Environmental Impact on Retail Estate Business
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What promotional strategies can be undertaken when environmental factors affect real estate business? Case study of “Magical Homes in London and Dubai”
Real estate business is one of biggest market of the business world, contained the largest surplus money of the business. The history of the real estate business is very strange and unpredictable. No doubt is slow moving industry with respect to time but it carries a lot. Past experiences shows that property investment was the first and safest priority in all over the world for long term investments and profit making business. Where the property investors has seen the huge profits there was also a slumps in the property market which made the real estate business an anonymous business. There were number of environmental factors behinds the uncertainty of the real estate business which influenced in the shape of recession, natural disasters, economic condition, political instability and some time in the shape of sports event like Olympics hit the real estate market positively and negatively.
On time decisions and effective management can make things easier. Promotion plans and strategies can reduced the impact of environmental factors on the real estate business. This study was about learnt the past experiences and to find out the impact of new environmental factor and their influenced on the real estate market. The aims of the study was to learnt the behaviour of the environmental factors in the modern age with respect of politically, economically, sociologically, technologically and legally. Even in the modern world an other emerging factor was the hosting of sports events like Olympics and worst factor in the history was the recession which influenced the real estate market in very unexpected manners.
The objectives of the study was to study the promotional plans and strategies which could be the best deal to reduced the impact of such environmental factors and to enhance the believe of the investors and builder to come forward and join the world leading business for huge profits and gaining. The on time decisions and the suggested strategy can raise the investment in the real estate business. The conclusion and recommendation can explain the objectivity of the study in a comprehensive manner.
Real estate property business has a very interesting history of its own. It is a very uncertain and unpredictable market and because of its strangeness, this international business market is very charming for investors and entrepreneurs. The investments in this market usually much higher than expected therefore a huge surplus of money is still lying in this business market. Despite of recent terrible crash of real estate business, still got a large investment to spend.
People visiting around the world for peace and looking for luxury living at minimum cost or affordable cost, So customers and investors need to know the ups and downs of the market in the mirror of past, present and future, no doubt its not perfectly doable but at least the research like this can make the investors wiser and predictable and they can think either their investments are in right direction or they going to make a dumb decision. There are number of factors which influence the real estate market directly and indirectly. This research would be the comprehensive discussion of these environmental factors like location, type of land, weather, culture, languages and legal property laws of that particular state. This study would be a revolution in the understanding of real estate property business.
Affordable plans, promotions and advertisement can help to guide the investors in the right direction. In today's real estate market every investor is looking for a competitive price to gain a profit as well as the service provider company should be the responsible for the successful delivery of the project, after sales support services, dedicated advantages comes in houses, arrangement of resale of the property, arrangement of rental services and all other strategies which designed to help the investor in order to maximise the return on investments. So this kind of strategies can be undertaken in order to gain trust of investors.
1.1 Background of the study
The current situation of real estate property business is very important after a terrible recession (2008-2009) in all over the world. The economic condition of the world developed countries is poor and struggling to get better environment for investments. This situation creates a compotation between the land giants but here the situation is different as we saw, State of Emirates getting better and have a sound position in terms of real estate property business infect Dubai got the attraction of the world investors and entrepreneurs' because its past planning and attention in this market.
Free hold property law of Emirates in 2003 has changed from its present condition and they are changing the map of the world in the shape of luxurious living, large resorts of islands, desserts villas, world tallest buildings, under water hotel and many more attractions made real estate property business in ‘Dubai' a great success story.
On the other hand in London situation has changed. After a terrible recession of (2008-2009) which had a worst impact on United Kingdom than European Union .UK is a huge economy of the world and has the opportunity to lead the world. The real estate property business in this country had faced the worst ever condition but now it is getting better day by day and it is going towards the peak point again. UK got the opportunity to host the Olympics 2012 in London. Olympics 2012 such a huge project with operating cost of £580 millions and it could be increase than the expected cost.
Comparison of real estate market of emerging city Dubai and developed country UK has raised many questions in the mind of investors, as time to time both countries has hit by the environmental factors like economic factors, political factors, social factors, cultural and legal factor. The uncertain situation of real estate market has created an economical crisis, because the financial institutions became tougher, the banks became stricter and this situation has affected the potential investors.
In this situation real estate companies and the investors needs to adopt the attractive and affordable promotion plans that can develop the interest of investors and buyers. Theses plans and strategies can help to reduce the impact of environmental factors on the business of real estate market.
1.2 Research Background
Jones, Lang, Lassalle entitled has given a report called ‘Reaching Beyond the Gold: The Impact of the Olympics on Real Estate Markets' examines the impact of staging the Olympics on recent host cities and looks ahead to 2012.It shows that sports event like this has an impact not only on the real estate property business but also on the every institutions of the country. Past experiences shows a positive impact on the property like the prices of property in Sydney is still rising and even the prises are 50% higher than before. So the major impact of events like Olympics is on real estate property business which could be helpful to improve the prices of property after recession.
London and Dubai, both of the cities have got their own entity in the market of real estate property business. Past experiences showed that the people of the urban areas have been moving towards rural areas and there were a number of reasons behind this migration. Even in last decade people like to buy or rent their properties in countries like Dubai. In case of city like London the situation will change because of the environmental factor has changed the economic, political, social and legal conditions of the country. UK has improved economically in last few months and the real estate market getting better especially in London and investors has risen dramatically since recession over and being the host city of Olympics.
1.3 Organisation Background
This study has a case study of “Magical homes Dubai”, is a London based company, who dealing with the investors from all around the world, they offering them advice in off-plan, resale, renting or buying property. They are offering their services in UAE and especially in Dubai for buying, selling, renting, reselling of houses, apartment, offices, villas and commercial spaces.
