Marketing Dynamics

MARKETING DYNAMICS
MODULE-2
MARKETING ENVIRONMENT

SYLLABUS
 Meaning – Demographic, Economic, Natural, Political, Legal and socio-cultural
environments
 Market Segmentation – Meaning and Definition
 Importance
 Bases of Market Segmentation
 Types of Market Segmentation-
 Limitations of Market Segmentation

Manasa.R
Asst Prof
DBIMSCA-BBA
Marketing Dynamics

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.
 It discusses the market environment as consisting of suppliers, customers,
competitors, intermediaries, and civil society organizations.
 It also defines opportunities and threats, with opportunities arising from satisfying
customer needs and threats stemming from external factors like competition or
legislation.
 The marketing environment surrounds and impacts upon the organization. these
includes “micro environment” and “internal environment”.
 Micro environment- includes suppliers that deal directly, consumers and customers
and other local stakeholders.
 Macro environment – includes all factors that an influence an organization, but that
are out of their direct control.

DEFINITION
According to Philip Kotler, “Marketing Environment refers to the external factors and
forces that affect the company’s ability to develop and maintain successful and relationships
with its target customers”.

IMPORTANCE OF MARKETING ENVIRONMENT

1. Increased general awareness- It creates an increased general awareness of
environmental changes on the part of management.
2. Greater effectiveness- It guides with greater effectiveness in matters relating to
government.
3. Marketing analysis- It helps in marketing analysis.
4. Resource allocations- It suggests improvements in diversification and resource
allocations.
5. Capitalize upon opportunities- It helps firms to identify and capitalize upon
opportunities’ rather than losing out to competitors.
6. Objective qualitative information- It provide a base of objective qualitative
information about the business environment that can subsequently be of value in
designing the strategies
COMPONENTS OF MARKETING ENVIRONMENT/ FACTORS INFLUENCING
MARKETING ENVIRONMENT
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.

Manasa.R
Asst Prof
DBIMSCA-BBA
Marketing Dynamics

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

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:

 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
over which the marketer has little or no control. The external environment is of two types:
 Micro marketing environment
 Macro marketing environment
A] 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 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 the target group of the organisation.

Manasa.R
Asst Prof
DBIMSCA-BBA
Marketing Dynamics

 Competitors are the players in the same market who targets similar customers as the
organisation.
 The public comprises any other group with an actual or potential interest or affects the
company’s ability to serve its customers.
B] 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 six parts.

1. 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.
2. 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.
3. Physical Environment
The physical environment includes the natural environment in which the business
operates. This includes climatic conditions, environmental change, accessibility to
water and raw materials, natural disasters, pollution etc.
4. Technological Environment
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.
5. Political-Legal Environment
The political & Legal environment includes laws and government 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 society.
6. 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.

Manasa.R
Asst Prof
DBIMSCA-BBA
Marketing Dynamics

MARKET SEGMENTATION
 Market segmentation is the practice of dividing your target market into
approachable groups.
 Market segmentation creates subsets of a market based on demographics, needs,
priorities, common interests, and other psychographic or behavioural criteria used
to better understand the target audience.
 Segmentation is the process of defining and subdividing a large homogenous
market into clearly identifiable segments having similar needs, wants or demand
characteristics.
DEFINITION OF MARKET SEGMENTATION
According to Philip Kotler, “Whenever a market for a product or service consists of two
or more buyers, the market is capable of being segmented, that is divided into meaningful buyer
groups. The purpose of segmentation is to determine differences among buyers which may be
consequential in choosing away them or marketing to them”.
Or
According to William J Stanton, “Market segmentation consists of taking the total
heterogeneous market for a product and dividing it into several sub- markets or segments, each
of which tends to be homogenous in full significant aspects”.
IMPORTANCE OF MARKET SEGEMENTATION
1. Enhanced Targeting: Segmentation enables businesses to identify and focus on the
segments that are most likely to purchase their products. For example, Apple targets
tech-savvy and premium-segment consumers who are willing to pay more for advanced
features and quality. This targeted approach is evident in their marketing strategies and
product designs, appealing specifically to these segments.
2. Personalized Marketing: Companies can create personalized marketing campaigns by
understanding different segments. For instance, Netflix uses viewer data to segment its
audience based on viewing habits and preferences. This allows them to recommend
personalized content to users in both India and the USA, increasing engagement and
satisfaction.
3. Resource Allocation: Segmentation helps businesses allocate their marketing
resources efficiently. Amazon, for example, uses segmentation to identify prime
markets for different product categories. In electronics, they might target tech cities like
Bangalore in India and San Francisco in the USA, ensuring better ROI for their
marketing spend.
4. Competitive Advantage: Segmenting the market can provide a competitive edge.
Take Coca-Cola, which segments its market by occasion and demographics. They offer
a range of products from Coke Zero for health-conscious adults to fruit-based drinks
for children, catering to diverse preferences and gaining a competitive advantage in
both the Indian and US markets.
5. Market Expansion: Segmentation can reveal new market opportunities. For instance,
automobile company Ford uses segmentation to identify potential customers for

