Demarketing is simply defined as efforts made or steps taken by companies to reduce or discourage demands for a product generally. Demarketing ads can be done on the demand for a product in certain locations where the supply comes with much costs and little or no profits.
Why would a company want to run demarketing ads on a product or an arm of their business or service? How does this benefit a business? What are the reasons for demarketing? What are the types of demarketing? Do the advantages of demarketing outweigh the disadvantages? How can one develop an efficient demarketing strategy? These are questions we will answer in this article.
Reasons for demarketing
While demarketing meaning is perceived to be the use of advert to reduce demand. This is done by consciously running demarketing ads. The question that comes to mind is what could be the possible reasons for demarketing? Here are a few
1. When Demand is more than supply.
Too many demands and too little supply can birth new competitors into the market, so businesses try to demarket their products to curb this. One of the other reasons for demarketing in this regard is to reduce demand in a location, the company cannot supply to. Or a market segment the business doesn’t want to sell to.
2. Where you should conserve resources.
There are businesses that depend on natural resources for their raw materials. Where these raw materials are not readily available or must be conserved. An example could be Trees and policies against deforestation which might make a furniture company demarket their product to ensure demands match up with available resources.
3. Poor or absent distribution chain.
Of what need is a demand if you don’t have efficient means of getting the product to the market or customers? Businesses might try to demarket until they find an efficient seamless distribution channel.
4. When the price of selling in a particular location is extremely high:
A business might choose to demarket their products in that location. When the cost incurred in selling makes the company go into losses or little gain compared to the stress and gain in other locations. Selling in such areas is usually considered not beneficial.
Read Also: 7 best brand marketing techniques
5. Save consumers from health complications.
This is one of the major reason of demarketing by the government and health agencies. They spend so much money to reduce the demand for alcoholic substances, cigarettes, and unhealthy drugs. This they do to help people maintain and live a healthy life.
There are many other reasons for demarketing, but the sole purpose of demarketing is to reduce demand and help a business make more profits from selling a few.
What are demarketing ads?
Demarketing ads are ads specifically targetted for the purpose of reducing demands for a product. An example of demarketing ads was coca-cola sponsoring ads warning people of dangers of consuming the coca-cola drink due to high sugar content simply because they want to raise the demand for their low sugar coca-cola drinks like diet coke. So they run demarketing ads against high sugar coke and then recommend the Diet Coke as a healthier alternative.
Read More: All you need to know about demarketing ads
Putting a higher price on low-profit commodity just to encourage buyers to go for more quantity. Subscription packages can put a higher price on a 1month subscription package but lower prices when one subscribes for more than 12months. The goal is to get loyal long term customers by making people subscribe for a longer period. This might mean that the business earns more profit when people subscribe for a longer period. So, they try to demarket or discourage customers from short term subscriptions.
Types of Demarketing
There are different types of demarketing every business should understand. Understanding these types of demarketing would help a business ascertain which one is best suited for the objective. It also helps you decide the strategy that needs to be executed. Here are the types of marketing to consider adopting.
1. Selective demarketing:
This is simply choosing a certain type of people to market to. It means to focus on certain customer segments alone and leaving behind others to ensure they never buy. An example of this is seen in real estate businesses where a realtor only desires a certain kind of people to own property in a certain region and probably for a certain purpose.
One might choose to selectively market to individuals who want to build a production factory as they are more likely to buy more plots. They simply believe it would yield more profit selling to them.
could mean selling land to rich individuals simply because the realtor wants only rich people in that region. This could be for easy maintenance. It can also be for the simple reason that these set of people are not price-sensitive. They would be willing to pay more than the poor.
If Coca-Cola notices that they earn more profit from selling Fanta drink than they do selling the Coke, they may let out much propaganda to make people discover how coke can be poisonous to their health and Fanta being the better alternative. Every demarketing agenda is targeted towards making more profits while reducing costs and losses.
