Managing the Sales Force

The face of any organization is the sales force. Companies spend a considerable amount of time and money on sales force rather than on any other promotional activity. However, sales force is expensive and companies are looking forward to managing them in an efficient and effective manner.

Designing of the Sales Force

Sales force is linking between companies and customer. Therefore, companies have to be careful in designing and structuring sales force.

1. The first step is setting out an objective for sales force. Earlier companies had a single objective increasing sale making it objective also for sales people. Sales people are asked to perform a search for prospective clients or lead. Sales people are asked to balance time between a prospective customer and current customer. Effective communication of product and services is essential to close the deal. Sales people also play an important role in after sales service and can make a difference for the company. Sales people are eyes and ears of the company in the market gathering information about competition and customer changing demands.
2. The second step is use sales people strategically. Sales people have to combine efforts with other team members to achieve the objective. Sales people should be aware how to analyze market data been provided and convert them into marketing strategies.
3. The third step is deciding the structure of the sales force. The structure of the sales is dependent on the strategy followed by the company. Common sales force structures are as follows:-
• Territorial structure is used where every sales representative is assigned specific geographical area. This structure is preferred for building relationships with locals.
• Product structure is used for complex and un- related product portfolio. Here the sales people are directly associated with research and development of the products.
• Market structure is used if the companies are operating different industry or market segments. Every sales force specializes in a definite market and helps push a product efficiently across the given market. However, the disadvantage would arise if customers are located over a wide geographical area.
• Complex structure is used when companies are in business of selling complex product to different customer across a large geographical area. Here sales force structure is a combination of other structures discussed.

Once the structure is designed companies need to make a decision with respect to the size of the sales force. The size of the sales force is dependent on the market size and number of customers.

4. The next step is to design compensation for the sales force. Compensation plays a big motivational factor for sales people. Companies follow a structure of a fixed amount plus a variable amount depending of success achieved in the market. Allowances play an important factor in the salary owing to continuous travel and market visits.

Managing Sales Force

Integral part for success of marketing strategy is management of the sales force. The management of sales consists of following:-

Recruitment is at the centre of an effective sales force. One approach in the selection is asking a customer what characteristics they look for in a sales representative. Companies develop selection procedure where behavioral and management skills are tested.

Training is essential to remain ahead of the competition. Sales force needs training before entering the market as well as training at different stage of the product life cycle.

Supervision on sales force is decided on the profile of product portfolio. A general supervision is maintained with respect to sales people dealing with potential clients. Another supervision is related to efficient time management from preparation of client call to closing of the deal.

Motivation is a key aspect for management of the sales force. Here compensation plays an important in driving up the motivational level. Compensation can be assigned based on sales quota. Other motivational tools are social gathering and family outing.

Evaluation is essential to management of a sales force. Sales reports sent by the sales force serve a good starting point of evaluation.

Art of negotiation and relationship marketing these two are the important aspects of successful sales representative and long term benefit for the company.

Facebook as a Digital Marketing Tool

Facebook as a Digital Marketing Tool

 

Digital Marketing entails marketing of goods and services using digital technologies and digital mediums. In this context, it would be pertinent to note that with the advent of Web 2.0 or social media, marketers now have the chance to utilize the opportunities offered by digital marketing using social media like Facebook. This article explores the advantages and disadvantages of using Facebook for digital marketing and discusses the various issues surrounding this concept. Before launching into the discussion, it would be worthwhile to note that the unparalleled access to a large consumer base afforded by Facebook makes it the ideal medium of choice for marketers especially those in the business of consumer goods and FMCG or Fast Moving Consumer Goods. This is because Facebook has a combined user base of more than a billion people and reaches nearly one in four adults in the United States alone. Apart from this, the use of Facebook in the emerging markets is even more pervasive with estimates suggesting that out of the 80 percent of the total Facebook users who are from outside of the United States, nearly half of them are active users making the medium a platform for brands to be noticed in the “noisy social media world”.

