Principles of Marketing

Chapter Two
Marketing Environment
Marketers need to be good at building good relationships with their customers and external
partners. To do this effectively, they must understand the major environmental forces that
surround all of these relationships. A company's marketing environment consists of the actors
and forces outside the organization that affect marketing management's ability to develop and
maintain successful transactions with its target customers. The marketing environment offers
both opportunities and threats.
Successful companies know the vital importance of using their marketing research and
intelligence systems constantly to watch and adapt to the changing environment. Too many other
companies, unfortunately, fail to think of change as opportunity. They ignore or resist critical
changes until it is almost too late. Their strategies, structures, systems and culture grow
increasingly out of date. Different world class business organizations have faced crises because
they ignored environmental changes for too long.

A company's marketers take the major responsibility of identifying significant changes in the
environment. More than any other group in the company, marketers must be the trend trackers
and opportunity seekers. Although every manager in an organization needs to observe the outside
environment, marketers have two special aptitudes. They have disciplined methods - marketing
intelligence and marketing research - for collecting information about the marketing
environment. They also normally spend more time in the customer and competitor environment.
By conducting systematic environmental scanning, marketers are able to revise and adapt
marketing strategies to meet new challenges and opportunities in the marketplace. Here, we
classify marketing environment as the company’s microenvironment and macro environment.

The Company's Microenvironment

A company’s success will be affected by actors in the company's microenvironment. These
actors include other company departments, suppliers, marketing intermediaries, customers,
competitors and various publics
1. The Company itself

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In designing marketing plans, marketing management should take other company groups, such as
top management, finance, research and development (R & D), purchasing, manufacturing and
accounting, into consideration. All these interrelated groups form the internal environment. Top
management sets the company's mission, objectives, broad strategies and policies. Marketing
managers must make decisions consistent with the plans made by top management, and top
management must approve marketing plans before they can be implemented. Marketing
managers must also work closely with other company departments.

 Finance is concerned with finding and using funds to carry out the marketing plan.
 The R & D department focuses on the problems of designing safe and attractive products.
 Purchasing worries about getting supplies and materials,
 Manufacturing is responsible for producing the desired quality and quantity of products.
 Accounting has to measure revenues and costs to help marketing know how well it is
achieving its objectives.
Therefore, all of these departments have an impact on the marketing department's plans and
actions. Under the marketing concept, all of these functions must 'think customer' and they
should work together to provide superior customer value and satisfaction

2. Suppliers

Suppliers have an important link in the company's overall customer 'value delivery system".
They provide the resources needed by the company to produce its goods and services. Supplier
developments can seriously affect marketing. Marketing managers must watch supply
availability - supply shortages or delays, labor strikes and other events can cost sales in the short
run and damage customer satisfaction in the long -run.

3. Marketing Intermediaries

Marketing intermediaries are firms that help the company to promote, sell and distribute its
goods to final buyers. They include resellers, physical distribution firms, marketing services
agencies and financial intermediaries. Now let us see each of them:
1) Resellers-are distribution channel firms that help the company find customers or make sales
to them. These include wholesalers and retailers, which buy and resell merchandise.

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2) Physical distribution firms-they help the company to store and move goods from their points
of origin to their destinations.
3) Marketing services agencies- are the marketing research firms, advertising agencies, media
firms and marketing consultancies that help the company target and promote its products to
the right markets. When the company decides to use one of these agencies, it must choose
carefully because the firms vary in creativity, quality, service and price.
4) Financial intermediaries- include banks, credit companies, insurance companies and other
businesses that help finance transactions or insure against the risks associated with the
buying and selling of goods.
Like suppliers, marketing intermediaries form an important component of the company's overall
value delivery system. In its mission to create satisfying customer relationships, the company
must do more than just optimize its own performance. It must partner effectively with suppliers
and marketing intermediaries to optimize the performance of the entire system.

4. Customers

The company must study its customer markets closely. Here we have five types of customer
market.
i. Consumer markets consist of individuals and households that buy goods and services for
personal consumption.
ii. Business markets buy goods and services for further processing or for use in their
production process, whereas reseller markets buy goods and services to resell at a profit.
iii. Institutional markets are made up of schools, hospitals, prisons and other institutions that
provide goods and services to people in their care.
iv. Government markets are made up of government agencies that buy goods and services in
order to produce public services or transfer the goods and services to others.
v. International markets consist of buyers in other countries, including consumers,
producers, resellers and governments.
Each market type has special characteristics that call for careful study by the seller. At any point
in time, the firm may deal with one or more customer markets.

5. Competitors

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The marketing concept states that, to be successful, a company must provide greater customer
value and satisfaction than its competitors do. Thus, marketers must do more than simply adapt
to the needs of target consumers. They must also gain strategic advantage by positioning their
offerings strongly against competitors’ offerings in the minds of consumers.
No single competitive marketing strategy is best for all companies. Each firm should consider its
own size and industry position compared to those of its competitors.

