boots&open markets others
3. The measurement of customer equity
Customer equity is measured as the sum of the lifetime values of all the company’s customers. This indicator reflects how much a company is worth at a specific point in time as a result of its customer management efforts. An example of formula for the measurement of customer equity is presented bellow:
N t
where: CE is customer equity; i (from 1 to N) corresponds to the individual customers; t (from 1 to T) is the time unit (month, year etc.); CMit is the contribution margin generated by the customer i in the time unit t;
δ
is the interest rate (cost of capital that is used to calculate the net present value) corresponding to the specific time unit t.The formulae that have been presented are based on the assumption that customers remain fully active during the period under consideration. In a real business environment, this assumption is not valid.
Consequently, marketers should take into account customer retention probabilities and adjust the formulae for the determination of LTV as follows:
where: Rr is the retention rate and AC is the cost of acquiring the customer i.
The perspective into the future is by far more important than into the past when computing the LTV [5]. In the process of strategy design, the past does not provide marketers a relevant view of customer LTV. The main factors that generate the preference for a perspective into the future are the following: (i) revenues from customers tend to grow over time as they buy more in terms of quantity and an ever wider range of products from the company’s portfolio; (ii) costs associated with customer retention are smaller than customer acquisition costs; (iii) totally satisfied and delighted customers generate additional revenue to the supplier due to their referrals; (iv) loyal customers pay prices that are often higher than those offered to new customers (companies provide discounts to lure potential customers into buying).
An example of CE calculation is presented in table 2. The data reflect the situation of a company that acquired 2,000 new customers due to a direct mailing campaign with a response rate of 4%. The average annual sales value generated by a customer is 250 Euros and it is assumed to be constant over the lifetime of the customer. The gross margin is 30%. The retention rate increases progressively from the first to the fifth year of the customers’ lifetime. The profit per period is discounted to the present value with an annual rate of 14%.
The calculated customer equity is 68,106 Euros generated during a lifetime of five years. The CE value reflects the total net present value of the profits generated by the customers retained by the company. The improvement in the annual retention rate may have a positive effect on the customer equity value.
Table 2 – Example of CE calculation
Year Sales per customer (Euros) Manufacturer ‘s gross margin (Euros)1 Marketing and servicing costs (Euros) Retention rate (%)2 Survival rate (%)3 Number of active customers4 Annual profit per customer (Euros)5 Annual discounted profit per customer (Euros)6 Total discounted profit per period (Euros)7
1 250 75 25 35 35.0 700 50 50 35,000
2 250 75 25 50 17.5 350 50 43 15,050
4 250 75 25 78 8.7 174 50 32 5,568
5 250 75 25 86 7.48 150 50 28 4,200
Total CE 68,106
Note: (1) Gross margin calculated according to a 30% rate over the sales per customer. (2) The retention rate is specific to each annual period. (3) The annual survival rate is the share of the initial number customers that have remained loyal in the year under consideration. (4) Estimated number calculated by multiplying the initial number of new customers (2,000 customers) by the survival rate. (5) From the company’s perspective, the annual profit per customer is calculated by deducting the marketing and servicing costs from the manufacturer’s gross margin. (6) Calculated on the basis of 14% discount rate. (7) Total value obtained by multiplying the annual discounted profit per period by the number of active customers in that period.
The lifetime value and the customer equity are indispensable metrics for the effective and efficient management of the relationships with customers. They guide the strategic decisions of the company. In order to improve the LTV and CE values, companies must continuously diminish the acquisition costs, strengthen the retention rates and augment the profit earned per customer. Every improvement in the LTV and CE influences the financial results of the organization and has a significant impact on its position in the marketplace.
BIBLIOGRAPHY
1. Kotler P. – “Principles of Marketing”, eleventh edition, Pearson Education, Prentice-Hall, Upper Saddle River, New Jersey, 2006, p. 9.
2. Buttle F. – “Customer Relationship Management. Concepts and Tools”, Elsevier, Butterworth-Heinemann, 2006, p. 127.
3. Jackson, D.R. – “In Quest of the Grail: Breaking the Barriers to Customer Valuation”, in “Direct Marketing 54”, no. 11, 1992, pp. 44-48.
4. Roberts M.L., Berger P.D. – “Direct Marketing Management”, www.marylouroberts.info, 1999.
5. Reichheld F., Sasser W.E. Jr. – „Zero Defections: Quality Comes to the Services”, in “Harvard Business Review”, September/October 1990, pp. 105-111.
