Professional Documents
Culture Documents
Marketing Note
Marketing Note
Marketing Note
In simple words Marketing is managing profitable customer relationships. But now the
concept of Marketing is satisfying customer needs. In other words marketing defines as a
social and managerial process by which individuals and groups obtained what they need
and want through creating and exchanging products and value with others.
Here comes some important terms which are the essential parts of marketing and they are
need, want and demand
Need: needs are states of felt deprivation. There are some basic needs of human being
which are food, clothing, warmth and safety. Besides some other essential needs which
are social needs for belonging and affection and individual needs for knowledge and self-
expression.
Want: Wants are the form of human needs which are taken as shaped by culture and
individual person’s ability. In short wants are the object that satisfy the needs
The core concepts of marketing is defined as the need, want and demand creates the
marketing offers as products or service which fulfill the value and satisfaction of human
being then exchanges or transact in a place which is called the market.
To follow the marketing core concept we can define marketing as managing market to
bring about profitable exchange relationships by creating value and satisfying needs and
wants.
What are the different types of demand with a few examples of each?
Types of Demand
There are mainly 8 types of demands in Marketing which have to be taken into
consideration by the marketing manager during demand forecasting. The various types of
demands, and how to tackle the challenges for marketers in these various demands, is
discussed below.
1) Negative Demand
Negative demand is a type of demand which is created if the product is disliked in general.
The product might be beneficial but the customer does not want it. Example of negative
demand is a) Dental work where people don’t want problems with their teeth and use
preventive measures to avoid the same.
b) Insurance, which people should have but they delay buying an insurance policy.
Similarly, people would like to avoid heart attacks and hence may pay for a full body check
up where the results might be negative, but still the customer has to pay. The marketer has
to solve the issue of no demand by analyzing why the market dislikes the product and then
counter acting with the right marketing tactics.
2) Unwholesome demand
Unwholesome demand is the other side of Negative demand. In negative type of demands,
customer does not want the product even though product might be necessary for the
customer. But in unwholesome demand, the customer should not desire the product, yet
the customer wants the product badly. Best example of unwholesome demand are
cigarettes, alcohol, pirated movies, guns etc.
3) No demands
Certain products face the challenge of no demand. The best example for the same can
be education courses where there is very low demand or no demand at all. Such cases are
very hard to counter.
4) Latent Demand
Latent demand is, as the name suggests, a demand which the customer realizes later. Thus,
while buying the product, he might not desire some features. But later on, he might think
about those features and buy the product. The best examples of latent demand are normal
phones vs smart phones.
People nowadays want more and more features in the smartphone. They might settle for a
normal phone, but then later on they get the itch to buy a smart phone. Similarly, people
might buy a patrol car. But most likely their second car will be a diesel car. A marketing
managers job is to find out the features which people might be looking for later and market
them to the customer in such a manner that he immediately wants them.
5) Declining demand
Declining demand is when demand for a product is declining. For example, when CD
players were introduced and IPOD came in the market, the demand for Walkman went
down. Although there was still a demand for the product, the demand was a declining
demand. A marketer’s job in such a case to think ways to revive the product so that the
demand is not declining.
6) Irregular demand
Irregular demand can be demand which is not consistent. The best example of irregular
demand is seasonal products like umbrellas, air conditioners or resorts. These products sell
irregularly and sell more during peak season whereas their demand is very low during non
seasons. The best way to counter irregular demand is to introduce incentives for the
customer to buy the product.
7) Full demand
In an ideal environment, a company should always have full demand. Full demand means
that the demand is meeting the supply potential of the company. It also means that the
markets are happy with the products of the company and that people want to buy from the
same company. The marketing challenge in this type of demand is to maintain the same
level of interest in the product and the company.
8) Overfull demands
Overfull demands happen when the companies manufacturing capacity is limited but the
demand is more than the supply. This can be observed in the cement industry occasionally.
Generally, most cement industries have limited manufacturing capacity. And hence, brand
switching in cement industry is high. Many companies use de-marketing techniques to
counter act overfull demands. This is because if the company keeps marketing, but it is not
able to supply the material, then the company might suffer badly in brand equity.
