As stated earlier, marketing is a system and it operates within a wider system called environment. Several factors inside and outside a business enterprise influence its marketing and other activities. These factors or forces are collectively known as © marketing environment. 2.1 NATURE OF MARKETING ENVIRONMENT According to Philip Kotler, marketing environment refers to the external factors and forces that affect a firm’ ability to develop and maintain successful transactions and relationships with its target customers. Marketing environment includes all theOe eee 2.2 idl ne decisions and activities of an enterprise, rces consist of the resources stomers, competitors, d legal, technological, economic hat influence —, i | or external. These forces may Z and marketing mix of the company: intermediaries, suppliers» and natural factors. ronment are within the control of a firm some of the elements in marketing envi : Sr wile other forces are beyond its control. ite eT iaen ae os ah ae ; acaba isation, (stable) or dynamic. Since liberalisation an glol aie : — in India has become turbulent. Marke ment is com} of several interacting forces. is environment means the to the marketing of a product MARKETING ENVIRONMENT .s a marketer to: ds and preferences of customers; for satisfying the unmet needs, ting environ! tality of forces and entities that surround Thus, marketin} ; or service. and potentially influence 2.2 NEED FOR UNDERSTANDING Continuous monitoring of environment enable: (i) understand and analyse the changing nee (ii) take initiative in launching products/services anticipate and counter the moves of competitors; (iii) mix to fit the requirements of consumers; (iv) design and modify marketing (v) identify and anticipate the opportunities and threats for the enterprises (vi) acquire strengths and remove weaknesses for faci iti ane cing the threats and exploiting (vii) adapt the firm to the uncontrollable environment. Environmental scanning involves co: ms of time, money, and efforts. Bu! ig involves costs in tert Ys the benefits accruing from such scanning far exceed the costs. 8 8 Need f A , i pia a snsins Bien Eaveonmient has increased in recent years due to fast ng n road, Economic conditi iti ee itions, political situati : pele Aste serio and technology have ons we — In order to survive and sels foaies competition from agile rations improve products and servic Efaniel scanty bases fms ae cn established firms like Bajaj Auto ha oh to provide great value to ace wal : ave learnt a bi ; granted can be disastrous. New entrants like rhea eae a ait inetie Honda capi"23 Marketing Environment *” market at the cost of Bajaj Auto because these firms brought out trendy products that better matched the needs of young generation. ‘ 2.3. MICRO ENVIRONMENT Marketing environment may be divided into two broad categories : 1. Micro environment, and 2. Macro environment. | Micro environment implies the factors and forces in the immediate environment | which influence the company’s ability to serve its market. These forces are related to a specific enterprise and form part of its total marketing system. These are the direct action elements of the environment or the immediate external forces which influence marketing plans and operations of the company. Micro environment consists mainly of the following forces : () Suppliers, (ii) Market intermediaries, | (iii) Customers, | (iv) Competitors, and ei (v) Public. Figure 2.1: Components of Marketing Environment Micro environment begins with the company’s environment itself wherein the marketing managers are necessarily required to handle : (i) brand managers, (i) marketing researchers, ee24 Marketing Managen (iii) advertising and sales promotion specialists, (iv) sales managers, and (v) sales representatives, All these selling personnel combined together hold the fort. They do help developing the marketing plans for all the existing products and are also helpful developing new products, Keeping with the company’s environment, the market ‘managers in consultation with top management—Finance and Accounts, Resear and Development, Purchase and Manufacturing—make decisions making th market proposals. These proposals are duly approved by top management befo marketing managers are asked to implement them. The marketing managers, tht are required to see through the potential conflicts within the company and betwe: marketing and other functions. In order to strike balance here they are required Negotiate with internal company groups to chalk out a course of action with Purpose to design and implement the marketing plans. 1. Suppliers: Suppliers are either individuals or business houses. They, combine together, provide tesources that are needed by the company. Now the compar necessarily should go for developing spe. cifications, searching the potential supplier identifying and analysing the suppliers, and thereafter choose those suppliers wh offer best mix of quality, delivery, reliability, credit, warranties, and obviously lo cost. The developments in the sup pliers’ environment have a substantial impact 0 the marketing operations of the company since su pply planning has become mot important and scientific in recent years, To the extent that companies can lowe their supply costs and increase their product quality, they in natural course can gai a competitive advantage in the market. Price trends need constant check and carefu scrutiny. Supply shortages have to be fully monitored and plans should have to b made to avoid the grip of supply shortages on marketing efforts. Regardin advertising, marketing, research, sales, training, and marketing consultancy, th marketing managers are sole decision makers. The top management may prepare broad policy framework but the decision in these matters lies on the shoulders 0 marketing managers. 