How to find relevant information.Fifth session.

ProblemHow to find the relevant information for your business plan?

Learning objectives 
1) Why and when should a startup company gather secondary versus primary data to validate the business case?

2)What secondary data do you need for your business idea?
3) How to gather secondary data for your business idea? List the links to your relevant sources of secondary data.

Keywords

Marketing research
Scientific discovery methods applied to marketing decision making. It generally comprises of (1) Market research: identification of a specific market and measurement of its size and other characteristics. (2) Product research: identification of a need or want and the characteristic of the good or service that will satisfy it. (3) Consumer research: identification of the preferences, motivations, and buying behavior of the targeted customer. Information for marketing research is collected from direct observation of the consumers (such as in retail stores), mail surveys, telephone or face-to-face interviews, and from published sources (such as demographic data).
businessdictionary)

Market research
Market research is the process of assessing the viability of a new good or service through research conducted directly with the consumer which allows a company to discover the target market and record opinions and other input from consumers regarding interest in the product. Market research may be conducted by the company itself or by a third-party company that specializes in the market research field. Test subjects are usually compensated with product samples and/or paid a small stipend for their time.
(investopedia)Secondary data and primary data have a major difference in purpose of information. Thus, primary data was collected or created for a specific task particularly to benefit current work, while secondary could also be used to specific tasks in work, but was collected previously or for another puprose originally.  

Customer insight could be defined as “a deep truth about the customer, based on their behaviour, experiences, beliefs, needs or desires that is relevant to the tasks or issue and rings bells with target people” (Government Communications Network’s Engage Programme).

1) Why and when should a startup company gather secondary versus primary data to validate the business case?

To successfully launch his business idea, an enterpreneur should take into account many different external factors in his Microevironment, as well as in Macroenvironment. Internal factors, which could be crucial to future start up, is also a group demanding precise attention.

Kotler suggests us four steps of building Marketing research process:
-Define the problem and research objectives. 
-Develop the research plan for collecting information 
-Research plan implementation. 
-Interprete and report findings

Primary data provide qualitative data. It means it gives information on subjective quality-related features like look, feel, taste, lightness, heaviness, etc., of any object or phenomenon under research or inquiry.
On the contrary, secondary data, provide quantitative data. In other words, it gives information about an object or event in a numerical, statistical and tabulated form like in percentages, lists, tables, etc.

Source: G.Akrani

2)What secondary data do you need for your business idea?
Every research starts with "Secondary data" , sometimes it is called “desk research” (because it can be done from behind a desk), this technique involves research and analysis of existing research and data. 


Talking about when a company should start gathering data and what specific secondary data do we need, I always refer to a common sense of importance to success of operations.

Firstly, we need to asure, that our business idea could be prolific in current macroeconomics, in social, technological and economical situation.
Secondly, we need to verify if there would be a demand for our product\service
We have to begin with a question "Why people are going to pay money for a particular product or a service?" What is an existing problem, sufficient enough to be paid for its resolve? 
"When a person or organisation decides to buy or use a service, it is triggered by an underlying need or need arousal."
(Source: Lovelock C., Wirtz, J. & Chew, P. 2012, Essentials of Services Marketing, p.37)  
And, at third place we have to find all information which allows us to calculate your future business process and find out, if there could be a margin for you, as a business owner.
The collection of secondary data is from internal and external published sources.
Internal sources of secondary data could be:
-Company's accounts,
-Sales figures,
-Reports and records,
-Promotional campaigns' data,
-Customers' feedback,
-Cost information,
-Marketing activities, so on.
External sources of secondary data include:
-Data published by country's central, state and local governments,
-Data even published by foreign governments,
-Publications released by international organizations (like the IMF, WHO, ILO, UNO, WWF, etc.) and their subsidiary bodies,
-Reports prepared by various commissions and other appointed committees,
-Results of research work published by research institutions, universities, subject scholars, economists, etc.,
-Books, newspapers, and magazines,
-Reports and journals of trade unions, industries, and business associations,
-Information released by a central bank, stock exchanges, etc.,
-Public libraries,
-Archives, Directories, Databases, and Indexes,
-Old historical records,
-Online websites, blogs, and forums.  (Gaurav Akrani)



3) How to gather secondary data for your business idea? List the links to your relevant sources of secondary data.
We already have an existing business in Logistic Automatisation software, so I would share some ways, how I gather information.
One of the best ways to find information to fill a report with is to create this information. The most reliable method in customer development, accordingly to Steve Blank is to interview your customer.
To Identify customer needs, determine functional requirements, concept development

and analysing of competitive products may be used Kano model. 
1)For example, in our business, I use mainly information about customer's expectations and demands directly by phone call.
2) We have a wide practice of surveys, which main goal is to find out, why our registered client did not proceed to commit a purchase and started using our service.