‘Magical homes Dubai' provided services to the customers from last ten years, is an expert in providing investment property in UAE and London. In addition providing investors with exclusive and the uniqueness in providing highly sought after property option with the best customer service is the core operation.
1.4 Rationale for the chosen topic
The main reason of the topic to be chosen that the demand of the profession and the scope of profession are very high despite of bad turn's real estate property business has a vast field of business. Living of people has changed completely and its need to change further in future which opens the new horizons in real estate property business. Infect both the developed and under developed countries have a huge market in real estate business and its growing day by day with passage of increase in population of the world, in other words shelter is the basic need of life and its never gone to end. So it's a profession of life and it has a wide scope in international business.
Currently if take a look on trends and developments of any country then its easy to say that the real estate property business plays a vital rule in assessment of the country's economic condition. The real estate property business depends on different environmental factors which are important to study and need to have a good knowledge about so the investment needs to be invest in the right place, for this purpose of knowing this study could be a mile stone. This study would be helpful in the decision making and to find out the save investment plan on the international level.
Although, Real estate property business has effected by different environmental factors directly and indirectly but critical analysis of these environmental factors in the light of past and present can make the decision making quite easier for the future prediction. Comparison of big markets like London and Dubai can make the job easier for the investors and entrepreneurs to find out the right choice around the world.
1.5 Statement of the problem
World become a global market, any company can make strategy for its local market and the strategy to hit the international market but in this case there could be various environmental factors involved which influence the business either domestic level or international level. Theses environmental factors could be economical, political, social, cultural and legal factors. This study can help to understand the emerging problems of the real estate property business market. The population of any country shows the appreciation of the people and the development in the real estate property business show the growing power. The population of London was more than 8 million and it's expected to be rise in the near future. After the recovery of economic crises the real estate property business has grown up and prices of the market is getting better and there will a positive chances of incoming investment for the near future because of the Olympics 2012. On the other hand Dubai has increasing population of 1.5 million which is expected to exceed 1.9 million in 2010. With the increase in population has directly effect the demand of property so the study can guide the investors and the financial institutions that which strategies could be helpful for new plans and promotions.
1.6 Research aims and objectives
This study contains a couple of aims and objectives but theses points cover a comprehensive study of knowledge which can provide a handsome idea to the investors and the entrepreneurs around the world.
· To examine the investors behaviour when environmental factors affect the development in the real estate sector.
* To analyse the impact of environmental factors on the real estate business internally and externally
* To find out the new strategies which could be helpful to reduce the negative influence of environmental factors
* To explore the promotional strategies that can be undertaken to help the real estate companies to overcome the crisis
· To determine the new promotional strategies that can be attractive and feasible for the investors internationally
The aims and objectives of the study is dame clear as it represents the importance and significance of the study. Real estate property business covers a big surplus of the business and it need to be study in terms of save and profit making business. So facts and s of this market are very uncertain and factors involved in the uncertainty of the market need to be study. These factors could be economic, geographical, cultural, demographical, legal and political. So the economic factor is very important in the real estate property market, it directly influence the price of the property, if the economic condition of that particular is not that well then the prices of the property could be lower than the expected prices but most of that type case the demand goes higher than higher but the supply of the property goes down and down.
The political factor is the most affective factor in environmental factors, as the political condition of any country or state has a direct impact on the economic condition, so the more stability condition of the country leads the country towards the most stable place.
The geographical factor is also an important factor in the real estate property market as it has direct impact on it, as the location of the property lies in the developed country then the prices and demand of that particular property goes high, and if the geographically it lies in the under developed country then the demand and prices goes down.
The factor of the culture has a impact on the real estate property business market, as the culture is the representative of any population if the population have a culture of luxurious life style then the market of the real estate property business will be higher but if it prevail in lower standard living then the real estate property business growth will be lower.
Demographical factor is very important factor of the real estate property business market because it has a direct influence with the real estate property business market like the first step of the building of a new housing unit is to commission the demographical study of that particular area, which shows the current population, density and the growth of the population, the age distribution of the population, the average size of the household, the race of the population, the sex of the population and the local market of the population, so demographic factor has its own importance.
The factor like legal condition of that particular area plays a very important rule, if the legal condition of the state is worthy, provides facilities to the both buyers and sellers then it can create a big market and can attract the investors but if the legal condition is not that flexible then the investors can never be interested in such type of market.
The seasonal factor has a very important place in the history of the real estate business market and it can change the destiny of the nation, as seen in the past that the seasonal events like Olympics had a positive effect on the real estate business market. The objectives of the studies are very clear which lead the study toward desirable results.
This study basically provides the feasibility of the real estate property market in the new era of world. It has also conducted to find out the potential of the real estate property market either it's a worthy business of market or dumb way of caring a business.
This research will provides a brief but a comprehensive outline and relative concerns of the real estate property business market, which includes the brief knowledge of the market sector that how it can work? The pros and cons of the real estate property market, how the demand can be show?, how the property did suit the requirement of the investor?, how the offer can be made?, how to negotiate with the seller?, how the deal can be finalize the deal?, how to meet the legal laws of that particular part of the world?, how to make sure that the property is free hold or lease property?, how the survey of the property can be done?, how the demand and supply can be calculated?, how the demand and supply effect the prices of the property? Etc. it also includes the information about the financial estimate of the property that is very helpful to understand the feasibility of any property matches with the need of investors. It also includes the knowledge of the human resource that is required for the investment and maintains of the property.
