Need for Inventory Management - Why do Companies hold Inventories?

Inventory is a necessary evil that every organization would have to maintain for various purposes. Optimum inventory management is the goal of every inventory planner. Over inventory or under inventory both cause financial impact and health of the business as well as effect business opportunities.

Inventory holding is resorted to by organizations as hedge against various external and internal factors, as precaution, as opportunity, as a need and for speculative purposes.

Reasons why organizations maintain Raw Material Inventory

Most of the organizations have raw material inventory warehouses attached to the production facilities where raw materials, consumables and packing materials are stored and issue for production on JIT basis. The reasons for holding inventories can vary from case to case basis.

1.      Meet variation in Production Demand

Production plan changes in response to the sales, estimates, orders and stocking patterns. Accordingly the demand for raw material supply for production varies with the product plan in terms of specific SKU as well as batch quantities.

Holding inventories at a nearby warehouse helps issue the required quantity and item to production just in time.

2.      Cater to Cyclical and Seasonal Demand

Market demand and supplies are seasonal depending upon various factors like seasons; festivals etc and past sales data help companies to anticipate a huge surge of demand in the market well in advance. Accordingly they stock up raw materials and hold inventories to be able to increase production and rush supplies to the market to meet the increased demand.

3.      Economies of Scale in Procurement

Buying raw materials in larger lot and holding inventory is found to be cheaper for the company than buying frequent small lots. In such cases one buys in bulk and holds inventories at the plant warehouse.

4.      Take advantage of Price Increase and Quantity Discounts

If there is a price increase expected few months down the line due to changes in demand and supply in the national or international market, impact of taxes and budgets etc, the company’s tend to buy raw materials in advance and hold stocks as a hedge against increased costs.

Companies resort to buying in bulk and holding raw material inventories to take advantage of the quantity discounts offered by the supplier. In such cases the savings on account of the discount enjoyed would be substantially higher that of inventory carrying cost.

5.      Reduce Transit Cost and Transit Times

In case of raw materials being imported from a foreign country or from a far away vendor within the country, one can save a lot in terms of transportation cost buy buying in bulk and transporting as a container load or a full truck load. Part shipments can be costlier.

In terms of transit time too, transit time for full container shipment or a full truck load is direct and faster unlike part shipment load where the freight forwarder waits for other loads to fill the container which can take several weeks.

There could be a lot of factors resulting in shipping delays and transportation too, which can hamper the supply chain forcing companies to hold safety stock of raw material inventories.

6.      Long Lead and High demand items need to be held in Inventory

Often raw material supplies from vendors have long lead running into several months. Coupled with this if the particular item is in high demand and short supply one can expect disruption of supplies. In such cases it is safer to hold inventories and have control.

Holding inventories help the companies remain independent and free from vendor dependencies.

Inventory Management Concepts

Inventory management and supply chain management are the backbone of any business operations. With the development of technology and availability of process driven software applications, inventory management has undergone revolutionary changes. In the last decade or so we have seen adaptation of enhanced customer service concept on the part of the manufacturers agreeing to manage and hold inventories at their customers end and thereby effect Just In Time deliveries. Though this concept is the same in essence different industries have named the models differently. Manufacturing companies like computer manufacturing or mobile phone manufacturers call the model by name VMI – Vendor Managed Industry while Automobile industry uses the term JIT – Just In Time where as apparel industry calls such a model by name – ECR - Efficient consumer response. The basic underlying model of inventory management remains the same.

Let us take the example of DELL, which has manufacturing facilities all over the world. They follow a concept of Build to Order where in the manufacturing or assembly of laptop is done only when the customer places a firm order on the web and confirms payment. Dell buys parts and accessories from various vendors. DELL has taken the initiative to work with third party service providers to set up warehouses adjacent to their plants and manage the inventories on behalf of DELL’s suppliers. The 3PL - third party service provider receives the consignments and holds inventory of parts on behalf of Dell’s suppliers. The 3PL warehouse houses inventories of all of DELL’s suppliers, which might number to more than two hundred suppliers. When DELL receives a confirmed order for a Laptop, the system generates a Bill of material, which is downloaded at the 3PL, processed and materials are arranged in the cage as per assembly process and delivered to the manufacturing floor directly. At this point of transfer, the recognition of sale happens from the Vendor to Dell. Until then the supplier himself at his expense holds the inventory.

