Principles of Marketing

1
Marketing Research and Environment

Marketing Research and Environment

Market research is the process of assessing the viability of a new good or

service through research conducted directly with the consumer which allows
a company to discover the target market and record opinions and other input
from consumers regarding interest in the product. Market research may be
conducted by the company itself or by a third-party company that specializes
in the market research field. Test subjects are usually compensated with
product samples and/or paid a small stipend for their time.
Objectives:
1. Define and Understand Market Research
2. Be Familiar with the types of Marketing Research
3. Define and Understand Marketing Environment
4. Differentiate Micro from Macro Environment

Market Research
Why is Market Research Important for your Business?
Business market research is the process of collecting data to determine
whether a particular product/service will satisfy the needs of your
customers. With effective market research, your company can gain
invaluable information about your competitors, economic shifts,
demographics, the current market trends and the spending traits of your
customers.

Purpose
The purpose of market research is to examine the market associated
with a particular good or service to determine how the audience will receive
it. This can include information gathering for the purpose of market
segmentation and product differentiation, which can be used to tailor
advertising efforts or determine which features are seen as a priority to the
consumer.

Market Research Process

A business must engage in a variety of tasks to complete the market
research process. It needs to gather information based on the market sector
being examined. The business must analyze and interpret the resulting data
to determine the presence of any patterns or relevant data points that it can
use in the decision-making process.

Course Module
 Primary and Secondary Information
Primary information is the data that the company has collected directly or
that has been collected by a person or business hired to conduct the research.
Primary information generally falls into two categories. Exploratory research
is a less structured option and functions by asking more open-ended
questions of those selected as part of the market research sample, and it
results in questions or issues being presented that the company may need to
address. Specific research obtains answers to previously identified issues
that are often brought to attention through exploratory research.
Secondary information is data that an outside entity has already gathered.
This can include population information from government census data, trade
association reports or presented research that another business operating
within the same market sector has already gathered.

Use of Market Research Results in Business

A company that was considering going into business might conduct market
research to test the viability of its product or service. If the market research
confirms consumer interest, the business can proceed confidently with
the business plan. If not, the company should use the results of the market
research to make adjustments to the product to bring it in line with customer
desires.

Types of Market Research

Using primary or secondary data, there are two types of research studies:
 Exploratory. Exploratory market research gathers lots of open-ended data
from many people to better understand a problem or opportunity. The goal is
to gather perceptions and opinions regarding an issue, so your company can
decide how to address it. But first you have to understand how your market
sees the issue.
 Specific. Once you understand the larger market issues, or opportunities,
you can use specific questions to gather information that could lead to a new
product or service. Market research firms often use specific questions to
gather feedback on a new advertising campaign, or to refine a planned new
product.

Primary Market Research Tools

Primary research is more time-consuming and expensive; sometimes it’s the
only way to get the information you need. The most common primary
research tools are:
 Surveys. Asking customers a series of questions to better understand
how they feel about a product’s features, or about the experience they
had during their hotel stay, for example, are two possible uses of a survey.
Surveys consist of a list of questions that can be shared with an individual
by phone, in person, on a card or paper, or online using a survey software.
 Focus groups. Bringing together groups of people with a common
characteristic, such as age, hobby, or buying habits, to better
understanding their likes and dislikes is a focus group. Focus groups
typically consist of 8-12 people with a moderator who poses questions
 Principles of Marketing
3
Marketing Research and Environment

for the group to discuss. They are a useful way of getting feedback on a
new product, new features, or new ad campaign.
 Observation. When the researcher gathers information simply by
watching how a subject interacts with a product, the technique is
observation. This is often used in comparing preferences for several types
of products.
 In-depth interviews. Another market research technique is the one-on-
one interview with an individual, during which probing questions are
posed to better understand that person’s product preferences.

Sources of Secondary Data

When conducting market research to better understand industry trends and
broader shifts, secondary research is often a good place to start. Some of the
most useful sources include:
 Industry associations and trade groups – most associations publish
annual outlooks
 Trade journals specific to your industry
 Government reports - such as the Census or annual federal procurement
results
 Industry analysts – these individuals monitor the performance of public
companies in your space
 University faculty members – see what research reports they may have
published
 Websites – while Wikipedia isn’t a reliable source, there may be others
that lead you to reputable sources and reports
 Competitor websites and materials – to convince potential customers to
buy from them, they may share useful statistics and reports

The purpose of market research is to provide information that will assist

you in making better decisions, to help your company be more successful.

