Rights and Duties of indemnifier

The rights of the indemnity-holder are the duties of indemnifier, and duties of the indemnity-holder are the rights of the indemnifier. Discharge of contract means the termination of a contractual relationship between parties. The indemnity contract essentially involves one party promising to make good for the loss of the other. These losses may arise either due to the conduct of the other party or due to someone else and the discharge of a contract means the termination of contractual obligations.

Parties to the contract of Indemnity

The contract of indemnity consists of two parties:

  • Promisor or Indemnifier: The person who promises to bear the loss. For eg: ‘P’ is the indemnifier or promisor because he promises to bear the loss of ‘Q’.
  • Promisee or Indemnity holder: The person whose loss is covered or who are compensated.

Essentials of Contract of Indemnity

  • Parties to a contract: There should be two parties, namely, promisor or indemnifior and promisee or indemnity or indemnity holder.
  • Loss Prevention: A contract of indemnity is entered into for the purpose of protecting against damage. Damage may be caused by the conduct of the promisor or any other person.
  • Express or implied: A contract of indemnity may be expressed (i.e. made by spoken or written words) or implied (i.e. from the conduct of the parties or circumstances of a particular case).
  • Essentials of a valid contract: A contract of indemnity is a special type of contract. The principles of common law of contract contained in Sections 1 to 75 of the Indian Contract Act, 1872 apply to them. Therefore, it must have all the essentials of a valid contract.
  • Number of contracts: In a contract of indemnity, there is only one contract which is between the Indemnifier and indemnified.

Rights of the Indemnity holder

  • Right to recover damages paid in a suit [Section 125 (1)]: An indemnity holder has the right to recover from the indemnifier which he may be obliged to pay in any suit in respect of the contract of Indemnity applies.
  • Right to recover cost incurred in defending a suit [Section 125(2)]: An Indemnity holder has the right to recover the cost incurred by him in defending a law suit in the court of law.
  • Right to recover amount paid under compromise [Section 125(3)]: An Indemnity holder has the right to recover the amount paid by him in any compromise under the suit from the Indemnifier.

Rights of Indemnifier

It is a well-known principle of law that where one person has agreed to compensate another, he will agree to do well for his losses, so Indemnifier has right to protect or reimburse himself in any way or means from the losses.

Duties of Indemnifier

The duties of an indemnifier arise in the following circumstances:

  • There must be a loss in accordance with the contract to make the indemnifier liable.
  • There must be an occurrence of the anticipated event. Without any occurrence of the prescribed event, there is no indemnity by the indemnifier.
  • Where the right of indemnity is used by the indemnity-holder prudently and the instruction of the indemnifier is not contravened or when there is no breach of contract.
  • If the costs demanded by the indemnifier are not caused by negligence, haphazard behaviour.

Duties of Indemnity holder = Rights of Indemnifier

Except as otherwise stated in the contract, the indemnifier shall not be liable for damages under the following circumstances. He is also called the duty of indemnity-holder.

  • Duty to Act Prudently: Except as otherwise stated in the contract, the indemnifier shall not be indemnified for the loss caused by the negligence of the indemnity holder. In other words, it is the duty of the indemnity-holder to act prudently.
  • Duty not to cause any harm or loss: If the indemnity-holder acts with the intention of causing any loss or damage, the indemnifier shall not be liable for such loss. In other words, it is the duty of the indemnity or holder not to cause harm or harm.
  • Duty to comply with the intentions of the Indemnifier: If the indemnity-holder acts against the instruction of the other party or the promisor, the indemnifier shall not be liable for such damages as the Indemnity holder goes beyond the instructions given by the Indemnifier. In other words, it is the duty of the indemnity-holder to follow the intent of the promoter.

Customer Retention, Features, Importance, Need, Process

Customer retention refers to the strategies and actions a business takes to keep its existing customers engaged and loyal over time. It involves creating positive customer experiences, providing exceptional service, and offering value that exceeds customers’ expectations, encouraging them to continue choosing the company’s products or services. Effective customer retention is crucial as it typically costs less to retain an existing customer than to acquire a new one. It also leads to increased lifetime value from customers, higher profitability, and can generate positive word-of-mouth that attracts new customers. Retention strategies may include personalized communication, loyalty programs, feedback loops, and continuous improvement of products or services based on customer needs and preferences. Focusing on customer retention helps businesses build a loyal customer base, ensuring stable revenue and long-term success.

Customer Retention Features:

  • Personalization:

Tailoring communication, offers, and services to meet the individual preferences and needs of customers, making them feel valued and understood.

  • Quality Product or Service:

Ensuring the product or service offered is of high quality, meets customer expectations, and delivers on its promises, leading to customer satisfaction and repeat purchases.

  • Customer Service Excellence:

Providing exceptional, responsive, and helpful customer service that resolves issues promptly, exceeds expectations, and builds trust.

  • Loyalty Programs:

Implementing programs that reward customers for their repeat business, such as points, discounts, or exclusive benefits, encouraging them to remain loyal.

  • Regular Communication:

Keeping in touch with customers through newsletters, updates, and personalized messages that keep them informed, engaged, and appreciated.

  • Feedback Loops:

Actively seeking, listening to, and acting on customer feedback to continuously improve products, services, and customer experiences.

  • Customer Engagement:

Creating opportunities for customers to interact with the brand beyond transactions, through social media, community events, or content, enhancing their connection to the brand.

  • Convenience:

Making it easy for customers to purchase, use, and get support for a product or service, thereby increasing their satisfaction and likelihood to remain loyal.

  • Value Proposition:

Continuously demonstrating the value of the product or service to the customer, ensuring they understand the benefits of remaining a customer over time.

  • Emotional Connection:

Building a brand that customers feel emotionally connected to, through shared values, stories, or experiences, making them more likely to stay loyal.

  • Customized Experiences:

Offering customized experiences based on customer data and insights, ensuring each interaction is relevant and meaningful.

  • Proactive Problem Solving:

Anticipating and addressing potential issues before they become problems for customers, demonstrating care and commitment to their satisfaction.

  • Transparency:

Being open and honest in all dealings, including pricing, policies, and procedures, which builds trust and loyalty.

  • Retention Analysis:

Regularly analyzing customer behavior, purchase patterns, and feedback to identify retention opportunities and risks.

  • Continuous Improvement:

Committing to ongoing enhancements of products, services, and customer experiences based on evolving customer needs and market trends.

Customer Retention Importance:

  • Cost Efficiency:

It is widely acknowledged that retaining an existing customer is significantly less expensive than acquiring a new one. The resources required for marketing, sales processes, and the acquisition of new customers far exceed those needed to keep current customers satisfied.

  • Increased Profitability:

Loyal customers tend to buy more over time as their relationship with the company strengthens. They are also less sensitive to price changes, contributing to higher profitability. According to various studies, increasing customer retention rates by just 5% can increase profits by 25% to 95%.

  • Revenue Stability:

A stable base of repeat customers provides a predictable and steady revenue stream. This stability is crucial for effective planning, investment, and growth strategies.

