Marketing environment

UNIT -2 MARKETING ENVIRONMENT

Marketing environment consists of all the internal and external influences which
affect marketing decision making and have an impact on its performance.

For the success of marketing activities it is important to analyze the marketing

environment and study the factors to ensure right decisions are taken at the right time.

Significance of understanding Market Environment:

a) Identification of SWOT
b) Helps explore and exploit business opportunities
c) Aids the organisation to respond to new demands and trends
d) Helps the organisation to stay competitive and grow
e) Ensures effective utilization of resources
f) Helps build brand reputation
g) Aids an organisation in being proactive and build effective strategies

Process of environmental analysis

1. Scanning- process of identifying the signal of changes around the company
2. Monitoring-involves tracking the changes, assembling more data and study the
pattern ofchange
3. Forecasting- developing possible changes or actions required in marketing activities
4. Assessment- evaluating the changes before and after action

The components of Marketing Environment may be classified into two categories

Marketing Environment
Micro Environment Macro Environment

1. Organization dept 1. Demographic

Environment
2. Corporate resources. 2. Economic
Environment
3. Marketing Mix. 3. Social cultural
Environment
4. Market 4.Political
Environment
5. Suppliers 5.Legel Environment
6. Market intermediaries 6. Technological
Environment
7. Customers 7.Ecological

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Micro Environment:
Micro Environment of the organization consists of those elements which are controlled by
the management

1. Organisation Department:

It consists of many departments such as marketing , Production, Finance, Personnel etc

each department is placed under the under the control of the manager. All department
head workingco-ordination to achieve the organizational objectives.

2. Corporate Resources:

Corporate resources are comprises of manpower, Materials, Money, Machine and

management. All these are controllable be adjusted according to the marketing planning
and policy.

3. Marketing Mix:

Another controllable factors of micro environment is marketing mix it consists of four

element vizProduct, Price, Promotion and place.
3. Markets:

It consists of different types of purchases individuals and householders for personal

consumption producer and manufacturing for manufacturing planner, wholesaler for
selling to retailers,

4. Suppliers:

Even regarding suppliers the organization the organization can think of availing the
required materials or labour according to its manufacturing programmes .it can be adopt
purchase policywhich gives bargaining power to the organization.

5. Market intermediaries:

Market intermediaries are the middlemen who help in the efficient marketing of goods.
The market intermediaries includes agent, Wholesalers, retailers and mercantile agents.

6. Employees:

Employees of an organization consists of members, Executives, supervisors etc. can be

controlled by great extent, Employees loyalty, sincerity, Productivity and their attitude
towards their job and organization.

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Macro Environment:
Macro environment or external forces are those forces or factors which are usually
external andwhich are uncontrollable.

1. Demographic Environment: Demography is the study of population and

demographic environment is the understanding of the composition, growth and
distribution of human population, the household patterns, level of income and other such
characteristics. Structure and composition of population will affect marketing activities.
Key demographic factors are:
 Age Group
 Gender Mix
 Education / Literacy levels
 Household Patterns
 Religion and ethnicity
 Birth and death rate,
 Population density,
 Rural and urban population

2. Economic Environment: Economic Environment refers to the sum of all economic

factors, policies and resources, trade cycles, distribution of wealth within an economy.
Marketers need to understand not only the population but also the purchasing power of
people and willingness to spend. Savings and investment pattern will affect the
purchasing power which, in turn, will affect the economy of the country.

It includes factors like

• Economic Policies – Monetary and Fiscal Policies, Foreign Trade Policy
• Income levels
• Savings and Investment
• Inflation Rate
• Credit Availability
• Interest Rate
• Stage of Business Cycle: Prosperity, recession, boom, depression, recovery

3. Socio Cultural Environment: Socio cultural environment refers to the set of

beliefs, customs, traditions, practices and norms that exist within a society. Society, being
that force, in which people live in, shape their beliefs, cultural values and social norms, it
plays a major role in influencing their preferences, likes, dislikes and purchase behaviour.

The aspects of social and cultural factors that impact marketers are
• Social and Cultural Values / Lifestyle : That influences fashion, youth

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behaviour, the presence of double income households, nuclear families/ joint family, time
Pressure etc.
• Social Problems: Child labour, awareness of environment pollution, working and
living conditions of people
• Social Trends: Consumerism, ethical consciousness and social responsibility of
business are the growing trends that the organisation need to pay heed to.

