Module 1- Introduction to Marketing

Topics to be covered- Importance of Marketing, Definition of market and marketing, Types of

Needs, Elements of Marketing Concept, Functions of Marketing, Evolution of Marketing, Marketing
v/s Selling, Customer Value and Satisfaction, 4 P’s of Marketing, Marketing Environment,
Techniques used in environment analysis, Characteristics (Micro and Macro), Marketing to 21 st
century customer.

INTRODUCTION

Marketing is the science of meeting the needs of a customer by providing valuable products to customers by utilizing
the expertise of the organization, at same time, to achieve organizational goals.

There are various standard definitions of marketing. While the words used may be different, it is obvious that all
marketing activity is about the customer, focused at acquiring them and retaining them.

Marketing is a business function and set of processes involved in creating, delivering and communicating value
to customers, followed by managing customer relationships, resulting in mutual benefit for the business and its
stakeholders. Marketing is also the science of selecting target markets via market analysis and segmentation,
with a comprehensive knowledge of buying behaviour, aiming to provide the best customer value.

However, marketing is successful only when an organization‟s mission, vision, tasks and ability to leverage
technology align with and complement each other, and the business as a whole.

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Marketing provides businesses with a competitive edge, since that is what they need to do, to gain loyal
customers.

Businesses achieve this by convincing potential customers that their product is the nearest thing that satisfies
their needs and wants and do it consistently, with the result that the loyal customer starts buying from them
without looking at the competition.

This is what all businesses dream of and achieving this is possible only with a solid marketing plan in place.

With the advent of the internet, there are several marketing channels available to businesses, besides traditional
marketing. All of them focus on engaging the customer.

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According to The American Marketing Association - Marketing is the activity, set of institutions, and processes
for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners,
and society at large.

Definition of Market – Refers to a place where buyer and seller meet tighter to exchange the values. A market is
defined as the sum total of all the buyers and sellers in the area or region under consideration. The area may be the
earth, or countries, regions, states, or cities. The value, cost and price of items traded are as per forces of supply and
demand in a market.

Definition of Marketing - The American Marketing Association defines marketing as an organizational function
and set of processes for creating, communicating and delivering value to customers and for managing customer
relationships in ways that benefit the organization and its stakeholders

IMPORTANCE OF MARKETING

Importance of marketing can be studied as follows:

1. Marketing Helps in Transfer, Exchange and Movement of Goods: Marketing is very helpful in transfer,
exchange and movement of goods. Goods and services are made available to customers through various
intermediaries‟ viz., wholesalers and retailers etc. Marketing is helpful to both producers and consumers.
To the former, it tells about the specific needs and preferences of consumers and to the latter about the
products that manufacturers can offer. According to Prof. Haney Hansen “Marketing involves the design of
the products acceptable to the consumers and the conduct of those activities which facilitate the transfer of
ownership between seller and buyer.”

2. Marketing Is Helpful In Raising And Maintaining The Standard Of Living Of The Community-

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Marketing is above all the giving of a standard of living to the community. Paul Mazur states, “Marketing is
the delivery of standard of living”. Professor Malcolm McNair has further added that “Marketing is the
creation and delivery of standard of living to the society”.
By making available the uninterrupted supply of goods and services to consumers at a reasonable price,
marketing has played an important role in raising and maintaining living standards of the community.
Community comprises of three classes of people i.e., rich, middle and poor. Everything which is used by
these different classes of people is supplied by marketing.
In the modern times, with the emergence of latest marketing techniques even the poorer sections of society
have attained a reasonable level of living standard. This is basically due to large scale production and lesser
prices of commodities and services. Marketing has infact, revolutionised and modernised the living standard
of people in modern times.

3. Marketing Creates Employment- Marketing is complex mechanism involving many people in one form or
the other. The major marketing functions are buying, selling, financing, transport, warehousing, risk bearing
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 and standardisation, etc. In each such function different activities are performed by a large number of individuals
and bodies.
Thus, marketing gives employment to many people. It is estimated that about 40% of total population is directly
or indirectly dependent upon marketing. In the modern era of large scale production and industrialisation, role of
marketing has widened.
This enlarged role of marketing has created many employment opportunities for people. Converse, Huegy and
Mitchell have rightly pointed out that “In order to have continuous production, there must be continuous
marketing, only then employment can be sustained and high level of business activity can be continued”.

4. Marketing as a Source of Income and Revenue:

The performance of marketing function is all important, because it is the only way through which the concern
could generate revenue or income and bring in profits. Buskirk has pointed out that, “Any activity connected
with obtaining income is a marketing action. It is all too easy for the accountant, engineer, etc., to operate
under the broad assumption that the Company will realise many dollars in total sales volume.
However, someone must actually go into the market place and obtain dollars from society in order to sustain
the activities of the company, because without these funds the organisation will perish.”
Marketing does provide many opportunities to earn profits in the process of buying and selling the goods, by
creating time, place and possession utilities. This income and profit are reinvested in the concern, thereby
earning more profits in future. Marketing should be given the greatest importance, since the very survival
of the firm depends on the effectiveness of the marketing function.

