Buying Strategy

Overview:

With every purchase a company makes, there are many ways to benefit from the ever-changing tax structure as long as the timing is right. Those lower, out-of-pocket costs result not only from the routine, accelerated cost write offs for depreciation that are already in the tax law, but also from the new law’s first-year expensing increases as well as from increased first-year “bonus” depreciation. Every site and facility planner has long been aware of the tax deduction of a reasonable allowance for the exhaustion, wear, and tear of business equipment and property. Under the standard modified accelerated cost recovery system (MACRS), the “no questions asked,” “one write off fits all” depreciation has been turned into a cost recovery system. Read this article to have more apprehension.

“It’s scorched earth with Dickie Scruggs,” says Mr. Merkel, sitting in a wood-paneled office featuring duck-hunting memorabilia and two framed checks representing about $17 million in payments that Mr. Scruggs had to disgorge to Mr. Merkel’s client — a lawyer named Alwyn Luckey who argued that Mr. Scruggs shortchanged him for work he performed on asbestos cases that made Mr. Scruggs rich.

Mr. Merkel and prosecutors say that the Luckey case foreshadowed some of Mr. Scruggs’ woes in the current bribery case. “As far as whether he’s guilty, I can’t say,” Mr. Merkel concedes. “But I’m not surprised, because he’s willing to use any means to an end. And it irks the hell out of me when Scruggs skates on the edge and makes the profession look bad.”

According to an official investigating the Scruggs case who asked not to be identified because he was not authorized to discuss it publicly, federal prosecutors have asked the Justice Department’s Public Integrity Section to examine whether Mr. Scruggs has engaged in multiple bribery attempts of local judges. A spokeswoman for the Justice Department declined to comment publicly on the case. The case is also likely to fuel further debate over the merits of lucrative class-action lawsuits.

Even if Mr. Merkel turns out to be wrong, the indictment casts a different kind of spotlight on Mr. Scruggs, who cultivated the image of a smooth Southern lawyer capable of winning huge verdicts on behalf of smokers and, most recently, victims of Hurican Catarina. Indeed, Mr. Scruggs was a key character in “The Insider,” the 1999 film that detailed how he helped win a $248 billion settlement from the tobacco industry.

Consumer Buying Behavior

Possibly the most challenging concept in marketing deals with understanding why buyers do what they do (or don’t do). But such knowledge is critical for marketers since having a strong understanding of buyer behavior will help shed light on what is important to the customer and also suggest the important influences on customer decision-making. Using this information, marketers can create marketing programs that they believewill be of interest to customers.

As you might guess, factors affecting how customers make decisions are extremely complex. Buyer behavior is deeply rooted in psychology with dashes of sociology thrown in just to make things more interesting. Since every person in the world is different, it is impossible to have simple rules that explain how buying decisions are made. But those who have spent many years analyzing customer activity have presented us with useful “guidelines” in how someone decides whether or not to make a purchase.

In fact, pick up any textbook that examines customer behavior and each seems to approach it from a different angle. The perspective we take is to touch on just the basic concepts that appear to be commonly accepted as influencing customer behavior. We will devote two sections of the Principles of Marketing tutorial to customer behavior. In this section we will examine the buying behavior of consumers (i.e., when people buy for personal reasons) while in Part 5: Business Buying Behavior we will examine factors that influence buyer’s decisions in the business market.

Banking managment

Banking is a commercial or state institution that provides financial services , including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit. A commercial bank accepts deposits from customers and in turn makes loans, even in excess of the deposits; a process known as fractional-reserve banking. Some banks (called Banks of issue) issue banknotes as legal tender. Many banks offer ancillary financial services to make additional profit; for example, most banks also rent safe deposit boxes in their branches.

Currently in most jurisdictions commercial banks are regulated and require permission to operate. Operational authority is granted by bank regulatory authorities which provides rights to conduct the most fundamental banking services such as accepting deposits and making loans. A commercial bank is usually defined as an institution that both accepts deposits and makes loans; there are also financial institutions that provide selected banking services without meeting the legal definition of a bank.

