Marketers nationwide are setting their plans in motion for 2008. Big-name brands will embrace new technologies and adjust their budgets in some surprising ways. And as an entrepreneur, you can use some of these tactics to reach your own audience in the coming year.
In 2008, you can expect major marketing trends to include:
A shift from traditional to "alternative" media
Advertising in newspapers and magazines, and on radio and TV will continue to be marketing staples, but spending in new media will show the biggest growth as advertisers move money into online, mobile and alternative out-of-home advertising. Many marketers are finding alternative media the best way to reach audiences effectively and to yield a measurable ROI. A communications industry forecast published by Veronis Suhler Stevenson predicts alternative advertising spending will increase more than 23 percent from 2006 to 2011, while traditional advertising will have a compound annual growth rate of just over 1 percent.
A growth spurt for interactive marketing
Interactive marketing spending will more than triple over the next five years, reaching $61 billion by 2012, according to Forrester Research. To put this into context, interactive marketing, which currently accounts for just 8 percent of all ad spending, will increase to 18 percent of marketers' total advertising budgets in five years.
Interactive encompasses new marketing channels such as e-mail and search marketing, online video ads and social media. Mobile marketing, also a form of interactive media, is getting hotter as consumers become increasingly comfortable using personal computing handsets. Other emerging channels, including game marketing, podcasts and RSS feeds, will claim increasingly larger shares of marketers' budgets.
More off-line support for online campaigns
Here's where the value of advertising synergy hits home. In 2008 and beyond, the trend toward using off-line media to drive customers to the web will continue and pick up speed. Traditional media are increasingly relied on to support new interactive campaigns. Display advertising, in particular, will be the workhorse that Forrester Research predicts will reach $14 billion by 2012.
TV is another traditional advertising medium that will increasingly be used to pique consumer interest and point prospects to a website where they can find more in-depth information. Once there, entertaining online video ads may be used to tell a longer, more involved story. Consumer adoption of online video is growing, and most age groups are expected to step up its use in 2008.
Taking Advantage of the Trends
In 2008, the major marketers who set the trends will help consumers adopt new media consumption methods. And they'll pave the way for small business owners to follow suit without the risk or heavy financial outlay.
Here are four ways to increase sales and your advertising ROI by capitalizing on the hottest trends for 2008.
1. Engage the customer. The move toward alternative advertising versus some of the more traditional methods coincides with the emergence of technologies that enable a one-on-one dialogue with customers. For example, follow the trend of social media by posting your products on sites that encourage customer or peer reviews. Social media add an element of impartiality and are increasingly looked to as reliable sources of information.
2. Integrate your off-line and online campaigns. Look for ways to use off-line media to drive traffic to a website with specialized landing pages that tell a deeper story. Use print and TV ads to start the customer education process and direct potential buyers online to learn more and take the next steps in the purchase process. And direct an e-mail campaign to your current customer database to offset the cost of direct mail. Simply alternate e-mail and postal mail for a cost-effective one-two punch.
3. Move some off-line dollars online. Online advertising now offers a strong alternative to some traditional media, such as print yellow pages. Consider moving some of your traditional directory advertising dollars into online directories and search engines. The vast majority of Americans research their products online before making purchases, so a paid search campaign is an ideal way to make sure you turn up at the top of search results.
4. Follow your customer. Alternative out-of-home advertising opportunities let you place your message wherever your customers go. You can put your name and company logo on the umbrellas used by urban street vendors, or name hiking trails in wilderness areas. The key to using these new opportunities effectively is to place your message where it will appear in the proper context and reach your potential customers when they are in the right frame of mind.
The new year comes full of high-return marketing opportunities. By closely watching the hottest trends, you can make smart choices that let you step ahead of your slower-moving competitors.
Kim T. Gordon is the "Marketing" coach at Entrepreneur.com and a multifaceted marketing expert, speaker, author and media spokesperson. Over the past 26 years, she's helped millions of small-business owners increase their success through her company,National Marketing Federation Inc. Her latest book ,Maximum Marketing, Minimum Dollars, is now available.
Thursday, March 27, 2008
Guides for Marketing
1.Attract Attention With a Feature Article
Pitching the media can be tough. Every day, reporters are inundated with breaking news from different sources, all clamoring for attention. One way to break through the cacophony is to offer a different type of article--one that speaks to a topic that’s of interest to a target audience but isn’t dependent on being newsworthy right at the moment it’s sent. That type of article is called a feature.
A feature is an in-depth look at a topic, product or industry--it’s a complex story designed to be read at a leisurely pace. And a feature can benefit your company by linking your brand or product to a larger trend or industry focus while also showcasing you, the entrepreneur, as a thought-leader in your field. While a news release is designed to entice the reporter into finding out more information themselves, a feature’s designed to be used as is, or merely edited to fit the space available.
Topics such as health, home improvement, travel and technology all lend themselves well to features since they can be used in special sections of newspapers--such as lifestyle, home, arts or technology--or in the weekend magazines. Trade publications also publish feature articles, usually in the form of special supplements.
Because a feature should be written from a journalistic perspective, you should emphasize information over outright promotion. Ideally, a feature editor won’t change the story at all and will use it when it’s needed as part of a theme or to fill space.
Papers like to have quality articles on hand, so come up with your feature-worthy concept, then use the following guidelines to help you write a great article.
Headlines
The headline is the most vital part of your feature. Treat the headline as if it were a summary of the article. Ask yourself, Why is this story important? What about it will it grab readers’ interest? A good headline answers those questions by telling the reader something new, different or useful--in 20 words or less. A few examples I’ve seen recently include:
* Plug-In Devices Help Save Money on Your Utility Bill
* Reinventing the "Mommy Tack": More Women Choose Business Ownership to Gain Control, Flexibility and Family Time
* The Sleep Expert's Advice on Creating the Right Sleep Environment for Students
To come up with a good headline, pretend you’re telling a friend what the article’s about, explaining the most interesting aspects of your story. Keep the wording simple, and avoid superlatives and emotive language. Also, avoid using a brand or client name in the headline unless it’s very well known. Instead, focus on what’s most interesting about your topic.
Leads
A strong lead paragraph offers intrigue from the start. Editors don’t have time to read through the entire article to reach your key point, and neither do your readers. Think of the lead as an extended version of the headline, even using some of the same words.
When writing a lead, try to keep the paragraph short--two to three short sentences at the most. In total, your feature should be close to 400 words. Don’t worry about your brand at this point--just introduce the interesting aspects of the story. If your lead reads like an ad, it’ll be discarded immediately.
The Second Paragraph
The second paragraph serves to support and expand on the ideas set out in the lead. It’s also a good place to let people know who’s “behind” the feature so there’s no confusion about who provided the copy. Also, if the article has to be shortened due to space limitations, having the name of the company or spokesperson and your web address near the beginning will be vitally important.
If written well, the first two paragraphs can serve as a brief column item or filler if a newspaper or magazine has only limited space.
Using Quotes
A quote can lend authority to an article, introduce an expert and further advance the story. Most important, quotes can introduce personal feelings, comments and opinion, so this is where you want to use superlatives and emotive language (without sounding false!). Be sure quotes are in a conversational style, and don’t merely cite facts or figures--no real person speaks only in data. Also avoid repeating information or using jargon; speak as if you were explaining your product or service to your grandmother.
Ideally, the person you quote should be someone who’d be available for interviews should a journalist want to ask additional questions. So he or she should be knowledgeable on the topic and open to working with the media. Use your strongest quote first, and be sure to provide information on the speaker and his or her relation to the company in a contact section at the end of your article.
Getting Into Detail
After the third paragraph, any information you add should develop the story further and hold the interest of the reader. Now’s the time to go into detail about the benefits of a product, or the mechanisms of how it works. However, for ease of reading, use bullet points or “top tips” if you’re listing information.
Another thing to remember--and one way a feature differs from a news release--is that a feature story will almost never include corporate identity or forward-looking statements.
When to Send a Feature
Generally, newspaper feature sections are planned at least three weeks in advance, so you’ll need to plan ahead. E-mail the features editor to determine their interest before you start writing--just a simple outline will do. If you’re trying to get into a trade publication, do your research and check the deadlines--they could be working as much as three months in advance.
Most newswires offer feature services and media databases, and they’ll often offer a feature calendar that corresponds with publications’ due dates. Consider distributing your feature via newswire and, if possible, choose one that has a list of when and where your feature could be placed and advises on crafting your feature for the different audiences.
Also, don’t forget your web audience. Search engines are used millions of times each day by people looking for how-to, where-to and when-to articles. Your newswire can help you reach these audiences by providing search engine optimization to help get your story placed highly in searches.
Images and Multimedia
A photo can often mean difference between your feature being chosen for publication vs. them choosing your competitor’s. A photo helps explain the story and can draw the eye of those scanning the page. It also giveseditors more options when filling space.
Make sure your photos are high-quality: Always provide digital photos in high resolution (300 dpi) and, if possible, have them shot by a professional. A bad photo will reflect on the quality of your feature.
Other multimedia options include a video or audio version of your story, or additional expert quotes and interviews. A feature podcast or multimedia news release can include all these assets to transform your story into an online experience for your audience, complete with links and reference materials to let them experience more for themselves.
Finally…
When sending your feature to reporters for editorial consideration, don’t be afraid to call them to offer more information; however, don’t call to check that the article has arrived. Reporters are busy and don’t like being called without good reason. And be patient--since your feature isn’t breaking news, the reporter may file it for use next week, next month or during the next holiday season.
Once your feature’s been accepted, look out for follow-up opportunities: Keep tabs on industry trends, or consider doing a “What happened a year later” story or a biography of someone quoted in the article. With luck, your feature could be the next topic of discussion around the water cooler.
Mark Nowlan is Entrepreneur.com's "PR" columnist and senior vice president of marketing & communications at PR Newswire. Nowlan is a frequent lecturer on media relations, strategic communications and crisis communications at industry conferences around the country. Get more information about PR Newswire and public relations with their PR Toolkit for small businesses.
2.How to Attract Visitors to Your Site
I see it time and time again: The number-one challenge faced by brand-new internet business owners is a lack of traffic. Obviously, if your website isn't getting any traffic, you're not generating any sales. And what's worse is that without traffic, you can't test the key components of your sales process. And if you roll out a large traffic campaign before you've tested your site to make sure it converts maximum visitors into buyers, you risk losing sales and looking unprofessional to potential business partners and affiliates.
So you're caught in a vicious cycle: Before ramping up a big traffic campaign, you need to test your sales process, but without any traffic, testing is difficult--if not impossible!
In this article, I'm going to give you an eight-step action plan that will show you:
* How to get cheap, instant traffic to your website so you can test key components of your sales process--your sales copy, order form, navigation and opt-in offer--before rolling out a large-scale traffic campaign;
* How to ensure that every element of your sales process is optimized to convert maximum traffic into maximum sales;
* The most effective strategies for attracting thousands of highly qualified potential buyers to your site right away; and
* The secret to putting your entire traffic campaign on autopilot.
So even if your site is getting no traffic right now, you can be testing the key elements of your sales process tomorrow--and as soon as two weeks from now, you can be rolling out your traffic campaign in full.
Sound good? Let's get you started off on the right foot!
Step 1: Get the traffic you need to test your website fast! When I talk about testing with new internet business owners, I hear the same two questions all the time:
* How do I test my site?
* What do I test on my site?
As you may already know, there are an infinite number of things you can test on your site to help you increase sales. From layout to copy to design, there are limitless combinations of changes that may improve your visitor-to-sale conversion rate. But what's "enough" when you're just starting out? What elements should you focus on testing before rolling out your traffic campaign?
My advice is to stick to the basics. Focus on testing your:
* Salescopy, especially your headline, benefits, guarantee and call to action
* Order process, which needs to be simple enough for a novice web user to place an order
* Opt-in offer, so you can determine if you're successfully capturing your visitors' contact information
* Site navigation, so you can figure out how many clicks it takes to buy. Ideally it should take less than three.
These are the four critical aspects of your sales process that need to be tested before you start driving traffic. Later on, once you've generated sales and have some steady traffic, you can move on to testing other parts of your site.
Of course, all this talk of testing your new site raises one big question: How can you test without traffic? Because if you're just getting started, chances are good that your website doesn't get much traffic yet.
The solution is simple: Buy traffic through PPC search engines. Pay-per-click search engines are a lot like auctions--they allow you to bid for top-ranking positions under keywords of your choice. For each visitor who searches the keyword(s) you bid on and then clicks through to your site, you pay whatever you bid. Prices typically range from five cents to a few dollars per click-through for popular keywords.
There are a ton of PPC search engines out there, but the two best ones to get started with are:
* Yahoo Search Marketing and
* MIVA
With PPC search engines, you get cheap, instant, qualified traffic--provided you bid on targeted keywords. Not only that, but bidding on traffic in the PPC search engines can help your site get ranked in the free search engines, too!
Here are a few tips to help you start bidding for traffic without breaking the bank:
In Yahoo Search Marketing, bid to appear in the top three listings whenever possible, since these results are also "pushed" to appear in the search results for MSN, Yahoo, AltaVista, InfoSpace, AlltheWeb and NetZero--reaching 80 percent of all internet users.
Bid on targeted, descriptive keywords. So don't just bid on "sock;" bid on "red wool sock." Not only are targeted keywords and phrases usually cheaper to bid on--they'll also attract more qualified potential buyers. Use a keyword selection tool like Google's AdWords Keyword Tool to research targeted keywords that attract maximum traffic for minimal cost-per-click.
After you've tested and tweaked your site with a limited amount of purchased traffic, it's time to start generating qualified traffic for your site on a larger scale. But how do you go from some traffic to a ton of traffic?
Step 2: Get cheap traffic quickly with PPC advertising. Once you've tested your site with limited PPC traffic, the fastest way to ramp up traffic to your site is to roll out a PPC campaign on a larger scale. Obviously, you should start with Yahoo Search Marketing and Findwhat, as mentioned above. But here are some more PPC engines to consider bidding with as you increase your investment:
* Kanoodle
* Enhance Interactive
* LookSmart
This is also a great time to get started with Google AdWords --Google's own PPC contender. With Google AdWords, you get instant traffic with no waiting. Because as soon as you put the money down on your keywords, your ad goes up and starts working for you.
Step 3: Get free traffic from search engines like Google. Now that you've bid on keywords for a strong showing in the PPC search engines, it's time to tackle the organic search engines and directories. Search engines like Google and directories like Yahoo! can still be a great source of free traffic for your website. The trick is getting a competitive ranking for your best keywords.
The first step in getting a top ranking in the search engines is to submit or suggest your site to them. In other words, you have to provide them with details about your site. You want to make sure that the "spiders"--automated programs that crawl the web indexing sites for the search engines--find your site and include it in the search results.
While the spiders do index sites and pages that haven't been submitted, you certainly don't want to leave this to chance. A spider might find your website and index it next week--or it might be two years before that finally happens. So take the time to submit your site to be sure you're included. Once your site's been submitted, expect it to take two to six weeks for your listing to appear.
Every engine has a slightly different process for site submission, and it pays to follow their guidelines. For example, there's a fee to list your site in the directory at Yahoo!, but Google doesn't charge for their submission process. Here's a tip: If you submit your site exactly as they ask, you stand a better chance of getting a good listing on the first page of search results.
To submit or suggest your site to the major engines, follow the simple instructions they provide on these pages:
* For Google, go to www.google.com/addurl/?continue=/addurl
* For Yahoo Directory, go to http://docs.yahoo.com/info/suggest/
* For Yahoo! Search, go to http://submit.search.yahoo.com
* For MSN, go to http://search.msn.com/docs/submit.aspx
* For AOL, submit your site to the Open Directory Project, which uses ODP data. Here's the link: http://dmoz.org/add.html
And don't bother with companies that offer to submit your site to the search engines. Since each search engine uses a different set of criteria to rank your site, free submission services can actually end up doing you more harm than good, since they submit the same information in the same way to all the engines.
3.Build Sales with E-Mail Marketing
If you're looking for a highly effective, yet low-cost way to up-sell or cross-sell current customers, consider setting up an e-mail marketing program. Since it can cost as much as five times more to win a new customer than to keep an old one, retention programs using e-mail are a solid small-business marketing tactic. E-mail programs to in-house lists perform at least as well as direct mail--and often considerably better--without the postage or printing costs. And results are easy to track and measure.
Here are three steps that'll help you build a successful e-mail marketing campaign:
1. Build your list. Today, having a terrific website is simply not enough. You need a marketing program that drives traffic there and keeps visitors coming back. And since e-mail to rental lists is often kicked out as spam, it's essential to build your own opt-in list of customers and prospects. These are individuals who have visited your site and given you permission to contact them.
Prominently post a sign-in box or button on your home page accompanied by brief copy that induces visitors to join your list. This simple one-click button or single-entry form should click through to a more in-depth form where you can gather demographic and other pertinent information. To induce visitors to register, you can offer entry in a sweepstakes or contest, special notification of sales or new products, a free newsletter, access to members-only content, or even the ability to post product reviews or participate in message boards. Brick-and-mortar retailers can also capture e-mail information by asking for e-mail addresses from customers at checkout. And service businesses can contact satisfied clients and gain permission to add them to an e-mail list.
As you build your list, it's easy to add the e-mail addresses, names and demographic information to an in-house database using contact management software. Affordable off-the-shelf software products, such as ACT! 2005 from Best Software and GoldMine 6.5 by FrontRange, will help you track all sales and marketing activities as well as maintain vital demographic and sales information.
2. Send the right message. For many e-mail marketers, it's beneficial to alternate promotional messages with softer-sell communications, such as newsletters. This helps avoid list burnout and may increase the frequency with which you can successfully communicate with your customers and prospects. The most crucial element is to make the content of your e-mails relevant to the needs of your recipients, because off-target e-mails and those that come too frequently are generally treated as spam.
E-newsletters allow you to share information with your customers, position your company or yourself as an expert in your field, introduce new products and services, and get vital feedback from customers. There are two types of editorial styles: short blurbs with links to longer articles, or one major article interspersed with ads or promotional links. The key to success is to make your newsletter content so compelling that customers and prospects will look forward to receiving it. Choose a name for your e-newsletter that communicates something important to the subscriber, and keep your design, tone and format consistent from one issue to the next.
In addition to e-newsletters, e-mails that include sales promotions, coupons, customer reward information and invitations to events are generally well received. Nearly one-third of respondents to a recent DoubleClick consumer e-mail study said they'd made an immediate online purchase as a result of receiving an e-mail, and close to one-third said they'd clicked on messages for information and later made an online purchase as a result.
3. Design and track like a pro. The two elements that most dramatically affect your e-mail "open rate" are the "from" and "subject" lines. So it's essential to make it clear the e-mail is coming from you, a valued source of information. And the subject line must contain a benefit, or at least convey what your e-mail contains--otherwise your open rate will plummet. Comply with all CAN SPAM regulations by including your company's name and physical address in the body of the message as well as an unsubscribe option at the bottom.
When it comes to design and execution of your e-mail campaign, it's not necessary to go it alone. In fact, it's difficult for an entrepreneur to send more than 50 e-mails at a time, since higher numbers are usually blocked as spam by ISPs. Fortunately, e-mail marketing services that cater to small businesses, such as Constant Contact or those available through major web hosting services like Interland, will generally e-mail up to 5000 subscribers for $50 a month or less. The service will also maintain and clean your list by removing bounces and addresses of people who choose to unsubscribe.
Choose an e-mail marketing service that provides design templates for e-newsletters, promotional offers and coupons that are easy to customize. Since only about 56 percent of internet users have broadband, it's essential to design full-color, high impact HTML newsletters or promotions but still give recipients the option of receiving a text-only version.
Best of all, most e-mail marketing services will provide all your campaign metrics, which are vital to evaluating the effectiveness of your mailings. You'll be able to identify who opened your e-mail and clicked on each link. Then you can fine-tune your key elements--from your offers to your subject lines--for maximum ROI, and compare your results from one mailing to the next.
Kim T. Gordon is the "Marketing" coach at Entrepreneur.com and a multifaceted marketing expert, speaker, author and media spokesperson. Over the past 26 years, she's helped millions of small-business owners increase their success through her company, National Marketing Federation Inc.
3.How to Create a Marketing Plan
What is a marketing plan and why is it so essential to the success of your business? Find out here, in the first section of our comprehensive guide to creating a marketing plan.
Firms that are successful in marketing invariably start with a marketing plan. Large companies have plans with hundreds of pages; small companies can get by with a half-dozen sheets. Put your marketing plan in a three-ring binder. Refer to it at least quarterly, but better yet monthly. Leave a tab for putting in monthly reports on sales/manufacturing; this will allow you to track performance as you follow the plan.
The plan should cover one year. For small companies, this is often the best way to think about marketing. Things change, people leave, markets evolve, customers come and go. Later on we suggest creating a section of your plan that addresses the medium-term future--two to four years down the road. But the bulk of your plan should focus on the coming year.
You should allow yourself a couple of months to write the plan, even if it's only a few pages long. Developing the plan is the "heavy lifting" of marketing. While executing the plan has its challenges, deciding what to do and how to do it is marketing's greatest challenge. Most marketing plans kick off with the first of the year or with the opening of your fiscal year if it's different.
Who should see your plan? All the players in the company. Firms typically keep their marketing plans very, very private for one of two very different reasons: Either they're too skimpy and management would be embarrassed to have them see the light of day, or they're solid and packed with information . . . which would make them extremely valuable to the competition.
You can't do a marketing plan without getting many people involved. No matter what your size, get feedback from all parts of your company: finance, manufacturing, personnel, supply and so on--in addition to marketing itself. This is especially important because it will take all aspects of your company to make your marketing plan work. Your key people can provide realistic input on what's achievable and how your goals can be reached, and they can share any insights they have on any potential, as-yet-unrealized marketing opportunities, adding another dimension to your plan. If you're essentially a one-person management operation, you'll have to wear all your hats at one time--but at least the meetings will be short!
What's the relationship between your marketing plan and your business plan or vision statement? Your business plan spells out what your business is about--what you do and don't do, and what your ultimate goals are. It encompasses more than marketing; it can include discussions of locations, staffing, financing, strategic alliances and so on. It includes "the vision thing," the resounding words that spell out the glorious purpose of your company in stirring language. Your business plan is the U.S. Constitution of your business: If you want to do something that's outside the business plan, you need to either change your mind or change the plan. Your company's business plan provides the environment in which your marketing plan must flourish. The two documents must be consistent.
4.Creating a Great Business Card
A business card is an integral part of any good marketing plan. For its size and cost, it's probably the most powerful part. Of course, you can't expect your business card to tell the whole story about your company. What you should expect it to do is present a professional image people will remember. A business card can make or break a client's first impression of your company. In fact, this little card makes as much of an impression as your personal appearance-the suit you wear or the briefcase you carry.
Choose a card style that's appropriate for your business, industry and personal style. If you're a funeral director, for example, you don't want to be caught handing out day-glow cards with cartoon figures on them. If you're a mechanic whose specialty is converting old Beetles into dune buggies, a formal, black-on-white engraved card will probably be dropped into the nearest circular file. When crafting a design, start with the style that best supports the business image you wish to project. To help you get started, here are five different card styles for you to consider:
* Basic cards. A basic card is usually printed in black ink on plain white or cream stock. This is a good style to choose when utility is all you need. It's a no-nonsense approach that can appeal to clients and prospects who would not be impressed by fancy design features-the people who want "just the facts, ma'am." The design is simple, and the information is clear and concise.
* Picture cards. Having your face on your card-whether it's a photograph, a drawing or a caricature-helps a contact remember you the next time he or she sees you. Images representing a product or service, or a benefit your business provides, can help you communicate your business better than dozens of words. A splash of color (rather than just black and white) is often helpful on a picture card, too.
* Tactile cards. Some cards are distinguished not so much by how they look as by how they feel. They may use nonstandard materials, such as metal or wood, or have unusual shapes, edges, folds or embossing. Tactile cards tend to be considerably more expensive than regular cards because they use nonstandard production processes such as die cuts. But for some businesses, this more unusual card may be worth the price.
* Multipurpose cards. A card can do more than promote your name and business-it can also serve as a discount coupon, an appointment reminder or some other function. It may also provide valuable information that the average person may need. For example, a hotel may include a map on the back of its card for any guests who are walking around the local area. A card of any type can be made multipurpose by adding any of these types of features.
* Outside-the-box cards. A wildly original, fanciful or extravagant presentation can draw extra attention. Creativity knows no bounds-except the amount of money you wish to spend. Some examples are cards made of chocolate or that folded out into a miniature box to keep small items in.
Now It's Time to Order
Once you've settled on a basic idea for your business card, it's time to head to the printer. There are four primary considerations when ordering business cards:
* Weight. Most business cards are printed on 80-pound cover stock.
* Finish. Of the three available-smooth, linen and laid-the smooth finish is the most popular.
* Color. Right now, two-color cards predominate. If you're selecting from a catalog, there are between five and 15 standard colors to choose from. If you have another ink color in mind, your printer can show you a Pantone Matching System book, which includes every shade under the sun.
* Quantity. It generally pays to print more cards rather than fewer, because the printer's cost is primarily in the setup.
For more detailed descriptions of the different types of business cards, take a look at It's in the Cards. In it, Ivan Misner, Candace Bailly and Dan Georgevich review more than 2,000 business cards from 10 countries and select more than 200 examples of some of the best, which are shown throughout the book in full-color.
One Final Tip
Though this may sound like obvious advice, it might cost you another trip to the printer if you don't heed it: Include the essentials. This means your name, title, company name, address, phone number (or numbers, if you want to include your cell), e-mail and Web site. If someone wants to contact you after receiving your card, you sure as heck want them to be able to.
Compiled from articles written by Kim T. Gordon and Ivan Misner previously published on Entrepreneur.com.
5.Creative Brainstorming Techniques
6 ways to come up with million-dollar marketing ideas
By Kim T. Gordon
Q: My partner and I need some creative ideas for our business. We want to do some brainstorming, but we're not sure how to go about it. What's the best way to use this technique?
A: Brainstorming is a great technique for generating creative ideas. Generally performed in groups, it's a fun way to get lots of fresh ideas out on the table and get everyone thinking and pulling together. Over the years, I've participated in and facilitated brainstorming sessions ranging in size from just several people to about 40. But to start out, I recommend you keep your group on the small side. The participants should be relatively at ease with one another, and as you continue to brainstorm together over time, they'll become more comfortable throwing out off-the-wall ideas--which often generate the best results.
Begin by choosing a facilitator to record the ideas on large, poster-size sheets of paper that can be stuck to a bulletin board or along the walls of the room. This will keep all the ideas clearly visible. And follow these important ground rules:
* Suspend criticism. All ideas, no matter how crazy they may seem, should be encouraged and recorded without comment or criticism from the group. The general goal of brainstorming is to collect as many ideas as possible, making quantity much more important than quality at this initial stage.
* Postpone evaluation. Brainstorming sessions are not the time or place to evaluate the merits of the ideas suggested. So don't suspend the process to evaluate the projected results of any single idea.