2. Ostensible Demarketing
This is done by making people believe a certain product might soon be scarce in the market. This can be achieved by also making people believe that if they don’t buy a certain product at a particular time, they might never buy it again at all or at such a lower price. What effect does this create?
People would want to rush the product before it gets scarce. So, this will enable the company to increase the price and gain more profits.
This was experienced shortly before the COVID-19 lockdown of 2020 where people believed that if they don’t buy foodstuffs now, they might never be able to buy again. Many bought so much that could sustain them through the indefinite lockdown so they could store up.
This also happens during seasonal periods like Christmas where products are hoarded and reserved to be sold in Christmas periods so more profits could be made.
The strategy behind this is to create scarcity so demand can increase as this would cause price increase and thus more profit.
This happens occasionally in the forex and exchange market where people hoard a certain currency believing scarcity of it would increase demand. BMW did this too in 1997 by restricting their supplies in the UK market. So a lot of people sought to buy this “hard to find” commodity.
3. General Demarketing.
General demarketing is seen when a company or government really wants to reduce the demand for this product not for some people but for everyone. An example is a government demarketing the sales and production of alcoholic substances and cigarettes for everyone and everywhere.
Best Demarketing strategies
There are many demarketing strategies one can execute in business to maximize profits
1. Differentiation Strategy
This demarketing ads strategy hinges on the 4Ps of marketing to implement demarketing efforts. It lays emphasis on place, product, price, and promotion.
A business might increase the price of their product in other to wade off price-conscious individuals from buying. Most businesses believe that price-conscious individuals give the most complain and concern over seemingly little issues. To successfully do this, you need to learn how to raise the price without losing your customers to your competitor
Read Also: 15 ways to retain your valued customers
The idea of place is to make a purchase in a certain location very difficult either by reducing supplies in that location or increasing price. it can also be done by consciously running demarketing ads in such locations. This might be because it costs the business more to supply to those locations thereby incurring losses or low gain.
On the product aspect, a business might remove a warranty on a product so as to discourage people from buying it. On the contrary, When a business launches a core product, it might increase the warranty on the new product. This would make people run after the new product even when it has fewer features.
Thinking of promotions, a business might just stop all promotional activities targeted on selling a product. They simply stop the advertising, remove the added value on the product, etc
2. Bait and switch strategy
This can be illegal and one can get sued for this as it thrives on deception. This type of demarketing ads is advertising an extremely great product at an extremely low price. It’s also called “too good to be true” price when actually the product isn’t available.
When people troop in to purchase, they are told the product is unavailable, convincing them to buy another product. It’s a “bait” to catch people’s attention and then “switch” them to another product at a higher price.
One major characteristic of this strategy is that it thrives on a “too good to be true” price and also on deception. Before applying this, learn these 12 ways to give excellent customer experience
3. Price discrimination strategy
To achieve this, businesses input cost transactions on product payment. This can be just a flat rate transaction cost irrespective of whether one is buying 1 product or 100 products. It discourages people from buying just 1 and gears them towards buying as many as possible in other to spread the cost and maximize gain.
4. Stock Outage strategy.
This is to create an artificial shortage of products, this will make people pay in advance. This might help a business use the money paid as advance payment to finance the production.
5. Crowding cost demarketing
When there is a discount or promo on special days like Black Friday sales, there could be queues which makes purchase difficult. This would make a few customers willing to pay higher just to evade the queue.
Advantages of Demarketing
The following advantages of Demarketing explain why a business would demarket its products.
1. To reduce cost and increase profit:
when a business feels like they don’t gain anymore on a product, they try to demarket it and channel people’s attention to products that have the likely hood to earn them more.
2. To conserve resources:
when production material is scarce companies tend to demarket the products so as to reduce demand and give room for the production materials to replenish. This is seen when these materials are natural resources like trees etc used for furniture and books.
3. Health benefits:
This advantage of demarketing is seen in the government’s effort to reduce the demand for tobacco, alcoholic drinks, herbal drugs, etc.