2, Market Intermediaries: Market intermediaries are either business houses 0 individuals who come to the aid of the company in promoting, selling, an‘ distributing the goods to the ultimate consumers, They are middlemen (wholesalers retailers, agents), distributing agencies, market service agencies, and financit institutions. Be they any type of intermediary the company must take into activé consideration the following major points :‘Marketing Environment 25 1. Middlemen come into being to help overcome the discrepancies in quantities, place, time, assortment and possession that would otherwise exist in a given condition. . It is advantageous and efficient to work through the established marketing channels instead of creating one and thus going for experiments. . Of course, it is not easy to select and work with middlemen but the marketing managers must ensure an effective management and satisfaction of marketing channels to enlist their long-lasting support on better terms. If this is not ensured there is very chance that the marketing efforts may have to face diminishing support or sometimes may face even exclusion. . The marketing managers have to decide the most cost effective modes of transportation while balancing the considerations of cost, delivery, speed and safety. .. The marketing management has also to constantly review the performance of both middlemen and others helping its efforts periodically. If necessary, it may take recourse to replacement of those who no longer perform at the expected level. . The marketing management wing of the company may feel the shortage of funds. The company’s performance may be affected accordingly. The credit costs have to be weighed in all their perspectives. Business plans have to be developed as per such credit raising capacity and costs. Also it is necessary to develop strong relationships with both outside and inside financial intermediaries, 3. Customers: The company establishes faithful links with both suppliers and middlemen with two objectives in mind : om 2. To supply appropriate products and services to its target market; and To see that consumer satisfaction is provided as per the dictates of the target market. The target market of a company is usually of the following five types: © Consumer market, i.e., individuals and householders. © Industrial market. i.e., organisations buying for producing (manufacturing) other products and services for the purpose of either earning profits or fulfilling other objectives or both.26 Marketing Managemen, © Reseller market, i.e., organisations buying goods and services with a view to sell them to others for a profit. These may be selling intermediaries and retailers. © Government and other non-profit market, i.e., those buying goods and Services in order to produce public services. They transfer the goods and services tg those who need them for consumption in most of the cases. International market, i.e., individuals and organisations of nations other than homeland who buy for either consumption or for industrial use or for both, They may be foreign consumers, producers, resellers and governments. It must, however, be not forgotten that consumer satisfaction is the prime motto of a company. 4. Competitors: No company stands alone in serving and satisfying the needs of a customer market. It faces competition. It is, therefore, necessary to build an efficient system of marketing. This helps the company in facing a host of competitors with confidence and, of course, with better results, Identification: ofcompetitors is of utmost importance. Then after these competitors: need monitoring. This isnotall. The company, in order to come out successfully, has to adopt means which may helpit to outmanoeuvre the competitors and capturing the customer's loyalty is not enough. The loyalty so earned has to be maintained. For this purpose the company has to maintain such a marketing system which may be able to maintain the loyalty for a long run. The competitive environment consists of certain basic things which every marketing manager has to take note of. Phillip Kotler is of the opinion that the best way for a company to grasp the full range of its competition is to take the viewpoint of a buyer. What does a buyer think about that which eventually leads to purchasing something? Kotler has illustrated by taking a person who has been working hard and needs a break. He may ask to himself as to what should he ought to do for attaining this break after a sustained hard work. Among the possibilities that may Pop into his mind may be socialising, exercising, reading, going to cinema, watching television, hotelling, etc. Kotler has also explained the types of competition (Desire, Generic, Form and Brand Competitions) and has summarised by pointing out that a company must keep four basic dimensions in mind, which can be called the four Cs of market positioning. It must consider the nature of the Customers, Channels, Competitors, and its own Characteristics as a company. Successful marketing is a matter of. achieving an effective alignment of the company with customers, channels, and competitors. 