MODULE – II

Marketing Environment

The marketing environment consists of actors and forces outside the organization that affect

management’s ability to build and maintain relationships with target customers.

• Environment offers both opportunities and threats.

• Marketing intelligence and research used to collect information about the environment.

Marketing environment Includes:

• Microenvironment: actors close to the company that affects its ability to serve its

customers.

• Macro environment: larger societal forces that affect the microenvironment.

• Considered to be beyond the control of the organization.

The Company’s Microenvironment

Company’s Internal Environment:

– Areas inside a company.

– Affects the marketing department’s planning strategies.

– All departments must “think consumer” and work together to provide superior

customer value and satisfaction.

 Actors in the
Microenvironment

1. Company

2. Suppliers

3. Intermediaries in marketing

4. Customers

5. Competitors

[Link]

1. The company is the main actor in managing with marketing activities and its placement is of

great importance for the overall marketing system. While it is not important just the positioning

of the marketing function, but also the position of the other functions, and their connection with

the marketing function.

2. Suppliers are also a very important factor in marketing management. Namely, given that

suppliers should provide the necessary materials and supplies, it is clear that disturbances in this

area directly affect the ability of the company to realize its goals.

3. Intermediaries in marketing may be companies who assist in the promotion, sales and

distribution. As primary mediators occur:

- Intermediaries in the trade that make it possible to find buyers as agents and trade

intermediaries.

- Physical distribution companies that carry out activities such as inventory storage, transport and

so on.

- Marketing services agencies.

- Financial intermediaries, which include banks, insurance offices, etc.. that help provide

funding the company.

4. Customers are the most important factors micro environment enterprise. There are 5 basic

consumer markets:

- Consumer market where there are families and individuals as buyers of goods for personal

consumption

- Industrial markets where purchases are in charge of the production process

- Market resellers where purchased for further sale

- International markets

5. competition has a direct impact on the marketing elements and occurs in the following basic

types:

- Competition-brands (brands) products

- Competition of the products and enterprises operating in the same industry

- Competition in the characteristics of products that meet the same need

- Generic competition regarding the various possibilities of spending money at their disposal

purchase.

6. Public: A Company’s obligation is not only to meet the requirements of its customers, but also
to satisfy the various groups. A public is defined as “any group that has an actual or potential
ability to achieve its objectives”. The significance of the influence of the public on the company
can be understood by the fact that almost all companies maintain a public relation department. A
positive interaction with the public increase its goodwill irrespective of the nature of the public.
A company has to maintain cordial relation with all groups, public may or may not be interested
in the company, but the company must be interested in the views of the public.

Public may be various types. They are:

a. Press: This is one of the most important group, which may make or break a
company. It includes journalists, radio, television, etc. Press people are often
referred to as unwelcome public. A marketing manager must always strive to get a
positive coverage from the press people.

b. Financial Public: These are the institutions, which supply money to the company.
Eg: Banks, insurance companies, stock exchange, etc. A company cannot work
without the assistance of these institutions. It has to give necessary information to
these public whenever demanded to ensure that timely finance is supplied.

c. Government: Politicians often interfere in the business for the welfare of the
society & for other reasons. A prudent manager has to maintain good relation with
all politicians irrespective of their party affiliations. If any law is to be passed,
which is against the interest of the company, he may get their support to stop that
law from being passed in the parliament or legislature.

d. General Public: This includes organisations such as consumer councils,

environmentalists, etc. as the present day concept of marketing deals with social
welfare, a company must satisfy these groups to be successful.
 The Company’s Macroenvironment

1. Demography: It is defined as the statistical study of the human population & its
distribution. This is one of the most influencing factors because it deals with the people
who form the market. A company should study the population, its distribution, age
composition, etc before deciding the marketing strategies. Each group of population
behaves differently depending upon various factors such as age, status, etc. if these
factors are considered, a company can produce only those products which suits the
requirement of the consumers. In this regard, it is said that “to understand the market you
must understand its demography”.

2. Economic Environment: A company can successfully sell its products only when
people have enough money to spend. The economic environment affects a consumer’s
purchasing behavior either by increasing his disposable income or by reducing it. Eg:
During the time of inflation, the value of money comes down. Hence, it is difficult for
them to purchase more products. Income of the consumer must also be taken into
account. Eg: In a market where both husband & wife work, their purchasing power will
be more. Hence, companies may sell their products quite easily.
 3. Physical Environment or Natural Forces: A company has to adopt its policies within
the limits set by nature. A man can improve the nature but cannot find an alternative for
it.

Nature offers resources, but in a limited manner. A product manager utilizes it efficiently.
Companies must find the best combination of production for the sake of efficient utilization of
the available resources. Otherwise, they may face acute shortage of resources. Eg: Petroleum
products, power, water, etc.