  • Word-of-Mouth Marketing:

Satisfied, loyal customers are more likely to recommend a brand to their friends and family. This word-of-mouth marketing is incredibly valuable, as it comes with a high level of trust and a low acquisition cost.

  • Feedback and Improvement:

Regular customers are more likely to provide valuable feedback, which can be crucial for continuous improvement. This feedback can help businesses innovate and stay ahead of market trends, ensuring they remain competitive.

  • Market Insights:

Retained customers can offer insights into market trends and customer preferences, enabling businesses to adapt their offerings and strategies effectively. This can lead to better product development and service enhancements tailored to customer needs.

  • Brand Advocacy:

Loyal customers often become brand advocates, promoting the brand through social media and other channels. This advocacy extends the reach of the brand’s marketing efforts and builds its reputation.

  • Reduced Sensitivity to Competition:

When customers are loyal to a brand, they are less likely to switch to a competitor, even in the face of aggressive pricing or marketing strategies. This loyalty acts as a barrier to entry for competitors and protects the company’s market share.

  • Enhanced Customer Lifetime Value (CLV):

By increasing the duration of the customer relationship, businesses enhance the lifetime value of each customer. A higher CLV means more revenue generated per customer, optimizing the return on investment in customer acquisition and retention efforts.

  • Emotional Connection:

Building an emotional connection with customers fosters loyalty, which is critical in today’s competitive market. Emotional connections can lead to a sense of belonging among customers, making them more likely to stay with a brand even when alternatives are available.

Customer Retention Need:

  • Financial Efficiency:

Acquiring new customers can be 5 to 25 times more expensive than retaining existing ones. Customer retention strategies are cost-effective, reducing the overall marketing and acquisition expenses while maximizing the return on investment.

  • Profitability:

Retained customers tend to spend more over time, contributing significantly to revenue. Studies have shown that increasing customer retention rates by even a small percentage can lead to a substantial increase in profits. This is because loyal customers are more likely to make repeat purchases and are less price-sensitive.

  • Predictable Revenue Stream:

A stable base of loyal customers provides a predictable and steady revenue stream. This reliability allows for better financial planning and risk management, as businesses can forecast future income with greater accuracy.

  • Enhanced Customer Lifetime Value (CLV):

Customer retention efforts increase the lifetime value of customers, as they continue to purchase over a longer period. This extended relationship not only boosts immediate sales but also enhances the overall contribution of each customer to the business’s financial health.

  • Word-of-Mouth Referrals:

Satisfied and loyal customers are more likely to recommend your brand to others, acting as brand ambassadors. This organic form of marketing is not only cost-effective but also highly credible, attracting new customers who already have a positive impression of your brand.

  • Feedback Loop for Improvement:

Regular customers provide valuable feedback that can drive continuous improvement and innovation. This insight allows businesses to refine their offerings and address issues promptly, maintaining a competitive edge.

  • Reduced Sensitivity to Competition:

When customers are loyal to a brand, they’re less likely to switch to competitors, even in response to price promotions or new offerings. Customer retention strengthens brand loyalty, creating a barrier against competitors.

  • Building Brand Equity:

Consistent positive experiences reinforce a brand’s reputation, contributing to stronger brand equity. Over time, this can elevate a brand’s position in the market, making it more attractive not just to potential customers but also to partners, investors, and talent.

  • Operational Stability:

A focus on customer retention can lead to more stable operations, as businesses can maintain a steady demand for their products or services. This stability supports efficient resource management, from inventory control to staffing.

  • Emotional Connection and Trust:

Developing a deep emotional connection and trust with customers ensures they feel valued and understood. This emotional investment makes customers more forgiving of mistakes and more open to new products or services from the brand.

Customer Retention Process:

  • Customer Onboarding:

The journey begins with a smooth and informative onboarding process that sets the tone for the customer’s relationship with the brand. Proper onboarding ensures customers understand how to get the most out of the product or service, reducing frustration and early churn.

  • Understanding Customer Needs and Expectations:

Collecting and analyzing data on customer preferences, behaviors, and feedback is crucial. This insight helps in tailoring experiences, products, and services to meet or exceed customer expectations.

  • Regular Communication:

Keeping the lines of communication open through personalized emails, newsletters, social media interactions, and other channels helps maintain a connection with the customer. Regular, relevant communication can keep customers informed, engaged, and appreciated.

  • Delivering Quality Customer Service:

Providing exceptional, responsive customer service is key to resolving issues promptly and maintaining customer satisfaction. This includes offering multiple channels for support and ensuring that customer service representatives are empathetic and efficient.

  • Creating a Loyalty Program:

Implementing a loyalty or rewards program can incentivize repeat purchases and deepen customer engagement. These programs should offer real value and be aligned with customer interests and behaviors.

  • Soliciting and Acting on Feedback:

Encouraging customers to share their opinions and suggestions, and then acting on that feedback, demonstrates that a business values its customers and is committed to continuous improvement.

  • Personalization:

Using customer data to personalize interactions, offers, and experiences can make customers feel valued and understood, increasing their loyalty to the brand.

  • Providing Value Beyond the Purchase:

Offering educational content, advice, and other resources that help customers achieve their goals can enhance the perceived value of a brand and strengthen customer relationships.

  • Engagement and Community Building:

Engaging customers through social media, events, and community forums can create a sense of belonging and loyalty. These platforms can also be used for exclusive offers, insider news, and direct customer interaction.

  • Monitoring and Measuring Retention:

Tracking key metrics such as customer retention rate, churn rate, customer lifetime value, and net promoter score (NPS) helps businesses understand the effectiveness of their retention strategies and make informed decisions.

  • Continuous Improvement:

The customer retention process is ongoing. Based on insights gathered from data and feedback, businesses should continually refine their strategies, products, services, and experiences to meet evolving customer needs.

Experience Management

Experience management is an effort by organizations to measure and improve the experiences they provide to customers as well as stakeholders like vendors, suppliers, employees, and shareholders. The concept posits the notion that experiences comprise distinct economic offerings that create economic value and competitive advantage.

Organizations have begun to collect experience data in addition to operational data, since experiences are seen as a competitive advantage. Experience management platforms provide various services to automate the process of identifying and improving experiences across an organization.

Broader than customer experience, experience management now encompasses customer experience along with other areas, such as brand experience, employee experience and product experience, which are all seen as interrelated.

Management

To create and manage the experiences, businesses must evaluate, implement, integrate, and build experiences from a fragmented landscape. Such needs are met by experience management platforms, which help automate the process of measuring and improving experiences across an organization by coordinating content, customer data and core services, and unifying marketing, commerce and service processes.

Experience management platforms compare multiple layers of data and statistics to enable organizations to identify any experience gaps. They connect operational databases with human feedback, analyzing respondents’ emotions, beliefs, and sentiments for a holistic view of the experiences they provide. Their methods include artificial intelligence, predictive analytics, and statistical models.

