Advertising

A Coca-Cola advert from the 1890s.

Advertisement in a rail station in Berlin. Advertising is a form of communication that typically attempts to persuade potential customers to purchase or to consume more of a particular brand of product or service. Many advertisements are designed to generate increased consumption of those products and services through the creation and reinforcement of "brand image" and "brand loyalty". For these purposes, advertisements sometimes embed their persuasive message with factual information. Every major medium is used to deliver these messages, including television, radio, cinema, magazines, newspapers, video games, the Internet and billboards. Advertising is often placed by an advertising agency on behalf of a company or other organization. Advertisements are seen on the seats of shopping carts, on the walls of an airport walkway, on the sides of buses, and are heard in telephone hold
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messages and in-store public address systems. Advertisements are often placed anywhere an audience can easily or frequently access visual, audio and printed information. Organizations that frequently spend large sums of money on advertising that sells what is not, strictly speaking, a product or service include political parties, interest groups, religious organizations, and military recruiters. Non-profit organizations are not typical advertising clients, and may rely on free modes of persuasion, such as public service announcements. Advertising spending has increased dramatically in recent years. In 2006, spending on advertising has been estimated at $155 billion in the United States and $385 billion worldwide, and the latter to exceed $500 billion by 2010. While advertising can be seen as necessary for economic growth, it is not without social costs. Unsolicited Commercial Email and other forms of spam have become so prevalent as to have become a major nuisance to users of these services, as well as being a financial burden on internet service providers. Advertising is increasingly invading public spaces, such as schools, which some critics argue is a form of child exploitation. History Black-figured lekythos with the inscription: “buy me and you'll get a good bargain”, ca. 550 BC, Louvre Commercial messages and political campaign displays have been found in the ruins of ancient Arabia. Egyptians used papyrus to create sales messages and wall posters, while lost-and-found advertising on papyrus was common in Ancient Greece and Ancient Rome. Wall or rock painting for commercial advertising is another manifestation of
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an ancient advertising form, which is present to this day in many parts of Asia, Africa, and South America. The tradition of wall painting can be traced back to Indian rock-art paintings that date back to 4000 BCE. As printing developed in the 15th and 16th century, advertising expanded to include handbills. In the 17th century advertisements started to appear in weekly newspapers in England. These early print advertisements were used mainly to promote: books and newspapers, which became increasingly affordable with advances in the printing press; and medicines, which were increasingly sought after as disease ravaged Europe. However, false advertising and so-called "quack" advertisements became a problem, which ushered in the regulation of advertising content.

Edo period advertising flyer from 1806 for a traditional medicine called Kinseitan As the economy expanded during the 19th century, advertising grew alongside. In the United States, the success of this advertising format eventually led to the growth of mail-order advertising. In June 1836, French newspaper La Presse is the first to include paid advertising in its pages, allowing it to lower its price, extend its readership and increase its profitability. The formula is soon copied by all titles. Around 1840, Volney Palmer established a predecessor to advertising agencies in Boston. Around the same time, in France, Charles-Louis Havas extended the services of his news agency, Havas to include advertisement brokerage, making it the first French group to organize. At first, agencies were brokers for advertisement space in newspapers. N. W. Ayer & Son was the first full-service agency to assume responsibility for advertising content. N.W. Ayer opened in 1869, and was located in Philadelphia.

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At the turn of the century, there were few career choices for women in business; however, advertising was one of the few. Since women were responsible for most of the purchasing done in their household, advertisers and agencies recognised the value of women's insight during the creative process. In fact, the first American advertising to use a sexual sell was created by a woman – for a soap product. Although tame by today's standards, the advertisement featured a couple with the message "The skin you love to touch".

A print advertisement for the 1913 issue of the Encyclopædia Britannica When radio stations began broadcasting in the early 1920s, the programs were however nearly exploded. This was so because the first radio stations were established by radio equipment manufacturers and retailers who offered programs in order to sell more radios to consumers. As time passed, many non-profit organizations followed suit in setting up their own radio stations, and included: schools, clubs and civic groups. When the practice of sponsoring programs was popularised, each individual radio program was usually sponsored by a single business in exchange for a brief mention of the business' name at the beginning and end of the sponsored shows. However, radio station owners soon realised they could earn more money by selling sponsorship rights in small time allocations to multiple businesses throughout their radio

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station's broadcasts, rather than selling the sponsorship rights to single businesses per show. This practice was carried over to television in the late 1940s and early 1950s. A fierce battle was fought between those seeking to commercialise the radio and people who argued that the radio spectrum should be considered a part of the commons – to be used only non-commercially and for the public good. The United Kingdom pursued a public funding model for the BBC, originally a private company but incorporated as a public body by Royal Charter in 1927. In Canada, advocates like Graham Spry were likewise able to persuade the federal government to adopt a public funding model. However, in the United States, the capitalist model prevailed with the passage of the 1934 Communications Act which created the Federal Communications Commission. To placate the socialists, the U.S. Congress did require commercial broadcasters to operate in the "public interest, convenience, and necessity". Nevertheless, public radio does exist in the United States of America. In the early 1950s, the Dumont television network began the modern trend of selling advertisement time to multiple sponsors. Previously, Dumont had trouble finding sponsors for many of their programs and compensated by selling smaller blocks of advertising time to several businesses. This eventually became the norm for the commercial television industry in the United States. However, it was still a common practice to have single sponsor shows, such as the U.S. Steel Hour. In some instances the sponsors exercised great control over the content of the show - up to and including having one's advertising agency actually writing the show. The single sponsor model is much less prevalent now, a notable exception being the Hallmark Hall of Fame. The 1960s saw advertising transform into a modern approach in which creativity was allowed to shine, producing unexpected messages that made

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advertisements more tempting to consumers' eyes. The Volkswagen ad campaign—featuring such headlines as "Think Small" and "Lemon" (which were used to describe the appearance of the car)— ushered in the era of modern advertising by promoting a "position" or "unique selling proposition" designed to associate each brand with a specific idea in the reader or viewer's mind. This period of American advertising is called the Creative Revolution and its poster boy was Bill Bernbach who helped create the revolutionary Volkswagen ads among others. Some of the most creative and long-standing American advertising dates to this incredibly creative period.

Public advertising on Times Square, New York City. The late 1980s and early 1990s saw the introduction of cable television and particularly MTV. Pioneering the concept of the music video, MTV ushered in a new type of advertising: the consumer tunes in for the advertising message, rather than it being a by-product or afterthought. As cable and satellite television became increasingly prevalent, specialty channels emerged, including channels entirely devoted to advertising, such as QVC, Home Shopping Network, and ShopTV. Marketing through the Internet opened new frontiers for advertisers and contributed to the "dot-com" boom of the 1990s. Entire corporations operated solely on advertising revenue, offering everything from coupons to free Internet access. At the turn of the 21st century, a number of websites including the search engine Google, started a change in online advertising by emphasizing contextually relevant, unobtrusive ads intended to
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help, rather than inundate, users. This has led to a plethora of similar efforts and an increasing trend of interactive advertising. The share of advertising spending relative to GDP has changed little across large changes in media. For example, in the U.S. in 1925, the main advertising media were newspapers, magazines, signs on streetcars, and outdoor posters. Advertising spending as a share of GDP was about 2.9 percent. By 1998, television and radio had become major advertising media. Nonetheless, advertising spending as a share of GDP was slightly lower—about 2.4 percent.[10] A recent advertising innovation is "guerrilla promotions", which involve unusual approaches such as staged encounters in public places, giveaways of products such as cars that are covered with brand messages, and interactive advertising where the viewer can respond to become part of the advertising message. This reflects an increasing trend of interactive and "embedded" ads, such as via product placement, having consumers vote through text messages, and various innovations utilizing social networking sites (e.g. MySpace). Paul McManus, the Creative Director of TBWA\Europe in the late 90s summed up advertising as being "…all about understanding. Understanding of the brand, the product or the service being offered and understanding of the people (their hopes and fears and needs) who are going to interact with it. Great advertising is the creative expression of that understanding." Mobile Billboard Advertising Mobile Billboards are flat-panel campaign units in which their sole purpose is to carry advertisements along dedicated routes selected by clients prior to the start of a campaign. Mobile Billboard companies
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do not typically carry third-party cargo or freight. Mobile displays are used for various situations in metropolitan areas throughout the world, including:
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Target advertising One day, and long term campaigns Convention Sporting events Store openings or other similar promotional events Big advertisements from smaller companies

Public service advertising The same advertising techniques used to promote commercial goods and services can be used to inform, educate and motivate the public about noncommercial issues, such as AIDS, political ideology, energy conservation, religious recruitment, and deforestation. Advertising, in its non-commercial guise, is a powerful educational tool capable of reaching and motivating large audiences. "Advertising justifies its existence when used in the public interest - it is much too powerful a tool to use solely for commercial purposes." - Attributed to Howard Gossage by David Ogilvy Public service advertising, non-commercial advertising, public interest advertising, cause marketing, and social marketing are different terms for (or aspects of) the use of sophisticated advertising and marketing communications techniques (generally associated with commercial enterprise) on behalf of non-commercial, public interest issues and initiatives. In the United States, the granting of television and radio licenses by the FCC is contingent upon the station broadcasting a certain amount of public service advertising. To meet these requirements, many broadcast stations in America air the bulk of
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their required Public Service Announcements during the late night or early morning when the smallest percentage of viewers are watching, leaving more day and prime time commercial slots available for high-paying advertisers. Public service advertising reached its height during World Wars I and II under the direction of several governments. Now in days, people average around 500 advertisements a day, found one researcher. Types of advertising Media

Paying people to hold signs is one of the oldest forms of advertising, as with this Human directional pictured above

A bus with an advertisement for GAP in Singapore. Buses and other vehicles are popular mediums for advertisers.

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A DBAG Class 101 with UNICEF ads at Ingolstadt main railway station Commercial advertising media can include wall paintings, billboards, street furniture components, printed flyers and rack cards, radio, cinema and television ads, web banners, mobile telephone screens, shopping carts, web popups, skywriting, bus stop benches, human directional, magazines, newspapers, town criers, sides of buses or airplanes ("logojets"), in-flight advertisements on seatback tray tables or overhead storage bins, taxicab doors, roof mounts and passenger screens, musical stage shows, subway platforms and trains, elastic bands on disposable diapers, stickers on apples in supermarkets, shopping cart handles, the opening section of streaming audio and video, posters, and the backs of event tickets and supermarket receipts. Any place an "identified" sponsor pays to deliver their message through a medium is advertising. Another way to measure advertising effectiveness is known as ad tracking. This advertising research methodology measures shifts in target market perceptions about the brand and product or service. These shifts in perception are plotted against the consumers’ levels of exposure to the company’s advertisements and promotions. The purpose of Ad Tracking is generally to provide a measure of the combined effect of the media weight or spending level, the effectiveness of the media buy or targeting, and the quality of the

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advertising executions or creative. Ad Tracking Article Covert advertising Covert advertising is when a product or brand is embedded in entertainment and media. For example, in a film, the main character can use an item or other of a definite brand, as in the movie Minority Report, where Tom Cruise's character John Anderton owns a phone with the Nokia logo clearly written in the top corner, or his watch engraved with the Bulgari logo. Another example of advertising in film is in I, Robot, where main character played by Will Smith mentions his Converse shoes several times, calling them "classics," because the film is set far in the future. I, Robot and Spaceballs also showcase futuristic cars with the Audi and Mercedes-Benz logos clearly displayed on the front of the vehicles. Cadillac chose to advertise in the movie The Matrix Reloaded, which as a result contained many scenes in which Cadillac cars were used. Similarly, product placement for Omega Watches, Ford, Vaio, BMW and Aston-Martin cars are featured in recent James Bond films, most notably Casino Royale. Television commercials TV commercial is generally considered the most effective mass-market advertising format, as is reflected by the high prices TV networks charge for commercial airtime during popular TV events. The annual Super Bowl football game in the United States is known as the most prominent advertising event on television. The average cost of a single thirty-second TV spot during this game has reached $2.7 million (as of 2007). The majority of television commercials feature a song or jingle that listeners soon relate to the product. See Music in advertising.

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Virtual advertisements may be inserted into regular television programming through computer graphics. It is typically inserted into otherwise blank backdrops or used to replace local billboards that are not relevant to the remote broadcast audience. More controversially, virtual billboards may be inserted into the background where none existing in real-life. Virtual product placement is also possible. Infomercials There are two types of infomercials, described as long form and short form. Long form infomercials have a time length of 30 minutes. Short form infomercials are 30 seconds to 2 minutes long. Infomercials are also known as direct response television (DRTV) commercials. The main objective in an infomercial is to create an impulse purchase, so that the consumer sees the presentation and then immediately buys the product through the advertised toll-free telephone number or website. Infomercials describe, display, and often demonstrate products and their features, and commonly have testimonials from consumers and industry professionals. Some well known companies in the infomercial business are Script to Screen, Hawthorne Direct, International Shopping Network and Guthy-Renker. Newer media and advertising approaches Increasingly, other media are overtaking television because of a shift towards consumer's usage of the internet as well as devices such as TiVo. Advertising on the World Wide Web is a recent phenomenon. Prices of Web-based advertising space are dependent on the "relevance" of the surrounding web content and the traffic that the website receives.

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E-mail advertising is another recent phenomenon. Unsolicited bulk E-mail advertising is known as "spam". Some companies have proposed to place messages or corporate logos on the side of booster rockets and the International Space Station. Controversy exists on the effectiveness of subliminal advertising (see mind control), and the pervasiveness of mass messages (see propaganda). Unpaid advertising (also called word of mouth advertising), can provide good exposure at minimal cost. Personal recommendations ("bring a friend", "sell it"), spreading buzz, or achieving the feat of equating a brand with a common noun (in the United States, "Xerox" = "photocopier", "Kleenex" = tissue, "Vaseline" = petroleum jelly, "Hoover" = vacuum cleaner, and "Band-Aid" = adhesive bandage) — these are the pinnacles of any advertising campaign. However, some companies oppose the use of their brand name to label an object. Equating a brand with a common noun also risks turning that brand into a genericized trademark - turning it into a generic term which means that its legal protection as a trademark is lost. As the mobile phone became a new mass media in 1998 when the first paid downloadable content appeared on mobile phones in Finland, it was only a matter of time until mobile advertising followed, also first launched in Finland in 2000. By 2007 the value of mobile advertising had reached 2.2 billion dollars and providers such as Admob delivered billions of mobile ads. More advanced mobile ads include banner ads, coupons, MMS picture and video messages, advergames and various engagement marketing campaigns. A particular feature driving mobile ads is the 2D Barcode, which replaces the need to do any typing of web addresses, and uses the camera
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feature of modern phones to gain immediate access to web content. 83 percent of Japanese mobile phone users already are active users of 2D barcodes. A new form of advertising that is growing rapidly is Social network advertising. It is Online Advertising with a focus on social networking sites. This is a relatively immature market, but it has shown a lot of promise as advertisers are able to take advantage of the demographic information the user has provided to the social networking site. From time to time, The CW airs short programming breaks called "Content Wraps," to advertise one company's product during an entire commercial break. The CW pioneered "content wraps" and some products featured were Herbal Essences, Crest, Guitar Hero 2, Cover Girl, and recently Toyota.

Effect on memories and behavior "Half the money I spend on advertising is wasted; the trouble is, I don't know which half." - popular quote generally attributed to either John Wanamaker or William Lever; also one of the Wrigley people from the gum company.

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Billboard, New York City, (2005).The ad says, "60 days of daylight for Apartment 6F." The impact of advertising has been a matter of considerable debate and many different claims have been made in different contexts. During debates about the banning of cigarette advertising, a common claim from cigarette manufacturers was that cigarette advertising does not encourage people to smoke who would not otherwise. The (eventually successful) opponents of advertising, on the other hand, claim that advertising does in fact increase consumption. According to many sources, the past experience and state of mind of the person subjected to advertising may determine the impact that advertising has. Children under the age of four may be unable to distinguish advertising from other television programs, while the ability to determine the truthfulness of the message may not be developed until the age of 8. Over the past fifteen years a whole science of marketing analytics and marketing effectiveness has been developed to determine the impact of marketing actions on consumers, sales, profit and market share. Marketing Mix Modeling, direct response measurement and other techniques are included in this science. Public perception of the medium As advertising and marketing efforts become increasingly ubiquitous in modern Western societies, the industry has come under criticism of groups such as Adbusters via culture jamming which criticizes the media and consumerism using advertising's own techniques. The industry is accused of being one of the engines powering a convoluted economic mass production system which promotes consumption. Recognizing the social impact of advertising, Mediawatch-uk, a
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British special interest group, works to educate consumers about how they can register their concerns with advertisers and regulators. It has developed educational materials for use in schools. Public interest groups are increasingly suggesting that access to the mental space targeted by advertisers should be taxed, in that at the present moment that space is being freely taken advantage of by advertisers with no compensation paid to the members of the public who are thus being intruded upon. This kind of tax would be a Pigovian tax in that it would act to reduce what is now increasingly seen as a public nuisance. Efforts to that end are gathering more momentum, with Arkansas and Maine considering bills to implement such a taxation. Florida enacted such a tax in 1987 but was forced to repeal it after six months, as a result of a concerted effort by national commercial interests, which withdrew planned conventions, causing major losses to the tourism industry, and cancelled advertising, causing a loss of 12 million dollars to the broadcast industry alone.

Billboard in Lund, Sweden, saying "One Night Stand?" (2005)

Regulation
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In the US many communities believe that many forms of outdoor advertising blight the public realm. As long ago as the 1960s in the US there were attempts to ban billboard advertising in the open countryside. Cities such as São Paulo have introduced an outright ban with the UK capital also having specific legislation to control unlawful displays. There have been increasing efforts to protect the public interest by regulating the content and the influence of advertising. Some examples are: the ban on television tobacco advertising imposed in many countries, and the total ban of advertising to children under twelve imposed by the Swedish government in 1991. Though that regulation continues in effect for broadcasts originating within the country, it has been weakened by the European Court of Justice, which had found that Sweden was obliged to accept foreign programming, including those from neighboring countries or via satellite. In Europe and elsewhere, there is a vigorous debate on whether (or how much) advertising to children should be regulated. This debate was exacerbated by a report released by the Kaiser Family Foundation in February 2004 which suggested that food advertising targeting children was an important factor in the epidemic of childhood obesity in the United States of America. In many countries - namely New Zealand, South Africa, Canada, and many European countries - the advertising industry operates a system of selfregulation. Advertisers, advertising agencies and the media agree on a code of advertising standards that they attempt to uphold. The general aim of such codes is to ensure that any advertising is 'legal, decent, honest and truthful'. Some selfregulatory organizations are funded by the industry, but remain independent, with the intent of upholding the standards or codes (like the Advertising Standards Authority in the UK).
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In the UK most forms of outdoor advertising such as the display of billboards is regulated by the UK Town and County Planning system. Currently the display of an advertisement without consent from the Planning Authority is a criminal offense liable to a fine of £2500 per offence. All of the major outdoor billboard companies in the UK have convictions of this nature. Naturally , many advertisers view governmental regulation or even self-regulation as intrusion of their freedom of speech or a necessary evil. Therefore, they employ a wide-variety of linguistic devices to bypass regulatory laws (e.g. printing English words in bold and French translations in fine print to deal with the Article 12 of the 1994 Toubon Law limiting the use of English in French advertising); see Bhatia and Ritchie 2006:542. The advertisement of controversial products such as cigarettes and condoms is subject to government regulation in many countries. For instance, the tobacco industry is required by law in most countries to display warnings cautioning consumers about the health hazards of their products. Linguistic variation is often used by advertisers as a creative device to reduce the impact of such requirements. Future Global advertising Advertising has gone through five major stages of development: domestic, export, international, multi-national, and global. For global advertisers, there are four, potentially competing, business objectives that must be balanced when developing worldwide advertising: building a brand while speaking with one voice, developing economies of scale in the creative process, maximising local effectiveness of ads, and increasing the company’s speed of implementation. Born from the evolutionary stages of global marketing are the
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three primary and fundamentally different approaches to the development of global advertising executions: exporting executions, producing local executions, and importing ideas that travel. (Global marketing Management, 2004, pg 13-18) Advertising research is key to determining the success of an ad in any country or region. The ability to identify which elements and/or moments of an ad that contributes to its success is how economies of scale are maximised. Once one knows what works in an ad, that idea or ideas can be imported by any other market. Market research measures, such as Flow of Attention, Flow of Emotion and branding moments provide insight into what is working in an ad in any country or region because the measures are based on the visual, not verbal, elements of the ad. (Young, p.131) Trends With the dawn of the Internet came many new advertising opportunities. Popup, Flash, banner, advergaming, and email advertisements (the last often being a form of spam) are now commonplace. The ability to record shows on DVRs (such as TiVo) allow users to record the programs for later viewing, enabling them to fast forward through commercials. Additionally, as more seasons of prerecorded “Boxed Sets” are offered for sale of Television show series; fewer people watch the shows on TV. However, the fact that these sets are sold, means the company will receive additional profits from the sales of these sets. To counter this effect, many advertisers have opted for product placement on TV shows like Survivor. Particularly since the rise of "entertaining" advertising, some people may like an advertisement enough to wish to watch it later or show a friend. In general, the advertising
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community has not yet made this easy, although some have used the Internet to widely distribute their ads to anyone willing to see or hear them. Another significant trend regarding future of advertising is the growing importance of niche or targeted ads. Also brought about by the Internet and the theory of The Long Tail, advertisers will have an increasing ability to reach specific audiences. In the past, the most efficient way to deliver a message was to blanket the largest mass market audience possible. However, usage tracking, customer profiles and the growing popularity of niche content brought about by everything from blogs to social networking sites, provide advertisers with audiences that are smaller but much better defined, leading to ads that are more relevant to viewers and more effective for companies' marketing products. Among others, Comcast Spotlight is one such advertiser employing this method in their video on demand menus. These advertisements are targeted to a specific group and can be viewed by anyone wishing to find out more about a particular business or practice at any time, right from their home. This causes the viewer to become proactive and actually choose what advertisements they want to view. In freelance advertising, companies hold public competitions to create ads for their product, the best one of which is chosen for widespread distribution with a prize given to the winner(s). During the 2007 Super Bowl, Pepsico held such a contest for the creation of a 30-second television ad for the Doritos brand of chips, offering a cash prize to the winner. Chevrolet held a similar competition for their Tahoe line of SUVs. This type of advertising, however, is still in its infancy. It may ultimately decrease the importance of advertising agencies by creating a niche for independent freelancers.