Above are the 8 types of demand which a marketing manager has to forecast and manage at
all times. Each type of demand has its own challenges and the marketing manager needs to
be quick on his feet to manage all the different type of demands
Marketing Strategies For Various Types of Demand
Marketing management has the task of influencing the level, timings and composition of
demand in a way that will help the organization to achieve its objectives. Also, a marketer
has to take into consideration different types of demand for his product before he comes up
with a strategy. Here are some effective marketing strategies for various types demand
1.Negative Demand
Most or even all important segments in a market dislike the product, even to the extent of
being prepared to pay a price to avoid it - for example, some people have a negative
demand for dental care, and others have a negative demand for air travel.
Marketing Strategy: The task of marketing in this situation is generally to identify the
cause of negative demand and attempt to counter it. For example, if the product has a poor
reputation or image, or its features or performance are inadequate, then marketing
managers will need to consider how to alter the reputation of the product, whether to
change its features and generally determine how to ensure that the correct image is created
for that product. The marketing task is to analyze, why the market dislikes the products?
2.No Demand
this usually covers products with no perceived value in a particular market. In relatively
crime free areas, for example, there may be no demand for security systems because
consumers may not appreciate the need for such products.
Marketing Strategy: The marketing task is to find ways to connect the benefits of the
products to the person’s natural needs and interests. The task of marketing then becomes
one of stimulating demand for that product. In practice, this often means persuading
consumers to buy or use a particular product or service. This element of persuasion means
that stimulation marketing is often subject to criticism for being manipulative, but of
course we must remember that it may be beneficial in many cases such as encouraging
vaccination and encouraging health screening.
3.Latent Demand
One of the demand states that company may face in certain situations. This happens
because consumers may share a strong need that cannot be satisfied by any existing
product. There is a strong latent demand for a specific product.
Marketing Strategy: The marketing task is to measure the size of the potential market and
develop effective goods and services that would satisfy the demand.
4.Declining Demand
In this case, the demand for a product is declining and this decline represents something
more serious than a temporary drop in sales. Examples might include rail travel in the US,
vinyl records or mechanical watches.
Marketing Strategy: The task of marketing is to identify causes of decline and to reassess
the nature of the product, its features, its target market and the marketing campaign with a
view to either reviving demand for the product or deleting it. We should perhaps note that
attempts to revive a product go beyond simply relying on large scale advertising and
promotional efforts since these often act as an indication to the consumer that the
particular product is experiencing difficulties.
5.Irregular Demand
Irregular demand is arguably one of the most common situations facing anyone involved in
marketing in the service sector. It involves a situation where the pattern of demand is
based on seasonal factors or other sources of volatility such as short term economic
fluctuations. There are many examples of this type of demand in food markets, holiday
markets and travel markets.
6.Full Demand
Demand is currently at a desirable level and one that is consistent with the existing
corporate and marketing objectives.
Marketing Strategy: The main concern in this situation is to maintain this level of demand
by continuously monitoring and adjusting marketing campaign as and when attitudes
change or competitive threats appear.
8.Unwholesome Demand
Any positive level of demand is regarded as excessive because of the undesirable qualities
of the product. This situation is probably most commonly associated with 'vice' products
such as drugs, smoking and other 'social cause' products. However, counter-marketing
may also be relevant in the business community when it may be used to phase out firms
existing products. This may involve ending promotions, raising price or even, for some
products, the implementation of legal restrictions.
Marketing Strategy: These categories of demand demonstrate that the task of marketing
management is much broader than simply creating and maintaining demand - rather it
involves responding to and managing patterns of demand within the market place.
However, it is important to stress that this demand management does not take place in
isolation. Marketing must manage demand more effectively than the competition in order
to be successful and must be prepared to respond and react to what happens in the
marketplace, not only in terms of existing and potential consumers but also in terms of
competitor’s activities.
As markets become more and more competitive and customers become more sophisticated
and quality conscious, the adoption of a marketing orientation becomes increasingly
important in ensuring organizational success. This marketing orientation requires that the
consumer be seen as central to the business and that the organization focuses its attention
on identifying and responding to consumer needs as they are at present, as well as trying to
anticipate future needs. However, the type of products which can be developed will be
affected by the organization’s own capabilities. The key principle of marketing is to be able
to meet consumer needs more effectively than competitors.
To apply the BCG Matrix you can think of it as showing a portfolio of products or services,
so it tends to be more relevant to larger businesses with multiple services and markets.
However, marketers in smaller businesses can use similar portfolio thinking to their
products or services to boost leads and sales as we'll show at the end of this article.