6. Publics

The company's marketing environment also includes various publics. A public is any group that
has an actual or potential interest in or impact on an organization's ability to achieve its
objectives. These publics include:
I. Financial publics- Financial publics influence the company's ability to obtain funds.
Example, banks
II. Media publics- Media publics are those that carry news, features and editorial opinion.
They include newspapers, magazines and radio and television stations,
III. Government public-. Management must consider government developments. Marketers
must often consult the company's lawyers on issues of product safety, truth-in-advertising
and other matters.
IV. Citizen action public-. A company's marketing decisions may be questioned by consumer
organizations, environmental groups, minority groups and other pressure groups.
V. Local publics- Every company has local publics, such as neighborhood residents and
community organizations. Large companies usually appoint a community-relations
officer to deal with the community, attend meetings, answer questions and contribute to
worthwhile causes.
VI. General public- A company needs to be concerned about the public’s attitude towards its
products and activities. The public's image of the company affects its buying. Thus, many
large corporations invest huge sums of money to promote and build a healthy corporate
image
VII. Internal publics. A company's internal publics include its workers, managers, volunteers
and the board of directors. When employees feel good about their company, this positive
attitude spills over to their external publics.

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A company can prepare marketing plans for these major publics as well as for its customer
markets. Suppose the company wants a specific response from a particular public, such as
goodwill, favorable word of mouth, or donations of time or money. The company would have to
design an offer to this public that is attractive enough to produce the desired response.

The Company's Macro Environment

The company and all the other actors operate in a larger macro environment of forces that shape
opportunities and pose threats to the company. In this section, we will discuss the six most
influential forces in the company's macro environment and show how they affect marketing
plans.

1. Demographic Environment

Demography is the study of human populations in terms of size, density, location, age, gentler,
race, occupation and other statistics. The demographic environment has considerable interest to
marketers because it involves people, and people make up markets. The most important
demographic characteristics and trends in the largest world markets include Population Size and
Growth Trends, Changing Age Structure of a Population, Rising Number of Educated People,
Increasing Diversity

2. Economic Environment

Markets require buying power as well as people. The economic environment consists of factors
that affect consumer purchasing power and spending patterns. Marketers should be aware of the
predominant economic trends such as Income Distribution and Changes in Purchasing Power,
Changing Consumer Spending Patterns

3. Natural Environment

The natural environment involves the natural resources that are needed as inputs by marketers
or that are affected by marketing activities. Marketers should be aware of four trends in the
natural environment: Shortages of Raw Materials, Increased Cost of Energy, increased
Pollution, Government Intervention in Natural Resource Management

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4. Technological Environment

The technological environment is perhaps the most dramatic force now shaping our destiny.
Every new technology replaces an older technology. New technologies create new markets and
opportunities. Marketers need to understand the changing technological environment and the
ways that new technologies can serve customer and human needs. They need to work closely
with R & D people to encourage more market-oriented research.

5. Political Environment

Marketing decisions are strongly affected by developments in the political environment.

The political environment consists of laws, government agencies and pressure groups that
influence and limit various organizations and individuals in a given society. Marketers need to
know about the main laws protecting competition, consumers and society. International
marketers should additionally be aware of regional, country and local laws that affect their
international marketing activity.

6. Cultural Environment

The cultural environment is made up of institutions and other forces that affect society's basic
values, perceptions, preferences and behaviors. People grow up in a particular society that shapes
their basic beliefs and values. Marketers must be aware of these cultural influences and how they
vary across societies within the markets served by the firm.

Responding to the Marketing Environment

Many companies view the marketing environment as an uncontrollable element to which they
must react and adapt. They passively accept the marketing environment and do not try to change
it. They analyze the environmental forces and design strategies that will help the company avoid
the threats and take advantage of the opportunities the environment provides.

Other companies take a proactive stance toward the marketing environment. Rather than simply
watching and reacting, these firms take aggressive actions to affect the public’s and forces in
their marketing environment. Such companies hire activists to influence legislation affecting

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their industries and stage media events to gain favorable press coverage. They press law suits and
file complaints with regulators to keep competitors in line, and they form contractual agreements
to better control their distribution channels.
By taking action, companies can often overcome seemingly uncontrollable environmental events.
For example, whereas some companies view the ceaseless online rumor mill as something over
which they have no control, others work proactively to prevent or counter negative word of
mouth.
Marketing management cannot always control environmental forces. In many cases, it must
settle for simply watching and reacting to the environment. For example, a company would have
little success trying to influence geographic population shifts, the economic environment, or
major cultural values. But whenever possible, smart marketing managers will take a proactive
rather than reactive approach to the marketing environment.

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