Archive for October, 2010

Gender As a Basis for Demographic Segmentation

Much research suggests that men and women process information from ads differently.
For instance, it has been shown that women process more detailed information than do men, possibly because they are more attuned to paying attention to external cues than men are (they are but generalizations!). The woman manager who headed Nike’s marketing campaigns to grow its women’s’ markets agrees, and claims that women are:

  1. More discerning buyers than men, and
  2. That they research many products and weigh several factors before they buy.
  3. Women unlike men-find ads using celebrity endorsements to be unpersuasive because they don’t like being preached at.
  4. Women are responsive instead to ads that portray women as powerful, capable people who hate being told they can’t do things simply because they are women.

Be the first to comment - What do you think?

Income – A Basis for Demographic Segmentation

Another useful a priori demographic variable is income. Not surprisingly, higher income households tend to be less price-sensitive, placing a higher value on buying higher-quality merchandise. Because of the growth in dual-income households, there has been a dramatic growth in the proportion of total spending in the economy coming from such households, implying that the market for high-end products and services should increase substantially.

It is seen that low-income people prefer beedis for smoking. Middle-income buyers smoke Wills Filter, and high-income buyers like 555 cigarettes.

Even sometimes the choice of celebrity endorser is considered while targeting at a certain income category. Amitabh Bachchan for Parker Pen and not Govinda.

Be the first to comment - What do you think?

Geographic Location – A Basis for Demographic Segmentation

Geographic location can often provide the basis for an effective a priori segmentation strategy. A firm with modest resources can dominate, if it so chooses, a small geographic area. Its distribution within the limited area can be Internet. Local media such as newspapers or spot television can be employed, and it is possible to buy space in regional editions of major national magazines. In fact Coca Cola with the inclusion of different Indian cultures in their advertisements with Aamir Khan is a wonderful example of “think globally and act locally”.

The Coca-Cola Can Puzzle 3D Jigsaw Puzzle 40pc
In recent years, it has become increasingly possible to learn something about a company’s target consumers simply by knowing the postal zip code in which they live. Census-based demographic data on households has been analyzed by various companies to yield “average profiles” for households in different segments, or groups, of zip codes. In fact the cities and towns in India have been classified on certain basis. So a classification of Delhi might be classified as belonging to the same cluster as the classification of Mumbai, because they are very similar to each in terms of their scores on these variables. An advertiser can examine these scores of each classification cluster and identify which ones are most likely to respond to an advertising or direct marketing effort.

Be the first to comment - What do you think?

Product-class Usage As a Basis for Demographic Segmentation

A natural and powerful a priori segmentation variable is product-class usage. Who are the heavy users of the product or service? In many product categories, the heavy users (who are usually 20 to 30 percent of the users) account for almost 70 to 80 percent of the volume consumed: this is sometimes called the “80:20” rule. It is obviously extremely valuable for a brand to have most of its users from the heavy-user category, for that should lead to disproportionately higher share of units sold.

Segmentation & Positioning for Strategic Marketing DecisionsOne segmentation scheme might thus involve heavy users, light users, and nonusers. This particular segmentation scheme is likely to be useful wherever the focus is on building up the market. Each person is classified according to usage, and a program is developed to increase the usage level. The segments defined by usage usually require quite different marketing programs. So a program tailored to one of these segments can generate a substantially greater response than would a marketing program common to all segments. Of course, designing and implementing several marketing programs is costlier than developing one, but the resulting market response will often be significant enough to make it worthwhile.

A somewhat different aspect of usage segmentation is the possibility that consumers may seek different benefits from the same product (e.g., soft drinks) depending on the nature of the usage-occasion (e.g., social use versus food-enhancement). Different ad campaigns to address these different occasion-based segments are therefore also possible.

Be the first to comment - What do you think?

Occupation – A Basis for Demographic Segmentation

We have the professionals who are MBAs, CA, etc; we have the Technical, the Government servants, businessman, farmers, and housewives, unemployed, the list seems to go on. Of late there are insurance firms who are targeting at the housewives and even at the unemployed to sell their policies.