Considering each of these quadrants, here are some recommendations on actions for each:
Dog products: The usual marketing advice here is to aim to remove any dogs from your
product portfolio as they are a drain on resources.
However, this can be an over-simplification since it's possible to generate ongoing revenue
with little cost.
For example, in the automotive sector, when a car line ends, there is still a need for
spare parts. As SAAB ceased trading and producing new cars, a whole business emerged
providing SAAB parts.
Question mark products: As the name suggests, it’s not known if they will become a
star or drop into the dog quadrant. These products often require significant investment
to push them into the star quadrant. The challenge is that a lot of investment may be
required to get a return. For example, Rovio, creators of the very successful Angry Birds
game has developed many other games you may not have heard of. Computer games
companies often develop hundreds of games before gaining one successful game. It’s not
always easy to spot the future star and this can result in potentially wasted funds.
Star products: Can be the market leader though require ongoing investment to sustain.
They generate more ROI than other product categories.
Cash cow products: The simple rule here is to ‘Milk these products as much as possible
without killing the cow! Often mature, well-established products. The company Procter &
Gamble which manufactures Pampers nappies to Lynx deodorants has often been
described as a ‘cash cow company’.
Use the model as an overview of your products, rather than detailed analysis. If market share
is small, use the 'relevant market share' axis is based on your competitors rather than entire
market.
There are four strategies possible for any product / SBU and these are the strategies which
are used after the BCG analysis. These strategies are
1) Build – By increasing investment, the product is given an impetus such that the product
increases its market share. Example – Pushing a Question mark into a Star and finally a
cash cow (Success sequence)
2) Hold – The company cannot invest or it has other investment commitments due to
which it holds the product in the same quadrant. Example – Holding a star there itself as
higher investment to move a star into cash cow is currently not possible.
3) Harvest – Best observed in the Cash cow scenario, wherein the company reduces the
amount of investment and tries to take out maximum cash flow from the said product
which increases the overall profitability.
4) Divest – Best observed in case of Dog quadrant products which are generally divested to
release the amount of money already stuck in the business.
Thus the BCG matrix is the best way for a business portfolio analysis. The strategies
recommended after BCG analysis help the firm decide on the right line of action and help
them implement the same.
HOW TO APPLY BCG MATRIX TO YOUR BUSINESS
“To be successful, a company should have a portfolio of products with different growth rates
and different market shares. The portfolio composition is a function of the balance between
cash flows. High growth products require cash inputs to grow. Low growth products should
generate excess cash. Both kinds are needed simultaneously.” – Bruce Henderson
Step 1 – Choose the Unit. Strategic Business Units, individual brands, product lines or the
firm as a whole are all areas that can be analyzed using the BCG matrix. The chosen unit
drives the entire analysis and key definitions. The market, industry, competitors and
position will all be based on the chosen unit.
Step 2 – Define the Market. Following the choice of the unit or area to be analyzed, the
most important stage for the rest of the matrix is the definition of the market. An
incorrectly defined market will lead to an incorrect classification of the unit. A Mercedes-
Benz analyzed in a passenger vehicle market will be a dog with a small market share.
However, analyzed within a luxury car market, it will be a cash cow.
Step 3 – Calculate Relative Market Share. At this stage, the relative market share for the
chosen unit needs to be calculated. This can be done in terms or revenues or marker share.
The formula used here us a division of the selected brand’s market share or revenues by
the market share or revenues of the biggest competitor in the industry. The result in
plotted on the x-axis.
Step 4 – Calculate Market Growth Rate. Online industry reports can be used to find the
rate of growth for the industry. If this is not possible, then it can be estimated by looking at
the average revenue growth of the leading firms in the industry. This measurement is a
percentage and is plotted on the y-axis.
Step 5 – Draw Circles on the Matrix. Once all the measures are calculated, they can be put
onto the matrix. This can be done by drawing a circle for each brand within a unit, or all the
brands in a company. The size of each circle should correspond to business revenue
generated by the brand.
EXAMPLES
Nestle
According to an analysis posted here, the BCG matrix analysis for Nestle reveals some
interesting perspectives. A global multinational in the food and beverage industry, the
Swiss company is the 69th highest revenue producer in the world. Over 8000 brands fall
within its umbrella and are as widespread as bottled water and pet food. The company
announced plans to sell off under-performing brands which were consistently showing
poor sales. This analysis used the 2002 annual report for its figures which can be
found here.
