Chapter Two

The Marketing Environment

 Learning Goals

1. Understand environmental forces

2. Learn how demographic and economic
factors affect marketing
3. Identify trends in the firm’s natural and
technological environments
4. Explore key changes in political and cultural
environments
5. Realize how companies react to the
marketing environment
 Definition of Marketing
Environment
 The actors and forces outside marketing that
affect marketing management’s ability to build
and maintain successful relationships with target
customers and are two types
 Microenvironment: Includes the actors close to
the company
 Macro environment: Involves larger societal
forces
 The marketing environment offers both
opportunities and threats.
 Cont’d…
 A company's marketers take the major responsibility of identifying
significant changes in the environment.
 Although every manager in an organization needs to observe the
outside environment, marketers have two special skill.
1. They have disciplined methods - marketing intelligence and
marketing research - for collecting information about the
marketing environment.
2. 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.
 2.1. Microenvironment
 Marketing management's job is to create attractive offers for target
markets. However, marketing managers cannot simply focus on the
target market's needs.
 Their success will also be affected by actors in the company's
microenvironment.
 The micro-environment consists of forces close to the company that
affect its ability to serve its customers.
 For most companies, the micro environmental components are:
 Company, Competitors, and
 Suppliers, Publics
 Marketing channel firms (intermediaries),
 Customer markets,
 2.1.1. COMPANY
 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.
 Top management is responsible for setting the company’s mission,
objectives, broad strategies, and policies.
 Marketing managers must make decisions within the parameters
established by top management.
 Marketing managers must also work closely with other company
departments.
 All departments must “think consumer” if the firm is to be
successful. The goal is to provide superior customer value and
satisfaction.
 2.1.2. Suppliers
 Suppliers are firms and individuals that provide
the resources needed by the company and its
competitors to produce goods and services.
 Marketing managers should
1. Consider supply availability (such as supply
shortages).
2. Monitor price trends of key inputs. Rising supply
costs must be carefully monitored which lead to
price rising.
 2.1.3. Marketing
Intermediaries
Marketing intermediaries are firms that help the company to promote,
sell and distribute its goods to final buyers. They include:
Resellers are distribution channel firms that help the company find
customers or make sales to them. These include wholesalers and
retailers who buy and resell merchandise.
Physical distribution firms: include warehouse, transportation and
other firms that help a company to stock and move goods from their
points of origin to their destinations.
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
(vary in creativity, quality, service and price).
Financial intermediaries help finance transactions and insure against risks.
 2.1.4. Customers
 The company must study its customer markets closely since each
market has its own special characteristics.
 These markets normally include:
 Consumer markets (individuals and households that buy goods and
services for personal consumption).
 Business markets (buy goods and services for further processing or
for use in their production process).
 Reseller markets (buy goods and services in order to resell them at a
profit).
 Government markets (agencies that buy goods and services in order
to produce public services or transfer them to those that need them).
 International markets (buyers of all types in foreign countries).
 2.1.5. Competitors
 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.
 2.1.6. 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. Can be
 Financial publics--influence the company’s ability to obtain funds.
 Media publics--carry news, features, and editorial opinion.
 Government public: Marketers must often consult the company's
lawyers on issues of product safety, truth-in-advertising and other
matters.
 Citizen action publics. A company's marketing decisions may be
questioned by consumer organizations, environmental groups,
minority groups and other pressure groups.
 Local publics. Every company has local publics, such as
neighborhood residents and community organizations.
 Cont’d…
 General publics--a company must be concerned about
the general public’s attitude toward its products and
services.
 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.
 2.2. Macro Environment

 The following forces in the Broad/ macro

Environment have a major impact on the
Task/micro Environment:
Demographics
Economics
Natural environment
Technological environment
Political-legal environment
Social-cultural environment
2.2.1. Demographic Environment
 Demography is the study of human population in terms of size,
density, location, age, gender, race, occupation and other statistics.
 The demographic environment is of major interest to marketers
because it involves, people, and people make up markets.
 Demographic trends are constantly changing such as:
Population Age Mix: getting older
Population Growth: increasing rate
Ethnic Group: diversity
Education Status: increased in number
Household Patterns: married and no children
 Economic Environment

