How To Understand Your Customers
Buyer orientation - understanding and satisfying your customers - is essential for commercial success. This guide explains how small companies can profit from understanding their customers.
Understanding one's customers is so important that large corporations spend hundreds of millions annually on market research. Although such formal research is important, a small firm can usually avoid this expense. Typically, the owner or manager of a small concern knows the customers personally. From this foundation, understanding of your customers can be built by a systematic effort. A comprehensive system for understanding is what is called the six honest serving men. "Their names are What and Why and When and How and Where and Who."
What
A seller characterizes what customers are buying as goods and services - toothpaste, drills, video games. cars. . . But understanding of buyers starts with the realization that they purchase benefits as well as products. Consumers don't select toothpaste. Instead. some will pay for a decay preventive. Some seek pleasant taste. Others want bright teeth. Or perhaps any formula at a bargain price will do.
Similarly, industrial purchasing agents are not really interested in drills. They want holes. They insist on quality appropriate for their purposes, reliable delivery when needed, safe operation, and reasonable prices.
Video games are fun. They are bought for home entertainment, family togetherness, development of personal dexterity, introduction to computers, among other satisfactions. Commercial customers include arcades, pizza parlors, and assorted enterprises. They benefit from a potential source of income, a means of attracting buyers to their premises, or perhaps a competitive move.
Similarly, cars are visible evidence of a person's wealth, reflection of life style, a private cabin for romance. Or they represent receipts from leases, means to pursue an occupation. . . Some people even buy cars for transportation.
You must find out, from their point of view, what customers are buying. The common names of products mean as little to them as the chemical names on the label of a proprietary drug. (A sick person's real need is safe. speedy relief.) Understanding your customers enables you to profit by providing what buyers seeks - satisfaction.
Products change, but basic benefits like personal hygiene, attractiveness, safety, entertainment, and privacy endure. So do commercial purposes such as quests for competitive superiority or profitability.
Successful manufacturers and service establishments produce benefits for which customers are willing to pay. Successful wholesalers and retailers select offerings of such demanded benefits that they can resell at a profit. Successful businesspeople, in other words. understand the reason for their customers' buying decisions.
Why
The reason that customers buy is logical from their point of view. Understanding customers derives from this fundamental premise. Don't argue with taste. Everybody is unique. Each person has individual pressures and criteria. Moreover, perceptions differ. The astute businessperson deduces and accepts the buying logic of customers and serves them accordingly.
To learn why customers buy can be quite difficult.
Some buyers hide their true motivations. In many cases the reasons are obscure to the buyers themselves. Most purchase decisions are multi-causal. Often, conflicts abound. A car buyer may want the roominess of a large vehicle and the fuel economy of a subcompact. The resolution of such mutually exclusive desires is usually indeterminate.
Sometimes the reasons why customers buy are trivial. If customers feel indifferent toward a product or store, the selection is apt to be happenstance. Perhaps several rival offerings meet all the conditions that a purchaser deems important. Consequently, minor factors govern. This explains the rationale of the consumer who chose a P 1,722,000 car because its upholstery was most attractive. The point: Pay attention to details. They may be crucial to customers.
Often the best clues are the customers' actions. Shrewd businesspeople respect what people say, but pay special attention to what people do. More important than why customers buy is why former customers have taken their patronage elsewhere and why qualified buyers are not buying. What is now keeping them from buying?
Can this obstacle be surmounted? Businesspeople monitor competitive offerings and buyers' reactions to infer clues. Informal conversations may also reveal some reasons. Special offers may overcome resistance and boost profits.
All the time the manager must be careful to retain the company's regular customers. For instance, a specialty dress shop may try to widen its patronage through a new line at bargain prices. This move could disturb the store's usual patrons. They may take their trade to another store that caters exclusively to their social class. Many of the dresses were bought for special occasions when projection of a genteel image was important to the customer. Understanding of customers includes awareness of the time of the purchase and use of the merchandise.
When
A seller must be ready when the buyer is, lest an opportunity be irretrievably lost. Customers buy when they want an offering and have the time and money to purchase it. Buying patterns can often be discerned from an analysis of customers and their purchases. For example, wants for many consumer goods and services are tied to customers' rites of passage. The following purchase occasions in the adult life cycle are typical:
1. Marriage, separation,
2. Acquisition of a home
3. Change in employment or career
4. Graduate study; running for office
5. Health care, injury, illness
6. Pregnancy, nurture of children
7. Children enter school; graduate
8. Children leave home (for college or permanently)
9. Move to another area
10. Vacations; major social activities
11. Permanent retirement from work
12. Death of a family member.
Shrewd retailers keep track of such key buying events and gain a head start on making sales. Logs of birthdays and anniversaries are a case in point. Additional purchase occasions are impersonal. Seasonal factors include recurring holidays and weather changes. Among other favorable influences on purchases are start of the school year, semi-annual white sales, introduction of new models and clearance of old ones, special price concessions, and improvement in economic conditions or buyer's confidence.
Some of the latter factors also apply to manufacturers. Small plants work closely with their buyers' inventory managers and replenish stock at their reorder point. A current vogue is just-in-time delivery. Interactive computers make replenishment notices routine.
Many consumers have time for shopping only during offhours. in the evenings, and on weekends. The trend from a single breadwinner per family toward having all adults of a household engage in commercial employment has intensified this time peculiarity. Astute retailers adjust their hours, staffing, and availability of merchandise to customers' shopping convenience. Bartenders know that business booms on payday. Manufacturers profit from timing their offers to their customers' budgetary cycles. Thus, knowing when products are bought and used is a valuable facet of understanding customers. Although a transaction may be concluded in a moment, most purchases actually entail a drawn-out process. This process will be described in the next section which analyzes how customers buy.
How
Knowledge of how customers buy pays off in several ways. (1) Sellers can design their offerings to meet the exact needs of their buyers. (2) Sellers can influence decision makers at crucial steps of the buying process. (3) Sellers can lay the groundwork for repeat business.
Buying methods are best visualized as processes. Household purchases usually start when a consumer has a desire or a problem that an acquisition might satisfy or solve. Industrial purchases usually start when a user or a routine sets off a signal (requisition) for approval of a procurement.
People are diverse. Every consumer, every firm pursues a buying process of its own. Buying processes also depend on the significance of the product to the buyer and on other circumstances. Although buying processes are not uniform. some steps are common to most of them. The seller needs to know only these critical steps when he or she can affect the outcome of the buying decision.
Shrewd sellers delve into the behavioral milestones of purchasers. But for each very important customer the buying process should be diagrammed individually, showing names of influencers at each decision stage, elapsed time between stages, and any other pertinent information.
Perhaps a change in life style or a demonstration at a friend's house has caused this consumer to recognize the need for a personal computer. But lack of knowledge and the fear of a wrong decision may counteract this desire. The process continues, however, if advertisements and expected benefits persuade the consumer to act. Despite budgetary constraints and uncertainty about future needs, the consumer proceeds to compare stores and brands.