5. Public: General public do take interest in the business undertaking. The compat has a duty to satisfy the people at large along with competitors and the consumers:Marketing Environment 27 This is not a futile exercise. But it is an exercise which has a larger impact on the well-being of the company for tomorrow's stay and growth. The actions of the company do affect the interests of other groups also. These other groups are those who form general public for the company, who must be satisfied along with the consumers of the company’s products. A public is defined as any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives. Public relations is certainly a broad marketing operation which must be fully taken care of. The company expects some response from this public as well. Goodwill, favourable reactions, donation (of time as well as money) and hidden potential future buyers are a few of the responses which a company expects from the public. To build such a goodwill and to seek favourable response, it is very much necessary to satisfy the public as well. Kotler in this regard has stated that companies must put their primary energy into effectively managing their relationships with their customers, distributors, and suppliers. Their overall success will be affected by how other publics in the society view their activity. Companies would be wise to spend time monitoring all their publics, understanding their needs and opinions, and dealing with them constructively. 2.4 MACRO ENVIRONMENT Macro environment consists of the indirect action elements or remote forces in the marketing environment. They affect the overall climate in which the marketing department functions. These forces indirectly influence the firm's ability to operate in the market effectively. Macro environment consists of the following components. 1. Demographic Forces: Demography is the study of population and its characteristics. In marketing demographic environment implies size and growth of population, age, sex, education, incomewise distribution of population. Demographic forces are very important because people make up the market. In order to market his product/service effectively, a marketer must understand the needs, habits and behaviour of people. These differ with age, sex, education, income, family influence, etc. Demographic study provides a consumer profile which serves as the basis of market segmentation. India’s population is estimated to be more than 1,250 million people. It is the second largest in the world and is growing about 2 per cent per annum. Population is a problem in India and the Government is using social marketing (family planning schemes) to restrict population growth.. Marketing Managemen, In recent decades, market has expanded due to rise in per capita income ang education level. Demographic data help in preparing geographical marketing plans; household marketing plans, age and sexwise plans, etc. These plans may prove to be reliable in the short run. The firm may forecast the major demographic trends in order to achieve good results. It is true that a marketer is capable of developing substantial control over a target market (group of consumers). But he cannot have any control over the population characteristics, viz., age, income, marital status, occupation, education, etc. Moreover, demographic structure is seldom static for long and changes in demographic composition often test the resiliency of a marketing firm. Rarther, these changes influence the behaviour of consumers which, in turn, will have a direct impact on the market place. The ripples of these changes will reach the organisation compelling it to alter or amend the existing marketing practices. In short, marketing firms will have to continuously measure the changes qualitative as well as quantitative that are taking place in the population structure. To avoid negative consequences brought on by active consumer groups, a marketer must communicate with consumers, anticipate problems, respond to complaints, and make sure that the firm operates properly. Political forces Figure 2,2: Macro EnvironmentMarketing Environment PF 2, Economic Forces: Economic environment comprises the country’s economic @ (i) (ii) (iv) system, structural anatomy of the economy, nature of factor endowment, economic policies and markets. Nature of economic system: The economic system of a country consists of. ownership of means of production, production relations, role of planning, price mechanism, etc. In a capitalistic system there are few restrictions on free enterprise whereas there is no freedom of business in a communist system. India has a mixed economy wherein private enterprises have to compete with the public sector. Structural anatomy: It refers to the composition of national output, occupational distribution of labour force, capital formation, trade composition, etc. These factors highlight the structural balance or imbalance between different sectors like agriculture, industry, trade, services, etc. India is mainly an agricultural country though industry contributes a significant proportion of the total national income. Figure 2.3: Effect of Economic Conditions on Marketing Factor endowment : It implies supply of land and capital, size and general health of the labour force, entrepreneurial talent and other resources in the country. India is a labour-surplus and capital-scarce country. Income distribution, savings, debt and availability of credit are other important elements of economic environment. Role of planning : Industrial policy, fiscal policy, monetary policy, and other economic policies exercise a significant influence on marketing, Five-year Plans in India have affected marketing plans and programmes in different industries. Markets ; Conditions in capital market, labour market and factor market affect marketing activities.2.10 : Marketing Managemen ‘Table 2.1: Implication of Policy for Marketing Process Organisational system Marketing Objectives : Rate of growth, Rate of = Market