Year: 2020

Break even pricing is a strategy focused on penetrating the market by keeping the price of the product in such a manner that the company is neither in profit nor in loss. Break even price has one of the simplest pricing formulas. Fixed cost + Variable cost = Total cost / Break even price. Thus, the key factor to maintain break even price is to determine the exact fixed and variable costs. The application of break even pricing comes when making business and marketing plans as well as when trying to penetrate a new market. Even in the business environment, break even price plays an important role.

Whenever you decide to start your own business, your main goal is going to make it profitable and sustainable. But for every business in the initial stages of the development, it takes time to build profits. In these cases the best option for you is to reach a break even point, where you are neither in profit nor in loss. Profit is the most desirable goal but not losing money and to be on zero loss can also be an alternative solution rather than getting negative results on your investments.

Break even pricing is the practice of setting a price point at which a business will earn zero profits on a sale. The intention is to use low prices as a tool to gain market share and drive competitors from the marketplace. By doing so, a company may be able to increase its production volumes to such an extent that it can reduce costs and then earn a profit at what had previously been the break even price. Alternatively, once it has driven out competitors, the company can raise its prices sufficiently to earn a profit, but not so high that the increased price is tempting for new market entrants. The concept is also useful for establishing the lowest acceptable price, below which the seller will begin to lose money on a sale. This information is useful when responding to a customer that is demanding the lowest possible price.

The break even price can be calculated based on the following formula:

(Total fixed cost / Production unit volume) + Variable cost per unit

This calculation allows you to calculate the price at which the business will earn exactly zero profit, assuming that a certain number of units are sold. In practice, the actual number of units sold will vary from expectations, so the true break even price may prove to be somewhat different.

It is especially common for a new entrant into a market to engage in break even pricing, in order to obtain market share. It is particularly likely when the new entrant has a product that it cannot differentiate from the competition in a meaningful way, and so differentiates on price.

A business intent on following the break even pricing strategy should have substantial financial resources, since it may incur significant losses during the early stages of this strategy.

Pricing is the method of determining the value a producer will get in the exchange of goods and services. Simply, pricing method is used to set the price of producer’s offerings relevant to both the producer and the customer.

Every business operates with the primary objective of earning profits, and the same can be realized through the Pricing methods adopted by the firms.

Pricing is a process to determine what manufactures receive in exchange of the product. Pricing depends on various factors like manufacturing cost, raw material cost, profit margin etc.

Objectives of Pricing

The main objectives of pricing can be learnt from the following points:

• Maximization of profit in short run
• Optimization of profit in the long run
• Maximum return on investment
• Decreasing sales turnover
• Fulfill sales target value
• Obtain target market share
• Penetration in market
• Introduction in new markets
• Obtain profit in whole product line irrespective of individual product profit targets
• Tackle competition
• Recover investments faster
• Stable product price
• Affordable pricing to target larger consumer group
• Pricing product or services that simulate economic development

Future is uncertain. Man thinks about future. He may be a businessman, a broker, a manufacturer, a commission agent etc. All guess about the future in their respective field of interest. We try to know, through a clear imagination, what will be happening in the near future after a weak, month or year. It can be called forecast or prediction. The process of forecasting is based on reliable data of past and present. Forecasting is not new, as it has been practiced from time immemorial.

Forecasting is one of the important aspects of administration. The comer-stone of successful marketing planning is the measurement and forecasting to market demand. According to American Marketing Association, “Sales forecast is an estimate of Sales, in monetary or physical units, for a specified future period under a proposed business plan or programme and under an assumed set of economic and other forces outside the unit for which the forecast is made.”

A sales forecast is an estimation of sales volume that a company can expect to attain within the plan period. A sales forecast is not just a sales predicting. It is the act of matching opportunities with the marketing efforts. Sales forecasting is the determination of a firm’s share in the market under a specified future. Thus sales forecasting shows the probable volume of sales.

“Sales forecast is an estimate of sales during a specified future period, whose estimate is tied to a proposed marketing plan and which assumes a particular state of uncontrollable and competitive forces.” —Candiff and Still

Factors influencing a Sales Forecasting:

A sales manager should consider all the factors affecting the sales, while predicting the firm’s sales in the market.

An accurate sales forecast can be made, if the following factors are considered carefully:

1. General Economic Condition:

It is essential to consider all economic conditions relating to the firm and the consumers. The forecaster must see the general economic trend-inflation or deflation, which affect the business favourably or adversely. A thorough knowledge of the economic, political and the general trend of the business facilitate to build a forecast more accurately. Past behaviour of market, national income, disposable personal income, consuming habits of the customers etc., affect the estimation to a great extent.

2. Consumers:

Products like, wearing apparel, luxurious goods, furniture, vehicles; the size of population by its composition-customers by age, sex, type, economic condition etc., have an important role. And trend of fashions, religious habits, social group influences etc., also carry weights.

3. Industrial Behaviours:

Markets are full of similar products manufactured by different firms, which compete among themselves to increase the sales. As such, the pricing policy, design, advanced technological improvements, promotional activities etc., of similar industries must be carefully observed. A new firm may come up with products to the markets and naturally affect the market share of the existing firms. Unstable conditions—industrial unrest, government control through rules and regulations, improper availability of raw materials etc., directly affect the production, sales and profits.

4. Changes within Firm:

Future sales are greatly affected by the changes in pricing, advertising policy, quality of products etc. A careful study in relation to the changes on the sales volume may be studied carefully. Sales can be increased by price cut, enhancing advertising policies, increased sales promotions, concessions to customers etc.

5. Period:

The required information must be collected on the basis of period—short run, medium run or long run forecasts.