At this search and evaluation stage advice from present satisfied customers is especially influential. Make sure your customers are satisfied and favorably recommend your merchandise or service. To the contrary, poor shopping facilities or irritating personnel can sway the potential customer against making the purchase from you.
Sooner or later, further search does not seem worthwhile. If the positives still outweigh the negatives, the consumer picks a store and brand. The transaction itself is consummated quickly, assuming the wanted item is available. The satisfied customer makes recommendations to others and gives you his or her repeated, regular business.
Businesspeople can create sales by predisposing potential buyers to their product or store. Manufacturers can offer exclusive benefits in their goods, such as friendly relations, efficient operations, and easy manuals. Enticing advertisements help persuade prospects to visit a retail outlet and ask about a particular brand. Creative salespeople overcome the customer's objections and doubts and close the sale. Post-transaction service keeps the customer satisfied. Referrals usually follow.
Specific details are needed to track acquisition of something complex, say a computer. On the other hand, less detail is needed if the purchase is laundry detergent or some other staple with which the customer is less involved. In the latter case, depletion of the home inventory triggers a routine, leading directly to choice: the usually purchased brand. If the usual brand is out-of-stock or another brand is on sale. a substitute may be bought quickly. Brand comparisons follow or may be omitted.
Some products are bought when an emergency need for them arises. A physical examination and the filling of a prescription are urgent when sickness strikes. Arrangements for funerals follow immediately after the death of a family member. Umbrellas are in demand when it rains. An unexpected snow storm generates extra calls for tire chains, towing services, and car batteries. Often, convenient availability determines when these goods and services are purchased. And even if customers do have ample time to select merchandise, sellers who stand ready to supply wanted or expected brands are apt to gain preference and profit when shoppers decide where to buy.
People want options. Although convenient availability is the main buying criterion for many routine household products, savvy merchants stock a selection conforming to the diverse preferences of their patrons. Some people demand manufacturers' advertised brands. Resellers' brands are favored by others. On some classes of goods, generic brands have become popular in recent years. Moreover, many consumers seek occasional variety. Clearly the decision of which products to stock is important.
It is more important yet on shopping goods because buyers compare them before purchase. And it is most important on specialty goods, those preselected by brand name. If a store does not stock these uniquely wanted brands, a prospect will leave without buying. Whoever offers them on acceptable terms gains the sale.
Where
From a multitude of studies emerge different criteria for deciding where to shop. Most research on the subject agrees that store location is a major consideration, Stores usually draw most of their patronage from their surrounding neighborhood.
Savvy store managers make a special effort to understand the shopping-related motivations and preferences of local residents. New managers of fast-food units, for example, canvass nearby dwellings and introduce themselves to the households. Some supermarkets maintain consumer advisory boards to elicit suggestions and reactions. Other means of communication with customers include informal conversations at the store and suggestion boxes with interviews and awards.
Incidentally, complaints are an excellent guide for making store policies more amenable to customers. Personnel should be instructed to thank patrons for their comments. Prompt consideration, followed by a personal letter from the store manager, is highly desirable.
Location is extremely important to "captive" buyers. Exclusively franchised utilities, shops in isolated hotels. and cafeterias or automatic vending machines in factories are examples. At the opposite extreme, shoppers escape spatial restrictions by buying from mail-order firms or telephone solicitors.
Other patronage influences vary. They depend on the type of product. type of store, and the characteristics of the consumer. The offered assortment's perceived quality. depth, and breadth certainly are very important. along with price, This does not imply that all goods have to be top quality or all prices the lowest. Perceptions are decisive.
If quality seems high, some customers infer that prices are high too regardless of the facts. The important point is to understand customers and to provide what causes them to buy. For example, assurance of repair service weighs heavily with the worrier type of customer. A convenience-minded buyer is concerned with parking space or delivery service.
Of course, shoppers must be told that wanted goods and services are available. Advertising helps disseminate this information. So does a store's reputation for consistent policies of satisfying its customers.
Occasional promotions inject some excitement into the tedium of shopping. Some clients like to socialize, which can absorb much of an employee's time and may even annoy other buyers. Nevertheless, personnel should be friendly and helpful. Also influential, for some customers, is the apparent socio-economic level of other shoppers.
Personal affinity for other customers or for salespeople is a decisive factor in the success of party-selling, e.g., household goods and in-home selling (cosmetics). The choice of where to buy items requiring major outlays (securities, and insurance) often revolves around from whom to buy.
In selecting a retail store, many customers consider physical features. Layouts can invite or repel patronage. Motorists who are in a hurry, for instance, are apt to use a gasoline station at which business can be transacted quickly. Altogether, buyers perceive a mix of tangible and intangible factors that comprise a store's atmosphere. Accordingly, they either do or don't feel comfortable about shopping there.
To the casual observer, all supermarkets seem more or less alike, But. in fact, store managers can regulate many of the above-mentioned variables and thereby affect where shoppers buy. According to recent studies in several Philippine cities, household buyers perceive supermarkets in their neighborhood as sufficiently different to determine their patronage preference. The four main types of supermarkets offer: (1) High quality at commensurate prices, (2) Lowest price level in the area, (3) Swift completion, (4) Friendly atmosphere. Each can profit by appealing to a different segment of buyers. the topic of the next section.
Who
Identification of customers and prospects makes effective targeting possible. Small business owners pride themselves on knowing their customers personally. In the industrial field, understanding of each major customer and buying influence is essential. When dealing with a large number of customers, however, individual familiarity is not feasible. Hence mass merchandisers and others in this situation group their customers, whose reactions to offerings are similar, into segments. Then they design a separate appropriate marketing program for each segment.
Strategies vary, A small firm might prosper by concentrating its resources on one segment. Because customers are volatile, the specializing firm is vulnerable to sudden change in its target segment's patronage. Hence some companies address several segments simultaneously. Although expensive, a strategy of employing different tactics for different segments can be quite profitable. Other firms scatter offers to just anybody. They hope that segments will select themselves.
One basis for segmentation is geographic. Retail customers are apt to live or work in the store's vicinity. Industrial buyers tend to concentrate regionally. So do users of services. Intensive cultivation of local potential customers can be efficient and lucrative. Personal knowledge of local buyers and a shared community spirit help cement relations with these customers.
Segmentation is an art. All "honest serving men" - what, why, when, how, where, as well as who - can be the key to segmentation. Whatever the basis, each identified segment should have sufficient purchasing power to make a special effort commercially worthwhile. Accessibility is vital. How can the segment be reached? Are advertisements, telephone solicitations, or personal visits efficient? How about trade shows or personal contacts? The ideal segment is stable in purchase needs and loyalty, helping you fend off competition.
Besides segmentation, understanding of customers also requires insight into their buying roles. The buyer for a one-person household or one-person business is the initiator of the order, the decider, and the user. Even in this case, however, some outsiders are influential.