Importance of Marketing Research

Research, as a general concept, is the process of gathering information to
learn about something that is not fully known. Nearly everyone engages in
some form of research. From the highly trained geologist investigating newly
discovered earthquake faults, to the author of best selling spy novels gaining
insight into new surveillance techniques, to the model train hobbyist
spending hours hunting down the manufacturer of an old electric engine,
each is driven by the quest for information.

Course Module
For marketers, research is not only used for the purpose of learning, it is also
a critical component needed to make good decisions. Market research does
this by giving marketers a picture of what is occurring (or likely to occur)
and, when done well, offers alternative choices that can be made. For
instance, good research may suggest multiple options for introducing new
products or entering new markets. In most cases marketing decisions prove
less risky (though they are never risk free) when the marketer can select
from more than one option.
Using an analogy of a house foundation, marketing research can be viewed as
the foundation of marketing. Just as a well-built house requires a strong
foundation to remain sturdy, marketing decisions need the support of
research in order to be viewed favorably by customers and to stand up to
competition and other external pressures. Consequently, all areas of
marketing and all marketing decisions should be supported with some level
of research.
While research is key to marketing decision making, it does not always need
to be elaborate to be effective. Sometimes small efforts, such as doing a quick
search on the Internet, will provide the needed information. However, for
most marketers there are times when more elaborate research work is
needed and understanding the right way to conduct research, whether
performing the work themselves or hiring someone else to handle it, can
increase the effectiveness of these projects.

Why conduct Market Research?

Market research allows you to identify threats and opportunities in the
market place and provides the information on which you can make informed
decisions. The more accurate the information - the better the decision.
Market research therefore reduces the risk involved in making these
decisions. It also reduces the risk of not being able to make decisions because
you did not have the information at hand (for example, a change in the
market that catches you by surprise).
Market research helps you to:
 Identify new products or services.
 Spot or anticipate market trends or changes.
 Determine if customers are satisfied, and if not, what is wrong.
 Keep one step ahead of your competitors.
 Spot trends or warning signals in your own business.
 Decide which advertising medium works best for your
business.
 Keep up to date with new technology in your industry.
 Tell you if a new idea is likely to be viable or not, and so on.
Market research is therefore the business tool that helps you reduce the risk
that a new idea will fail, and helps reduce the risk of being in business. In
short, it helps you both stay in business and build a more profitable business.
 Principles of Marketing
5
Marketing Research and Environment

However, in most businesses very little research is conducted. This is

because people are unsure how to perform such market research properly.

The Market Research Process: 6 Steps to success

Figure 1: 6 Steps to Success

BREAKING DOWN 'Market Research'

The purpose of market research is to examine the market associated with a

particular good or service to determine how the audience will receive it. This
can include information gathering for the purpose of market segmentation
and product differentiation, which can be used to tailor advertising efforts or
determine which features are seen as a priority to the consumer.

Marketing Environment
The marketing environment represents a mix between the internal and
external forces which surround an organization and have an impact upon it,
especially their ability to build and maintain successful relationships with
target customers.
The marketing environment consists of the micro and macro environment.
Macro environmental factors include social, economic, political and legal
influences, together with demography and technological forces. These are
sometimes referred to as the PESTLE factors and are discussed in more detail
in PESTLE analysis. The organization cannot control these forces, it can only
prepare for changes taking place.

Micro environment refers to the forces closely influencing the company and
directly affect the organization’s relationships. The factors include the
company and its current employees, its suppliers, marketing intermediaries,
competitors, customers and the general public. These forces can sometimes
be controlled or influenced and are explained in more detail in Porter’s 5
Forces.
Course Module
 Firms are affected by lots of different things; a firm's marketing environment
is made up of all of the things that affect the way it operates. Some of the
factor's in a firm's marketing environment can be controlled by the firm but
some are uncontrollable. Firms need to understand their marketing
environment so that they can make the most of positive factors and manage
the impact of negative factors. A firm's marketing environment can be split
into three parts: internal environment, macro environment and micro
environment.
The diagram below splits the Marketing Environment into its three
components; Macro-Environment, Micro-Environment and Internal
Environment. The Marketing Environment diagram below also provides
examples of factors that make up the marketing environment

Internal Environment
The internal environment is made up of factors within the firm itself. As
listed in the table above examples include employees, company policy, capital
assets, the firm's structure and the firm's products (materials). These factors
can be controlled by the firm as the factors are to do with how the firm
decides to set itself up.
Micro Environment
The micro environment is made up of factors that are close to the firm and
affect it on a 'day to day' basis; usually these factors interact with the firm or
are involved in the same industry. Micro environment examples include
customers, banks and trade unions as they all interact with the firm.
Competitors are also part of the micro environment because they are selling
competing products, their activity could have a direct impact on the firm's
daily business. Some of the factors within the micro environment can be
controlled by the firm whilst others cannot. For more information about the
micro environment and how to analyze a firm's micro environment through a
stakeholder analysis, read our article about the Micro-Environment.

