History of money

In the beginning, people bartered. Barter is the exchange of a good or service for another good or service, a bag of rice for a bag of beans. However, what if you couldn't agree what something was worth in exchange or you didn't want what the other person had. To solve that problem humans developed what is called commodity money.

A commodity is a basic item used by almost everyone. In the past, salt, tea, tobacco, cattle and seeds were commodities and therefore were once used as money. However, using commodities as money had other problems. Carrying bags of salt and other commodities was hard, and commodities were difficult to store or were perishable.

Barter	The first people didn't buy goods from other people with money. They used barter. Barter is the exchange of personal possessions of value for other goods that you want. This kind of exchange started at the beginning of humankind and is still used today. From 9,000-6,000 B.C., livestock was often used as a unit of exchange. Later, as agriculture developed, people used crops for barter. For example, I could ask another farmer to trade a pound of apples for a pound of bananas.
Shells	At about 1200 B.C. in China, cowry shells became the first medium of exchange, or money. The cowry has served as money throughout history even to the middle of this century.
First Metal Money	China, in 1,000 B.C., produced mock cowry shells at the end of the Stone Age. They can be thought of as the original development of metal currency. In addition, tools made of metal, like knives and spades, were also used in China as money.  From these models, we developed today's round coins that we use daily. The Chinese coins were usually made out of base metals which had holes in them so that you could put the coins together to make a chain.
Silver	At about 500 B.C., pieces of silver were the earliest coins.   Eventually in time they took the appearance of today and were imprinted with numerous gods and emperors to mark their value. These coins were first shown in Lydia, or Turkey, during this time, but the methods were used over and over again, and further improved upon by the Greek, Persian, Macedonian, and Roman empires. Not like Chinese coins, which relied on base metals, these new coins were composed from scarce metals such as bronze, gold, and silver, which had a lot of intrinsic value.
Leather Currency	In 118 B.C., banknotes in the form of leather money were used in China. One-foot square pieces of white deerskin edged in vivid colors were exchanged for goods. This is believed to be the beginning of a kind of paper money.
Noses	During the ninth century A.D., the Danes in Ireland had an expression "To pay through the nose." It comes from the practice of cutting the noses of those who were careless in paying the Danish poll tax.
Paper Currency	From the ninth century to the fifteenth century A.D., in China, the first actual paper currency was used as money. Through this period the amount of currency skyrocketed causing severe inflation. Unfortunately, in 1455 the use of the currency vanished from China. European civilization still would not have paper currency for many years.
Potlach	In 1500, North American Indians engaged in potlach, a term that describes the exchange of gifts at banquets, dances, and various rituals. Since the trading of gifts was so important in figuring the leaders’ community status, potlach went out of control as the gifts became more extravagant in an effort to surpass others' gifts.
Wampum	In 1535, though likely well before this earliest recorded date, strings of beads made from clam shells, called wampum, are used by North American Indians as money. Wampum means white, the color of the clam shells and the beads.
Gold Standard	In 1816, England made gold a benchmark of value. This meant that the value of currency was pegged to a certain number of ounces of gold. This would help to prevent inflation of currency. The U.S. went on the gold standard in 1900.
Depression	Because of the depression of the 1930's, the U.S. began a world wide movement to end tying currency to gold. Today, few nations tie the value of their currency to the price of gold. Other government and financial institutions now try to control inflation.
Today	At present, nations continue to change their currencies. For example, the U.S. has already changed its $100 and $20 banknotes. More changes are in the works.
Tomorrow	Tomorrow is already here. Electronic money (or digital cash) is already being exchanged over the Internet.

Market Research

Situation Analysis:

• A situation analysis is broken down into several different areas. These are: SWOT analysis, Customer Analysis (to establish a target market), Competitor Appraisal, and resource Analysis.
• The business must make a Situational Analysis based on the influences of the Macro environment, as well as the proximate environment
• Market Segmentation (target market) involves dividing up groups of people into buyers of certain products/services.

Customer Analysis:

A target market can be established by looking at the following factors:

• Where it is accessible (both the product and message)
• The demography (the population in a group or area(s)) of an assortment of places
• What size should the market be - In numbers (Sizeable?)- And in boundaries (Measurable)
• What are the identifiable factors of this market (how it differs to other target markets?)
• Psycho graphically - Lifestyle based/image of the target market
• Geographically - Which regions/areas
• Benefit - Focus on the benefit the product provides, for this target market, not on the customer characteristics
• Size - Frequency of use/level of demand in the target market, being heavy, medium, or light
• Using the above factors in formulating a group which satisfy all of the above points, you have now established a target market

Competitor Appraisal:

Once a target market has been established you must then analyze the competition (if any). There two three types of competition a company can have:

• Direct Competition - When one business approaches the customers of another business and attempts to win them over. This only happens when two or more companies are producing the same product.
• Substitute Products - Another type of competition which can come from one company producing a substitute product of another company’s product line.

Competitor Monitoring: This is a vital part of the market research. The best form of competitor monitoring, is to calculate their market share by estimating the total value of the market. If a competitor is gaining a greater market share, it is time for the company to re-organise their marketing plan. Competitive advantage refers to all things an organisation can do better than its competitors.

