Module 2

Marketing Environment
and Consumer Behavior

Prof. Mangala V Reddy

Marketing Management
PGDM - IIBS
Marketing Research Process
• Research – The process of finding a solution to a problem or a question
through use of scientific tools / techniques.

• Marketing Research- the process of collection of data in an organized

manner, with subsequent recording and analyzing of such data that will
help the business manager in an effective decision making process.
• The information gathered and analyzed through marketing research can
be used for internal purposes or for making important strategic decisions.

• The Marketing Research Process focuses on collecting insights from

your target audience, such as their opinions and attitudes that would
help you evaluate current products, services or test concepts aimed at
improving them. It can also gauge customer perceptions about your
company. This is best known as brand tracking
Steps in Marketing Research Process
• Formulating the problem: problem as to be clearly and specifically
defined
• Developing objectives of the research: objectives should cover
questions regarding the purpose of the study, the information needs &
sources of information and how the study should be conducted
• Designing an effective research plan: determines the tools and
techniques that are employed for conducting marketing research
(exploratory, descriptive and casual research)
• Data collection techniques: the information requirement for solving a
business problem are identified in the problem formulation stage.
primary & secondary
• Evaluating the data and preparing a research report: the process of
editing, coding, tabulation and evaluation using statistical applications.
The report will be submitted to the management to contribute to effective
decision making.
Marketing Environment

• The marketing environment refers to all internal and external

factors, which directly or indirectly influence the organization’s
decisions related to marketing activities.
• Internal factors are within the control of an organization; whereas,
external factors do not fall within its control.
• The external factors include government, technological,
economical, social, and competitive forces; whereas, organization’s
strengths, weaknesses, and competencies form the part of internal
factors.
Features of Marketing Environment
• Specific and General Forces: It refers to different forces that affect the
marketing environment. Specific forces include those forces, which directly affect
the activities of the organization. Examples of specific forces are customers and
investors.
• Complexity: It implies that a marketing environment include number of factors,
conditions, and influences.
• Vibrancy: Vibrancy implies the dynamic nature of the marketing environment. A
large number of forces outline the marketing environment, which does not
remain stable and changes over time
• Uncertainty: It implies that market forces are unpredictable in nature. Every
marketer tries to predict market forces to make strategies and update their
plans.
• Relativity: It explains the reasons for differences in demand in different
countries. The product demand of any particular industry, organization, or
product may vary depending upon the country, region, or culture. For example,
sarees are the traditional dress of women in India, thus, it is always in demand.
Types of marketing Environment
• The sale of an organization depends on its marketing activities, which in
turn depends on the marketing environment.
• The marketing environment consists of forces that are beyond the control
of an organization but influences its marketing activities.
• The marketing environment is dynamic in nature.
• Therefore, an organization needs to keep itself updated to modify its
marketing activities as per the requirement of the marketing
environment.
• Any change in marketing environment brings threats and opportunities
for the organization.
• An analysis of these changes is essential for the survival of the
organization in the long run.
• A marketing environment mostly comprises of the following types of
environment:
1. Micro Environment
2. Macro Environment
• Micro Environment:
• Micro environment refers to the environment, which is closely linked
to the organization, and directly affects organizational activities.
• It can be divided into supply side and demand side environment.
• Supply side environment includes the suppliers, marketing
intermediaries, and competitors who offer raw materials or supply
products.
• On the other hand, demand side environment includes customers
who consume products.
• The micro environment is the group of factors that influence the firm’s
ability to compete in its chosen markets. Customers, suppliers,
distributors, and competitors are the key players. The company’s
macro- and micro environments influence the nature of the
opportunities and risks they face
Micro Marketing Environmental Factors
Marketing success is about building relationships with other departments of the
company, suppliers, marketing intermediaries, and competitors.
Company
• Marketing management considers other departments when designing marketing
plans. These include top management, finance, research and development
(R&D), purchasing, operations, and accounting.
• These interrelated groups make up the internal environment. The company’s top
management decides its mission, goals, strategies, and policies. These plans and
strategies are used by marketing managers to make decisions.
Employers
• The key component of any business’s success is its employees. Training and
motivation sessions are key to the quality of employees. Training & Development
are essential to instill marketing skills in individuals.
Market Intermediaries
• Market intermediaries are intermediary parties who help businesses distribute
their products on the market. Market intermediaries can be wholesalers,
retailers, or distributors. They are essential to the business because they
represent the company’s products in the marketplace.
Customers
• Customers purchase the products of the company for consumption purpose. Customer
satisfaction is the main objective of any organization. To satisfy customers, the
organization conducts research and develops products to meet their needs.
Competitors
• Marketers must adapt to the needs and wants of their target customers. Marketers
must also position their products strongly in comparison to the offerings of
competitors.
• There is no single strategy that works best for all businesses. Every firm must consider
its industry and size in relation to its competitors. Some strategies can be used by large
firms that have a dominant position in an industry.
• Even a small firms can develop strategies that offer higher rates of return than larger
firms.
Public
• Public opinion is crucial to the success of any business. It can either build or destroy a
company’s image in the marketplace.
• The public can influence the buying decisions of their target audience. The internet has
made it easier to control the public, especially since they are able to freely share their
opinions about your products or services online.
Macro Marketing Environmental Factors
• The company and all other factors work in a larger macro environment that
shapes opportunities and poses threats to the company. Even the largest
companies can be vulnerable to macro environmental changes. Some of these
forces cannot be predicted or managed with skillful management. Companies
that can adapt environmental changes will be successful.
Demographic: understanding the market based on the characteristics of hum
population like gender, age, marital status, size, educational level, standard of
living. Eg: nuclear families, Ready to eat (increase in working professionals)