Question Marks – Here, the question marks have a low market share within a high growth
market. The product mentioned here requires an influx of investment to capitalize on
potential segments. This investment is however, not likely to yield too much return
investment.
Stars – These brands have a high share in a high growth market. Nestle’s varied mineral
water is in this quadrant. The brands in this are require investment to maintain their
position and differentiation in both mature and emerging markets.
Dogs – The Nestle products in this category have a lower market share in a low growth
market. An example of this is a lean cuisine unit and weight loss management brands which
did not take off outside the US. A sports performance and nutrition brand called PowerBar
is also confirmed to be divested by the company most likely due to poor sales in a saturated
market. These products generate enough revenue to sustain themselves but are not
exciting not major sources of revenues.
Cash Cows – These brands are important because of their cash generating potential. This
means that they have a higher market share in a slow-growth industry. Very little
investment is needed by these brands and funds generated from them are used to fuel Stars
or Question Marks.
4 Components of Holistic Marketing
The holistic marketing concept is based on the development, design, and implementation of
marketing programs, processes, and activities that recognize their breadth and
interdependencies. Holistic marketing recognizes that everything matters in marketing and
that a broad, integrated perspective is often necessary.
Integrated Marketing – occurs when the marketer devises marketing activities and
assembles marketing programs to create, communicate, and deliver value for consumers
such that “the whole is greater than the sum of its parts.” Two key themes are that (1)
many different marketing activities can create, communicate, and deliver value and (2)
marketers should design and implement any one marketing activity with all other activities
in mind.
The marketing concept is the strategy that firms implement to satisfy customers needs,
increase sales, maximize profit and beat the competition. There are five marketing concepts
that organizations adopt and execute.
Marketing is a department of management that tries to design strategies that will build
profitable relationships with target consumers. But what philosophy is the best for a
company in setting marketing strategies?
There are five alternative concepts under which organizations design and carry out their
marketing strategies.
5 Marketing Concepts
1. Production Concept,
2. Product Concept,
3. Selling Concept,
4. Marketing Concept,
5. Societal Marketing Concept.
These concepts are described below;
Production Concept
The idea of production concept – “Consumers will favor products that are available and
highly affordable”. This concept is one of the oldest Marketing management orientations
that guide sellers.
Companies adopting this orientation run a major risk of focusing too narrowly on their own
operations and losing sight of the real objective.
Most times; the production concept can lead to marketing myopia. Management focuses on
improving production and distribution efficiency.
Although;
in some situations; the production concept is still a useful philosophy.
Product Concept
The product concept holds that the consumers will favor products that offer the most in
quality, performance and innovative features.
Here; under this concept,
Marketing strategies are focused on making continuous product improvements.
Product quality and improvement are important parts of marketing strategies, sometimes
the only part. Targeting only on the company’s products could also lead to marketing
myopia.
For example;
Suppose a company makes the best quality Floppy disk. But a customer does really need a
floppy disk?
She or he needs something that can be used to store the data. It can be achieved by a USB
Flash drive, SD memory cards, portable hard disks, and etc.
So that company should not look to make the best floppy disk. They should focus to meet
the customer’s data storage needs.
Selling Concept
The selling concept holds the idea- “consumers will not buy enough of the firm’s products
unless it undertakes a large-scale selling and promotion effort”.
Here the management focuses on creating sales transactions rather than on building long-
term, profitable customer relationships.
In other words;
The aim is to sell what the company makes rather than making what the market wants.
Such aggressive selling program carries very high risks.
In selling concept the marketer assumes that customers will be coaxed into buying the
product will like it, if they don’t like it, they will possibly forget their disappointment and
buy it again later. This is usually very poor and costly assumption.
Typically the selling concept is practiced with unsought goods. Unsought goods are that
buyers do not normally think of buying, such as insurance or blood donations.
These industries must be good at tracking down prospects and selling them on a product’s
benefits.
Marketing Concept
The marketing concept holds- “achieving organizational goals depends on knowing the
needs and wants of target markets and delivering the desired satisfactions better than
competitors do”.
Here marketing management takes a “customer first” approach.
Under the marketing concept, customer focus and value are the routes to achieve sales and
profits.
The marketing concept is a customer-centered “sense and responds” philosophy. The job is
not to find the right customers for your product but to find the right products for your
customers.