Macro Environment
 Principles of Marketing
7
Marketing Research and Environment

The macro environment is made up of factors that affect the firm on a long
term basis. In general macro environment factors are not close to the firm.
Macro environment factors could be national or global measures and affect
many industries and groups.
Macro environment examples include legislation, the economy (e.g.
recession, inflation, VAT changes), and technological change such as the
internet. Macro environment factors are uncontrollable factors but still
influence company strategy. For more information about the macro
environment including how to analyze a firm's macro environment through a
PEST Analysis, look at our article about the Macro-Environment.

Conclusion
One factor can be part of a firm's micro environment and macro
environment. The media can be used to illustrate this:
 A one off media story about the firm may affect daily operations and will
therefore be part of the firm's micro environment;
 Whilst a general desire to avoid a negative media story may influence a firm's
long term business operations and therefore make up the firm's macro
environment.
Firms should not concern themselves too much about which of the three
categories a factor fits into. Instead firms should ensure that they have
correctly identified all of the factors which make up their marketing
environment and plan how to manage them for the firm's benefit.

Environmental Contexts
Familiarity with the different types of markets helps marketers to better
understand the marketing environment they operate within.
The main types of customers are businesses, consumers, government bodies
and employees. Several transactions can occur between them, leading to the
concept of consumer or B2C markets, Business or B2B markets, export
markets, government or G2C markets, with each having their own
specific profile.
Business to business (B2B) marketing represents the sales process
between organizations or institutions. Transactions in these markets are
often more complex, the distribution channels are shorter and more direct
with stricter product standards and specifications.
Consumer markets (B2C) are represented by individuals who purchase
goods, products or services for their own consumption.
They can be segmented into various groups taking into account factors such
as age, education, location, attitudinal values, income, etc., meaning that
various marketing strategies can be applied.

Course Module
G2C markets (government to citizen) develop when governmental
institutions become sellers and citizens assume the role of buyers.

These interactions are becoming increasingly more specialized. For example,

we can have B2E (business to employee), a transaction that reflects what
businesses do attract and keep their employees in terms of recruitment
tactics, benefits and opportunities, plus E2B(employee to business). Others
from thedigital arena include C2C (consumer-to-consumer) or P2P (peer-
to-peer), which represent the ability of online users to interact directly with
each other, without the need for an intervening organization other than to
facilitate the communication.

MacroEnvironment - Elements of General Environment and of Specific

Environment
The general environment consists of all the background conditions in the
external environment of an organization. The primary elements of the
general environment include the following:
• Economic conditions –– health of the economy in terms of inflation,
income levels, gross domestic product, unemployment, and job outlook.
• Sociocultural conditions –– norms, customs, and values on such matters
as human rights; trends in education and related social institutions; as well
as demographic patterns in society.
• Legal-political conditions –– prevailing philosophy and objectives of the
political party or parties running the government, as well as laws and
government regulations.
• Technological conditions –– development and availability of technology,
including scientific advancements.
• Natural environment conditions –– nature and conditions of the natural
environment, including levels public concern expressed through
environmentalism.
The specific environment (or task environment) consists of the actual
organizations, groups, and persons with whom an organization interacts and
conducts business. The primary elements of the specific environment are the
organization’s important stakeholders, which include the following:
• Customers ––consumer or client groups, individuals, and organizations
that purchase the organization’s goods and/or use its services.
• Suppliers ––providers of the human, information, and financial
resources and raw materials needed for the organization’s operations.
• Competitors –– organizations that offer the same or similar goods and
services to the same consumer or client groups.
• Regulators –– government agencies and representatives, at the local,
state, and national levels, that enforce laws and regulations affecting the
organization’s operations.
• Investors/owners  individuals, groups, and other
organizations/institutions that hold an equity interest in the business.
 Principles of Marketing
9
Marketing Research and Environment

Course Module
 Macro Factors affecting Business Environment

1. Business firm is an open system. It gets resources from the environment and
supplies itsgoods and services to the environment. There are different levels of
environmental forces.Some are close and internal forces whereas others are
external forces. External forces may berelated to national level, regional level or
international level. These environmental forcesprovide opportunities or threats
to the business community. Every business organization triesto grasp the
available opportunities and face the threats that emerge from the
businessenvironment.The term business „typically‟ refers to the development
and processing of economic values insociety. Normally, the term is applied to
portion of economic activities whose primarypurpose is to provide goods and
services for society in an effective manner. It is also appliedto economics and
commercial activities of institutions which having other purposes.

