Thursday, November 29, 2007

Listening skills

Generally speaking people are either readers or listeners and we find that it is usually a waste of time to talk to a reader. He only listens after he has read. It is equally a waste of time to give a detailed written communication to a listener. He can only grasp what it is all about through the spoken word. In the business world, however, the successful businessman has got to train himself to be both a good listener and a good reader.

Most of the barriers to effective communications can be overcome if people realize the need to listen carefully and attentively. Richard Hubbell, who had undertaken research in the subject, informs us that 98% of what a man learns in his life time is learnt through his eyes or his ears. If this statement is even partially true then our educational system, with its emphasis on acquiring knowledge through reading, is unbalanced. And this defect seems to have been noticed for most educational reforms in recent years have begun to lay stress on educating with the help of audio-visual aids.

Since a successful businessman must keep himself not only abreast of knowledge in his field but must know all that is going on in his organization it is very necessary that he should learn to be a good listener. Some experts believe that the ability to ‘listen’ is so important in business and industry that in the future employers will first find out the ‘listening index’ of a recruit before deciding to employ him. It is said “one bad listener can cause more damage in a complex economy than all good listeners can compensate for?

A manager must be a good listener for it has been estimated that he spends, on an average , 25 or more percent of his working time in listening. Yet, it has been found, that managers listen at only about 25% efficiency. Attentive listening is, also not enough. Retaining what is heard is equally important. According to experts we retain 50% of what we hear and 48 hours later that drops another 50%.

Listening is closely linked with perception, for while we use that ear for listening it is really in the mind that the message is perceived. And it is the mind that decides whether we should listen attentively , half attentively, critically or with concentration. It also decides whether the message should be retained or forgotten.

How to listen effectively

1.A good listener has to exercise mental discipline over himself. Only if you concentrate properly can you be a good listener.

2.If you are attending a meeting, talk or lecture see to it that you arrive early so that you can settle yourself physically and compose yourself mentally before the speeches start.

3.Do not allow yourself to be distracted by noises or other things like a pretty girl or handsome boy entering the room or the perfume of your neighbor. Do not distract the speaker yourself.

4.Find an area of interest and listen for ideas.

5.Avoid thinking too much about a point that has just been made by the speaker as this will prevent you from paying attention to the next. You can take notes and think about the matter later. Try to understand first, evaluate later.

6.Keep on open mind and be patient.

7.if you find that an informal talk or discussion has been going on for a very long time then do not hesitate to suggest a break so that the participants may refresh themselves and be able to concentrate better after the break.

8.Avoid listening to several people at the same time. If your telephone rings in the middle of an important conversation do not interrupt the conversation but request the telephoning party to ring you up later.

9.Show interest in the person who is talking to you by looking at him and by either nodding your head or by short encouraging A friendly and patient attitude helps you to get a real insight into the thoughts and feelings of the speaker. You could also restate the speaker’s feelings briefly.

10.Do not contradict openly with words like “ I think you are wrong? as this discourages the speaker or forces him to use false insincere arguments.

11.Listen to the feelings of the speaker and not only to his words.

12.Make sure that there are no emotional barriers on your own side which prevent you from listening attentively. Do not interrupt, unless it is absolutely necessary. Do not be in a hurry to talk.

Factors in customer behavior

Behavioral scientist Frederick Herzberg gave the ‘Two factor Theory’ of human motivation. According to him, there are satisfiers and dissatisfies in any work situation. Calling them as motivators or hygiene factors respectively, Herzberg said that it is the motivator that propels individuals to excellence. Extending the theory to marketing, one finds that hygienic factors are product quality, packaging, product warranty, etc. These are the given factors and all customers expect these features in all product groups. But the motivators will be factors like customer focused sales team, a good customer service and may be even just the fact that the usage of a product may help customer create a separate identify for himself or herself. What is therefore important is that marketer should identify these satisfiers in each customer group.

Mc Clelland’s Theory of achievement motivation:
Harvard Professor David Mc Clelland has provided a new insight into human motivation. According to hi, there are three motives that drive human beings to higher performance. These are the need for belonging (affiliation need), need for power(i.e. need to influence) and the need for achievement. It is the latter need which makes individuals and societies excel and be creative. Extending the theory to marketing, some products are seen to re[present achievement, while others are seen as power symbols and yet others as product meant for satisfying the need for belonging Marketers have used these motives in evolving their communication programs. Consider for example, the advertising campaigns of credit card companies which appeal to people high on achievement, while the Videocon’s ad for its washing machine, “You are ready for the show? or Maggi noodles “Just two minutes? are campaigns high on affiliation need satisfaction.

Thus, McClelland’s theory does help a firm to evolve its strategies for people motivated by different needs. An important observation in human motivation is that as societies develop primary motives, i.e. physiological needs like sex, hunger, etc. become less important and secondary motives like achievement and power gain higher degree of importance. The Marketer needs to be aware of this process, as for different communities and groups need mix may be different and hence requiring different marketing tasks.

Buyer's Motivation

What motivates a buyer? The earliest understanding of the rationale of buyer behavior was provided by well-known economist Adam Smith. According to him, a human being is a rational individual. He or she evaluates various alternatives and will buy or select alternatives where the marginal utility is more than the marginal price he or she paid for it. Consider the case of Priti, a housewife. After spending a few hours on her shopping she is tired and walks over to a nearby restaurant. She has the choice of either buying a fruit juice, a soft drink, a tea or coffee. A glass of fresh fruit juice costs her Rs 7.50, a soft drink also costs her Rs 7.50, and tea or coffee costs Rs 3.50. Now if she decides to buy a soft drink, then the utility of this soft drink is more than the marginal price she is paying to get it. In this case she is paying almost Rs 4.00 more than a cup of tea or coffee. The utility of soft drink to her at this time is more than tea or coffee or fruit juice.

The assumption in the economic version of buyer behavior is that the lowest priced product will sell as its marginal utility will always be higher than others. Price therefore is the critical factor in determining customer choice. Another assumption is that all products are alike and no differentiation is possible between them. Finally, the customer is aware of the alternatives available to him or her.

The economic model can explain human behavior to a limited extent only because humans are not always rational beings. We are all known to indulge in acts and shopping behavior which are not necessarily rational. For example, a young man who loves his wife very dearly, and works in a different town away from his wife and family may make a long distance call almost every day not caring for the cost. The economists would like us to believe that this young man will consider the marginal cost and utility of making a long distance call and writing a letter (buying postage and stationary)

Besides, rarely the information on alternatives complete. Marketers create differentiation in their products. Branding is common in manufactured consumer goods. And each brand communicates a different image. However, the limits to product differentiation through technology, features, packaging, intangibles like guarantee or warranties are soon reached. In today’s world of technology standardization there is hardly any differentiation between two brands of the same product on a feature to feature basis. Price then becomes important yet not the crucial factor. Hence the economic model does provide limited but useful insight into buyer behavior.

Selection of an employee

Seven Steps in the Selection Process

Step 1 Initial Screening

If our recruiting effort has been successful, we will be confronted with a number of potential applicants. Based on the job description and job specification, some of the respondents can be eliminated hey sharing of job description information with the individual can frequently encourage the unqualified or marginally qualified to voluntarily withdraw from candidacy. Another important point during the initial screening phase is to identify a salary range, as a job opening which sounds exciting but has a low salary may not seem attractive to the applicants.

Step 2: Completion of Applications Form

Once the initial screening has been completed, applicants are asked to complete the organization’s application form. Some organizations may require only the applicant’s name, address and telephone number, while others may request the completion of a six to ten page comprehensive personal history profile. In general terms, the application form gives a synopsis of what applicants have been doing, their skills and their accomplishments.

Step 3 : Employment Tests

An employment test is a means of assessing a job applicant’s characteristics through paper-and-pencil responses or exercise. Three major types of tests used in the selection process are ability, personality and performance tests. Ability tests measure mainly mental, mechanical and clerical abilities or sensory capacities( like vision and hearing), personality tests are means of measuring characteristics , such as patterns of thoughts, feelings and behaviors. These characteristics are distinctly combined in an individual and influence that individual’s interactions in various situations. Paper-and-pencil personality tests measure such characteristics sociability, independence and need for achievement. Performance tests are means of measuring practical ability on a specific job. The applicant completes some job activity under structured conditions. For example, a sales representatives may be asked to handle a situation involving a very difficult customer. Although such tests can be costly if special facilities and equipment are needed , performance tests tend to be valid predictors of future performance.

Step 4 Comprehensive interview

Those individuals who are still viable applicants after the initial screening application form, and required tests have been completed, are then given a comprehensive interview. The applicant may be interviewed by the personnel department interviewers, executives within the organization, potential supervisors, or colleagues. The comprehensive interview is designed to probe into areas that cannot be addressed by the application form or tests. These areas consists of assessing one’s motivation, ability to work under pressure and ability to ‘fit in ‘ with the organization This information must be job related.