Advantages of Using Facebook

Continuing the points made above, it is indeed the case that Facebook offers penetration and reach to marketers especially those operating on shoestring budgets, as they do not have to spend large amounts of money on expensive marketing campaigns. Moreover, unlike traditional media where the effectiveness and efficacy of a marketing campaign cannot be measured directly and instead, readership or viewership metrics are used, Facebook marketing can be measured for its efficacy as click through and conversion of eyeballs into purchases is readily available. Further, Facebook offers the unprecedented chance for marketers to target a global audience and at the same time, consider local factors. In other words, what this means is that marketers can create campaigns, which have a global theme and at the same time can reach out to their local audience as well. The conflation of reaching out to a wider audience without compromising on the local customers means that Facebook becomes the social networking site of choice when compared to Twitter and Instagram that are more focused in their reach. Further, the “death of distance” and the removal of the geographical constraints mean that spatial and locational barriers are nonexistent with Facebook Digital Marketing. Already companies like Coca Cola and Starbucks have used the power of Facebook to integrate it with their marketing strategies for effective customer outreach.

Downsides of Using Facebook

Of course, there are downsides to using Facebook as a marketing tool and these include the rapidity with which negative publicity can travel around the world in a jiffy. For instance, a jealous competitor or a disgruntled employee might post negative comments or information about the brand or the product and considering the ways in which such comments can go “viral” in a matter of hours and even minutes, it is the case that marketers and companies have to be always on the lookout for what is being said and commented upon on their products. The point to be noted here is that by the time, the marketer, the company representative comes up with a rebuttal, or the disproving of the negative comment or publicity, the damage would have been done. Apart from this, using Facebook as the digital marketing medium means that instant gratification is the norm rather than any sustained engagement with the brand. This results in users (who are mostly of the Generation Y) forming opinions of the brand in a shallow and superficial manner which means that little attention is paid to deeper thought and nuanced marketing as is the case with traditional media.

Other issues to be considered

We have considered the advantages and disadvantages of using Facebook for Digital Marketing. Apart from these, other issues count in favor of Facebook. For instance, marketing on Facebook is easy and inexpensive when compared to traditional media as all one needs to do is to integrate Facebook into the company’s online marketing strategy and create a fan page or a dedicated page in addition to providing for targeted messages aimed the focused consumer segment. Further, marketing on Facebook can bring additional benefits as can be seen in the company’s recent moves to be more aggressive as far as e-Commerce and m-Commerce are concerned. This has long been a sticking point between Facebook and its corporate clients, as the latter wanted the former to integrate these aspects more into the overall strategy.

Changing World of Marketing and Increased Demands on Marketers

Changing World of Marketing and Increased Demands on Marketers

Traditional Marketing

The world of marketing is literally changing by the minute as marketing is no longer confined to traditional selling and advertising but also encompasses use of advanced technologies and Big Data Analytics in a real time manner.

For instance, traditionally, marketers were expected to rely on market research conducted by specialized agencies as well as in house teams to assess the demand and consumer preferences for a particular good or service.

Next, they were expected to coordinate with the R&D (Research and Development), Production, and Quality Control departments to time the release of the products or services. Further, they were then expected to undertake advertising and sales promotions that entailed managing the ad campaigns and supply chain as well as distribution channel management.

Finally, they were expected to incorporate the feedback from the point of sale outlets as well as from market research to asses and determine whether their strategies have succeeded or need to be fine-tuned.

In all the above steps, marketing was essentially demand driven and involved optimum use of technology and at the same time, was largely on physical dimensions since all this was done in the manufacturing supply chains as well as geographical distribution channels.

This meant that marketing was as much about advertising and promotions as it was about reaching out to consumers through physical channels.

New Age Marketing

However, in the recent decade or so, marketing has been transformed in ways that marketers in the 20th century could not have imagined with the emergence of digital and mobile media as well as social media.

While the introduction of Television and associated advertising and sales was the first wave of innovation and the early computer driven selling was the second wave of innovation, the advent of enhanced digital media and the convergence of social media and Smartphones can be thought of as the third wave of innovation that goes far beyond the realms of traditional marketing.

To see how this works, marketing is no confined to specific geographies anymore. Anyone with a computer and an internet connection and a credit card can shop for products anywhere in the world anytime of the day and everywhere in the world and every time they feel like shopping.

Borderless World and a World That Operates on a 24/7 Basis

This means that selling is no longer a time bound or spatial bound affair since consumers in the West can shop for products made in the East during their daytime which is the night time for the latter. Similarly, the equation is reversed when Eastern consumers shop on Western e-Commerce sites.

Apart from this, the near instantaneous feedback from consumers on a global scale means that there are no lags as far as the time between product launch and closing the feedback loop is concerned.

Indeed, one can go as far to say that there is no closure of the feedback loop since the repeated iterations between the various stages in the marketing value chain means that marketing is not a real time affair unconstrained by either time or distance.