1.7 Structure of the dissertation
1.7.1 First chapter
is introduction about the research work, tell about the research topic, its background, history, importance, aims and objective of the study, statement of the problem, scope of the study and then the structure of the study that how the reader can go through the study and find the guide for next study.
1.7.2 Second chapter
This chapter was the literature review of the study, which gives the brief but comprehensive guide of the study that has a complete knowledge about the research that was done in respect of the topic chosen.
1.7.3 Third chapter
This chapter is regarding the research methodology used in this study and has followed the recommended ‘harwared style of referencing' and research process and eventually select the method of the research used to get the primary data and processed the secondary data.
1.7.4 Fourth chapter
This chapter was about the outcomes and finding knowledge of the research study made, which gave a comprehensive idea of the solution of the problem.
1.7.5 Fifth Chapter
This chapter was about the conclusion and recommendation of the study. The conclusion of the study was about the guideline for problem's solution and some suggestions for the company or any other institution having same kind of difficulties and the recommend the way for further studies.
2 Literature Review
In previous chapter of introduction presented the basic theme of this study that what has been discussed in the rest of the study. It showed the main aims and objectives and what research question have discussed to find the objectives of the study. In this chapter of literature review, a strong formation of knowledge and the efforts made in this study or the related study will be discussed that leads towards the finding and conclusion of the research work.
Promotional strategies can be undertaken when environmental factors affect the real estate business and it is the phenomenon of every business that promotion plans and strategies like market pull and product push strategies could be helpful to make good business strategies accordingly.
* A process can be a push operates as long as there all the goods or services to be processed, a system is said to be operate push if all its stages are push.
* A process can be operate pull if it is dictated to work or remain idle because of the feedback from downstream. So the system is called pull operates if all the stages are pull. (Brassington and Pettitt, 2007).
Push and pull strategy
(Brassington and Pettitt, 2007)
2.1 PESTLE Analysis of the real estate business
While analysing the factors affecting the real estate industry, it is vital to over look the factors that in one way or another affect the number of important variables that have there influence on the specific business or organisations supply and demand and its cost (Katter and Schlesinger, 1991; Johnson and Scholes, 1993). The radical ongoing recession in the entire business world brings change in the society and customers behaviour towards their purchasing power and on real estate has its wide spread affect. (Tsiakkiros, 2002) Number factors been catalogues' have possible issues addressed in the recent days which directly or indirectly affect the industry. PEST analysis is one of them which categories environmental influence as political, economic, social and technological forces. In recent studies two additional factors of environmental and legal added to make it PESTLE analysis. Analysis and impact of these factors will be examined and to observe their affect on the entire industry later the findings will be used to make the contingency plans against the threats to the business strategy and its growth plans (Byars, 1991; Copper, 2000).
According to Kotler(1998) PEST analysis is very influential tool for making business strategies for making growth and to understand the reasons for decline , positioning the product in the market, enhancing the product offer and its promotions, seeking the potential market and direction for operation. PEST is usually applied by companies for reviewing the business direction, and marketing proposition. Real estate business enhance its fortune in the modern world by this influential tool of PEST for making strategic planning , business and product development, and also for affective research of the market. PEST also ensures to the businesses that their performance in the market is aligned in positive direction while having the powerful forces of change which affect the business environment (Porter, 1985). PEST also helpful for the businesses which are which are new in the market operations in a very new market or country. Concluding the basic concept of PEST, it helps to effectively change to the realities of the new environment.
Main aspects of PEST analysis includes:
Government policies which include tax policy, employment laws, trade restrictions, reforms, tariffs and political stability influence many other environmental factors which can affect the organisations performance. Policies like European countries join the single European currency or remain outside. There are many other aspects in which government policies will affect the organisation and the country's economic situation a as a whole as they provide opportunities and threats. Where capital markets responsible for determining the for the alternatives for funding the organisations and business and they are under control of the governments policies. Even in UK Bank of England, which also influenced by the government policies like rate of interest charged for the loans some times determined by the government. Thompson (2002), refers capital markets will be more buoyant when government spending increase the money supply. Company performance according to the shareholders expectations, their decisions to sell the companies shares and willingness for providing more equity will also be affected by the government policies. Labour market which represents the national and regional availability of specific skills which all influenced by the government and other regional agencies. The power of trade unions and inflation which influenced on labour cost all affect the business environment in one way or other.
The economic condition which affects every business that how much its easy to flourish the business in easy economic conditions and what difficulties a business can face during the recession period of the economy . Economic conditions affect the success and profitability of the business at any time as it affects the capital availability, cost and product demand (Thompson, 2002). The timing factor for the investment also influenced by the economic conditions. When the economy as a whole or certain part of the economy sectors growing demand may exist for the product and services which are not in demand in economic recession circumstances. Recession and downturn situation in the economy is bad for most of the businesses but at the same time in these conditions some businesses prosper and avail some growth opportunities' (Robinson and et al., 1978; Thompson, 2002).
Economic condition of the current era is also the worst one of its kind. Which resulted in the low demand for the housing and real estate and this can be judged from the declining trend in the UK and Dubai real estate businesses. Many large firms like Barrett's homes in UK and Emaar stop there progress work on the ongoing projects and recent economic downturn in the Dubai World business is directly affected by Emaar company slump. Economic factor is the most important factoring the PEST analysis in the recent time.
What is occurring socially in markets in which businesses operates , population growth rate , age groups , career attitude , emphasis on safety , global warming .Demand for fashion , taste and rapidly changing trends in the sociocultural environment both provide with threats and opportunities to the businesses (Thompson , 2002 ; Pearce and Robinson, 2005). Products production and promotion strategies affect to the change in the behaviour and liking and disliking of the customer. Changing behaviour of the customers affects the ways of routine production and forced the businesses to change the formal procedures of designing and producing the product. The demographic factor must be considered by the organisations while doing the overseas businesses as the products and services needs variations. The structure, age and the people working has vital important while bearing the demand and demand for the particular product and services.
