Marketing Class XI Study Material PDF

MARKETING CLASS XI Study Material  INDEX Unit 1: Introduction to Marketing Unit 2: Marketing Environment Unit 3: Marketing Segmentation, Targeting & Positioning Unit 4: Fundamentals of Marketing Mix Unit 5: Consumer Behavior  MARKETING...

MARKETING CLASS XI Study Material  INDEX Unit 1: Introduction to Marketing Unit 2: Marketing Environment Unit 3: Marketing Segmentation, Targeting & Positioning Unit 4: Fundamentals of Marketing Mix Unit 5: Consumer Behavior  MARKETING CLASS XI Study Material UNIT - 1 Unit Code UNIT TITLE: Introduction to Marketing Location: Duration: Marks: 12 Class Room Learning Outcome Knowledge Performance Teaching & Evaluation Evaluation Training Method Session 1: Introduction to Concept and Definition Of Marketing 1. Concept of 1. Understanding 1.Identify Activity: marketing of Marketing different Acquaint students 2. Definition and concept in day to manufacturers and with the concept of Meaning of day life. marketers of Manufacturer and Marketing 2. Difference products marketer by making between 2.Understand them picking manufacturer and marketing by products that they marketer understanding consume every day 3. Objectives of need, wants, and finding out the Marketing demands, market manufacturer and 4. Detailed offerings marketers of each. definition of 3. Understand 2. making students marketing objectives of understand need, marketing wants, demands, 4.Understand market offering and customer value customer value along and customer with customer satisfaction in satisfaction marketing Session 2: Scope and Importance of Marketing 1. Understand 1. Describe the 1. Specify scope Interactive Lecture: Scope of scope of of marketing by Acquaint students Marketing marketing by supporting with the scope and 2. Importance of marketing examples in each importance of 1  Marketing. people, ideas, case mentioned marketing experience, 2.Identify types of Activity: 1. Prepare events, places, markets on the an assignment by basis of level, collecting print properties, customers and advertisements and organisations medium analysing the and information message conveyed in 2.What is a 3. Specify the role marketing of goods, Market and Types of marketing in services people, of Markets development of ideas, experience, 3.Importance of economy, in a events, places, marketing to company, society marketers, properties, and consumers customer and organisations society and information. 3. Visit different companies and find different marketing and selling activities adopted Session 3: Journey of marketing through different Marketing Philosophies 1. Evolution of 1.Understand the 1. Identify the Interactive Lecture: different evolution of basic ideology Discussion of Marketing marketing through behind each different philosophies production concept evolved of marketing evolved Philosophies concept, product over period of time. concept , selling 2. Enumerate Activity: Prepare an concept, supportive assignment of Which Marketing concept examples for each Philosophies are and societal concept being adapted as per marketing concept todays context with Distinguish examples to support between from different marketing and industry 2  selling Session 4: Difference between Marketing and Selling 1. Concept of Marketing 1. Explain 1. Identify the Interactive Lecture: and Selling marketing and point of Discussion on how selling as different differences in the marketing and selling concepts marketing and are different 2.Understanding selling concepts Activity: different 1. Visit in a group ideologies behind 2. List out the to different marketing the concepts components organisations in essential for your locality (distributors, selling and wholesalers, marketing retailers). Make a report to find the marketing activities of each of them respectively. Also identify different activities followed in selling and marketing UNIT TITLE: Introduction of Marketing Learning Objectives After reading this unit, students will be able to:  Explain the meaning and concept of marketing  Understand the importance of marketing to Marketer, consumers and society  Understand the scope of marketing  Distinguish between marketing and selling 3  Learn the journey of marketing through different philosophies  Explain the meaning of certain keywords INTRODUCTION Consider a typical day in one’s life. We start our day with consumption of different sorts of products from the moment we wake up in the morning to the time we go to bed. Most of the times we start our day by taking a bath with the soap and the shampoo that we use. The breakfast we take might be a parantha, bread, butter, milk, tea or juice. The cloth we drape in. We may be using public and private transport for commuting to go to schools or workplace. The use of gadgets throughout the day, the television shows we watch for entertainment, the books and newspaper or information material we read, the bed mattress we sleep on and the list of products we use are endless. The entire day we consume different sorts of products. Have we ever thought of where do these products come from? Who does manufacture them? How does the product reach us and how have we come to know about the product? There are three classes involved in the complete process of consumption i.e, the manufacturer or producer, marketer and the end user. A manufacturer is someone who makes products in a factory; anything from a needle to a plane. A producer is someone who makes the product but not in a factory. For example, a farmer is a producer of fruits and vegetables. On the other hand, marketer is someone who performs various activities to facilitate exchange of goods and services between the producers or manufacturers and users (consumer) of the product. End user is a person who ultimately uses or intends to use the product also known as consumer. For example 'Fiama Di Wills soap', ‘Engage deo’,‘Aashirvaadaata’, ‘Sunfeast biscuits’, ‘Bingo snacks’, ‘Yippee noodles’, ‘B Natural juices’, ‘John player’ and ‘Miss player cloths’ are manufactured by Indian Tobacco Company (ITC) and marketed by ITC too. But there can be different set of manufacturers and marketers like ‘Good Day Crunches’ is manufactured by J.B.Manghram Food Pvt. Ltd but marketed by Britania. Similarly ‘Polo mint candy’ brand with a hole in the middle is manufactured by Makson Pharmaceuticals but marketed by Nestle India. Thus, Britania and Nestle are marketer’s but not manufacturers of the products. These firms undertake various activities to stimulate the demand of their products and earn profit by meeting customers’ needs and wants. These firms perform various activities by the marketers to facilitate exchange of goods and services between the producer and consumer 4 called marketing activities. We as consumers might know the marketer’s name as that is what is popularly known. Activity 1 Pick out products that you consume every day basis. It can be from chewing gum to a Car. Find out is the manufacturer and marketer the same. Mention at least 10 products with the (i) same marketer and manufacturer and (ii) different marketer and manufacturer. SESSION 1: Introduction to Concept and Definition Of Marketing The term marketing has been described by different people in different ways. For some it is a fun activity of ‘shopping’, for some it is shopping along with entertainment. There are others who question, does marketing mean selling? Some of us believe marketing starts after selling; they believe ‘selling’ is merely where a salesman is required to sell. However, selling is a part of marketing, selling includes selling of goods, services and ideas. Marketing is a broader term and selling is one of the functions of marketing. Some people question does marketing mean advertising? Marketing undoubtedly includes advertising; the main role of advertising is to ‘communicate’. But marketing is much bigger than advertising. Does marketing mean distribution? The answer is same as in the above two cases thus the product that reaches us is another function of the marketer i.e. distribution function, but marketing is much bigger than this too. Some even believe that marketing is a post-production activity. Marketing involves various activities that take place even before the products are produced. What does the term marketing mean? Marketing refers to the process of ascertaining consumer needs, converting them into products and services, and then moving the product or service to the final consumer segment with emphasis on profitability and customer satisfaction, ensure ng the optimum use of the resources available to the organization. Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individuals and organizational objectives. As per Philip Kotler, the marketing guru, marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and 5 exchanging products and value with others. The author has considered marketing as a social process where interaction of people is an essential component of it. Through this interaction the persuasion for selling the products or services begins. Thus marketing is purely purchase decision of the customer but through continuous marketing initiatives at different stages. Marketing starts before the production of the goods and continues even after the selling of the products. So we say marketing is a continuous process. Where activities pertaining to identification of the needs, wants and demands of the customer, then designing of a suitable product to meet the needs, giving name to the product and converting it to a brand by communicating it to the customers. Figure 1.1: Core Marketing Concepts, source: www.expertsmind.com Let’s understand few Marketing Concepts that are a part of the definitions: Need(s), Want(s) and Demand(s) Need(s) Marketing is a continuous process. Our marketers are individuals who enter in the market and have understanding of the activities of the marketing. For understanding the activities properly, understanding the needs and wants of customers becomes essential. Thus, 6 marketing is satisfaction of the needs and wants of the customer. Needs are the state of being deprived of something. Needs can be physical like hunger, clothing, shelter and sex. If unsatisfied it leaves a person unhappy and uncomfortable. For example, when we are fasting and didn’t have food since morning the moment a person names our favourite food it is tough for us to resist. Needs can also be social like love and belongingness, self-esteem like status and self-actualization needs. These needs are not invented by marketer rather the widely known academic model of needs was proposed by psychologist Abraham Maslow. Although this model is prominently used in motivational studies but can also be applied for studying customers’ needs. Customer needs are the problems that customers plan to solve with the purchase of goods or services. A marketer can’t create needs. Marketers have the option of identifying, analyzing, anticipating and fulfilling the needs only. Fig 1.2: Maslow’s Hierarchy of Needs, source: storify.com Want(s) Wants are the form taken by human needs as they are shaped by culture and individual personality. These are essentially dependent upon needs. For example, a person in North India would satisfy his hunger with rajma and chawal while a person from South India would like to have fish curry and rice. Demand(s) 7 We may want to dine out in a five star hotel. But the question is do we have money to dine at Taj? If yes, then it will become demand. Wants backed by willingness and purchasing power is known as demand. The top marketing companies like HUL, Idea and Airtel etc. first understand needs and wants of customers and then fulfil the needs, wants and demands by conducting consumer research and get regular feedback from their salesmen in the market about unfulfilled customer needs. For example : Big Bazaar a retail store of Future group, shop floor managers regularly mingle with customers on the shop floor and try to satisfy every customer. Objectives of Marketing A company must be clear with its marketing objectives and it these objectives must fit in with the overall business objectives for formulation of proper business strategy. The objectives of marketing the company must take care are: 1. Creation of Demand: The marketing management’s first objective is to create demand through various means. A conscious attempt is made to find out the preferences and tastes of the consumers by the company. Demand for the products and services are created by informing the customers their utility. According the products and services are produced to satisfy the needs of the customers. 2. Customer Satisfaction: The first and foremost marketing manager must study the demands of customers before offering any product or services. Marketing begins and ends with the customer. Satisfaction of the customers is outcome of understanding of needs and meeting them successfully. 3. Market Share: Every business aims at increasing its market share. It is the ratio of its sales to the total sales in the economy. For instance, both Pepsi and Coke compete with each other to increase their market share. For this, they have adopted innovative strategies. These strategies can be adopted in marketing, advertising, sales promotion activities and even through innovative packaging, etc. 4. Generation of Profits: The marketing department is the only department which generates revenue for the business. Sufficient profits must be earned as a result of sale of want-satisfying products. If the firm is not earning profits, it will not be able to survive in the market. Moreover, profits are also needed for the growth and diversification of the firm. 5. Public Image: To build up the public image of a firm over a period is another objective of marketing. Goodwill of company is created over a period of time with regular emphasis on customer satisfaction through continuous improvement in product and services. The marketing department provides quality products to customers at reasonable prices and thus creates its impact on the customers. 8 Create a Market Offering Why do we purchase or own anything? Many of us own iPods. We own one because we want to hear music. Or we own one because we have been influenced to buy one. AfteriPod’s were introduced, few purchased the device because the image it had was they were “cool”. Owning an iPod became a cool fashion statement. But now iPods have become quite common but the impact that iPods had on the music and entertainment industry has been huge because the product was a revolution in the entertainment industry which replaced walkman a device used earlier.People buy things to solve needs. In the case of the iPod, the need is to have better access to music or to look cool, or both. ‘Market Offerings’ are products and services designed to deliver value to customers—either to fulfill their needs, satisfy their “wants,” or both. Market offering refers to a complete offer for a product or service. The product or service that is sold into the marketplace is called as a market offering. Product Needs and wants can be satisfied with products and services offered to the market. A product is not limited to physical objects or tangible items i.e they can be touched, seen and felt rather it is anything that satisfies a need is called a product. Product also includes services which are intangible along with tangible goods. A product can be a person, place, organisation, activities and even ideas. There are thousands of examples of products like food products, TV, Laptop, Mobile Phones, and Clothes etc. Source: fssairegistration.in Fig 1.3: Products 9 Services Services are deeds, processes and performances coproduced/provided by one person for another person. Services are intangible products which can’t be touched, seen and felt. As economy grows, the service sector also starts flourishing. The same can be seen in Indian scenario here services contribute more than 55% to the GDP. Service sector includes banking, insurance, teaching, advertising, consultancy etc. Source: hotelbobbyssolitaireinternational.in Fig 1.4: Services Customer Value As discussed in the example of buying an iPod, we buy an iPod because it not only gives good music output (benefit) but also the cool fashion statement associated with it. Imagine one buying a product? When we buy a product, aren’t we thinking of the benefits the product brings to you. It’s not only benefit it is rather the bundle of benefits associated with the product in the form of product quality, after-sales services, warranty, repairs costs, free home delivery, user friendliness etc. Customers are smart and they evaluate between benefits they are acquiring and price they are paying for those benefits. Customer value is difference between the values benefits the customer gains from owning a product and cost of obtaining 10 the product. The cost of product is not limited to price but also time and energy spent shopping. Customer value can be shown as an equation as below: Customer Value = Total Customer Benefits – Total Customer Costs Thus the marketer’s role is to add more value to product in terms of benefits so that customer prefers the product in relation to competitor’s product. Customer Satisfaction Customer satisfaction is the measure of success of an organization. A Customer is said to be satisfied if their expectations match with the actual performance of the product. Customer satisfaction is the match between customer expectations of the product and the product’s actual