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Do the principles of marketing still apply?

Rayanna Anderson

There is no doubt that technology has changed our world significantly. The messages we once prepared for print media are now created to be included in everything from our web presence to a multitude of social media platforms. Instead of monitoring our marketing campaign’s success by sales only, we pour over analytics data from detailed reports that we could have only imagined a few years ago.

In as much as technology has changed the way we do business, how has it also changed the way we market to our customers? Alas, while much has changed and continues to transition daily, do the principles of marketing still apply? I concur they do.

A great marketing plan is still about focusing on customers and reaching them with a message that will encourage them to buy. So, at the risk of being considered “old school,” the following are the fundamental components that should be included in your marketing plan.

Marketing Objective. Beginning by identifying your desired outcome is a key guiding principle. Your marketing objective should keep in mind the current situation of your market including its size, distribution setup, and your company’s pricing requirements and goals.

Some conventional marketing objectives include: introduction of a new product or service, growing the market of your existing business, entering a new location, bundling your products and/or services, enhancing a product, or engaging a new customer type.

Each marketing objective will include plans for achieving the goal; and eventually, the who, what, when, where and how.

Target Market. I recommend identifying your target market by describing your ideal customer (your most likely buyer). Additionally, you may want to expand your customer list to include a few levels of segmentation, or customers with specific needs, behaviors and demographics.  This process will help confirm what every professional marketer knows — that not everyone is your customer, and your money is better spent focusing on those folks who are.

Competitive Analysis. Identifying your competition and knowing how your products or services are different from theirs is critical to any marketing plan. If you could substitute your name for your competitor’s on their website, you have not succeeded in differentiating your company; therefore, it will be difficult for you to gain market share.

A good way to create a competitive analysis is to generate a SWOT (strengths, weaknesses, opportunities and threats) analysis of your company. Strengths and weaknesses are internal to your organization, while opportunities and threats relate to external factors. Therefore, strengths and weaknesses generally focus on how you compare to your competitors, while opportunities and threats are often considered an extension of the market situation. Some questions to ask yourself include: what trends in your market will favor your situation; what are the trending demographics of your customers and will they benefit or challenge you; and, as your products or service exist now, are you well positioned to succeed in the market or will you need to make major renovations to thrive?

Marketing Strategy. Your marketing strategy identifies where and how your proposed customers will hear and see your message. It should consider each market customer segment and identify specific plans to reach each segment of buyer.  Today, these strategies might include everything from email and social media to seminars and street events. Think, how will I find and connect with my most likely customers?

Budget and Metrics. Managing the budget includes allocating a cost for each activity planned, along with who is responsible for keeping the implementation in check. Acquiring price quotes is key to not exceeding estimates.

Keep metrics in order to measure your progress toward your marketing objectives and to know where you are succeeding. Additionally, as time passes you may find it necessary to adjust your marketing schedule, budget or method. With organized metrics and budget reporting, you will have the key information you need to keep your marketing plan dynamic and coordinated with your sales.

Even with today’s technology, marketing plans are still about attracting customers to your business by using the right message which results in the right outcome — sales!

Rayanna Anderson, MBA, is the Entrepreneurship Coordinator and Community Liaison for the Missouri State University’s College of Business.  Anderson writes about issues from her 25 years of consulting with small businesses in Springfield and the state of Missouri.  Email: RayannaAnderson@MissouriState.edu.

This article appeared in the October 8 edition of the Springfield News-Leader and can be accessed online here.  

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The case for accounting, continued

Les HeitgerIn an earlier article, we discussed the essential role that financial accounting reports play in supporting capital markets and facilitating a healthy economy. In this article, we address the second major function of accounting systems. Managerial accounting is focused on providing internal managers of businesses the essential information they need to effectively manage each segment of their business.

