Financial performance of ABC Ltd - Free Essay Example

Sample details Pages: 7 Words: 2101 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Introduction Accounting is concerned with collecting, analyzing, and communicate accounting information. The accounting information is helpful to those people who make plans about business and in making important decisions related to the business The aim of this paper is to evaluate the financial position of the company and the importance of credit manager to achieve credit sales targeted and importance of actual figures when estimating the budget. Don’t waste time! Our writers will create an original "Financial performance of ABC Ltd" essay for you Create order This paper consists of two main sections. In the first part, evaluation of the financial position of ABC Ltd uses gross profit margin and net profit margin. The second part concentrates on things need to consider when preparing the budget in order to prevent from biased budget. Part A A) Account Year 1 Year 2 Year 3 Year 4 Sales 296700 296700 370875 445050 Cost of sales 176900 198128 229970 283040 Gross profit 119800 98572 140905 162010 Selling and distribution expenses 35600 40940 47348 57672 Administration and general expenses 45900 49113 52785 56457 Financial expenses 15800 15484 15168 14536 Net profit 22500 (6965) 25604 33345 Evaluate the financial performance of ABC Ltd. Over the four year period. Financial ratio examines the financial health of the business. It helps to identify the financial strengths and weakness of the business. By calculating the ratio, it is possible to provide a good picture of the financial position and performance of a business. Financial ration can be represented in numerous ways. For example, as percentage, as fraction and as proportion. Financial ratio can be classified into profitability, efficiency, liquidity, gearing and investment. ABC Ltd companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial performance is evaluated by using profitability ration of gross profit margin and net profit margin. Gross profit is the difference between the sales and cost of sales. And the ratio is a measure of profitability in buying ad selling goods and service before any other expenses are taken into account. For example: Gross Profit Margin = Gross Profit x100 Sales = 119800/296700 x 100 = 40% Gross profit for the year one is 40%. The most appropriate measure of operational performance for comparison purposes is the Net profit margin ratio. The factors which influence the net profit margin of a business are the degree of competition, type of customer, economic climate and industry characteristics. For example: Net Profit Margin = Net profit before interest and taxation x 100 Sales = 22500/296700 x 100 = 8% Net Profit Margin for the Year one is 8% Year 1 Year 2 Year 3 Year 4 Gross Profit Margin (%) 40 33 38 36 Net Profit Margin (%) 8 (2) 7 7 Gross profit margin of ABC Ltd company has fallen down from 40% to 33%. And again increased to 38% and fall down to 36%. The decrease of the gross profit margin of ABC Ltd was a result of high production cost of the company. The raw material used to produce goods and services has increased. As a result the company is experiencing less gross profit margins. Nonetheless, the Net profit margin of ABC Ltd has been maintained for the last two years, Year 3 and Year 4. Whereas in Year 1 company had a high net profit margin and it gradually decreased and company experience loss of (2) % of Net profit margin. This may be because the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s Gross profit margin decreased from 40 to 33 and affected the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s net profit margin. Moreover, it may be the reason that, the company has high expense such as high selling and distribution expense, Administration and other general expenses. After experiencing a loss in Year 2, company gain 7% of net profit margin in Year 3 and year 4 also. This shows company has minimized their expenses and cost of sales and increase their revenue by generating more sales. Below show graphical demonstration of ABC Ltd financial performance. Account Year 1 Year 2 Year 3 Year 4 Trend Sales 296700 296700 370875 445050 Increased by 148350 Cost of sales 176900 198128 229970 283040 Increased by 106140 Gross profit 119800 98572 140905 162010 Increased by 42210 Selling and distribution expenses 35600 40940 47348 57672 Increased by 22072 Administration and general expenses 45900 49113 52785 56457 Increased by 10557 Financial expenses 15800 15484 15168 14536 Decreased by 1264 Net profit 22500 (6965) 25604 33345 Increased by 10845 According to the above table, all the accounts except the financial expense of ABC Ltd, all others have increased. Total sales increased. Meaning that number of goods and services sold by ABC Ltd have increased and generated a huge amount of revenue. However, the cost of sales also has increased. But compared to sales achieved, cost of sales is less than the sales generated. Meaning that the money generated by sales by the company was spent to make the sales, such as raw material, Equipements, machineries cost. Therefore the company gross profit has increased. The expenses spent to generate the revenue are selling and distribution expenses, administration and other general expenses and financial expenses. All expenses have increased except financial expenses. This may be due to each years increase in sales of the company. As demand for the goods and service increases, more number of good and services are produced. And to deliver the products to customers, costs incurred will be high such as delivery cost, transportation cost and other administrative cost related to the delivery of goods and services. Financing expenses have decreased such as rent paid, electricity, fixtures and fitting etc. As a result Net profit of ABC Ltd increased by $10,845. Part B A) Why credit manager is to blame for poor credit collection There are certain causes why credit manager is to blame for the deterioration in the credit collection period which are beyond the credit manager. Downturn in the economy When the budget was formulated, during that time economy may have been in a very good condition like in a boom. Businesses earn profits and their ability to pay the suppliers would be strong. And based on credit worthiness, ABC company Ltd has released goods on credit facility during that time. After two months of time, the economy turned into recession. During recession, companies reluctant to spend money and have difficulties in paying to debtors, lenders and suppliers. Henceforth customers, who have bought goods from ABC Ltd under the credit facility, would not able to pay as agreed terms and conditions. Liberalize credit policy The next reason which credit manager cannot be blamed, is a formulation of credit policy terms and conditions and implementation of the policy. When developing a credit policy there are certain conditions which should take into account. For example, buyerà ¢Ã¢â€š ¬Ã¢â€ž ¢s strength in the market, available net profit margin, size and type of buyers, buyerà ¢Ã¢â€š ¬Ã¢â€ž ¢s creditworthiness and many more. Any credit policy should include the range of payment, terms, prepayment terms, installments, penalty interest, conditions of sales, methods of assessing customer, explaining credit rating and risk codes, legal actions, follow up methods, staff responsibility and authority, relationship with another and arbitration process. If these clauses are incorporated into the policy, and customers are aware before getting into any sales and customer agreed by signing the terms, then the customer will be binding to it. As a result the credit manager would able to claim for the payment accordingly to the agreement, if a customer is disobeying the agreed terms and conditions. Therefore, it is a responsibility of policy makers of the company and senior management to come up with a strong policy and implementing it. And this could be done in coordination with a credit manager. Another reason could be that, even if the company has a strong policy, without acting upon it, we cannot achieve what we want. For example, if the sales persons or sales manager, or senior management, issue goods without checking the credit worthiness of customer with their friends or close customers and they make own payment paying term their way without consent of credit manager. Increased competition among suppliers The business environment is very volatile. Competition among business increases steadily. Being proactive would be the best solution for the success of the company. During the tough competition, it is essential to revise the credit policy terms as accordingly to customer needs and affordability. Otherwise competitors would be offering more attractive conditions and they are likely to get all customers resulting gain the market share in the business sector. And ABC Ltd would not able to get enough customers to achieve the credit targets allocated in the budget. Quality of goods and services If the quality of the products offered by ABC Ltd is very low, then the customer will refuse to buy the products. Even if they buy the product if the quality is below their expected level, then the payment will be held for some time. And ità ¢Ã¢â€š ¬Ã¢â€ž ¢s a responsibility of the production department to produce the goods with good quality according to customer needs. The goods Delaying in delivering If the company is unable to deliver the goods at the agreed time, then the customer would not able to depend on the company. In other words, failure to deliver the promises will lead to loss of customer and low dependability. Therefore, it is important for production department to provide raw materials and other necessary material to produce goods and ità ¢Ã¢â€š ¬Ã¢â€ž ¢s their responsibility to deliver the goods to customers on time. If the company fails to provide this, then the customers would prefer other competitors and faces low market share and generate low profit. Relationship with sales and credit department The relationship between sales staffs (or sales manager) and credit manager is very important. The credit manager responsibility is that to provide further guidance to achieve sales to the sales staffs. Why manager might submit a budget estimate that is biased. And ways to Company guard against it. According to the CIMA definition of budget, it is a plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned income to be generated and/or expenditure to be incurred during that period and the capital to be employed to attain a given objective. There are types of budget, managers use when preparing the budget. One of the methods is incremental budget. The budget is prepared using the previous year budget as a basis with incremental amount is added to the new budget. Resources are allocated based on previous years resource allocations. The main advantage of this type of budget is that it is easy to understand and implement and also save time. This could be one of the reasons why budget estimates are based. The main reason is that incremental budget does not take environment changing factor into considerations. Due to changing is economy, budget need to be revised basically periodically and necessary amendments need to be done. Another problem is that, incremental budget does not have incentives to innovative ideas and to reduce cost. Another type of budget could be fixed budget. In fixed budgets, figures are fixed at the beginning of budgetary period. Any change in circumstance, these cannot be changed. For example, due to high inflation, raw material costs (others as well, such as machinery cost, about cost, rent, electricity) increase more that which is estimated in the budget. In fixed budget this cannot be changed. Therefore, actual expenditure exceeds than the estimated value in the budget. A good way to mitigate the budget that is based is that having shorter review periods. For example, if estimated budget is for one year. Then managers can review the budget after three month period or on quarter basis. The second way to guard the company from base budget is that to approach zero based budgeting. Budget starts from zero and items included in the budget should be justifiable to the budget holder. All expenses allocated for the whole project, should justify each activity separately and develop a questioning attitude. This helps to minimize the over spendinging and inefficient. Therefore company cannot spend more that what it is estimated and from the estimated expenditure, expected profits will be generated. Conclusion From above discussion, we can conclude that, increase in company gross profit would have a direct impact on net profit. Generating more sales will increase the gross profits and by minimizing the company expenses, the companies net profit would increase. And the profitability can be compared against the previous years by using ratios and trend analysis. Secondly, businesses normally prepare the budgets annually and quarterly. Regular evaluation of budgets prevents from overspending and adjust the budgets, according to changing the environment. And also in order to achieve high credit facility a budgeted, not only the credit manager should work on it. Other department staffs like sales and senior management should play an important role in doing so. References Atrill, McLaney, Harvey Jenner 2012, Accounting an introduction, 5th edn, Pearson Australia. FICM, GB 1986,  © 2004 FECMA , viewed 1 December 2014, https://www.fecma.eu/Documents/FECMA%20Credit%20Policy%20chapt%20%201.pdf. McLaney, E Atrill, P 2010, Accounting An Introduction, 5th edn, Pearson Education Limited. Riley, Jim 2012, Tutor2u Limited, viewed 1 December 2014, https://www.tutor2u.net/business/accounts/incremental-budgeting.htm. Schaeffer, MS 2012, Essentials of Credit, Collections, and Accounts Receivable, John Wiley Sons, Inc., Hoboken, New Jersey, USA. Page 1 of 14