share, etc. will be affected Marketing Internal and External Resources are affected. Opportunities Uncontrollable variables get altered due to effect of safety and health needs. changes in the level of economic activity, etc, Marketing Strategies Restriction on product features, controls on package, use of materials, etc. Price, promotion, distribution are also affected. Economic forces influence marketing both directly and indirectly. Directly these forces affect costs and prices of products and services. Indirectly, economic forces affect the purchasing power of people. Money supply, interest rates, price level, consumer credit and other economic conditions influence marketing plans and programmes. For example, growth of consumer credit in India has expanded market for real estate and consumer durables. Trade cycles affect sales. During inflation consumers tend to curtail or postpone expenditure on luxury products. On the other hand, during a period of prosperity, consumers are less conscious of small price differences and tend to buy luxury goods. Study and knowledge of economic forces is essential for preparing effective marketing plans. No firm is immune to economic forces although some are less vulnerable than others. Anticipation of future economic conditions will enable the firm tc devise appropriate marketing strategies. Adoption of marketing strategies in tun¢ with different economic phases is outlined in Table 2.2. 3. Social and Cultural Forces: The socio-cultural environment consists of casti structure, customs and conventions, mobility of labour, educational system, cultura heritage, social beliefs and values, lifestyles, etc. Increase in knowledge and scientifiv progress have led to rising consumer expectations. Consumers now expect bette: quality products and greater information from marketers. Growing consumerisn indicates consumer dissatisfaction. Social and cultural forces are very important to a marketer. Peoples’ attitudes, custom and values influence the type of products and services demanded. For example changes in the attitudes of people towards food and clothing in India have resulte‘ in the growth of food processing and garment manufacturing firms. Socio-cultur@ environment is always dynamic and cable TV is changing social and cultural value! in India. Business firms must make necessary adjustments in their marketing effort to cope with these changes. Social and cultural forces also determine the code a conduct marketers should follow. Social pressures on business are growing.2.12 Marketing Manage, i 'o select their own life fish a Walmart found that Chinese consumers preferred t. i installed ¢ sea food. So. their stores began displaying the meat uncovered and ii led § tanks, leading to increase in sales. In recent years, the concept of social responsibility a oe ts aed i ii cept. The im literature as an alternative to the marketing con ion of socia responsible marketing is that business firms should take the lead in ne socially harmful products (e,g.. cigarettes). As such social responsibility has becon another legitimate pressure of the market place. The: Pressure groups who imy the following diagram: re are innumerable number, Pose restrictions on marketing process as may be seen fro Activist Consumers Social Workers Cs ea Mass Media Professional Groups Politicians | It may be noted that legal and the socia is found that the legal Social pressure devel Practices. It is interes marketing, they are unable t centre round the following (a) (b) () (d) Figure 2.4: The Interaction of Pressure Groups and its Impact on Marketing I environme: environment is an off-sho ‘OPS as a consequence of t iting to note that though ps nts are closely related. Often! ot of social pressures, Again, th The proliferation of trivial prod Non-replenishable s, i é ucts and Services leads to wastage carce resources,Marketing Environment - (e) The goal of profit maximisation penetrates deeper into all activities of the firm rather than the social obligation. 4, Political and Legal Forces: The politico-legal environment of a country consists of the political organisations, political stability, constitutional provisions affecting business, government intervention in business, foreign policy, legal framework, court rulings, regulating agencies, etc. In India, Government policy was responsible for the flight of multinationals like IBM and Coca Cola in 1978. As the policy regarding multinationals and foreign investment has been liberalised, a large number of multinationals have entered the country even in low tech areas like food processing (Pepsi), electronics (Sony), cars (Hundai), etc. Now power, communication, roads, ports and other infrastructural areas have been opened up for the multinationals. In recent times, political instability, nuclear tests, economic sanctions, South East Asian Crisis, and World Trade Organisation (WTO) have influenced marketers in India. Political and legal forces determine public policy. Marketers must understand the public policy and its implications. In some cases it may enhance marketing opportunities while in other cases it may restrict the same distribution systems. Marketing decisions caunot be taken without taking into account the developments in political and legal field. Government agencies, political parties, pressure groups and laws create tremendous pressures and constraints for marketing management. Laws affect product design, pricing and promotion. Irrespective of the political ideologies, intervention in the marketing process has almost become common in every nation. ‘ The history of business legislation during the past hundred years has been characterised