4. Turn off wrong customers:
It helps businesses turn off on the wrong customers to focus on a more lucrative customer/market segment. A hotel that wants to set a standard of prestige might put a high cost so as to keep low-income earners away.
How to develop Demarketing strategy
1. Understand consumer behaviour well enough to ascertain which strategy to imbibe.
2. Understand the marketing goals and objectives of your firm and choose the demarketing strategy that helps you achieve these goals.
3. Combine these 2 above to craft a good strategy.
Marketing is not always a good option. I have also written on how marketing can kill your business. It will give you an insight on when not to market and employ demarketing ads effectively. I hope you learned from this article? Tell me about it on the comment session below and also drop your questions. I will be glad to give replies to your comments.
SME loans: The Updated 2021 List (+Detailed Application Guide)
What is an SME loan?
An SME (Small and Medium Enterprises) loan is elementary funding of small and medium-sized business enterprises. The SME loan assures a thin gap of credit for attaining the borrowing needs of small and medium scale enterprises. It can be used as working capital as well as for long term requirements.
Purpose of SME loans.
As a matter of fact, an SME loan serves as working capital for a long time, he loan ensures that the borrowing needs of SME’s are met right away, and again, it is confirmed after checking the business nature, cash flow, the trend, and climax requirements.
To be eligible for this loan, one should meet up with the specified profits under the MSMED Act of 2006 for SME and also the microwave enterprise.
Securities (collaterals) are needed to access some SME loans while requires no collateral. Some demand collateral depending on the amount you request but mostly when you come from a registered organization no collateral is needed.
Features of SME loans.
#1. It is easy to access.
#2. Interest rates are attractive and also affordable, depending on your business strength.
#3. The documentation is not rigid.
#4. However, this entails easy repayment.
#5. Creditors can offer you up to 2 years before you pay back.
Some SME loans in Nigeria.
In Nigeria, SME loans are also accessible and once you meet up the requirements, you will get them. In reality, some banks offering SME loans in Nigeria includes the UBA, GT BANK, the Central Bank of Nigeria, and other governmental banks like Bank of Agriculture, Bank of Industry, and the Development Bank of Nigeria.
SME Loans without Collateral in Nigeria.
In Nigeria, some platforms/banks issue loans without collateral and they include;
#1. United Bank of Africa (UBA):
Firstly, UBA has a program “NO WAHALA LOAN” and this is without collateral and might borrow loans for SME or to fix your car, pay bills, and for other emergencies.
#2. GT Bank:
Secondly, the GT Bank “quick credit” is super-fast and can be gotten in just two hours of official sanctions and this loan does not require paperwork. ou get it by dialing a shortcode and it’s a maximum of 5 million naira.
#3. First Bank of Nigeria (FBN):
Thirdly, the FBN operates the “first edu” loan and this is available for private educational sectors that are registered with the Corporate Affairs Commission (CAC). The loan obtainable is up to 10 million naira.
4) First City Monument Bank Limited (FCMB):
FCMB provides the following loans without collateral:
#1. Auto Loan: This loan enables customers to own a car and pay over time.
#2. Salary Top-up: This loan grants you access and grants you payment before payment.
#3. Fast Cash loan: This grants instant cash to customers, up to 100,000.
#4. Premium Salary loan: This grant is up to a minimum of 2 million naira.
To access these loans, just dial *329# USSD code.
On the other hand, banks like WEMA Bank, Access Bank, Stanbic Bank, and Fidelity Bank have loan programs without collateral. But for online purposes, you can search for the following platforms to get a quick loan without collateral in Nigeria.
They are as follows: GROFIN, SMEDAN, LYDIA.CO, AELLA-CREDIT, ZEDVANCE, PAYLATER, KIAKIA.CO, ONE-FI, SPECTA, and QUICK CHECK.
Federal Government SME loans.