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Embedded advertising or in-film ad placements are happening on a larger scale now than ever before. Films like Krrish had over a dozen placements including Lay’s, Bournvita, Samsung, Faber Castell and Hero Honda.

BRAND
A brand is a collection of images and ideas representing an economic producer; more specifically, it refers to the concrete symbols such as a name, logo, slogan, and design scheme. Brand recognition and other reactions are created by the accumulation of experiences with the specific product or service, both directly relating to its use, and through the influence of advertising, design, and media commentary. A brand is a symbolic embodiment of all the information connected to a company, product or service. A brand serves to create associations and expectations among products made by a producer. A brand often includes an explicit logo, fonts, colour schemes, symbols, sound which may be developed to represent implicit values, ideas, and even personality. The brand, and "branding" and brand equity have become increasingly important components of culture and the economy, now being described as "cultural accessories and personal philosophies". In non-commercial contexts, the marketing of entities which supply ideas or promises rather than product and services (e.g. political parties or religious organizations) may also be known as "branding". Concepts Some marketers distinguish the psychological aspect of a brand from the experiential aspect. The
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experiential aspect consists of the sum of all points of contact with the brand and is known as the brand experience. The psychological aspect, sometimes referred to as the brand image, is a symbolic construct created within the minds of people and consists of all the information and expectations associated with a product or service. Marketers engaged in branding seek to develop or align the expectations behind the brand experience (see also brand promise), creating the impression that a brand associated with a product or service has certain qualities or characteristics that make it special or unique. A brand is therefore one of the most valuable elements in an advertising theme, as it demonstrates what the brand owner is able to offer in the marketplace. The art of creating and maintaining a brand is called brand management. This approach works not only for consumer goods B2C (Business-to-Consumer), but also for B2B (Business-to-Business), see Philip Kotler & Waldemar Pfoertsch. A brand which is widely known in the marketplace acquires brand recognition. When brand recognition builds up to a point where a brand enjoys a critical mass of positive sentiment in the marketplace, it is said to have achieved brand franchise. One goal in brand recognition is the identification of a brand without the name of the company present. For example, Disney has been successful at branding with their particular script font (originally created for Walt Disney's "signature" logo), which it used in the logo for go.com. Consumers may look on branding as an important value added aspect of products or services, as it often serves to denote a certain attractive quality or characteristic (see also brand promise). From the perspective of brand owners, branded products or services also command higher prices. Where two products resemble each other, but one of the products has no associated branding (such as a
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generic, store-branded product), people may often select the more expensive branded product on the basis of the quality of the brand or the reputation of the brand owner.

BRAND NAME
The brand name is often used interchangeably with "brand", although it is more correctly used to specifically denote written or spoken linguistic elements of a brand. In this context a "brand name" constitutes a type of trademark, if the brand name exclusively identifies the brand owner as the commercial source of products or services. A brand owner may seek to protect proprietary rights in relation to a brand name through trademark registration. Advertising spokespersons have also become part of some brands, for example: Mr. Whipple of Charmin toilet tissue and Tony the Tiger of Kellogg's. The act of associating a product or service with a brand has become part of pop culture. Most products have some kind of brand identity, from common table salt to designer clothes.

BRAND IDENTITY
How the brand owner wants the consumer to perceive the brand - and by extension the branded company, organisation, product or service. The brand owner will seek to bridge the gap between the brand image and the brand identity. Brand identity is fundamental to consumer recognition and symbolizes the brand's differentiation from competitors. Brand identity may be defined as simply the outward expression of the brand, such as name and visual appearance. Some practitioners however define brand identity as not only outward expression (or physical facet), but also in terms of the values a brand carries in the eye of the
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consumer. In 1992 Jean-Noel Kapferer developed the Brand Identity Prism, which charts the brand identity along a constructed source and constructed receiver axis, with externalization on the one side and internalization on the other. On the externalization side brand identity consists of "physical facet", "relationship" and "reflected consumer". On the internalization side brand identity consists of "personality", "culture (values)" and "consumer mentalisation". In this respect Kapferer positions brand personality as one factor within brand identity BRAND PERSONALITY Brand personality is the attribution of human personality traits to a brand as a way to achieve differentiation. Such brand personality traits may include seriousness, warmth, or imagination. Brand personality is usually built through long-term marketing, as well as packaging and graphics. BRAND PROMISE Brand promise is a statement from the brand owner to customers, identifies what consumers should expect from all interactions with the brand. Interactions may include employees, representatives, actual service or product quality or performance, communication etc. The brand promise is often strongly associated with the brand owner's name and/or logo. The brand promise may be expressed in a "tag line", for example a dining restaurant may create the following brand promise: "Carl's Steak House -"Our food is the best, but the memories we help you create are even better."" Other brand owners may develop their brand promise into a detailed statement on the values, characteristics and behaviour of their brand. For example BP describes its brand promise as "our fundamental beliefs" which have evolved over time. BP continues "At the
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core of BP is an unshakable commitment to integrity, honest dealing, treating everyone with respect and dignity, striving for mutual advantage and contributing to human progress." BRAND VALUE Brand equity or brand value measures the total value of the brand to the brand owner, and reflects the extent of brand franchise. A brand can be an intangible asset, used by analysts to rationalize the difference between a company's "book value" and market value. For example, the market value of a company can far exceed its tangible assets (physical assets owned by the company, such as stock or machinery), and its brand value can account for some of the difference. Up to 85 percent of a company’s market value might be intangible (for example know-how, existing client relationships), and Interbrand, a brand consultancy, states that tangible assets may account for less than five percent of a company’s market value, for example in the case of Coca-Cola or Microsoft. Brand value, especially in the case of consumer product brands, may arise out of customer loyalty. Brand value may also arise in terms of staff retention benefits (e.g. the ability of the company to attract and retain skilled and/or talented employees offering competitive salaries). Brand value can be negatively influenced. For example, in 1999 Nike's brand value was estimated at 8 billion US$. Facing media exposure and consumer boycotts over supply chain issues, Nike's brand value declined in following two years to 7.6 billion US$, and rose back to 9.26 billion US$ in 2004 after Nike addressed its supply chain issues. Campaigning groups may deliberately target a company’s brand value to force a company into
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adopting a certain position or practices. Some campaign groups have thought to do this by deliberately subverting a brand’s image, logo or message, creating a negative association among consumers. This attack may be visual, as pioneered by groups such as the Adbusters, or focusing on the message. For example, BP’s “Beyond Petroleum” branding is subverted by campaigners into headline such as “BP: Beyond Petroleum or Beyond Preposterous?” or “BP must move beyond petroleum as profits soar“. BRAND MONOPOLY In economic terms the "brand" is, in effect, a device to create a "monopoly" — or at least some form of "imperfect competition" — so that the brand owner can obtain some of the benefits which accrue to a monopoly or unique point of sale, particularly those related to decreased price competition. In this context, most "branding" is established by promotional means. However, there is also a legal dimension, for it is essential that the brand names and trademarks are protected by all means available. The monopoly may also be extended, or even created, by patent, copyright, trade secret (e.g. secret recipe), and other sui generis intellectual property regimes (e.g.: Plant Varieties Act, Design Act). In all these contexts, retailers' "own label" brands can be just as powerful. The "brand", whatever its derivation, is a very important investment for any organization. RHM (Rank Hovis McDougall), for example, have valued their international brands at anything up to twenty times their annual earnings. BRANDING POLICIES There are a number of possible policies: Company name

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Often, especially in the industrial sector, it is just the company's name which is promoted (leading to one of the most powerful statements of "branding"; the saying, before the company's downgrading, "No one ever got fired for buying IBM"). In this case a very strong brand name (or company name) is made the vehicle for a range of products (for example, Mercedes-Benz or Black & Decker) or even a range of subsidiary brands (such as Cadbury Dairy Milk, Cadbury Flake or Cadbury Fingers in the United States). INDIVIDUAL BRANDING Each brand has a separate name (such as Seven-Up or Nivea Sun (Beiersdorf)), which may even compete against other brands from the same company (for example, Persil, Omo, Surf and Lynx are all owned by Unilever). Attitude branding Attitude branding is the choice to represent a larger feeling, which is not necessarily connected with the product or consumption of the product at all. Marketing labeled as attitude branding include that of Nike, Starbucks, The Body Shop, Safeway, and Apple Computer. In the 2000 book, No Logo, attitude branding is described by Naomi Klein as a "fetish strategy". "A great brand raises the bar -- it adds a greater sense of purpose to the experience, whether it's the challenge to do your best in sports and fitness, or the affirmation that the cup of coffee you're drinking really matters." - Howard Schultz (president, ceo and chairman of Starbucks "No-brand" branding

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Recently a number of companies have successfully pursued "No-Brand" strategies, examples include the Japanese company Muji, which means "No label, quality goods" in English. Although there is a distinct Muji brand, Muji products are not branded. This no-brand strategy means that little is spent on advertisement or classical marketing and Muji's success is attributed to the word-of-mouth, a simple shopping experience and the anti-brand movement. Other brands which are thought to follow a no-brand strategy are American Apparel, which like Muji, does not brand its products. Derived brands In this case the supplier of a key component, used by a number of suppliers of the end-product, may wish to guarantee its own position by promoting that component as a brand in its own right. The most frequently quoted example is Intel, which secures its position in the PC market with the slogan "Intel Inside". Brand development In terms of existing products, brands may be developed in a number of ways: Brand extension The existing strong brand name can be used as a vehicle for new or modified products; for example, many fashion and designer companies extended brands into fragrances, shoes and accessories, home textile, home decor, luggage, (sun-) glasses, furniture, hotels, etc. Mars extended its brand to ice cream, Caterpillar to shoes and watches, Michelin to a restaurant guide, Adidas and Puma to personal hygiene. There is a difference between brand extension and line extension. When Coca-Cola launched "Diet

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Coke" and "Cherry Coke" they stayed within the originating product category: non-alcoholic carbonated beverages. Procter & Gamble (P&G) did likewise extending its strong lines (such as Fairy Soap) into neighboring products (Fairy Liquid and Fairy Automatic) within the same category, dish washing detergents. Multi-brands Alternatively, in a market that is fragmented amongst a number of brands a supplier can choose deliberately to launch totally new brands in apparent competition with its own existing strong brand (and often with identical product characteristics); simply to soak up some of the share of the market which will in any case go to minor brands. The rationale is that having 3 out of 12 brands in such a market will give a greater overall share than having 1 out of 10 (even if much of the share of these new brands is taken from the existing one). In its most extreme manifestation, a supplier pioneering a new market which it believes will be particularly attractive may choose immediately to launch a second brand in competition with its first, in order to pre-empt others entering the market. Individual brand names naturally allow greater flexibility by permitting a variety of different products, of differing quality, to be sold without confusing the consumer's perception of what business the company is in or diluting higher quality products. Once again, Procter & Gamble is a leading exponent of this philosophy, running as many as ten detergent brands in the US market. This also increases the total number of "facings" it receives on supermarket shelves. Sara Lee, on the other hand, uses it to keep the very different parts of the business separate — from Sara Lee cakes through Kiwi polishes to L'Eggs pantyhose. In the hotel
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business, Marriott uses the name Fairfield Inns for its budget chain (and Ramada uses Rodeway for its own cheaper hotels). Cannibalization is a particular problem of a "multibrand" approach, in which the new brand takes business away from an established one which the organization also owns. This may be acceptable (indeed to be expected) if there is a net gain overall. Alternatively, it may be the price the organization is willing to pay for shifting its position in the market; the new product being one stage in this process. Small business brands Branding a small or medium sized business (SME) follows essentially the same principle a branding larger corporation. The main differences being that small businesses usually have a smaller market and have less reach than larger brands. Some people argue that it is not possible to brand a small business, however there are many examples of small businesses that became very successful due to branding. Starbucks initially used almost no advertising and over a period of ten years developed such a strong brand that the company went from one shop to hundreds. Own brands and generics With the emergence of strong retailers the "own brand", a retailer's own branded product (or service), also emerged as a major factor in the marketplace. Where the retailer has a particularly strong identity (such as Marks & Spencer in the UK clothing sector) this "own brand" may be able to compete against even the strongest brand leaders, and may outperform those products that are not otherwise strongly branded. Concerns were raised that such "own brands" might displace all other brands (as they have done in
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Marks & Spencer outlets), but the evidence is that — at least in supermarkets and department stores — consumers generally expect to see on display something over 50 per cent (and preferably over 60 per cent) of brands other than those of the retailer. Indeed, even the strongest own brands in the UK rarely achieve better than third place in the overall market. This means that strong independent brands (such as Kellogg's and Heinz), which have maintained their marketing investments, are likely to continue their strong performance. More than 50 per cent of UK FMCG brand leaders have held their position for more than two decades, although it is arguable that those which have switched their budgets to "buy space" in the retailers may be more exposed. The strength of the retailers has, perhaps, been seen more in the pressure they have been able to exert on the owners of even the strongest brands (and in particular on the owners of the weaker third and fourth brands). Relationship marketing has been applied most often to meet the wishes of such large customers (and indeed has been demanded by them as recognition of their buying power). Some of the more active marketers have now also switched to 'category marketing' - in which they take into account all the needs of a retailer in a product category rather than more narrowly focusing on their own brand. At the same time, probably as an outgrowth of consumerism, "generic" (that is, effectively unbranded goods) have also emerged. These made a positive virtue of saving the cost of almost all marketing activities; emphasizing the lack of advertising and, especially, the plain packaging (which was, however, often simply a vehicle for a different kind of image). It would appear that the penetration of such generic products peaked in the early 1980s, and most consumers still appear to be

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looking for the qualities that the conventional brand provides. History Although connected with the history of trademarks[14] and including earlier examples which could be deemed "protobrands" (such as the marketing puns of the "Vesuvinum" wine jars found at Pompeii), brands in the field of mass-marketing originated in the 19th century with the advent of packaged goods. Industrialization moved the production of many household items, such as soap, from local communities to centralized factories. When shipping their items, the factories would literally brand their logo or insignia on the barrels used, extending the meaning of "brand" to that of trademark. Bass & Company, the British brewery, claims their red triangle brand was the world's first trademark. Lyle’s Golden Syrup makes a similar claim, having been named as Britain’s oldest brand, with its green and gold packaging having remained almost unchanged since 1885. Cattle were branded long before this; the term "maverick", originally meaning an unbranded calf, comes from Texas rancher Samuel Augustus Maverick who, following the American Civil War, decided that since all other cattle were branded, his would be identified by having no markings at all. Factories established during the Industrial Revolution, generating mass-produced goods and needed to sell their products to a wider market, to a customer base familiar only with local goods. It quickly became apparent that a generic package of soap had difficulty competing with familiar, local products. The packaged goods manufacturers needed to convince the market that the public could place just as much trust in the

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non-local product. Campbell soup, Coca-Cola, Juicy Fruit gum, Aunt Jemima, and Quaker Oats were among the first products to be 'branded', in an effort to increase the consumer's familiarity with their products. Many brands of that era, such as Uncle Ben's rice and Kellogg's breakfast cereal furnish illustrations of the problem. Around 1900, James Walter Thompson published a house ad explaining trademark advertising. This was an early commercial explanation of what we now know as branding. Companies soon adopted slogans, mascots, and jingles which began to appear on radio and early television. By the 1940s, manufacturers began to recognize the way in which consumers were developing relationships with their brands in a social/psychological/anthropological sense. From there, manufacturers quickly learned to build their brand's identity and personality (see brand identity and brand personality), such as youthfulness, fun or luxury. This began the practice we now know as "branding" today, where the consumers buy "the brand" instead of the product. This trend continued to the 1980s, and is now quantified in concepts such as brand value and brand equity. Naomi Klein has described this development as "brand equity mania".[1] In 1988, for example, Phillip Morris purchased Kraft for six times what the company was worth on paper; it was felt that what they really purchased was its brand name. Marlboro Friday April 2, 1993 - marked by some as the death of the brand - the day Phillip Morris declared that they were to cut the price of Marlboro cigarettes by 20%, in order to compete with bargain cigarettes. Marlboro cigarettes were notorious at the time for their heavy advertising campaigns, and wellnuanced brand image. In response to the
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announcement Wall street stocks nose-dived[1] for a large number of 'branded' companies: Heinz, Coca Cola, Quaker Oats, PepsiCo. Many thought the event signalled the beginning of a trend towards "brand blindness" (Klein 13), questioning the power of "brand value". Business marketing Business Marketing is the practice of organizations, including commercial businesses, governments and institutions, facilitating the sale of their products or services to other companies or organizations that in turn resell them, use them as components in products or services they offer, or use them to support their operations. Also known as industrial marketing, business marketing is also called business-to-business marketing, or B2B marketing, for short. (Note that while marketing to government entities shares some of the same dynamics of organizational marketing, B2G Marketing is meaningfully different.) Origins of business marketing In the broadest sense, the practice of one purveyor of goods doing trade with another is as old as commerce itself. As a niche in the field of marketing as we know it today, however, its history is more recent. In his introduction to Fundamentals of Business Marketing Research, J. David Lichtenthal, professor of marketing at the City University of New York's Zicklin School of Business, notes that industrial marketing has been around since the mid-19th century, although the bulk of research on the discipline of business marketing has come about in the last 25 years. Morris, Pitt and Honeycutt, 2001, point out that for many years business marketing took a back seat to consumer marketing, which entailed providers of goods or services selling directly to households through mass media and retail channels. This began
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to change in middle to late 1970s. A variety of academic periodicals, such as the Journal of Business-to-Business Marketing and the Journal of Business & Industrial Marketing, now publish studies on the subject regularly, and professional conferences on business-to-business marketing are held every year. What's more, business marketing courses are commonplace at many universities today. In fact, Dwyer and Tanner (2006) point out that more marketing majors begin their careers in business marketing today than in consumer marketing. Business marketing vs. consumer marketing Although on the surface the differences between business and consumer marketing may seem obvious, there are more subtle distinctions between the two with substantial ramifications. Dwyer and Tanner (2006) note that business marketing generally entails shorter and more direct channels of distribution. While consumer marketing is aimed at large demographic groups through mass media and retailers, the negotiation process between the buyer and seller is more personal in business marketing. According to Hutt and Speh (2001), most business marketers commit only a small part of their promotional budgets to advertising, and that is usually through direct mail efforts and trade journals. While that advertising is limited, it often helps the business marketer set up successful sales calls. Marketing to a business trying to make a profit (Business-to-Business marketing) as opposed to an individual for personal use (Business-to-Consumer, or B2C marketing) is similar in terms of the fundamental principals of marketing. In B2C, B2B and B2G marketing situations, the marketer must always:

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* successfully match the product/service strengths with the needs of a definable target market; * position and price to align the product/service with its market, often an intricate balance; and * communicate and sell it in the fashion that demonstrates its value effectively to the target market.s These are the fundamental principals of the 4 Ps of marketing (the marketing mix) first documented by E. Jerome McCarthy in 1960.[1] Who is customer in a B2B Sale? While "other businesses" might seem like the simple answer, Dwyer and Tanner (2006) say business customers fall into four broad categories: companies that consume products or services, government agencies, institutions and resellers. The first category includes original equipment manufacturers, such as automakers, who buy gauges to put in their cars, and users, which are companies that purchase products for their own consumption. The second category, government agencies, is the biggest. In fact, the U.S. government is the biggest single purchaser of products and services in the country, spending more than $300 billion annually. But this category also includes state and local governments. The third category, institutions, includes schools, hospitals and nursing homes, churches and charities. Finally, resellers consist of wholesalers, brokers and industrial distributors. So what are the meaningful differences between B2B and B2C marketing? A B2C sale is to an individual. That individual may be influenced by other factors such as family members or friends, but ultimately it’s a single person that pulls out their wallet. A B2B sale is to
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an organization. And in that simple distinction lies a web of complications that differ because of the organizational nature of the sale and which vary widely by firmographic (i.e., “demographic” for segmenting businesses) such as business size, location, industry and revenue base. The marketing mix is affected by the B2B uniqueness which include complexity of business products and services, diversity of demand and the differing nature of the sales itself (including fewer customers buying larger volumes).[2]. Because there are some important subtleties to the B2B sale, the issues are broken down beyond just the original 4 Ps developed by McCarthy. B2B Marketing Strategies B2B Branding B2B branding is different from B2C in some crucial ways, including the need to closely align corporate brands, divisional brands and product/service brands and to apply your brand standards to material often considered “informal” such as email and other electronic correspondence. Product (or Service) Because business customers are focused on creating shareholder value for themselves, the cost-saving or revenue-producing benefits of products and services are important to factor in throughout the product development and marketing cycles. People (Target Market) Quite often, the target market for a business product or service is smaller and has more specialized needs reflective of a specific industry or niche. Regardless of the size of the target market, the business customer is making an organizational