5. Marketing Acts as a Basis for Making Decisions: A businessman is confronted with many problems in the
form of what, how, when, how much and for whom to produce? In the past problems was less on account of

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local markets. There was a direct link between producer and consumer.
In modern times marketing has become a very complex and tedious task. Marketing has emerged as new
specialised activity along with production.
As a result, producers are depending largely on the mechanism of marketing, to decide what to produce and
sell. With the help of marketing techniques a producer can regulate his production accordingly.

6. Marketing Acts as a Source of New Ideas- The concept of marketing is a dynamic concept. It has changed
altogether with the passage of time. Such changes have far reaching effects on production and distribution.
With the rapid change in tastes and preference of people, marketing has to come up with the same.
Marketing as an instrument of measurement, gives scope for understanding this new demand pattern and
thereby produce and make available the goods accordingly.

7. Marketing Is Helpful In Development Of An Economy: Adam Smith has remarked that “nothing happens
in our country until somebody sells something”. Marketing is the kingpin that sets the economy revolving.

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 The marketing organisation, more scientifically organised, makes the economy strong and stable, the lesser the
stress on the marketing function, the weaker will be the economy.

DEFINITIONS OF MARKET AND MARKETING

A simple definition for marketing is that it is the creation and satisfaction of demand for your product, service or
ideas. If all goes well, this demand should translate into sales and, ultimately, revenue.

 What is Marketing?

In 2012, Dr Philip Kotler defined marketing as “The science and art of exploring, creating, and delivering value
to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines,
measures and quantifies the size of the identified market and the profit potential” (Kotler, 2012).

The American Marketing Association (AMA), defines marketing as “The activity, set of institutions, and
processes for creating, communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large” (AMA, 2017).

 What Is a Market?

A market is a place where parties can gather to facilitate the exchange of goods and services. The parties
involved are usually buyers and sellers. The market may be physical like a retail outlet, where people meet face-
to-face, or virtual like an online market, where there is no direct physical contact between buyers and sellers.
There are some key characteristics that help define a market, including the availability of an arena, buyers and
sellers, and a commodity that can be purchased and sold.

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TYPES OF NEEDS

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According to Abraham Maslow, human needs are of five kinds 1. Physiological needs 2. Safety needs 3. Social
needs 4. Esteem needs and 5. Self-actualization needs!

Abraham Maslow, a famous social scientist and a psychologist, developed a theory of motivation which is based on
the hierarchy of needs.

The basic assumption underlying this theory is that the behaviour of the individual is strongly driven by the urgency
of the need i.e. the individual would try to satisfy his strongest need first and once it has been achieved it would no
longer motivate him hence he would move higher to meet his other needs.

According to him there are five kinds of needs viz., physiological, safety, social, esteem and self-actualization as
explained below in the diagram.

1. Physiological Needs:

Physiological needs (e.g. food, shelter, clothing, water, air, sleep etc.) refer to those needs which are so
essential. The survival of human beings would be in danger if these needs are not satisfied. These needs are
biological in nature and keep the body fit. There is a famous saying that a man can live on bread alone if there is
no butter.

2. Safety Needs:

After the physiological needs are satisfied to a reasonable degree, the safety needs take the place e.g., security of
job, pension for old age, insurance plan, compensation for lay off or retrenchment. In choosing a job, security
needs play an important role.

3. Social Needs:

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Social needs include need for love, affection, friendship, acceptance by group etc. A man is a social being and
he has a need „to love‟ and „to be loved‟. Workers form informal groups for having a meaningful relationship
with others. Management should not object to such groups except when they are detrimental to the organisation.

4. Esteem Needs:

These needs are concerned with one‟s self esteem such as self-respect, self-confidence, status, recognition,
approval, appreciation etc. The satisfaction of these needs produces a feeling of self-confidence among the
employees. The employees should be praised for good work done since it amounts to recognition of their work.

5. Self-Actualization Needs:

These needs include need for self-development, self-actualization, self-advancement, desire to take an increased
responsibilities etc. Not many employees try to satisfy these needs but an employee who wants to develop, will
feel restlessness till he satisfies this need.

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According to Maslow, this need might be phrased as the desire to become more and more what one is, to become
everything that one is capable of becoming.

Maslow’s need hierarchy theory emphasizes three basic ingredients:

(i) A man is a social animal and he always desires for more and more. His needs are of many types.

(ii) There is a hierarchy of these needs i.e., these needs are arranged in a series of preference. After the lower level
needs are satisfied, the needs of the higher level take their place. A man whose stomach is full becomes conscious of
the other needs.

