Monday, July 16, 2012

SELECTION OF A PRODUCT


Very essential for being success in business venture. The various factors that influence the entrepreneur in selecting the right product are:

  • The import restrictions or whether the import of the selected items is banned- In case of banned item, the domestic market will offer considerable scope for selling as the demand for such a product would not be met by import.
  • Whether the entrepreneur or his partners have substantial experience in the manufacture and marketing of certain products. Most often, the items selected are of those lines of products in which entrepreneur or his colleagues have gathered enough experience.
  • Degree of profitability that rules in the market. Such information can be obtained from the banks or the financial corporations or the market itself.
  • Concessions available from the government for producing a product that may be import substitution. Entrepreneur will select a particular product that enjoys a substantial amount of incentives, concessions, liberal taxation policies etc.
  • Products belonging to priority industries or small- scale sector- certain products are listed by the government for purchasing exclusively from the small- sector.
  • Market for the product – if the product also has an export market, it widens the scope of marketing and hence the success of the enterprise.
  • Certain products are permitted for production only if the others belong to de- licensed category. Hence a product belonging to licensed category or de- licensed category is also considered before selecting the product.
  • Products enjoying specific advantages such as locations viz, if produced in free trade zone in a backward area.
  • Product belonging to an ancillary unit serves as a major component for the OEM- provides a ready demand and hence ensures easy marketability.
  • Finally, whether the machinery and raw materials required to manufacture the product would be imported or indigenous, requirement of skilled/ unskilled labor, indigenous technical know-how or foreign collaboration. The study of project idea is the starting point of the feasibility analysis.

SEARCH FOR A BUSINESS IDEA

CHOOSING AN IDEA

To get established as a successful entrepreneur depends to a large extent on a good idea. Idea must not only be good for the market, but good for the project and good for the entrepreneurs. Further, it should be manageable without much dependence on others and should provide satisfactory results to the entrepreneur. In the idea stage, suggestions for new products are obtained from all possible sources viz. customers, competitors, R&D, distributors and company employees. Essentially the entrepreneur needs to scan the environment.
  
THE VARIOUS SOURCES ARE

Personal Informal Sources
  • Family
  • Customers
  • Friends
  • Colleagues
  • Salesman
  • Social Contacts
  • Employees

Personal Formal Sources
  1. Bankers
  2. Business Consultants

Impersonal Written Sources
  1. Magazines
  2. Journals
  3. Books
  4. Newsletter
  5. Newspapers
  6. Catalogues

Impersonal Oral Sources
  1. Trade Shows
  2. Seminars/ Workshops
  3. Professional Organizations
  4. Small Business Organizations
  5. Suppliers/ Dealers
One should use as many resources as possible for the purpose of scanning the environment.

OBSERVATIONS
  • With constant observation, entrepreneurs target potential market, consumers, products and availability raw materials and widening of market demand.
  • Entrepreneurs get tempted to step into the field that profit potential and is socially acceptable.

Setting the Advertising Budget

Setting an advertising objective is easy, but achieving the objective requires a ellthought out strategy. One key factor affecting the strategy used to achieve advertising objectives is how much money an organization has to spend. The funds designated for advertising make up the advertising budget and it reflects the amount an organization is willing (i.e., approved by high-level management) to commit to achieve its advertising objectives.

Organizations use several methods for determining advertising budgets including:

Percentage of Sales – Under this approach advertising spending is set based on either a percentage of previous sales or a percentage of forecasted sales. For example, an organization may set next year’s advertising budget at 10% of this year’s sales level. One problem with this approach is that the budget is based on what has already happened and not what is expected to occur. If the overall market grows rapidly in the following year, the 10% level from the previous year may be well below what is necessary for the company to maintain or increase its market share. Alternatively, companies may consider allocating advertising funds based on a percentage of forecasted sales. In this way advertising is viewed as a driver of future sales and spending on advertising is linked directly to meeting future sales forecasts. However, since future sales are not guaranteed, the actual percentage spent may be considerably higher than expected if the sales forecast is greater than what actually occurs.

What is Affordable – Many smaller companies find spending of any kind to be constraining. In this situation, advertising may be just one of several tightly allocated spending areas and, thus, the level spent on advertising may vary over time. For these companies, advertising may only occur when extra funds are available.