In larger households or businesses, these buying roles are usually played by separate individuals. It helps you to know who activates (requisitions) purchases, who exerts influence, who decides what and where to buy, who uses the product-and what their criteria are. Then you tailor and target your offerings to satisfy each major participant in the buying process.
As has been shown, understanding of customers enables a seller to increase sales. This same understanding can equally serve to reduce costs. Higher sales at lower costs inevitably boost profits.
A small firm that understands its customers can buy or produce exactly what they want-and nothing else. The firm's sales effort is efficient because it builds on why its customers want to buy not on why others buy, or why the vendor wants to sell.
Merchandise can be ready when customers need it. Thus a knowledgeable seller avoids unnecessary inventory costs or penalties for late delivery. Understanding how customers buy lets a seller employ promotional media, appeals, and timing for maximum effectiveness. Transportation costs are lowered by shipping merchandise to where it is needed. Knowledge of who comprises suitable segments and the separate buying roles can reduce the waste of soliciting unqualified or uninterested people.
Customers Are Dynamic
The best source for you to learn about customers is your personal interaction with them. At work, social and civic activities, and chance encounters, people talk and reveal their attitudes and motivation. Listen to your customers. You can also keep abreast of purchasing patterns by observing competitors' practices and by asking sales personnel who is buying what, where.
Articles in business and trade newspapers and magazines give information on products, trends, marketing, finance, the economy. Trade directories, Yellow Pages, and brokers' direct-mail lists identify who buyers are, and most industries have associations and specialized marketing research that provide insights for understanding customers.
Students Earn Money By Reading Internet Ads
Friday, August 22, 2008
Small Business Marketing
Introduction To Marketing
One of the greatest needs of managers of business is to understand and develop marketing programs for their products and services. Business success is based on the ability to build a growing body of satisfied customers. Modern marketing programs are built around the "marketing concept," which directs managers to focus their efforts on identifying and satisfying customer needs - at a profit.
Marketing continues to be a mystery . . . to those who create it and to those who sponsor it. Often, the ad that generates record-breaking volume for a retail store one month is repeated the following month and bombs. A campaign designed by the best ad agency may elicit a mediocre response. The mystery eludes solution but demands attention.
Your marketing results can be improved through a better understanding of your customers. This approach usually is referred to as the marketing concept.
Putting the customer first is probably the most popular phrase used by firms ranging from giant conglomerates to the corner barber shop, but the sloganizing is often just lip service. The business continues to operate under the classic approach - "Come buy this great product we have created or this fantastic service we are offering." The giveaway, of course, is the word we. In other words, most business activities, including advertising, are dedicated to solving the firm's problems. Success, however, is more likely if you dedicate your activities exclusively to solving your customer's problems.
Any marketing program has a better chance of being productive if it is timed, designed and written to solve a problem for potential customers and is carried out in a way that the customer understands and trusts. The pages that follow will present the marketing concept of putting the customer first. Marketing is a very complex subject; it deals with all the steps between determining customer needs and supplying them at a profit.
The Marketing Concept
The marketing concept rests on the importance of customers to a firm and states that:
All company policies and activities should be aimed at satisfying customer needs, and
Profitable sales volume is a better company goal than maximum sales volume.
To use the marketing concept, businesses should:
Determine the needs of their customers (Market Research);
Analyze their competitive advantages (Market Strategy);
Select specific markets to serve (Target Marketing), and;
Determine how to satisfy those needs (Market Mix).
Market Research
In order to manage the marketing function successfully, good information about the market is necessary. Frequently, a small market research program, based on a questionnaire given to present customers and/or prospective customers, can disclose problems and areas of dissatisfaction that can be easily remedied, or new products or services that could be offered successfully.
Marketing Strategy
Marketing strategy encompasses identifying customer groups (Target Markets), which a small business can serve better than its larger competitors, and tailoring its product offerings, prices, distribution, promotional efforts and services towards that particular market segment (Managing the Market Mix). A good strategy implies that a business cannot be all things to all people and must analyze its markets and its own capabilities so as to focus on a target market it can serve best.
Target Marketing
Owners of small businesses have limited resources to spend on marketing activities. Concentrating their marketing efforts on one or a few key market segments is the basis of target marketing. The major ways to segment a market are:
Geographical segmentation - developing a loyal group of consumers in the home geographical territory before expanding into new territories.
Product segmentation - extensively promoting existing best-selling products and services before introducing a lot of new products.
Customer segmentation - identifying and promoting to those groups of people most likely to buy the product. In other words, selling to heavy users before trying to develop new users.
Managing the Market Mix
There are four key marketing decision areas in a marketing program. They are:
Products and Services,
Promotion,
Distribution, and
Pricing.
The marketing mix is used to describe how owner-managers combine these four areas into an overall marketing program.
Products and Services
Effective product strategies for a business may include concentrating on a narrow product line, developing a highly specialized product containing an unusual amount of service.
Promotion
This marketing decision area includes advertising, salesmanship and other promotional activities. In general, high quality salesmanship is a must for small businesses due to their limited ability to advertise heavily. Good yellow-page advertising is a must for small retailers. Direct mail is an effective, low-cost medium of advertising available to small businesses.
Price
Determining price levels and/or pricing policies (including credit policy) is the major factor affecting total revenue. Generally, higher prices mean lower volume and vice-versa, however, small businesses can often command higher prices due to the personalized service they can offer.
Distribution
The manufacturer and wholesaler must decide how to distribute their products. Working through established distributors or manufacturers' agents generally is most feasible for small manufacturers. retailers should consider cost and traffic flow as two major factors in location site selection, especially since advertising and rent can be reciprocal. In other words, low-cost, low-traffic location means you must spend more on advertising to build traffic.
Marketing Performance
After marketing program decisions are made, owner-managers need to evaluate how well decisions have turned out. Standards of performance need to be set up so results can be evaluated against them. Sound data on industry norms and past performance provide the basis for comparing against present performance.
Owner-managers should audit their company's performance at least quarterly. The key questions to ask are:
Is the company doing all it can to be customer-orientated?
Do the employees make sure the customer's needs are truly satisfied and leave them with the feeling that they would enjoy coming back?
Is it easy for the customer to find what he or she wants and at a competitive price?
How to Develop a Marketing Concept
Unfortunately, there is still a misunderstanding about the word marketing. Many people, including top executives, use it as a sophisticated term for selling. Marketing representative is commonly used in ads to recruit salespeople. Actually, marketing is a way of managing a business so that each critical business decision is made with full knowledge of the impact it will have on the customer.
Here are some specific ways in which the marketing concept approach differs from the classic, or sales, approach to managing a business.
1. In the classic approach, engineers and designers create a product, which is then given to salespeople who are told to find customers and sell the product. In the marketing approach, the first step is to determine what the customer needs or wants. That information is given to designers who develop the product and finally to engineers who produce it. Thus, the sales approach only ends with the customer, while the marketing approach begins and ends with the customer.