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purchase decision and the dynamics of this, both procedurally and in terms of how they value what they are buying from you, differ dramatically from the consumer market. There may be multiple influencers on the purchase decision, which may also have to be marketed to, though they may not be members of the decision making unit. Pricing The business market can be convinced to pay premium prices more often than the consumer market if you know how to structure your pricing and payment terms well. This price premium is particularly achievable if you support it with a strong brand. Promotion Promotion planning is relatively easy when you know the media, information seeking and decision making habits of your customer base, not to mention the vocabulary unique to their segment. Specific trade shows, analysts, publications, blogs and retail/wholesale outlets tend to be fairly common to each industry/product area. What this means is that once you figure it out for your industry/product, the promotion plan almost writes itself (depending on your budget) but figuring it out can be a special skill and it takes time to build up experience in your specific field. Promotion techniques rely heavily on Marketing Communications strategies (see below). Place (Sales & Distribution) The importance of a knowledgeable, experienced and effective direct (inside or outside) sales force is often critical in the business market. If you sell through distribution channels also, the number and type of sales forces can vary tremendously and your success as a marketer is highly dependent on their success.
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B2B Marketing Communications Methodologies The purpose of B2B marketing communications is to support the organizations' sales effort and improve company profitability. B2B marketing communications tactics generally include advertising, public relations, direct mail, trade show support, sales collateral, branding, and interactive services such as website design and search engine optimization. The Business Marketing Association[1] is the trade organization that serves B2B marketing professionals. It was founded in 1922 and offers certification programs, research services, conferences, industry awards and training programs. Positioning Statement An important first step in business to business marketing is the development of your positioning statement. This is a statement of what you do and how you do it differently and better and more efficiently than your competitors. Developing your messages The next step is to develop your messages. There is usually a primary message that conveys more strongly to your customers what you do and the benefit it offers to them, supported by a number of secondary messages, each of which may have a number of supporting arguments, facts and figures. Building a campaign plan Whatever form your B2B marketing campaign will take, build a comprehensive plan up front to target resources where you believe they will deliver the best return on investment, and make sure you have all the infrastructure in place to support each stage of the marketing process - and that doesn't just

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include developing the lead - make sure the entire organization is geared up to handle the inquiries appropriately. Briefing an agency A standard briefing document is usually a good idea for briefing an agency. As well as focusing the agency on what's important to you and your campaign, it serves as a checklist of all the important things to consider as part of your brief. Typical elements to an agency brief are: Your objectives, target market, target audience, product, campaign description, your product positioning, graphical considerations, corporate guidelines, and any other supporting material and distribution. Measuring results The real value in results measurement is in tying the marketing campaign back to business results. After all, you’re not in the business of developing marketing campaigns for marketing sake. So always put metrics in place to measure your campaigns, and if at all possible, measure your impact upon your desired objectives, be it Cost Per Acquisition, Cost per Lead or tangible changes in customer perception. How big is business marketing? Hutt and Speh (2001) note that "business marketers serve the largest market of all; the dollar volume of transactions in the industrial or business market significantly exceeds that of the ultimate consumer market." For example, they note that companies such as GE, DuPont and IBM spend more than $60 million a day on purchases to support their operations. Dwyer and Tanner (2006) say the purchases made by companies, government agencies and institutions "account for more than half of the

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economic activity in industrialized countries such as the United States, Canada and France." A 2003 study sponsored by the Business Marketing Association estimated that business-to-business marketers in the United States spend about $85 billion a year to promote their goods and services. The BMA study breaks that spending out as follows (figures are in billions of dollars):
• • • • • • • • • • •

Trade Shows/Events -- $17.3 Internet/Electronic Media -- $12.5 Promotion/Market Support -- $10.9 Magazine Advertising -- $10.8 Publicity/Public Relations -- $10.5 Direct Mail -- $9.4 Dealer/Distributor Materials -- $5.2 Market Research -- $3.8 Telemarketing -- $2.4 Directories -- $1.4 Other -- $5.1

The fact that there is such a thing as the Business Marketing Association speaks to the size and credibility of the industry. BMA traces its origins to 1922 with the formation of the National Industrial Advertising Association. Today, BMA, headquartered in Chicago, has more than 2,000 members in 19 chapters across the country. Among its members are marketing communications agencies that are largely or exclusively business-tobusiness-oriented. What's driving growth in B2B Marketing? The tremendous growth and change that business marketing is experiencing is due in large part to three "revolutions" occurring around the world today, according to Morris, Pitt and Honeycutt (2001). First is the technological revolution. Technology is changing at an unprecedented pace, and these
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changes are speeding up the pace of new product and service development. A large part of that has to do with the Internet, which is discussed in more detail below. Technology and business strategy go hand in hand. Both are corelated .While technology supports forming organization strategy, the business strategy is also helpful in technology development. Both play a great role in business marketing. Second is the entrepreneurial revolution. To stay competitive, many companies have downsized and reinvented themselves. Adaptability, flexibility, speed, aggressiveness and innovativeness are the keys to remaining competitive today. Marketing is taking the entrepreneurial lead by finding market segments, untapped needs and new uses for existing products, and by creating new processes for sales, distribution and customer service. The third revolution is one occurring within marketing itself. Companies are looking beyond traditional assumptions and adopting new frameworks, theories, models and concepts. They're also moving away from the mass market and the preoccupation with the transaction. Relationships, partnerships and alliances are what define marketing today. The cookie-cutter approach is out. Companies are customizing marketing programs to individual accounts. The impact of the Internet The Internet has become an integral component of the customer relationship management strategy for business marketers. Dwyer and Tanner (2006) note that business marketers not only use the Internet to improve customer service but also to improve opportunities with distributors. According to Anderson and Narus (2004), two new types of resellers have emerged as by-products of
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the Internet: infomediaries and metamediaries. Infomediaries, such as Google and Yahoo, are search engine companies that also function as brokers, or middlemen, in the business marketing world. They charge companies fees to find information on the Web as well as for banner and pop-up ads and search engine optimization services. Metamediaries are companies with robust Internet sites that furnish customers with multiproduct, multivendor and multiservice marketspace in return for commissions on sales. With the advent of b-to-b exchanges, the Internet ushered in an enthusiasm for collaboration that never existed before--and in fact might have even seemed ludicrous 10 years ago. For example, a decade ago who would have imagined Ford, General Motors and DaimlerChrysler entering into a joint venture? That's exactly what happened after all three of the Big Three began moving their purchases online in the late 1990s. All three companies were pursuing their own initiatives when they realized the economies of scale they could achieve by pooling their efforts. Thus was born what then was the world's largest Internet business when Ford's Auto-Xchange and GM's TradeXchange merged, with DaimlerChrysler representing the third partner. While this exchange did not stand the test of time, others have, including Agentrics, which was formed last year with the merger of WorldWide Retail Exchange and GlobalNetXchange, or GNX. Agentrics serves more 50 retailers around the world and more than 300 customers, and its members have combined sales of about $1 trillion. Hutt and Speh (2001) note that such virtual marketplaces enable companies and their suppliers to conduct business in real time as well as simplify purchase processes and cut costs.

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Direct marketing Direct marketing is a sub-discipline and type of marketing. There are two main definitional characteristics which distinguish it from other types of marketing. The first is that it attempts to send its messages directly to consumers, without the use of intervening media. This involves commercial communication (direct mail, e-mail, telemarketing) with consumers or businesses, usually unsolicited. The second characteristic is that it is focused on driving purchases that can be attributed to a specific "call-to-action." This aspect of direct marketing involves an emphasis on trackable, measurable positive (but not negative) responses from consumers (known simply as "response" in the industry) regardless of medium. If the advertisement asks the prospect to take a specific action, for instance call a free phone number or visit a website, then the effort is considered to be direct response advertising. History The term direct marketing is believed to have been first used in 1961 in a speech by Lester Wunderman, who pioneered direct marketing techniques with brands such as American Express and Columbia Records. The term junk mail, referring to unsolicited commercial ads delivered via post office or directly deposited in consumers' mail boxes, can be traced back to 1954. The term spam, meaning "unsolicited commercial email", can be traced back to March 31, 1993, although in its first few months it merely referred to inadvertently posting a message so many times on UseNet that the repetitions effectively drowned out the normal flow of conversation.

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Although Wunderman may have been the first to use the term direct marketing, the practice of mail order selling (direct marketing via mail) essentially began in the U.S. upon invention of the typewriter in 1867. The first modern mail-order catalog was produced by Aaron Montgomery Ward in 1872. The Direct Mail Advertising Association, predecessor of the present-day Direct Marketing Association, was first established in 1917. Third class bulk mail postage rates were established in 1928. Direct marketing's history in Europe can be traced to the 15th century. Upon Gutenberg's invention of movable type, the first trade catalogs from printerpublishers appeared sometime around 1450. Benefits and drawbacks Direct marketing is attractive to many marketers, because in many cases its positive effect (but not negative results) can be measured directly. For example, if a marketer sends out one million solicitations by mail, and ten thousand customers can be tracked as having responded to the promotion, the marketer can say with some confidence that the campaign led directly to the responses. The number of recipients who are offended by the junk mail/spam, however, is not easily measured. By contrast, measurement of other media must often be indirect, since there is no direct response from a consumer. Measurement of results, a fundamental element in successful direct marketing, is explored in greater detail elsewhere in this article. Yet since the start of the Internet-age the challenges of Chief Marketing Executives (CMOs) are tracking direct marketing responses and measuring results. While many marketers like this form of marketing, some direct marketing efforts using particular media have been criticized for generating unwanted
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solicitations. For example, direct mail that is irrelevant to the recipient is considered junk mail, and unwanted email messages are considered spam. Some consumers are demanding an end to direct marketing for privacy and environmental reasons, which direct marketers are able to provide by using "opt out" lists, variable printing and more targeted mailing lists. Channels Some direct marketers also use media such as door hangers, package inserts, magazines, newspapers, radio, television, email, internet banner ads, payper-click ads, billboards, transit ads. And according to Ad Age, "In 2005, U.S. agencies generated more revenue from marketing services (which include direct marketing) than from traditional advertising and media."

Direct mail The most common form of direct marketing is direct mail, sometimes called junk mail, used by advertisers who send paper mail to all postal customers in an area or to all customers on a list.

Typical junkmail.

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Any medium that can be used to deliver a communication to a customer can be employed in direct marketing. Probably the most commonly used medium for direct marketing is mail, in which marketing communications are sent to customers using the postal service. The term direct mail is used in the direct marketing industry to refer to communication deliveries by the Post Office, which may also be referred to as "junk mail" or "admail" and may involve bulk mail. Junk mail includes advertising circulars, catalogs, free trial CDs, pre-approved credit card applications, and other unsolicited merchandising invitations delivered by mail or to homes and businesses, or delivered to consumers' mailboxes by delivery services other than the Post Office. Bulk mailings are a particularly popular method of promotion for businesses operating in the financial services, home computer, and travel and tourism industries. In many developed countries, direct mail represents such a significant amount of the total volume of mail that special rate classes have been established. In the United States and United Kingdom, for example, there are bulk mail rates that enable marketers to send mail at rates that are substantially lower than regular first-class rates. In order to qualify for these rates, marketers must format and sort the mail in particular ways - which reduces the handling (and therefore costs) required by the postal service. Advertisers often refine direct mail practices into targeted mailing, in which mail is sent out following database analysis to select recipients considered most likely to respond positively. For example a person who has demonstrated an interest in golf may receive direct mail for golf related products or perhaps for goods and services that are appropriate for golfers. This use of database analysis is a type of database marketing. The United States Postal
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Service calls this form of mail "advertising mail" (admail for short). Telemarketing The second most common form of direct marketing is telemarketing,{[fact}} in which marketers contact consumers by phone. The unpopularity of cold call telemarketing (in which the consumer does not expect or invite the sales call) has led some US states and the US federal government to create "no-call lists" and legislation including heavy fines. This process may be outsourced to specialist call centres. In the US, a national do-not-call list went into effect on October 1, 2003. Under the law, it is illegal for telemarketers to call anyone who has registered themselves on the list. After the list had operated for one year, over 62 million people had signed up. [3] The telemarketing industry opposed the creation of the list, but most telemarketers have complied with the law and refrained from calling people who are on the list. Canada has passed legislation to create a similar Do Not Call List. In other countries it is voluntary, such as the New Zealand Name Removal Service. Email Marketing Email Marketing may have passed telemarketing in frequency at this point, and is a third type of direct marketing. A major concern is spam. Broadcast faxing A fourth type of direct marketing, broadcast faxing, is now less common than the other forms. This is partly due to laws in the United States and elsewhere which make it illegal.

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Voicemail Marketing A fifth type of direct marketing has emerged out of the market prevalence of personal voice mailboxes, and business voicemail systems. Due to the ubiquity of email marketing, and the expense of direct mail and telemarketing, voicemail marketing presented a cost effective means by which to reach people with the warmth of a human voice. Abuse of consumer marketing applications of voicemail marketing resulted in an abundance of "voice-spam", and prompted many jurisdictions to pass laws regulating consumer voicemail marketing. More recently, businesses have utilized guided voicemail (a application where pre-recorded voicemails are guided by live callers) to accomplish personalized business-to-business marketing formerly reserved for telemarketing. Because guided voicemail is used to contact only businesses, it is exempt from Do Not Call regulations in place for other forms of voicemail marketing. Couponing Couponing is used in print media to elicit a response from the reader. An example is a coupon which the reader cuts out and presents to a superstore check-out counter to avail of a discount. Coupons in newspapers and magazines cannot be considered direct marketing, since the marketer incurs the cost of supporting a third-party medium (the newspaper or magazine); direct marketing aims to circumvent that balance, paring the costs down to solely delivering their unsolicited sales message to the consumer, without supporting the newspaper that the consumer seeks and welcomes. Direct response television marketing

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A related form of marketing is infomercials. They are typically called direct response marketing rather than direct marketing because they try to achieve a direct response via broadcast on a third party's medium, but viewers respond directly via telephone or internet. TV-response marketing--i.e. infomercials--can be considered a form of direct marketing, since responses are in the form of calls to telephone numbers given on-air. This both allows marketers to reasonably conclude that the calls are due to a particular campaign, and allows the marketers to obtain customers' phone numbers as targets for telemarketing. Under the Federal Do-Not-Call List rules in the US, if the caller buys anything, the marketer would be exempt from Do-Not-Call List restrictions for a period of time due to having a prior business relationship with the caller. Major players are firms like QVC, Thane Direct, and Interwood Marketing Group then cross-sell, and upsell to these respondents. Direct selling Direct selling is the sale of products by face-to-face contact with the customer, either by having salespeople approach potential customers in person, through indirect means such as Tupperware parties. Integrated Campaigns For many marketers, a comprehensive direct marketing campaign employs a mix of channels. It is not unusual for a large campaign to combine direct mail, telemarketing, radio and broadcast TV, as well as online channels such as email, search marketing, social networking and video. In a report conducted by the Direct Marketing Association, it was found that 57% of the campaigns studied were employing integrated strategies. Of those, almost

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half (47%) launched with a direct mail campaign, typically followed by e-mail and then telemarketing.

Relationship marketing Relationship marketing is a form of marketing developed from direct response marketing campaigns conducted in the 1960's and 1980's which emphasizes customer retention and continual satisfaction rather than individual transactions and per-case customer resolution. Relationship marketing differs from other forms of marketing in that it targets an audience with more directly suited information on products or services which suit retained customer's interests, as opposed to direct or "Intrusion" marketing, which focuses upon acquisition of new clients by targeting majority demographics based upon prospective client lists. Development According to Leonard Berry, relationship marketing can be applied: when there are alternatives to choose from; when the customer makes the selection decision; and when there is an ongoing and periodic desire for the product or service. Fornell and Wernerfelt used the term "defensive marketing" to describe attempts to reduce customer turnover and increase customer loyalty. This customer-retention approach was contrasted with "offensive marketing" which involved obtaining new customers and increasing customers' purchase frequency. Defensive marketing focused on reducing or managing the dissatisfaction of your customers, while offensive marketing focused on
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"liberating" dissatisfied customers from your competition and generating new customers. There are two components to defensive marketing: increasing customer satisfaction and increasing switching barriers. Traditional marketing originated in the 1960s and 1970s as companies found it more difficult to sell consumer products. Its consumer market origins molded traditional marketing into a system suitable for selling relatively low-value products to masses of customers. Over the decades, attempts have been made to broaden the scope of marketing, relationship marketing being one of these attempts. Marketing has been greatly enriched by these contributions. The practice of relationship marketing has been greatly facilitated by several generations of customer relationship management software that allow tracking and analyzing of each customer's preferences, activities, tastes, likes, dislikes, and complaints. This is a powerful tool in any company's marketing strategy. For example, an automobile manufacturer maintaining a database of when and how repeat customers buy their products, the options they choose, the way they finance the purchase etc., is in a powerful position to custom target sales material. In return, the customer benefits from the company tracking service schedules and communicating directly on issues like product recalls. The latest trend in relationship marketing is personalized marketing. In personalized marketing, the main preference is given to consumer. The consumer shopping profile is built as the person shops on the website. This information is then used to compute what can be his likely preferences in other categories. These items are than shown to the customer through web cross-sell, email recommendation and other channels.

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Personalized marketing has also migrated into direct mail, allowing marketers to take advantage of the technological capabilities of digital, tonerbased printing presses to produce unique, personalized pieces for each recipient. Marketers can personalize documents by any information contained in their databases, including name, address, demographics, purchase history, and dozens (or even hundreds) of other variables. The result is a printed piece that (ideally) reflects the individual needs and preferences of each recipient, increasing the relevance of the piece and increasing the response rate. Scope Relationship marketing has been strongly influenced by reengineering. According to reengineering theory, organizations should be structured according to complete tasks and processes rather than functions. That is, crossfunctional teams should be responsible for a whole process, from beginning to end, rather than having the work go from one functional department to another. Traditional marketing is said to use the functional department approach. This can be seen in the traditional four P's of the marketing mix. Pricing, product management, promotion, and placement are claimed to be functional silos that must be accessed by the marketer if she is going to perform her task. According to Gordon (1999), the marketing mix approach is too limited to provide a usable framework for assessing and developing customer relationships in many industries and should be replaced by an alternative model where the focus is on customers and relationships rather than markets and products. In contrast, relationship marketing is crossfunctional marketing. It is organized around processes that involve all aspects of the organization. In fact, some commentators prefer to call relationship marketing "relationship
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management" in recognition of the fact that it involves much more than that which is normally included in marketing. Martin Christopher, Adrian Payne, and David Ballantyne at the Cranfield Graduate school of Management claim that relationship marketing has the potential to forge a new synthesis between quality management, customer service management, and marketing. They see marketing and customer service as inseparable. In spite of this broad scope, relationship marketing has not lost its core marketing orientation though. It involves the application of the marketing philosophy to all parts of the organization. Every employee is said to be a "part-time marketer". The way Regis McKenna (1991) puts it: "Marketing is not a function, it is a way of doing business . . . marketing has to be all pervasive, part of everyone's job description, from the receptionist to the board of directors." Because of this, it is claimed that relationship marketing is a more pure form of marketing than traditional marketing. Approaches Satisfaction Relationship marketing relies upon the communication and acquisition of consumer requirements solely from existing customers in a mutually beneficial exchange usually involving permission for contact by the customer through an "opt-in" system.[4] With particular relevance to customer satisfaction the relative price and quality of goods and services produced or sold through a company alongside customer service generally determine the amount of sales relative to that of

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competing companies. Although groups targeted through relationship marketing may be large, accuracy of communication and overall relevancy to the customer remains higher than that of direct marketing, but has less potential for generating new leads than direct marketing and is limited to Viral marketing for the acquisition of further customers. Retention A key principle of relationship market is the retention of customers through varying means and practices to ensure repeated trade from preexisting customers by satisfying requirements above those of competing companies through a mutually beneficial relationship This technique is now used as a means of counterbalancing new customers and opportunities with current and existing customers as a means of maximizing profit and counteracting the "leaky bucket theory of business" in which new customers gained in older direct marketing oriented businesses were at the expense of or coincided with the loss of older customers. This process of "churning" is less economically viable than retaining all or the majority of customers using both direct and relationship management as lead generation via new customers requires more investment. Many companies in competing markets will redirect or allocate large amounts of resources or attention towards customer retention as in markets with increasing competition it may cost 5 times more to attract new customers than it would to retain current customers, as direct or "offensive" marketing requires much more extensive resources to cause defection from competitors. However, it is suggested that because of the extensive classic marketing theories center on means of attracting customers and creating transactions rather than maintaining them, the majority usage of direct marketing used in the past is now gradually being
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used more alongside relationship marketing as it's importance becomes more recognizable.. It is claimed by Reichheld and Sasser that a 5% improvement in customer retention can cause an increase in profitability of between 25 and 85 percent (in terms of net present value) depending on the industry. However Carrol, P. and Reichheld, F. dispute these calculations, claiming they result from faulty cross-sectional analysis. According to Buchanan and Gilles, the increased profitability associated with customer retention efforts occurs because of several factors that occur once a relationship has been established with a customer.