Big Data and the Transformation of Marketing

Another important and perhaps the most important change or transformation in the way marketing has been revolutionized is the use of increasingly sophisticated algorithms and data driven analytics software along with Big Data.

It is no longer the case that marketers act on demand and forecasts of demand. Instead, they are now creating demand wherein they sense and intuit consumer preferences and indeed, to the extent that they predict consumer preferences even before such thoughts cross the consumers’ minds.

While this might sound like science fiction and scary to everyone, all one has to do is to visit the e-Commerce retailers such as Amazon that uses Big Data extensively to the point that it has the ability to predict consumer preferences better than the consumers themselves.

What this means is that marketing is now in an exciting new game which while stressful and hyper competitive is also full of opportunities for anyone who can master these elements.

The Human Element versus Machine Intelligence

Indeed, the Brave New World of Marketing is now a combination of the age old art of selling and the New Age science of analytics driven selling. Further, as mentioned earlier, with no geographical or time constraints and moreover, with no physical channels, the entire world is the market and the technocratic cyberspace is the new distribution channel where the traditional concerns about such aspects have been replaced by concerns about payment systems and interlocking rules and regulations worldwide where the global drives are sometimes up against local imperatives.

While some might argue that marketing has always been about meeting unmet needs and driving consumer preferences, it is the case that the New Age marketer is becoming less important when compared to the machines and the algorithms that are driving the process.

In addition, while it is the case that concerns about payment channels and the competing global and local drivers of growth have always been present, what is different now is the real time and by the minute changes in the entire marketing value chain.

However, despite the arguments and the counter arguments about how much has changed or not, we would like to point out that while the media and the geospatial transformations have indeed revolutionized marketing, the human element is still important since we are yet to have computers who can think better than humans. In conclusion, as explained earlier, the art of marketing with the science of prediction means that marketing is no longer what it used to be.

Push and Pull Marketing in Context of Online, Mobile, and Big Data Business Models

Push and Pull Marketing in Context of Online, Mobile, and Big Data Business Models

Marketing is usually taken to be the entire gamut of activities that span customer acquisition, retention, and customer prospecting. In this context, we are used to receiving marketing messages and advertisements that entice us and persuade us to buy and consume products

This is the traditional concept of push marketing wherein marketing messages about new products and new releases often find their way into our email, snail mail, and other channels.

Indeed, traditionally, marketing has always been characterized as push marketing wherein marketers target advertisements and marketing messages at consumers based on broad and wide as well as deep and spread out parameters such as demographics, gender, income levels, geography, and some personalized preferences based on consumer profiling according to these parameters.

However, in recent years, there has been a rise in the pull marketing wherein marketers do not stop at “pushing” products to consumers and instead, “pull” the consumers to buy products and consume brands based on proactive and predictive capabilities.

How this works is that marketers begin to take a consumer database and then determine the various classifications and categorizations as described earlier and then they begin to use Big Data to predict what those consumers would buy next. In other words, when contrasted to the traditional push marketing wherein products and brands are first conceived and then consumers targeted, pull marketing differs in the sense that consumers and their future consumer behavior is predicted and sensed as well as intuited.

To give examples of push and pull marketing, consider ads for everyday products such as Toothpastes, Edible Items, and FMCG or Fast Moving Consumer Goods. In these instances, marketers prepare a list of potential consumers and then begin market research to determine the likely target market for the brands and products.

Once the target market is identified, then marketers begin to “push” the products to consumers wherein ads and marketing messages are targeted at the consumer segments based on market research. Thus, demand is sought to be generated for the supply of products and brands that are pushed to the consumers who are at the center of the marketers’ universe.

In contrast, the new age marketers go beyond pushing products and brands and instead, pull consumers into their universe wherein their future needs and preferences are estimated and evaluated and then ads and marketing messages targeted at them.

In other words, the marketing process is predictive and intuitive in nature wherein marketers have the power to anticipate shifts in consumer preferences and sense and intuit what consumers are going to do next. This differs from traditional push marketing in the sense that consumers who are again at the center of the marketers universe are pulled in an outward circle manner whereas in push marketing, products are pushed in an inward circle manner to the consumers.

Thus, there is a world of difference between push and pull marketing and the latter has taken off in a big way in recent years mainly due to the sophisticated tools and software that is available to the marketers through Big Data.