performance. Customer satisfaction differs from one person to another; it’s an experience which is different for different individuals. A proper evaluation of a product or service can only be done by experiencing it. So, customer satisfaction is a post- purchase phenomenon. Satisfaction can only be measured by comparing pre-purchase expectation and post-purchase experience. The equation used to determine the level of a customer’s satisfaction is: Customer Satisfaction=Experience – Expectation Customer satisfaction is only obtained once the customer has experienced a product or service. It is always a post purchase phenomenon which is quite emotional in nature. Exchange Process Exchange is the act of obtaining a desired object from someone by offering something in return. Marketing works through exchange. Exchange process is simply when an individual or an organisation obtain and satisfy a need or want by offering some money in exchange of products or services. For example we go get a haircut at a salon, we pay for the hair cut. The money paid in lieu of the service taken is an exchange process.This exchange process extends into relationship marketing and we enter into exchange relationships all the time. With relationship marketing the purpose is to build a long-term relationship with the customer. In 11 the above example if we are satisfied by the haircut service we may intend to take more services from the same saloon and intend to become a permanent customer with the salon. By delivering value to customers, a relationship with customers is developed. So marketing is earning profit by building relationship with customer through satisfying his needs and wants. The same can be applicable for a product too. KNOWLEDGE ASSESSMENT 1 Fill in the blanks with appropriate answers: 1. _________________ makes products but not in factories. 2. _________________starts before production of goods but continues after selling of products. 3. _________________ are state of being deprived of something. 4. Wants are human needs shaped by________________and ________________. 5. Wants backed by willingness and purchasing power are called_________________. 6. The intangible acts and deeds offered from one party to another without the transfer of title is called___________________. 7. Customer value is a __________________, which reflects the state of difference between customer benefits and customer costs ___________purchase (pre-purchase ). 8. Customer satisfaction is a __________________, which reflects the state of difference between product or service experience with that of expectation (post- purchase). 9. [Ans: 1. Producer, 2. Marketing, 3. Needs, 4. Culture and personality, 5. Demands, 6. Services, 7. Proactive component, before, 8. reactive component] Session 2: Scope and Importance of Marketing Gone are the days when marketing was confined only to goods and services. Now the scope of marketing has increased and one can also market people, ideas, experience, events, places, 12 properties, organisations and information and not just confined to goods or services. In other words anything that is of value to others can be marketed. The scope of marketing are explained as under: Goods: A tangible item which can be an article, commodity, material, merchandise, supply, wares produced from agricultural, construction, manufacturing or mining activities. Services: Products that have intangible properties such as banking, consultancy, education, insurance, accounting, expertise, medical treatment or transportation. Experience: Marketers can create stage and market experiences to the customers. For example Water Park, and theme parks provide experience marketing. Another different real life experience is been enjoyed by customers at modern retail outlets. Now retailing is not an activity involved in just selling goods to the customers, it has now become an experience. Shopping in a mall where the delightful experience comprises of not only shopping but also, spending time with family and friends, eating out, watching movie and enjoying the complete day. Fig 1.5 Marketing of Experiences, source: mnftiu.cc, indiafamousfor.com People Marketing can help people to market themselves. Politicians are the most suitable and common example of people marketing. Politicians market themselves to the customers (voters) by promising them certain bundle of benefits. Cricketers, film stars, authors, painters, musicians and sportsperson market themselves. Some of the well-known personalities are Amitabh Bachchan, Sachin Tendulkar, Salmaan Khan etc. These people are not only successful in marketing themselves but also they lent their names to products like perfumes 13 (Shilpa Shetty), retail stores by the name of true blue (Sachin Tendulkar), and cloths and accessories by Salman Khan with the name of ‘Being Human’. Fig 1.6 Marketing of People, source: sports.ndtv.com, bollywoodmastiofficial.blogspot.com, www.hochgepokert.com Places Cities, state and nation can be marketed to the consumers. Place marketers include real estate developers, commercial banks, businesses etc. One can’t forget the incredible India campaign by Indian government to market India as tourist spot. In India, Bangalore is known as the silicon valley of India. Kerala is known as God’s own country. Madhya Pradesh is known as “Heart of incredible India”. A campaign by Amithabh Bachan for Khushoo Gujratki 14 Fig 1.7 Marketing of Places, source: www.globalgujaratnews.in, www.tourismwatch.in Organizations Organizations market themselves to create and boost their image in customers mind. They try to create a unique and favourable image in the eyes of customers that can give organizations an edge over others in the market place. ‘Tata group’comprising of multiple brands, stands for trust and quality globally. Philips promises its customers products which are technologically advance and hassle free. So its marketing campaign is based on sense and simplicity platform. 15 Fig 1.8 Marketing of Organizations, source: www.thehindubusinessline.com Property Properties, whether tangible like real estate or intangibles like stocks can be marketed to the customers. Properties are bought and sold and this exchange process seeks the role of marketing. Real estate developers (DLF, Unitech, and Supertech) develop property and seek buyers for the same. Same is the case with any investment company that wishes to sell its securities to individuals as well as institutions. 16 Fig 1.9 Marketing of Properties source: dnaindia.com, indiainfoline.com Events Marketers promote different events from time totime their customers. These events can be for individuals or organizations. Sports events like Commonwealth games, Cricket world cup series, Musical Concert, Awards, and Fashion shows, etc are events kushaldave.wordpress.com, www.t20worldcup2016schedule.org Fig 1.10 Marketing of Events, source: Information Information is basically produced and marketed and distributed by universities, schools, colleges, newspapers, magazines, books etc to the customers at a price. The customers here might be parents, students and communities. For example Source: en.wikipedia.org, businessworld.in 17 Fig 1.11 Marketing of Information Ideas Every marketer offers some idea. Some offer it for money others do it for society in general. Marketers make profit from society and they shall also give back to the society. Social marketing comprises of creating awareness on few ideas like Family Planning, AIDS awareness, discouraging-smoking, child labour, domestic violence, wearing of helmet while driving, blood and eye donation etc. Fig 1.12 Marketing of Ideas, source: childlabourandhumanrights.wordpress.com, mindbodyspiritualawareness.com Activity II Collect 5 advertisements from latest newspaper or magazines for marketing of (i) services (ii) properties (iii) ideas (iv) places and (v) events. Understand the messages conveyed in each case. How each message is different from another and which is more appealing. By this time few more questions would be rising in your mind they may include: What is a market? What all can be marketed? What all activities does a marketer perform? What is marketing management? For having the answer to these questions lets read the text further: What is a market? Market originates from Latin word ‘MARCUTUS’ which means a place where buyer and sellers meet for business. Earlier in our country buyer and seller gathered at a specific place called ‘haats’or ‘melas’. But with passage of time buyers and sellers need not to meet face to 18 face for transaction, they can meet virtually through e-commerce platforms. On the basis of end use, market can be of different types: Consumer Markets (FMCG-Fast moving consumer goods, consumer durables, soft goods), industrial markets (finished goods, components and services), intermediate markets (wholesale and retail markets), geographical location (local, national, global/international markets, rural and urban market), and Non-profit and Governmental Markets (companies selling to non-profit organizations with limited purchasing power need to be price careful). The Importance of Marketing Earlier finance was considered backbone for any business but gradually marketing gained importance and was considered more important than other functions of business i.e. Finance, Production and Human resources. Later it was realized that to run business profitably companies need to market their products if they want to gain more profits. As for every business the leading factor for success is the customer. Thus with the customer as a controller, marketing becomes a major integrative function of the organization. However, Marketing cannot be kept apart and the Product, Pricing, Placement and promotions of the product ultimately depends on the marketing function. Currently marketing is a core business discipline since it contributes greatly to the success of the organization. It’s also essential to appreciate the concept of marketing as the cost of marketing amounts to forty to sixty percent of the total cost. Production and distribution depend largely on marketing. Marketing covers advertising, promotion, public relations, and sales. It is the process of introducing and promoting the quality product or service into the market. If the company targets more of customer’s needs, they will come back again and again and even bring along other customers. On the other hand, if the company push more on the product and ignore customer’s needs and wants, they will in no time lose their customers. Marketing plays an important role to the marketer, customers and society. Importance to the Marketers 1. Marketing Promotes Product Awareness to the Public The primary task of marketing is to get the product or service recognized by the market. It is important that public awareness of product and company information is spread to the buying public, this is possible if heavy advertising, sales promotion, personal selling, direct 19 marketing is done for creating awareness. There is no fixed rule for all butobviously the use of a particular technique depends upon the nature of product, market and the financial conditions of the company. 2. Marketing Helps In Enhancing Product Sales Apart from public awareness about a company’s products and services, marketing helps boost sales and revenue growth. Once the public learns the your product through TV advertisements, radio commercials, newspaper ads, online ads etc, it will generate sales. More the people know a productor a service; more interested they would be in buying the products. 3. Marketing Builds Company Reputation Marketers continuously aim to create an image of the company in general public eyes. They tend to create brand name recognition. This is done so that consumers can easily associate the brand name with the images, logo, or caption that they hear and see in the advertisements. For example, McDonalds is known for its arch design which attracts people and identifies the image as McDonalds. With an established name in the industry, a business continues to grow and expand because more and more customers will purchase the products from a trustworthy and reputed company. Importance to Customers 1. Marketing creates Utilities: Marketing creates different types of utilities, form utility – from a plumber to furniture, place utility- product moving from the factory to the customer, time utility- product available when needed, information utility- ingredients of the product and even how to use the product, and possession utility- transfer of ownership from retailer to customer. 2. Large number of choices available: Marketers create needs and wants and try to satisfy that through offering variety of product choices. If one wantssoap, there are n numbers of brands available. For example Lux, Pears, Rexona, Dove are range of soaps offered by HUL. 3. More platforms available: With the advent of technology, the marketers are offering customers both offline and online platforms to purchase. Now marketers are serving more number of customers through different ways, reminders of sales comes through sms, e-mail, 20 facebook, whatsap, Even customers have become smarter, they search for information from different online platforms and buy the best deal. Importance to the Society 1. Source of Employment: Marketing offers a great range of wide and exciting career opportunities. Marketing offers employment in the field of personal selling, packaging, and advertising, marketing research, consultancy, distribution and channel sales. 2. Welfare of Customers and Stakeholders: Though profit maximisation is main motive of every business but many marketers have taken up corporate social responsibility in order to give back to society. Different forms For example, HUL’s – Behaviour Change Program where washing hands with soap before a mother touches her baby is proven to prevent many of infant deaths in villages. Where, over 40% of child deaths under the age of 5 happen in the first 28 days of life. Washing hands with soap before a mother touches her baby is proven to prevent many of these deaths. This campaign is to help teach mothers this lifesaving habit and ‘Help A Child Reach 5’. 21  KNOWLEDGE ASSESSMENT 2 1. ______________the potential customers of future. a) Customer b) Consumer c) Prospects d) Marketer 2. Consumer Markets comprises of ________________________ a) Fast moving consumer goods (FMCG) b) Industrial markets c) Intermediate markets d) All the above 3. Market offering can be combination of a) Product & services b) Information c) Places d) All of above 4. Market consists of a) Potential buyers b) Actual buyers c) Both a and b d) None of the above 5. Marketers builds company’s reputation by creating _______________ of company in general public’s eyes. a) Sales b) Image c) Logo d) None of above 6. The public comes to know about the product of the company through ______________. a) Television b) Newspaper c) Radio d) Online 22  e) All the above 7. Marketing is a core business discipline it covers_________________. a) Advertising b) Promotions c) Public relations d) All the above 8. Scope of marketing is not limited to products, services but now one can market ideas, people, events, places, properties, information, organisations and _____________. a) Goods b) Agents c) Experiences d) None of above 9. Customer value is a difference of total customer benefits and _____________________. a) Total customer experience b) Total customer cost c) Warranty d) None of the above Ans: 1. A 2. D 3. D 4. C 5. B 6. E 7. D 8. C 9. B 23 Session 3: Marketing Philosophies Business has evolved significantly and markets have changed all over the world with the passage of time. The companies have also changed the way they deal with the market, progressing through different phases of progress. The advances in all areas of life change the way people live and work. In line with this progress, the marketing function has come into being. Understanding the use of modern marketing technology and emerging communication strategies in the new marketing era can help the company build deeper relationships in the marketplace. As every company differs in philosophyand objectives, the decisionstoo differ on the basis of factors adopted i.e whether the company focuses on mass production /innovative product/ aggressive selling /customer satisfaction/ societal development /relationship building. Hence, understanding philosophies right from Production concept has been explained. Fig 1.13 Philosophies in Marketing Production Concept Production concept lays emphasis on affordability and availability of products. Affordability is possible by reducing cost of production by producing large quantities and achieving mass production.Availability is possible by mass distribution by making the product widely available.This philosophy states that any amount of goods produced will sell if it is available and affordable to customers. 