3) To be able negotiate and be informed about current situation on market, I also track information about our competitors.
Here is,for example, the list of our competitors.
http://veeroute.com/
http://www.antor.ru/en/index.php
http://maxoptra.com/
http://tms.abmcloud.com/
http://ant-logistics.com/
http://www.1cbit.ru/1csoft/bit-upravlenie-transportnoy-logistikoy/

http://logist1c.ru/

Sources:
- Kotler, P. & Armstrong, G. 2016. Principles of Marketing. Sixteen edition, Global edition. Pearson Education.
- Lovelock, C. Wirtz, J.& Chew, P. 2012. Essentials of Services Marketing. London: Prentice Hall.
- Wood, M. B. 2014. The marketing plan A handbook / Marian Burk Wood/ Fifth Edition. Pearson Prentice Hall, Cop. Upper Saddle River.
-http://www.investopedia.com/terms/m/market-research.asp#ixzz4Lf662HB3
-http://www.businessdictionary.com/definition/marketing-research.html

-https://nottinghaminsight.org.uk/insight/key-datasets/customer/what-is-customer-insight.aspx
http://www.mymarketresearchmethods.com/primary-secondary-market-research-difference/
http://kalyan-city.blogspot.fi/2014/12/difference-between-primary-and_1.html

Planning promotion mix in Marketing and case study.Fourth session.

Problem:
How to plan the promotion mix when promoting sales?

Learning objectives:
1)What are the roles of the different promotion tools in Jamil's case?
2)What would be worthwhile doing with € 5.000,- or € 12.000,-?
3)How to find information for estimating the costs?


Keywords - definitions
Promotion Mix: the specific mix of advertising, sales promotion, public relations, personal selling and direct marketing tools that the company uses to persuasively communicate customer value and build customer relationships. (Kotler, 696)

Advertising: any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor. (Kotler, 696)

PR:  is building good relations with the company’s various publics by obtaining favourable publicity, building up a good corporate image and handling or heading off unfavourable rumours, stories, and events.(Kotler, 696)

SP: Sales Promotion is short-term incentives to encourage purchase or sale of a product or service.(Kotler, 697)

Direct mail: sub-category of Direct Marketing, that suppose sending an offer, announcement, reminder, or other item directly to a person at a particular adress.(Kotler, 697)

Online-marketing: A form of marketing which uses the internet, utilizing company Web sites, online ads and promotions, e-mail, online video and blogs.(Kotler, 695)

Guerilla marketing: Guerrilla Marketing is about taking the consumer by surprise, make an indelible impression and create copious amounts of social buzz. It is an advertisement strategy concept designed for businesses to promote their products or services in an unconventional way with little budget to spend. It could be a youtube video or a viral post in social media, which would benefit your company. (drip.co)

Zero-budget-marketing: marketing without any budget or with unsufficient costs compared to other marketing methods.

1) To begin with I would like refer to value ,which I mentioned in my first article of this cycle. Promotion mix is only part of a broader set of marketing and company decisions. It's job is to help communicate the brand's value proposition to target customers.
According to our case, Jamil has "very tiny shop, selling Indian home decorations".  And when an enterpreneur make a choise, which marketing tool to use, it should be based on efficiency to his concrete business. So, it may be completly obvious, that using TV advertising would not help to Jamil's business, it would spend way too much money and would not get to his target auditory.
Here are steps of the promotional program, according to Kotler: 
1. Identify target audience and characteristics, and perception of product, context etc. 
2. Define communications objectives (not aware, awareness, interest, evaluation, trial, adoption). Seeking cognitive, affective or behavioral response. 
3. Establish budget (affordable / % sales / competitive / objective and task) 
4.  Message startegy and execution
4.  Which source to use? Select media (communications channels)  and timing.

5. Measure the impact, return on advertising.

We have previously discussed about importance of identifying target audience and characteristics.
In our case  Jamil already has a budget which he intend spending to increase sales.

There are several allocation methods used in developing a budget. The most common are listed below, accordingly to Haitham Al Khammash work:

Percentage of Sales method

Objective and Task method

Competitive Parity method

Market Share method

Unit Sales method

All Available Funds method

Affordable method

Also, no matter, which message Jamil wants to deliver to his target clients, he need to understand, what he want to achieve (sales objective). It determins furthermore the main advertising objective, which is a specific communication task, with a specific target audience, during a pecific period of time. Advertising objectives could be "to inform", "to persuade", or "to remind".
Here are some communication objectives:

I believe, that Jamil's business has narrow market and a competition in home decoration items is not extreme, so it would be better for him to set an aim to inform people about his shop, in order to increase sales.

But what are the ways, how we can reach our consumers (communication channels)?
According to M.B. Wood and also to Kotler&Armstrong, there are five major promotion tools:
-Advertising - any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor. (Kotler, 696)
-Sales Promotion - short-term incentives to encourage purchase or sale of a product or service.(Kotler, 697)
-Personal selling- interactions with the customers via sales force of company to engage them, make sales or build customer relations (Kotler, 447)
-Public relations -building good relations with the company’s various publics by obtaining favourable publicity, building up a good corporate image and handling or heading off unfavourable rumours, stories, and events.(Kotler, 696)
-Direct and digital marketing is a direct interaction with carefully segmented clients or client communities to obtain immediate responce and enforce customer relationship.

Case.
In Jamil's case I would reccomend to try all possible options of using free promotional instruments or almost free tools and then try more classical advertising approaches.Probably home decoration items is not a single or impulse acqusition, so if Jamil's clients would know somehow about new arrivals in his shop, it would increase his sales. 
Some of free instrument could be:
-Create profile page or add information about your business on every social media, e.g. Facebook, LinkedIn, Twitter page. 
-Update those profiles,so people would get used to receive some information about your products and even could share it( funny Indian decoration items)
-Post valueable content in groups\communities related to design
-Make a video guide in your shop and upload it on Youtube or Vimeo
-Find local communities or talkboard forums and post information there
-Find ethnical or expat communities and attend some meetings to share information about your shop

Advertising is great way to let people know about your product.
I would reccomend to begin with a different attraction items near his shop. It could be information on boards or advertising in mailboxes of nearby houses, like an example of direct mail marketing. Quality made plastic signs could create and intrest of people walking by.