Further, with the advent of the internet and Smartphones, consumers can be pulled into the marketers’ universe more easily as these channels provide the marketers with an ability to draw the consumers rather than pushing the products alone.

Indeed, while one cannot pull consumers entirely through pamphlets, TV ads, and radio spots that are generic in nature, the internet and Smartphones allow marketers to reach consumers in a more micro and customized as well as targeted manner.

In addition, the internet and Smartphones allow marketers to combine Big Data software with the inherent technologies embedded in these media and channels and hence, gives them unprecedented power over the consumers.

Indeed, while push marketing was static and one way, pull marketing is dynamic and two way meaning that consumers can be pulled more easily since they “interact” with the marketing campaigns in a dynamic manner which would allow them to communicate and reveal their preferences to the marketers in a “real time” manner.

Thus, marketers can devise marketing campaigns that are more personalized and customized that increases the possibility of the consumers being pulled into the orbit of the brand universe.

As can be seen from the discussion so far, pull marketing is something where the consumers and their future moves are anticipated and predicted using Big Data and then leveraging online and mobile channels, they are drawn to buying products based not only on customer segmentation principles but also based on more micro and granular customer targeting methods and processes.

Though some experts characterize this as push marketing with more advanced technology being used, for the purposes of this article, it would be safe to say that the term pull marketing suits this new age selling better.

Finally, given the awesome power of Big Data and the convenience of the online and mobile channels, it would not be surprising if in the future, we find more real time updating of marketing strategies that are more dynamic and interactive. Already anyone who uses the internet to shop and Smartphones to buy products would know how customized marketing works.

Thus, with more sophisticated technologies, it might be possible to delve into the minds of the consumers and predict what they would do next which is way ahead of traditional push marketing that depends on market research conducted before the products are launched and instead, rely on market research that is dynamic and real time in nature.

 

Managing Retailing, Wholesaling and Market Logistics

Managing Retailing, Wholesaling and Market Logistics

 

Companies are looking forward to moving away from the conventional supply chain and moving towards value network. In a value network traditional supplier-wholesaler-retailer are considered as partners rather than as a customer. Companies designing marketing channel under the value network principle need to understand the players, role and their importance.

Retailing

The act through which goods and services reach the end customer for individual or business usage is known as retailing. The players involved in this act are known as retailers. Retailers can be manufactures, distributors or wholesalers. They can reach the end customer through the internet or physical stores. Retail organizations are divided into three categories store retailers, non-store retailers and retail organization. Store retailing, the best example is the department store like Macy or Sears. Store retailers are further divided on the service level with self-service, self-selection, limited service and full service stores. Store retailing comprises over 90% in way products reach the end customer.

Over the years non-store retailing has garnered a market share. Non-store retailing includes direct selling, direct marketing, automatic vending and buying service. Avon is an example of direct selling. Internet retail giant Amzon.com is an example of direct marketing. Soft drink vending machines are a form of automatic vending.

Retail organizations are retailing stores under direct ownership of corporate. Customer satisfaction and brand management becomes easier through retail organizations. Corporate chain store like Old Navy and Franchises like McDonald’s are good examples of retail organizations.

Every retailer needs to have a business or marketing strategy for success. Retailer needs to analyze its target market and customers for an in-store promotion and product assortment. Services form a big part of retailing business, so retailers have to finalize level of service. Services include pre-purchase, post purchase and supporting services.

With the advent of technology and unprecedented economic growth, retailing has its own share of change in business ways.

Wholesaling

The act of purchasing goods for consumer and industry for further resale is referred to as wholesaling. Here, manufactures and farmers are not considered as wholesalers.

Wholesaler is an important part of the marketing channel. Wholesaler increase reach of the company products and the risk of selling to the customers. Wholesaler can store inventory of various assortment of product thus helping cost for company and time for customers. Wholesaler can serve as ears and eyes for the company in understanding competition and customer.

Marketing Logistics

The supply chain management is essential for companies to improve productivity and reduce costs. The purpose of marketing logistic is to design and implement infrastructure, which will deliver goods from the point of origin to point of sell in an effective and least cost manner. This objective mix of high customer satisfaction and lowest cost possible are asymmetrical. The major decision involved with marketing logistic relate to order processing, warehousing, inventory and transportation.

Companies look forward to shortening order to payment cycle. A long cycle will lead to decrease in customer satisfaction and company’s profit. Companies have to set benchmarks at each level from sales people receiving orders to receiving payment from creditors.

