Tag: Advanced Accounting B.com Notes

Human resource planning is a process that identifies current and future human resources needs for an organization to achieve its goals. Human resource planning should serve as a link between human resource management and the overall strategic plan of an organization. Ageing workers population in most western countries and growing demands for qualified workers in developing economies have underscored the importance of effective human resource planning.

As defined by Bulla and Scott, human resource planning is ‘the process for ensuring that the human resource requirements of an organization are identified and plans are made for satisfying those requirements’. Reilly defined (workforce planning) as: ‘A process in which an organization attempts to estimate the demand for labour and evaluate the size, nature and sources of supply which will be required to meet the demand. ‘ Human resource planning includes creating an employer brand, retention strategy, absence management strategy, flexibility strategy, (talent management) strategy, (recruitment) and selection strategy.

Businesses typically look three to five years ahead when formulating a strategic plan, and the process results in a document that articulates the company’s vision, mission, big-picture goals and the broad strategies it will use to reach those goals. This planning document is intended to guide leadership in its decision-making.

A key part of strategic planning is assessing the company’s resources. It’s easy for any company to dream big and have stratospheric ambitions, but what the company can realistically achieve is limited by the number and type of resources it has at its disposal. For most businesses, those resources fall into three main categories:

Technology resources: This includes all the equipment, processes and infrastructure the business uses to create the products and services that it brings to market.

Financial resources: Finance comprises all the liquid resources the company can use to carry out its business operations namely cash in hand, short-term and long-term bank deposits, liquid financial investments like stocks and bonds, and approved bank loans.

Human resources: This resource comprises the people whose talents, skills and personal characteristics the business can use to accomplish its strategic goals. While technology and money are important assets, human resources are the most important, because technology and money need people to manage them.

Implementation Stages

1. Assessing the current HR capacity

Develop a skills catalog for your employees so that you have a clear understanding of what your staff currently holds. This employee catalog should include everything from volunteer activities to certifications, of all degrees not just topics pertaining to their particular position. These catalogs can be assessed to deem whether or not an employee is ready to add more responsibility, or to forecast the employee’s future development plans.

2. Forecasting HR requirements

This step includes projecting what the HR needs for the future will be based on the strategic goals of the organization. Keep in mind you will need to also accommodate for external challenges that can affect your organization.

3. Gap Analysis

During this step you will observe where your organization is currently, and where you want to be in the future. You will identify things such as, the employee count, and the skills evaluation and compare it to what will be needed to achieve your future goal. During this phase you should also review your current HR practices and identify what you are doing that is useful and what you can add, that will help you achieve your goal.

4. Developing HR strategies to support the strategies of the organization.

There are 5 HR strategies that you can follow to meet your organizational goals.

• Restructuring strategies: This includes reducing staff, regrouping tasks to create well-designed jobs, and reorganizing work groups to perform more efficiently.
• Training and development strategies: This includes providing the current staff with training and development opportunities to encompass new roles in the organization
• Recruitment strategies: This includes recruiting new hires that already have the skills the organization will need in the future.
• Outsourcing strategies: This includes outreaching to external individuals or organizations to complete certain tasks.
• Collaboration strategies: This includes collaborating with other organizations to learn from how others do things, allow employees to gain skills and knowledge not previously available in their own organization.

Theories

Strategic human resource management

Strategic human resource management is “critical importance of human resources to strategy, organizational capability to adapt to change and the goals of the organization”. In other words, this is a strategy that intends to adapt the goals of an organization and is built off of other theories such as the contingency theory as well as institutional theory which fit under the umbrella of organizational theory. These theories look at the universalize, contingency and configuration perspectives to see the effect of human resource practices in organizations.