• •

The cost of acquisition occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost. Account maintenance costs decline as a percentage of total costs (or as a percentage of revenue). Long-term customers tend to be less inclined to switch, and also tend to be less price sensitive. This can result in stable unit sales volume and increases in dollar-sales volume. Long-term customers may initiate free word of mouth promotions and referrals. Long-term customers are more likely to purchase ancillary products and high margin supplemental products. Customers that stay with you tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share. Regular customers tend to be less expensive to service because they are familiar with the process, require less "education", and are consistent in their order placement. Increased customer retention and loyalty makes the employees' jobs easier and more
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satisfying. In turn, happy employees feed back into better customer satisfaction in a virtuous circle. Relationship marketers speak of the "relationship ladder of customer loyalty". It groups types of customers according to their level of loyalty. The ladder's first rung consists of "prospects", that is, people that have not purchased yet but are likely to in the future. This is followed by the successive rungs of "customer", "client", "supporter", "advocate", and "partner". The relationship marketer's objective is to "help" customers get as high up the ladder as possible. This usually involves providing more personalized service and providing service quality that exceeds expectations at each step. Customer retention efforts involve considerations such as the following: 1. Customer valuation - Gordon (1999) describes how to value customers and categorize them according to their financial and strategic value so that companies can decide where to invest for deeper relationships and which relationships need to be served differently or even terminated. 2. Customer retention measurement - Dawkins and Reichheld (1990) calculated a company's "customer retention rate". This is simply the percentage of customers at the beginning of the year that are still customers by the end of the year. In accordance with this statistic, an increase in retention rate from 80% to 90% is associated with a doubling of the average life of a customer relationship from 5 to 10 years. This ratio can be used to make comparisons between products, between market segments, and over time. 3. Determine reasons for defection - Look for the root causes, not mere symptoms. This involves probing for details when talking to former
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customers. Other techniques include the analysis of customers' complaints and competitive benchmarking (see competitor analysis). 4. Develop and implement a corrective plan - This could involve actions to improve employee practices, using benchmarking to determine best corrective practices, visible endorsement of top management, adjustments to the company's reward and recognition systems, and the use of "recovery teams" to eliminate the causes of defections. A technique to calculate the value to a firm of a sustained customer relationship has been developed. This calculation is typically called customer lifetime value. Retention strategies also build barriers to customer switching. This can be done by product bundling (combining several products or services into one "package" and offering them at a single price), cross selling (selling related products to current customers), cross promotions (giving discounts or other promotional incentives to purchasers of related products), loyalty programs (giving incentives for frequent purchases), increasing switching costs (adding termination costs, such as mortgage termination fees), and integrating computer systems of multiple organizations (primarily in industrial marketing). Many relationship marketers use a team-based approach. The rationale is that the more points of contact between the organization and customer, the stronger will be the bond, and the more secure the relationship. Application Relationship marketing and transactional marketing are not mutually exclusive and there is no need for a conflict between them. However, one approach
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may be more suitable in some situations than in others. Transactional marketing is most appropriate when marketing relatively low value consumer products, when the product is a commodity, when switching costs are low, when customers prefer single transactions to relationships, and when customer involvement in production is low. When the reverse of all the above is true, as in typical industrial and service markets, then relationship marketing can be more appropriate. Most firms should be blending the two approaches to match their portfolio of products and services. Virtually all products have a service component to them and this service component has been getting larger in recent decades. (See service economy and experience economy.) Internal marketing Relationship marketing stresses on what it calls internal marketing. This refers to using marketing techniques within the organization itself. It is claimed that many of the traditional marketing concepts can be used to determine what the needs of "internal customers" are. According to this theory, every employee, team, or department in the company is simultaneously a supplier and a customer of services and products. An employee obtains a service at a point in the value chain and then provides a service to another employee further along the value chain. If internal marketing is effective, every employee will both provide and receive exceptional service from and to other employees. It also helps employees understand the significance of their roles and how their roles relate to others'. If implemented well, it can also encourage every employee to see the process in terms of the customer's perception of value added, and the organization's strategic mission. Further it is claimed that an effective internal marketing program is a prerequisite for effective external marketing efforts. (George, W. 1990)

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The six markets model Adrian Payne (1991) from Cranfield University goes further. He identifies six markets which he claims are central to relationship marketing. They are: internal markets, supplier markets, recruitment markets, referral markets, influence markets, and customer markets. Referral marketing is developing and implementing a marketing plan to stimulate referrals. Although it may take months before you see the effect of referral marketing, this is often the most effective part of an overall marketing plan and the best use of resources. Marketing to suppliers is aimed at ensuring a longterm conflict-free relationship in which all parties understand each other's needs and exceed each other's expectations. Such a strategy can reduce costs and improve quality. Influence markets involve a wide range of submarkets including: government regulators, standards bodies, lobbyists, stockholders, bankers, venture capitalists, financial analysts, stockbrokers, consumer associations, environmental associations, and labor associations. These activities are typically carried out by the public relations department, but relationship marketers feel that marketing to all six markets is the responsibility of everyone in the organization. At times Payne sub-divides customer markets into existing customers and potential customer, yielding seven rather than six markets. He claims that each market will require its own strategies and recommends separate marketing mixes for each of the seven. although it is thought as a good techneique.

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Marketing plan The marketing planning process In most organizations, "strategic planning" is an annual process, typically covering just the year ahead. Occasionally, a few organizations may look at a practical plan which stretches three or more years ahead. To be most effective, the plan has to be formalized, usually in written form, as a formal `marketing plan'. The essence of the process is that it moves from the general to the specific; from the overall objectives of the organization down to the individual action plan for a part of one marketing programme. It is also an interactive process, so that the draft output of each stage is checked to see what impact it has on the earlier stages - and is amended accordingly. Marketing planning aims and objectives Behind the corporate objectives, which in themselves offer the main context for the marketing plan, will lay the 'corporate mission'; which in turn provides the context for these corporate objectives. This `corporate mission' can
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be thought of as a definition of what the organization is; of what it does: 'Our business is …'. This definition should not be too narrow, or it will constrict the development of the organization; a too rigorous concentration on the view that `We are in the business of making meat-scales', as IBM was during the early 1900s, might have limited its subsequent development into other areas. On the other hand, it should not be too wide or it will become meaningless; `We want to make a profit' is not too helpful in developing specific plans. Abell suggested that the definition should cover three dimensions: 'customer groups' to be served, 'customer needs' to be served, and 'technologies' to be utilized [1]. Thus, the definition of IBM's `corporate mission' in the 1940s might well have been: `We are in the business of handling accounting information [customer need] for the larger US organizations [customer group] by means of punched cards [technology].' Perhaps the most important factor in successful marketing is the `corporate vision'. Surprisingly, it is largely neglected by marketing textbooks; although not by the popular exponents of corporate strategy indeed, it was perhaps the main theme of the book by Peters and Waterman, in the form of their `Superordinate Goals'. 'In Search of Excellence' said: "Nothing drives progress like the imagination. The idea precedes the deed." [2] If the organization in general, and its chief executive in particular, has a strong vision of where its future lies, then there is a good chance that the organization will achieve a strong position in its markets (and attain that future). This will be not least because its strategies will be consistent; and will be supported by its staff at all levels. In this context, all of IBM's marketing activities were underpinned by its philosophy of `customer service'; a vision originally promoted by the charismatic Watson dynasty.

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The emphasis at this stage is on obtaining a complete and accurate picture. In a single organization, however, it is likely that only a few aspects will be sufficiently important to have any significant impact on the marketing plan; but all may need to be reviewed to determine just which 'are' the few. In this context some factors related to the customer, which should be included in the material collected for the audit, may be:
• • •

Who are the customers? What are their key characteristics? What differentiates them from other members of the population? What are their needs and wants? What do they expect the `product' to do? What are their special requirements and perceptions? What do they think of the organization and its products or services? What are their attitudes? What are their buying intentions?

• • •

• •

A `traditional' - albeit product-based - format for a `brand reference book' (or, indeed, a `marketing facts book') was suggested by Godley more than three decades ago:
1. Financial data --Facts for this section will come

from management accounting, costing and finance sections. 2. Product data --From production, research and development.

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3. Sales and distribution data - Sales, packaging, distribution sections. 4. Advertising, sales promotion, merchandising data - Information from these departments. 5. Market data and miscellany - From market research, who would in most cases act as a source for this information. His sources of data, however, assume the resources of a very large organization. In most organizations they would be obtained from a much smaller set of people (and not a few of them would be generated by the marketing manager alone). It is apparent that a marketing audit can be a complex process, but the aim is simple: 'it is only to identify those existing (external and internal) factors which will have a significant impact on the future plans of the company'. It is clear that the basic material to be input to the marketing audit should be comprehensive. Accordingly, the best approach is to accumulate this material continuously, as and when it becomes available; since this avoids the otherwise heavy workload involved in collecting it as part of the regular, typically annual, planning process itself when time is usually at a premium. Even so, the first task of this `annual' process should be to check that the material held in the current `facts book' or `facts files' actually 'is' comprehensive and accurate, and can form a sound basis for the marketing audit itself. The structure of the facts book will be designed to match the specific needs of the organization, but one simple format - suggested by Malcolm McDonald - may be applicable in many cases. This splits the material into three groups: 1. 'Review of the marketing environment'. A study of the organization's markets, customers, competitors and the overall economic, political, cultural and technical environment; covering
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developing trends, as well as the current situation. 2. 'Review of the detailed marketing activity'. A study of the company's marketing mix; in terms of the 7 Ps - (see below) 3. 'Review of the marketing system'. A study of the marketing organization, marketing research systems and the current marketing objectives and strategies. The last of these is too frequently ignored. The marketing system itself needs to be regularly questioned, because the validity of the whole marketing plan is reliant upon the accuracy of the input from this system, and `garbage in, garbage out' applies with a vengeance.

'Portfolio planning'. In addition, the coordinated planning of the individual products and services can contribute towards the balanced portfolio. '80:20 rule'. To achieve the maximum impact, the marketing plan must be clear, concise and simple. It needs to concentrate on the 20 per cent of products or services, and on the 20 per cent of customers, which will account for 80 per cent of the volume and 80 per cent of the `profit'. '7 Ps': Product, Place, Price and Promotion, Physical Environment, People, Process. The 7 Ps can sometimes divert attention from the customer, but the framework they offer can be very useful in building the action plans.

It is only at this stage (of deciding the marketing objectives) that the active part of the marketing planning process begins'.

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This next stage in marketing planning is indeed the key to the whole marketing process. The marketing objectives state just where the company intends to be; at some specific time in the future. James Quinn succinctly defined objectives in general as: "Goals (or objectives) state 'what' is to be achieved and 'when' results are to be accomplished, but they do not state 'how' the results are to be achieved". They typically relate to what products (or services) will be where in what markets (and must be realistically based on customer behaviour in those markets). They are essentially about the match between those 'products' and 'markets'. Objectives for pricing, distribution, advertising and so on are at a lower level, and should not be confused with marketing objectives. They are part of the marketing strategy needed to achieve marketing objectives. To be most effective, objectives should be capable of measurement and therefore 'quantifiable'. This measurement may be in terms of sales volume, money value, market share, percentage penetration of distribution outlets and so on. An example of such a measurable marketing objective might be `to enter the market with product Y and capture 10 per cent of the market by value within one year'. As it is quantified it can, within limits, be unequivocally monitored; and corrective action taken as necessary. The marketing objectives must usually be based, above all, on the organization's financial objectives; converting these financial measurements into the related marketing measurements. He went on to explain his view of the role of `policies', with which strategy is most often confused: "Policies are rules or guidelines that express the 'limits' within which action should occur.

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Simplifying somewhat, marketing strategies can be seen as the means, or `game plan', by which marketing objectives will be achieved and, in the framework that we have chosen to use, are generally concerned with the 7 Ps. Examples are: Price- The amount of money needed to buy products Product- The actual product Promotion (advertising)- Getting the product known Placement- Where the product is located People- Represent the business Physical environment- The ambience, mood, or tone of the environment Process- How do people obtain your product In principle, these strategies describe how the objectives will be achieved. The 7 Ps are a useful framework for deciding how the company's resources will be manipulated (strategically) to achieve the objectives. It should be noted, however, that they are not the only framework, and may divert attention from the real issues. The focus of the strategies must be the objectives to be achieved - not the process of planning itself. Only if it fits the needs of these objectives should you choose, as we have done, to use the framework of the 7 Ps. The strategy statement can take the form of a purely verbal description of the strategic options which have been chosen. Alternatively, and perhaps more positively, it might include a structured list of the major options chosen. One aspect of strategy which is often overlooked is that of 'timing'. Exactly when it is the best time for each element of the strategy to be implemented is
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often critical. Taking the right action at the wrong time can sometimes be almost as bad as taking the wrong action at the right time. Timing is, therefore, an essential part of any plan; and should normally appear as a schedule of planned activities. Having completed this crucial stage of the planning process, you will need to re-check the feasibility of your objectives and strategies in terms of the market share, sales, costs, profits and so on which these demand in practice. As in the rest of the marketing discipline, you will need to employ judgement, experience, market research or anything else which helps you to look at your conclusions from all possible angles. Detailed plans and programmes At this stage, you will need to develop your overall marketing strategies into detailed plans and programmes. Although these detailed plans may cover each of the 7 Ps, the focus will vary, depending upon your organization's specific strategies. A product-oriented company will focus its plans for the 7 Ps around each of its products. A market or geographically oriented company will concentrate on each market or geographical area. Each will base its plans upon the detailed needs of its customers, and on the strategies chosen to satisfy these needs. Again, the most important element is, indeed, that of the detailed plans; which spell out exactly what programmes and individual activities will take place over the period of the plan (usually over the next year). Without these specified - and preferably quantified - activities the plan cannot be monitored, even in terms of success in meeting its objectives. It is these programmes and activities which will then constitute the `marketing' of the organization over the period. As a result, these detailed marketing programmes are the most important,
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practical outcome of the whole planning process. These plans should therefore be:

Clear - They should be an unambiguous statement of 'exactly' what is to be done. Quantified - The predicted outcome of each activity should be, as far as possible, quantified; so that its performance can be monitored. Focused - The temptation to proliferate activities beyond the numbers which can be realistically controlled should be avoided. The 80:20 Rule applies in this context too. Realistic - They should be achievable. Agreed - Those who are to implement them should be committed to them, and agree that they are achievable.

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The resulting plans should become a working document which will guide the campaigns taking place throughout the organization over the period of the plan. If the marketing plan is to work, every exception to it (throughout the year) must be questioned; and the lessons learned, to be incorporated in the next year's plan. Content of the marketing plan A marketing plan for a small business typically includes Small Business Administration Description of competitors, including the level of demand for the product or service and the strengths and weaknesses of competitors 1. Description of the product or service, including special features 2. Marketing budget, including the advertising and promotional plan 3. Description of the business location, including advantages and disadvantages for marketing
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4. Pricing strategy 5. Market Segmentation Medium-sized and large organizations The main contents of a marketing plan are: 1. Executive Summary 2. Situational Analysis 3. Opportunities / Issue Analysis - SWOT Analysis 4. Objectives 5. Strategy 6. Action Programme (the operational marketing plan itself for the period under review) 7. Financial Forecast 8. Controls In detail, a complete marketing plan typically includes: 1. Title page 2. Executive Summary 3. Current Situation - Macroenvironment o economy o legal o government o technology o ecological o sociocultural o supply chain 4. Current Situation - Market Analysis o market definition o market size o market segmentation o industry structure and strategic groupings o Porter 5 forces analysis o competition and market share o competitors' strengths and weaknesses o market trends 5. Current Situation - Consumer Analysis o nature of the buying decision o participants o demographics
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psychographics o buyer motivation and expectations o loyalty segments 6. Current Situation - Internal o company resources  financial  people  time  skills o objectives  mission statement and vision statement  corporate objectives  financial objective  marketing objectives  long term objectives  description of the basic business philosophy o corporate culture 7. Summary of Situation Analysis o external threats o external opportunities o internal strengths o internal weaknesses o Critical success factors in the industry o our sustainable competitive advantage 8. Marketing research o information requirements o research methodology o research results 9. Marketing Strategy - Product o product mix o product strengths and weaknesses  perceptual mapping o product life cycle management and new product development o Brand name, brand image, and brand equity o the augmented product o product portfolio analysis  B.C.G. Analysis  contribution margin analysis
o

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G.E. Multi Factoral analysis  Quality Function Deployment 10. Marketing Strategy - segmented marketing actions and market share objectives o by product, o by customer segment, o by geographical market, o by distribution channel. 11. Marketing Strategy - Price o pricing objectives o pricing method (eg.: cost plus, demand based, or competitor indexing) o pricing strategy (eg.: skimming, or penetration) o discounts and allowances o price elasticity and customer sensitivity o price zoning o break even analysis at various prices 12. Marketing Strategy - promotion o promotional goals o promotional mix o advertising reach, frequency, flights, theme, and media o sales force requirements, techniques, and management o sales promotion o publicity and public relations o electronic promotion (eg.: Web, or telephone) o word of mouth marketing (buzz) o viral marketing 13. Marketing Strategy - Distribution o geographical coverage o distribution channels o physical distribution and logistics o electronic distribution 14. Implementation o personnel requirements  assign responsibilities  give incentives  training on selling methods o financial requirements

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o o o o o

15.
o o o o o o

16.
o o

17.
o o

management information systems requirements month-by-month agenda  PERT or critical path analysis monitoring results and benchmarks adjustment mechanism contingencies (What if's) Financial Summary assumptions pro-forma monthly income statement contribution margin analysis breakeven analysis Monte Carlo method ISI: Internet Strategic Intelligence Scenarios Prediction of Future Scenarios Plan of Action for each Scenario Appendix pictures and specifications of the new product results from research already completed

Measurement of Progress The final stage of any marketing planning process is to establish targets (or standards) so that progress can be monitored. Accordingly, it is important to put both quantities and timescales into the marketing objectives (for example, to capture 20 per cent by value of the market within two years) and into the corresponding strategies. Changes in the environment mean that the forecasts often have to be changed. Along with these, the related plans may well also need to be changed. Continuous monitoring of performance, against predetermined targets, represents a most important aspect of this. However, perhaps even more important is the enforced discipline of a regular formal review. Again, as with forecasts, in many cases the best (most realistic) planning cycle will revolve around a quarterly review. Best of all, at least in terms of the quantifiable aspects of the
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plans, if not the wealth of backing detail, is probably a quarterly rolling review - planning one full year ahead each new quarter. Of course, this does absorb more planning resource; but it also ensures that the plans embody the latest information, and - with attention focused on them so regularly - forces both the plans and their implementation to be realistic. Plans only have validity if they are actually used to control the progress of a company: their success lies in their implementation, not in the writing'. Performance analysis The most important elements of marketing performance, which are normally tracked, are: Sales analysis Most organizations track their sales results; or, in non-profit organizations for example, the number of clients. The more sophisticated track them in terms of 'sales variance' - the deviation from the target figures - which allows a more immediate picture of deviations to become evident.. `Micro- analysis', which is a nicely pseudo-scientific term for the normal management process of investigating detailed problems, then investigates the individual elements (individual products, sales territories, customers and so on) which are failing to meet targets. Market share analysis Relatively few organizations, however, track market share. In some circumstances this may well be a much more important measure.. Sales may still be increasing, in an expanding market, while share is actually decreasing - boding ill for future sales when the market eventually starts to drop. Where such market share is tracked, there may be a number of aspects which will be followed:

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• • • •

overall market share segment share - that in the specific, targeted segment relative share -in relation to the market leaders annual fluctuation rate of market share

Expense analysis The key ratio to watch in this area is usually the `marketing expense to sales ratio'; although this may be broken down into other elements (advertising to sales, sales administration to sales, and so on). Financial Analysis The `bottom line' of marketing activities should at least in theory, be the net profit (for all except nonprofit organizations, where the comparable emphasis may be on remaining within budgeted costs). There are a number of separate performance figures and key ratios which need to be tracked:
• • •

gross contribution<>net profit gross profit<>return on investment net contribution<>profit on sales

There can be considerable benefit in comparing these figures with those achieved by other organizations (especially those in the same industry); using, for instance, the figures which can be obtained (in the UK) from `The Centre for Interfirm Comparison'. The most sophisticated use of this approach, however, is typically by those making use of PIMS (Profit Impact of Management Strategies), initiated by the General Electric Company and then developed by Harvard Business School, but now run by the Strategic Planning Institute. The above performance analyses concentrate on the quantitative measures which are directly related to short-term performance. But there are a

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number of indirect measures, essentially tracking customer attitudes, which can also indicate the organization's performance in terms of its longerterm marketing strengths and may accordingly be even more important indicators. Some useful measures are:
• •

market research - including customer panels (which are used to track changes over time) lost business - the orders which were lost because, for example, the stock was not available or the product did not meet the customer's exact requirements customer complaints - how many customers complain about the products or services, or the organization itself, and about what

Use of Marketing Plans A formal, written marketing plan is essential; in that it provides an unambiguous reference point for activities throughout the planning period. However, perhaps the most important benefit of these plans is the planning process itself. This typically offers a unique opportunity, a forum, for `information-rich' and productively focused discussions between the various managers involved. The plan, together with the associated discussions, then provides an agreed context for their subsequent management activities, even for those not described in the plan itself. Budgets as Managerial Tools The classic quantification of a marketing plan appears in the form of budgets. Because these are so rigorously quantified, they are particularly important. They should, thus, represent an unequivocal projection of actions and expected results. What is more, they should be capable of being monitored accurately; and, indeed, performance against budget is the main (regular) management review process.
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The purpose of a marketing budget is, thus, to pull together all the revenues and costs involved in marketing into one comprehensive document. It is a managerial tool that balances what is needed to be spent against what can be afforded, and helps make choices about priorities. It is then used in monitoring performance in practice. The marketing budget is usually the most powerful tool by which you think through the relationship between desired results and available means. Its starting point should be the marketing strategies and plans, which have already been formulated in the marketing plan itself; although, in practice, the two will run in parallel and will interact. At the very least, the rigorous, highly quantified, budgets may cause a rethink of some of the more optimistic elements of the plans. Approaches to budgeting Many budgets are based on history. They are the equivalent of `time-series' forecasting. It is assumed that next year's budgets should follow some trend that is discernible over recent history. Other alternatives are based on a simple `percentage of sales' or on `what the competitors are doing'. However, there are many other alternatives - Ven:

Affordable - This may be the most common approach to budgeting. Someone, typically the managing director on behalf of the board, decides what is a `reasonable' promotional budget; what can be afforded. This figure is most often based on historical spending. This approach assumes that promotion is a cost; and sometimes is seen as an avoidable cost. Percentage of revenue - This is a variation of `affordable', but at least it forges a link with sales volume, in that the budget will be set at a certain percentage of revenue, and thus
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follows trends in sales. However, it does imply that promotion is a result of sales, rather than the other way round. Both of these methods are seen by many managements to be `realistic', in that they reflect the reality of the business strategies as those managements see it. On the other hand, neither makes any allowance for change. They do not allow for the development to meet emerging market opportunities and, at the other end of the scale, they continue to pour money into a dying product or service (the `dog').