Resource Analysis:

Once you have completed a competitor appraisal you must then do a resource analysis. The businesses resources are broken down into three areas, these are:

• Staff - The marketing plan should analyse the skills of every employee involved in marketing. Your staff should be promoting the image you wish the public to think of the company. They should be well trained in areas such as the art of selling, good customer relations, and more. The people should have the following skills: Alertness, good knowledge of product, good appearance, good communication skills, and dedication to maintain the product in a competitive environment.

• Finance- Finance is needed for different methods of advertising or promoting the product. These needs vary according to the life cycle of the business. Finance is necessary for the promotion or development of new products

• Assets - The fixed assets of a business will determine the capacity of the production system. A successful product can be stopped from greater production if resources are at full usage.

SWOT Analysis:

This needless to say means an analysis of the:

• Strengths - which areas a business excels compared to its competitors

• Weaknesses - which areas other businesses has to improve on in relation to its competitors

• Opportunities - All things which benefit the business

• Threats - All things which can threaten a businesses survival, or a product's survival

Aspects which influence a SWOT analysis are:

• Market share - Sales – Profits
• Competition - Advertising - Size of customer base
• Pricing - Innovative potential.
• Product characteristics (company reputation, price, design, colour uniqueness, quality, warranty, packaging, sales support, and positioning in market)

Capital Market role and function

1. Mobilization of Savings: Capital market is an important source for mobilizing idle savings from the economy. It mobilizes funds from people for further investments in the productive channels of an economy. In that sense it activate the ideal monetary resources and puts them in proper investments.
2. Capital Formation: Capital market helps in capital formation. Capital formation is net addition to the existing stock of capital in the economy. Through mobilization of ideal resources it generates savings; the mobilized savings are made available to various segments such as agriculture, industry, etc. This helps in increasing capital formation.
3. Provision of Investment Avenue: Capital market raises resources for longer periods of time. Thus it provides an investment avenue for people who wish to invest resources for a long period of time. It provides suitable interest rate returns also to investors. Instruments such as bonds, equities, units of mutual funds, insurance policies, etc. definitely provides diverse investment avenue for the public.
4. Speed up Economic Growth and Development: Capital market enhances production and productivity in the national economy. As it makes funds available for long period of time, the financial requirements of business houses are met by the capital market. It helps in research and development. This helps in, increasing production and productivity in economy by generation of employment and development of infrastructure.
5. Proper Regulation of Funds: Capital markets not only helps in fund mobilization, but it also helps in proper allocation of these resources. It can have regulation over the resources so that it can direct funds in a qualitative manner.
6. Service Provision: As an important financial set up capital market provides various types of services. It includes long term and medium term loans to industry, underwriting services, consultancy services, export finance, etc. These services help the manufacturing sector in a large spectrum.
7. Continuous Availability of Funds: Capital market is place where the investment avenue is continuously available for long term investment. This is a liquid market as it makes fund available on continues basis. Both buyers and seller can easily buy and sell securities as they are continuously available. Basically capital market transactions are related to the stock exchanges. Thus marketability in the capital market becomes easy.

Customer Life Time Value:

Customer lifetime value has intuitive appeal as a marketing concept, because in theory it represents exactly how much each customer is worth in monetary terms, and therefore exactly how much a marketing department should be willing to spend to acquire each customer. In reality, it is difficult to make accurate calculations of customer lifetime value. The specific calculation depends on the nature of the customer relationship.

Customer relationships are often divided into two categories. In contractual or retention situations, customers who do not renew are considered "lost for good". Magazine subscriptions and car insurance are examples of customer retention situations. The other category is referred to as customer migrations situations. In customer migration situations, a customer who does not buy (in a given period or from a given catalog) is still considered a customer of the firm because she may very well buy at some point in the future. In customer retention situations, the firm knows when the relationship is over. One of the challenges for firms in customer migration situations is that the firm may not know when the relationship is over (as far as the customer is concerned).

Most models to calculate CLV apply to the contractual or customer retention situation.

These models make several simplifying assumptions and often involve the following inputs:

Churn rate The percentage of customers who end their relationship with a company in a given period. One minus the churn rate is the retention rate. Most models can be written using either churn rate or retention rate. If the model uses only one churn rate, the assumption is that the churn rate is constant across the life of the customer relationship.

Discount rate The cost of capital used to discount future revenue from a customer. Discounting is an advanced topic that is frequently ignored in customer lifetime value calculations. The current interest rate is sometimes used as a simple (but incorrect) proxy for discount rate.

Retention cost The amount of money a company has to spend in a given period to retain an existing customer. Retention costs include customer support, billing, promotional incentives, etc.

Period The unit of time into which a customer relationship is divided for analysis. A year is the most commonly used period. Customer lifetime value is a multi-period calculation, usually stretching 3-7 years into the future. In practice, analysis beyond this point is viewed as too speculative to be reliable. The number of periods used in the calculation is sometimes referred to as the model horizon.

Periodic Revenue The amount of revenue collected from a customer in the period.