Basically, the Federal Government has released new details on the Micro Small and Medium Enterprises (MSMEs) support scheme being rolled out under the National Economic Sustainability Programme.
Accordingly, estimate provides sum of N50 billion will be used to provide payroll support, N200 billion for loans to artisans, and N10 billion support to private transport companies and workers
Correspondingly, the government disclosed in a tweet on the official handle of the government, the support scheme will include a Guaranteed Off-take Scheme for priority products, and an MSMEs Survival Fund.
The Bank of Industry is there to provide transformation of Nigerian industrial/manufacturing sector.
As a result, there are several intervention funds under the Bank of Industry. Examples include:
#1. N235 BILLION CBN INTERVENTION FUND FOR MANUFACTURING RE-FINANCING AND RESTRUCTURING FACILITIES OF BANKS’ LOANS.
#2. N300 BILLION CBN POWER AND AIRLINE INTERVENTION FUND (PAIF)
#3. FGN SPECIAL INTERVENTION FUND FOR MSMEs (National Enterprise Development Program)
Read More: Federal Government Grants
Development Bank of Nigeria Loans (DBN).
This is another of the Government SME Intervention funds that so many SME owners in Nigeria don’t know about. However, the DBN exists for one purpose, o alleviate the financing constraints that micro, small, and medium scale enterprises face in Nigeria.
To qualify for a DBN loan, you must meet these criteria:
#1. Be involved in productive enterprises.
#2. Must be a customer of a certified financial institution.
Agric Small Medium Enterprise Investment Scheme (AGSMEIS).
The AGSMEIS initiative is specifically one of the many Federal Government Intervention efforts to promote agri-businesses in the country. It also provides support to other SMEs to facilitate employment generation and sustainable economic development.
Furthermore, MSMEs can apply for up to N10 million at a return rate of 5% per annum. Some of the objectives of this scheme include:
#1. Provide finance to Nigerian SMEs.
#2. Generate employment opportunities for Nigerian youth.
#3. Equally, facilitate sustainable agricultural practices and develop an efficient agricultural value chain.
#4. Boost managerial capacity in SMEs and Agri-businesses so that they can grow to become huge organizations.
Some sectors of the AGSMEIS caters for the following:
- Creative Industry
- Production and Manufacturing
- Services (restaurants, hospitality)
World Bank SME loan:
Comparatively, World Bank data, financing, and know-how have helped millions of SMEs to gain access to financial services to manage risks, survive temporary cash-flow constraints, and grow; thus creating jobs and raising incomes. The World Bank helps more than 60 countries provide an enabling environment for MSMEs, with an active portfolio of US$3.2 billion for MSME support through 38 active lending projects, with many more MSMEs benefiting through WB-supported financial institutions.
How to apply for SME Loan.
#1. Submit Application:
Simply enter your personal, business and also financial information to receive an MSME/ SME loan.
#2. Upload Your Documents:
If you applied online then upload your digital data for verification but if offline submit your documents to the nearest branch.
#3. Get Approved:
Before accessing this loans just make sure you get approved legitimately to avoid any complications.
Financial Risk Management: All you need to know (+practical examples)
What is Financial Risk Management?
Financial Risk Management is the exercise of analyzing potential risks ahead, its identification, and the provision of solutions to curb the risks. In making business plans, the ability to manage the risks soundly determines the level of profit and losses involved in the establishment.
Read More: Financial Intelligence
Importance of Financial Risk Management.
It is no doubt that the sustainability of investments or financial resources depends on the risk management factor. Financial Risk Management aids you to monitor, point out, and take charge of your capital, savings, and income. In doing this, one avoids business breakdown. Financial emergencies, management errors, legal liabilities, accidents, and natural disaster leads to financial risks, but when properly managed brings a sure guide to the organization or individual during the hard times. Financial Risk management is very prominent for an establishment to be successful. It also majors in reducing losses and escalating returns.