Step 5 Background Investigation

This step includes contacting former employers to confirm the candidates work record and to obtain their appraisal of the performance in the previous job. It also includes verifying the educational accomplishments shown on the application, and contacting personal references. This type of investigation has major implications and every personnel administrator has the responsibility to investigate each potential applicant. Though there is often reluctance on the part of references to give information, there are ways in which the personnel administrators can obtain it. A seasoned personnel administrator expects this and delves deep into the candidate’s background and gets his information.

Step 6 Physical Examination

The applicant may consist of having taking a physical examination which is intended to screen out those individuals who are unable to comply physically with the requirements of the job and the organization. The physical examinations are required to minimize the standards for the organization’s group life and medical insurance programs and base data in case of future compensation claims.

Step 7 Final Employment Selection

Those who perform in all the above step are considered or eligible for employment The actual hiring decision is made by the Manager in the department that had the position open. The applicants has to work for the managers so, the boss and the employee should have good relationship.

Personnel records - information to be included

Preliminary Summary and Service

(i)Attention should be directed to :
Trends
New developments
Notable changes
Special projects
Unusual accomplishments

(ii)It should be designed to :
Catch interest
Encourage a detailed study
Enlist co-operation
Focus attention.

Employment

(i)Numbers : Beginning and/or end of a period:
By departments
Whether employees is temporary or permanent
By sex
Whether hourly rated or salaried.

(ii)Labor turnover, separation and accession:
By department and/or plant
By types of separation
By quits, lay-offs, discharges
By avoidable vs unavoidable
By reasons ( marriage, home duties, frequency, pregnancy, moving ,pension death)
Comparison with local , state or national turnover.
(iii)Unfulfilled requisitions:
By department
By job.

Job Analysis, Recruitment and Selection

(i)Jobs analyzed or reviewed:
By department
By plant
(ii) Application for employment:

By skills
By Sex
By source
Employee interviews
Applicants tested
References checked.

Training

(i)Enrolment
By training programs
By new trainee programs
Number finishing by programs.
(ii)Turnover—- separations of former trainees
Cost of training.

Promotion Transfers, Appraisals

(i)Promotions, by departments
(ii)Transfers, by departments
(iii)Numbers rated, by departments

Labor Relations

(i)New agreements—in negotiation/negotiated
(ii)Amendments—negotiated
(iii)Arbitrations—in process or concluded, by results
(iv)Grievances –settled in process.
By subject
By the stage at which settled.
By the nature of the settlement.

Medical, Health, Safety

(i)Deaths among employees
(ii)Retirements
(iii)Physical examinations
(iv)Medical treatments
(v)Hospital calls on employees.
(vi)Illness—number of cases by department:
By kind of illness
By department
By time lost
By cause
Be severity and frequency rates
Workmen compensation, number of cases:
(vii)By department
By new and recurrent cases
By amount of benefit
By cost.

Other Employee Services

(i)Benefit plan, membership
(ii)Benefits offered:
By number of employees
By type death, disability maternity
By amount paid.
(iii)Personal loans, number and amount.
(iv)Credit union:
Applications approved or disapproved
Loans extended, number and amount.
(v)Life insurance
(vi)Pensions—- normal retirements, optional retirements, disability retirements.
(vii)House organs—circulation costs
(viii)Suggestions—- number received and disposed of ; awards for suggestions.
(ix)Cafeteria——meals served, rupees sales, cost, subsidies
(x)Recreational activities—-type , participation costs.

Wage and Salary Administration

(i)Rates reviewed and rates changed:
By number
By type——merit increase, revaluation.
(ii)Job evaluation—-by department or type of job.
(iii)Overtime—total hours, departments and numbers of employees affected, total cost.
(iv)Earnings
Weekly average , by department: hourly rated or salary proportion in each age and salary class.
(v)Call-in and call-back pay
By department
By cost

Records and Reports

(i)Special reports released
(ii)Personnel actions recorded.

Research

(i)Projects completed
(ii)Progress reports on continuing projects.
(iii)New projects planned or undertaken.

Staff Administration

(i)Staff assignments by name
(ii)Expenditure on staff activities
By controllable vs uncontrollable
By major activities.

Orientation of a new employee

Orientation covers the activities involved in introducing new employees to the organization and to his or her work unit. It is only a small part of the overall socialization of a new organizational member. It expands on the information received during the recruitment and selection stages and helps to reduce anxiety of joining a new job. An orientation program should familiarize the member with the organization’s new objectives, history, philosophy, procedures and rules. It must communicate relevant personnel policies such as hours of work, pay procedures, overtime requirements, specific duties and responsibilities of the job, introduce the employee to his or her superior and co-workers and provide a tour off the organization’s physical facilities.

In many medium-sized and most large organizations, the personnel department takes charge of explaining such matters. In other organizations new employees will receive their entire orientation from the supervisor. In small organizations, the employee orientation may not be formal and the supervisor may assign the new member to another employee who will introduce him to the others. This could be followed by a quick tour of the office after which the new employee is shown his desk and left to fend for himself.

Every organization has its own unique culture that defines appropriate behaviors for organizational members. This culture includes longstanding and often unwritten rules and regulations, a special language for communication, prejudices and standards for social etiquette. An employee who has been properly socialized to the organization’s culture, then, has learned how things are done and which work-related behaviors are acceptable and desirable and which ones are not.

The concepts of role, values and norms are interrelated. The parameters of the role change in response to the value and norms in the environment where one performs that role. People who readily accept all of them become conformists or the infamous “Yes Man? . At the other extreme are the rebels, those who reject all the organization’s standards. In between, are the individuals who accept some standards, but not others. The main objectives of socialization process is to ensure that rebellious, norm rejecting types are changed or expelled. However, depending on the management’s objectives, managers utilize different methods of socialization.

Succeeding with Succession

Meeting the new challenges of succession planning requires going much deeper in the workforce and, instead of just spotting high producers, identifying employees with high potential and guiding them along the path to achieving their full promise.

The biggest thing that is going on is a movement away from traditional succession planning. Today, instead of focusing on the top 25 or 50 employees, companies are pushing it further down in the organization and using it more as a development tool
While companies have often used technology to identify star performers who may be able to back up top executives, many are now using it to look at succession planning at other levels of the organization as well. This deeper look requires a much higher degree of technical sophistication to accommodate the larger number of employees at more levels in the organization.

If all a company needs to do is track who is going to replace a few senior executives, a simple spreadsheet or database may be all that is needed. With larger organizations, that is not adequate.
The size of the company clearly affects what software they should select. Smaller employers of up to 400 people can get by with PC-based systems, but when we start getting bigger than that we need to start thinking about more-complex systems.

Lauren Choate, assistant vice president of training and organizational development at Great-West Life & Annuity Insurance Co has more than 6,000 employees, 850 of them managers in the company. An ordinary conventional system would not do for consideration of Succession Planning
It was clear to her that the company needed to bolster its succession planning process, but she also knew from experience that managers tend to view talent review or succession planning as extra work. So, when she started working on implementing a formal succession planning process, she was looking for technologies that would reduce the managers’ workload and cut through any resistance.

She used automation to make it easier for the manager and to make it easily repeatable for next year by having the information in the database.

Great-West had already been using Revexion Talent Management System for performance management. Because the software also comes with a succession planning module, it was simply a matter of activating those features.

The WisdomNet software pulls data from the SAP database, and employees update their own information, including their biography, education, certification and previous job experience. Managers then assess them on their leadership competencies, their potential and their future jobs, and identify who can serve as backups for the employees.

The technology side is not where the work is when it comes to succession planning; the real work is the process, the people and the goal.

After completing the evaluation process, managers run various reports and take them to the annual talent review meetings. They share some of the reports with other managers and use others for themselves.

The system was piloted in the 1st year with 300 managers, and planning is on expanding it to the full 850 managers in the 2nd year itself. Even those expected to resist the system say the process was worthwhile and it led to thoughtful dialogue about the staff. As a result, some employees were encouraged to leave, but many more were identified as having future jobs.

The system ought to be transparent and easy to use so it is viewed as a tool, not a hindrance.

An additional benefit of automating the succession planning process is that it broadly exposes information that previously might have been available to only a few people.
Automating the succession planning process produces several advantages for organizations. While it is hard to quantify the value of succession planning, there are some metrics available.
The more senior the position and the longer it takes to fill, productivity starts getting reduced, not just from that individual, but from the whole division while waiting for the new boss.
Whatever particular leadership development problem a company is seeking to address, a high-quality succession process is likely to be an integral part of the solution.