(iii) A satisfied need can never work as a motivator. Only those needs which are not satisfied act as a motivator for
influencing the human behaviour.

ELEMENTS OF MARKETING MIX

Marketing Mix is a set of marketing tool or tactics, used to promote a product or services in the market and sell
it. It is about positioning a product and deciding it to sell in the right place, at the right price and right time. The
product will then be sold, according to marketing and promotional strategy. The components of the marketing
mix consist of 4Ps Product, Price, Place, and Promotion. In the business sector, the marketing managers plan a
marketing strategy taking into consideration all the 4Ps. However, nowadays, the marketing mix increasingly
includes several other Ps for vital development

Product in Marketing Mix:

A product is a commodity, produced or built to satisfy the need

of an individual or a group. The product can be intangible or

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tangible as it can be in the form of services or goods. It is
important to do extensive research before developing a product
as it has a fluctuating life cycle, from the growth phase to the
maturity phase to the sales decline phase.

A product has a certain life cycle that includes the growth phase,
the maturity phase, and the sales decline phase. It is important
for marketers to reinvent their products to stimulate more
demand once it reaches the sales decline phase. It should create
an impact in the mind of the customers, which is exclusive and different from the competitor‟s product. There is
an old saying stating for marketers, “what can I do to offer a better product to this group of people than my
competitors”. This strategy also helps the company to build brand value.

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Price in Marketing Mix:

Price is a very important component of the marketing mix definition. The price of the product is basically the amount
that a customer pays for to enjoy it. Price is the most critical element of a marketing plan because it dictates a
company‟s survival and profit. Adjusting the price of the product, even a little bit has a big impact on the entire
marketing strategy as well as greatly affecting the sales and demand of the product in the market. Things to keep on
mind while determining the cost of the product are, the competitor‟s price, list price, customer location, discount,
terms of sale, etc.

Price is considered as one of the most important elements of marketing mix as decisions related to pricing can
directly affect the revenues of the organisation. Pricing has many components and it is not just a tag on the product
or service. Foremost, while calculating a tour cost, the tour operator must take into account the direct and indirect
cost, fixed and variable cost, mark up, profit margins, competitive pricing, special offers and discounting strategies.
In case of international tourists, a travel agent has to consider the fluctuations due to foreign exchange.
Increased competition and easy access of information among consumers, have made pricing decisions
challenging. For example, a person who wishes to travel from New Delhi to Mumbai can easily compare the
prices of various flights across various platforms and then make a decision. Many websites facilitates price
comparison of hotels across various platforms, thereby empowering the consumers. The pricing environment
has become challenging because the service providers are ready to offer the product or the service at the desired
price level. For example Priceline.com offers an option to the customers to buy products at their desired price
point.

A marketer has to take a number of pricing decisions including– price of the product or service, discounts or
allowances, credit terms, payment period and related decision. For example, many hotels are willing to offer
special discounts during the off-season just to ensure survival during that period. Making effective decisions on

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pricing can significantly impact the perceived value of the offering. While making pricing decisions, a marketer
should account for multiple factors including the company, competitors, customers and the overall marketing
environment. While establishing the price of the product the firm should first select the pricing objective like
maximise profit, maximise market share or other. In case a company intends to maximise the profits, it will
establish the price in accordance with the cost structure and the minimum margin they expect. In case the
objective is to establish the product with quality leadership, a firm will establish price accordingly. For example,
Burj Al Arab offers the most expensive hotel rooms in the world which has an average price tag of $25,000 and
above

Place in Marketing Mix:

Placement or distribution is a very important part of the marketing mix strategy. We should position and
distribute our product in a place that is easily accessible to potential buyers/customers.

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As product decisions correspond to creating value, promotion decisions correspond to communicating value;
successful value creation needs successful value delivery. Since travel experiences are highly dependent upon a
network of suppliers, organisations in this industry need to manage this complex marketing/distribution channel
system and value network. Place decisions are related to distribution channels where a set of interdependent
organisations (e.g. airlines, hotel, taxi, travel agents, guides etc) come together to make a product or service available
to the tourists for consumption. A marketer plans the overall marketing strategy, yet the distribution channel or
supply chain management decisions can significantly influence the marketing effectiveness. The primary objective of
the distribution channels is not only to serve the market, but they also have to play a significant role in developing
the market.

Promotion in Marketing Mix:

It is a marketing communication process that helps the company to publicize the product and its features to the
public. It is the most expensive and essential components of the marketing mix, that helps to grab the attention
of the customers and influence them to buy the product. Most of the marketers use promotion tactics to promote
their product and reach out to the public or the target audience. The promotion might include direct marketing,
advertising, personal branding, sales promotion, etc.

