Unit-2
MARKETING ENVIRONMENT (MACRO)
Meaning of Marketing Environment:
The marketing environment refers to all internal and external factors, which directly or
indirectly influence the organization’s decisions related to marketing activities. Internal factors
are within the control of an organization; whereas, external factors do not fall within its control.
The external factors include government, technological, economic, social, and competitive
forces; whereas, organization’s strengths, weaknesses, and competencies form the part of
internal factors.
Marketers try to predict the changes, which might take place in future, by monitoring the
marketing environment. These changes may create threats and opportunities for the business.
With these changes, marketers continue to modify their strategies and plans.
Macro Environment:
Macro environment involves a set of environmental factors that is beyond the control of an
organization. These factors influence the organizational activities to a significant extent. Macro
environment is subject to constant change. The changes in macro environment bring
opportunities and threats in an organization. Let us discuss these factors in details:
i. Demographic Environment:
Demographic environment is the scientific study of human population in terms of elements,
such as age, gender, education, occupation, income, and location. It also includes the increasing
role of women and technology. These elements are also called as demographic variables.
Before marketing a product, a marketer collects the information to find the suitable market for
the product.
Demographic environment is responsible for the variation in the tastes and preferences and
buying patterns of individuals. The changes in demographic environment persuade an
organization to modify marketing strategies to address the altering needs of customers.
Demography is the study of population characteristics that are used to describe consumers.
Demographics tell the marketers who are current and potential customer, where are they, how
many of them are likely to buy and what the market is selling. Marketers are keenly interested
in studying the demography ethnic mix, educational level and standard of living of different
cities, regions and nation because changes in demographic characteristics have a bearing on
the way people live, spend their money and consume.
ii. Economic Environment:
Economic environment affects the organization’s cost structure and customers’ purchasing
power. The purchasing power of a customer depends on the current income, prices of the
product, savings, and credit availability.
Economic environment is the most significant components of the marketing environment. It
affects the success of the business organisation as well as its survival. The economic policy of
the government, needless to say, has a very great impact on business. Some categories of
business are favourably affected by the government policy some adversely affected while some
other remains unaffected. The economic system is a very important determinant of the scope
of private business and is very important external constraints on business.
The factors economic environment is as follows:
a. Inflation: It influences the customers’ demand for different products. For example, higher
petrol prices lead to a fall in demand for cars.
b. Interest Rates: It determines the borrowing activities of the organization. For example,
increase in interest rates for loan may lead organizations to cut their important activities.
c. Unemployment: It leads to a no income state, which affects the purchasing power of an
individual.
d. Customer Income: It regulates the buying behavior of a customer. The change in the
customer’s income leads to changed spending patterns for the products, such as food and
clothing.
e. Monetary and Fiscal Policy: It affects all the organizations. The monetary policy stabilizes
the economy by controlling the interest rates and money supply in an economy; whereas, fiscal
policy regulates the government spending in various areas by collecting the revenue from the
citizens by taxing their income.
iii. Natural Environment:
Natural environment consists of natural resources, which are needed as raw materials to
manufacture products by the organization. The marketing activities affect these natural
resources, such as depletion of ozone layer due to the use of chemicals. The corrosion of the
natural environment is increasing day-by-day and is becoming a global problem.
The natural environment involves the natural resources that are needed as input by the
marketers and that are affected by marketing activities. Environmental concerns have grown
steadily in recent years. Marketer should be aware of the trends like shortage of raw material,
increased population and increased government intervention in natural resources. The
management of the companies will have to understand their environmental responsibility and
commit them self in the green marketing.