Emotions

Affect is a generic term that covers a broad range of feelings that people experience. It’s an umbrella concept that encompasses both emotions and moods. Emotions are intense feelings that are directed at someone or something. Finally, moods are feelings that tend to be less intense than emotions and that lack a contextual stimulus.

Emotions are reactions to an object, not a trait. They are object-specific. You show your emotions when you’re happy about something, angry at someone, afraid of something. Moods, on the other hand, aren’t directed at an object. Emotions can turn into moods when you lose focus on the contextual object. So when a work colleague criticizes you for the way you spoke to a client, you might become angry at him. That is, you show emotion (angry) toward a specific object (your colleague) But later in the day, you might find yourself just generally dispirited. You can’t attribute this feeling to any single event; you’re just not your normal, upbeat self. This affect state describes a mood.

Emotional labor

If you ever had a job working in retail sales or waiting on tables in a restaurant, you known the importance of projecting a friendly demeanor and a smile. Even though there were days when you didn’t feel very cheerful, you knew management expected you to be upbeat when dealing with customers. So you faked it. And in so doing, you expressed emotional labor.

Every employee expends physical and mental labor when they put their bodies and cognitive capabilities, respectively, into their job. But jobs also require emotional labor. This is when an employee expresses organizationally desired emotions during interpersonal transactions.

The concept of emotional labor originally developed in relation to service jobs. Airline flight attendants, are expected to be cheerful, funeral counselors sad, and doctors emotionally neutral. But today, the concepts of emotional labor is relevant to almost every job. You’re expected, for example, to be courteous and not hostile in interactions with coworkers. The true challenge is when employees have to project one emotion while simultaneously feeling another. This creates emotional dissonance, which can take a heavy toll on employees. Left untreated, bottled up feelings of frustration, anger, and resentment can eventually lead to emotional exhaustion and burnout.

Decision making process

Decision-making is the process through which managers identify organizational problems an attempt to resolve them. Managers may not always make the right decisions, but they use their knowledge of appropriate decision making processes to increase the odds. Managers make many different decisions in the course of their work and it becomes necessary that the decision-making process is effective. An effective decision-making process generally includes four steps:

1. Identify the problem.
2. Generate alternative solutions.
3. Evaluate and choose among alternative solutions.
4. Implement and monitor the chosen solution.

Identify the problem:

Organizational problems must be identified to change the situation from unwanted to desired. This can happen in 3 general stages. Scanning for the problem, Categorizing it and its diagnosis.
The first stage signals the changes in the work situation creating a problem.The Categorization stage, attempts are made to understand the signs that there is some discrepancy between the desired and current state of affairs. It may be difficult to specify the exact nature of the problem but one can find out whether it is a problem or non problem. Diagnosis stage involves gathering further information and specifying the exact nature of the problem.

Generating alternative solutions:

This is the 2nd step in decision making process requiring creative and innovative solutions. The concerned manager must develop alternative solutions. The ideas can be used together or partially eliminated as he proceeds in solving the problem.

Evaluating and choosing an alternative:

Each alternative has to be evaluated according to six criteria. Feasibility, Quality, Acceptability, Costs, Reversibility and Ethics.

Feasibility refers to an extent the alternative is to be considered based on the budget, policy, technology and other constraints of the organization.
The Quality evaluation must consider how effective is the alternative in solving the problem.
The Acceptability creation refers to the degree to which the decision making will affect the decision maker and others.
The Costs consideration should be taken into account in implementing an alternative depending upon the resources of the organization.
Any alternative decision taken must be reversible in case it is found adverse to the organization during implementation or later.
An alternative shall be compatible with the social responsibility of the organization and ethical standards.

Implement and monitor the chosen solution:

This requires careful and intelligent planning within the domain of other five. Managers also need to monitor he decision implementation to be sure that things are progressing as planned. The more important the problem, the greater the effort of follow up mechanism.

Developing OR OB model

A model is an abstraction of reality, a simplified representation of some real-world phenomenon. A mannequin in a retail store is a model. So, too, is the accountant’s formula: Assets + Liabilities = Owner’s Equity. The information below shows the Basic OB model and its levels on which it is constructed.

Basic OB Model
  • Organization Systems level
  • Group level
  • Individual level

It proposes that there are three levels of analysis in OB and that, as we move from the individual level to the organization system level, we add systematically to our understanding of behavior in organizations. The three basic levels are analogous to building blocks; each level is constructed on the previous level. Group concepts grow out of the foundation laid in the individual section; we overlay structural constraints on the individual and group in order to arrive at organizational behavior.

The Dependent Variables

A dependent variable is the key factor that you want to explain or predict and that is affected by some other factor. What are the primary dependent variables in OB? Scholars have historically tended to emphasize productivity, absenteeism, turnover, and job satisfaction. More recently, a fifth variable—organizational citizenship—- has been added to this list. Let’s briefly review each of these variables to ensure that we understand what they mean and why they’ve achieved their level of distinction.

Productivity

An organization is productive if it achieves its goals and does so by transferring inputs to outputs at the lowest cost. As such, productivity implies a concern for both effectiveness and efficiency.

A hospital is effective when it successfully meets the needs of its clientele. It is efficient when it can do so at a low cost. If a hospital manages to achieve higher output by reducing the average number of days a patient is confined to the bed or by increasing the number of staff-patient contacts per day that is productive efficiency.

Popular measures of organizational efficiency include return on investment, profit per dollar of sales, and output per hour of labor. We can also look at productivity from the perspective of the individual employee.

Organizations in service industries also need to include “attention to customer needs and requirements? in assessing their effectiveness. Why? Because, there is a clear chain of cause-and-effect running from employee attitudes and behavior to customer attitudes and behavior to an organization’s revenues and profits. Sears, in fact, has carefully documented this chain. The company’s management found that a 5% improvement in employee attitudes leads to a 1.3 % increase in customer satisfaction, which in turn translates into a 0.5 % improvement in revenue growth. More specifically, Sears found that by training employees to improve the employee—customer interaction, it was able to improve customer satisfaction by 4% over a 12-month period, which generated an estimated $200 million in additional revenues.

In summary, one of OB’s major concerns is productivity. We want to know what factors will influence the effectiveness and efficiency of individuals, of groups, and of the overall organization.

Performance management for call center efficiency

Call centers historically have been viewed as costs rather than business assets, which explain the recent focus on operational cost reduction through workforce management. Performance management provides unprecedented visibility into call center operations so that line-of-business and call center managers can make informed decisions about issues that are strategically relevant to the enterprise.

Business Managers of consumer-oriented organizations are changing the way they view and manage call centers. Many of them have started to improve call center efficiency by spearheading workforce management initiatives that optimize human capital resources for customer-facing activities.

Some companies have significantly reduced call center-related operational costs; they are still largely unable to correlate the budget allocated for operational costs. The most innovative companies are taking the next step—adding performance management to the mix to improve call center effectiveness.

Through on-demand, event driven capabilities, managers can accelerate efficiency and understand how the call center affects the overall organization from business, financial, and operational perspectives.

Team leaders can also visually monitor activity levels, observe changes in the quality of operations, and take required action with greater speed and precision than is possible using traditional enterprise applications with or without workforce management capabilities.
Enterprise applications are self-contained, meaning that they include the features and functions necessary to improve one or more specific business activities. Some applications come with their own historical reporting tools, so line-of business managers can make retrospective adjustments or improvements.

Performance management takes call center operations to the next level of effectiveness by providing visibility across applications and detailed information about business processes. Managers concerned can make informed decisions about operational changes and improvements.

A leading telecommunications company traditionally used agent incentives to terminate their in-bound calls after a certain length of time because the time spent for customer assistance was too lengthy. What the management did not know was the correlation of the call duration with the up sell of high margin products and ultimately the call center profitability!

The motivation for considering shorter call duration was efficiency so as to answer more customer calls. If the shorter call duration was correlated with lower sales volume or diminished service level, it may in fact have been offset by a proportional loss of profitability. Therefore the decision would not have been cost effective.

Performance management solutions not only reveal which incentive programs are working and why, but they also enable sales managers to adjust incentive programs on the fly.

Conversely, if organizations lack visibility into the actual reason for increase or decrease in performance, quality, revenue, costs, or profitability, the reason for success or failure is a mystery.

Performance management provides organizations with deep insight into call center effectiveness the higher levels of intelligence enable call center managers to maintain tighter control of schedules and conformance.

Performance management also provides new insights into organizational behavior by providing shared visibility across job functions, departments, and applications. In the event of an out-of-bounds condition where an activity exceeds or falls below an acceptable range, root cause analyses can be performed with greater precision using drill-down and event-driven capabilities. When the analytical insight is shared across operational roles, immediate action may be taken to correct any negative exceptions. The added visibility also enables call center managers to correlate quality of service and up-sell performance by agent, group, or location so best practices can be aggregated across the call center, enabling the continuous improvement of call center operations.