Sales promotional tools could include: 
• samples 
• Coupons 
• rebates 
• cash refunds 
• product warranties 
• prizes 
• frequent user programs 
• free trials 

Jamil could invest his money in sales promotion to create word of mouth. Usually Chinise and Indian goods have reputation of bad quality, so additional warranty, from my perception, could increase trust to his items. Special offers or small gifts may change for good customer experience and satisfaction. Also the culture of different promotional tools increase client's intrest to return in this shop.

Jamil already have a shop, where his products are on sale, but he could also try to work with a business consumers and percuade them to supply some goods from him. It would require him to hire another employee or he could do it himself in the begginning. He should also teach his workers at encounter some greeting and storytelling technique.

Public relations tools could include: 
• news 
• speeches 
• events 
• public service activities 

From my opinion, Jamil would comparatively low benefit from those activities, as far as his business still not large enough to make such captial investments - to have a separate worker, which would be in charge of public relations. However, for a small business it is good to have a common idea, a mission which could representate this particular shop and make it unique in eyes of media and regular customers.

I am not sure in Jamil's case about digital marketing. It is hard to decline a fact of common digititalisation but for interior goods there could be few options. To create an internet shop and regularly update assortment (with good pictures and full description), but then it should be completly another division of his business, I even may assume, independant. Or his shop could be just presented virtually with main goal to make accent, so people would visit it. It would be also good if information about his shop could be easialy found in google or google maps and some other navigation devices.

3)How to find information for estimating the costs?
There are several allocation methods used in developing a budget. The most common are Affordable, Percentage-on-Sales, Competitive-Parity and Objective-and-Task methods, according to Kotler&Armstrong. However, there are more listed below, based on information from Haitham Al Khammash work:

Percentage of Sales method
Objective and Task method
Competitive Parity method
Market Share method
Unit Sales method
All Available Funds method
Affordable method
It is important to notice that most of these methods are often combined in any number of ways, depending on the situation. Because of this, these methods should not be seen as rigid but as building blocks that can be combined, modified, or discarded as necessary. Remember, a business must be flexible—ready to change course, goals, and philosophy when the market and the consumer demand such a change.       ·   

Percentage of Sales Method:
Due to its simplicity, the percentage of sales method is the most commonly used by small businesses. When using this method an advertiser takes a percentage of either past or anticipated sales and allocates that percentage of the overall budget to advertising. But critics of this method charge that using past sales for figuring the advertising budget is too conservative, that it can stunt growth. However, it might be safer for a small business to use this method if the ownership feels that future returns cannot be safely anticipated. On the other hand, an established business, with well-established profit trends, will tend to use anticipated sales when figuring advertising expenditures. This method can be especially effective if the business compares its sales with those of the competition (if available) when figuring its budget.

Objective and Task Method
Because of the importance of objectives in business, the task and objective method is considered by many to make the most sense and is therefore used by most large businesses. The benefit of this method is that it allows the advertiser to correlate advertising expenditures with overall marketing objectives. This correlation is important because it keeps spending focused on primary business goals.

With this method, a business needs to first establish concrete marketing objectives, often articulated in the "selling proposal," and then develop complementary advertising objectives articulated in the "positioning statement." After these objectives have been established, the advertiser determines how much it will cost to meet them. Of course, fiscal realities need to be figured into this methodology as well. Some objectives (expansion of area market share by 15 percent within a year, for instance) may only be reachable through advertising expenditures beyond the capacity of a small business. In such cases, small business owners must scale down their objectives so that they reflect the financial situation under which they are operating.

Competitive Parity Method
While keeping one's own objectives in mind, it is often useful for a business to compare its advertising spending with that of its competitors. The theory here is that if a business is aware of how much its competitors are spending to advertise their products and services, the business may wish to budget a similar amount on its own advertising by way of staying competitive. Doing as one's competitor does is not, of course, always the wisest course. And matching another's advertising budget dollar for dollar does not necessarily buy one the same marketing outcome. Much depends on how that money is spent. However, gauging one's advertising budget on other participants' in the same market is a reasonable starting point.

Market Share Method
Similar to competitive parity, the market share method bases its budgeting strategy on external market trends. With this method a business equates its market share with its advertising expenditures. Critics of this method contend that companies that use market share numbers to arrive at an advertising budget are ultimately predicating their advertising on an arbitrary guideline that does not adequately reflect future goals.

Unit Sales Method
This method takes the cost of advertising an individual item and multiplies it by the number of units the business wishes to sell. This method is only effective, of course, when the cost of advertising a single unit can be reasonably determined.

 All Available Funds Method
This aggressive method involves the allocation of all available profits to advertising purposes. This can be risky for a business of any size it means that no money is being used to help the business grow in other ways (purchasing new technologies, expanding the work force, etc.). Yet this aggressive approach is sometimes useful when a start-up business is trying to increase consumer awareness of its products or services. However, a business using this approach needs to make sure that its advertising strategy is an effective one and that funds which could help the business expand are not being wasted.

Affordable Method
With this method, advertisers base their budgets on what they can afford. Of course, arriving at a conclusion about what a small business can afford in the realm of advertising is often a difficult task, one that needs to incorporate overall objectives and goals, competition, presence in the market, unit sales, sales trends, operating costs, and other factors.