Socio cultural environment refers to a set of beliefs ,customs, practices ,norms and
behaviuor that exists with in a society which describes relationship to themselves and
others.

1. Changes in life styles

2. Family structures
3. Attitudes and values
4. Household patterns
5. Social mobility

4. Political and Legal Environment: Includes all laws, regulations, policies brought
about by a Government, its agencies and the existence of lobbying groups that influence
or restrict individuals or organisations. Marketing systems are affected by government
policies, laws and regulations in varying degrees.

The most prominent factors are:

2. Monetary and Fiscal Policies: Taxes and Duties
3. Social legislation: Anti pollution laws, Drugs Control act,
4. Legislation specific to Marketing: MRTP act, Consumer protection Act, Sale of
Goods Act, Essential Commodities Act etc.

Political environment simply refers to the way a country is being run in terms of
politics. The political environment includes all laws , government agencies and
lobbying groups that influence or restrict individuals or organization.

5. Political system 5. monopoly controls

6. Political Risk 6.Legislations
7. Political ideologies
8. Indicators of political instability

5. Technological environment: Radical development in science and technology has

completely transformed life and living conditions. Technology can affect markets and
marketing activities in three ways:
a) Emergence of entirely new industries. Ex. Computers, Lasers, Robotics
b) Radically alter or destroy existing industries. Ex: Television, Post Office
c) Stimulate market and industries not related directly to their production

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technology. Ex: E-commerce, Information & Communication Sys.

d) Degree of automation
e) Emerging technologies
f) R&D activities
g) Technology transfer
h) Use of IT and communication

6. Market environment: Marketing strategies recognize the force of competition in a

free market economy and these plans are based on the anticipated moves of the opponent.
Marketing strategies are planned, formulated and altered in response to the competition.
Competition influences the choice of target markets, segmentation strategy and
marketing mix formulation.

7. Natural environment: Rising awareness about preservation and survival of our

ecological system has resulted in increasing focus on societal marketing. Marketers need
to pay due attention to the quality of our life and environment.

1. Geographical Location
2. Availability of resources
3. Access to natural
resources
4.Concern for
environment
5.Increased energy
cost.

8. International / Global environment: Increasing globalisation and integration with

world economy, marketing needs to consider factors such as foreign trade and
investment policy, Exchange rate fluctuations, Taxes and duties etc.

Market Segmentation

Meaning:
Marketing segmentation means identifying the group customers those who are having
similar wants and needs.

Definition:
Philip kotler : “ Market segmentation is the act of identifying and prolifying distinct
group of buyers who might require separate products and for marketing mix”.

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Market segmentation is the subdividing of market into homogeneous

subsection s of customers where subsection may conceivably be selected as a
market target to be reached with a distinct marketing mix”.

Importance and benefits of marketing segmentation:

1. Understanding the needs of the consumers.
2. Better position to spot marketing opportunities.
3. Allocation of marketing Budget
4. Meeting the competition effectively
5. Effective marketing programmes
6. Choosing of advertising media.
7. Increasing sales volume
8. Benefits the customers
9. Better utilization of marketing resources
10. Discovering marketing opportunities
11. Provision information
12. Evolution of marketing activities
13. Formulation of marketing mix
14. It facilitates effective tapping of the chosen market.
15. Helps in the formulation of the STP (Segmentation, targeting and positioning)

Requisites of or Criteria of Effective Market Segmentation

The following requisites of criteria for an effective segmentation
1. Measurable and obtainable
The size, profile and other relevant characteristics of the segment must be measurable and
obtainable in terms of data.

2. Relavent
The size and potential of a market segment have to be large enough to economically justify
separate marketing activities for the segment.

3. Substantial;
The segments should be substantial to several required returns or profits to the companies
and large from consumer demand.

4. Accessible:
The segment as to be accessible and servable for he company.

5. Valid;
This means the extent to which the base is directly associated with the differences in

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needsand wants between the different segments.

6. Distinguishable or differentiable:
The market segments have to be that diverse that they show different reactions to different
marketing mixes. If not there is no use to break them up in segments.

7. The need and characteristics of segment behviour must be similar.

8. Actionable or feasible:
It has to be possible to approach each segment with a particular marketing programme
anddraw advantages from that.

9. Durability:
The differences between segments are good enough to differentiate from various customer
buying characteristics and likely to endure or erode as buyer gain experience and technology
diffuse.