* Build on others' ideas. At their best, brainstorming sessions are fast-paced and fun. Participants should try to build each consecutive idea on the previous ones. This can sometimes result in surprising twists and turns.
Though all brainstorming sessions should follow these basic ground rules, there are numerous ways to approach the idea-generation process. Here are three proven methods to try:
* Pose an initial question. Suppose you had created a product for small businesses and were looking for a new marketing approach. The facilitator might open the brainstorming session by posing a question such as "What do small business owners want?" Participants would then throw out ideas, such as "to save time" or "to increase sales." Or you might select a feature of your new product-one-button operation, for example--and open with a question such as "How does one-button operation help small business owners?"
* Use word association. This method involves brainstorming lists of words and then finding linkage between key words on each list. For example, imagine you want to create a new slogan for a hair gel product. You could start with the root word "gel" and use word association to come up with a list of ideas, such as "flexible hold." Then you could brainstorm another list beginning with "flexible." In the end, you might have four or five lists of ideas based on word association. To build your slogan, you'd choose a word from each of the lists and creatively link them together.
* Identify a challenge. Even the most difficult questions can be tackled by brainstorming, provided you have the right group of people. When I was called in by an auto parts manufacturer to find ways to use the company's roll-forming expertise to produce additional products, we gathered together a large group of experienced workers from throughout the plant for brainstorming. As the facilitator, I began by posing a simple challenge--list anything made from rolled metal not presently manufactured by the company. In short order, the group turned out dozens of viable product ideas. Later, management evaluated all the ideas to determine which products offered the greatest potential.
So while inspiration may come to you in the shower, a more structured approach to creative idea generation is often the best bet. Try using these effective brainstorming techniques to come up with terrific ideas for marketing your own business.
Kim T. Gordon is an author, marketing coach and media spokesperson-and one of the country's foremost experts on entrepreneurial success. Her newest book, Bringing Home The Business, identifies the 30 "truths" that can make the difference between success and failure in a homebased business. Kim offers one-on-one coaching by telephone to motivated individuals, providing practical marketing advice and budget-conscious strategies unique to your business. To receive free how-to articles and advice, get information on coaching and appearances, read a book excerpt, or contact Kim, visit http://www.smallbusinessnow.com, a huge site devoted exclusively to marketing your small business.
6.Gathering Competitive Intelligence
It's official. You're going to start your own business. You know what you plan to sell and who your customers or clients will be. But how will you decide what your marketing materials should look like or even what you'll charge for your products or services? You need to become an amateur sleuth and gather competitive intelligence to create an on-target marketing program and tailor your services or products to position against the competition.
It's important to complete a competitive analysis during the start-up phase of your new business, about the time you're putting together your marketing plan. In fact, if you get underway without performing a competitive analysis, you run the risk of creating marketing tools and product or service offerings that are way off the mark. This can cost you valuable time and money during the critical early months. You should also plan to gather competitive intelligence as your business grows, in order to stay competitive.
Who's Your Competition?
One of the biggest mistakes new entrepreneurs make is failing to recognize the range of competitors for their businesses. Your new company will have two types of competition-real and perceived. For example, imagine you're a former college athlete who's decided to start a personal fitness training business. Your competitors will fall into two categories: other personal trainers, and gyms and health clubs that offer trainers or advisors on staff. Although you'd directly compete only with the other personal trainers, your prospects-people who want to shape up-would perceive the gyms that offer these services as a viable alternative to hiring you. So to complete your competitive analysis, you need to evaluate the marketing materials and services both types of competitors offer.
Get the Facts
The first step in your competitive analysis is to collect all the marketing materials used by your competitors-both perceived and real. Begin by clipping your competitors' ads. Then request copies of their brochures and other marketing materials-not so you can copy their ideas, but so you can check out marketing strategies and formats, competitive pricing, special offers, the key benefits (or promises made), and clues to marketing niches that may be underserved. If possible, you may even want to "mystery shop" your competitors-go out and actually buy their products or services so you can experience the purchasing process with their store personnel or salespeople. If your competitors are large enough, you can gather information about them on the Net. Use major search engines to look for recent press releases and articles about them. There are even free sites on the Web that allow you to customize your own daily news page, such as NewsPage by NewsEdge Corp. (www.newspage.com). And don't forget to check out your competitors' Web sites. How do your direct and perceived competitors use the Net to attract customers and sell products? This will give you important clues about information a Web site of your own should contain.
Put It All Together
Now you're ready to draw some conclusions about the types of competitive offers and pricing your new business should use. Best of all, you'll have clear guidelines for developing your marketing tools. Complete your analysis by answering these questions:
* What size are their materials? Do most of your competitors use standard mailing envelopes, or are they using large folders with inserts?
* Do your competitors use photography or illustrations in their materials?
* Do they have Web sites, and how deep are they? Do they sell products online or just offer information?
* How are your competitors' products or services similar to yours? How are they different?
* What key benefits do their marketing materials communicate? Can you offer additional benefits that are valuable to prospects?
* What special product, service or pricing offers do your competitors use to stimulate responses to brochures and ads?
Once you find answers to these questions, you'll be in the perfect position to create marketing tools that work as hard as you do.
This article originally appeared as "The Spying Game" in the October 1999 issue of Business Start-Ups magazine.
Kim T. Gordon is a national speaker, the author of Growing Your Home-based Business and president of National Marketing Federation Inc., which provides marketing guidance by telephone to small and homebased businesses nationwide. For information and books, call (800) 2-SOLVE-IT.
7.How to Harness the Marketing Power of Blogs
This newest web phenomenon can rank your site #1 in search engines, boost traffic and sales, and establish you as an expert in your industry.
I'm sure you've heard about one of the biggest things to hit the web in the last few years: blogging.
A "blog" (derived from the term "web log") is basically just a website with two key differences: First, it's extremely easy to add information to it. A blog is like an online journal, so you just log in, type what happened today, post it, and you're done! Second, you can add a simple little feature that automatically tells a whole bunch of other websites that you've made an update to your blog--every time you make a change.
However, what you may not know is that a blog can also be a very powerful marketing tool for your business, and some people actually earn an income just from blogging alone.
The fact is, blogging is fast becoming an extremely important strategy for any online marketer. An effective blog can:
* drive swarms of traffic to your main website,
* generate more product sales,
* create an additional stream of advertising income,
* be a great customer service tool,
* and much more!
Blogs have an informal, conversational style, and readers can join in by commenting on each post. Blogs can be chatty, informative, opinionated and often humorous, and it's this "human" aspect of blogs that draws many people to them.
But the best part about blogs is how accessible they are to everyone. Blogs are free (or very inexpensive) to set up using services like Bloggeror TypePad. They're also easy to use (you can literally create your own blog in less than five minutes) and easy to promote with all the new tools and resources that have been created specifically for blogs.
How You Can Use a Blog to Accelerate Online Success
The fact is, blogs are no longer just online diaries of people's personal lives. Both online and offline businesses can use blogs to take their products and services to a wider audience, increasing their traffic, leads and sales.
Let's look more closely at a few of the extremely powerful ways your business can benefit from a blog. With an effective business blog, you can:
* Humanize your business. Because a blog is much more informal than other websites, you can write posts in your own voice and give your business more of a human face. This helps reassure prospective customers that there's a "real person" behind the website who'll take care of their needs. It also allows you to inject much more of your own personality into your online business than your main sales site could do.
* Improve your customer service. Your blog can act as a kind of interactive FAQ, allowing your customers to submit questions and you to answer them. You can also provide product updates, how-to articles, and other information of relevance to your customers. Prospective customers who see your blog will be encouraged by your commitment to good customer service.
* Give your target market the information they're looking for. With its automatic archiving feature--by date and category--a blog is a fantastic content-management system. It's easy for you to post new information on a regular basis, and it's easy for your visitors to find the information they want. With a well-written, regularly updated blog, you can become a reliable resource in your industry and build a following of loyal readers who depend on your content. These people will be your best potential customers.
* Drive traffic to your sales website. If you already have a website, a blog can give your traffic levels a real boost. For starters, your blog will attract new visitors that you can then redirect to your main sales website through links and special offers. But an even more effective technique is to use strategic keywords and links to specific sales pages to dramatically improve the search engine rankings of both your blog and your main website.
* Build your credibility and establish yourself as an industry expert. You can give your credibility a real boost by regularly posting valuable and relevant information on your blog. It's a great way to establish yourself as an expert in your subject area, and allow your visitors to feel much more comfortable buying from you.
* Promote your products or services. You can actually sell products directly from a blog, or you can use your blog to mention new products and direct visitors to your sales website.
* Generate extra income. There are now several advertising programs available, such as Google AdSense, that allow you to monetize your blog and generate an extra revenue stream.
3 Key Tips for Starting a Business Blog
Excited yet? You should be--blogging's not just a winning strategy, it's also a lot of fun! The beauty of blogging is that you can easily incorporate it into your daily schedule of tasks. You can even blog when you're on the road.
But what does it take to become a really successful blogger?
1. Great content: If your content isn't interesting and relevant to your target market, your blog won't work. It's as simple as that. You'll be surprised, however, how easy it is to find things to write about if you really put your mind to it. It could be news articles about your industry, product updates, interviews, personal insights into topics of importance to your target audience, and much more.
2. Regular updating: I won't lie to you: there are some days when I really find it hard to find the time to post a new article. But if I don't post, no one will come back. It's like subscribing to a daily newspaper but only getting a copy delivered now and then! So post often and your audience will keep coming back. And regularly adding fresh content to your blog also gives you a boost in the search engine rankings.
3. Your own distinct voice: It's important that you write in your own voice. A blog is no place for formality and corporate speak. It's more of a forum, a place where ideas can flourish and topics of current interest can be debated. You don't even need to be a brilliant writer; you just need to be able to relate to your audience and give them good content.
Final Thoughts
Starting a blog can take as little as five minutes. Of course, starting a blog is the easy part; turning your blog into a strategic tool that drives traffic and sales to your online business is a completely different matter.
Building a truly effective blog that keeps people coming back again and again takes a lot more than five minutes; it takes time and dedication to develop a blog that keeps your audience coming back for more.
Derek Gehl is Entrepreneur.com's "E-Business" columnistand the CEO of the Internet Marketing Center, an internet marketing firm that has helped thousands of people learn to start and run their own online businesses. He is also author of the online guide, Blogging for Dollars.
8.Implement a PR Strategy in 7 Days
Building publicity for you and your business can be done one day at a time.
Q: I want to generate publicity for my business, but I don't really know where to start or how to go about it. Can you help?
A: Here's how to generate publicity for you and your business by spending just a little of each of the next seven days on PR:
Day 1: Determine your target.
Make a list of all the publications in your target market area. These will most likely be newspapers, such as weekly newspapers, daily newspapers, regional business journals, free about-town advertising fliers and chamber of commerce newsletters. I would shy away from national publications unless you have a dynamite national story or you have a connection at a national publication. Next, determine the radio and television stations in your target market area. This includes AM, FM, public radio, college radio stations and the like.
Day 2: Develop a database of contacts from day one.
From each of the publications, determine where your news or announcement would best fit. Once you have done this, find out who the primary editor or reporter is for this part of the publication. Sometimes this is a feature editor, a feature reporter, a pool reporter or the managing editor. Do not send your press release to anybody and everybody at a particular publication. Do the same thing for radio and TV producers: Find out who assigns the news to reporters. Find out who edits the on-air news.
Day 3: Determine what PR story you will communicate.
Brainstorm PR topics. Are you making an announcement, communicating a change, stating an opinion or revealing a finding? Do you have a local angle to a national story? Is your information newsworthy and not promotionally slanted? All you need is 12 topics to average one press release per month for one year. However, don't let this schedule stop you from reporting news when it happens or making an announcement.
Day 4: Write the actual press release.
Editors love people who speak their language. A one-page press release that opens with who, what, where, when and why will make them happy and increase your probability of getting into their publication. Include some background information, a quote from you or another high-ranking person in the organization and the contact information. That's all there is to a press release. It doesn't have to be a long thesis. It doesn't have to have every single detail in it. If the reporter wants to do more of a story, he or she will call to develop further.
Day 5: Send your press release to those in the database you established on day two.
Some editors prefer faxed press releases, yet there is a growing trend toward receiving them by e-mail. Very rarely are press releases snail-mailed; however, some still are when photos are part of the release. Finding out your editor's, reporter's or producer's preference will increase your chance of publicity.
Day 6: Use your press release for other things.
Because of the sheer number of press releases generated, they cannot all be published. Don't let this stop you from issuing the release and trying to generate publicity. There are other things you can do with press releases. You can post them on your Web site in the media room area. You can use them as direct-mail pieces to customers and prospects. You can use them as handouts on sales calls or put them on the other side of your fliers. Use your imagination here, and you will be surprised at the unique ways you have to generate publicity and ultimately buzz about you and your business.
Day 7: Continue your efforts to establish relationships with editors, reporters and producers.
The more relationships you have with your targeted publications, the increased likelihood you have of getting publicity. The time to do this is not when you have a breaking news story. Take your time in this area and spread out your efforts. Then when you do have that breaking news or blockbuster story, you'll know who to contact directly and quickly for the biggest PR impact.
Spending just a little bit of time each day on these seven steps will make you an expert in the PR arena. The most appealing part of all about this kind of PR strategy is the cost. In the spirit of guerrilla marketing, this is not high-dollar marketing, but rather marketing that relies on your time, energy and imagination.
Al Lautenslager is the president and owner of The Ink Well, a commercial printing and mailing company in Wheaton, Illinois, and the principal of Market For Profits, a Naperville, Illinois-based marketing consulting and coaching firm. He can be reached at al@market-for-profits.com or through his Web site, Market for Profits".
9.How to Use an E-book to Promote Your Business
This step-by-step guide to using e-books is the fastest way to get your product or service noticed by thousands of online customers.
Of the 1 billion people who now use the internet worldwide, the vast majority are searching for information--they're seeking financial services, looking for medical information, checking real estate listings, chatting with newsgroups, researching products and services, and looking for information that'll answer their questions and solve their problems.
So what does that mean for you, the entrepreneur? It means that information is a hot product!
To profit from this overwhelming demand for information, one of the first things you'll need is an affordable and simple way to package and distribute information products securely online.
That's where e-books come in. E-books (electronic books) aren't only the perfect vehicle in which to package your valuable information product, they're also easy--and free--to deliver. Plus, once you've put in the initial time to create them, your costs to reproduce them are zero--so you keep 100 percent of the profits!
The important thing to note about e-books is they aren't just books. Unlike a paper book, which can only contain words and maybe the odd chart or illustration, an e-book can contain absolutely anything that can be delivered over the internet.
This means you can easily take any multimedia presentation--including audio and video files--that would work on a website and package it in an e-book.
In fact, there are literally dozens of ways for you to use e-books to increase sales, capture opt-ins, generate sales leads, and more. For example, with e-books you can:
* Record a video presentation of your best salesperson pitching your product. A video sales pitch is a great way to reach a far wider audience because you can easily send it around the internet.
* Create an interactive demonstration of how your product works. People love to be able to see how something works before they buy it, and if you capture the contact information of everyone who views your demonstration, you can easily follow up with those leads.
* Create "preview" chapters--an incredibly powerful sales tool. You can let visitors to your site download your e-book and read one or two chapters, and then prompt them to "unlock" the rest of the e-book by paying for it. Once people prove to themselves that you're offering valuable information, they'll gladly pay to get the rest of it.
* Increase your sales with free or paid trials of text, audio or video products. It's easy to sell "free trial" e-books that give readers full or partial access to your information for a limited time. If you collect each customer's credit card information at the beginning of the free trial, you can simply bill them after the trial period is up. And if a customer decides they don't want your product, you can simply shut off their e-book access from your own computer.
* Compile audio or video interviews with industry experts. This makes for a highly marketable e-book that's fun and easy to create. Most people will agree to an interview if you approach them professionally and explain how they stand to benefit from the exposure of participating in your e-book.
E-books have come a long way from the simple electronic delivery of text-based documents. Just use your imagination and let e-books help you create and distribute professional-looking information products that'll wow your customers.
Pitching the media can be tough. Every day, reporters are inundated with breaking news from different sources, all clamoring for attention. One way to break through the cacophony is to offer a different type of article--one that speaks to a topic that’s of interest to a target audience but isn’t dependent on being newsworthy right at the moment it’s sent. That type of article is called a feature.
A feature is an in-depth look at a topic, product or industry--it’s a complex story designed to be read at a leisurely pace. And a feature can benefit your company by linking your brand or product to a larger trend or industry focus while also showcasing you, the entrepreneur, as a thought-leader in your field. While a news release is designed to entice the reporter into finding out more information themselves, a feature’s designed to be used as is, or merely edited to fit the space available.
Topics such as health, home improvement, travel and technology all lend themselves well to features since they can be used in special sections of newspapers--such as lifestyle, home, arts or technology--or in the weekend magazines. Trade publications also publish feature articles, usually in the form of special supplements.
Because a feature should be written from a journalistic perspective, you should emphasize information over outright promotion. Ideally, a feature editor won’t change the story at all and will use it when it’s needed as part of a theme or to fill space.
Papers like to have quality articles on hand, so come up with your feature-worthy concept, then use the following guidelines to help you write a great article.
Headlines
The headline is the most vital part of your feature. Treat the headline as if it were a summary of the article. Ask yourself, Why is this story important? What about it will it grab readers’ interest? A good headline answers those questions by telling the reader something new, different or useful--in 20 words or less. A few examples I’ve seen recently include:
* Plug-In Devices Help Save Money on Your Utility Bill
* Reinventing the "Mommy Tack": More Women Choose Business Ownership to Gain Control, Flexibility and Family Time
* The Sleep Expert's Advice on Creating the Right Sleep Environment for Students
To come up with a good headline, pretend you’re telling a friend what the article’s about, explaining the most interesting aspects of your story. Keep the wording simple, and avoid superlatives and emotive language. Also, avoid using a brand or client name in the headline unless it’s very well known. Instead, focus on what’s most interesting about your topic.
Leads
A strong lead paragraph offers intrigue from the start. Editors don’t have time to read through the entire article to reach your key point, and neither do your readers. Think of the lead as an extended version of the headline, even using some of the same words.
When writing a lead, try to keep the paragraph short--two to three short sentences at the most. In total, your feature should be close to 400 words. Don’t worry about your brand at this point--just introduce the interesting aspects of the story. If your lead reads like an ad, it’ll be discarded immediately.
The Second Paragraph
The second paragraph serves to support and expand on the ideas set out in the lead. It’s also a good place to let people know who’s “behind” the feature so there’s no confusion about who provided the copy. Also, if the article has to be shortened due to space limitations, having the name of the company or spokesperson and your web address near the beginning will be vitally important.
If written well, the first two paragraphs can serve as a brief column item or filler if a newspaper or magazine has only limited space.
Using Quotes
A quote can lend authority to an article, introduce an expert and further advance the story. Most important, quotes can introduce personal feelings, comments and opinion, so this is where you want to use superlatives and emotive language (without sounding false!). Be sure quotes are in a conversational style, and don’t merely cite facts or figures--no real person speaks only in data. Also avoid repeating information or using jargon; speak as if you were explaining your product or service to your grandmother.
Ideally, the person you quote should be someone who’d be available for interviews should a journalist want to ask additional questions. So he or she should be knowledgeable on the topic and open to working with the media. Use your strongest quote first, and be sure to provide information on the speaker and his or her relation to the company in a contact section at the end of your article.
Getting Into Detail
After the third paragraph, any information you add should develop the story further and hold the interest of the reader. Now’s the time to go into detail about the benefits of a product, or the mechanisms of how it works. However, for ease of reading, use bullet points or “top tips” if you’re listing information.
Another thing to remember--and one way a feature differs from a news release--is that a feature story will almost never include corporate identity or forward-looking statements.
When to Send a Feature
Generally, newspaper feature sections are planned at least three weeks in advance, so you’ll need to plan ahead. E-mail the features editor to determine their interest before you start writing--just a simple outline will do. If you’re trying to get into a trade publication, do your research and check the deadlines--they could be working as much as three months in advance.
Most newswires offer feature services and media databases, and they’ll often offer a feature calendar that corresponds with publications’ due dates. Consider distributing your feature via newswire and, if possible, choose one that has a list of when and where your feature could be placed and advises on crafting your feature for the different audiences.
Also, don’t forget your web audience. Search engines are used millions of times each day by people looking for how-to, where-to and when-to articles. Your newswire can help you reach these audiences by providing search engine optimization to help get your story placed highly in searches.
Images and Multimedia
A photo can often mean difference between your feature being chosen for publication vs. them choosing your competitor’s. A photo helps explain the story and can draw the eye of those scanning the page. It also giveseditors more options when filling space.
Make sure your photos are high-quality: Always provide digital photos in high resolution (300 dpi) and, if possible, have them shot by a professional. A bad photo will reflect on the quality of your feature.
Other multimedia options include a video or audio version of your story, or additional expert quotes and interviews. A feature podcast or multimedia news release can include all these assets to transform your story into an online experience for your audience, complete with links and reference materials to let them experience more for themselves.
Finally…
When sending your feature to reporters for editorial consideration, don’t be afraid to call them to offer more information; however, don’t call to check that the article has arrived. Reporters are busy and don’t like being called without good reason. And be patient--since your feature isn’t breaking news, the reporter may file it for use next week, next month or during the next holiday season.
Once your feature’s been accepted, look out for follow-up opportunities: Keep tabs on industry trends, or consider doing a “What happened a year later” story or a biography of someone quoted in the article. With luck, your feature could be the next topic of discussion around the water cooler.
Mark Nowlan is Entrepreneur.com's "PR" columnist and senior vice president of marketing & communications at PR Newswire. Nowlan is a frequent lecturer on media relations, strategic communications and crisis communications at industry conferences around the country. Get more information about PR Newswire and public relations with their PR Toolkit for small businesses.
2.How to Attract Visitors to Your Site
I see it time and time again: The number-one challenge faced by brand-new internet business owners is a lack of traffic. Obviously, if your website isn't getting any traffic, you're not generating any sales. And what's worse is that without traffic, you can't test the key components of your sales process. And if you roll out a large traffic campaign before you've tested your site to make sure it converts maximum visitors into buyers, you risk losing sales and looking unprofessional to potential business partners and affiliates.
So you're caught in a vicious cycle: Before ramping up a big traffic campaign, you need to test your sales process, but without any traffic, testing is difficult--if not impossible!
In this article, I'm going to give you an eight-step action plan that will show you:
* How to get cheap, instant traffic to your website so you can test key components of your sales process--your sales copy, order form, navigation and opt-in offer--before rolling out a large-scale traffic campaign;
* How to ensure that every element of your sales process is optimized to convert maximum traffic into maximum sales;
* The most effective strategies for attracting thousands of highly qualified potential buyers to your site right away; and
* The secret to putting your entire traffic campaign on autopilot.
So even if your site is getting no traffic right now, you can be testing the key elements of your sales process tomorrow--and as soon as two weeks from now, you can be rolling out your traffic campaign in full.
Sound good? Let's get you started off on the right foot!
Step 1: Get the traffic you need to test your website fast! When I talk about testing with new internet business owners, I hear the same two questions all the time:
* How do I test my site?
* What do I test on my site?
As you may already know, there are an infinite number of things you can test on your site to help you increase sales. From layout to copy to design, there are limitless combinations of changes that may improve your visitor-to-sale conversion rate. But what's "enough" when you're just starting out? What elements should you focus on testing before rolling out your traffic campaign?
My advice is to stick to the basics. Focus on testing your:
* Salescopy, especially your headline, benefits, guarantee and call to action
* Order process, which needs to be simple enough for a novice web user to place an order
* Opt-in offer, so you can determine if you're successfully capturing your visitors' contact information
* Site navigation, so you can figure out how many clicks it takes to buy. Ideally it should take less than three.
These are the four critical aspects of your sales process that need to be tested before you start driving traffic. Later on, once you've generated sales and have some steady traffic, you can move on to testing other parts of your site.
Of course, all this talk of testing your new site raises one big question: How can you test without traffic? Because if you're just getting started, chances are good that your website doesn't get much traffic yet.
The solution is simple: Buy traffic through PPC search engines. Pay-per-click search engines are a lot like auctions--they allow you to bid for top-ranking positions under keywords of your choice. For each visitor who searches the keyword(s) you bid on and then clicks through to your site, you pay whatever you bid. Prices typically range from five cents to a few dollars per click-through for popular keywords.
There are a ton of PPC search engines out there, but the two best ones to get started with are:
* Yahoo Search Marketing and
* MIVA
With PPC search engines, you get cheap, instant, qualified traffic--provided you bid on targeted keywords. Not only that, but bidding on traffic in the PPC search engines can help your site get ranked in the free search engines, too!
Here are a few tips to help you start bidding for traffic without breaking the bank:
In Yahoo Search Marketing, bid to appear in the top three listings whenever possible, since these results are also "pushed" to appear in the search results for MSN, Yahoo, AltaVista, InfoSpace, AlltheWeb and NetZero--reaching 80 percent of all internet users.
Bid on targeted, descriptive keywords. So don't just bid on "sock;" bid on "red wool sock." Not only are targeted keywords and phrases usually cheaper to bid on--they'll also attract more qualified potential buyers. Use a keyword selection tool like Google's AdWords Keyword Tool to research targeted keywords that attract maximum traffic for minimal cost-per-click.
After you've tested and tweaked your site with a limited amount of purchased traffic, it's time to start generating qualified traffic for your site on a larger scale. But how do you go from some traffic to a ton of traffic?
Step 2: Get cheap traffic quickly with PPC advertising. Once you've tested your site with limited PPC traffic, the fastest way to ramp up traffic to your site is to roll out a PPC campaign on a larger scale. Obviously, you should start with Yahoo Search Marketing and Findwhat, as mentioned above. But here are some more PPC engines to consider bidding with as you increase your investment:
* Kanoodle
* Enhance Interactive
* LookSmart
This is also a great time to get started with Google AdWords --Google's own PPC contender. With Google AdWords, you get instant traffic with no waiting. Because as soon as you put the money down on your keywords, your ad goes up and starts working for you.
Step 3: Get free traffic from search engines like Google. Now that you've bid on keywords for a strong showing in the PPC search engines, it's time to tackle the organic search engines and directories. Search engines like Google and directories like Yahoo! can still be a great source of free traffic for your website. The trick is getting a competitive ranking for your best keywords.
The first step in getting a top ranking in the search engines is to submit or suggest your site to them. In other words, you have to provide them with details about your site. You want to make sure that the "spiders"--automated programs that crawl the web indexing sites for the search engines--find your site and include it in the search results.
While the spiders do index sites and pages that haven't been submitted, you certainly don't want to leave this to chance. A spider might find your website and index it next week--or it might be two years before that finally happens. So take the time to submit your site to be sure you're included. Once your site's been submitted, expect it to take two to six weeks for your listing to appear.
Every engine has a slightly different process for site submission, and it pays to follow their guidelines. For example, there's a fee to list your site in the directory at Yahoo!, but Google doesn't charge for their submission process. Here's a tip: If you submit your site exactly as they ask, you stand a better chance of getting a good listing on the first page of search results.