Other uses

While the term experience management is predominantly used in business, it has another meaning. It is used for a special kind of knowledge management that deals with collecting, modeling, storing, reusing, evaluating, and maintaining experience. In that sense, the term is interchangeable with expertise management.

Importance:

  • Global pandemic has shifted our world to online/virtual: Many of our day-to-day activities including work, shopping, communication, etc. are now done virtually using technology. That means a bad experience can easily result in loss of business. For example, employees that get frustrated from bad experiences at work may consider switching to a new job. Customers who can’t easily navigate your website or access the information they need, for example, will likely consider alternatives from another vendor.
  • Device and app proliferation: A constant increase in device models, OS versions, and applications had led to a more complex environment that organizations need to support. For example, IT needs to support a wide range of device and operating system (OS) combinations across their employee base. An app developer needs to make sure the app works on any device and any OS to retain and increase the customer base. And so on.
  • Consumerization of everything: The expectation for flexibility, choice, and ease of use that originated in consumer-originated technologies has expanded to other areas of our lives, including work style preferences and flexibility.

Working:

Measure: to effectively measure end-user experience, an organization should have the ability to capture both quantitative and qualitative data. Quantitative is normally data collected by systems like:

  • Endpoint management tools that capture data such as device health. For example, how much memory capacity is left on the device or what is the battery life status can impact user experience.
  • Application performance monitoring (APM) tools that capture app crashes, hangs, errors, etc. For example, have the ability to measure how long it takes to perform a single task. These tools also often track how users navigate an app and provide more information about user experience while in the app, such as how easy it is to checkout or identify where users typically drop.
  • Network monitoring tools track the availability, health, and performance of networks. There are many protocols for network monitoring that look at different aspects of network traffic.

In addition to quantitative data, organizations that want to manage experience also need to capture qualitative data to better understand the end-user sentiment and capture issues that might not come up otherwise. There are many surveying tools in the market to capture this data.

Analyze and Visualize: once the data is collected, organizations need a way to analyze and visualize the data, normally this is done through dashboards and reports. Some tools use machine learning models to provide additional, more advanced insights such as experience scores, or identifying when a KPI is outside a normal range. This enables organizations to get visibility into their environment and make data-driven decisions.

Troubleshoot: in case of an issue, organizations should proactively troubleshoot to find the root cause of the issue. In many cases, this is done manually which can be extremely time-consuming and often requires the end-user to be involved in this process. In many cases the amount of data is overwhelming and a more guided approach based on past experience can be useful, for example, in a case where the same issue has happened in the past with another user. Additionally, providing admins with more data in context to the issue at hand can speed up root cause analysis.

Remediation: once a root cause of an issue has been identified, the organization would want to fix it. In some cases, the issue can be solved by the user without intervention from the company, for example, a password reset. Ideally, organizations would want to leverage automation and self-service workflows as much as possible to cut down costs and improve the overall experience.

Organizations that are more advanced in their experience management journey would want to transition from reactive issue detection to a more proactive approach where they can identify issues before the end-user notices or their experience is impacted. Additionally, advanced organizations would provide end users with self-service options, providing more flexibility and reducing costs at the same time.

Features of experience management software

Ticket management

The software allows you to log all customer issues. You can use this data to identify customer needs. The platform avails customized automations and ticket routing.

Products and inventory

The management software has an integrated product data base for ease of tracking. You can identify the products people are buying more and associate particular products with specific customers.

Customer management

This feature allows you to analyze customer data. This includes their contacts, product preferences or locations.

Integration

Experience management software can integrate seamlessly with other business systems, eliminating duplication of effort and tasks. For example, integrating your experience management software with your CRM software enhances coordination, collaboration and productivity across your teams. The software integrates well with business systems thanks to the availability of APIs.

Customer Loyalty Concept, Principles, Significance and Dimensions

Customer Loyalty describes an ongoing emotional relationship between you and your customer, manifesting itself by how willing a customer is to engage with and repeatedly purchase from you versus your competitors. Loyalty is the byproduct of a customer’s positive experience with you and works to create trust.

Loyal customers

  • Purchase repeatedly
  • Use what they purchase
  • Interact with you through a variety of different channels
  • Are your biggest proponents, sending others to you and providing proactive (and reactive) positive feedback

Types:

People are loyal for various reasons, but it’s relatively easy to group them into six distinct loyalty categories.

  • Happy Customer

These customers like your products or services, have never complained, and probably have purchased from you numerous times. But your competitors can easily steal them: all it takes is a better deal, a discount, or the formation of a new relationship.

  • Price-loyal

These customers are with you only because of low prices. If they can save money elsewhere, they’ll leave. If you offer the best price again, they’ll return. It’s pretty easy to keep this type of customer, but at a tremendous cost.

  • Loyalty program-loyal

These customers are not loyal to your company or what you sell. They are loyal only to your loyalty program, and in many cases, only because your loyalty reward offers the best deal.

  • Convenience-loyal

This person is loyal only because your brand is easy to communicate with, easy to find, and easy to purchase from. A convenience-loyal customer isn’t swayed by price: Convenience is what keeps them with you.

  • Loyal to freebies

These customers are not drawn to your brand because of what you sell but because of other things you offer. Free Wi-Fi or infant changing tables or free inspections are some examples. Customers who are loyal to your freebies may buy from you only sporadically and don’t contribute heavily to your revenue stream.

  • Truly loyal

These are your customer advocates. They repeatedly purchase from you, talk about their great experiences with your company, and send their friends and family to you.

Principles

  • Always deliver excellence

You are not expected to be perfect, but your effort should always be excellent. When customers can depend on that, you will be rewarded with their loyalty.

  • Give to receive

Whether you are a restaurant that gives free breadsticks with every order or care service station that vacuums out carefully before you return the vehicle, go above the norm. When you give a little more, you receive a lot back in return.

  • Know your customer

It is so rare these days to be on a first-name basis with your dry cleaner, mail delivery person, or the teller at the bank. Take a minute to acknowledge people by knowing their names. That moment of relationship building will create a foundation for mutual loyalty.

  • Be accessible

Customers have far more faith in companies where they can actually reach a live body than companies that only have email and recorded messages. Make yourself accessible.

  • Reward loyalty

For customers and vendors that have been with you since the beginning, be sure to grandfather them in whenever possible when you make shifts to your business model.

  • Respond to customer feedback

If customers are willing to share their needs and wants, listen and respond. It’s a great way to show them you care.

  • Lead with service

The customer should want to come back because of the service they receive, not because of convenience or price. In fact, many people are willing to pay more for a better customer experience.

  • Know your business

Customers want to have confidence that you are an expert in what you are providing. So, make sure that you are.

  • Appreciate your employees and vendors

Your employees and your vendors are the lifeblood of your business. You are dependent upon both to keep your business running smoothly and for representing your company. Make sure both feel acknowledged and supported.

  • Maintain your principles

While loyalty requires some sacrifice and compromise, it should not come at the expense of your integrity. Be true to yourself and the mission of your company and you will engender loyalty.