Let us look at the benefits of this model for both Dell as well as Its Suppliers:

1. With VMI model, Dell has reduced its inbound supply chain and thereby gets to reduce its logistics and inventory management costs considerably.
2. DELL gets to postpone owning inventory until at the time of actual consumption. Thereby with no inventories DELL has no need for working capital to be invested into holding inventories.
3. DELL does not have to set up inventory operations and employ teams for operations as well as management of inventory functions.

Supplier Benefits

1. Supplier gets to establish better relationship and collaboration with DELL with long-term business prospect.
2. By agreeing to hold inventories and effect JIT supplies at the door to DELL, supplier will be in a better position to bargain and get more business from DELL.
3. With VMI model, supplier gets an opportunity to engage in better value proposition with his customer DELL.
4. Supplier gets confirmed forecast for the entire year with commitments from DELL for the quantity off take.
5. VMI managed is managed by 3PL and supplier does not have to engage himself in having to set up and manage inventory operations at DELL’s premise.
6. 3PL Managed VMI holds inventories of all suppliers thereby charges each supplier on per pallet basis or per sq.ft basis. Supplier thereby gets to pay on transaction basis without having to marry fixed costs of inventory operations.

Today most of the Multi National companies have successfully managed to get their suppliers and 3PL service providers to setup VMI throughout their plants all over the world and this model has become the order of the day.

Inventory Management

In any business or organization, all functions are interlinked and connected to each other and are often overlapping. Some key aspects like supply chain management, logistics and inventory form the backbone of the business delivery function. Therefore these functions are extremely important to marketing managers as well as finance controllers.

Inventory management is a very important function that determines the health of the supply chain as well as the impacts the financial health of the balance sheet. Every organization constantly strives to maintain optimum inventory to be able to meet its requirements and avoid over or under inventory that can impact the financial figures.

Inventory is always dynamic. Inventory management requires constant and careful evaluation of external and internal factors and control through planning and review. Most of the organizations have a separate department or job function called inventory planners who continuously monitor, control and review inventory and interface with production, procurement and finance departments.

Defining Inventory

Inventory is an idle stock of physical goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time.

Any organization which is into production, trading, sale and service of a product will necessarily hold stock of various physical resources to aid in future consumption and sale. While inventory is a necessary evil of any such business, it may be noted that the organizations hold inventories for various reasons, which include speculative purposes, functional purposes, physical necessities etc.

From the above definition the following points stand out with reference to inventory:

• All organizations engaged in production or sale of products hold inventory in one form or other.
• Inventory can be in complete state or incomplete state.
• Inventory is held to facilitate future consumption, sale or further processing/value addition.
• All inventoried resources have economic value and can be considered as assets of the organization.

Different Types of Inventory

Inventory of materials occurs at various stages and departments of an organization. A manufacturing organization holds inventory of raw materials and consumables required for production. It also holds inventory of semi-finished goods at various stages in the plant with various departments. Finished goods inventory is held at plant, FG Stores, distribution centers etc. Further both raw materials and finished goods those that are in transit at various locations also form a part of inventory depending upon who owns the inventory at the particular juncture. Finished goods inventory is held by the organization at various stocking points or with dealers and stockiest until it reaches the market and end customers.

Besides Raw materials and finished goods, organizations also hold inventories of spare parts to service the products. Defective products, defective parts and scrap also forms a part of inventory as long as these items are inventoried in the books of the company and have economic value.

