Module 2 Marketing Environment

Module 2Aim To understand the behavior of key Marketing

Environmental forces that have an implication on marketing decisions

To understand & grasp of the techniques available for environmental scanning

To understand Market Research

Objective To Learn how to gather Information & Scanning of the

Environment To Learn the meaning & concept of Macro / Micro Environment To Learn the objectives, scope, limitations & applications of

Market Research

Marketing Environment After going through this module, you will be able

to:– Understand Marketing Environment & Market Research– Information Gathering & Scanning the Environment– Understand meaning & concept of Macro / Micro

Environment– Understand objective, scope, limitation & applications of

Market Research

Marketing Environment

1970s & 1980s linkages of Marketing & Environment arose from the energy shortage

The first major energy crisis, environmental forces severely hit oil companies, automakers, independent oil dealers, & such fuel-dependent industries

Which was clearly a government environment & overestimates of the availability of US resources

It was argued that US oil companies underinvested in refining capacity, in part because of the increased capital investment required by environmental legislation

One thing certain about the crisis was its impact

Marketing Environment Contd..

Nearly 60,000 auto production workers were unemployed at one point; 16 of the 44 auto plants in the nation were either closed or partially shut down; and major plans of the automakers, such as expanding General Motors’ Oldsmobile Division, were scrapped.

The impact of the crisis was sharply felt by the 25,000 independent dealership for US made autos

Shortages & higher gasoline prices caused consumers to postpone car purchases & buy smaller, more economical cars

Marketing Environment Contd..

The slump in big-cars sales became unprecedented rout, with sales running more than 50% behind sales for the previous year. Sudden collapse of the big-car market forced many dealers into bankruptcy

5years latter, in 1980s approaching gas prices again sky-rocketed & gas rationing was actively discussed

The auto industries debated how to interpret the change

Hence, this shows that

First & most obvious, it demonstrates the dependence of organization on uncontrollable environmental change. Forecasters warn that uncontrollable disruptions of various types will probably increase.

Secondly, it shows that governmental, natural, & economic forces affect customers, competitors, & marketing.

Importance of Marketing Environments

Marketing Environment is that which is external to the marketing management function, largely uncontrollable, potentially relevant to marketing decision making, & changing & / or constraining in nature

The marketing environment is more important to management today than ever before, this is both because the rate of environmental change has increased & because there are more types of important environmental changes

Importance contd..

The rate of environmental change should be remembered that all of the development experienced by humankind has occurred within a mere moment of history

New types of environmental change have come to the forefront, economic factors go to the core business activity, & historically they have always been important to marketing management.

Importance contd..

Until around 1900, the above factors effectively represented the firm’s macro environment.

– The governmental & legal forces became more significance During the1930s, the growth of labour organizations further

affected the decision of management. – Most recently the consumer groups have used the similar

tactics to those of labor group. Both highlights a movement towards a pluralistic & interdependence society of interest groups, with business no longer the dominant element

Some of the more important current environmental changes refers as “mega trends”

– among the most important for marketers is the transition from an industrial society to an information society & form a national economy to a global economy

Ignoring the opportunities & threats posed by uncontrollable environmental change is nothing short of folly, which reflects on growing recognition by both corporate strategic marketing planners & line marketers

Characteristics of Marketing Environment

The environment of any thing is large or small, & as simple or complex

Changing consumer incomes, technological innovation, changing government agencies, & shifting consumer values are examples of the marketing environmental

This environment includes those things that are external, largely uncontrollable, changing, constraining, & potentially relevant

Characteristics of Marketing Environment Cond..

