Module 2

MBA 09

Purpose of Marketing Environment Analysis

To know where the environment is heading

To find out the opportunities and threatsTo assess the scope of opportunities

and short list those that can favorably impact the business.

To project how the environment will be at a future point of time

To help secure the right fit between the environment and the business unit

Marketing Environment Analysis

Is the process of gathering, filtering and analysing information relating to the marketing environment.

Factors to be covered under Environmental Analysis

Macro Environment

Demographic Environment

Socio-Cultural Environment

Economic Environment Political Environment Natural Environment Technological

Environment Legal Environment Government Policies

Micro environment The Market/Demand The Consumer The Industry The Competition Government Policies Supplier – Related

Factors

Mega/Macro EnvironmentDemographic EnvironmentSocio-Cultural EnvironmentEconomic EnvironmentPolitical EnvironmentNatural EnvironmentTechnological EnvironmentLegal EnvironmentGovernment Policies

Demographic Environment

Factors relating to Population Size Growth Rate Age Distribution Religious Composition Literacy Levels House hold pattern Regional characteristics

Socio-Cultural Environment

Culture (religion, language, education etc)Social Class (income, occupation, lifestyle,

behavior)Changing position of women

Economic Environment

General Economic Conditions Rate of Growth of Economy Credit Availability and Interest Rates Inflation Rate Behaviour of Capital Markets Foreign Exchange Reserves Exchange Rates Tax Rates Prices of Essential Commodities Energy ( cost, availability etc) Labour ( cost, skill, availability etc)

Political Environment

Form of GovernmentPolitical StabilitySocial and Religious OrganisationsMedia and Pressure Group

Natural Environment

Natural ResourcesEcologyClimateRecent Trends in Natural

EnvironmentShortage of Raw MaterialsIncreased Energy CostsAnti- Pollution PressuresChanging Role of Government

Options Available in TechnologyGovernments Approach in respect of

TechnologyTechnology Selection

Technological Environment

Legal Environment/Business Legislation

Corporate AffairsConsumer ProtectionEmployee ProtectionSectoral Protection Corporate ProtectionProtection of society as a whole against

unbridled business behaviourRegulations on products, prices and

distribution

Environmental Factors Specific to the Business Concerned (micro)

The Market/DemandThe ConsumerThe IndustryThe CompetitionGovernment PoliciesSupplier – Related Factors

The Market/Demand

Nature of the demandSize of the demand, present and potentialChanges taking place in consumption

pattern and buying habitsInvasion of substitute productsChanges taking place in consumption

pattern/buying habits

The Consumer

Preferences/Priorities Location and Number Purchasing Power Buying Behaviour Personality Traits Lifestyles and Needs Brand Loyalty Reactions to Competing Products

The Industry

Knowledge About IndustryCompetitive Advantage Building

Government Policies

Subsidising selected firms and IndustriesBan fresh entry in selected IndustriesGovernment can be producers, thus acting

as competitors

Supplier – Related Factors

Bargaining Power in the IndustryTrade-off between integrated and

outsourcingSuppliers becoming Competitors

Environmental scanning has to be a Continuous Affair

Marketing research

American marketing association defines marketing research as “ the systematic gathering, recording and analyzing of data about the problems relating to marketing of goods and services”

Market research

It is the process of collecting and analyzing data relating to demand for a good or service in a specific market

Marketing Research provides information about customers and markets, and their reactions to various products, prices, distribution and promotion strategies

Scope of marketing research

Consumer research Product research including product planning

and development Study of the market Sales research- methods, performance,

establishing territories and quotas Pricing- expectations, actions and reactions,

policies and strategies Distribution research-

channels,intermediaries,inventory level, handling and transportation

Motivation research- why people buy or do not buy a product

Advertising research- ad messages, selection of the right media, evaluation

Policy research-finance, production and HR activities

Marketing Research Process

Formulating/ identification of the problem

Planning the research techniqueCollection of dataAnalyzing the dataInterpreting the dataPreparing and presenting the reportFollow up study

Research Plan Research design is broadly classified into

Exploratory research, Descriptive research and Casual research

Research instruments used are a) Questionaires b) Mechanical instruments such as galvanometer

(for response assessment such as emotions, interest in an advertisement), tachistoscope (message is flashed one hundredth of a second several times and subject behaviour is observed)

c) Sampling

Data Collection Techniques

Internal data through financial accounting records, sales records, reports from salesman etc