Brand name consumer companies are improving the corporate bottom line by taking advantage of the higher levels of call center intelligence performance management offers. Line-of-business managers can monitor the performance of individuals, groups, and departments based on aggregate data from all critical business applications. In doing so, they are taking workforce management to a whole new level. The combination of workforce management and performance management, large organizations and service providers are improving the effectiveness and profitability of call centers while increasing customer satisfaction and revenue per customer

Corporate objectives

n the pricing objectives, an important issue to be decided by the top management is their corporate objectives. These will reflect the philosophy of the owners or principal share holders and also their perception of the external environment. The objective could be to skim the cream from the market or to penetrate the market and establish leadership or to balance the profits across the product lines. No pricing decision can be taken in the absence of these corporate objectives statement.

Competitor reactions

Competition affects price decisions. If the firm is the leader it can set a price and let the competition set its price level. But even the leader firm has to anticipate competitor firm’s reaction to a price change. As we know that, the competitor can react by either following the leader or deciding to ignore him and retain or lower its price. Thus, in deciding the price strategy, a marketer has to anticipate competitor’s reaction.

Government policy

The government‘s fiscal policy also contributes towards the pricing decisions. Here, the marketer has to consider taxation, customs and import duties, if any, on his product and on the inputs used by the firm. For example, if the firm uses a product which attracts a higher sales tax or whose prices are controlled by the government (as in the case of steel, cement, etc. until recently), then its finished product price will be high. Even if the firm wants to reduce the end price to the customer to generate demand, it may not be able to do so mainly due to government policies. This is true today for several products in India, as the excise duty, sales tax and other duties have formed a large proportion of the final product’s price.

Barriers in the industry

The entry barrier in the industry not only affects the competition but also the firm’s prices. High barriers always encourage inefficiency, high costs and high prices.

Thus, a price decision is complex and a marketer needs to be wary of all the influences on his decisions.

Pricing methods

Costs, demand and competition underlie different pricing methods that a firm may adopt. Let’s turn to these methods and see the benefits that each of them offers.

Cost oriented method

There are two pricing methods under this group. One is based on the full cost, the other on variable cost.

1.Full cost or mark up pricing: Under this method, the marketer estimates the total cost of producing or manufacturing the product and then adds to it a mark up or the margin that the firm wants. This is indeed the most elementary pricing method and many of the services and projects are priced accordingly. To arrive at the mark up price, one can use the following formula
Mark up Price = a / (1-r)

“a? = Unit cost ( Fixed cost + variable cost) “r “ = Expected return on sales expressed as a percent.

This approach ensures that all costs are recovered and the firm makes a profit. Indeed it satisfies the finance oriented executives but this method ignores the fact that it is not necessary that the firm is able to sell its entire merchandise at this price. It does not consider customer’s value perception and also the competitor’s reaction. Some firms use this as a launch strategy, but this could prove fatal if competition already exists within the industry. It may be a useful method if everyone in the industry adopts it, for this can minimize price wars.

Marginal cost or contribution pricing

Here, the company may work on the premise of recovering its marginal cost and getting a contribution towards its overheads. The method works well in a market already dominated by giant firms or characterized by intense competition. The objectives of the firm is to get a foothold in the market

Going Rate or “Follow the Crowd?

This method is competition oriented. In this method, the firm prices its products at the same level as that of the competition. This method assumes that there will be no price wars within the industry. This method is commonly used in an oligopolistic market. Despite, it is necessarily true that all firms or the leader firm is operating efficiently. In case it is not, it will mean that the follower firm also adopts a price level which reflects leader’s inefficiency rather than the firm’s efficiency. Besides, it is not always true that a decision taken in collective wisdom is the best. It may certainly not be so from the customer’s point of view.

Sealed Bid Pricing

Another form of competition oriented pricing is the sealed bid pricing. In a large number of projects, industrial marketing and marketing to the government, suppliers are asked to submit their quotations, as a part of a tender. The price quoted reflects the firm’s cost and its understanding of competition. If the firm was to price its offer only at its cost level, it may be the lowest bidder and may even get the contract but may not make any profit out of the deal. So, it’s important that the firm uses expected profit at different price levels to arrive at the most profitable price. This can be arrived at by considering the profits and profitability of getting a contract at different prices.

Tuesday, November 27, 2007

Contributing disciplines to the OB field

Organizational behavior is an applied behavioral science that is built on contributions from a number of behavioral disciplines. The predominant areas are psychology, sociology, social psychology, anthropology, and political science. Psychology’s contributions have been mainly at the individual or micro level of analysis, while the other four disciplines have contributed to our understanding of macro concepts such as group processes and organization.

Psychology

Psychology is the science that seeks to measure, explain, and sometimes change the behavior of humans and other animals. Psychologists concern themselves with studying and attempting to understand individual behavior. Those who have contributed and continue to add to the knowledge of OB are learning theorists, personality theorists, counseling psychologists, and, most important, industrial and organizational psychologists.

Early, industrial/organizational psychologists concerned themselves with the problems of fatigue, boredom, and other factors relevant to working conditions that could impede efficient work performance. More recently, their contributions have been expanded to include learning, perception, personality, emotions, training, leadership effectiveness, needs and motivational forces, job satisfaction, decision-making processes, performance appraisals, attitude measurement, employee selection techniques, work design, and job stress.

Sociology

While psychology focuses on the individual, sociology studies people in relation to their fellow human beings. Specifically, sociologists have made their greatest contribution to OB through their study of group behavior in organizations, particularly formal and complex organizations. Some of the areas within OB that have received valuable input from sociologists are group dynamics, design of work teams, organizational culture, formal organization theory and structure, organizational technology, communications, power, and conflict.

Social Psychology

Social psychology blends concepts from both psychology and sociology. It focuses on the influence of the people on one another. One of the major areas under considerable investigation by social psychologists has been change—- how to implement it and how to reduce barriers to its acceptance. In addition, we find social psychologists making significant contributions in the areas of measuring , understanding, and changing attitudes; communication patterns; building trust; the way in which group activities can satisfy individual needs; and group decision-making process.

Anthropology

Anthropology is the study of societies to learn about human beings and their activities. For instance, anthropologists’ work on cultures and environments has helped us understand differences in fundamental values, attitudes, and behavior between people in different countries and within different organizations. Much of our current understanding of organizational culture, organizational environments, and differences between national cultures is the result of the work of anthropologists or those using their methods.

Political Science

Although frequently overlooked, the contributions of political scientists are significantly to the understanding of behavior in organizations. Political science studies the behavior of individuals and groups within a political environment. Specific topics of concern here include the structuring of conflict, allocation of power, and how people manipulate power for individual self-interest.

Human resources in India

The structure, values and the level of education of human resources in the country influence much of the HRM functions of any organization. The influence of manpower in the country can be studied through the changes in structure of employment.

Change in the structure of Employment:

Structure of employment in an organization changes with the entrance of people from different backgrounds (social, economic, region, community, sex, religion, culture etc) in to the workforce. There has been a significant change in the structure of employment with the entry of

1.Candidates belonging to scheduled caste, scheduled tribe and backward communities, thanks to government’s reservation policy, and with
2.More female employees, due to increased career orientation among women or suitability of women for certain jobs, women becoming more acclimatized to the working climate and having a higher level of commitment. Organizational workforce is composed of people from different regions, mostly due to increased transportation facilities and mobile character of people. Further, technological revolution has brought occupational mobility. These changes in workforce have naturally complicated the task of HRM as the personnel manager has to deal with the employees with different backgrounds.

Changes in Employee Roles and their Values

It was the opinion of the management that the employees had to obediently follow the management’s decision, as the management was the boss. But gradually, this hierarchical relationship has been replaced by a relationship in which employees and management are partners in the organizations.

Further, changing structure of the workforce has led to the introduction of new values in organizations.
Among these are moves towards—

(i)Emphasis on quality of life than quantity
(ii)Equity and justice for the employees over economic efficiency.
(iii)Pluralism and diversity over uniformity and centralism;
(iv)Participation over authority,
(v)Personal convictions over dogma, and
(vi)The individual over the organizations.

Alienation from the job, increasing counter-productive behavior, rising expectations and changing ideas of the employees are some of the other factors responsible for change in the values and the roles of human force. Consequently, it has been imperative for the management to provide various fringe benefits to improve morale, to introduce negotiating machinery to redress grievance; to encourage employee participation in decision making and the like, to pave the way for industrial democracy to meet the situations of workforce.