The marketing environment includes:– Non marketing departments within the firm– As well as markets,– Competitors, &– The macroenvironment

Marketers are primarily adapters:– They adapt their products– They adapt prices– They adapt promotion & – They adapt distribution to fit the marketplace,

which was true for the auto industry during the energy crisis


Certain environmental forces are partially controllable, but most are largely uncontrollable

– Some changes in environmental factors, such as shifting population characteristics, represents a key source of uncertainty

– Other changes constrain management to the extent of defining a straight & narrow path for it

The marketing environment must be potentially relevant to marketing decision making in the organization

– The potentially relevant environment for an electronic calculator firm is very different from that for a soap producer


The environment comprises surrounding offices & personnel within the company, the intra-organizational environment

The most important aspect of the intra-organizational environment is the internal corporate, or “the collection of beliefs, expectations, & values shared by the corporation members & transmitted from one generation of employees to another”

Leading companies seem to exhibit a relatively open, creative, & adaptive corporate culture


Marketers look beyond the corporate wall, to work with independent parties that require constant attention; these include

– Marketing intermediaries as distributors,– Advertising agencies, & – Marketing research firms

This task environment includes markets & competitor The task environment should be thought of as mediating

between the macro environment & management;– Changes in markets & competitors often result from macro

environmental changes, as was illustrated by the effects of the energy crisis on auto industry

Gathering Information / MIS

Firms develop Marketing Information systems (MIS) which provides management with rapid & incredible details about:

– Buyer wants– Preferences & – Behavior– Consumption patterns in other countries too

Example: Swiss consume the most chocolate, Greeks eat the most Cheese, Irish drink the most tea, & the Austrians smoke the most cigarettes


Many managers complain about not knowing where critical information is located in the company;

– Getting too much information that they cannot use & too little that they really need;

– Getting important information too late; &– Doubting the information’s accuracy

In today’s information-based society, companies with superior information enjoy a competitive advantage

Companies can choose its markets better, develop better offerings, & execute better marketing planning


The company’s marketing information system should represent a cross between

– what managers think they need,– What managers really need & – What is economically feasible

To discover their information needs, some useful questions are:– What decisions do you regularly make?– What information do you need to make these decisions?– What information do you regularly get?– What special studies do you periodically request?– What information do you want that you are not getting now?– What information would you want daily? Weekly? Monthly? Yearly– What magazines & trade reports would you like to see on a regular basis?– What topics would you like to be kept informed of?– What data analysis programs would you want?– What are the four most helpful improvements that could be made in the

present marketing information system?

Environmental Scanning

Forecast probabilityof impact, timing of

potential consequences

Monitor: Determinenature, direction,rate of change,

magnitude of forces

Identify potentiallyrelevant environmental

changes

Develop & implementstrategic responses

Environmental Scanning in Action: An Overview

Environmental Scanning / Monitoring

High probable changes that are most likely to impact the company

Low-probability changes that could have major consequences

Overview of the social, technological, economic, governmental, & natural environments as they relate to marketing

A step-by-step way to scan the environment include identifying threats & opportunities, monitoring & forecasting these potential forces, & developing strategic responses

Environmental Scanning / Monitoring Process

Environmental Scanning / Monitoring is the process of

(1) Gathering Information regarding a company’s External Environment

(2) Analyzing it & (3) Forecasting the impact of whatever trends

the analysis suggests

Environmental Scanning / Monitoring Process cont..

The word Environment is associated with our physical environment – air quality, water pollution, solid-waste disposal, & natural-resource conservation. How ever we use environment in a much broader sense in this module

An organization operates within an external environment that it generally cannot control.

At the same time, marketing & non-marketing resources exist within the organization that generally can be controlled by its executives

Levels of External Environmental Forces

Macro Environment influences such as (they affect all firms)

– Demographics, – Economic Conditions, – Culture & – Laws

Micro Environment influences consist of (they affect a particular firm)

– Suppliers,– Marketing Intermediaries &– Customers

External Macro-Environment ForcesExternal Macro-environment of a Company’s Marketing Program

Social &Cultural forces

Political &Legal forces

Technology

Demographics Competition

EconomicConditions

Company’s MarketingProgram

Six largely uncontrollable external forces influence an organization’s marketing activity

External Macro-Environment ForcesDemographics



Technology


EconomicConditions


External Macro-Environment Forces Demographics

Demographics refers to the characteristics of Populations, including such factors as; Size, Distribution, & Growth

Changes in the age distribution are the result of many factors, including the quality of health care & nutrition.

Two key factors are the No. of women who are of child-bearing age & the birthrate.