External sources are of 2 types a) Primary data collection – Mail

interviews, Telephonic interviews, Personal interviews, Observation

b) Secondary data collection

Barriers to the use of Marketing Research

All problems cannot be researched. A narrow conception of the research Uneven caliber of researchers (view it as a

clerical job) Poor framing of the problem Late and occasionally erroneous findings Only a tool to improve the decision making

process Personality and Presentational differences Cannot predict the future

Executives hesitant to use MR practicesBased on sampling and hence lacks

accuracyTime consumingLack of professionals

Marketing information system is a process which helps marketers manage their marketing efforts, effectively and efficiently. It helps in planning, analyzing and presenting the information necessary for marketing decisions

Importance of marketing information system Anticipation of consumer demand (changing

styles) Economic indicators Dynamic competitive environment Development of science and technology Growing complexity of marketing Consumerism and increasing grievances

Components of MkISInternal marketing information ( Data

available within the firm)Marketing intelligence system( data

available in the external environment)Marketing research system(special studies

relating to a particular problem)

Types Of Markets

Consumer MarketsConsumer markets are the markets for products and services bought by individuals for their own or family use. Goods bought in consumer markets can be categorized in several ways:

Convenience goods--Fast-moving consumer goods (“FMCG's”)– These are high volume, low unit value, fast repurchase– Examples include: Ready meals; Baked Beans, biscuits, Newspapers

Specialty goods Special / unique features Buyers make special efforts to buy them Buy from specialist retailers Reluctant to buy substitutes E.g., ray ban sunglasses, Rolex watch, Tata

sumo Nikon camera etc

Shopping goods Buy after comparing the suitability, quality, price

etc of different brands E.g., clothing, furniture, shoes, utensils etc

Emergency Goods- To fulfill an urgent need May be a convenience good or a shopping

good

It can also be classified as: Consumer durables – These have low volume but high unit value. Consumer

durables are often further divided into:– White goods (e.g. fridge-freezers; cookers; dishwashers; microwaves)– Brown goods (e.g. DVD players; games consoles; personal computers)- orange goods( goods which change at a moderate rate- clothing)- red goods-( American expression of fast moving consumer goods like food)- yellow goods( American expression of consumer goods that are purchased infrequently, yellow =brown + white, e.g. oven, refrigerator, TV, CD player)

Soft goods – Soft goods are similar to consumer durables, except that they wear out more quickly and therefore have a shorter replacement cycle– Examples include clothes, shoes

Services (e.g. hairdressing, dentists, childcare_)

Industrial goods meant for use in production / business/

institutional purposes Not directly used by the consumers Classified as

Production facilities and equipments, production materials, production supplies and management materials

• Selling finished goods– Examples include office furniture, computer systems

• Selling raw materials or components– Examples include steel, coal, gas, timber

• Selling services to businesses– Examples include waste disposal, security, accounting & legal services

Consumer behaviour

“Consumer behaviour is a process whereby individuals decide what, when, how and from whom to purchase goods and services”

- Walters and Paul CB decides how consumers make purchase

decisions and how they use the products they buy

Important for framing production policies, price policies, distribution policies and also in designing the sales promotion programmes.

Need and importance of CB

enables marketer to design appropriate strategies for marketing

plan and develop productsframing pricing policiesto know buying motivedeciding on appropriate channelsbuying decision and consumption

BUYING MOTIVE

is a strong feeling , instinct, desire or an emotion that make the buyer to buy the product

Are influences or considerations which provide the impulse to buy, induce action or determine choice in the purchase of goods and services

Types of buying motives

Product motive( hunger thirst ,sleep etc) Patronage motive( price, location, quality, variety,

service, personality of the owner or the salesman) Emotional motive (status, personal comfort, pride) Rational motive (logical thinking- price, durability,

efficiency, convenience, monetary gain etc) Inherent motive (for satisfaction he makes best efforts) Learned motive ( acquired or learned from environment

and education- religious belief, fear , security )

Consumer buying process

Recognition of a needIdentification of alternativesEvaluation of alternativesPurchase decisionPost purchase behaviour

Organizational Buying Process Problem recognition

Determine product dimensions and quantity

Precise description of product characteristics

Search and qualification of potential sources

Acquisition and analysis of proposals

Evaluation of proposals and supplier selection

Selection of an order routine

Performance feedback and evaluation

Specific marketing considerations in the industrial facilities business :

Long decision taking processHigh riskComplex buying centerThe specific competitive situation

Demand Forecasting

Market demand may mean different things to different marketers, but the marketer needs to have a clear idea what it means to his company and estimate it accordingly

Concept of Market Demand for Marketing

Market demand for a product under a specified marketing activity is the sales volume of the product in the target market for a specified time period in a particular region

Steps Market potential Companies Demand Sales quota and Sales Budget Current Demand estimation

Future Demand Estimationa) Composite sales force opinion

(company asks its sales force to estimate sales patterns in the near future depending upon their experience)

b) Survey of buyer intentionsc) Expert opinion

Market Demand – The total volume that would be bought by a defined customer group in a defined geographical area in a defined marketing environment under a defined marketing program.