Importance of Sales Forecasting:

1. Supply and demand for the products can easily be adjusted, by overcoming temporary demand, in the light of the anticipated estimate; and regular supply is facilitated.
2. A good inventory control is advantageously benefited by avoiding the weakness of under stocking and overstocking.
3. Allocation and reallocation of sales territories are facilitated.
4. It is a forward planner as all other requirements of raw materials, labour, plant layout, financial needs, warehousing, transport facility etc., depend in accordance with the sales volume expected in advance.
5. Sales opportunities are searched out on the basis of forecast; mid thus discovery of selling success is made.
6. It is a gear, by which all other activities are controlled as a basis of forecasting.
7. Advertisement programmes are beneficially adjusted with full advantage to the firm.
8. It is an indicator to the department of finance as to how much and when finance is needed; and it helps to overcome difficult situations.
9. It is a measuring rod by which the efficiency of the sales personnel or the sales department, as a whole, can be measured.
10. Sales personnel and sales quotas are also regularized-increasing or decreasing-by knowing the sales volume, in advance.
11. It regularizes productions through the vision of sales forecast and avoids overtime at high premium rates. It also reduces idle time in manufacturing.
12. As is the sales forecast, so is the progress of the firm. The master plan or budget of a firm is based on forecasts. “The act of forecasting is of great benefit to all who take part in the process, and is the best means of ensuring adaptability to changing circumstances. The collaboration of all concerned leads to a unified front, an understanding of the reasons for decisions, and a broadened outlook.”

Types of Sales Forecasting:

The Economic Forecast:

This type of forecast is important to understand the general economic trend through a careful study of Five Year Plans, Gross national products. National income, Government expenditure, Unemployment, Consumer spending habits etc. This is in order to have an accurate forecast. Big companies, in India, adopt this method.

The Industry Forecast:

The future market demand is calculated through industrial forecast or market forecast. The expected sales forecasts of all the industries, in the same line of business are combined. Market demand may be affected by controllable-price, distribution, promotion, etc., and uncontrollable-demographic, economic, political, technological development, cultural activities etc. The executive must take into account all these conditions while forecasting.

The Company Forecast:

The third step goes to the firm concerned to look into the market share, for which forecast is to be made. By considering both controllable and uncontrollable, based on chosen marketing plans within the firm, with that of other industries, steps are taken in formulating forecasts.

There are three classes of sales forecasts:

1. Short-run Forecast:

It is also known as operating forecast, covering a maximum of one year or it may be half-yearly, quarterly, monthly and even weekly. This type of forecasting can be advantageously utilized for estimating stock requirements, providing working capital, establishing sales quotas, fast moving factors. It facilitates the management to improve and co-ordinate the policies and practice of marketing-production, inventory, purchasing, financing etc. Short-run forecast is preferred to all types and brings more benefits than other types.

2. Medium-run Forecast:

This type of forecast may cover from more than one year to two or four years. This helps the management to estimate probable profit and control over budgets, expenditure, production etc. Factors-price trend, tax policies, institutional credit etc., are specially considered for a good forecast.

3. Long-run Forecast:

This type of forecast may cover one year to five years, depending on the nature of the firm. Seasonal changes are not considered. The forecaster takes into account the population changes, competition changes, economic depression or boom, inventions etc. This type is good for adding new products and dropping old ones.

Limitations of Sales Forecast:

In certain cases forecast may become inaccurate. The failure may be due to the following factors:

1. Fashion:

Changes are throughout. Present style may change any time. It is difficult to say as to when a new fashion will be adopted by the consumers and how long it will be accepted by the buyers. If our product is similar to the fashion and is popular, we are able to have the best result; and if our products are not in accordance with the fashion, then sales will be affected.

2. Lack of Sales History:

A sales history or past records are essential for a sound forecast plan. If the past data are not available, then forecast is made on guess-work, without a base. Mainly a new product has no sales history and forecast made on guess may be a failure.

3. Psychological Factors:

Consumers’ attitude may change at any time. The forecaster may not be able to predict exactly the behaviour of consumers. Certain market environments are quick in action. Even rumours can affect market variables. For instance, when we use a particular brand of soap, it may generate itching feeling on a few people and if the news spread among the public, sales will be seriously affected.

4. Other Reasons:

It is possible that the growth may not remain uniform. It may decline or be stationary. The economic condition of a country may not be favourable to the business activities-policies of the government, imposition of controls etc. It may affect the sales.

The methods of forecasting discussed above have respective merits and demerits. No single method may be suitable. Therefore, a combination method is suitable and may give a good result. The forecaster must be cautious while drawing decisions on sales forecast. Periodical review and revision of sales forecast may be done, in the light of performance. A method which is quick, less costly and more accurate may be adopted.

Sales promotion refers to ‘those marketing activities that stimulate consumer shows and expositions.

Purchasing and dealer effectiveness such as displays, demonstration and various non- recurrent selling efforts not in the ordinary routine.” According to A.H.R. Delens: “Sales promotion means any steps that are taken for the purpose of obtaining an increasing sale. Often this term refers specially to selling efforts that are designed to supplement personal selling and advertising and by co-ordination helps them to become more effective.”

In the words of Roger A. Strong, “Sales promotion includes all forms of sponsored communication apart from activities associated with personal selling. It, thus includes trade shows and exhibits, combining, sampling, premiums, trade, allowances, sales and dealer incentives, set of packs, consumer education and demonstration activities, rebates, bonus, packs, point of purchase material and direct mail.”

Objectives of Sales Promotion:

Sales promotion is a vital bridge or a connecting link between personal selling and advertising.

Sales promotion activities are undertaken to achieve the following objectives:

1. To increase sales by publicity through the media which are complementary to press and poster advertising.
2. To disseminate information through salesmen, dealers etc., so as to ensure the product getting into satisfactory use by the ultimate consumers.
3. To stimulate customers to make purchases at the point of purchase.
4. To prompt existing customers to buy more.
5. To introduce new products.
6. To attract new customers.
7. To meet competition from others effectively.
8. To check seasonal decline in the volume of sales.

Importance of Sales Promotion:

The importance of sales promotion has increased tremendously in the modern times. Lakhs of rupees are being spent on sales promotional activities to attract the consumers in our country and also in other countries of the world.

Some large companies have also begun to appoint sales promotion managers to handle miscellaneous promotional tools. All these facts show that the importance of sales promotion activities is increasing at a faster rate.

As in the case of advertising, effective sales promotion involves an on-going process with a number of stages.

1. Establishment of objectives:

Sales-promotion objectives vary according to the target market. If the target is the customer, objectives could include the encouragement of increased usage or the building of trial among non-users or other brand users. For intermediaries, objectives could be to encourage off-season sales or offsetting competitive promotions. Sales-promotion activity could also be aimed at internal personnel, making up part of the reward system

2. Selection of promotional tools:

Promotional objectives form the basis for selecting the most appropriate sales-promotion tools. The cost and effectiveness of each tool must be assessed with regard to achieving these objectives in respect of each target market. The tools available to the service marketer are described in more detail in the next section.