2. The second major difference between the sales and marketing approaches is the focus of management. The sales approach almost always focuses on volume while the marketing approach focuses on profit.
In short, under the classic (sales) approach the customer exists for the business, while under the marketing approach the business exists for the customer.
The marketing concept is a management plan that views all marketing components as part of a total system that requires effective planning, organization, leadership and control. It is based on the importance of customers to a firm, and states that:
All company policies and activities should be aimed at satisfying customer needs.
Profitable sales volume is a better company goal than maximum sales volume.
In order to conduct a successful marketing concept program you must be able to answer the following questions:
1. What type of business are you in (manufacturing, merchandising or service)?
2. What is the nature of your product(s) or service(s)?
3. What market segments do you intend to serve? (Describe the age, sex, income level and life-style characteristics of each market segment.)
4. What strategies will you use to attract and keep customers?
Product
Price
Place
Promotion
Persuasion (personal selling)
5. What is your unique selling proposition (USP)? 6. Who is your competition, and what will you do to control your share of the market?
One of the greatest needs of managers of business is to understand and develop marketing programs for their products and services. Business success is based on the ability to build a growing body of satisfied customers. Modern marketing programs are built around the "marketing concept," which directs managers to focus their efforts on identifying and satisfying customer needs - at a profit.
Marketing continues to be a mystery . . . to those who create it and to those who sponsor it. Often, the ad that generates record-breaking volume for a retail store one month is repeated the following month and bombs. A campaign designed by the best ad agency may elicit a mediocre response. The mystery eludes solution but demands attention.
Your marketing results can be improved through a better understanding of your customers. This approach usually is referred to as the marketing concept.
Putting the customer first is probably the most popular phrase used by firms ranging from giant conglomerates to the corner barber shop, but the sloganizing is often just lip service. The business continues to operate under the classic approach - "Come buy this great product we have created or this fantastic service we are offering." The giveaway, of course, is the word we. In other words, most business activities, including advertising, are dedicated to solving the firm's problems. Success, however, is more likely if you dedicate your activities exclusively to solving your customer's problems.
Any marketing program has a better chance of being productive if it is timed, designed and written to solve a problem for potential customers and is carried out in a way that the customer understands and trusts. The pages that follow will present the marketing concept of putting the customer first. Marketing is a very complex subject; it deals with all the steps between determining customer needs and supplying them at a profit.
The Marketing Concept
The marketing concept rests on the importance of customers to a firm and states that:
All company policies and activities should be aimed at satisfying customer needs, and
Profitable sales volume is a better company goal than maximum sales volume.
To use the marketing concept, businesses should:
Determine the needs of their customers (Market Research);
Analyze their competitive advantages (Market Strategy);
Select specific markets to serve (Target Marketing), and;
Determine how to satisfy those needs (Market Mix).
Market Research
In order to manage the marketing function successfully, good information about the market is necessary. Frequently, a small market research program, based on a questionnaire given to present customers and/or prospective customers, can disclose problems and areas of dissatisfaction that can be easily remedied, or new products or services that could be offered successfully.
Marketing Strategy
Marketing strategy encompasses identifying customer groups (Target Markets), which a small business can serve better than its larger competitors, and tailoring its product offerings, prices, distribution, promotional efforts and services towards that particular market segment (Managing the Market Mix). A good strategy implies that a business cannot be all things to all people and must analyze its markets and its own capabilities so as to focus on a target market it can serve best.
Target Marketing
Owners of small businesses have limited resources to spend on marketing activities. Concentrating their marketing efforts on one or a few key market segments is the basis of target marketing. The major ways to segment a market are:
Geographical segmentation - developing a loyal group of consumers in the home geographical territory before expanding into new territories.
Product segmentation - extensively promoting existing best-selling products and services before introducing a lot of new products.
Customer segmentation - identifying and promoting to those groups of people most likely to buy the product. In other words, selling to heavy users before trying to develop new users.
Managing the Market Mix
There are four key marketing decision areas in a marketing program. They are:
Products and Services,
Promotion,
Distribution, and
Pricing.
The marketing mix is used to describe how owner-managers combine these four areas into an overall marketing program.
Products and Services
Effective product strategies for a business may include concentrating on a narrow product line, developing a highly specialized product containing an unusual amount of service.
Promotion
This marketing decision area includes advertising, salesmanship and other promotional activities. In general, high quality salesmanship is a must for small businesses due to their limited ability to advertise heavily. Good yellow-page advertising is a must for small retailers. Direct mail is an effective, low-cost medium of advertising available to small businesses.
Price
Determining price levels and/or pricing policies (including credit policy) is the major factor affecting total revenue. Generally, higher prices mean lower volume and vice-versa, however, small businesses can often command higher prices due to the personalized service they can offer.
Distribution
The manufacturer and wholesaler must decide how to distribute their products. Working through established distributors or manufacturers' agents generally is most feasible for small manufacturers. retailers should consider cost and traffic flow as two major factors in location site selection, especially since advertising and rent can be reciprocal. In other words, low-cost, low-traffic location means you must spend more on advertising to build traffic.
Marketing Performance
After marketing program decisions are made, owner-managers need to evaluate how well decisions have turned out. Standards of performance need to be set up so results can be evaluated against them. Sound data on industry norms and past performance provide the basis for comparing against present performance.
Owner-managers should audit their company's performance at least quarterly. The key questions to ask are:
Is the company doing all it can to be customer-orientated?
Do the employees make sure the customer's needs are truly satisfied and leave them with the feeling that they would enjoy coming back?
Is it easy for the customer to find what he or she wants and at a competitive price?
How to Develop a Marketing Concept
Unfortunately, there is still a misunderstanding about the word marketing. Many people, including top executives, use it as a sophisticated term for selling. Marketing representative is commonly used in ads to recruit salespeople. Actually, marketing is a way of managing a business so that each critical business decision is made with full knowledge of the impact it will have on the customer.
Here are some specific ways in which the marketing concept approach differs from the classic, or sales, approach to managing a business.
1. In the classic approach, engineers and designers create a product, which is then given to salespeople who are told to find customers and sell the product. In the marketing approach, the first step is to determine what the customer needs or wants. That information is given to designers who develop the product and finally to engineers who produce it. Thus, the sales approach only ends with the customer, while the marketing approach begins and ends with the customer.
2. The second major difference between the sales and marketing approaches is the focus of management. The sales approach almost always focuses on volume while the marketing approach focuses on profit.
In short, under the classic (sales) approach the customer exists for the business, while under the marketing approach the business exists for the customer.
The marketing concept is a management plan that views all marketing components as part of a total system that requires effective planning, organization, leadership and control. It is based on the importance of customers to a firm, and states that:
All company policies and activities should be aimed at satisfying customer needs.
Profitable sales volume is a better company goal than maximum sales volume.