Rapid changes in the technology has forced the companies to update there ways of doing the businesses to meet the demands and services of the customers. |technology in a way or other also benefited the organisations for cutting there cost by outsourcing etc. Various literatures in strategic management recognised technology (Capron and Glazer, 1987; Johnson and Scholes, 1993; Jan, 2002) for giving the competitive advantage to the organisation; technology is used for creating the model. Breakthrough in technology resulted in the invention of new industries which also poses the threat to the existing organisations in the market for its products and services , the affected firms must be alert themselves for coping with the new innovation threat from the new industries by enhancing the business techniques by adopting the new technology . New technology can provide a useful input and procedures for manufacturing the products and offering services. It all requires the well trained and skilled staff and there is a need for heavy funding.
2.2 SWOT Analysis of the real estate business
Accessibility of resources and environmental opportunity is one thing and proper utilisation of these opportunities by the champion or the strategic leader is both different aspects of organisations efficiency. Evaluation of environment opportunities is very important by analysing and in direct relation to the strengths and weaknesses of the organisations resources and culture. The close relation between environment, values and resources results in the existence of real opportunities. Evaluating and analysing the organisations strengths and weaknesses in context to the environmental opportunities is generally known as SWOT analysis.
While studying strategic and marketing analysis history SWOT is considered to be a very important tool. Who actually explored and invent SWOT not known, but the text books in 1972 on strategy and marketing has some of its features. It advocates on the importance of SWOT in a way that, it is a tool to measure the fitness of the organisation‘s strategies and its environment and also used to suggest that the ways to defend the organisation against its weaknesses and threats (Adams, 2005). SWOT is criticised in recent period because of its simplicity as both the management and people at the academic level use and apply this tool without considering the long term impact of their decisions using SWOT which normally useless. The SWOT concept has been conceived and achieved in that simple time when there were no theories like trade-offs of strategic theory not comes into existence (De Witt and Meyer, 1998)
Internal and external customer s can only analyse and determine the strong aspects of an organisation. Strength is a, Resources of the firm which gives the competitive advantage in the market and cause to serve or expected to serve in the market.
In SWOT, strength of the organisation refers to the comparative advantage of the firm's distinctive competence on the other firms in the marketplace. Strengths of the company arise from the resources edge of the organisation available to the firm from other organisation.
The firm's weaknesses also not determined from organisations point of view but again from customers view point. Usually it is quite difficult for the firms to admit and acknowledge its mistakes and shortcomings but as far as the business ethics are
considered, they must admit their weaknesses and work for its improvement. A weakness of a firm is a,
“Limitation or deficiency in one or more resources or competencies relative to competitors that impedes a firm's effective performance”
* http://4.bp.blogspot.com/_h-ozPPN71BY/Sqd0HAS-MKI/AAAAAAAAAas/wlb15zL5SfM/s400/swot-analysis-image.png 25/12/09
Organisations always try to continue to grow their business and opportunity is another major factor of SWOT which enables organisations to analyse the available opportunities in the marketplace to grow. Opportunities refer to the adaptation and use of new technology in the market, flexible government to encourage investment and new businesses, demographic and social patterns. Having an opportunity in the organisations environment is a big situation. Critical analysis of prior overlooked market segments, adaptation in competitive atmosphere, changes in technology and enhanced relationship between buyers or supplier relationship all refers to the strong opportunity for the firm's growth.
No one consider the threats what any business can face at any point of time during the course of their business , no matter with fact that they are not controllable , like, recent economic recession in the world , for which the world economy as a whole was not prepared . Here, it is very necessary for the strategic management of the organisation to be prepared themselves for the threats even in the peak time of their businesses. Threat considered being the major and unfavourable condition in the business life. Threats can also become the key factor in the firm's current and future position.
Threats refers to the easy entrance of the competitors in the market, slow grow rate , higher bargaining power of buyer or suppliers is another threat for the business and revised government regulations.(Adam, 2005)
2.3 Promotional strategies
Every business needs to sell its product at an attractive price. For this reason the benefits of the products must be conveyed to the customers in a very smooth and easy way. In marketing, for addressing the benefits of the products to the customers directly, companies climb on the ladder of known as “promotion”. “Promotion is all about companies communicating with customers”. (Jobber, 2007)
Walkers the UK's number one brand in grocery, which cover the lucrative market of over 37 percent. They are spending about £17m on the advertising. It was heard that there is a nutrition shortage in children and the growing number of people were concerned about children obesity. In 2004 walkers has faced a downturn in the sales which was 1.7 percent in bagged sales and about 1.9 percent on the overall range of snacks. That was tougher time for nation's favourite snacks then they need to develop a new product with a reduced fat and salt content in the product. Technicians had worked on the new product of low in fat and salt and high in nutrition. In 2004 according to a new promotional strategy of giving away walker pack to catch up with the active life style of the people and to save the brand name was carried out. These initiatives was used to tackle the negative impact of the brand name then to head on with good name, they also introduced the new promotion strategy of giving 9000 iPod minis online in autumn 2005. This promotional strategy was already introduced on the web site to motivate the customers that they can win iPod mini in every 5 minutes during September. Along with this there were heavy investment made in the advertisement for the potato head range to let the customer know there is no fat, no artificial flavour, no artificial colour and low salt variant. So this strategy gave the assurance that the customer who were fall out of core category, this is the right product for those people. (Harwood, 2005; parry, 2005).