The no. of women of child-bearing age is a function of the births that occurred some years before & they are predictable

Birthrate at any one point in time is influenced by a wide variety of social & economic factors that are much less predictable

– Ex: attitude towards careers & family size certainly affect the birthrate.

Another notable demographic trend is the rapid growth of minority markets - & their buying power

Demographic Environment

World wide population growth Population age mix / age composition Ethnic & other markets

Educational groups Household patterns Geographical shifts in population Sex structure of the population & role of

women

External Macro-Environment Forces Economic Conditions



Technology


EconomicConditions



People alone do not make a market. They must have money to spend & be willing to

spend it. The Economic environment is a significant forces

that affects the marketing activities of just about any organization.

A marketing program is affected especially by economic factors as the current and anticipated stage of the business cycle, as well as inflation and interest rates


Inflation – a rise in prices of goods & services represents inflation.

– When prices rise at a faster rate than personal incomes, consumer buying power declines.

– Inflation rates affect government policies, consumer psychology & also marketing programs

Interest Rates – when interests rates are high, for instance, consumers tend not to make long-term purchases such as housing.

– Some marketers offer below-market interest rates (a form of price cut) as a promotional device to increase business.

Ex: Auto manufacturers use this tactic occasionally


Stage of the Business Cycle: (Traditional)– Prosperity is a period of economic growth, organization

tend to expand their marketing programs as they add new products & enter new markets

– Recession is a period of retrenchment for consumers & business – we tighten our economic belts. People can become discouraged, scared, and angry. Example: customers cut on eating out side home & entertainment

– Depression– Recovery is the period of when economy is moving from

recession to prosperity

External Macro-Environment Forces Competition



Technology


EconomicConditions



Three types of competition

Competition

EveryCompany

SubstituteProducts

BrandCompetition


Brand Competition – comes from marketers of directly similar products. Ex: credit cards

Substitute Products - satisfy the same need Ex: growing no. of homeowners have been choosing wood flooring instead of carpeting , causing carpet sales to stagnate

More general type of competition, Every Company is a rival for the customer’s limited buying power.

Hence, Skillful marketer constantly monitors all aspects of competitors’ marketing activities – their products, pricing, distribution systems & promotional programs

External Macro-Environment Forces Technology



Technology


EconomicConditions



Technology has a tremendous impact on consumers lifestyle, their consumption patterns, & their economic well-being

Ex: Technological Developments such as airplane, plastics, TV, computers, lasers & etc., at present all these has reached their major market share.

In future technology could improve Ex: Low-cost methods for making ocean water drinkable, or even commercial travel to moon


Technological breakthroughs can affect markets in 3 ways:

By starting entirely new industries, as computers, lasers have done

By radically altering, or virtual destroying, existing industries, when TV crippled the radio & movie industries, Computers replaced Typewriters

By stimulating markets & industries not related to the new technology, new home appliances & microwavable foods give people additional time in which to engage in other activities

External Macro-Environment Forces Political and Legal Forces



Technology


EconomicConditions



The Political & Legal Forces on marketing can be grouped into the following 4 categories:

Monetary and fiscal policies Social legislation and regulations Governmental relationships with industries Legislation related specifically to marketing


Monetary & fiscal policies: – Marketing efforts are affected by the level of

government spending, the money supply, & tax legislation

Social legislation & regulation: – Legislation affecting the environment – Ex: antipollution laws. – Regulations set by the Environmental Protection

Agency


Governmental relationships with Industries: subsidies in agriculture, shipbuilding, passenger rail transportation, & other industries.

– Tariffs & import quotas also affect specific industries. – Government deregulation continues to have an effect on

financial institutions & public utilities (such as electric & natural gas suppliers) as well as on the

– telecommunications & transportation industries Legislation related specifically to marketing:

– Marketers need not be a lawyers, but they should know something about laws affecting marketing –

– why they were passed, their main provisions, & – current ground rules set by the courts & – regulatory agencies for administering them

External Macro-Environment Forces Social & Cultural Forces



Technology


EconomicConditions



Socio-cultural patterns – lifestyles, values, & beliefs – are more complex & are changing much more quickly than they used to.