Types of Inventory by Function

INPUT	PROCESS	OUTPUT
Raw Materials	Work In Process	Finished Goods
Consumables required for processing. Eg : Fuel, Stationary, Bolts & Nuts etc. required in manufacturing	Semi Finished Production in various stages , lying with various departments like Production, WIP Stores, QC, Final Assembly, Paint Shop, Packing, Outbound Store etc.	Finished Goods at Distribution Centers throughout Supply Chain
Maintenance Items/Consumables	Production Waste and Scrap	Finished Goods in transit
Packing Materials	Rejections and Defectives	Finished Goods with Stockiest and Dealers
Local purchased Items required for production		Spare Parts Stocks & Bought Out items
		Defectives, Rejects and Sales Returns
		Repaired Stock and Parts
		Sales Promotion & Sample Stocks

Growth and Historical Evaluation of ERP

Use of computer systems is a post second world war phenomenon. The first working computer was developed by two scientists at University of Manchester, UK. However, commercial applications of computer commenced during 1960s.

Pre ERP systems

In the sixties, computers were bulky, noisy and without the facility of standard operating systems. The organizations used to develop computerized systems that were stand alone, tailor made and without an integrated approach. The software development, in a sense was re-inventing wheel, as basic business process is similar for all organization in the same business sector. Due to this restrictive environment, Development, maintenance and modification cost became prohibitive. Developer ended up developing isolated and piece meal systems, even within an organization. Thus, a pay roll system, accounting system and inventory system were developed in isolation as per specific need of business units and were incompatible to each other.

MRP-Advent of ERP

Stand alone systems, in vogue during sixties, were incapable of processing planning requirement of an enterprise encompassing production planning, procurement and inventory, which became an impediment in adopting Materials Requirement Planning (MRP). MRP was first adopted by IBM and J I Case (a tractor maker from USA) during late seventies, when integrated systems started taking shape. The basic idea of MRP was to assimilate planning and scheduling elements to the manufacturing process. The process of MRP was to plan and procure purchase requirements based on finished products, inventory on hand, allocated inventory and expected arrivals. Subsequently, it was supplemented by Capacity Requirement planning (CRP) to create capacity plans of shop floors and sub=contractors.

There was continued development of MRP system during 1980s. The need moves beyond shop floor and MRP II was introduced incorporating planning element of distribution as well as forecasting requirement.

ERP Evolution

ERP was introduced in late 1980 to integrate other business functionalities not covered by MRP or MRP II. It is not confined to manufacturing only but covers all facets of organization such as:

1. Finance
2. Human Resources
3. Supply Chain
4. warehouse management, and
5. Project Management

ERP development from software solution provider mainly emerged as a sequel of their MRP products. Some of the early solution providers are

1. SAP from Germany
2. BaaN from Netherland
3. JD Edwards from USA, and
4. Lawson from USA

Few vendors did not follow this course. Starting point of Oracle ERP was their accounting package whereas People-soft ERP evolved from their HR suite.

During 1990s, ERP products continued to evolve. Vendors added new functionalities, incorporated Graphic User/ Internet browser interface and brought out new versions of their products. Some solutions were found to be more suitable for a particular vertical such as discrete manufacturing, utility, process industries, public sector and retail. Several vendors brought out reference models of their product, meaning that through pre-configuring basic and common data, a particular flavor of their product will be more compatible to the business need of a particular sector/ sub-sector.

Traditionally, the biggest purchaser of an ERP solution is fortune 500 companies. But, this market has since been saturated. Vendors are now looking to increase their presence in small and medium business sector. Due to fierce competition and financial crisis, there are also a number of takeover and mergers across ERP solution providers during early 2000 such as Oracle taking over People Soft, Infor taking over BaaN and Microsoft taking over Axapta.