3. Planning the sales-promotion programme:

The major decisions that need to be made when designing the sales-promotion programme relate to the timing of the promotion and how long this tool is to be used. Also important are the size of incentive, rules for eligibility and, of course, the overall budget for the promotion.

4. Pre-testing:

This needs to be undertaken to ensure that potentially expensive problems are discovered before the full launch of a promotion. Testing in selected market segments can highlight problems of ambiguity, response rates and give an indication of cost effectiveness.

5. Implementation:

The programme for implementation must include two important time factors First, it must indicate the ‘lead time’- the time necessary to bring the programme up to the point where the incentive is made available to the public. Second, the ‘sell in time’ which is the period of time from the date of release to when approximately 90-95 per cent, of incentive material has been received by potential customers.

6. Evaluation:

The performance of the promotion needs to be assessed against the objectives set. If objectives are specific and quantifiable, measurement would seem to be easy. However, extraneous factors could account for the apparent success of many sales-promotion activities.

For example, competitive actions or seasonal variations may have influenced customers’ decision making. It can also be extremely difficult to separate out the effects of sales-promotion activity from other promotional activity-or indeed from other marketing-mix changes.

Steps in Personal Selling

The selling process consists of several steps; there are few basic steps, which need to be followed for all types of products. The selling process can be for short time or long time, depending upon the nature of the product. A product, which needs huge investment, may take longer time to complete the selling process whereas in case of daily products where the customer is aware of the nature of the product, the selling process ends in shorter time.

Example: Door to door sales, where the salesperson explains all the steps and ends the process in 10 to 15 minutes. However, for heavy machinery, it may take time to present the technical nature and explain the product; it takes more than one visit to complete the selling process.

Prospecting

The initial step of selling process starts with prospecting or searching for potential customers. Apart from retail sales, it’s very rare when customers reach out to the salesperson. It’s the salesperson who reaches out to customers in order to sell the product.

The following are the two major activities under prospecting:

• Find the prospects or the potential customers
• Educate them in order to figure out if they are valid customers

Find the Prospects or the Potential Customers

Finding the prospect is not an easy step for a sales person because consumers would not even like to listen to the presentation regarding the product they do not need. The rate of saying “No” is very high. In few consumer goods, the identification of customers comes from sources like friends, relatives, colleagues etc. The following are some of the best sources.

• Existing Customers” One of the good sources of prospects is an existing customer. For a salesperson, it is very easy to sell the products to an existing customer instead of selling to the new customers.
• Never-ending Chain” This is a competing strategy to find out prospects. The salesperson reaches many new customers with the help of existing customers. The salesperson selling the product to existing customers asks to provide referral to friends or relatives and the salesperson reaches the new customers. This chain goes on and on.
• Cold Call: In this technique, the salesperson has to visit door to door to sell the products. The sales process starts from introduction but in this case, the rejection rate is high.
• Directories: The salesperson tries to find out prospect customer contact with the help of a directory. The salesperson can also collect the information through membership directories of trade associations, social organization etc.
• Mailing: The companies promote their product through mails by sending advertisements. The advantage is that it’s cheap and the company targets many customers by sending mass mailers.
• Exhibition: The salesperson could target the prospective customers through tradeshows and exhibitions. It’s one of the simplest ways and the salesperson could also practically show the use of the product and the features. Announcement is advance, before the exhibitions starts, is very helpful to attract more customers.

Train/Educate the Prospects

After the salesperson has identified the potential customers, he should find out if they are valid prospects. After finding the valid prospects, the salesperson has to give the presentation.

There are several approaches for qualifying customers and the prominent approach is MAN, i.e., Money, Authority and Need.

• Money: The salesperson should know the financial status of the customers because money matters a lot, and, without it, the prospect cannot purchase the product. The consumer or the prospect should be able to pay money in return of the product.
• Authority: The prospect that is purchasing the product should have the authority to make decision. This is important while dealing with government agencies, corporate etc.
• Need: This is one of the most important points because if the prospect has money and also the authority but there is no need of the product, he or she will not purchase the product.

The salesperson has to find out about these aspects before proceeding to the selling process.

Preparation for the Sale of Product

Once the prospect has been identified and qualified as discussed in first step, the salesperson has to prepare for the sales of product or service. The following are the two stages involved in preparation −

• Pre-approach
• Call Planning

Pre-approach

This step involves collecting all the information important to learn about the prospects and their needs. The following are the four steps of pre-approach:

• Prospect need and ability should be disclosed.
• All the required information, which would help the salesperson to prepare the presentation.
• Relevant information, which helps salesperson not create any errors during presentation.
• Confidence to tackle the questions of the prospect.

Call Planning

Call Planning includes a particular planning sequence. The salesperson calls the customer and explains the objective of the call and explains the product to makes appointments.

The first objective of the salesperson is to get an order from the customer. Some objectives may also be required in the mid-of-the-call progress, depending on the call. Following are a few objectives for call planning −

• Collect more information from the customer .
• Find out the need of the customer and link with the features of product.
• Take permission from customer before presentation of product.
• Suggest a new distributor.

The salesperson has to develop a strategy and plan accordingly to achieve the objective or goal. The salesperson should be very careful while checking the background of the customers and obtaining details. This helps to frame a strategy and develop a plan. The calls made by salesperson are costly, so they have to take prior appointment.

Presentation

In this step, the salesperson has to give the presentation regarding the product to the customer. She/he should explain the features of the product and how it will fulfill the needs. The presentation should be clear and understandable by the customer. It should also be interesting to keep the customer involved in the conversation.

A presentation can be classified into the following categories −

• Fully automated
• Semi-automated
• Memorized
• Organized
• Unstructured

Fully Automated

In this approach, the salesperson gives the presentation with the help of slides in a structured manner. He also explains and clears the doubts of the customers. Example: Life Insurance.

Semi-Automated

The salesperson reads out the company brochures and adds comments as per requirement or queries from the client. Example: Pharmaceutical products.

Memorized

The company presents its message, which is short and crisp, and which can be easily memorized by the customer.