Types of Financial Risk Management.
Comparatively, there are different types of risks that an organization can face and the division is in three main branches. That includes:
#1. Enterprise Risk:
These are risks by businesses to increase profits and uphold quality shareholding values. For instance, some companies diversify their products into sizes or different packs to gain sales and new investors.
#2. Non-Business risks:
It Arises from a lack of control by the firm. That is, they arise from general economic imbalance or government policies.
#3. Monetary Risks:
This is connected with the losses of the organization, insufficient sales, a drop in interest rates, currencies, and loss of shareholders.
Other types of Financial Risk Management are:
#a. Market Risk:
This type of risk arises due to the movement in the prices of financial instruments. Market risk can be classified as Directional Risk and Non-Directional Risk. Movement in stock price, interest rates, and more leads to Directional risk. Non-Directional risk, on the other hand, can be volatility risks.
#b. Credit Risk:
This type of risk arises when one fails to fulfill their obligations towards their counterparties. Credit risk can be classified into Sovereign Risk and Settlement Risk. Sovereign risk usually arises due to difficult foreign exchange policies. Settlement risk, on the other hand, arises when one party makes the payment while the other party fails to fulfill the obligations.
#c. Liquidity Risk:
This type of risk arises out of an inability to execute transactions. Liquidity risk can be classified into Asset Liquidity Risk and Funding Liquidity Risk. Asset Liquidity risk arises either due to insufficient buyers or insufficient sellers against sell orders and buys orders respectively.
#d. Operational Risk:
This type of risk arises out of operational failures such as mismanagement or technical failures. Nevertheless, Operational risk can be classified into Fraud Risk and Model Risk. Fraud risk arises due to the lack of controls and Model risk arises due to incorrect model application.
#e. Legal Risk:
This type of financial risk arises out of legal constraints such as lawsuits. Whenever a company needs to face financial losses out of legal proceedings, it is a legal risk.
Financial Risk Management Process.
Financial Risk Management process is the skeleton of motions to curb financial risks. These steps are:
#1. Risk identification:
Be that as it may, this is the first step to take in Financial Risk Management. It is pertinent to know the risk associated with your operating location. Since the risks can be visible the organization can now profer solutions to deal with it both online and offline and even in terms of the report.
#2. Risk Management:
Provided a risk is identified, the depth of the risk can be determined. In this process, you point out the harshness of the risk to the business. Then you can now take steps, know if is a major or minor risk, document it, evaluate it, and map out how to curb it.
#3. Risk Ranking:
The level of risks should be classified and prioritized and also the security of risks is seen and this ranking gives the organization a whole view of the risk they are exposed to. Higher risks are ranked first before lower risks for immediate attention.
#4. Risk Treatment:
All the risks that were identified, analyze, and ranked need to be treated as soon as possible maybe by connecting with risk experts concerning the type of risk and its solution. Risk treatment involves setting up meetings with shareholders and experts needed, so everyone can see and discuss the problem and the best ways to deal with them.
#5. Risk Review and Monitoring:
In treating risks, not all risks can be solved at once so those yet to be solved around often reviewed and monitored including those risks that are always present like the market risk and environmental risks. Meanwhile, employees keep a close watch on the risks. Similarly, Risk management is a practice in all sizes of businesses. Small businesses do it informally while big ones do it formally.
#5.Financial Risk Management Techniques.
Here are some techniques involved in financial risk management:
- Risk identification: In reality, this helps pointing out the risks to which the organization is exposed to is and is the first step of the process.
- Assessment: By leveraging a mix of qualitative and quantitative techniques simultaneously, each identified risk is assessed to estimate the scale
- Prioritization: The risks are then placed in hierarchy various methods, most commonly through a map of the estimated risks against a matrix that measures likeliness and impact
- Risk Response: Businesses will then need to look at the assessment and come up with an action plan whether it may be to implement a tool or tactic
- Implementation: Above all, after coming up with an action plan to move forward with, the business would need to implement the plan and monitor its performance
#6. Examples of Financial Risk Management.