24 The production concept is almost extinct now with companies paying more and more attention to the customer as the basic ideology here is customers will choose products and services that are widely available and are of economical. So business is mainly concerned with making as many units as possible. By concentrating on producing maximum volumes, such a business aims to maximize profitability by exploiting economies of scale. This seems a viable strategy in developing markets i.e. India, Brazil, Russia, China, and South Africa. The Mantra for this concept is “Low cost and mass production” as rightly proven by Lenovo computers of China. Product Concept During production concept supply increased over demand. Gradually low cost and availability couldn’t ensure increase in sale and survival along with growth of the firm. The companies had to innovate products and started giving more choices to customers which lead to product concept. This concept is based on the philosophy that consumers will prefer products that have better quality, performance and features. It emphasises on innovation to produce better quality products. It believes in the ideology that a “good product will sell itself” as rightly proven by Apple and Google brands. Both of these companies have strived hard on their products and deliver customers rich feature, innovative and diverse application products that people just love these brands. So a good product backed by right price and proper distribution and promotion will sell in the market and need not to be low priced (production concept) to sell in market. Thus product improvement became the key to profit maximisation for firms in product concept. Selling Concept With the passage of time marketing environment further underwent changes, competition was constantly increasing and just the improvement in product and making it available to customers was not working. There was something more required then just a quality product for the survival and growth of the companies as large number of sellers started manufacturing quality product. Something more was required to persuade the customers now. Business philosophy changed it was believed that customer would not buy or would not buy enough until or unless they are convinced and influenced to do so. Therefore, Selling is the act of influencing a customer to buy a product or service. Businesses had to concentrate on ways of selling their products. 25 The concept is based on the belief that customers, be individual or organizations will not buy enough of the organization’s products unless they are persuaded to do so. So organizations should undertake selling and promotion of their products for success. Thus making good products was not enough rather focus changed to pushing the sales of products through aggressive selling. The selling effort is supported by promotional activities and aggressive advertising. The company does not consider the needs and wants rather thinks that anything and everything can be sold. This concept can also be applied in the firms having over capacity in which their goal is to sell what they produce than what the customer really wants. For example this concept is effectively applicable in the cases of unsought goods like life insurance, vacuum cleaner, fire fighting equipment’s including fire extinguishers where the customer doesn’t need them but if persuaded constantly the customer buys them. The disadvantage with this approach is that it assumes that customer will certainly buy the product after due persuasion and if dissatisfied will not speak to others, which is not true. Marketing Concept By this time customers were fed up of too much influence of the salesman during purchase of products which led to unnecessary purchase that did meet customer’s needs and wants. Customers expected that companies should be more responsible enough to understand their actual needs and wants rather than imposing products on them. The marketing concept proposes that the success of the firm depends on how well it understands the needs and wants of the customers and how successfully it converts these needs in to products and services that will satisfy the customer’s requirements. Marketing starts before the product; service or solution is ready and continues even after the sale has been made. In marketing company makes honest efforts towards retaining the customers and also attracting new ones. Customer satisfaction is the strongest pillar of marketing where company assures that customers are satisfied after buying a product or service. This is a customer centric approach rather than product centric one. In marketing concept customer satisfaction is the focal point and all decision making based on it. Decisions like the product to be produced, with the features to be included. The price and the place to be sold all depends on the customers. For example if customer is in need of a pen, pencil and eraser all in one Linc pens have met that need of customers. If customers want triple door in refrigerators LG, Godrej, Hitachi companies will produce them to satisfy their needs and wants. These companies spend a lot on research to understand and meet customers’ requirements. 26 KNOWLEDGE ASSESSMENT 3 State True or False: 1. Product means only physical products 2. Needs and wants are same. 3. Marketing is more than selling. 4. Marketing concept doesn’t just end with understanding customers needs and wants, it is makingcustomers satisfied. 5. Product concept led to production concept. 6. Production concept believed in improvement in product and making it available to customers. 7. The production concept is extinct in India. 8. Marketing begins before production and continues after sales. 9. Marketing is no longer a function of marketing department only. 10. In selling concept, it is the customer and not the seller that needs to beware. Answer: False- 1, 2, 5,6, 7 True- 3, 4, 8, 9, 10 Session 4: Marketing vs. Selling Many people confuse selling and marketing as one and same thing. In reality both are quite different from each other. Selling is an important part of marketing but its not marketing. Marketing is much wider in scope than selling. Selling is characterized by product focus approach. It has short term goal of achieving market share. It does not consider a planning for building up the brand in the market place and doesn’t have a high loyal set of customers. The end means of any sales activity is maximizing 27 profits through sales maximization. The marketer is of the view that once the production completes, the task of sales force begins and it’s the duty of the sales force to sell what has been produced. Aggressive selling is adopted for achieving the sales which gives cash to the company. Marketing as a concept is wider than selling and focuses on customers’ needs and wants rather than the product. Marketing starts before the production and product is produced according to the needs and wants of the customers. Customer satisfaction is given vital importance and changes are made if customer is not satisfied. It is a long chain of activity, which comprises production, packing, promotion, pricing, distribution and then the selling. Profits are not ignored but they are built up on a long run basis and realized with customer satisfaction. Every business is for profit even marketing believes in profit maximisation but through following pillars:  Identification of target customers of target market  Understanding of needs and wants of customers  Developing products or services as per the needs and wants of customers  Satisfaction of needs of customers Fig 1.14 Selling and marketing Concepts 28 Point of Difference Marketing Concept Selling Concept 1. Definition Marketing is the process of creating Selling is the process of value for customer and delivering encoring customers for goods and services for earning profit. increasing sales. 2. Objective The objective of this concept is to The objective of selling satisfy customer through goods and concept is to increase sales of services. goods and services. 3. Scope The scope of marketing concept is The scope of selling concept wider. is narrow. 4. Emphasis This concept emphasis on customer This concept emphasis on needs. products or services. 5. Profit This concept earns profit through This concept earns profit customer satisfaction through attractive sales and promotion. 6. Start This concept starts with actual and This concept starts with potential customers existing product. 7.Market This concept thinks about market This concept never thinks segmentation segmentation deeply. about market concept. 8. Marketing mix This concept gives equal importance This concept gives on marketing mix. importance on only promotion. 9. Effectiveness This concept is applicable in pure This concept is useless in competition market. pure competition market 10. Price Consumers determine price. Cost determines price. 11. View on business It views business as a customer It views business a goods satisfying process. producing process. Table 1.1 Distinguish Between Marketing Concept and Selling Concept Societal Marketing Concept Mother earth has given us everything it is a rich source of air, water, minerals,and land that we live on. Further we all live in a society and are a part of it. We can not even think of a single day without family and friends. Our environment is facing a lot of problems in the form of pollution, deforestation, increasing population, depleting natural resources, poverty, and environmental deterioration. There are many more are challenges posed by social problems too. The duty of business doesn’t end by just meeting needs and wants of customers rather the duty of business to consider a larger perspective by really acting in the best interest of individuals and society. 