Although income statements and balance sheets play an important role in providing information to external stakeholders and to high-level executives within an organization, such statements do little to help managers within an organization plan and control the business operations they manage. If a company’s income statement shows it is profitable, that may make management and investors happy with the results. But if a company is to remain profitable or improve its profit picture, managers of the various segments of a business must be able to make informed decisions that reflect the economic consequences of the decisions made and the actions taken by management and employees.

Successful organizations, both profit seeking and not-for-profit, operate in a competitive environment using the entity’s limited resources as wisely as possible to achieve its goals. Internal managers frequently want answers to questions such as (1) what parts of the business are most and least profitable; (2) what parts of our business are competitive and what parts are not; (3), what does it cost to make our products and provide our services, and how does that compare with our strongest competitors; (4) should our firm add new product lines or terminate current product lines? These and many other managerial questions are crucial to the successful management of operations and development of effective strategic and operational plans for the company.

An obvious question is, “What kinds of management accounting information are necessary to support management in answering these types of questions?” The answer is that it can be any information management believes is valuable in providing useful information to the management function. Unlike financial accounting, which is driven by Generally Accepted Accounting Principles (GAAP), management accounting information is driven primarily by the information needs of management. The key issue for management is to identify and provide management accounting information relevant to management’s information needs. Of course, the benefit of providing the information must be greater than the cost of capturing and reporting the information.

There are many different types of economic entities, each with their own challenges for effectively managing operations to achieve their goals. Therefore, each entity’s management accounting system is somewhat different than that of other firms. But all management accounting systems have the common goal of helping managers make the best and most informed decisions possible.

Professor Les Heitger, Ph.D., CPA, is the BKD Distinguished Professor of Forensic Accounting in the School of Accountancy at Missouri State University, He is the National President of the Forensic Accounting Section of the American Accounting Association (AAA), he is co-author of Forensic and Investigative Accounting, and he teaches primarily graduate Forensic Accounting courses.  He can be reached atlesheitger@missouristate.edu  

This article appeared in the October 1 edition of the Springfield News-Leader and can be accessed online here.  


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What you should know before serving on a board of directors

headshot Richard Ollis

The landscape of business continues to evolve and become more complex. Regulations, litigation and duties corporations and their management owe the public are all increasing the risk of serving as a director or officer. This changing risk is especially troublesome since directors and officers put their personal assets at risk for decisions (or lack of) that they make on behalf of an organization.

Companies and their actions are increasingly targets for criticism. Bernie Sanders used this as a key platform in his campaign. Executive pay, employment issues, regulations, financial oversight and international risks are just a sampling of the areas of pitfalls where many companies and their directors have fallen prey.

Even serving on a nonprofit board can be fraught with risk. Many are asking is it really worth putting my assets at risk?

A corporate director has duties which include:

  • To act in good faith to promote the success of the company
  • To be aware of and follow company by-laws, agreements and resolutions
  • To exercise independent judgement
  • To carry out duties with reasonable skill and care
  • To avoid conflicts of interest
  • To comply with all statutory and regulatory obligations
  • To make sure appropriate records, minutes and documents are kept
  • To act in the best interest of the company and its employees, shareholders and customers for all financial dealings

If that’s not enough, there have been two recent events that changed landscape of this ever-changing risk.

On Sept. 9, 2015, the Department of Justice issued new guidance instructing prosecutors and civil attorneys to place more focus on individuals potentially involved in corporate wrongdoing. The Yates Memo requires corporations to provide all relevant facts relating to individuals responsible for misconduct in order “to be eligible for any cooperation credit.” The Memo also directs civil attorneys to focus on bringing actions against individuals. Note the focus on individuals.

The second issue involves the continuing discussions, regarding duties corporations and their management owe the public, at the 2016 National Business Law Scholars Conference. Some of the issues discussed related to this topic involve whether insurance should be limited in certain situations. The intent is that those making decisions (or their lack of making decisions) will assume personal responsibility and suffer the consequences of their actions.

