Marketing environment is the set of all such factors outside the marketing that have an influence on the company’s marketing and some of them are also influenced by the company’s marketing.
The marketing environment of a company comprises both actors and forces outside marketing that affect marketer’s ability to develop and maintain successful transactions with its target customers.
Marketing environment offers both opportunities and threats. The marketer must watch the changing environment and must adapt their marketing strategies to environmental developments and changes. Marketing environment consists of a micro environment and a macro environment.
The microenvironment includes forces close to the company over which it has some control, e.g., suppliers, customer markets, marketing channels, competitors, etc. The macro environment comprises larger societal forces which affect the whole macro environment, e.g., economic, political, technological and cultural forces.
The micro environment includes: 1. The Company 2. Suppliers 3. Marketing Intermediaries 4. Customers 5. Competitors 6. Publics.
The macro environment includes: 1. Demographic Factors 2. Economic Factors 3. Natural Factors 4. Technological Factors 5. Political & Legal Factors s6. Socio-Cultural Factors.
Marketing Environment: Micro Environment and Macro Environment
Marketing Environment – Micro and Macro Environment (With Factors)
“A company’s marketing environment consists of the factors and forces outside marketing that affect marketing management’s ability to maintain successful relationships with its target customers”. – Philip Kotler
Every company should understand the factors and forces in its environment because these factors and forces, together influence the success of marketing. Even a very strong company cannot insulate itself against the influence of this environment. The marketing environment does both-present opportunities and pose threats to marketing. A wise company always understands its environment and manages their influence to its advantage.
A company’s marketing environment is of two types – The macro environment and the micro environment. There are several interpretations of the terms macro and micro.
In a simple way the meaning of these terms can be understood as follows:
1. A company’s macro environment consists of such forces which are far away from it and are strong and large. These factors exert their influence on the company’s marketing but the company cannot influence these factors. A company has to understand this and do its best to carry marketing within the prevailing limitations.
2. A company’s micro environment consists of such forces which are very proximate to it. These factors also exert their influence on the company’s marketing and the company in turn can influence these factors. A company has to understand this and tactfully use the situation to the best to serve its own interests of effective marketing.
1. Macro Environment:
“The macro environment consists of the larger societal forces that affect the micro environment-demographic, economic, natural, technological, political and cultural forces. The micro environment consists of the forces close to the company that affect its ability to serve its customers-the company, suppliers, marketing channel firms, customer markets, competitors and publics”. – Philip Kotler
The following are the important factors in a company’s macro environment:
i. Demographic factors
ii. Economic factors
iii. Natural factors
iv. Technological factors
v. Political & legal factors
vi. Socio-cultural factors
Demography is the study of the population of a country and also its composition based on criteria such as gender, age, income, education, ethnicity, rural and urban etc. The birth rate, death rate and growth of population are also part of demography.
Since marketing deals with people of a country an understanding of the country’s demography is very crucial to a company.
If the majority of the population consists of youngsters, different types of products will be demanded by the market as compared with a market constituting more of elders. Youngsters generally demand products like fast automobiles, fanciful dresses etc. Elderly generally demand products like health care services, pension schemes etc. Educated and uneducated people exhibit different patterns of consumption of goods.
Manufacturing companies have realized that they have to develop different sets of products and marketing strategies to suit rural and urban markets. There are regional differences also. People in South India exhibit a different type of consumption pattern as compared with people of North or East India.
A company has to understand the demographic breakup of the population of the country do design appropriate products and pragmatic marketing strategies.
The economic factors constitute factors such as the GDP, per capita income, inflation, deflation, and recession, rates of interests, money supply conditions, and incidence of savings etc. which prevail in a country.
The above factors greatly affect the marketing of a company as they collectively have a great influence on the purchasing power of the people. The purchasing power of the people enables them to buy goods and services.
A high per capita income endows the people with more spending power. Inflation generally increases incomes. A liberal supply of money and credit in the economy enables the middle income class to buy high priced goods such as automobiles, apartments etc. An economy with a high incidence of savings reduces the demand for the goods and services. A low rate of interest gives a fillip to the business sector.
A proper understanding of the economic factors will enable a company to frame pragmatic policies in terms of pricing, advertisement budgets, quantity of goods to be manufactured etc.