Few Social & Cultural forces that have significant marketing implications are:

Concern about Natural Environment Changing Gender Roles A premium on time Physical Fitness and Health


Concern about Natural Environment : Many Consumers emphasize on Quality of life rather than the

Quantity of goods consumed. The theme is “not more, but better” Consumers consider integral to Quality of Life is the natural

environment Consumers express concerns on air & water pollution, holes in

the ozone layer, acid rain, solid waste disposal, & the destruction of rainforests & other natural resources

These concerns raise the public’s level of environmental consciousness

Ex: Auto engines using electric motors, veg / natural colures, Reclamere Inc., recycles hazardous materials form old unwanted electronic equipments & disposes them by collecting


Changing Gender Roles : Changing roles of women Increasing no. of 2 income households, Male-female roles related to families, jobs, recreation, & buying

behavior are changing dramatically Example: more men shop for household necessities,

particularly groceries, where as more women purchase such products like cars, mutual funds & etc

In interesting reversal, women are buying more athletic shoes than men are,

In contrast, a growing no. of “house husbands” are staying home & assuming primary responsibility for child care & homemaking while their wives work full-time

Marketers should be aware that these 2 groups of men, “Change Adapters” & “Change Opposers” buy different items & shop in different ways.


A Premium on Time : Since 1990’s Many are working longer hours than their parents

did, since 1990’s many large companies downsized, thereby expanding the workload for the remaining employees

May people also consider it necessary to be involved in activities such as continuing education, personal fitness, & etc., also placed more emphasis on family

Time-short people seek to gain more time, if possible & maximize the benefit of whatever free time they have

Example: Many people, especially 2 income households, with more income but less time are more willing to pay for convenience

Every phase of company’s marketing program is affected by consumers’ desire for convenience


Physical Fitness and Health Most demographic & economic segments of our society seem

to reflect an increased interest in physical fitness & health Participation in fitness activities from yoga to aerobic is on

raise. Diets for wait loss; food low in salt, cholesterol & foods high in vitamins, minerals & etc.,

Fitness centers as well as manufacturers of exercise equipment have benefited

Many consumers changing their dietary habits, they are aware of the relationship between diet, heart disease & cancer.

Thus companies need to recognize & respond to the public’s growing health interest in health.

Example: Most supermarkets now stock an assortment of health foods

External Micro-Environment

The 3 additional environmental forces which are external to an organization & affect its marketing activities are:

The firm’s market Suppliers Marketing intermediariesThese represent the micro environmental forces for a

company

Company’sMarketingProgram

SuppliersMarketing

IntermediariesMarketing

IntermediariesThe

Market

External Micro-Environment

The Marketing (general definition)– How to reach customers & serve it profitable & in a socially

responsible manner 3 specific factors need to be considered

– People or organizations with needs,– Their purchasing power,– Their buying behavior

Suppliers– A business cannot sell a product without being able to make or buy

it.– We consider firms Suppliers a vital part of its marketing

environment Marketing Intermediaries

– Marketing intermediaries are of 2 types– Middlemen (wholesalers & retailers)– Facilitating organizations (transportation, warehousing, & financing

that are need to complete exchanges between buyers & sellers

Organizational Internal Environment


Research & Development

LocationCompany

Image

Human Resource

FinancialResources

ProductionFacilities

The Entire Operating Environment for a Company’s Marketing Program



Technology


EconomicConditions


SuppliersMarketing

Intermediaries

MarketingIntermediaries

TheMarket

Production FacilitiesFinancial ResourcesHuman Resources

Company ImageResearch & Development

Location

Marketing Research Meaning & Scope of MR

Definition Marketing research is a research on the manifold

problems on marketing Its purpose is to aid decision-making in marketing Systematic gathering & analysis of information is

what it does in achieving its mission The increase complexity of business activities, MR

too has been growing in complexity It has emerged as a highly specialized function of

marketing management Today MR needs specialized skills & sophisticated

techniques

Marketing Research Benefits on Marketing Research

Three Benefits on Marketing Research Research on Consumers Research on Products Research on Distribution

