economic studies

➤ For predicting future market movements by technicians

➤ As a proxy for the market portfolio of risky assets when calculating the systematic risk of an asset.

THE VALUE CHAIN BASIC INFORMATION AND TUTORIALS

Harvard’s Michael Porter has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm is a synthesis of activities performed to design, produce, market, deliver, and support its product.

The value chain identifies nine strategically relevant activities—five primary and four support activities —that create value and cost in a specific business.

The primary activities are (1) inbound logistics, or bringing materials into the business; (2) operations, or converting materials into final products; (3) outbound logistics, or shipping out final products; (4) marketing, which includes sales; and (5) service. Specialized departments handle the support activities —(1) procurement, (2) technology development, (3) human resource management, and (4) firm infrastructure. (Infrastructure covers the costs of general management, planning, finance, accounting, legal, and government affairs.)

The firm’s task is to examine its costs and performance in each value-creating activity and look for ways to improve it. Managers should estimate competitors’ costs and performances as benchmarks against which to compare their own. And they should go further and study the “best of class” practices of the world’s best companies.

We can identify best-practice companies by consulting customers, suppliers, distributors, financial analysts, trade associations, and magazines to see whom they rate as doing the best job. Even the best companies can benchmark, against other industries if necessary, to improve their performance. To support its corporate goal to be more innovative, GE has benchmarked against P&G as well as developing its own best practices.

The firm’s success depends not only on how well each department performs its work, but also on how well the company coordinates departmental activities to conduct core business processes.5

These processes include:

• The market-sensing process. All the activities in gathering and acting upon information about the market

• The new-offering realization process. All the activities in researching, developing, and launching new high-quality offerings quickly and within budget

• The customer acquisition process. All the activities in defining target markets and prospecting for new customers

• The customer relationship management process. All the activities in building deeper understanding, relationships, and offerings to individual customers

• The fulfillment management process. All the activities in receiving and approving orders, shipping the goods on time, and collecting payment.

Strong companies are reengineering their work flows and building cross-functional teams to be responsible for each process. At Xerox, a Customer Operations Group links sales, shipping, installation, service, and billing so these activities flow smoothly into one another.

Winning companies excel at managing core business processes through cross-functional teams. AT&T, LexisNexis, and Pratt & Whitney have reorganized their employees into cross-functional teams; cross functional teams exist in nonprofit and government organizations as well.

To be successful, a firm also needs to look for competitive advantages beyond its own operations, into the value chains of suppliers, distributors, and customers. Many companies today have partnered with = specific suppliers and distributors to create a superior value delivery network, also called a supply chain.

INTERMARKET TRADING SYSTEM BASIC INFORMATION AND TUTORIALS

A centralized quotation system is currently available—the Intermarket Trading System (ITS), developed by the American, Boston, Chicago, New York, Pacific, and Philadelphia Stock Exchanges and the NASD.

ITS consists of a central computer facility with interconnected terminals in the participating market centers. The number of issues included, the volume of trading, and the size of trades have all grown substantially.

With ITS, brokers and market makers in each market center indicate specific buying and selling commitments through a composite quotation display that shows the current quotes for each stock in every market center. A broker is expected to go to the best market to execute a customer’s order by sending a message committing to a buy or sell at the price quoted.

When this commitment is accepted, a message reports the transaction. The following example illustrates how ITS works.

A broker on the NYSE has a market order to sell 100 shares of GE stock. Assuming the quotation display at the NYSE shows that the best current bid for GE is on the Pacific Stock Exchange (CSE), the broker will enter an order to sell 100 shares at the bid on the PSE.

Within seconds, the commitment flashes on the computer screen and is printed out at the PSE specialist’s post where it is executed against the PSE bid. The transaction is reported back to New York and on the consolidated tape.

Both brokers receive immediate confirmation, and the results are transmitted at the end of each day. Thereafter, each broker completes his or her own clearance and settlement procedure.

The ITS system currently provides centralized quotations for stocks listed on the NYSE and specifies whether a bid or ask away from the NYSE market is superior to that on the NYSE.

Note, however, that the system lacks several characteristics. It does not automatically execute at the best market. Instead, you must contact the market maker and indicate that you want to buy or sell, at which time the bid or ask may be withdrawn.

Also, it is not mandatory that a broker go to the best market. Although the best price may be at another market center, a broker might consider it inconvenient to trade on that exchange if the price difference is not substantial.

It is almost impossible to audit such actions. Still, even with these shortcomings, substantial technical and operational progress has occurred on a central quotation system.

MARKETING DEFINED AND EXPANDED BASIC INFORMATION

What Is Marketing?

Marketing is about identifying and meeting human and social needs. One of the shortest good definitions of marketing is “meeting needs profitably.”When eBay recognized that people were unable to locate some of the items they desired most, it created an online auction clearinghouse.

When IKEA noticed that people wanted good furnishings at substantially lower prices, it created knockdown furniture. These two firms demonstrated marketing savvy and turned a private or social need into a profitable business opportunity.

The American Marketing Association offers the following formal definition: Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

Coping with these exchange processes calls for a considerable amount of work and skill. Marketing management takes place when at least one party to a potential exchange thinks about the means of achieving desired responses from other parties.

Thus we see marketing management as the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.

We can distinguish between a social and a managerial definition of marketing. A social definition shows the role marketing plays in society; for example, one marketer has said that marketing’s role is to “deliver a higher standard of living.” Here is a social definition that serves our purpose:

Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others.

Managers sometimes think of marketing as “the art of selling products,” but many people are surprised when they hear that selling is not the most important part of marketing! Selling is only the tip of the marketing iceberg.

Peter Drucker, a leading management theorist, puts it this way: There will always, one can assume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.

Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available.

When Nintendo designed its Wii game system, when Canon launched its ELPH digital camera line, and when Toyota introduced its Prius hybrid automobile, these manufacturers were swamped with orders because they had designed the right product, based on doing careful marketing homework.