1. Banks have influenced economies and politics for centuries. Historically, the primary purpose of a bank was to provide loans to trading companies. Banks provided funds to allow businesses to purchase inventory, and collected those funds back with interest when the goods were sold. For centuries, the banking industry only dealt with businesses, not consumers. Commercial lending today is a very intense activity, with banks carefully analysing the financial condition of their business clients to determine the level of risk in each loan transaction. Banking services have expanded to include services directed at individuals, and risk in these much smaller transactions are pooled.

A bank generates a profit from the differential between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities. This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclic and dependent on the needs and strengths of loan customers. In recent history, investors have demanded a more stable revenue stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees but also including service charges on array of deposit activities and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers, etc.). However, lending activities still provide the bulk of a commercial bank's income.

The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Florentines bankers, who used to make their transactions above a desk covered by a green tablecloth.^{[citation needed]} However, there are traces of banking activity even in the babylonian times, and indeed a book about the history of banking is named : Banking, from Babylon to Wall Street.

The banking industry is a highly regulated industry with detailed and focused regulators. All banks with FDIC-insured deposits have the FDIC as a regulator; however, for examinations, the Federal Reserve is the primary federal regulator for Fed-member state banks; the Office of the Comptroller of the Currency (“OCC”) is the primary federal regulator for national banks; and the Office of Thrift Supervision, or OTS, is the primary federal regulator for thrifts. State non-member banks are examined by the state agencies as well as the FDIC. National banks have one primary regulator—the OCC.

Each regulatory agency has their own set of rules and regulations to which banks and thrifts must adhere.

The Federal Financial Institutions Examination Council (FFIEC) was established in 1979 as a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions. Although the FFIEC has resulted in a greater degree of regulatory consistency between the agencies, the rules and regulations are constantly changing.

In addition to changing regulations, changes in the industry have led to consolidations within the Federal Reserve, FDIC, OTS and OCC. Offices have been closed, supervisory regions have been merged, staff levels have been reduced and budgets have been cut. The remaining regulators face an increased burden with increased workload and more banks per regulator. While banks struggle to keep up with the changes in the regulatory environment, regulators struggle to manage their workload and effectively regulate their banks. The impact of these changes is that banks are receiving less hands-on assessment by the regulators, less time spent with each institution, and the potential for more problems slipping through the cracks, potentially resulting in an overall increase in bank failures across the United States.

The changing economic environment has a significant impact on banks and thrifts as they struggle to effectively manage their interest rate spread in the face of low rates on loans, rate competition for deposits and the general market changes, industry trends and economic fluctuations. It has been a challenge for banks to effectively set their growth strategies with the recent economic market. A rising interest rate environment may seem to help financial institutions, but the effect of the changes on consumers and businesses is not predictable and the challenge remains for banks to grow and effectively manage the spread to generate a return to their shareholders.

The management of the banks’ asset portfolios also remains a challenge in today’s economic environment. Loans are a bank’s primary asset category and when loan quality becomes suspect, the foundation of a bank is shaken to the core. While always an issue for banks, declining asset quality has become a big problem for financial institutions. There are several reasons for this, one of which is the lax attitude some banks have adopted because of the years of “good times.” The potential for this is exacerbated by the reduction in the regulatory oversight of banks and in some cases depth of management. Problems are more likely to go undetected, resulting in a significant impact on the bank when they are recognized. In addition, banks, like any business, struggle to cut costs and have consequently eliminated certain expenses, such as adequate employee training programs.

Banks also face a host of other challenges such as aging ownership groups. Across the country, many banks’ management teams and board of directors are aging. Banks also face ongoing pressure by shareholders, both public and private, to achieve earnings and growth projections. Regulators place added pressure on banks to manage the various categories of risk. Banking is also an extremely competitive industry. Competing in the financial services industry has become tougher with the entrance of such players as insurance agencies, credit unions, check cashing services, credit card companies, etc.

So what do you think, is banking in your country good or bad ? :)

Part 2 - Using Marketing in prax

In the small chapter category (less than 75 members), the Boston chapter received awards in the Membership and Programs categories. In addition, the chapter was presented with the Emerging Chapter Award.

In the medium chapter category (75-200 members) Northern California received an award for its chapter Web Site, and the Houston chapter received awards for its annual Awards program, Fund Raisers, and Student Assistance.

In the large chapter category (more than 200 members), the Milwaukee chapter was recognized with Membership, Programs, and Student Assistance awards. In addition, the chapter also was recognized with the Chapter Momentum award.