by three distinct legislative philosophies: (i) To prevent monopoly and protect competition, (ii) To protect individual consumers, and (iii) To protect society. The legal environment is also referred to as Public Policy environment. The vast governmental network of laws and regulations, policy decisions, government bureaucracy, and the legislative processes have varied impact on marketing strategies. Fig. 2.5 depicts how different public policy actions reach the marketing activities of a firm, Public policy may prohibit many practices that were common earlier. In India, the Consumer Protection Act and other laws designed to protect consumers Tequire business firms to avoid unfair practices. Marketing managers must fully understand and respect political and legal forces. ;Marketing Manage, 2.14 Legislative Action Executory Action Judicial Action Enactments Regulatory Agencies Case Decisions Marketing Figure 2.5: The Impact of Legal Environment on Marketing es The increasing complexity of legal environment makes the manufacturers to be constant vigil of the situation. It may be necessary that basic organisational struct: has to be altered to avoid constraints arising out of the public policy implementati In the area of marketing strategy, the net effect of public policy is to prohibit m: practices that had once been quoted common regardless of their ethics. There mi be opportunities enhanced in some instances but the general effect is negative. Multinationals like Coca Cola and IBM had to flee India during 1977 due to hos political environment. The positive political situation has permitted th corporations to again operate in the country. The impact of political and legal environment may be summarised as under: () Substantial amount of legislation regulating business exists to prot consumers from unfair business practices, to avoid unfair competition. safeguard small firms and to conserve foreign exchange. (ii) Marketing managers are required to get full knowledge and understand of political and legal forces for achieving their goals. 5. Technological Forces: Science and technology have transformed life a consumption patterns. Technological developments determine the type and qual of products and services to be produced and the nature of plant and equipm' used. Computers, pocket-sized water purifier (Aqua pen), digital watches, Inter? E-mail. Fax, frozen foods, are some of the examples. ‘Technology influences prod! development, packaging, prices, and promotion. Advances in technology are an important uncontrollable environment for market in two ways: First, they are totally unpredictable: and secondly, adoption of technology often is prevented by constraints imposed by internal and exte!" resources. At the same time it should be remembered that technological prose creates new avenues of opportunity and also poses threat for individual compa™‘Marketing Environment an ‘As an opportunity, technology is a source of new and better products. It is an easy way to gain a differential advantage over competitors with technologically superior roduct. Asa threat, technological development by competitors may result in loss of markets. Product advances in copier instruments offer a good example in this context. Similarly, the technology has contributed shifts from Black and White TV sets to Colour sets and now to the three-dimensional sets. Quartz and Digital watches account for a substantial share of all timepieces sold. The fact that technology is a major force in business and industry, its consequent stresses on marketing cannot be denied. A new development can give birth to new | industry or make an existing, profitable product obsolete. The one possible way to | avert the exigencies, in such circumstances, is to strengthen Research and | Development (R&D) and to imbibe a preparedness at all levels of the organisation. The technological developments and consequent industrialisation have caused another problem to crop up. viz., environmental pollution. Business firms have to make more capital investments for expensive pollution control devices which ultimately raises the cost of production resulting in loss of markets. It is true that pollution problem is an uncontrollable variable for the individual business firm. But it should also be noted that pollution creates three kinds of opportunities 1 for those firms that have the foresight to address these difficulties, and the imagination and technical skill to solve them. First, it creates markets for improved methods of waste treatment and methods for recycling. Second, a marketing challenge to devise alternative ways to developing inexpensive packaging methods and materials. Third, an opportunity to find productive and socially beneficial uses for industrial, animal and human wastes. The technologies, viz.. micro-electronics, computers, robotics, telecommunications are all destined to affect future of many marketing organisations. Marketing management is very much required to pay attention to the changing technological environment and to see as to how new technologies can serve best the human needs, Marketing management today has to establish a very close relation with R&D experts and has to draw a plan whereby market-oriented research is encouraged. Marketing managers have to be alert enough and have to be responsive to the negative aspects of any innovation that “might harm the users and create distrust and opposition”. They must watch carefully the trends in general. In Particular. it must see through the: 1. Accelerating pace of technological change so as to assess the impact on consumption patterns and marketing systems. 