To submit or suggest your site to the major engines, follow the simple instructions they provide on these pages:
* For Google, go to www.google.com/addurl/?continue=/addurl
* For Yahoo Directory, go to http://docs.yahoo.com/info/suggest/
* For Yahoo! Search, go to http://submit.search.yahoo.com
* For MSN, go to http://search.msn.com/docs/submit.aspx
* For AOL, submit your site to the Open Directory Project, which uses ODP data. Here's the link: http://dmoz.org/add.html
And don't bother with companies that offer to submit your site to the search engines. Since each search engine uses a different set of criteria to rank your site, free submission services can actually end up doing you more harm than good, since they submit the same information in the same way to all the engines.
3.Build Sales with E-Mail Marketing
If you're looking for a highly effective, yet low-cost way to up-sell or cross-sell current customers, consider setting up an e-mail marketing program. Since it can cost as much as five times more to win a new customer than to keep an old one, retention programs using e-mail are a solid small-business marketing tactic. E-mail programs to in-house lists perform at least as well as direct mail--and often considerably better--without the postage or printing costs. And results are easy to track and measure.
Here are three steps that'll help you build a successful e-mail marketing campaign:
1. Build your list. Today, having a terrific website is simply not enough. You need a marketing program that drives traffic there and keeps visitors coming back. And since e-mail to rental lists is often kicked out as spam, it's essential to build your own opt-in list of customers and prospects. These are individuals who have visited your site and given you permission to contact them.
Prominently post a sign-in box or button on your home page accompanied by brief copy that induces visitors to join your list. This simple one-click button or single-entry form should click through to a more in-depth form where you can gather demographic and other pertinent information. To induce visitors to register, you can offer entry in a sweepstakes or contest, special notification of sales or new products, a free newsletter, access to members-only content, or even the ability to post product reviews or participate in message boards. Brick-and-mortar retailers can also capture e-mail information by asking for e-mail addresses from customers at checkout. And service businesses can contact satisfied clients and gain permission to add them to an e-mail list.
As you build your list, it's easy to add the e-mail addresses, names and demographic information to an in-house database using contact management software. Affordable off-the-shelf software products, such as ACT! 2005 from Best Software and GoldMine 6.5 by FrontRange, will help you track all sales and marketing activities as well as maintain vital demographic and sales information.
2. Send the right message. For many e-mail marketers, it's beneficial to alternate promotional messages with softer-sell communications, such as newsletters. This helps avoid list burnout and may increase the frequency with which you can successfully communicate with your customers and prospects. The most crucial element is to make the content of your e-mails relevant to the needs of your recipients, because off-target e-mails and those that come too frequently are generally treated as spam.
E-newsletters allow you to share information with your customers, position your company or yourself as an expert in your field, introduce new products and services, and get vital feedback from customers. There are two types of editorial styles: short blurbs with links to longer articles, or one major article interspersed with ads or promotional links. The key to success is to make your newsletter content so compelling that customers and prospects will look forward to receiving it. Choose a name for your e-newsletter that communicates something important to the subscriber, and keep your design, tone and format consistent from one issue to the next.
In addition to e-newsletters, e-mails that include sales promotions, coupons, customer reward information and invitations to events are generally well received. Nearly one-third of respondents to a recent DoubleClick consumer e-mail study said they'd made an immediate online purchase as a result of receiving an e-mail, and close to one-third said they'd clicked on messages for information and later made an online purchase as a result.
3. Design and track like a pro. The two elements that most dramatically affect your e-mail "open rate" are the "from" and "subject" lines. So it's essential to make it clear the e-mail is coming from you, a valued source of information. And the subject line must contain a benefit, or at least convey what your e-mail contains--otherwise your open rate will plummet. Comply with all CAN SPAM regulations by including your company's name and physical address in the body of the message as well as an unsubscribe option at the bottom.
When it comes to design and execution of your e-mail campaign, it's not necessary to go it alone. In fact, it's difficult for an entrepreneur to send more than 50 e-mails at a time, since higher numbers are usually blocked as spam by ISPs. Fortunately, e-mail marketing services that cater to small businesses, such as Constant Contact or those available through major web hosting services like Interland, will generally e-mail up to 5000 subscribers for $50 a month or less. The service will also maintain and clean your list by removing bounces and addresses of people who choose to unsubscribe.
Choose an e-mail marketing service that provides design templates for e-newsletters, promotional offers and coupons that are easy to customize. Since only about 56 percent of internet users have broadband, it's essential to design full-color, high impact HTML newsletters or promotions but still give recipients the option of receiving a text-only version.
Best of all, most e-mail marketing services will provide all your campaign metrics, which are vital to evaluating the effectiveness of your mailings. You'll be able to identify who opened your e-mail and clicked on each link. Then you can fine-tune your key elements--from your offers to your subject lines--for maximum ROI, and compare your results from one mailing to the next.
Kim T. Gordon is the "Marketing" coach at Entrepreneur.com and a multifaceted marketing expert, speaker, author and media spokesperson. Over the past 26 years, she's helped millions of small-business owners increase their success through her company, National Marketing Federation Inc.
3.How to Create a Marketing Plan
What is a marketing plan and why is it so essential to the success of your business? Find out here, in the first section of our comprehensive guide to creating a marketing plan.
Firms that are successful in marketing invariably start with a marketing plan. Large companies have plans with hundreds of pages; small companies can get by with a half-dozen sheets. Put your marketing plan in a three-ring binder. Refer to it at least quarterly, but better yet monthly. Leave a tab for putting in monthly reports on sales/manufacturing; this will allow you to track performance as you follow the plan.
The plan should cover one year. For small companies, this is often the best way to think about marketing. Things change, people leave, markets evolve, customers come and go. Later on we suggest creating a section of your plan that addresses the medium-term future--two to four years down the road. But the bulk of your plan should focus on the coming year.
You should allow yourself a couple of months to write the plan, even if it's only a few pages long. Developing the plan is the "heavy lifting" of marketing. While executing the plan has its challenges, deciding what to do and how to do it is marketing's greatest challenge. Most marketing plans kick off with the first of the year or with the opening of your fiscal year if it's different.
Who should see your plan? All the players in the company. Firms typically keep their marketing plans very, very private for one of two very different reasons: Either they're too skimpy and management would be embarrassed to have them see the light of day, or they're solid and packed with information . . . which would make them extremely valuable to the competition.
You can't do a marketing plan without getting many people involved. No matter what your size, get feedback from all parts of your company: finance, manufacturing, personnel, supply and so on--in addition to marketing itself. This is especially important because it will take all aspects of your company to make your marketing plan work. Your key people can provide realistic input on what's achievable and how your goals can be reached, and they can share any insights they have on any potential, as-yet-unrealized marketing opportunities, adding another dimension to your plan. If you're essentially a one-person management operation, you'll have to wear all your hats at one time--but at least the meetings will be short!
What's the relationship between your marketing plan and your business plan or vision statement? Your business plan spells out what your business is about--what you do and don't do, and what your ultimate goals are. It encompasses more than marketing; it can include discussions of locations, staffing, financing, strategic alliances and so on. It includes "the vision thing," the resounding words that spell out the glorious purpose of your company in stirring language. Your business plan is the U.S. Constitution of your business: If you want to do something that's outside the business plan, you need to either change your mind or change the plan. Your company's business plan provides the environment in which your marketing plan must flourish. The two documents must be consistent.
4.Creating a Great Business Card
A business card is an integral part of any good marketing plan. For its size and cost, it's probably the most powerful part. Of course, you can't expect your business card to tell the whole story about your company. What you should expect it to do is present a professional image people will remember. A business card can make or break a client's first impression of your company. In fact, this little card makes as much of an impression as your personal appearance-the suit you wear or the briefcase you carry.
Choose a card style that's appropriate for your business, industry and personal style. If you're a funeral director, for example, you don't want to be caught handing out day-glow cards with cartoon figures on them. If you're a mechanic whose specialty is converting old Beetles into dune buggies, a formal, black-on-white engraved card will probably be dropped into the nearest circular file. When crafting a design, start with the style that best supports the business image you wish to project. To help you get started, here are five different card styles for you to consider:
* Basic cards. A basic card is usually printed in black ink on plain white or cream stock. This is a good style to choose when utility is all you need. It's a no-nonsense approach that can appeal to clients and prospects who would not be impressed by fancy design features-the people who want "just the facts, ma'am." The design is simple, and the information is clear and concise.
* Picture cards. Having your face on your card-whether it's a photograph, a drawing or a caricature-helps a contact remember you the next time he or she sees you. Images representing a product or service, or a benefit your business provides, can help you communicate your business better than dozens of words. A splash of color (rather than just black and white) is often helpful on a picture card, too.
* Tactile cards. Some cards are distinguished not so much by how they look as by how they feel. They may use nonstandard materials, such as metal or wood, or have unusual shapes, edges, folds or embossing. Tactile cards tend to be considerably more expensive than regular cards because they use nonstandard production processes such as die cuts. But for some businesses, this more unusual card may be worth the price.
* Multipurpose cards. A card can do more than promote your name and business-it can also serve as a discount coupon, an appointment reminder or some other function. It may also provide valuable information that the average person may need. For example, a hotel may include a map on the back of its card for any guests who are walking around the local area. A card of any type can be made multipurpose by adding any of these types of features.
* Outside-the-box cards. A wildly original, fanciful or extravagant presentation can draw extra attention. Creativity knows no bounds-except the amount of money you wish to spend. Some examples are cards made of chocolate or that folded out into a miniature box to keep small items in.
Now It's Time to Order
Once you've settled on a basic idea for your business card, it's time to head to the printer. There are four primary considerations when ordering business cards:
* Weight. Most business cards are printed on 80-pound cover stock.
* Finish. Of the three available-smooth, linen and laid-the smooth finish is the most popular.
* Color. Right now, two-color cards predominate. If you're selecting from a catalog, there are between five and 15 standard colors to choose from. If you have another ink color in mind, your printer can show you a Pantone Matching System book, which includes every shade under the sun.
* Quantity. It generally pays to print more cards rather than fewer, because the printer's cost is primarily in the setup.
For more detailed descriptions of the different types of business cards, take a look at It's in the Cards. In it, Ivan Misner, Candace Bailly and Dan Georgevich review more than 2,000 business cards from 10 countries and select more than 200 examples of some of the best, which are shown throughout the book in full-color.
One Final Tip
Though this may sound like obvious advice, it might cost you another trip to the printer if you don't heed it: Include the essentials. This means your name, title, company name, address, phone number (or numbers, if you want to include your cell), e-mail and Web site. If someone wants to contact you after receiving your card, you sure as heck want them to be able to.
Compiled from articles written by Kim T. Gordon and Ivan Misner previously published on Entrepreneur.com.
5.Creative Brainstorming Techniques
6 ways to come up with million-dollar marketing ideas
By Kim T. Gordon
Q: My partner and I need some creative ideas for our business. We want to do some brainstorming, but we're not sure how to go about it. What's the best way to use this technique?
A: Brainstorming is a great technique for generating creative ideas. Generally performed in groups, it's a fun way to get lots of fresh ideas out on the table and get everyone thinking and pulling together. Over the years, I've participated in and facilitated brainstorming sessions ranging in size from just several people to about 40. But to start out, I recommend you keep your group on the small side. The participants should be relatively at ease with one another, and as you continue to brainstorm together over time, they'll become more comfortable throwing out off-the-wall ideas--which often generate the best results.
Begin by choosing a facilitator to record the ideas on large, poster-size sheets of paper that can be stuck to a bulletin board or along the walls of the room. This will keep all the ideas clearly visible. And follow these important ground rules:
* Suspend criticism. All ideas, no matter how crazy they may seem, should be encouraged and recorded without comment or criticism from the group. The general goal of brainstorming is to collect as many ideas as possible, making quantity much more important than quality at this initial stage.
* Postpone evaluation. Brainstorming sessions are not the time or place to evaluate the merits of the ideas suggested. So don't suspend the process to evaluate the projected results of any single idea.
* Build on others' ideas. At their best, brainstorming sessions are fast-paced and fun. Participants should try to build each consecutive idea on the previous ones. This can sometimes result in surprising twists and turns.
Though all brainstorming sessions should follow these basic ground rules, there are numerous ways to approach the idea-generation process. Here are three proven methods to try:
* Pose an initial question. Suppose you had created a product for small businesses and were looking for a new marketing approach. The facilitator might open the brainstorming session by posing a question such as "What do small business owners want?" Participants would then throw out ideas, such as "to save time" or "to increase sales." Or you might select a feature of your new product-one-button operation, for example--and open with a question such as "How does one-button operation help small business owners?"
* Use word association. This method involves brainstorming lists of words and then finding linkage between key words on each list. For example, imagine you want to create a new slogan for a hair gel product. You could start with the root word "gel" and use word association to come up with a list of ideas, such as "flexible hold." Then you could brainstorm another list beginning with "flexible." In the end, you might have four or five lists of ideas based on word association. To build your slogan, you'd choose a word from each of the lists and creatively link them together.
* Identify a challenge. Even the most difficult questions can be tackled by brainstorming, provided you have the right group of people. When I was called in by an auto parts manufacturer to find ways to use the company's roll-forming expertise to produce additional products, we gathered together a large group of experienced workers from throughout the plant for brainstorming. As the facilitator, I began by posing a simple challenge--list anything made from rolled metal not presently manufactured by the company. In short order, the group turned out dozens of viable product ideas. Later, management evaluated all the ideas to determine which products offered the greatest potential.
So while inspiration may come to you in the shower, a more structured approach to creative idea generation is often the best bet. Try using these effective brainstorming techniques to come up with terrific ideas for marketing your own business.
Kim T. Gordon is an author, marketing coach and media spokesperson-and one of the country's foremost experts on entrepreneurial success. Her newest book, Bringing Home The Business, identifies the 30 "truths" that can make the difference between success and failure in a homebased business. Kim offers one-on-one coaching by telephone to motivated individuals, providing practical marketing advice and budget-conscious strategies unique to your business. To receive free how-to articles and advice, get information on coaching and appearances, read a book excerpt, or contact Kim, visit http://www.smallbusinessnow.com, a huge site devoted exclusively to marketing your small business.
6.Gathering Competitive Intelligence
It's official. You're going to start your own business. You know what you plan to sell and who your customers or clients will be. But how will you decide what your marketing materials should look like or even what you'll charge for your products or services? You need to become an amateur sleuth and gather competitive intelligence to create an on-target marketing program and tailor your services or products to position against the competition.
It's important to complete a competitive analysis during the start-up phase of your new business, about the time you're putting together your marketing plan. In fact, if you get underway without performing a competitive analysis, you run the risk of creating marketing tools and product or service offerings that are way off the mark. This can cost you valuable time and money during the critical early months. You should also plan to gather competitive intelligence as your business grows, in order to stay competitive.
Who's Your Competition?
One of the biggest mistakes new entrepreneurs make is failing to recognize the range of competitors for their businesses. Your new company will have two types of competition-real and perceived. For example, imagine you're a former college athlete who's decided to start a personal fitness training business. Your competitors will fall into two categories: other personal trainers, and gyms and health clubs that offer trainers or advisors on staff. Although you'd directly compete only with the other personal trainers, your prospects-people who want to shape up-would perceive the gyms that offer these services as a viable alternative to hiring you. So to complete your competitive analysis, you need to evaluate the marketing materials and services both types of competitors offer.
Get the Facts
The first step in your competitive analysis is to collect all the marketing materials used by your competitors-both perceived and real. Begin by clipping your competitors' ads. Then request copies of their brochures and other marketing materials-not so you can copy their ideas, but so you can check out marketing strategies and formats, competitive pricing, special offers, the key benefits (or promises made), and clues to marketing niches that may be underserved. If possible, you may even want to "mystery shop" your competitors-go out and actually buy their products or services so you can experience the purchasing process with their store personnel or salespeople. If your competitors are large enough, you can gather information about them on the Net. Use major search engines to look for recent press releases and articles about them. There are even free sites on the Web that allow you to customize your own daily news page, such as NewsPage by NewsEdge Corp. (www.newspage.com). And don't forget to check out your competitors' Web sites. How do your direct and perceived competitors use the Net to attract customers and sell products? This will give you important clues about information a Web site of your own should contain.
Put It All Together
Now you're ready to draw some conclusions about the types of competitive offers and pricing your new business should use. Best of all, you'll have clear guidelines for developing your marketing tools. Complete your analysis by answering these questions:
* What size are their materials? Do most of your competitors use standard mailing envelopes, or are they using large folders with inserts?
* Do your competitors use photography or illustrations in their materials?
* Do they have Web sites, and how deep are they? Do they sell products online or just offer information?
* How are your competitors' products or services similar to yours? How are they different?
* What key benefits do their marketing materials communicate? Can you offer additional benefits that are valuable to prospects?
* What special product, service or pricing offers do your competitors use to stimulate responses to brochures and ads?
Once you find answers to these questions, you'll be in the perfect position to create marketing tools that work as hard as you do.
This article originally appeared as "The Spying Game" in the October 1999 issue of Business Start-Ups magazine.
Kim T. Gordon is a national speaker, the author of Growing Your Home-based Business and president of National Marketing Federation Inc., which provides marketing guidance by telephone to small and homebased businesses nationwide. For information and books, call (800) 2-SOLVE-IT.
7.How to Harness the Marketing Power of Blogs
This newest web phenomenon can rank your site #1 in search engines, boost traffic and sales, and establish you as an expert in your industry.
I'm sure you've heard about one of the biggest things to hit the web in the last few years: blogging.
A "blog" (derived from the term "web log") is basically just a website with two key differences: First, it's extremely easy to add information to it. A blog is like an online journal, so you just log in, type what happened today, post it, and you're done! Second, you can add a simple little feature that automatically tells a whole bunch of other websites that you've made an update to your blog--every time you make a change.
However, what you may not know is that a blog can also be a very powerful marketing tool for your business, and some people actually earn an income just from blogging alone.
The fact is, blogging is fast becoming an extremely important strategy for any online marketer. An effective blog can:
* drive swarms of traffic to your main website,
* generate more product sales,
* create an additional stream of advertising income,
* be a great customer service tool,
* and much more!
Blogs have an informal, conversational style, and readers can join in by commenting on each post. Blogs can be chatty, informative, opinionated and often humorous, and it's this "human" aspect of blogs that draws many people to them.
But the best part about blogs is how accessible they are to everyone. Blogs are free (or very inexpensive) to set up using services like Bloggeror TypePad. They're also easy to use (you can literally create your own blog in less than five minutes) and easy to promote with all the new tools and resources that have been created specifically for blogs.
How You Can Use a Blog to Accelerate Online Success
The fact is, blogs are no longer just online diaries of people's personal lives. Both online and offline businesses can use blogs to take their products and services to a wider audience, increasing their traffic, leads and sales.
Let's look more closely at a few of the extremely powerful ways your business can benefit from a blog. With an effective business blog, you can:
* Humanize your business. Because a blog is much more informal than other websites, you can write posts in your own voice and give your business more of a human face. This helps reassure prospective customers that there's a "real person" behind the website who'll take care of their needs. It also allows you to inject much more of your own personality into your online business than your main sales site could do.
* Improve your customer service. Your blog can act as a kind of interactive FAQ, allowing your customers to submit questions and you to answer them. You can also provide product updates, how-to articles, and other information of relevance to your customers. Prospective customers who see your blog will be encouraged by your commitment to good customer service.
* Give your target market the information they're looking for. With its automatic archiving feature--by date and category--a blog is a fantastic content-management system. It's easy for you to post new information on a regular basis, and it's easy for your visitors to find the information they want. With a well-written, regularly updated blog, you can become a reliable resource in your industry and build a following of loyal readers who depend on your content. These people will be your best potential customers.
* Drive traffic to your sales website. If you already have a website, a blog can give your traffic levels a real boost. For starters, your blog will attract new visitors that you can then redirect to your main sales website through links and special offers. But an even more effective technique is to use strategic keywords and links to specific sales pages to dramatically improve the search engine rankings of both your blog and your main website.
* Build your credibility and establish yourself as an industry expert. You can give your credibility a real boost by regularly posting valuable and relevant information on your blog. It's a great way to establish yourself as an expert in your subject area, and allow your visitors to feel much more comfortable buying from you.
* Promote your products or services. You can actually sell products directly from a blog, or you can use your blog to mention new products and direct visitors to your sales website.
* Generate extra income. There are now several advertising programs available, such as Google AdSense, that allow you to monetize your blog and generate an extra revenue stream.
3 Key Tips for Starting a Business Blog
Excited yet? You should be--blogging's not just a winning strategy, it's also a lot of fun! The beauty of blogging is that you can easily incorporate it into your daily schedule of tasks. You can even blog when you're on the road.
But what does it take to become a really successful blogger?
1. Great content: If your content isn't interesting and relevant to your target market, your blog won't work. It's as simple as that. You'll be surprised, however, how easy it is to find things to write about if you really put your mind to it. It could be news articles about your industry, product updates, interviews, personal insights into topics of importance to your target audience, and much more.
2. Regular updating: I won't lie to you: there are some days when I really find it hard to find the time to post a new article. But if I don't post, no one will come back. It's like subscribing to a daily newspaper but only getting a copy delivered now and then! So post often and your audience will keep coming back. And regularly adding fresh content to your blog also gives you a boost in the search engine rankings.
3. Your own distinct voice: It's important that you write in your own voice. A blog is no place for formality and corporate speak. It's more of a forum, a place where ideas can flourish and topics of current interest can be debated. You don't even need to be a brilliant writer; you just need to be able to relate to your audience and give them good content.
Final Thoughts
Starting a blog can take as little as five minutes. Of course, starting a blog is the easy part; turning your blog into a strategic tool that drives traffic and sales to your online business is a completely different matter.
Building a truly effective blog that keeps people coming back again and again takes a lot more than five minutes; it takes time and dedication to develop a blog that keeps your audience coming back for more.
Derek Gehl is Entrepreneur.com's "E-Business" columnistand the CEO of the Internet Marketing Center, an internet marketing firm that has helped thousands of people learn to start and run their own online businesses. He is also author of the online guide, Blogging for Dollars.
8.Implement a PR Strategy in 7 Days
Building publicity for you and your business can be done one day at a time.
Q: I want to generate publicity for my business, but I don't really know where to start or how to go about it. Can you help?
A: Here's how to generate publicity for you and your business by spending just a little of each of the next seven days on PR:
Day 1: Determine your target.
Make a list of all the publications in your target market area. These will most likely be newspapers, such as weekly newspapers, daily newspapers, regional business journals, free about-town advertising fliers and chamber of commerce newsletters. I would shy away from national publications unless you have a dynamite national story or you have a connection at a national publication. Next, determine the radio and television stations in your target market area. This includes AM, FM, public radio, college radio stations and the like.
Day 2: Develop a database of contacts from day one.
From each of the publications, determine where your news or announcement would best fit. Once you have done this, find out who the primary editor or reporter is for this part of the publication. Sometimes this is a feature editor, a feature reporter, a pool reporter or the managing editor. Do not send your press release to anybody and everybody at a particular publication. Do the same thing for radio and TV producers: Find out who assigns the news to reporters. Find out who edits the on-air news.
Day 3: Determine what PR story you will communicate.
Brainstorm PR topics. Are you making an announcement, communicating a change, stating an opinion or revealing a finding? Do you have a local angle to a national story? Is your information newsworthy and not promotionally slanted? All you need is 12 topics to average one press release per month for one year. However, don't let this schedule stop you from reporting news when it happens or making an announcement.
Day 4: Write the actual press release.
Editors love people who speak their language. A one-page press release that opens with who, what, where, when and why will make them happy and increase your probability of getting into their publication. Include some background information, a quote from you or another high-ranking person in the organization and the contact information. That's all there is to a press release. It doesn't have to be a long thesis. It doesn't have to have every single detail in it. If the reporter wants to do more of a story, he or she will call to develop further.
Day 5: Send your press release to those in the database you established on day two.
Some editors prefer faxed press releases, yet there is a growing trend toward receiving them by e-mail. Very rarely are press releases snail-mailed; however, some still are when photos are part of the release. Finding out your editor's, reporter's or producer's preference will increase your chance of publicity.
Day 6: Use your press release for other things.
Because of the sheer number of press releases generated, they cannot all be published. Don't let this stop you from issuing the release and trying to generate publicity. There are other things you can do with press releases. You can post them on your Web site in the media room area. You can use them as direct-mail pieces to customers and prospects. You can use them as handouts on sales calls or put them on the other side of your fliers. Use your imagination here, and you will be surprised at the unique ways you have to generate publicity and ultimately buzz about you and your business.
Day 7: Continue your efforts to establish relationships with editors, reporters and producers.
The more relationships you have with your targeted publications, the increased likelihood you have of getting publicity. The time to do this is not when you have a breaking news story. Take your time in this area and spread out your efforts. Then when you do have that breaking news or blockbuster story, you'll know who to contact directly and quickly for the biggest PR impact.
Spending just a little bit of time each day on these seven steps will make you an expert in the PR arena. The most appealing part of all about this kind of PR strategy is the cost. In the spirit of guerrilla marketing, this is not high-dollar marketing, but rather marketing that relies on your time, energy and imagination.
Al Lautenslager is the president and owner of The Ink Well, a commercial printing and mailing company in Wheaton, Illinois, and the principal of Market For Profits, a Naperville, Illinois-based marketing consulting and coaching firm. He can be reached at al@market-for-profits.com or through his Web site, Market for Profits".
9.How to Use an E-book to Promote Your Business
This step-by-step guide to using e-books is the fastest way to get your product or service noticed by thousands of online customers.
Of the 1 billion people who now use the internet worldwide, the vast majority are searching for information--they're seeking financial services, looking for medical information, checking real estate listings, chatting with newsgroups, researching products and services, and looking for information that'll answer their questions and solve their problems.
So what does that mean for you, the entrepreneur? It means that information is a hot product!
To profit from this overwhelming demand for information, one of the first things you'll need is an affordable and simple way to package and distribute information products securely online.
That's where e-books come in. E-books (electronic books) aren't only the perfect vehicle in which to package your valuable information product, they're also easy--and free--to deliver. Plus, once you've put in the initial time to create them, your costs to reproduce them are zero--so you keep 100 percent of the profits!
The important thing to note about e-books is they aren't just books. Unlike a paper book, which can only contain words and maybe the odd chart or illustration, an e-book can contain absolutely anything that can be delivered over the internet.
This means you can easily take any multimedia presentation--including audio and video files--that would work on a website and package it in an e-book.
In fact, there are literally dozens of ways for you to use e-books to increase sales, capture opt-ins, generate sales leads, and more. For example, with e-books you can:
* Record a video presentation of your best salesperson pitching your product. A video sales pitch is a great way to reach a far wider audience because you can easily send it around the internet.
* Create an interactive demonstration of how your product works. People love to be able to see how something works before they buy it, and if you capture the contact information of everyone who views your demonstration, you can easily follow up with those leads.
* Create "preview" chapters--an incredibly powerful sales tool. You can let visitors to your site download your e-book and read one or two chapters, and then prompt them to "unlock" the rest of the e-book by paying for it. Once people prove to themselves that you're offering valuable information, they'll gladly pay to get the rest of it.