Legal: The laws and regulations of a country have a major impact on the way a
company conducts its business. Marketing activities in particular are greatly
influenced by legislation. Self updation on important rules, regulations and acts
have a significant effect on their businesses.

Political: Business gets affected due to political and government influences, they
excise power over trade relations, creating favorable environment for international
trade.
Economic Environment: The economy is a system that processes material and
energy inputs and converts them into finished goods and services for distribution.
All business organizations are involved in the economy and have an interest in
guiding their policies.
• 22% of country’s adjusted gross national income is earned by the top 5% and top
20% rich earn 51% of total national income. The bottom 40% of American
earners receive only 11 percent of total income.

Technology: the use of scientific knowledge and tools to solve specific problems
and perform tasks in an effective manner. Eg: eating habits, fitness, work style
(wfh) and so on. Advancement in technology has a direct impact on economic
growth.

Socio-cultural: the attitudes, beliefs, norms, values & lifestyles of individuals in a

society. These forces can change the market dynamics & marketers can face both
opportunities & threats from socio-cultural forces. Eg; lifestyles of people, working
professionals in the house, preferences of eating food.
Demand Forecast & Measurement
• It’s the market research that enlightens the company on the credibility of
the product in the market, sales pattern, buyer acceptance level and
most importantly the forecast future sales.

• To estimate the current & future demand for the product, estimates of
demand like total market potential, area market potential, composite
sales force opinion, survey of buyer intentions, expert opinion, past sales
analysis and test marketing method are considered.

• The concept of 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.

• Factors like company demand, company sales forecast, sales quota &
Sales budget play a vital role in estimating the demand.
• Demand forecasting and sales forecasting are important for any
marketing planning and control as it serves the basis for comparison over
a period of time.