2. Unlimited innovational opportunities so as to accept the challenge in each case and develop practical affordable versions of these products.Marketing Managem, 7 2.16 Budgets so as to modernise the Tesear 3. Higher Research & Development , laboratories, to induct highly qualified and trained research team, and h to achieve a stronger marketing orientation by accepting major challeng, and solving major scientific problems. 4. Concentration on minor improvement rather than on major innovations an discoveries so as to avoid copying competitors’ products, making minor featy; and style improvements and to proceed cautiously with a view to becom offensive in improvements and developments. 6. Physical/Natural Forces: Ecology is the study of relationship between livin, things and their surroundings. With the acceptance of societal marketing concep marketers are expected to pay attention to the allocation and conservation of scarc Fesources So as to maintain the ecological balance. They must avoid pollution of air water and noise. In India, the Government has introduced Eco mark for marketing Eco-friendly products. Need for conservation of power and other sources of energy, and forest wealth have affected wood-based and other industries, Impact of physical environment on marketing decision-making may be enumerated as below : 1. There should be a balance between the attention paid on efficient service of the consumers’ needs and costs involved in term of environment imbalances, if any, in serving these needs and wants, N + The company management has to take into active consideration while chalking out marketing plans and Programmes. The environmentalists express concern about strip mining, forest depletion, factory smoke, loss of recreational opportunities and other health hazards because of rash and unmindful industrialisation following profit-oriented marketing plans and Programmes. the quality of life it can 's too are interested in ice the ecological balance . The marketing management is more concerned about tl offer through marketing efforts, The environmentalist: quality of life. But they are not prepared to sacrifi and quality of the environment, A marketing decision must, therefore, strike a balance between the two assuring that ecological balance will be maintained for better tomorrow, The present has to Sacrifice fc flor tomorrow, 4. It is a pertinent demand of the environmentalists to get included the environmental costs while taking a Production and marketing decisions. Unles this is done, marketing efforts may succeed today but surely these efforts a! bound to fail tomorrow and day after,‘Marketing Environment Hy 5, Environmentalists are of the view that packaging is a waste and advertisements lead people to consume what actually they would have not liked to consume in normal circumstances. The marketing management, on the other hand, feels that packaging is a convenience for both the marketers and consumers. For them, advertisement is an education and the consumers need education in every sense of the term. Here again, marketing decision will have to strike balance in order to maintain the ecological balance. 6. Shopping centres are a boon for both the marketers and consumers. Less energy, less time, less expenditure, and more satisfaction for both the marketers and consumers are a few of the objectives behind these shopping centres. But environmentalists are against such centres on the plea that these centres are more prone to pollution and ecological disturbances. Here marketing decision is hard. But hard decisions are also to be taken for a better future. 7. There cannot be two opinions that steel enterprises, ferrous and non-ferrous industries and public utilities have led to huge investment in pollution-control instruments and devices, and also costlier fuels. The auto industries, the soap factories, the gasoline industries, etc. are health hazards for the surroundings. These industries do not like environmental restrictions and regulations. The products of these companies go costlier because of such costlier devices since these costs are absorbed and then passed over to the consumers. Marketing management is hard pressed on this point. Here again a hard decision or two is called for. What should the marketing management do? What should be the decision under these circumstances? Marketing manager’ life has become too complicated these days. He has to: (i) check into the environmental consequences of the product, its packaging and above all its production processes; (ii) raise prices to cover environmental costs (no doubt these costs are ultimately borne by the consumers, and it is also a fact that such products are harder to sell); (iii) recognise the validity of respecting the environment; (iv) introduce the environmental criteria while deciding on product ingredients, design, and packaging; direct its Research & Development wing to find out ecologically superior products so as to make it a major selling point of the product; and WMarketing Managemen 2.22 2.5 STEPS IN CONSUMER DECISION-MAKING roceed while making their buying decision, ough which consumers pt . g cen aa ion process. This process consists of fiy, is known as the consumer buying decisi stages as shown in Fig. 2.10. ji Purchase Post-purchage Problem. Information | _,) Evaluation of chs recognition [| _ search altematives [>| decision [>| evaluation Figure 2.10 : Consumer Buying Decision Process These stages in consumer buying decision process are explained below: 1. Problem Recognition: The buying decision process starts when the consumer recognises an unsatisfied need. This unsatisfied need may arise internally (eg. hunger or