Natural factors in this context mean factors relating to ecology, environment etc. The fast deteriorating conditions of ecology and environment greatly affect a company’s marketing.
Factors like environmental pollution, weakening ozone layer, dwindling forests, shrinking water bodies, deficient power supply etc. have a very negative impact on marketing.
The present situation is witnessing a great surge in the levels of awareness relating to environmental matters. People will not buy the products of a company if they are not eco- friendly. Every company requires natural resources as its raw materials.
A company has to convince the customers that it is environmentally responsible, that the production processes are eco-friendly, that its products are safe etc. The governments are also becoming very stringent in terms of environment matters. Governments will come down very heavily on such companies which are not environmentally responsible. Pollution control measures are becoming more and more stringent day by day.
A company has to realize these facts, revamp all its operations become eco-friendly and also project the same to the society so that its products are well accepted in the market.
Technology is a wonderful gift of our times. Technology has created positive things such as the computer, the lifesaving drugs, medical equipment etc., negative things such as machine guns, nuclear bombs and also mixed gifts to the society such as automobiles, mobile phones etc.
Technology is the total of techniques and means employed to provide objects necessary for human comforts.
Every new technology replaces the existing technology and the latter goes waste. CD/DVD players have replaced cassette players, the T.V’s and home theatre systems have replaced the cinema theatres. Therefore any spending on new technology will be recovered fast by the companies. Technology is itself is a very expensive matter but those companies which do not technologically upgrade constantly will be rejected by the market.
Selling technologically superior products enables a manufacturer to overcome competition. On the other hand too much of the technology also becomes unacceptable. There are so many products which are good but based on very high technology, much beyond the levels of understanding and assimilation capacity of the buyers have pathetically flopped in the market.
Technological advancements are stringently tested by the government before permitting the sale of such products. This is done in the interest of the society. Therefore a company should make very safe products. For example – medicines.
Scientists at present are researching on many wonderful products such as practical electric cars, cancer cure etc. Technology is developed by consistent R& D efforts and spending.
A company has to understand the above matters before deciding on the level of technology for its products.
v. Political & Legal Factors:
The policies framed by the government in terms of finance, economy, consumer protection, ecology and environment, direct and indirect taxation, imports and exports, foreign investment, product safety norms etc. have a very strong influence on marketing.
These laws also keep changing from time to time.
In any country, government itself is a large purchaser of things and in fact is the largest purchaser in several cases.
According to Philip Kotler, government enacts these laws with three main intentions:
(a) To protect a company from other companies.
(b) To protect the consumers from the business.
(c) To protect the society from business.
A company may have to enter into contracts and agreements with several other individuals and companies. These laws are also framed by the government.
Every company has to understand the laws of the country which have an impact on its marketing and carry on marketing appropriately. No company can violate the governmental policies or laws in any way. A company has to do everything within the frame work of law as set by the government.
vi. Socio-Cultural Factors:
The customs, traditions, living habits, thinking, human relations etc. of a society are largely influenced by the culture. Culture itself is a social heritage. All of us subconsciously imbibe cultural and social values in our lives. The cultural and social factors are inextricably deep rooted in our minds, even in the case of the so called highly educated and modern minded people.
Our purchases of goods and services are greatly influenced by such cultural and social factors. Even though our core cultural values remain the same, our secondary cultural values keep changing. People belonging to different cultures exhibit different purchase behaviour.
A company has to understand these cultural factors before designing products or marketing policies. Anything which goes against the cultural factors of a society will be summarily rejected by the society.
2. Micro Environment:
“Micro environment refers to the forces which are close to the company that affect its ability to service its customers. The company, suppliers, marketing channel firms, customer markets, competitors and publics” – Philip Kotler
The following are the important factors in a company’s micro environment:
i. The company
ii. Suppliers
iii. Marketing intermediaries
iv. Customers
v. Competitors
vi. Publics
To achieve the task of the marketing, the marketing department needs the co-operation of various other company departments. The finance department is concerned with finding and using funds to carry out the marketing plan. The R&D department designs safe and attractive products according to the market requirements.
The purchasing department buys the appropriate materials. The manufacturing department manufactures the goods according to the market requirements. The accounting department has to maintain accounts of all the events in the business.