The Culture of Islam Essay example - 1549 Words

Islam is more than a religion, it’s a culture, and as such has an effect on political, social, and economic aspects of life—this is especially true outside of the Western world. Followers of Islam believe in full submission to God and this submission is practiced in the secular realm (Taha, 114). Of the five pillars of Islam, one (the zakat) has a direct affect on economic policy and ethics. The culture of Islam has shaped economic and business guidelines In the Islamic World and continues to do so. Cultural ideals attributed to the Qur’an or the Prophet Muhammad, have been a vital source for economic and business practices that have helped to shape the history of many Islamic nations, and are guiding the creation of policies†¦show more content†¦Ã¢â‚¬Å"Islam’s original principle is the common or joint possession of property amongst the slaves of God, so that each one takes according to his needs, the basic needs of a traveler (passing throug h this life to the next true and lasting life)† (Taha, 138), it is also important to note that this statement is made in a section titled â€Å"Capitalism Is Not An Original Precept In Islam†. Taha references Muslims as ‘slaves of God’, or submitters, who should have their needs met and then contribute to the needs of others. Much of this communal nature is attributed to the tribal history of many Islamic peoples, and the descendants of these people still have an egalitarian outlook on the world in which they live (Kanna, 109). Muslims are not allowed to make money in ways that require little or no work, the Qur’an states: â€Å"They ask thee concerning wine and gambling. Say: In them is great sin, and some profit for men; but the sin is greater than the profit†, gambling is usually illegal and frowned upon in Islamic societies because it is too easy to attain wealth through it (Williams and Zinkin, 523). Work is important in the Islamic culture, not necessarily for economic purposes in the Western sense, but because it allows for prosperity for everyone and is an example of activities rewarded for in the after-life that are ‘secular’ (William and Zinkin, 521). The idea of mutualShow MoreRelatedIslam Culture Versus Islam Religion The Western Perception of Islam1969 Words   |  8 PagesIslam Culture Versus Islam Religion The Western Perception of Islam Throughout this course we have learned several different aspects of Islam as a culture and as a religion we have also been able to put to rest several myths that have plagued Islam in the eyes of the Western World. In this paper I will discuss the significant difference of Islam as a religion versus Islam as a culture as seen through the eyes of a Malay Muslim. I will then go on to discuss how the WesternRead MoreEssay on Islam: A Religion and Culture1630 Words   |  7 PagesIslam: A Religion and Culture Islam is one of the oldest religions in history dating back to about 600 AD. It began when a man named Muhammad heard a voice from the heavens instructing him to proclaim the word of god. Currently there are over 800 million followers of the Muslim religion. The main text of the religion is the Quran which is said to be the word of God, or Allah as called in Muslim. Within the Quran, The five pillars of Islam are proclaimed along with many other concepts very uniqueRead MoreEssay on Islam Culture and Beliefs1418 Words   |  6 PagesIslam is one of the worlds greatest monotheistic religions. The followers of Islam are known as Muslims, and they believe in God, Allah. The word Islam is an Arabic word that means submitting and surrendering your will to Almighty God.† The word comes from the same root as the Arabic word salam† which means peace. Islam is the religion of about one and half billion people in the world. It is the second largest in the number of followers afte r Christianity. 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It includes values, customs, habits, thoughts that guide members of the society. Culture can also be defined as practices and knowledge that is transmitted to the generation by social interactions between members of a social community (Pohlong 1). It differs from community to community. The purpose of the essay is to relate and differentiate culture from religion, especially

6 Traits of Writing - Using the Model in the Classroom

The six traits of writing model provides a recipe for successful prose writing. This approach defines the ingredients of effective writing for students to practice and teachers to assess, equipping both parties with tools for strategically analyzing written work. Students can become self-sufficient and methodical writers when they learn to develop the following characteristics in their writing. To take advantage of this revolutionary model, learn what the six traits are and how to teach them. What are the Six Traits of Writing? The six key characteristics that define high-quality writing are: IdeasOrganizationVoiceWord ChoiceSentence FluencyConventions Please note that while this method is often called the 6 1 Trait Model, the plus one presentation trait is largely optional as it is a characteristic of the overall product and not the writing itself. This trait will not be described further here. Ideas This writing component captures the main idea of a piece through detail. Only details that are relevant and informative of the main topic should be included. Strong writers have an awareness of how to use just the right amount of detail, using ideas that make the overall message more clear and leaving anything out that takes away from it. How to Teach: Do an exercise with students where you tell a story using no detail while they close their eyes. Could they picture it? Ask them how to improve your story and introduce the concept that ideas need to be supported to be effective.Ask students to describe what is happening in a photograph. Have them do this in partnerships where only one partner can see the picture at a time and the other must convey the message of the photo in front of them.Have students compose a paragraph packed with as much supporting detail as possible. Tell them to choose a specific (true) event that happened to them and use their senses to describe it. Organization This trait describes how all ideas in a piece of writing must fit together within a larger message. The organizational structure of a written work needs to follow a clear pattern such as chronological order for narratives or logical order for informational writing. The writer needs to make strong connections from one point to another so that a reader can easily follow along. A sense of sequence is necessary for organizing. How to Teach Take a piece of writing and cut it into chunks, having students piece the writing back together as best as they can.Jumble a list of directions and have students arrange the steps in order.Read two short informational books whose organization structures vary. Ask your students what is different about the organization of the books. Voice This trait describes the unique style of each writer. Through voice, a writers personality permeates a piece but does not detract from the genre or message. Strong writers are not afraid to express their individuality and show readers their point of view. Good writing sounds like its writers. How to Teach Discuss the personality traits of a few childrens book authors, then read a variety of literature and have students try to identify the author by voice.Compare and contrast the voice in select fiction and nonfiction books.Have students write a letter to a grandparent about their favorite school subject. When they are finished, discuss how they cultivated their voice in the letter and whether they feel that their thoughts and emotions came through. Word Choice Word choice describes the effectiveness of each word in a piece of writing. Strong words enlighten readers and clarify ideas but too many large or misplaced words can muddle the message. Great writing is never verbose. Writers should be economical with their words and choose only the best ones because every word is important. Linguistic awareness and a robust vocabulary are necessary for effective writing. How to Teach Keep a word wall, adding to and discussing it frequently.Show students a paragraph with words missing. Offer options for words to put in the blanks and explain why some of them are better than others.Introduce students to thesauruses. Teach that a well-rounded vocabulary is useful but caution against overdoing it by having them first replace as many words as they can in a paragraph and then only words that make sense to replace. Sentence Fluency This trait describes the smoothness that sentences contribute to a piece. Fluent writing is rhythmic and forward-moving because its sentences are easy to read. Even more important to sentence fluency that correctness and grammar are meaning and variety. The best writers make sure that each of their sentences says precisely what it is supposed to say and vary their sentence structures so that they dont all resemble each other. How to Teach Write a story where every single sentence begins and ends in the exact same way. Talk with your class about why this is problematic and have them help add variety to the sentence structures.Rearrange the sentences in a popular piece of writing. Have the students fix it and talk about why it matters that sentences flow easily into each other.Have students take a sentence in a piece of informational writing and flip the words around. Does it make more or less sense? Is their way better or worse? Conventions This trait focuses on the correctness of a piece in terms of spelling, grammar, punctuation, and other rules. Writing can only be great if it is technically correct. Great writers are proficient punctuators, capable spellers, and grammar savants. Conventions require time and patience to master but are easy to practice. How to Teach Give your students a word to correctly work into a sentence. Begin with simple sentence parts such as subjects and verbs and progressively get more difficult with adverbs, adjectives, and more.Teach students to peer review each others work for correctness. They do not need to correct every tiny detail. Rather, focus on one skill at a time (punctuation, capitalization, etc.).Use  curriculum materials such as handouts and mini-lessons  to teach conventions. Sources Nast, Phil. â€Å"6 1 Trait Writing.†Ã‚  National Education Association.â€Å"What Are the Traits?†Ã‚  Education Northwest, Dec. 2012.