The universalize perspective says that there are better human resource practices than others and those should be adopted within organization while contingency says that human resource practices need to align with other organization practices or the organizations mission, and configuration perspective is based on how to combine multiple aspects of human resource practices with effectiveness or performance. This can also be viewed as how human resource practices fit vertically or horizontally in an organization. This theory also involves looking at the value of human capital as well as social capital both in and outside of organizations and how this affects human resource practices. Human capital being knowledge and skills of individuals working for the organization and social capital is based on the character and value of relationships in and out of the organization. “Colbert suggests that SHRM should focus on the interactions and processes of the organization’s social system the intentions, choices and actions of people in the system and on HR systems as a coherent whole.”

Resource dependency theory

Resource dependence theory which is the theory that organizations are not self-sustaining there they must depend on outside resources to stay functioning. “Resources and dependence could help to explain how HR practices evolve from the interaction between nonprofits and their environment, how they deploy employee skills, behaviors and how HR systems are managed.”

Managerial Judgement:

Managerial judgement technique is very common technique of demand forecasting. This approach is applied by small as well as large scale organisations. This technique involves two types of approaches i.e. ‘bottom-up approach’ and ‘top-down approach’. Under the ‘bottom-up approach’, line mangers send their departmental requirement of human resources to top management.

Executive or Managerial Judgment method is the most suitable for smaller enterprises because they do not afford to have work study technique. Under this method the executives sit together and determine the future manpower requirements of the enterprise and submit the proposal to the top management for approval. This approach is known as ‘bottom up’ approach.

Sometimes the members of top management sit together and determine the needs on the advice of personnel department. The forecasts so prepared sent for review to the departmental heads and after their consent approved the need. This is known as ‘top down’ approach. The best way is the combination of the two approaches. Executives at both levels equipped with guidelines sit together and determine the human resources need of the organization.

Top management ultimately forecasts the human resource requirement for the overall organisation on the basis of proposals of departmental heads. Under the Top-down approach’, top management forecasts the human resource requirement for the entire organisation and various departments. This information is supplied to various departmental heads for their review and approval. However, a combination of both the approaches i.e. ‘Participative Approach’ should be applied for demand forecasting. Under this approach, top management and departmental heads meet and decide about the future human resource requirement. So, demand of human resources can be forecasted with unanimity under this approach.

Ratio Trends Analysis:

Under this method the ratios are calculated for the past data related to number of employees of each category i.e. production, sales and marketing levels, work load levels. Future production and sales levels, work load, activity levels are estimated with an allowance of changes in organization, methods and jobs. The future ratios are estimated. Then future human resources requirement is calculated on the basis of established ratios. This method is easy to understand. Value depends upon accuracy of data.

Estimated production for next year = 1,40,000 units

Estimated no. of workers needed

(on the basis of ratio-trend of 1: 200) will be = 700

Regression Analysis:

This is similar to ratio-trend analysis in that forecast is based on the relationship between sales volume and employee size. However, regression analysis is more statistically sophisticated. A firm first draws a diagram depicting the relationship between sales and workforce size. It then calculates regression line – a line that cuts right through the center of the points on the diagram. By observing the regression line, one can find out number of employees required at each volume of sales.

Regression analysis is used to forecast demand for human resources at some point of time in future by using factors such as sales, production services provided etc. This method is used when independent and dependent variables are functionally related to each other. Nowadays computers are used to solve regression equations for demand forecasting.

Work Study Techniques

It is also known as work load analysis. Under this method the stock of workload and the continuity of operations are determined. Accordingly the labour requirement is determined. The workload becomes the base for workforce analysis for the forthcoming years. Here due consideration is given to absenteeism and labour turnover. This method is also known as work study technique. Here working capacity of each employee is calculated in terms of man-hours. Man-hours required for each unit is calculated and then number of required employees is calculated.

Work-study techniques can be used when it is possible to apply work measurement to calculate length of operations and the amount of labor required. The starting point in a manufacturing company is the production budget, prepared in terms of volumes of saleable products for the company as a whole, or volumes of output for individual departments.

The budgets of productive hours are then compiled using standard hours for direct labor. The standard hours per unit of output are then multiplied by the planned volume of units to be produced to give the total number of planned hours for the period. This is then divided by the number of actual working hours for an individual operator to show the number of operators required.