In the global environment of business, new plans and promotion are necessary for the rival of the business. To get a competitive edge in higher competition, promotional strategies can play a role. Some time environmental factors like political, social, economical, and cultural and can be affect the business harshly but wise decisions of the management in the shape of promotional strategies can save the business empire.
P&O liner Aurora, a luxury cruise has started its 103 days voyage around the world with 1759 passengers on 9th January 2005. It was made for life time ‘voyage' but unfortunately it cost a lifetime saving for passengers. But the trouble started in the early days of her life, when sailed around Isle of Wight. Engine problem started and 300 passengers abandoned the cruise because of sever problem in information progress. Aurora finally started the planned route on the 19th of January from the cost of Devon but disappointment again propulsion problem arose even just after 110 miles. The ship and passenger returned to Southampton after cancellation of trip.
Aurora failure story hit all the broadcast and printing media, focused on they difference between expectations of the passengers and the real experience. The realty of the matter revealed in an article few days later that Aurora had a strange history of early days of her opening. As the champagne was not smashed on her naming ceremony, broken down in her maiden voyage and the 600 passengers and crew had experienced a highly contagious virus in 2003. Mitchell (2005) revealed the lack of positivism in action and PR during the 10 days as leaving P&O had pulled out the stop providing a good time and unprofessional, uncaring behaviour towards the passenger on board. Aurora might have not found either way of spend some of her £11.5m budget on the promotional strategies to came back into services.
(Daily mail, 2005; Marketing week; Mitchell, 2005)
Promotional strategies does work when environmental factors affect the business, of course in term of save the big investment or the business empire, further promotional strategies necessarily needs to be adopt. Other wise business can be face loses and bad name of the business.
According to the investigation carried out in Cyprus that the criteria followed by the real estate investors was the wrong estimate of decision making, it was revealed in the investigation city has developed in the real estate industry due to different environmental factors. Tourist development was the most important factor then size of the earthquake risk in this area. (MOSCHBOIS, et al, 2008)
Cypriot realtors have to issue the appreciation report that shows the growing power of the city and the promotional strategies like development of tourist industry can boost the real estate business in Cyprus. On the other hand it can also be under estimate as the risk of earthquake, the population of the city and then an under develop area could be critical aspect of the development of Cyprus.
2.3.1 Characteristics of promotional strategy
Every business marketing its products using the communications programme is called “promotional mix” which consists of six different steps can be undertaken for the promotion of any product or plan. Theses steps can be helpful for the implementation of the strategies and plans. (Jobber, 2007)
Brief discussion of six key tools of promotional strategy
* For reaching the wide audience rapidly it can make a bridge for good awareness
* For communication the brand positioning affectedly and repeatedly, TV medium is particularly strong
* It can be used to accelerate the sales efforts to give status to the company and its products
* Questions regarding personal liking flexibility can not be answered
* sales closure capability is limited
* interactive: it can be helpful to answer the question and to achieve the objective
* adaptable: performance can be altered depending on the customer need
* critical argument can be developed
* personal selling can be resulted in building personal nature relationship
* opportunities are higher to close the sales
* higher cost on sales calls ( )
* customer response is more to a direct targeting of consumer needs
* direct marketing can be communicate personally
* easy to measure the short term effectiveness
* building the continuous relationship by periodic contact
* competitors can be defeated because of its less visible activity
* response of customer could be low
* poor way of targeting can be result of customer annoyance
* low cost, global reach to the customers
* sites visited by the customer can be measured
* high rate of direct sales
* dialogue between companies, supplier and customer can build
* prices and catalogue can be update quickly and cheaply
* easy way of searching and buying product
* necessity of the negotiating with the sales people can be avoid
* sales promotion and incentive can gives a quick boost to the sales
* its effectiveness could be limited
* more incentive on product (eg money off ) can damage the brand image
* credibility is high as the information and message come from third party
* has edge on advertisement because of higher readership in trade and technical publication
* Higher risk that the contents of press release may be distorted
(Jobber, 2007; pp: 499)
Detailed discussion on the above six key promotion tools can be as followed.
is the first step in order to implement any strategy and no doubt advertisement plays a very important role in the strategic process. It could be in any shape like electronic media, by word of mouth or the physical demonstration of the product.
Wright and Crimp (2003) stated that how advertising works as it has varied task, based on the consensus that there can be no single all-embracing theory. In modern age advertisement has vital role in any business which appeal to the customer need and explain every single step involved.
Strong and weak theories of how advertising works
According to Cridge (2009), in the modern age the companies should be able to ensure that they create not just the big but irresistible ideas for advertisement of their product. In today's age advertisement of the brand and product is not an easy task; companies need to be ensuring that is irresistible. Advertisement agency called 118 118 has opened recently which provides services to the customers looking for any business contact number (Cridge, 2009).
According to Shepherd (2005), television advertiser can demonstrate the product in action by using television. Television advertisement often use when the building of brand image is required. Comparatively to other media of advertisement, it is easy to create an atmosphere for the product promotion. Shepherd (2005) points out the potential threat to this medium of advertisement by referring to the rapid emergence of personal video recorders (PVRs) that can store up to 30 hours of programs, gives convenience to consumer to play them back. Watching the recorded programs using (PVRs) allowing the consumer to skip the ads. Alone in USA 92% of the ads been skipped by the 6% of the population who watched 60% of their programs through (PVRs). But this take up is slow in Europe because of prices fall may accelerate and this create fall in television advertisement. (Shepherd, 2005)
Television is a strong source of advertisement of the product and services and it plays an important part in the process of advertisement but on the ad
Developing an advertising strategy
Hick (2005), elaborated in a special report in a radio campaign, the advent of the digital radios increased the number of radio stations which also include the sound quality along with the screen displays allowing companies web sites and telephone number run same time as an advertisement. The availability of radio listening through web browser is become a reality which in result increase the radio advertisement campaign. (Hick, 20005). Radio in the modern age is an important sort of advertisement. Which can hit a number of consumers but has a threat as well of not being listened by the listener? As the customer have the choice to ignore it.