The marketing concept and the selling concepts are two extreme concepts and totally
different from each other.
2 The Selling Concept is suitable with The Marketing Concept is suitable for almost
unsought goods—those that buyers do any type of product and market.
not normally think of buying, such as
insurance or blood donations.
3 Focus of the selling concept starts at the Focus of the marketing concept starts at
production level. understanding the market.
4 Any company following selling concept Companies that are following the marketing
undertakes a high-risk concept requires to bare less risk and
uncertainty.
6 The Selling Concept makes poor Marketing concept works on facts gathered
assumptions. by its “market and customer first” approach.
Societal marketing concept questions whether the pure marketing concept overlooks
possible conflicts between consumer short-run wants and consumer long-run welfare.
The societal marketing concept holds “marketing strategy should deliver value to
customers in a way that maintains or improves both the consumer’s and society’s well-
being”.
It calls for sustainable marketing, socially and environmentally responsible marketing that
meets the present needs of consumers and businesses while also preserving or enhancing
the ability of future generations to meet their needs.
The Societal Marketing Concept puts the Human welfare on top before profits and
satisfying the wants.
The global warming panic button is pushed and a revelation is required in the way we use
our resources. So companies are slowly either fully or partially trying to implement the
societal marketing concept.
Related Articles
1Examples of Market Segmentation
2Examples of Business Market Segmentation
3Define Market Segmentation & Targeting
4What Are the Characteristics of Market Segments & Target Markets?
The segmentation of consumer markets requires the creation of sub-groups from a larger
population to more specifically target them. There are virtually dozens of ways that a
market might be segmented and the segments chosen will depend on the business and the
products or services it offers. Basically, segmentation is all about identifying specific groups
of people based on common characteristics.
Demographics
Psychographics are qualitative attributes of a market and refer to the way people think and
what they like to do. Psychographics is sometimes categorized with the acronym IAO which
stands for Interests, Activities and Opinions. It can be difficult for marketers to segment
their markets into these types of categories on their own. Nielsen is one organization that
offers access to consumer lists based on their specific classifications. They have divided U.S.
households into 66 distinct types or segments to help marketers focus on market segments
based on psychographic characteristics. Psychographics are personal attributes related to
personality, values, attitudes, interests, or lifestyles.
Purchase Behaviors
An important way for businesses to segment their consumer markets is through purchase
behavior. Keeping good records of customers and their purchases, allows marketers to
identify those who have purchased certain types of products or spent at certain levels and
to then target them with similar offers. Marketers are also able to target customers of other
businesses through by renting lists, which can be used in direct marketing efforts through
traditional mail or, increasingly, online.
Pulling It Together
The more segments that marketers are able to identify and combine to specifically target
groups of individuals most likely to be interested in what they have to offer, the more
effective--and cost effective--their marketing efforts can be. Toward this end, businesses
attempt to learn as much as they can about their customers--where they live, their age,
their income levels, what they purchase, what their hobbies are and what their likes and
dislikes are. This information can then be used to "clone" these customers by reaching out
to non-customers who share similar traits and characteristics.
The business portfolio is one of the most crucial factors for any organization. Why? Because
it is about what the organization plans, sells, and stops to sell. The business portfolio must
be based on the company’s mission, objectives and strategy, in order to fit the company’s
strengths and weaknesses, philosophy and competencies to opportunities in the market
environment. Designing the business portfolio involves analyzing the company’s current
portfolio, before strategies for growth and downsizing can be developed. The Boston
Growth-Share Matrix, developed by the Boston Consulting Group, is a very helpful tool for
analysing the company’s current portfolio.
The business portfolio is the complete collection of products and businesses that make up a
company. Designing and maintaining a healthy portfolio involves thorough understanding
of the firm’s objectives and the markets it wants to serve. Business portfolio planning
consists of two steps, in which the Boston Matrix provides a great aid. Firstly, the business
must analyse its current business portfolio to determine which businesses (SBUs, see
below) should receive more, less, or no investment. This is significantly influenced by the
life cycle stage the products are in. Does the product reach the end of its life cycle end soon?
Then, it should not receive too much attention anymore. Secondly, the firm must shape its
future portfolio, based on the analysis of the current portfolio, by developing strategies for
growth and downsizing.