Sources:
- Kotler, P. & Armstrong, G. 2016. Principles of Marketing. Sixteen edition, Global edition. Pearson Education.
- Lovelock, C. Wirtz, J.& Chew, P. 2012. Essentials of Services Marketing. London: Prentice Hall.
- Wood, M. B. 2014. The marketing plan A handbook / Marian Burk Wood/ Fifth Edition. Pearson Prentice Hall, Cop. Upper Saddle River.
-Info Marketers: Unleash Your Sales With Guerrilla Marketing Tactics  article
https://www.drip.co/blog/tips-and-tactics/info-marketers-unleash-your-sales-with-guerrilla-marketing-tactics/
-Khammash, Haitham. 2015. The effect of using the concept of marketing communications on the quality of the marketing message.

Place\Distribution in Marketing and case study.Third session.

Brief contents of this article:
The main question is: 
What kind of distribution channel opportunities there are?
How, when, and where to make goods and services available to customers?

Learning objectives:
1)Levels of marketing channels
2)Functions of marketing channels
3)Conflicts in marketing channels
4)Channel design decision


1. Levels of marketing channels.
A channel level is a layer of intermediaries that performs some work in bringing the product and its ownership to the final buyer and according to "Principles of marketing" they could be Direct or Inderect, depending on the amount of intermediary levels involved, where Direct( sometimes called Zero-level channel) has no such levels, and Inderect has one or more. Channels divide in groups on product purpose basis: for instance, if  aproduct or service supposed to be sold to Customer (B2C, business to customer, e.g.supermarket) or to Business (B2B, business to business, e.g. office supplies). However there are some businesses, that use B2G (Business to Goverment, e.g machinery\ weaponry ) and even C2C (Customers to Customers, e.g. bulletin boards like Ebay ).
The visual presentation of how marketiung channels work:

Kotler, P. & Armstrong, G, page 379

Case:
In our case we have  Indian interior decoration products. And Jamil, business owner could work in two directions, B2B and B2C simultaneously to achieve better sales.

2.Functions of marketing channels
Marketing channels are meant to facilitate the process of delivery, fasten it and make a product or service avaliable to broader auditory. Intermediaries create greater efficiency in presenting products of producer, by including them in wide assortment accessible to target markets, when producer has limited variety of production and intrested in large quantities of his product sales. However, long chain of middlemen increases cost of a product to final consumer and hardens the producer's ability to track and control, how his product is presented to consumers.

Here are some main functions of marketing channels, presented by Kotler & Armstrong in "Principles of Marketing":

-Information- gathering and distributing marketing research and intelligence information about actors and forces in the market environment needed for planning and facilitating exchange.

-Promotion- developing and spreading persuasive communications about an offer
-Contact- finding and communicating with prospective buyers
-Matching- shaping and fitting the offer to the buyer’s needs, including such activities as manufacturing, grading, assembling and packaging.
-Negotiation- researching an agreement on the price and other terms of the offer, so that ownership or possession can be transferred.
-Physical distribution- transporting and storing goods
-Financing- acquiring and using funds to cover the costs of the channel work
-Risk taking- assuming the risks of carrying out the channel work.
Case:
As a new player on market, Jamil would have great benefits from developing distribution channels.

3.Conflicts in marketing channels
In real world, every company and every person involved in distribution want to benefit from it. When some issues with goals, roles or rewards arise between members of channels and when someone's intrest affect or even confronts with interest of another party the conflict occurs.
Conflicts between members could be Horizontal (for instance, when several distributors have to share same market\area)  or Vertical (e.g. producer is not satisfied with retailer offering or a way of promoting his product(s)).  To avoid such conflicts many companies try to control as many operations as possible, if it benefits organisation's goals.
Case:
Jamil in this case is represented as a the second intermediary (distributor) of  some Indian manufacturer. In our case not stated, if he has an exclusive rights to sell products of this producer or not. Usually, large retailers have a tendency to overpass middleman as Jamil and work with factory directly, and this allows them to control frequency of distribution, prices and support sustainability in that region. Large retailers have their logistic processes and large quantities, which makes shipping for them less expencive. Jamil could not stay compete with them at this level. Also,some day, he may have and idea to widen his assortment and find some other suppliers in India, but now with his current abilities it is better, I suppose, to start with a direct sales and grow amount of contracts with small companies.

4.Channel design decision
Marketing channel design calls for analyzing consumer needs setting channel objectives and choosing between major channel alternatives.

As logical development of unorganised distribution, where each member of chain had independance in their choises and approaches to work, is a VMS, a vertical marketing system, hence all members are binded to some rules or regulations dictated by one particular member (usually, the most powerful one, which impact on overall success of this joint venture is dominating). The coordination could be based on contracts between firms- Contractual VMS, or implied by the size and power of one party- Administred VMS. There is also a corporate VMS, a company with many branches or divisions, which could have their different goals in their specific market, but still obliged to perform tasks assigned by main office in a cooperation with other offices\factories\logistic division and shape local tasks under top priority of the whole organisation benefit.

However, in modern reality, a company choose several distribution channels instead of taking just one and it is called Multichannel Distribution system. But how to make it organised? And which strategy to choose with those channel members?
There are three ways to cooperate with members of your channel: provide them special rights to sell your product and build close relationships with them (Exclusive distribution), choose distributors on some Selective basis (e.g. volume of purchase, number of outlets etc.) to have some control over them and help them by limiting their possible competitors or allow everyone sell your product with some entry barriers, but generally no specific limits ( Intensive distribution).






