Internet is another revolutionary force for the promotion of product allowing global reach to the consumer at lower cost. Companies are able to measure the number of customers visit web sites, click on the advertisement which accelerate direct sales and possible growth of e-business mostly in the areas of hotel travel and information technology. It also gives the facility to change the advertised contents, business to business catalogue and price list. Internet also established a convenient way of dialogue between companies their customers and suppliers. Google and yahoo are the most powerful and fastest form of advertisement placing web links; they are also the market leader for ‘pay-per-click' advertising (economist, 2005). Internet adverting is very common and a cheap way of advertising now a days and got a broader scope in the advertising process. On the other hand every company trying to do the same and competition has risen which made it less affective.
Ocado, an online grocery services provider for the big supermarket giant called Waitrose. They use different marketing communication for their promotional strategies, like advertised on radio, use attractive posters, free vouchers for the dedicated customers, regular contact with their customer by contacting them post or electronic mail to remind their weakly or monthly online grocery shopping and when they add any new area in their territory, they used to drive around in that area with the objective of raising awareness of availability of services in that area. Ocado was the best online grocery services provider in 2005 and it was the chance of reassurance to their existing customer that they having made a good choice and attract the customer by send a newsletter, magazine, leaflet and gift voucher. (Armitt, 2005)
So promotional strategies like keep the customer in touch by reminding mails, magazine, free vouchers and leaflet of new offers. It reminds the loyalty of the services provider toward the customer and it create a good name of the business but on the other side of picture these promotions could be waste if the customer never noticed theses offers and forget to keep it mind for further transactions.
Baileys a brand has used a perfectively affective way of advertising. They were continually looking a way in which to recruit the new youngster drinkers to the brand. They tried to change the old-fashion and created a new sassier image. The research agency has presented the report that how can target the real customer of the product and they sponsored the programme called ‘sex and the city' in this channel 4 TV programme. A husky female voice over is used to answer the question full of sexual innuendo in the beginning and the end of the programme. By this ‘sex and the city' city cocktail trend has changed in trendy pubs and clubs.
(Elms and svender, 2005; singh 2004; Wilkinson, 2004)
Television advertising has always an affect on the specific age of the customer and if it is an entertainment for the customer in the shape of musical or comedy programme then it find the proper way of attention to the customer but it could have a negative impact on the mind of youngster and could be against the law.
ASA (advertising standard authority) received 375 complaints regarding the campaign ‘love your bum' of the toilet tissue's maker company called Velvet. In this advertisement a number bare bottoms have been showed off to encourage people to treat themselves ‘feel-good experience'. Even some of the public member did not bother this ad but ASA feel no hesitation to an action even that was not much offensive. When the advertising agency called Saatchi and Saatchi been questioned about the produced billboard for club 18-30 for holidays carrying an anonymous slogan of ‘summer of 69' and ‘beaver Espana' and the featuring picture shows a young men in boxer short close-up of crotch shots to present the ‘holiday package' but the company claimed that the graphic are the true picture of such holidays. As the ASA received about 492 record witness complaints so the authority of ASA ruled that these poster should be withdrawn. (Burrell, 2005)
No doubt advertisement plays an important role in the marketing process of any goods and services but the bad slogan creates a bad name for the company and the bad advertisement can ruin the product life cycle.
Abbot (2005) argues, about the situation faced by the basic customers and tells that the sales environment need to be consider because of integration between brand and consumer. Companies realised that the affective advertising is very important for communication objectives. Retail environment has increasingly crowded and competition has increased so retailers need to be more and more advertising using every sort of media including posters, banners, leaflets, displays and the impact of standout has arisen. One area of advertising faces the growth that is floor media, if we consider Tesco in this respect then it shows that every store spends about £400 for week on floor media and every 400 stores of Tesco experience the same. Slogan and brand name can be found every where until the customer finish the shopping and pay, which influence the buyer. (Benady, 2005)
Microsoft trying to make a contract with Adrail to put the footprint of dinosaur in the down station to emphases the floor media which portrait the computer-illiterate as dinosaur and same way BT has used floor media in providing internet services in the network rails. In such a way a big competitive environment can be seen which either can influence the customers mind or can made them confused in between the brand names and prices. So affective adverting can only communicate with the customer needs that can be any promotion or incentive which influence the customer's mind.
Sony Ericson has made a use of print media when expand paper to online. In summer 2005 Sony Ericson has advertised on vogue.com where the fashion team member did the job and provided their one picture with one piece of their wardrobe clothes using a Sony Ericson phone and that was posted on the web with the explanations, why that clothing is their favourite piece of clothing. This initiative was thought to introduce a new model of Sony Ericson handset. (New media age, 2005)
Impressive way of advertising using an affective communicating sort have been recognised by the influenced customer and it open the new way of advertising and launching the product.
Zanussi Electrolux launched its Jetsystem washing machine and advertised it in the magazine with a slogan of ‘Everyone knows showers are more efficient than bath' and answer the question about the Jetsystem that how effectively it works power-shower, cloths-clean, and save money, energy, water and time. It was revealed in the corporate line ‘makes life a little easier' that all the advertisement of what ever Zanussi product indicate the same massage of motivation that gives customer incentive. The corporate line also claims that there should always be a message to exemplify the benefit of the product. (Homes and gardens, 2005)
So the advertisement should always been carrying a good a beneficial message for the audience which influence the mind and creates a motivation to buy the product.