The example is given below:

(a) Planned annual production = 2, 00,000 units

(b) Standard man-hours required for each unit = 2 Hours

(c) Planned man-hour needed for the year (a x b) = 4, 00,000 hrs.

(d) Planned annual contribution of an employee = 2000 hrs.

(e) No. of employees required ————- (c/d) = 4, 00,000/2000 = 200

This method is useful for long term forecasting.

Delphi Technique

Delphi technique is also very important technique used for estimating demand of human resources. This technique takes into consideration human resources requirements given by a group of experts i.e. mangers. The human resource experts collect the manpower needs, summarises the various responses and prepare a report. This process is continued until all experts agree on estimated human resources requirement.

Delphi Technique Named after the ancient Greek Oracle at the city of Delphi, the Delphi technique is a method of forecasting personnel needs. It solicits estimates of personnel needs from a group of experts, usually managers. The human resource planning (HRP) experts act as intermediaries, summarize the various responses and report the findings back to the experts.

The experts are surveyed again after they receive this feedback. Summaries and surveys are repeated until the experts’ opinions begin to agree. The agreement reached is the forecast of the personnel needs. The distinguishing feature of the Delphi technique is the absence of interaction among experts.

Demand forecasting is a quantitative aspect of human resource planning. It is the process of estimating the future requirement of human resources of all kinds and types of the organisation.

Human resource (HR) demand forecasting is the process of estimating the future quantity and quality of people required. The basis of the forecast must be the annual budget and long-term corporate plan, translated into activity levels for each function and department. In a manufacturing company, the sales budget would be translated into a production plan giving the number and type of products to be produced in each period. From this information, the number of hours to be worked by each skilled category to make the quota for each period, would be computed. Once the hours are available, determining the quality and quantity of personnel will be the logical step.

HR Demand forecasting must consider several factors-both external as well as internal. Among the external factors are competition (foreign and domestic), economic climate, laws and regulatory bodies, changes in technology, and social factors. Internal factors include budget constraints, production levels, new products and services, organisational structure, and employee separations. Demand forecasting is common among organisations, though they may not do personnel-supply forecasting.

Factors:

(1) Employment trend in the organisation for at least last five years to be traced

to determine the future needs.

(2) Organisation has to find out the replacement needs due to retirement, death, resignation, termination etc.

(3) Improvement in productivity is yet another factor. To improve productivity organisation needs better employees with skills and potential. Productivity leads to growth but depends on the demands for the product of the enterprise in the market. Higher demand may lead to more employment of skilled personnel’s.

(4) Expansion of the organisation leads to hiring of more skilled persons. The base of human resource forecast is the annual budget. Manufacturing plan depends upon the budget. Expansion in production leads to more hiring of skills and technology.

1. Assessing Human Resources:

The assessment of HR begins with environmental analysis, under which the external (PEST) and internal (objectives, resources and structure) are analyzed to assess the currently available HR inventory level.

After the analysis of external and internal forces of the organization, it will be easier for HR manager to find out the internal strengths as well as weakness of the organization in one hand and opportunities and threats on the other. Moreover, it includes an inventory of the workers and skills already available within the organization and a comprehensive job analysis.

2. Demand Forecasting:

HR forecasting is the process of estimating demand for and supply of HR in an organization. Demand forecasting is a process of determining future needs for HR in terms of quantity and quality. It is done to meet the future personnel requirements of the organization to achieve the desired level of output.

Future human resource need can be estimated with the help of the organization’s current human resource situation and analysis of organizational plans and procedures. It will be necessary to perform a year-by-year analysis for every significant level and type.

3. Supply Forecasting:

Supply is another side of human resource assessment. It is concerned with the estimation of supply of manpower given the analysis of current resource and future availability of human resource in the organization. It estimates the future sources of HR that are likely to be available from within an outside the organization. Internal source includes promotion, transfer, job enlargement and enrichment, whereas external source includes recruitment of fresh candidates who are capable of performing well in the organization.