29 The societal marketing concept believes in giving back to the society as it believes that the company is profiting because of society and hence it should also take measures to make sure the society also benefits from the company. The concept advocates to deliver the customer satisfaction in a way that preserves or enhances the customer’s and the society’s well-being. Societal Marketing can be defined as a marketing function in which the organizations identify the needs and wants of the target market and then align the marketing activities of an organization in such a manner that their marketing efforts are socially responsible and thereby help the organization in gaining the trust of the society by having an image of a socially responsible organization, but still remaining profitable. Societal marketing is marketing with a noble cause. Now a day’s one can find number of examples where companies are supporting one or another good cause. Aircel is promoting ‘Save Tiger Campaign’, Idea is concerned about increasing population and deforestation, ITC’s project of spending each rupee from sales generated through Classmate stationery, Tata Tea Jago Re campaign are some of the prominent companies who are very active in societal marketing. Body Shop, a cosmetic company uses only vegetable based materials for its products. It is also against Animal testing, supports community trade, activate Self Esteem, Defend Human Rights, and overall protection of the planet. Procter and Gamble also practices societal marketing concept wherein it gives certain percentage of sales of its products for deprived classes of the world specifically the developing countries. Relationship Marketing The approach came into existence in 1990’s. As the name suggest this approach focuses on customer retention and satisfaction rather than being transactional in nature. The approach aims to build stronger relationship with customers and its business partners. Although the idea of building relationships with customers, was given its due importance in the marketing concept but extending relationships to business partners makes relationship marketing unique. The approach suggests developing strong relationship with its partners who are suppliers and distributors. It will lead to better channel arrangements, higher levels of cooperation, less conflict, and increased efficiency. In relationship marketing everyone is treated as customers. By relationship-building with all of these organizations and individuals, we can develop 30 strategies that are in the best interest of everyone in the entire channel of distribution. As a result, everyone wins. Orientation Production Product Selling Marketing Societal Marketing Basis Philosophy Quality Product with Products Satisfied Consider products at good quality, don’t sell Customers Social lower price features and themselves. responsibility performance. Customers while need to be marketing convinced to buy. Objective Minimize Offer Best Maximize Profit with Profit with cost and Quality Sales customer customer maintain Product satisfaction satisfaction volume and protected social interest Method Focus on Focus on Aggressive Focus on Marketing production Product and Promotion to total mix changed and its features sell more marketing according to distribution mix Society’s efficiency. best interest Table 1.2 Comparative Analysis of Marketing Philosophies KEY WORDS Marketing: marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Needs: need is basic requirement of human being such as hunger, clothing, shelter and sex. If unsatisfied it leaves a person unhappy and uncomfortable. Wants: Human needs shaped by culture and individual personality are wants. Demands: Wants backed by willingness and purchasing power is known as demand. 31 Product: A product is tangible item that can be touched, seen, felt and satisfies need. Services: Deeds, processes and performances provided by one person for another person Customer Satisfaction: Expectations of customers match with the actual performance of the product SUMMARY  Traditionally, market refers to a place where buyers and sellers meet to enter into transactions involving in exchange of goods and services.  In modern marketing sense, market is set of actual and potential buyers of products or services.  Marketing is not merely a post-production activity. It includes many activities that are performed before goods are actually produced and continue after goods have been sold.  Anything can be marketed that is of value to others. It can be a product or a service or an idea or information or a place or a property or an event and even experience.  Many people confuse selling for marketing but selling is only a part of process of marketing. Marketing is customer focused and selling is seller focused.  Production concept believes in ideology of ‘mass production and mass consumption’  Product concept believes in ideology of product with good quality, features and performance.  Selling concept believes that products don’t sell themselves. Customers need to be convinced to buy. KNOWLEDGE ASSESSMENT 5 Short Answer Questions Q1. What is marketing? Can a marketer be a manufacturer, support with relevant examples? Q2. Distinguish between production and product concepts. Q3. Distinguish between Marketing and selling. Q4. ‘Customer is the king’, which philosophy follows this ideology? KNOWLEDGE ASSESSMENT 5 Long Answer Questions Q1. Define Market? Explain the types of markets? Q2. What is marketing? Give examples to support your answer. Q3. Marketing is not merely limited to selling of products and services. Elaborate 32 Q4. Importance of Marketing is not merely for customers but for society and marketer too. Q5. Societal marketing is earning profits by working for society, explain and support with examples. KNOWLEDGE ASSESSMENT 6 Projects Q2. Visit in a team of 4-5 students in a group to different marketing organisations in your locality (distributors, wholesalers, retailers). Make a report to find the marketing activities of each of them respectively. Is there any difference in the activities in the organizations visited? Which activities are common to them? References: 1. Harsh V.Verma, Ekta Duggal, Marketing, 1st pub., Oxford University Press, 2015 2. Michael D. Hutt, Dheeraj Sharma, Thomas W. Speh, B2B marketing: a south - Asian perspective, 11th ed, Cengage Learning, 2014 3. Alvin Lee, Mark G, Edward, Marketing strategy: a life cycle approach, Cambridge University Press, 2014. 4. Tapan K.Panda, Marketing management text and cases: Indian Context, 2 nd ed, Excel Books, 2013 5. David L. Kurtz, Principles of contemporary marketing, 15th ed., Cengage Learning, 2013 6. James C. Anderson, Business market management (B2B), 3rd. ed., Pearson education, 2012 7. Bert rosenbloom , Marketing management text and cases: an Indian perspective, 7th ed., Cengage Learning, 2011 Online sources: sports.ndtv.com bollywoodmastiofficial.blogspot.com www.hochgepokert.com en.wikipedia.org childlabourandhumanrights.wordpress.com, mindbodyspiritualawareness.com 33 34  UNIT II:MARKETING ENVIRONMENT Unit Code: UNIT TITLE: MARKETINGE ENVIRONMENT Duration: Location: SESSION1: MEANING AND IMPORTANCE OF ENVIRONMENT Learning Outcome Knowledge Evaluation Performance Teaching and Classroom Evaluation Training Method or 1. Meaning 1. Explain the 1. Understandin Interactive Company’s and importance of meaning and definition g the term Lecture: premises Environment in of Marketing Marketing 1. Introduction Marketing environment environment, static of Marketing 2. Discuss static environment and environment, static environment and dynamic environment and dynamic environment environment dynamic in business. 