In order to conduct a successful marketing concept program you must be able to answer the following questions:
1. What type of business are you in (manufacturing, merchandising or service)?
2. What is the nature of your product(s) or service(s)?
3. What market segments do you intend to serve? (Describe the age, sex, income level and life-style characteristics of each market segment.)
4. What strategies will you use to attract and keep customers?
Product
Price
Place
Promotion
Persuasion (personal selling)
5. What is your unique selling proposition (USP)? 6. Who is your competition, and what will you do to control your share of the market?
Monday, August 11, 2008
KRAs and Performance Indicators
KRAS, PERFORMANCE MEASURES AND INDICATORS
After the vision, mission and objectives are set in place, a method for measuring progress and success of implementation will be needed in the business plan. Choosing a balanced set of results-based performance measures to gauge the success in meeting the objectives is one of the important and difficult aspects of the strategic planning process.
Performance in the strategic plan should be measured because:
Most people want to do a god job. Usually, what gets measured gets done. Performance indicators and measures help managers and employees focus on what is important. By comparing actual with expected results, it enables managers and owners to evaluate progress towards the attainment of objectives.
Measuring performance is a good management practice. The enterprise requires that performance measures should be established thus providing accountability for results at each level of operating unit.
Measuring performance can enhance the quality of products and services. Performance measures or indicators inform staff of customers' needs and levels of satisfaction and make it possible to identify actions to improve quality and costs.
Measuring performance helps in budget and development review. Performance indicators and measures are valuable in the budget development process. They allow for more accurate assessment of resources needed to support activities. They also help identify what level of product or service will be provided for the amount of funding available.
Key Result Areas
Good performance measures need to be clearly identified and defined including exactly what is being measured. They must be tied and made fit to the missions and objectives. For example if an enterprise would have these objectives:
Increase in Profitability
Increase in Market Share
Enterprise Growth
In these examples, increase in profitability can be be manifested in the following key result areas:
Increase in profitability may be seen in the increase of absolute amount of gross profits, net profit before tax or net profit after tax for the planned period. Similarly, profits can also be looked at as increases in dividends declared or even return on investments, return on sales, return on assets and contribution margin. These items maybe considered as possible key result areas - because they manifest or show profitability.
Increase in the market share in terms number of product units sold or in terms of value could mean the relative position of the enterprise among similar players supplying similar products in a certain/defined geographic market territory. The percentage of market share becomes the key result area.
Enterprise growth can be seen in increases of assets, owners equity, number of additional offices/outlets, addition of affiliates in cases of franchises and increases in the number of product lines and outputs.
The Key Result Areas or KRA’s are qualitative manifestations that the objectives are being attained. KRA’s must be converted into numerical Performance Indicators or PIs. PIs are nothing but exact quantifications of the KRAs.
Performance Indicators
It is important that the key result areas be totally and clearly understood by the enterprise's operating units. Once the key result areas are identified and decided on, the enterprise need to define the quantitative performance measures, determine data requirements, identify current baselines, set realistic performance targets based on benchmarking and compare actual versus expected results.
A comprehensive set of performance measures will be linked to missions and objectives; will measure intermediate and final outcomes; will delineate clear responsibilities; will address multiple priorities and will be useful to the staff, management and owners of the enterprise.
In the previous examples used in this workbook, PIs for KRA "increase in profitability" could be expressed as
"Attain a net profit of P5.0 M by the year 200X"
"Achieve a sustained minimum return on investments of 25% in the next 5 years starting year 200X"
"Attain a return on equity of 14% by 200X, 16% by 200Y and 18% by 200Z"
Similarly for KRA=" enterprise growth"
"Attain an net asset value of P 60.M by the year 200x"
"Attain an annual net asset growth of 10% in the next five years"
"Attain an annual increase of 10 franchisees over the next five years"
Again, the PIs are the numerical quantification of the key result areas. It should be borne in mind however, that these key result areas and performance indicators should be the ultimate ones - meaning these are the KRAs and PIs of the enterprise as a whole.
Other KRAs and PIs could be done on the subordinate levels of the enterprise like , divisions, departments and sections. The KRA of a production department in a manufacturing set-up could be " reduction of rejects" and the PI could be " zero by the year 200X" or KRA and PI of " Increase in sales inquiries by 10% every six months for a marketing department as a result of an advertising program for an automotive dealership Other examples of an enterprise's subordinate-level organizational units are as follows:
"Increase of 15% in the present output of plastic film extrusion department by the end of the year."
"Reduce traveling expenses to 3% of total sales for the years 200X, 200Y and 200Z"
"Yearly increase of 5% in the commission sales force starting 200X to 200Y"
To further understand the nature of KRAs and PIs, strategic planning incorporates five common measures namely, input, output, outcome, efficiency and quality. Inputs measures the amount of resources needed to produce the products and services. Inputs include labor, materials, equipment and supplies. Input measures measures are useful in showing the total cost of providing a product or service and the related costs intertwined costs such as overhead.
Outputs on the other hand measures the amount or volume of products and services produced. Outputs focus on the level of activities in a particular enterprise unit. Outputs are useful in defining what a particular activity produces.
However, they are limited because they do not indicate whether the objectives or goals are achieved and they do not reveal about quality or efficiency.
Outcomes reflect the actual results achieved as well as the impact of the enterprise activity or program. Both intermediate and long-term outcomes can be evaluated. Enterprise owners are generally the most interested in outcome measures. Yet information about the ultimate results is often not available or practical to measure. In these instances, it may be necessary to use proxy or substitute measures. For example, computerization in an enterprise may result in the fast production of databases and information. The outputs may be inventory updates, budget updates, personnel information etc. The outcome value of these outputs should result in good, fast, accurate and right management decisions. Similarly, a good personnel benefits program should result in not only making employees happy but also increase in workload outputs and quality. A training program should be evaluated not in terms of the number of personnel trained, the number of sessions conducted etc., but rather on whether the trained personnel have attained greater knowledge, achieved the right aptitude and attitude, enhanced effectiveness and efficiency.
Efficiency measures are also known as productivity measures. Efficiency can be measured in terms of cost per unit of output, the ratio of outputs per unit of input and the ratio of outputs per unit of time. Ratios can help express the relationships between different performance measures to convey more information about productivity and the cost effectiveness of an activity or enterprise program.
Measures of quality include reliability, accuracy, courtesy, competence, responsiveness and completeness associated with the product or service. Quality measures reflect the effectiveness in meeting the expectations of customers. Some of the examples include 1) number of defect-free products and services 2) Accuracy of information entered into the enterprise data bases 3) percentage of satisfied customers 4) meeting of product/service specifications and standards.
After the vision, mission and objectives are set in place, a method for measuring progress and success of implementation will be needed in the business plan. Choosing a balanced set of results-based performance measures to gauge the success in meeting the objectives is one of the important and difficult aspects of the strategic planning process.