Significance

  • Loyal Customers Keeps Marketing Costs Down

Repeat business is cheaper than new business. In fact, acquiring a new customer is as much as 25 times more expensive than keeping an existing one. Long-time customers don’t require the extensive marketing efforts that potential customers do. Yes, an advertised deal or coupon might bring a loyal customer into the store, but they were already on the way there to begin with. You can depend on loyal customers to choose your business over others, so carefully craft campaigns to acknowledge their commitment – don’t oversell the loyal base.

  • Loyal Customers Serve As Brand Advocates

Businesses can depend on their loyal customers to represent their brand. Loyal customers are knowledgeable about your product, experienced with the service you provide, and can be eager to talk about it. They serve as an unbiased source of information, no strings attached, which is even more convincing than your company’s marketing efforts. Brand advocates will bring you business, at no cost, simply through their recommendations. These leads aren’t just free, they are valuable: leads gained from advocates are 7 times more likely to convert than other leads.

  • Loyal Customers Leave Fantastic Reviews

Nothing is more meaningful than an online review containing the phrase, “I’ve been a customer for over a decade.” This speaks volumes about the kind of service your business has been providing consistently year after year. It demonstrates that your business values its customers and delivers a product worth going back to. This type of testimonial is the kind that wins over the 86% of consumers who read reviews. An easy way to double down on this value and further demonstrate how much you invest in your customers is by responding to these reviews in a meaningful way.

  • Loyal Customers Are More Likely To Buy Additional Products

Loyal customers come to your store regularly and fully trust the service you provide. With this trust already earned, it makes sense that they would try your other products. For example, customers who have had consistently great experiences with your sales team are more likely to give your service or parts department a chance. The proof is in the profit: existing customers spend an average of 67% more than first time customers. In fact, repeat customers make up only 8% of all customers but account for 40% of a company’s revenue. Loyal customers spend more money per visit than new customers, bringing us to number five.

  • More Loyal Customers Mean Higher Profits

The ultimate reason why loyal customers are vital to small businesses: they lead to more profits. Spending more money per visit to your store adds up over time, so much so that increasing customer retention by just 5% will increase profit by 25%.  The effort it takes to create loyal customers has a great return value, and this value means sustainability. Repeat customers provide the sturdy foundation your business needs to not only survive but flourish.

Assess your business plan and make sure you aren’t getting distracted by the allure of new customers. Remember to allocate enough time and money into building and retaining loyal customers. With the right balance, you can maintain a base of lifetime customers, save money, and grow your business.

Dimensions

  • Attitudinal Loyalty:

Can be described as customer’s attitude loyal or disloyal type behavior towards the product of interest. This type of attitude is constantly inclined towards continuous evaluation of competitor’s brands and the willingness to buy a product. However, this cannot be measured for obvious reasons, as we are unable to quantify the internal attitude of the customer when he/she buys our product or service.

  • Behavioral Loyalty:

On the other hand has been more useful to determine the actual mechanics and techniques of managing the relationship. In addition and more recently, loyalty has also been identified as Situational.

  • Situational Loyalty:

Has been defined as a dimension, that is measured on the basis of continuous and variety of purchases based on consumption situations. Word of mouth, intention of purchase etc could be used as examples here.

  • Cognitive Loyalty:

Is also a dimension, where a customer actually understands the entire process, consults with peer groups, compares products and services on offer and makes a decision.

  • Emotional Loyalty:

Another important dimension of loyalty, it is a result of customer’s feelings, interpersonal relationship with the employees of the company, expectations. These are developed through some sort of comfort which eventually builds trust and may also result in a long term friendship.

Demand Management

Demand management is a planning methodology used to forecast, plan for and manage the demand for products and services. This can be at macro-levels as in economics and at micro-levels within individual organizations. For example, at macro-levels, a government may influence interest rates to regulate financial demand. At the micro-level, a cellular service provider may provide free night and weekend use to reduce demand during peak hours.

Demand management has a defined set of processes, capabilities and recommended behaviors for companies that produce goods and services. Consumer electronics and goods companies often lead in the application of demand management practices to their demand chains; demand management outcomes are a reflection of policies and programs to influence demand as well as competition and options available to users and consumers. Effective demand management follows the concept of a “closed loop” where feedback from the results of the demand plans is fed back into the planning process to improve the predictability of outcomes. Many practices reflect elements of systems dynamics. Volatility is being recognized as significant an issue as the focus on variance of demand to plans and forecasts.

Macroeconomics

In macroeconomics, demand management it is the art or science of controlling aggregate demand to avoid a recession.

Demand management at the macroeconomic level involves the use of discretionary policy and is inspired by Keynesian economics, though today elements of it are part of the economic mainstream. The underlying idea is for the government to use tools like interest rates, taxation, and public expenditure to change key economic decisions like consumption, investment, the balance of trade, and public sector borrowing resulting in an ‘evening out’ of the business cycle. Demand management was widely adopted in the 1950s to 1970s, and was for a time successful. It caused the stagflation of the 1970s, which is considered to have been precipitated by the supply shock caused by the 1973 oil crisis.

Theoretical criticisms of demand management are that it relies on a long-run Phillips Curve for which there is no evidence, and that it produces dynamic inconsistency and can therefore be non-credible.

Today, most governments relatively limit interventions in demand management to tackling short-term crises, and rely on policies like independent central banks and fiscal policy rules to prevent long-run economic disruption.

Demand management as a business process

Demand management is both a stand-alone process and one that is integrated into sales and operations planning (S&OP) or integrated business planning (IBP).

Demand management in its most effective form has a broad definition well beyond just developing a “forecast” based on history supplemented by “market” or customer intelligence, and often left to the supply chain organization to interpret. Philip Kotler notes two key points:

1. Demand management is the responsibility of the marketing organization (in his definition sales is subset of marketing);

2. The demand “forecast” is the result of planned marketing efforts. Those planned efforts, not only should focus on stimulating demand, more importantly influencing demand so that a business’s objectives are achieved.

The components of effective demand management, identified by George Palmatier and Colleen Crum, are:

1. Planning demand;

2. Communicating demand;

3. Influencing demand

4. Prioritizing demand.

Demand control

Demand control is a principle of the overarching demand management process found in most manufacturing businesses. Demand control focuses on alignment of supply and demand when there is a sudden, unexpected shift in the demand plan. The shifts can occur when near-term demand becomes greater than supply, or when actual orders are less than the established demand plan. The result can lead to reactive decisions, which can have a negative impact of workloads, costs, and customer satisfaction.

Demand control creates synchronization across the sales, demand planning, and supply planning functions. Unlike typical monthly demand or supply planning reviews, demand control reviews occur at more frequent intervals (daily or weekly), which allows the organization to respond quickly and proactively to possible demand or supply imbalances.