Best Guess – Companies entering new markets often lack knowledge of how much advertising is needed to achieve their objectives. In cases where the market is not well understood, marketers may rely on their best judgment (i.e., executive’s experience) of what the advertising budget should be.

Setting Advertising Objectives:

The advertising objectives are determines on the following basis:

Message About Product – Details about the product play a prominent role in advertising for new and existing products. In fact, a very large percentage of product-oriented advertising includes some mention of features and benefits offered by the marketer’s product. Advertising can be used to inform customers of changes that take place in existing products. For instance, if a beverage company has purchased the brands of another company resulting in a brand name change, an advertising message may stress “New Name but Same Great Taste”.

Message About Price – Companies that regularly engage in price adjustments, such as running short term sales (i.e., price markdown), can use advertising to let the market know of price reductions. Alternatively, advertising can be used to encourage customers to purchase now before a scheduled price increase takes place.

Message About Other Promotions – Advertising often works hand-in-hand with other promotional mix items. For instance, special sales promotions, such as contests, may be announced within an advertisement. Also, advertising can help salespeople gain access to new accounts if the advertising precedes the salesperson’s attempt to gain an appointment with a prospective buyer. This may be especially effective for a company entering a new market where advertising may help reduce the uncertainty a buyer has about a new company.

Message About Distribution – Within distribution channels, advertising can help expand channel options for a marketer by making distributors aware of the marketer’s offerings. Also, advertising can be used to let customers know locations where a product can be purchased

BRIEF HISTORY OF ADVERTISING

Modern advertising is largely a product of the twentieth century, however, communication has been a part of the selling process ever since the exchange of goods between people started. The development of technology and research has led to increased sophistication in advertising in recent decades. During ancient and medieval times, advertising was crude if measured by present day standards, however, the basic reason for using advertising was the same then as it is now.

Institutions come into existence only when a need for them develops. A variety of external forces support and nourish the growth and development of an institution.
To survive, the institution must be dynamic, flexible and adaptable to meet the needs in the changing conditions of the environment.

The recorded history of advertising goes back to about 5000 years including the modern satellite and internet age. Our knowledge of advertising in ancient times is quite fragmented. Nevertheless, it seems that the urge to advertise is a part of human nature since ancient times. The diggings by archaeologists, in countries rimming the Mediterranean sea, has unearthed a Babylonian Clay tablet of about 3000BC, Bearing inscription for an ointment dealer, a scribe , and a shoemark, Romans and their predecessor knew that “it pays to advertise”. Papyri found in the ruins of Thebes (Egypt) show announcements offering rewards for the return of runaway slaves about 3000 BC.

Before the invention of printing from movable type (about AD 1438) by Johann Gutenberg there were three forms of advertising.

1. Trademarks: Craftsman, in early times, wanted to be identifes for their skills and places their individual marks on goods that they crafted. This led to reputation building of particular artisans by word of mouth. Buyers learnt to look for distinctive marks just as we look today for brands names and trademarks on products.

2. Signs: Phoenicians, and other traders, painted commercial messages on prominent tocks along trade routes that they frequented. These messages highly praised the products that were for sale. This is an example of ancient outdoor advertising, Archaeologists have revealed, from excavations at Pompeii, that little shops had inscriptions on walls near the entrance to inform the passers-by whether the shop sold pottery, wine, bread, or any other goods.

3. Town Criers: This system of town criers was perhaps, present in all developed civilizations of the ancient world. In Greece, during the golden age, town criers were paid to go around town spreading news and making announcements in the streets of Athens. Epics and history books about ancient India reveal that the rulers used the system of town criers in India to inform the public of various public interest matters. In rural India, town criers were used till as late as the 1950s.

The first known printed advertisements in the English language appeared nearly forty years after the invention of movable type. William Caxton of London printed the first advertisements. It was a handbill of rules for the guidance of clergy at Easter and was put on church doors. The printed newspaper emerged form the newsletters which were handwritten by professional writers for limited circulation among the nobles and others.