Therefore, all these departments within the company exert a very strong influence on the company and its marketing.
Suppliers are the businesses and individuals who provide raw materials to a company to be converted into finished goods. Suppliers determine the quality of the products a company makes through the supply of goods. Suppliers must supply quality goods, on time, at reasonable prices and on favourable terms and conditions. Moreover, the cost of the products of the company largely depends on the cost at which the raw materials are supplied to the company.
Therefore, suppliers exert a very strong influence on the company and its marketing.
iii. Marketing Intermediaries:
Marketing intermediaries enable the company to sell and physically distribute the goods throughout the market. They include several individuals and organizations.
Transport organizations enable the physical distribution of the goods. Wholesalers and retailers sell the goods of the company. Marketing servicing agents are also very essential such as banks, insurance companies, clearing and forwarding agencies.
Therefore, marketing intermediaries exert a very strong influence on the company and its marketing.
The ultimate success of marketing depends on the customers. Customers include individuals, firms, governments, other companies, importers etc. The marketing’s aim should be to find customers, develop customers, serve them well and retain them. Customers are the ones who sustain the company. If customers do not buy the products of a company, there is no way any company can survive, let alone succeed.
Therefore, customers exert a very strong influence on the company and its marketing.
Every business should deliver greater satisfaction to its customers than its competitors do. Therefore, every company has to understand its competitors. This is important for a company to maintain or improve its position within the market. If a business is unaware of its competitors’ moves, it will find it very difficult to outsmart its competitors.
Therefore, competitors exert a very strong influence on the company and its marketing.
A public, in this context means any group which can impact an organization’s ability to achieve its objectives.
The following are such publics:
(a) Finance institutions which provide finance to a company.
(b) Media which can create a positive or negative image about the company in the minds of the general public.
(c) Government which decides the success of a company through its policies and its legislations.
(d) Citizen action groups which can question several actions of the company.
(e) Local groups which can raise objections on account of environmental and other issues.
(f) General public whose attitude towards the company is very important.
(g) Internal groups such as the employees, managers, the board of directors etc. can decide the success of the company through their co-operation.
Therefore, publics exert a very strong influence on the company and its marketing.
Marketing Environment – Micro and Macro
Marketing environment offers both opportunities and threats. The marketer must watch the changing environment and must adapt their marketing strategies to environmental developments and changes.
Marketing environment consists of a micro environment and a macro environment. The microenvironment includes forces close to the company over which it has some control, e.g., suppliers, customer markets, marketing channels, competitors, etc. The macro environment comprises larger societal forces which affect the whole macro environment, e.g., economic, political, technological and cultural forces.
1. Micro Environment:
Marketer’s job is to create attractive offers for target markets. But marketing manager cannot simply restrict its attention to the target market’s needs.
Their success is affected by the following factors:
i. Company:
In designing a marketing strategy, a marketing manager should take other company groups into account — groups such as top management, finance, research and development and purchasing. All these interrelated groups form the internal environment. Top management sets the company’s objectives, strategies and policies. Marketing manager must make decisions within the plans made by top management and they must work closely with other company departments.
ii. Suppliers:
Suppliers are firms and individuals which provide resources needed by the company to produce goods and services. Marketing managers must watch supply availability carefully. Supply shortages or delays affect sales in the short run and damage customer goodwill in the long run.
iii. Marketing Intermediaries:
Marketing intermediaries are firms that help the firm to sell and distribute its goods to final buyers. They include middlemen, physical distribution firms, marketing services agencies and financial intermediaries.
Middlemen help the company find customers. These include wholesalers and retailers who buy and resell merchandise. Selecting the right middleman is a difficult job. Physical distribution firms help the company to store and move goods from their points of origin to their destinations. Warehouse store and protect goods before they move to their destinations.
Transportation companies include railways, truck companies, airlines, shipping companies specialize in the movement of goods from one location to another. A company must determine the best ways to store and ship goods. Marketing services and marketing consulting research firms, advertising agencies and marketing consulting firms that help the company to promote its products to the right markets.