Americas Involvement and the Intentions of Wilson’s...

Most of the World’s major Nations were in a state of turmoil from the year 1914-1918, during the conflict of World War I. This War to End all Wars began with the German’s pushing other European Nation’s buttons, including the progression of militarism, imperialism, nationalism, and the creation of alliances among all of the Nations. After the course of three years of grueling trench warfare the tide of the Germans was receding, and President Woodrow Wilson of the United States presented his famous Fourteen Points, in hope that he would direct all Nations to aspire for the establishment of world peace. Wilson’s first proposal for the treaty among the Nations stated that no secret treaties should be made among Nations. This point is†¦show more content†¦Fourth, the amount of arms in a Nation’s possession must be limited â€Å"to the lowest point consistent with domestic safety† during diplomatic crisis. This point was directly related to America, because during the development of the European â€Å"powder keg†, America was extremely out-armed. Wilson believed that if each Nation had substantial arms to defend during crisis, peace negotiations would be made much easier. Point five states that Colonial claims obtained during the war should be centered upon the interests of colonial people and of the imperialistic powers. This point refers mainly to the land acquired by Germany, since they did obtain land, but were defeated, and in serious trouble. America didn’t really have a say in this affair, because they were to gain no land, and lost none either. However Wilson felt that it was his responsibility to keep the other Nations from completely ruining Germany’s economy, by being the mediator and taking reasonable amounts away from Germany. The points 6-13 dealt with boundary changes that were to take place under the Treaty of Versailles. The countries that would be affected by these changes include: Russia, Belgium, Montenegro, the Polish, Romania, Serbia, and the Turkish people. Wilson’s final point promoted the League of Nations. The creation of an International organization would allowShow MoreRelatedEssay on Woodrow Wilson and American Diplomacy2945 Words   |  12 Pagesdestiny, and to remain free of entanglements overseas. Although he could not convince his fellow politicians on Capitol Hill of the probable success of his ideas, he did persuade the fellow writers of the Treaty of Versailles to use his Fourteen Points. America’s role as a political global superpower was established during his Presidency, as well as the modern policy that peace depends on the spread of democracy, and that national interest consists of adhering to a global system of law. 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Since many of the causes of the Depression were linked to conservative policies / philosophies, many conservative points of view lost credibility and became unpopular, such as: * either pro-big-business or laissez faire (republican) economic policies, which had led to unsustainable and unbalanced rapid growth, * tax cuts for rich which had led to maldistribution

Higher Education Marketing Mix Free Essays

CHAPTER 3 MARKETING’S ROLE IN HIGHER EDUCATION 3. 1 INTRODUCTION Chapter 2 introduced some of the major changes and trends that have taken place in the higher education environment both internationally and locally. Although higher education institutions can be classified as non-profit organisations, the challenges discussed in Chapter 2 necessitate higher education institutions to take on the organisation-like behaviour of profit organisations and to become more marketingoriented. We will write a custom essay sample on Higher Education Marketing Mix or any similar topic only for you Order Now An understanding of the environment in which higher education institutions operate, provides an essential background against which to understand and assess the benefits of focusing on students as customers. If higher education institutions understand the landscape in which they operate, they can begin to plan to serve the market effectively and efficiently with their marketing strategy. Being marketingoriented requires that organisations have knowledge on external forces (as explained in Chapter 2), but also knowledge on customers’ needs and wants (to be addressed in Chapter 4). It is against this backdrop of changes in the environment, such as the decrease in government funding and the increase in competition, that the need for marketing in higher education can be seen. In order to survive and to develop a sustainable competitive advantage in a changing higher education landscape, higher education institutions should satisfy the needs of their customers by adding value. Institutions should provide more benefits to their customers than competitors if they want to stay competitive. In the competitive environment in which higher education institutions operate (refer to Chapter 2), enhanced customer satisfaction may be one of the ways in which institutions can create and sustain a competitive advantage. This can be achieved with the effective application of the marketing mix elements. Marketing, and more specific a market-orientation, can provide a detailed understanding of the needs of ustomers and ensure that higher education institutions address the needs in as – 73 – efficient and comprehensive manner as possible. In short, higher education institutions need to set marketing objectives and formulate a marketing strategy. Given the market-oriented focus and importance of the marketing mix elements, the main focus of this chapter will be on higher education institutions’ formulation and implementation of the elements of the services marketing mix. This chapter will explore the literature available on the changing role of marketing, the marketing concept, market- and marketing-orientation, consumer behaviour and the integration of all the units of a higher education institution to formulate a service product strategy, price strategy, distribution strategy, communication strategy, people strategy, physical evidence strategy and process strategy in order to meet the needs of students. 3. 2 THE CHANGING ROLE OF MARKETING Marketing plays a major role in any organisation and is viewed by Lamb et al. 2004:5) as a process that starts with identifying customer groups, finding out about their needs and wants, matching what the organisation can offer with what the customer wants and then effectively communicating and selling it to the customer. Although the primary aim of marketing is to satisfy the needs of customers, it involves a cluster of activities such as product/service innovation, design, development, distribution, advertising, selling and how the product/service is acquired and used by the customer. Machado and Cassim (2002:2) regard marketing as the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives. Mowen (1995:7) states that the importance of understanding consumer behaviour is found in the definition of marketing as a human activity directed at satisfying needs and wants through a human exchange process. Effective marketing requires a higher education institution to identify their target audiences, understand them, and communicate with them as directly and interactively as possible (Laurer, 2006). According to Shoemaker (1999), marketing is the proactive management of the relationship between a higher education institution and its various – 74 – markets by using the tools of marketing: service product, place, price, promotion, process, people and physical evidence. Marketing’s greater contribution lies in its ability to facilitate the exchange process that takes place between the non-profit organisation such as the higher education institution, and each of the customer groups it addresses (Sargeant, 2005:295). Marketing can provide a detailed understanding of the needs of such customers and ensure that the institution addresses these needs in as efficient and comprehensive manner as possible. This understanding of customers’ needs can aid organisations in creating and sustaining a competitive advantage. Lynch and Baines (2004:171) found that higher education institutions’ sustainable competitive advantages are usually based on superior knowledge, reputation, innovation or architectural related advantages. However, marketing is not stagnant and over the years the marketing activities of organisations have changed. Kolter (2003) and Strydom, Jooste and Cant (2000:10) identify four stages that strongly influence the evolution of organisations’ marketing activities. These stages are referred to as production, sales, marketing and societal marketing. The production orientation focuses on the internal capabilities of the organisation rather than the needs of the market, while a sales orientation is based on the premise that people will buy more if aggressive sales techniques are used. Both of these orientations lack a customer focus. Organisations realise the importance of marketing and building long-term relationships with their customers; thus, a marketing orientation. The societal marketing orientation builds on the marketing orientation but adds that customer value must be delivered in such a way that it maintains or improves the society’s wellbeing. According to Kotler and Fox (1995:11), there are also definite stages in the evolution of marketing in higher education. The focus has moved from â€Å"marketing is unnecessary† to â€Å"marketing is promotion† to â€Å"marketing is positioning† to the stage where in some cases marketing is seen as part of strategic planning for higher education institutions. Law (2002:4) is of the opinion that higher education institutions in South Africa are moving from â€Å"marketing is promotion† to more emphasis on positioning and strategic planning. This stage is also described as the â€Å"marketing company† era. The marketing – 75 – ompany era is characterised by short- and long-term marketing planning and the whole organisation’s efforts are guided by the marketing concept (Perreault McCarthy 2002:34). The marketing concept is a management philosophy with the basic premises that an organisation needs to research the needs and wants of customers and then produce products or services that will satisfy these needs and wants (Strydom, Jooste Cant, 2000:12; and Kohli Jaworski, 1990:467). The marketing concept will be explained in the next section. 3. 