In the same category, the Colorado chapter earned recognition for its Awards Programs, Fund Raisers, Website, CareerLink, Publicity, and Newsletters activities. The chapter also was named Chapter of the Year in the large chapter category.

Representatives from various local chapters display their chapter achievement awards presented at Chapter Day during the 2007 BMA Annual Conference. From left to right: Marilee Yorchak, BMA Colorado; Greg Olsen, BMA Colorado; Vic Cherubini, BMA Houston; Robin Seidner, BMA Colorado; Inez Moriarty, BMA Houston; Brian Bearden, BMA Houston; Larry Perrault, BMA Boston, Mike Stefaniak, BMA Milwaukee; Karen Sheehey, BMA Boston; Meg Goodman, BMA International; Karen Conrad, BMA Milwaukee; John Favalo, BMA International; Ilka Hoffins, BMA Milwaukee; and Jeannie Zeames, BMA Colorado.

Marketing is so easy, but

A market-focused, or customer-focused, organization first determines what its potential customers desire, and then builds the product or service. Marketing theory and practice is justified in the belief that customers use a product/service because they have a need, or because a product/service provides a perceived benefit.

"The right Product, at the right Place, at the right Time, and at the right Price"

Two major factors of marketing are the recruitment of new customers (acquisition) and the retention and expansion of relationships with existing customers (base management).

Once a marketer has converted the prospective buyer, base management marketing takes over. The process for base management shifts the marketer to building a relationship, nurturing the links, enhancing the benefits that sold the buyer in the first place, and improving the product/service continuously to protect the business from competitive encroachments.

Marketing methods are informed by many of the social sciences, particularly psychology, sociology, and economics. Anthropology is also a small, but growing, influence. Market research underpins these activities. Through advertising, it is also related to many of the creative arts.

For a marketing plan to be successful, the mix of the four "Ps" must reflect the wants and desires of the consumers in the target market. Trying to convince a market segment to buy something they don't want is extremely expensive and seldom successful. Marketers depend on marketing research, both formal and informal, to determine what consumers want and what they are willing to pay for it. Marketers hope that this process will give them a sustainable competitive advantage. Marketing management is the practical application of this process. The offer is also an important addition to the 4P's theory.

Within most organizations, the activities encompassed by the marketing function are led by a Vice President or Director of Marketing. A growing number of organizations, especially large US companies, have a Chief Marketing Officer position, reporting to the Chief Executive Officer.

The American Marketing Association (AMA) states, “Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives".

he original 4Ps concept idea was developed to help marketers manage the four most important aspect of marketing. With the Internet and the Web 2.0, marketers need to adapt a new perspective on these elements that is encompassing and strategic, not narrow and tactical. Author and consultant Idris Mootee came up with the concept of “New 4Ps” model in 2001 in his book High Intensity Marketing (SA Press 2001) to supplement the traditional marketing 4Ps. They are Personalization, Participation, Peer-to-Peer and Predictive Modeling. Today,these are the directions that cutting edge marketing is advancing.

The first “P” is the simple idea of “Personalization” which now takes on a whole new meaning. The author refers to customization of products and services through the use of the Internet. Early examples include Dell on-line and Amazon.com, but this concept is further extended with emerging social media and advanced algorithms. Emerging technologies will continue to push this idea forward.

The second “P” is the concept of “Participation”, it is to allow customer to participate in what the brand should stand for; what should be the product directions and even which ads to run. This concept is laying the foundation for disruptive change that we have yet to see the full impact with the degree of democratization brought about by this idea. By enabling each of us to create and publish our own stories, the power of deciding what we read; listen and watch has spread from a handful of media companies to anyone with a camera, a connection and a computer.

The third “P” is “Peer-to-Peer” which refers to customer networks and communities where advocacy happens. The historical problem with marketing is that it is "interruptive" in nature, trying to impose their brand on the customer. This is most apparent in TV advertising, which pushes out its own idea of what the brand is without engaging the customers. These "passive customer bases" will ultimately be replaced by the "active customer communities". Brand engagement happens within those conversations. P2P is now being referred as Social Computing and will likely to be the most disruptive force in the future of marketing.

The last “P” is “Predictive Modeling” which refers to neural network algorithms that are being successfully applied in marketing problems (both a regression as well as a classification problem).