In 2005, jazzfm.com was relaunched by the Guardian Media Group, which was the one of the few online radio service at that time. It has a large number of advertising opportunities like 650.000 ‘jazz head' individual were motivated and attracted toward the services each month. By offering typical banners, buttons, branded microsites and bespoke online advertising solution for customers. ‘Jazz.com' also able to provide advertising services for BT, British Airways, Microsoft Corporation and Mercedes, with the access to this niche but also influential audiences, at the fraction of the cost of traditional media. (Jones, 2005)
Radio has been used as the source of advertising since long time ago but in this modern age it comes in the emerging shape because listeners can listen the radio online and other handy devices like mobile phone and iPods. So it has a large number of influential audiences which are typically 30-40 years old. The advertising solution and fraction of cost also motivate to have the services. On other side if the take a look on it critically then it has also got some bad points that audience can miss or loss the information in the adds by different ways.
According to Polak, (2005), global advertising has increased rapidly. Some sectors of the continent can be treated in a single territory and could have the same advertising approach but in this Europe can be treated as a single territory for the products of ‘Nestle'. But in this situation an n environmental factor affects the whole advertisement process as the Europe has 44 different nations and about 60 different languages and same of advertising does not work for the whole the Europe. Say for instance if we consider the Nescafe the product of Nestle need to be advertise in the Europe then it need to have a various version of advertisement in different culture and language to attract the each country audiences. (Polak, 2005)
Culture and language are very important environmental factor which need to be consider in any type of international business when expand the business globally. So it can raise the cost of the advertisement and directly raise the cost of the product and services.
According to marketing week, the company called Brother sign a £2m deal with channel 4 business programme (Risking). The company is basically dealt with the office equipments and that deal was the part of their promotional campaign. The management of the company believes that the programme is about the fortune of the people and it has about 3 million viewers. The company provide idents at the beginning, end of the programme and in the breaks as well. In addition on the website of the channel 4 viewers also see the badge of the company. The Organisation provides an opportunity to recognise the pressure faced by the new small business developers and believes that it printers and all-in-one ranges are ideally suited for those specifics needs and the objective of the deal was gain as to align the Brother with small new businesses. (Marketing Week, 2005b).
To find the influence audience, target marketing is very important to address the target audience for the promotional strategies. In this way the marketing objectives can be obtain easily and address the right audience who would be influence by the advertising directly. 2.3.3 Personal selling
is the marketing task, unlike advertising, promotion and non personal communication. Basically it is a marketing task and a form of direct selling, which is related to face to face relation with the customer directly. In personal selling the seller have direct contact with the buyer, who can understand the needs and identified the problems and requirement of the buyer, which could be helpful for the seller to upgrade the product in the light of this knowledge. The particular matters of the buyer could also be sort out with one-to-one basis.
Over 70% of marketing budget spend on the sales force because of the nature of product. It needs the concentration of the sales person in terms of travelling and other sort of expenses also include in the sales. (Jobber, 2007)
However, it is likely to be seen that companies and big organizations are trying to reduce their sales force because of the customer concentration on the centralized buying. It is also have big budget of the marketing to maintain a sales force of the company. So companies are moving their attentions toward relationship marketing.
Sales force has automated with laptop, palmtop computers, mobile phones, fax machines, e-mail and sophisticated sales-oriented software, which helped out in avoid travelling, account planning, recruitment and selection and evaluation of the sales personnel. Every sales person has connected with the head office using wireless technology in two ways, “(i) sales person's laptop is synchronized with head office by connecting a mobile phone to the laptop; (ii) a personal digital assistant is used by the sales person to transmit sales information to, and receive reports from the head office”. (Jobber and Lancaster (2006))
The selling process (Jobber, 2007)
Personal selling in modern age becomes very mortal, sales person has latest techniques using latest technology rather than just having an idea in mind and the presentation of the sales ideas. It made the job easy and timely convenient without having several interactions with the customer or the buyer, just go through the web or the e-mail resources to have the latest knowledge and updates of the business. (Moncrief and Marshall (2005))
Technology revolution has played and important part in the history of sales and marketing of any business as it saved money, time and sales force as well. Now it is so easy so expand the business globally without any hesitation of distance and to have a contact between sales person and the head office, so technology like this can help to reduce the effect of environmental factors.
Characteristics of modern selling
(Moncrief and Marshall (2005))
2.4 The promotional mix methods
There are some other methods which are used to increase the sales; they are used as secondary methods after advertising, direct selling, personnel selling and digital selling. In fact theses Promotional method got equal importance and each method is used as a part of consistent communication programme so they can used to support and reinforce the whole process and the message for the whole process needs to be consistent in the whole programme for the product positioning. Some of the methods areas followed. (Jobber, 2007)
* Sales promotion
* Public relation and publicity
* Product placement
2.4.1 Sales promotion
can be done in different ways. It could be in the shape of money off on the product, bonus pack, premium pack or the free sample. Basically it's all about the consumer promotion and no doubt it increase the sales of the product but some time the brand name recognize as just like the other brand.
2.4.2 Old traditional methods of promotions
BOGOFs,(buy one get other one free) also a consumer promotion which means in the price of one the consumer will get two, some time wine offered the same deal that if the consumer buy one bottle of wine other comes free. But according to ‘Ritson' These kind of promotion can be dangerous for the premium positioning of the brand and can be consider just as the other brands names which are available at discounted price in bulks. (Ritson, M. 2005)
It was an error decision for Cadbury of offering (buy one get one free), it increase the sales of the product for the time being but proved as the worst strategy ever for the brand premium.