Current trend

ERP solutions, which were mostly, operating as a back end system, is now broadening its horizon. ERP vendors are extending their products to become Internet enabled. ERP extension products (mostly as an add on to their existing products) now provide solutions for Advanced Planning and Scheduling, Manufacturing Execution System, Advanced Business intelligence and Dashboards, Sales force automation, Product Lifecycle Management and Warehouse management.. Business to Businesses and Business to Commerce functionalities, as add on solution, is now getting seamlessly integrated with Back end, thus making it possible to bring e-commerce under the gambit of ERP.

Enterprise Resource Planning (ERP)

There are various ways in defining an Enterprise resource Planning System. This is how it has been defined by American Inventory and Production Control System (APICS) dictionary:

“Enterprise Resource Planning: An accounting oriented information system for identifying and planning the enterprise-wide resources to make ship and account for customer orders.”

Again in Internet encyclopedia, it has defined as: “An enterprise planning system is an integrated computer based application used to manage internal and external resources, including tangible assets, financial resources, material and human resources”.

Basically, an ERP combines several traditional management functions into a logical integrated system and facilitate flow of information across these functions. It is designed to model and automate basic processes across the organization over a centralized database and eliminates the need of disparate systems maintained by various units of the organization.

Figure below shows how information is integrated in a typical organization using a ERP system.

ERP system is thus a mirror image of the major business processes of an organization.

Need for Enterprise Resource Planning - Why ERP ?

Separate systems were being maintained during 1960/70 for traditional business functions like Sales & Marketing, Finance, Human Resources, Manufacturing, and Supply Chain Management. These systems were often incongruent, hosted in different databases and required batch updates. It was difficult to manage business processes across business functions e.g. procurement to pay and sales to cash functions. ERP system grew to replace the islands of information by integrating these traditional business functions.

The successful implementation of an ERP system will have many advantages, as indicated below:

• Business integration and Improved Data Accuracy: ERP system is composed of various modules/ sub modules where a module represents a particular business component. If data is entered in one module such as receiving, it automatically updates other related modules such as accounts payable and inventory. This updating occurs at real time i.e. at the time a transaction occurs. Since, data needs to be entered only once at the origin of transaction, the need of multiple entries of the same data is eliminated. Likelihood of duplicate/ erroneous data is, therefore, minimized. The centralized structure of the data base also enable better administration and security provisions, which minimizes loss of sensitive data.
• Planning and MIS: The various decision support tools like planning engines and simulations functions, form integral part of an ERP system which helps in proper utilization of resources like materials, human resources and tools. Constrained based planning help in drawing appropriate production schedules, thereby improving operation of plant and equipment. As a part of MIS, an ERP system, contains many inbuilt standard reports and also a report writer which produce ad hoc reports, as and when needed.
• Improved Efficiency and Productivity: In addition to provision of improved planning, ERP system provides a tremendous boost to the efficiency of day to day and routine transactions such as order fulfillment, on time shipment, vendor performance, quality management, invoice reconciliation, sales realization, and cash management. Cycle time is reduced for sales to cash and procurement to pay sequences.
• Establishment of Standardized Procedures: ERP system is based on processes of international best practices, which are adopted by the organizations during implementation. Department silos are purged and maverick practices are done away with. Because of top down view available to management, chances of theft, fraud and obsolescence are minimized.
• Flexibility and technology: Due to globalized environment, where production units, distribution centers and corporate offices reside in different countries, organizations need multi currency, multi language and multi accounting modes, in an integrated manner. These provisions are available in most of the ERP systems, particularly in products offered by tier 1 and tier 2 vendors. ERP vendors are also quick to adopt latest technologies, from mainframe to client server to internet. Unlike a bespoke system, Upgrading to latest technology for a running ERP system is uncomplicated, involving mostly adoption of service packs and patches.

Conclusion

Although ERP provides many advantages; its implementation is a strategic decision, involving significant resources (both financial and human), proper evaluation and business process re-engineering. There must be commitment from all levels. A failed implementation may lead to bankruptcy of an organization.