Profit Margin Profit as a percentage of revenue. Depending on circumstances this may be reflected as a percentage of gross or net profit. For incremental marketing that does not incur any incremental overhead that would be allocated against profit, gross profit margins are acceptable.

Comfort Zones:

Tice has developed the concept of comfort zone in which people operate. Change of any type even if for the better, can be very uncomfortable. People become frozen into a particular situation and whilst it may not be the better situation available, the effort and uncertainty of changing can inhibit even a change for the better. Any movement away from the zone of comfort is it for better or worse is resisted.

In terms of relationship between customer relations and loyalty, the concept of comfort zones can be used to explain why customers stay loyal to an organization or product even if another is convenient. Customers tend to stick to what they know. This form of loyalty is termed as Comfort Loyalty.

Linked to the effect of comfort zones is the cost of customer of switching to no other supplier or product. In the case of everyday house hold goods (FMCG), there may be no cost. However, switching, say computer operating systems may require a purchase of new software, Changing to another make of a car may require building up a relationship with a new supplier and dealer and these costs can be perceived as too high. They may not be monetary at all, often they are time and effort consuming and costs the consumer never the less.

Types of Customer Loyalty:

1. Supplier Loyalty:

Many customers are not only loyal to a particular brand, but also loyal to particular supplier, a type of customer known as hostage i.e., somebody who has no choice but to be a customer of a particular brand or supplier. Such a situation could occur in a small village community where there is only a shop selling perhaps just one brand of bread. A customer who is without transport could be forced, if they really want bread beans, to be loyal to that one brand and that one supplier. The term introduced for this is PSEUDO-LOYALTY.

2. Supra-Loyalty:

Supra-loyalty is a term that can be applied to those who are extremely loyal to an organization, product or service. In the case of loyalty to an organization, that have normally build up a personal relationship with the organization over a period of time or in these of product/service, their identify themselves with it. It is as if they have internalized relationship and consider themselves almost part of the organization instead of being a customer.

3. De-loyalty:

A customer who makes a deliberate decision to move to another organization because he or she has been let down by an organization that they were previously loyal can be described as being DE-LOYAL. This is not same as disloyalty, which suggests that it is the customer who is doing something wrong. In the case of de-loyalty, it is the organization which has let the customer down. There is evidence that people are willing to forgive one mistake or one case of poor service. Customer loyalty can be retained even after a mistake provided that rectification (an apology) is speedily forthcoming. However, if a super-loyal customer becomes disenchanted, they may take their business else where, in effect becoming de-loyal. if they are very disappointed they may become ANTI-LOYAL, seek retribution against the organization.

4. Disloyalty:

It is a mute point as to whether a customer can actually be disloyal. Customers owe nothing, in terms of loyalty to suppliers. Many customers may feel that they are being disloyal if they go else where but feeling disloyal is not the same as being disloyal. The only obligation actually placed on the customer is to render payment for the product or service provided by payment of monetary and other terms.

Organizations, having a responsibility to their customers, can be disloyal too. Disloyalty is not providing a product or service deliberately to a previously loyal customer. An example of this would be an organization that treated a new customer better, deliberately or unintentionally than the existing customers. In this case, the organization would be being disloyal to relationship that had been built up. If the existing customer decides to go elsewhere, then they would be making a perfectly valid and proper decision. Disloyalty implies an act and not the customer is capable of such an act. The customer may be a – loyal, de-loyal or even anti-loyal but never disloyal.

Customer Loyalty

Definition of Loyalty:

Loyalty may be defined as “The biased behavioral response, expressed over time by some decision making unit with respect to one out of a set of processes resulting in brand commitment”.

Loyalty must be seen as “biased repeat purchase behavior” or repeat patronage accompanied by a favorable attitude. Loyalty can originate from factors extrinsic to the relationship such as the market structure in which the relationship exists, but also in intrinsic factors such as relationship strength and handling of critical episodes during the relationship.

Advantages for setting up Loyalty:

1. Building lasting relationships with customers by rewarding them for their patronage.

2. Gathering high profits through extended product usage and cross-selling

3. Gathering customer information

4. Decommodifying brands i.e., differentiating from crowds.

5. Defending market position

6. Planning against competitive activity.

Classification of customers with reference to Loyalty:

There are six classifications of customers in respect of loyalty:

1) Current loyal customers who will continue to use the product or service

2) Current customers who may switch to another brand

3) Occasional customers who would increase consumption of the brand if the incentives were right.

4) Occasional customers who would decrease consumption of the brand if competitor offered the right incentive.

5) Non-users who could become customers.

6) Non- users who could never become customers.

It is important to distinguish between loyalty to the generic product, the brand and particular supplier. Many people drink coffee as beverage. Those who drink considerable quantity of coffee can be described as having a product loyalty. Within the group, there will be some that buy just the cheapest coffee or drink whatever available. They are product loyal but not brand loyal. They are not disloyal as that implies that there has been a loyalty, but they have no loyalty at all to a particular brand. Those who have a particular brand loyalty, they always buy a particular brand or at least a brand from the same product.