Time fences

The demand control process requires that all functions agree on time fences within the planning horizon, which should be no less than a rolling 24 months based on integrated business planning best practices. A time fence is a decision point within a manufacturer’s planning horizon. Typically, three established time fences exist within a company:

  • Future planning zone: Supply is managed to match demand
  • Trading zone: Demand is managed to match supply for production
  • Firm zone: Demand is managed to match supply for procurement

Demand controller

A demand controller is established when a company implements a demand control process. Unlike a demand planner who focuses on long-term order management, the demand controller is responsible for short-term order management, focusing specifically when demand exceeds supply or demand appears to be less than planned, and engages sales management in both situations. The demand controller works across multiple functions involved in the supply and demand processes, including demand planning, supply planning, sales, and marketing.

Components

  • Modelling: It is the process of representing reality in a simplified way that allows us to understand and predict behavior. In other words, it is a means of understanding the past to anticipate the future better.
  • Demand Forecasting is the process of making predictions about future events based on past data. This data can come from many sources, including historical sales.
  • Demand planning: Making a demand plan requires the right tools, information, and operation. Depending on its strategic objectives, product positioning, and inventory needs, it may be different for each organization.
  • Supply Planning: It determines the correct quantity of materials, parts, and products to produce or procure to meet customer demand. It ensures that an organization has the proper inventory to meet customer demand while maximizing profits.

Advantages and Functionalities

Advantages

  • Helps to build a foundation for merchandising, budgeting, and logistics processes.
  • Monitor supplier transactions and check for growth or decline, respectively.
  • Monitor all related expenditures.
  • Build a strong relationship with customers and suppliers. Also, ensure that relationships last with reasonable pricing and other offers.
  • Allows you to boost supply chain operations.
  • It helps to create more revenues.

Functionalities

  • Point out the critical delivery dates.
  • Make out the future needs.
  • Point out the frequency of demand.
  • Link the requirement to the budget.
  • Based on past spending and future demands, analyze the expenditure.
  • It integrates with strategy, procurement, requirement, and market analysis.
  • In the case of strategic purchases, manages industry analysis and commodity analysis.

Demand management process

  1. Planning Demand

This process analyzes customer requirements in advance and forecasts IT resources.

Built primarily for IT administrators, this component analyzes, evaluates, and projects customers’ future requirements within an IT environment.

It uses statistical analysis, best practices, and current demand cycles to evaluate future customer needs.

It also serves as an input to capacity planning to provision required IT resources based on current and expected future demand.

  1. Communicating demand

Communicating demand is an essential component of demand management. Therefore, management will implement qualitative methods to forecast the market and share with the stakeholders.

Once the firm understands the demand, it is vital to make it known to several aspects of the business to ensure they leverage the production accordingly.

  1. Influence demand

As part of supply chain management (SCM), Businesses should focus on retaining customers, service levels, and supplier relationships.

Companies should build additional policies to face sudden changes in demand and supply.

  1. Prioritizing demand

Identifying and prioritizing projects forms an essential part of the demand management process.

Organizational capacity, risk assessment, financial value, and implications must be carefully assessed while forming policies.

Challenges

While implementing demand management faces some fundamental challenges. They are

  • Lack of knowledge about automated algorithms.
  • Maintaining balance for sales and retailers to generate demand design to find the timing, level, and location.
  • Lack of organized data structure for receiving, storing, and retrieving the point of sale information from retailers.

Factors that affect demand

Many factors will influence demand. Here I am listing a few factors.

External factors

  • Market situations: It is a significant factor that directly affects the demand for example, recessions and strikes.
  • Competitor’s step: If your competitor starts giving the same product or services with good quality at less price, then there will be a chance of a sudden reduction of demand for your product or service.
  • Seasonality: Some products’ demand increases or decreases depending on seasons. For example, ice cream, woolen cloths, umbrellas, school bags, etc.
  • Trends: Market trend is one of the major factors that increases or decreases demand.

Internal factors

  • Pricing approach
  • Maintenance
  • Customer relationship
  • Promotion and advertisement for products/services
  • Product alteration

Demand management vs demand planning

Demand Management Demand Planning
It is the process of understanding, anticipating, and managing customer demand. It is designing and building a plan to meet desired customer demand at a minimal cost.
It includes forecasting future demand, setting targets for meeting that demand, and taking steps to ensure that the necessary supplies are available when customers want them. It usually includes determining what products to make, how much of each product to make, when to make them, and where to make them.
Considers customer demand in the short term Considers customer demand in the long term

Coping with emerging and instant situations

Benefits

This is part of why emotion-focused coping can be quite valuable—shifting how we experience potential stressors in our lives can reduce their negative impact. With emotion-focused coping, we don’t need to wait for our lives to change or work on changing the inevitable.

We can simply find ways to accept what we face right now, and not let it bother us. This can cut down on chronic stress, as it gives the body a chance to recover from what might otherwise be too-high levels of stress.

Another advantage of emotion-focused coping is that it allows us to think more clearly and access solutions that may not be available if we are feeling overwhelmed. Because stressed people do not always make the most effective decisions, emotion-focused coping can be a strategy to get into a better frame of mind before working on problem-focused techniques.

In this way, emotion-focused coping can help with both emotions and solutions. And the two types of coping strategies work well together in this way. While problem-focused strategies need to fit well with the specific stressors they are addressing, emotion-focused coping techniques work well with most stressors and need only fit the individual needs of the person using them.

Meditation

Meditation can help you to separate yourself from your thoughts as you react to stress. So, you can stand back and choose a response rather than react out of panic or fear.

Meditation also allows you to relax your body, which can reverse your stress response as well. Those who practice meditation tend to be less reactive to stress, too, so meditation is well worth the effort it takes to practice.

Reframing

Cognitive reframing allows you to shift the way you see a problem, which can actually make the difference between whether or not you feel stressed by facing it. Reframing techniques aren’t about “tricking yourself out of being stressed,” or pretending your stressors don’t exist; reframing is more about seeing solutions, benefits, and new perspectives.

Journaling

Journaling allows you to manage emotions in several ways. It can provide an emotional outlet for stressful feelings. It also can enable you to brainstorm solutions to problems you face.

Journaling also helps you to cultivate more positive feelings, which can help you to feel less stressed. It also brings other benefits for wellness and stress management, making it a great emotion-focused coping technique.

Positive Thinking

Being an optimist involves specific ways of perceiving problems ways that maximize your power in a situation, and keep you in touch with your options. Both of these things can reduce your experience of stress, and help you to feel empowered in situations that might otherwise overwhelm you.

Cognitive Distortions

Recognizing the way the mind might naturally alter what we see, what we tell ourselves about what we are experiencing, and the ways in which we may unknowingly contribute to our own problems can allow us to change these patterns. Become aware of common cognitive distortions, and you’ll be able to catch yourself when you do this, and will be able to recognize and understand when others may be doing it as well.

Stages of Reacting to Change

Change can be difficult because it can challenge how we think, how we work, the quality of our relationships, and even our physical security or sense of identity. We usually react to change in four stages:

  • Shock and disorientation.
  • Anger and other emotional responses.
  • Coming to terms with the “New normal.”
  • Acceptance and moving forward.

But our progression through these stages is rarely simple or linear. We might get stuck in one stage, or advance quickly but then regress. And there’s often no clear-cut, decisive move from one stage to another. Shock can change to anger, for example, with no obvious break between the two.