There are many different factors, which have influence on making channel decision. Some of internal are:
-Direction, goals and objectives
-Resources and competencies
-Marketing mix
-Control (do you want to have everything under your command?)
And some of external factors, which should be considered:
-Customer
-Market
-Environemental factors
-Competitors
-Intermediary availability
(Wood, p. 140)
However, on practice companies could perform SWOT- analysis (Strengths, Weaknesses, Opportunities, Threats) to be able understand their own position and set goals. It is important to understand and clearly describe, how your partners would benefit from collaboration with your company, because it is irresponcible to believe, that they would be intrested in your success. Only when others could make profit on partnership with you and hence you understand their underlies, only then you could utilize and also benefit from them.

Case:
I have been selling franchise for almost a year and supporting all processes connected with a franchise and I have my point of view on it.  Jamil idea to start a franchise is optimistic, but, from my point of view, is without a solid ground. The idea of franchising is in spreading idea of efficient way of earning profits and making the company grow very fast, to the mutual benefit (brand, customer loyalty, collective purchase bulk prices, etc) . Then the franchisor could earn some money, have his company growing and save resources, while franchisee could join and start easily earning with some guarantees of success. Jamil does not have neither brand nor some other additional value in his business. He is simply a reseller. Primitive model: buy cheap, sell high, difference cover costs=profit.
There would be no competitive advantage for those, who would decide to buy his franchise. So why should they pay their money to him? I do not think, that indian commodities are such rare or unique, so selling them would make someone stand out and distance from competitors.
Jamil could write all his business process in schemes and if he is profitable, then some enthusiastic heads, which could also be intrested in it, might be found. However I suppose, that the better option for him is to find existing retailers, which could help him with information and promotion and provide selective policy with them, one town- one distributor. Then they would have some motivation to work with his products and share information about it, not being afraid of loosing competitive advantage on their market. As a further development of relations with those distributors, they could help to negotiate the contracts with some large retailers, by providing their brand as a trust factor and also being responcible for physical distribution- transporting and storing goods. Large retailers is a big money and repeating orders, but they are not an easy clients and they won't change their business process to make it easier for Jamal.




Keywords - definitions

Distribution: Also Place. One of the four elements of the Marketing Mix (Product, Price, Promotion, Place/Distribution). Comprises all activities that bring a product from its place of origin to the consumer (Lovelock & Wirtz 2012, 391.)

Intensive distribution - A marketing strategy under which a company sells through as many outlets as possible, so that the consumers encounter the product virtually everywhere they go: supermarkets, drug stores, gas stations, and the like. Soft drinks are generally made available through intensive distribution. (Kotler & Armstrong)

Selective distribution- Type of product distribution that lies between intensive distribution and exclusive distribution, and in which only a few retail outlets cover a specific geographical area. Considered more suitable for high-end items such as 'designer' or prestige goods.(Kotler & Armstrong)

Exclusive Distribution: Number of intermediaries is limited; this offers bigger control, but also less market coverage.

Wholesaling: A major form of channel intermediaries. Selling products to retailers

Retailing: Selling products or services to final consumers via multiple channels of distribution

Franchising: a contractual association between a manufacturer,wholesaler, or service organisation (a franchisor) and independent business people (franchisees) who buy the right to own and operate one or more units in the franchise system. (Kotler & Armstrong, p.693)

Coverage: Number of active retail and/or wholesale outlets (relative to a saturation level) that sell a specific firm's brands in a given market. Required market coverage is achieved by following concentrated marketing, differentiated marketing, or undifferentiated marketing strategy.
Undifferentiated marketing (focus on common need of consumers),
differentiated marketing (promotional offers are specialised for each individual target market), and
concentrated marketing (focuses on a section in market place and seeks to gain the majority market share there) (businessdictionary)

Sources:
- Kotler, P. & Armstrong, G. 2016. Principles of Marketing. Sixteen edition, Global edition. Pearson Education.
- Lovelock, C. Wirtz, J.& Chew, P. 2012. Essentials of Services Marketing. London: Prentice Hall.
- Wood, M. B. 2014. The marketing plan A handbook / Marian Burk Wood/ Fifth Edition. Pearson Prentice Hall, Cop. Upper Saddle River.
-http://www.businessdictionary.com/definition/market-coverage.html

Price in marketing. How to set a Price. PBL Task 2.

Brief contents of this article.
The main question is:  
"What is price? How to set a price?"





























Regarding the main topic and problem, we have found such subtopics (learning objectives):
1)What are the factors affecting price decisions? And how do those factors affect?
2)What could be pricing methods? 