Performance in the strategic plan should be measured because:
Most people want to do a god job. Usually, what gets measured gets done. Performance indicators and measures help managers and employees focus on what is important. By comparing actual with expected results, it enables managers and owners to evaluate progress towards the attainment of objectives.
Measuring performance is a good management practice. The enterprise requires that performance measures should be established thus providing accountability for results at each level of operating unit.
Measuring performance can enhance the quality of products and services. Performance measures or indicators inform staff of customers' needs and levels of satisfaction and make it possible to identify actions to improve quality and costs.
Measuring performance helps in budget and development review. Performance indicators and measures are valuable in the budget development process. They allow for more accurate assessment of resources needed to support activities. They also help identify what level of product or service will be provided for the amount of funding available.
Key Result Areas
Good performance measures need to be clearly identified and defined including exactly what is being measured. They must be tied and made fit to the missions and objectives. For example if an enterprise would have these objectives:
Increase in Profitability
Increase in Market Share
Enterprise Growth
In these examples, increase in profitability can be be manifested in the following key result areas:
Increase in profitability may be seen in the increase of absolute amount of gross profits, net profit before tax or net profit after tax for the planned period. Similarly, profits can also be looked at as increases in dividends declared or even return on investments, return on sales, return on assets and contribution margin. These items maybe considered as possible key result areas - because they manifest or show profitability.
Increase in the market share in terms number of product units sold or in terms of value could mean the relative position of the enterprise among similar players supplying similar products in a certain/defined geographic market territory. The percentage of market share becomes the key result area.
Enterprise growth can be seen in increases of assets, owners equity, number of additional offices/outlets, addition of affiliates in cases of franchises and increases in the number of product lines and outputs.
The Key Result Areas or KRA’s are qualitative manifestations that the objectives are being attained. KRA’s must be converted into numerical Performance Indicators or PIs. PIs are nothing but exact quantifications of the KRAs.
Performance Indicators
It is important that the key result areas be totally and clearly understood by the enterprise's operating units. Once the key result areas are identified and decided on, the enterprise need to define the quantitative performance measures, determine data requirements, identify current baselines, set realistic performance targets based on benchmarking and compare actual versus expected results.
A comprehensive set of performance measures will be linked to missions and objectives; will measure intermediate and final outcomes; will delineate clear responsibilities; will address multiple priorities and will be useful to the staff, management and owners of the enterprise.
In the previous examples used in this workbook, PIs for KRA "increase in profitability" could be expressed as
"Attain a net profit of P5.0 M by the year 200X"
"Achieve a sustained minimum return on investments of 25% in the next 5 years starting year 200X"
"Attain a return on equity of 14% by 200X, 16% by 200Y and 18% by 200Z"
Similarly for KRA=" enterprise growth"
"Attain an net asset value of P 60.M by the year 200x"
"Attain an annual net asset growth of 10% in the next five years"
"Attain an annual increase of 10 franchisees over the next five years"
Again, the PIs are the numerical quantification of the key result areas. It should be borne in mind however, that these key result areas and performance indicators should be the ultimate ones - meaning these are the KRAs and PIs of the enterprise as a whole.
Other KRAs and PIs could be done on the subordinate levels of the enterprise like , divisions, departments and sections. The KRA of a production department in a manufacturing set-up could be " reduction of rejects" and the PI could be " zero by the year 200X" or KRA and PI of " Increase in sales inquiries by 10% every six months for a marketing department as a result of an advertising program for an automotive dealership Other examples of an enterprise's subordinate-level organizational units are as follows:
"Increase of 15% in the present output of plastic film extrusion department by the end of the year."
"Reduce traveling expenses to 3% of total sales for the years 200X, 200Y and 200Z"
"Yearly increase of 5% in the commission sales force starting 200X to 200Y"
To further understand the nature of KRAs and PIs, strategic planning incorporates five common measures namely, input, output, outcome, efficiency and quality. Inputs measures the amount of resources needed to produce the products and services. Inputs include labor, materials, equipment and supplies. Input measures measures are useful in showing the total cost of providing a product or service and the related costs intertwined costs such as overhead.
Outputs on the other hand measures the amount or volume of products and services produced. Outputs focus on the level of activities in a particular enterprise unit. Outputs are useful in defining what a particular activity produces.
However, they are limited because they do not indicate whether the objectives or goals are achieved and they do not reveal about quality or efficiency.
Outcomes reflect the actual results achieved as well as the impact of the enterprise activity or program. Both intermediate and long-term outcomes can be evaluated. Enterprise owners are generally the most interested in outcome measures. Yet information about the ultimate results is often not available or practical to measure. In these instances, it may be necessary to use proxy or substitute measures. For example, computerization in an enterprise may result in the fast production of databases and information. The outputs may be inventory updates, budget updates, personnel information etc. The outcome value of these outputs should result in good, fast, accurate and right management decisions. Similarly, a good personnel benefits program should result in not only making employees happy but also increase in workload outputs and quality. A training program should be evaluated not in terms of the number of personnel trained, the number of sessions conducted etc., but rather on whether the trained personnel have attained greater knowledge, achieved the right aptitude and attitude, enhanced effectiveness and efficiency.
Efficiency measures are also known as productivity measures. Efficiency can be measured in terms of cost per unit of output, the ratio of outputs per unit of input and the ratio of outputs per unit of time. Ratios can help express the relationships between different performance measures to convey more information about productivity and the cost effectiveness of an activity or enterprise program.
Measures of quality include reliability, accuracy, courtesy, competence, responsiveness and completeness associated with the product or service. Quality measures reflect the effectiveness in meeting the expectations of customers. Some of the examples include 1) number of defect-free products and services 2) Accuracy of information entered into the enterprise data bases 3) percentage of satisfied customers 4) meeting of product/service specifications and standards.
Vision Mission, Objectives
VISION, MISSION, OBJECTIVES
The Vision, Mission and Objectives are sets of statements answering the question "Where do we want to be ?"
Vision
A vision is an ideal state or condition which an organization wants to attain. It should not be too idealized, however, as to lose all meaning. A vision is an end scenario that could be achieved after successive stages of intermediate scenarios. A vision is an ideal state of the enterprise's future being - a lucid imagery of the ultimate success of the enterprise. It is a compelling, conceptual picture of the desired future. It is better to describe and picture the vision in vivid terms.
A vision statement should be clear and easily understood, appropriate and ambitious. It should orient the group's energies and serve as a guide to action.
The vision becomes a focal point for everyone in the enterprise. While in most cases, the enterprise vision is set by the owners, great visions are conceived through sharing between the enterprise owners, management and all levels in the organization. By sharing the vision, it establishes commitment to the over-all vision by employees at all levels.