10. Other criteria’s.

Some of the other criteria for the segmentation is Grow potential , Profitable, Less risk
and Less competition etc.

Bases for Segmentation:

1. People Oriented Approach
2. Product Oriented Approach

People Oriented Approach is based on Customer Personal Characteristics such as:

Demographic Characteristics – Based on the observable aspects of the population and

is a dynamic, complex variable. It includes segmentation on basis of:
 Age- people of different age groups require and prefer different types of products
 Ex: Watches, Footwear and so on
 Gender- Ex: Cosmetics, accessories
 Family Size – Ex: FMCG products that have single units and family packs for big
families
 Family Life Cycle – Ex: A married couple with no children will have a different
consumption pattern when compared to a family with kids.

Socio-Economic Characteristics: Are predominantly as given below

 Income levels- based on income of people

 Occupation – the type of jobs held by the population, be it salaried (private/
public sector) or self employed
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 Education – Literacy levels, Vocational or Professional courses

 Social class- upper class, middle class and lower class
 Religion, Race, Nationality –it will explain the diversities and irregularities in the
market

Geographic location and mobility: Where people live is one of the best clues to what
they want to buy, their likes and preferences. The characteristics include:

 Region of the country

 Urban, Semi-Urban, Rural
 Size of town/city
 Climate and weather conditions

Psycho-graphic
a. Values and Lifestyle (VALS): Classifies individuals on basis of AIO
 Activities: Work, Hobbies, Shopping style
 Interests: In Food, Fashion, Recreation
 Opinions: About themselves/Others, Social Issues

b. Personality: On basis of the prominent personality traits observed in the

population mix. Ex: Analytical, Expressiveness, Friendliness, Dominance etc.

Product Oriented Approach: Focuses on bases of Customer Response Behaviour

towards product. This is also known as behavioural segmentation.
In this approach the customers are divided based on the way they respond to, use or know
of a product:
o Use Pattern: On basis of the product usage frequency customers may be
categorised as light, medium and heavy users.
o Product Usage Occasions: Segmentation is done on basis of the occasions of
use. Whether customers are using a product on regular, everyday occasions or special /
festive occasions etc.
o Loyalty: Segmentation is based on the loyalty of customers to the product /
brand or store. The customers may be classified as Hard core loyalists, Soft core loyalists,
fence-sitters, experimenters and rejecters.
o Benefits Pattern: This form of segmentation focuses on the core benefits and
desires of customers, to satisfy which they may buy products. It is inclusive of such
factors as economy, performance, durability, product appearance and status

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CONSUMER BEHAVIOUR
Consumer behavior is the process and physical activity individuals engage
in when emulating, using or disposing of goods and services.

Consumer behavior is the process whereby the individuals decide

whether ,What, When ,Where, how, from where to purchase goods and
services.
Consumer Behaviour can be defined as the activities and actions of people
and organizations that purchase and use economic goods and services,
including the influence on these activities and actions.

Characteristics of Consumer Behaviour:

1. Consumer behavior is the process by which individuals decide whether ,what
,when ,from whomwhere and how much to buy.

2. Consumer Behaviour consist of Mental and physical activities which

consumer undertake to acquire goods and services.
3. Consumer behavior covers both visible and invisible activities.

4. Consumer Behaviour in the market place is affected by several internal and

external factors.

5. Consumer behavior is influenced by a number of Marketing stimuli offered by

the company

6. Consumer behavior involves psychological ,physiological, socio-

psychological and socio- Economic factors process.

7. The study of consumer is a difficult task and complex process.

8. The buying behavior of consumer is based on the decision process.

9. Consumer behavior is dynamic too constantly changing.

10. Consumer behavior is a

continuous process.

Importance of the study of Consumer

Behaviour:-

1.Implementing the modern marketing concept

2.Effective Market Segmentation

3.Effective Marketing programme and decisions.
4.Rapid introduction of the New product.
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5.Avoid product failure chances.

6.Exploiting Marketing opportunities.
7.Adjustment with change
8.Environmental concern
9.Incrased interest in consumer protection.

Factors influencing consumer behaviour :

PERSONAL INFLUENCES:
a) Demographics
Age and the life cycle: Lifecycle is an orderly series of stages in which consumer
attitude and behavioural tendencies evolve and occur because of developing maturity,
experience, income and status. Marketers often define their target markets in terms of
life-cycle stage and develop appropriate products and marketing plans for each stage.
Economic Situation: A person's economic situation will affect product choice. Marketers
of income-sensitive goods watch trends in personal income, savings, and interest rates. If
economic indicators point to a recession, marketers can take steps to redesign, reposition,
and re-price their products closely.

