Professor Vipin [Year]
Unit 2
Marketing Environment
Meaning of Marketing Environment
The market environment is a marketing term and refers to factors and forces that affect a firm’s
ability to build and maintain successful relationships with customers. Two levels of the environment
are:
a) Micro (internal) environment - small forces within the company that affect its ability to serve
its customers
b) Macro (national) environment - larger societal forces that affect the microenvironment.
Macro Environment
To succeed in marketing, we must learn to accommodate the external uncontrollable factors. These
factors act as constraints at all levels. In other words they limitation on freedom of action.
1. Demography: market means people with money and with a will to spend their money to
satisfy their demand. Demography is a scientific study of human population and its
distribution structure. For example, studying population growth can help a company arrive
at understanding the type of products that will be required over a decade. It helps
understand the profile of consumers which is important for market segmentation and
determining target markets. Good demography analysis combines several factors such as
population growth, income or economic power, life cycle analysis of the consumer,
occupation, education and geographic segmentation. It can also help marketing agencies
understand how consumers will react to a new product or marketing campaign.
2. Economic Environment: People constitute one element of the market, and their purchasing
power constitutes the other. When there is willingness to spend there is effective demand. A
higher economic growth means higher employment and income and this leads to economic
boom in many industries. Marketing plans and programs influence interest rates, money
supply, price level and consumer credit. The other economic factors such as changes in
foreign exchange, currency devaluation, trade tariffs can affect demand and profits on
international and domestic products. The level of personal income may also affect the
changes in the marketing programs. Economy situations such as recession can affect the
quality of products being launched in the market and the even the promotion policies of the
business.
3. Social and Cultural Environment: these factors affect the business in the long run. New
demands are created and old ones are lost. There are 3 aspects in the social environment:
a. Changes in lifestyle
b. Social problems such as concern over the promotion and product’s impact on the
environment
c. Growing consumerism indicating consumer dissatisfaction since 1960. Consumerism
has become important to marketing decision process.
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Social environment importance has made companies focus not only on the consumer’s
welfare but also the social / citizen welfare as well. Marketers are now called upon not only
to deliver higher material standard of living but also assure quality of life such as pollution
free environment, eco-friendly products and easy recyclable products.
4. Political and Legal Forces: these factors are gaining considerable importance on the
marketing activities and operations of a business. The government’s monetary, fiscal; import
and export policies have a significant impact on marketing activities. In many countries there
is specific legislation to control marketing. This is seen in the products and services being
sold in the Securities Market. Another impact of legal forces is on practices such as
monopoly, restrictive and unfair trade practices. Such factors can lead to changes in prices of
the products, quality of advertisements, agreements with distributors, promotion devices,
and division of new markets and exclusion of new competitors.
5. Science and Technology: These factors have led to radical changes in lifestyles, consumption
patterns and economic welfare. Development of science and technology has transformed
living conditions in both developed and developing countries. Technology has changed
methods, materials and techniques used to achieve commercial and industrial objectives.
Technology has also lead to economic growth. The development of the electronics market
over the last 50 years has seen massive changes in products, leading to innovations in
products such as telephones, televisions, cameras, computers among others. Technology
and science have brought changes in the quality of food that is available in the market.
6. Competition: Price competition is largely seen in the retail markets. All marketing decisions
are made by assessing the competition in the free market. Competition affects the
company’s product mix, price mix and promotion mix. Marketing strategies are developed to
fight competition. The activities of the competitors are carefully evaluated to formulate
these strategies. These strategies ensure the company’s survival in the market. The
conditions for competition are ever changing and firms must be able to adapt to these
changes. There can always be a chance of a new competitor entering into the markets.
7. Ecology: It has assumed unique importance in production and marketing in developed
economies. Environmental experts are regularly showcasing the importance of the
preservation and survival of ecological systems. Pollution is a product of economies where
there is high consumption. Today’s companies want to satisfy their consumers and also look
into the welfare of the society as well. Marketing executives are now giving importance to
the quality of life and environmental protection. Companies have started to make products
that do not pollute environment and deplete the scarce resources and also restore balance
to the ecological environment.
8. International Environment: consists of factors that have an impact on foreign trade of a
country; factors such as foreign policies, international treaties, investment polices and trade
tariffs. The formation of the WTO has lead to massive changes in how international trading
environment affects a business.
9. Consumer Demand: consumer demand is ever changing, unpredictable, and immeasurable
with accuracy. Today’s marketing strategies involve responding to a consumer’s needs, and
developing policies and products that aim at consumer satisfaction and quality of service. By
trying to satisfy a customer’s demands, there has been product innovation and efficient
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production of goods and services. Repeated sales are due to customer satisfaction. And this
is a direct link to the profits of the company.