The Process for Creating a Vision
Like much of strategic planning, creating a vision begins with and relies heavily on intuition and dreaming.As part of the process, you may brainstorm with your staff or your board what you would like to accomplish in the future. Talk about and write down the values that you share in pursuing that vision. Different ideas do not have to be a problem. People can spur each other on to more daring and valuable dreams and visions -- dreams of changing the environment that they are willing to work hard for.The vision may evolve through a strategic planning process. Or, it may be formed in one person's head in the shower one morning! a serendipity. The important point is that members of an organization without a vision may toil, but they cannot possibly be creative in finding new and better ways to get closer to a vision without that vision formally in place. Enterprises, with many of their staff and board members actively looking for ways to achieve a vision, have a powerful competitive and strategic advantage over organizations that operate without one.
When developing a vision statement, keep in mind of the following:
Brief and memorable
Inspiring and challenging
Descriptive of the ideal
Appealing to employees, customers and owners
Idealistic
Enduring
In addition, a vision statement should answer the following questions:
What does the enterprise want, what are its aspirations ?
How does the enterprise wish to be known by customers. employees and the community surrounding it.
How will the enterprise enhance or improve the quality of life for those who patronize its products and/or services
Perceptions of Ideal Futures: An Exercise in Forming Vision
This section outlines an exercise you may employ to assist your organization indefining its own vision. By using this exercise to develop your organizational vision, you may be better assured that the vision statement that is developed is a shared vision.
At a retreat or at a board meeting or staff meeting or even when enjoying a company outing at the beach, take an hour to explore your vision. Breaking into small groups helps increase participation and generate creativity. Agree on a rough time frame, say five to ten years. Ask people to think about the following questions:
How do you want your customers, community, province, country to be different ?What role do you want your enterprise to play in these environments ? What will success look like?Then ask each group to come up with a metaphor for your organization, and todraw a picture of success: "Our company is like ... a caterpillar with synchronized pods or feet movement with the head setting the direction and the feet contribute to the successful forward movement to destination". or " a train with comfortably-seated passengers and cargo, speedily and smoothly traveling over rails with its powerful engine pulling the carriages to its destination". The value of metaphors is that people get to stretch their minds and experiment with different ways of thinking about what success means to them. Finally, have all the groups share their pictures of success with each other. One person should facilitate the discussion and help the group discuss what they mean and what they hope for. Look for areas of agreement, as well as different ideas that emerge. The goal is to find language and imagery that your organization's members can relate to as their vision for success.
Some of the examples of vision statements are as follows:
" Schmitz Transportation Corporation is the most dominant and transport service provider company operating in Cavite and Laguna areas providing the safest, most prompt and quality service"
"RSBI is the number one publisher of educational materials in the country in all educational levels, namely the basic education in both private and public schools, the tertiary education; the post collegiate level initially represented by the School of Law"
"NFG is the leading manufacturer and distributor of high quality garments, setting the trend and providing the benchmark of quality garments in the Philippines"
Mission Statement
A mission statement is the general thrust of the organization that is anchored on its vision. It is the primal motivation of the organization, its very reason for existence. It must be broad enough to inspire everybody in the organization but narrow enough to focus its efforts. A mission statement is a brief, comprehensive statement of purpose of an enterprise. The mission statement identifies what, and for whom, the enterprise do.
The mission statement is an invaluable tool in directing, planning and implementing enterprise efforts. The mission describes customers and products or services. The mission is a part of the organization’s identity, is all encompassing and rarely changes, and is the ultimate rationale for the existence of the enterprise.
When writing a mission statement, consideration should be given to these questions:
Who are we?
What do we do?
For whom do we do it?
Why do we do it?
In many cases, mission statements speak about the enterprise's purposes concerning its products, customers or clients, its employees and its owners.
Mission Statement Criteria
A good mission statement will:
Identify the overall purpose for the existence of the enterprise as established in its corporate papers.
Identify the basic needs or distinct problems that the enterprise is designed to address.
Identify clients, customers or users ( both internal and external) of the enterprise.
Help identify client, customer and stakeholder expectations, requirements, services and products provided to meet these requirements, and processes and resources used to satisfy the requirements.
Lead to the development of performance measures that reflect customer and stakeholder requirements.
Defining the Mission
To facilitate the development, review or revision of an enterprise mission, use the following process:1. Identify the original purpose for the enterprise.
Why does the enterprise exist ? What problems were to be addressed by the enterprise ?
What functions, products or services are, or should be, provided?
2. Reflect the customer and stakeholder base in the statement.
Use the customer identification completed during the SWOT.
3. Identify current needs or distinct problems.
How do current expectations differ from the original purpose of the enterprise ? What are the primary needs or problems that have to be addressed?
4. Review and revise existing mission statements and draft new statements as appropriate.
Are enterprise program and subprogram missions clearly understood by employees and customers.?
Examples of Mission Statements:
"To provide the business community the availability of computer software needed using the most advanced and appropriate technology at highly competitive costs."
"To provide the best benefit package to the employees and considering them as part owners of the company."
"To provide the stockholders the highest returns on investments and regularly allow them to receive dividends"
"We profit most by giving the service that is best"
Objectives
The development of objectives completes the "Where do we want to be ?" part of the strategic planning process. Objectives are measurable end results that derive their impetus from the mission statements. In contrast to the vision, mission or goals, objectives are specific, time bound and measurable. Strategic planners have developed an acronym (SMART) for easy description of objectives- thus
Specific : Objectives should reflect specific accomplishments that are desired, not ways to accomplish them. Objectives should generate specific strategies or actions and be detailed enough to be understandable and give clear directions to others.
Measurable: Objectives must be measurable to determine when they have been accomplished. Accountability should be built into the planning process. A method for measuring an objective must be in place before work is actually began.
Aggressive and Attainable: If objectives are to be the standards for achievement, they should be challenging, but should be realistically achievable.
Result-Oriented: Objectives should specify a result. This is where the performance indicators are required. Results could either be quantifiable or descriptive
Time-Bound: Objectives must be attained over a specific period of time. Generally, objectives are more manageable by tying it down to budgets and fiscal calendars.
For many enterprises, the objectives are in the areas of profitability, enterprise growth in terms of number asset size, number of outlets/offices, market share and product diversification. The detailed description of objectives a more defined in this workbook section on "Key Result Areas and Performance Indicators".
Examples:
Objectives that are not "SMART"
To increase sales
To increase company assets
To increase market share
Objectives that are "SMART"
To increase sales by 10% annually in the next 5 years
To add sales outlets by 50 every year until 2008
To capture 80% market share in Metro Manila by the year 2007
The Vision, Mission and Objectives are sets of statements answering the question "Where do we want to be ?"
Vision
A vision is an ideal state or condition which an organization wants to attain. It should not be too idealized, however, as to lose all meaning. A vision is an end scenario that could be achieved after successive stages of intermediate scenarios. A vision is an ideal state of the enterprise's future being - a lucid imagery of the ultimate success of the enterprise. It is a compelling, conceptual picture of the desired future. It is better to describe and picture the vision in vivid terms.
A vision statement should be clear and easily understood, appropriate and ambitious. It should orient the group's energies and serve as a guide to action.