As a marketing strategy, in addition to creating value by developing products and services, communicating
value to the potential customers is equally important. To effectively reach and influence the target markets, a
tourism marketer has to creatively develop integrated marketing communication strategy. A marketer has to
decide on what to communicate, how and when to communicate so that there is synergistic effect of their
communication. With the advent of technology, internet and social media, the way firms and consumers

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communicate has profoundly changed. In the changing and challenging communication environment, a marketer
has to creatively design the marketing communication channel. A marketer has multiple options of reaching out
to consumers by developing an appropriate marketing communication mix

What is 7 P of Marketing?

The 7Ps model is a marketing model that modifies the 4Ps model. As Marketing mix 4P is becoming an old
trend, and nowadays, marketing business needs deep understanding of the rise in new technology and concept.
So, 3 more new P‟s were added in the old 4Ps model to give a deep understanding of the concept of the
marketing mix.

People in Marketing Mix:

The company‟s employees are important in marketing because they are the ones who deliver the service to
clients. It is important to hire and train the right people to deliver superior service to the clients, whether they
run a support desk, customer service, copywriters, programmers…etc. It is very important to find people who

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genuinely believe in the products or services that the particular business creates, as there is a huge chance of giving
their best performance. Adding to it, the organisation should accept the honest feedback from the employees about
the business and should input their own thoughts and passions which can scale and grow the business.

Process in Marketing Mix:

We should always make sure that the business process is well structured and verified regularly to avoid mistakes and
minimize costs. To maximise the profit, Its important to tighten up the enhancement process.

Physical Evidence in Marketing Mix:

In the service industries, there should be physical evidence that the service was delivered. A concept of this is
branding. For example, when you think of “fast food”, you think of KFC. When you think of sports, the names Nike
and Adidas come to mind.

Importance of Marketing Mix

The marketing mix is a remarkable tool for creating the right marketing strategy and its implementation through
effective tactics. The assessment of the roles of your product, promotion, price, and place plays a vital part in
your overall marketing approach. Whereas the marketing mix strategy goes hand in hand with positioning,
targeting, and segmentation. And at last, all the elements, included in the marketing mix and the extended
marketing mix, have an interaction with one another.

EVOLUTION OF MARKETING

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Production Concept-

1. Under this people believed that when a product‟s quality is good enough it doesn‟t require any additional
efforts in promotion as people will anyhow purchase it. This was the widely used approach during the
industrial revolution.

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2. People focused on more production at a low cost so that it can fetch better returns. Before the revolution
maximum products were handmade and this entire process made the production cost of the product go
high.
3. Due to a high production cost, producers had no option but to sell it at higher prices.
4. After the introduction of machinery, this production cost came comparatively down and the products
were being sold at 1/10th of the original price.
5. Customers were ready to buy this product with happiness as it was cheaper for them than ever. In this
case, there was hardly any requirement for marketing, and the products were being sold with ease.
6. Though when we are going through this philosophy of production orientation we need to know that a
few assumptions were taken while framing this philosophy; as everything that was being produced with
the machinery could be sold, the production cost was kept to a minimum only, and so on.
7. Manufacturers during this phase of the evolution of marketing concepts were eyeing more efficient
production which is coming out of low-cost as to attain the maximum profit.

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Product Orientation-

1. Here, a more competitive approach was taken during the production process in order to produce the most
ideal product they can.
2. An assumption was made during this phase that if the people are already having a product of certain quality
they will only expect you to produce a product of better quality than that.
3. If they are already benefited from the core features of a product then if you want to sell your product, you
will have to create something different and better.

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4. What was happening in this phase was, that every production process was setting a standard before itself.
5. Since customers were seeking a product with more and more unique features, manufacturers were also
aiming toward producing a better and better product. They were doing their best to solve the problem of the
diverse needs of customers.
6. But there was a downside during this approach to production – the prices of the product were going up at a
high rate.
7. Every time the product contained more and more features, this leads the manufacturers to increase the price
of the product, and sometimes even the customer themselves were not in a position to pay the prices for
what they seek were seeking from the product

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Sales Orientation-

1. By this time people started to recognize the importance of the promotion process and why they should
introduce marketing to their business.
2. Producers started to realize that the mere production of quality products is not enough for their
business‟s growth rather they will also have to invest in the promotion process.

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3. They realized that it was extremely difficult for them to move the product out of their firm without
proper promotion or advertising.
4. What we know today about marketing was realized during that period of time. They started to feel that
no matter how much quality their products contain, people won‟t buy them if they are kept to mum.
5. During this phase, the manufacturers were only eyeing two things – producing the best quality product
they can and convincing the people at their best to buy the products that they produced.
6. They started using different tactics to influence people to buy their products. Even high-pressure tactics
were being introduced to boost up sales.
7. This philosophy is being followed since the 1940s and the marketing which we are following currently is
entirely based on the same philosophy.