Occupation and Income: The profession or the occupation of a person has an impact on
the products they consume. The status of a person is projected through various
symbols like the dress, accessories and possessions, etc. For example : Blue-collar
workers tend to buy more rugged work clothes, whereas white-collar workers buy more
business suits. Marketers try to identify the occupational groups that have an above-
average interest in their products and services.

b) Personality
Each person's distinct personality influences his or her buying behaviour. Personality can
be useful in analyzing consumer behaviour for certain product or brand choices. For
example : Coffee marketers have discovered that heavy coffee drinkers tend to be high on
sociability. Thus, to attract customers, Starbucks and other coffeehouses create
environments in which people can relax and socialize over a cup of steaming coffee.

Personality is influenced by self-concept and roles played by an individual. Self Concept

has 3 parts:
1. The idealized Self – What would you like to be?
2. Looking Glass Self- How you think others see you?
3. Self - Your own concept of what you are like?

Roles : Loving Father/ Mother, Caring Wife, Friendly Colleague etc.

c) : Lifestyle
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Lifestyle is a typical way of living in a dynamic society. The method of measuring a

consumer‘s lifestyle is called psychographics. It is a person‘s mode of living as identified
by his or her activities, interest and opinions. Activities: Work, Hobbies, Shopping style
Interests: In Food, Fashion, Recreation Opinions: About themselves/Others, Social Issues
Our life styles are reflected in our personalities and self-concepts. When Psychographic
information is combined with demographic information, it gives a well-rounded picture
ofa person

External or inter-personal influences on buyer behaviour include the following:

CULTURAL FACTORS

Culture, subculture and social class are particularly important influences on consumer
buying behaviour.

Culture: Culture is the most fundamental determinant of a person’s wants and behaviour.
A child during its growth is exposed to these broad cultural values: achievement and
success, activity, efficiency and practicality, progress, material comfort, individualism,
freedom, humanitarianism and youthfulness.

Subculture
Each culture consists of smaller subcultures that provide more specific identification for
their members. Subcultures include nationalities, religions, racial groups and geographic
regions. Many subcultures make up important market segments, leading marketers to
tailor products and marketing programmes to their needs.

Social Class
Social classes are relatively homogeneous and enduring divisions in a society. They are
hierarchically ordered and their members share similar values, interests, and behaviour.
Social classes reflect income as well as occupation, education, and other indicators.
Those within each social class tend to behave more alike than do persons from different
social classes. Also, within the culture, persons are perceived as occupying inferior or
superior positions according to social class.

SOCIAL FACTORS:

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1. Family 2. Reference group 3. Roles & statuses

a) Family: Most consumers belong to a family group. The family can exert
considerable influence in shaping the pattern of consumption and indicating the decision
making roles.
personal values, attitudes and buying habits have been shaped by family members. The
members of the family play different roles such as influencer, decider, purchaser and user
in the buying process.

Family Decision Making

The family life cycle describes the distinct phases that a family progresses through from
formation to retirement, each phase bringing with it identifiable purchasing behaviours.

b) Reference group:
The concept of reference group is borrowed from sociology and psychology. Reference
groups are social, economic, or professional groups to which the buyer belongs. A buyer
is influenced by/ gets advice from these small groups and uses to evaluate his or her
opinions and beliefs.

Word of Mouth Communication is the process by which messages are passed from
member to member. These influences are reflected in brand preferences and decision
making process.

Reference Groups may be of three types:

I. Associate reference groups: Groups an individual belongs to—the individual adopts
certain behaviour patterns of these groups.

II. Dissociative reference groups: Groups people do not want to associate with
Relatives, Friends, Local Club are reference groups which may be Associate /
Disassociate RGs.

III. Aspirational reference groups: Groups an individual aspires to join/associate with.

Opinion leaders are individuals who exert direct or indirect social influence over others.
They are Aspirational RGs

c) Social Class
Sociology points out the relationship between social class and consumption patterns.
Consumers‘ buying behaviour is determined by the social class to which they belong or
to which they aspire, rather than by their income alone. Three distinct social classes

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are Upper, Middle and Lower classes.

Upper class consumers want products and brands that are clear symbols of their social
status
Middle class consumers shop carefully and read advertisements and compare prices
before they buy.
Lower class consumers do not care to read much.