4. Matching Demand and Supply:

It is another step of human resource planning. It is concerned with bringing the forecast of future demand and supply of HR. The matching process refers to bring demand and supply in an equilibrium position so that shortages and over staffing position will be solved.

In case of shortages an organization has to hire more required number of employees. Conversely, in the case of over staffing it has to reduce the level of existing employment. Hence, it is concluded that this matching process gives knowledge about requirements and sources of HR.

5. Action Plan:

It is the last phase of human resource planning which is concerned with surplus and shortages of human resource. Under it, the HR plan is executed through the designation of different HR activities. The major activities which are required to execute the HR plan are recruitment, selection, placement, training and development, socialization etc.

Finally, this step is followed by control and evaluation of performance of HR to check whether the HR planning matches the HR objectives and policies. This action plan should be updated according to change in time and condition.

The selection tests aim at measuring such skills and abilities in a worker that are decided by job analysis to be essential for successful job performance. A test is an instrument designed to measure selected psychological factors.

The basic assumption underlies the use of tests in personnel selection is that the individuals are different in their job-related abilities and skills and that these skills can be adequately and accurately measured for comparison. A great number of human abilities are complex and interrelated. Hence, these have to be understood in association with each other.

Types

(a) Ability or Intelligence tests:

These tests are conducted to judge the mental capacity (intelligence), sensory capacity (vision and hearing), mechanical and clerical abilities of the candidates. “Tests of verbal and numerical ability, with questions on vocabulary, similarities, opposites, arithmetical calculations, etc. are referred to as intelligence tests.” A questionnaire is prepared with objective type questions evaluated through computers.

Knowledge and proficiency in language (English or Hindi) can also be tested through ability tests. People who score high on these tests have the ability to absorb, interpret and analyse business information quickly and perform well at work.

(b) Aptitude tests:

These tests judge the aptitude of a person to accept future jobs. They explore a person’s potential to perform present and potential organisational tasks. People differ in their ability to do certain tasks and aptitude tests measure this ability to explore their potential to work.

“Aptitude tests can measure specific abilities or aptitudes (for example, spatial ability, manual dexterity, numerical ability, verbal ability) and are used to gauge the person’s potential.” Every individual differs in his ability to perform organisational tasks and, therefore, these tests enable the manager to know the skills and competence of the candidates to work on the job.

(c) Personality tests:

Personality reflects emotional stability and competence to perform effectively at work. Personality tests judge personal traits of a person (their feelings, thought about work, risk taking, confidence etc.) and test his ability to perform the job.

Personality tests assume direct relationship between one or more of the personality factors and ability of a person to do certain jobs. After assessing personality, his personality profile is compared with standard profile relevant for the job.

(d) Performance tests:

These are on-the-job tests. The candidates perform the job for which they are being considered. They are also known as “in-tray” tests as candidates work on a representative sample of the work. The data entry operator, for example, may be asked to type a page to judge his proficiency in typing. Though these tests are costly, they help in selecting the most suitable candidate for the job.

Advantages of Test:

(i) Objective Assessment:

Tests provide better objective criteria than any other method. Subjectivity of every type is almost eliminated.

(ii) Proper Assessment:

Tests provide a basis for finding out the suitability of candidates for various jobs.

The mental capability, aptitude, liking and interests of the candidates enable the selectors to find out whether a person is suitable for the job for which he is a candidate.

(iii) Selection of Better Persons:

The aptitude, temperament and adjustability of candidates are determined with the help of tests. This enables their placement on the jobs where they will be most suitable. It will also improve their efficiency and job satisfaction.

(iv) Uniform Basis:

Tests provide a uniform basis for comparing the performance of applicants. Same tests are given to the candidates and their score will enable selectors to see their performance.

(v) Labour Turnover Reduced:

Proper selection of persons will also reduce labour turnover. If suitable persons are not selected, they may leave their job sooner or later. Tests are helpful in finding out the suitability of persons for the jobs. Interest tests will help in knowing the liking of applicants for different jobs. When a person gets a job according to his temperament and interest he would not leave it.