Manasa.R
Asst Prof
DBIMSCA-BBA
Marketing Dynamics

different car models. In India, they might focus on economic models for cost-conscious
consumers, while in the USA, they could target luxury segments with high-end models.
6. Customer Retention: Businesses can increase customer loyalty by satisfying specific
segment needs. Samsung, for instance, offers a wide range of smartphones catering to
different segments—from budget phones popular in India to high-end models preferred
in the USA. This approach helps retain diverse customer groups by meeting their
specific needs.
7. Product Development: Insights from market segmentation can guide innovation. For
example, L'Oréal develops beauty products by considering the diverse skin tones and
textures prevalent in different regions. They offer products suitable for these varied skin
types, ensuring relevance and appeal across these markets.

TYPES OF MARKET SEGMENTATION

1. Demographic Segmentation: Demographic segmentation involves dividing the
market based on variables such as age, gender, income, education, occupation, family
size, and life cycle. It's straightforward and often the starting point for segmentation, as
these factors are easy to identify.
2. Geographic Segmentation: Geographic Segmentation is segmented based on
geographical boundaries like cities, states, regions, or countries. It can also include
urban, suburban, and rural areas or even based on climate and population density.
3. Psychographic Segmentation: The psychographic segmentation relies on consumers'
lifestyles, interests, attitudes, values, and personalities. It's more subjective but can be
incredibly effective as it considers the consumer's psychological traits, which can
influence buying behavior.
4. Behavioural Segmentation: In behavioural segmentation, marketers segment
consumers based on their behavior towards products, including usage rate, brand
loyalty, user status (new, regular, potential), benefits sought, and readiness to purchase.
It's crucial for understanding consumer interaction with a product or service.
5. Technographic Segmentation: In the digital age, segmenting based on consumers' use
of technology, preferred devices, software, and platforms is increasingly relevant.

EFFECTIVE SEGMENTATION CRITERIA

1. Measurable- The size and purchasing power profiles of the market should be
measurable. A consumer’s profiles and data provides marketing strategists with the
necessary information on how to carry out their campaign. It would be difficult to create
advertisements for markets that have little to no data or for audiences that can’t be
measured.
2. Substantial- the market a brand should want to penetrate should be a substantial
number. The firm should clearly define a consumer’s profiles by gathering data on their
age, gender, job, socio-economic status and purchasing power.
3. Accessible- Means that customers and consumers are easily reached at an affordable
cost. This helps determine how certain ads can reach different target markets and how
to make ads more profitable.
Manasa.R
Asst Prof
DBIMSCA-BBA
Marketing Dynamics

4. Actionable- the market segments need to be actionable. The market segment need to
respond to a certain marketing strategy or program and have outcomes that are easily
quantifiable.
5. Differentiable- When segmenting the market, firs should make sure that different
target market respond differently to different marketing strategies

LIMITATIONS OF MARKET SEGMENTATION:

1. It Can Be Expensive-Finding out what different groups of customers want takes a lot of
time and money. Companies need to do research and make different ads or products for each
group, which can cost a lot.

2. Too Many Small Groups-If a company divides the market into too many small groups, it
becomes hard to manage. Serving tiny groups may not be worth the effort or cost.

3. Hard to Find the Right Groups-Sometimes it's difficult to figure out how to divide
customers. People can be different in many ways, and it's not always clear which way is best
to group them.

4. People Change Over Time-What people like today might change tomorrow. This means
the segments a company creates might not stay useful for long.

5. Not Enough Good Information-To divide the market properly, companies need good data
about their customers. If they don’t have it, the segments might not be accurate.

6. Might Miss Other Customers-Focusing too much on a few groups could make the company
ignore other people who might also want their product.

7. Hard to Use in Real Life-Even if a company finds good segments, it can be hard to create
the right products, ads, and services for each one.

8. People in the Same Group Aren’t Always the Same-Just because customers are in the
same segment doesn’t mean they all want the same thing. Everyone is still a little different.

Manasa.R
Asst Prof
DBIMSCA-BBA