The various examples of Financial Risk Management appears in daily markets and investment processes like car loans, mortgage instalments, insurance, student loans and even when people borrow money from banks to pay back wit an interest rate or use their own money to set up a business. More practical examples are the deep thinking we do before setting up a business, diversifying our brands and when a person evaluates the organization debts, incomes and monitor his/her enterprise.
#7. Financial Risk Management Courses.
Certainly, below are some courses on financial risk management one can take for professional and business growth:
1. Statistics in business.
2. Business legislation and compliance.
3. Organizational ethics
4. Risk management process.
5. People-related management.
6. Legal risk management
7. Master class private equity.
8. Accounting and financial analysis.
#8. Financial Risk Management Certification.
You can obtain these certificates by doing Financial Risk Management courses either online or offline. However, to receive the FRM designation, candidates must successfully complete a comprehensive, two-part exam and complete two years of work experience in financial risk management. Professionals who hold the FRM designation can also participate in optional continued professional development.
Be that as it may, the certificate can make you a consultant in Financial Risk Management. Some of this includes:
- Certified in Risk and Information Systems Control (CRISC)
- Certified in the Governance of Enterprise IT (CGEIT)
- Project Management Institute-Risk Management Professional (PMI-RMP)
- Information Technology International Library (ITIL) Expert
- Certification in Risk Management Assurance (CRMA)
Read More: PRINCIPLES OF FINANCE
What Is BUSINESS PROCESS OUTSOURCING(BPO): Overview, Examples, And Benefits
Business Process Outsourcing Meaning
Business process outsourcing (BPO) is a business practice in which one organization hires another company to perform a process task that the hiring organization needs in order for its own company to be successful.
BPO has its roots in the manufacturing industry. Manufacturers contract with other companies to handle certain processes, such as: B. Parts of their supply chains that are not related to the core competencies needed to make their end products.
Types of BPO
Since companies around the world provide BPO services to other organizations, BPO can be divided into several types based on the location of the service provider:
- Outsourcing on land: when an organization hires a service provider that is located in the same country. It is also known as national outsourcing.
- Nearshore Outsourcing: when an organization hires a service provider in a neighboring country.
- Offshore outsourcing: when an organization hires a service provider in another country. Also called offshoring.
How does BPO work?
Organizational executives make the decision to outsource a business process in a number of ways. For example, startups often have to outsource back office and front office functions because they do not have the resources to develop the workforce and the support functions to carry them out internally. On the other hand, an established company may choose to outsource a task that it has been doing all the time after analysis shows that an outsourced provider can do the job better and at a lower cost.
Management experts recommend that corporate executives identify functions that can be outsourced and then weigh that function against the pros and cons of outsourcing to determine if it makes strategic sense for the company to move that function to an outsourced provider.
In this case, the organization not only needs to identify the best supplier to do the job, but it must also move the work itself from the internal supplier to the external one.
This requires a significant amount of change management, as switching to an outsourced vendor generally has an impact on people, established processes, and existing workflows.
The relocation also affects the finances of the company, not only in terms of shifting the costs of the internal function to the outsourced providers, but also in terms of taxes and reporting requirements.
The organization may also need to invest in a technology solution to enable a smooth flow of work from the organization itself to the outsourcing provider. The scope and costs of this technology solution depend on the scope of the outsourced function and the maturity of the solution. The technology infrastructure is available at both companies.
What is BPO used for?
Companies contract with BPO providers for two main areas:
- Back-office Operations: This includes payment processing, information technology services, quality assurance, etc.
- Front Desk Operations: This includes marketing, sales, customer relations, and complaint procedures.
In many cases, organizations outsource one or more functions. For example, instead of outsourcing all human resources functions, the company only outsources accounting processes.
Over the years, the BPO industry has grown significantly, offering a wide range of services and functions to businesses.