Limitations

(A) Tests cannot fully understand a candidate’s personality. At best, they can only differentiate between those who have scored above and below the cut off point. This limitation is, however, overcome by the proceedings of the further selection process.

(B) Some tests like lie detection tests are not advisable as they demoralize the candidates.

(C) Fear of Exposure:

Some persons may not submit to the tests for fear of exposure. They may be competent but may not like to be assessed through the tests. The enterprise may be deprived of the services of such personnel who are not willing to appear for the tests but are otherwise suitable for the concern.

(D) Tests are not always suitable measures of selection. A candidate may spoil his test but may still be suitable for the job.

(E) Wrong Use: The tests may not be properly used by the employees. Those persons who are conducting these tests may be biased towards certain persons. This will falsify the results of tests. Tests may also give unreliable results if used by incompetent persons.

Posting a job ad for a position that does not exist. There are a few reasons this may be done: to see what talent might be available in a potential new location; to attract passive candidates to build up a talent pipeline; to use up remaining postings in an expiring contract with an online jobs board, if only to collect resumes; to see if current employees will respond to a blind ad, indicating they are ready to jump ship; or to foster the idea that the company is growing and stable, rather than the opposite.

If, for any of these reasons, a job ad is posted when no open position actually exists, applicants, employees, clients and customers may be led to distrust the company or recruiter due to unethical practices. Reputations can be ruined quickly with a simple social media post; allowing only actual openings to be advertised will alleviate this risk.

Some ethical ways of researching talent availability in a new location include:

• Gathering demographic data. Do your research to find out about the education level, cost of living and unemployment rates in the area. The Bureau of Labor Statistics, local unemployment agencies and other government groups have this information available and will provide it at no cost.
• Talking to local business groups. The Chamber of Commerce, Rotary Club or other local business groups can provide information on the employment climate in the area you are considering.
• Reading local publications. These newspapers or journals can be a wealth of information, as they may discuss the local labor market or highlight growth or shrinkage among local industries. Review the sections in which the hiring and promotions of local employees are announced, to see where people are being hired and what types of positions are highlighted. Most of these sections also have listings of job openings in the area.
• Data mining resume databases. Sites like Monster or LinkedIn, where people can post resumes, will give you a good idea of talent availability in the local market. Use these resources not only to assess availability, but also to target top candidates if you choose to move forward.

Misrepresenting the duties or requirements of an open position. This generally occurs when a position is difficult to fill, or a recruiting quota needs to be met and desperation sets in. Promising more autonomy or authority than a position has can lead to an unhappy hire and even more cost to the employer when the new hire quickly leaves. The same holds true for hiring someone who is overqualified, or hiring someone who is underqualified and becomes overwhelmed and unproductive. To maintain ethical practices and integrity as a recruiter and for your company, be completely transparent with applicants about what the job they are applying for entails.

Unethical employee referral practices. While a popular and successful tool to hire quality candidates, employee referral programs can create ethical issues of which HR should be aware. These issues can arise when senior-level employees make a referral and expect a hire, regardless of merit; a referred candidate is hired, and there is a sense that the referring employee is indebted to the hiring manager for “doing him or her a favor”; and special interests, such as a client referral, carry weight over merit.

Unethical use of social media. There are certainly legal risks in discovering and using protected-status information (e.g., age, ethnicity or religion) against an applicant; there are also ethical concerns.

At its most flagrant, unethical behaviors include recruiters’ creating fake social media accounts to gain access to applicant profiles to mine private information about them and access their friends. Even when candidates are notified that you will be looking at their accounts and thus require them to provide social media passwords (not legal in some states), you’ve crossed a line into their private lives and accessed information that is not job-related and therefore should not be used against them. But what is seen cannot be unseen, so ethically and legally there are limits to using such information.