When the company decides to use one of the agencies, it must choose carefully and review their performance regularly. Financial intermediaries include banks, insurance, and credit companies that help finance transactions Most companies depend on financial intermediaries to finance their transactions.
iv. Customer Markets:
A company must study its customer markets closely. There are five types of customer markets — consumer markets, business markets, reseller markets, government markets and international markets.
Consumer markets consist of individuals and households that buy goods and services for personal consumption. Business markets buy goods and services for use in their production process, whereas reseller markets buy goods and services to resell at a profit. Government markets are made up of government agencies that buy goods and services in order to transfer the goods and services to others who need them. Lastly, international markets consist of buyers in other countries.
v. Competitors:
A company must satisfy the needs and wants of consumers better than its competitors, if it wants to be successful. Marketers will not simply adapt to the needs of target consumers, they must be positioning their offerings strongly against competitors’ offerings in the minds of consumers. Different types of competitive strategies have to be adopted by different companies because there is no one best strategy for all companies.
2. Macro Environment:
The macro environment is described by mnemonics as PEST, i.e., Politics, Economics, Society and Technology. A company’s macro environment consists of six major forces – Demographic Environment, Economic Environment, Natural Environment, Technological Environment, Political Environment and Cultural Environment.
i. Demographic Environment:
Demography is the study of population. The demographic environment is of major interest to the market because it involves people and people make up markets. The Indian population exceeds 120 crores. Two important demographic trends are noticeable.
Indian population is getting older for two reasons — birth rate is slowing falling and life expectancy is increasing so the proportion of older people is increasing and middle-class family size is becoming smaller. Families with two children are considered ideal —”hum do, hamare do”.
The number of educated women going outside for work has gone up considerably. The size of child population is large thus there is a good market for children’s toys, foods, furniture and many firms are offering products designed for children. At the other end, the 60 and over group now makes up 9% of India’s population. As this group grows so will be the demand for retirement communities, life-care and health-care services, old-age home and leisure travel.
Finally, the number of non-family households is increasing, particularly in Western countries. Many young adults leave home and live in independently. Many adults choose to remain single. There are many divorced or widowed people living alone. These groups have their own special needs, e.g., they need smaller apartments, reasonably priced furniture and food that ready-to-eat and packaged in smaller sizes.
The population is becoming better educated. The rising number of educated people will increase the demand for quality products, books, magazines and travel.
ii. Economic Environment:
Markets require buying power as well as people. The economic environment consists of factors which affect consumer purchasing power and spending patterns. Marketers should be aware of major economic trends.
Marketers should pay attention to income distribution as well as average income. Income distribution in most countries including India is skewed. At the top are upper-class consumers whose spending patterns are not affected by current economic events and who are a major market for luxury goods.
There is a middle class which is somewhat careful about its spending. The working class must focus on the basics like food, clothing and shelter. Finally, the underclass (mainly retirees) are very careful even when they purchase basics of food, clothing and shelter.
Changes in major economic variables such as income, cost of living, interest rates, and saving patterns have a large impact on the market place.
iii. Natural Environment:
The natural environment refers to the natural resources which are needed as inputs by marketers or that they are affected by marketing activities. Environmental concerns have grown steadily during the past two decades.
Some trend analysts believe that the 90s will be the “Earth Decade”, in which protection of the natural environment will be the major issue facing business and the people. In many industrial cities around the world, air, water and sound pollution have reached dangerous levels. Marketers should be aware of the trends in the natural environment.
Air and water are not infinite resources, as it is generally supposed. Water shortage is already a big problem in many cities. Renewable resources such as forest and food have to be used wisely. Farms in the forestry business are required to reforest timberlands in order to protect the soil and to ensure enough wood supplies to meet future demand. Food supply will be a major problem as more and more agricultural lands are becoming habitable land for growing people.
Non-renewable resources such as oil, coal and various minerals become a serious problem. Firms making products that require these increasingly scarce resources face large cost increases even if the materials are available. It is not easy for them to pass these costs on to the consumers.
One non-renewable resource — oil — has created the most serious problem for future economic growth. Major industrial economies of the world depend heavily on oil and until economic energy substitutes are developed oil will dominate the world economic and political scene. Many companies are searching for practical ways for harnessing solar, nuclear and other forms of energy.