Another change in the values is the declining work ethics. Further employees prefer flexible working hours to fixed time schedule. A flexible schedule fit not only with the values of modern workforce but also benefits the employer with the enhancement in productivity, reduction in employee tardiness, absenteeism and turnover, improvement in morale and the like. Since, the rights of citizenship are entering the organizations freedom of speech and the right to privacy is becoming part of the work ethics.

Level of Education

Workers have been entering the organizations with increased level of formal education in recent years. Increased formal education led to the changes in attitude of employees. The well educated employees always challenge and question the management’s decisions and want a voice in the company’s affairs affecting their interest. “As the base of education broadens, management must plan to deal with employees on a higher plane of logical interactions? Thus, management of well educated employees is a problem to the organization though they make valuable contributions.

The historical evolution of organizational behavior

Why study history? Oliver Wendell Holmes answered that question succinctly when he said ? when I want to understand what is happening today or try to decide what will happen tomorrow, I look back? By looking back at the history of organizational behavior, you gain a great deal of insight into how the field got to where it is today .It’ll help you understand, for instance, how management came to impose rules and regulations on employees, why many workers in organizations do standardized and repetitive tasks on assembly lines, and why a number of organizations in recent years have replaced their assembly lines with team-based work units.

In promoting ideas that would eventually have a major influence in shaping the direction and boundaries of OB: Adam Smith, Charles, and Robert Owen.

What are their contributions?

ADAM SMITH

Adam Smith is more typically cited by economists for his contributions to classical economic doctrine, but his discussion in The Wealth of Nations, published in 1776, included a brilliant argument on the economic advantages that organizations and society would reap from the division of labor (also called work specialization) .Smith used the pin-manufacturing industry for his examples. He noted that 10 individuals, each doing specialized task, could produce about 48,000 pins a day among them. He proposed, however, that if each were working separately and independently, the 10 workers together would be lucky to make 10 pins in one day .If each had to draw the wire, straighten it, cut it, pound heads for each pin, sharpen the point, and solder the head and pin shaft, it would be quite a feat to produce 10 pins a day!

Smith concluded that division of labor raised productivity by increasing each worker’s skill and dexterity, by saving time that is commonly lost in changing tasks, and by encouraging the creation of labor-saving inventions and machinery .The extensive development of assembly-line production processes during the twentieth century was undoubtedly stimulated by the economic advantages of work specialization cited over two centuries ago by Adam Smith.

CHARLES BABBAGE

Charles Babbage was a British mathematics professor who expanded on the virtues of division of labor first articulated by Adam Smith .In his book On the Economy of Machinery and Manufactures, published in 1832; Babbage added the following to Smith’s list of the advantages that accrue from division of labor.

1.It reduces the time needed for learning a job.
2.It reduces the waste of material during the learning stage.
3.It allows for the attainment of high skill levels.
4.It allows a more careful matching of people’s skills and physical abilities with specific tasks.

Moreover, Babbage proposed that the economies from specialization should be as relevant to doing, mental work as physical labor. Today, for example, we take specialization for granted among professionals. When we have a skin rash, we go to a dermatologist .When we buy a home, we consult a lawyer who specializes in real estates tax accounting, entrepreneurship, marketing research, and organization behavior .These applications of division of labor were unheard of in eighteenth century England .But contemporary organizations around the World—in both manufacturing and service industries –make wide use of division of labor

ROBERT OWEN

Robert Owen was a Welsh entrepreneur who bought his first factory in 1789, at the age of 18. He is important in the history of OB because he was one of the first industrialists to recognize how that growing factory system was demeaning to workers.

Repulsed by the harsh practices he saw in factories—such as the employment of young children (many under the age of 10 with 13- hour workdays, and miserable working conditions—Owen became a reformer. He chided factory owners for treating their equipment better than their employees He criticized them for buying the best machines but then employing the cheapest labor to run them. Owen argued that money spent on improving labor was one of the best investments that business executives could make .He claimed that showing concern for employees both was profitable for management and would relieve human misery.

For his time, Owen was an idealist. What he proposed was a utopian workplace that would reduce the sufferings of the working class. He was more than a hundred years ahead of his time when he argued, in 1852, for regulated hours of work for all, child labor laws, public education, company-furnished meals at work, and business involvement in community projects.

The history which has become a past now shows how each management wizard contributed towards welfare of employees, their working conditions and hence eventually increasing the productivity.

Psychographic variables

Today psychographic factors also play an important role in buyer’s decision. These factors refer to life-style & personality. Psychologists tell us that an individual’s behavior is a function of these two factors. Life-style would refer to the beliefs, attitudes, interest and opinions that an individual has about him, his family and the world. Put in other words, it’s the individual’s way of living in the world as reflected by his attitudes, interests and opinions. Contemporary researchers show that even though two customers may share common demographic characteristics, the two may differ significantly in terms of their life –styles Hence, a product or a brand positioned for customers like them may not be bought by one of the customers because he or she may not perceive the brand or product as suiting his or her life-style. Life-style portrays the whole person interacting with his or her external environment. It is more than just a social class.

The marketer needs to be aware of these life-styles in his target market .He may choose to position his product to suit a life-style of an achiever or a royalty or as provided by the VALS framework developed by Arnold Mitchell of SRI International .According to this framework people can be categorized into nine groups.

They are:

1.Survivors- These are disadvantaged people who tend to be despairing, depressed and withdrawn.

2.Sustainers- are disadvantaged people who are valiantly struggling to get out of poverty.

3.Belongers- Are individuals who are conventional, conservative, nostalgic and unexperimental and who would rather fit in than stand out.

4.Emulators- Are ambitious, upwardly mobile and status conscious; they want to make it big.

5.Achievers- Are the nation’s leaders, who make things happen, work within the system and enjoy good life.

6.I-am-me- Are people who are typically young, self-engrossed and given to whim.

7.Experimental- Are individuals who pursue a rich inner life and want to experience directly what life has to offer.

8.Socially Conscious- Are those who have a high sense of social responsibility and want to improve conditions in society.

9.Integrate- Are men and women who are fully matured psychologically and combine the best element of inner and outer directedness.

This categorization of individuals is based on the assumption that each of them goes through various stages of development, and each stage affects their attitudes, psychological needs and behavior. As mentioned earlier while describing Maslow’s theory of hierarchy of needs, each individual goes through survival needs (survivors and sustainer)to affiliation and esthete (belongers, emulators, achievers) to more inner-directed needs (I-am-me experimentals and societally conscious)Very few of us reach the integrates level.

Marketers direct their products and brands to the affiliation, esteem, and inner-directed needs Consider, for example the positioning of Gwalior suitings using Nawab Pataudi, Sharmila Tagore and their son. Consider Raymond’s suiting ads showing their Managing Director Mr .Vijayapat Singhania, wearing their suit lengths, after a successful solo flight. Once again, Citibank Diners ad positioning the card at emulators and achievers illustrate the life-style of contemporary times.

The next psychographic variable is personality—this refers to traits that we exhibit in our relationship with others It also refers to psychological characteristics of individuals that lead them to be relatively consistent as they respond to their environment .Based on these explanation, people are described as warm,loving,caring,outgoing,extroverts,introverts,aggressive,non-responsive,confident,etc.Personality again provides a useful understanding of consumer behavior and products can be designed to suit different personality profiles. The sales person has to adapt his or her personal selling style to the customer’s personality.

Thus, in contemporary marketing, psychographic factors play a more important role than just the demographic variables. In fact, tomorrow’s marketing in India will be an increasingly life-styled marketing.

Transitions in conflict thought

It is entirely appropriate to say that there has been a conflict over the role of conflict itself in groups and organizations. One school of thought argues that conflict must be avoided—that it indicates a malfunctioning within the group .This is the traditional view. Another school of thought, the human relations view, argues that conflict is a natural and inevitable outcome in any group and that it is not necessarily evil, but rather has the potential to be a positive force in determining group performance. The third, and most recent perspective proposes that not only can conflict act as a positive force in a group but that some conflict is absolutely necessary for a group to perform effectively. We label this third school the interactionist approach. Let’s take a closer look at each of these views.

THE TRADITIONAL VIEW

The earliest approach to conflict assumed that all conflict was bad. Conflict was viewed negatively, and it was used synonymously with such terms as violence, destruction, and irrationality to reinforce its negative connotation. Conflict, by definition, was harmful and was to be avoided. The American syndicate’s management and the yacht’s team members essentially subscribed to this view of conflict.

The traditional view was consistent with the attitudes that prevailed about group behavior in the 1930s and 1940s.Conflict was seen as a dysfunctional outcome resulting from poor communication, a lack of openness and trust between people, and the failure of managers to be responsive to the needs and aspirations of their employees.