Some essential factors for businesses to consider for ethical recruiting:

• Never place misleading job advertisements: This includes misrepresenting the requirements of a particular position. It also refers to working conditions and the current or projected state of the organisation.
• Interview correctly to ensure proper matching: It is vital for agencies to interview candidates thoroughly to match them with the right job. This includes giving guidance to candidates and helping them understand the offer and its associated career implications.
• Treat all candidates equally: An important ethical factor, it is essential not to discriminate on the basis of gender, race, origin, religion or political views. Always review candidates based on their merits. It is critical for HR professionals to be honest, consistent and objective throughout the recruiting process.
• Solicit only information that is necessary: For instance, information like the city a candidate was born does not matter or have an impact when it comes to their ability to perform a certain role. Where they currently reside, however, does have implications of where they are able to commute to on a daily basis.
• Maintain confidentiality on the use and storage of candidate information: Confidentiality is essential. This includes obtaining the candidate’s consent to release their details to a specific client or for a specific position. Conduct yourself in a transparent fashion, ensuring that a candidate fully understands the possible risks involved if going to work for a competitor to their current employer.
• Never practice redirection: This is when a recruiter takes feedback from a hiring manager after a candidate’s interview and sends it to the candidate. If the candidate can address the hiring manager’s worries, it increases the likelihood that they’ll be chosen for the job and the recruiter will secure their fee. It may be effective, but it’s highly unethical.
• Inform candidates appropriately of the selection decision: Always let a candidate know within a specified and communicated time-frame whether they got the job or not. Do not leave them hanging.

Job redesign tailor’s employee positions to an organization’s current functions and needs.  During times of change, job redesign ensures that organizational needs are filled by proficient employees.  Job redesign can involve something as simple as adding a single job function, or it can be as complex as completely overhauling the position.

Job redesign can also involve the addition of new tasks to provide employees with variety and challenges.  This can contribute to increased employee satisfaction in workplace experience.  The process can also be purposed to holistically balance the tasks and abilities of a group of employees.

Restructuring the elements including tasks, duties and responsibilities of a specific job in order to make it more encouraging and inspiring for the employees or workers is known as job redesigning. The process includes revising, analyzing, altering, reforming and reshuffling the job-related content and dimensions to increase the variety of assignments and functions to motivate employees and make them feel as an important asset of the organization. The main objective of conducting job redesigning is to place the right person at the right job and get the maximum output while increasing their level of satisfaction.

Process

• Revising the Job Content: Job redesigning process involves recollecting and revising job-related information to determine the inconsistency between person and the job.
• Analyzing Job-related Information: Once the job analyst is through with recollecting and revising the job content, analyzing the discrepancies is the next step. It is done to determine the hindrances in performing job-related tasks and duties and investigate why an employee is not able to deliver the expected output.
• Altering the Job Elements: The next step is to amend the job elements. It may include cut back on extra responsibilities or addition of more functions and a higher degree of accountability. The basic aim of altering the job content is to design a job in such a manner that encourages employees to work harder and perform better.
• Reformation of Job Description and Specification: After altering the job elements, a job analyst needs to reform the job description and specification in order to make sure that the worker placed at a particular place is able to deliver what is expected of him.
• Reshuffling the Job-related Tasks and Duties: Next is to reallocation of new or altered tasks and functions to employees. It may be done by rotating, enriching, enlarging and engineering the job. The idea is to motivate the performers while increasing their satisfaction level.

Advantages

• Creates the best match between an employee’s abilities/experience and a position
• Establishes lean organizational efficiency
• Increases employee productivity and workplace satisfaction
• Increases employee retention
• Enhances the Quality of Work-Life: Job redesigning motivates the employees and enhances the quality of their work life. It increases their on-the-job productivity and encourages them to perform better.
• Increases Organization’s and Employees’ Productivity: Altering their job functions and duties makes employees much comfortable and adds to their satisfaction level. The unambiguous job responsibilities and tasks motivate them to work harder and give their best output. Not only this, it also results in increased productivity of an organization.
• Brings the Sense of Belongingness in Employees: Redesigning job and allowing employees to do what they are good at creates a sense of belongingness in them towards the organization. It is an effective strategy to retain the talent in the organization and encouraging them to carry out their responsibilities in a better fashion.
• Creates a Right Person-Job Fit: Job Redesigning plays an important role in creating a right person-job fit while harnessing the full potential of employees. It helps organization as well as employees in achieving their targets or goals.