Types of BPO Services
BPO services are generally divided into horizontal and vertical services. These are explained below:
Horizontal BPO includes role-focused outsourcing. The provider specializes in performing certain functions in various industries. Examples of horizontal BPO are outsourcing in the areas of procurement, payroll, human resources, facilities management, and similar functions. getix focuses on providing services in horizontal functions such as payroll, human resources, benefits administration, tax solutions, etc. However, Gartner says that companies should focus on providing vertical services as the market matures.
A vertical BPO focuses on demonstrating various functional services in a limited number of industry sectors. Healthcare, financial services, manufacturing, and retail are examples of vertical BPO domains.
Types of BPO jobs done from home
One of the most common business processes outsourced in the US is call center work. While most call center jobs are actually done in stationary call centers, more and more BPOs are using in-house call center agents. These can be freelance jobs or contracts.
Data entry and transcription
Data entry is another common job type that BPOs offer their clients, and many of the jobs in this area are from home. Typically, work-from-home data entry jobs are intended for independent contractors. They often pay by the piece, which can mean less than minimum wage. Many data entry companies use crowdsourcing to distribute available work among a large remote workforce. The transcription is more slick and generally more worthwhile than entering data.
Hospitals, doctor’s offices, and insurance companies often hire BPOs who specialize in medical business processes such as medical coding, billing, and transcription.
Accounting / bookkeeping
Accounting and bookkeeping functions are often outsourced to BPOs. However, relatively few BPOs use home-based workers for this type of work. However, there are a few on this list for accounting jobs from home.
Below are top BPO Companies
- EXL Service
- SunTec India
- Unity Communications
- Plaxonic Technologies
- Octopus Tech
Benefits of BPO
- Lower cost
One of the main reasons for business outsourcing is cost reduction. Instead of buying IT equipment and hiring more employees for different tasks, they can outsource the tasks to a service provider and thus reduce or even eliminate overhead costs.
- Greater efficiency
BPO companies have experience in various areas and work at the highest level. They also adopt best practices and use the latest technology. This, of course, leads to greater efficiency and productivity.
- Focus on core business functions
Many businesses, usually startups, struggle with difficult business activities. By transferring secondary processes to a BPO company, the company has more time to focus on its core business activities.
- Worldwide expansion
When an organization decides to enter a foreign market, some activities that require local market knowledge, national legal knowledge or fluency in foreign languages can be assigned to a BPO company. Helps increase efficiency and expand faster.
- Economic benefits
Organizations often find that an outsourced provider can run a business process at a lower cost, or they find that hiring an outsourced provider can save them money in other ways because of the relationship; B. in tax savings.
With BPO contracts, companies can more flexibly adapt how the outsourced business process is completed, and thus better react to changing market dynamics.
- Competitive advantage
With BPO, companies can outsource processes that are not at the core of their business or mission, allowing companies to focus more resources on what sets them apart from the market.
- Higher quality and better performance
Since the core business of BPO providers is to run the specific processes for which they are mandated, they can theoretically focus on delivering those processes at the highest level, often with greater precision, efficiency, and speed.
Cons of BPO
- Security issues
There is a potential for a security breach when working with a BPO company, as sensitive data must be shared and processed.
- Excessive reliance on the BPO company
When work is outsourced to a BPO company for an extended period of time, an organization can get used to the way it works and tend to rely too heavily on it. This results in the organization paying higher costs than usual when necessary.
- Communication problems
When working with a BPO company abroad, the language barrier can be an obstacle to efficiency. Outsourcing jobs such as development or IT services, involving many people, can lead to errors due to misunderstandings. Sometimes it can be very expensive.
- Unexpected or hidden costs
Since work is not always hard and fast, the organization may underestimate the amount of work and generate higher costs than expected. Working with a BPO company can incur legal costs in the event of a dispute or disagreement. Delays in the delivery of work can also result in indirect costs.
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