If you’re asked to serve on a board of directors, there are several things you should consider:

  • What type of orientation is provided to directors? Are corporate governance documents (by-laws, minutes, board policies) provided and reviewed? Is there a strategic plan and budget? These documents indicate whether an organization is proficient in providing their directors proper training and sufficient information.
  • What type of documents are you, as a potential director, being asked to review and/or sign? Is there a conflict of interest statement? Does the organization have a written document stating that it will indemnify (make whole) their directors if they are sued while acting in their official capacity? These documents will help determine if proper conflicts are being recorded and how an organization intends to respond to legal action brought against their board.
  • What type of insurance protection does the organization provide? Does the organization provide an overview of this protection to the board? Board members should be especially interested in executive liability and crime coverages. Does the organization have Directors and Officers, Employment Practices and Fiduciary liability policies? Crime coverages are also important to financially protect the organization.

Becoming a director of any organization is a significant responsibility. Whether it’s a civic, nonprofit or for-profit entity, the duties and risks can be reduced by proper procedures, documentation and risk management.  Understanding these best practices will enable a potential director to determine the risk of accepting a board position.

Richard Ollis is CEO of Ollis/Akers/Arney, an employee owned business and insurance advisory firm. 

 This article appeared in the September 25 edition of the Springfield News-Leader and can be accessed online here.  
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Calendar anomalies: Summer rallies and fall risk

James Philpot photo

Almost as predictable as the seasons are statements made about investing, relative to the season. It is quite common to hear investors speak optimistically of a “summer rally” or cautiously anticipating heightened investing risk in the fall. Mark Twain echoed this popular notion when he described October as “one of the particularly dangerous months” for stocks. (Twain quickly adds the remaining 11 months to his list.) The prospect that certain times are systematically better or worse for investing is intriguing. This week, I discuss what finance professionals call calendar anomalies.

Calendar anomalies are patterns in investment returns — like a seasonal effect — that are unexplained by theoretical finance models. Modern finance theory holds that, over time, investment returns should be substantially equal across the calendar because information — the response to which moves investment prices — reaches the market randomly. If a calendar anomaly exists, investors could exploit the effect and earn additional profit.  For example, if the average return, over time, to stocks in July is positive, and the average return in August is negative, an investor could profit by annually buying at the beginning of July and selling at the beginning of August.

The so-called October effect is one popularly regarded calendar effect. While the data do not support that stock market returns are systematically negative in October, many investors remember that the biggest stock market crashes (1929, 1987, 1989) happened in October; thus, they treat October with caution. Another anomaly, theJanuary effect, predicts several outcomes. One is that the stock market tends to perform well in the first two weeks of the year. Another January effect prediction is that small-firm stocks will outperform large-company stocks during January. Finally, January is frequently seen as a barometer for stock returns for the rest of the year.

Other proposed calendar patterns include the Weekend (or Monday) effect and theturn-of-the-month effect. The weekend effect has stock returns averaging positive and highest on Fridays while negative and lowest on Mondays. The turn-of-the-month effect posits that stock returns during a monthly period are greatest during the two or three day period around the end/beginning of a calendar month.

Are these effects valid? With the exception of the October effect, all of these anomalies were at one time supported by historical market data. Over the past 50 years, many academics and practitioners have formally studied calendar anomalies to determine whether they really exist, why they persist and whether they can be exploited. If we aggregated the results of these studies, we’d see varied results that are highly sensitive to the country, type of market, and time period studied. In addition, those studies confirming the existence of a particular anomaly generally find an effect that is not profitable when trading costs and taxes are also considered.

My own quick examination of NYSE Composite index data over the past 50 years shows that measured average October returns are actually higher than the average of all months. August had the lowest measured average return, which was negative. The differences in average return were not statistically significant and, alone, would have unlikely produced profitable trading.