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Customer Orientation-

1. Under this philosophy, the main aim of businesses is to understand and satisfy the expectations of the
customer.
2. This is undoubtedly the most ideal condition of any business where they try to figure out what are the actual
needs of the customer and what they expect from their seller.
3. Since the 1950s this philosophy has been considered the fundamental aim of any business.
4. Customer satisfaction was the main aim of businesses during this phase of the evolution of marketing. They
focused on the customer more than just their product.

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5. What they produced depended upon what the customer desired and expects from them.
6. First of all the businesses commence with the customer and once they are all clear about their needs and
desires, they move on to the next step; production.
7. What they are going to produce and how the production process will proceed depends on the above-
mentioned factors.
8. Under this philosophy many assumptions were made as well like; as firms are going to produce only those
products that are desired by the customer, the entire management will work to enhance their programs for
the prime satisfaction of their customer and the business focuses on the long-term goals rather than the quick
sales.
9. Under this philosophy, marketing campaigns grew as well.
10. Businesses came to know about their audience‟s desires only through their marketing campaign and they
were able to be aware of their product through their marketing campaigns only.

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Social or Societal Marketing Orientation

1. Till now marketing campaigns were completely oriented toward business, sales, products, and customers. We
were not paying attention to the environmental degradation that was happening due to our activities.
2. Marketing theory went through a refinement during this phase when the marketers and the business
owners started paying attention to the environment.
3. They started to recognize how their activities are harming nature and eventually creating harm for our
society as well.
4. Consumer welfare came into play during this phase of the evolution of marketing. Here the aim of
businesses shifted towards providing humans with a quality lifestyle and along with that ensuring a
pollution-free environment around us.
5. Now the businesses were not just focusing on producing quality products rather they were focused on
producing environment-friendly products.
6. Their aim shifted from complete customer satisfaction to customer welfare as well as social welfare.

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7. Environment safety was the major aim of businesses and this philosophy of environmental protection is
being followed even today and that is what we call Green Marketing.

MARKETING V/S SELLING

The key difference between selling and marketing is that selling refers to the transaction where a good or service
is being exchanged for money, whereas marketing refers to the activities and plans that are taken by the
companies to promote the buying or selling of a product or service.

Selling and marketing are two inter-related processes. Generally, in the modern market, it‟s almost impossible to
sell a product or service without using any marketing efforts.

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 Prof. Harshita Kaushik/AIT/MBA/Marketing Management

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CUSTOMER VALUE AND SATISFACTION

Though customer value and customer satisfaction sound similar there are some differences between them. Customer
value and customer satisfaction emerge from the same core concept of customer delight. However, both are used to
identify different parameters of customer experience, customer perception, and purchasing behavior. So, there are
some obvious differences between them. But, on simple sight, they are hard to spot. Both concepts are important for
all organizations, and they need to concentrate on them for business excellence. The benefits of excelling in
customer value and customer satisfaction are customer loyalty, customer retention, high customer lifetime value,
market leadership, and goodwill. Both concepts are subjective as they have the tendency to be different from person
to person.

What is Customer Value?

Value is one of the highly misused concepts due to ambiguity and lack of clarity as per Gummerus. Different
authors have explained customer value in different modes. So, proper classification of customer value is
important. From a theoretical background, the value is the total perceived benefit exceeding the total perceived
cost. Customers evaluate the trade-off between the benefits they are acquiring and the price they are paying for
those benefits. Customer value can be shown as an equation as below:

Customer Value = Total Customer Benefits – Total Customer Costs

The benefits can be product quality, after-sales services, warranty, repairs costs, free delivery, customer
friendliness, etc. Total customer costs are not only limited to the price, it can include time spent, energy spend,

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risks, emotional stress, etc. The major attributes that contribute in deciding the customer value are conformance
of product standards, product choices, price, brand, value added services, relationships, and experiences.

The customers evaluate their perceived value of a brand with other brands available in the market, before
deciding on the purchase. They will buy the product/ service that has superior perceived value comparatively.
So, an organisation has to outperform their competitor in all aspects to be a success story in the market. Benefits
of superior customer value for the organization are delighted customers, satisfied employees, enhanced market
share, competitor edge, and improved brand image. Customers calculate value, before purchasing as it assists
them to make the best choice available in the market. So, customer value is proactive.

Evaluation of customer value metrics assists an organisation to plan a product with higher benefits than
competitors with the price customer willing to pay. Specific value propositions can be offered to respective
customer segments.

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What is Customer Satisfaction?

Customer satisfaction can drive an organisation to excellence while dissatisfaction can send it out of business. It has
such uniqueness to it. Customer satisfaction can be classified as the match between customer expectations of the
product and the product‟s actual performance. Customer expectation and how they understand the actual product
performance is more emotional. Satisfaction is felt by an individual and not thought. So, it differs from person to
person and is very complex to quantify.