ST S TR RA AT TE EG GI IC C M MA AR RK KE ET TI IN NG G PL P LA AN NN NI IN NG G IN I N T TH HE E P PU UB BL LI IC C S SE EC CT TO OR R - -CO C ON NC CE EP PT TU UA AL L D DE EL LI IM MI IT TA AT TI IO ON NS S- -
Barbu Andreea Mihaela
Academia de Studii Economice – Facultatea de Marketing, Str. Mihai Eminescu, nr. 13-15, sector 1, Bucuresti, Tel.:0724.381.862, E-mail: abarbu@mk.ase.ro
Constantinescu Mihaela
Academia de Studii Economice – Facultatea de Marketing, Str. Mihai Eminescu, nr. 13-15, sector 1, Bucuresti, Tel.: 0721.223.896, E-mail: mihaela.co@gmail.com
In the conditions of integrating in the European Union, the public institutions from Romania have to align to the european standards. This can not be possible without planning the efforts and the resources according to the opportunities and risks existing on the external marketing environment.
The paper focuses on the strategic planning process and its dimensions, as: time horizon, domain, frequency and managerial level where it can be applied. There are also underlined the advantages of aplying the strategic plans in the public institutions’ activities. One thing that can be noticed easily, is that the romanian public institutions are activating in a dynamic, changing, not stable marketing environment.
In the paper there is also presented the relationship between the planning and the other functions of management.
As a conclusion, the strategic planning process is a solution to any successful business.
Key words: strategic planning, public institutions, managerial process
„Marketing is the blood that gives birth to any business. You can have a great product, technical know-how and many years of experience in the field of financial management, but if you want your business to develop well and vigorously – to grow alone – then you need marketing. And the first and the most important step is the marketing plan.” 23
Strategic marketing planning focuses on many aspects related to the company. It reflects what the company wants to acquire, how the company will reach that level, how she realises that she reached the wanted level.
Challenge in the field of planning refers to make some decisions that should assure the successful future of the organization.
Planning is a process that never ends by creating a plan, but it continues with its implementation, which is a step that can bring some improvements or modifications to the plan in order to make it more efficient.
Planning is an activity of making decisions , which represents the basis of the management process and which helps managers to organize, run and control, offering to the company a target and a direction.
The relationship between the planning and the others functions of the management is illustrated in the following figure:
15 Marty, 1971, quoted in Witt, S.,F., Moutinho, L., „Tourism Marketing and Management Handbook”, Prentice Hall Europe,Hertfordshire,1995, p.295.
16 Middleton, V.,T.,C., “Marketing in Travel and Tourism”, Butterworth – Heinemann, Oxford, 1997, p.73
17 Stancioiu, A.,F., “Strategii de Marketing in Turism”, Editura Economica, Bucuresti, 2004, p.102
18 Morrison, A.,M., „Hospitality and Travel Marketing, Delmar Publishers,1989, p.141
19 Kotler, P., Bowen, J., Makens, J., “Marketing for Hospitality&Tourism”, Prentice Hall Inc., Upper Saddle River, NJ, 1996, p.254
20 Morrison, A.,M., readed work, p.144
21 Witt, S.,F., Moutinho, L., readed work, p.299-302
22 Middleton, V.,T.,C., readed work, p.76
23 Ros J, Marketing Plans In A Week, Second Edition, Cox&Wyman Ltd., Reading, London, 2003, p.5.
Figure no.1 – Relationship of the planning with the managerial processes
So, strategic planning is a management instrument, and, as any other management instrument, it is used for one purpose: to help the company to develop her activity, to concentrate her energy, to ensure the employees that they work together to reach the same ideal, to establish and adjust the action direction of the company, as a response to a changing business environment.
Actually, „market oriented strategic planning is the managerial process of conceiving and keeping a viable relationship of corresponding between the objectives, abilities and resources of the company and the opportunities on a changing market. The goal of strategic planning is to model the economic activities and the products of the company so that to be realised the proposed profits and growing rates.” 24
The process is strategic because it involves finding the best sollutions to the circoumstances of the business environment, even if they are known or not.
Public institutions have to develop their activities in a dynamic or even hostile environment. Strategic planning supposes knowing the institution’s objectives and resources, but also a responsible reaction from the top management in front of such a changing environment.