Warehousing for finished goods is another important hub for companies. There has to be a right balance between sales order and quantity of finished goods. Warehousing at strategic locations increases timely delivery of goods and reducing in inventory. Technology has helped in improving warehousing standards.

Piled up inventory is not a good sign for the company. Inventory management involves making decision with time and quantity of raw materials for matching customer requirements. Management principle like Just In Time (JIT) are used for better inventory management. In JIT focus is to develop well time flow of raw materials and finished goods.

Transportation and freight cost plays an important role in final pricing, delivery and condition of raw materials as well as finished products. Here companies need to make the decision, whether to use a private carrier (company ownership), contractual (Outside agency) or common carrier (service shared at standard rates).

Retailing, wholesaling and logistic decision are very important to deliver value to end customers.

Competitor Intelligence Research & Market Intelligence

 

Competitor Intelligence Research & Market Intelligence

Businesses now operate in a world in which information is more readily and publicly available than ever before.  Thanks to the development of the Internet, information on market trends, legislation, customers, suppliers, competitors, distributors, product development and almost every other conceivable topic is available at the click of a mouse.  Search engines, online libraries, company websites and other sources provide information in an increasingly plentiful, easy to find, and easy to digest way.

Even traditional forms of information provision such as libraries and publications are moving online.  All in all, information providers are responding to customer demand by making more and more information available not only online, but also in a searchable format

Market Intelligence?

Market intelligence is a term that is widely used, widely misunderstood, and often mistaken for a mysterious art requiring high-level detective work. In simple terms, market intelligence is information that is gathered for the purpose of making business decisions.  It is largely synonymous with market research, the systematic gathering, recording, analysis and interpretation of information about a company’s markets, competitors and customers.

Market intelligence can be obtained externally – by a market research and intelligence company, or by an internal department.   Once the market intelligence is obtained, it is usually managed in-house, often in an informal fashion, but increasingly with the assistance of IT-based market intelligence systems provided by technology and market research companies.

Market intelligence, competitor intelligence & business intelligence

Market intelligence is sometimes confused with competitor intelligence.  The latter is a more specific term, referring specifically to information about a particular company’s competitors.  SCIP, the Society of Competitive Intelligence Professionals, defines it as follows:

Business intelligence (BI) is also a term that is frequently used interchangeably with the term market intelligence, again incorrectly.  Business intelligence refers to all of the information used by a company for the purposes of decision-making, but tends to refer to data relating to the company itself, rather than its market environment.  BI therefore includes sales data, production data and financial data, and tends to be collected internally rather than by outside agencies.  BI is usually closely related to businesses’ KPIs (key performance indicators).

The Purposes of Market Intelligence

Market intelligence can be used to assist with more or less every decision faced by a company.  The overriding purpose of most market intelligence, however, is to help the company grow – to increase revenue, profit, or market share.  Good market intelligence can therefore have a huge return on investment - $40,000-$150,000 spent on intelligence can generate or save many times that amount in extra customer revenue or the avoidance of a bad investment decision.

Gathering Market Intelligence

Market entry and market expansion studies

Means of gathering market intelligence vary according to the objectives of the intelligence.  The first example in the table above – market entry and market expansion intelligence – is the most varied in terms of the mix of intelligence gathering methods used.  In order to gather enough good quality information to inform a decision to invest in a new market, or simply to increase investment in an existing market, the market research and intelligence firm would gather information from the following sources:

·         Potential buyers – to ascertain how much demand there is for the product/service

·         Distributors, agents and other intermediaries – to find out how to best get products and services to market, and again to ascertain how much demand there is for the product/service

·         Competitors – to find out how other companies have successfully entered and stayed in the market, and judge the market’s likely response to a new entrant

Industry experts such as journalists and industry associations – these organizations can frequently provide a quick and concise overview of the market, as well as numerous leads in the form of contact details of market players

In short, conducting a comprehensive and actionable market entry or market expansion project requires a 360-degree view of the market.

Market assessment studies are extremely similar in their approach, albeit the consultant is generally cross-checking a decision that has largely been made, rather than exploring a completely new market or opportunity.  Acquisition studies form part of the due diligence of an acquisition target, with most of the information being gathered through the following means:

·         Interviews with the acquisition targets themselves – to gauge their strategy, intentions, performance and characteristics

·         Interviews with competitors of the acquisition target – to assess their views of the company’s strengths and weaknesses as well as the strategy, intentions, performance and characteristics of the competitors

·         Interviews with customers of the acquisition target – these are arguably the most important interviews of all, as they allow us to gauge the reputation, performance  and brand values of the acquisition target, as well as pick up ‘industry gossip’ regarding issues such as the target’s financial status

·         Published information such as annual reports and industry reports

                      Suppliers and distributors to the acquisition target are generally of less use, but can provide some interesting perspectives in terms of the performance and attributes of the acquisition target.