Organized

One of the most attractive, effective and often-used approaches is organized presentation. The salesperson can make changes in the presentation as required but based on the company’s pre-defined outline. In this approach, the sale person covers the four steps, i.e., Attention, Interest, Desire and Action.

Unstructured

The salesperson and the customer together try to resolve the problems. Hence this approach is also known as problem solving. This type of presentation is not well focused many a times; some points are missed and time is wasted. Also the salesperson has to face many queries from the customers and if the salesperson is new in the field, he/she will not be able to answer the queries in an effective manner.

Thus, we can conclude that the presentation to the established customers should be done by an effective salesperson.

Handling Objections

The salesperson has to struggle to sell the product to the customers. During the sales process, the prospects raise objections, which can be stated or hidden. Prospects may state the reason for objections and give a chance to salesperson to answer. This is an absolute situation because the prospect is informed regarding the objections.

Unfortunately, in many cases, the prospects do not provide the reason for objection of the product. They hide their real reason for not buying the product. If the salesperson is unable to know the real reason, he/she will not be able to resolve the problem.

To resolve this, there are two techniques to find out the objections.

• To allow the prospect to talk to find out the hidden objection.
• The observation gained by experience and mixing with the knowledge of the prospects.

Many times, the objection is due to high price of the product. That objection can be answered when the salesperson has the knowledge of the competitor’s products as well.

Also, in many cases, the prospects do not understand the technical aspects and are misinformed. The salesperson should provide additional information in this case.

Now we can conclude that the objection can be resolved by providing an alternative product to the prospects.

Closing the Sale

After answering the objections made by prospects, the salesperson asks for the prospect to order the product. If the prospect does not agree to buy the product, the entire effort gets waste. The following are some effective techniques to close the sale:

Gift Close

In this technique, the customers get an incentive for immediate buying action. The salesperson informs regarding the benefits of the product to the prospects.

Example: A company provides an option to the prospect that if the bill exceeds Rs.3000, he can buy a bed sheet worth 2000 for just Rs.200.

Here, if the customer has made a purchase of Rs.2500, he will check out to buy something else to reach 3000. This helps the company to sell two extra products — one for Rs.500 or more to reach 3000 and another, bed sheet for Rs.200.

Direct Close

This is one of the simplest techniques to close the sales. This happens when the buyer has positive approach to buy a product. The salesperson summarizes the important points that were made prior to sale.

Example: A prospect needs beauty cream and steps into a shop. The salesperson offers the products; if required, shows the demo. Once the prospect is satisfied, he/she will buy it.

If the salesperson is experienced, he/she will try to close it as early as possible because he/she would understand if the prospect is inclined to buy the product. A good salesperson makes sure that he has completed all the steps during sales process.

Thus, closing is an important step in sales process. The other steps are meaningless without closing.

Follow-up

After making the sale, the salesperson has to follow up with the prospects. After sales activities are important parts of the selling process. This helps in reducing any doubt by the customer regarding the product or service. There is also a chance that the buyer with buy again in future.

There are specific policies by a company for after sales activities. Even though the company provides good products, there will be few complaints from customers. The complaints should be taken seriously and the company should try to resolve. This helps the company to improve in terms of product or service.

An experienced salesperson tries to provide the best service to its customers. As a part of handling complaints, they also keep the prospect informed regarding the latest products or services and also provide other types of assistance. The salesperson should build good rapport with the customer. This helps to get more customers because the existing customer will refer to his friends and relatives.

The salesperson should thank the customer for the business and offer small gifts.

1. Self confidence and polite

Self-confidence is the first step to success. Be confident; if you are not sure yourselves, how can you convince your customer. Self confidence is not arrogance, be polite.

2. Commitment

You have to commit to your job, this industry is too tough for those who has only half-hearted, committed or choose another field, do not waste your time.

3. Discipline

Do not expect a “hit and run” system can bring any result, you should have discipline to follow up all your commitment.

4. Honest and Enthusiastic

All you tell should be the truth, but does not mean you have to tell all the truth which you have to keep due to positioning and negotiation. Do not over promise, if you are not sure, tell them I will find the answer for you.

5. Give impact

There are two many sales knocking at your customers’ door, they can only remember the sales executive who give them an impact (either good or bad).

6. Preparation

A good impact can only achieved if you prepare properly. I will not see any High Way salesman who just drop in and  hear him talking nonsense, but I will accept somebody who has prepared a relevant topic which can arouse my interest (to get more value from him/her). No preparation do not go to see the customer, you waste you time and the company money.

7. Keep on learning

Every day we learn, we can only advise our customers if we know what they are current doing. And usually you learn more from your customers (on field learning) by asking relevant question, but before you can ask relevant questions you should have some basic knowledge on the issue.

8. Convey your idea to your customer

You should have a courage to convey your idea, not just “Yes, Sir”, you will lose your value if every time your response is “Yes, Sir”, then the customer will send you away with1 kg of spray powder or ink. Usually, most of the idea comes from your observation/listen from others customer. By systematically learning, you can obtain a lot of idea.

9. Be creative and pro active

Don’t bring the same topic every time you visit your customer, otherwise you become Order Taker and they will happily send you away with 1 kg of spray powder. Think of different topic, (ink, graphic supplier, logistic, business environment, competition, payment, pricing, investment, interest rate, capital etc.). The more knowledge you know on your relevant field, the more your customer will value you.

• Killer instinct alias closing sales

Whatever value you add to the customer, some body has to pay and it is your customer who is going to pay. If you can’t close the sales, you have to question yourself: does my customer aware of my value?