* Increase your sales with free or paid trials of text, audio or video products. It's easy to sell "free trial" e-books that give readers full or partial access to your information for a limited time. If you collect each customer's credit card information at the beginning of the free trial, you can simply bill them after the trial period is up. And if a customer decides they don't want your product, you can simply shut off their e-book access from your own computer.
* Compile audio or video interviews with industry experts. This makes for a highly marketable e-book that's fun and easy to create. Most people will agree to an interview if you approach them professionally and explain how they stand to benefit from the exposure of participating in your e-book.
E-books have come a long way from the simple electronic delivery of text-based documents. Just use your imagination and let e-books help you create and distribute professional-looking information products that'll wow your customers.
10 Marketing Trends to Watch in 2007
Throughout 2006, I've been watching and interpreting the marketing stats and studies that impact small businesses to give you tips on staying one step ahead. Now, with 2007 fast approaching, let's look at a roundup of the hottest trends, from changes taking place among consumer audiences through what to watch for in traditional and online marketing. Here's the info you need on the most important trends and how to make the most of them to increase sales and grow your business in the New Year.
Consumer Trends
1. College Grads
If you're searching for the most effective way to reach this desirable prospect group, move your marketing dollars into online media. The internet is now the primary source of media and entertainment among college grads, whose top planned purchases upon graduation are professional clothing, travel/airline tickets, health insurance and furniture according to the “Y2M: eGrad College Graduate Survey”. Nearly 80 percent of respondents are online purchasers, making them ideal candidates for your online campaign.
2. Affluent Working Women
The big news is that this group is increasing in size, and the best way to reach them may be online. According to The Media Audit, affluent working women with family incomes of $75,000 or more are growing in number, and 94.3 percent access the internet during an average month. About half are now considered heavy users of the internet, while heavy use of radio, television, newspapers and direct mail has all declined within this group. To increase sales from this expanding audience, alter your media spending to place greater emphasis online.
3. Asian Population Growth
The southern region of the U.S. boasts the fastest Asian population growth rate (31 percent), followed by the Midwest (24 percent), the Northeast (23 percent) and the West (19 percent), according to an analysis of Census Bureau data in the “American Community Survey” by Kang & Lee Advertising. Asians represent a prospect group with higher than average household incomes and education levels. Can you offer a product or service that will appeal to this growing market?
4. Word-Of-Mouth
Want to build buzz? Lucid Marketing's study, "U.S. Adults: Word of Mouth Communications," found that women were more likely than men to share a positive experience with a business or recommend an enjoyable product; full-time employees made substantially more daily contacts than those not in the workforce; and people with household earnings of more than $100,000 were more likely to make recommendations than those earning less. So buzz marketers should direct efforts to these three "chatty" groups.
Trends in Traditional Media
5. Yellow Pages
According to a study from the Kelsey group, marketers targeting younger demographics should transition away from print. Only 28 percent of teens said they would turn to print Yellow Pages first to find a local business, product, or service, while 47 percent said their first choice would be search engines. And just 44 percent of respondents between the ages and 18 and 34 favored print Yellow Pages.
6. Simultaneous Media Usage
There's no longer such a thing as a captive media audience--consumers are frequently participating in more than one form of media at any one time. Seventy percent of web users, for instance, watch TV occasionally to regularly while online, according to BIGresearch’s “Simultaneous Media Survey.” It also found that nearly 65 percent watch TV while they read, and 51 percent of radio listeners read the newspaper while listening. The rise in multitasking among consumers mandates an integrated media approach and an increased emphasis on advertising within the most relevant and engaging content.
7. Newspapers
This past year, many of the websites of major newspapers have become the number-one portals in their geographic markets and are drawing a larger, younger and more affluent readership. The audience that reads a newspaper’s website but not its print version accounts for 2 to 15 percent of the Integrated Newspaper Audience, according to Scarborough Research, and that represents hundreds of thousands of readers for many newspapers in larger markets. They’re successfully attracting 18-to-34-year-olds to their sites, and the online readers are more upscale, which can make them a more desirable audience. If you're an advertiser in the "print" newspaper, you can negotiate for a combo rate to run online as well to reach these additional readers. And if advertising in the print newspaper is too expensive for your business, you may find more affordable rates online by drilling down past the main pages to place ads on content-rich, but less frequently visited web pages.
Hot Online Trends
8. Web Conferencing
As business travel becomes increasingly challenging due to increased security, advance check-in times and transportation delays, online workshops and meetings that require no travel are coming to the forefront. It’s more desirable than ever to demo your new product to a group or make a sales presentation without anyone ever leaving home. Participants can watch your presentation on their computer monitors and hear you live on their computer speakers or by phone. In fact, I'm now transitioning to this technology to deliver webinars, and you can, too.
9. Online Research
Whether you sell exclusively online or primarily through a brick-and-mortar site, online search will have a profound impact on your sales in 2007. When asked how often they researched products online before buying them in person or in a store, 87 percent of nearly 7,500 respondents to a BIGresearch “Consumer Intentions and Actions Survey” said they did so occasionally to regularly. And a comScore research study showed that 63 percent of searchers completed a purchase in offline retail stores following their search activity. So no matter whether you sell online, off-line or both, you need a great website with deep, persuasive content that keeps your prospects and customers shopping on your site or sends them to your store.
10. Local Search
Want to know where to invest your online marketing dollars in 2007? Aim for higher rankings in the top search engines. Sixty-two percent of searchers click on a link within the first page of results, according to a report from iProspect and Jupiter Research. To win higher rankings in natural search results, you can optimize your site by sprinkling the keyword phrases your best prospects will be searching for throughout all the pages of your site, in your page descriptions and in metatags. You should also secure links to your site from other high-ranking websites. But to guarantee you'll turn up in the top search results, invest in a paid search campaign. Local search campaigns are often the most affordable and will bring traffic from your immediate market area in the New Year.
Kim T. Gordon is the "Marketing" coach at Entrepreneur.com and a multifaceted marketing expert, speaker, author and media spokesperson. Over the past 26 years, she's helped millions of small-business owners increase their success through her company,National Marketing Federation Inc.Her latest book,Maximum Marketing, Minimum Dollars, is now available.
Consumer Trends
1. College Grads
If you're searching for the most effective way to reach this desirable prospect group, move your marketing dollars into online media. The internet is now the primary source of media and entertainment among college grads, whose top planned purchases upon graduation are professional clothing, travel/airline tickets, health insurance and furniture according to the “Y2M: eGrad College Graduate Survey”. Nearly 80 percent of respondents are online purchasers, making them ideal candidates for your online campaign.
2. Affluent Working Women
The big news is that this group is increasing in size, and the best way to reach them may be online. According to The Media Audit, affluent working women with family incomes of $75,000 or more are growing in number, and 94.3 percent access the internet during an average month. About half are now considered heavy users of the internet, while heavy use of radio, television, newspapers and direct mail has all declined within this group. To increase sales from this expanding audience, alter your media spending to place greater emphasis online.
3. Asian Population Growth
The southern region of the U.S. boasts the fastest Asian population growth rate (31 percent), followed by the Midwest (24 percent), the Northeast (23 percent) and the West (19 percent), according to an analysis of Census Bureau data in the “American Community Survey” by Kang & Lee Advertising. Asians represent a prospect group with higher than average household incomes and education levels. Can you offer a product or service that will appeal to this growing market?
4. Word-Of-Mouth
Want to build buzz? Lucid Marketing's study, "U.S. Adults: Word of Mouth Communications," found that women were more likely than men to share a positive experience with a business or recommend an enjoyable product; full-time employees made substantially more daily contacts than those not in the workforce; and people with household earnings of more than $100,000 were more likely to make recommendations than those earning less. So buzz marketers should direct efforts to these three "chatty" groups.
Trends in Traditional Media
5. Yellow Pages
According to a study from the Kelsey group, marketers targeting younger demographics should transition away from print. Only 28 percent of teens said they would turn to print Yellow Pages first to find a local business, product, or service, while 47 percent said their first choice would be search engines. And just 44 percent of respondents between the ages and 18 and 34 favored print Yellow Pages.
6. Simultaneous Media Usage
There's no longer such a thing as a captive media audience--consumers are frequently participating in more than one form of media at any one time. Seventy percent of web users, for instance, watch TV occasionally to regularly while online, according to BIGresearch’s “Simultaneous Media Survey.” It also found that nearly 65 percent watch TV while they read, and 51 percent of radio listeners read the newspaper while listening. The rise in multitasking among consumers mandates an integrated media approach and an increased emphasis on advertising within the most relevant and engaging content.
7. Newspapers
This past year, many of the websites of major newspapers have become the number-one portals in their geographic markets and are drawing a larger, younger and more affluent readership. The audience that reads a newspaper’s website but not its print version accounts for 2 to 15 percent of the Integrated Newspaper Audience, according to Scarborough Research, and that represents hundreds of thousands of readers for many newspapers in larger markets. They’re successfully attracting 18-to-34-year-olds to their sites, and the online readers are more upscale, which can make them a more desirable audience. If you're an advertiser in the "print" newspaper, you can negotiate for a combo rate to run online as well to reach these additional readers. And if advertising in the print newspaper is too expensive for your business, you may find more affordable rates online by drilling down past the main pages to place ads on content-rich, but less frequently visited web pages.
Hot Online Trends
8. Web Conferencing
As business travel becomes increasingly challenging due to increased security, advance check-in times and transportation delays, online workshops and meetings that require no travel are coming to the forefront. It’s more desirable than ever to demo your new product to a group or make a sales presentation without anyone ever leaving home. Participants can watch your presentation on their computer monitors and hear you live on their computer speakers or by phone. In fact, I'm now transitioning to this technology to deliver webinars, and you can, too.
9. Online Research
Whether you sell exclusively online or primarily through a brick-and-mortar site, online search will have a profound impact on your sales in 2007. When asked how often they researched products online before buying them in person or in a store, 87 percent of nearly 7,500 respondents to a BIGresearch “Consumer Intentions and Actions Survey” said they did so occasionally to regularly. And a comScore research study showed that 63 percent of searchers completed a purchase in offline retail stores following their search activity. So no matter whether you sell online, off-line or both, you need a great website with deep, persuasive content that keeps your prospects and customers shopping on your site or sends them to your store.
10. Local Search
Want to know where to invest your online marketing dollars in 2007? Aim for higher rankings in the top search engines. Sixty-two percent of searchers click on a link within the first page of results, according to a report from iProspect and Jupiter Research. To win higher rankings in natural search results, you can optimize your site by sprinkling the keyword phrases your best prospects will be searching for throughout all the pages of your site, in your page descriptions and in metatags. You should also secure links to your site from other high-ranking websites. But to guarantee you'll turn up in the top search results, invest in a paid search campaign. Local search campaigns are often the most affordable and will bring traffic from your immediate market area in the New Year.
Kim T. Gordon is the "Marketing" coach at Entrepreneur.com and a multifaceted marketing expert, speaker, author and media spokesperson. Over the past 26 years, she's helped millions of small-business owners increase their success through her company,National Marketing Federation Inc.Her latest book,Maximum Marketing, Minimum Dollars, is now available.
Monday, March 24, 2008
Business plan
A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.
The business goals being attempted may be for-profit or non-profit. For-profit business plans typically focus on financial goals. Non-profit and government agency business plans tend to focus on service goals. Business plans may also target changes in perception and branding by the customer, client, tax-payer, or larger community. A business plan having changes in perception and branding as its primary goals is called a marketing plan.
Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, particularly financial stakeholders. They typically have detailed information about the organization or team attempting to reach the goals. With for-profit entities, external stakeholders include investors and customers.[1] External stake-holders of non-profits include donors and the clients of the non-profit's services.[2] For government agencies, external stakeholders include tax-payers, higher-level government agencies, and international lending bodies such as the IMF, the World Bank, various economic agencies of the UN, and development banks.
Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization. An internal business is often developed in conjunction with a balanced scorecard or a list of critical success factors. This allows success of the plan to be measured using non-financial measures. Business plans that identify and target internal goals, but provide only general guidance on how they will be met are called strategic plans.
Operational plans describe the goals of an internal organization, working group or department.[3] Project plans, sometimes known as project frameworks, describe the goals of a particular project. They may also address the project's place within the organization's larger strategic goals.[4][5]
Contents
* 1 Business Plan Content
* 2 Business
o 2.1 Support services
o 2.2 Resources for researching facts and figures
+ 2.2.1 Internal corporate records
+ 2.2.2 Free information
+ 2.2.3 Fee-based services
o 2.3 Strategic Analysis
o 2.4 Forecasts: Modeling Techniques
* 3 Presentation Formats
* 4 Revisiting the Business Plan
o 4.1 Cost overruns and revenue shortfalls
* 5 Legal and Liability Issues
o 5.1 Disclosure requirements
o 5.2 Limitations on content and audience
* 6 Open Business Plans
o 6.1 Examples
* 7 How Business Plans are Used
o 7.1 Venture Capital
o 7.2 Public Offerings
o 7.3 Within Corporations
+ 7.3.1 Fundraising
+ 7.3.2 Total Quality Management
+ 7.3.3 Management by Objective
+ 7.3.4 Strategic Planning
o 7.4 Education
+ 7.4.1 K-12
+ 7.4.2 Higher Education
* 8 Satires of Business Plans
Business Plan Content
For more details on this topic, see Content of a business plan.
Business plans are decision-making tools. There is no fixed content for a business plan. Rather the content and format of the business plan is determined by the goals and audience. A business plan should contain whatever information is needed to decide whether or not to pursue a goal.
For example, a business plan for a non-profit might discuss the fit between the business plan and the organization’s mission. Banks are quite concerned about defaults, so a business plan for a bank loan will build a convincing case for the organization’s ability to repay the loan. Venture capitalists are primarily concerned about initial investment, feasibility, and exit valuation. A business plan for a project requiring equity financing will need to explain why current resources, upcoming growth opportunities, and sustainable competitive advantage will lead to a high exit valuation.
Preparing a business plan draws on a wide range of knowledge from many different business disciplines: finance, human resource management, intellectual property management, supply chain management, operations management, and marketing, among others.[6]. It can be helpful to view the business plan as a collection of sub-plans, one for each of the main business disciplines.[7]
Business
Support services
* books, portals, and other sources of written information
* consulting services
* electronic planning templates (software)
* face to face help: mentoring programs, training courses
o Germany: Bundesministerium für Wirtschaft und Technologie (BMWi) [1].
o Morocco: CRI (Centre Régional d'Investisment)
o Pakistan: SMEDA (Small and medium enterprise development authority)
o UK: Business Link
o USA: SCORE, SBA centers
o Canada: Industry Canada, [2]
o India : Allindialive Business Planing Portal,[3]
o Other countries: needs research
Resources for researching facts and figures
Internal corporate records
Free information
* published statistics on the web
* business libraries
Fee-based services
* marketing reports from subscription services
* archive and journal services
* books
* www.myessentialplans.com
Strategic Analysis
* Industry Assessment
o The macroenvironment
o Customer Strategy & Market Analysis
* Competitor Analysis
o Porter 5 forces analysis
Forecasts: Modeling Techniques
Presentation Formats
The format of a business plan depends on its presentation context. It is not uncommon for businesses, especially start-ups to have three or four formats for the same business plan:
* an "elevator pitch" - a three minute summary of the business plan's executive summary. This is often used as a teaser to awaken the interest of potential funders, customers, or strategic partners.
* an oral presentation - a hopefully entertaining slide show and oral narrative that is meant to trigger discussion and interest potential investors in reading the written presentation. The content of the presentation is usually limited to the executive summary and a few key graphs showing financial trends and key decision making benchmarks. If a new product is being proposed and time permits, a demonstration of the product may also be included.
* a written presentation for external stakeholders - a detailed, well written, and pleasingly formatted plan targeted at external stakeholders.
* an internal operational plan - a detailed plan describing planning details that are needed by management but may not be of interest to external stakeholders. Such plans have a somewhat higher degree of candor and informality than the version targeted at external stakeholders.
Revisiting the Business Plan
Cost overruns and revenue shortfalls
Cost and revenue estimates are central to any business plan for deciding the viability of the planned venture. But costs are often underestimated and revenues overestimated resulting in later cost overruns, revenue shortfalls, and possibly non-viability. During the dot-com bubble 1997-2001 this was a problem for many technology start-ups. However, the problem is not limited to technology or the private sector; public works projects also routinely suffer from cost overruns and/or revenue shortfalls. The main causes of cost overruns and revenue shortfalls are optimism bias and strategic misrepresentation.[8][9] Reference class forecasting has been developed to reduce the risks of cost overruns and revenue shortfalls.
Legal and Liability Issues
Disclosure requirements
An externally targeted business plan should list all legal concerns and financial liabilities that might negatively affect investors. Depending on the amount of funds being raised and the audience to whom the plan is presented, failure to do this may have severe legal consequences.
Limitations on content and audience
Non disclosure agreements (NDAs) with third parties, non-compete agreements, conflicts of interest, privacy concerns, and the protection of one's trade secrets may severely limit the audience to which one might show the business plan. Alternatively, they may require each party receiving the business plan to sign a contract accepting special clauses and conditions.
This situation is complicated by the fact that many venture capitalists will refuse to sign an NDA before looking at a business plan, lest it put them in the untenable position of looking at two independently developed look-alike business plans, both claiming originality. In such situations one may need to develop two versions of the business plan: a stripped down plan that can be used to develop a relationship and a detail plan that is only shown when investors have sufficient interest and trust to sign an NDA.
Open Business Plans
Traditionally business plans have been highly confidential and quite limited in audience. The business plan itself is generally regarded as secret. However the emergence of free software and open source has opened the model and made the notion of an open business plan possible.
An Open Business Plan is a business plan with unlimited audience. The business plan is typically web published and made available to all.
In the free software and open source business model, trade secrets, copyright and patents can no longer be used as effective locking mechanisms to provide sustainable advantages to a particular business and therefore a secret business plan is less relevant in those models.
While the origin of the Open Business Plan model is in the free software and Libre services arena, the concept is likely applicable to other domains.
Examples
* Neda Open Business Plan [10]
* Sample Business Plan [11]
How Business Plans are Used
Venture Capital
* business plan contests - provides a way for venture capitals to find promising projects
* venture capital assessment of business plans - focus on qualitative factors such as team.
Public Offerings
* in a public offering, potential investors can evaluate perspectives of issuing company [12]
Within Corporations
Fundraising
Total Quality Management
For more information see Total Quality Management
Management by Objective
For more information see Management by objectives
Strategic Planning
For more information see Strategic Planning
Education
Business plans are used in some primary and secondary programs to teach economic principles.[13] Wikiversity has a Lunar Boom Town project where students of all ages can collaborate with designing and revising business models and practice evaluating them to learn practical business planning techniques and methodology.
Higher Education
* BA, MBA programs
o integrative team projects
o projects for specific course work
o Business plan contests
GetSet for Business [4] provides UK educational establishments with the facility for students to learn about starting a business and produce a professional and bespoke business plan online.
Satires of Business Plans
The business plan is the subject of many satires. Satires are used both to express cynicism about business plans and as an educational tool to improve the quality of business plans. For example,
* Five Criteria for a successful business plan in biotech uses Dilbert comic strips to remind people of what not to do when researching and writing a business plan for a biotech start-up. Scott Adams, the author of Dilbert, is an MBA graduate (U.C. Berkeley) who sees humor as a critical tool that can improve the behavior of businesses and their managers.[14] He has written numerous critiques of business practices, including business planning. The website Dilbert.com - Games has a mission statement generator that satirizes the wording often found in mission statements. His book The Dilbert Principle – A Cubicle’s Eye View of Bosses, Meetings, Management Fads & Other Workplace Afflictions discusses the foibles of management and their plans as depicted in the Dilbert comic strips by Scott Adams.
* In the article "South Park's" Investing Lesson, the The Motley Fool columnist "Fool on the Hill" uses the Underpants Gnomes to illustrate the fallacy of focusing on goals without a clear implementation strategy. The Underpants Gnomes episode satirizes the business plans of the Dot.com era. It features a three-part business plan for a new coffee shop:
1. Collect underpants
2. ???
3. Profit!
The business goals being attempted may be for-profit or non-profit. For-profit business plans typically focus on financial goals. Non-profit and government agency business plans tend to focus on service goals. Business plans may also target changes in perception and branding by the customer, client, tax-payer, or larger community. A business plan having changes in perception and branding as its primary goals is called a marketing plan.
Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, particularly financial stakeholders. They typically have detailed information about the organization or team attempting to reach the goals. With for-profit entities, external stakeholders include investors and customers.[1] External stake-holders of non-profits include donors and the clients of the non-profit's services.[2] For government agencies, external stakeholders include tax-payers, higher-level government agencies, and international lending bodies such as the IMF, the World Bank, various economic agencies of the UN, and development banks.
Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization. An internal business is often developed in conjunction with a balanced scorecard or a list of critical success factors. This allows success of the plan to be measured using non-financial measures. Business plans that identify and target internal goals, but provide only general guidance on how they will be met are called strategic plans.
Operational plans describe the goals of an internal organization, working group or department.[3] Project plans, sometimes known as project frameworks, describe the goals of a particular project. They may also address the project's place within the organization's larger strategic goals.[4][5]
Contents
* 1 Business Plan Content
* 2 Business
o 2.1 Support services
o 2.2 Resources for researching facts and figures
+ 2.2.1 Internal corporate records
+ 2.2.2 Free information
+ 2.2.3 Fee-based services
o 2.3 Strategic Analysis
o 2.4 Forecasts: Modeling Techniques
* 3 Presentation Formats
* 4 Revisiting the Business Plan
o 4.1 Cost overruns and revenue shortfalls
* 5 Legal and Liability Issues
o 5.1 Disclosure requirements
o 5.2 Limitations on content and audience
* 6 Open Business Plans
o 6.1 Examples
* 7 How Business Plans are Used
o 7.1 Venture Capital
o 7.2 Public Offerings
o 7.3 Within Corporations
+ 7.3.1 Fundraising
+ 7.3.2 Total Quality Management
+ 7.3.3 Management by Objective
+ 7.3.4 Strategic Planning
o 7.4 Education
+ 7.4.1 K-12
+ 7.4.2 Higher Education
* 8 Satires of Business Plans
Business Plan Content
For more details on this topic, see Content of a business plan.
Business plans are decision-making tools. There is no fixed content for a business plan. Rather the content and format of the business plan is determined by the goals and audience. A business plan should contain whatever information is needed to decide whether or not to pursue a goal.
For example, a business plan for a non-profit might discuss the fit between the business plan and the organization’s mission. Banks are quite concerned about defaults, so a business plan for a bank loan will build a convincing case for the organization’s ability to repay the loan. Venture capitalists are primarily concerned about initial investment, feasibility, and exit valuation. A business plan for a project requiring equity financing will need to explain why current resources, upcoming growth opportunities, and sustainable competitive advantage will lead to a high exit valuation.
Preparing a business plan draws on a wide range of knowledge from many different business disciplines: finance, human resource management, intellectual property management, supply chain management, operations management, and marketing, among others.[6]. It can be helpful to view the business plan as a collection of sub-plans, one for each of the main business disciplines.[7]
Business
Support services
* books, portals, and other sources of written information
* consulting services
* electronic planning templates (software)
* face to face help: mentoring programs, training courses
o Germany: Bundesministerium für Wirtschaft und Technologie (BMWi) [1].
o Morocco: CRI (Centre Régional d'Investisment)
o Pakistan: SMEDA (Small and medium enterprise development authority)
o UK: Business Link
o USA: SCORE, SBA centers
o Canada: Industry Canada, [2]
o India : Allindialive Business Planing Portal,[3]
o Other countries: needs research
Resources for researching facts and figures
Internal corporate records
Free information
* published statistics on the web
* business libraries
Fee-based services
* marketing reports from subscription services
* archive and journal services
* books
* www.myessentialplans.com
Strategic Analysis
* Industry Assessment
o The macroenvironment
o Customer Strategy & Market Analysis
* Competitor Analysis
o Porter 5 forces analysis
Forecasts: Modeling Techniques
Presentation Formats
The format of a business plan depends on its presentation context. It is not uncommon for businesses, especially start-ups to have three or four formats for the same business plan:
* an "elevator pitch" - a three minute summary of the business plan's executive summary. This is often used as a teaser to awaken the interest of potential funders, customers, or strategic partners.
* an oral presentation - a hopefully entertaining slide show and oral narrative that is meant to trigger discussion and interest potential investors in reading the written presentation. The content of the presentation is usually limited to the executive summary and a few key graphs showing financial trends and key decision making benchmarks. If a new product is being proposed and time permits, a demonstration of the product may also be included.
* a written presentation for external stakeholders - a detailed, well written, and pleasingly formatted plan targeted at external stakeholders.
* an internal operational plan - a detailed plan describing planning details that are needed by management but may not be of interest to external stakeholders. Such plans have a somewhat higher degree of candor and informality than the version targeted at external stakeholders.
Revisiting the Business Plan
Cost overruns and revenue shortfalls
Cost and revenue estimates are central to any business plan for deciding the viability of the planned venture. But costs are often underestimated and revenues overestimated resulting in later cost overruns, revenue shortfalls, and possibly non-viability. During the dot-com bubble 1997-2001 this was a problem for many technology start-ups. However, the problem is not limited to technology or the private sector; public works projects also routinely suffer from cost overruns and/or revenue shortfalls. The main causes of cost overruns and revenue shortfalls are optimism bias and strategic misrepresentation.[8][9] Reference class forecasting has been developed to reduce the risks of cost overruns and revenue shortfalls.
Legal and Liability Issues
Disclosure requirements
An externally targeted business plan should list all legal concerns and financial liabilities that might negatively affect investors. Depending on the amount of funds being raised and the audience to whom the plan is presented, failure to do this may have severe legal consequences.
Limitations on content and audience
Non disclosure agreements (NDAs) with third parties, non-compete agreements, conflicts of interest, privacy concerns, and the protection of one's trade secrets may severely limit the audience to which one might show the business plan. Alternatively, they may require each party receiving the business plan to sign a contract accepting special clauses and conditions.
This situation is complicated by the fact that many venture capitalists will refuse to sign an NDA before looking at a business plan, lest it put them in the untenable position of looking at two independently developed look-alike business plans, both claiming originality. In such situations one may need to develop two versions of the business plan: a stripped down plan that can be used to develop a relationship and a detail plan that is only shown when investors have sufficient interest and trust to sign an NDA.
Open Business Plans
Traditionally business plans have been highly confidential and quite limited in audience. The business plan itself is generally regarded as secret. However the emergence of free software and open source has opened the model and made the notion of an open business plan possible.
An Open Business Plan is a business plan with unlimited audience. The business plan is typically web published and made available to all.
In the free software and open source business model, trade secrets, copyright and patents can no longer be used as effective locking mechanisms to provide sustainable advantages to a particular business and therefore a secret business plan is less relevant in those models.
While the origin of the Open Business Plan model is in the free software and Libre services arena, the concept is likely applicable to other domains.