Customer Analysis: How to Effectively Target the Market

Customer Analysis: How to Effectively Target the Market

A customer analysis is also known as a customer profile or target market.Analysis and it is an essential element of your company business plan. 

                 This analysis will determine your marketing strategy by identifying your customer base and ascertaining their needs, something which helps you develops your product or service in a way that specifically meets or exceeds those needs.  You can use a customer analysis not only to better understand your current customer base, but also to draw in new customers.  You do this by studying why people buy certain products, the method by which they make their purchase, how often they buy those products, and under what conditions they make their purchasing decisions.

A customer analysis profile helps you not only to develop your product, but also tells you how to best position and sell yourself in the market. In order to properly position yourself, you have to know both your customer demographics, such as age, geographic location, gender, and income, and their purchasing patterns.  Your customer analysis will be informed by the stages in the buyer decision-making process.  Buyer decision-making can be seen as an underlying psychological process, meaning that the stages a customer goes through when making a decision to purchase are not necessarily consciously undertaken in the mind of the buyer.

The Buyer Decision Process

This process reflects the stages that a buyer goes through before making a purchase.  The general stages assume that the purchase is already of a general value to the buyer and that the buyer has time to make an informed decision before he or she actually makes the purchase.  Economic decisions are not always rationally motivated. For example, you may have two products on the market with exactly the same ingredients, but with drastically different prices, such as the brand name headache medicine, Excedrin and the no-name brand, Headache Relief typically offered at a discount store.  For some customers, the name brand is more important than the specific ingredients – so much so that they will pay more than double the price just to have it.  Why is this so?  What are the prime motivators for that customer?  In a competitive market, knowing the answers to these kinds of questions is what makes an in-depth customer analysis so valuable to a business.

The Stages in the Buyer Decision-Making Process

Recognition of the Problem

This is often considered the most important step in the buying process:  a potential buyer recognizes either a desire that needs fulfilling or a problem that needs solving. That need or problem can be internally motivated, such as a need to eat or to remedy a headache, or, it can be externally motivated through strategic advertising, that is, advertising which constellates a need that a customer was previously unaware of.

The Search for Information

After a buyer has recognized the problem, he or she will begin to search for a solution.  This is the stage at which the buyer starts to look for information to find out more about what products and services are currently in the market. Having your information strategically placed can make the difference in whether or not a potential buyer sees your product or service.

An Evaluation of Alternatives

This is the stage at which the buyer measures his or her needs and desires against what is available and how much it costs. At this stage, a buyer will determine a set of criteria by which to assess the alternatives. You need to know these criteria in order to position yourself against your competition.

Post-Purchase Evaluation

This is the stage at which the customer assesses the product or service in terms of its value.  Did the product meet his or her needs?  Did it exceed expectations?  Was the benefit worth the cost? Would they buy the product again?  This information is crucial in establishing customer loyalty and getting word-of-mouth advertising.

Your Customer Analysis

Determining Your Customers Needs and Desires

In order to establish your customer base, you need to determine your customer’s needs and desires.  In other words, you have to know what the prime motivators for making the purchase are. What exactly are they looking for in the product or service?  Are they making a purchase that solves a problem or are they making a purchase that fulfills a desire. The answer to these questions will lend insight into the underlying psychological motivations for the intended purchase. This information helps you determine a plan of action to encourage the customer to come to you instead of your competitors.

You must also determine if your customers are willing to wait for delivery of your product or if they need it on demand. This helps you determine not only your production strategy, but also your market placement strategy.  Other factors to consider are whether your customer has a preference for quality versus quantity; what their general price-point is; and whether or not they demand a warranty.

Customer Demographics

Are you positioning yourself in the right retail or market outlets?  Your customer demographic describes the specific segment of the market to which your product or service appeals. This information is based on factors such as age, social class, geography, and gender.  This helps determine both your market advertising and placement.  For example, you probably do not want to place an advertisement for denture cream or bladder control products on MTV.  The same would be true for advertising a high grade power saw during daytime television.