Calendar effects make for good conversation, and many will claim to have a profitable “system” based on the calendar. However, the variability of the evidence suggests the average investor will be better suited by a buy-and-hold strategy that does not attempt market timing.

Dr. James Philpot is a Certified Financial Planner® and is Associate Professor of Finance at Missouri State University. Statements in this column are intended for educational and informational use only, and are not to be construed as investment advice.

This article appeared in the September 17 edition of the Springfield News-Leader and can be accessed online here.  

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How important is quality?

Barry Cobb headshot
Barry Cobb

I recently asked my 7-year-old son and 13-year-old daughter if they wanted to participate in an experiment. My son looked puzzled and my daughter rolled her eyes! But when I revealed a large package of fun size M&M’s, they became more interested. I began by asking what they expected to see when they opened the bags of M&M’s. They expected a variety of colors, smooth round pieces, and the signature “m” on each piece, and a “delicious” taste. Consumers have expectations of all products or services, including M&M’s.

This tasty discussion brings us to an important topic for business managers — quality. Quality is the degree to which a product or service meets customer expectations. For example, if a soft drink label says the can contains 12 ounces of soda, a reasonable customer expects the amount will be very close to 12 ounces. Airline passengers expect their luggage to arrive with their flight. Diners expect restaurant food to taste good and be delivered in a timely manner. When the two young consumers in our household open a package of M&M’s, they expect to see candies in a variety of colors and without blemishes. If you managed the M&M production facility, how would you monitor whether these expectations are being met? I’ll describe our attempt to address this issue with the fun size M&M’s.

We opened the large outer package and counted out 22 small bags of M&M’s. We pretended each of the bags was a random sample of M&M’s produced at hourly time intervals in a factory. To address the quality characteristic of color variety, we calculated the percentage of each color (blue, orange, green, yellow, brown and red) for each sample. We also counted the number of blemishes in each bag — deformities, broken pieces, partially missing letters, etc.

My son observed trends in the data we recorded. Blue and orange pieces were present in all samples, yellow and green were absent in four, red was absent in three, and brown was absent in two. Further analysis revealed that orange pieces made up 25 percent of all pieces sampled, but there were five “hours” in a row where the orange proportion exceeded the overall average. Six samples were defect-free, but the last six “hourly” samples contained defects, with four groups having more than one defect. If these were actually time-ordered data from the production process, the results could be helpful in discovering potential problems that inevitably occur in any production process.

The M&M example demonstrates that monitoring measurements of the product characteristics customers perceive to be critical is an important quality control technique. Observing the percentage of your customers who return a product may reveal important information about the process of understanding and completing an order. Customers also desire responsiveness. Average time to fill orders and percentage of orders filled by a promised date can be measured to monitor this aspect of quality. Similarly, service businesses may choose to measure and monitor the total time to complete a customer’s job. For many businesses, customer satisfaction is more subjective. Direct surveys of customers may be required to measure quality.

As a business owner or manager, identify the characteristics of your product or service that are most critical to meeting customer expectations. Develop measurements related to those characteristics and be aware of trends that occur over time. Importantly, measurements can reveal both good and bad aspects of your business processes. Several hours or days in a row with no poor outcomes observed is a good thing. Can further investigation reveal what made such an occurrence possible? Identifying positive and negative trends leads to continuous improvement.

At the end of our experiment, the three of us addressed the issue of taste. We concluded that there was no problem in the area of taste quality in the package of M&M’s we purchased!

The Excellence in Missouri Foundation (excellenceinmo.org/events) and the American Society for Quality (asq.org/learninginstitute) have live and online training programs that can assist business owners and managers in data use and development measurement that can improve the quality of products and services.

Barry Cobb is an associate professor of supply chain management and logistics in the Department of Marketing at Missouri State University. He holds a Ph.D. from the University of Kansas and conducts research and consulting in the areas of operations and supply chain management.

This article appeared in the September 10 edition of the Springfield News-Leader and can be accessed online here.  
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