Be the first to comment - What do you think?

Education – A Basis for Demographic Segmentation

The different academic qualification would mean how people are receptive to the content of the advertisement. The school going kids would be able to grasp any advertisement given by an IIT coaching institute. Whereas the graduates and the

postgraduates would grasp the ads which would offer them a job or a professional course. This type of advertising is especially there in recruitment advertisements.

Be the first to comment - What do you think?

Generation – A Basis for Demographic Segmentation

What's Next, Gen X?: Keeping Up, Moving Ahead, and Getting the Career You WantPepsi with its ads on ‘Gen X’, were able to understand the relevance of generation advertising. Be it the baby boomers of the 60s and the high energy level Generation Y, the brands and the companies’ focus on certain generations for marketing their products. Each set of generations has their own values, beliefs and attitudes and focusing on these variables the brands could be positioned towards them.

Be the first to comment - What do you think?

Family Size – A Basis for Demographic Segmentation

Following are certain classifications and the type of products that they are likely to purchase:

  • Young & single: Personal consumption items, entertainment, bikes, clothing and love to go on a vacation.
  • Newly married couples: Households durables like furniture, TVs, refrigerators, etc.
    How to Market to People Not Like You: "Know It or Blow It" Rules for Reaching Diverse Customers
  • Young married with child: Toys, medicines, tonics, baby food, formula milk, etc.
  • Older married with children: Food products, music, educational services and wide variety of other products.
  • Older married with dependant children: Rational purchases more on replacement buying.
  • Older married with no children: Self-education, saving schemes, hobbies, luxury appliances, magazines, health products, etc.
  • Old single retired: Economic lifestyle, health-care and other services and have budget constraints.
  • Young married with child dual income: Convenience goods like washing machines, microwave ovens, costly garments for the kid along with games. Expenditure on instant food and crèches, etc.
  • Single parent families: Buying physical, psychological and financial securities, like insurance, alarms, boarding school expenses.
  • Divorced: Money saving products, rental housing, childcare, time saving appliances, etc.
  • Older people married or single: Cash poor and health conscious. They need security and recreation.
  • Middle age: Children’s lesson on dance and music, dental care, furniture, autos, houses, dining out, etc.
  • Middle aged with no children: Luxuries, travels, gift products, etc.

This is one of the segmentation variables to be considered while understanding the target audience.

Be the first to comment - What do you think?

Taxation – A History and Brief Guide

A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, secessionist movements or revolutionary movements). Taxes could also be imposed by a sub national entity. Taxes consist of direct tax or indirect tax, and may be paid in money or as unpaid labour. A tax may be defined as a “pecuniary burden laid upon individuals or property to support the government […] a payment exacted by legislative authority.
A tax “is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority” and is “any contribution imposed by government […] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name