Industry almost always damages the natural environment. It is time to consider the disposal of chemical and nuclear wastes, the dangerous mercury levels in the ocean, the quantity of chemical pollutants in the soil and the littering of the environment with non-biodegradable bottles, plastics and other packaging materials.
On the other hand, public concern creates a marketing opportunity for alert companies. Such concern creates a large market for pollution control solutions such as recycling centres and land fill systems. It leads to a search for new ways to produce and package goods that do not cause environmental damage.
Increasing numbers of consumers buy “environmental friendly” products, even if these products cost more. Many companies are responding to such consumer demands with ecologically safer products, recyclable packaging and better pollution controls.
Various government agencies play an active role in environmental protection. The Environment Protection Act 1986 has given more power in the hands of Government for the protection of environment. In future, business can expect strong controls from government and pressure groups.
iv. Technological Environment:
The technological environment is perhaps crucial in shaping our destiny. Technology has created such wonders as penicillin, bypass surgery, Internet, etc. It has also initiated such horrors as the nuclear bomb, submarine and machine gun. Some mixed innovations have also come our way, such as the automobile, TV, other household appliances and credit cards. Technology has created both wonders and blunders.
Every new technology replaces an older technology. Transistors harmed radio business, Xerox harmed carbon-paper business and digital cable TV harmed cinemas. When old industries ignored new technologies, their businesses declined.
New technologies create new markets and opportunities. Companies that do not keep up with technological change will soon find their products outdated and they will miss new opportunities.
Many companies these days spend heavily on R&D. Owing to the high cost of developing and introducing new technologies many companies are making minor product improvements. They are happy to put their money into copying competitors’ products, and making minor style improvements.
As products become more complex the people need to know that they are safe. The government agencies ban potentially unsafe products. Marketers should develop products keeping an eye to the Consumer Protection Act.
v. Political Environment:
Marketing decisions are strongly influenced by the political environment. The political environment comprises laws, government agencies and pressure groups.
Even the most liberal advocates of free market economy agree that the system works best with some regulations. Proper regulations encourage competitions and ensure fair markets for goods and services. Thus governments adopt public policy to regulate business for the good of society as a whole. Every marketing activity is subject to laws and regulations.
Laws affecting business has increased over the years mainly for protecting the consumers from unfair business practices and to protect the interests of society against unrestrained business behaviour.
vi. Legal Environment:
Marketing decisions are strongly affected by laws relating to competition, price fixation, distribution arrangement, advertising, etc. It is necessary for a marketer to understand the legal environment of the country.
The following laws affecting business in India are important:
a. Indian Contract Act, 1872
b. Factories Act, 1948
c. Essential Commodities Act, 1955
d. The Companies Act, 1956
e. MRTP Act, 1969
f. Environment Protection Act, 1986
g. Consumer Protection Act, 1986
h. Taxation Laws.
vii. Cultural Environment:
Cultural environment consists of institutions and other forces that affect society’s basic values, perceptions, preferences and behaviours. Men grow up in a particular society which shapes their basic beliefs and values.
Marketing Environment – Micro and Macro (with Factors, Limitations and Aspects)
Marketing activities are influenced by several factors inside and outside a business firm. These factors or forces influencing marketing decision making are collectively called marketing environment. It comprises all those forces which have an impact on market and marketing efforts of the enterprise.
According to Philip Kotler, marketing environment refers to, “external factors and forces that affect the company’s ability to develop and maintain successful transactions and relationships with its target customers”. Marketing environment includes both controllable and uncontrollable forces.
The marketing environment may be broadly divided into two types:
I. Micro environment.
II. Macro environment.
I. Micro Environment:
Microenvironment begins with the company’s environment itself wherein the marketing managers are necessarily required to handle:
i. Brand managers.
ii. Marketing researchers.
iii. Advertising and sales promotion specialists.
iv. Sales managers.
v. Sales representatives.
Microenvironment implies the factors and forces in the immediate environment which affect the company’s ability to serve its market. These factors are otherwise called controllable factors.
These factors are discussed in detail:
Suppliers are either individuals or business houses. They, combined together, provide resources that are needed by the company. Now the company should necessarily go for developing specifications, searching the potential suppliers, identifying and analysing the suppliers and thereafter choose those suppliers who offer the best mix of quality, delivery reliability, credit, warranties and obviously low cost.