Stage 1: Shock and Disorientation

Experiencing a sudden, big change can feel like a physical blow. For example, a global financial crisis may result in significant losses and redundancies. This may sweep away roles and relationships that you’ve cultivated for years, leading to instability. Or, a sudden bereavement or health issue may change your fundamental outlook on life.

In the initial stage of coping, you’ll likely feel confused and uncertain. Your first priority should be to seek reliable information and to make sense of the situation.

Stage 2: Anger and Other Emotional Responses

Initial disorientation at the prospect of change usually gives way to a wave of strong emotions. You might be angry about a downgrade of your role, or fearful about the impact that a layoff will have on your family.

Even if the change in your circumstances is something that you’ve instigated yourself, you may find yourself swinging between optimism and pessimism. This is quite natural, and it’s a normal step on the way to resolving your situation.

It’s important to avoid suppressing your emotions, but it’s equally key to manage them. So, acknowledge the way you feel, but be sure to assess what you can express openly (such as general comments about a project’s progress) and what you should probably keep to yourself (opinions about a colleague’s performance, for example).

Stage 3: Coming to Terms with the “New Normal

During this stage, your focus will likely start to shift away from what you’ve lost and toward what’s new. This process may be slow, and you might be reluctant to acknowledge it, but it’s an essential part of coping with change. The key here is to make a commitment to move on.

Start to explore more deeply what the change means. Your instinct may be to behave resentfully and to be unwilling to cooperate, but this may cause yourself and others harm. So, search for and emphasize the positive aspects of your developing situation. At the same time, is patient. Remember, coming to terms with change is a gradual process.

Installment System, Meaning, Features

The monthly or period payment in installment purchase is termed an installment whereas, in hire purchase arrangement, it is called hire charges. Installment derives its value from the length of time, the sale value of an asset, and the interest rate. In contrast, the hire charges are a function of two additional factors, viz. option of termination and repairs and maintenance. Ideally, the installment should be less than the hire charges for the same asset. Therefore, hire purchase is an expensive system compared to installment purchase.

Features

  • The buyer makes the payment in different installment over a period of time as agrees upon in the agreement.
  • Installment purchase system is just like an outright credit sale of goods.
  • Under installment purchase system, the buyer gets the immediate possession as well as the ownership of goods.
  • The seller cannot responses the good if the buyer made default in the payment of installment but he/she can sue against the buyer for the recovery of amount due.
  • In case of default in the payment of installment, the total amount of installments already paid by the buyer cannot be forfeited.
  • Risk of goods/assets are to be borne by the buyer just after signing the agreement.
  • Under installment system, the buyer can sell or mortgage the goods even before clearing all the installments.
  • The buyer of the goods under installment purchase system has no right to return the goods to the seller.

Risk, Repair, and Maintenance related to Asset

In hire purchase, all the risks are borne by the financing company until the hirer’s last payment because it is the official owner of the asset till that time. In installment purchases, the risks are borne by the buyer from day one. Similarly, repair and maintenance is the headache of the financier in the case of hire purchase and the buyer in case of an installment purchase.

Right to Sell or Transfer

The owner of the assets always exercises the right to sell or transfer. In the case of hire purchase, this right lies with the financing company or seller as the case may be because they are the owners of the asset. In the case of an installment purchase, it is with the buyer because he becomes the owner on the day he signs the agreement.

The default of Installment/Hire Charges

When a hirer defaults in the payment of hire charges, the financier has the right to forfeit the money paid till that date and take back possession of the goods. Whereas in installment purchase, the installment paid are not forfeited, and the financier is liable to receive the remaining dues.

Attitude and Behaviour

Attitude

Attitude refers to the standpoint, or the stance one has towards something or someone. Therefore, they are judgments or opinions about a certain subject matter or a person. These standpoints or opinions are formed based on that person’s values and emotions. In brief, attitudes are the personal responses to certain things according to that person’s preference.

Accordingly, several factors such as a person’s life experiences, values, moral attributes, and living environment (family, society) directly influence their attitudes to particular subject matters or persons. More importantly, attitudes differ from one individual to another and from one subject matter to another.

A person’s attitude can be positive, negative or neutral views, which shows one’s likes and dislikes for someone or something. So, the type of attitude we carry, speaks a lot about us, as we get into that mood and transmits a message to the people around us. There is no such thing like ideal attitude, for a particular situation as it is spontaneous and so we always have a choice to opt the right attitude for us.

There is a direct relationship between attitude and behavior. It is evident from the ABC model of attitudes, which describes the components of individual attitudes.

Affective: Refers to the part of the attitude that drives a person’s feelings

Behavioral: Refers to the behavior a person shows or how one reacts with accordance to their attitude in a particular situation

Cognitive: Refers to a person’s opinion, beliefs or thought about a subject matter or a person.

Behavior

Behavior is the way in which one acts or conducts oneself, especially towards others. Hence, behavior comprises of our actions with concern to the interactions or the relationships we maintain with the external environment. Moreover, a person’s actions and conduct is defined as ‘human behavior’. Human behavior can be of two main categories as innate behavior and learned behavior.

Furthermore, behavior can be described as our immediate response to external stimuli. And, this can be voluntary or involuntary, or conscious or unconscious. Similarly, by proper scrutiny of someone’s behavior, we can deduce a lot of facts about that person’s character and personality.

Thus, several main factors influence the behavior of a person; some of these factors include their surrounding (either they like that surrounding or not), their biology (the physical and mental wellbeing), and their psychological attributes (such as character traits, attitudes etc.).

In short, behavior is an individual or group reaction to inputs such as an action, environment or stimulus which can be internal or external, voluntary or involuntary, conscious or subconscious.

Attitude

Behavior

Meaning Attitude refers to a person’s mental view, regarding the way he/she thinks or feels about someone or something. Behavior implies the actions, moves, conduct or functions of an individual or group towards other persons.
Based on Experience and observation Situation
Trait Human Inborn
What is it? A person’s mindset. Outward expression of attitude.
Reflects What you think or feel? What you do?
Defined by Way we perceive things. Social Norms

Characteristics of Attitude

An attitude is a positive, negative, or mixed evaluation of an object that is expressed at some level of intensity. Our attitude can vary in strength along both positive effect, and with negative effect, with ambivalence or with apathy and indifference. It usually implies feelings that are either positive or negative. Social psychologists use the term attitude differently. Gordon Allport formulated the following definition: “An altitude is a mental and neural stale of readiness, organized through experience, exerting a directive or dynamic influence upon the individual’s response to ill objects and situations with which it is related.”

“Attitude as an enduring organization of motivational, emotional, perceptual and cognitive processes with respect to some aspect of the individual’s world.”

Krech and Crutchfield

“Attitude is a mental and neutral state of readiness organized through experience, exerting a directive or dynamic influence upon individual’s response to all objects and situations with which it is related.”

G.W. Allport

Character

Attitude are predispositions

Attitude are predispositions of purpose, interest or opinion of the person to assess some objects in a favourable or an unfavourable manner.