Examples
* Neda Open Business Plan [10]
* Sample Business Plan [11]
How Business Plans are Used
Venture Capital
* business plan contests - provides a way for venture capitals to find promising projects
* venture capital assessment of business plans - focus on qualitative factors such as team.
Public Offerings
* in a public offering, potential investors can evaluate perspectives of issuing company [12]
Within Corporations
Fundraising
Total Quality Management
For more information see Total Quality Management
Management by Objective
For more information see Management by objectives
Strategic Planning
For more information see Strategic Planning
Education
Business plans are used in some primary and secondary programs to teach economic principles.[13] Wikiversity has a Lunar Boom Town project where students of all ages can collaborate with designing and revising business models and practice evaluating them to learn practical business planning techniques and methodology.
Higher Education
* BA, MBA programs
o integrative team projects
o projects for specific course work
o Business plan contests
GetSet for Business [4] provides UK educational establishments with the facility for students to learn about starting a business and produce a professional and bespoke business plan online.
Satires of Business Plans
The business plan is the subject of many satires. Satires are used both to express cynicism about business plans and as an educational tool to improve the quality of business plans. For example,
* Five Criteria for a successful business plan in biotech uses Dilbert comic strips to remind people of what not to do when researching and writing a business plan for a biotech start-up. Scott Adams, the author of Dilbert, is an MBA graduate (U.C. Berkeley) who sees humor as a critical tool that can improve the behavior of businesses and their managers.[14] He has written numerous critiques of business practices, including business planning. The website Dilbert.com - Games has a mission statement generator that satirizes the wording often found in mission statements. His book The Dilbert Principle – A Cubicle’s Eye View of Bosses, Meetings, Management Fads & Other Workplace Afflictions discusses the foibles of management and their plans as depicted in the Dilbert comic strips by Scott Adams.
* In the article "South Park's" Investing Lesson, the The Motley Fool columnist "Fool on the Hill" uses the Underpants Gnomes to illustrate the fallacy of focusing on goals without a clear implementation strategy. The Underpants Gnomes episode satirizes the business plans of the Dot.com era. It features a three-part business plan for a new coffee shop:
1. Collect underpants
2. ???
3. Profit!
Business model
The term business model describes a broad range of informal and formal models that are used by enterprises to represent various aspects of business, including its purpose, offerings, strategies, infrastructure, organizational structures, trading practices and operational processes and policies. Although the term can be traced to the 1950s, it achieved mainstream usage only in the 1990s. Many informal definitions of the term can be found in popular business literature, such as the following:
“ A business model is a conceptual tool that contains a big set of elements and their relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams. ”
— Osterwalder, Pigneur and Tucci (2005)
More recently, researchers build definitions based on economic and organizational theories and show that the definitions are econometrically sound. For example, Malone, et al. (2006) at MIT propose an operational definition of business model, based on theories such as those from transaction cost economics. Zott and Amit (2002) from INSEAD and Wharton based their definition on boundary-spanning transactions.
Simply put: What problem does this business solve and how does it do so profitably?
Contents
* 1 Basing concept
* 2 Components of a business model
* 3 Evolution
o 3.1 Example business models over the years
* 4 Do Business Models Matter?
* 5 Related Concepts
o 5.1 See also
Basing concept
A business model is a representation of a selected view on reality. This chosen view is a specialization compared to copying the real system or the modeled business process with the following restrictions:
* Model is no copy of reality
* Model requires validation
* Other models are possible and may have validity
* Model serves testing of hypotheses at low risk and low cost
* Model serves ease of intelligibility
* View specializes to certain purpose
* Other views are not represented as well
Components of a business model
Many different conceptualizations of business models exist (Chesbrough and Rosenbloom 2000; Hamell 2000; Linder and Cantrell 2000; Petrovic, Kittl et al.; Weill and Vitale 2001; Gordijn 2002; Afuah and Tucci 2003; Osterwalder 2004; Fetscherin & Knolmayer 2005). They all have various degrees of resemblance or difference. The model proposed by Osterwalder (2004) synthesises the different conceptualizations into a single reference model based on the similarities of a large range of models. The author's conceptualization describes a business model as consisting of nine related business model building blocks. Thus, a business model describes a company's business:
Infrastructure
* core capabilities: The capabilities and competencies necessary to execute a company's business model.
* partner network: The business alliances which complement other aspects of the business model.
* value configuration: The rationale which makes a business mutually beneficial for a business and its customers.
Offering
* value proposition: The products and services a business offers.
Customers
* target customer: The target audience for a business' products and services.
* distribution channel: The means by which a company delivers products and services to customers. This includes the company's marketing and distribution strategy.
* customer relationship: The links a company establishes between itself and its different customer segments. The process of managing customer relationships is referred to as customer relationship management.
Finances
* cost structure: The monetary consequences of the means employed in the business model. A company's DOC.
* revenue: The way a company makes money through a variety of revenue flows. A company's income.
These 9 business model building blocks constitute a business model design template which allows companies to describe their business model.
Evolution
A brief history of the development of business models might run as follows. The oldest and most basic business model is the shop keeper model. This involves setting up a store in a location where potential customers are likely to be and displaying a product or service.
Over the years, business models have become much more sophisticated. The bait and hook business model (also referred to as the "razor and blades business model" or the "tied products business model") was introduced in the early 20th century. This involves offering a basic product at a very low cost, often at a loss (the "bait"), then charging compensatory recurring amounts for refills or associated products or services (the "hook"). Examples include: razor (bait) and blades (hook); cell phones (bait) and air time (hook); computer printers (bait) and ink cartridge refills (hook); and cameras (bait) and prints (hook). An interesting variant of this model is a software developer that gives away its word processor reader for free but charges several hundred dollars for its word processor writer.
In the 1950s, new business models came from McDonald's Restaurants and Toyota. In the 1960s, the innovators were Wal-Mart and Hypermarkets. The 1970s saw new business models from FedEx and Toys R Us; the 1980s from Blockbuster, Home Depot, Intel, and Dell Computer; the 1990s from Southwest Airlines, Netflix, eBay, Amazon.com, and Starbucks. Poorly thought out business models were a problem with many dot-coms.
Today, the type of business models might depend on how technology is used. For example, entrepreneurs on the internet have also created entirely new models that depend entirely on existing or emergent technology. Using technology, businesses can reach a large number of customers with minimal costs.
Example business models over the years
* The subscription business model
* The razor and blades business model (bait and hook)
* The pyramid scheme business model
* The multi-level marketing business model
* The network effects business model
* The monopolistic business model
* The cutting out the middleman model
* The auction business model
* The online auction business model
* The bricks and clicks business model
* The loyalty business models
* The Collective business models
* The industrialization of services business model
* The servitization of products business model
* The low-cost carrier business model
* The online content business model
* The freemium business model
* The premium business model
* The direct sales model
* The professional open-source model
* Various distribution business models
Do Business Models Matter?
Malone et al. (2006) at MIT find that some business models, as defined by them, indeed performed better than others in a dataset consisting of the largest U.S. firms, in the period 1998 through 2002, while they did not prove whether or not the existence of a business model mattered or not.
“ A business model is a conceptual tool that contains a big set of elements and their relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams. ”
— Osterwalder, Pigneur and Tucci (2005)
More recently, researchers build definitions based on economic and organizational theories and show that the definitions are econometrically sound. For example, Malone, et al. (2006) at MIT propose an operational definition of business model, based on theories such as those from transaction cost economics. Zott and Amit (2002) from INSEAD and Wharton based their definition on boundary-spanning transactions.
Simply put: What problem does this business solve and how does it do so profitably?
Contents
* 1 Basing concept
* 2 Components of a business model
* 3 Evolution
o 3.1 Example business models over the years
* 4 Do Business Models Matter?
* 5 Related Concepts
o 5.1 See also
Basing concept
A business model is a representation of a selected view on reality. This chosen view is a specialization compared to copying the real system or the modeled business process with the following restrictions:
* Model is no copy of reality
* Model requires validation
* Other models are possible and may have validity
* Model serves testing of hypotheses at low risk and low cost
* Model serves ease of intelligibility
* View specializes to certain purpose
* Other views are not represented as well
Components of a business model
Many different conceptualizations of business models exist (Chesbrough and Rosenbloom 2000; Hamell 2000; Linder and Cantrell 2000; Petrovic, Kittl et al.; Weill and Vitale 2001; Gordijn 2002; Afuah and Tucci 2003; Osterwalder 2004; Fetscherin & Knolmayer 2005). They all have various degrees of resemblance or difference. The model proposed by Osterwalder (2004) synthesises the different conceptualizations into a single reference model based on the similarities of a large range of models. The author's conceptualization describes a business model as consisting of nine related business model building blocks. Thus, a business model describes a company's business:
Infrastructure
* core capabilities: The capabilities and competencies necessary to execute a company's business model.
* partner network: The business alliances which complement other aspects of the business model.
* value configuration: The rationale which makes a business mutually beneficial for a business and its customers.
Offering
* value proposition: The products and services a business offers.
Customers
* target customer: The target audience for a business' products and services.
* distribution channel: The means by which a company delivers products and services to customers. This includes the company's marketing and distribution strategy.
* customer relationship: The links a company establishes between itself and its different customer segments. The process of managing customer relationships is referred to as customer relationship management.
Finances
* cost structure: The monetary consequences of the means employed in the business model. A company's DOC.
* revenue: The way a company makes money through a variety of revenue flows. A company's income.
These 9 business model building blocks constitute a business model design template which allows companies to describe their business model.
Evolution
A brief history of the development of business models might run as follows. The oldest and most basic business model is the shop keeper model. This involves setting up a store in a location where potential customers are likely to be and displaying a product or service.
Over the years, business models have become much more sophisticated. The bait and hook business model (also referred to as the "razor and blades business model" or the "tied products business model") was introduced in the early 20th century. This involves offering a basic product at a very low cost, often at a loss (the "bait"), then charging compensatory recurring amounts for refills or associated products or services (the "hook"). Examples include: razor (bait) and blades (hook); cell phones (bait) and air time (hook); computer printers (bait) and ink cartridge refills (hook); and cameras (bait) and prints (hook). An interesting variant of this model is a software developer that gives away its word processor reader for free but charges several hundred dollars for its word processor writer.
In the 1950s, new business models came from McDonald's Restaurants and Toyota. In the 1960s, the innovators were Wal-Mart and Hypermarkets. The 1970s saw new business models from FedEx and Toys R Us; the 1980s from Blockbuster, Home Depot, Intel, and Dell Computer; the 1990s from Southwest Airlines, Netflix, eBay, Amazon.com, and Starbucks. Poorly thought out business models were a problem with many dot-coms.
Today, the type of business models might depend on how technology is used. For example, entrepreneurs on the internet have also created entirely new models that depend entirely on existing or emergent technology. Using technology, businesses can reach a large number of customers with minimal costs.
Example business models over the years
* The subscription business model
* The razor and blades business model (bait and hook)
* The pyramid scheme business model
* The multi-level marketing business model
* The network effects business model
* The monopolistic business model
* The cutting out the middleman model
* The auction business model
* The online auction business model
* The bricks and clicks business model
* The loyalty business models
* The Collective business models
* The industrialization of services business model
* The servitization of products business model
* The low-cost carrier business model
* The online content business model
* The freemium business model
* The premium business model
* The direct sales model
* The professional open-source model
* Various distribution business models
Do Business Models Matter?
Malone et al. (2006) at MIT find that some business models, as defined by them, indeed performed better than others in a dataset consisting of the largest U.S. firms, in the period 1998 through 2002, while they did not prove whether or not the existence of a business model mattered or not.
Marketing strategy
A marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.
Contents
[hide]
* 1 Key part of the general corporate strategy
* 2 Sectorial tactics and actions
* 3 Types of strategies
* 4 Strategic models
Key part of the general corporate strategy
A MARKETING STRATEGY is most effective when it is an integral component of corporate strategy, defining how the organization will successfully engage customers, prospects, and competitors in the market arena. It is partially derived from broader corporate strategies, corporate missions, and corporate goals. As the customer constitutes the source of a company's revenue, marketing strategy is closely linked with sales. A key component of marketing strategy is often to keep marketing in line with a company's overarching mission statement.
Sectorial tactics and actions
A publishing strategy can serve as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy. For example: "Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer's interaction with the low-cost product or service."
A strategy consists of a well thought out series of tactics to make a marketing plan more effective. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objectives[3]. Plans and objectives are generally tested for measurable results.
A marketing strategy often integrates an organization's marketing goals, policies, and action sequences (tactics) into a cohesive whole. Similarly, the various strands of the strategy , which might include advertising, channel marketing, internet marketing, promotion and public relations can be orchestrated. Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group. Each one group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable.
Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned. See strategy dynamics.
Types of strategies
Every marketing strategy is unique, but can be reduced into a generic marketing strategy. There are a number of ways of categorizing these generic strategies. A brief description of the most common categorizing schemes is presented below:
* Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are three types of market dominance strategies:
o Leader
o Challenger
o Follower
* Porter generic strategies - strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage.
o Cost leadership
o Product differentiation
o Market segmentation
* Innovation strategies - This deals with the firm's rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types:
o Pioneers
o Close followers
o Late followers
* Growth strategies - In this scheme we ask the question, “How should the firm grow?”. There are a number of different ways of answering that question, but the most common gives four answers:
o Horizontal integration
o Vertical integration
o Diversification
o Intensification
A more detailed scheme uses the categories:
* Prospector
* Analyzer
* Defender
* Reactor
* Marketing warfare strategies - This scheme draws parallels between marketing strategies and military strategies.
Strategic models
Marketing participants often employ strategic models and tools to analyze marketing decisions. When beginning a strategic analysis, the 3Cs can be employed to get a broad understanding of the strategic environment. An Ansoff Matrix is also often used to convey an organization's strategic positioning of their marketing mix. The 4Ps can then be utilized to form a marketing plan to pursue a defined strategy.
Marketing in Practice
The Consumer-Centric Business
There are a many companies especially those in the Consumer Package Goods (CPG) market that adopt the theory of running their business centred around Consumer, Shopper & Retailer needs. Their Marketing departments spend quality time looking for "Growth Opportunities" in their categories by identifying relevant insights (both mindsets and behaviours) on their target Consumers, Shoppers and retail partners. These Growth Opportunites emerge from changes in market trends, segment dynamics changing and also internal brand or operational business challenges.The Marketing team can then prioritise these Growth Opportunites and begin to develop strategies to exploit the opportunities that could include new or adapted products, services as well as changes to the 4Ps.
Real-life marketing primarily revolves around the application of a great deal of common-sense; dealing with a limited number of factors, in an environment of imperfect information and limited resources complicated by uncertainty and tight timescales. Use of classical marketing techniques, in these circumstances, is inevitably partial and uneven.
Thus, for example, many new products will emerge from irrational processes and the rational development process may be used (if at all) to screen out the worst non-runners. The design of the advertising, and the packaging, will be the output of the creative minds employed; which management will then screen, often by 'gut-reaction', to ensure that it is reasonable.
For most of their time, marketing managers use intuition and experience to analyze and handle the complex, and unique, situations being faced; without easy reference to theory. This will often be 'flying by the seat of the pants', or 'gut-reaction'; where the overall strategy, coupled with the knowledge of the customer which has been absorbed almost by a process of osmosis, will determine the quality of the marketing employed. This, almost instinctive management, is what is sometimes called 'coarse marketing'; to distinguish it from the refined, aesthetically pleasing, form favored by the theorists.
Contents
[hide]
* 1 Key part of the general corporate strategy
* 2 Sectorial tactics and actions
* 3 Types of strategies
* 4 Strategic models
Key part of the general corporate strategy
A MARKETING STRATEGY is most effective when it is an integral component of corporate strategy, defining how the organization will successfully engage customers, prospects, and competitors in the market arena. It is partially derived from broader corporate strategies, corporate missions, and corporate goals. As the customer constitutes the source of a company's revenue, marketing strategy is closely linked with sales. A key component of marketing strategy is often to keep marketing in line with a company's overarching mission statement.
Sectorial tactics and actions
A publishing strategy can serve as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy. For example: "Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer's interaction with the low-cost product or service."
A strategy consists of a well thought out series of tactics to make a marketing plan more effective. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objectives[3]. Plans and objectives are generally tested for measurable results.
A marketing strategy often integrates an organization's marketing goals, policies, and action sequences (tactics) into a cohesive whole. Similarly, the various strands of the strategy , which might include advertising, channel marketing, internet marketing, promotion and public relations can be orchestrated. Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group. Each one group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable.
Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned. See strategy dynamics.
Types of strategies
Every marketing strategy is unique, but can be reduced into a generic marketing strategy. There are a number of ways of categorizing these generic strategies. A brief description of the most common categorizing schemes is presented below:
* Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are three types of market dominance strategies:
o Leader
o Challenger
o Follower
* Porter generic strategies - strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage.
o Cost leadership
o Product differentiation
o Market segmentation
* Innovation strategies - This deals with the firm's rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types:
o Pioneers
o Close followers
o Late followers
* Growth strategies - In this scheme we ask the question, “How should the firm grow?”. There are a number of different ways of answering that question, but the most common gives four answers:
o Horizontal integration
o Vertical integration
o Diversification
o Intensification
A more detailed scheme uses the categories:
* Prospector
* Analyzer
* Defender
* Reactor
* Marketing warfare strategies - This scheme draws parallels between marketing strategies and military strategies.
Strategic models
Marketing participants often employ strategic models and tools to analyze marketing decisions. When beginning a strategic analysis, the 3Cs can be employed to get a broad understanding of the strategic environment. An Ansoff Matrix is also often used to convey an organization's strategic positioning of their marketing mix. The 4Ps can then be utilized to form a marketing plan to pursue a defined strategy.
Marketing in Practice
The Consumer-Centric Business
There are a many companies especially those in the Consumer Package Goods (CPG) market that adopt the theory of running their business centred around Consumer, Shopper & Retailer needs. Their Marketing departments spend quality time looking for "Growth Opportunities" in their categories by identifying relevant insights (both mindsets and behaviours) on their target Consumers, Shoppers and retail partners. These Growth Opportunites emerge from changes in market trends, segment dynamics changing and also internal brand or operational business challenges.The Marketing team can then prioritise these Growth Opportunites and begin to develop strategies to exploit the opportunities that could include new or adapted products, services as well as changes to the 4Ps.
Real-life marketing primarily revolves around the application of a great deal of common-sense; dealing with a limited number of factors, in an environment of imperfect information and limited resources complicated by uncertainty and tight timescales. Use of classical marketing techniques, in these circumstances, is inevitably partial and uneven.
Thus, for example, many new products will emerge from irrational processes and the rational development process may be used (if at all) to screen out the worst non-runners. The design of the advertising, and the packaging, will be the output of the creative minds employed; which management will then screen, often by 'gut-reaction', to ensure that it is reasonable.
For most of their time, marketing managers use intuition and experience to analyze and handle the complex, and unique, situations being faced; without easy reference to theory. This will often be 'flying by the seat of the pants', or 'gut-reaction'; where the overall strategy, coupled with the knowledge of the customer which has been absorbed almost by a process of osmosis, will determine the quality of the marketing employed. This, almost instinctive management, is what is sometimes called 'coarse marketing'; to distinguish it from the refined, aesthetically pleasing, form favored by the theorists.
Strategic management
Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives[1]. It is the process of specifying the organization's objectives, developing policies and plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives. Strategic management, therefore, combines the activities of the various functional areas of a business to achieve organizational objectives. It is the highest level of managerial activity, usually formulated by the Board of directors and performed by the organization's Chief Executive Officer (CEO) and executive team. Strategic management provides overall direction to the enterprise and is closely related to the field of Organization Studies.
“Strategic management is an ongoing process that assesses the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.” (Lamb, 1984:ix)[2]
There are many software products available in the market that process and report organisational data and which aid in strategic management—e.g. SAP, SEM, SAS, etc.
Contents
* 1 Processes
o 1.1 Strategy formulation
o 1.2 Strategy implementation
o 1.3 Strategy evaluation
* 2 General approaches
* 3 The strategy hierarchy
* 4 Historical development of strategic management
o 4.1 Birth of strategic management
o 4.2 Growth and portfolio theory
o 4.3 The marketing revolution
o 4.4 The Japanese challenge
o 4.5 Gaining competitive advantage
o 4.6 The military theorists
o 4.7 Strategic change
o 4.8 Information and technology driven strategy
* 5 The psychology of strategic management
* 6 Reasons why strategic plans fail
* 7 Criticisms of strategic management
* 8 Journals devoted primarily to strategic management
Processes
Strategic management is a combination of three main processes which are as follows:
Strategy formulation
* Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental.
* Concurrent with this assessment, objectives are set. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.
* These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives.
This three-step strategy formulation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there. These three questions are the essence of strategic planning. SWOT Analysis: I/O Economics for the external factors and RBV for the internal factors.
Strategy implementation
* Allocation of sufficient resources (financial, personnel, time, technology support)
* Establishing a chain of command or some alternative structure (such as cross functional teams)
* Assigning responsibility of specific tasks or processes to specific individuals or groups
* It also involves managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary.
* When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.
Strategy evaluation
* Measuring the effectiveness of the organizational strategy. It's extremely important to conduct a SWOT analysis to figure out the strengths, weaknesses, opportunities and threats (both internal and external) of the entity in question.
General approaches
In general terms, there are two main approaches, which are opposite but complement each other in some ways, to strategic management:
* The Industrial Organizational Approach
o based on economic theory — deals with issues like competitive rivalry, resource allocation, economies of scale
o assumptions — rationality, self discipline behaviour, profit maximization
* The Sociological Approach
o deals primarily with human interactions
o assumptions — bounded rationality, satisfying behaviour, profit sub-optimality. An example of a company that currently operates this way is Google
Strategic management techniques can be viewed as bottom-up, top-down, or collaborative processes. In the bottom-up approach, employees submit proposals to their managers who, in turn, funnel the best ideas further up the organization. This is often accomplished by a capital budgeting process. Proposals are assessed using financial criteria such as return on investment or cost-benefit analysis. Cost underestimation and benefit overestimation are major sources of error. The proposals that are approved form the substance of a new strategy, all of which is done without a grand strategic design or a strategic architect. The top-down approach is the most common by far. In it, the CEO, possibly with the assistance of a strategic planning team, decides on the overall direction the company should take. Some organizations are starting to experiment with collaborative strategic planning techniques that recognize the emergent nature of strategic decisions.
The strategy hierarchy
In most (large) corporations there are several levels of strategy. Strategic management is the highest in the sense that it is the broadest, applying to all parts of the firm. It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under this broad corporate strategy there are often functional or business unit strategies.
Functional strategies include marketing strategies, new product development strategies, human resource strategies, financial strategies, legal strategies, supply-chain strategies, and information technology management strategies. The emphasis is on short and medium term plans and is limited to the domain of each department’s functional responsibility. Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader corporate strategies.
Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have reengineered according to processes or strategic business units (called SBUs). A strategic business unit is a semi-autonomous unit within an organization. It is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An SBU is treated as an internal profit centre by corporate headquarters. Each SBU is responsible for developing its business strategies, strategies that must be in tune with broader corporate strategies.
The “lowest” level of strategy is operational strategy. It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. It must operate within a budget but is not at liberty to adjust or create that budget. Operational level strategy was encouraged by Peter Drucker in his theory of management by objectives (MBO). Operational level strategies are informed by business level strategies which, in turn, are informed by corporate level strategies. Business strategy, which refers to the aggregated operational strategies of single business firm or that of an SBU in a diversified corporation refers to the way in which a firm competes in its chosen arenas.
Corporate strategy, then, refers to the overarching strategy of the diversified firm. Such corporate strategy answers the questions of "in which businesses should we compete?" and "how does being in one business add to the competitive advantage of another portfolio firm, as well as the competitive advantage of the corporation as a whole?"
Since the turn of the millennium, there has been a tendency in some firms to revert to a simpler strategic structure. This is being driven by information technology. It is felt that knowledge management systems should be used to share information and create common goals. Strategic divisions are thought to hamper this process. Most recently, this notion of strategy has been captured under the rubric of dynamic strategy, popularized by the strategic management textbook authored by Carpenter and Sanders [1]. This work builds on that of Brown and Eisenhart as well as Christensen and portrays firm strategy, both business and corporate, as necessarily embracing ongoing strategic change, and the seamless integration of strategy formulation and implementation. Such change and implementation are usually built into the strategy through the staging and pacing facets.
Historical development of strategic management
Birth of strategic management
Strategic management as a discipline originated in the 1950s and 60s. Although there were numerous early contributors to the literature, the most influential pioneers were Alfred D. Chandler, Jr., Philip Selznick, Igor Ansoff, and Peter Drucker.
Alfred Chandler recognized the importance of coordinating the various aspects of management under one all-encompassing strategy. Prior to this time the various functions of management were separate with little overall coordination or strategy. Interactions between functions or between departments were typically handled by a boundary position, that is, there were one or two managers that relayed information back and forth between two departments. Chandler also stressed the importance of taking a long term perspective when looking to the future. In his 1962 groundbreaking work Strategy and Structure, Chandler showed that a long-term coordinated strategy was necessary to give a company structure, direction, and focus. He says it concisely, “structure follows strategy.”[3]
In 1957, Philip Selznick introduced the idea of matching the organization's internal factors with external environmental circumstances.[4] This core idea was developed into what we now call SWOT analysis by Learned, Andrews, and others at the Harvard Business School General Management Group. Strengths and weaknesses of the firm are assessed in light of the opportunities and threats from the business environment.
Igor Ansoff built on Chandler's work by adding a range of strategic concepts and inventing a whole new vocabulary. He developed a strategy grid that compared market penetration strategies, product development strategies, market development strategies and horizontal and vertical integration and diversification strategies. He felt that management could use these strategies to systematically prepare for future opportunities and challenges. In his 1965 classic Corporate Strategy, he developed the gap analysis still used today in which we must understand the gap between where we are currently and where we would like to be, then develop what he called “gap reducing actions”.[5]
Peter Drucker was a prolific strategy theorist, author of dozens of management books, with a career spanning five decades. His contributions to strategic management were many but two are most important. Firstly, he stressed the importance of objectives. An organization without clear objectives is like a ship without a rudder. As early as 1954 he was developing a theory of management based on objectives.[6] This evolved into his theory of management by objectives (MBO). According to Drucker, the procedure of setting objectives and monitoring your progress towards them should permeate the entire organization, top to bottom. His other seminal contribution was in predicting the importance of what today we would call intellectual capital. He predicted the rise of what he called the “knowledge worker” and explained the consequences of this for management. He said that knowledge work is non-hierarchical. Work would be carried out in teams with the person most knowledgeable in the task at hand being the temporary leader.
In 1985, Ellen-Earle Chaffee summarized what she thought were the main elements of strategic management theory by the 1970s:[7]
* Strategic management involves adapting the organization to its business environment.
* Strategic management is fluid and complex. Change creates novel combinations of circumstances requiring unstructured non-repetitive responses.
* Strategic management affects the entire organization by providing direction.