3 THE MARKETING CONCEPT Churchill and Peter (1998:12) describe the implementation of the marketing concept as an organisation that satisfies customer needs and wants as a means to achieve their own objectives. Although it seems simple, it is complex in the sense that changes within the economic, social, political and technological environment, as discussed in Chapter 2, constantly leads to changing customer needs and wants. Lamb et al. (2004:17) state that institutions who want to survive in the future will have to be customer-focused, market-driven, global in scope and flexible in its ability to deliver superior value to ustomers whose preferences and expectations change continuously. Foxall and Goldsmith (1998:7) feel that consumer orientation stems from an organisation’s adoption and implementation of the marketing mix (price, service product, promotion, place, people, process, physical evidence), but adds that the adoption and implementation of the marketing concept has four major implications: à ¢â‚¬ ¢ The success of any organisation depends above all on the consumers and what they are willing to accept and pay. †¢ The organisation must be aware of what the market wants, preferably well before production commences. Consumer wants must be continually monitored and measured so that, through service product and market development, the organisation keeps ahead of competitors. †¢ Top management must achieve the integration of all the components of the marketing strategy into a single strategic plan, based on knowledge of consumer behaviour. – 76 – Mowen (1995:4) underlines the importance of the marketing concept by stating that the marketing concept embodies the view that an industry is a customer satisfying process, not a goods producing process. An industry begins with the customer and its needs, not a patent, raw material, or selling skill. The general acceptance of the concept that an organisation functions to fulfil consumers’ needs and wants, through understanding their exchange partner (customers), makes the study of consumer behaviour, and thus this study, essential. Mowen (1995:5) and Churchill and Peter (1998:13) agree that the basic idea of the marketing concept is to give the customers what they want. However, consumers are not always sure of their wants or what they are being offered, and are much more open to persuasion than is commonly acknowledged by the marketing concept. The marketing concept is based on four basic principles: consumer orientation or the target market; long-term maximisation of profitability or another measure of long-term success, total organisation effort, and social responsibility (Kotler, 2003:20 and Perreault McCarthy, 2002:34). The four principles of the marketing concept will be briefly explained below. 3. 3. THE PRINCIPLE OF CONSUMER ORIENTATION Strydom et al. (2000:12) view consumer orientation as the first principle of the marketing concept, indicating that all actions should be aimed at satisfying consumer needs, demands and preferences. Although this implies that the consumer objective is to achieve total need satisfaction, it does not mean that an organisation must provide for unrealistic consumer needs. According to Kotler (2003:20), organisat ions have to carefully choose their target markets and then prepare a tailored marketing programme. Research conducted by Conway, Mackay and Yorke (1994:35) on higher education institutions in the United Kingdom (UK) found that more than half of the institutions did not have a customer orientation in their planning and that most institutions merely pay lip service to the variety of target markets they serve. This study will attempt to gather the necessary information to enable institutions to become more customer oriented in understanding the needs and wants of students, specifically regarding the choice factors and information sources used when selecting a university. 3. 3. THE PRINCIPLE OF INTEGRATION AND COORDINATION OF ACTIVITIES – 77 – Strydom et al. (2000:14) define a system as an integrated whole – a group of related units working together to achieve a joint objective. The second principle suggests that marketing activities of a higher education institution should be closely coordinated with each other and with other functional areas such as production, finance, administration, human resources and procurement. The marketing concept has been a useful mechanism in helping to unify the independent functional areas to increase customer satisfaction. All seven marketing mix instruments (price, service product, promotion, distribution, people, process and physical evidence) should complement and reinforce one another in such a way that the student will prefer the institution’s service offerings to that of competitors. 3. 3. 3 THE PRINCIPLE OF MAXIMISING LONG-TERM SUCCESS The third principle is directed at achieving market share, return on investment and the objectives of the organisation. Marketing plans and corporate goals must be closely coordinated to ensure profitability. Maximising profitability is the primary objective of a profit-seeking organisation and can be achieved only through the consideration of consumer needs. Non-profit organisations attempt to achieve some other objective than profit. This does not mean than they are uninterested in income, as they have to generate cash to survive. However, their primary goal is non-economic, and for higher education institutions that is to provide education. Although there is an emergence of for-profit higher education institutions, as discussed in Chapter 2, non-profit higher education institutions also need to focus on their long-term sustainability. For-profit organisational success is measured ultimately by profitability. For non-profit organisations, measuring success is not so easy. Higher education institutions’ success can be measured in research output terms, number of students taught, student pass rate, range of qualifications of staff or even the quality of teaching. The combination of these factors makes the measurement of success difficult and can lead to conflict. For example: more students and larger classes may reduce time needed for research by staff to deliver the required research outputs. The principle of maximising long-term success is therefore more complex in higher education institutions than for for-profit organisations. Marketing is of growing importance to non-profit organisations, because of the need to generate funds in an increasingly competitive arena. Even – 78 – higher education institutions that rely on government funding must show how their work is of benefit to society and must meet the needs of their customers. 3. 3. 4 THE PRINCIPLE OF SOCIAL RESPONSIBILITY Zikmund and D’Amico (2001:20) state that the pure marketing concept disregards environmental changes and problems and focuses on short-term customer satisfaction rather than on the long-term wellbeing of society. Involvement and concern for the environment and the society in which the marketing task is performed are typical characteristics of a strategic approach to marketing management. Organisations should therefore strive to obtain the goodwill of the society, rather than only the support of the target market. By demonstrating social responsibility, higher education institutions can earn the goodwill of the public and government. This has a long-term dimension that can favourably influence the future of any institution in terms of funding and a steady supply of customers. From the discussion of the marketing concept and its principles, it is clear that by accepting the marketing concept, institutions have recognised that consumers and their behaviour has a direct bearing on the formulation of a marketing strategy – and therefore the relevance of this study. The marketing concept helps to bring focus and enables an organisation to satisfy consumers’ needs (Perreault McCarthy, 2002:41). If higher education institutions want to be successful in today’s dynamic higher education landscape, competing for resources, support and customers, they too should adhere to principles of the marketing concept, especially being consumeroriented, when conducting their business. Applied to higher education, the marketing concept holds that higher education institutions should conduct their planning bearing in mind and recognising that they exist primarily for the purpose of providing a service product to students. Campus activities should thus focus on satisfying the needs of students (Massad Tucker, 2000:1-5). The philosophy of the marketing concept forms the underlying basis for an organisation’s market- and marketing-orientation. These two concepts will be briefly explained in the next section. – 79 – 3. 4 MARKET-ORIENTATION AND MARKETING-ORIENTATION Throughout the literature, the term market-orientation and marketing-orientation is used interchangeably (Payne, 1988; Kohli, Jaworski, Kumar, 1993 and Sharp, 1991). Notice should however be taken of a small group of authors, such as Cravens, Lamb and Crittenden (1996), who argue that there are slight differences between the two concepts. However, it is not the purpose of this study to argue or investigate if there are differences between these concepts, but rather to show how the adherence to these concepts can enable higher education institutions to survive and grow (Voon, 2006:598). 3. 4. 1 MARKET-ORIENTATION Market-orientation refers to everyone in the organisation being committed to the customer and adapting in a timely way to meeting the changing needs of the customer. Market-orientation is a bias towards the market, requiring knowledge of customer needs and wants, competitors and external forces (Evans, James Tomes, 1996:209). Kasper (2002:1047) defines a market-orientation as the degree to which an organisation and all its thinking and acting (internally as well as externally) is guided and committed to the factors determining the market behaviour of the organisation itself and its customers. Kohli and Jaworski (1990:3) define market-orientation as the activities involved in the implementation of the marketing concept. An organisation with a market-orientation determines the needs and wants of the target market and delivers the desired satisfaction more effectively and efficiently than the competition. Thus, market-orientation extends beyond the marketing concept philosophy, as it also offers a process for delivering customer value. A market-oriented organisation understands customer preference and requirements and effectively combines and directs the skills and resources of the entire organisation to satisfy customers’ needs. According to Kasper (2002:1052), a robust market-orientation has become a strategic necessity for any service organisation due to increasing market turbulence and intensifying competition. He states that the market-orientation of an organisation can be seen as a particular position on a scale ranging from being truly market-oriented to not being market-oriented at all. Results from Kasper’s research show that a market-oriented service organisation has an open, employee-oriented, result-oriented, pragmatic, – 80 – professional, well-communicated, marketing goals-oriented, market knowledge (customers and competition) system with dedicated employees that know what customer focus and service means. Market forces (refer to Chapter 2) changed the landscape of higher education into a competitive environment requiring a market-orientation (Koerwer, 2001). According to Couturier (2002), reduction in government support and increase in new technologies and improved learning produce students with high expectations and this further pressurises higher education institutions to become more market-oriented. Shoemaker (1999) states that glossy brochures, catchy slogans and the existence of marketing programmes do not give higher education institutions a market-orientation. Marketorientation requires a philosophy and a culture that go deep in the organisation. This means an institution where students are involved in the service production process and where administration, faculty and support staff work together effectively. A marketorientation requires a commitment and power from top management. Shoemaker (1999) states that a market-oriented higher education institution is characterised by: †¢ A top management actively involved in providing institutional marketing leadership; †¢ A marketing process integrated to reflect, recognise and involve all institutional stakeholders; Marketing plans that are well distributed among top institutional officers; †¢ Outside marketing consultants used to build and enrich the institutional culture; †¢ Regular and structured marketing research studies of all important stakeholder areas; †¢ A marketing-oriented planning culture that includes the participation of all stakeholder areas; and †¢ Marketing evaluation systems in place to assure continuous monitoring and improvement of marketing programmes and strategies. – 81 – 3. 