Tata Nano Car – A New approach to product development 

The dream project of Mr. Ratan Tata to develop 1 lakh car got the shape when Tata Motors launched Tata Nano car in January 2008. Mr. Tata wanted to develop a local transport for middle class families who use two wheelers for commuting individual as also with family. The two wheeler mode is relatively an unsafe mode of transportation. Tata Motor engineers decided to go beyond the conventional cost reduction exercise. As Mr. Tata said only countries like India and Pakistan can make such a low cost vehicle primarily because of the ingenuity of the people and the facts that India is one the largest two wheeler markets. The engineers worked to redesign the car engine as also the very design and the style   of the car. Institute of Development in Automotive Engineering (I.D.E.A) was mandated with the styling I.D.E.A is a design house that had earlier designed Tata Motor’s Indica.

After several promotions the engineers finally built a 624 cc engine with a bhp of 34 as this was the optimal design. For the first time the high pressure die cast engine was made in India.

Compared to Maruti 800 which delivered 37 bhp, Nano’s engine was more optimal with a multi-point fuel injection system developed by Bosch.

To meet the final price of 1 lakh, Tata also had to pair their margins and produce at sub-stantially low cost. They also got prepared for a longer breakeven. All components manufactures redesigned their components to meet the Tata Nano requirement. For example the steering shaft was made hallow thereby reducing the cost and weight. MRF redesigned the tyre to bear extra weight on the rare wheels

Tata Nano car also conforms to the stiffest pollution control norms and passed through all crash test.It has a four-speed manual gearbox and high on fuel efficiency.

The car was launched internationally as a new paradigm in affordable or frugal innovation and one that herald a new era in small car manufacturing in India. It put the Third World on Wheels and had far reaching implications for the whole world. Commenting on this development, Chief Designer of the ford motor Company J.Mays said, For the first time in the world history of auto industry there is a generation that is connected globally. They see an iPod or a Nokia Phone or a 1200 dollar women’s hand bag and think just because it is small does not mean that it can’t be fantastic”. And very belief will now guide them to buy low cost small like Nano.

Details of Nano

Specs:

Engine: 624 cc / 33 bhp4 door, 5 seater (and yes 4 Wheeled too) Rear Engine Weight: 600 kgsMileage - 22-23 km/liter

Variants:

Standard Deluxe (with AC)

Future:

 Diesel Variant Exports outside India or assembly plants outside

Comparison

8% less in length (bumper to bumper) with respect to Maruti 800 21% more in inner space with respect to Maruti 800

Looks:

Front side looks more like Matiz (or Spark as we now call it)Back side looks more like India with those long tail lights.

Insight:

People often criticize something that is making waves everywhere. This has also been the case with Tata Nano. Competitors, safety regulators, environmentalists and most others conceived the problems that India will face, when such a car is available, much before the actual launch of the car.

Strategies to Attract and Retain Price Sensitive Customer

Strategies to Attract and Retain Price Sensitive Customer:

Indian economy is an example of contradictions while it has continued to grow in the last two decades, albeit at a moderate rate of 6.7% and there are large numbers of consumers who are moving up the socioeconomic pyramid. Still India continues to remain a price sensitive market. This example the introduction of small unit packaging most often priced at less than Rs 10. Be it a chocolate bar, Shampoo, Soup or toilet soap or toothpaste. Whenever a price rise in a commodity is expected, there is a tendency of the consumer to buy it in a large quantity, so that impact of the price hike could be felt at a later date. Nobody understand it better than Big Bazaar Wednesday of each week, Big Bazaar run a special price promotion offering a flat discount of 5% on all its products. Wednesday sees the largest number of footfalls of housewives in Big Bazaar across all its stores in the country. To further soften the impact of high prices, Big Bazaar has launched its own brands to offer customer an opportunity to buy unpackaged and unbranded staple foods like wheat, rice, sugar and pulses.

Price sensitivity is not unique to India. Consumer all over the world exhibit price sensitivity for different products and brands. Also the price sensitivity differs based on the time of consumption. For example airlines have responded to price sensitive buyers by offerings to them lower fares. In order to keep themselves afloat the airlines in India had to cut down on the freebees including the free baggage allowance, meals, in-flight entertainment and even the newspaper. Today all airlines ask customer to pay for the meal on board and for self-selection of the seat, especially those that are considered to be the premium namely the front rows and the isle and the window seats. Though initially low cost airlines like GoAir, Indigo and Spice Jet offered no frill flights, today even the full service flights like those of Jet Airways and Air India also had to adopt no frill strategy as they did not want to lose the price sensitivity customers. Same is true with Tata which designed the water purifier ‘Swatch’ for the price sensitive Indian market.