The developments in the supplier’s environment have a substantial impact on the marketing operations of the company, since supply planning has become more important and scientific in recent years. Price trends need constant check and careful scrutiny.
Supply shortages have to be fully monitored and plans have to be made to avoid the grip of supply shortages on marketing efforts. Regarding advertising, marketing, research, sales, training and marketing consultancy, the marketing managers are sole decisions makers.
Market intermediaries are either business houses or individuals who come to the aid of the company in promoting, selling and distributing the goods to the ultimate consumers. They are middlemen (wholesalers, retailers, and agents), distributing agencies, market service agencies and financial institutions.
Middlemen help to overcome the discrepancies in quantities, place, time, assortment and possession that would otherwise exist in a given condition. The marketing managers have to decide the most cost-effective modes of transportation and balancing the considerations of cost, delivery, speed and safety.
The company establishes faithful links with both suppliers and middlemen with two objectives in mind:
i. To supply appropriate products and services to its target market;
ii. To see that consumer satisfaction is provided as per the dictates of the target market.
The target markets of a company are of the following five types:
Consumer market – Individuals and householders.
Industrial market – Organizations that buy goods for producing other products and services for the purpose of either earning profits or fulfilling other objectives or both.
Reseller market – Organizations that buy goods and services with a view to sell them to others for a profit. They may be selling intermediaries and retailers.
Government and other non-profit market – They buy goods and services in order to produce public services. They transfer them to those who need them for consumption, in most of the cases.
International market – Individuals and organizations of nations other than the homeland, who buy for either consumption or for industrial use or for both. They may be foreign consumers, producers, resellers and governments.
Though there are different target markets, the prime motto of marketing is consumer satisfaction.
The competitive environment consists of certain basic things which every marketing manager has to take note of. Philip 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 that eventually leads to purchasing something?” Kotler has illustrated by taking a person who has been working hard and needs a break. He may ask himself as to what ought for attaining this break after a sustained hard work.
Among the possibilities that may pop up in his mind may be socializing, exercising, reading, going to cinema or hotels, watching television, etc. Kotler has also explained the types of competition (desire, generic, and form and brand competition) and has summarized by pointing out that a company must keep four basic dimensions in mind, which can be called the four C’s of market positioning. They are Customers, Channels, Competitors and Company. Successful marketing is a matter of achieving an effective alignment of the company with customers, channels and competitors.
General public do take interest in the business undertaking. The company has a duty to satisfy the people at large along with competitors and consumers. 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.
A public is defined as – “any group that has an actual or potential interest in or an impact on a company’s ability to achieve its objectives”. Public relations are certainly a broad marketing operation which must be fully taken care of. Companies would be wise to spend time monitoring the public understanding, their needs and opinions, and dealing with them constructively.
II. Macro Environment:
Environment provides resources and opportunities. It also puts limits and constraints on the organization, and influences its survival and growth.
Macro-environment refers to those factors which are external forces in the company’s activities and do not concern the immediate environment. Macro-environment are uncontrollable factors which indirectly affect the concern’s ability to operate in the market effectively. On the contrary, the microenvironment refers to internal factors that directly affect the market operating ability of the company and the factors are controllable. The company can manage these factors to its best advantage.
The uncontrollable external forces that have their own implications on the marketing strategy of a company are:
i. Demography.
ii. Economic environment.
iii. Social and cultural environment.
iv. Political and legal environment.
v. Technological advancements.
vi. Competition.
vii. Ecology.
viii. Customer demand.
To be successful in marketing, marketing managers must understand these uncontrollable forces, learn to accommodate them, and if possible take advantage of them in their marketing plans and policies. These uncontrollable forces are the parameters of the market. They act as constraints on the organization at all levels. Constraints are limitations on freedom of action.
These limitations are described briefly below:
Market means people with money and with a will to spend their money to satisfy their demand. Hence, marketing management is directly interested in demography, that is, scientific study of human population and its distribution structure. Growing population indicates growing market, particularly for baby products.
If a rise in birth rate is anticipated, the market potential is tremendous. But when we have reduction in the birth rate, and a lower rate of growth of population, many companies specializing in baby products will have to adjust their marketing strategy accordingly.