Attitude are different from values

Attitude are different from values: Values are the ideals, whereas attitudes are narrow, they are our feelings.

Attitude are evaluative statement

Attitude are evaluative statements: either favourable or unfavourable concerning the objects, people or events.

Attitude influence human behavior

A positive attitude towards a thing will influence human behavior towards the thing favorably and vice-versa.

Attitude have intensity

It refers to the strength of the effective component. For example, we may dislike an individual but the extent of our disliking would determine the intensity of our attitude towards the person.

Attitude are learnt

Attitude is not inborn phenomenon. Attitudes are learnt through social interaction and experience.

Functions of Attitude

Four important functions of attitude which are crucial in organizational behavior viewpoint are:

  • Adjustment Function
  • Ego-Defensive Function
  • Value-Expressive Function
  • Knowledge Function

Adjustment Function

Attitudes often help individuals to adjust to their work environment.

Consumers hold certain brand attitudes partly because of the brand utility. If a product has helped us in the past even in a small way, our attitude towards it tends to be favorable. One way of changing attitude in favor of a product is by showing people that it can solve utilitarian goals. They may not have considered some advertisement which stresses the utilitarian benefits of a product.

Ego-Defensive Function

Consumers want to protect their self concept from inner feelings of doubt. Cosmetic and personal hygiene products, by acknowledging this need, increase their relevance to the consumer and have the possibility of a favorable attitude by offering reassurance to the consumers self concept.

Value-Expressive Function

Attitudes are one expression of general values, lifestyles, and outlook. If a consumer segment generally holds a positive attitude towards being in a fashion segment, consumer may treat high fashion clothing and accessories as symbols of that lifestyle.

Knowledge Function

Attitudes provide frames of reference or standard that allow individuals to understand and perceive the world around him. Individuals have a strong need to know and understand the people and things with whom they come in contact, especially if they think they might influence their behavior.

Example, If a student has a strong negative attitude towards the college, whatever the college does, the student will be perceived as something ‘bad’ and as actually against them.

Perceptual Mechanism

Perceptual Inputs:

A number of stimuli are constantly confronting people in the form of information, objects, events, people etc. in the environment. These serve as the inputs of the perceptual process. A few of the stimuli affecting the senses are the noise of the air coolers, the sound of other people talking and moving, outside noises from the vehicular traffic or a street repair shop or a loud speaker playing somewhere plus the impact of the total environmental situation. Some stimuli do not affect the senses of a person consciously, a process called subliminal perception.

Perceptual Mechanism:

When a person receives information, he tries to process it through the following sub processes of selection, organisation and interpretation.

(A) Perceptual Selectivity:

Many things are taking place in the environment simultaneously. However, one cannot pay equal attention to all these things, thus the need of perceptual selectivity. Perceptual selectivity refers to the tendency to select certain objects from the environment for attention. The objects which are selected are those which are relevant and appropriate for an individual or those which are consistent with our existing beliefs, values and needs. For this, we need to screen or filter out most of them so that we may deal with the important or relevant ones.

The following factors govern the selection of stimuli:

(i) External Factors

(ii) Internal Factors

Various external and internal factors which affect our selection process are as explained below:

(i) External Factors:

(a) Size:

The bigger the size of the stimulus, the higher is the probability that it is perceived. Size always attracts the attention, because it establishes dominance. The size may be the height or weight of an individual, sign board of a shop, or the space devoted to an advertisement in the newspaper. A very tall person will always stand out in the crowd on the other hand; a very short person will also attract attention. A full page advertisement will always catch attention as compared to a few lines in the classified section.

(b) Intensity:

Intensity attracts to increase the selective perception. A few examples of intensity are yelling or whispering, very bright colours, very bright or very dim lights. Intensity will also include behavioural intensity. If the office order says “Report to the boss immediately,” it will be more intense and effective as compared to the office order which says “Make it convenient to meet the boss today.”

(c) Repetition:

The repetition principle states that a repeated external stimulus is more attention drawing than a single one. Because of this principle, supervisors make it a point to give the necessary directions again and again to the workers. Similarly, the same advertisement or different advertisement but for the same product shown, again and again on the TV will have more attention as compared to an advertisement which is shown once a day.

(d) Status:

High status people ran exerts greater influence on the perception of the employees than the low status people. There will always be different reactions to the orders given by the foreman, the supervisor or the production manager.

(e) Contrast:

An object which contrasts with the surrounding environment is more likely to be noticed than the object which blends in the environment. For example, the Exit signs in the cinema halls which have red lettering on a black background are attention drawing or a warning sign in a factory, such as Danger, written in black against a red or yellow background will be easily noticeable. In a room if there are twenty men and one woman, the woman will be noticed first because of the contrast.

(f) Movement:

The principle of motion states that a moving object receives more attention than an object which is standing still. A moving car among the parked cars catches our attention faster. A flashing neon-sign is more easily noticed.

(g) Novelty and Familiarity:

This principle states that either a novel or a familiar external situation can serve as an attention getter. New objects in the familiar settings or familiar objects in new settings will draw the attention of the perceiver. A familiar face on a crowded railway platform will immediately catch attention. Because of this principle, the managers change the workers jobs from time to time, because it will increase the attention they give to their jobs.

(h) Nature:

By nature we mean, whether the object is visual or auditory and whether it involves pictures, people or animals. It is well known that pictures attract more attention than words. Video attracts more attention than still pictures. A picture with human beings attracts more attention than a picture with animals.

(ii) Internal Factors:

The internal factors relate to the perceiver. Perceiving people is very important for a manager, because behaviour occurs as a result of behaviour.

Following are the internal factors which affect perception:

  1. Learning:

Although interrelated with other internal factors learning may play the single biggest role in developing perceptual set. A perceptual set is basically what a person expects from the stimuli on the basis of his learning and experience relative to same or similar stimuli. This perceptual set is also known as cognitive awareness by which the mind organizes information and forms images and compares them with previous exposures to similar stimuli. A number of illustrations have been used by psychologists to demonstrate the impact of learning on perception.

Some are as explained below:

(i) Learning creates an expectancy in an individual and expectancy makes him see what he wants to see.

  1. Motivation:

Besides the learning aspects of the perceptual set, motivation also has a vital impact on perceptual selectivity. For example, a person who has a relatively high need for power, affiliation or achievement will be more attentive to the relevant situational variables. For example, when such a person walks into the lunch room, he may go to the table where several of his co-workers are sitting, rather than a table which is empty or on which just one person is sitting.

Another example is that a hungry person will be more sensitive to the smell or sight of food than a non-hungry person. In one experiment people who were kept hungry for some time were shown some pictures and were asked to describe what they saw in them. Most of the reported more food items in such perceptions.

Personality.

Closely related to learning and motivation is the personality of the perceiving person. For example, the older senior executives often complain about the inability of the new young manager to take tough decisions concerning terminating or reassigning people and paying attention to details and paper work. The young managers, in turn, complain about the ‘old guards’ resisting change and using paper and rules as ends in themselves. Different perceptions in young and old are due to their age differences. Further, the generation gap witnessed in recent years definitely contributes to different perceptions.