Job redesign is an important part of optimizing an organization’s workforce, especially if:

• There has been a major shift in an organization’s use of technology.
• Employees are being transferred from one department to another.
• Employees are taking on additional job functions after organizational or departmental right-sizing.

In situations like those described above, the following process is most effective:

• Competency mapping of current employee functions
• Functional analysis of new employee functions
• Gap analysis of current and new employee functions
• Reassign job functions elsewhere, as necessary
• Identification of custom training to bridge the employee’s transition

As opposed to direct marketing, where advertisers send the same message to everyone and expect a large portion of those people to reject the message behavioral marketing takes online information and uses it to tailor the message to the user.

Behavioral targeting uses web analytics, computer applications and cookies, browsing and search history, and IP addresses, to create user profiles of individual consumers. With that information, the website’s ad server will then generate relevant and targeted content or advertisements that appeals to their interests.

Response rate is a measurement of the amount of people who respond to a certain call-to-action. When marketers want to solicit a response from consumers, they will distribute an offer to the consumers. The consumers who respond to the offer are calculated into the metric.

Measuring response rate has multiple applications in marketing, depending on the marketer’s need. The measurement could be based on the amount of people who responded to a marketing survey, the amount of people who filled out a contact form asking for information, or any other action that requires a response.

Marketers should actively encourage recipients to respond to the offers. Response rates that are too low can result in a sample bias, thus skewing the results and producing inaccurate results for marketers. Careful attention should be paid to eliminating any additional factors that might produce biased results.

Keep in mind that although response rate is a helpful metric to know, it can be misleading as well. Rates can vary dramatically depending on the demographics of an area, the relevance of the offer to the target market, and how compelling the offer is. In some cases, a high response rate can be related to unsatisfactory results, whereas a low rate could produce results that are very positive.

The rate of sales within a retail market is calculated by taking the value sales of the product, dividing by the average number of stores selling, multiplied with the numeric distribution, divided by the weighted distribution.

The calculation looks like this:

(Value Sales / average # of stores selling) * (numerical distribution / weighted distribution).

So, what does the rate of sales actually tell us? It tells us, as the name implies, the sales rotation of any given product(s), in a retailer, in a defined period of time such as moving annual total.

Manufacturers of FMCG products can for example use this fact to gauge whether or not a certain product is given the right amount of priority by a retailer.

It’s one thing to look at value sales on any given period and comparing this to the previous year or previous period to see if sales go up or down, but if we would like to know how a particular SKU is performing, irrespective of the distribution of the product within the retailer(s) (to a certain extent), we would also need to look at the sales rotation, i.e., how fast is this product actually selling when it’s on the shelf at a given retailer in a defined period of time. This can then in turn be used by the manufacturers to show which products should be prioritized from the retailer side, as a product with a higher rate of sales will all else being equal equate to higher sales and thus drive more value to the category.

It can also be used to measure the effectiveness of each retailer compared with each other to see who’s performing best and thus who should be given priority by the manufacturer.

Most of the largest online retailers and social-media sites already use behavioral marketing technique as do the companies that purchase ads from those sites. However, behavioral marketing isn’t only used purely to “sell you stuff.” By targeting ads to specific needs, companies can also provide goods and services that will not only fill consumer closets, but improve their quality of life. For example, a pharmaceutical company can create and implement advertising that encourages people to use and continue taking a new cancer or hyperactivity drug.

Because behavioral marketing is extremely targeted, this strategy doesn’t work as well with products that appeal to a more general audience. Additionally, because of the data being used, privacy issues and legislation to address those issues will affect the approaches used by marketers going forward. However, when used properly, behavioral targeting can be a very effective way to reach the right customers with the right products and services.