Population forecasts for the next decade can be arrived at with considerable accuracy and on the basis of such forecasts; marketing management can adjust marketing plans and policies to establish favourable relationship with demographic changes.
Demographic analysis deals with quantitative elements such as – age, sex, education, occupation, income, geographic concentration and dispersion, urban and rural population, etc. Thus, demography (study of population) offers a consumer profile which is very essential in market segmentation and determination of target markets.
The quantitative aspect of consumer demand is provided by demography, for example, census, whereas the qualitative aspect of consumer demand (for example, personality, attitudes, motivation, perception, etc.,) is provided by behavioural analysis.
Good demographic analysis combines several factors such as – rate of growth of population, income or economic power, life cycle analysis of consumer, occupation, education and geographic segmentation. Both demographic and behavioural analysis enables marketing executives to understand the basis of market segmentation and to determine market reaction to a new product or consumer reaction to an advertising campaign.
People constitute only one element of a market. The second essential element of a market is purchasing power and willingness to spend, called effective demand. Hence, economic conditions play a significant role in the marketing system. High economic growth assures higher level of employment and income, and this leads to marketing boom in many industries.
Marketing plans and programmes are also influenced by many other economic parameters such as interest rates, money supply, price level, consumer credit, etc. Higher interest rate adversely influences real estate market and markets of consumer durables sold on installment basis. Exchange fluctuations, currency devaluation, changes in political and legal set-up influence international marketing.
The level of take-home pay determines disposable personal income and it influences marketing programmes directly. Economic conditions leading to recession can influence product planning, price fixing and promotion policies of a business enterprise. Marketing mix must be formulated on the basis of important economic indices.
Since 1974, that is, after the energy (oil) crisis all over the world there is an inflationary trend and a continuous price rise. A high rate of inflation affects the economic structure of a country. Inflation coupled with scarcity conditions can radically change consumer buying habits.
Many purchases may be postponed or even eliminated. Higher petrol prices created a trend in favour of small cars and public transport. Inflationary conditions adversely affect the market of consumer durables. Economic forces can have positive or negative effects upon the promotion efforts of business units. Trade and business booms and slumps constitute the economic aspects of marketing environment.
iii. Social and Cultural Environment:
Social and cultural forces usually influence the welfare of a business concern in the long-run. In an ever-changing society, new demands are created and old ones are lost in due course. Marketing management is called upon to make necessary adjustments in marketing plans in order to fulfill new social demands.
There are three aspects of social environment:
a. Changes in our lifestyles and social values, for example, changing role of women, emphasis on quality instead of quantity of goods, greater reliance on governments, greater preference to recreational activities, etc.
b. Major social problems, for example, concern for pollution of our environment, socially responsible marketing policies, need for safety in occupations and products, etc.
c. Growing consumerism indicating consumer dissatisfaction since 1960. Consumerism is becoming increasingly important to marketing decision process. Social environment in many countries is responsible for emphasizing social responsibility of business and customer-oriented marketing approach.
Societal marketing concept demanding not only consumer welfare but also citizen welfare is due to the prevalent social environment and social or cultural values in advanced countries. Marketers are now called upon not only to deliver higher material standard of living, but also assure good quality of life, for example, an environment free from pollution.
iv. Political and Legal Environment:
Political and legal forces are gaining considerable importance in marketing activities and operations of business enterprises. Marketing systems are affected by government monetary and fiscal policies, import-export policies, and customs duties. Legislation controlling physical environment, such as – antipollution laws also influence marketing plans and policies. In many countries there are specific legislations to control marketing, such as -forward markets of commodities and securities.
Consumer legislation tries to protect consumer interests. There are also legislations to control and regulate monopoly and unfair trade practices in many countries. Marketing management cannot ignore the legislation regulating competition and protecting consumers. Marketing policymaking is influenced by government policies and controls throughout the world.
In some countries the government, rather than the market, provides a dominating marketing mechanism. Business enterprises may not be allowed to resort to price discrimination, false and misleading advertising, exclusive distributorships and agreements, deceptive sales promotion methods, division of markets, exclusion of new competitors and such other unfair trade practices.
v. Technological Advancements:
Unprecedented development of science and technology since 1940 has created a phenomenal impact on our lives. In one generation we have witnessed radical changes in our lifestyles, in our consumption pattern as well as in our economic welfare.