Covert and Public Service Advertising

As evident from the word “covert”, this type of advertising aims to integrate the advertising with the non-promotional mediums. This practice is most-commonly found in films. For example, billboards of the products may be shown in the film for a prolonged period of time. Or a character in the film may mention the name of the brand again and again. At other times the director may present the product as an integral part of the film. For example, the cars featured in several action flicks. Remember the Cadillac in Matrix Reloaded and BMWs in James Bond movies.

It is a fact that these tactics seem to be high profile and also seem to require a lot of bucks. Only established brand names have used such form of advertising. Not everyone has the financial prowess to use this form of advertising. However, there are ways through which you can also promote your product or service. Maybe contributing an article in local daily will work well for you. You can mention your brand quite subtly there. On the Internet too, covert advertising is a hot trend. You can blog about the product or ask a well-known blogger to write about your product or service. However, this should be done inconspicuously.

As opposed to covert advertising, public service advertising aims at spreading awareness about issues that are relevant to public interest. Such ads may quote a political viewpoint, a philosophy, or a religious concept. Such humanitarian ads are usually broadcasted on the radio or television, though they can also appear in newspapers and magazines. A PSA or Public Service Announcement is aimed to alter public attitudes on issues ranging from health, safety, and conservation.

Most of the PSA ads use celebrities in order to gain attention. Others focus their ads on the risks that can come to men, women, and children. In recent years, it has become quite common in US to broadcast the public service ads just after or in between the programs that relate to public service in any way. They provide information such as the toll free help lines, websites and addresses. In general, the public service ads are about rape, HIV, cancer, child abuse, domestic violence, and civil rights.

While public service advertising is not as popular as paid advertising, it should be given due importance. All across the world, such type of advertising is now widely used. In fact, in US, public service advertising was once a requirement if the radio and television stations were to get their licenses from Federal Communications Commission (FCC).

Public Service Advertising should carry a short and to the point message. The advertisement should be made keeping the target audience in mind. As it is not about buying a product but a change in the attitude altogether, the advertisements have to be amply clear and the message should prompt the people to take a step forward. If the shift in the mindsets of people does not happen, then the ad is not conveying the message properly. For this reason, the PSA’s are often dramatic and expressive.

Outdoor Advertising

Outdoor advertising communicates the message to the general public through highway billboards, transit posters and so on. Outdoor advertising is a very important form of advertising as the ads are huge and are visible to one and all. The important part of the advertising is that the message to be delivered should be crisp and to the point. Though images can be used, but they cannot be used in excess. Everything should be presented to the viewer in such a format so that the viewers make up their mind to buy the product or service.

The message to be delivered can be an ad to buy a product, take a trip, vote for a politician, or give to a charity. According to Outdoor Advertising Association of America (OAAA), millions of dollars are being spent on outdoor advertising each year and the figures are expected to grow. This is due to the fact that outdoor traffic keeps on growing every year and hence the target audience for outdoor advertising is ever increasing.

The print and newspaper advertising takes up a huge part of advertising but outdoor advertising is unique in its own way. It is an extremely cost-effective method of advertising. All you need to do is to design a billboard and get it printed as compared to the television advertising where an entire 30 second commercial has to be designed. If the outdoor ads are strategically placed, it can guarantee substantial exposure for very little cost. That is why outdoor advertising is very cost-effective.

Different industries make use of outdoor advertising in their own different way. For example, eating joints and eateries on the highway make use of highway billboards to draw the customer to have a bite and rest a little at their joint. Mac Donalds and Subway are the excellent examples. The automobile and tourism industries make use of the billboards to advertise their products and tourism plans. These are way too successful because of the fact that people on the highway are on the lookout for such information.

Apart from the billboards, there are several other forms in which outdoor advertising can take place. For example, beverage companies make use of sporting events and arenas to showcase their products. For example, Coca Cola was one of the FIFA World Cup sponsors. Other places where you can see outdoor advertising are:

• taxicabs
• buses
• railways
• subways and walls on which murals are painted

All these forms of outdoor advertising are very popular and extremely cost effective. 