4. Technological Factors: From customer’s point of view, improvement in technology

means improvement in the standard of living. In this regard, it is said that “Technologies
shape a Person’s Life”.

Every new invention builds a new market & a new group of customers. A new technology
improves our lifestyle & at the same time creates many problems. Eg: Invention of various
consumer comforts like washing machines, mixers, etc have resulted in improving our lifestyle
but it has created severe problems like power shortage.

Eg: Introduction to automobiles has improved transportation but it has resulted in the problems
like air & noise pollution, increased accidents, etc. In simple words, following are the impacts of
technological factors on the market:

a) They create new wants

b) They create new industries

c) They may destroy old industries

d) They may increase the cost of Research & Development.

 5. Social & Cultural Factors: Most of us purchase because of the influence of social &
cultural factors. The lifestyle, values, believes, etc are determined among other things by
the society in which we live. Each society has its own culture. Culture is a combination of
various factors which are transferred from older generations & which are acquired. Our
behaviour is guided by our culture, family, educational institutions, languages, etc.

The society is a combination of various groups with different cultures & subcultures. Each
society has its own behavior. A marketing manager must study the society in which he operates.

Consumer’s attitude is also affected by their society within a society, there will be various small
groups, each having its own culture.

Eg: In India, we have different cultural groups such as Assamese, Punjabis, Kashmiris, etc. The
marketing manager should take note of these differences before finalizing the marketing
strategies.

Culture changes over a period of time. He must try to anticipate the changes new marketing
opportunities.
Consumer Behavior: “The behavior that consumers display in searching for, purchasing, using,
evaluating, and disposing of products and services that they expect will satisfy their needs”.

Two types of consumers

Personal Consumer: “The individual who buys goods and services for his or her own use, for
household use, for the use of a family member, or for a friend”.

Organizational Consumer:“A business, government agency, or other institution (profit or

nonprofit) that buys the goods, services, and/or equipment necessary for the organization to
function”.

Five-Stage Model of the Consumer

Buying Process
Problem Identification

Information Search

Evaluation of alternatives

Purchase Decision

Post purchase Behavior

 Need recognition

The buying decision

process starts with the
buyer’s recognition of a
problem or need.
The need can be triggered by internal
or external stimuli.
The marketer needs to identify the
circumstances that trigger the
particular need or interest in
consumer.
Information Search

In many cases, an aroused consumer

searches for information about the
product.
Through;
Personal Sources (Family, Friends,
Neighbors)
Commercial sources (Advertising,
sales person, dealers, displays, etc)
Public Sources (Mass media)
Experimental Sources (handling,
examining & using the product)
Evaluation of alternatives

Consumer evaluates
the alternative based
on;
Product attributes,
weightage for
important attributes,
brand image, utility
function & evaluation
procedure.
Total Set

Hero honda Awareness set

Bajaj Choice Set
Decision
TVS
Hero
Suzuki
Yamaha
Honda Hero
Yamaha Honda
Mahindra
TVS
Kinetic
Hero
Royal Enfield Kinetic
Honda
Bajaj
Yamah
a
Bajaj
 Purchase Decision

After the brand choice the consumer

forms a purchase intention followed
by the purchase decision, vendor
decision, quantity decision, timing
decision and payment method
decision.
 Post purchase behavior

satisfaction with a purchase is basically a function

of the initial performance level expectations and
perceived performance relative to those
Relationship of Expectations, Performance and Satisfact
expectations
Organizational Buying Behaviour
Organization buying is the decision-making process by which formal organizations establish the
need for purchased products and services and identify, evaluate, and choose among alternative
brands and suppliers.

Organizational BuyingProcess :