Competitive parity - In this case, the organization relates its budgets to what the competitors are doing: for example, it matches their budgets, or beats them, or spends a proportion of what the brand leader is spending. On the other hand, it assumes that the competitors know best; in which case, the service or product can expect to be nothing more than a follower. Zero-based budgeting - In essence, this approach takes the objectives, as set out in the marketing plan, together with the resulting planned activities and then costs them out. Differences between marketing and business plans.

Marketing research Marketing research, or market research, is a form of business research and is generally divided into two categories: consumer market research and business-to-business (B2B) market research, which was previously known as industrial marketing research. Consumer marketing research studies the buying habits of individual people while businessto-business marketing research investigates the

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markets for products sold by one business to another. Consumer market research is a form of applied sociology that concentrates on understanding the behaviours, whims and preferences, of consumers in a market-based economy, and aims to understand the effects and comparative success of marketing campaigns. The field of consumer marketing research as a statistical science was pioneered by Arthur Nielsen with the founding of the ACNielsen Company in 1923 Thus marketing research is the systematic and objective identification, collection, analysis, and dissemination of information for the purpose of assisting management in decision making related to the identification and solution of problems and opportunities in marketing. Marketing research characteristics First, marketing research is systematic. Thus systematic planning is required at all the stages of the marketing research process. The procedures followed at each stage are methodologically sound, well documented, and, as much as possible, planned in advance. Marketing research uses the scientific method in that data are collected and analyzed to test prior notions or hypotheses. Marketing research is objective. It attempts to provide accurate information that reflects a true state of affairs. It should be conducted impartially. While research is always influenced by the researcher's research philosophy, it should be free from the personal or political biases of the researcher or the management. Research which is motivated by personal or political gain involves a breach of professional standards. Such research is deliberately biased so as to result in predetermined findings. The motto of every researcher should be, "Find it and tell it like it is." The objective nature of
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marketing research underscores the importance of ethical considerations, which are discussed later in the chapter. Marketing research involves the identification, collection, analysis, and dissemination of information. Each phase of this process is important. We identify or define the marketing research problem or opportunity and then determine what information is needed to investigate it. Because every marketing opportunity translates into a research problem to be investigated, the terms "problem" and "opportunity" are used interchangeably here. Next, the relevant information sources are identified and a range of data collection methods varying in sophistication and complexity are evaluated for their usefulness. The data are collected using the most appropriate method; they are analyzed, interpreted, and inferences are drawn. Finally, the findings, implications and recommendations are provided in a format that allows the information to be used for management decision making and to be acted upon directly. It should be emphasized that marketing research is conducted to assist management in decision making and is not: a means or an end in itself. The next section elaborates on this definition by classifying different types of marketing research. Comparison with other forms of business research Other forms of business research include:

Market research is broader in scope and examines all aspects of a business environment. It asks questions about competitors, market structure, government regulations, economic trends, technological advances, and numerous other factors that make up the business environment (see environmental scanning). Sometimes the term refers more particularly to the financial
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analysis of companies, industries, or sectors. In this case, financial analysts usually carry out the research and provide the results to investment advisors and potential investors.

Product research - This looks at what products can be produced with available technology, and what new product innovations near-future technology can develop (see new product development). Advertising research - is a specialized form of marketing research conducted to improve the efficacy of advertising. Copy testing, also known as "pre-testing," is a form of customized research that predicts in-market performance of an ad before it airs, by analyzing audience levels of attention, brand linkage, motivation, entertainment, and communication, as well as breaking down the ad’s flow of attention and flow of emotion. Pre-testing is also used on ads still in rough (ripomatic or animatic) form. (Young, pg. 213)

Classification of marketing research Organizations engage in marketing research for two reasons: (1) to identify and (2) solve marketing problems. This distinction serves as a basis for classifying marketing research into problem identification research and problem solving research. Problem identification research is undertaken to help identify problems which are, perhaps, not apparent on the surface and yet exist or are likely to arise in the future. Examples of problem identification research include market potential, market share, brand or company image, market characteristics, sales analysis, short-range forecasting, long range forecasting, and business trends research. A survey of companies conducting marketing research indicated that 97 percent of
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those who responded were conducting market potential, market share, and market characteristics research. About 90 percent also reported that they were using other types of problem identification research. Research of this type provides information about the marketing environment and helps diagnose a problem. For example, a declining market potential indicates that the firm is likely to have a problem achieving its growth targets. Similarly, a problem exists if the market potential is increasing but the firm is losing market share. The recognition of economic, social, or cultural trends, such as changes in consumer behavior, may point to underlying problems or opportunities. The importance of undertaking problem identification research for the survival and long term growth of a company is exemplified by the case of PIP printing company. Once a problem or opportunity has been identified, as in the case of PIP, problem solving research is undertaken to arrive at a solution. The findings of problem solving research are used in making decisions which will solve specific marketing problems. More than two-thirds of companies conduct problem solving research. The Stanford Research Institute, on the other hand, conducts an annual survey of consumers that is used to classify persons into homogeneous groups for segmentation purposes. The National Purchase Diary panel (NPD) maintains the largest diary panel in the United States. Standardized services are research studies conducted for different client firms but in a standard way. For example, procedures for measuring advertising effectiveness have been standardized so that the results can be compared across studies and evaluative norms can be established. The Starch Readership Survey is the most widely used service for evaluating print advertisements; another well-known service is the
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Gallup and Robinson Magazine Impact Studies. These services are also sold on a syndicated basis.
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Customized services offer a wide variety of marketing research services customized to suit a client's specific needs. Each marketing research project is treated uniquely. Some marketing research firms that offer these services include Burke Marketing Research, Market Facts, Inc., and Elrick & Lavidge. Limited-service suppliers specialize in one or a few phases of the marketing research project. Services offered by such suppliers are classified as field services, coding and data entry, data analysis, analytical services, and branded products. Field services collect data through mail, personal, or telephone interviewing, and firms that specialize in interviewing are called field service organizations. These organizations may range from small proprietary organizations which operate locally to large multinational organizations with WATS line interviewing facilities. Some organizations maintain extensive interviewing facilities across the country for interviewing shoppers in malls. Coding and data entry services include editing completed questionnaires, developing a coding scheme, and transcribing the data on to diskettes or magnetic tapes for input into the computer. NRC Data Systems provides such services. Analytical services include designing and pretesting questionnaires, determining the best means of collecting data, designing sampling plans, and other aspects of the research design. Some complex marketing research projects require knowledge of sophisticated procedures, including specialized experimental designs, and analytical techniques such as conjoint analysis and multidimensional scaling. This kind of expertise can

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be obtained from firms and consultants specializing in analytical services. Data analysis services are offered by firms, also known as tab houses, that specialize in computer analysis of quantitative data such as those obtained in large surveys. Initially most data analysis firms supplied only tabulations (frequency counts) and cross tabulations (frequency counts that describe two or more variables simultaneously). With the proliferation of software, many firms now have the capability to analyze their own data, but, data analysis firms are still in demand. Branded marketing research products and services are specialized data collection and analysis procedures developed to address specific types of marketing research problems. These procedures are patented, given brand names, and marketed like any other branded product. Types of marketing research Marketing research techniques come in many forms, including:

Ad Tracking – periodic or continuous in-market research to monitor a brand’s performance using measures such as brand awareness, brand preference, and product usage. (Young, 2005) Advertising Research – used to predict copy testing or track the efficacy of advertisements for any medium, measured by the ad’s ability to get attention, communicate the message, build the brand’s image, and motivate the consumer to purchase the product or service. (Young, 2005)

YEADS

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Brand equity research - how favorably do consumers view the brand? Brand name testing - what do consumers feel about the names of the products? Commercial eye tracking research - examine advertisements, package designs, websites, etc by analyzing visual behavior of the consumer Concept testing - to test the acceptance of a concept by target consumers Coolhunting - to make observations and predictions in changes of new or existing cultural trends in areas such as fashion, music, films, television, youth culture and lifestyle Buyer decision processes research - to determine what motivates people to buy and what decision-making process they use Copy testing – predicts in-market performance of an ad before it airs by analyzing audience levels of attention, brand linkage, motivation, entertainment, and communication, as well as breaking down the ad’s flow of attention and flow of emotion. (Young, p 213) Customer satisfaction research - quantitative or qualitative studies that yields an understanding of a customer's of satisfaction with a transaction Demand estimation - to determine the approximate level of demand for the product Distribution channel audits - to assess distributors’ and retailers’ attitudes toward a product, brand, or company Internet strategic intelligence - searching for customer opinions in the Internet: chats,
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forums, web pages, blogs... where people express freely about their experiences with products, becoming strong "opinion formers"

Marketing effectiveness and analytics Building models and measuring results to determine the effectiveness of individual marketing activities. Mystery Consumer or Mystery shopping - An employee or representative of the market research firm anonymously contacts a salesperson and indicates he or she is shopping for a product. The shopper then records the entire experience. This method is often used for quality control or for researching competitors' products. Positioning research - how does the target market see the brand relative to competitors? what does the brand stand for? Price elasticity testing - to determine how sensitive customers are to price changes Sales forecasting - to determine the expected level of sales given the level of demand. With respect to other factors like Advertising expenditure, sales promotion etc. Segmentation research - to determine the demographic, psychographic, and behavioural characteristics of potential buyers Online panel - a group of individual who accepted to respond to marketing research online Store audit - to measure the sales of a product or product line at a statistically selected store sample in order to determine market share, or to determine whether a retail store provides adequate service

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Test marketing - a small-scale product launch used to determine the likely acceptance of the product when it is introduced into a wider market Viral Marketing Research - refers to marketing research designed to estimate the probability that specific communications will be transmitted throughout an individuals Social Network. Estimates of Social Networking Potential (SNP) are combined with estimates of selling effectiveness to estimate ROI on specific combinations of messages and media.

All of these forms of marketing research can be classified as either problem-identification research or as problem-solving research. A company collects primary research by gathering original data. Secondary research is conducted on data published previously and usually by someone else. Secondary research costs far less than primary research, but seldom comes in a form that exactly meets the needs of the researcher. A similar distinction exists between exploratory research and conclusive research. Exploratory research provides insights into and comprehension of an issue or situation. It should draw definitive conclusions only with extreme caution. Conclusive research draws conclusions: the results of the study can be generalized to the whole population. Exploratory research is conducted to explore a problem to get some basic idea about the solution at the preliminary stages of research. It may serve as the input to conclusive research. Exploratory research information is collected by focus group interviews, reviewing literature or books, discussing with experts, etc. This is unstructured and qualitative in nature. If a secondary source of data is unable to serve the purpose, a convenience sample of small size can be collected. Conclusive
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research is conducted to draw some conclusion about the problem. It is essentially, structured and quantitative research, and the output of this research is the input to management information systems (MIS). Exploratory research is also conducted to simplify the findings of the conclusive or descriptive research, if the findings are very hard to interpret for the marketing manager. Marketing research methods Methodologically, marketing research uses the following types of research designs: Based on questioning:

Qualitative marketing research - generally used for exploratory purposes - small number of respondents - not generalizable to the whole population - statistical significance and confidence not calculated - examples include focus groups, in-depth interviews, and projective techniques Quantitative marketing research - generally used to draw conclusions - tests a specific hypothesis - uses random sampling techniques so as to infer from the sample to the population - involves a large number of respondents - examples include surveys and questionnaires. Techniques include choice modelling, maximum difference preference scaling, and covariance analysis.

Based on observations:

Ethnographic studies -, by nature qualitative, the researcher observes social phenomena in their natural setting - observations can occur cross-sectionally (observations made at one time) or longitudinally (observations occur over several time-periods) - examples include

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product-use analysis and computer cookie traces. See also Ethnography and Observational techniques. Experimental techniques -, by nature quantitative, the researcher creates a quasiartificial environment to try to control spurious factors, then manipulates at least one of the variables - examples include purchase laboratories and test markets

Researchers often use more than one research design. They may start with secondary research to get background information, then conduct a focus group (qualitative research design) to explore the issues. Finally they might do a full nation-wide survey (quantitative research design) in order to devise specific recommendations for the client. Business to business market research Business to business (B2B) research is inevitably more complicated than consumer research. The researchers need to know what type of multifaceted approach will answer the objectives, since seldom is it possible to find the answers using just one method. Finding the right respondents is crucial in B2B research since they are often busy, and may not want to participate. Encouraging them to “open up” is yet another skill required of the B2B researcher. Last, but not least, most business research leads to strategic decisions and this means that the business researcher must have expertise in developing strategies that are strongly rooted in the research findings and acceptable to the client. There are four key factors that make B2B market research special and different to consumer markets:

The decision making unit is far more complex in B2B markets than in consumer markets

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B2B products and their applications are more complex than consumer products B2B marketers address a much smaller number of customers who are very much larger in their consumption of products than is the case in consumer markets Personal relationships are of critical importance in B2B markets.

Marketing Research in Small Business and Nonprofit Organizations Marketing research does not only occur in huge corporations with many employees and a large budget. Marketing information can be derived by observing the environment of their location and the competitions location. Small scale surveys and focus groups are low cost ways to gather information from potential and existing customers. Most secondary data (statistics, demographics, etc.) is available to the public in libraries or on the internet and can be easily accessed by a small business owner. International Marketing Research International Marketing Research follows the same path as domestic research, but there are a few more problems that may arise. Customers in international markets may have very different customs, cultures, and expectations from the same company. In this case, secondary information must be collected from each separate country and then combined, or compared. This is time consuming and can be confusing. International Marketing Research relies more on primary data rather than secondary information. Gathering the primary data can be hindered by language, literacy and access to technology. Commonly used marketing research terms

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Market research techniques resemble those used in political polling and social science research. Metaanalysis (also called the Schmidt-Hunter technique) refers to a statistical method of combining data from multiple studies or from several types of studies. Conceptualization means the process of converting vague mental images into definable concepts. Operationalization is the process of converting concepts into specific observable behaviors that a researcher can measure. Precision refers to the exactness of any given measure. Reliability refers to the likelihood that a given operationalized construct will yield the same results if re-measured. Validity refers to the extent to which a measure provides data that captures the meaning of the operationalized construct as defined in the study. It asks, “Are we measuring what we intended to measure?” Applied research sets out to prove a specific hypothesis of value to the clients paying for the research. For example, a cigarette company might commission research that attempts to show that cigarettes are good for one's health. Many researchers have ethical misgivings about doing applied research. Sugging (or selling under the guise of l.market research) forms a sales technique in which sales people pretend to conduct marketing research, but with the real purpose of obtaining buyer motivation and buyer decision-making information to be used in a subsequent sales call. Frugging comprises the practice of soliciting funds under the pretense of being a research organization. Selecting a research supplier A firm that cannot conduct an entire marketing research project in-house must select an external supplier for one or more phases of the project. The
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firm should compile a list of prospective suppliers from such sources as trade publications, professional directories, and word of mouth. When deciding on criteria for selecting an outside supplier, a firm should ask itself why it is seeking outside marketing research support. For example, a small firm that needs one project investigated may find it economically efficient to employ an outside source. Or a firm may not have the technical expertise undertake certain phases of a project or political conflict-of-interest issues may determine that a project be conducted by an outside supplier.
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When developing criteria for selecting an outside supplier, a firm should keep some basics in mind. What is the reputation of the supplier? Do they complete projects on schedule? Are they known for maintaining ethical standards? Are they flexible? Are their research projects of high quality? What kind and how much experience does the supplier have? Has the firm had experience with projects similar to this one? Do the supplier's personnel have both technical and nontechnical expertise? In other words, in addition to technical skills, are the personnel assigned to the task sensitive to the client's needs and do they share the client's research ideology? Can they communicate well with the client? [6] The cheapest bid is not always the best one. Competitive bids should be obtained and compared on the basis of quality as well as price. A good practice is to get a written bid or contract before beginning the project. Decisions about marketing research suppliers, just like other management decisions, should be based on sound information. [6] Careers in marketing research Career opportunities are available with marketing research firms (e.g., A. C. Nielsen, Burke Marketing
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Services, M/A/R/C). Equally appealing are careers in business and nonbusiness firms and agencies with in-house marketing research departments (e.g., Procter & Gamble, Coca-Cola, AT&T, the Federal Trade Commission, United States Census Bureau). Advertising agencies (e.g., BBDO International, Ogilvy & Mather, J. Walter Thompson, Young & Rubicam) also conduct substantial marketing research and employ professionals in this field. Some of the positions available in marketing research include vice president of marketing research, research director, assistant director of research, project manager, field work director, statistician/data processing specialist, senior analyst, analyst, junior analyst and operational supervisor. [7] The most common entry-level position in marketing research for people with bachelor's degrees (e.g., BBA) is as operational supervisor. These people are responsible for supervising a well-defined set of operations, including field work, data editing, and coding, and may be involved in programming and data analysis. Another entry-level position for BBAs is assistant project manager. An assistant project manager will learn and assist in questionnaire design, review field instructions, and monitor timing and costs of studies. In the marketing research industry, however, there is a growing preference for people with master's degrees. Those with MBA or equivalent degrees are likely to be employed as project managers. Marketing strategy A marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage. A marketing strategy should be centred around the key concept that customer satisfaction is the main goal.

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Key part of the general corporate strategy A marketing strategy is most effective when it is an integral component of corporate strategy, defining how the organization will successfully engage customers, prospects, and competitors in the market arena. It is partially derived from broader corporate strategies, corporate missions, and corporate goals. As the customer constitutes the source of a company's revenue, marketing strategy is closely linked with sales. A key component of marketing strategy is often to keep marketing in line with a company's overarching mission statement. Basic theory: 1) Target Audience 2) Proposition/Key Element 3) Implementation Sectorial tactics and actions A marketing strategy can serve as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy. For example: "Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer's interaction with the low-cost product or service." A strategy consists of a well thought out series of tactics to make a marketing plan more effective. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objectives[5]. Plans and objectives are generally tested for measurable results. A marketing strategy often integrates an organization's marketing goals, policies, and action sequences (tactics) into a cohesive whole. Similarly, the various strands of the strategy , which might
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include advertising, channel marketing, internet marketing, promotion and public relations can be orchestrated. Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group. Each one group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable. Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned. See strategy dynamics. Types of strategies Marketing strategies may differ depending on the unique situation of the individual business. However there are a number of ways of categorizing some generic strategies. A brief description of the most common categorizing schemes is presented below:

Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are three types of market dominance strategies: o Leader o Challenger o Follower Porter generic strategies - strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage.