2. Distinguish environment; 3. Study ‘Internal between ‘Internal ‘Internal environment factors’ environment factors’ environment and ‘External and ‘External factors’ and environment factors’ environment factors’ ‘External 3. Evaluate environment theimpact of factors’ ‘Internal environment factors’ Activity: (4 Ps) Differentiate the role of 4 Ps in different industries 1. Meaning and 1. Describe the 1. Rationalize Interactive steps in meaning and steps in the Environmental Lecture: Environmental Environmental scanning Discussion of scanning scanning (ETOP) 2. Explain the ETOP profile and 2. Importance of significance of its importance for a Environmental Environmental firm scanning scanning for an Activity: organization Make ETOP  profile of an industry of your choice SESSION 2: MACRO ENVIRONMENT FACTORS 1.Discuss the meaning Interactive of Macro Environment Lecture: in business Explain Macro 2.Detaileddiscussion on environmentDemog Demographic forces raphic factors and Politico-legal forces Political and legal factors for business activity Activity: Distinguish Demographic factors Political and legal factors for an industry 1. Economic 1.Acknowledge factors 1. Explicate various Interactive forces of macro environment factors of macro Lecture: 2. Natural or environment, i. e. or Clarification of physical forces 2.Enumerate the impact physical forces, physical forces, 3. Technologic of Economic forces, Technological forces Technological al forces Natural or physical and Socio-cultural forces and Socio- 4. Socio- forces, Technological forces cultural forces cultural forces forces and Socio- cultural forces Activity: Enlist various physical forces, Technological forces and Socio-  cultural forces in an industry SESSION 3: MICRO ENVIRONMENT FACTORS 1. Meaning and 1.Enumerate different 1. Classify the Interactive constituent factors components of Micro main heads involved Lecture: of Micro Environment for firms- in Micro business 1.Acquaint Environment for Suppliers, Marketing environment students with firms- intermediaries, 2.Differentiate different Suppliers, Competitors, various categories of constituent factors Marketing Customers, General Suppliers, of Micro intermediaries, public Marketing Environment for Competitors, 2. Differentiate intermediaries, firms- Customers, General various categories of Competitors, Suppliers, public Suppliers, Marketing Customers, General Marketing intermediaries, public intermediaries, Competitors, Competitors, Customers, General Customers, public General public. Activity: 1. Collect information on factors of Micro Environment for manufacturing firms and service firms (Note: The location would depend upon the topic under discussion, wherein it will be the classroom for the theoretical interactions and the student will be required to visitield/retail outlet or the marketing department of an organization to observe and comprehend the conceptsrelated to marketing.)  UNIT II: MARKETING ENVIRONMENT Learning Objectives After reading this unit, the students will be able to: 1. Explain the nature of the business environment 2. Recognize the relationship between the firm and its environment 3. Comprehend Environmental Scanning and its significance 4. Understand the factors determining macro environment in business 5. Analyse the micro economic factors of business environment 6. Explain the effects of demographic change on marketing 7. Discuss the nature of economic factors and sources of competition in business 8. Explain how technological change can transform industries SESSION I: MEANING AND IMPORTANCE OF ENVIRONMENT INTRODUCTION: Marketing is an art of winning hearts of customersand persuading them to buy the firm’s products and services.It creates value for customers and in return captures value/ profit from the customers.A company's ability to develop and maintain successful relations with its target customers, in fact,determines its growth. No business operates in a vacuum. The exchange process between the firm and its customers depends uponbusiness decisions taken bythe firm, and these decisions again, are affected by the marketing environment. Marketing environment consists of numerousfactors and forces close to company which affect its ability to serve and satisfy its customers for their needs and requirements. The mix of these internal and external factors affect the way a firm operates. Firms need to understand the marketing environment so that they can make the most of positive factors and manage the impact of negative factors. Sincea successful relationship with customers and stakeholders results into growth of business, now a dayalmost all the firms engaged in production and marketing, tend to identify, monitor and analyse these forces before taking decisions for the firm. In production process, right from the productconceptualization tillfinal production, every single person, group entity, event or factor- internal/ external,makes a specific impact on firm's choices. Similarly individuals or organizations, in capacity ofcustomers, suppliers, competitors, even governments are also affected by the firm’s activities. As these directly or indirectly give some input into marketing decisions taken by the firm.A firm plans productionkeeping in view the customers' needs,market characteristics, competing rivals, behaviour of suppliers and distributorsfor its product. It also gives due consideration to the legislative, social and cultural framework.By producing goods and services for people, the firm is committed to provide satisfaction to individuals and to increase the welfare of society. It is, in fact, the economic and social organ of society, so it must achieve its economic goal also. According to M. Weimer, “Business environment is the climate or set of conditions -i.e., economic, social, legal, technological and political situations in which business activities are conducted". In the words of Keith Davis, "Business environment is the aggregate of all conditions, events and influences that surround and affect it.” Philip Kotlerdefines "A company's marketing environment consists of the actors and forces outside marketing that affect its management's ability to build and maintain successful relationships with target customers." There are few examples of external forces making an influence on a business: i. Fast technological changes as in the mobile industry or computer industry- introduction of new models and software and Apps ii. Uncertainty in political scenario, e.g., changing governments, change of finance minister or minister of concerned industries etc. iii. Changes in government's economic policies, e.g., licensing policy, taxation policy, inter-state or foreign trade policy. iv. Social changes, e.g., demand for reservation in jobs for minorities and women. v. Changes in fashion and tastes of consumers, e.g., preference for organic products ordemand for Khadi clothes in place of synthetic clothes by the customers etc. vi. Industrial conflicts caused by labour unrest- labour demanding higher wages and bonus and better working conditions, etc. vii. Globalization and Liberalization resulting in increased competition in the market with the entry of multinational corporations or start-ups The environmental forces, at times, do not show any significant change.The environment of a business enterprise then is termed as stable or static environment. But modern organizations now a day are observing frequent changes, both internally as well as externally. The nature and degree of change is unpredictable. There are new products and designs being introduced to the market every day, invention of new techniques of production, new competitors, changes in ministries in the Government, changes in policies related to industry, taxation or banking that bring irregularity in the environment for the marketers. Such factors creatinginstability make the business environment volatile and it is called a dynamic environment.The firm has to deal with the changes taking place 'within' and 'around' it. There are certain forces that can be controlled to a large extent by the management of a company. These are calledinternal environment factors, which are generally related to product design, volume of production, procurement of raw material, employment of labour, doses of financial investment and expansion plans of the firm. These changes can be introduced as per desire of the company's management. Besides this, the four P's of marketing i.e., product, price, place and promotion are also controllable. For example, if the customers expect some variations in the product offered by the firm, or price is high/ low for the target customers or the current medium of advertisement is not effective enough, the firm is quite free switch over to required changes. These factors are a part of controllable environment making an impact on approach and success of its operations. Another type of marketing environment, which generally cannot be guarded by the management of a company, is called uncontrollable environment. This also affects marketing policies and strategies of the firm to a great extent. The external uncontrollable environment consists of factors and forces at two levels namely- micro environment, and macro environment. Micro environment consists of the elements or forces that influence marketing and business directly. It includes suppliers, customers, intermediaries, competitors