* Strategic management involves both strategy formation (she called it content) and also strategy implementation (she called it process).
* Strategic management is partially planned and partially unplanned.
* Strategic management is done at several levels: overall corporate strategy, and individual business strategies.
* Strategic management involves both conceptual and analytical thought processes.
Growth and portfolio theory
In the 1970s much of strategic management dealt with size, growth, and portfolio theory. The PIMS study was a long term study, started in the 1960s and lasted for 19 years, that attempted to understand the Profit Impact of Marketing Strategies (PIMS), particularly the effect of market share. Started at General Electric, moved to Harvard in the early 1970s, and then moved to the Strategic Planning Institute in the late 1970s, it now contains decades of information on the relationship between profitability and strategy. Their initial conclusion was unambiguous: The greater a company's market share, the greater will be their rate of profit. The high market share provides volume and economies of scale. It also provides experience and learning curve advantages. The combined effect is increased profits.[8] The studies conclusions continue to be drawn on by academics and companies today: "PIMS provides compelling quantitative evidence as to which business strategies work and don't work" - Tom Peters.
The benefits of high market share naturally lead to an interest in growth strategies. The relative advantages of horizontal integration, vertical integration, diversification, franchises, mergers and acquisitions, joint ventures, and organic growth were discussed. The most appropriate market dominance strategies were assessed given the competitive and regulatory environment.
There was also research that indicated that a low market share strategy could also be very profitable. Schumacher (1973),[9] Woo and Cooper (1982),[10] Levenson (1984),[11] and later Traverso (2002)[12] showed how smaller niche players obtained very high returns.
By the early 1980s the paradoxical conclusion was that high market share and low market share companies were often very profitable but most of the companies in between were not. This was sometimes called the “hole in the middle” problem. This anomaly would be explained by Michael Porter in the 1980s.
The management of diversified organizations required new techniques and new ways of thinking. The first CEO to address the problem of a multi-divisional company was Alfred Sloan at General Motors. GM was decentralized into semi-autonomous “strategic business units” (SBU's), but with centralized support functions.
One of the most valuable concepts in the strategic management of multi-divisional companies was portfolio theory. In the previous decade Harry Markowitz and other financial theorists developed the theory of portfolio analysis. It was concluded that a broad portfolio of financial assets could reduce specific risk. In the 1970s marketers extended the theory to product portfolio decisions and managerial strategists extended it to operating division portfolios. Each of a company’s operating divisions were seen as an element in the corporate portfolio. Each operating division (also called strategic business units) was treated as a semi-independent profit center with its own revenues, costs, objectives, and strategies. Several techniques were developed to analyze the relationships between elements in a portfolio. B.C.G. Analysis, for example, was developed by the Boston Consulting Group in the early 1970s. This was the theory that gave us the wonderful image of a CEO sitting on a stool milking a cash cow. Shortly after that the G.E. multi factoral model was developed by General Electric. Companies continued to diversify until the 1980s when it was realized that in many cases a portfolio of operating divisions was worth more as separate completely independent companies.
The marketing revolution
The 1970s also saw the rise of the marketing oriented firm. From the beginnings of capitalism it was assumed that the key requirement of business success was a product of high technical quality. If you produced a product that worked well and was durable, it was assumed you would have no difficulty selling them at a profit. This was called the production orientation and it was generally true that good products could be sold without effort, encapsulated in the saying "Build a better mousetrap and the world will beat a path to your door." This was largely due to the growing numbers of affluent and middle class people that capitalism had created. But after the untapped demand caused by the second world war was saturated in the 1950s it became obvious that products were not selling as easily as they had been. The answer was to concentrate on selling. The 1950s and 1960s is known as the sales era and the guiding philosophy of business of the time is today called the sales orientation. In the early 1970s Theodore Levitt and others at Harvard argued that the sales orientation had things backward. They claimed that instead of producing products then trying to sell them to the customer, businesses should start with the customer, find out what they wanted, and then produce it for them. The customer became the driving force behind all strategic business decisions. This marketing orientation, in the decades since its introduction, has been reformulated and repackaged under numerous names including customer orientation, marketing philosophy, customer intimacy, customer focus, customer driven, and market focused.
The Japanese challenge
By the late 70s people had started to notice how successful Japanese industry had become. In industry after industry, including steel, watches, ship building, cameras, autos, and electronics, the Japanese were surpassing American and European companies. Westerners wanted to know why. Numerous theories purported to explain the Japanese success including:
* Higher employee morale, dedication, and loyalty;
* Lower cost structure, including wages;
* Effective government industrial policy;
* Modernization after WWII leading to high capital intensity and productivity;
* Economies of scale associated with increased exporting;
* Relatively low value of the Yen leading to low interest rates and capital costs, low dividend expectations, and inexpensive exports;
* Superior quality control techniques such as Total Quality Management and other systems introduced by W. Edwards Deming in the 1950s and 60s.[13]
Although there was some truth to all these potential explanations, there was clearly something missing. In fact by 1980 the Japanese cost structure was higher than the American. And post WWII reconstruction was nearly 40 years in the past. The first management theorist to suggest an explanation was Richard Pascale.
In 1981 Richard Pascale and Anthony Athos in The Art of Japanese Management claimed that the main reason for Japanese success was their superior management techniques.[14] They divided management into 7 aspects (which are also known as McKinsey 7S Framework): Strategy, Structure, Systems, Skills, Staff, Style, and Supraordinate goals (which we would now call shared values). The first three of the 7 S's were called hard factors and this is where American companies excelled. The remaining four factors (skills, staff, style, and shared values) were called soft factors and were not well understood by American businesses of the time (for details on the role of soft and hard factors see Wickens P.D. 1995.) Americans did not yet place great value on corporate culture, shared values and beliefs, and social cohesion in the workplace. In Japan the task of management was seen as managing the whole complex of human needs, economic, social, psychological, and spiritual. In America work was seen as something that was separate from the rest of one's life. It was quite common for Americans to exhibit a very different personality at work compared to the rest of their lives. Pascale also highlighted the difference between decision making styles; hierarchical in America, and consensus in Japan. He also claimed that American business lacked long term vision, preferring instead to apply management fads and theories in a piecemeal fashion.
One year later The Mind of the Strategist was released in America by Kenichi Ohmae, the head of McKinsey & Co.'s Tokyo office.[15] (It was originally published in Japan in 1975.) He claimed that strategy in America was too analytical. Strategy should be a creative art: It is a frame of mind that requires intuition and intellectual flexibility. He claimed that Americans constrained their strategic options by thinking in terms of analytical techniques, rote formula, and step-by-step processes. He compared the culture of Japan in which vagueness, ambiguity, and tentative decisions were acceptable, to American culture that valued fast decisions.
Also in 1982 Tom Peters and Robert Waterman released a study that would respond to the Japanese challenge head on.[16] Peters and Waterman, who had several years earlier collaborated with Pascale and Athos at McKinsey & Co. asked “What makes an excellent company?”. They looked at 62 companies that they thought were fairly successful. Each was subject to six performance criteria. To be classified as an excellent company, it had to be above the 50th percentile in 4 of the 6 performance metrics for 20 consecutive years. Forty-three companies passed the test. They then studied these successful companies and interviewed key executives. They concluded in In Search of Excellence that there were 8 keys to excellence that were shared by all 43 firms. They are:
* A bias for action — Do it. Try it. Don’t waste time studying it with multiple reports and committees.
* Customer focus — Get close to the customer. Know your customer.
* Entrepreneurship — Even big companies act and think small by giving people the authority to take initiatives.
* Productivity through people — Treat your people with respect and they will reward you with productivity.
* Value-oriented CEOs — The CEO should actively propagate corporate values throughout the organization.
* Stick to the knitting — Do what you know well.
* Keep things simple and lean — Complexity encourages waste and confusion.
* Simultaneously centralized and decentralized — Have tight centralized control while also allowing maximum individual autonomy.
The basic blueprint on how to compete against the Japanese had been drawn. But as J.E. Rehfeld (1994) explains it is not a straight forward task due to differences in culture.[17] A certain type of alchemy was required to transform knowledge from various cultures into a management style that allows a specific company to compete in a globally diverse world. He says, for example, that Japanese style kaizen (continuous improvement) techniques, although suitable for people socialized in Japanese culture, have not been successful when implemented in the U.S. unless they are modified significantly.
Gaining competitive advantage
The Japanese challenge shook the confidence of the western business elite, but detailed comparisons of the two management styles and examinations of successful businesses convinced westerners that they could overcome the challenge. The 1980s and early 1990s saw a plethora of theories explaining exactly how this could be done. They cannot all be detailed here, but some of the more important strategic advances of the decade are explained below.
Gary Hamel and C. K. Prahalad declared that strategy needs to be more active and interactive; less “arm-chair planning” was needed. They introduced terms like strategic intent and strategic architecture.[18][19] Their most well known advance was the idea of core competency. They showed how important it was to know the one or two key things that your company does better than the competition.[20]
Active strategic management required active information gathering and active problem solving. In the early days of Hewlett-Packard (H-P), Dave Packard and Bill Hewlett devised an active management style that they called Management By Walking Around (MBWA). Senior H-P managers were seldom at their desks. They spent most of their days visiting employees, customers, and suppliers. This direct contact with key people provided them with a solid grounding from which viable strategies could be crafted. The MBWA concept was popularized in 1985 by a book by Tom Peters and Nancy Austin.[21] Japanese managers employ a similar system, which originated at Honda, and is sometimes called the 3 G's (Genba, Genbutsu, and Genjitsu, which translate into “actual place”, “actual thing”, and “actual situation”).
Probably the most influential strategist of the decade was Michael Porter. He introduced many new concepts including; 5 forces analysis, generic strategies, the value chain, strategic groups, and clusters. In 5 forces analysis he identifies the forces that shape a firm's strategic environment. It is like a SWOT analysis with structure and purpose. It shows how a firm can use these forces to obtain a sustainable competitive advantage. Porter modifies Chandler's dictum about structure following strategy by introducing a second level of structure: Organizational structure follows strategy, which in turn follows industry structure. Porter's generic strategies detail the interaction between cost minimization strategies, product differentiation strategies, and market focus strategies. Although he did not introduce these terms, he showed the importance of choosing one of them rather than trying to position your company between them. He also challenged managers to see their industry in terms of a value chain. A firm will be successful only to the extent that it contributes to the industry's value chain. This forced management to look at its operations from the customer's point of view. Every operation should be examined in terms of what value it adds in the eyes of the final customer.
In 1993, John Kay took the idea of the value chain to a financial level claiming “ Adding value is the central purpose of business activity”, where adding value is defined as the difference between the market value of outputs and the cost of inputs including capital, all divided by the firm's net output. Borrowing from Gary Hamel and Michael Porter, Kay claims that the role of strategic management is to identify your core competencies, and then assemble a collection of assets that will increase value added and provide a competitive advantage. He claims that there are 3 types of capabilities that can do this; innovation, reputation, and organizational structure.
The 1980s also saw the widespread acceptance of positioning theory. Although the theory originated with Jack Trout in 1969, it didn’t gain wide acceptance until Al Ries and Jack Trout wrote their classic book “Positioning: The Battle For Your Mind” (1979). The basic premise is that a strategy should not be judged by internal company factors but by the way customers see it relative to the competition. Crafting and implementing a strategy involves creating a position in the mind of the collective consumer. Several techniques were applied to positioning theory, some newly invented but most borrowed from other disciplines. Perceptual mapping for example, creates visual displays of the relationships between positions. Multidimensional scaling, discriminant analysis, factor analysis, and conjoint analysis are mathematical techniques used to determine the most relevant characteristics (called dimensions or factors) upon which positions should be based. Preference regression can be used to determine vectors of ideal positions and cluster analysis can identify clusters of positions.
Others felt that internal company resources were the key. In 1992, Jay Barney, for example, saw strategy as assembling the optimum mix of resources, including human, technology, and suppliers, and then configure them in unique and sustainable ways.[22]
Michael Hammer and James Champy felt that these resources needed to be restructured.[23] This process, that they labeled reengineering, involved organizing a firm's assets around whole processes rather than tasks. In this way a team of people saw a project through, from inception to completion. This avoided functional silos where isolated departments seldom talked to each other. It also eliminated waste due to functional overlap and interdepartmental communications.
In 1989 Richard Lester and the researchers at the MIT Industrial Performance Center identified seven best practices and concluded that firms must accelerate the shift away from the mass production of low cost standardized products. The seven areas of best practice were:[24]
* Simultaneous continuous improvement in cost, quality, service, and product innovation
* Breaking down organizational barriers between departments
* Eliminating layers of management creating flatter organizational hierarchies.
* Closer relationships with customers and suppliers
* Intelligent use of new technology
* Global focus
* Improving human resource skills
The search for “best practices” is also called benchmarking.[25] This involves determining where you need to improve, finding an organization that is exceptional in this area, then studying the company and applying its best practices in your firm.
A large group of theorists felt the area where western business was most lacking was product quality. People like W. Edwards Deming,[26] Joseph M. Juran,[27] A. Kearney,[28] Philip Crosby,[29] and Armand Feignbaum[30] suggested quality improvement techniques like Total Quality Management (TQM), continuous improvement, lean manufacturing, Six Sigma, and Return on Quality (ROQ).
An equally large group of theorists felt that poor customer service was the problem. People like James Heskett (1988),[31] Earl Sasser (1995), William Davidow,[32] Len Schlesinger,[33] A. Paraurgman (1988), Len Berry,[34] Jane Kingman-Brundage,[35] Christopher Hart, and Christopher Lovelock (1994), gave us fishbone diagramming, service charting, Total Customer Service (TCS), the service profit chain, service gaps analysis, the service encounter, strategic service vision, service mapping, and service teams. Their underlying assumption was that there is no better source of competitive advantage than a continuous stream of delighted customers.
Process management uses some of the techniques from product quality management and some of the techniques from customer service management. It looks at an activity as a sequential process. The objective is to find inefficiencies and make the process more effective. Although the procedures have a long history, dating back to Taylorism, the scope of their applicability has been greatly widened, leaving no aspect of the firm free from potential process improvements. Because of the broad applicability of process management techniques, they can be used as a basis for competitive advantage.
Some realized that businesses were spending much more on acquiring new customers than on retaining current ones. Carl Sewell,[36] Frederick Reicheld,[37] C. Gronroos,[38] and Earl Sasser[39] showed us how a competitive advantage could be found in ensuring that customers returned again and again. This has come to be known as the loyalty effect after Reicheld's book of the same name in which he broadens the concept to include employee loyalty, supplier loyalty, distributor loyalty, and shareholder loyalty. They also developed techniques for estimating the lifetime value of a loyal customer, called customer lifetime value (CLV). A significant movement started that attempted to recast selling and marketing techniques into a long term endeavor that created a sustained relationship with customers (called relationship selling, relationship marketing, and customer relationship management). Customer relationship management (CRM) software (and its many variants) became an integral tool that sustained this trend.
James Gilmore and Joseph Pine found competitive advantage in mass customization.[40] Flexible manufacturing techniques allowed businesses to individualize products for each customer without losing economies of scale. This effectively turned the product into a service. They also realized that if a service is mass customized by creating a “performance” for each individual client, that service would be transformed into an “experience”. Their book, The Experience Economy,[41] along with the work of Bernd Schmitt convinced many to see service provision as a form of theatre. This school of thought is sometimes referred to as customer experience management (CEM).
Like Peters and Waterman a decade earlier, James Collins and Jerry Porras spent years conducting empirical research on what makes great companies. Six years of research uncovered a key underlying principle behind the 19 successful companies that they studied: They all encourage and preserve a core ideology that nurtures the company. Even though strategy and tactics change daily, the companies, nevertheless, were able to maintain a core set of values. These core values encourage employees to build an organization that lasts. In Built To Last (1994) they claim that short term profit goals, cost cutting, and restructuring will not stimulate dedicated employees to build a great company that will endure.[42] In 2000 Collins coined the term “built to flip” to describe the prevailing business attitudes in Silicon Valley. It describes a business culture where technological change inhibits a long term focus. He also popularized the concept of the BHAG (Big Hairy Audacious Goal).
Arie de Geus (1997) undertook a similar study and obtained similar results. He identified four key traits of companies that had prospered for 50 years or more. They are:
* Sensitivity to the business environment — the ability to learn and adjust
* Cohesion and identity — the ability to build a community with personality, vision, and purpose
* Tolerance and decentralization — the ability to build relationships
* Conservative financing
A company with these key characteristics he called a living company because it is able to perpetuate itself. If a company emphasizes knowledge rather than finance, and sees itself as an ongoing community of human beings, it has the potential to become great and endure for decades. Such an organization is an organic entity capable of learning (he called it a “learning organization”) and capable of creating its own processes, goals, and persona.
The military theorists
In the 1980s some business strategists realized that there was a vast knowledge base stretching back thousands of years that they had barely examined. They turned to military strategy for guidance. Military strategy books such as The Art of War by Sun Tzu, On War by von Clausewitz, and The Red Book by Mao Zedong became instant business classics. From Sun Tzu they learned the tactical side of military strategy and specific tactical prescriptions. From Von Clausewitz they learned the dynamic and unpredictable nature of military strategy. From Mao Zedong they learned the principles of guerrilla warfare. The main marketing warfare books were:
* Business War Games by Barrie James, 1984
* Marketing Warfare by Al Ries and Jack Trout, 1986
* Leadership Secrets of Attila the Hun by Wess Roberts, 1987
Philip Kotler was a well-known proponent of marketing warfare strategy.
There were generally thought to be four types of business warfare theories. They are:
* Offensive marketing warfare strategies
* Defensive marketing warfare strategies
* Flanking marketing warfare strategies
* Guerrilla marketing warfare strategies
The marketing warfare literature also examined leadership and motivation, intelligence gathering, types of marketing weapons, logistics, and communications.
By the turn of the century marketing warfare strategies had gone out of favour. It was felt that they were limiting. There were many situations in which non-confrontational approaches were more appropriate. The “Strategy of the Dolphin” was developed in the mid 1990s to give guidance as to when to use aggressive strategies and when to use passive strategies. A variety of aggressiveness strategies were developed.
In 1993, J. Moore used a similar metaphor.[43] Instead of using military terms, he created an ecological theory of predators and prey (see ecological model of competition), a sort of Darwinian management strategy in which market interactions mimic long term ecological stability.
Strategic change
In 1970, Alvin Toffler in Future Shock described a trend towards accelerating rates of change.[44] He illustrated how social and technological norms had shorter lifespans with each generation, and he questioned society's ability to cope with the resulting turmoil and anxiety. In past generations periods of change were always punctuated with times of stability. This allowed society to assimilate the change and deal with it before the next change arrived. But these periods of stability are getting shorter and by the late 20th century had all but disappeared. In 1980 in The Third Wave, Toffler characterized this shift to relentless change as the defining feature of the third phase of civilization (the first two phases being the agricultural and industrial waves).[45] He claimed that the dawn of this new phase will cause great anxiety for those that grew up in the previous phases, and will cause much conflict and opportunity in the business world. Hundreds of authors, particularly since the early 1990s, have attempted to explain what this means for business strategy.
In 1997, Watts Waker and Jim Taylor called this upheaval a "500 year delta."[46] They claimed these major upheavals occur every 5 centuries. They said we are currently making the transition from the “Age of Reason” to a new chaotic Age of Access. Jeremy Rifkin (2000) popularized and expanded this term, “age of access” three years later in his book of the same name.[47]
In 1968, Peter Drucker (1969) coined the phrase Age of Discontinuity to describe the way change forces disruptions into the continuity of our lives.[48] In an age of continuity attempts to predict the future by extrapolating from the past can be somewhat accurate. But according to Drucker, we are now in an age of discontinuity and extrapolating from the past is hopelessly ineffective. We cannot assume that trends that exist today will continue into the future. He identifies four sources of discontinuity: new technologies, globalization, cultural pluralism, and knowledge capital.
In 2000, Gary Hamel discussed strategic decay, the notion that the value of all strategies, no matter how brilliant, decays over time.[49]
In 1978, Dereck Abell (Abell, D. 1978) described strategic windows and stressed the importance of the timing (both entrance and exit) of any given strategy. This has led some strategic planners to build planned obsolescence into their strategies.[50]
In 1989, Charles Handy identified two types of change.[51] Strategic drift is a gradual change that occurs so subtly that it is not noticed until it is too late. By contrast, transformational change is sudden and radical. It is typically caused by discontinuities (or exogenous shocks) in the business environment. The point where a new trend is initiated is called a strategic inflection point by Andy Grove. Inflection points can be subtle or radical.
In 2000, Malcolm Gladwell discussed the importance of the tipping point, that point where a trend or fad acquires critical mass and takes off.[52]
In 1983, Noel Tichy recognized that because we are all beings of habit we tend to repeat what we are comfortable with.[53] He wrote that this is a trap that constrains our creativity, prevents us from exploring new ideas, and hampers our dealing with the full complexity of new issues. He developed a systematic method of dealing with change that involved looking at any new issue from three angles: technical and production, political and resource allocation, and corporate culture.
In 1990, Richard Pascale (Pascale, R. 1990) wrote that relentless change requires that businesses continuously reinvent themselves.[54] His famous maxim is “Nothing fails like success” by which he means that what was a strength yesterday becomes the root of weakness today, We tend to depend on what worked yesterday and refuse to let go of what worked so well for us in the past. Prevailing strategies become self-confirming. In order to avoid this trap, businesses must stimulate a spirit of inquiry and healthy debate. They must encourage a creative process of self renewal based on constructive conflict.
In 1996, Art Kleiner (1996) claimed that to foster a corporate culture that embraces change, you have to hire the right people; heretics, heroes, outlaws, and visionaries[55]. The conservative bureaucrat that made such a good middle manager in yesterday’s hierarchical organizations is of little use today. A decade earlier Peters and Austin (1985) had stressed the importance of nurturing champions and heroes. They said we have a tendency to dismiss new ideas, so to overcome this, we should support those few people in the organization that have the courage to put their career and reputation on the line for an unproven idea.
In 1996, Adrian Slywotsky showed how changes in the business environment are reflected in value migrations between industries, between companies, and within companies.[56] He claimed that recognizing the patterns behind these value migrations is necessary if we wish to understand the world of chaotic change. In “Profit Patterns” (1999) he described businesses as being in a state of strategic anticipation as they try to spot emerging patterns. Slywotsky and his team identified 30 patterns that have transformed industry after industry.[57]
In 1997, Clayton Christensen (1997) took the position that great companies can fail precisely because they do everything right since the capabilities of the organization also defines its disabilities.[58] Christensen's thesis is that outstanding companies lose their market leadership when confronted with disruptive technology. He called the approach to discovering the emerging markets for disruptive technologies agnostic marketing, i.e., marketing under the implicit assumption that no one - not the company, not the customers - can know how or in what quantities a disruptive product can or will be used before they have experience using it.
A number of strategists use scenario planning techniques to deal with change. Kees van der Heijden (1996), for example, says that change and uncertainty make “optimum strategy” determination impossible. We have neither the time nor the information required for such a calculation. The best we can hope for is what he calls “the most skillful process”.[59] The way Peter Schwartz put it in 1991 is that strategic outcomes cannot be known in advance so the sources of competitive advantage cannot be predetermined.[60] The fast changing business environment is too uncertain for us to find sustainable value in formulas of excellence or competitive advantage. Instead, scenario planning is a technique in which multiple outcomes can be developed, their implications assessed, and their likeliness of occurrence evaluated. According to Pierre Wack, scenario planning is about insight, complexity, and subtlety, not about formal analysis and numbers.[61]
In 1988, Henry Mintzberg looked at the changing world around him and decided it was time to reexamine how strategic management was done.[62][63] He examined the strategic process and concluded it was much more fluid and unpredictable than people had thought. Because of this, he could not point to one process that could be called strategic planning. Instead he concludes that there are five types of strategies. They are:
* Strategy as plan - a direction, guide, course of action - intention rather than actual
* Strategy as ploy - a maneuver intended to outwit a competitor
* Strategy as pattern - a consistent pattern of past behaviour - realized rather than intended
* Strategy as position - locating of brands, products, or companies within the conceptual framework of consumers or other stakeholders - strategy determined primarily by factors outside the firm
* Strategy as perspective - strategy determined primarily by a master strategist
In 1998, Mintzberg developed these five types of management strategy into 10 “schools of thought”. These 10 schools are grouped into three categories. The first group is prescriptive or normative. It consists of the informal design and conception school, the formal planning school, and the analytical positioning school. The second group, consisting of six schools, is more concerned with how strategic management is actually done, rather than prescribing optimal plans or positions. The six schools are the entrepreneurial, visionary, or great leader school, the cognitive or mental process school, the learning, adaptive, or emergent process school, the power or negotiation school, the corporate culture or collective process school, and the business environment or reactive school. The third and final group consists of one school, the configuration or transformation school, an hybrid of the other schools organized into stages, organizational life cycles, or “episodes”.[64]
In 1999, Constantinos Markides also wanted to reexamine the nature of strategic planning itself.[65] He describes strategy formation and implementation as an on-going, never-ending, integrated process requiring continuous reassessment and reformation. Strategic management is planned and emergent, dynamic, and interactive. J. Moncrieff (1999) also stresses strategy dynamics.[66] He recognized that strategy is partially deliberate and partially unplanned. The unplanned element comes from two sources: emergent strategies (result from the emergence of opportunities and threats in the environment) and Strategies in action (ad hoc actions by many people from all parts of the organization).
Some business planners are starting to use a complexity theory approach to strategy. Complexity can be thought of as chaos with a dash of order. Chaos theory deals with turbulent systems that rapidly become disordered. Complexity is not quite so unpredictable. It involves multiple agents interacting in such a way that a glimpse of structure may appear. Axelrod, R.,[67] Holland, J.,[68] and Kelly, S. and Allison, M.A.,[69] call these systems of multiple actions and reactions complex adaptive systems. Axelrod asserts that rather than fear complexity, business should harness it. He says this can best be done when “there are many participants, numerous interactions, much trial and error learning, and abundant attempts to imitate each others' successes”. In 2000, E. Dudik wrote that an organization must develop a mechanism for understanding the source and level of complexity it will face in the future and then transform itself into a complex adaptive system in order to deal with it.[70]
Information and technology driven strategy
Peter Drucker had theorized the rise of the “knowledge worker” back in the 1950s. He described how fewer workers would be doing physical labour, and more would be applying their minds. In 1984, John Nesbitt theorized that the future would be driven largely by information: companies that managed information well could obtain an advantage, however the profitability of what he calls the “information float” (information that the company had and others desired) would all but disappear as inexpensive computers made information more accessible.