To analyse the current portfolio, the Boston Growth-Share Matrix should be applied. It
assists in evaluating the businesses that make up the company and the attention they
should receive. The idea behind this is that management will want to put more resources
into its more profitable products and businesses and on the contrary, less resources into
weaker products and businesses.
The first step that needs to be taken is to identify the key businesses that make up the
company: The Strategic Business Units (SBUs). Strategic Business Units may be a division
of the company, a product line, a brand or even a single product. Then, the company is able
to assess the attractiveness of each SBU in order to decide how much attention, or support,
it should receive. Why should the firm do so? Clearly because it helps to find the way in
which it should best use its strengths and competencies in order to take advantage of
attractive opportunities in the market environment. Therefore, each SBU should be
analysed with regard to the attractiveness of its market or industry and the strength of its
position in that market or industry.
The Boston Growth-Share Matrix addresses this. It was developed by the Boston Consulting
Group (BCG), which is a leading management consulting group, and is today the best-
known and most popular portfolio-planning method. The Boston Matrix classifies all the
companies SBUs according to the attractiveness of the SBUs industry or market, which is
measured in terms or market growth rate, and the SBUs position in that industry or
market, measured in terms of relative market share the company has. On the vertical axis,
market growth rate provides a measure for the attractiveness of the SBUs market. On the
horizontal axis, relative market share measures the company’s strength in that market.
The market growth and relative market share of each SBU leads to a classification into one
of four categories:
Stars are high-growth, high-share products or businesses. Those often require heavy
investments to finance their rapid growth. Once their growth slows down, which will
eventually be the case, Stars will turn into Cash Cows.
Cash Cows. Cash Cows are low-growth, but high-share products or businesses. They need
less investment to hold their market share, being well-established and successful SBUs.
Therefore, Cash Cows produce a lot of cash which the company can use to invest in and
support other SBUs that need investments to finance their growth, namely Question Marks
and Stars.
Question Marks. Question Marks are low-share Strategic Business Units, but in high-growth
markets. To hold their share, not mentioning increasing it which would be desirable,
Question Marks require a lot of cash. If Question Marks become a success, they will turn
into Stars one day. However, the likelihood that they fail must not be neglected. For that
reason, management has to decide carefully which Question Marks will receive attention
and investment in order to build them into stars, and which other, less promising ones will
be phased out.
Dogs are low-growth, low-share businesses and products. In other words, Dogs are the
least desirable SBUs of a company. They may generate enough cash still to maintain
themselves. However, Dogs will not be large sources of cash, and should be phased out as
soon as they become unprofitable or as soon as the firm can make better use of its
resources to support other SBUs.
As said before, the classification into Stars, Cash Cows, Question Marks and Dogs is strongly
linked to the Product Life Cycle stage the Strategic Business Unit is in. Question Marks are
new, innovative products, which may become a large success in the future, but still carry
the risk that they will not be a hit. Stars are still growing, while Cash Cows are in the
maturity stage when the market is satisfied and does not grow much anymore. Finally,
when decline is reached, SBUs can be called Dogs.
When the firm has classified the SBUs, it can determine the roles each SBU will play in the
future, in order to shape the future business portfolio. The company can choose from four
strategies for each business unit. Firstly, it can invest more in the SBU in order to build and
grow its market share. This will apply particularly well to Question Marks and Stars.
Secondly, it can invest just enough to hold the market share of the SBU at its current level,
which applies to Cash Cows. Or, thirdly, it can harvest the SBU, which means milking its
short-term cash flows, but regardless of the long-term effect. Finally, the firm can choose to
divest the SBU, either by selling it or by phasing it out, in order to make better use of
valuable resources elsewhere. This would be done with a Dog on the business portfolio.
After having evaluated the current business portfolio, the company should look at the
future. In rapidly changing times, constant innovation is critical to survival in the market.
Therefore, the second part of designing the business portfolio involves finding products
and businesses the company should consider in the future, by developing strategies for
growth and downsizing
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
Money
Machinery
Materials
Markets
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, 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 Environment
The micro component of the external environment is also known as the task
environment. It comprises of external forces and factors that are directly related
to the business. These include suppliers, market intermediaries, customers,
partners, competitors and the public
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. 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 which 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.
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 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.
Understanding Customers
A 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 the consumer
behaviour better.
Tapping Trends
Breaking into new markets and capitalizing on new trends requires a lot of insight
about the marketing environment. The marketer needs to research about every
aspect of the environment to create a foolproof plan.