thirst) or by an external stimulus (e.g. a TV ad for a new car). A consumer is said to recognise an unsatisfied need when there is a discrepancy between what the consumer wants and what actually he is. The intensity of an unsatisfied need depends upon the magnitude of the difference between the desired state and the actual state; and the relative significance of the need. Problem recognition has following implications for marketers: (a) Marketers need to identify these stimuli that cause the buyers to recognise particular need. (b) Marketers need to convince the consumer that their product offering offersa superier solution. (c)_In case the recognition is not strong enough the marketer needs to make the consumer aware that a problem exists and then convince the consumer of superior solution. A buyer recognises the problem when he becomes aware of the desired state and an actual condition. For example, a housewife who has been cooking food on het gas stove starts feeling the need for a microoven. She recognises that a difference exists between the desired state—a microoven and the actual condition—a gas stove She, therefore, decides to buy a microoven. The speed with which a consumer rec -gonises the probl i low. Sometimes, a person has a problem FU eee ste ast ort n or need but is unaware of it, Marketers U* advertising, personal selling and other methods to help trigger recognition of s needs or problems. For example, a firm marketing microoven may show in ' advertisements the various types of dishes which can be prepared with the help” microoven and which are not possible on a Bas stove,Marketing Environment 223 2. Information Search: After recognising the problem or need, a buyer searches for _ product information that can resolve the problem or satisfy the need. For example, the housewife may search for information about different types and brands of microovens. She acquires information over time. There are two types of information search. In the internal search, she searches her memory for information about microovens. In case necessary information is not retrieved from memory, she seeks additional information through external search which consists of friends, relatives and the media. Consumer information sources fall into four groups. (i) Personal sources: Family, friends, neighbors, acquaintance. (i) Commercial Sources: Advertising, salespersons, dealers, packaging, displays. (ii) Public sources: mass media, consumer, rating organizations. (iv) Experiential sources: Handling, examining, uses the product. A consumer study has shown that word of mouth communication has stronger impact on consumer judgements than print media. Consumers generally view information from public sources (government reports, publications and news) as highly credible. Marketers repeat advertisements and use visuals to increase consumer learning of information. Information is sought on alternative brands available, the features an ideal brand should contain and the features present in each brand. The nature of information search undertaken depends upon the type of decision, and the brand’s position in or out of the evoked set. 3. Evaluation of Alternatives: A successful information search yields a number of brands that a buyer views as possible alternatives. This group of products/brands is called the buyer's evoked set. For example, an evoked set of microovens might include those made by LG, Whirlpool, Samsung and Philips. Various objective and subjective characteristics that are important to the buyer are used to evaluate the alternatives. Cost and warranty are examples of objective criteria whereas brand image and style are examples of subjective characteristics. The buyer also assigns 4 certain degree of importance to each criterion. Using the evaluation criteria, a buyer rates and ranks alternative brands. In case the buyer is not able to decide the brand after evaluation, further information search may be necessary. Marketers influence evaluation by framing the alternatives. Framing can make a characteristic seen more important to a consumer. For example, by stressing the sleek style of his microoven, a marketer can direct the buyers’ attention to his product of superiority. But framing can influence mainly inexperienced buyers. Once evaluation of alternatives yields one or more brands that the consumer isMarketin, 2.24 § Manage r moves on to the next stage. A marketer can influey the evaluation by communicating brand features. For this Purpose the marl must understand the criteria used by consumers to evaluate alternative brand, Some basic concepts will help us understand consumer evaluation Processes, (1 ‘The consumer is trying to satisfy a need. (2) The consumer is looking for certain benefit from the product solution. (3) The consumer sees each product as a bund of attributes with varying abilities of delivering the benefit sought to satisfy this need. This attributes of interest to buyers vary by product. 4. Purchase Decision: In this stage, the buyer chooses the product or brand to be bought. Product availability may influence which brand is purchased. For example, if the brand ranked highest is unavailable, the buyer may purchase the brand ranked second. During this stage the buyer also chooses the seller from whom he or she will buy the product. The consumer also decides how much to buy, when to buy and how to pay for the purchase. The terms of sale (price, delivery, warranty, maintenance agreement, installation and credit arrangement) are settled. Finally, the actual purchase takes place. 