Product differentiation o Market segmentation Innovation strategies - This deals with the firm's rate of the new product development and business model innovation. It asks whether
o

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the company is on the cutting edge of technology and business innovation. There are three types: o Pioneers o Close followers o Late followers Growth strategies - In this scheme we ask the question, “How should the firm grow?”. There are a number of different ways of answering that question, but the most common gives four answers: o Horizontal integration o Vertical integration o Diversification o Intensification A more detailed scheme uses the categories:
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Prospector Analyzer Defender Reactor

Marketing warfare strategies - This scheme draws parallels between marketing strategies and military strategies.

Strategic models Marketing participants often employ strategic models and tools to analyze marketing decisions. When beginning a strategic analysis, the 3Cs can be employed to get a broad understanding of the strategic environment. An Ansoff Matrix is also often used to convey an organization's strategic positioning of their marketing mix. The 4Ps can then be utilized to form a marketing plan to pursue a defined strategy. Marketing in Practice The Consumer-Centric Business

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There are a many companies especially those in the Consumer Package Goods (CPG) market that adopt the theory of running their business centred around Consumer, Shopper & Retailer needs. Their Marketing departments spend quality time looking for "Growth Opportunities" in their categories by identifying relevant insights (both mindsets and behaviours) on their target Consumers, Shoppers and retail partners. These Growth Opportunites emerge from changes in market trends, segment dynamics changing and also internal brand or operational business challenges.The Marketing team can then prioritise these Growth Opportunites and begin to develop strategies to exploit the opportunities that could include new or adapted products, services as well as changes to the 4Ps. Real-life marketing primarily revolves around the application of a great deal of common-sense; dealing with a limited number of factors, in an environment of imperfect information and limited resources complicated by uncertainty and tight timescales. Use of classical marketing techniques, in these circumstances, is inevitably partial and uneven. Thus, for example, many new products will emerge from irrational processes and the rational development process may be used (if at all) to screen out the worst non-runners. The design of the advertising, and the packaging, will be the output of the creative minds employed; which management will then screen, often by 'gutreaction', to ensure that it is reasonable. For most of their time, marketing managers use intuition and experience to analyze and handle the complex, and unique, situations being faced; without easy reference to theory. This will often be 'flying by the seat of the pants', or 'gut-reaction'; where the overall strategy, coupled with the knowledge of the customer which has been absorbed almost by a process of osmosis, will
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determine the quality of the marketing employed. This, almost instinctive management, is what is sometimes called 'coarse marketing'; to distinguish it from the refined, aesthetically pleasing, form favored by the theorists. Service (economics) .A service is the non-material equivalent of a good. A service provision is an economic activity that does not result in ownership, and this is what differentiates it from providing physical goods. It is claimed to be a process that creates benefits by facilitating either a change in customers, a change in their physical possessions,[disambiguation needed] or a change in their intangible assets. By supplying some level of skill, ingenuity, and experience, providers of a service participate in an economy without the restrictions of carrying stock (inventory) or the need to concern themselves with bulky raw materials. On the other hand, their investment in expertise does require marketing and upgrading in the face of competition which has equally few physical restrictions. Providers of services make up the Tertiary sector of industry. Key characteristics Services can be paraphrased in terms of their main attributes. They are intangible and insubstantial; they cannot be handled, smelled, tasted, heard, etc. There is neither potential nor need for storage and they are said to be inseparable and perishable. Because services are difficult to conceptualize, marketing them requires creative visualization to effectively evoke a concrete image in the customer's mind. From the customer's point of view, this characteristic makes it difficult to evaluate or compare services prior to experiencing the service delivery. They are perishable, unsold
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service time is a lost economic opportunity. For example a doctor who is booked for only two hours a day cannot later work those hours— she has lost her economic opportunity. Other service examples are airplane seats (once the plane departs, those empty seats cannot be sold), and theatre seats (sales end at a certain point). There is a lack of transportability as services tend to be consumed at the point of "production" although this does not apply to outsourced business services. Services are regarded as heterogeneous or lacking homogeneity and are typically modified for each consumer or each new situation (consumerised). Mass production of services is very difficult. This can be seen as a problem of inconsistent quality. Both inputs and outputs to the processes involved providing services are highly variable, as are the relationships between these processes, making it difficult to maintain consistent quality. There is labor intensity as services usually involve considerable human activity, rather than a precisely determined process. Human resource management is important. The human factor is often the key success factor in service industries. It is difficult to achieve economies of scale or gain dominant market share. There are demand fluctuations and it can be difficult to forecast demand which is also true of many goods. Demand can vary by season, time of day, business cycle, etc. There is buyer involvement as most service provision requires a high degree of interaction between service consumer and service provider. There is a clientbased relationship based on creating long-term business relationships. Accountants, attorneys, and financial advisers maintain long-term relationships with their clientes for decades. These repeat consumers refer friends and family, helping to create a client-based relationship. Service definition The clear-cut, consistent, generic definition of the service term reads as follows:
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A service is a set of benefits delivered from the accountable service provider, mostly in close coaction with his service suppliers, generated by the functions of technical systems and/or by distinct activities of individuals, respectively, commissioned according to the needs of his service consumers by the service customer from the accountable service provider, rendered individually to the authorized service consumers on their dedicated request, and, finally, utilized by the requesting service consumers for executing and/or supporting their day-to-day business tasks or private activities. Service specification Any service can be completely, consistently and cleary specified by means of the following 12 standard attributes 1. Service Consumer Benefit(s) 2. Service-specific Functional Parameter(s) 3. Service Delivery Point 4. Service Consumer Count 5. Service Readiness Time(s) 6. Service Support Time(s) 7. Service Support Language(s) 8. Service Fulfillment Target 9. Maximum Impairment Duration per Incident 10. Service Delivering Duration 11. Service Delivery Unit 12. Service Delivering Price The meaning and content of these attributes are: 1. Service Consumer Benefits describe the (set of) benefits which are callable, receivable and effectively utilizable for any authorized service consumer and which are provided to him as soon as he requests the offered service. The description of these benefits must be phrased in the terms and wording of the intended service consumers.

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2. Service-specific Functional Parameters specify the functional parameters which are essential and unique to the respective service and which describe the most important dimension of the service output, e.g. maximum e-mailbox capacity per registered and authorized e-mail service consumer. 3. Service Delivery Point describes the physical location and/or logical interface where the benefits of the service are made accessible, callable and receivable to the authorized service consumers. At this point and/or interface, the preparedness for service delivery can be assessed as well as the effective delivery of the service itself can be monitored and controlled. 4. Service Consumer Count specifies the number of intended, identified, named, registered and authorized service consumers which are allowed and enabled to call and utilize the defined service for executing and/or supporting their business tasks or private activities. 5. Service Readiness Times specify the distinct agreed times of day when

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the described service consumer benefits are o accessible and callable for the authorized service consumers at the defined service delivery point o receivable and utilizable for the authorized service consumers at the respective agreed service level all service-relevant processes and resources are operative and effective all service-relevant technical systems are up and running and attended by the operating team the specified service benefits are comprehensively delivered to any authorized requesting service consumer without any delay or friction.

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The time data are specified in 24 h format per local working day and local time, referring to the location of the intended service consumers. 6. Service Support Times specify the determined and agreed times of day when the usage and consumption of the contracted services is supported by the service desk team for all identified, registered and authorized service consumers within the service customer's organizational unit or area. The service desk is the single point of contact for any service consumer inquiry regarding the contracted and delivered services. During the defined service support times, the service desk can be reached by phone, e-mail, web-based entries and/or fax, respectively. The time data are specified in 24 h format per local working day and local time, referring to the location of the intended service consumers. 7. Service Support Languages specifies the languages which are spoken by the service desk team(s) to the service consumers calling them. 8. Service Fulfillment Target specifies the service provider's promise of effective and seamless delivery of the defined benefits to any authorized service consumer requesting the service within the defined service times. It is expressed as the promised minimum ratio of the counts of successful individual service deliveries related to the counts of called indivdual service deliveries. The effective service fulfillment ratio can be measured and calculated per single service consumer or per consumer group and may be referred to different time periods (workday, calenderweek, workmonth, etc.) 9. Maximum Impairment Duration per Incident specifies the allowable maximum elapsing time [hh:mm] between

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the first occurrence of a service impairment, i.e. service quality degradation or service delivery disruption, whilst the service consumer consumes and utilizes the delivered service, and the full resumption and complete execution of the service delivery to the content of the affected service consumer.

10. Service Delivering Duration specifies the promised and agreed maximum period of time for effectively delivering all specified service consumer benefits to the requesting service consumer at the defined service delivery point. 11. Service Delivery Unit specifies the basic portion for delivering the defined service consumer benefits. The service delivery unit is the reference and mapping object for all cost for service generation and delivery as well as for charging and billing the consumed service volume to the service customer who has ordered the service delivery. 12. Service Delivering Price specifies the amount of money the service customer has to pay for the consumption of distinct service volumes. Normally, the service delivering price comprises two portions

a fixed basic price portion for basic efforts and resources which provide accessibility and usability of the service delivery functions, i.e. service access price a price portion covering the service consumption based on o fixed flat rate price per authorized service consumer and delivery period without regard on the consumed service volumes, o staged prices depending on consumed service volumes, o fixed price per particularly consumed service delivering unit.

Service delivery
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The delivery of a service typically involves six factors:
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The accountable service provider and his service suppliers (e.g. the people) Equipment used to provide the service (e.g. vehicles, cash registers) The physical facilities (e.g. buildings, parking, waiting rooms) The requesting service consumer Other customers at the service delivery location Customer contact

The service encounter is defined as all activities involved in the service delivery process. Some service managers use the term "moment of truth" to indicate that defining point in a specific service encounter where interactions are most intense. Many business theorists view service provision as a performance or act (sometimes humorously referred to as dramalurgy, perhaps in reference to dramaturgy). The location of the service delivery is referred to as the stage and the objects that facilitate the service process are called props. A script is a sequence of behaviours followed by all those involved, including the client(s). Some service dramas are tightly scripted, others are more ad lib. Role congruence occurs when each actor follows a script that harmonizes with the roles played by the other actors. In some service industries, especially health care, dispute resolution, and social services, a popular concept is the idea of the caseload, which refers to the total number of patients, clients, litigants, or claimants that a given employee is presently responsible for. On a daily basis, in all those fields, employees must balance the needs of any individual case against the needs of all other current cases as well as their own personal needs.

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Under English law, if a service provider is induced to deliver services to a dishonest client by a deception, this is an offence under the Theft Act 1978.

Service-Goods continuum The service-goods continuum The dichotomy between physical goods and intangible services should not be given too much credence. These are not discrete categories. Most business theorists see a continuum with pure service on one terminal point and pure commodity good on the other terminal point. Most products fall between these two extremes. For example, a restaurant provides a physical good (the food), but also provides services in the form of ambience, the setting and clearing of the table, etc. And although some utilities actually deliver physical goods — like water utilities which actually deliver water — utilities are usually treated as services. In a narrower sense, service refers to quality of customer service: the measured appropriateness of assistance and support provided to a customer. This particular usage occurs frequently in retailing.
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List of economic services

Service output in 2005 In 2005, USA was the largest producer of services followed by Japan and Germany, reports the International Monetary Fund. Services accounted for 78.5% of the U.S. Economy in 2007[1], compared to 20% in 1947. The following is an incomplete list of service industries, grouped into rough sectors. Parenthetical notations indicate how specific occupations and organizations can be regarded as service industries to the extent they provide an intangible service, as opposed to a tangible good.

• •

business functions (that apply to all organizations in general) o consulting o customer service o human resources administrators (providing services like ensuring that employees are paid accurately) child care cleaning, repair and maintenance services o janitors (who provide cleaning services) o gardeners o mechanics construction o carpentry o electricians (offering the service of making wiring work properly) o plumbing death care o coroners (who provide the service of identifying corpses and determining time and cause of death)

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funeral homes (who prepare corpses for public display, cremation or burial) dispute resolution and prevention services o arbitration o courts of law (who perform the service of dispute resolution backed by the power of the state) o diplomacy o incarceration (provides the service of keeping criminals out of society) o law enforcement (provides the service of identifying and apprehending criminals) o lawyers (who perform the services of advocacy and decision making in many dispute resolution and prevention processes) o mediation o military (performs the service of protecting states in disputes with other states) o negotiation (not really a service unless someone is negotiating on behalf of another) education (institutions offering the services of teaching and access to information) o library o museum o school entertainment (when provided live or within a highly specialized facility) o gambling o movie theatres (providing the service of showing a movie on a big screen) o performing arts productions o sexual services o sports o television fabric care o dry cleaning o laundromat (offering the service of automated fabric cleaning) financial services
o

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• • • • •

• • •

accounting o banks and building societies (offering lending services and safekeeping of money and valuables) o real estate o stock brokerages o tax return preparation foodservice industry hairdressing health care (all health care professions provide services) hospitality industry information services o data processing o database services o language interpretation o language translation risk management o insurance o security social services o social work transport utilities o electric power o natural gas o telecommunications o waste management o water industry
o

Strategic management Strategic management is the art and science of formulating, implementing and evaluating crossfunctional decisions that will enable an organization to achieve its objectives. It is the process of specifying the organization's objectives, developing
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policies and plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives. Strategic management, therefore, combines the activities of the various functional areas of a business to achieve organizational objectives. It is the highest level of managerial activity, usually formulated by the Board of directors and performed by the organization's Chief Executive Officer (CEO) and executive team. Strategic management provides overall direction to the enterprise and is closely related to the field of Organization Studies. In the field of business administration it is possible mention to the "strategic consistency." According to Arieu (2007), "there is strategic consistency when the actions of an organization are consistent with the expectations of management, and these in turn are with the market and the context."

“Strategic management is an ongoing process that assesses the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.” (Lamb, 1984:ix)

Processes

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Strategic management is a combination of three main processes which are as follows (as documented by Lemon Consulting) Strategy formulation

Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macroenvironmental. Concurrent with this assessment, objectives are set. These objectives should be parallel to a timeline; some are in the short-term and others on the long-term. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives. These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives.

This three-step strategy formulation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there. These three questions are the essence of strategic planning. SWOT Analysis: I/O Economics for the external factors and RBV for the internal factors.

Strategy implementation

Allocation and management of sufficient resources (financial, personnel, time, technology support)

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• •

Establishing a chain of command or some alternative structure (such as cross functional teams) Assigning responsibility of specific tasks or processes to specific individuals or groups It also involves managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary. When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.

Strategy evaluation

Measuring the effectiveness of the organizational strategy. It's extremely important to conduct a SWOT analysis to figure out the strengths, weaknesses, opportunities and threats (both internal and external) of the entity in question. This may require to take certain precautionary measures or even to change the entire strategy.

In corporate strategy, Johnson and Scholes present a model in which strategic options are evaluated against three key success criteria:
• • •

Suitability (would it work?) Feasibility (can it be made to work?) Acceptability (will they work it?)

Suitability Suitability deals with the overall rationale of the strategy. The key point to consider is whether the strategy would address the key strategic issues underlined by the organisation's strategic position.

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• •

Does it make economic sense? Would the organisation obtain economies of scale, economies of scope or experience economy? Would it be suitable in terms of environment and capabilities?

Tools that can be used to evaluate suitability include:
• • • •

SWOT Analysis Ranking strategic options Decision trees What-if analysis

Feasibility Feasibility is concerned with the resources required to implement the strategy are available, can be developed or obtained. Resources include funding, people, time and information. Tools that can be used to evaluate feasibility include:
• • •

cash flow analysis and forecasting break-even analysis resource deployment analysis

Acceptability Acceptability is concerned with the expectations of the identified stakeholders (mainly shareholders, employees and customers) with the expected performance outcomes, which can be return, risk and stakeholder reactions.

Return deals with the benefits expected by the stakeholders (financial and non-financial). For example, shareholders would expect the increase of their wealth, employees would expect improvement in their careers and customers would expect better value for money.
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Risk deals with the probability and consequences of failure of a strategy (financial and non-financial). Stakeholder reactions deals with anticipating the likely reaction of stakeholders. Shareholders could oppose the issuing of new shares, employees and unions could oppose outsourcing for fear of loosing their jobs, customers could have concerns over a merger with regards to quality and support.

Tools that can be used to evaluate acceptability include:
• •

what-if analysis stakeholder mapping

General approaches In general terms, there are two main approaches, which are opposite but complement each other in some ways, to strategic management:

The Industrial Organizational Approach o based on economic theory — deals with issues like competitive rivalry, resource allocation, economies of scale o assumptions — rationality, self discipline behaviour, profit maximization The Sociological Approach o deals primarily with human interactions o assumptions — bounded rationality, satisfying behaviour, profit sub-optimality. An example of a company that currently operates this way is Google

Strategic management techniques can be viewed as bottom-up, top-down, or collaborative processes. In the bottom-up approach, employees submit proposals to their managers who, in turn, funnel the best ideas further up the organization. This is often accomplished by a capital budgeting process. Proposals are assessed using financial criteria such
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as return on investment or cost-benefit analysis. Cost underestimation and benefit overestimation are major sources of error. The proposals that are approved form the substance of a new strategy, all of which is done without a grand strategic design or a strategic architect. The top-down approach is the most common by far. In it, the CEO, possibly with the assistance of a strategic planning team, decides on the overall direction the company should take. Some organizations are starting to experiment with collaborative strategic planning techniques that recognize the emergent nature of strategic decisions. The strategy hierarchy In most (large) corporations there are several levels of strategy. Strategic management is the highest in the sense that it is the broadest, applying to all parts of the firm. It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under this broad corporate strategy there are often functional or business unit strategies. Functional strategies include marketing strategies, new product development strategies, human resource strategies, financial strategies, legal strategies, supply-chain strategies, and information technology management strategies. The emphasis is on short and medium term plans and is limited to the domain of each department’s functional responsibility. Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader corporate strategies. Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have reengineered according to processes or strategic business units (called SBUs). A strategic business unit is a semi114

autonomous unit within an organization. It is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An SBU is treated as an internal profit centre by corporate headquarters. Each SBU is responsible for developing its business strategies, strategies that must be in tune with broader corporate strategies. The “lowest” level of strategy is operational strategy. It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. It must operate within a budget but is not at liberty to adjust or create that budget. Operational level strategy was encouraged by Peter Drucker in his theory of management by objectives (MBO). Operational level strategies are informed by business level strategies which, in turn, are informed by corporate level strategies. Business strategy, which refers to the aggregated operational strategies of single business firm or that of an SBU in a diversified corporation refers to the way in which a firm competes in its chosen arenas. Corporate strategy, then, refers to the overarching strategy of the diversified firm. Such corporate strategy answers the questions of "in which businesses should we compete?" and "how does being in one business add to the competitive advantage of another portfolio firm, as well as the competitive advantage of the corporation as a whole?" Since the turn of the millennium, there has been a tendency in some firms to revert to a simpler strategic structure. This is being driven by information technology. It is felt that knowledge management systems should be used to share information and create common goals. Strategic divisions are thought to hamper this process. Most recently, this notion of strategy has been captured under the rubric of dynamic strategy, popularized
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by the strategic management textbook authored by Carpenter and Sanders. This work builds on that of Brown and Eisenhart as well as Christensen and portrays firm strategy, both business and corporate, as necessarily embracing ongoing strategic change, and the seamless integration of strategy formulation and implementation. Such change and implementation are usually built into the strategy through the staging and pacing facets. Historical development of strategic management Birth of strategic management Strategic management as a discipline originated in the 1950s and 60s. Although there were numerous early contributors to the literature, the most influential pioneers were Alfred D. Chandler, Jr., Philip Selznick, Igor Ansoff, and Peter Drucker. Alfred Chandler recognized the importance of coordinating the various aspects of management under one all-encompassing strategy. Prior to this time the various functions of management were separate with little overall coordination or strategy. Interactions between functions or between departments were typically handled by a boundary position, that is, there were one or two managers that relayed information back and forth between two departments. Chandler also stressed the importance of taking a long term perspective when looking to the future. In his 1962 groundbreaking work Strategy and Structure, Chandler showed that a long-term coordinated strategy was necessary to give a company structure, direction, and focus. He says it concisely, “structure follows strategy.” In 1957, Philip Selznick introduced the idea of matching the organization's internal factors with external environmental circumstances.[4] This core idea was developed into what we now call SWOT analysis by Learned, Andrews, and others at the Harvard Business School General Management
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Group. Strengths and weaknesses of the firm are assessed in light of the opportunities and threats from the business environment. Igor Ansoff built on Chandler's work by adding a range of strategic concepts and inventing a whole new vocabulary. He developed a strategy grid that compared market penetration strategies, product development strategies, market development strategies and horizontal and vertical integration and diversification strategies. He felt that management could use these strategies to systematically prepare for future opportunities and challenges. In his 1965 classic Corporate Strategy, he developed the gap analysis still used today in which we must understand the gap between where we are currently and where we would like to be, then develop what he called “gap reducing actions”. Peter F Drucker was a prolific strategy theorist, author of dozens of management books, with a career spanning five decades. His contributions to strategic management were many but two are most important. Firstly, he stressed the importance of objectives. An organization without clear objectives is like a ship without a rudder. As early as 1954 he was developing a theory of management based on objectives. This evolved into his theory of management by objectives (MBO). According to Drucker, the procedure of setting objectives and monitoring your progress towards them should permeate the entire organization, top to bottom. His other seminal contribution was in predicting the importance of what today we would call intellectual capital. He predicted the rise of what he called the “knowledge worker” and explained the consequences of this for management. He said that knowledge work is non-hierarchical. Work would be carried out in teams with the person most knowledgeable in the task at hand being the temporary leader.