4. 2 MARKETING-ORIENTATION An organisation with a marketing-orientation adheres to the principles of the marketing concept and offer customers what they need (Perreault McCarthy, 2002:37). Marketing-orientation implies that the main task of a higher education institution is to determine the needs and wants of target markets and to satisfy them through the design, communication, pricing, delivery of appropriate and competitively viable programmes and services (Kotler Fox, 1995:8). Laurer (2006) states that strategic plans of higher education institutions will have to become marketing-oriented plans. This begins with an environmental scan that determines how society is changing and then outlines how programmes, pricing and access to learning (distribution), employees (people) and process will meet these changing needs. According to Massad and Tucker (2000), higher education institutions in the United States have embraced a marketing-oriented approach to admission. They state that the trend began in the late 1970’s in the USA and is driven by increased competition and a shrinking enrolment pool. Higher education institutions in Shanghai started in 1999 to reform their policies to be more marketing-oriented (People Daily, 1999). These policies include practical plans such as providing enough residence and departmental buildings for students and lecturers, logistic service renovations, and improved logistic service quality. Several reasons exist why achieving a marketing-orientation is problematic for some higher education institutions (Sargeant, 2005:297): †¢ Conflict between management and academic interest. There is a split in the responsibility for dealing with customers between departments and an institution’s central administrative function. †¢ The lack of a strategic perspective. Courses are sometimes established and maintained for the status of the department or institution rather than where there is clear evidence of an economic viability or long-term demand. †¢ The diversity of the marketing activity. Marketing is conducted by a variety of players, such as the admissions officer, school liaison officers, research officer and faculties, making the coordination difficult. †¢ Academic value. Some institutions still perceive marketing as being incompatible with their education mission. – 82 – Nevertheless, higher education institutions must aim to become marketing-oriented. The market concept forms the underlying philosophy for both a market and marketingorientation. A marketing-orientation is an all-embracing concept referring to both behavioural and philosophical standing of marketing, therefore incorporating the market-orientation. Thus, for the purpose of this study, the term marketing-orientation will be used to indicate a market- and/or marketing-orientation. 3. 5 MARKETING STRATEGY AND CONSUMER BEHAVIOUR According to Hawkins et al. (2001:7), an effective marketing strategy is based on knowledge of the environment, competitors and customers. The study of customers’ needs, perceptions, aspirations, motivations, culture and decision-making processes is called consumer behaviour (Du Plessis Rousseau 2005:8). Consumer behaviour serves as a basis for marketing strategy formulation. Figure 3. 1 indicates that an understanding of consumer behaviour is the basis for marketing strategy formulation and will serve as a visual guide for the remainder of this chapter. It also visually shows the integration and link between Chapter 2, Chapter 3 and Chapter 4. Figure 3. begins with the analysis of the market (Step 1) in which the organisation is operating. It requires a detailed analysis of the organisation’s capabilities, strengths and weaknesses, competition, the economical and technological forces affecting the market, and the current and potential customers in the market (refer to Chapter 2). The consumer analysis component of the first step enables an organisation to identify groups of individuals with similar needs . The identified market segments, in step two, can be described in terms of demographics, media preference and geographic location. One or more of these segments are then selected as target market, based on the organisation’s capabilities relative to those of its competition, taking into account current economic and technological conditions. The organisation then decides on the desired image of the service product or brand, also known as the service product or brand position. The third step entails the marketing mix/strategy formulation. Hawkins et al. (2001:14) point out that a marketing strategy basically answers the question: How will we provide – 83 – superior customer value to our target market? The answer requires the formulation of a consistent marketing mix. Thus, the marketing strategy is formulated in terms of the marketing mix. Lamb et al. (2004:12) point out that this step involves the determining of service product features, price, communications (promotion), distribution (place), people, process and physical evidence that will provide the customer with superior value. The total service product is then presented to the target market, which constantly engages in processing information and making decisions to enhance and maintain their lifestyles. The marketing strategy (as implemented in the marketing mix) intervenes between the decision-making process of consumers (Step 4) and the outcomes/goals of an organisation. The outcomes of the organisation are determined by its interaction with the consumer decision-making process. Organisations can only succeed if consumers see a need that the organisation’s service product can address, become aware of the service product, decide that it is the best viable alternative solution, proceed to buy it, and become satisfied with the results (Hawkins et al. , 2004:22-23). The consumer decision-making process will be discussed in detail in Chapter 4. Finally, the reaction of the target market to the total service product produces an image of the service product, brand or organisation, sales (or the lack thereof), and some level of customer satisfaction among those who did purchase. As the components of the market analysis (Step 1) was discussed as part of the trends in the higher education landscape in Chapter 2 and the consumer decision-making process (Step 4) will be explained in Chapter 4, the remainder of the chapter will focus on the STP process (Step 2) and marketing strategy (Step 3) as depicted in Figure 3. . – 84 – MARKETING MIX/STRATEGY (CHAPTER 3) Service product (3. 7. 1) Price (3. 7. 2) Promotion (3. 7. 3) Place (3. 7. 4) People (3. 7. 5) Process (3. 7. 8) Physical evidence (3. 7. 9) Problem recognition (4. 7) Information search (4. 8) Alternative evaluation (4. 9) Selection and purchase (4. 10) Post-purchase process (4. 11) OUTCOME Customer Satisfaction Sales Product/brand image/organisation Source: Ad apted from Hawkins, Best and Coney (2001:8). – 85 – CHAPTER 3 STP- PROCESS (CHAPTER 3) Segmentation, target market and product positioning (3. 6) CONSUMER DECISION-MAKING PROCESS (CHAPTER 4) STEP 4 CHAPTER 2 MARKET ANALYSIS (CHAPTER 2) Competitors Company Consumer Conditions CHAPTER 4 STEP 3 STEP 2 STEP 1 Figure 3. 1: Marketing strategy and consumer behaviour As the components of the market analysis (Step 1) was discussed as part of the trends in the higher education landscape in Chapter 2 and the consumer decision-making process (Step 4) will be explained in Chapter 4, the remainder of the chapter will focus on the STP process (Step 2) and marketing strategy (Step 3) as depicted in Figure 3. . 3. 6 SEGMENTATION, TARGET MARKETING AND POSITIONING (STP PROCESS) Marketing strategy formulation for organisations takes place via the process of integrating segmentation, targeting, positioning and the services marketing mix. Once organisations have segmented the market, they must determine the market potential of each segment and then select segments to target. A target market can be defined as a fairly homogeneous group of customers to whom an organisation directs its market offering. Organisations must determine a mixture of the marketing elements that they will combine to satisfy their target market. Selecting a market-oriented strategy is referred to as target marketing. A specific marketing strategy specifies a particular target customer (Perreault McCarthy, 2002:47). Most non-profit organisations serve several groups or publics. The two broad groups are donors, who may be individuals, trusts, companies or governmental bodies. The second group consists of their clients such as students, parents, government or employers. Often higher education institutions need to satisfy both groups and this complicates the marketing task (Lovelock Wright, 2002:233). Students, prospective students and their families are seen as customers or consumers who must be attracted to the institution, who must be satisfied, and who must have a good experience at the institution. This will ensure that they spread positive word-of-mouth and influence other potential students to select the institution (Reich, 2004). Students can be regarded as the primary clients of higher education institutions and parents, employers and society as secondary beneficiaries. As an institution’s target market changes, new needs and trends evolve (as discussed in Chapter 2), making it necessary for institutions to rethink their position and often to reposition in order to address the new needs or trends (McGolddrick, 2000:54) This study focuses on students as a target market of institutions, as traditionally most institutions’ marketing efforts are directed at satisfying 86 – the needs of students. This study will provide insight into the demographics and choice factor importance that forms part of students decision-making behaviour, which will aid higher education institutions in understanding their target market to ensure satisfaction through implementing an appropriate marketing strategy. After segmentation and target marketing, organisations should position their market offerings in such a way that it is perceived to satisfy the needs of customers better than the competition. According to Hawkins et al. 2001:289), a product’s position refers to the schematic memory of a brand in