Micro Environment
Some of the internal controllable factors are:
1. Organization: An organization consists of many departments such as finance, marketing,
production and personnel. Each department is placed under a manager. All managers’ work
together to achieve common objective. The marketing department plays an important role
in achieving these objectives.
2. Corporate Resources: this includes, men, materials, money, machinery and management. All
can be controlled and adjusted to the marketing policy and all influence the marketing
environment. Utilization of resources and manufacturing activity depends on the company’s
external environment.
3. Marketing Mix: This includes 4Ps of marketing; product, place, promotion and price. Each of
these factors can vary according to the external environment factors like competition,
consumer satisfaction and cost effectiveness.
4. Markets: A market consists of different types of purchasers (those who purchase for
household consumption, for manufacturing, wholesalers, retailers etc). Depending on the
policy of the company and market conditions, the company exercises control over the
market. If balanced sales are required, the company can divide the market into segments.
5. Supplies: even regarding suppliers, the company can get its required raw materials
depending on its manufacturing programme. Generally companies adopt a purchase policy
which gives them a bargaining power. Hence controlling supplies.
6. Marketing Intermediaries: intermediaries (distributors) depending on the sales policies of
the company. Companies can reach consumers either through wholesalers or retailers.
Hence intermediaries can be controlled.
7. Employees: employees include executives, supervisors, managers etc. Their loyalty, sincerity
productivity and attitude towards their jobs and the company can be controlled by following
sound and employee-oriented policies.
Market Segmentation
It is the process of subdividing a market into distinct groups of customers with similar needs. Each
subset of the market is selected as a target market and can be reached with a distinct marketing mix.
Each sub group is characterized by particular tastes and requiring specific marketing mix.
Segmentation is done to prioritize the market and improve profitability and to provide a means to
choose the most appropriate communication media and messages for each unique market segment.
Requisites for Effective Segmentation
Following are the requisites for effective segmentation
1. Definable: a company must be able to describe its marketing segment and for this the key
characteristics of the segment should show homogeneity. This would help in measuring the
market size and define the boundaries of the segment.
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2. Measurable: Segment must be measurable; it should be possible to quantify the segment.
This will help in knowing the potential customers in each segment.
3. Viable: segmentation must be cost effective and profitable for the marketers. Hence there is
a requisite for a large segment that can produce the required turnover and profit.
4. Reachable: marketers must be able to reach their customers effectively and efficiently in
each segment. This can be done by having good physical distribution and communication
systems.
5. Relevant: market must for segments on a relevant basis. Proper analysis of the total market
and classification are the two important aspects of market segmentation.
6. Intensity in competition: this is a parameter that determines inter firm rivalry. The greater
the competition, the more unattractive it will be for the market.
The Bases for Market Segmentation
Consumer
Characteristics
Consumer
Responses
Geographic
Benefits
Demographich
and Socio
Economic
Usage
Psychological
Loyalty
Occasion
Consumer Characteristics Approach
The variables of this approach are:
1. Geographic characteristics: The following are the geographic characteristics;
i.
ii.
iii.
iv.
Historically this has been a way of segmenting markets
Regional differences in product tastes are well known.
Sellers distinguish areas and decide where they have competitive advantage.
They may group markets such as ‘urban and rural’ or on the basis of regions such as
‘north, south, east and west’
v.
Geographic segmentation helps marketers concentrate their efforts on effective
utilization of organization resources.
vi.
Geographic mobility changes consumer habits and cancels the organization set up.
2. Demographic and Socio-Economic characteristics: The features are
i.
It involves identifying buyers based on:.
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ii.
iii.
a. Sex and Age: male and female consumers show remarkable differences. The
recent interest with children, the teenage and youth market shows the
importance of age as the variable characteristic. Different age groups have
different age patterns.
b. Family Life-Cycle: it is defined in terms of age, marital status, age of housewife
and present age of children. A family life cycle has a significant impact on the
consumer behaviour regards to purchase of durable and non durable goods.
c. Social Class: Social class is used to describe the differences in a consumer’s
purchasing power, knowledge and skills. It also considers income, occupation,
education and place of residence. There are 3 social classes; upper class, middle
class and lower class.
d. Religion, Race and Culture: these explain the regularities and diversities in
human behaviour
A marketing manager will segment his market based on these parameters and
tabulate them to understand the variable he will face.