Customer expectation can be influenced by past consumption experiences, recommendations from friends, seller
promise, and competitor information. From the customer‟s view, a proper evaluation can only be done by
experiencing the product or service. So, customer satisfaction is a post-purchase phenomenon. So, it‟s a reactive
response. Satisfaction can only be measured by comparing pre-purchase expectation and post-purchase experience. If
the product experience meets the perceived value, it is satisfaction. If not, it is dissatisfaction. So, customer value
transforms as customer satisfaction once the customer experiences the offering. However, customer expectation
can‟t always be termed as customer value. At times, customers may have higher expectations than what can be
actually provided.

4 P’S OF MARKETING

(******Already mentioned******)

MARKETING ENVIRONMENT

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Marketing system of every business organisation is influenced by a large number of uncontrollable factors that
surround the company. So the marketing system of a company must have to operate within the framework of the
environmental forces. According to Philip Kotler, a company's marketing environment consists of the actors and
forces outside d marketing that affect marketing management's ability to develop and maintain successful
transactions with its target consumers. For example, the relevant environment to a car tyre manufacturer may be the
car manufacturers and buyers, the tyre manufacturing technology, the tax structure, imports and export regulations,
the distributors, dealers, competitors, etc. In addition to these, the company may have to consider its own capabilities
in terms of its production, technology, finance, sales force, etc. The environment becomes important due to the
Marketing Environment fact that it is changing and there is uncertainty. Some of these environmental factors are
uncontrollable. There is both a threat and opportunity in these changes.

Marketing environment is the combination of external and internal factors and forces that affect the company’s
ability to establish a relationship and serve its customers.

The marketing environment of a business consists of an internal and an external environment.

 The internal environment is company-specific and includes owners, workers, machines, materials etc.

 The external environment is further divided into two components: micro & macro.

o The micro or the task environment is also specific to the business but is external. It consists of
factors engaged in producing, distributing, and promoting the offering.

o The macro or the broad environment includes larger societal forces which affect society as a
whole. It is made up of six components: demographic, economic, physical, technological,
political-legal, and social-cultural environment.

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“A company’s marketing environment consists of the actors and forces outside of marketing that affect
marketing management ability to build and maintain successful relationships with target customers”. – Philip
Kotler

What Are The Components Of Marketing Environment?

The marketing environment is made up of the internal and external environment of the business. While the
internal environment can be controlled, the business has less or no control over the external environment.

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:

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  Men: The people of the organisation including both skilled and unskilled workers.

 Minutes: Time taken for the processes of the business to complete.

 Machinery: Equipment required by the business to facilitate or complete the processes.

 Materials: The factors of production or supplies required by the business to complete the processes or
production.

 Money: Money is the financial resource used to purchase machinery, materials, , and pay the employees.

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, the 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 marketing environment

 Macro marketing environment

Micro Environment

The micro-component of the external environment is also known as the task environment. It comprises external
forces and factors that are directly related to the business. These include suppliers, market

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intermediaries, customers, partners, competitors and the public

 Suppliers include all the parties which provide resources needed by the organisation.

 Market intermediaries include parties involved in distributing the product or service of the
organisation.

 Partners are all the separate entities like advertising agencies, market research organisations, banking
and insurance companies, transportation companies, brokers, etc. which conduct business with the
organisation.

 Customers comprise of the target group of the organisation.

 Competitors are the players in the same market who targets similar customers as that of the
organisation.

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  Public is made up of any other group that has an actual or potential interest or affects the company‟s ability
to serve its customers.

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 that 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

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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 the 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.

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Importance of Marketing Environment

Every business, no matter how big or small, operates within the marketing environment. Its present and future
existence, profits, image, and positioning depend on its internal and external environment. The business
environment is one of the most dynamic aspects of the business. In order to operate and stay in the market for
long, one has to understand and analyse the marketing environment and its components properly.

 Essential for planning

An understanding of the external and internal environment is essential for planning for the future. A marketer
needs to be fully aware of the current scenario, dynamism, and future predictions of the marketing environment
if he wants his plans to succeed.

Prof. Harshita Kaushik/AIT/MBA/Marketing Management

 Understanding Customers

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 consumer behaviour better.

 Tapping Trends

Breaking into new markets and capitalising on new trends requires a lot of insight into the marketing
environment. The marketer needs to research about every aspect of the environment to create a foolproof plan.

 Threats and Opportunities

Sound knowledge of the market environment often gives a first-mover advantage to the marketer as he makes
sure that his business is safe from future threats and taps the future opportunities.

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 Understanding the Competitors

Every niche has different players fighting for the same spot. A better understanding of the marketing environment
allows the marketer to understand more about the competitions and about what advantages do the competitors have
over his business and vice versa.

Features of Marketing Environment

The marketing environment surrounding a business possesses the following five features:

 Specific and general forces: The marketing environment is made up of both specific and general forces.
Specific forces such as customers and investors directly affect the business‟s working, while general forces
like social, legal, technological, or political factors indirectly affect the business‟s working.