Following natural factors affect the marketing activities of an organization in a great way:
a. Natural Resources: It serves as raw material for manufacturing various products. Every
organization consumes natural resources for the production of its products. Organizations are
realizing the problem of depletion of resources and trying best to use these resources
judiciously. Thus, some organizations have indulged in de-marketing their products. For
example, Indian Oil Corporation (IOC) tries to reduce the demand for its products by promoting
advertisements, such as Save Oil, Save India.
b. Weather: It leads to opportunities or threats for the organizations. For example, in summer,
demand for water coolers, air conditioners, cotton clothes, and water increases while in winter,
the demand for woolen clothes and room heaters rises. The marketing environment is greatly
influenced by the weather conditions of a country.
c. Pollution: It includes air, water, and noise pollution, which lead to environmental
degradation. Now-a-days, organizations tend to promote environment friendly products
through its marketing activities. For example, the organizations promote the usage of jute and
paper bags instead of plastic bags.
iv. Socio-Cultural Environment:
Socio-cultural environment comprises forces, such as society’s basic values, attitudes,
perception and behaviour. These forces help in determining that what type of products
customers prefer, what influences the purchase attitude or decision, which brand they prefer,
and at what time they buy the products. The socio-cultural environment explains the
characteristics of the society in which the organization exists. The analysis of socio-cultural
environment helps an organization in identifying the threats and opportunities in an
organization.
For example, the lifestyles of people are changing day-by-day. Now, the women are perceived
as an active earning member of the family. If all the members of a family are working then the
family has less time to spend for shopping. This has led to the development of shopping malls
and super markets, where individuals could get everything under one roof to save their time.
v. Technological Environment:
Technology contributes to the economic growth of a country. It has become an indispensable
part of our lives. Organizations that fail to track ongoing technological changes find it difficult
to survive in today’s competitive environment. Technology acts as a rapidly changing force,
which creates new opportunities for the marketers to acquire the market share. Marketers with
the help of technology can create and deliver products matching the life style of customers.
Thus, marketers should observe the changing trends in technology.
The technological environment is the most dramatic force now facing our destiny.
Technological discoveries and development create opportunity and threat in the market. The
marketer should watch the trend in the technology. The biggest impact that the society has been
undergoing in the last few years is the technological advancement, product change and its
effects consumers. Technology has brought innumerable changes inhuman lives, be it a travel
or office equipment. Instead of moving into the new technologies, many old industries fought
or ignored them and their business declined. Yet it is the essence of market capitalism to be
dynamic and tolerate the creative destructiveness of technology as the price of progress.
vi. Political Environment: The political environment consists of factors related to the
management of public affairs and their impact on the business of an organisation. Political
environment has a close relationship with the economic system and the economic policy. Some
Governments specify certain standards for the products including packaging. products. In most
nations, promotional activities are subject to various types of controls Some other Governments
prohibit the marketing of certain. India is a democratic country having a stable. political system
where the Government plays an active role as a planner, promoter and regulator of economic
activity.
vii. Legal Environment: Marketing decisions are strongly affected by laws pertaining to
competition, price-setting, distribution arrangement, advertising etc. It is necessary for a
marketer to understand the legal environment of the country and the jurisdiction of its courts.
Chapter-2
Marketing Research
Marketing research is a method to know the following:
(i) Who are the buyers of our products or services.
(ii) Where do they live?
(iii) When and how do they buy?
(iv) What they actually want?
(v) Whether our customers are satisfied with our products or services?
(vi) Who are our competitors and which policies or strategies they follow?
(vii) Whether our products are inferior or superior as compared to competitor's products?
Market research is done to know the answer to such questions. The company or marketer can
know the limitations of their products or policies and strategies. On the basis of that they can
take steps to improve it.
In short market research is concerned with data gathering. It is a branch of marketing research.
DEFINITION
A better definition of marketing research has been attempted by the Committee of the American
Marketing Association: "the gathering, recording and analysing of all facts about problems
relating to the transfer and sale of goods and services from producer to consumer."
OBJECTIVES OF MARKETING RESEARCH
The main objective of marketing research is to provide answers to the following four questions:
(i) What to sell ?
(ii) When to sell ?
(iii) Where to sell?
(iv) How to sell ?
It is hoped that the answers obtained through marketing research would enable the producer to
sell at a higher price so that profit is maximised.
The objectives of marketing research related to the above goal may be analysed as follows:
(1) For Production of a New Product: When a new product is to be placed in the market, the
producer must assess the prospects of its sales through marketing research. The producer can
decide the type of the product, level of its price and size of output etc. on the basis of marketing
research information.