Qualities of Highly affective Sales executive

1. Ability to define the position’s exact functions and duties in relation to the goals the company should expect to attain. Sales executives calculate what is entailed in their responsibilities. Whether or not the company provides them with a job description, they draw up their own descriptions consistent with the responsibilities assigned by higher management. Revision are necessary whenever changes occur in the assigned responsibilities or in company goals.
2. Ability to utilize time efficiently. The time of sales executives is valuable, and they budget it and use it carefully. They allocate working time to tasks yielding the greatest return. They arrive at an optimum division between office work and field supervision. Even the use of off duty hours is important. Excessive work time and too little leisure reduces efficiency. Successful sales executive balance such leisure time activities as community service and professional meeting against personal social activates, recreation, and self improvement.
3. Ability to select and train capable subordinates and willingness to delegate sufficient authority to enable them to carry out assigned task with minimum supervision. Ability to delegate authority is must. Effective executives select high caliber subordinates and provide them with authority to make decisions. Within existing policy limits, decision are made by subordinates; when an exception falling outside these limits occurs, the superior decides. The more capable the subordinates, the wider policy limits can be And the more the superior’s time is freed for planning.
4. Ability to exercise skilled leadership. Competent sales executives develop and improve their skills in dealing with people although they rely to a certain extent on an intuitive grasp of leadership skills, they depend far move on careful study of motivational factors and shrewd analysis of the ever changing patterns of unsatisfied needs among those with whom they work. Skilled leadership is important in dealing with subordinates and with everyone else.
5. Ability to allocate sufficient time for thinking and planning. Able administrators make their contributions through thinking and planning. They know how and are willing to think. They recognize that reviewing past performances is a prerequisite to planning. They strive to gain new insight that will bring problems into better focus. Effective sales executives shield themselves from routine tasks and interruptions. Failing this, they retreat to surroundings which are conductive to thinking and planning.

An advertising budget is an estimate of a company’s promotional expenditures over a certain time period. More importantly, it is the money a company is willing to set aside to accomplish its marketing objectives. When creating an advertising budget, a company must weigh the value of spending an advertising dollar against the value of that dollar as recognized revenue.

An advertising budget is part of a company’s overall sales or marketing budget that can be viewed as an investment in a company’s growth. The best advertising budgets and campaigns focus on customers’ needs and solving their problems, not company problems such as an overstock reduction.

A budget is an expression in monetary terms of the forward plan and the proposed activity. Advertising plan includes, sales targets, product facts, marketing information, competitive situation, creative platform, copy treatment etc. The advertising budget is the translation of an advertising plan into monetary form. It states the amount of proposed advertising expenses and informs the management of the organisation the expected cost of executing the advertising plan.

The advertising budget should concentrate on the following two aspects:

1. It should be constructed considering the financial strength of the organisation.
2. Specific operational activities should be identified and detailed allocation of funds should be specified.

The budgetary process should follow the steps listed below:

1. Preparation of budget
2. Presentation and approval of the budget
3. Execution of budget, and
4. Monitoring and controlling of the budget,

Advertising Budget and Goals

Before deciding on a specific advertising budget, companies should make certain determinations to ensure that the budget is in line with their promotional and marketing goals:

• Target consumer: Knowing the consumer and having their demographic profile can help guide advertising spend.
• Type of media that is best for the target consumer: Mobile or internet advertising via social media may be the answer, although traditional media, such as print, television, and radio may be best for a given product, market, or target consumer.
• Right approach for the target consumer: Depending on the product or service, consider if appealing to the consumer’s emotions or intelligence is a suitable strategy.
• Expected profit from each dollar of advertising spend: This may be the most important question to answer, as well as the most difficult.

Importance of Advertising Budget

The objective of a company which markets its products is to earn profits and increase brand awareness. Advertising objectives of a company is purely dependent on the advertising campaign, type of customers, advertising media and what the company wants to achieve. Hence, for any marketing activity that a company wants to do, it has to spend some money. This is why advertising budget is important. It helps in understanding the objectives. The costs, helps to formulate strategies and generate profits by increasing the overall sales.

Factors Affecting Advertising Budget

Advertising is one of the variables which affect sales and hence the profit earned. It is therefore difficult to calculate the amount to be allocated for advertisement budget. Also the budgeting depends on various other factors like:

1. Degree of competitiveness in market: Monopoly/Duopoly/Oligopoly

A monopoly firm does not have to worry about the promotional spends as it is the only player in the market. For duopoly, where market is dominated by two dominant players, the promotional budgets would be high to outperform each other. In an Oligopolistic market, where the market is cluttered and there are many players, promotional spends has to be higher as the frequency of advertisements has to be increased to get noticed among so many players. Thus depending upon the competition the advertising budget is set.

2. Market Share: Market leader/Market Follower

The advertising budget for a market follower will be decided by the tactics of the market leader. To improve market share one of the investment is to increase promotional spent. Thus, where a company stands is a deciding factor in advertising budget

3. Product life-cycle stage: Introduction/growth/maturity/decline

The advertisement budget would be higher at the introduction and growth stages as it has to introduce the product in the market and establish itself among the competitors so the frequency of advertisements would be high and so would be the budget. As the product reaches maturity and decline stages the promotional spent would be lower.

4. Advertising Frequency

An ad can be played only once or can be be multiple times. Also, it can be daily, weekly, fortnightly, monthly etc. Depending upon the requirement, the advertising budget is altered.

Advertising Budget Process

There are certain steps which can be followed in creating an advertising budget. They can be explained as below:

1. Understanding advertising objectives based on the goals which have been set by the company.
2. Determine the tasks, ad campaigns which could be done.
3. Formulating, evaluating and preparing the breakup of advertising budget.
4. Taking approvals form the senior management.
5. Allocation of funds for different activities under the advertising budget.
6. Monitoring and controlling the expenditure and revising it for better profit.

Process of Advertising Budget:

The advertising budget is a statement of the advertising plan in financial terms. It is the allocation of available funds to various advertising functions after determining the total funds available for advertising pur­poses during a specified period.

The budgetary process involves:

1. Prepara­tion,
2. Presentation,
3. Execution, and
4. Control.

1. Preparation:

The total expenditure on advertising is estimated on the basis of the information of markets, product, pricing, image, message and media. The determination of the total funds is the first step in budget­ing, which is known as budget appropriation. The determination of ad­vertising appropriation depends on the existing sales, the unit of sales, and the expenditure on advertising and affordable capacity.

After determining the appropriation, the next step is to specify the expenditure to be incurred on each function of advertising. The allocation of appropriation to different advertising activities in made on the basis of the contribution to advertising and the attitude of the management.

Thus, the total budget is cut into small budgets for each advertising function. Advertising budgets are prepared for each market segment, time and geographic area.

2. Presentation:

The budget prepared by the advertising manager is presented to the marketing manager who decides the rationale and the contribution of the budget components. The budget is modified on the basis of the prevailing marketing conditions and management requirements.