The OAAA has divided the Outdoor Advertising into four major categories: Billboards – These usually account for almost half of the revenue of outdoor advertising. Then there is transit system and mobile advertising which also takes up a major pie of outdoor advertising. Advertising on public furniture is also used comprehensively these days globally. Last but not the least is alternative advertising. Such advertising can be in the form of corporate blogging which is an important form of advertising these days.

To conclude, one can say that outdoor advertising, if used wisely is very powerful and cost-effective way of advertising.

Broadcast Advertising

Generally speaking, broadcast advertising is radio, television, and Internet advertising. The commercials aired on radio and televisions are an essential part of broadcast advertising.

The broadcast media like radio and television reaches a wider audience as opposed to the print media. The radio and television commercials fall under the category of mass marketing as the national as well as global audience can be reached through it.

The role of broadcast advertising is to persuade consumers about the benefits of the product. It is considered as a very effective medium of advertising. The cost of advertising on this channel depends on the time of the commercial and the specific time at which it is aired. For example, the cost of an ad in the premium slot will be greater than in any other slot.

A radio ad must be aired several times before it actually sinks in the minds of the consumers. Thus the frequency of the ad is important. The type of your target audience is also important. Therefore, one must do a research on which type of audience listens to which channels if they want the ads to be successful. The voice talent in the commercial should be taken keeping in mind the type of audience and the type of commercial.

The television advertising is usually considered the advertising for the corporate giant, though even the small businesses can benefit from it. A strong audio and video combination is a must for the success of the commercial. But it is also important that the audio and video should function well without each other. For example, if a person is not viewing the TV but just listening to it, s/he should get the idea and vice versa.

It is extremely important that whatever has been advertised in the commercial is true. For this reason, organizations such as Federal Trade Commission (FTC) are there to monitor the commercials on television and radio. This ensures that the advertisers are not making any false claims to lure consumers to buy their products.

Most of the radio and television advertisements are paid though there are some public service ads which can be aired for free. The advertisers usually have to pay for the spot which lasts for 30 seconds. In rare cases, this spot can increase to 60 seconds too.

These days radio and television ads are prepared by advertising agencies for their clients. They understand the need of the client and make the commercial keeping in mind the current state of affairs. Broadcast advertising has become a very essential part of marketing in recent times. Companies allocate specific budget for radio and television ads and make an estimate of how much revenue they can earn through broadcast advertising. For example, marketing consultants are hired to determine the return on investment (ROI) for spending on radio and television ads. Sometimes the marketing consultants of these businesses run sample ads to judge its popularity among the viewers.

Internet or online advertising uses the Internet or the World Wide Web for the purpose of attracting consumers to buy their product and services. Examples of such advertising include ads on search engine result pages, rich media ads, banner ads, social network advertising, and email marketing and so on. Online advertising has its benefits, one of them being immediate publishing of the commercial and the availability of the commercial to a global audience. But along with the benefits come the disadvantages too. These days, advertisers put distracting flashing banners or send across email spam messages to the people on a mass scale. This can annoy the consumers and even the real ads might get ignored in the process. Therefore, ethics in advertising is very important for it to be successful.

Whatever the mode of advertising, broadcast advertising is an inherent part of any advertising campaign these days.

Print Advertising

Print advertising is a widely used form of advertising. These advertisements appear in newspapers or magazines and are sometimes included as brochures or fliers. Anything written in the print media to grab the attention of the specific target audience comes under the purview of print advertising.

People who read newspapers or other publications have a tendency to browse the print ads that they come across. The decision to buy the product might not be instantaneous, but it does settle down in their subconscious mind. Next time they see the product in the market, they are tempted to buy it.

Print advertisements are only effective when people see them. When people browse through newspapers and publications, these advertisements should grab the attention of the potential customer. Therefore, these advertisements should be created in such a manner that they can hold the attention of the customer to some extent. Usually a team of individuals is required in order to design the advertisements.