relation to competing brands, products, services and stores. Brand image, a closely related concept, can be defined as the schematic memory of a brand without reference to competing brands. Strydom et al. (2000:14) regard a product’s position as the way consumers perceive a product or service in terms of its character and advantages in relation to competitors. Du Plessis and Rousseau (2003:276) state that the important underlying principle is recognising that the marketing battle today is fought in the minds of the consumer. Research shows those products or services that enjoy high awareness levels usually enjoy dominant market penetration and market share. But awareness is not enough; the service product must have a meaningful position in the mind of the consumer and stand for something of value to the consumer. Mowen (1995:18) defines product differentiation as the process of positioning the product by manipulating the marketing mix so that customers can perceive meaningful differences between a particular brand and competing brands. A highly differentiated brand may have strong competitive advantages, because it is easily recognisable as being different from competitors. Institutions need to know how they and their service products are positioned in the student’s mind. The stimuli that institutions employ, such as advertising or sponsorships, can influence the service product’s interpretation and thus its position. Hawkins et al. (2001:289) is of the opinion that organisations frequently fail to achieve the type of service product image or position they desire, because they fail to anticipate or test the consumer’s reaction. These positions have developed and evolved over time. Therefore, the message received from the organisation must be consistent or change in a deliberate manner to reflect or alter a desired change in brand position. – 87 – Strydom et al. (2000:134) state that organisations must position their brands so that they are perceived to satisfy the needs of the target market better than competitors’ offerings. The institution must develop a unique appeal for the brand in the consumer’s mind and position the brand as filling a particular need of the consumer. Berman and Evans (2001:122) point out that through positioning, institutions devise their strategy in a way that projects an image relative to the institution’s category and its competitors, and elicits consumers’ responses to their image. Sargeant (2005:322) notes that positioning can also have a profound impact on the success or failure of fundraising initiatives and attempts to work closely with commerce and industry. Those higher education institutions that are perceived as being either of high quality or as unique in some way, are likely to have the greatest success in these areas. Law (2002:3) states that it is important for institutions to distinguish themselves from competitors in terms of values that are important to the student. Therefore, higher education institutions need to develop a clear position that can be stated simply, effectively and often (Dehne, 2001). The author continues by saying that as competition becomes stronger, an integrated marketing strategy based on the identified positioning of the institution will play a crucial role. If organisations want staff and students to project a positive image, they must clearly define exactly what that image is; not vague understanding, but specifics (Sharpe Harville, 1987). Law (2002:4) emphasises the importance of addressing the values that are important for prospective students in the publications of the institution. It can therefore be said that in the positioning of the institution, the needs and perceptions of important values of the respective public should be seriously considered. The elements of higher education institutions’ marketing are mixed to form an integrated strategy where each component plays a role to position the institution in its chosen target market (Van Biljon, 1992:65). According to Czinkota, Kotabe and Mecer (1997:217), organisations must first determine how they want to position their service products and use their service products’ position as basis for developing their marketing strategies. This means that after the STP (segmentation, targeting and positioning) process, organisations must blend the services marketing mix elements into a marketing strategy that reflect the organisation’s desired osition to their target market. – 88 – The next section focuses on the services marketing mix and its elements as it pertains to higher education institutions. 3. 7 THE SERVICES MARKETING MIX OF HIGHER EDUCATION INSTITUTIONS The development of a marketing strategy involves the coordination and combination of the m arketing mix elements (Mowen, 1995:19; and Hawkins et al. , 2001:6). It is the combination and coordination of the elements in the marketing mix that enables organisations to meet customers’ needs and provides customer value. A traditional marketing mix consists of the following elements: price, service product, promotion and place (distribution). However, due to the intangible, inseparable, heterogeneous and perishable nature of services, the traditional marketing mix was extended to include process, people and physical evidence (Goldsmith, 1999:178). Because higher education institutions mainly provide intangible service products, the extended marketing mix, better known as the services marketing mix, forms the focus of this chapter. Higher education institutions need a well-developed comprehensive marketing strategy that is carefully communicated throughout the institution (Robinson Long, 1987:44; Brooker Noble, 1985:34) and the services marketing mix will help higher education institutions to shape their service offerings according to the needs of their customers. Grove, in Kraft (2006) showed that in the marketing of education, the marketing mix is the single most important determinant of marketing success. In the light of the fact that marketing can influence the consumer’s behaviour and the services marketing mix can assist higher education institutions in developing a holistic and well thought-through service offering, the seven services marketing mix elements (service product, price, promotion, distribution, people, physical evidence and process) will be discussed in the main part of this chapter. – 89 – 3. 7. 1 THE SERVICE PRODUCT STRATEGY OF HIGHER EDUCATION INSTITUTIONS The most basic decision that higher education institutions have to make is what programmes and services they will offer to their students, alumni and donors. An institution’s service product strategy determines its identity, position and how customers will respond to the institution. A product is anything a consumer acquires, or might acquire to meet a perceived need and thus the sum of all the products and/or services offered by an organisation. To define the term service is not easy or simplistic. Although the process may be tied to a physical product, the performance is essentially intangible and does not normally result in ownership of any of the factors of production. Services create value and provide benefits for customers at specific times and places. Lovelock and Wright (2002:3) define services as an act or performance offered by one party to another. Irons (1997:12) defines services as perishable, transient acts that have no lasting material, being mainly presented by people that cannot be separated from the provider. Therefore, the personal characteristics of the provider are an important part of the service. Du Plessis and Rousseau (2003:175) state that these definitions reveal that the nature of service centres on the characteristic of intangibility and that it is this feature that distinguishes services marketing from the marketing of physical goods. The goods and services continuum is shown in Figure 3. 2 below. Figure 3. 2: Goods and services continuum Tangible dominant Complete tangible products Tangible products with supporting services Intangible dominant Hybrid offers Source: Adapted from Palmer (2005:24). – 90 – Major service with supporting products Pure services It is evident that in services, the intangible element is dominant. The provision of education, although intangible, also contains tangible elements. Institutions provide service activities such as the teaching process and contact with customers (intangible element) as well as learning aterial such as textbooks (tangible element). McCollKennedy (2003:6-7) regards goods and services’ tangibility on a continuum, rather than in one category. At one end of the continuum are the intangible services and at the other end are tangible products. Higher education, which can be described as a major service (intangible) with minor supporting products (ta ngible), are leaning towards the intangible side of the continuum. In addition to categorising services based on their tangibility, it is also useful to identify who or what is the direct recipient of the service. Services can either be directed at people’s bodies, intangible assetes, physical possessions or people’s minds such as education (Lovelock, 1996:29). In order to better understand the concept of services, the distinguishing characteristics of services will now be explained. The basic characteristics of services are briefly outlined below (Lovelock Wright, 2002:14-16): †¢ Customers do not obtain ownership. Customers usually derive value from a service without obtaining ownership of any tangible elements; †¢ Service products are intangible performances. Intangible refers to something that is experienced and cannot be touched or preserved. Although services often include tangible elements, the service performance itself is basically intangible; †¢ Customer involvement in the production process. Customers are often actively involved in helping to create the service product by helping themselves or by cooperating with the service personnel. Customers cannot sit back and wait for the experience to be delivered as they do with the purchase of tangible products they have to participate. †¢ People as part of the service product. Given the fact that different service personnel may deliver the service product to customers, it is difficult to achieve – 91 – uniformity in service delivery. This difference (heterogeneity) in attitude and action will typically result in very different customer perceptions of the quality and overall satisfaction levels. People are such an important component of service delivery that it is added as an element to service organisations marketing mix and will be discussed in Section 3. 7. 