The top executive may also fix the budget and budget components. The financial manager is consulted before this decision is taken. The budget is modified in the light of sales forecast, sales opportunities and the role of advertising in capturing the market share. The advertising plan is then formulated for the final budget.

3. Budget Execution:

The execution of the budget is done through routine activities. The cost of advertising, production, purchase of adver­tising time and space and other functions are considered. Constant sur­veillance and periodic checks determine whether the advertising norms are implemented and budgets properly utilised.

The budgets are prepared in the light of the normal marketing conditions. If the conditions change, the budgets are changed accordingly. Contingency funds are provided in the beginning, which are used during times of need.

4. Control of Budget:

The advertising budget should not be less than the advertising expenditure. The expenditure is compared with the provision in the advertising plan. No larger amount should be spent unless the advertiser is constrained to do so in the light of existing conditions. The planned expenditure and the actual expenditure should be on parallel lines.

The budgeted expenditure on advertising should be used only for advertising purposes and not for other purposes. Since sales promotions include several functions other than the advertising function, the adver­tising budget should be used only for the advertising purposes and not for other sales promotion strategies that is, on personal selling, merchandising, packaging, public relations, etc.

There should be a separate budget for each sales promotion strategy. When the budget is exhausted by other functions, the phenomenon is known as budget attrition, which should be avoided. There are some combined expenditures on sales promotion which may be drawn from the advertising budget.

Public relations (PR) is nothing but the practice of protecting as well as enhancing the reputation of any particular organization/firm or for that matter any individual. In today’s world of fierce competition, where every organization strives hard to work toward its brand image, public relations has become the need of the hour. It is essential for every organization to communicate well with its public/target audience. The correct flow of information is essential. Here comes the importance of public relations.

The practice of maintaining a healthy relationship between organization and its public/employees/stakeholders/investors/partners is called public relations. Public relation activities ensure the correct flow of information between the organization and its public also called its target audience. Public relations goes a long way in maintaining the brand image of an organization in the eyes of its audience, stake holders, investors and all others who are associated with it.

For schools, the target audience would be students and their parents/guardians, for retailers the target audience would be customers and so on.

In the above examples, Public Relations ensures a smooth two way communication between the school authorities and its target audiences (students and their parents).Retailers must address their customers well for a positive word of mouth and a strong brand positioning. It is really important to create a positive image of any particular brand in the minds of consumers for it do well. Public relations experts not only help in the flow of information from the organization to its public but also from the public to the organization.(Two way communication).The flow of information from the public to the organization is generally in the form of reviews, feedback(positive/negative),appreciation and so on. Public relations strengthens the relationship between the organization and its target audience, employees, stakeholders, investors etc.

Public Relation Activities

Here are some ways of enhancing an organization’s brand image:

• Addressing the media
• Speaking at various press conferences, seminars.
• Advertisements to correctly position the brand, Pamphlets, Brochures, magazines notices, newsletters and so on.
• Corporate Social responsibility (CSR Activities)
• Introducing various loyalty schemes for customers like membership cards, premium clubs so as to retain the customers.
• Various events, shows and activities.

Effective Public Relations

Public Relations is said to be effective under all the below circumstances:

• Awareness: To create a positive image of an organization, the message must reach the public. Information must reach in its desired form for effective public relation.
• Acceptance: The audience must understand what the message intends to communicate. They ought to agree with the message.
• Action: The audience ought to give feedback to the organization accordingly.

To conclude public relations is nothing but an effort to present one’s organization in the best light.

Types of Public Relations

When it comes to companies and corporations, everyone has an opinion – customers, shareholders, the media, the government and the general public. There are dozens of viewpoints, and almost as many types of PR. Each type has a purpose, and each one suits a different type of professional.

• Media relations
• Community relations
• Corporate and social responsibility
• Public affairs
• Crisis management
• Social media
• Employee relations
• Integrated marketing and communications

(i) Media relations

Media relations is all about dealing with the media – writing press releases, scheduling interviews and giving press conferences. The goal is to generate positive coverage of your company or your product. Basically, you want the media to do your advertising for free.

Key to media relations is generating a ‘hook’ to draw in audiences. You need to have an eye for a compelling story that the media will want to cover. You also need to have the skills to get the story out there, which can vary depending on the role. Copywriters produce snappy, well-written press releases, while company spokespeople stand up and give speeches to the press. In smaller organisations, one person is responsible for everything.

(ii) Community relations

Community engagement officers work to develop a company’s relationship with the local (and not-so-local) community.

Reasons for doing this include:

• Getting local support for a project, such a building a new manufacturing plant.
• ‘Giving something back’, which improves the company’s ethical reputation.
• Getting people interested in your products or services.
• Changing people’s mindset about an issue.

(iii) Corporate and social responsibility

Related to community engagement, there is PR that improves the company’s reputation for ethics, environmental responsibility, and community and charity works. This area of PR can hugely affect an organisation’s business practices. A CSR PR officer might recommend the company to change its entire recycling policy, or even its business direction.

To be a good CSR officer you need the ear of the company leaders – which takes networking skills, people skills, persuasion and the ability to endear yourself to your colleagues.

(iv) Public affairs

Public affairs, also known as lobbying, is all about getting the government on your side. Say you wanted a change in farming legislation so you could sell your product for more money. You’d need to make contact with a minister, convince them of your case, and provide them with information so they can talk confidently about your issue and fight your corner.

(v) Crisis Management

Crisis management is the PR you need when disaster strikes: a faulty product has to be recalled, an oil tanker spills, an employee accuses the company of wrongdoing, or the CEO is arrested for public indecency. These things could ruin the company’s reputation and need to be dealt with quickly.

(vi) Social Media

Many companies use social media campaigns as a form of marketing, but social media also has huge PR potential. Some of a company’s greatest PR successes (and disasters) can happen on social media. It’s a place where your interactions with a single customer are visible to the whole world. It allows companies to show their lighter side – for example, two fast food chains exchanging friendly Twitter insults. It’s also a good place for honest public apologies.

(vii) Employee Relations

Also known as internal PR, employee relations is the business of giving employees a positive view of the company they work for. The goal is to keep them satisfied, motivated and loyal.