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In 1985, Ellen-Earle Chaffee summarized what she thought were the main elements of strategic management theory by the 1970s:
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• •

• •

Strategic management involves adapting the organization to its business environment. Strategic management is fluid and complex. Change creates novel combinations of circumstances requiring unstructured nonrepetitive responses. Strategic management affects the entire organization by providing direction. Strategic management involves both strategy formation (she called it content) and also strategy implementation (she called it process). Strategic management is partially planned and partially unplanned. Strategic management is done at several levels: overall corporate strategy, and individual business strategies. Strategic management involves both conceptual and analytical thought processes.

Growth and portfolio theory In the 1970s much of strategic management dealt with size, growth, and portfolio theory. The PIMS study was a long term study, started in the 1960s and lasted for 19 years, that attempted to understand the Profit Impact of Marketing Strategies (PIMS), particularly the effect of market share. Started at General Electric, moved to Harvard in the early 1970s, and then moved to the Strategic Planning Institute in the late 1970s, it now contains decades of information on the relationship between profitability and strategy. Their initial conclusion was unambiguous: The greater a company's market share, the greater will be their rate of profit. The high market share provides volume and economies of scale. It also provides experience and learning curve advantages. The combined effect is increased
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profits. The studies conclusions continue to be drawn on by academics and companies today: "PIMS provides compelling quantitative evidence as to which business strategies work and don't work" Tom Peters. The benefits of high market share naturally lead to an interest in growth strategies. The relative advantages of horizontal integration, vertical integration, diversification, franchises, mergers and acquisitions, joint ventures, and organic growth were discussed. The most appropriate market dominance strategies were assessed given the competitive and regulatory environment. There was also research that indicated that a low market share strategy could also be very profitable. Schumacher (1973), Woo and Cooper (1982), Levenson (1984), and later Traverso (2002) showed how smaller niche players obtained very high returns. By the early 1980s the paradoxical conclusion was that high market share and low market share companies were often very profitable but most of the companies in between were not. This was sometimes called the “hole in the middle” problem. This anomaly would be explained by Michael Porter in the 1980s. The management of diversified organizations required new techniques and new ways of thinking. The first CEO to address the problem of a multidivisional company was Alfred Sloan at General Motors. GM was decentralized into semiautonomous “strategic business units” (SBU's), but with centralized support functions. One of the most valuable concepts in the strategic management of multi-divisional companies was portfolio theory. In the previous decade Harry Markowitz and other financial theorists developed the theory of portfolio analysis. It was concluded
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that a broad portfolio of financial assets could reduce specific risk. In the 1970s marketers extended the theory to product portfolio decisions and managerial strategists extended it to operating division portfolios. Each of a company’s operating divisions were seen as an element in the corporate portfolio. Each operating division (also called strategic business units) was treated as a semiindependent profit center with its own revenues, costs, objectives, and strategies. Several techniques were developed to analyze the relationships between elements in a portfolio. B.C.G. Analysis, for example, was developed by the Boston Consulting Group in the early 1970s. This was the theory that gave us the wonderful image of a CEO sitting on a stool milking a cash cow. Shortly after that the G.E. multi factoral model was developed by General Electric. Companies continued to diversify until the 1980s when it was realized that in many cases a portfolio of operating divisions was worth more as separate completely independent companies. The marketing revolution The 1970s also saw the rise of the marketing oriented firm. From the beginnings of capitalism it was assumed that the key requirement of business success was a product of high technical quality. If you produced a product that worked well and was durable, it was assumed you would have no difficulty selling them at a profit. This was called the production orientation and it was generally true that good products could be sold without effort, encapsulated in the saying "Build a better mousetrap and the world will beat a path to your door." This was largely due to the growing numbers of affluent and middle class people that capitalism had created. But after the untapped demand caused by the second world war was saturated in the 1950s it became obvious that products were not selling as easily as they had been. The answer was to concentrate on selling. The 1950s and 1960s is
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known as the sales era and the guiding philosophy of business of the time is today called the sales orientation. In the early 1970s Theodore Levitt and others at Harvard argued that the sales orientation had things backward. They claimed that instead of producing products then trying to sell them to the customer, businesses should start with the customer, find out what they wanted, and then produce it for them. The customer became the driving force behind all strategic business decisions. This marketing orientation, in the decades since its introduction, has been reformulated and repackaged under numerous names including customer orientation, marketing philosophy, customer intimacy, customer focus, customer driven, and market focused. The Japanese challenge By the late 70s people had started to notice how successful Japanese industry had become. In industry after industry, including steel, watches, ship building, cameras, autos, and electronics, the Japanese were surpassing American and European companies. Westerners wanted to know why. Numerous theories purported to explain the Japanese success including:
• • • • • •

Higher employee morale, dedication, and loyalty; Lower cost structure, including wages; Effective government industrial policy; Modernization after WWII leading to high capital intensity and productivity; Economies of scale associated with increased exporting; Relatively low value of the Yen leading to low interest rates and capital costs, low dividend expectations, and inexpensive exports; Superior quality control techniques such as Total Quality Management and other systems introduced by W. Edwards Deming in the 1950s and 60s.
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Although there was some truth to all these potential explanations, there was clearly something missing. In fact by 1980 the Japanese cost structure was higher than the American. And post WWII reconstruction was nearly 40 years in the past. The first management theorist to suggest an explanation was Richard Pascale. In 1981 Richard Pascale and Anthony Athos in The Art of Japanese Management claimed that the main reason for Japanese success was their superior management techniques.[14] They divided management into 7 aspects (which are also known as McKinsey 7S Framework): Strategy, Structure, Systems, Skills, Staff, Style, and Supraordinate goals (which we would now call shared values). The first three of the 7 S's were called hard factors and this is where American companies excelled. The remaining four factors (skills, staff, style, and shared values) were called soft factors and were not well understood by American businesses of the time (for details on the role of soft and hard factors see Wickens P.D. 1995.) Americans did not yet place great value on corporate culture, shared values and beliefs, and social cohesion in the workplace. In Japan the task of management was seen as managing the whole complex of human needs, economic, social, psychological, and spiritual. In America work was seen as something that was separate from the rest of one's life. It was quite common for Americans to exhibit a very different personality at work compared to the rest of their lives. Pascale also highlighted the difference between decision making styles; hierarchical in America, and consensus in Japan. He also claimed that American business lacked long term vision, preferring instead to apply management fads and theories in a piecemeal fashion. One year later The Mind of the Strategist was released in America by Kenichi Ohmae, the head of McKinsey & Co.'s Tokyo office.[15] (It was originally
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published in Japan in 1975.) He claimed that strategy in America was too analytical. Strategy should be a creative art: It is a frame of mind that requires intuition and intellectual flexibility. He claimed that Americans constrained their strategic options by thinking in terms of analytical techniques, rote formula, and step-by-step processes. He compared the culture of Japan in which vagueness, ambiguity, and tentative decisions were acceptable, to American culture that valued fast decisions. Also in 1982 Tom Peters and Robert Waterman released a study that would respond to the Japanese challenge head on. Peters and Waterman, who had several years earlier collaborated with Pascale and Athos at McKinsey & Co. asked “What makes an excellent company?”. They looked at 62 companies that they thought were fairly successful. Each was subject to six performance criteria. To be classified as an excellent company, it had to be above the 50th percentile in 4 of the 6 performance metrics for 20 consecutive years. Forty-three companies passed the test. They then studied these successful companies and interviewed key executives. They concluded in In Search of Excellence that there were 8 keys to excellence that were shared by all 43 firms. They are:

• •

A bias for action — Do it. Try it. Don’t waste time studying it with multiple reports and committees. Customer focus — Get close to the customer. Know your customer. Entrepreneurship — Even big companies act and think small by giving people the authority to take initiatives. Productivity through people — Treat your people with respect and they will reward you with productivity. Value-oriented CEOs — The CEO should actively propagate corporate values throughout the organization.
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• • •

Stick to the knitting — Do what you know well. Keep things simple and lean — Complexity encourages waste and confusion. Simultaneously centralized and decentralized — Have tight centralized control while also allowing maximum individual autonomy.

The basic blueprint on how to compete against the Japanese had been drawn. But as J.E. Rehfeld (1994) explains it is not a straight forward task due to differences in culture. A certain type of alchemy was required to transform knowledge from various cultures into a management style that allows a specific company to compete in a globally diverse world. He says, for example, that Japanese style kaizen (continuous improvement) techniques, although suitable for people socialized in Japanese culture, have not been successful when implemented in the U.S. unless they are modified significantly. Gaining competitive advantage The Japanese challenge shook the confidence of the western business elite, but detailed comparisons of the two management styles and examinations of successful businesses convinced westerners that they could overcome the challenge. The 1980s and early 1990s saw a plethora of theories explaining exactly how this could be done. They cannot all be detailed here, but some of the more important strategic advances of the decade are explained below. Gary Hamel and C. K. Prahalad declared that strategy needs to be more active and interactive; less “arm-chair planning” was needed. They introduced terms like strategic intent and strategic architecture. Their most well known advance was the idea of core competency. They showed how important it was to know the one or two key things that your company does better than the competition.
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Active strategic management required active information gathering and active problem solving. In the early days of Hewlett-Packard (H-P), Dave Packard and Bill Hewlett devised an active management style that they called Management By Walking Around (MBWA). Senior H-P managers were seldom at their desks. They spent most of their days visiting employees, customers, and suppliers. This direct contact with key people provided them with a solid grounding from which viable strategies could be crafted. The MBWA concept was popularized in 1985 by a book by Tom Peters and Nancy Austin.[21] Japanese managers employ a similar system, which originated at Honda, and is sometimes called the 3 G's (Genba, Genbutsu, and Genjitsu, which translate into “actual place”, “actual thing”, and “actual situation”). Probably the most influential strategist of the decade was Michael Porter. He introduced many new concepts including; 5 forces analysis, generic strategies, the value chain, strategic groups, and clusters. In 5 forces analysis he identifies the forces that shape a firm's strategic environment. It is like a SWOT analysis with structure and purpose. It shows how a firm can use these forces to obtain a sustainable competitive advantage. Porter modifies Chandler's dictum about structure following strategy by introducing a second level of structure: Organizational structure follows strategy, which in turn follows industry structure. Porter's generic strategies detail the interaction between cost minimization strategies, product differentiation strategies, and market focus strategies. Although he did not introduce these terms, he showed the importance of choosing one of them rather than trying to position your company between them. He also challenged managers to see their industry in terms of a value chain. A firm will be successful only to the extent that it contributes to the industry's value chain. This forced management to look at its operations from the customer's point of

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view. Every operation should be examined in terms of what value it adds in the eyes of the final customer. In 1993, John Kay took the idea of the value chain to a financial level claiming “ Adding value is the central purpose of business activity”, where adding value is defined as the difference between the market value of outputs and the cost of inputs including capital, all divided by the firm's net output. Borrowing from Gary Hamel and Michael Porter, Kay claims that the role of strategic management is to identify your core competencies, and then assemble a collection of assets that will increase value added and provide a competitive advantage. He claims that there are 3 types of capabilities that can do this; innovation, reputation, and organizational structure. The 1980s also saw the widespread acceptance of positioning theory. Although the theory originated with Jack Trout in 1969, it didn’t gain wide acceptance until Al Ries and Jack Trout wrote their classic book “Positioning: The Battle For Your Mind” (1979). The basic premise is that a strategy should not be judged by internal company factors but by the way customers see it relative to the competition. Crafting and implementing a strategy involves creating a position in the mind of the collective consumer. Several techniques were applied to positioning theory, some newly invented but most borrowed from other disciplines. Perceptual mapping for example, creates visual displays of the relationships between positions. Multidimensional scaling, discriminant analysis, factor analysis, and conjoint analysis are mathematical techniques used to determine the most relevant characteristics (called dimensions or factors) upon which positions should be based. Preference regression can be used to determine vectors of ideal positions and cluster analysis can identify clusters of positions.

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Others felt that internal company resources were the key. In 1992, Jay Barney, for example, saw strategy as assembling the optimum mix of resources, including human, technology, and suppliers, and then configure them in unique and sustainable ways.[22] Michael Hammer and James Champy felt that these resources needed to be restructured. This process, that they labeled reengineering, involved organizing a firm's assets around whole processes rather than tasks. In this way a team of people saw a project through, from inception to completion. This avoided functional silos where isolated departments seldom talked to each other. It also eliminated waste due to functional overlap and interdepartmental communications. In 1989 Richard Lester and the researchers at the MIT Industrial Performance Center identified seven best practices and concluded that firms must accelerate the shift away from the mass production of low cost standardized products. The seven areas of best practice were:
• • • • • • •

Simultaneous continuous improvement in cost, quality, service, and product innovation Breaking down organizational barriers between departments Eliminating layers of management creating flatter organizational hierarchies. Closer relationships with customers and suppliers Intelligent use of new technology Global focus Improving human resource skills

The search for “best practices” is also called benchmarking. This involves determining where you need to improve, finding an organization that is exceptional in this area, then studying the company and applying its best practices in your firm.

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A large group of theorists felt the area where western business was most lacking was product quality. People like W. Edwards Deming, Joseph M. Juran, A. Kearney, Philip Crosby, and Armand Feignbaum suggested quality improvement techniques like Total Quality Management (TQM), continuous improvement, lean manufacturing, Six Sigma, and Return on Quality (ROQ). An equally large group of theorists felt that poor customer service was the problem. People like James Heskett (1988),[31] Earl Sasser (1995), William Davidow,[32] Len Schlesinger, A. Paraurgman (1988), Len Berry, Jane Kingman-Brundage, Christopher Hart, and Christopher Lovelock (1994), gave us fishbone diagramming, service charting, Total Customer Service (TCS), the service profit chain, service gaps analysis, the service encounter, strategic service vision, service mapping, and service teams. Their underlying assumption was that there is no better source of competitive advantage than a continuous stream of delighted customers. Process management uses some of the techniques from product quality management and some of the techniques from customer service management. It looks at an activity as a sequential process. The objective is to find inefficiencies and make the process more effective. Although the procedures have a long history, dating back to Taylorism, the scope of their applicability has been greatly widened, leaving no aspect of the firm free from potential process improvements. Because of the broad applicability of process management techniques, they can be used as a basis for competitive advantage. Some realized that businesses were spending much more on acquiring new customers than on retaining current ones. Carl Sewell, Frederick F. Reichheld, C. Gronroos, and Earl Sasser showed us how a competitive advantage could be found in ensuring
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that customers returned again and again. This has come to be known as the loyalty effect after Reicheld's book of the same name in which he broadens the concept to include employee loyalty, supplier loyalty, distributor loyalty, and shareholder loyalty. They also developed techniques for estimating the lifetime value of a loyal customer, called customer lifetime value (CLV). A significant movement started that attempted to recast selling and marketing techniques into a long term endeavor that created a sustained relationship with customers (called relationship selling, relationship marketing, and customer relationship management). Customer relationship management (CRM) software (and its many variants) became an integral tool that sustained this trend. James Gilmore and Joseph Pine found competitive advantage in mass customization. Flexible manufacturing techniques allowed businesses to individualize products for each customer without losing economies of scale. This effectively turned the product into a service. They also realized that if a service is mass customized by creating a “performance” for each individual client, that service would be transformed into an “experience”. Their book, The Experience Economy, along with the work of Bernd Schmitt convinced many to see service provision as a form of theatre. This school of thought is sometimes referred to as customer experience management (CEM). Like Peters and Waterman a decade earlier, James Collins and Jerry Porras spent years conducting empirical research on what makes great companies. Six years of research uncovered a key underlying principle behind the 19 successful companies that they studied: They all encourage and preserve a core ideology that nurtures the company. Even though strategy and tactics change daily, the companies, nevertheless, were able to maintain a core set of values. These core values encourage
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employees to build an organization that lasts. In Built To Last (1994) they claim that short term profit goals, cost cutting, and restructuring will not stimulate dedicated employees to build a great company that will endure.[42] In 2000 Collins coined the term “built to flip” to describe the prevailing business attitudes in Silicon Valley. It describes a business culture where technological change inhibits a long term focus. He also popularized the concept of the BHAG (Big Hairy Audacious Goal). Arie de Geus (1997) undertook a similar study and obtained similar results. He identified four key traits of companies that had prospered for 50 years or more. They are:
• •

• •

Sensitivity to the business environment — the ability to learn and adjust Cohesion and identity — the ability to build a community with personality, vision, and purpose Tolerance and decentralization — the ability to build relationships Conservative financing

A company with these key characteristics he called a living company because it is able to perpetuate itself. If a company emphasizes knowledge rather than finance, and sees itself as an ongoing community of human beings, it has the potential to become great and endure for decades. Such an organization is an organic entity capable of learning (he called it a “learning organization”) and capable of creating its own processes, goals, and persona. The military theorists In the 1980s some business strategists realized that there was a vast knowledge base stretching back thousands of years that they had barely examined. They turned to military strategy for guidance. Military strategy books such as The Art of War by Sun Tzu, On War by von Clausewitz, and
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The Red Book by Mao Zedong became instant business classics. From Sun Tzu they learned the tactical side of military strategy and specific tactical prescriptions. From Von Clausewitz they learned the dynamic and unpredictable nature of military strategy. From Mao Zedong they learned the principles of guerrilla warfare. The main marketing warfare books were:
• • •

Business War Games by Barrie James, 1984 Marketing Warfare by Al Ries and Jack Trout, 1986 Leadership Secrets of Attila the Hun by Wess Roberts, 1987

Philip Kotler was a well-known proponent of marketing warfare strategy. There were generally thought to be four types of business warfare theories. They are:
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Offensive marketing warfare strategies Defensive marketing warfare strategies Flanking marketing warfare strategies Guerrilla marketing warfare strategies

The marketing warfare literature also examined leadership and motivation, intelligence gathering, types of marketing weapons, logistics, and communications. By the turn of the century marketing warfare strategies had gone out of favour. It was felt that they were limiting. There were many situations in which non-confrontational approaches were more appropriate. The “Strategy of the Dolphin” was developed in the mid 1990s to give guidance as to when to use aggressive strategies and when to use passive strategies. A variety of aggressiveness strategies were developed. In 1993, J. Moore used a similar metaphor.[43] Instead of using military terms, he created an