Marketing Research Classification of M R Jobs

Routine problem analysis & research on non-routine problems

Research on short-term problems Classification based on the actual subject of the

research Subject of the Research

– Research on Consumers - Research on Distribution

– Research on Market / Demand - Research on Price– Research on Product / Brand - Research on Advertising

& Promotions– Research on Competition - Research on Sales

Methods

Marketing Research

Helps Pick & Choose Customers, & Make Focused Offers

Helps Know Which Products Move in the Market & Why

Helps New Entrants Plan Their Channels by Studying Existing Ones

Marketing ResearchProcedure or Steps Involved in MR

Define the Problem &Research objective

Develop theResearch

plan

Collect theInformation

Analyze theinformation

Make theDecision

Present theFindings

Define theobjective

Conduct Informal

investigation

Conduct SituationAnalysis

Plan & Conduct Formal

Investigation

Analyze data & Report

Result

Conduct Follow-up

FurtherStudy

Needed?

YesEnd Project&

Report ResultNo

Marketing Research Procedure

OR


(1) DEFINING THE MARKETING PROBLEM & IDENTIFYING THE MR PROBLEM INVOLVED

Wrong Problem-Definition Misdirects Research

Specifying the Information Requirement


(2) DEVELOP THE RESEARCH DESIGNE & RESEARCH PROCEDURE

(a) DATA COLLECTION Primary Data

Interview is the most common method, – Mail interview– Telephone interview– Personal interview

Questionnaire is the most common instrument– Questionnaire development– Open-end question– Closed-end question


Secondary Data– Sources of internal secondary data

– Customer Data Base

Sources of external secondary data– News paper– Magazines– Technical journals– Trade publications– Directories– Government publication– Committee reports– Reference books– Customer Data Base can also be a External secondary data

too


SAMPLING Developing Sampling Design Choosing the sample unit (who are to be Surveyed) Choosing the sample size (how many to be

surveyed) Choosing the sample procedure (how to ensure

those who are to be interrogated are included in the sample)

Choosing the sample media (how to reach the respondents in the sample – through mail interview, personal interview or telephone interview)


STEPS INVOLVED IN A MARKET SURVEY Planning the survey

– Problem definition– Selection of the survey method– Sampling– Questionnaire development– Pilot survey

Field work– Selection & training of investigation– Interviewing / collection of data– Supervision / overseeing the field work

Processing– Processing of data – Tabulating

Analyzing & Interpretation– Editing– Interpreting data– Statistical analysis & Interpretation

Report Making– Summarizing findings & recommendations]– Report writing

Marketing ResearchMR Limitations

LIMITATIONS OF MR MR does not provide final solution, it only provides

the indicators Errors can creep in the findings of MR (Ex: sampling,

choice of research methodology, research design itself, computation, analysis also)

It could be expensive MR has a time limitation Research findings are made with reference to a

given marketing efforts, known performance of competitors, known policies of government etc., if one or more of these elements change, as they often do, research results may not remain valid.

Case Study:Is XM Satellite Radio Playing your Song?

As XM Satellite illustrates, any organization must identify & then respond to numerous Environmental forces ranging form shifting consumer tastes to advancing technology

Some of these forces are external to the firm, whereas others come from within.

Management can’t do much about controlling the external forces, but it generally can control the internal ones.

Many of these forces influence what can & should be done in the area of marketing.

Ultimately, a firm’s ability to adapt to its operating environment determines, in large part, its level of business success.

Thus, XM, like any organization, must manage its marketing program within its combined external & internal environment.

Assignment

You are the National Head – Marketing for HLL / ITC. The company is planning to launch a new confectionary product. What marketing process will you adopt and how will you analyse the environmental forces affecting to your marketing program, why should customers buy your product?

Bibliography

Marketing Management – Carvens, Hills, Woodruff - AITBS

Introduction - Marketing Management – Saxena 3rd Edition TMH

Gathering Information and scanning the environment –Meaning and concept of Macro / Micro Environment – Marketing concepts & cases – Michael, Bruce, William, Stanton & Ajay Pandit – Indian 13th Edition

Introduction to Marketing Research – VS Ramaswamy, S Namakmari 3rd Edition