5; †¢ Importance of time. Customers have to be physically present to receive services. Customers are becoming increasingly time sensitive and speed is often a key element in good service delivery; and †¢ Services are perishable and cannot be stored like physical goods. Thus, although education includes tangible elements such as textbooks, chairs and notes, students derive value from higher education without obtaining ownership. Students are involved in the education production process as they participate in and help make the final service product, by giving inputs in class or participating in campus events. As higher education is perishable and cannot be stored, students must be physically present to receive education. It is evident that offering educational services involve special challenges, since most services education is intangible, inseparable, variable and perishable. Developing service products that satisfy consumers’ wants and needs are a critical marketing activity for institutions (Hoyer MacInnis, 2001:40). Consumer research can provide useful information for service product decisions. According to Czinkota et al. (1997:109), information provided by consumer behaviour research, such as this study, can help organisations to decide which attributes to add to or change in an existing offering; aid them in correctly naming or re-naming their organisations and make effective packaging and branding decisions. Higher education institutions should evaluate its academic programmes and service product mix periodically, and particularly when considering modifications. Some programmes are more central than others. Education offerings are specifically essential programmes that institutions cannot do without. Other programmes may be easier to modify, like recreational activities that are usually auxiliary programmes. Certain programmes will play a major role in attracting customers and these are called flagship programmes (Kotler Fox, 1995:282). – 92 – Information provided by this study will enable institutions to determine the importance of some components of their service product (variety of study courses, academic quality and sport programmes) in the institution selection process of students. Higher education institutions must also develop a pricing strategy for their service products. The pricing decision is of utmost importance, as this will ensure income for higher education institutions that will enable them to implement al the other decisions such as promotion, distribution, processes, physical evidence and people. Section 3. 7. 2 will focus on the pricing strategy of higher education institutions. 3. 7. 2 THE PRICING STRATEGY OF HIGHER EDUCATION INSTITUTIONS In this section, the pricing strategy of higher education institutions will be discussed by defining the term price, explaining possible pricing objectives of higher education institutions, explaining discounts and highlighting the role of price. Price plays an important role in the marketing mix, quality perception, attracting customers and providing revenue to institutions. Price is the amount of money (or some other item that is exchanged or bartered) that the buyer exchanges for a service product provided by the seller. Lamb et al. (2004:570) describe prices as that which is given up in exchange to acquire goods and services. The price of a service plays two major roles. Firstly, it influences how much of the service product the customer will purchase, and secondly, it influences whether selling the service will be profitable for the organisation or not (Machado Cassim, 2000:99). Prices can be seen as the amount that a customer (students, parents or employers) must pay to be educated. The price of higher education institutions are influenced by the subsidy from government as well as donations and the cost of presenting the course, prices of competition and inflation. Price, for students, consists of a monetary cost as well as other costs, for example effort cost (completing long essay application forms), psychological cost (stress of enrolling in an institution far from home) and time cost (visiting or attending open days at different institutions) (Kotler Fox, 1995:311). Students and their parents are not just interested in the institution’s list price (official – 93 – tuition and fees printed in a catalogue), but also the effective price. According to Kotler and Fox (1995:312), the effective price is the amount the customer will actually pay for all the educational benefits and value received. Prospective students may find it difficult to measure effective price early in the decision process, since effective price can only be known after the student has gone though the application process and has been accepted and financial aid has been allocated. Tuition fees represent only a fraction of the total cost of attending a higher education institution and living cost and other education related expenses must also be considered by students (Anon, 2006b). Diederichs (1987:112) found that price plays an important role in students’ choices of a higher education institution. The first aspect organisations should consider when pricing a service product is to decide on the pricing objectives they want to achieve. Pricing objectives can influence the price of the service product and include: maximising profit (short- or long-term), building market share, maximising long-term customer perceptions of the value of the service product, maximising immediate cash flow, positioning the service product in a certain place in customers’ minds, and targeting a given segment of the market. Higher education institutions may pursue more than one of these objectives at the same time depending on the situation they are facing. A new higher education institution emerging after a merger may aim to position their service product, as well as targeting a given segment and maximising long-term perceptions of value (McColl-Kennedy, 2003:270 and Machado Cassim, 2002:106-107). Higher education institutions should take into account three factors when setting prices for their educational programmes: †¢ Firstly, cost, by determining the amount of revenue needed to cover expected operating expenses; Secondly, customer demand, which emphasises that the final price decision is always made by the customer; and †¢ Thirdly, competition, as institutions have to weigh their â€Å"value† and establish their price relative to their competitors. Institutions should always consider the effects of a given pricing policy on enrolment, the nature and mission of the institution, the prices charged by competition and the – 94 – effect of their prices and price changes on actions of competition (Kotler Fox, 1995:309). The pricing objective of a higher education institution will also affect its discount policy, as discount influence profit, market share, cash flow and positioning. Once the basic price is established, organisations need to establish some flexibility in terms of that price. Discount can be defined as the reductions to the basic price (Machado Cassim, 2002:116). Higher education institutions need to determine and publish their prices (tuition fees) and discounts. Financial aid is seen as a form as discount by students. Kotler and Fox (1995:310) state that financial aid is not just used to attract students to increase the size of classes, but also to ensure the needed composition of the class to meet diversity objectives. Student aid or financial aid makes it possible for many students from low- and middle income families to afford higher education (Anon, 2006b). Cabrera and La Nasa (2000:10) found that financial aid especially influences students positively to select a particular institution and also allows parents to consider a wider range of institutions. This study will include the importance of financial aid in selecting a higher education institution. Diederichs (1987:114) found that a higher education institution’s price policy should take into consideration the facilities needed, quality of education and competitiveness, as students often use the price of a product or service as an indicator of quality. For example, more expensive institutions may be viewed as providing better education. Some institutions make use of their price/quality relationship by trying to raise the prestige and attractiveness of their institution by raising the tuition fees. Higher education institutions must carefully consider the role of price in the marketing mix, as price can be used as a quality indicator and thereby influence the perception of the institution’s position. Higher education institutions often offer substantial amounts of financial aid to talented students to maintain their competitive advantage. Students and parents are looking for the best overall deal in terms of educational quality and prices (Laurer, 2006). Courant (2006:4) is of the opinion that higher education institutions prepare students to lead an examined life and should therefore price higher education as an expensive, high value proposition. Wallace (2003:32) argues that higher tuition fees will enable institutions to improve the quality of education and in countries where higher education is subsidised or offered for free, education would be held in higher esteem if a price were attached to it. However, Beckett (2005) warns that institutions – 95 – should be aware that charging top fees may cause institutions to loose students and not widen the participation. Wallace (2003) states that universities in France, England, the United States and Germany are facing the same problems with the price of education, as government funding for education is decreasing and institutions have to look at increasing tuition fees. The result is that students in these countries are protesting the price increases. The increased value of a higher education degree, increased research at universities, reduced state funding for public higher education institutions and monopolistic behaviour of higher education institutions are other possible reasons for higher prices (Barry, 1998:84). Higher educational institutions rely on tuition fees, donors and government subsidies as sources of revenue. As discussed in Chapter 2, changes in the financial environment emphasise the trend of institutions to cut cost, increase productivity and offer more financial aid to students. Most educational institutions depend heavily on tuition fees to keep operating and pricing therefore becomes very important. Price plays a role in determining who will apply, who will attend, who the institutions will serve, what the institutions will be able to offer and whether the institutions will meet its enrolment objectives and revenue needs. From the discussion it is evident that a pricing strategy is important for education institutions because they depend on revenue to operate, especially in the light of the decrease in subsidies (refer to Chapter 2). Price is part of the marketing mix and should be considered as an element of the institution’s strategy planning. When setting price, decision-makers should understand how students perceive price and the importance of price in selecting institutions. According to Cosser and Du Toit (2002:77), price is an important factor considered in choosing a higher education institution. It is important that higher education institutions know the cost of producing the service, know the price of competitors, identify pricing factors that are relevant to pricing decisions, and decide on a pricing strategy that will attract enough students. It is evident from the above-mentioned that higher education management needs information on the students and market to make effective pricing decisions. This study will provide some insight on the importance of price in the institution selection process. – 96 – Higher education institutions can have good quality educational services offered at the right price to students, but if students and parents are not aware of these services and prices, they will not consider the institution. It is thus important that higher education institutions communicate with their prospective students and parents. The next section will focus on the promotional or communication strategy of higher education institutions. 