Daniel Bell (1985) examined the sociological consequences of information technology, while Gloria Schuck and Shoshana Zuboff looked at psychological factors.[71] Zuboff, in her five year study of eight pioneering corporations made the important distinction between “automating technologies” and “infomating technologies”. She studied the effect that both had on individual workers, managers, and organizational structures. She largely confirmed Peter Drucker's predictions three decades earlier, about the importance of flexible decentralized structure, work teams, knowledge sharing, and the central role of the knowledge worker. Zuboff also detected a new basis for managerial authority, based not on position or hierarchy, but on knowledge (also predicted by Drucker) which she called “participative management”.[72]
In 1990, Peter Senge, who had collaborated with Arie de Geus at Dutch Shell, borrowed de Geus' notion of the learning organization, expanded it, and popularized it. The underlying theory is that a company's ability to gather, analyze, and use information is a necessary requirement for business success in the information age. (See organizational learning.) In order to do this, Senge claimed that an organization would need to be structured such that:[73]
* People can continuously expand their capacity to learn and be productive,
* New patterns of thinking are nurtured,
* Collective aspirations are encouraged, and
* People are encouraged to see the “whole picture” together.
Senge identified five components of a learning organization. They are:
* Personal responsibility, self reliance, and mastery — We accept that we are the masters of our own destiny. We make decisions and live with the consequences of them. When a problem needs to be fixed, or an opportunity exploited, we take the initiative to learn the required skills to get it done.
* Mental models — We need to explore our personal mental models to understand the subtle effect they have on our behaviour.
* Shared vision — The vision of where we want to be in the future is discussed and communicated to all. It provides guidance and energy for the journey ahead.
* Team learning — We learn together in teams. This involves a shift from “a spirit of advocacy to a spirit of enquiry”.
* Systems thinking — We look at the whole rather than the parts. This is what Senge calls the “Fifth discipline”. It is the glue that integrates the other four into a coherent strategy. For an alternative approach to the “learning organization”, see Garratt, B. (1987).
Since 1990 many theorists have written on the strategic importance of information, including J.B. Quinn,[74] J. Carlos Jarillo,[75] D.L. Barton,[76] Manuel Castells,[77] J.P. Lieleskin,[78] Thomas Stewart,[79] K.E. Sveiby,[80] Gilbert J. Probst,[81] and Shapiro and Varian[82] to name just a few.
Thomas A. Stewart, for example, uses the term intellectual capital to describe the investment an organization makes in knowledge. It is comprised of human capital (the knowledge inside the heads of employees), customer capital (the knowledge inside the heads of customers that decide to buy from you), and structural capital (the knowledge that resides in the company itself).
Manuel Castells, describes a network society characterized by: globalization, organizations structured as a network, instability of employment, and a social divide between those with access to information technology and those without.
Stan Davis and Christopher Meyer (1998) have combined three variables to define what they call the BLUR equation. The speed of change, Internet connectivity, and intangible knowledge value, when multiplied together yields a society's rate of BLUR. The three variables interact and reinforce each other making this relationship highly non-linear.
Regis McKenna posits that life in the high tech information age is what he called a “real time experience”. Events occur in real time. To ever more demanding customers “now” is what matters. Pricing will more and more become variable pricing changing with each transaction, often exhibiting first degree price discrimination. Customers expect immediate service, customized to their needs, and will be prepared to pay a premium price for it. He claimed that the new basis for competition will be time based competition.[83]
Geoffrey Moore (1991) and R. Frank and P. Cook[84] also detected a shift in the nature of competition. In industries with high technology content, technical standards become established and this gives the dominant firm a near monopoly. The same is true of networked industries in which interoperability requires compatibility between users. An example is word processor documents. Once a product has gained market dominance, other products, even far superior products, cannot compete. Moore showed how firms could attain this enviable position by using E.M. Rogers five stage adoption process and focusing on one group of customers at a time, using each group as a base for marketing to the next group. The most difficult step is making the transition between visionaries and pragmatists (See Crossing the Chasm). If successful a firm can create a bandwagon effect in which the momentum builds and your product becomes a de facto standard.
Evans and Wurster describe how industries with a high information component are being transformed.[85] They cite Encarta's demolition of the Encyclopedia Britannica (whose sales have plummeted 80% since their peak of $650 million in 1990). Many speculate that Encarta’s reign will be short-lived, eclipsed by collaborative encyclopedias like Wikipedia that can operate at very low marginal costs. Evans also mentions the music industry which is desperately looking for a new business model. The upstart information savvy firms, unburdened by cumbersome physical assets, are changing the competitive landscape, redefining market segments, and disintermediating some channels. One manifestation of this is personalized marketing. Information technology allows marketers to treat each individual as its own market, a market of one. Traditional ideas of market segments will no longer be relevant if personalized marketing is successful.
The technology sector has provided some strategies directly. For example, from the software development industry agile software development provides a model for shared development processes.
Access to information systems have allowed senior managers to take a much more comprehensive view of strategic management than ever before. The most notable of the comprehensive systems is the balanced scorecard approach developed in the early 1990's by Drs. Robert S. Kaplan (Harvard Business School) and David Norton (Kaplan, R. and Norton, D. 1992). It measures several factors financial, marketing, production, organizational development, and new product development in order to achieve a 'balanced' perspective.
The psychology of strategic management
Several psychologists have conducted studies to determine the psychological patterns involved in strategic management. Typically senior managers have been asked how they go about making strategic decisions. A 1938 treatise by Chester Barnard, that was based on his own experience as a business executive, sees the process as informal, intuitive, non-routinized, and involving primarily oral, 2-way communications. Bernard says “The process is the sensing of the organization as a whole and the total situation relevant to it. It transcends the capacity of merely intellectual methods, and the techniques of discriminating the factors of the situation. The terms pertinent to it are “feeling”, “judgement”, “sense”, “proportion”, “balance”, “appropriateness”. It is a matter of art rather than science.”[86]
In 1973, Henry Mintzberg found that senior managers typically deal with unpredictable situations so they strategize in ad hoc, flexible, dynamic, and implicit ways. He says, “The job breeds adaptive information-manipulators who prefer the live concrete situation. The manager works in an environment of stimulous-response, and he develops in his work a clear preference for live action.”[87]
In 1982, John Kotter studied the daily activities of 15 executives and concluded that they spent most of their time developing and working a network of relationships from which they gained general insights and specific details to be used in making strategic decisions. They tended to use “mental road maps” rather than systematic planning techniques.[88]
Daniel Isenberg's 1984 study of senior managers found that their decisions were highly intuitive. Executives often sensed what they were going to do before they could explain why.[89] He claimed in 1986 that one of the reasons for this is the complexity of strategic decisions and the resultant information uncertainty.[90]
Shoshana Zuboff (1988) claims that information technology is widening the divide between senior managers (who typically make strategic decisions) and operational level managers (who typically make routine decisions). She claims that prior to the widespread use of computer systems, managers, even at the most senior level, engaged in both strategic decisions and routine administration, but as computers facilitated (She called it “deskilled”) routine processes, these activities were moved further down the hierarchy, leaving senior management free for strategic decions making.
In 1977, Abraham Zaleznik identified a difference between leaders and managers. He describes leadershipleaders as visionaries who inspire. They care about substance. Whereas managers are claimed to care about process, plans, and form.[91] He also claimed in 1989 that the rise of the manager was the main factor that caused the decline of American business in the 1970s and 80s. Lack of leadership is most damaging at the level of strategic management where it can paralyze an entire organization.[92]
According to Corner, Kinichi, and Keats,[93] strategic decision making in organizations occurs at two levels: individual and aggregate. They have developed a model of parallel strategic decision making. The model identifies two parallel processes both of which involve getting attention, encoding information, storage and retrieval of information, strategic choice, strategic outcome, and feedback. The individual and organizational processes are not independent however. They interact at each stage of the process.
Reasons why strategic plans fail
There are many reasons why strategic plans fail, especially:
* Failure to understand the customer
o Why do they buy
o Is there a real need for the product
o inadequate or incorrect marketing research
* Inability to predict environmental reaction
o What will competitors do
+ Fighting brands
+ Price wars
o Will government intervene
* Over-estimation of resource competence
o Can the staff, equipment, and processes handle the new strategy
o Failure to develop new employee and management skills
* Failure to coordinate
o Reporting and control relationships not adequate
o Organizational structure not flexible enough
* Failure to obtain senior management commitment
o Failure to get management involved right from the start
o Failure to obtain sufficient company resources to accomplish task
* Failure to obtain employee commitment
o New strategy not well explained to employees
o No incentives given to workers to embrace the new strategy
* Under-estimation of time requirements
o No critical path analysis done
* Failure to follow the plan
o No follow through after initial planning
o No tracking of progress against plan
o No consequences for above
* Failure to manage change
o Inadequate understanding of the internal resistance to change
o Lack of vision on the relationships between processes, technology and organization
* Poor communications
o Insufficient information sharing among stakeholders
o Exclusion of stakeholders and delegates
Criticisms of strategic management
Although a sense of direction is important, it can also stifle creativity, especially if it is rigidly enforced. In an uncertain and ambiguous world, fluidity can be more important than a finely tuned strategic compass. When a strategy becomes internalized into a corporate culture, it can lead to group think. It can also cause an organization to define itself too narrowly. An example of this is marketing myopia.
Many theories of strategic management tend to undergo only brief periods of popularity. A summary of these theories thus inevitably exhibits survivorship bias (itself an area of research in strategic management). Many theories tend either to be too narrow in focus to build a complete corporate strategy on, or too general and abstract to be applicable to specific situations. Populism or faddishness can have an impact on a particular theory's life cycle and may see application in inappropriate circumstances. See business philosophies and popular management theories for a more critical view of management theories.
In 2000, Gary Hamel coined the term strategic convergence to explain the limited scope of the strategies being used by rivals in greatly differing circumstances. He lamented that strategies converge more than they should, because the more successful ones get imitated by firms that do not understand that the strategic process involves designing a custom strategy for the specifics of each situation.[94]
Ram Charan, aligning with a popular marketing tagline, believes that strategic planning must not dominate action. "Just do it!", while not quite what he meant, is a phrase that nevertheless comes to mind when combatting analysis paralysis.
Journals devoted primarily to strategic management
* Strategic Management Journal[2]
* The Journal of Business Strategy
* Long Range Planning – house journal of the Strategic Planning Society
* Strategy and Leadership [3]
* Strategy – house magazine of the Strategic Planning Society
“Strategic management is an ongoing process that assesses the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.” (Lamb, 1984:ix)[2]
There are many software products available in the market that process and report organisational data and which aid in strategic management—e.g. SAP, SEM, SAS, etc.
Contents
* 1 Processes
o 1.1 Strategy formulation
o 1.2 Strategy implementation
o 1.3 Strategy evaluation
* 2 General approaches
* 3 The strategy hierarchy
* 4 Historical development of strategic management
o 4.1 Birth of strategic management
o 4.2 Growth and portfolio theory
o 4.3 The marketing revolution
o 4.4 The Japanese challenge
o 4.5 Gaining competitive advantage
o 4.6 The military theorists
o 4.7 Strategic change
o 4.8 Information and technology driven strategy
* 5 The psychology of strategic management
* 6 Reasons why strategic plans fail
* 7 Criticisms of strategic management
* 8 Journals devoted primarily to strategic management
Processes
Strategic management is a combination of three main processes which are as follows:
Strategy formulation
* Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental.
* Concurrent with this assessment, objectives are set. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.
* These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives.
This three-step strategy formulation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there. These three questions are the essence of strategic planning. SWOT Analysis: I/O Economics for the external factors and RBV for the internal factors.
Strategy implementation
* Allocation of sufficient resources (financial, personnel, time, technology support)
* Establishing a chain of command or some alternative structure (such as cross functional teams)
* Assigning responsibility of specific tasks or processes to specific individuals or groups
* It also involves managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary.
* When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.
Strategy evaluation
* Measuring the effectiveness of the organizational strategy. It's extremely important to conduct a SWOT analysis to figure out the strengths, weaknesses, opportunities and threats (both internal and external) of the entity in question.
General approaches
In general terms, there are two main approaches, which are opposite but complement each other in some ways, to strategic management:
* The Industrial Organizational Approach
o based on economic theory — deals with issues like competitive rivalry, resource allocation, economies of scale
o assumptions — rationality, self discipline behaviour, profit maximization
* The Sociological Approach
o deals primarily with human interactions
o assumptions — bounded rationality, satisfying behaviour, profit sub-optimality. An example of a company that currently operates this way is Google
Strategic management techniques can be viewed as bottom-up, top-down, or collaborative processes. In the bottom-up approach, employees submit proposals to their managers who, in turn, funnel the best ideas further up the organization. This is often accomplished by a capital budgeting process. Proposals are assessed using financial criteria such as return on investment or cost-benefit analysis. Cost underestimation and benefit overestimation are major sources of error. The proposals that are approved form the substance of a new strategy, all of which is done without a grand strategic design or a strategic architect. The top-down approach is the most common by far. In it, the CEO, possibly with the assistance of a strategic planning team, decides on the overall direction the company should take. Some organizations are starting to experiment with collaborative strategic planning techniques that recognize the emergent nature of strategic decisions.
The strategy hierarchy
In most (large) corporations there are several levels of strategy. Strategic management is the highest in the sense that it is the broadest, applying to all parts of the firm. It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under this broad corporate strategy there are often functional or business unit strategies.
Functional strategies include marketing strategies, new product development strategies, human resource strategies, financial strategies, legal strategies, supply-chain strategies, and information technology management strategies. The emphasis is on short and medium term plans and is limited to the domain of each department’s functional responsibility. Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader corporate strategies.
Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have reengineered according to processes or strategic business units (called SBUs). A strategic business unit is a semi-autonomous unit within an organization. It is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An SBU is treated as an internal profit centre by corporate headquarters. Each SBU is responsible for developing its business strategies, strategies that must be in tune with broader corporate strategies.
The “lowest” level of strategy is operational strategy. It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. It must operate within a budget but is not at liberty to adjust or create that budget. Operational level strategy was encouraged by Peter Drucker in his theory of management by objectives (MBO). Operational level strategies are informed by business level strategies which, in turn, are informed by corporate level strategies. Business strategy, which refers to the aggregated operational strategies of single business firm or that of an SBU in a diversified corporation refers to the way in which a firm competes in its chosen arenas.
Corporate strategy, then, refers to the overarching strategy of the diversified firm. Such corporate strategy answers the questions of "in which businesses should we compete?" and "how does being in one business add to the competitive advantage of another portfolio firm, as well as the competitive advantage of the corporation as a whole?"
Since the turn of the millennium, there has been a tendency in some firms to revert to a simpler strategic structure. This is being driven by information technology. It is felt that knowledge management systems should be used to share information and create common goals. Strategic divisions are thought to hamper this process. Most recently, this notion of strategy has been captured under the rubric of dynamic strategy, popularized by the strategic management textbook authored by Carpenter and Sanders [1]. This work builds on that of Brown and Eisenhart as well as Christensen and portrays firm strategy, both business and corporate, as necessarily embracing ongoing strategic change, and the seamless integration of strategy formulation and implementation. Such change and implementation are usually built into the strategy through the staging and pacing facets.
Historical development of strategic management
Birth of strategic management
Strategic management as a discipline originated in the 1950s and 60s. Although there were numerous early contributors to the literature, the most influential pioneers were Alfred D. Chandler, Jr., Philip Selznick, Igor Ansoff, and Peter Drucker.
Alfred Chandler recognized the importance of coordinating the various aspects of management under one all-encompassing strategy. Prior to this time the various functions of management were separate with little overall coordination or strategy. Interactions between functions or between departments were typically handled by a boundary position, that is, there were one or two managers that relayed information back and forth between two departments. Chandler also stressed the importance of taking a long term perspective when looking to the future. In his 1962 groundbreaking work Strategy and Structure, Chandler showed that a long-term coordinated strategy was necessary to give a company structure, direction, and focus. He says it concisely, “structure follows strategy.”[3]
In 1957, Philip Selznick introduced the idea of matching the organization's internal factors with external environmental circumstances.[4] This core idea was developed into what we now call SWOT analysis by Learned, Andrews, and others at the Harvard Business School General Management Group. Strengths and weaknesses of the firm are assessed in light of the opportunities and threats from the business environment.
Igor Ansoff built on Chandler's work by adding a range of strategic concepts and inventing a whole new vocabulary. He developed a strategy grid that compared market penetration strategies, product development strategies, market development strategies and horizontal and vertical integration and diversification strategies. He felt that management could use these strategies to systematically prepare for future opportunities and challenges. In his 1965 classic Corporate Strategy, he developed the gap analysis still used today in which we must understand the gap between where we are currently and where we would like to be, then develop what he called “gap reducing actions”.[5]
Peter Drucker was a prolific strategy theorist, author of dozens of management books, with a career spanning five decades. His contributions to strategic management were many but two are most important. Firstly, he stressed the importance of objectives. An organization without clear objectives is like a ship without a rudder. As early as 1954 he was developing a theory of management based on objectives.[6] This evolved into his theory of management by objectives (MBO). According to Drucker, the procedure of setting objectives and monitoring your progress towards them should permeate the entire organization, top to bottom. His other seminal contribution was in predicting the importance of what today we would call intellectual capital. He predicted the rise of what he called the “knowledge worker” and explained the consequences of this for management. He said that knowledge work is non-hierarchical. Work would be carried out in teams with the person most knowledgeable in the task at hand being the temporary leader.
In 1985, Ellen-Earle Chaffee summarized what she thought were the main elements of strategic management theory by the 1970s:[7]
* Strategic management involves adapting the organization to its business environment.
* Strategic management is fluid and complex. Change creates novel combinations of circumstances requiring unstructured non-repetitive responses.
* Strategic management affects the entire organization by providing direction.
* Strategic management involves both strategy formation (she called it content) and also strategy implementation (she called it process).
* Strategic management is partially planned and partially unplanned.
* Strategic management is done at several levels: overall corporate strategy, and individual business strategies.
* Strategic management involves both conceptual and analytical thought processes.
Growth and portfolio theory
In the 1970s much of strategic management dealt with size, growth, and portfolio theory. The PIMS study was a long term study, started in the 1960s and lasted for 19 years, that attempted to understand the Profit Impact of Marketing Strategies (PIMS), particularly the effect of market share. Started at General Electric, moved to Harvard in the early 1970s, and then moved to the Strategic Planning Institute in the late 1970s, it now contains decades of information on the relationship between profitability and strategy. Their initial conclusion was unambiguous: The greater a company's market share, the greater will be their rate of profit. The high market share provides volume and economies of scale. It also provides experience and learning curve advantages. The combined effect is increased profits.[8] The studies conclusions continue to be drawn on by academics and companies today: "PIMS provides compelling quantitative evidence as to which business strategies work and don't work" - Tom Peters.
The benefits of high market share naturally lead to an interest in growth strategies. The relative advantages of horizontal integration, vertical integration, diversification, franchises, mergers and acquisitions, joint ventures, and organic growth were discussed. The most appropriate market dominance strategies were assessed given the competitive and regulatory environment.
There was also research that indicated that a low market share strategy could also be very profitable. Schumacher (1973),[9] Woo and Cooper (1982),[10] Levenson (1984),[11] and later Traverso (2002)[12] showed how smaller niche players obtained very high returns.
By the early 1980s the paradoxical conclusion was that high market share and low market share companies were often very profitable but most of the companies in between were not. This was sometimes called the “hole in the middle” problem. This anomaly would be explained by Michael Porter in the 1980s.
The management of diversified organizations required new techniques and new ways of thinking. The first CEO to address the problem of a multi-divisional company was Alfred Sloan at General Motors. GM was decentralized into semi-autonomous “strategic business units” (SBU's), but with centralized support functions.
One of the most valuable concepts in the strategic management of multi-divisional companies was portfolio theory. In the previous decade Harry Markowitz and other financial theorists developed the theory of portfolio analysis. It was concluded that a broad portfolio of financial assets could reduce specific risk. In the 1970s marketers extended the theory to product portfolio decisions and managerial strategists extended it to operating division portfolios. Each of a company’s operating divisions were seen as an element in the corporate portfolio. Each operating division (also called strategic business units) was treated as a semi-independent profit center with its own revenues, costs, objectives, and strategies. Several techniques were developed to analyze the relationships between elements in a portfolio. B.C.G. Analysis, for example, was developed by the Boston Consulting Group in the early 1970s. This was the theory that gave us the wonderful image of a CEO sitting on a stool milking a cash cow. Shortly after that the G.E. multi factoral model was developed by General Electric. Companies continued to diversify until the 1980s when it was realized that in many cases a portfolio of operating divisions was worth more as separate completely independent companies.
The marketing revolution
The 1970s also saw the rise of the marketing oriented firm. From the beginnings of capitalism it was assumed that the key requirement of business success was a product of high technical quality. If you produced a product that worked well and was durable, it was assumed you would have no difficulty selling them at a profit. This was called the production orientation and it was generally true that good products could be sold without effort, encapsulated in the saying "Build a better mousetrap and the world will beat a path to your door." This was largely due to the growing numbers of affluent and middle class people that capitalism had created. But after the untapped demand caused by the second world war was saturated in the 1950s it became obvious that products were not selling as easily as they had been. The answer was to concentrate on selling. The 1950s and 1960s is known as the sales era and the guiding philosophy of business of the time is today called the sales orientation. In the early 1970s Theodore Levitt and others at Harvard argued that the sales orientation had things backward. They claimed that instead of producing products then trying to sell them to the customer, businesses should start with the customer, find out what they wanted, and then produce it for them. The customer became the driving force behind all strategic business decisions. This marketing orientation, in the decades since its introduction, has been reformulated and repackaged under numerous names including customer orientation, marketing philosophy, customer intimacy, customer focus, customer driven, and market focused.
The Japanese challenge
By the late 70s people had started to notice how successful Japanese industry had become. In industry after industry, including steel, watches, ship building, cameras, autos, and electronics, the Japanese were surpassing American and European companies. Westerners wanted to know why. Numerous theories purported to explain the Japanese success including:
* Higher employee morale, dedication, and loyalty;
* Lower cost structure, including wages;
* Effective government industrial policy;
* Modernization after WWII leading to high capital intensity and productivity;
* Economies of scale associated with increased exporting;
* Relatively low value of the Yen leading to low interest rates and capital costs, low dividend expectations, and inexpensive exports;
* Superior quality control techniques such as Total Quality Management and other systems introduced by W. Edwards Deming in the 1950s and 60s.[13]
Although there was some truth to all these potential explanations, there was clearly something missing. In fact by 1980 the Japanese cost structure was higher than the American. And post WWII reconstruction was nearly 40 years in the past. The first management theorist to suggest an explanation was Richard Pascale.
In 1981 Richard Pascale and Anthony Athos in The Art of Japanese Management claimed that the main reason for Japanese success was their superior management techniques.[14] They divided management into 7 aspects (which are also known as McKinsey 7S Framework): Strategy, Structure, Systems, Skills, Staff, Style, and Supraordinate goals (which we would now call shared values). The first three of the 7 S's were called hard factors and this is where American companies excelled. The remaining four factors (skills, staff, style, and shared values) were called soft factors and were not well understood by American businesses of the time (for details on the role of soft and hard factors see Wickens P.D. 1995.) Americans did not yet place great value on corporate culture, shared values and beliefs, and social cohesion in the workplace. In Japan the task of management was seen as managing the whole complex of human needs, economic, social, psychological, and spiritual. In America work was seen as something that was separate from the rest of one's life. It was quite common for Americans to exhibit a very different personality at work compared to the rest of their lives. Pascale also highlighted the difference between decision making styles; hierarchical in America, and consensus in Japan. He also claimed that American business lacked long term vision, preferring instead to apply management fads and theories in a piecemeal fashion.
One year later The Mind of the Strategist was released in America by Kenichi Ohmae, the head of McKinsey & Co.'s Tokyo office.[15] (It was originally published in Japan in 1975.) He claimed that strategy in America was too analytical. Strategy should be a creative art: It is a frame of mind that requires intuition and intellectual flexibility. He claimed that Americans constrained their strategic options by thinking in terms of analytical techniques, rote formula, and step-by-step processes. He compared the culture of Japan in which vagueness, ambiguity, and tentative decisions were acceptable, to American culture that valued fast decisions.
Also in 1982 Tom Peters and Robert Waterman released a study that would respond to the Japanese challenge head on.[16] Peters and Waterman, who had several years earlier collaborated with Pascale and Athos at McKinsey & Co. asked “What makes an excellent company?”. They looked at 62 companies that they thought were fairly successful. Each was subject to six performance criteria. To be classified as an excellent company, it had to be above the 50th percentile in 4 of the 6 performance metrics for 20 consecutive years. Forty-three companies passed the test. They then studied these successful companies and interviewed key executives. They concluded in In Search of Excellence that there were 8 keys to excellence that were shared by all 43 firms. They are:
* A bias for action — Do it. Try it. Don’t waste time studying it with multiple reports and committees.
* Customer focus — Get close to the customer. Know your customer.
* Entrepreneurship — Even big companies act and think small by giving people the authority to take initiatives.
* Productivity through people — Treat your people with respect and they will reward you with productivity.
* Value-oriented CEOs — The CEO should actively propagate corporate values throughout the organization.
* Stick to the knitting — Do what you know well.
* Keep things simple and lean — Complexity encourages waste and confusion.
* Simultaneously centralized and decentralized — Have tight centralized control while also allowing maximum individual autonomy.
The basic blueprint on how to compete against the Japanese had been drawn. But as J.E. Rehfeld (1994) explains it is not a straight forward task due to differences in culture.[17] A certain type of alchemy was required to transform knowledge from various cultures into a management style that allows a specific company to compete in a globally diverse world. He says, for example, that Japanese style kaizen (continuous improvement) techniques, although suitable for people socialized in Japanese culture, have not been successful when implemented in the U.S. unless they are modified significantly.
Gaining competitive advantage
The Japanese challenge shook the confidence of the western business elite, but detailed comparisons of the two management styles and examinations of successful businesses convinced westerners that they could overcome the challenge. The 1980s and early 1990s saw a plethora of theories explaining exactly how this could be done. They cannot all be detailed here, but some of the more important strategic advances of the decade are explained below.
Gary Hamel and C. K. Prahalad declared that strategy needs to be more active and interactive; less “arm-chair planning” was needed. They introduced terms like strategic intent and strategic architecture.[18][19] Their most well known advance was the idea of core competency. They showed how important it was to know the one or two key things that your company does better than the competition.[20]
Active strategic management required active information gathering and active problem solving. In the early days of Hewlett-Packard (H-P), Dave Packard and Bill Hewlett devised an active management style that they called Management By Walking Around (MBWA). Senior H-P managers were seldom at their desks. They spent most of their days visiting employees, customers, and suppliers. This direct contact with key people provided them with a solid grounding from which viable strategies could be crafted. The MBWA concept was popularized in 1985 by a book by Tom Peters and Nancy Austin.[21] Japanese managers employ a similar system, which originated at Honda, and is sometimes called the 3 G's (Genba, Genbutsu, and Genjitsu, which translate into “actual place”, “actual thing”, and “actual situation”).