 Markets require buying power as well as

people. The economic environment consists
of factors that affect consumer purchasing
power and spending patterns.
 Economic trend
Changes In Income
Changing consumer spending patterns
Savings, Debt and Credit Availability
 Natural Environment
 The natural environment involves the natural
resources that are needed as inputs by
marketers or that are affected by marketing
activities.
 Trends
Shortage of Raw Materials
Increased Energy Costs
Increased Pollution Levels
Changing Role of Government
 Technological Environment
 The technological environment is perhaps the
most dramatic force now shaping our destiny.
 New technologies create new markets and
opportunities. The marketer should watch the
following trends in technology.
Fast Pace of Technological Change
Innovation Opportunities
High R&D Budgets
Regulations of Technological Change
 Political-Legal Environment
 The political environment consists of laws, government agencies
and pressure groups that influence and limit various organizations
and individuals in a given society.
 Some trends in the political environment include:
1). Increasing legislation to:
a)Protect companies from each other.
b)Protecting consumers from unfair business practices.
c)Protecting interests of society against unrestrained business
behavior.
2). Changing government agency enforcement. New laws and their
enforcement will continue or increase.
3). Increased emphasis on ethics and socially responsible actions.
 Social-Cultural Environment
 The cultural environment is made up of institutions and
other forces that affect society’s basic values,
perceptions, preferences, and behaviors.
 Among the most dynamic cultural characteristics are:
1. Persistence of cultural values. People’s core beliefs and
values have a high degree of persistence.
2. Shifts in secondary cultural values: Although core
values are fairly persistent, cultural swings do take
place.
 Consumer market and
Customers’ Buying Behavior
 Learning Goals
 Define the consumer market and construct a simple
model of consumer buying behavior.
 Tell how culture, subculture and social class influence
consumer buying behavior.
 Describe how consumers' personal characteristics and
primary psychological factors affect their buying
decisions.
 Discuss how consumer decision making varies with the
type of buying decision.
 Consumer Buying Behavior
 Consumer buying behavior: refers to the buying
behavior of final consumers - individuals and
households that buy goods and services for
personal consumption.
 All the individuals and households who buy or
acquire goods and services for personal
consumption make up the consumer market.
 Understanding consumer buying behavior and
"Knowing customers" are never simple. Customers
may state their needs and wants but act otherwise.
 Why Do Customers Buy
Products?
 To solve specific problems
 To prevent a problem from occurring
 For symbolic purpose: emotional and
psychological satisfaction
 Out of a habit
 Because of persuasion
 Because of coercion.
 Cont’d…
 The starting point for understanding buying
behavior is the stimulus- response model.
 The central question to be answered by this
model can be stated as: "how do consumers
respond to various marketing stimuli the
company might use?"
Model of Consumer Behavior
 1. Cultural factors
 Cultural factors exert the broadest and deepest
influence on consumer behavior.
 The marketer needs to understand the role
played by the buyer's
 Culture: The set of basic values,
perceptions, wants and behaviors learned
by a member of society from family and
other important institutions.
 Human behavior is largely learned.
 Cont’d…
 Marketers are always trying to spot cultural
shifts in order to imagine new products that
might be wanted.
E.g. Cultural shift towards greater concern
about health and fitness
 Subculture: Each culture contains smaller
subcultures or groups of people with shared
value systems based on common life
experiences and situations.
 Cont’d…
 Subcultures include nationalities, religions,
racial groups and geographic regions.
 social class: are society's relatively permanent
and ordered divisions whose members share
similar values, interests and behaviors.
 It is not only determined by a single factor,
such as income, but is measured as a
combination of occupation, income, education,
wealth and other variables.
 2. Social Factors
1. Reference Group: consists of all the groups
that have a direct (face-to-face) or indirect
influence on the person’s attitudes or behavior.
 Groups that have a direct influence and to
which a person belongs are called membership
groups.
 Some are primary groups with whom there is
regular but informal interaction - such as family,
friends, neighbors and fellow workers.
 Cont’d…
 Some are secondary groups, which are more
formal and have less regular interaction. These
include organizations like religious groups,
professional associations and trade unions.
 People are also influenced by groups to which
they do not belong. For example aspirational
groups are those a person would like to join.
 Dissociative groups are those whose values or
behavior a person rejects.
 Cont’d…
 Reference groups influence a person in at least
three ways.
1. They expose the person to new behaviors and
lifestyles.
2. They influence the person's attitudes and self-
concept because he or she wants to 'fit in'.
3. They also create pressures to conform that
may affect the person's product and brand
choices.
 Cont’d…
 The importance of group influence varies by
product and brand.
 It tends to be strongest when the product is
visible to others whom the buyer respects.
2. FAMILY
 Family members can strongly influence buyer
behavior. We can distinguish between two
families in the buyer's life.
 Cont’d…
 The buyer's parents making the “family of
orientation".
 The "family of procreation" - the buyer's
spouse and children - have a more direct
influence on everyday buying behavior.
 3. Roles and Status: The person's position in
the group he or she belong can be defined in
terms of both role and status.
 Cont’d…

 Role consists of the activities that people are

expected to perform according to the persons
around them.
 Each role carries a status reflecting the
general esteem given to it by society.
 People often choose products that show their
status in society.
 3. Personal Factors
 A buyer's decisions are also influenced by
personal characteristics such as
The buyer's age and life-cycle stage,
Occupation,
Economic situation: saving, disposable income
 Lifestyle: is a person's pattern of living as expressed
in his or her activities, interests and opinions.
(psychographics)
 Personality and self concept
 Cont’d…
 Personality refers to unique psychological
characteristics that lead to relatively consistent
and lasting responses to one's own
environment.
 E.g. confidence, sociability, dominance
 Self-concept: Self-image, or the complex mental
pictures that people have of themselves.
 4. Psychological Factors

 A person's buying choices are further

influenced by four important
psychological factors:
Motivation,
Perception,
Learning, and
Beliefs and attitudes.
CONSUMERS' BUYING ROLES
1. Initiator. The person who first suggests or thinks of the
idea of buying a particular product or service.
2. Influencer. A person whose view or advice influences
the buying decision,
3. Decider. The person who ultimately makes a buying
decision or any part of it - whether to buy, what to buy,
how to buy or where to buy.
4. Buyer. The person who makes an actual purchase.
5. User. The person who consumes or uses a product or
service.
The Buyer Decision Process
 Cont’d…
 The consumer can obtain information from any
of several sources:
 Personal sources: family, friends, neighbors,
 Commercial sources: advertising,
salespeople, dealers, packaging, displays.
 Public sources: mass media, consumer-
rating organizations.
 Experiential sources: handling, examining,
using the product.
 Cont’d…
 Generally, the consumer receives the most
information about a product from commercial
sources - those controlled by the marketer.
 The most effective sources, however, tend to
be personal.
 Alternative evaluation: The stage of the buyer
decision process in which the consumer uses
information to evaluate alternative brands in
the choice set.
END OF CHAPTER TWO