2. Business may be defined as “the organized effort by individuals to produce

goods andservices to sell these goods and services in a market place and to reap
some reward for thiseffort.” Functionally, we may define business as “those
human activities which involvesproduction or purchase of goods with the object
of selling them at a profit margin. Business organizations cannot change the
external environment but they just react. Theychange their internal business
components (internal environment) to grasp the externalopportunities and face
the external environmental threats. It is, therefore, very important toanalyze
business environment to survive and to get success for a business in its industry.
It is therefore, a vital role of managers to analyze business environment so that
they could pursueeffective business strategy.A business firm gets human
resources, capital, technology, information, energy, and rawmaterials from
society. It follows government rules and regulations, social norms and
culturalvalues, regional treaty and global alignment, economic rules and tax
policies of thegovernment. Thus, a business organization is a dynamic entity
because it operates in adynamic business environment.Systems Approach of
Business EnvironmentAll the systems are subsystems of other system in the
nature except the supra-system orcosmos. We individually are also the part of
our family. Formal organization or business ismade of group of people for
specific purpose. Very similar to the organization we personallayer the members
of our family and that is a component of a broader society. The same societyis a
component of a nation. Group of nation with similar interest are grouped in
regionalalliances such as SAARC and EU. World economy is made of with all
these regionalalliances and network.In this approach, nothing is in isolation. All
are integrated and interlinked. Organizations areopen systems because they get
resources from others and give output to others. A businessdeals with number of
business environmental forces. These forces from where a business
getsresources and supplies resources, forces that influence the business
operation, and factor thatpresent opportunities and threats are taken as the
business environment.
 Principles of Marketing
11
Marketing Research and Environment

3. Business can be viewed as an internal system or controllable system of a

manager or strategist. Managers can control their own businesses. Managers can
collect resources such as capital, human, information, idea, land, and
equipments. These components are controllable. Managers can operate their
organization and use their decision to run it. Similarly, the output of the
organization is also under their control. But, other broader systems that cover
the business may not controllable. Group of similar organization becomes an
industrial system that comprises business organizations as its subsystems.
Industry level environment is common to all the businesses running within the
industry. A country and its environment is broader system that cover seven the
different sectors or industries such as banking, education, health, trade,
manufacturing, and service industries. Therefore, it affects all the business
operations inside the nation. Regional alliances influence the national policy
because a country is a sub system of the regional alliances such as SAARC and
BIMSTEC. Even such regional alliances areal so affected by the broader
international systems such as WTO and United Nations. In case of a business, it is
a very small subsystem that should follow the industry norms, national policies,
regional agreements, and global systems. It can be said that a business and its
internal areas are controllable for a manager but other broader systems control
the businesses. Therefore, the strategy for a manager is to control internal areas
and react with the external forces to grasp the opportunity and face the threats
presented by the external environment. This system approach can be classified
into three environmental groups: uncontrollable, semi-controllable, and
controllable.

4. Components of Business Environment Business environment of the

firms/company or organization can be classified into two broad categories:
Internal Environment, External Environment Component of Business
Environment. A variety of factors can affect companies’ business. Such factors
can be national level, regional level, and international level environmental
forces. These factors are also known as societal factors or macro level business
environment factors. In general, five forces are taken as the general
environmental factors namely economic, socio-cultural, political-legal,
technological, and international. Some writers included natural environment as
a distinct component but the growing social awareness on natural environment
shows that this component can be included into the socio-cultural environment.
Set of these environmental factors is mostly referred by first four factors PEST
(Political-legal, Economic, Socio-cultural, and Technological). The logic behind
this is pervasiveness of the international environment because it affects all these
four sectors. Fast growing technological development, outsourcing business,
emergences of multinational companies, and global and regional alliances have
made the world a global village.