 Complex: The marketing environment is a complex interaction of several elements, factors, conditions,
and forces that affect the business‟s ability to establish a relationship and serve its customers.

 Dynamic: The environment surrounding a business is very dynamic as its constituents do not remain
stable and change over time. Moreover, while marketers can control some of the marketing environment
elements, several elements are out of the marketer‟s control.

 Uncertain: Forces that rule the marketing environment are highly uncertain, and it becomes tough for a
marketer to predict market forces to develop marketing startegies and plans.

 Relative: Marketing environments are also relative in nature. A specific product might have a good
demand in the USA but not in India because of the different marketing environments in the two
countries.

Prof. Harshita Kaushik/AIT/MBA/Marketing Management

Both micro and macro-environment play an important role in the organization’s growth, success, and existence.
Despite being different from each other, both are complementary. By studying these environmental factors, an
organization can prepare a marketing strategy by doing SWOT (strength, weakness, opportunity, threat)
analysis of its business.

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 Environmental Quick
Threat and Environmental
Opportunity Profile Scanning Technique
Analysis (ETOP) Analysis (QUEST)

SWOT Analysis PEST Analysis

TECHNIQUES OF ENVIRONMENTAL SCANNING

Different techniques of environmental scanning are described below:

1. Environmental Threat and Opportunity Profile Analysis (ETOP)

ETOP is considered as a useful device that facilitates an assessment of information related to the environment
and also in determining the relative significance of external environment threats and opportunities to
systematically evaluate environmental scanning. By dividing the environment into different sections, the ETOP
analysis helps in analyzing its impact on the organization. The analysis is based on threats and opportunities in

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the environment.

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2. Quick Environmental Scanning Technique Analysis (QUEST)

QUEST is an environmental scanning technique that is designed to assist with organizational strategies by keeping
adheres to change and its implications. Different steps involved in this technique are as follows:

 The process of environmental scanning starts with the observation of the organization‟s events and trends by
strategists.

 After observation, important issues that may impact the organization are considered using environment
appraisal.

 A report is created by making a summary of these issues and their impact.

 In the final step, planners who are responsible for deciding the feasibility of the proposed strategy, review
reports.

3. SWOT Analysis

SWOT analysis stands for strengths, weaknesses, opportunities and threats analysis of a business environment.
Strengths and weaknesses are an organization‟s internal factor while threats and opportunities are considered as
external factors. So, the process of SWOT analysis includes the systematic analysis of these factors to determine
an effective marketing strategy. It is a tool that is used by the organization for auditing purposes to find its
different key problems and issues.

Prof. Harshita Kaushik/AIT/MBA/Marketing Management

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These are identified through internal and external environmental analysis.

Internal environment analysis/ scanning

Different factors are considered while analyzing the internal environment of an organization like the structure of the
organization, physical location, the operational capacity and efficiency of the organization, market share, financial
resources, skills and expertise of employees, etc.

Strengths: The strength of any organization is related to its core competencies i.e. efficient resources or technology
or skills or advantages over its competitors. For example, the marketing expertise of a firm can be its strength. Apart
from this, an organization‟s strength can be:

 Strong customer relations

 Market leader in its product or services

 Sound market image and reputation

 Smooth cash-flows

Weaknesses: A weakness or limitation of an organization is related to the scarcity of its resources or skill-set of
staff or capabilities that creates an adverse effect on its performance. For example, limited cash-flow and high
cost are considered as a financial weakness of the organization. Similarly, other weaknesses can be:

 Poor product quality

 Low productivity

 Unrecognized brand name or poor brand image

Prof. Harshita Kaushik/AIT/MBA/Marketing Management

External environment analysis/scanning

Different factors that are considered while scanning the external environment of the organization like
Competitors, customers, suppliers, technology, social and economic factors, political and legal issues, market
trends, etc.

Opportunities: An opportunity of the organization‟s environment is considered as its most favorable situation.
These are the circumstances that are external to the business and can become an advantage to the
organization. For example, different opportunities for a firm can be:

 Social media marketing

 Mergers & acquisitions

 Tapping new markets

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  Expansion in International market

 New product development

Threats: Threats of an organization are current or future unfavourable situations that may occur in its external
environment. For example, below are a few major threats for a firm:

 A new competitor in the market

 The slow growth of the market

 Changing customer preferences

 Increase in the bargaining power of consumers

 Change in regulations or major technical changes

4. PEST Analysis

PEST technique for a firm‟s environmental scanning includes analysis of political, economic, social, and
technical factors of the environment.

Prof. Harshita Kaushik/AIT/MBA/Marketing Management

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a) Political/ Legal factors: Different factors like changes in tax policy, availability of raw material, etc. creates a
direct effect on a business. So organizations are required to constantly monitor tax-related policy changes as an
increase in tax may increase the heavy financial burden on them. Similarly, different laws like “Consumer protection
act” also play an important role in an organization‟s operation activities as it is important to abide by the act.