Company Demand – Company’s estimated share of market demand at alternative levels of company marketing effort in a given time period.

Sales Quota – Sales goal set for a product line, company division, or sales representative.

Sales Budget – a conservative estimate of the expected volume of sales and is used primarily for making current purchasing, production and cash flow decisions.

Estimating Current Demand

Total Market Potential = Potential number of buyers x Average quantity purchased by a buyer x The Price

Area Market Potential – There are primarily two methods

a) Market – Build up method – requires identifying all the potential buyers in each market and estimating their potential purchases

b) Multiple factor Index method – Estimating market potential either by using existing market indices or by developing their own market indices

Eg: Potential of a “Book publishing company” depends on Population, number of teachers in the market etc.

Industry Sales and Market shares

Estimating Future Demand

Survey of Buyers intentions Composite of Sales force opinions Expert opinion Past sales analysis Market- Test method

Heart of Modern Strategic Marketing

SegmentingTargetingPositioning

MARKET SEGMENTATION

A Market segment consists of a group of customers who share a similar set of needs and wants

Basic Market Preference PatternsHomogeneousDiffusedClustered

“Market segmentation is the subdividing of market into homogeneous Sub section of customers , where any sub section can conceivably be selected as a target market to be reached with a distinct marketing mix” – Philip Kotler

Purpose of segmentation

Helps company to exploit its market better by selecting niches (suitable segments).

Helps in focussing strategies more sharply on target groups.

Allocation of marketing budget.Builds customer loyalty.

Effective Segmentation CriteriaMeasurableSubstantial (large enough to serve)AccessibleDifferentiableResponsiveness (effective programs

for attracting and serving the segments)

Patterns of segmentation

Undifferentiated marketing ( soft drink)Differentiated marketing( FMCG)Concentrated marketing (trying to

monopolise himself- railways)Customized marketing( interior designing,)

Bases for segmentation

Demographic segmentationGeographic segmentationBehavioral segmentationPsychographic segmentation

Demographic Age and Life-cycle stage (Johnson baby

soap for infants and children) Gender Income Occupation Religion Purchasing power

Geographic segmentation Area Climate Population density

Behavioural Segmentation Decision Roles- People are different and they

all pursue different roles like initiator, influencer, Decider, Buyer and User (useful for designing communication strategy)

Behavioural Variables- Occasions, Benefits, User status, Usage rate, Buyer- readiness stage, Loyalty Status (Hard core loyals, Split loyals, Shifting loyals, Attitude)

PsychographicLifestylesSocial class personality

Bases for Segmenting Business Markets Geography Benefits sought Usage rateBusiness Buyers have to orient their tastes as

below - First time prospects - Novice - Sophisticates

Costs involved

Management costProduction costProduct costInventory costPromotion cost

Niche Marketing – Niche is a more narrowly defined customer group seeking a distinctive mix of benefits.

Local Marketing – It is a growing trend called as Grass roots Marketing. Marketing activities are pursued for getting on close and personally relevant to individual customers as possible

Customerisation- It combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice.

TARGET MARKETING

Target marketing strategies

Undifferentiated targeting strategyDifferentiated targeting strategyConcentrated targeting strategyCustomized targeting strategy

Factors affecting targeting

Objectives of the companyResourcesProfitabilitycompetition

PRODUCT POSITIONING

“positioning is the act of designing the company’s offer and image so that it occupies a distinct and a valued place in the target consumers minds “

– PHILIP KOTLERsteps in product positioning Identifying potential competitive advantages Choosing the appropriate advantages Communicating those advantages

Techniques of positioning

Positioning by corporate identity (tata, Sony, godrej)

Positioning by brand endorsement (lux, surf , titan, dettol)

By product attributes or benefits (pepsodent germ killer and gum protection

By use, occasion and time (Vicks for cold, burnol for burns, dettol antiseptic)

By price and quality (Nirma detergent powder) By product category( dove – creamy moisturiser,

7up- alternative to cola) By product user( particularly for class of

customers- horlicks junior, malt, nutrition drink) By competitor(well established image of the

competitor – Avis-’ we serve better because we r no.2’)

Thank you