The first ad, in any language, to be printed on a circulated sheet appeared in German news pamphlets in about 1525. The ad praised the virtues of a mysterious drug. It was from such beginnings that the printed newspaper emerged and the first printed newspaper in Engli8sh came out in 1622, called the Weekly News of London. The first advertisement appeared in an English newspaper in 1625.

The first ad in America appeared in 1704 in the Boston Newsletter. The first ad that appeared offered a reward for the capture of a thief. This was more like the reward for returned slaves written on Egyptian Papyrus thousands of years before present day advertising came into being.

By the middle of the 17th century, weekly newspapers called ‘mercuries’, started to appear in England. Most of the early advertisements in these newspapers were in the form of announcements. Importers of products new to England were prominent advertisers. The first ad offering coffee appeared in a newspaper in 1652, followed by an offering of chocolate in 1657 and tea in 1658.

DEVELOPMENT OF MODERN ADVERTISING:

It is a fact that advertising as we know it really had its beginnings in mid 19th century. Volney B Palmer was the first advertising agent who established an office in Philadelphia. For a fee, he worked as an agent for newspapers numbering about 1400. He sold space to advertisers throughout the country. He did not provide any creative or planning services to clients, except the media selection.

In the late 1880s, John E Powers emerged as great copywriter. He had a simple approach-he believed in “printing the news of store…no catchy headings…no brag , no pressure.” J Walter Thompson, a young advertising executive, signed an exclusive contract with twenty-five of the best American magazines and had an impressive list of advertisers. He is also known as the inventor of the modern advertising agency.

Albert Lasker and Claude C. Hopkins got together in the last decade of the 19th century. Claude C Hopkins developed the ‘reason why’ approach to advertising copy. Albert Lasker made the ad agency a professional business that included the “records of results.” This was the counterpart of today’s research department.

The dominant approach to copy writing was “reason why” during this time. However, a famous copywriter, Theodore F McManus of General Motors, challenged this style. He believed in producing impressionistic copy by incorporating original art, striking layouts and elegant writing, to create a positive image of the company and its products.

An agency, Lord and Thomas, had two remarkable copywriters, John E Kennedy (joined Lord and Thomas in 1898) and Claude C Hopkins, and enjoyed a reputation for creative work. Hopkins had joined Lord and Thomas in 1907 and was regarded by many as the greatest creator of advertising who ever practiced the art.

Hopkins was particularly good at understanding the consumer and how advertising should be integrated in the total marketing effort. John E Kennedy believed that advertising was “salesmanship in print.” He tried to provide a reason why customers should buy the advertised products.

During the 1920s, modern marketing research entered the world of advertising. As a result of this new development, advertising in this period started stressing on the outcomes of consumer purchases such as health, happiness, status, love, etc.
Advertisements contained a bold headline, artwork, photography and plenty of colour. Before the severe depression of the 1920s, radio was not being used for advertising. Strange though it seems, during this period of depression, commercial radio emerged, though it was not really a good period for advertising.

CONTEMPORARY ADVERTISING:

Most of the growth in advertising has happened after Second World War. Excessive mechanized production and serious efforts to rebuild nations and economies were under way. Western Europe and the Far East started to compete in world markets and advertising became an essential part of this new economy. Large corporations such as Coca-Cola, General Motors and IBM had long been active all over the world. After 1946, quite a number of medium and small companies entered the international market. Large advertising agencies of USA, Western Europe and the Far East started opening their offices in several countries.

Specialists in market research, sales promotion, merchandising and public relations started running the advertising industry during the 1950s. Creativity in advertising was almost non-existent till then and ads were mostly “me too” type of messages with a lot of worldly visualization and little copy. Rossers Reeves of Ted Bates Agency was probably the most successful among copywriters. He originated the concept of USP (Unique Selling Proposition). His argument was that the marketer should discover one important attribute of his product. This attribute should be communicated properly and effectively to the audience and should be repeated over and over. It was during the 1950s that television emerged as one of the most spectacular development in the history of advertising. Television showed a significant advantage over other media as it could combine both sight and sound.

It was mainly because of the efforts of Leo Burnett, David Ogilvy and William Bernbach that creativity and soft sell were reintroduced in advertising. Burnett’s contribution in the late 1950s and 1960s brought drama and warmth to advertising with unforgettable characters such as the Marlboro Man. Ogilvy, with the Hathaway shirt man wearing an eye-patch, introduced a unique type of intelligence and class to advertising. Bernbach’s contribution was combining copy, art and humour. “We try harder because we are No.2” is the ad which has been hailed as one of the most remarkable advertisements by Bernbach.