Choice

• Consumer goods -- comprising convenience, select and speciality goods.
• Industrial goods -- used in the manufacturing process to produce other goods.
• Services -- usually personal.

Scope

• Breadth -- number of product lines in a range.
• Depth -- number of product items in a product line.

Steps in product design

• Design and development of product ideas.
• Selection of and sifting through product ideas.
• Design and testing of product concept.
• Analysis of profitability of product concept.
• Design and testing of physical product.
• Test marketing.

Requirements of good packaging

• Appropriately designed for target market
• Eye-catching
• Suitable to product
• Compliant with retailers' requirements
• Promotes image of enterprise
• Distinguishable from competitors' products
• Strong, convenient, well-designed

[edit] Forms of packaging

• Speciality packaging -- emphasises the elegant character of the product
• Packaging for double-use
• Combination packaging -- two or more products packaged in the same container
• Kaleidoscopic packaging -- packaging changes continually to reflect a series or particular theme
• Packaging for immediate consumption -- to be thrown away after use
• Packaging for resale -- packed, into appropriate quantities, for the retailer or wholesaler

[edit] Significance of a trademark

• Distinguishes one company's goods from those of another
• Serves as advertisement for quality
• Protects both consumers and manufacturers
• Used in displays and advertising campaigns
• Used to market new products

[edit] Requirements of a good trademark

• Reflects products' advantages
• Good, simple language
• Easily pronounced and remembered
• Distinct from names of other products
• Easily added to an existing range
• Easily registered for legal protection

[edit] Pricing

Pricing refers to the amount of money exchanged for a product. This value is determined by utility to the consumer in terms of money and/or sacrifice that he is prepared to give for it.

[edit] Objectives

• Definite sales volume
• Achieve profit
• Larger market share
• Maintain market share
• Eliminate competition
• Advantages of mass production
• Satisfactory return on capital

[edit] Factors influencing price-determination

• Production and distribution costs
• Substitute goods available
• Normal trade practices
• Fixed prices
• Reaction of distributors
• Reaction of consumers
• Nature of demand:
  • Elastic
  • Inelastic
• Form of market:
  • Perfect competition
  • Monopolistic competition
  • Monopoly
  • Oligopoly

[edit] Steps to determine price

• Determine market share to be captured
• Set up price strategy
• Estimate demand
• Evaluate competitors' reactions

[edit] Distribution

[edit] Channels

• Manufacturer to consumer (most direct)
• Manufacturer to wholesaler to retailer to consumer (traditional)
• Manufacturer to agent to wholesaler to retailer to consumer

[edit] Manufacturers

[edit] Reasons for direct selling methods

• Manufacturer wants to demonstrate goods.
• Wholesalers, retailers and agents not actively selling.
• Manufacturer unable to convince wholesalers or retailers to stock product.
• High profit margin added to goods by wholesalers and retailers.
• Middlemen unable to transport.

[edit] Reasons for indirect selling methods

• Manufacturer does not have the financial resources to distribute goods.
• Distribution channels already established.
• Manufacturer has no knowledge of efficient distribution.
• Manufacturer wishes to use capital for further production.
• Too many consumers in a large area; difficult to reach.
• Manufacturer does not have a wide assortment of goods to enable efficient marketing.

[edit] Wholesalers

[edit] Reasons for using wholesalers

• Bear risk of selling goods to retailer or consumer
• Storage space
• Decrease transport costs
• Grant credit to retailers
• Able to sell for the manufacturers
• Give advice to manufacturers
• Break down products into smaller quantities

[edit] Reasons for bypassing wholesalers

• Limited storage facilities
• Retailers' preferences
• Wholesaler cannot promote products successfully
• Development of wholesalers' own brands
• Desire for closer market contact
• Position of power
• Cost of wholesalers' services
• Price stabilisation
• Need for rapid distribution

[edit] Ways of bypassing wholesalers

• Sales offices or branches
• Mail orders
• Direct sales to retailers
• Travelling agents

[edit] Agents

• Commission agents work for anyone who needs their services. They do not acquire ownership of goods but receive del credere commission.
• Selling agents act on an extended contractual basis, selling all of the products of the manufacturer. They have full authority regarding price and terms of sale.
• Buying agents buy goods on behalf of producers and retailers. They have an expert knowledge of the purchasing function.
• Brokers specialise in the sale of one specific product. They receive a brokerage.
• Factory representatives represent more than one manufacturer. They operate within a specific area and sell related lines of goods but have limited authority regarding price and sales terms.