5. Post-purchase Evaluation: After the purchase, the buyer begins evaluating the product to ascertain if its actual performance meets the expectations. Many criteria used in evaluating alternatives are applied again for this purpose. The outcome of i this stage is either satisfaction or dissatisfaction. Shortly after purchasing an expensive product, a buyer doubts whether he made the right decision. This is called cognitive dissonance. For example, after buying a microoven for Rs 10,000 a housewife may wonder whether she purchased the right brand and quality. A satisfied consumer See ae eee choice. This is called post purchase aa Te ae eee Post-purchase use and Disposal: Marketers should also monitor how ss and dispose of the product. If consumers store the product in a dock me : is probably not very satisfying and word-of-mouth will be not bei aa “ sell or trade the product new product sales will be depressed. Chinaare a 7 _ mi sometimes, attempt to reduce copii é howing that consumers are very satisfi eon buyers, Generally, high involve! ment ed alte ‘ance because these cause a relativelY native. The marketers need to study willing to buy, the coi:sume!‘Marketing Environment ¢ 2.25 25 Dn toss, how consumers use their products. Study of post purchase behaviour helps a marketer in: « Improving product design Identifying effective themes for marketing communication © Developing more effective packaging ¢ Finding new uses of the product It is necessary to clarify some points about consumer buying decision process. First, the actual act of purchasing is only one stage in the process, and usually not the first stage. Second, all consumers do not necessarily pass through all stages in the buying process. Buyers may end the process at any stage. All consumers do not reach the purchase stage. Finally, all consumer decisions do not always include all the five stages. Persons engaged in extended problem solving usually go through all stages of this decision process. But those who engaged in limited problem solving and routine response behaviour may omit some stages. 2.6 CHARACTERISTICS OF INDUSTRIAL MARKETS Industrial markets means the organizations which buy items for use in their production systems. Raw materials, components, accessories, semi-processed items, installations, machinery and equipments etc. are the industrial goods purchased by them. The main characteristics of industrial markets are described below: 1. Derived Demand: Demand in industrial markets is derived from the demand for consumer goods. For example, Tata Motors buys steel because consumers buy its vehicles. When consumer demand for vehicles declines, the demand for steel and other products used to make vehicles will decline. Few but Large Buyers: In industrial market, buyers are few in number. But each buys in large quantity. For example, when MRF sells replacement tiers to final consumers, its potential market includes millions of consumers. But each will buy only four types. On the other hand, when MRF sells tyres in industrial market a few car manufactures are the buyers. But each manufacturer will buy thousands\millions tyres. 3. Concentrated Market: Industrial markets are geographically concentrated. mills which buy sugarcane are concentrated in few states x For example, sugar of India.Marketing Mana 2.26 i Monegepoe 4. Inelastic Demand: Demand in industrial markets is not affected much in th F short run by changes in prices. For example, an increase in the price of tyre will not lead to a sharp decline in demand from vehicle manufacturers, - Fluctuating Demand: The demand for industrial goods and services tends t change more quickly than the demand for consumer goods and services, / small percentage increare in consumer demand can cause a large increase jy industrial demand. 6. Professional Buying: In comparison to consumer buying, industrial buyin, involves more decision makers and a more rational buying effort. Industria buying is usually done by trained buying agents. More complex the purchase, more people participate in the decision marking process. There are purchase committees consisting of senior managers and technical experts. 7. Complex Buying Decision: Industrial purchases involve large sums of money, complex technical and economic considerations and interaction among people at many levels. Industrial buyers may take longer to make buying decisions. Industrial buying process is also more formalized than the consumer buying process. Detailed product specifications, written purchase orders, careful searches, and formal approval are required in industrial buying. 8. Greater Interdependence: In industrial buying, buyer and sellers depend more on each other. Sellers often customize their offerings to industrial customer needs. Industrial markets attempt to build close long-term relationships with their customers Many industrial buyers practice supplier relationship management to develop a core supplier group and work closely with it. SUMMARY Nature: Marketing environment is comprehensive, dynamic and all pervading, Need: Study of environment helps marketers in taking decisions about different elements of marketing mix. Micro Environment: It includes economic, social, cultural, political, legal, technological and natura forces that effect marketers. These forces a lib oe eoeclatlee re either controllable or uncontrollable. Consumer Buying Decision Process: Problem recognition, information search, evaluation of alternatives, purchase and post-purchase evaluation are the steps in this process. Characteristics of Industrial Markets: Derived demand, few b inelastic demand, fluctuating demand, professional buying, complex buying decision. independence and long term relationship. ut large buyers, concentrated market clos? |