Probably the most influential strategist of the decade was Michael Porter. He introduced many new concepts including; 5 forces analysis, generic strategies, the value chain, strategic groups, and clusters. In 5 forces analysis he identifies the forces that shape a firm's strategic environment. It is like a SWOT analysis with structure and purpose. It shows how a firm can use these forces to obtain a sustainable competitive advantage. Porter modifies Chandler's dictum about structure following strategy by introducing a second level of structure: Organizational structure follows strategy, which in turn follows industry structure. Porter's generic strategies detail the interaction between cost minimization strategies, product differentiation strategies, and market focus strategies. Although he did not introduce these terms, he showed the importance of choosing one of them rather than trying to position your company between them. He also challenged managers to see their industry in terms of a value chain. A firm will be successful only to the extent that it contributes to the industry's value chain. This forced management to look at its operations from the customer's point of view. Every operation should be examined in terms of what value it adds in the eyes of the final customer.
In 1993, John Kay took the idea of the value chain to a financial level claiming “ Adding value is the central purpose of business activity”, where adding value is defined as the difference between the market value of outputs and the cost of inputs including capital, all divided by the firm's net output. Borrowing from Gary Hamel and Michael Porter, Kay claims that the role of strategic management is to identify your core competencies, and then assemble a collection of assets that will increase value added and provide a competitive advantage. He claims that there are 3 types of capabilities that can do this; innovation, reputation, and organizational structure.
The 1980s also saw the widespread acceptance of positioning theory. Although the theory originated with Jack Trout in 1969, it didn’t gain wide acceptance until Al Ries and Jack Trout wrote their classic book “Positioning: The Battle For Your Mind” (1979). The basic premise is that a strategy should not be judged by internal company factors but by the way customers see it relative to the competition. Crafting and implementing a strategy involves creating a position in the mind of the collective consumer. Several techniques were applied to positioning theory, some newly invented but most borrowed from other disciplines. Perceptual mapping for example, creates visual displays of the relationships between positions. Multidimensional scaling, discriminant analysis, factor analysis, and conjoint analysis are mathematical techniques used to determine the most relevant characteristics (called dimensions or factors) upon which positions should be based. Preference regression can be used to determine vectors of ideal positions and cluster analysis can identify clusters of positions.
Others felt that internal company resources were the key. In 1992, Jay Barney, for example, saw strategy as assembling the optimum mix of resources, including human, technology, and suppliers, and then configure them in unique and sustainable ways.[22]
Michael Hammer and James Champy felt that these resources needed to be restructured.[23] This process, that they labeled reengineering, involved organizing a firm's assets around whole processes rather than tasks. In this way a team of people saw a project through, from inception to completion. This avoided functional silos where isolated departments seldom talked to each other. It also eliminated waste due to functional overlap and interdepartmental communications.
In 1989 Richard Lester and the researchers at the MIT Industrial Performance Center identified seven best practices and concluded that firms must accelerate the shift away from the mass production of low cost standardized products. The seven areas of best practice were:[24]
* Simultaneous continuous improvement in cost, quality, service, and product innovation
* Breaking down organizational barriers between departments
* Eliminating layers of management creating flatter organizational hierarchies.
* Closer relationships with customers and suppliers
* Intelligent use of new technology
* Global focus
* Improving human resource skills
The search for “best practices” is also called benchmarking.[25] This involves determining where you need to improve, finding an organization that is exceptional in this area, then studying the company and applying its best practices in your firm.
A large group of theorists felt the area where western business was most lacking was product quality. People like W. Edwards Deming,[26] Joseph M. Juran,[27] A. Kearney,[28] Philip Crosby,[29] and Armand Feignbaum[30] suggested quality improvement techniques like Total Quality Management (TQM), continuous improvement, lean manufacturing, Six Sigma, and Return on Quality (ROQ).
An equally large group of theorists felt that poor customer service was the problem. People like James Heskett (1988),[31] Earl Sasser (1995), William Davidow,[32] Len Schlesinger,[33] A. Paraurgman (1988), Len Berry,[34] Jane Kingman-Brundage,[35] Christopher Hart, and Christopher Lovelock (1994), gave us fishbone diagramming, service charting, Total Customer Service (TCS), the service profit chain, service gaps analysis, the service encounter, strategic service vision, service mapping, and service teams. Their underlying assumption was that there is no better source of competitive advantage than a continuous stream of delighted customers.
Process management uses some of the techniques from product quality management and some of the techniques from customer service management. It looks at an activity as a sequential process. The objective is to find inefficiencies and make the process more effective. Although the procedures have a long history, dating back to Taylorism, the scope of their applicability has been greatly widened, leaving no aspect of the firm free from potential process improvements. Because of the broad applicability of process management techniques, they can be used as a basis for competitive advantage.
Some realized that businesses were spending much more on acquiring new customers than on retaining current ones. Carl Sewell,[36] Frederick Reicheld,[37] C. Gronroos,[38] and Earl Sasser[39] showed us how a competitive advantage could be found in ensuring that customers returned again and again. This has come to be known as the loyalty effect after Reicheld's book of the same name in which he broadens the concept to include employee loyalty, supplier loyalty, distributor loyalty, and shareholder loyalty. They also developed techniques for estimating the lifetime value of a loyal customer, called customer lifetime value (CLV). A significant movement started that attempted to recast selling and marketing techniques into a long term endeavor that created a sustained relationship with customers (called relationship selling, relationship marketing, and customer relationship management). Customer relationship management (CRM) software (and its many variants) became an integral tool that sustained this trend.
James Gilmore and Joseph Pine found competitive advantage in mass customization.[40] Flexible manufacturing techniques allowed businesses to individualize products for each customer without losing economies of scale. This effectively turned the product into a service. They also realized that if a service is mass customized by creating a “performance” for each individual client, that service would be transformed into an “experience”. Their book, The Experience Economy,[41] along with the work of Bernd Schmitt convinced many to see service provision as a form of theatre. This school of thought is sometimes referred to as customer experience management (CEM).
Like Peters and Waterman a decade earlier, James Collins and Jerry Porras spent years conducting empirical research on what makes great companies. Six years of research uncovered a key underlying principle behind the 19 successful companies that they studied: They all encourage and preserve a core ideology that nurtures the company. Even though strategy and tactics change daily, the companies, nevertheless, were able to maintain a core set of values. These core values encourage employees to build an organization that lasts. In Built To Last (1994) they claim that short term profit goals, cost cutting, and restructuring will not stimulate dedicated employees to build a great company that will endure.[42] In 2000 Collins coined the term “built to flip” to describe the prevailing business attitudes in Silicon Valley. It describes a business culture where technological change inhibits a long term focus. He also popularized the concept of the BHAG (Big Hairy Audacious Goal).
Arie de Geus (1997) undertook a similar study and obtained similar results. He identified four key traits of companies that had prospered for 50 years or more. They are:
* Sensitivity to the business environment — the ability to learn and adjust
* Cohesion and identity — the ability to build a community with personality, vision, and purpose
* Tolerance and decentralization — the ability to build relationships
* Conservative financing
A company with these key characteristics he called a living company because it is able to perpetuate itself. If a company emphasizes knowledge rather than finance, and sees itself as an ongoing community of human beings, it has the potential to become great and endure for decades. Such an organization is an organic entity capable of learning (he called it a “learning organization”) and capable of creating its own processes, goals, and persona.
The military theorists
In the 1980s some business strategists realized that there was a vast knowledge base stretching back thousands of years that they had barely examined. They turned to military strategy for guidance. Military strategy books such as The Art of War by Sun Tzu, On War by von Clausewitz, and The Red Book by Mao Zedong became instant business classics. From Sun Tzu they learned the tactical side of military strategy and specific tactical prescriptions. From Von Clausewitz they learned the dynamic and unpredictable nature of military strategy. From Mao Zedong they learned the principles of guerrilla warfare. The main marketing warfare books were:
* Business War Games by Barrie James, 1984
* Marketing Warfare by Al Ries and Jack Trout, 1986
* Leadership Secrets of Attila the Hun by Wess Roberts, 1987
Philip Kotler was a well-known proponent of marketing warfare strategy.
There were generally thought to be four types of business warfare theories. They are:
* Offensive marketing warfare strategies
* Defensive marketing warfare strategies
* Flanking marketing warfare strategies
* Guerrilla marketing warfare strategies
The marketing warfare literature also examined leadership and motivation, intelligence gathering, types of marketing weapons, logistics, and communications.
By the turn of the century marketing warfare strategies had gone out of favour. It was felt that they were limiting. There were many situations in which non-confrontational approaches were more appropriate. The “Strategy of the Dolphin” was developed in the mid 1990s to give guidance as to when to use aggressive strategies and when to use passive strategies. A variety of aggressiveness strategies were developed.
In 1993, J. Moore used a similar metaphor.[43] Instead of using military terms, he created an ecological theory of predators and prey (see ecological model of competition), a sort of Darwinian management strategy in which market interactions mimic long term ecological stability.
Strategic change
In 1970, Alvin Toffler in Future Shock described a trend towards accelerating rates of change.[44] He illustrated how social and technological norms had shorter lifespans with each generation, and he questioned society's ability to cope with the resulting turmoil and anxiety. In past generations periods of change were always punctuated with times of stability. This allowed society to assimilate the change and deal with it before the next change arrived. But these periods of stability are getting shorter and by the late 20th century had all but disappeared. In 1980 in The Third Wave, Toffler characterized this shift to relentless change as the defining feature of the third phase of civilization (the first two phases being the agricultural and industrial waves).[45] He claimed that the dawn of this new phase will cause great anxiety for those that grew up in the previous phases, and will cause much conflict and opportunity in the business world. Hundreds of authors, particularly since the early 1990s, have attempted to explain what this means for business strategy.
In 1997, Watts Waker and Jim Taylor called this upheaval a "500 year delta."[46] They claimed these major upheavals occur every 5 centuries. They said we are currently making the transition from the “Age of Reason” to a new chaotic Age of Access. Jeremy Rifkin (2000) popularized and expanded this term, “age of access” three years later in his book of the same name.[47]
In 1968, Peter Drucker (1969) coined the phrase Age of Discontinuity to describe the way change forces disruptions into the continuity of our lives.[48] In an age of continuity attempts to predict the future by extrapolating from the past can be somewhat accurate. But according to Drucker, we are now in an age of discontinuity and extrapolating from the past is hopelessly ineffective. We cannot assume that trends that exist today will continue into the future. He identifies four sources of discontinuity: new technologies, globalization, cultural pluralism, and knowledge capital.
In 2000, Gary Hamel discussed strategic decay, the notion that the value of all strategies, no matter how brilliant, decays over time.[49]
In 1978, Dereck Abell (Abell, D. 1978) described strategic windows and stressed the importance of the timing (both entrance and exit) of any given strategy. This has led some strategic planners to build planned obsolescence into their strategies.[50]
In 1989, Charles Handy identified two types of change.[51] Strategic drift is a gradual change that occurs so subtly that it is not noticed until it is too late. By contrast, transformational change is sudden and radical. It is typically caused by discontinuities (or exogenous shocks) in the business environment. The point where a new trend is initiated is called a strategic inflection point by Andy Grove. Inflection points can be subtle or radical.
In 2000, Malcolm Gladwell discussed the importance of the tipping point, that point where a trend or fad acquires critical mass and takes off.[52]
In 1983, Noel Tichy recognized that because we are all beings of habit we tend to repeat what we are comfortable with.[53] He wrote that this is a trap that constrains our creativity, prevents us from exploring new ideas, and hampers our dealing with the full complexity of new issues. He developed a systematic method of dealing with change that involved looking at any new issue from three angles: technical and production, political and resource allocation, and corporate culture.
In 1990, Richard Pascale (Pascale, R. 1990) wrote that relentless change requires that businesses continuously reinvent themselves.[54] His famous maxim is “Nothing fails like success” by which he means that what was a strength yesterday becomes the root of weakness today, We tend to depend on what worked yesterday and refuse to let go of what worked so well for us in the past. Prevailing strategies become self-confirming. In order to avoid this trap, businesses must stimulate a spirit of inquiry and healthy debate. They must encourage a creative process of self renewal based on constructive conflict.
In 1996, Art Kleiner (1996) claimed that to foster a corporate culture that embraces change, you have to hire the right people; heretics, heroes, outlaws, and visionaries[55]. The conservative bureaucrat that made such a good middle manager in yesterday’s hierarchical organizations is of little use today. A decade earlier Peters and Austin (1985) had stressed the importance of nurturing champions and heroes. They said we have a tendency to dismiss new ideas, so to overcome this, we should support those few people in the organization that have the courage to put their career and reputation on the line for an unproven idea.
In 1996, Adrian Slywotsky showed how changes in the business environment are reflected in value migrations between industries, between companies, and within companies.[56] He claimed that recognizing the patterns behind these value migrations is necessary if we wish to understand the world of chaotic change. In “Profit Patterns” (1999) he described businesses as being in a state of strategic anticipation as they try to spot emerging patterns. Slywotsky and his team identified 30 patterns that have transformed industry after industry.[57]
In 1997, Clayton Christensen (1997) took the position that great companies can fail precisely because they do everything right since the capabilities of the organization also defines its disabilities.[58] Christensen's thesis is that outstanding companies lose their market leadership when confronted with disruptive technology. He called the approach to discovering the emerging markets for disruptive technologies agnostic marketing, i.e., marketing under the implicit assumption that no one - not the company, not the customers - can know how or in what quantities a disruptive product can or will be used before they have experience using it.
A number of strategists use scenario planning techniques to deal with change. Kees van der Heijden (1996), for example, says that change and uncertainty make “optimum strategy” determination impossible. We have neither the time nor the information required for such a calculation. The best we can hope for is what he calls “the most skillful process”.[59] The way Peter Schwartz put it in 1991 is that strategic outcomes cannot be known in advance so the sources of competitive advantage cannot be predetermined.[60] The fast changing business environment is too uncertain for us to find sustainable value in formulas of excellence or competitive advantage. Instead, scenario planning is a technique in which multiple outcomes can be developed, their implications assessed, and their likeliness of occurrence evaluated. According to Pierre Wack, scenario planning is about insight, complexity, and subtlety, not about formal analysis and numbers.[61]
In 1988, Henry Mintzberg looked at the changing world around him and decided it was time to reexamine how strategic management was done.[62][63] He examined the strategic process and concluded it was much more fluid and unpredictable than people had thought. Because of this, he could not point to one process that could be called strategic planning. Instead he concludes that there are five types of strategies. They are:
* Strategy as plan - a direction, guide, course of action - intention rather than actual
* Strategy as ploy - a maneuver intended to outwit a competitor
* Strategy as pattern - a consistent pattern of past behaviour - realized rather than intended
* Strategy as position - locating of brands, products, or companies within the conceptual framework of consumers or other stakeholders - strategy determined primarily by factors outside the firm
* Strategy as perspective - strategy determined primarily by a master strategist
In 1998, Mintzberg developed these five types of management strategy into 10 “schools of thought”. These 10 schools are grouped into three categories. The first group is prescriptive or normative. It consists of the informal design and conception school, the formal planning school, and the analytical positioning school. The second group, consisting of six schools, is more concerned with how strategic management is actually done, rather than prescribing optimal plans or positions. The six schools are the entrepreneurial, visionary, or great leader school, the cognitive or mental process school, the learning, adaptive, or emergent process school, the power or negotiation school, the corporate culture or collective process school, and the business environment or reactive school. The third and final group consists of one school, the configuration or transformation school, an hybrid of the other schools organized into stages, organizational life cycles, or “episodes”.[64]
In 1999, Constantinos Markides also wanted to reexamine the nature of strategic planning itself.[65] He describes strategy formation and implementation as an on-going, never-ending, integrated process requiring continuous reassessment and reformation. Strategic management is planned and emergent, dynamic, and interactive. J. Moncrieff (1999) also stresses strategy dynamics.[66] He recognized that strategy is partially deliberate and partially unplanned. The unplanned element comes from two sources: emergent strategies (result from the emergence of opportunities and threats in the environment) and Strategies in action (ad hoc actions by many people from all parts of the organization).
Some business planners are starting to use a complexity theory approach to strategy. Complexity can be thought of as chaos with a dash of order. Chaos theory deals with turbulent systems that rapidly become disordered. Complexity is not quite so unpredictable. It involves multiple agents interacting in such a way that a glimpse of structure may appear. Axelrod, R.,[67] Holland, J.,[68] and Kelly, S. and Allison, M.A.,[69] call these systems of multiple actions and reactions complex adaptive systems. Axelrod asserts that rather than fear complexity, business should harness it. He says this can best be done when “there are many participants, numerous interactions, much trial and error learning, and abundant attempts to imitate each others' successes”. In 2000, E. Dudik wrote that an organization must develop a mechanism for understanding the source and level of complexity it will face in the future and then transform itself into a complex adaptive system in order to deal with it.[70]
Information and technology driven strategy
Peter Drucker had theorized the rise of the “knowledge worker” back in the 1950s. He described how fewer workers would be doing physical labour, and more would be applying their minds. In 1984, John Nesbitt theorized that the future would be driven largely by information: companies that managed information well could obtain an advantage, however the profitability of what he calls the “information float” (information that the company had and others desired) would all but disappear as inexpensive computers made information more accessible.
Daniel Bell (1985) examined the sociological consequences of information technology, while Gloria Schuck and Shoshana Zuboff looked at psychological factors.[71] Zuboff, in her five year study of eight pioneering corporations made the important distinction between “automating technologies” and “infomating technologies”. She studied the effect that both had on individual workers, managers, and organizational structures. She largely confirmed Peter Drucker's predictions three decades earlier, about the importance of flexible decentralized structure, work teams, knowledge sharing, and the central role of the knowledge worker. Zuboff also detected a new basis for managerial authority, based not on position or hierarchy, but on knowledge (also predicted by Drucker) which she called “participative management”.[72]
In 1990, Peter Senge, who had collaborated with Arie de Geus at Dutch Shell, borrowed de Geus' notion of the learning organization, expanded it, and popularized it. The underlying theory is that a company's ability to gather, analyze, and use information is a necessary requirement for business success in the information age. (See organizational learning.) In order to do this, Senge claimed that an organization would need to be structured such that:[73]
* People can continuously expand their capacity to learn and be productive,
* New patterns of thinking are nurtured,
* Collective aspirations are encouraged, and
* People are encouraged to see the “whole picture” together.
Senge identified five components of a learning organization. They are:
* Personal responsibility, self reliance, and mastery — We accept that we are the masters of our own destiny. We make decisions and live with the consequences of them. When a problem needs to be fixed, or an opportunity exploited, we take the initiative to learn the required skills to get it done.
* Mental models — We need to explore our personal mental models to understand the subtle effect they have on our behaviour.
* Shared vision — The vision of where we want to be in the future is discussed and communicated to all. It provides guidance and energy for the journey ahead.
* Team learning — We learn together in teams. This involves a shift from “a spirit of advocacy to a spirit of enquiry”.
* Systems thinking — We look at the whole rather than the parts. This is what Senge calls the “Fifth discipline”. It is the glue that integrates the other four into a coherent strategy. For an alternative approach to the “learning organization”, see Garratt, B. (1987).
Since 1990 many theorists have written on the strategic importance of information, including J.B. Quinn,[74] J. Carlos Jarillo,[75] D.L. Barton,[76] Manuel Castells,[77] J.P. Lieleskin,[78] Thomas Stewart,[79] K.E. Sveiby,[80] Gilbert J. Probst,[81] and Shapiro and Varian[82] to name just a few.
Thomas A. Stewart, for example, uses the term intellectual capital to describe the investment an organization makes in knowledge. It is comprised of human capital (the knowledge inside the heads of employees), customer capital (the knowledge inside the heads of customers that decide to buy from you), and structural capital (the knowledge that resides in the company itself).
Manuel Castells, describes a network society characterized by: globalization, organizations structured as a network, instability of employment, and a social divide between those with access to information technology and those without.
Stan Davis and Christopher Meyer (1998) have combined three variables to define what they call the BLUR equation. The speed of change, Internet connectivity, and intangible knowledge value, when multiplied together yields a society's rate of BLUR. The three variables interact and reinforce each other making this relationship highly non-linear.
Regis McKenna posits that life in the high tech information age is what he called a “real time experience”. Events occur in real time. To ever more demanding customers “now” is what matters. Pricing will more and more become variable pricing changing with each transaction, often exhibiting first degree price discrimination. Customers expect immediate service, customized to their needs, and will be prepared to pay a premium price for it. He claimed that the new basis for competition will be time based competition.[83]
Geoffrey Moore (1991) and R. Frank and P. Cook[84] also detected a shift in the nature of competition. In industries with high technology content, technical standards become established and this gives the dominant firm a near monopoly. The same is true of networked industries in which interoperability requires compatibility between users. An example is word processor documents. Once a product has gained market dominance, other products, even far superior products, cannot compete. Moore showed how firms could attain this enviable position by using E.M. Rogers five stage adoption process and focusing on one group of customers at a time, using each group as a base for marketing to the next group. The most difficult step is making the transition between visionaries and pragmatists (See Crossing the Chasm). If successful a firm can create a bandwagon effect in which the momentum builds and your product becomes a de facto standard.
Evans and Wurster describe how industries with a high information component are being transformed.[85] They cite Encarta's demolition of the Encyclopedia Britannica (whose sales have plummeted 80% since their peak of $650 million in 1990). Many speculate that Encarta’s reign will be short-lived, eclipsed by collaborative encyclopedias like Wikipedia that can operate at very low marginal costs. Evans also mentions the music industry which is desperately looking for a new business model. The upstart information savvy firms, unburdened by cumbersome physical assets, are changing the competitive landscape, redefining market segments, and disintermediating some channels. One manifestation of this is personalized marketing. Information technology allows marketers to treat each individual as its own market, a market of one. Traditional ideas of market segments will no longer be relevant if personalized marketing is successful.
The technology sector has provided some strategies directly. For example, from the software development industry agile software development provides a model for shared development processes.
Access to information systems have allowed senior managers to take a much more comprehensive view of strategic management than ever before. The most notable of the comprehensive systems is the balanced scorecard approach developed in the early 1990's by Drs. Robert S. Kaplan (Harvard Business School) and David Norton (Kaplan, R. and Norton, D. 1992). It measures several factors financial, marketing, production, organizational development, and new product development in order to achieve a 'balanced' perspective.
The psychology of strategic management
Several psychologists have conducted studies to determine the psychological patterns involved in strategic management. Typically senior managers have been asked how they go about making strategic decisions. A 1938 treatise by Chester Barnard, that was based on his own experience as a business executive, sees the process as informal, intuitive, non-routinized, and involving primarily oral, 2-way communications. Bernard says “The process is the sensing of the organization as a whole and the total situation relevant to it. It transcends the capacity of merely intellectual methods, and the techniques of discriminating the factors of the situation. The terms pertinent to it are “feeling”, “judgement”, “sense”, “proportion”, “balance”, “appropriateness”. It is a matter of art rather than science.”[86]
In 1973, Henry Mintzberg found that senior managers typically deal with unpredictable situations so they strategize in ad hoc, flexible, dynamic, and implicit ways. He says, “The job breeds adaptive information-manipulators who prefer the live concrete situation. The manager works in an environment of stimulous-response, and he develops in his work a clear preference for live action.”[87]
In 1982, John Kotter studied the daily activities of 15 executives and concluded that they spent most of their time developing and working a network of relationships from which they gained general insights and specific details to be used in making strategic decisions. They tended to use “mental road maps” rather than systematic planning techniques.[88]
Daniel Isenberg's 1984 study of senior managers found that their decisions were highly intuitive. Executives often sensed what they were going to do before they could explain why.[89] He claimed in 1986 that one of the reasons for this is the complexity of strategic decisions and the resultant information uncertainty.[90]
Shoshana Zuboff (1988) claims that information technology is widening the divide between senior managers (who typically make strategic decisions) and operational level managers (who typically make routine decisions). She claims that prior to the widespread use of computer systems, managers, even at the most senior level, engaged in both strategic decisions and routine administration, but as computers facilitated (She called it “deskilled”) routine processes, these activities were moved further down the hierarchy, leaving senior management free for strategic decions making.
In 1977, Abraham Zaleznik identified a difference between leaders and managers. He describes leadershipleaders as visionaries who inspire. They care about substance. Whereas managers are claimed to care about process, plans, and form.[91] He also claimed in 1989 that the rise of the manager was the main factor that caused the decline of American business in the 1970s and 80s. Lack of leadership is most damaging at the level of strategic management where it can paralyze an entire organization.[92]
According to Corner, Kinichi, and Keats,[93] strategic decision making in organizations occurs at two levels: individual and aggregate. They have developed a model of parallel strategic decision making. The model identifies two parallel processes both of which involve getting attention, encoding information, storage and retrieval of information, strategic choice, strategic outcome, and feedback. The individual and organizational processes are not independent however. They interact at each stage of the process.
Reasons why strategic plans fail
There are many reasons why strategic plans fail, especially:
* Failure to understand the customer
o Why do they buy
o Is there a real need for the product
o inadequate or incorrect marketing research
* Inability to predict environmental reaction
o What will competitors do
+ Fighting brands
+ Price wars
o Will government intervene
* Over-estimation of resource competence
o Can the staff, equipment, and processes handle the new strategy
o Failure to develop new employee and management skills
* Failure to coordinate
o Reporting and control relationships not adequate
o Organizational structure not flexible enough
* Failure to obtain senior management commitment
o Failure to get management involved right from the start
o Failure to obtain sufficient company resources to accomplish task
* Failure to obtain employee commitment
o New strategy not well explained to employees
o No incentives given to workers to embrace the new strategy
* Under-estimation of time requirements
o No critical path analysis done
* Failure to follow the plan
o No follow through after initial planning
o No tracking of progress against plan
o No consequences for above
* Failure to manage change
o Inadequate understanding of the internal resistance to change
o Lack of vision on the relationships between processes, technology and organization
* Poor communications
o Insufficient information sharing among stakeholders
o Exclusion of stakeholders and delegates
Criticisms of strategic management
Although a sense of direction is important, it can also stifle creativity, especially if it is rigidly enforced. In an uncertain and ambiguous world, fluidity can be more important than a finely tuned strategic compass. When a strategy becomes internalized into a corporate culture, it can lead to group think. It can also cause an organization to define itself too narrowly. An example of this is marketing myopia.
Many theories of strategic management tend to undergo only brief periods of popularity. A summary of these theories thus inevitably exhibits survivorship bias (itself an area of research in strategic management). Many theories tend either to be too narrow in focus to build a complete corporate strategy on, or too general and abstract to be applicable to specific situations. Populism or faddishness can have an impact on a particular theory's life cycle and may see application in inappropriate circumstances. See business philosophies and popular management theories for a more critical view of management theories.
In 2000, Gary Hamel coined the term strategic convergence to explain the limited scope of the strategies being used by rivals in greatly differing circumstances. He lamented that strategies converge more than they should, because the more successful ones get imitated by firms that do not understand that the strategic process involves designing a custom strategy for the specifics of each situation.[94]
Ram Charan, aligning with a popular marketing tagline, believes that strategic planning must not dominate action. "Just do it!", while not quite what he meant, is a phrase that nevertheless comes to mind when combatting analysis paralysis.
Journals devoted primarily to strategic management
* Strategic Management Journal[2]
* The Journal of Business Strategy
* Long Range Planning – house journal of the Strategic Planning Society
* Strategy and Leadership [3]
* Strategy – house magazine of the Strategic Planning Society
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