More examples can be foreign trade policy, political changes, regulations in competition, trade restrictions, etc. also
considered as different political/ legal factors that exist in the external business environment.

b) Economic factors: Different economic Factors like the unemployment rate, inflation, cost of labor, economic
trends, disposable income of consumers, monetary policies, etc. play an important role in environmental scanning.

For example, in the case of high unemployment, a company may decrease the prices of its products or services and
in opposite situation i.e. when the unemployment rate is low then prices can be high. This happens because if more
customers are unemployed then by lowering the prices, an organization can attract them.

c) Social / Cultural factors: Attitude, trends, and behavioral aspects of society also create an impact on the
functioning of the organization. Studying and understanding the lifestyle of consumers is very much required to
target the right audience and to offer the right product or services based on their preferences.

For example, Issues and policies related to the environment like pollution control are also being considered by
organizations to ensure that it operates in an environment-friendly atmosphere. Taking care of the cultural
aspect of different countries while doing business at the international level, is also an important factor.

d) Technological Factors: Technological factors affect the way firms produce products and services as well as
market them. Like, “processes based on new technologies” is one of the important factors of a technological
environment. To maximize profits, production should be handled most cost-effectively and this, technology has

Prof. Harshita Kaushik/AIT/MBA/Marketing Management

an important contribution.

For example, an increase in computer and internet-based technology is playing a major role in the way
organizations are distributing and marketing their products and services. Also, different advancements in
technologies like automation of the manual process and use of machinery based on more advanced and latest
technologies, more investment in research & development by organizations have increased their efficiency by
increasing production in less time, cost-reduction and better investment in the long run.

MARKETING TO THE 21ST CENTURY CUSTOMER

The American Marketing Association defines marketing as “the activity, set of institutions, and processes for
creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners
and society at large.” Marketing has evolved significantly during the last few decades. The marketing era that
began in the 1950s evolved into the relationship marketing era in the 1990s and transformed into the digital
marketing era in the first decade of the 21st century.

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Rise of Digital Marketing

Marketing in the 21st century combines both traditional and digital channels to promote products and services.
Before the 21st century, organizations had no advertising options other than conventional channels such as
newspapers, television, flyers and radio to reach their target customers. They focused on mass marketing campaigns
to create awareness in the target market and influence potential customers to make purchasing decisions.

The arrival of the internet transformed the concept of promotion into inbound marketing from outbound marketing.
Inbound marketing facilitates two-way interactive communication between organizations and customers through
search engines and social media platforms, emails and content strategies.

Social Media Marketing

Organizations use social networking platforms such as Facebook, Twitter, LinkedIn and Instagram extensively to
engage target audiences in interaction and influence their behavior. Social media has become a platform for
people to share opinions and purchase experiences. With appropriate marketing efforts to channel these opinions
and purchase experiences, organizations spread positive word-of-mouth through social media platforms and
increase conversion rates. The benefits of social media marketing for organizations are low cost and high
response rate.

Personalized Email Marketing

Marketing in the 21st century focuses on adding value to customers by educating and entertaining them through
digital platforms. Email marketing is a widely used tool for sending personalized messages to customers and
persuading them to make purchases. Organizations in the 21st century have created opt-in email lists to execute
an email marketing campaign. An opt-in email list comprises email addresses of individuals who have shown an

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interest in services or products offered by an organization.

As reported by the Data and Marketing Association in 2019, organizations earn an average of $42 on every $1
they spend on email marketing. The Content Marketing Institute in 2019 reported that nearly 87 percent of
organizations use emails to disseminate a personalized promotional message to clients.

Content Marketing Strategy

Content is king when it comes to marketing in the 21st century. Small and medium-scale organizations
extensively use search engine marketing techniques to reach target customers online. High-quality, unique and
value-added content is essential for websites to achieve high ranks on search engines such as Google, Yahoo
and Bing. The Google search engine, in particular, emphasizes quality content when ranking websites. The
content marketing strategy in the 21st century is to help organizations achieve objectives such as engaging
customers, persuading them to make purchase decisions, and developing brand identity.

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Traditional Marketing in the 21st Century

Though organizations have shifted to digital marketing in the 21st century, traditional marketing is not dead. Large-
scale organizations are still highly dependent on television and print advertising to attract customers. The marketers
of large-scale organizations integrate traditional and digital marketing strategies to create a suitable brand image for
their products. Meanwhile, small-scale organizations with a lower marketing budget leverage digital marketing tools
to bring more clients on board.

Marketing in the 21st century is a mix of both traditional and digital marketing. Depending on the type of products,
marketing budget, size of the target market, and spending habits of potential customers, organizations alter their
marketing strategies accordingly.

Prof. Harshita Kaushik/AIT/MBA/Marketing Management

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