However it does not disclose which brand the consumer is likely to buy.
3. Psychographics segmentation can be broken down into lifestyle and personality
characteristics:
i)
Personality: It refers to the individual’s consistent reactions to the world about him.
Personality tests attempt to measure such characteristics like dominance, attitude,
aggressiveness, objectivity, achievement, motivation etc influence buyer behaviour.
Individuals who have achieved their physiological needs, they would be highly
motivated to buy products like Life insurance, investments in mutual funds IPOs etc
in order to secure their present and future
ii)
Lifestyle: Different people have different lifestyle patterns and behaviour may
change as we pass through different stages of life. For example, a family with young
children is likely to have a different lifestyle to a much older couple whose children
have left home, and there are, therefore, likely to be significant differences in
consumption patterns between the two groups. Virgin Mobiles ads are targeted on
fun loving youngsters having a lifestyle which includes long hours of telephonic
conversations.
Consumer Behaviour
Any individual who purchases goods and services from the market for his/her end-use is called a
consumer.
In simpler words a consumer is one who consumes goods and services available in the market.
Consumer Behaviour is a branch which deals with the various stages a consumer goes through
before purchasing products or services for his end use.
Consumer purchases are influenced strongly by or there are four factors.
1. Cultural Factor: Cultural factor divided into three sub factors
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a) Culture: The set of basic values perceptions, wants, and behaviours learned by a
member of society from family and other important institutions. Culture is the most
basic cause of a person’s wants and behaviour. Every group or society has a culture, and
cultural influences on buying behaviour may vary greatly from country to country.
b) Sub Culture: A group of people with shared value systems based on common life
experiences and situations. Each culture contains smaller sub cultures a group of people
with shared value system based on common life experiences and situations. Sub culture
includes nationalities, religions, racial group and geographic regions. Many sub culture
make up important market segments and marketers often design products.
c) Social Class: Almost every society has some form of social structure, social classes are
society’s relatively permanent and ordered divisions whose members share similar
values, interests and behaviour.
2. Social Factors: A consumer’s behaviour also is influenced by social factors, such as
a) Groups: Two or more people who interact to accomplish individual or mutual goals. A
person’s behavious is influenced by many small groups. Groups that have a direct
influence and to which a person belongs are called membership groups.
b) Some are primary groups includes family, friends, neighbours and coworkers. Some are
secondary groups, which are more formal and have less regular interaction. These
includes organizations like religious groups, professional association and trade unions.
c) Family: Family members can strongly influence buyer behaviour. The family is the most
important consumer buying organization society and it has been researched extensively.
Marketers are interested in the roles, and influence of the husband, wife and children on
the purchase of different products and services.
d) Roles and Status: A person belongs to many groups, family, clubs, and organizations. The
person’s position in each group can be defined in terms of both role and status.
For example. M & “X” plays the role of father, in his family he plays the role of husband,
in his company, he plays the role of manager, etc. A Role consists of the activities people
are expected to perform according to the persons around them.
3. Personal Factors: It includes
a) Age and Life cycle Stage: People changes the goods and services they buy over their
lifetimes. Tastes in food, clothes, furniture, and recreation are often age related. Buying
is also shaped by the stage of the family life cycle.
b) Occupation: A person’s occupation affects the goods and services bought. Blue collar
workers tend to buy more rugged work clothes, whereas white-collar workers buy more
business suits. A Co. can even specialize in making products needed by a given
occupational group. Thus, computer software companies will design different products
for brand managers, accountants, engineers, lawyers, and doctors.
c) Economic situation: A person’s economic situation refers to his ability to spend, his
income and dependents if any.
d) Life Style:- Life Style is a person’s Pattern of living, understanding these forces involves
measuring consumer’s major activities (Work, hobbies, shopping, support etc) interest
(Food, fashion, family recreation) and opinions (about themselves, Business, Products)
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e) Personality and Self concept: Each person’s distinct personality influence his or her
buying behaviour. Personality refers to the unique psychological characteristics that lead
to relatively consistent and lasting responses to one’s own environment.
4. Psychological Factors: It includes these Factors.
a) Motivation: Motive (drive) a need that is sufficiently pressing to direct the person to
seek satisfaction of the need
b) Perception: The process by which people select, Organize, and interpret information
to form a meaningful picture of the world.
c) Learning: Changes in an individuals’ behaviour arising from experience.
d) Beliefs and attitudes: Belief is a descriptive thought that a person holds about
something
e) Attitude: a Person’s consistently favourable or unfavourable evaluations, feelings,
and tendencies towards an object or idea
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