It seems relevant to especially look at the development of Indian advertising. Two British advertising agencies, J. Walter Thompson and D J Keyemer, were the ones that laid foundations of professional advertising in India in the early 1950s

J Walter Thompson is now HTA and D J Keymer became Ogilvy & Mather. The positioning era had not dewaned till the 1950s and it was the time of “ART in INDUSRTY”. Major advertisers like Burmah Shell and Dunlop were more concerned with “aesthetic creativity” rather than the compulsion of selling. Even in the mid – 1960s, advertising professionals had not heard of “positioning”. Subroto Sengupta, a well-known personality in the field of advertising, a renowned teacher of marketing and an author, was one of the founderdirectors of Clarion Advertising. He was formerly associated with D J Keymer. Another agency that flourished was OBM of Mumbai. Indians started Dattaram, Sista’s and National in Mumbai and Tom and Bay in Pune. To Start with, these agencies were only space buyers.

Kersey Kartrak, an exceptionally talented advertising professional, helped in nurturing many talents that include Arun Nanda, Mohammad Khan and Ravi Gupts in the mid-1960s. Gerson da Cunha introduces Alique Padamese who today is consider as the orginal god in Lintas. Other important names in Indian advertising include K Kurian, Sylvie da Kunha, Josephine Turor, Bobby Kooka, Subbash Ghosal and some others. The collapse of some agencies, such as MCM and Iyer’s , brought on the scene many new agencies. The major trend of the 1970s was a professional approach and consolidation.
During the 1980s, the economy showed significant improvements and advertising agencies flourished.

Advertising is rarely a stable business. I changes with business conditions, social and cultural times and technology. Ads in the pre-independence period in India were mainly addressed to the affluent classs. These ads were generally for tea, gramophones, cars, hotels and restaurants and cotton goods, etc. After independence, when the princely states and Zamindari system were abolished, a new middle-class emerged. With this significant changed social, cultural, and economic scenario, advertisers started paying attention to the middle class.

Advertising Club of Mumbai celebrated its silver jubilee in March 1980 and there was a workshop on twenty-five years of Indian advertising. There are now advertising clubs in al metropolitan cities and more than 500 advertising agencies. There are professional bodies that represent the advertiser, the advertising agency and the media. The names of these representative bodies are:
  • The Indian Society of Advertisers (ISA)
  • The Advertising Agencies Association of India (AAAI)
  • The Indian Newspaper Society (INS)

Indian advertising has taken rapid strides and is becoming more professional by the day. The comment of former Chief Executive of Hindustan Thompson Associates, Mr. Ghosal, about Indian advertising is interesting. He said, “Advertising is absolutely essential. Unless a product sells, the investment made in the project is rendered infructuous. But the trouble with Indian advertising is that it is not rooted in our ethos. It is westernized, partly because most of our advertising is aimed at the urban consumer. But there should be a mix, so that advertising can sell and yet retain the Indian flavor”.

Or advertising in the last couple of decades has made much progress in terms of technical excellence, copy and graphics. However, progress in the area of relating to the customers is slow. There is a definite trend, both in audio-visual and print ads, to use appeals that are compatible with Indian Culture.

Advertising in the 21st Century:

The past decade has witnessed a remarkable impact on advertising due to rapid strides in technology. It is difficult to determine exactly what the coming decades in this new century will bring, however, what looks certain is that there will be much greater consumer involvement and control and some degree of two-way communication. With the opening up of economies, mass marketers will continue to increase their operations on a world wide basis. More and more global players will increasingly adjust their strategies to a local market; country-based or region-based; and advertising will increasingly acquire a local colour. In this regard we are already witnessing some interesting advertising campaigns by Coca-Cola and Pepsi.

Further progress in artificial intelligence will add a totally new dimension to advertising and it’s planning. There will be major career opportunities for talented people in the electronic media. There will be a number of challenges unique to the coming generations and with these challenges there will be opportunities, responsibilities, and rewards that advertises of the past could not have imagined.