Meanwhile, the process reffers to planning because it involves establishing some objectives –related to an expected situation in the close or far future- but also because it involves developing some ways for reaching these objectives.
Strategic planning process raises a sum of questions, which can help the specialists to gather and incorporate information about present and about the business environment in which the public institution will activate in future.
Finally, the process is related to decisions and fundamental actions, because the choises have to be made in such a modality, that they should answer to the sum of questions mentioned before. The plan is neither more nor less than a sum of decisions about what a public institution should do, why to activate this way and how to react to the changes of the marketing environment. It is impossible to do all the time what you have to do, this is why strategic planning supposes that some decisions and actions are more important than others and it is necessary to adopt those decisions that are strictly related to the success of the public institution.
We are wondering, maybe, why is so important marketing strategic planning in a public institution. The answer is neither simple nor singular, it focuses on a multitude of arguments, as the following:
− It defines clearly the goal of the institution and establish realistic objectives, according to the organization’s mission, in a short period of time, adequate to the capacity of the institution of implementing the plan;
− It assures the use of public institution’s resources for reaching some key priorities;
− It offers a basic level, from where it can progress, this progress being measured;
− It offers the possiblity of examinating the way in which the changes of the marketing environment influenced or will influence the institution;
− It facilitates the integration and coordination of the marketing mix;
24 Kotler Ph.- Managementul marketingului, EdiŃia a III-a, Editura Teora, Bucure ti 2003, p.93 Planning
Organization Coordination Control
− It gathers all the motivated employees’ efforts in order to establish together where is the institution going to;
− It contributes to the growing of the efficiency and productivity;
− It determines building of such a powerful team from top or middle management;
− It offers solutions to major problems.
The next question is about the right moment for developing the strategic planning process. It is known the fact that tactical plan is established for one year, while the strategic plan is established for a period longer than one year.25
There are also authors that say that there is a diference between the strategic an dtactical plan from the environment marketing point of view. 26
About the long term planning it is said that it represents developing of a plan for reaching an objective or a sum of objectives for a period of a few years, mentioning that present information about the future conditions are certain enough to assure the quality of the plan, even over the moment of its implementing.
On the other hand, strategic planning considers that the public institution should react to a dinamic, changing and not stable, marketing environment, how is the case of long-term planning. In public sector, there is a common opinion and according to this the marketing environment is is changing and difficult to be predicted. So, strategic planning focuses on the importance of making decisions that will ensure the ability of the organization of answering successfully to the changes from the marketing environment.
Temporal horizon that a plan is conceived for, is very important, managers using both plans for one year (short-time plans) and plans conceived for at least five years (long-term plans). 27
Long-term plans are those that cover competitive, technological and strategic complex aspects of the top management of an organization, and which involves also the alocating of the resources.
Long-term planning refers to rearch and development, capital expansion, organizational and managerial development and also to satisfaction of the financial needs of the organization.
Medium-term plans are conceived, usually, for one till three years. While the long-term plans are derived directly from the process of strategic planning, the medium-term plans are more detailed and more relevant for the medium and low management.
Short-term plans are conceived for one year and they have a more powerfull impact over the daily activities of the managers in comparison with medium or long-term plans.
25 Balaure V. – Marketing, EdiŃia a II-a revăzută i adăugită, Editura Uranus, Bucure ti, 2002, p.586
26 http://www.allianceonline.org/FAQ/strategic_planning/what_is_strategic_planning.faq
27 http://www.unibuc.ro/eBooks/StiinteADM/cornescu/cap2.htm
Figure no.2 – The four dimensions of planning
A few fundamental benefits of the strategic planning process include:
− A clearly defined direction which guides and sustains the organization’s management;
− A vision and a goal shard by all employees;
− An increased level of commitment for the company and her objectives;
− An improved quality of services for clients and a modality of measuring this services;
− The ability of establishing some priorities and preparing the resources for the opportunities;
− The ability of treating the risks that are coming from the external environment;
− The process which helps the crisis management.
Marketing plan is essential for any successful business.It is the heart of the business, the basis from where all the others management and operational plans are created. Marketing offers to any public institution a sum of informations, that can lead to the success of the organization, if they are applied corectly.