2. General
1. Problem 3. Product
Description
Recognition Specifications
of Need
5. Acquisition
4. Supplier
Search
Organiza and Analysis
tional of Proposals
7. Selection
6. Supplier Buying 8. Performance
of
Selection Process Review
Order Routine
Most of the information an industrial buyer receives is delivered through direct contacts such as
sales representatives or information packets. It is unlikely that an industrial buyer would use
information provided through a trade ad as the sole basis for making a decision.
1. Problem recognition. The process begins when someone in the organization recognizes a
problem or need that can be met by acquiring a good or service. Problem recognition can occur
as a result of internal or external stimuli. External stimuli can be a presentation by a salesperson,
an ad, or information picked up at a trade show.
2. General need description. Having recognized that a need exists, the buyers must add further
refinement to its description . Working with engineers, users, purchasing agents, and others, the
buyer identifies and prioritizes important product characteristics. Armed with exten~ive product
knowledge, this individual is capable of addressing virtually all the product-relatGd concerns of
a typical customer. To a lesser extent, trade advertising provides valuable iaformation to smaller
or isolated customers. Noteworthy is the extensive use of direct marketing techniques (for
example, toll-free numbers and information cards) in [Link] with many trade ads. Finally,
public relations plays a significant role through lle placement of stories in various trade journals.
3. Product specification. Technical specifications come next. '!'his is usually the responsibility
of the engineering department. Engineers design several alternatives, depending on the priority
list established earher.
4. Supplier search. The buyer now tries [0 identify the most appropriate vendor. The buyer can
examine trade directories, perfonn a computer search, or phone other companies for
recommendations. Marketers can par:.icipate in this stage by contacting possible opinion leaders
and soliciting support or by contacting the buyer directly. Personal selling plays a major role at
this s~age .
5. Proposal solicitation. Qualified suppliers are next invited to submit proposals. Some
suppliers send only a catalog or a sales representative. Proposal development is a complex task
that requires extensive research and skilled witting and presentation. In extreme cases, such
proposals are comparable to complete marketing strategies found in the consumer sector.
6. Supplier selection. At this stage, the various proposals are screened and a choice is made. A
significant part of this selection is evaluating the vendor. One study indicated that purchasing
managers felt that the vendor was often more important than the proposal. Purchasing managers
listed the three most important characteristics of the vendor as delivery capability, consistent
quality, and fair price. Another study found that the relative importance of different attributes
varies with the type of buying situations For example, for routine-order products, delivery,
reliability, price, and supplier reputation are highly importan~. These factors can serve as appeals
in sales presentations and in trade ads.
7. Order-routine specification. The buyer now writes the final order with the chosen supplier,
listing the technical specifications, the quantity needed, the warranty, and so on.
8. Performance .review. In this final stage, the buyer reviews the supplier's performance. This
may be a very simple or a very complex process.
Different groups or individuals may play one or more of the following roles:

 Users: these are the people who will directly use or consume or require the product or
service in order to undertake their operational duties.

 Influencers: these are individuals or groups who help specify the requirements or provide
information to help evaluate the alternatives. People who provide technical input are usually
in this group.

 Buyers: these individuals and groups have the formal authority to select vendors and
undertake the actual purchase transaction. They may take a major role in the negotiations on
price and conditions of supply.

 Deciders: These individuals have formal or informal authority to select the final supplier.
May be the same as Buyers in routine purchases.

 Gatekeepers: These individuals informally or formally control the flow of information or

access to other groups involved in the buying process.

Three Buying Situations:

1. New task

2. Modified rebuy

3. Straight rebuy

New task: In this situation, the buyer is buying the product for the first time. As the cost of the
product or consumption value becomes higher, more number of executives are involved in the
process. The stages of awareness, interest, evaluation, trial, and adoption will be there for the
products of each potential supplier. Only the products which pass all the stages will be on the
approved list and price competition will follow subsequently.

 When the problem or need is totally different from previous experiences.

 Significant amount of information is required.
 Buyers operate in the extensive problem solving stage.
 Buyers lack well defined criteria.
 Lack strong predispositions toward a solution.
Modified rebuy: In this buying situation, there is a modification to the specifications of the
product or specifications related to delivery. Executives apart from the purchasing department
are involved in the buying decisions. The company is looking for additional suppliers or is ready
to modify the approved vendors list based on the technical capabilities and delivery capabilities.

 Decision makers feel there are benefits to be derived by reevaluating alternatives.

 Most likely to occur when displeased with the performance of current supplier.
 Buyers operate in the limited problem solving stage.
 Buyers have well defined criteria.

Straight rebuy
In this buying situation, only purchasing department is involved. Thet get an information from
inventory control department or section to reorder the material or item and they seek quotations
from vendors in an approved list. The "in-suppliers" make efforts to maintain product and service
quality. The "out-suppliers" have to make efforts to get their name list in the approved vendors'
list and for this purpose they have to offer something new or find out any issues of dissatisfaction
with current suppliers and promise to provide better service.

 The problem or need is a recurring or continuing situation.

 Buyers have experience in the area in question.

 Require little or no new information.

 Buyers operate in the routine problem solving stage.

The differences between organizational and individual buying processes

Buying Step Business to Business Consumer

Problem Anticipates and plans for purchase on
Reacts to needs when they arise
recognition a routine basis
General need Extensive, objective cost-benefit Limited analysis of benefits; concern
description analysis with total cost
Product Precise technical description using
Description more in terms of benefits
specification techniques such as value analysis
Information/ Extensive search that extends to the Limited search – geographically and in
Supplier search search for supplier terms of sources
Proposal Formal, such as in a tender process if
May be verbal
solicitation large volumes or values involved
Buying Step Business to Business Consumer