(2) For the Improvement in the Quality of the Product: Marketing research is necessary to
find out the deficiencies in the product quality so that its quality may be improved in such a
manner that it becomes more acceptable to the customers. Marketing research is necessary to
know the market response especially when new product is to be introduced in the market
(3) For Making Necessary Changes in the Product: Customers' requirements and changes
required therein can be known through marketing research. On the basis of this knowledge,
changes can be effected in the colour, size, flavour, packing and price of the product so that it
becomes more suitable to the costomers' requirements. For example, many companies have
recently changed the size of the toilet soaps they produce.
(4) For Sales Promotion: Marketing research is undertaken also to promote sales of the
product. Producers obtain information about current level of market demand, degree of
competition in the market, customers' needs, publicity and its impact, packing and its
attractiveness etc. On the basis of this information, producers can take measures to make such
changes that their products become more acceptable and saleable.
(5) To Identify the Causes of Decline in Sales: Whenever sales decline to a considerable
extent, it becomes necessary to find out the factors responsible for the decline in sales.
Marketing research is conducted for this purpose. Through marketing research, relevant
information is collected and analysed. The analysis reveals the main defects in the sales
methods suggesting the measures to remove these defects.
(6) To Judge the Strength of the Competitors: Marketing research is conducted also to find
out the main competitors in the market, the nature of their products, prices at which they sell,
the media of publicity they adopt, the channels of distribution they employ etc.
(7) To get Information about Purchasing Power of the Buyers: Marketing research is useful
also in securing information about the number of buyers in different market segments,
purchasing power of these buyers, the size of purchases by them etc.
(8) To Decide the Medium of Advertisement: Advertisement is very expensive and it has to
be decided as to which medium of advertisement will give maximum benefit. Here marketing
research gives useful information.
(9) To Modernise Organisation: In order to improve and modernise the organisation structure
of enterprise, marketing research provides suggestions and necessary data.
(10) To Exchange Exports: Marketing research is also undertaken to explore foreign markets
and increase exports.
(11) To have Knowledge about Customers' Preferences: In order to improve or change the
quality, form, size etc. of the product to make it according to the changing tasks of customers
and market in general, marketing research is undertaken.
(12) To Prepare Sales Budget: It is not possible to prepare sales budget without data provided
by marketing research.
PROCEDURE OF MARKETING RESEARCH:
Marketing research is so delicate, complicated and tough that it can prove fruitless unless it is
carefully planned and efficiently executed. To improve the efficiency of marketing research, a
rational and systematic procedure may be suggested as follows:
(1) To define the problem or to determine objectives of marketing research.
(2) To overview the situation.
(3) To carry on informal investigation
(4) Planning of final investigation
(5) Collecting necessary data
(6) Tabulating, Analysing and Interpreting the data
(7) Interpreting the conclusions.
(8) Preparing Research Report.
(9) Implementing Recommendations effectively.
Let us describe these steps in detail:
(1) To define the problem or determining the objectives: To conduct marketing research
without any clear objective in mind is as futile as sailing a ship without any idea of its
destination. The nature of research would be easily determined only when its objectives are
clearly defined and known. For this purpose, the investigators will have to take into account
the views and opinions of other individuals and officers also. They must not rely only on their
personal skill.
Defining problem is essential for two reasons: one, it indicates the limits of research work and
secondly, efforts can be concentrated only to those matters which are relevant to the objectives.
(2) Analysing the Situation: Before conducting research work, it is necessary to get familiar
with the problems the company is faced with and also with the situation in which the research
work is to be done. An analysis of the situation can help the research officials to determine how
much information can be collected and how much of it should really be gathered. If the decision
regarding the type and extent of information is incorrect, a lot of time and money will be wasted
and yet essential information will be missing.
(3) Informal Investigation: In this stage, the officer in charge of research work, and his
assistants also, make an attempt to get a firm grip over the problems by visiting the customers,
traders and industrialists etc. Thereby they can decide how and on what basis should research
work be carried further. Sometimes the officers themselves contact the customers and traders
etc. and sometimes they ask their assistants to contact them. In that case it is necessary that the
assistants are well trained and qualified for the job.