• Forecasting helps in identifying and solving marketing and sales

problems. Further, they are also used for setting performance standards.
If the market knows the different tools and their application and is
familiar with the market forces, most often, 90 to 95% of the forecast is
good.
• Market Classification- the numbers of customers who are likely to
become customers and buy a product represents the size of the market
for a product. It may be potential market, the available market (enough ,
the qualified available market, the target market and the penetrated
market.
Why Should You Measure Current Market Demand?
• The marketing opportunities of a company are basically identified by
conducting marketing research. After the research identifies
opportunities, target markets should be selected very carefully,
evaluating the identified opportunities. To begin with, the management
must measure and forecast the size, growth, and profit potential of each
opportunity.
• Sales Forecast prepared by the marketing department is required by the:
• Finance Department to raise the needed cash for investment and
operations.
• Manufacturing Department to establish capacity and output levels.
• Purchasing Department to acquire the right amount of supplies
• Human Resources Department to hire the needed numbers of workers
The Measures of Market Demand
• The market demand for a product under a specific marketing activity is the sales
volume of the product in the target market for a specified time period in a
particular region.
• Sales forecasts are, mostly, estimated on the basis of market demand. Demand
can be measured for six different product levels, five different space levels and
three different time levels. That means, a company can prepare as many as 6 X 5
X 3 = 90 different types of demand estimates.
• A company can make many different types of demand estimates or
measurements. As Dr. Kotler identified, there are 90 different types of demand
estimates that a company can make.
• It can be measured for five different space levels, six different product levels, and
three different time levels, and thus a company can have 90 types of demand
estimates (5 x 6 x 3).
• To order raw materials, plan production, and borrow cash, a company may forecast a
specific product’s short-run demand (time level).Again, it may forecast regional
demand for its major product line to decide whether to set up a regional distribution
network.
Potential Available
Market Market

Market

Target Penetrated
Market Market
• Potential market is the set of consumers who show sufficient interest in the
product’s offer. The mere interest of people does not serve the purpose of
marketers. People must have sufficient income to buy the product as well as
access to the offer.
• Available market is the set of consumers who have interest, income, and
access to a specific market offer. Every individual in the available market of a
particular product may not qualify to buy it either because the company may
discourage some of them or the law may restrict some from buying (qualified
available market)
• Target Market - is the part of the qualified available market the company
decides to pursue. The company might decide to concentrate its marketing
and distribution effort on one region. The company will end up selling to a
certain numbers of buyers in its target market.
• Penetrated market is the set of consumers who are buying the company’s
product.
 • Market demand for a product is the total volume that
would be bought by a defined customer group in a
defined geographical area in a defined time period in a
defined marketing environment under a defined
marketing program. Market demand is a function of the
stated conditions and is, therefore, called market
demand function. Demand can be measured in
physical or monetary terms. Demand is always for a
specific time frame.
• Market Forecast At any given time, there is only one
level of industry marketing expenditure. The market
demand corresponding to this level is called market
forecast. Market forecast shows expected market
demand. Market Potential Market potential is the limit
approached by market demand as industry marketing
expenditures approach infinity for a given marketing
environment.
• Market potential shows the maximum market
demand.. It is that level market demand resulting from
a very high level of industry marketing expenditure,
Market Demand as a function of industry where further increases in marketing effort would have
marketing expenditures
little effect in stimulating further demand.
• Company demand is the company’s share of the total market demand. It is
subject to all the determinants of the market demand, plus the determinants of
the company’s market share, that is the levels of company’s marketing efforts in
a given time period. The company’s share of market demand depends on how it’s
products, services, prices, communications and so on are perceived relatively to
the competitors’. If other things are equal, the company’s market share would
depend on the size and effectiveness of its market expenditures relative to its
competitors.
• Company sales forecast is the expected level of company sales based on a
chosen marketing plan and an assumed marketing environment. Two other
concepts need to be mentioned in relation to the company sales forecast.
• A sales quota is the sales goal set for a product line, company division or
sales representative.
• A sales budget is a conservative estimate of the expected volume of sales and
is used primarily for making current purchasing, production and cash flow
decisions.
• Company Sales Potential is the sales limit approached by company demand as
company marketing effort increases relative to competitors. The absolute limit of
company demand is, of course, the market potential.
 Characteristics and examples of various demand states
Sr. Demand state Characteristic Example
No.
1. Negative demand Consumer does not like the product A strict vegetarian person will not take non
and even prepared to pay a price to vegetarian food and may even skip the meal
avoid it. and remain hungry.
2. No demand Consumers are not interested in the A farmer may not be interested to adopt new
product or not aware about the farming technique for one or the other
product. reason or might not be aware about the
same.
3. Latent demand A strong need which cannot be A single dose of drug which cure deadly
satisfied by existing products. disease like AIDS or cancer.