The view that all conflict is bad certainly offers a simple approach to looking at the behavior of people who create conflict .Since all conflict is to be avoided, we need merely direct our attention to the causes of conflict and correct the malfunctionings in order to improve group and organizational performance. Although research studies now provide strong evidence to dispute that this approach to conflict reduction results in high group performance ,many of us still evaluate conflict situations using this outmoded standard. As well as many senior executives and board of directors.

THE HUMAN RELATIONS VIEW

The human relations position argued that conflict was a natural occurrence in all groups and organizations. Since conflict was inevitable, the human relations school advocated acceptance of conflict. Proponents rationalized its existence: It cannot be eliminated, and there are even times when conflict may benefit a group’s performance. The human relations view dominated conflict theory from the late 1940s through the mid-1970s.

THE INTERACTIONIST VIEW

While the human relations approach accepted conflict, the interactionist approach encourages conflict on the grounds that a harmonious peaceful, tranquil, and cooperative group is prone to becoming static, apathetic, and non responsive to change and innovation .The major contribution of the interactionist approach, therefore, is to encourage group leaders to maintain an on going minimum level of conflict—enough to keep the group viable, self-critical and creative.

Structure of marketing plan

Once a firm has been able to identify market opportunity, it sets out to evolve a marketing plan. In most Indian firms, marketing planning is an informal exercise. This is particularly evident in a family managed or a sole proprietary concern. However, in large professionally managed firms, marketing planning is a formal exercise undertaken on an annual basis .There is no uniformity in the structures of marketing plans of different companies However, a careful analysis of these plans show that they generally have the following contents:

Executive summary

The executive summary is an overall bird’s eye view of the marketing plan .It tells the focus of the plan and is generally targeted at the top management .Since the top management is always short of time, it is evident that no top manager will be able to go through all the facts and figures in the plan .He needs to be told in a clear and concise manner the thrust of the plan, the objectives to be achieved and the overall strategy.

Situation analysis

A marketing plan has the origin in the situation analysis or situation audit. At this stage the following issues are raised:

•Where are we in terms of our sales, market share and profitability?

Answers to these should reflect actual to planned performance on all these parameters, as far as possible, should be obtained on the following two basis:

1.Product and
2.Customer groups

•Where are our competitors in terms of sales, market share and profitability on the above two parameters.
•What environment factors helped or hindered our growth?
•What will be the environment factors in future?

This analysis will help the marketer to identify opportunities and threats as also firm’s strengths and weakness.

Objectives

Having conducted an in-depth situation analysis, the firm has to decide on its objectives. Many a time, firms commit a mistake by stating their objectives in terms of historical growth of their sales turnover. The fallacy in these objectives is that it does not relate the company’s strength to the market situation. For example, if, in an industry, all the players are growing at the rate of 25 to30% per annum, it is a clear indicator of a growing market. There could be others who might be growing at a higher rate than this firm and hence are more competitive. Thus it is important that objectives should reflect aspirations at the following levels:

1.Relative market share of the SBU.
2.Sales turnover of the SBU.
3.Profit and ROI from the SBU.
4.Customer satisfaction.

Clearly defined, realistic but highly challenging objectives on these parameters help guide marketing and other functional teams to achieve planned performance.

These objectives, as mentioned above, should be based on market realities and be meaningful and achievable .All concerned must participate in this determination .In other words, a bottom-up approach will help make marketing objectives more realistic This implies involving even the sales personnel in objective setting exercise

Segmenting and targeting the market

Hindustan Lever Ltd. is a leading FMCG conglomerated in India whose success in management policies and strategies are taken as an example by many Indian companies and emulated.

The decade of 1980 must have been a memorable one for Hindustan Levers Ltd (HLL) .For, in a typical David and Goliath war, the giant and an undisputed market leader in consumer non-durables in India suffered a humiliating defeat at the hands of a new and small firm, Nirma Chemicals .Nirma Washing Powder became a national brand soon after 1982, when the Indian Television went commercial and started color telecast. The product immediately caught the fancy of the middle-income customers; who was finding it difficult to make both ends meet with a limited monthly income. Nirma was the lowest priced branded washing powder available in the grocery and co-operative stores .The middle class housewife was more than satisfied, as she could now choose a lower priced washing powder rather than the high priced Surf detergent powder from HLL. Nirma also had an impact on upper middle income and higher income families where it was used for washing their inexpensive clothes and linen. Initially, HLL responded by launching sales promotion campaigns on Surf—by offering a bucket at subsidized price for every 1 kg of Surf, or by trading premium brands of toilet soap with every kilogram of Surf. These schemes, however, could not stop the decline in the popularity of Surf. HLL then launched a head-on attack on Nirma .Without naming it (though it was obvious) they came up with an advertising commercial comparing 1 kg of surf with 1 kg of low-priced yellow washing powder and showed that Surf washed more clothes than the low-priced yellow washing powder—and hence it was economical to buy Surf.

The commercial did not bring in any substantial results. It was at this time (around 1984) that HLL decided to take a fresh look at the market. Research was conducted throughout the country which revealed that different income groups of the consumers had varying expectations from detergents and washing powder, it also showed that different colors of washing or detergent powders were associated with different types of fabrics. For example, yellow colored washing or detergent powders were mainly bought by middle and lower middle or lower income group people. They washed all their fabrics and associated whiteness in clothes to a yellow colored powder .Also, middle class families used the blue colored Rin bar or the white colored Lux flakes for washing their expensive clothes. The research further indicated that blue or white colored detergent powders were bought by middle to higher income group people, and these colors were also associated with washing clothes clean. In fact, the housewife was known to add “blue? to her laundry to give that extra whiteness to the white clothes. Interestingly, green was also a color that was perceived to clean extra-dirty clothes. Armed with this research on color perceptions and income groups, HLL launched the Sunlight (yellow) , Wheel(green), Rin (blue) and Surf Ultra(white) detergents powders for different market segments. This strategy of segmenting the markets ,understanding its needs and then evolving a marketing mix to suit separate segment needs helped HLL win back its lost market. In fact Nirma made all other consumer product companies sit up and take a fresh look at their markets It announced ,for many, a beginning of an era of low priced products for a highly price sensitive Indian Market , and, to others ,an end of a mass marketing era. Niche marketing and segmental marketing were ushered in by firms like Titan Watches, Cambridge and Chirag Din Shirts and trousers, T-series music and audio cassettes and their like. The market was indeed changing demanding a new response from the companies. The latter part of 1980s or early 1990s taught the firms a lesson—“one cannot be everything to everyone; but one can be everything to a select few? This is the basis of segmentation.

SEGMENTATION DEFINED

Market segmentation is the process of dividing a heterogeneous market into homogeneous sub-units. Consider the Indian market, which consists of 844 million people, as per the 1991 census. For a consumer product company making toiletries, this is a big number and hence a big market. However, not all the 844 million people believe in the same things. Not all look for same features and buy for the same reason. Now when the same toiletries firm looks at the census data further, it finds that there are about 438 million men and 406 million women. 64% of the men and 39% of the women were literate. This forms a new insight. So on the basis of this insight should the firm make toiletries for men or women, or both? The firm also found that 74% of the entire population lived in rural areas .Given this fact, the question then is, should the firm launch a product for rural males or females ,or both ,or only for the Urban customers ?The firm decided to launch the product for the urban male customer, The firm also took note of the NRS IV data from IMRB and MARG ,two leading marketing research agencies ,which showed that 21% of urban households belonged to the higher income group and 58% to the middle income. Given this data, the firm decided to launch a premium price range of toiletries for the urban high-income male customers.

Thus, the total population of a given market indicates only the market size .This, however, does not indicate anything more .To succeed, a firm needs to realize that the market is a heterogeneous one and cater to it accordingly. The marketer must also identify similarities among the different groups of customers.

NEED FOR SEGMENTATION

The market segmentation helps a firm compete in a highly competitive market. A successful marketer knows that all elements of marketing mix are imitable. Sooner or later the competition will catch up and at the end of the day; it will become a promotion and price war. To be able to overcome this threat from competition, a successful marketer should always segment the markets, and then position themselves in a segment where they perceive they will be able to defend against competitive attacks, and emerge as the segment leader. As Michael Porter states, the competitive advantage of a firm lies in being everything to a select few. To be everything to everyone is a sure recipe for a strategic failure.

Scope of production, planning and control

Production planning and control encompasses the following areas:

Materials

Planning for procurement of raw materials, components and spare parts in the right quantities and specifications at the right time, from the right source and at the right price .Purchasing, storage, inventory control, standardization, variety reduction, value analysis and inspection are the other activities associated with materials.

Methods

Choosing the best method of processing from several alternatives .It also includes determining the best sequence of operations (process plans) and planning for tooling, jigs and fixtures etc.

Machines and equipments

Manufacturing methods are related to production facilities available in the production system. It involves facilities such as planning, capacity planning, allocation and utilization of plant and equipments, machines etc.