PSYCHOLOGICAL FACTORS:

a) Needs and Motivation

Need motivates an individual to act. Motivation is all those pressures and influences that
trigger, channelize and sustain consumer behaviour. Motivation tries to explain the WHY
of Buyer Behaviour. Maslow’s hierarchy of Needs helps to understand the role played by
motivation in influencing consumer behaviour. Maslow has arranged human needs in a
hierarchy, from the most pressing to the least pressing. They are Physiological needs,
Safety, Social, Esteem and Self- actualization needs.

b) Learning
Learning is defined as the process by which individuals acquire the purchase and
consumption knowledge, gain from past experience and that result in future behaviour.
Marketers have applied the learning process to effectively advertise their products,
teachthe consumers about their products and help them develop Brand Loyalty.

c) Perception
A motivated person is ready to act. How the motivated person acts is influenced by his or
perception of the situation. Perception is the process by which an individual selects,
organizes and interprets information inputs to create a meaningful picture of the world.

d) Attitude
Attitudes are an overall evaluation that lead people to respond in a consistently
favourable or unfavourable way to a given object. Attitudes are formed through
interaction with others, family and peer groups. It is the attitude of a consumer which
leads to purchase or rejection. For a marketer, the consumers‘ attitude towards a product/
brand is very important. They are interested in knowing how attitudes are formed and if
the attitude is not favourable, how it can be changed. Perception is an intellectual
process shaping the belief system, Attitude is your disposition (+/-), leading to a
behaviour or action.

SITUATIONAL FACTORS
Are temporary conditions that affect how buyer‘s behave at the time and place of
purchase in terms of:

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Whether they actually buy your product or buy additional products or buy nothing at
all from you.

They include things like:

1. Physical factors
2. Social factors
3. Time factors
4. Reason for the buyer‘s purchase, and
5. The buyer‘s mood

Consumers’ / Buyer’s Decision Making Process:

1. Need Recognition
The buying process starts when the buyer recognizes a problem or need. The need can be
triggered by internal,external factors, marketing stimuli. Ex. Person’s normal needs-
hunger/ thrust –rises to threshold level and becomes a drive. Marketing helps consumers
recognize an imbalance between present status and preferred state.

2. Information Search
An aroused consumer will be inclined to search for more information. There are two
types of search:
1. Internal search- memory.
2. External search- if the consumer needs more informationthey will engage in
external search.
These sources are:
Personal sources - Friends and relatives (word of
mouth); Commercial Sources - Marketer dominated
sources; Public sources – Expert reviews, customer
reviews
Experiential Sources – Demonstration of product, sampling

The information search helps buyer find possible alternatives- i.e.- the Evoked Set. Ex.
Hungry- want to go out and eat. Evoked set is Chinese food , Indian food, Italian food etc.

3. Evaluation of Alternatives

Consumer evaluation process: The consumer sees each product as a bundle of attributes
for delivering the benefits sought to satisfy these needs. A product is viewed as a bundle
of attributes. Attributes of interests to buyer may be:
Cameras : picture clarity, size, price,
ease of use Hotels: Location, cleanliness,
ambience, price
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Information about the characteristics of the products are provided by the marketer.
Competitor brand information helps compare and evaluate the brands. In order to reduce
the number of alternatives, a cut - off criteria may be applied on the basis of important
attributes. The important attributes are ranked and brands rated on the attributes. Brand
that is rated highest on the most important attributes is more likely to be selected. In
evaluation stage the consumer form preferences among the brands. In this phase-
consumer chooses buying alternative.

Factors that influence buying at this stage are:

Situational Factors: Store, Method of purchase, Incentives offered, out of stock, budget etc.
Social Factors: Attitude of reference group members
Perceived Risk: High priced products imply higher risk. Low priced products may
have performance risk. Foreign brands because of after sales service aspect may have high
risk.

4. Purchase or No Purchase Decision: Consumer decides on the brand to purchase

and makes the payment. The consumer may also decide not to purchase any product at
all.

5. Post Purchase Experience and Behaviour Consumer analyze the Brand, during
Purchase and Usage (Post-Purchase). The analysis is done basis Expectation vis-à-vis
Level of Satisfaction. The outcomes are: Satisfaction or Dissatisfaction.
Satisfaction will create brand preference
Dissatisfaction will lead to negative feelings and create anxiety and doubts

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