Marketing Management - I

Module 2
Market, Customer & Environment
 Market
O Where two parties engage in the exchange of
rights of goods/services
O Process in which the prices of goods/services are
discovered
O Emerges spontaneously or constructed deliberately
by human interaction
O Facilitates trade
O Enables the distribution and allocation of
resources in a society

IIM Ranchi MBA 2023-25

 Types of Markets
O Based on physicality
O Retail markets
O Internet – e-commerce
O Based on regularity
O Markets/malls
O Haats
O Ad-hoc auctions
O Garage sales
O Based on products
O Final goods – consumer markets
O Intermediate goods – business markets

IIM Ranchi MBA 2023-25

 Types of Markets Contd.
O Based on resources
O Labour
O Foreign exchange
O Share
O Commodities
O Real estate
O Others
O Artificial markets – created by some other agency or out
of legislation
O Illegal markets

IIM Ranchi MBA 2023-25

IIM Ranchi MBA 2023-25
 Consumer Market
O End-user
O Individuals and/or households
O Potential/active buyers of products or
services
O Consumer products – directly fulfill the
desires of consumers; not intended to be
used in the manufacture of other
products/services

IIM Ranchi MBA 2023-25

 Business Market
O Manufacturers, intermediaries, wholesalers
O Business customers -
O Business-to-business (B2B)
O Buying centre-based purchasing

IIM Ranchi MBA 2023-25

 The Customer

IIM Ranchi MBA 2023-25

 Core Concepts

O Need: necessity to meet a

requirement
O From basic to luxury
O Want: specific objects to
satisfy the need

O Demand: want + ability to

pay

IIM Ranchi MBA 2023-25

 Customer Value
Brand
Functional benefits Other benefits
benefits

Other
Purchase price CPV
costs

O Customer Perceived Value (CPV) = Perceived

benefits – Perceived costs
O Perception matters – needs management

IIM Ranchi MBA 2023-25

 Managing CPV
O Increase benefits
O Add new features
O Improve accessibility
O Reduce costs
O Reduce price
O Increase efficiency
O Combination of both the above

IIM Ranchi MBA 2023-25

IIM Ranchi MBA 2023-25
 Customer Satisfaction
Post-purchase evaluation of product/service quality
based on pre-purchase expectations
Expectations

Disconfirmation Satisfaction

Perceived
quality

IIM Ranchi MBA 2023-25

 Managing Satisfaction
O ‘Under-promise and over-deliver’
O Monitor expectations, perceptions, and
quality
O Benefits
O Loyalty
O Champions
O Cost reduction – warranty claims, complaints
O Larger share-of-wallet (SoW)

IIM Ranchi MBA 2023-25

 Marketing Satisfaction

IIM Ranchi MBA 2023-25

 Customer Lifetime Value
O Present value of all profits expected to be
earned in the future from a customer
O Focus on a longer term
O Information needed to calculate CLV
O Customer purchase per year
O Profit earned on purchases
O Costs to service customer
O Customer retention rate
O Discount rate

IIM Ranchi MBA 2023-25

 CLV Calculation
𝑛
𝑡
𝐷(𝑅𝑡 − 𝐶𝑡 )/ 1 + 𝑟
𝑡=1

O t = year
O n = length of customer relationship
O D = customer retention rate
O Rt = Revenues earned from customer in year t
O Ct = Cost of servicing customer in year t
O r = discount rate

IIM Ranchi MBA 2023-25

 Relationship
O Developing and enhancing long-term, mutually
beneficial relationships with customers
O Transaction vs. relationship
O Customer experience
O Note:
O Bringing a new customer into the fold is 6-7
times costlier than retaining existing customers
O Small increases in customer retention rate will
enhance profits

IIM Ranchi MBA 2023-25

 Relationship Marketing
O Orientation on part of the firm to develop
relationships
O Commitment
O Elements
O Trust
O Communication
O Personalisation
O Customisation
O Loyalty programmes

IIM Ranchi MBA 2023-25

 The Environment

IIM Ranchi MBA 2023-25

 Market Environment
O Forces that influence the ability of a business to
create value, attract and serve customers
O Controllable and/or uncontrollable

Market Environment
External Internal

Micro Macro

IIM Ranchi MBA 2023-25

 Micro-environment
O Outside the internal environment
O Close enough to influence the ability of the
business to serve customers
O Elements
O Customers
O Suppliers
O Channels
O Advertising and/or MR agencies
O Competitors

IIM Ranchi MBA 2023-25

 Porter’s 5 Forces Model
Customer
bargaining
power

Threat of Competitive Threat of

new rivalry within
industry substitutes
entrants

Supplier
bargaining Caveat?
power

IIM Ranchi MBA 2023-25

 Macro-environment
O Forces essentially uncontrollable
O Influence the micro-environment
O Scanned by the PESTLE model
O Political factors
O Economic factors
O Socio-cultural factors
O Technological factors
O Legal factors
O Environmental factors

IIM Ranchi MBA 2023-25

 Impact of Macro-environment
O CSE report of 2009
O Presence of lead in
paints manufactured by
Indian companies
O Launch of lead-free
paints

IIM Ranchi MBA 2023-25

 Political Factors
O Political system – democracy vis-à-vis state
control
O Stability of the government
O Outlook of ruling parties towards
O Business
O MNCs
O Ease of investment, settling up business, and
exit

IIM Ranchi MBA 2023-25

 Economic Factors
O Inflation
O Recession
O Exchange rate
O Growth rate of the economy
O Income levels
O Consumer spending
O Unemployment
O Financial markets

IIM Ranchi MBA 2023-25

 Socio-cultural Factors
O Demographics
O Age distribution
O Sex ratio
O Education and literacy
O Community
O Skill level
O Rural-urban migration

IIM Ranchi MBA 2023-25

 Socio-cultural Factors
O Cultural factors
O Language
O Culture
O Food habits
O Entertainment and media
O Value system
O Interaction with brands
O Crowdsourcing

IIM Ranchi MBA 2023-25

 Technological Factors
O Current level of technology
O Comfort with technology
O E-commerce
O Diffusion of innovations
O ‘Reverse engineering’
O Government policies
O Stem-cell research
O GM foods

IIM Ranchi MBA 2023-25

 Legal Factors
O Unfair competitive practices
O Product standards certification
O IPR
O Taxation
O Advertising regulations
O Consumer protection
O Business ethics

IIM Ranchi MBA 2023-25

 Environmental Factors
O Pollution
O Water
O Air
O Noise
O Ground-water depletion
O Top-soil erosion
O Environmental pressure groups

IIM Ranchi MBA 2023-25

 Coke sucks

IIM Ranchi MBA 2023-25

 Internal vs. External
O Internal environment
O Internal marketing – implementation and
communication of organisational policies and
practices to employees and internal stakeholders
O External environment
O External marketing - implementation of marketing
practices directed outside the firm to create value
and form productive customer relationships

IIM Ranchi MBA 2023-25

 Internal Marketing - CISCO

IIM Ranchi MBA 2023-25

IIM Ranchi MBA 2023-25
 External Marketing
O Lobbying
O Managing government policies
O Regulatory agencies
O PR
O Managing information flow with public to create
favourable opinions
O Build a strong corporate ‘image’

IIM Ranchi MBA 2023-25

IIM Ranchi MBA 2023-25
 Thank You!

IIM Ranchi MBA 2023-25