To support one's learning, here are listed some of the keywords of our problem:

Price.  The expression of the value of the commodity in money is its price. It is the wide definition of a price by David Levine in "Economic Theory" book.
However, in marketing course we would be more focused on a price in context of a marketing mix, where price is regarded as an instrument to perform different strategies and obtain marketing goals. Price is a key concept in 4P, because it produces revenue and usually have direct correlation with demand on your product\services (if the elasticity is >0).
Fixed costs and Variable costs: The only difference between them is their relation to the output. Thus, fixed cost do not have a direct correspondance to output and have to be paid even if the firm produces zero, when variable cost are direclty volume-related.  (Samuelson, 2010) 

Gross profit: is the quanitive difference between revenue and COGS (costs of goods sold). Normally, this indicator is for intermediary use, but it could be also used in most simpliest business models to track profitability . Very important to see the difference between GP and Operating Profit, because gross profit calculation based on Variable costs.
Gross margin: is the percentage of Gross Profit in company's Revenue. Sometimes it is also called  ROS on GP (Return on Sales on Gross Profit).  It is exactly the same indicator as Gross Profit, but delivered in percents.
Cost-plus pricing: Manufacturer covers his expences and then surplus acceptable for his goals margin. This pricing developed on A.Smith work about Natural Value and Market value and later on D.Ricardo's Labor theory of value. 
Value-based pricing :   This approach takes into account actual value, which receive customer, how it benefit to him and cover his needs. It involves attaching value-added features and services to differentiate the company's offers and support charging higher prices ( Kotler , Armstrong 2010)
Price escalation: A disparity in pricing where goods have higher costs in a foreign market than in the domestic market due to transportation and exporting costs. Price escalation can also refer to the sum of cost factors in the distribution channels which add up to a higher final cost for a product in a foreign market. (Business Dictionary)


1)What are the factors affecting price decisions?
1.1.  According to  Lovelock, Wirtz, and Chew pricing strategy should be based on understanding of pricing objectives, in order to successfully implement company's goals.
Usually those objectives divided in two categories: direct to profitability(have impact on Revenue\Turnover\Profit,which are a prime cause of business itself), or inderect to profitability (such as  patronage and User base objectives)

Objectives for prising:
-Gain profit
   A)Make the largest possible contribution or profit
   B)Achieve a specific target level, but do not seek to maximize profit    

-Cover Costs
     A) Cover fully allocated costs
     B)Cover costs of providing one particular service
     C)Cover incremental costs of selling one extra unit

-Build Demand
     A)Maximize demand
    B)Achieve full capacity utilization

 -Build a User Base
     A) Encourage trial and adoption of service
     B)Build market share and/or a large user base

However, there are more Pricing objectives and they could vary, depending on objective depths and  in combination with another objective or objectives:
Profit maximization
Market share leadership
Customer retention and relationship building
Attracting new customers
Opposing competitive threats
Increasing customer excitement

1.2. Moving further, Essentials of service and Marketing book suggests us idea, that Pricing strategy is based on costs , competition and value to customer. I would like to concentrate on the value, which I assume, to be the most important.

I would like to take a short look on philosophy, I believe that in context of Marketing, it would help to understand some of people's behavior, which could not be measured, but, from my perspective, should be taken into account. 

The first wide known theory of value was discussed by Plato in the "Republic". His theory is very improtant, I think, and worth mentioning, because it lay base ground for later on theories related to Price and Pricing. Plato divides the value itself in two categories: Extrinsic and Intrinsic value. The difference between them is their purpose, are they supposed to be the end-in-themselves or interim to achieve something else. Later on John Dewey and Immanuel Kant developed his ideas, but this is less important,  rather than  it influenced different theories of value developed by Adam Smith, David Ricardo and Karl Marx.
As the summary, we could divide the value on objectivity and subjectivity basis and assume, that different players on market have their own vision of pricing.
Every enterpreneur receives money for his living for delivering a value to customers. Enterpreneur's goals to cover costs or stand out from competitors are secondary to "Value deliver" , because they are important only for himself and other enterpreneurs. What actually crucial for a customer is the Value. An those businesses, who aim to "beat competitors" and forget about customers are usually loose in competition. "Value-based pricing uses buyer's perception of value, not the seller's cost, as the key to pricing." (Kotler, Armstrong)

1.3.
In modern realities, there are external and internal factors for a business, which would or usually affect prices policy. Chapter 10 of Principles of Marketing book suggests such factors, as :
-Customer value
-Product Costs 
-Internal – Company marketing objectives; marketing mix strategy and organizational factors
-External – The nature of market and demand, competition, the economy, reseller needs, and government actions.

However, there are more, such as Legal or Trade factors which could vary from one market to another.

CASE.
Here are some of my recommendations, what and in which order you should check, to be able set a fair pricing.

0) I think, that Jamil, as other young enterpreneurs, should define appropriate margin level for his venture. It would help him to be realistic about his business and see, if he is ready to work on it or is it better to be hired employee.  
1) First thing, to set the pricing Jamil should check his postion in legal field. How much should he pay taxes? Are there any import restrictions? Are there any price regulations? It would be very depressing situation, if Jamil's planned margin level would be devoured all by taxes. It would also be negative, if his prices would be, for example too low and some of his competitors claim to authorities about artificial monopoly through demping. 2) It is very important  define your client, make some work in STP (Segmentation, Targeting and Positioning) and to find out customers perception.  Are there many indian shops or restaurants in town? Are people intrested in indian culture? What do they value in indian culture? 

3) Try to find some overall statistics and information about region to understand what your product should be? Is it a common or a luxury decoration solution for a limited auditory? Then what is the economical situattion in country? What are the trends? Decoration is not a "first need" (nessessity\inferior good) service, it could be rather a normal good (when population income changes, demand changes unsufficient) or luxury good (when population income increases, demand increases also).
4)Jamil should take price list of his Indian manufacturer and compare prices to local factories. Maybe they would have same products with same or lower prices and save money on transational costs, such as shipping, taxes, price escalation and many others.