4. Declining demand Reduction in demand of organizations All organizations may face such a situation
product/service due to less purchase. for their products or services.

5. Irregular demand Variation in demand is observed on a Demand of ice cream.

seasonal, monthly, weekly, daily, or
hourly basis.
6. Full demand Market demand is in accordance with Many organizations experience such a
organizations capacity. demand state. Cooperative dairy plants
of Gujrat have full demand.
7. Overfull demand Demand for organizations product are Some religious places experience more
more than which it can handle. devotees on some particular day then on
other days.
8. Unwholesome demand Demand of products undesirable from Drugs e.g. marijuana
societies point of view
Consumer Behavior
• The study on how individuals make decisions to spend their available resources
(time, money & effort) on consumption related items (what they buy, when they
buy, why they buy, where they buy, how often they buy and use a product or
service)
• The consumers identity, his beliefs, specific needs, attitudes and the kind of
product and brands available in that product category influence his buying
behavior.
• The success or failure of a product or service is directly related to the buying
behaviour of the customer.

• Buyer behaviour acts as an imperative tool in the hands of marketers to forecast

the future buying behaviour of customers and device marketing strategies
accordingly in order to create long term customer relationship.

• Understanding consumer behavior provides invaluable insights into why

people behave as they do when making purchasing decisions and its
impact on marketing strategies.
Factors Influencing Consumer Behavior
Factor Description
These include factors such as age, occupation, income, lifestyle, personality, and self-
Personal
concept. Personal factors greatly influence consumer behavior as they determine the
Factors
individual's needs, wants, and preferences.
Psychological factors include perception, motivation, learning, beliefs, attitudes, and
Psychological
emotions. The mentioned factors play a significant role in shaping consumer behavior by
Factors
influencing how individuals perceive, interpret, and respond to marketing stimuli.
The influence of family, friends, reference groups, social class, and culture has its fair share
Social Factors in influencing consumer behavior. These factors affect consumers' buying decisions by
shaping their values, norms, opinions, and behavior patterns.
Cultural factors encompass the impact of a person's culture, subculture, and social class on
their consumer behavior. Culture provides individuals with shared meanings, values, and
Cultural Factors
beliefs, while subcultures and social classes further shape their preferences and
consumption patterns.
Situational factors include factors such as the physical environment, time, and social
Situational surroundings in which a consumer makes a purchase decision. These factors can
Factors significantly impact consumer behavior by influencing the consumer's mood, behavior, and
purchase intentions.

The marketing mix, popularly known as the 4Ps in the marketing world (product, price,
place, and promotion), is a crucial factor influencing consumer behavior. The various ways
Marketing Mix
that companies design and market their products, set prices, distribute them, and promote
them can greatly affect consumer perceptions, preferences, and purchase decisions.
Other factors are:
• Economic Conditions & Consumer Behaviour
• Inflation rates, employment level, income distribution.

• Impact Of The Internet On Consumer Behaviour

• Easy access to information
• Rise of consumers purchasing online

• Influence Of Social Media

• Opinions
• Reviews
• Experiences
Routine Response Behavior
• Consumers exhibiting routine response behavior tend to make frequent
purchases with minimal thought or effort. They have established brand loyalty
and seek convenience in their buying process.
Limited Decision-Making
• Limited decision-making occurs when consumers engage in some information
search before making a purchase. They may compare different products or
brands based on features and benefits.
Extensive Decision-Making
• Consumers who engage in extensive decision-making conduct thorough research
when purchasing expensive or complex products. This type of consumer wants
to gather as much information as possible before making a decision.
Impulsive Buying Behavior
• Impulsive buying behavior involves consumers making unplanned purchases
based on emotions or immediate desires. These consumers are driven by the
thrill of the moment rather than rational decision-making processes.
Buying Decision Process

• The buying process is a series of steps that consumers go through when making
a purchase. It involves several stages, starting from need recognition to post-
purchase evaluation. Each stage can be influenced by various factors, such as
personal preferences, marketing messages, and recommendations from others.