According to Quilter 2005, “volume discount are given to retailer that hit sales target”. The promotion strategy can be discount in price and this discount can be given by the manufacturer or by the manufacturer and the retailer both in order to hit the target sales. In that case retailer needs to be devoted as well as to allow the product as larger space ever before. So that is a joint competition allows in store demonstrations.
In an other case of promotion manufacturer contributes the whole devotion as paying the adverting cost in the store of the retailer like to have an advertisement of 10 sec on the screen of the retailer could cost the manufacturer. (Quilter, 2005)
In such type of promotional strategies the manufacturer paid a lot in the shape of advertisement and the reduced prices of the product but it can be recovered by the sales targets.
2.4.3 New trends of promotion
Although promotional strategies not being adopted by the big brands names but its still been adopted in almost every business sector like IT, car industry, leisure and holidays, financial services institution, telecom and travel industries for the rise of the sales.
2.4.4 Public relation and publicity
T-mobile has make a use of the promotional strategy as offering their customer to keep their phone on when they travel abroad to get a free waterproof pouch. The return on investment was 2.5 to 1 and about 75 percent of the customers attracted by this promotional offer. Another promotional offer by the motor giant called fiat has offered the chance to compete a racing game or win a free DVD player and Xbox consoles. In the very first three weeks created about 1400 visits of the dealers and 203 cars were sold as a result of this campaign. (Eastwood, 2005 and Mclukan 2005)
In case Fiat they have used the integrated campaigner, media, television and new media with promotional techniques but in case of BBC promotional strategy when they promote their magazine ‘what to wear' by an e-mail directed at 100'000 dedicated readers and invited them to come and play with celebrities and a chance to win free £500 for shopping. That e-mail was send forward to friends and family by the eight fold viral effects and game was played 100'000, which cause the increase in sales of magazine by 20 percent. (Eastwood, 2005 and Mclukan 2005)
These promotional strategies could help out the business to align the product or to increase the sales and no longer the sales promotion is limited like the money off and bonus pack and so on. These integrated campaigns in every sectors becoming the norms.
According to Barrand (2005), “sponsorship can achieve a number of communicational objectives but there are also risks”. Sponsorship is an effective way of publicity for the brand name and a source of providing entertainment to the consumer or the buyer but it still got some risks include in this type of promotional method, like for example when Nike has entered in to the golf market for the five years plan of about £90 million with Tiger Woods. The company became very disappointed on the very first day of a major event. Woods lost his at his very first short when he was playing with the Nike driver and then he later reverted on his old driver made by rival Titleast. (Barrand, 2005)
According to Clark, 2005, to create a favourable association for a brand or company is very important objective of the sponsorship. Like for example Red Bull's sponsorship of such a crazy events like flugtag in which amateur pilots launched flying on a 30 foot ramp using a hand made flying machine. Which reinforce the 'wacky' image of the pilot and the sponsorship of UK athletics reinforces its energy association.
According to Stokes (2006) and Barrand (2005), “The clutter to be found in sports sponsorship has meant an increase in sponsorship of events in the arts, education and particularly music”. Brands like Carling, Heineken and coca-cola are competing each other in primary association with music sponsorship. Like for example carling sponsoring the weekend in Leeds and reading music, called carling weekend music festival and it also sponsoring different academies for music venues around the UK.
As number of people increased in downloading the music on handsets therefore companies like O2, T-mobile, Virgin, Orange and Vodafone has start sponsoring the music, they are hosting different events like v festival by virgin, O2 host the wireless festival but Vodafone has withdraw the sponsorship of Manchester united football club and start sponsoring the live music award and live gigs to its customer. Orange has heavily involved in sponsoring of Glastonbury festival, Leeds and Reading festival as well. (Barrand 2005 and Stokes 2006)
Basically the core purpose of this type of sponsorship is to target mind and hearts of 18-34 years old people, provides them the natural setting of young segments where they can enjoy themselves. The sponsored company, therefore by benefit by the association of the key leisure activities enjoyed by the young people.
Sponsoring the broadcaster is also an effective way of targeting the influenced audience and by this source of sponsorship, the broadcaster who face the higher cost of programming and the sponsor get the degree of influenced audience. Sponsor can get the cheaper way of advertising and right to exploit the programme, its characters and actors for the promotional purpose. An example of Domino's pizza's got the sponsorship of the Simpsons cartoon, a very famous character on television.
Nike is a big brand in the spots market and it has been the sponsor of Olympics in 1996 and 2000 by giving the highest bid of sponsorship. The return on investment was more than the expected. All the countries bidding for of Olympics of 2012, so keeping in mind the sponsorship, Nike has requested to advertise all sites close to the event in order to lead the market. (Choueke, 2005)
2.4.6 Product placement
Product placement is an important segment in the promotion of any product or services because the brand name seen in the movie or any television screen has a long lasting effect on the mind of the viewers. So product placement was not new trends in promotion sector that has been doing since 1945, when the star Joan Crawford was drinking a Jack Daniel's bourbone whisky seen in a movie. Another movie 1951, character was seen disposing of Humphrey Bogart's Gordon's gin. Growing film industry of India is also welcome such type of source of income. (Barn, 2005)
In the same way, Turner 2005 has explained the use of product placement as a positive association. The positive images of the film or television characters can be use to present the image of the brand name. The use of the Aston Martin or Jaguar car in the movies of James bond had created an image of sophistication. In famous movie Matrix the phone technology has been used by the sponsor of Samsun's mobile which highlighted the enhance technology of the brand. (Turner, 2005)
Further enhancement of the product
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