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Archive for the ‘Informatics’ Category

Pricing strategy in B2B markets: Demand (1/3)

In Informatics, Management on April 16, 2013 at 3:50 pm

1956_The Price is Right

The price is right

Price is an essential component of marketing and revenue generation which cuts to the heart of the purpose of modern enterprise. Businesses address customer needs through the provision of goods and services. However, this is not an end to itself. Primarily, firms exist to increase the wealth of their owners. To do this they engage in revenue and profit generating activities.

Revenue = price of good x quantity of good sold

Profit = total revenue – total costs

The profitability of a business can be increased by selling more, decreasing costs or raising prices. Although most obviously involved in the latter option, price strategy is an element of all of these methods. Enterprises can alter price to maximise profits, penetrate or skim markets, reduce inventories or encourage up- or cross-selling. Typical objectives include getting a return on investment and increase market share.

Businesses do not operate in a vacuum, however. Only certain pricing decisions will be viable for any one market situation. This article separates the relevant factors into demand, product and competitive conditions.

Demand

In neoclassical economics, lowering prices increases demand and adding to buyer costs reduce the number of potential customers willing to buy. However, more sophisticated models differentiate between inelastic and elastic demand.

Price elasticity refers to the percentage change in the quantity of a good demanded resulting from a 1% price change. If demand is inelastic, price alterations have a rapid effect. On the other hand, customers who are slow to be discouraged from buying as prices increase demonstrate elastic demand. The second scenario occurs when a product cannot be easily substituted or provides value through high quality. Similarly, buyers who are not attentive spenders or find searching for lower prices challenging are flexible in the prices they will pay.

CONTINUED IN PART 2.

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Plugged in: Why business is turning social

In Informatics, Management, Marketing on October 4, 2012 at 11:35 am

You have to be totally connected to anyone who touches your brand, if you don’t do that, I don’t know what your business model is in five years.

– Angela Ahren, Burberry CEO

McKinsey has predicted that social media is capable of unlocking $0.9-1.3 Trillion in value, and businesses are waking up to this fact.

Booz Allen and Buddy Media found that 57% of businesses plan to increase social media spending and 38% of CEOs label social as high priority. Celebrated examples of online engagement include Burberry’s website-as-social-network and Intuit’s use of crowdsourcing techniques to make their TurboTax service unbeatable.

Social media is even encroaching on the “real world”. Coca-Cola set up a theme park to check visitors into rides on their Facebook pages and Domino’s Pizza relayed comments they received online onto a billboard in Times Square. However, new technologies have worked to empower the customer and employee as much as the company.

……….

In 2006, Time Magazine chose “You” as the Person of the Year to reflect the growing power of social media. Last year, the magazine celebrated “The Protestor” – another subversive choice connected with the potential of social networks. In the 21st century, citizens have become empowered through technology: able to topple regimes, protest economic structures and target businesses that mismanage public relations.

When Netflix announced changes to its pricing structure, 82,000 negative comments flooded Twitter and Facebook. Within months, the company lost two thirds of its market share. Social media provides a highly visible platform for opinion – good or ill. In reaction, some business leaders approach marketing as, essentially, the continual management of online reputation. The embarrassing and damaging consequences of getting online interaction with customers wrong is writ large in Toyota’s handling of high-profile recalls in August and BP’s response to the 2010 Gulf oil spill.

With public disasters dominating news coverage of businesses’ forays into social media, it is unsurprising that Havard Business Review found that half of managers have a negative or uncertain attitude towards social media. Organisations are still liable to view social media as a threat to productivity, intellectual capital and privacy, rather than the future foundation of business.

This must change. Conversational channels, such as digital networks and social media, are making instant connectivity a norm of business life and early adopters have enjoyed the benefits of enhanced communication with internal and external stakeholders. The shift from broadcasting models of employee and market communication to more discursive modes has been prompted by long term trends, beyond the technological.

  • Economic change: Service industries have become more significant that manufacturing in developed economies, and knowledge work has supplanted other forms of labour. This has added importance to processing and sharing information.
  • Organisational change: Frontline employees are more pivotal in value-creating work. This has determined that lateral and bottom-up communication is as highly prized as top-down decrees.
  • Globalisation: Navigating cultural and geographic lines has necessitated fluid and complex interactions.
  • Generational change: Younger workers expect peers and authority figures to communicate with them in a dynamic, two-way fashion.