(4) Planning Final Investigation: When the preliminary work has been done as above, the
final investigation can be planned as under:
(i) To Determine the nature and extent of data: For any problem on hand, a large variety of
data may be available and the sources of information may be large in number. If the research
officer is not alert, he may commit the blunder of collecting the data which, though apparently
related to the problem at hand, may not be useful in its solution. In short a careful study should
be undertaken to decide the nature and extent of data to be collected. There is no hard and fast
rule in this regard, but it may be suggested that the data must not be either too wide or too
narrow, because if it is too wide, it will prove costly in terms of time and money and if it is too
narrow, it will not be helpful in realising the objectives of research.
(ii) To Prepare forms to collect primary data: Generally questionnaires are used to collect
necessary data. The questionnaires should be prepared very carefully. The questions should be
brief, precise and unambiguous. No one should get embarassed or hesitate in answering these
questions.
(iii) To Decide Samples: In conducting market survey, it is not possible to cover each and
every individual customer. Hence only samples are selected from customers. For example in
case of inquiry through questionnaire, it is Impossible to send questionnaire to millions of
individuals. Hence questionnaires are sent only to some thousands of individuals selected for
this purpose. Generally the statistical method of sampling is used and this method has actually
proved fruitful in most cases.
(5) To Collect Data: Two types of data are used for marketing research: Primary data and
secondary data. The information collected by the research officer himself is called primary
data, but if the data is collected by some external institutions for their own purpose and it is
used by the research officer. hen it is known as secondary data.
The most important step in collecting data is the selection of qualified trained, experienced and
sincere assistants for this purpose. If the assistants are polite, influential and energetic, they can
provide more authentic data. When the subjects of the survey are to be contacted in person,
assistants must be given clear instructions and proper training before hand.
(6) Tabulating, Analysing and Interpreting Data: The data should be properly arranged and
analysed so that useful conclusions may be derived from it easily. Hence this job must not be
entrusted to the assistants only without prior instructions and expert advice. It should be
examined how far samples selected are appropriate. It should be noted that samples which are
appropriate in one situation may not be so in other situation. The information made available
by the assistants should then be arranged systematically, in the form of tables and schedules.
Generally statistical methods are to be used to derive useful conclusions from the information
arranged in a tabular form. i.e. regression or correlation method etc.
(7) Interpreting the Conclusions: The research work does not end with the derivation of
statistical inferences. The marketing research officer should make recommendations on the
basis of data collected and analysed. For example, if it is found that the sales have declined
because of the change in buyers' preferences, the research officer should suggest ways and
means to increase sales through the change in product design, size or appearance etc. The
suggestions must be practicable and based on the reality of the market and current conditions
of the company.
(8) Preparing Research Report: A complete report consisting of all data and suggestions must
be prepared and presented before the management. When the report is meant for administrative
officers, it is called administrative report While preparing administrative report, it must not be
forgotten that the administrators are not accustomed to technical language. Hence simple terms
should be used so far as possible, because only administrators have the powers to sanction the
funds and execute the suggestions. The technical report is fully exhaustive as it contains all
information alongwith evidences, statistical methods of calculations, conclusions and
inferences, methods and sources of data etc. On the other hand, information report contains
information only, it does not include suggestions or recommendations. For example, data about
the number of birth and death in a particular region, number of marriages or number of students
enrolled in schools or colleges etc. will be included in the report Popular reports give
information to the average persons in simple language and interesting style.
(9) Implementing Recommendations: If the recommendations are not properly implemented,
money and time spent on research work and the report prepared on the basis of it will be useless.
The main weakness of many large companies is that they are careless in implementing the
recommendations made on the basis of marketing research. The recommendations should
initially be effected on experimental basis. If the results are encouraging, it should be executed
in its entirety.
IMPORTANCE (ADVANTAGES) OF MARKETING RESEARCH:
A most glaring aspect of modern production process is that production is carried on in
anticipation of demand. Hence marketing research becomes necessary to have a rough idea of
the existing and potential needs of the consumers. If this information is not obtained through
marketing research, there is every possibility that the commodity produced on a large scale
remains unsold and a huge loss is suffered by the producer. In reality, marketing research has
played a significant role in expanding the area of sales in present day circumstances.
