INSTITUTE OF ACCOUNTANCY ARUSHA

(IAA)

DEPARTMENT POSTGRADUATE STUDIES

TERM PAPER

NAME : EDNA MOLLEL

PROGRAMME : MBA

REG.NO : MBA/ 0041/2021

MODULE NAME : MARKETING MANAGEMENT

MODULE CODE : BAG 09101

LECTURER : Dr. Msafiri

MARKETING ENVIRONMENT
INTRODUCTION

MARKETING ENVIRONMENT

Marketing environment refers to different factors and forces that affect the capacity of

businesses to maintain or build effective and successful relationships with customers.

Micro and macro elements form two major issues that shape the debate on the

marketing environment. Microenvironmental factors entail all internal aspects that

affect organisations’ capacity to serve their customers. It is crucial to note that these

elements can also influence companies’ external environments. If the company does

not consider addressing threats and weakness that range from different views it might

cause failure to reach company target.A company’s marketing environment consists

of the actors and forces outside of marketing that affect marketing management ability

to build and maintain successful relationships with target customers (Kotler, 2012)

Internal Environment

The internal environment of the business includes all the forces and factors inside the

organisation which affect its marketing operations. These components can be grouped

under the Five Ms of the business, which are:

Men: The people of the organisation including both skilled and unskilled workers.

Minutes: Time taken for the processes of the business to complete.

Machinery: Equipment required by the business to facilitate or complete the

processes.

Materials: The factors of production or supplies required by the business to complete

the processes or production.

Money: Money is the financial resource used to purchase machinery, materials, , and

pay the employees.

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The internal environment is under the control of the marketer and can be changed

with the changing external environment. Nevertheless, the internal marketing

environment is as important for the business as the external marketing environment.

This environment includes the sales department, the marketing department, the

manufacturing unit, the human resource department, etc.

External Environment

The external environment constitutes factors and forces which are external to the

business and on which the marketer has little or no control. The external environment

is of two types:

Micro marketing environment

Macro marketing environment

Micro Environment

The micro-component of the external environment is also known as the task

environment. It comprises external forces and factors that are directly related to the

business. These include suppliers, market intermediaries, customers, partners,

competitors and the public. Suppliers include all the parties which provide resources

needed by the organisation. Market intermediaries include parties involved in

distributing the product or service of the organisation. Partners are all the separate

entities like advertising agencies, market research organizations, banking and

insurance companies, transportation companies, brokers, etc. which conduct business

with the organisation(Kotler,2012). Customers comprise of the target group of the

organisation. Competitors are the players in the same market who targets similar

customers as that of the organisation. Public is made up of any other group that has an

actual or potential interest or affects the company’s ability to serve its customers.

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Macro Environment

The macro component of the marketing environment is also known as the broad

environment. It constitutes the external factors and forces which affect the industry as

a whole but don’t have a direct effect on the business (Dawson,2014). The macro-

environment can be divided into 6 parts.

Demographic Environment

The demographic environment is made up of the people who constitute the market. It

is characterised as the factual investigation and segregation of the population

according to their size, density, location, age, gender, race, and occupation.

Economic Environment

The economic environment constitutes factors that influence customers’ purchasing

power and spending patterns. These factors include the GDP, GNP, interest rates,

inflation, income distribution, government funding and subsidies, and other major

economic variables.

Physical Environment

The physical environment includes the natural environment in which the business

operates. This includes the climatic conditions, environmental change, accessibility to

water and raw materials, natural disasters, pollution etc.

Technological Environment

The technological environment constitutes innovation, research and development in

technology, technological alternatives, innovation inducements also technological

barriers to smooth operation. Technology is one of the biggest sources of threats and

opportunities for the organisation and it is very dynamic.

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Political-Legal Environment

The political & Legal environment includes laws and government’s policies

prevailing in the country. It also includes other pressure groups and agencies which

influence or limit the working of the industry and/or the business in the society.

Social-Cultural Environment

The social-cultural aspect of the macro-environment is made up of the lifestyle,

values, culture, prejudice and beliefs of the people. This differs in different regions.