It also involves equipment replacement policy, maintenance policy and maintenance schedules, tools manufacture and maintenance of tools etc.

Manpower

Planning for manpower (labor, supervisory and managerial levels) having appropriate skills and expertise.

Routing

Determining the flow of work, material handling in the plant and sequence of operations or processing steps. This is related to considerations of appropriate shop layout and plant layout temporary storage locations for raw materials, components and semi-finished goods and of materials handling systems.

Estimating

Establishing operation times leading to fixation of performance standards both for workers and machines.

Loading and scheduling

Machine loading is allocation of jobs to machines in conjunction with routing and with due consideration for capacity of machines and priority for jobs in order to utilize the machines to the maximum possible extent.

Scheduling ensures that parts, sub-assemblies and finished products are completed as per the required delivery dates. It provides a time table of manufacturing activities .It ensures a balanced load on all work centers and ensures even flow of work through the manufacturing facilities.

Dispatching

This is concerned with the execution of the planning functions. It gives necessary authority to start a particular work which has already been planned under routing and scheduling functions. Dispatching is the release of orders and instructions for the starting of production in accordance with the route-sheets and schedule charts.

Expediting
Means chasing, follow –up progressing which is done after the dispatching function. It keeps a close liaison with scheduling in order to provide an efficient feed-back and prompt review of targets and schedules.

Inspection

This function is related to maintenance of quality in production and of evaluating the efficiency of the processes, methods and labor so that improvements can be made to achieve the quality standards set by product design.

Evaluating
The objective of evaluation is to improve performance. Performance of machines, processes and labor is evaluated to improve the same.

Cost Control

Manufacturing cost is controlled by wastage reduction, value analysis, inventory control and efficient utilization of all resources.

In short, production planning and control function are concerned with decision making regarding

1.What to produce
Product planning and development, including product design.

2.How to produce
Process planning, material planning, tool planning etc.

3.Where to produce
Facilities planning, capacity planning and sub-contracting planning.

4.When to produce
Production scheduling and machine loading.

5.Who will produce

Manpower planning.

6.How much to produce
Planning for quantity, economic batch size etc.

Production planning functions

The main functions of production planning are:

Estimating

Involves deciding the quantity of products to be produced and cost involved in it on the basis of sales forecast.
Estimating manpower, machine capacity and materials required (bill of material is the basis) to meet the planned production targets. These are the key activities before budgeting of resources (e.g.-production budget is the basis for materials budget, capital equipment budget and manpower budget)

Routing

This is the process of determining the sequence of operations to be performed in the production process. Routing determines what work must be done, where and how.

Routing information is provided by product or process engineering function and it is useful to prepare machine loading charts and schedules.

Route sheet

A route sheet is a document, providing information and instructions for converting the raw materials into finished parts or products. It defines each step of the production operation and lays down the precise path or route through which the product will flow during the conversion process.

Route sheets contain the following information:

1.The operations required and their desired sequence.

2.Machine or equipment to be used for each operation.

3.Estimated set up time and operation time per piece (standard time)

4.Tools, jigs and fixtures required for the operation.

5.Detailed drawings of parts, sub-assemblies and final assemblies.

6.Specification, dimensions, tolerances, surface finishes and quality standards to be achieved.

7.Specification of raw materials to be used.

8.Cutting speed, feed, depth of cut, etc., to be used on machine tools for the operations to be carried on.

9.Inspection procedure and metrology tools required for inspection.

10.Packing and handling instructions during the movement of parts and sub assemblies through the operation stages.

Scheduling

Involves fixing priorities for each job and determining the starting time and finishing time for each operation, the starting dates and finishing dates for each part, sub-assembly and final assembly .Scheduling lays down a time table for production, indicating the total time required for the manufacture of a product and also the time required for carrying out the operation for each part on each machine or equipment.

Objectives of scheduling are:

1.To prevent unbalanced use of time among work centers and departments

2.To utilize labor such that the output is produced within established lead time or cycle time so as to deliver the products in time and complete production at minimum total cost.

Loading

Facility loading means loading of facility or work centre and deciding, which jobs to be assigned to which work centre or machine. Loading is the process of converting operation schedules into practice .Machine loading is the process of assigning specific jobs to machines, men or work centers based on relative priorities and capacity utilization.

A machine loading chart (Gantt chart) is prepared showing the planned utilization of men and machines by allocating the jobs to machines or workers as per priority sequencing established at the time of scheduling.

Loading ensures maximum possible utilization of productive facilities and avoid bottlenecks in production. It is important to avoid either over loading or under loading the facilities, work centers or machines to ensure maximum utilization of resources.

Production control functions

Dispatching

Dispatching may be defined as setting production activities in motion through the release of orders (work order, shop order) and instructions in accordance with the previously planned time schedules and routings.

Dispatching also provides a means for comparing actual progress with planned production progress. Dispatching functions include;

1.Providing movement of raw materials from stores to the first operation and from one operation to the next operation till all the operations are carried out.

2.Collecting tools, jigs and fixtures from tool stores and issuing them to the user department or worker.

3.Issuing job orders authorizing operations in accordance with dates and times as indicated in schedules or machine loading charts.

4.Issue of drawings, specifications, route cards, material requisitions and tool requisitions to the user department.

5.Obtaining inspection schedules and issuing them to the inspection section.

6.Internal materials handling and movement of materials to the inspection area after completing the operation, moving the materials to the next operation center after inspection, and movement of completed parts to holding stores.

7.Returning jigs and fixtures and tools to stores after use.

Expediting/follow-up /Progressing

Expediting or progressing ensures that, the work is carried out as per the plan and that the delivery schedules are met.
Progressing includes activities such as status reporting, attending to bottlenecks or holdups in production and removing the same ,controlling variations or deviations from planned performance levels following up and monitoring progress of work through all stages of production, coordinating with purchase, stores, tool room and maintenance departments and modifying the production plans and re plan if necessary.

Need for expediting may arise due to the following reasons

1.Delay in supply of materials.
2.Excessive absenteeism.
3.Changes in design specifications.
4.Changes in delivery schedules initiated by customers.
5.Break down of machines or tools, jigs and fixtures.
6.Errors in design drawings and process plans.

Product related segmentation

The marketer may even use product related basis for segmenting his or her market .One of the important basis is the product ‘use situations’. Different customers may use the same product in different ‘use situations’. Rasna, for example is shown as being used in different situations like a party, for unexpected guests, a drink at the end of a long and tiring work day, etc. A marketer tries to make the product versatile so that it can be used in different situations. But the customers may use different products and brands for different situations. For instance, a customer may buy a sports watch for sporting activities and may buy a jeweled watch for a party. Thus depending on the use situations, a product or a brand may be selected by the customer. Knowing these situations help the marketer plan the positioning strategy.

Another commonly used product related variable is the benefits segmentation. Here, the marketer identifies benefits that a customer looks for when buying a product. This has been a very effective method of segmenting the market for watches, where a customer may buy one for just knowing the time, or for durability ,or as a gift/an accessory/a dress item/a jewellery item .In each case ,the customer need is different. And using this basis, the erstwhile market leader in the watches market, HMT, claimed in its promotion that if you (i.e. the customer) have the inclination, we have the time. Titan in one of its commercials reminds the woman that the next time a man thinks of a gift for you, ask for Titan. Customers look for different benefits .Some want intangible benefits while others look for tangible ones. Looking attractive and pretty is very important to a woman when she buys dresses or cosmetics .Hence, Garden Vareli used this intangible psychological benefit to segment its market

The quantity consumed at any given time has also been the basis for segmenting the beverages (tea, coffee), soft drinks, breweries, and cigarette markets. Accordingly, the following market segments are visible.

1.Heavy users
2.Moderate users
3.Light users.

The differentiation between them is based on the benchmark quantity defined by the marketer for each segment.

Competition Based Segmentation

An important indicator of marketing success of an enterprise is the number of its loyal customers. Customer loyalty, therefore, is an important index to determine the competitive position of the firm. This is also used as the basis for segmenting the market and evolving the marketing strategy for each segment and also to encourage customer loyalty. Based on loyalty, we can again have the following segments.

Hard Core Loyalist

Hard core loyalists are those customers who continue to buy the same brand over and over again. The test here is whether the customer would refuse the competing brand, if and when offered, and insist on buying his own preferred brand? Newspaper readers, cigarette smokers, and tea drinkers are some customer groups where such intense loyalties are commonly visible.

Soft Core Loyalist

Those who are loyal to two or three brands in a product group are called soft core loyalists .For example, a housewife who buys Lux, Lux, Lux, Cinthol, Cinthol and Pears, Pears, Lux in her nine shopping expeditions will be considered as a soft core loyal. The marketer needs to watch such customers and motivate them to shift to the hard core loyalty segment.