Employee relations work might include:

• Organising employee events
• Creating internal newsletters and other communications
• Resolving disputes
• Liaising with unions
• Helping line managers develop good relationships with their team

(viii) Integrated Marketing and Communications

Integrated marketing and communications (IMC) isn’t exactly a form of public relations – it’s a way to take all your activities, from advertising to media relations to internal communications, and ensure that you provide a consistent message that serves your overall strategy.

Tools of Public Relation

Following are the tools used in media relations:-

• Press Kits: Press kits include written material about the organization and its top people.
• Audio Releases: Audio releases or video releases are prerecorded messages distributed to various media channels.
• Matte Releases: Small local newspapers accept articles written by organizations when they do not have sufficient articles or stories to publish. Such releases are called as matte releases.
• Website Press Room: Public relations experts promote their organization and its products/services through online press rooms.
• Media Tour: Public relations experts publicize their organization and its products through media tour where key people of the organization travel to important places and locations and promote their products through various interviews to media people. They interact and share the benefits and USPs of their products/services with people from various news channels, radio channels and even print media. Organizations also hire celebrities or other people popular among the masses to promote and publicize their organization.
• Newsletters: Newsletters are nothing but publications which are distributed on a regular basis (monthly, quarterly) among target audiences. Public relations experts collect complete information (name, address, agegroup) of their target customers and distribute newsletters to create awareness about their products. Newsletters should include information about the organization, interview from key people, product information, testimonials from clients and so on.
• Events/Functions: Public relations experts organize special events, gatherings, parties, to target their customers and promote their organization and its products among them. People from media are also invited for coverage.
• Speaking Engagements: One of indirect ways of publicizing an organization and its products is through interacting with potential customers and target audience. Company officials address the target audience and do not only discuss about their products and services. They generally prefer any topic which would interest the target audiences.
• Employee interactions on a regular basis: It is really essential for employers to stay in constant touch with employees and keep them abreast with the latest developments and happenings within the organization. Management or public relations experts should circulate latest events, new product launches among employees through emails, circulars, notices or simply communicating with them.
• Charity/Corporate social responsibility: Public relations experts engage in various social and charitable activities to publicize their organization and its products. Organizations distribute products among target audiences to create a goodwill of their organization.

In any management practice, the functions of planning, staffing, directing and controlling are very crucial. Controlling is an important element of management and measuring and correcting of activities to assure that events conform to a marketing plan. It measures performance against goals and plans, shows where negative deviations exist and by putting in motion actions to correct deviations, helps assure accomplishment of plans.

Marketing control is a crucial function of marketing management. Using suitable controls, any deviation in marketing programmes and plans could be detected and corrected to direct it towards the marketing objectives and goals. Marketing control provides the means of testing whether desired goals and results are actually being achieved or not.

During planning of marketing programmes, the marketing objectives and targets are set and controls are used to check the implementation of marketing programmes and plans will lead to the set target and if not, then corrective action must be taken to ensure that at the end of the period, the actual performance of the marketing department and its activity is close to the desired results.

Marketing control is the most important task of the marketing department of a company. It is a control tool for ensuring that the marketing activities of company get directed towards its marketing objectives. According to Kotler, “Marketing control is the process of measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that marketing objectives are attained.”

Marketing control is a crucial part of the marketing job. It is the role for ensuring that the marketing programmes and activities of the firm are always directed toward its marketing objectives. Marketing control provides the means of testing whether the desired goals and results are being achieved or not. Inherent in the process is the assumption that the desired results are known beforehand. And knowing the desired results in advance, involves planning. In this sense, planning and control are closely interrelated.

Therefore, marketing control is defined, as the set of process that determines the deviation, if any, between the actual sales performance and the desired sales results and guides the marketing activity to the corrective action to achieve the desired marketing goals and objectives.

The actual performance may deviate from the desired performance due to many reasons including organisational factors and environmental factors. The marketing organisation will have to develop suitable strategy in terms of marketing mix programmes to counter environmental factors and necessary steps to correct any organisational factors.

Controlling may be defined as the process of analyzing actual operations and seeing that actual performance is guided towards expected performance. It involves comparing operating results with plans and taking corrective action when results deviate from plans. It is a mechanism by which someone or something is guided to follow the predetermined course. As a plan is put into operation, it becomes necessary to check results to find out whether the work is proceeding along the right lines. In case of any deviations, necessary corrective action is taken to ensure that in future the work proceeds in the desired manner.

According to Koontz and O’Donnell, “The managerial function of controlling is the measurement and correction of the performance of activities of subordinates in order to make sure that enterprise objectives and the plans devised to attain them are being accomplished.”

Concept of Control:

The essence of the concept is in determining whether the activity is achieving the desired results. In other words, the managerial function of control consists in a comparison of the actual performance with the planned performance with the object of discovering whether all is going on well according to plans.

Remedial action arising from a study of the deviations of the actual performance with the standard or planned performance will serve to correct the plans and make suitable changes in the process and structure of organisation, the staffing process and the process and techniques of direction. In this sense, the controlling function of management enables management to be self-corrective.

Nature of Control:

The main characteristics of the controlling function of management are given below:

1. Control can be exercised only with reference to and on the basis of plans.
2. The managerial functions cannot be completed effectively without performing the control function.
3. Control is in fact a follow-up action to the other functions of management.
4. It is an on-going process. That is, as long as an organisation exists, some sort of control is required.
5. Control is forward-working because past cannot be controlled.
6. Control is a process of measurement, comparison and verification.
7. The essence of control is action.
8. Control is dynamic and not static.
9. Control aims at preventing unacceptable or incorrect performance.
10. Control is a check-up measure. It comes in the end so as to ensure the proper implementation of plans. 

Relationship between Planning and Control:

Planning is the basis of control. Control implies the existence of certain standards against which actual results may be evaluated. Planning provides such standards. Where there is no plan there is no basis for control. Planning sets the course and control makes operations adhere to that course. Planning initiates the process of management, control completes the process. Without plans, control is blind for when one does not know where to go, one cannot judge whether one is on the right track or not.

Hicks stated that “Planning is clearly a pre-requisite for controlling. It is utterly foolish to think that controlling could be accomplished without planning. Without planning there is no pre-determined understanding of the desired performance.” Control makes planning a meaningful exercise just as planning provides the guidelines for control.

Planning is meaningless without control and control is aimless without planning. Planning and control are the inseparable, the twins of management. Unplanned actions cannot be controlled, for control involves keeping activities on course by correcting deviations from plans.