• The buyer decision process also called the consumer decision process, is a five-
step process through which customers decide if they want to make a purchase or
not.
1. Problem Recognition
• It’s in fact, the beginning of the buying process It is a perception. We realize what
we should ideally have and what we have at present. The decision to buy a
particular product depends on the necessity of that product to the buyer from
FMCG to a luxury product
2. Information Seeking
• This follows the problem recognition stage. The search is mostly directed toward
the products that are consistent with our needs. The amount and type of
information that is collected are related to the product in relation to the need for
the product information that can be gathered by ads, visiting the store through
the internet, or by talking with your friends.
3. Evaluation of Alternatives
• When the consumer seeks information he realizes the alternative choices
available and gets the background against which choices can be made. The
brand that consumer considers while making a purchase decision forms an
evoked set which is a small proportion of the total available brands. Promotion,
especially advertising provides information to consumers enabling them to
evaluate
4. Buying Decision
• After the alternative choices are evaluated The brands are ranked & the top-
ranking brand may be purchased. Ultimate buying decisions may undergo a
change if the preferred brand is not available.

5. Post-Purchase Evaluation
• Now the product has been bought and consumed. It is the stage for post-
purchase evaluation. The consumer may either be satisfied or dissatisfied. A
satisfied consumer stores the product information in his memory and uses it
next time at the time of the problem recognition stage. A dissatisfied consumer
may go in for another brand next time he is out to buy. He will seek additional &
will consider another set of brands
Difference between Business Market and Consumer Market

• Business markets often focus more on sales and purchases that are sold directly to
other businesses, which may use those products to re-sale directly to the consumer.
• A business market is a market in which organizations sell their goods and services to
other organizations to use in their manufacturing process or service provision.
• Business marketers sell products to (see Figure 1 below):
• Commercial enterprises - corporations, small businesses, etc.
• Governmental bodies - local councils, Department for Education, etc.
• Institutions - hospitals, universities, etc.
• Business marketers need to be extremely careful about their mode of
communication. Emails exchanged with clients should have appropriate subject line.
Mails with irrelevant subject line are generally not read by clients. In business
marketing, marketers ought to send personalized emails.
• There are less number of business buyers as compared to individuals who purchase
for their own end use.

Eg: Alibaba, Amazon, General Electrics, Indiamart

Consumer markets are markets where the consumer purchases an item to use for
their own use.
• Imagine you are looking to buy a new laptop. As a consumer, you would go to Apple
and probably purchase a single MacBook. However, a corporation looking to buy
laptops for its new office will likely purchase tens or even hundreds.
• Products in consumer market are further categorized into:
1.Fast Moving Consumer Goods (Abbreviated as FMCG)- the items that are sold
quickly to the end-users generally at nominal costs. Example - Aerated drinks,
grocery items
2.Consumer Durables- Goods that a consumer uses for a considerable amount of
time rather than consuming in one use are categorized under Consumer
Durables.
a) White Goods - (Refrigerators, Microwaves, air conditioners and so on (Majorly all
household appliances)
b) Brown Goods - (Television, CD Players, Radio, Game Consoles (Majorly used for
entertainment and fun)
3.Soft Goods - products which have a shorter lifecycle and their value decreases
after every use. Eg - shirts, clothes, shoes.
 Consumer Markets
Business Markets

Number of buyers Few Many

Buying process Formal and complex Less formal

Single purchase
Large Small
quantity

Highly important, close, and Relationships emphasised

Relationships
long-lasting to a lesser degree

Buying Many influences on decision- Mostly individual decision-

characteristics making making