IMPORTANCE OF MARKETING ENVIRONMENT

Every business, no matter how big or small, operates within the marketing

environment. Its present and future existence, profits, image, and positioning depend

on its internal and external environment. The business environment is one of the most

dynamic aspects of the business. In order to operate and stay in the market for long,

one has to understand and analyse the marketing environment and its components

properly(Hazen, 2017).

Essential for planning

An understanding of the external and internal environment is essential for planning

for the future. A marketer needs to be fully aware of the current scenario, dynamism,

and future predictions of the marketing environment if he wants his plans to succeed.

Understanding Customers

Thorough knowledge of the marketing environment helps marketers acknowledge and

predict what the customer actually wants. In-depth analysis of the marketing

environment reduces (and even removes) the noise between the marketer and

customers and helps the marketer to understand consumer behaviour better.

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Tapping Trends

Breaking into new markets and capitalising on new trends requires a lot of insight into

the marketing environment. The marketer needs to research about every aspect of the

environment to create a foolproof plan.

Threats and Opportunities

Sound knowledge of the market environment often gives a first-mover advantage to

the marketer as he makes sure that his business is safe from future threats and taps the

future opportunities.

Understanding the Competitors

Every niche has different players fighting for the same spot. A better understanding of

the marketing environment allows the marketer to understand more about the

competitions and about what advantages do the competitors have over his business

and vice versa.

FEATURES OF MARKETING ENVIRONMENT

The marketing environment surrounding a business possesses the following five

features:

Specific and general forces: The marketing environment is made up of both specific

and general forces. Specific forces such as customers and investors directly affect the

business’s working, while general forces like social, legal, technological, or political

factors indirectly affect the business’s working.

Complex: The marketing environment is a complex interaction of several elements,

factors, conditions, and forces that affect the business’s ability to establish a

relationship and serve its customers.

Dynamic: The environment surrounding a business is very dynamic as its constituents

do not remain stable and change over time. Moreover, while marketers can control

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some of the marketing environment elements, several elements are out of the

marketer’s control.

Uncertain: Forces that rule the marketing environment are highly uncertain, and it

becomes tough for a marketer to predict market forces to develop marketing startegies

and plans.

Relative: Marketing environments are also relative in nature. A specific product might

have a good demand in the USA but not in India because of the different marketing

environments in the two countries.

WHAT IS STP MARKETING?

STP marketing is an acronym for Segmentation, Targeting, and Positioning – a three-

step model that examines your products or services as well as the way you

communicate their benefits to specific customer segments.In a nutshell, the STP

marketing model means you segment your market, target select customer segments

with marketing campaigns tailored to their preferences, and adjust your positioning

according to their desires and expectations.STP marketing is effective because it

focuses on breaking your customer base into smaller groups, allowing you to develop

very specific marketing strategies to reach and engage each target audience. In

fact, 59% of customers say that personalization influences their shopping decision and

another 44% said that a personalized shopping experience would influence them to

become repeat customers of a brand.STP marketing represents a shift from product-

focused marketing to customer-focused marketing. This shift gives businesses a

chance to gain a better understanding of who their ideal customers are and how to

reach them. In short, the more personalized and targeted your marketing efforts, the

more successful you will be.

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The STEP Formula

If you are looking for a simple way to remember and summarize the STP marketing

concept, the acronym STEP is extremely useful:

Segmentation + Targeting Equals Positioning

This formula clearly illustrates that each segment requires tailored positioning and

marketing mix to ensure its success. Let’s take a closer look at each of the three steps

in the STP marketing model.

1. Segmentation

The first step of the STP marketing model is the segmentation stage. The main goal

here is to create various customer segments based on specific criteria and traits that

you choose. The four main types of audience segmentation include:

Geographic segmentation: Diving your audience based on country, region, state,

province, etc.

Demographic segmentation: Dividing your audience based on age, gender,

education level, occupation, gender, etc.

Behavioral segmentation: Dividing your audience based on how they interact with

your business: What they buy, how often they buy, what they browse, etc.

Psychographic segmentation: Dividing your audience based on “who” your potential

customer is: Lifestyle, hobbies, activities, opinions, etc.

2. Targeting

Step two of the STP marketing model is targeting. Your main goal here is to look at

the segments you have created before and determine which of those segments are

most likely to generate desired conversions (depending on your marketing campaign,

those can range from product sales to micro conversions like email signups).