[edit] Marketing communications

[edit] Advertising

• Paid form of public presentation and expressive promotion of ideas
• Aimed at masses
• Manufacturer may determine what goes into advertisement
• Pervasive and impersonal medium

[edit] Functions and advantages of successful advertising

• Task of the salesman made easier
• Forces manufacturer to live up to conveyed image
• Protects and warns customers against false claims and inferior products
• Enables manufacturer to mass-produce product
• Continuous reminder
• Uninterrupted production a possibility
• Increases goodwill
• Raises standards of living (or perceptions thereof)
• Prices decrease with increased popularity
• Educates manufacturer and wholesaler about competitors' offerings as well as shortcomings in their own.

[edit] Objectives

• Maintain demand for well-known goods
• Introduce new and unknown goods
• Increase demand for well-known goods

[edit] Requirements of a good advertisement

• Attract attention
• Stimulate interest
• Create a desire
• Bring about action

[edit] Seven steps in an advertising campaign

• Market research
• Setting out aims
• Budgeting
• Choice of media
• Design and wording
• Coordination
• Test results

[edit] Unethical advertising

• False or deceptive claims
• Deceptive names
• Offering second-hand or rebuilt goods as new ones
• False statements about competitors

[edit] Personal sales

Oral presentation given by a salesman who approaches individuals or a group of potential customers:

• Live, interactive relationship
• Personal interest
• Attention and response

[edit] Sales promotion

Short-term incentives to encourage buying of products:

• Instant appeal
• Anxiety to sell

[edit] Publicity

• Stimulation of demand through press release giving a favourable report to a product
• Higher degree of credibility
• Effectively news
• Boosts enterprise's image

[edit] Beyond the 4 Ps

[edit] Resources, Relationships, Offerings and Business Models

Marketing in the past focused mainly on basic concepts like the 4 Ps, and primarily on the psychological and sociological aspects of marketing. Competitive advantage was created by directly appealing to the needs, wants and behaviors of customers, better than the competition. Successful marketing was based on who could create the better brand or the lowest price or the most hype. Marketing in the future will be based on a more strategic approach to competitive marketing success.^[2] Marketers will consciously build and allocate resources, relationships, offerings and business models that other companies find hard to match. This does not mean the four P approach is dead, simply that it has been expanded upon.

[edit] Resources

Companies with a greater number of resources than their competitors will have an easier time competing in the marketplace. Resources include: financial (cash and cash reserves), physical (plant and equipment), human (knowledge and skill), legal (trademarks and patents), organizational (structure, competencies, policies), and informational (knowledge of consumers and competitors). Small companies usually have a harder time competing with larger corporations because of their disadvantage in resource allocation.

[edit] Relationships

Success in business, as in life, is based on the relationships you have with people. Marketers must aggressively build relationships with consumers, customers, distributors, partners and even competitors if they want to have success in today's competitive marketplace. There are four type of relationships (1)win-win (2)win-lose (3)lose-lose (4)lose-win.(customer-vendor)

[edit] Business Models

The concept of product vs. product in competitive marketing is dying. It's slowly becoming business model vs. business model. Business model innovation can make the competition's product superiority irrelevant. Business model innovation allows a marketer to change the game instead of competing on a level playing field.

[edit] Customer focus

Many companies today have a customer focus (or customer orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach.

In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.^[3]

A formal approach to this customer-focused marketing is known as SIVA^[4] (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus.

The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, place, promotion) of marketing management.

Product -> Solution
Promotion -> Information
Price -> Value

Place ->Access

The four elements of the SIVA model are:

- Solution: How appropriate is the solution to the customers problem/need

- Information: Does the customer know about the solution, and if so how, who from, do they know enough to let them make a buying decision

- Value: Does the customer know the value of the transaction, what it will cost, what are the benefits, what might they have to sacrifice, what will be their reward?

- Access: Where can the customer find the solution. How easily/locally/remotely can they buy it and take delivery.

This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management Journal of the American Marketing Association, and presented by them in Market Leader - the journal of the Marketing Society in the UK.

The model focuses heavily on the customer and how they view the transaction.

Product focus