Course Module
 5. In this context, effect of international environment in four major components of
general environmental factors is natural. Information Communication
Technology (ICT) revolution and globalization are to be considered very
important effect in today’s international business environment. Growing
multinational companies and their influence in one national economy is clearly
evident. Use of automated technology and e-commerce has replaced many of the
manual works and workplace. World Trade Organization and its growing
members including Nepalese 147th membership in Cancun summit has placed
new opportunities and threats to the developing countries like Nepal. South
Asian Association for Regional Cooperation (SAARC) is active since twenty years
and it recently declared South Asian Free Trade Area (SAFTA) charter.
Furthermore, Bay of Bengal Initiative for Multi-Sectored Technical and Economic
Cooperation (BIMSTEC) and its future potentialities presented new prospectus
to the local and international business entities in this sector.

Characteristics Of Business Environment

Business environment characteristics will be indicated that major challenges,
opportunities, threat and weakness of the business. Environment is Complex
Business environment principally consists of a number of factors, events
conditions. These are influenced to different departmental source in the
organization. These conditions do not exist in isolation and create entirely new
set of influences which interact with each other. This is difficult to influence to
organization. All these factors have to be considered as environment analysis is
complex and rigid and totally very difficult to grasp by the functional manager
and top level employees in the organization. Environment is Dynamic Business
and company environment is constantly changing in different nature. Micro and
macro environment factors are influenced to business. It impact to change on the
business conditions. Dynamic environment is flexible and dynamic nature in
company. This is causing due to change, strategic manager can shape strategy
and formulate short term and long term objectives. Environment is Multi–
faceted Strategic observer can shape and observe different characteristics of
environment. Strategic observer observes a particular change or latest
development in the business. It may be viewed as different opinions from
different observers in the organization. These things are frequently seen when
the development happens. All are happy to welcome it and think as an
opportunity for the company, even also as threat to company.
 Principles of Marketing
13
Marketing Research and Environment

The Impact ofMicro and Macro Environment Factors on Marketing

Micro Environment Factors

 The suppliers: Suppliers can control the success of the business when
they hold the power. The supplier holds the power when they are the
only or the largest supplier of their goods; the buyer is not vital to the
supplier’s business; the supplier’s product is a core part of the buyer’s
finished product and/or business.

 The resellers: If the product the organization produces is taken to market

by 3rdparty resellers or market intermediaries such as retailers,
wholesalers, etc. then the marketing success is impacted by those
3rd party resellers. For example, if a retail seller is a reputable name then
this reputation can be leveraged in the marketing of the product.

 The customers: Who the customers are (B2B or B2C, local or

international, etc.) and their reasons for buying the product will play a
large role in how you approach the marketing of your products and
services to them.

 The competition: Those who sell same or similar products and services as
your organization are your market competition, and they way they sell
needs to be taken into account. How does their price and product
differentiation impact you? How can you leverage this to reap better
results and get ahead of them?
Course Module
  The general public: Your organization has a duty to satisfy the public. Any
actions of your company must be considered from the angle of the
general public and how they are affected. The public have the power to
help you reach your goals; just as they can also prevent you from
achieving them.

Macro Environment Factors

 Demographic forces: Different market segments are typically impacted by

common demographic forces, including country/region; age; ethnicity;
education level; household lifestyle; cultural characteristics and
movements.

 Economic factors: The economic environment can impact both the

organization's production and the consumer’s decision making process.

 Natural/physical forces: The Earth’s renewal of its natural resources such

as forests, agricultural products, marine products, etc must be taken into
account. There are also the natural non-renewable resources such as oil,
coal, minerals, etc that may also impact the organization's production.

 Technological factors: The skills and knowledge applied to the

production, and the technology and materials needed for production of
products and services can also impact the smooth running of the business
and must be considered.

 Political and legal forces: Sound marketing decisions should always take
into account political and/or legal developments relating to the
organization and its markets.

 Social and cultural forces: The impact the products and services your
organizations brings to market have on society must be considered. Any
elements of the production process or any products/services that are
harmful to society should be eliminated to show your organization is
taking social responsibility. A recent example of this is the environment
and how many sectors are being forced to review their products and
services in order to become more environmentally friendly.

Micro and macro environments have a significant impact on the success of

marketing campaigns, and therefore the factors of these environments should be
considered in-depth during the decision making process of a strategic marketer.
Considering these factors will improve the success of your organization's
marketing campaign and the reputation of the brand in the long term.
 Principles of Marketing
15
Marketing Research and Environment

References
1. http://www.businessdictionary.com/definition/market-
environment.html
2. http://www.oxlearn.com/arg_Marketing-Resources-Marketing-
Environment_11_28
3. http://www.learnmarketing.net/environment.htm
4. http://www.investopedia.com/terms/m/market-research.asp

Course Module