Switchers

Switchers are those customers who never stick to a brand. These are the customers for whom brand switching is as easy as changing a shirt. They may switch for a variety or for a special deal. In either case, this is a very slipping market segment for the marketer .The firm needs to examine why it is losing its customers to competitor brands .This can help to strengthen its competitive position in the market.

While using the loyalty index to segment the market, a firm should however, be careful. For, what on the face may appear to be loyalty may in effect be a behavior caused by indifference, habit, non-availability of competing brands or low price. The marketer should examine these factors carefully and see if any of them is a factor determining customer loyalty.

Product Market selection

Having identified market opportunity, it is now important to carry out a product-market analysis for evolving a marketing plan. Some of the key issues that need to be addressed here are:

What markets need to be served?

Here the markets themselves need to address issues like whether they would want the firm to be in the national or regional market, youth or the grown-up market or the women market. In other words, the identification of the target market is important and becomes the starting point of any analysis.

What form should the product take?

For example, should the product be marketed as a commodity or as a branded product?

What should the product offer for use?

For example, conservation of energy resulting in low electricity bills is important for marketing of consumer appliances operated on electrical mains.

For whom is the product most important?

This decision would help in focusing market communications to a specific individual. For example the washing machine becomes an important product for the housewife; hence all communications from a firm marketing washing machine should be addressed to her.

Making Product/ Market Choices
Having considered issues pertaining to the market, the marketer now needs to turn his attention to making specific products-market choices. These relate to the following choices:

Horizontal Markets or Horizontal Diversification

Horizontally, markets can be segmented in terms of end-use. For example, an airline firm flying people from one destination to another in a region may also decide to diversify in the courier business and fly papers and cargo on its route. Like wise, a consumer appliances firm manufacturing toasters, mixers and geysers, targeted at middle income groups may decide to diversify into high-tech products like the microwave oven. This product will be used by upper middle and higher income group people.

Horizontal diversification generally starts with a technical innovation or up gradation and involves identification of market segments and product forms that will give the firm desired competitive advantage .One has seen a similar kind of diversification in electronic firms making entertainment products like radios, television sets and tape recorders. In the case of TV manufacturers, as soon as the government started color telecast in 1982 and allowed firms to import color TV kits on CKD (completely knocked down) basis, all of them diversified into the color TV market which was initially targeted at higher middle and higher income groups. But as technology developed, analog and digital color TVs were also added on by some of the firms in their product-mix. One does observe similar trends in service areas like banking, airlines, etc.

A decision to horizontally diversify is based on the following considerations:

1.Firm’s assessment of its strength and weakness
2.Market potential in the target market, or size of the target market.
3.Intensity of rivalry in the selected product-market.
4.Entry and exit barriers in the selected industry.
5.Value addition by manufacturers or conversely how is the ratio of the cost of materials and purchased parts to the selling price.

Vertical Product Market Choice

Vertical product—market choice refers to the market level at which the supplier sells. For example, a firm manufacturing and marketing gears may also start manufacturing and/or selling of gear-cutting tools and machines, as also fitment gauges that may be used by mechanics for enabling gear fitment in a systematic manner. This is exactly the case with Gajra Bevel Gears, which besides marketing differential and transmission gears, also markets fitment gauges. The Company believes that most mechanics in the country are not properly educated and do not follow a systematic method of gear fitment .Thus leading to product failure. In order to help them overcome this problem and also ensure lesser failures, the company decided to sell these gauges at subsidized prices to mechanics.

Like wise, cigarette companies realize that the quality of their product can get adversely affected if they use poor quality tobacco leaf or paper or even filter. Consequently they have diversified into these product groups also.

Product differentiation in monopolistic market competition

It becomes essential for a product to have an independent identity of its own especially when there are close substitutes in a monopolistic type of competition. Products like pant lengths, shirt pieces, dress pieces etc., there are many varieties and hence close substitutes. However each brand of product is differentiated by the consumers.

Product differentiation may take place in the form of:

1.Brand Name:
Products are known by their Brand names. Over the years certain firms acquire goodwill in the market. Firm’s name itself becomes a brand name for its product. Godrej cupboards, Phillips TV are some of the examples. Some products get established in the market by the product’s name as in the case of Colgate Tooth Paste, Parker Pen , Tata Tea etc.

2.Size:
Products are manufactured in different sizes. Economy, Family, Large, Extra large are some of the sizes in which the products are available. Certain firms may specialize in sizes like Family size or economy size. Thus the Product is known in the market for its particular size.

3.Design:
Products could be differentiated on the basis of design. Refrigerators, Cupboards, Scooters, Cars, are some of the products which are considered by the buyers on the basis of design.

4.Color:

Color is one of the important factor on which goods are differentiated. Textiles, Readymade Garments, Plastic Products, Automobiles, are preferred by the Customer on the basis of their color.

5.Taste and Perfume :

Products like Confectioneries, toothpaste , soaps, cosmetics are selected on the basis of taste or perfume

6.Good Salesmanship:
Customers may prefer the Products of a particular firm against its rival firms simply because of good salesmanship, positive attitude, approach and cooperation of the sales people.

7.After Sale Service:
Consumer Durable items have a warranty period during which free service is offered. Services are offered thereafter on payment. Quality and promotions of after sale service influence the customers while selecting the products.

Product differentiation through the above methods helps firms to acquire a certain degree of loyalty for their products from the customers. Brand or Product loyalty gives a certain degree of monopoly power to the firms. It further enables the firms to charge a high price though marginally. Being in a competitive market ,a firm, in spite of having captivated the customers cannot afford to remain complacent or become negligent about those aspects which had initially enabled it to acquire the brand loyalty. To maintain the monopoly element in the monopolistic competition it is essential to compete with the rivals and retain the monopoly power over the loyal customers. Customer loyalty cannot be taken for granted but needs to be cultivated and retained.

Pricing methods in strategic marketing management

Different Pricing methods are suggested and the most common are given as under:

•Full cost pricing
•Marginal cost pricing
•Price discrimination
•Multi Product pricing
•Transfer Pricing

This article discusses the ‘Full Cost Pricing’ strategy in detail, so that one can be easily made familiar with the Pricing strategies. The other pricing methods are only off shoots of the Full cost pricing method.

Price of a commodity is determined by demand for and supply of a commodity. The influence of demand and supply differs depending upon the nature and type of a commodity and also the form of market in which the commodity is sold. . A firm’s supply of a commodity is based on its production which is determined by the principle of MC = MR.

MC is marginal cost and MR is marginal demand.
Based on the market form the demand for the goods sold by a firm differs. In a perfectly competitive market a firm has a perfectly elastic demand. Thus it is a price taker. In a monopoly market the firm is the price maker. To sell more quantity, however, it has to lower the price. In a monopolistic competition there are many firms and commodity is differentiated. Each firm may have some influence on the price, yet due to the existence of close substitutes a firm cannot charge much higher price than its competitors. In an oligopoly market, the price is rigid and very often non price competition takes place. In theory the price charged is equal to average cost, so that a firm can earn a normal profit depending on cost and the demand can be higher than the average cost enabling the firm to earn excess profit. In the short run, a firm may be required to charge a price less than the average cost in order to remain in the market.
In practice, however, price charged may not be as per the theoretical principle. Let us discuss some of the methods followed by the firms.

FULL COST PRICING:

It is logical that, pricing of a commodity should cover the cost of production of the good and also bring a fair amount of profit. Many business enterprises have the idea that the perfect sales price is the sum of all costs plus the profit which will yield the goal return on capital employed. Under the method which is also called “COST PLUS PRICING OR MARK-UP PRICING? the firms first estimate the average viable cost (AVC) and add the average overhead charges (usually estimated as a percentage of AVC) to obtain fully allocated average cost (AC). For AC the firm adds up a mark up (m) on costs for earning profits. The following formula explains mark up on costs.

m = (P – C) / C
Where M= Mark up on cost P = Product Price C = fully allocated average cost
Here P-C is the profit margin.

From the above equation we can derive the price of a commodity from the cost plus pricing method. The price of the product will be

P = C (I + M)
Let us explain this with an example

Full capacity output = 12,500

80% Output (normal output) 10,000

Total Variable cost Rs. 1, 00,000

Overhead cost Rs. 60,000

Mark – up 25 percent

From the above the AV = Rs. 10
Average overhead cost Rs.6
The allocated full cost is 10 + 6 = 16
P = 16 (1 + 0.25) = 20
Mark – up is (Rs. 20 – Rs.16) = 0.25 i.e. 25%

Rs.16 Industries differ in their mark-up. It may vary from 10 percent onwards depending on the degree of competition. There are however, several varieties of full cost pricing methods. They differ on the basis of working out the cost and the types of costs and the percentage of mark-up.