Microenvironment
Macro-environment
The macro-environment consists of larger societal forces that affect the entire
microenvironment. The PESTLE analysis in a framework used to scan the
organization’s external business environment.
Political: They refer to the political environment and its stability. It accounts for
various government policies and its involvement in the trading agreement.
Economic: The economic environment like the growth rate, employment rations,
inflation, exchange rate, cost of living etc. can impact the organization and its
consumers
They analyze changing age and family structures, geographic populations shift,
educational, and diversity. However, marketers are facing another reality,
geographic population are shifting more often, especially in family and structures,
a better educated and more white-collars population are increasing diversity. In
other words, the economic environment consists of factors that affect buying
power and patterns. The economic environment is characterized by more
consumer concern for value in shifting consumer spending patterns. Today's
squeezed consumers are seeking greater value -- just the right combination of
good quality and service at a fair price. The distribution of income also is shifting.
Whether you have read on the Bible the rich have grown richer, and the poor
have remained poor even more, we've seen the middle class has shrunk, leading
to a two-tiered market. Many companies now tailor their marketing offers to two
different markets the affluent and the less affluent.
Secondly, the changing age structure of the population since the birthrates and
longer life expectancy, the population is rapidly getting older. This aging of the
population will have a significant impact on markets and those who service them.
If we take the U.S. population contains several generational groups divided pretty
much in four largest groups – the baby boomers, Generation X, the Millennials,
and Generation Z and their impact on today’s marketing strategies.
The Baby Boomers. The post-World War II baby boom produced 78 million
baby boomers, which were born between 1946 and 1964. Over the years, the
baby boomers have been one of the most powerful forces in the marketing
environment.
Gen Xers, who are parents, family comes first rather than career.
From a marketing standpoint, the Gen Xers are a more skeptical bunch. They
tend to research products before they consider a purchase, prefer quality to
quantity, and tend to be less receptive to overt marketing pitches. They are more
likely to be receptive to irreverent ad pitches that make fun of convention and
tradition.
Gen Xers are the first to grow up in the Internet era, got the benefits of
technology. almost 50% owns smartphones and over 10% owns tablets. Almost
80% of the Xers use internet for banking, over 70% for researching companies
and products, and around 80% have made purchase online. 95% have an active
Facebook page. Yep, that's right pretty much everybody.
Gen Xers now approaching the middle age, they are displacing the lifestyles,
cultures, and values of the baby boomers. They are the most educated
generation to date, and they possess hefty annual purchasing power, but they
are spending more carefully.
The Millennials or Generarion Y. born between 1977 and 2000, these
children of the baby boomers number 83 million or more, dwarfing the Gen Xers
and becoming larger even the boomers segment. Millennials are the most
financially strapped generation. Facing higher unemployment and saddled with
more debt, many of theses consumers have near-empty piggy banks. Because of
their numbers, the Millennials make up a huge and attractive market, both now
and in the future. They have in common is their comfort with digital technology.
They don’t just embrace technology; it’s a way of life. They are the first
generation to grow up in a world filled with computers, mobile phones, satellite
TV, iPods and iPads, and online social media. Consequently, they engage with
brands in an entirely new way, such as with mobile or social media. More than
sales pitches from marketers, they seek opportunities to shape their own brand
experience and share them with others. Also the Xennials (also known as the
Oregon Trail Generation and Generation Catalano) are among that class.
Xennials is a neologistic term used to describe people born during the
Generation X/Millennial cusp years.
Generation Z. young people born after 2000. The Gen Zers make up
important kids, tweens, and teens markets. For example, U.S. “Tweens”(age 8 to
12) number 20 million girls and boys who spend an estimated $43 billion annually
of their own money and influence a total of almost $200 billion of their own and
parents’ spending. Besides, these young consumers also represent tomorrow’s
markets- they are now forming brand relationships that will affect their buying
well into the future.
Objective 1: Describe the environmental forces that affect the company’s ability
to serve its customers
- Microenvironment consists of actors close to the company that combine to form its value
delivery network / affect its ability to serve its customers.
- Includes the company’s internal environment
- Marketing channel firms cooperate to create customer value
- Competitors oppose to the company in order to serve customers better
- Various publics have an actual interest in the company’s ability to meet its objectives
- 5 types of customer markets include: consumer, business, reseller, government and
international markets.