The relationship between digital networks and knowledge is crucial in explaining the power of social media. In 1999, Richard Varey observed, “A knowledge-based global order is growing. Yet the bulk of useful knowledge lies unused among employees at the bottom and scattered outside office walls among customers, suppliers, communities and other stakeholder groups.” Today, we may say this order has come to pass. A 2010 study by McKinsey & Co found that 85% of new jobs created since the turn of the century required complex knowledge skills. Further, intellectual property, brand value, process knowledge and other manifestations of brainpower were responsible for 70% of all US market value created between 2008 and 2010.

Technologies – such as computers, internet, email, intranet and digital networks – have made accessing the knowledge spread within organisations progressively easier. Crucially, however, valuable information also exists beyond the businesses four walls. Customers hold the invaluable knowledge of their wants, needs, desires with regards to product design, customer service, delivery, ect. Social media has been transformative in connecting businesses and their customers to an unoprecidented degree, allowing savvy organisations to monitor, amplify, respond to and lead customer opinion.

The benefits are apparent. Companies that adopt social technologies can see a 50% increase in customer satisfaction, 48% increase in business leads and 24% increase in revenue. However, companies have found that they cannot harness the collective knowledge and influence of online communities while preserving traditional silos and business philosophies.

Twitter may be able to be latched on as a channel for voting in the X Factor final, but incorporating social media into a business’s product development, marketing and customer relations requires a change in mind-set and organisation.

As we may continue to think

In Informatics, Management on October 3, 2012 at 9:09 pm

Internet to intranet: communication has changed, but the ideals remain the same.

Vannevar Bush’s 1945 article “As We May Think” is remarkable in many respects. It reflects the thinking of a scientist dedicated to war but looking forward to peace, represents a new idea of managing human knowledge and is renowned as the theoretical beginning of the Internet.

Bush looked to create a machine that would make collective memory and experience accessible to all. He headed the Advanced Research Projects Agency (ARPA), created in 1958 by Eisenhower in response to Soviet success  in the space race. 54 years later, we live in a world marked by his legacy.

The cumulative invention of the Web in the last three decades of the twentieth century forms one of the most important turning points in human history. From the turn of the 21st century, businesses have taken Bush’s legacy forward: applying the new technologies to the problems of intra-organisational connectivity. The result was the intranet – a network built for an employee audience.

Today, many organisations use internal networks to deliver tools and applications, contain complex corporate  directories and steer culture-change (i.e. take inspiration from the ideas employees post on forum conversations). The intranet has proved one of the most empowering and cost-effective technologies since the telephone. When used well it’s been found to:

  1. Increase productivity by making information immediately available
  2. Facilitate communication vertically and horizontally
  3. Make time: employees can link directly and swiftly to data
  4. Preserve knowledge: many corporate internets hold a central bank of up-to-date advice and learning
  5. Save money: IBM saves more than US$ 500 million a year performing HR services over the intranet*
  6. Create a common culture: the same information is available throughout the corporate structure
  7. Enhance personal branding: users consistently find authentic input increases their internal reputation
  8. Address the individual: intranet applications can be tailored to the user
  9. Empower employees: conversations are opened to the collective experience of the organisation
  10. Make you happy: 52% are more satisfied to be an IBM employee because of information obtained on the intranet*

*[Source: http://www.prescientdigital.com/articles/intranet-articles/the-intranet-as-an-employee-retention-tool/]

Employees themselves have adapted to use their intranet to receive corporate news, access customer information and share successes. Despite its integration into many modern workers’ lives, predictions of the death of internal networks linger on the lips of many tech analysts. According to these doomsday prophets, intranets are set to be replaced by social media. Cooler heads observe that, as long as companies continue to want the ability to address and hold conversations within a purely internal audience, intranets are not at risk.

Yet, social media has its place. Toby Ward (CEO, Prescient Digital Media) explains, “Social media merely represents another channel, another technology, to augment, or enhance the corporate intranet.” Ward argues that social media platforms – SocialText, SocialCast, ThoughtFarmer – are likely to become the main technology platforms powering the intranet. Yammer is a powerful example of this. Social media is the future, not the end, of internal networks.

After all, while technology has much changed from 1945, the principles remain the same. Intranet and its forefathers have always been about information sharing, knowledge gathering and collaboration. These are principles no organisation can do without and now fall firmly within the remit of IC. Embrace your role and ensure your intranet is used to forge a more collaborative, communicative, efficient and happy organisation.