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Your ideal segment is one that is actively growing, has high profitability, and has a

low cost of acquisition:

Size: Consider how large your segment is as well as its future growth potential.

Profitability: Consider which of your segments are willing to spend the most money

on your product or service. Determine the lifetime value of customers in each segment

and compare.

Reachability: Consider how easy or difficult it will be for you to reach each segment

with your marketing efforts. Consider customer acquisition costs (CACs) for each

segment. Higher CAC means lower profitability. 

There are limitless factors to consider when selecting an audience to target – we’ll get

into a few more later on – so be sure that everything you consider fits with your target

customer and their needs.

3. Positioning

The final step in this framework is positioning, which allows you to set your product

or services apart from the competition in the minds of your target audience. There are

a lot of businesses that do something similar to you, so you need to find what it is that

makes you stand out. 

All the different factors that you considered in the first two steps should have made it

easy for you to identify your niche. There are three positioning factors that can help

you gain a competitive edge:

Symbolic positioning: Enhance the self-image, belongingness, or even ego of your

customers. The luxury car industry is a great example of this – they serve the same

purpose as any other car but they also boost their customer’s self-esteem and image.

Functional positioning: Solve your customer’s problem and provide them with

genuine benefits.

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Experiential positioning: Focus on the emotional connection that your customers have

with your product, service, or brand.  

The most successful product positioning is a combination of all three factors. One

way to visualize this is by creating a perceptual map for your industry. Focus on

what is important for your customers and see where you and your competitors land on

the map.

BENEFITS OF STP MARKETING

If you aren’t already convinced that STP marketing is going to revolutionize your

business, we’re breaking down the key benefits that STP marketing has over a

traditional marketing approach. Because STP focuses on creating a precise target

audience and positioning your products/services in a way that is most likely to appeal

to that audience, your marketing becomes hyper-personalized. With personalization:

Your brand messaging becomes more personal and empathetic because you have your

customer personas and know exactly whom you’re talking to;

Your marketing mix becomes more crystalized and yields higher return on investment

because you’re no longer wasting budget on channels that your audience simply

ignores; Your market research and product innovation become more effective because

you know exactly whom to ask for advice and feedback in the development phase.

Yieldify’s recent research shows that eCommerce leaders are adopting

personalization at an unprecedented rate – 74% of eCommerce sites now claim to

have now adopted some level of personalization strategy. Their reasons? Fifty-eight

percent found that personalization helps increase customer retention, 55% cited

conversion and 45% found that personalization actually helped minimize the cost of

new customer acquisition. 

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Finally, STP marketing levels the playing field. The framework allows small

businesses and startups to find success in their niche markets when they normally

wouldn’t have the reach to compete with the larger whole-market businesses in their

industry.

CONCLUSION

Every business, no matter how big or small, operates within the marketing

environment. Its present and future existence, profits, image, and positioning depend

on its internal and external environment. The business environment is one of the most

dynamic aspects of the business. In order to operate and stay in the market for long,

one has to understand and analyse the marketing environment and its components

properly.An understanding of the external and internal environment is essential for

planning for the future. A marketer needs to be fully aware of the current scenario,

dynamism, and future predictions of the marketing environment if he wants his plans

to succeed.

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REFERENCES

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glocalisation’, Journal of Global Business Issues, vol. 9, no. 1, pp. 11-18.

Dawson, J., 2014. The Marketing Environment (RLE Marketing). Routledge.

Hazen, B, Mollenkopf, D, Wang, Y 2017, ‘Remanufacturing for the circular

economy: an examination of consumer switching behaviour’, Business Strategy & the

Environment, vol. 26, no. 4, pp. 451-464.

Petkovska, T 2015, ‘The role and importance of innovation in business of small and

medium enterprises’, Economic Development, vol. 17, no. 1/2, pp. 55-74.

Sarbjit, S 2017, ‘SWOT analysis of special economic zone’, Journal of Accounting,

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Siciliano, J 2016, ‘SWUF analysis: a new way to avoid the “opportunity” error of

SWOT’, Journal of the Academy of Business Education, vol.17, no. 1, pp. 201-208.

Kotler, P., 2012. Kotler on marketing. Simon and Schuster.