The vision becomes a focal point for everyone in the enterprise. While in most cases, the enterprise vision is set by the owners, great visions are conceived through sharing between the enterprise owners, management and all levels in the organization. By sharing the vision, it establishes commitment to the over-all vision by employees at all levels.
The Process for Creating a Vision
Like much of strategic planning, creating a vision begins with and relies heavily on intuition and dreaming.As part of the process, you may brainstorm with your staff or your board what you would like to accomplish in the future. Talk about and write down the values that you share in pursuing that vision. Different ideas do not have to be a problem. People can spur each other on to more daring and valuable dreams and visions -- dreams of changing the environment that they are willing to work hard for.The vision may evolve through a strategic planning process. Or, it may be formed in one person's head in the shower one morning! a serendipity. The important point is that members of an organization without a vision may toil, but they cannot possibly be creative in finding new and better ways to get closer to a vision without that vision formally in place. Enterprises, with many of their staff and board members actively looking for ways to achieve a vision, have a powerful competitive and strategic advantage over organizations that operate without one.
When developing a vision statement, keep in mind of the following:
Brief and memorable
Inspiring and challenging
Descriptive of the ideal
Appealing to employees, customers and owners
Idealistic
Enduring
In addition, a vision statement should answer the following questions:
What does the enterprise want, what are its aspirations ?
How does the enterprise wish to be known by customers. employees and the community surrounding it.
How will the enterprise enhance or improve the quality of life for those who patronize its products and/or services
Perceptions of Ideal Futures: An Exercise in Forming Vision
This section outlines an exercise you may employ to assist your organization indefining its own vision. By using this exercise to develop your organizational vision, you may be better assured that the vision statement that is developed is a shared vision.
At a retreat or at a board meeting or staff meeting or even when enjoying a company outing at the beach, take an hour to explore your vision. Breaking into small groups helps increase participation and generate creativity. Agree on a rough time frame, say five to ten years. Ask people to think about the following questions:
How do you want your customers, community, province, country to be different ?What role do you want your enterprise to play in these environments ? What will success look like?Then ask each group to come up with a metaphor for your organization, and todraw a picture of success: "Our company is like ... a caterpillar with synchronized pods or feet movement with the head setting the direction and the feet contribute to the successful forward movement to destination". or " a train with comfortably-seated passengers and cargo, speedily and smoothly traveling over rails with its powerful engine pulling the carriages to its destination". The value of metaphors is that people get to stretch their minds and experiment with different ways of thinking about what success means to them. Finally, have all the groups share their pictures of success with each other. One person should facilitate the discussion and help the group discuss what they mean and what they hope for. Look for areas of agreement, as well as different ideas that emerge. The goal is to find language and imagery that your organization's members can relate to as their vision for success.
Some of the examples of vision statements are as follows:
" Schmitz Transportation Corporation is the most dominant and transport service provider company operating in Cavite and Laguna areas providing the safest, most prompt and quality service"
"RSBI is the number one publisher of educational materials in the country in all educational levels, namely the basic education in both private and public schools, the tertiary education; the post collegiate level initially represented by the School of Law"
"NFG is the leading manufacturer and distributor of high quality garments, setting the trend and providing the benchmark of quality garments in the Philippines"
Mission Statement
A mission statement is the general thrust of the organization that is anchored on its vision. It is the primal motivation of the organization, its very reason for existence. It must be broad enough to inspire everybody in the organization but narrow enough to focus its efforts. A mission statement is a brief, comprehensive statement of purpose of an enterprise. The mission statement identifies what, and for whom, the enterprise do.
The mission statement is an invaluable tool in directing, planning and implementing enterprise efforts. The mission describes customers and products or services. The mission is a part of the organization’s identity, is all encompassing and rarely changes, and is the ultimate rationale for the existence of the enterprise.
When writing a mission statement, consideration should be given to these questions:
Who are we?
What do we do?
For whom do we do it?
Why do we do it?
In many cases, mission statements speak about the enterprise's purposes concerning its products, customers or clients, its employees and its owners.
Mission Statement Criteria
A good mission statement will:
Identify the overall purpose for the existence of the enterprise as established in its corporate papers.
Identify the basic needs or distinct problems that the enterprise is designed to address.
Identify clients, customers or users ( both internal and external) of the enterprise.
Help identify client, customer and stakeholder expectations, requirements, services and products provided to meet these requirements, and processes and resources used to satisfy the requirements.
Lead to the development of performance measures that reflect customer and stakeholder requirements.
Defining the Mission
To facilitate the development, review or revision of an enterprise mission, use the following process:1. Identify the original purpose for the enterprise.
Why does the enterprise exist ? What problems were to be addressed by the enterprise ?
What functions, products or services are, or should be, provided?
2. Reflect the customer and stakeholder base in the statement.
Use the customer identification completed during the SWOT.
3. Identify current needs or distinct problems.
How do current expectations differ from the original purpose of the enterprise ? What are the primary needs or problems that have to be addressed?
4. Review and revise existing mission statements and draft new statements as appropriate.
Are enterprise program and subprogram missions clearly understood by employees and customers.?
Examples of Mission Statements:
"To provide the business community the availability of computer software needed using the most advanced and appropriate technology at highly competitive costs."
"To provide the best benefit package to the employees and considering them as part owners of the company."
"To provide the stockholders the highest returns on investments and regularly allow them to receive dividends"
"We profit most by giving the service that is best"
Objectives
The development of objectives completes the "Where do we want to be ?" part of the strategic planning process. Objectives are measurable end results that derive their impetus from the mission statements. In contrast to the vision, mission or goals, objectives are specific, time bound and measurable. Strategic planners have developed an acronym (SMART) for easy description of objectives- thus
Specific : Objectives should reflect specific accomplishments that are desired, not ways to accomplish them. Objectives should generate specific strategies or actions and be detailed enough to be understandable and give clear directions to others.
Measurable: Objectives must be measurable to determine when they have been accomplished. Accountability should be built into the planning process. A method for measuring an objective must be in place before work is actually began.
Aggressive and Attainable: If objectives are to be the standards for achievement, they should be challenging, but should be realistically achievable.
Result-Oriented: Objectives should specify a result. This is where the performance indicators are required. Results could either be quantifiable or descriptive
Time-Bound: Objectives must be attained over a specific period of time. Generally, objectives are more manageable by tying it down to budgets and fiscal calendars.
For many enterprises, the objectives are in the areas of profitability, enterprise growth in terms of number asset size, number of outlets/offices, market share and product diversification. The detailed description of objectives a more defined in this workbook section on "Key Result Areas and Performance Indicators".
Examples:
Objectives that are not "SMART"
To increase sales
To increase company assets
To increase market share
Objectives that are "SMART"
To increase sales by 10% annually in the next 5 years
To add sales outlets by 50 every year until 2008
To capture 80% market share in Metro Manila by the year 2007
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