5)The easy way to move forward in understanding customer is to track his competitors activity. Are there many similar shops in town? What are their prices and what variety of goods do they have? If there are no such stores, maybe they are closed due to unprofitability? And it is a reason to check again customer's perceptions? 6) Then Jamil also should divide his expences in two categories of Fixed and Variable costs and see their percentage to be able understand, how they would be covered by his Sales and find his store break-even point. In other words, how much of Gross profit he should receive mothly, to be able cover his Fixed costs and stay if not profitable, but at least not in losses.

7) What would be strategy? To grow slow, but have profits since the begginning or Jamil has some funds to be able stay unprofitable for some period of time, which would allow him to grow fast? Should he make one pricing for everyone or several pricing plans? Should he set average price or premium?

2.What could be pricing methods? 
"Pricing methods are closely related to pricing objectives" (Blythe, Zimmerman).
There are three main groups : Cost based Pricing, Demand Based Pricing and Competition Oriented pricing and I would present three most widely used methods.

Cost based pricing:
-Mark-Up Pricing(cost plus pricing)
The selling price is fixed by adding Mark-up or Margin to its cost.
-Absorption cost pricing (full cost pricing)
 It includes : Fixed cost, Variable cost + profit. It also takes into account selling\transactional costs and advertisement cost.
-Target rate of return pricing
This tactic is similar to the previous one, the difference is in fix profit margin, it is fixed by considering the ROI . Firm will have return objectives, like 5% of invested capital, or 10% of sales revenue. And then you arrange your price structure to achieve these target rates of return.

Demand based pricing
-What the traffic can bear
Setting maximum prices, which exceed customers expectations, but demand does not changes or changes insufficiently (elasticity less than 1). Those are situations of shortage in commodity\Monopoly\Oligopoly.  In current realities this is almost impossible, because there are authorities, which track this situations and prevent them.
-Skimming pricing
Price skimming sees a company charge a higher price because it has a substantial competitive advantage.
-Penetration pricing
The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased.

Competition pricing:
– Premium pricing
Use a high price where there is a unique brand. This approach is used where a substantial competitive advantage exists and the marketer is safe in the knowledge that they can charge a relatively higher price.
– Differentiating Pricing
When company separate its products and make unique offering, based on place, customer groups or purchase volume. This pricing is refer to pricing discrimination originally.
– Parity Pricing/going rate pricing
 When buyers pay the same price regardless of where they buy the product or from whom. Going-rate pricing is often used on commodity products such as wheat, gold, or silver. People perceive the individual products in markets such as these to be largely the same. Consequently, there’s a “going” price for the product that all sellers receive.

(Rajagopal, p 102)

CASE.
In this case Jamil decided to use "Premium pricing" from the beginning, which I believe is not suitable to his business, because he is a new player on market, and does not have a brand or trust credit from previous customers.
Depending on Jamal's situation, his funds, as I already mentioned earlier, he may choose Penetration prising, to  widen amount of his customers and then later gain profits on return customers (of course, if his service is good) or he can try to set his target rate on investments and then narrow his clients profile, and make several client's groups (and services he is selling to those groups) , to implement  Differentiating pricing for them and try to work in this constrained field.


Sources:
Smith, A. 1776 . An Inquiry into the Nature and Causes of the Wealth of Nations. Book 1, Chapter 7
Levine, D. ,2006. Economic Theory. Samuelson P, 2010. Economics , p.159Lovelock, C. Wirtz, J. & Lovelock, C. Wirtz, J.& Chew. 2013. Essentials of Services Marketing. London: Prentice Hall.
http://www.businessdictionary.com/definition/price-escalation.html#ixzz4JgcxGFyg
Kotler P.,  Armstrong G.  2010 . Principles of Marketing.Pearson Education,
 Marketing Mix: Pricing Strategies, https://www.youtube.com/watch?v=H8aZr-Ula1w&feature=youtu.be
Blythe J., Zimmerman A.S., 2005. Business-to-business Marketing Management: A Global Perspective. Cengage Learning EMEA
Rajagopal, 2013. Marketing Decision Making and the Management of Pricing: Successful Business Tools. Idea Group Inc (IGI)

Product offering case study. First PBL session.

Brief contents of this article:
The main question is:
0)"How to define the product or service offering?"
Regarding the main topic and problem, we have found such subtopics (learning objectives):
1)How to make desirable product or service offering?
2)How does culture affect product decisions?
3)How to benefit from networks?
4)Where to find relevant information?

0.1. "How to define the product or service offering?"  From my personal expirience, product\service offering usually rely on definition of unique selling proposition (USP): "contains the one feature of the product that most stands out as different from the competition, and is usually a feature that conveys unique benefits to the consumer." (Source: Blythe, Jim (2005-01-01). Essentials of Marketing (3rd ed.). Financial Times Prentice Hall. p. 250) However it also could include information about other product attributes: "all features (both tangible and intangible) of a good or service that can be evaluated by customers" . (Source: Lovelock C., Wirtz, J. & Chew, P. 2012, Essentials of Services Marketing, p. 653)

1.1.  How to make desirable product or service offering?  Steven Blank in his book "The Four Steps to the Epiphany" (2006) recommends reversed approach for a startups: to begin with a Customer Discovery and Validation, only then proceed to Customer creation and Building a company. In such paradigm a product shaped to the offering, but not the contrary. I, myself, find such conception very useful in operational business positioning also.