The newspaper or magazine ad should be such that it should compel people to spend money on the products. This is just what the advertising team does. To create such an ad, the team members work on a concept and develop the wordings and images of the ad. These wordings and images are then brought together to form the final ad. Then there are people who deal with the placement of the ad. They have to make sure that if the client has paid for premium place, they get the desired exposure. For example, an ad on the first page will get instant attention of the reader than the ad on the subsequent pages. Likewise, an ad which occupies greater space is likely to get more attention. All these factors have to be looked into while designing the ad.

The sales team of the publication makes sure that it gets ads regularly. In fact, these ads are a major source of income for the publication and hence it is expected that there should be a constant flow of the ads. The sales team does just that.

Mailers are another type of print ads. These can range from well-designed postcards to simple paper leaflets. These are usually delivered by the postal workers in people’s mailboxes. The problem with these mailers is that they get least attention and are usually considered as junk and thrown away even without reading. To reduce this occurrence, companies sometimes make use of fliers. These are paper ads which are handed over to individuals in person. The logic is that if the ad is given to people personally, they will pay more attention to it, which is actually true to some extent.

Though print advertising is still very popular, it does take a hit from time to time. For example, during the recession phase, when people’s budgets were tight, they did not resort to print ads. In addition, with the advent of Internet, the print ads in the publications have gone down because Internet has a wider reach online. To overcome this scenario, new strategies have to be developed by advertisers and the print media. Globally, advertisers keep on developing strategies which benefit the business of print publications. Therefore, it can be said that print advertising is here to stay.

Classification of Advertising

Advertising is the promotion of a company’s products and services though different mediums to increase the sales of the product and services. It works by making the customer aware of the product and by focusing on customer’s need to buy the product. Globally, advertising has become an essential part of the corporate world. Therefore, companies allot a huge part of their revenues to the advertising budget. Advertising also serves to build a brand of the product which goes a long way to make effective sales.

There are several branches or types of advertising which can be used by the companies. Let us discuss them in detail.

Classification of Advertising

1. Print Advertising – The print media has been used for advertising since long. The newspapers and magazines are quite popular modes of advertising for different companies all over the world. Using the print media, the companies can also promote their products through brochures and fliers. The newspaper and magazines sell the advertising space and the cost depends on several factors. The quantity of space, the page of the publication, and the type of paper decide the cost of the advertisement. So an ad on the front page would be costlier than on inside pages. Similarly an ad in the glossy supplement of the paper would be more expensive than in a mediocre quality paper.
2. Broadcast Advertising – This type of advertising is very popular all around the world. It consists of television, radio, or Internet advertising. The ads on the television have a large audience and are very popular. The cost of the advertisement depends on the length of the ad and the time at which the ad would be appearing. For example, the prime time ads would be more costly than the regular ones. Radio advertising is not what it used to be after the advent of television and Internet, but still there is specific audience for the radio ads too. The radio jingles are quite popular in sections of society and help to sell the products.
3. Outdoor Advertising – Outdoor advertising makes use of different tools to gain customer’s attention. The billboards, kiosks, and events and tradeshows are an effective way to convey the message of the company. The billboards are present all around the city but the content should be such that it attracts the attention of the customer. The kiosks are an easy outlet of the products and serve as information outlets for the people too. Organizing events such as trade fairs and exhibitions for promotion of the product or service also in a way advertises the product. Therefore, outdoor advertising is an effective advertising tool.
4. Covert Advertising – This is a unique way of advertising in which the product or the message is subtly included in a movie or TV serial. There is no actual ad, just the mention of the product in the movie. For example, Tom Cruise used the Nokia phone in the movie Minority Report.
5. Public Service Advertising – As evident from the title itself, such advertising is for the public causes. There are a host of important matters such as AIDS, political integrity, energy conservation, illiteracy, poverty and so on all of which need more awareness as far as general public is concerned. This type of advertising has gained much importance in recent times and is an effective tool to convey the message.