3. 7. THE PROMOTIONAL STRATEGY OF HIGHER EDUCATION INSTITUTIONS Educational institutions need to effectively communicate with their target market(s) and publics. Institutions must inform students and parents about its goals, activities and offerings and motivate them to take an interest in the institution. To identify and satisfy consumers’ needs, an institution must have a good understanding of the consumer in order to gain a competitive advantage through its marketing mix (service product, price, distribution, promotion, process, people and physical evidence). Persuasive communication is central to the marketing of service products as features, benefits and values must be communicated to the consumers to influence their purchase behaviour. Everything and everybody in an institution has a role to play in communication. Examples include the organisation’s brand name or logo, campus grounds, service product quality, prices, employees, delivery vehicles, buildings, the technology the organisation has at its disposal, the capital the organisation has at its disposal and the organisational philosophy. Kelley and Mahady (2003:2) are of the opinion that promotion is an element sometimes overlooked by non-profit organisations. They argue that even if an institution offers some of the best programmes and services, these will not be utilised to the fullest if the market they were intended for has no knowledge of their existence. The remainder of Section 3. 7. 3 will focus on the definition of promotion, the communication process and the integrated services marketing communication (ISMC) mix available for higher education institutions. According to Hawkins et al. 2001:19), promotion or marketing communication includes advertising, the sales force, public relations, packaging and any other signals that the – 97 – organisation provides about itself and its products and services. Lamb et al. (2004:466) describe the promotional strategy as a plan for the optimal use of the elements of promotion, namely advertising, sales promotion, publicity and personal selling. Many higher e ducation institutions are returning to promotional or communication tools to promote courses in an attempt to maintain and/or expand their market share. The importance of communication can be seen in the establishment of communication departments, more funds that are allocated to marketing and appointing marketing managers or external communication experts to help with promotional activities. Higher education institutions are making use of radio, television, newspapers, buses, taxis and open days as well as more professional brochures and promotional material as vehicles for communication (Jones, 2002:41). This is necessary, since higher education institutions can no longer depend on pass rates alone to attract students. In order to utilise the promotional tools to their fullest and to ensure effective communication, higher education institutions need to understand the communication process. Communication involves the creation of shared meaning between participants. The intangibility, inseparability, perishability and heterogeneity of services create special communication requirements and involve the risk of miscommunication that is not so evident in the marketing of goods (McColl-Kennedy, 2003:236). Communication can be viewed upon as the transfer of a message from a sender to a receiver by means of a signal of some sort via a channel or medium. The sender translates his/her objectives, ideas and concepts through language into a message also known as encoding (Strydom et al. , 2000:344). The receiver tries to decode the message before he/she can comprehend its meaning and then the receiver reacts or responds to the message (Lamb et al. , 2004:326). The disturbances (physical or psychological) that prevent the successful transfer of the message are known as noise. Noise influences all the components of the communication process and places obstacles in the way of effective communication. Higher education institutions are the senders, while the receivers of the message are the potential students, existing students, parents, employers or alumni. For the purpose of this study, the focus is on the students of a higher education institution. This does not mean that institutions do not need to communicate with other publics such as alumni, parents, donors, government or the general public as well. According – 98 – to Jones (2002:44) the student’s ability to decode the message is influenced by his/her past experiences, feelings, emotions, attitudes and perceptions of the institution. Thus, higher education institutions need to fully understand their target market to identify the appropriate intended messages for the target market. The communication process gives higher education institutions the opportunity to influence prospective students’ behaviour by developing a message that creates awareness, position themselves in the mind of the student, change the student’s attitude towards the institution, or encourage the student to apply to the institution (Jones, 2002:45). The most popular communication/promotion objectives are general image enhancement and awareness of the institutions (Kittle, 2000). According to Jones (2002:43), emotions or feelings also play an important part in the encoding process and it is vital that higher education institutions should have empathy for other people’s cultural backgrounds. Higher education institutions need to select a medium that will attract attention, arouse interest and present the message clearly (Kotler Fox, 1995:353). Higher education institutions need knowledge about the language of the prospective students, knowledge of forms of communication and general background information about the prospective students in order to encode successfully. The media that will be investigated in this study include: printed media (advertisement in magazines, newspapers or outdoor media), broadcasting media (advertisements on radio and television), direct mail or direct marketing (newsletters and brochures of higher education institutions), body language and direct communication through representatives of the institution (school visits by staff or open days attended by students), word-of-mouth (conversations with alumni, friends or family members), or websites. In Chapter 4 the different media will be further discussed as part of the sources of information used by students. The promotional mix that an institution uses is determined by the student market’s expectations and requirements of the service products, together with the other elements of institutions’ marketing decisions. Machado and Cassim (2002:157) describe the promotional mix as the blend of promotional methods used by the organisation to communicate. A huge array of promotion elements exist, such as direct marketing, sales promotions, advertising, Internet and sponsorships. The communication process and the promotional mix elements (advertising, public – 99 – elations, personal selling and sales promotions) are used by organisations to communicate to their prospective customers. The message that reaches the customer should be the same regardless of whether it is an advertisement on the radio, websites, open days, or a newspaper insert. To ensure the careful coordination of all the promotional mix elements, organisations must adopt the concept of Integrated Marketi ng Communications (IMC) (Du Plessis Rousseau, 2005:345). For a higher education institution, this means that the institution coordinates all its communication activities. Zeithaml and Bitner (2000:405) suggest that a more complex integrated form of communication is needed for services, hence the ISMC approach as shown in Figure 3. 3. This concept requires a complete communication strategy that involves staff, every interface the institution has with its students, stakeholders and the community at large (Jones, 2002:450). Laurer (2006) suggests that institutions must coordinate all the promotional elements so that they meet the needs of students and parents who will pay for their products and services. Figure 3. serves as a visual guide for the discussion How to cite Higher Education Marketing Mix, Papers

Online Shopping Vs. Shopping Essay Example For Students

Online Shopping Vs. Shopping Essay Shopping has always been one of my favorite hobbies. The hardest part is choosing which is better at that moment, online shopping or in-store shopping. I personally love to do both, especially when there are sales, because sometimes online may have a better sale than in store and vice versa. In the real world real shoppers will know that Online and in-store shopping differentiates in various ways. However, depending on the situation they both are sometimes convenient ways to shop. Recently, in-store shopping has been more convenient for me because sometimes I just want or need something right away, but in reality I enjoy both ways of shopping. I believe that shopping preferences change depending on a person’s situation. I noticed that many people are starting to prefer online shopping more than in-store shopping. Although, online shopping is more convenient for individuals that don’t have time to go to the store. If you’re busy with work or school then online shopping can sometimes be more convenient. It’s also convenient since you don’t have to drive, catch the bus, wait in a long line, or deal with not being able to find an item. All you have to do is type in the item you’re looking for and it’s there. Once you find the item, you can order it at any time because online stores never close. Lately, I’ve been having a lot online shopping experiences because they have been having really great deals and sometimes extra 20% off purchase. Also since a lot of stores have started online shopping with pick up in the store, a lot of people have been enjoying that as well because you can order items and pay for them online. You receive a confirmation code and a time that your items will be ready and a. . t have to trust the size and measurements and most online stores clothes are not true to their sizes. At times, I received items with completely different measurements than they described. In conclusion when I decide to make online purchases, it’s usually because of the price and free shipping. I’m really into both online and in-store shopping because they’re both convenient at times. I just love to shop so I’m where ever the sales are at. I really like that I can shop worldwide with online shopping so many different stores and more options of items online. Although, I’ve had my share of negative experiences, I won’t let that stop me from making further online purchases. Online shopping and in-store shopping are both great ways to shop. I love shopping and I am always willing to explore various shopping options.