Planning is looking ahead and control is looking back. Planning is the determination of objectives, goals, strategies, policies, programmes of an organisation to give purpose and direction to the activities of the organisation over a specified period of time. It is anticipatory. It reduces confusion and uncertainty.

Control, on the other hand, is the direction of the operations of an enterprise towards pre-determined standards and monitoring the process in this regard for the purpose of correction and feed back. The purpose of control is to see that the structure and the pace of events in a business are conforming to plans.

All controls imply existence of goals and plans. No manager can ascertain whether his subordinates are operating in the desired way unless he has a plan. Control will be much better if the plans are more clear, complete and well coordinated and cover a long period. Without planning, there may be no control. Planning and controlling are inseparable functions of management. Planning and control are interrelated and interdependent.

Purpose of Control (Objectives):

A sound control system is needed for the following purposes:

1. Control reveals deficiency in planning: thus, plans and policies can be improved.
2. Control helps managers to discharge their responsibilities.
3. Control consists in verifying whether everything occurs in conformity with the plan adopted, the instruction issued and the principles established.
4. A sound control system not only reveals deviations but suggests -the corrective actions required to overcome the deficiencies.
5. Control keeps the subordinates under check and creates discipline among them.
6. Effective control ensures efficiency and effectiveness in the organisation.
7. A control system ensures the achievement of objectives.

Significance of Control (Benefits):

A good control system offers the following benefits:

1. A good control system provides timely information to management which is very useful in taking corrective actions. Control reveals deficiency in planning so that suitable action can be taken to improve plans and policies.
2. Control facilitates delegation and decentralization of authority. It helps to expand the span of supervision.
3. It forces the individuals to integrate their efforts and to work as a team for the achievement of standards.
4. It measures progress towards the goal and brings to light the adjustments, if any, required in day-to-day operations.
5. Control enables management to verify the quality of various plans. Control helps to review, revise and update the plans. Without an efficient control system even the best plans may not work out as expected.
6. Absence of control leads to a lowering of morale among employees because they cannot predict what will happen to them. They become the victims of the bias and repression of the superior.
7. According to Terry, “Controlling helps ensure that actions proceed according to plans, that proper direction, is taken, and that the various factors are maintained in their correct inter­relationships, so that adequate coordination is attained. “Control provides unity of direction.”
8. In the content of predetermined goals, control keeps all activities and efforts within their fixed boundaries and makes them to move towards common goals through co-ordinated directives.
9. An effective control system stimulates action by spotting the variations from the original plan highlighting them for the people who can set things right.
10. A person is likely to act according to plan, if he is aware that his performance will be evaluated against the planned targets. Therefore, he is more inclined to achieve the results according to the standards fixed for him.

Limitation of Control:

1. A firm cannot control the external factors-technological changes, changes in fashions, Government policies, social changes etc.
2. In some cases, standards of performance cannot be defined in quantitative terms, for example, human behaviours.
3. Control is a time-consuming and expensive process.
4. Control may not be acceptable to employees.

The control Process:

The process of control involves the following steps:

1. Fixation of Standard:

The first step in control process is the setting up of control standards. Standards represent the criteria against which actual performance is measured. Standards serve as the benchmarks because they reflect the desired results or acceptable level of performance.

2. Measurement of Performance:

After the fixation of standards, the actual performance of various individuals is measured. This involves setting up the methods of collecting accurate and up-to-date information on the progress of work. All measurements should be clear, comparable and reliable. Measurement of performance against standards should be on a future basis so that deviations are anticipated and necessary corrective actions are taken to prevent them.

3. Comparing Performance with Standards:

This refers to the comparison of the actual performance with the standards. It should be remembered here that appraisal of actual performance becomes quite easy if the standards are properly determined and methods of measuring performance are clearly stated. It is also important to note that while making appraisal of performance, the manager should concentrate mainly on those matters where major deviations are noticed.

4. Analysis of Deviations:

All deviations need not be brought to the notice of top management. A range of deviations should be established and only cases beyond this range should be reported. This is known as control by exception. When the deviation between standard and actual performance is beyond the prescribed limit, an analysis of deviations is made to identify the causes of deviations. Then the deviations and causes are reported to the managers who are authorized to take action.

5. Talking Corrective Action:

More reporting of actual performance or its comparison with pre­determined standards is not sufficient. Unless timely action is taken to adjust operations to standards, control process is incomplete. Corrective action may involve setting of new goals, change in organisation structure, and improvement in staffing and new techniques of directing.

Pre-Requisites of a good control system:

1. The objective and target must be clear.
2. The control system must be suitable.
3. The system should be easy to understand and operate.
4. Selection of tools and techniques must be proper.
5. There must be speedy feedback system.
6. There must be prompt reporting system of variances.
7. It must justify the expenses involved.
8. There must be a good system of corrective actions.
9. It must fix individual responsibility for the poor performance.
10. Controls, which are essential, should be given priority.

Marketing Controls:

There are several types of control available and the importance and purpose of these controls depend on the objectives for which these controls are to be used. All these controls have a common purpose, that is, monitoring the key result areas is marketing management. The key results are generally common for all marketing organisations.

Some of the important marketing controls commonly used are:

1. Annual Plan Control:

This is the most basic of all controls used in marketing organisations. The main purpose of this control is to monitor and take corrective action to examine whether planned sales results are being achieved. The responsibility for this lies with the marketing departmental head and all others in the top management.

2. Profitability Control:

Besides annual-plan control, companies carry on periodic research to determine the actual profitability of their different products, territories, customer groups, trade channels, order size etc. The task requires an ability to assign marketing and other costs to specific marketing entities and activities.

3. Efficiency Control:

Suppose a profitability analysis reveals that the company is earning poor profits in connection with certain products, territories or markets. The question is whether there are more efficient ways to manage the sales force, advertising, sales promotion. Distribution etc.

4. Strategic Control:

Organisations should examine critically their policies, objectives, marketing strategy, and competitive advantage and growth opportunities regularly so that their direction and growth and overall marketing effectiveness is not impaired or reduced. The scanning of marketing environment has become much more relevant and significant in view of uncertain’ economic conditions, fast changing technology, customer life-style, demographic changes etc.