In addition to the above two problems another problem is about the woman in the work place. Women are still not reaching the top levels of organisations. At least part of this problem can be attributed to perceptual barriers such as the established managerial hierarchy is not able to see (perceive) that qualified woman should be promoted into top level positions. Of course, there are individual differences in all age categories but the above examples show that how personalities, values and even age may affect the way people perceive the world around them.

  1. Perceptual Organisation:

After having selectively absorbed the data from the range of stimuli we are exposed to at any given time, we then try to organize the perceptual inputs in such a manner that would facilitate us to extract meaning out of what we perceive. Or in other words, person’s perceptual process organizes the incoming information into a meaningful whole. While selection is a subjective process, organizing is a cognitive process.

How we organize the stimuli is primarily based on the following principles:

(i) Figure and Ground:

Figure-Ground principle is generally considered to be the most basic form of perceptual organisation. This principle simply implies that the perceived object or person or event stands out distinct from its back ground and occupies the cognitive space of the individual. For example, as you read this page, you see white as the background and black as the letters or words to be read. You do not try to understand what the white spaces amidst the black letters could mean.

Likewise, in the organisational setting, some people are more noticed or stand out than others. For example, an individual in the organisation might try to focus his entire attention on his immediate supervisor, trying to be in his good books, completely ignoring his colleagues and how they feel about his behaviour. According to this principle, thus, the perceiver tends to organize only the information which stands out in the environment which seems to be significant to the individual.

(ii) Perceptual Grouping:

Grouping is the tendency to curb individual stimuli into meaningful patterns. For instance, if we perceive objects or people with similar characteristics, we tend to group them together and this organizing mechanism helps us to deal with information in an efficient way rather than getting bogged down and confused with so many details. This tendency of grouping is very basic in nature and largely seems to be inborn.

Some of the factors underlying his grouping are:

(a) Similarity:

The principle of similarity states that the greater the similarity of the stimuli, the greater the tendency to perceive them as a common group. The principle of similarity is exemplified when objects of similar shape, size or colour tend to be grouped together. For example, if all visitors to a plant are required to wear white hats while the supervisors wear blue hats, the workers can identify all the white hats as the group of visitors. Another example is our general tendency to perceive minority and women employees as a single group.

(b) Proximity:

The principle of proximity or nearness states that a group of stimuli that are close together will be perceived as a whole pattern of parts belonging together. For example, several people working on a machine will be considered as a single group so that if the productivity on that particular machine is low, then the entire group will be considered responsible even though, only some people in the group may be inefficient. The following figure demonstrates the proximity principle.

(c) Closure:

The principle of closure relates to the tendencies of the people to perceive objects as a whole, even when some parts of the object are missing. The person’s perceptual process will close the gaps that are unfilled from sensory input.

(d) Continuity:

Continuity is closely related to closure. But there is a difference. Closure supplies missing stimuli, whereas the continuity principle says that a person will tend to perceive continuous lines of pattern. The continuity may lead to inflexible or non creative thinking on the part of the organisational participants. Only the obvious patterns or relationships will be perceived. Because of this type of perception, the inflexible managers may require that employers follow a set and step by step routine leaving no ground for implementation of out of line innovative ideas.

(iii) Perceptual Constancy:

Constancy is one of the more sophisticated forms of perceptual organisation. This concept gives a person a sense of stability in this changing world. This principle permits the individuals to have some constancy or stability in a tremendously variable and highly complex world. If constancy were not at work, the world would be very chaotic and dis-organised for the individual.

There are several aspects of constancy:

(a) Shape Constancy:

Whenever an object appears to maintain its shape despite marked changes in the retinal image e.g. the top of a glass bottle is seen as circular whether we view it from the side or from the top.

(b) Size Constancy:

The size constancy refers to the fact that as an object is moved farther away from us we tend to see it as more or less un-variant in size. For example, the players in cricket field on the opposite side of the field do not look smaller than those closer to you even though their images on the retina of the eye are much smaller.

(c) Colour Constancy:

Colour constancy implies that familiar objects are perceived to be of the same colour in varied conditions. The owner of a red car sees it as red in the bright sunlight as well as in dim twilight. Without perceptual constancy the size, shape and colour of objects would change as the worker moved about and it would make the job almost impossible.

(iv) Perceptual Context:

The highest and most sophisticated forms of organisation are context. It gives meaning and value to simple stimuli, objects, events, situations and other persons in the environment. The organisational structure and culture provide the primary context in which workers and managers do their perceiving. For example, a verbal order, a new policy, a pat on the back, a raised eye brow or a suggestion takes on special meaning when placed in the context of the work organisation.

(v) Perceptual Defence:

Closely related to perceptual context is the perceptual defence. A person may build a defence against stimuli or situational events in a particular context that are personally or culturally unacceptable or threatening. Accordingly, perceptual defence may play a very important role in understanding union-management and supervisor-subordinate relationship. Most studies verify the existence of a perceptual defence mechanism.

The general conclusions drawn from these studies are that people may learn to avoid certain conflicting, threatening or unacceptable aspects of the context. The various defenses may be denial of an aspect, by modification and distortion, by change in the perception, then the last but not the least is recognition but refusal to change.

  1. Perceptual Interpretation:

Perceptual interpretation is an integral part of the perception process. Without interpretation, selection and organisation of information do not make any sense. After the information has been received and organised, the perceiver interprets or assigns meaning to the information. In fact, perception is said to have taken place only after the data have been interpreted. Several factors contribute towards the interpretation of data.

More important among them are perceptual set, attribution, stereotyping, halo effect, perceptual context, perceptual defence, implicit personality theory and projection. It may also be noted that in the process of interpretation, people tend to become judgmental. They may tend to distort what they see and even ignore things that they feel are unpleasant.

  1. Checking:

After data have been received and interpreted, the perceiver tends to check whether his interpretations are right or wrong. One way of checking is for the person himself to indulge in introspection. He will put a series of questions to himself and the answers will confirm whether his perception about an individual or object is correct or otherwise. Another way is to check the validity of the interpretation with others.

  1. Reacting:

The last stage in perception is the reaction. The perceiver shall indulge in some action in relation to the perception. The action depends on whether the perception is favourable or unfavourable. It is negative when the perception is unfavourable and the action is positive when the perception is favourable.

III. Perceptual Outputs:

Perceptual outputs encompass all that results from the throughout process. These would include such factors as one’s attitudes, opinions, feelings, values and behaviours resulting from the perceptual inputs and throughputs. Perceptual errors adversely affect the perceptual outputs. The lesser our biases in perception, the better our chances of perceiving reality as it exists or at least perceiving situations with the minimum amount of distortions.

This will help us to form the right attitudes and engage in appropriate behavioural patterns, which in turn will be beneficial for attaining the desired organisational outcomes. It is essentially important for managers who are responsible for organisational results to enhance their skills in order to develop the right attitudes and behaviours.

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