Though competitors should drive price down, in such cases they join hands to fix the price and in turn assured profits.

Pricing is one of the most important elements of the marketing mix, but lately it has come to occupy center stage In marketing wars. The reasons for this are:

a)Diminishing Products Differentiation : 

As technologies get standardized , differentiation among firms on the basis of the products is diminishing. More products and brands will transcend to a commodity situation. Knowledge of what constitutes price and its meaning to the customers can make pricing decisions more meaningful and help firms fight the price war.

b) Inter-firm Rivalry: 

The intensity of inter firm rivalry increase as entry and exit barriers in the industry are lowered. With an increase in the rivalry we find that a firm cost of operation also increases as it now has to spend more money to lure customer and middlemen.

c) Mature Products and Markets:

 When products and markets enter the maturity stage, the only way to differentiate various offers is on the basis of augmented service or price cuts. Many firms opt for the latter and then find their bottom lines getting eroded. Once again, pricing decisions relevant as leverage with firm is low unless it embarks upon non-price strategies.

d) Customers value perception:

 Another factor contribution to the importance of pricing decisions is the customer’s perception of the products current and potential value.

e) Inflation In the Economy: 

Pricing decisions become important in an inflationary economy. Inflation affects pricing in two ways- one it lowers the purchasing power of the customer and hence a search for low priced substitutes and two it increases a firm cost because of inputs costing more. This forces the price of products upwards. The firm now finds itself in a dilemma; if it passes the increases in input cost to the customer in the form of a price increases and there are equally attractive alternatives available at lower prices, the firm may lose the customer. And if it does not increases the price it may incur losses or find a reduction in profit margins.

Pricing Strategy & Pricing Tactics to Be Used for Your Product

Pricing Strategy & Pricing Tactics to Be Used for Your Product

The pricing strategy your company adopts, whether it is to sell a high volume at a low price, to sell a low volume at a high price or to fall somewhere in the middle, will likely employ certain pricing tactics. Using pricing tactics can make your product seem less expensive and therefore a greater value or can establish your company’s products as a luxury item.

Charm Pricing

One of the most common pricing tactics that companies use is to price their products just a few pennies lower so that the first number of the price is lower. For example, if you were using charm pricing, you would sell your products for $19.99 instead of $20 because $19.99 seems like it is less. It pushes your product into the $10-$19.99 price bracket so it appears to cost much less than $20.

Bumps

In the example above, setting the price to $19.99 made it seem lower for two reasons. For one, it did not end with “.00” so it seems smaller. However, there is a larger reason – price bumps. In this example, $20 can be a price bump. The concept of price bumps is commonly applied to real estate and vehicles; the price you set puts your product in a different category, just like when someone shops for a home and limits his search to homes within the $150,000 to $175,000 price range. However, with price bumps come certain expectations that you have to manage. You would expect a vehicle priced at more than $20,000 to have certain features; if you fail to provide those expected features, it could make your product less desirable. Of course, providing features that you would not expect at a certain price bump, such as paying less than $20,000 for a new four-wheel-drive vehicle, can demonstrate value.

Anchoring

Price bumps may also serve as “anchors,” that is, prices that set a benchmark. For instance, when Apple set the price for its iPod Shuffle at under $50, it opened up the market to a whole range of people who would not think that something priced under $50 was expensive, making them more likely to purchase the Shuffle, be it as a first MP3 player or as an extra one. Conversely, a company may opt to price an item over a threshold to develop its stance as a luxury brand, such as when a restaurant charges more than $5 for a drink.

Considerations

No matter which pricing tactic you use or purposely do not use, you are establishing your basis or competition to your customer. She has to see the relative value of your product, and the price has to match her expectations for that value. Within this, you still have to make sure that you are charging enough for your company to operate. For example, a small retailer will never be able to compete with a big-box discounter on price, so it has to establish value: either prestige value, the mechanism by which a retailer like Rolex can charge as much for a watch as some cars cost, or relative value, establishing that a consumer should come to your store for his widgets because even though they cost a bit more than those at Target, yours come with a lifetime warranty or are offered in a greater range of sizes and colors.