The phenomenal development of science and technology has completely transformed the life and living conditions in developed and developing countries. Ever-expanding markets create conditions that lead to technical progress. In most cases, the market was the mother of invention—the basic incentive for inventions is through research and development and for profit-seeking is through meeting market needs.
Technology is the way by which things are done—the methods, materials and techniques used to achieve commercial and industrial objectives. Modern economics have been shaped by technology. New technologies are the main source of economic growth.
Many business firms are earning handsome profits from products which did not exist some years back. Electronic industry is the best example of exploiting new marketing opportunities. Computers and airplanes are entirely new industries.
Digital watches are killing the marketing prospects of traditional watches. Artificial fibre cloth has almost killed the pure cotton textile industries in many countries. Television has adversely affected radio and cinema industries. Nearly 70 per cent of food products, now available in highly industrialized countries, were simply non-existent thirty years ago.
Consumer purchase and the manner in which they are consumed reflect a society’s lifestyle. Technological forces help to shape changes in the style of living of consumers. Marketing management with the help of technology can create and deliver standards and styles of life in many countries. It has the responsibility of relating changing lifestyle patterns, values and changing technology to market opportunities for profitable sales to particular market segments.
No marketing decision of major importance should be made without assessing competition in a free market economy. The marketing manager has little control over the actions of competitors. They can merely anticipate competitive actions and be prepared to deal with them. Competitors considerably influence the selection of target markets, suppliers, marketing channels as well as product mix, price mix and promotion mix.
In fact, formulation of marketing strategy is in itself a plan to fight against competitors’ move. An aggressive marketing manager knows that his marketing mix will encourage competition and he must anticipate the nature of this reaction while assessing his own situation. Similarly, he understands that activities of his rivals are bound to limit the marketing opportunities of his firm sooner or later.
Marketing strategies recognize the force of competition in a free market economy and these strategic plans are always based on the anticipated moves of the opponent. You have to outmanoeuver your opponent and then only your survival is assured in a competitive environment.
Competitive conditions within an industry are ever-changing and the marketing manager has to work hard to face the situation. After 1960, the marketing managers of cotton mills had to face competition from the synthetic fibre manufacturers.
In the wider concept of marketing, ecological environment has assumed a unique importance in production and marketing in modern economics. Environmental experts are vigorously advocating the preservation and survival of our entire ecological system. It is said that pollution is an inevitable by-product of high-consumption economic systems prevalent in the advanced countries.
The marketing system of an enterprise must satisfy not only the buyers of its products (consumers/users) but also societal wants which may be adversely affected by its activities and only then it is entitled to achieve its profit objective. The marketing executives must pay due attention to the quality of our life and our environment.
They must take measures to conserve and allocate efficient use of our scarce resources that can restore the balance in our ecological environment. Economical use of energy and natural resources are the essential ingredients of marketing strategies.
Customer demand is ever-changing, unpredictable and also immeasurable with accuracy. It is also complex and very intricate. Under the market-oriented, marketing philosophy, customer needs and desires act as the centre of the marketing universe. In fact, marketing system must respond to the customer needs and desires in all respects.
Marketing policies, programmes and strategies are planned, organized and executed with the main objective of customer satisfaction and service. It is in marketing that we satisfy individual and social values, needs and wants—be it through producing goods, supplying services, fostering innovation, or through creating satisfaction.
According to P. Drucker, There is only one valid definition of business purpose, “to create a customer”. The business enterprise aims to earn profits through serving the customer demand. It now thinks more in terms of profitable sale rather than more sales volume. Today marketing in the firm begins and also ends with the customers. First we have to identify customers, that is, our market.
Then we should develop a marketing programme in the form of the appropriate marketing mix to reach our customer, that is, our target market. We offer our output of goods and services primarily to secure continuous customer satisfaction. Repeat sales are possible only on customer satisfaction. The firm’s profits, indeed its very survival is linked to the satisfaction of customer needs and wants. Despite this obvious logic, even today many firms are still production or sales-oriented and not market-oriented.