(1) Solves Marketing Problems: Marketing research provides many information about market
and thereby it helps solve various problems of marketing. These are the problems pertaining to
customers, traders, competitors, nature of competition, advertising, distribution etc. Marketing
research serves as an effective tool in resolving all these problems.
(2) Increases Market Efficiency: Marketing research increases market efficiency also by
answering the questions such as which channels should be used to distribute the goods, how
should the product be designed, what should be its price, what should be the quality of the
product, all these problems can be solved effectively on the basis of the information obtained
through marketing research.
(3) Facilitates Sales Forecasting: Marketing research provides valuable information for sales
forecasting. Sales forcasting is based on a thorough study of seasonal, cyclical and secular
changes in market demand. Hence it can be fruitfully used for the planning of production,
marketing and sales.
(4) Authenticity of Decisions: The utility of marketing research in raising the authenticity of
business decisions is indisputable. Marketing manager is constantly in touch with the functions
of marketing research. He gathers information about current market situation, the factors
affecting market situation, the efforts made to influence these factors and their results etc. and
equips himself to arrive at prompt and most reliable decisions regarding production and sales.
(5) Helpful to Management: Marketing research helps management get better solutions of
complex problems about marketing processes. Through advertising and sales promotion
activities, a balance can be achieved between demand and supply in the market. But it is
marketing research which helps management in planning and executing advertisement and
sales promotion activities.
(6) Useful to Production: Marketing research is beneficial to the producer In various ways. It
guides him in the selection of production plan, distribution method, size of marketing
organisation, the instruments of publicity and advertisement etc.
(7) Link between Producer and Consumer: Marketing research acts as link between
producers and customers. Obviously there can be no direct contact and communication between
producers and customers when goods are produced on a large scale and at far off places in the
world. However, it is possible to fill the gap between producers and customers through
marketing search even in this situation.
LIMITATIONS/DISADVANTAGES OF MARKETING RESEARCH:
Though the marketing research has been developed speedily and is beneficial in many respect,
it suffers from the following limitations.
(1) Expensive: Trained employees and expert officers are required to be appointed for
marketing research. Large amount of money is to be spent for it. Hence it is expensive.
(2) Reliable sources of information: For marketing research reliable sources of information
are not applied it is useless. Its results are misleading. Sometimes it happens that the proper
information is there but its analysis has been made on wrong basis, then there is a possibility
of taking wrong decisions.
(3) Time consuming: Long time period is required from beginning of the marketing research
and the end of its. Thus, it is expensive from that sometimes we have to wait for months or
years for getting its results the view point of time. American Management Association has
mentioned If the managers take speedy decisions, marketing research puts into difficulty then
becoming advantageous.
(4) Qualified and Trained Officers: It is clears that the success of marketing research depends
upon the qualified and trained officers. It is some what difficult to get such type of officers.
(5) Does not provide solution of a problem: Marketing research provides information
regarding product, price, promotion, place, packaging etc. to take decisions by the
administrative officers. Decisions are to be taken by the officers themselves. It does not provide
solution of a problem but it provides guidance for it.
(6) Assumption regarding consumer behaviour is difficult : Marketing research is mainly a
study of consumer behaviour. But people always does not give complete and true information.
This way result of marketing research does not prove hundred percent true.
(7) Effect of External Factors: External and uncontrollable factors affect marketing results
adversely. Hence, it becomes difficult to estimate net impact of it due to such factors. Marketing
research mentions results of marketing efforts. e.g. information about competitors
performance, information about government policy etc. If any of these factors changes, result
of marketing research does not prove true.
(8) Biased Results: If the marketing researcher has a prejudice about the problem, then its
results will be unsatisfactory and misleading. Person's attitude, necessities, prejudice and other
social, cultural factors adversely affect the results of research.
(9) Risks of Decision-making: In every economic decisions there is a risk and uncertainty.
Marketing research cannot remove such risk and uncertainty. It attempts to minimize the risk.
Some experienced persons say that marketing research is not a magic stick for the solution of
marketing problems. But it is a helpful instrument for taking the marketing decisions.