The dimensions of the planning
Time Long-term plans Medium-term plans Short-term plans
Domain Strategic plans Operative plans
Frequency Unique plans Permanent plans
Managerial level Top management Middle management Low management
Bibliography:
1. Balaure V. – Marketing, EdiŃia a II-a revăzută i adăugită, Editura Uranus, Bucure ti, 2002, p.586 2. Kotler Ph.- Managementul marketingului, EdiŃia a III-a, Editura Teora, Bucure ti 2003, p.93 3. Ros J, Marketing Plans In A Week, Second Edition, Cox&Wyman Ltd., Reading, London, 2003,
p.5.
4. http://www.allianceonline.org/FAQ/strategic_planning/what_is_strategic_planning.faq 5. http://www.unibuc.ro/eBooks/StiinteADM/cornescu/cap2.htm
TH T HE E IN I NT TE ER RV VI IE EW W – – G GE EN NE ER RA AL L P PR RO OC CE ED DU UR RE E T TO O S SE EL LE EC CT T E EM MP PL LO OY YE EE ES S
Bîrlădeanu Gheorghina
UNIVERSITATEA AGORA ORADEA, gheorghina_birladeanu@yahoo.com, tel. 0745311745 RESUME
The new practical preoccupations in the organizational sociology promote a reorganization of the organizations on the pattern of the competences. According to the conception of Edward E. Lawler, the individuals capabilities are the essential element on which should gather our attention and these must be practiced in such a way to assure the competitive advantages. From the establishment of the places and from the human selection to fit these places, is necessary to start from finding and negotiating abilities, disponibities and human requirements to fit as well as possible into the organization, gathering teams with what people can or can not do.
The interview of selection is a discussion more or less informal between the candidate and the representants of the employer. His font mission is about the evaluation of the verbal and non verbal behaviour of the candidate, the confirmation of the gathered information from the presentation files. So the interview is about verbal and non verbal communication.
As method of investigation in the process of human selection, the interview will be „the hey of success” for both parts implicated, if this will be prepared well.
„The best way to predict the future is to create it yourself”
Stephen R. Covey Key words: interview, communication, employers, candidate.
The engagement is a process with a sort of „spicy thing” because the employer „buys” the time, the abilities and the fissionability of the candidate as a special service, for which he pays a payment that is called „salary” or „fee” on a good price. On the other side, a valuable candidate for a good job „sells” „a pack of services” that he disposes tot eh employer, he sells his own image and identity.28
The motivation letter, the curriculum and the recommendation letters or the references compose the presentation files and are preliminary documents for the interview that have as purpose to obtain the invitation to participate at the interview. So you have to „look good on the paper” first.
The selection interview is an act of oral structured communication, more or less strict, having the form of question and answering pattern. The objectives of the interview are reciprocical information, evaluation and convincement. From the verbal and nonverbal messages that are transmitted, the employer will try to:
− To find out if the one who in interviewed will be able to satisfy successfully the need of the position, and if the answer is yes,
− To convince the employer that the position and the organization answer to the qualifications, the potential, the needs and the interest that the organization has
− On the other side, the candidate will have the possibility:
− To clear his mind on the fact that he wants or not to be employed there, and if the answer is yes,
− To convince the employer that he is the right person that the organization needs for that position I will deal in the paper with the subject of the interview on the position of the employer.
The efficacy of the interview as a procedure of selecting is straight proportional with the competence of the employer. This one must structure the interview in an adequate manner and to lead the discussion on an established plan. So he will be able to get all the information he needs, regarding the qualities, the defects and the candidate’s potential that the job requires. The questions must deal with techniques that are meant to lead the written document of the candidate evaluation. So, it depends on the ability of the employer to communicate and also depends on the objectives that they want to establish.
To establish the interview’s objectives, the employer, the manager must evaluate the candidate regarding the quantity, to compare them and to reduce the filters effect of the perceptual barriers in communication.
So this will have to respect the 3 stages of the interview, as in any act of communication.29
28 Prutianu, ., Antrenamentul abilităŃilor de comunicare, Ed. Polirom, Ia i, 2004, p. 232-233.
29 Cândea, M., R., Cândea, D., Comunicarea managerială aplicată, Ed. Expert, Bucure ti, (1998), p. 211.
First, the candidate must be received and opened to the interview in an adequate manner. The development of the interview, is about the structure of the interview to choose the best choice (complete structured interior, unstructured interview, semi structured interview, stress controlled interview, and group interview) the last part, must be created an impression of a positive opinion towards the selection of the candidate, with the employers and with the organization.
Interview pattern
a. Regarding the development way
− face to face interview
− telephoned interview
− Internet interview
− Internet interview