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ecological theory of predators and prey (see ecological model of competition), a sort of Darwinian management strategy in which market interactions mimic long term ecological stability. Strategic change In 1970, Alvin Toffler in Future Shock described a trend towards accelerating rates of change.[44] He illustrated how social and technological norms had shorter lifespans with each generation, and he questioned society's ability to cope with the resulting turmoil and anxiety. In past generations periods of change were always punctuated with times of stability. This allowed society to assimilate the change and deal with it before the next change arrived. But these periods of stability are getting shorter and by the late 20th century had all but disappeared. In 1980 in The Third Wave, Toffler characterized this shift to relentless change as the defining feature of the third phase of civilization (the first two phases being the agricultural and industrial waves).[45] He claimed that the dawn of this new phase will cause great anxiety for those that grew up in the previous phases, and will cause much conflict and opportunity in the business world. Hundreds of authors, particularly since the early 1990s, have attempted to explain what this means for business strategy. In 1997, Watts Waker and Jim Taylor called this upheaval a "500 year delta."[46] They claimed these major upheavals occur every 5 centuries. They said we are currently making the transition from the “Age of Reason” to a new chaotic Age of Access. Jeremy Rifkin (2000) popularized and expanded this term, “age of access” three years later in his book of the same name. In 1968, Peter Drucker (1969) coined the phrase Age of Discontinuity to describe the way change forces disruptions into the continuity of our lives.[48] In an age of continuity attempts to predict the
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future by extrapolating from the past can be somewhat accurate. But according to Drucker, we are now in an age of discontinuity and extrapolating from the past is hopelessly ineffective. We cannot assume that trends that exist today will continue into the future. He identifies four sources of discontinuity: new technologies, globalization, cultural pluralism, and knowledge capital. In 2000, Gary Hamel discussed strategic decay, the notion that the value of all strategies, no matter how brilliant, decays over time.[49] In 1978, Dereck Abell (Abell, D. 1978) described strategic windows and stressed the importance of the timing (both entrance and exit) of any given strategy. This has led some strategic planners to build planned obsolescence into their strategies.[50] In 1989, Charles Handy identified two types of change. Strategic drift is a gradual change that occurs so subtly that it is not noticed until it is too late. By contrast, transformational change is sudden and radical. It is typically caused by discontinuities (or exogenous shocks) in the business environment. The point where a new trend is initiated is called a strategic inflection point by Andy Grove. Inflection points can be subtle or radical. In 2000, Malcolm Gladwell discussed the importance of the tipping point, that point where a trend or fad acquires critical mass and takes off. In 1983, Noel Tichy recognized that because we are all beings of habit we tend to repeat what we are comfortable with. He wrote that this is a trap that constrains our creativity, prevents us from exploring new ideas, and hampers our dealing with the full complexity of new issues. He developed a systematic method of dealing with change that involved looking at any new issue from three
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angles: technical and production, political and resource allocation, and corporate culture. In 1990, Richard Pascale (Pascale, R. 1990) wrote that relentless change requires that businesses continuously reinvent themselves. His famous maxim is “Nothing fails like success” by which he means that what was a strength yesterday becomes the root of weakness today, We tend to depend on what worked yesterday and refuse to let go of what worked so well for us in the past. Prevailing strategies become self-confirming. In order to avoid this trap, businesses must stimulate a spirit of inquiry and healthy debate. They must encourage a creative process of self renewal based on constructive conflict. In 1996, Art Kleiner (1996) claimed that to foster a corporate culture that embraces change, you have to hire the right people; heretics, heroes, outlaws, and visionaries[55]. The conservative bureaucrat that made such a good middle manager in yesterday’s hierarchical organizations is of little use today. A decade earlier Peters and Austin (1985) had stressed the importance of nurturing champions and heroes. They said we have a tendency to dismiss new ideas, so to overcome this, we should support those few people in the organization that have the courage to put their career and reputation on the line for an unproven idea. In 1996, Adrian Slywotsky showed how changes in the business environment are reflected in value migrations between industries, between companies, and within companies.[56] He claimed that recognizing the patterns behind these value migrations is necessary if we wish to understand the world of chaotic change. In “Profit Patterns” (1999) he described businesses as being in a state of strategic anticipation as they try to spot emerging patterns. Slywotsky and his team identified 30 patterns that have transformed industry after industry.
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In 1997, Clayton Christensen (1997) took the position that great companies can fail precisely because they do everything right since the capabilities of the organization also defines its disabilities. Christensen's thesis is that outstanding companies lose their market leadership when confronted with disruptive technology. He called the approach to discovering the emerging markets for disruptive technologies agnostic marketing, i.e., marketing under the implicit assumption that no one - not the company, not the customers - can know how or in what quantities a disruptive product can or will be used before they have experience using it. A number of strategists use scenario planning techniques to deal with change. Kees van der Heijden (1996), for example, says that change and uncertainty make “optimum strategy” determination impossible. We have neither the time nor the information required for such a calculation. The best we can hope for is what he calls “the most skillful process”. The way Peter Schwartz put it in 1991 is that strategic outcomes cannot be known in advance so the sources of competitive advantage cannot be predetermined. The fast changing business environment is too uncertain for us to find sustainable value in formulas of excellence or competitive advantage. Instead, scenario planning is a technique in which multiple outcomes can be developed, their implications assessed, and their likeliness of occurrence evaluated. According to Pierre Wack, scenario planning is about insight, complexity, and subtlety, not about formal analysis and numbers. In 1988, Henry Mintzberg looked at the changing world around him and decided it was time to reexamine how strategic management was done. He examined the strategic process and concluded it was much more fluid and unpredictable than people had thought. Because of this, he could not point to one process that could be called strategic planning.
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Instead he concludes that there are five types of strategies. They are:
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Strategy as plan - a direction, guide, course of action - intention rather than actual Strategy as ploy - a maneuver intended to outwit a competitor Strategy as pattern - a consistent pattern of past behaviour - realized rather than intended Strategy as position - locating of brands, products, or companies within the conceptual framework of consumers or other stakeholders - strategy determined primarily by factors outside the firm Strategy as perspective - strategy determined primarily by a master strategist

In 1998, Mintzberg developed these five types of management strategy into 10 “schools of thought”. These 10 schools are grouped into three categories. The first group is prescriptive or normative. It consists of the informal design and conception school, the formal planning school, and the analytical positioning school. The second group, consisting of six schools, is more concerned with how strategic management is actually done, rather than prescribing optimal plans or positions. The six schools are the entrepreneurial, visionary, or great leader school, the cognitive or mental process school, the learning, adaptive, or emergent process school, the power or negotiation school, the corporate culture or collective process school, and the business environment or reactive school. The third and final group consists of one school, the configuration or transformation school, an hybrid of the other schools organized into stages, organizational life cycles, or “episodes”.[64] In 1999, Constantinos Markides also wanted to reexamine the nature of strategic planning itself.[65] He describes strategy formation and implementation as an on-going, never-ending, integrated process requiring continuous
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reassessment and reformation. Strategic management is planned and emergent, dynamic, and interactive. J. Moncrieff (1999) also stresses strategy dynamics.[66] He recognized that strategy is partially deliberate and partially unplanned. The unplanned element comes from two sources: emergent strategies (result from the emergence of opportunities and threats in the environment) and Strategies in action (ad hoc actions by many people from all parts of the organization). Some business planners are starting to use a complexity theory approach to strategy. Complexity can be thought of as chaos with a dash of order. Chaos theory deals with turbulent systems that rapidly become disordered. Complexity is not quite so unpredictable. It involves multiple agents interacting in such a way that a glimpse of structure may appear. Axelrod, R., Holland, J., and Kelly, S. and Allison, M.A.,[69] call these systems of multiple actions and reactions complex adaptive systems. Axelrod asserts that rather than fear complexity, business should harness it. He says this can best be done when “there are many participants, numerous interactions, much trial and error learning, and abundant attempts to imitate each others' successes”. In 2000, E. Dudik wrote that an organization must develop a mechanism for understanding the source and level of complexity it will face in the future and then transform itself into a complex adaptive system in order to deal with it. Information and technology driven strategy Peter Drucker had theorized the rise of the “knowledge worker” back in the 1950s. He described how fewer workers would be doing physical labour, and more would be applying their minds. In 1984, John Nesbitt theorized that the future would be driven largely by information: companies that managed information well could obtain an advantage, however the profitability of what he calls the “information float” (information
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that the company had and others desired) would all but disappear as inexpensive computers made information more accessible. Daniel Bell (1985) examined the sociological consequences of information technology, while Gloria Schuck and Shoshana Zuboff looked at psychological factors. Zuboff, in her five year study of eight pioneering corporations made the important distinction between “automating technologies” and “infomating technologies”. She studied the effect that both had on individual workers, managers, and organizational structures. She largely confirmed Peter Drucker's predictions three decades earlier, about the importance of flexible decentralized structure, work teams, knowledge sharing, and the central role of the knowledge worker. Zuboff also detected a new basis for managerial authority, based not on position or hierarchy, but on knowledge (also predicted by Drucker) which she called “participative management”. In 1990, Peter Senge, who had collaborated with Arie de Geus at Dutch Shell, borrowed de Geus' notion of the learning organization, expanded it, and popularized it. The underlying theory is that a company's ability to gather, analyze, and use information is a necessary requirement for business success in the information age. (See organizational learning.) In order to do this, Senge claimed that an organization would need to be structured such that:
[73]

• • • •

People can continuously expand their capacity to learn and be productive, New patterns of thinking are nurtured, Collective aspirations are encouraged, and People are encouraged to see the “whole picture” together.

Senge identified five components of a learning organization. They are:
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Personal responsibility, self reliance, and mastery — We accept that we are the masters of our own destiny. We make decisions and live with the consequences of them. When a problem needs to be fixed, or an opportunity exploited, we take the initiative to learn the required skills to get it done. Mental models — We need to explore our personal mental models to understand the subtle effect they have on our behaviour. Shared vision — The vision of where we want to be in the future is discussed and communicated to all. It provides guidance and energy for the journey ahead. Team learning — We learn together in teams. This involves a shift from “a spirit of advocacy to a spirit of enquiry”. Systems thinking — We look at the whole rather than the parts. This is what Senge calls the “Fifth discipline”. It is the glue that integrates the other four into a coherent strategy. For an alternative approach to the “learning organization”, see Garratt, B. (1987).

Since 1990 many theorists have written on the strategic importance of information, including J.B. Quinn, J. Carlos Jarillo, D.L. Barton, Manuel Castells, J.P. Lieleskin, Thomas Stewart, K.E. Sveiby, Gilbert J. Probst, and Shapiro and Varian to name just a few. Thomas A. Stewart, for example, uses the term intellectual capital to describe the investment an organization makes in knowledge. It is comprised of human capital (the knowledge inside the heads of employees), customer capital (the knowledge inside the heads of customers that decide to buy from you), and structural capital (the knowledge that resides in the company itself). Manuel Castells, describes a network society characterized by: globalization, organizations structured as a network, instability of employment,
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and a social divide between those with access to information technology and those without. Stan Davis and Christopher Meyer (1998) have combined three variables to define what they call the BLUR equation. The speed of change, Internet connectivity, and intangible knowledge value, when multiplied together yields a society's rate of BLUR. The three variables interact and reinforce each other making this relationship highly non-linear. Regis McKenna posits that life in the high tech information age is what he called a “real time experience”. Events occur in real time. To ever more demanding customers “now” is what matters. Pricing will more and more become variable pricing changing with each transaction, often exhibiting first degree price discrimination. Customers expect immediate service, customized to their needs, and will be prepared to pay a premium price for it. He claimed that the new basis for competition will be time based competition.[83] Geoffrey Moore (1991) and R. Frank and P. Cook[84] also detected a shift in the nature of competition. In industries with high technology content, technical standards become established and this gives the dominant firm a near monopoly. The same is true of networked industries in which interoperability requires compatibility between users. An example is word processor documents. Once a product has gained market dominance, other products, even far superior products, cannot compete. Moore showed how firms could attain this enviable position by using E.M. Rogers five stage adoption process and focusing on one group of customers at a time, using each group as a base for marketing to the next group. The most difficult step is making the transition between visionaries and pragmatists (See Crossing the Chasm). If successful a firm can create a bandwagon effect in which the momentum builds and your product becomes a de facto standard.
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Evans and Wurster describe how industries with a high information component are being transformed. [85] They cite Encarta's demolition of the Encyclopedia Britannica (whose sales have plummeted 80% since their peak of $650 million in 1990). Many speculate that Encarta’s reign will be short-lived, eclipsed by collaborative encyclopaedias like Wikipedia that can operate at very low marginal costs. Evans also mentions the music industry which is desperately looking for a new business model. The upstart information savvy firms, unburdened by cumbersome physical assets, are changing the competitive landscape, redefining market segments, and disintermediating some channels. One manifestation of this is personalized marketing. Information technology allows marketers to treat each individual as its own market, a market of one. Traditional ideas of market segments will no longer be relevant if personalized marketing is successful. The technology sector has provided some strategies directly. For example, from the software development industry agile software development provides a model for shared development processes. Access to information systems have allowed senior managers to take a much more comprehensive view of strategic management than ever before. The most notable of the comprehensive systems is the balanced scorecard approach developed in the early 1990's by Drs. Robert S. Kaplan (Harvard Business School) and David Norton (Kaplan, R. and Norton, D. 1992). It measures several factors financial, marketing, production, organizational development, and new product development in order to achieve a 'balanced' perspective. The psychology of strategic management Several psychologists have conducted studies to determine the psychological patterns involved in
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strategic management. Typically senior managers have been asked how they go about making strategic decisions. A 1938 treatise by Chester Barnard, that was based on his own experience as a business executive, sees the process as informal, intuitive, non-routinized, and involving primarily oral, 2-way communications. Bernard says “The process is the sensing of the organization as a whole and the total situation relevant to it. It transcends the capacity of merely intellectual methods, and the techniques of discriminating the factors of the situation. The terms pertinent to it are “feeling”, “judgement”, “sense”, “proportion”, “balance”, “appropriateness”. It is a matter of art rather than science.”[86] In 1973, Henry Mintzberg found that senior managers typically deal with unpredictable situations so they strategize in ad hoc, flexible, dynamic, and implicit ways. He says, “The job breeds adaptive information-manipulators who prefer the live concrete situation. The manager works in an environment of stimulous-response, and he develops in his work a clear preference for live action.” In 1982, John Kotter studied the daily activities of 15 executives and concluded that they spent most of their time developing and working a network of relationships from which they gained general insights and specific details to be used in making strategic decisions. They tended to use “mental road maps” rather than systematic planning techniques. Daniel Isenberg's 1984 study of senior managers found that their decisions were highly intuitive. Executives often sensed what they were going to do before they could explain why. He claimed in 1986 that one of the reasons for this is the complexity of strategic decisions and the resultant information uncertainty.[90]

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Shoshana Zuboff (1988) claims that information technology is widening the divide between senior managers (who typically make strategic decisions) and operational level managers (who typically make routine decisions). She claims that prior to the widespread use of computer systems, managers, even at the most senior level, engaged in both strategic decisions and routine administration, but as computers facilitated (She called it “deskilled”) routine processes, these activities were moved further down the hierarchy, leaving senior management free for strategic decions making. In 1977, Abraham Zaleznik identified a difference between leaders and managers. He describes leadershipleaders as visionaries who inspire. They care about substance. Whereas managers are claimed to care about process, plans, and form. He also claimed in 1989 that the rise of the manager was the main factor that caused the decline of American business in the 1970s and 80s. Lack of leadership is most damaging at the level of strategic management where it can paralyze an entire organization. According to Corner, Kinichi, and Keats, strategic decision making in organizations occurs at two levels: individual and aggregate. They have developed a model of parallel strategic decision making. The model identifies two parallel processes both of which involve getting attention, encoding information, storage and retrieval of information, strategic choice, strategic outcome, and feedback. The individual and organizational processes are not independent however. They interact at each stage of the process. Reasons why strategic plans fail There are many reasons why strategic plans fail, especially:

Failure to understand the customer
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• •

Why do they buy o Is there a real need for the product o inadequate or incorrect marketing research Inability to predict environmental reaction o What will competitors do  Fighting brands  Price wars o Will government intervene Over-estimation of resource competence o Can the staff, equipment, and processes handle the new strategy o Failure to develop new employee and management skills Failure to coordinate o Reporting and control relationships not adequate o Organizational structure not flexible enough Failure to obtain senior management commitment o Failure to get management involved right from the start o Failure to obtain sufficient company resources to accomplish task Failure to obtain employee commitment o New strategy not well explained to employees o No incentives given to workers to embrace the new strategy Under-estimation of time requirements o No critical path analysis done Failure to follow the plan o No follow through after initial planning o No tracking of progress against plan o No consequences for above Failure to manage change o Inadequate understanding of the internal resistance to change o Lack of vision on the relationships between processes, technology and organization
o

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Poor communications o Insufficient information sharing among stakeholders o Exclusion of stakeholders and delegates

Limitations of strategic management Although a sense of direction is important, it can also stifle creativity, especially if it is rigidly enforced. In an uncertain and ambiguous world, fluidity can be more important than a finely tuned strategic compass. When a strategy becomes internalized into a corporate culture, it can lead to group think. It can also cause an organization to define itself too narrowly. An example of this is marketing myopia. Many theories of strategic management tend to undergo only brief periods of popularity. A summary of these theories thus inevitably exhibits survivorship bias (itself an area of research in strategic management). Many theories tend either to be too narrow in focus to build a complete corporate strategy on, or too general and abstract to be applicable to specific situations. Populism or faddishness can have an impact on a particular theory's life cycle and may see application in inappropriate circumstances. See business philosophies and popular management theories for a more critical view of management theories. In 2000, Gary Hamel coined the term strategic convergence to explain the limited scope of the strategies being used by rivals in greatly differing circumstances. He lamented that strategies converge more than they should, because the more successful ones get imitated by firms that do not understand that the strategic process involves designing a custom strategy for the specifics of each situation. Ram Charan, aligning with a popular marketing tagline, believes that strategic planning must not
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dominate action. "Just do it!", while not quite what he meant, is a phrase that nevertheless comes to mind when combatting analysis paralysis. The Linearity Trap It is tempting to think that the elements of strategic management – (i) reaching consensus on corporate objectives; (ii) developing a plan for achieving the objectives; and (iii) marshalling and allocating the resources required to implement the plan – can be approached sequentially. It would be convenient, in other words, if one could deal first with the noble question of ends, and then address the mundane question of means. But in the world in which strategies have to be implemented, the three elements are interdependent. Means are as likely to determine ends as ends are to determine means.[95] The objectives that an organization might wish to pursue are limited by the range of feasible approaches to implementation. (There will usually be only a small number of approaches that will not only be technically and administratively possible, but also satisfactory to the full range of organizational stakeholders.) In turn, the range of feasible implementation approaches is determined by the availability of resources. And so, although participants in a typical “strategy session” may be asked to do “blue sky” thinking where they pretend that the usual constraints – resources, acceptability to stakeholders , administrative feasibility – have been lifted, the fact is that it rarely makes sense to divorce oneself from the environment in which a strategy will have to be implemented. It’s probably impossible to think in any meaningful way about strategy in an unconstrained environment. Our brains can’t process “boundless possibilities”, and the very idea of strategy only has meaning in the context of challenges or obstacles to be overcome. It’s at least
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as plausible to argue that acute awareness of constraints is the very thing that stimulates creativity by forcing us to constantly reassess both means and ends in light of circumstances. The key question, then, is, "How can individuals, organizations and societies cope as well as possible with ... issues too complex to be fully understood, given the fact that actions initiated on the basis of inadequate understanding may lead to significant regret?" The answer is that the process of developing organizational strategy must be iterative. It involves toggling back and forth between questions about objectives, implementation planning and resources. An initial idea about corporate objectives may have to be altered if there is no feasible implementation plan that will meet with a sufficient level of acceptance among the full range of stakeholders, or because the necessary resources are not available, or both. Even the most talented manager would no doubt agree that "comprehensive analysis is impossible" for complex problems[97]. Formulation and implementation of strategy must thus occur sideby-side rather than sequentially, because strategies are built on assumptions which, in the absence of perfect knowledge, will never be perfectly correct. Strategic management is necessarily a "repetitive learning cycle [rather than] a linear progression towards a clearly defined final destination." While assumptions can and should be tested in advance, the ultimate test is implementation. You will inevitably need to adjust corporate objectives and/or your approach to pursuing outcomes and/or assumptions about required resources. Thus a strategy will get remade during implementation because "humans rarely can proceed satisfactorily except by learning from experience; and modest probes, serially modified on the basis of feedback, usually are the best method for such learning."
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It serves little purpose (other than to provide a false aura of certainty sometimes demanded by corporate strategists and planners) to pretend to anticipate every possible consequence of a corporate decision, every possible constraining or enabling factor, and every possible point of view. At the end of the day, what matters for the purposes of strategic management is having a clear view – based on the best available evidence and on defensible assumptions – of what it seems possible to accomplish within the constraints of a given set of circumstances. As the situation changes, some opportunities for pursuing objectives will disappear and others arise. Some implementation approaches will become impossible, while others, previously impossible or unimagined, will become viable. The essence of being “strategic” thus lies in a capacity for "intelligent trial-and error" rather than linear adherence to finally honed and detailed strategic plans. Strategic management will add little value -- indeed, it may well do harm -- if organizational strategies are designed to be used as a detailed blueprints for managers. Strategy should be seen, rather, as laying out the general path - but not the precise steps - by which an organization intends to create value. Strategic management is a question of interpreting, and continuously reinterpreting, the possibilities presented by shifting circumstances for advancing an organization's objectives. Doing so requires strategists to think simultaneously about desired objectives, the best approach for achieving them, and the resources implied by the chosen approach. It requires a frame of mind that admits of no boundary between means and ends.

Writing a Mission Statement Your mission statement is an opportunity to define your business at the most basic level. It should tell
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your company story and ideals in less than 30 seconds: who your company is, what you do, what you stand for, and why you do it. Do you want to make a profit, or is it enough to just make a living? What markets are you serving, and what benefits do you offer them? Do you solve a problem for your customers? What kind of internal work environment do you want for your employees? All of these issues may be addressed in a mission statement. Basic guidelines in writing a mission statement Your mission statement is about you, your company, and your ideals. Read other companies’ mission statements, but write a statement that is about you and not some other company. Make sure you actually believe in what you’re writing; your customers and your employees will soon spot a lie. Don’t “box” yourself in. Your mission statement should be able to withstand the changes that come up over time in your product or service offerings, or customer base. A cardboard box company isn’t in the business of making cardboard boxes; it’s in the business of providing protection for items that need to be stored or shipped. The broader understanding helps them see the big picture. Keep it short. The best mission statements tend to be three to four sentences long. Ask for input. Run your mission statement draft by your employees. Is it clear and easily understood, or does it sound like something from the Dilbert Mission Statement Generator? Aim for substance, not superlatives. Avoid saying how great you are, what great quality and what great service you provide.

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For more information on mission statements, see our sample mission statements below or use Business Plan Pro, which helps you write a mission statement as well as containing over 500 example mission statements.

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