1.2. 
I believe, that we have to begin with a question "Why people are going to pay money for a particular product or a service?" What is an existing problem, sufficient enough to be paid for its resolve? 
When a person or organisation decides to buy or use a service, it is triggered by an underlying need or need arousal.
(Source: Lovelock C., Wirtz, J. & Chew, P. 2012, Essentials of Services Marketing, p.37)  

Case: For example, in Jamil's case tourist guide services, as I suppose, may solve problem of uncertainy. This problem could be based on fear, e.g. tourists just do not know where to go in India, what to eat, what to expect, how to behave themselves etc. Safety is one of the two basic needs, according to Maslow's five-stage hierarchy model of needs. That is why people generally pay for products and services, which would provide them safety. Same deliberation should be made on other possible variants, interior decoration and cultural training.

















(Source: http://www.simplypsychology.org/maslow.html  Accessed 28.08.16)

1.3. The first question "Why?" is usually followed by question "Who are they?" (customers).
From previous studies I have learned that process of prioritization of company’s stakeholders is important, because there are too many of them existing and it is almost impossible to be equally good for all of them, due to variety of interests.

To provide outstanding core product and supplementary services you have to be aware of your main customer profile, likewise to maximize profitability of your venture. And that means  analyzing work in STP (Segmentation, Targeting and Positioning)  (Source: Lovelock C., Wirtz, J. & Chew, P. 2012, Essentials of Services Marketing, p.70-82)
Case: 
 Jamil had sorted his business ideas on a scale of customers needs importancy and now should think about those customers. For instance interior design clients. Are they private or business clients? Young or old? Poor or rich? Are they returning customers or single-entry? Who makes the decision? Etc.

1.4. After successful work on previous two questions it is time to apply the 4Ps of Marketing to our product or service. For a good there are: Product; Place and Time; Prices; Promotion and education. If we have a service, then 3 other P's also have significant role in process, it affect how customer interfere with a acompany: Process; Physical Environment; People.  (Source: Lovelock C., Wirtz, J. & Chew, P. 2012, Essentials of Services Marketing, p.26)
Case: Jamil had formed a report and now understand his main customer group and why they would pay for his product. But now he has another challenging task, to find out about his business in Cultural Training:
A) Product. Does his cultural training should also involve some priests lectures or would it be enough just his speech? Does he need to make a block about Indian food?
B) Place. Should it be 3 hours or 2 day seminars? Should it be in downtown or in cabin in woods?
C) Price.  Should I make one pricing for everyone or several pricing plans? Should I set average price or premium?
D) Promotion. Would it be enough to just post it on Facebook and to my contacts? Should I ask my network connections to place liflets in their shops?
E) Process. How many payment options should I offer? Do I have to arrange a transfer to the place?
F) Servicescape. Should it be a posh place? Do we need blanckets for our guests?
G) People.  Do I need a smiling assistant? Do I need some smiling monks?

1.5. All actions of the above could facilitate the process of creating offering and make it clear, structured and balanced.

2. How does culture affect product decisions? Consumer behaviour is influenced by internal and external conditions such as demographics, psychographics (lifestyle), personality, environment, motivation, knowledge, attitudes, beliefs, and feelings.People from different cultures tend to make decisions differently and even impulse purchases behavior differs.

Case: 

Jamil has unexpectedly found that people wanted his Interior decorations not because they would feel there comfortable and enjoy sleeping in this beautiful living room, but for other reasons. One person wanted to brag with his own modern house to friends, another one tried to cover his poverty with cheap laconic interior solutions. One woman ordered two rooms for her massage saloon.
That was a good experience and a good reason to asses his positioning and maybe change it to fit customers demands in this culture. Now he start to understand more about underlies of his clients.

3. How to benefit from networks? Keith Ferrazzi in his book "Never Eat Alone" suggest to establish connections with people before you are planning to have benefits from those people. Keith suggest to find themes, that you are genuinely intrested in, like sports or other hobbies. The one valuable advise from Ferazzi is to do not do networking for a networking itself, and try to find unique contact areas with a person.

 On web-site of Queensland Goverment I have found neat list of possible benefits of networking and I may say, that I share this position.
Building your network web may help you to find:-staff

-suppliers

-customers

-business partners and investors

-new locations to operate in

-a business mentor or mentee

-leads and referrals

-new opportunities

-information on current business trends and developments in your industry

-information to help you benchmark your business.

(Source: https://www.business.qld.gov.au/business/running/managing-business-relationships/networking-in-business/networking-improve-business Page 6) 

It was a useful reminder for me, to maintain my connections in order to keep in vision insights and market trends.

Case: 

Jamil's first tourist was a builder and two years later helped him to finish new sauna. Second's Jamil client told about his services in dance class. Jamil got few more clients because of that. Third client of Jamil was from another part of Finland and he come up with idea about franchise to him.

4. Where to find relevant information?

One of the best ways to find information to fill a report with is to create this information. The most reliable method in customer development, accordingly to Steve Blank is to interview your customer.
To Identify customer needs, determine functional requirements, concept development

and analysing of competitive products may be used Kano model.
(Source: Jacobs, Randy, Evaluating Satisfaction with Media Products and Services: An Attribute

Based Approach, European Media Management Review, 1999)
Kano model helps to place diverse functions of your product on a scale with two dimensions: Satisfaction and Execution. With Kano surveys it is possible to expose necessity of separate functions.
However, there are also other traditional ways to search information such as: Internet search, Expert consultation, network reccomendations.