In modern capitalist taxation systems, taxes are levied in money, but in-kind and corvée taxation is characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised areoften highly debated in politics and economics. Tax collection is performed by a government agency such as Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, or Her Majesty’s Revenue and Customs (HMRC) in the UK. When taxes are not fully paid, civil penalties (such as fines or forfeiture or criminal penalties (such as incarceration))
Purposes and effects: Funds provided by taxation have been used by states and their functional equivalents throughout history to carry out many functions. Some of these include expenditures on war, the enforcement of law and public order, protection of property, economic infrastructure (roads, legal tender, enforcement of contracts, etc.), public works, social engineering, and the operation of government itself. Most modern governments also use taxes to fund welfare and public services. These services can include education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water and waste management systems are also common public utilities. Colonial and moderning states have also used cash taxes to draw or force reluctant subsistence producers into cash economies
Governments use different kinds of taxes and vary the tax rates. This is done to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as business, or to redistribute resources between individuals or classes in the population. Historically, the nobility were supported by taxes on the poor; modern social security systems are intended to support the poor, the disabled, or the retired by taxes on those who are still working. In addition, taxes are applied to fund foreign and military aid, to influence the macroeconomic performance of the economy (the government’s strategy for doing this is called its fiscal policy – see also tax exemption), or to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive
The resource collected from the public through taxation is always greater than the amount which can be used by the government. The difference is called compliance cost, and includes for example the labour cost and other expenses incurred in complying with tax laws and rules. The collection of a tax in order to spend it on a specified purpose, for example collecting a tax on alcohol to pay directly for alcoholism rehabilitation centres, is called hypothecation. This practice is often disliked by finance ministers, since it reduces their freedom of action. Some economic theorists consider the concept to be intellectually dishonest since (in reality) money is fungible. Furthermore, it often happens that taxes or excises initially levied to fund some specific government programs are then later diverted to the government general fund. In some cases, such taxes are collected in fundamentally inefficient ways, for example highway tolls
Some economists, especially neo-classical economists, argue that all taxation creates market distortion and results in economic inefficiency. They have therefore sought to identify the kind of tax system that would minimize this distortion. Also, one of every government’s most fundamental duties is to administer possession and use of land in the geographic area over which it is sovereign, and it is considered economically efficient for government to recover for public purposes the additional value it creates by providing this unique service
Since governments also resolve commercial disputes, especially in countries with common law, similar arguments are sometimes used to justify a sales tax or value added tax. Others (e.g. libertarians) argue that most or all forms of taxes are immoral due to their involuntary (and therefore eventually coercive/violent) nature. The most extreme anti-tax view is anarcho-capitalism, in which the provision of all social services should be a matter of voluntary private contracts
Tax: Tax, Proportional tax, Progressive tax, Regressive tax, Direct tax, Indirect tax, Tax incidence, Tax rate, Effect of taxes and subsidies on price, Ad valorem tax, Capital gains taxProportional, progressive, and regressive Taxes: An important feature of tax systems is the percentage of the tax burden as it relates to income or consumption. The terms progressive, regressive, and proportional are used to describe the way the rate progresses from low to high, from high to low, or proportionally. The terms describe a distribution effect, which can be applied to any type of tax system (income or consumption) that meets the definition. A progressive tax is a tax imposed so that the effective tax rate increases as the amount to which the rate is applied increases. The opposite of a progressive tax is a regressive tax, where the effective tax rate decreases as the amount to which the rate is applied increases. In between is a proportional tax, where the effective tax rate is fixed as the amount to which the rate is applied increases. The terms can also be used to apply meaning to the taxation of select consumption, such as a tax on luxury goods and the exemption of basic necessities may be described as having progressive effects as it increases a tax burden on high end consumption and decreases a tax burden on low end consumption
Direct and Indirect: Taxes are sometimes referred to as direct tax or indirect tax. The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. In economics, direct taxes refer to those taxes that are collected from the people or organizations on which they are ostensibly imposed. For example, income taxes are collected from the person who earns the income. By contrast, indirect taxes are collected from someone other than the person ostensibly responsible for paying the taxes. In law, the terms may have different meanings. In U.S. constitutional law, for instance, direct taxes refer to poll taxes and property taxes, which are based on simple existence or ownership. Indirect taxes are imposed on rights, privileges, and activities. Thus, a tax on the sale of property would be considered an indirect tax, whereas the tax on simply owning the property itself would be a direct tax. The distinction can be subtle between direct and indirect taxation, but can be important under the law
Tax Burden: Law establishes from whom a tax is collected. In many countries, taxes are imposed on business (such as corporate taxes or portions of payroll taxes). However, who ultimately pays the tax (the tax “burden”) is determined by the marketplace as taxes become embedded into production costs. Depending on how quantities supplied and demanded vary with price (the “elasticities” of supply and demand), a tax can be absorbed by the seller (in the form of lower pre-tax prices), or by the buyer (in the form of higher post-tax prices). If the elasticity of supply is low, more of the tax will be paid by the supplier. If the elasticity of demand is low, more will be paid by the customer. And contrariwise for the cases where those elasticities are high. If the seller is a competitive firm, the tax burden flows back to the factors of production depending on the elasticities thereof; this includes workers (in the form of lower wages), capital investors (in the form of loss to shareholders), landowners (in the form of lower rents) and entrepreneurs (in the form of lower wages of superintendence).
To illustrate this relationship, suppose the market price of a product is US$1.00, and that a $0.50 tax is imposed on the product that, by law, is to be collected from the seller. If the product is a luxury (in the economic sense of the term), a greater portion of the tax will be absorbed by the seller. For example, the seller might drop the price of the product to $0.70 so that, after adding in the tax, the buyer pays a total of $1.20, or $0.20 more than he did before the $0.50 tax was imposed. In this example, the buyer has paid $0.20 of the $0.50 tax (in the form of a post-tax price) and the seller has paid the remaining $0.30 (in the form of a lower pre-tax price).
Forms of taxation: In monetary economics prior to fiat banking, a critical form of taxation was seignior age the tax on the creation amount
Other obsolete forms of taxation include:

1.Scutage- paid in lieu of military service; strictly speaking a commutation of a non-tax obligation rather than a tax as such, but functioning as a tax in practice
2. Tallage – a tax on feudal dependents
3. Tithe – a tax, or more precisely a tax-like payment (one tenth of one’s earnings or agricultural produce), paid to the Church (and thus too specific to be a tax in strict technical terms even though appearing as one to the payer
4. Aids – During feudal times Aids was a type of tax or due paid by a vassal to his lord
5. Danegeld – medieval land tax originally raised to pay off raiding Danes and later used to fund military expenditures
6. Carucate – tax which replaced the Danegeld in England
7. Tax Farming – the principle of assigning the responsibility for tax revenue collection to private citizens or groups
Some principalities taxed windows, doors, or cabinets to reduce consumption of imported glass and hardware. Armoires, hutches, and wardrobes were employed to evade taxes on doors and cabinets. In extraordinary circumstances, taxes are also used to enforce public policy like congestion charge (to cut road traffic and encourage public transport) in London. In Tsarist Russia, taxes were clamped on beards. Today, one of the most complicated taxation-systems worldwide is in Germany. Three quarters of the world’s taxation-literature refers to the German system. There are 118 laws, 185 forms, and 96,000 regulations, spending €3.7 billion to collect the income tax. Today, governments of advanced economies of EU, North America, and others rely more on direct taxes, while those of developing economies of India, Africa, and others rely more on indirect taxes

Tax Rates: Taxes are most often levied as a percentage, called the tax rate. An important distinction when talking about tax rates is to distinguish between the marginal rate and the effective (average) rate. The effective rate is the total tax paid divided by the total amount the tax is paid on, while the marginal rate is the rate paid on the next dollar of income earned. For example, if income is taxed on a formula of 5% from US$0 up to $50,000, 10% from $50,000 to $100,000, and 15% over $100,000,etc. A taxpayer with income of $175,000 would pay a total of $18,750 in taxes
Tax calculation: ((0.05*50,000)+ (0.10*50,000)+ (0.15*75,000)) = 18,750
The “effective rate” would be 10.7%: (18,750/175,000) = 0.107
Unit versus ad valorem taxes: Monopoly in general equilibrium [An article from: Journal of Public Economics]
The “marginal rate” would be 15%

An ad valorem tax is one where the tax base is the value of a good, service, or property. Sales taxes, tariffs, property taxes, inheritance taxes, and value added taxes are different types of ad valorem tax. An ad valorem tax is typically imposed at the time of a transaction (sales tax or value added tax (VAT)) but it may be imposed on an annual basis (property tax) or in connection with another significant event (inheritance tax or tariffs). An alternative to ad valorem taxation is an excise tax, where the tax base is the quantity of something, regardless of its price. For example, in the United Kingdom, a tax is collected on the sale of alcoholic drinks that is calculated by volume and beverage type, rather than the price of the drink.

Be the first to comment - What do you think?

« Previous Page