Objective 3: Identify the major trends in the firm’s natural and technological
environments
Objective 4: Explain the key changes in the political and cultural environments
The marketing information system distributes the relevant information to the marketers who can
make the efficient decisions related to the marketing operations viz. Pricing, packaging, new
product development, distribution, media, promotion, etc.
Every marketing operation works in unison with the conditions prevailing both inside and
outside the organization, and, therefore, there are several sources ( viz. Internal, Marketing
Intelligence, Marketing Research) through which the relevant information about the market can
be obtained.
The information can be collected from the documents such as invoices, transmit copies,
billing documents prepared by the firms once they receive the order for the goods and
services from the customers, dealers or the sales representatives.
The current sales data should be maintained on a regular basis that serves as an aide to a the
Marketing Information System. The reports on current sales and the inventory levels help the
management to decide on its objectives, and the marketers can make use of this information
to design their future sales strategy.
The Companies maintain several databases such as*Customer Database- wherein the
complete information about the customer’s name, address, phone number, the frequency of
purchase, financial position, etc. is saved.
*Product Database- wherein the complete information about the product’s price, features,
variants, is stored.
*Salesperson database, wherein the complete information about the salesperson, his name,
address, phone number, sales target, etc. is saved.
The companies store their data in the data warehouse from where the data can be retrieved
anytime the need arises. Once the data is stored, the statistical experts mine it by applying
several computer software and techniques to convert it into meaningful information that gives
facts and figures.
2. Marketing Intelligence System: The marketing intelligence system provides the data about the
happenings in the market, i.e. data related to the marketing environment which is external to the
organization. It includes the information about the changing market trends, competitor’s pricing
strategy, change in the customer’s tastes and preferences, new products launched in the market,
promotion strategy of the competitor, etc.
In order to have an efficient marketing Information System, the companies should work
aggressively to improve the marketing intelligence system by taking the following steps:
Providing the proper training and motivating the sales force to keep a check on the market
trends, i.e. the change in the tastes and preferences of customers and give suggestions on the
improvements, if any.
Motivating the channel partners viz. Dealer, distributors, retailers who are in the actual
market to provide the relevant and necessary information about the customers and the
competitors.
The companies can also improve their marketing intelligence system by getting more and
more information about the competitors. This can be done either by purchasing the
competitor’s product, attending the trade shows, reading the competitor’s published articles in
magazines, journals, financial reports.
The companies can have an efficient marketing information system by involving the loyal
customers in the customer advisory panel who can share their experiences and give advice to
the new potential customers.
The companies can make use of the government data to improve its marketing Information
system. The data can be related to the population trends, demographic characteristics,
agricultural production, etc. that help an organization to plan its marketing operations
accordingly.
Also, the companies can purchase the information about the marketing environment from the
research companies who carry out the researches on all the players in the market.
The Marketing Intelligence system can be further improved by asking the customers directly
about their experience with the product or service via feedback forms that can be filled online.
The secondary data are publicly available, but the primary data is to be collected by the
researcher through certain methods such as questionnaires, personal interviews, surveys,
seminars, etc.
A marketing research contributes a lot in the marketing information system as it provides the
factual data that has been tested several times by the researchers.
4. Marketing Decision Support System: It includes several software programs that can be used by
the marketers to analyze the data, collected so far, to take better marketing decisions.With the
use of computers, the marking managers can save the huge data in a tabular form and can apply
statistical programs to analyze the data and make the decisions in line with the findings.
Thus, the marketers need to keep a check on the marketing environment, i.e. both the internal
(within the organization) and the external (outside the organization, so that marketing policies,
procedures, strategies can be designed accordingly.
Marketing Research:
The Marketing Research is the systematic collection, organization, analysis and interpretation of
the primary or the secondary data to find out the solutions to the marketing problems.Several
Companies conduct marketing research to analyze the marketing environment comprising of
changes in the customer’s tastes and preferences, competitor’s strategies, the scope of new
product launch, etc. by applying several statistical tools. In order to conduct the market research,
the data is to be collected that can be either primary data (the first-hand data) or the secondary
data (second-hand data, available in books, magazines, research reports, journals, etc.)
The secondary data are publicly available, but the primary data is to be collected by the
researcher through certain methods such as questionnaires, personal interviews, surveys,
seminars, etc.
A marketing research contributes a lot in the marketing information system as it provides the
factual data that has been tested several times by the researchers.