and the general public. Macro environment includes demographics, economic forces, political andlegal forces, socio-cultural and technological forces, which arebeyond the control of firm and affect business indirectly. The firm analyzes these environmental forces also,while taking various decisions in marketing. Environmental Scanning The firmsurvives and contrives inan uncertain dynamic environment.An environmental scanning by the firm for recognizing potential opportunities and threats outside are very essential. It is, in fact, key to business success. The management has to systematically monitor the external forces to make strategy for the firm in the future. Through environmental analysis, the management can develop an Environmental Threat and Opportunity Profile (ETOP) which gauges the impact of various environmental forces on the firm.Threat may be like emergence of strong competition in the market by new firms and substitute products, and opportunity may occur in the form of path breaking new technology that may help to reduce cost and improve product quality of the firm.Environmental scanning is a process of scrutinizing and weighing up changes and trends in marketing environment by the firm. Before production and launching the product in the market the management has to make a good market research to explore various aspects like- a) Nature of target customers- Identifyingthe size of family, job profile, purchasing power and buying motive of the customer etc. For example before introducing Tata Nano to the automobile market these factors were ensured by the company. b) The market trends-Observing the position of company's previous products and services in the market, whether demand is likely to remain static, decrease or increase. c) Economic, social and political trends- Scanning the economic, social and political trends affecting productionnamely monetary policy, social changes, anti-pollution or energy conservation laws e.g., Tata Nano project faced strong opposition in Singur (West Bengal) both socially and politically. d) Technology trends- Anticipation oftechnological changes, i.e. whether new productmay become popular or what type of technology advancements are about to take place. e) Competition in the market- Analyzing the upcoming or existing competitors and what are their strengths and weaknesses. Importance of Environmental Scanning- The business environment is multifaceted, complex, and dynamic in nature and has a far- reaching impact on the survival and growth of the business.There is a close and continuous interaction between the business and its environment. An environmental scanningbecomes very crucial as it enables a management to identify present and future opportunities which it can exploit,orthreats and constraints which have tobe tackled. The observations made of the relevant aspects of the external environment provide the backdrop for internal strategies as well as forecasting of sales and profit trends.It is important for the management of a company to be fully aware of its external environment and develop plans and strategies to deal with the environmental forces. If a company is able to adapt to its environment, it would succeed in the long-run. But if it fails to become accustomed to its environment, it might fail in the long- run. For instance, bike producers of UK failed as they could not cope with the changes in the environment. On the contraryJapanese producers succeeded as they could evolve strategies and techniques to deal with changes in technological, economic, social and other environmental factors.In these competitive times marketing managers have to besmart and should have a proactive approach, i.e. planning for the future. They cannot afford to sit back waiting for the environment to change, and react to changes as they happen. Rather they have to identify and foresee changes in the environment, and plan their responses before the changes happen. Some of the organizations go even beyond and manage the environment in their own interests, as was the case of Ford, IBM, Sony, McDonalds and Microsoft. Environmental scanning is very significant for the organizations as it helps in- 1. Determining Opportunities- The interaction between the business and its environment identifies opportunities and helps in getting 'First Mover Advantage' out of it successfully. Opportunities mean the positive or favourable external forces that are likely to help a firm increase its business. The changes in the external environment indicate businessopportunities and help the firm in designing strategies to capitalize on them.For instance, by learning that the demand for bikes is going to increase, a bike producing company can take steps to increase production and introduce new models of motorbikes to lure new customers. This is what Hero Honda did in the 1990s to establish its leading position in the Indian bike market. By doing so, the company got the firstmover advantage. Another example could be of MarutiUdyog, which was the first company to identify a demand for small, economic cars in India in the 1980s. 2. Identification of Threats: Threats refer to the negative or unfavourable external factors that create hurdles for a firm. Environmental scanning helps toidentify possible threats in futureand give warning signals to the firms. For instance, an Indian firm finds that an MNC isentering the Indian market with new substitutes. This should workas awarning signal for the Indian firm. Based on this information, the Indian firm can improve the quality of its products, reduce cost of production, engage in aggressive advertising, etc. The proposal of Tata Motors to bring out a small economy car by 2008 was awarning signal for Maruti Suzuki to cut its costs or introduce economy models. 3. Sensitization of Management to Cope with Rapid Changes: The knowledge of environmental changes sensitizes the management to make strategy to cope with the emerging problems. A keen watch on the trends in the environment would help to sensitisethe firm's management to the changing technology, competition, government policies and changing needs of the customers, for example, Reliance Industries has always kept pace with the external environment and formulated strategies to avail opportunities in emerging high-tech areas. 4. Formulation of Strategies and Policies: Environmental analysis helps in identifying threats and opportunities in the market. They can serve as the basis of formulation of strategies to counter threats and capitalise on opportunities in the market. Leading companies like Reliance, Airtel, Tata Motors, Bajaj Auto and ITC have engaged the services of experts to monitor trends in the external environment. Theinputs provided by the experts are used in making strategies. 5. Image Building: If a firm is sensitive to the external environment, it will come out with new products and services to meet the requirements of the customers. This would build the image or reputation of the firm in the eyes of the customers and the general public. Because of sensitivity to Indian consumer's requirements, LG was able to enhance its brand image in the Indian market in a short span of time. SimilarlyG.E. divested its computer and air- conditioning business because they could not attain 1st or 2nd position in the business as per their policy. 6. Continuous Learning: Strategy formulation is a continuous process that involves keeping in touch with the external environment. Thus, managers continueto understand environmental changes and act on the basis of such information. Search of alternatives and choice of strategy to deal with the environment are parts of the learning process. 7. Giving Direction for Growth: The interaction with the environment leads to opening up new frontiers of growth for the business firms. It enables the business to identify the areas for growth and expansion of their activities. 8. Identifying Firm’s Strength and Weakness: Business environment helps to identify the individual strengths and weaknesses in view of thetechnological and global developments.It activates management to move accordingly. 9. Basis of strategy: Strategists can gather qualitative information regarding business environment and utilize it in formulating effective plants. For example: ITC Hotels foresaw bright opportunities in the travel and tourism industry and started building hotels in India and abroad. Similar is the case withOYO room services or Snapdeal and Amazon web portals. 10. Intellectual stimulation: Knowledge of environment changes provides intellectual stimulation toplanners and decision-making authorities. They can do it by paying more attention to people by listening to their problems and suggestion. They can also eliminate procedure complexities in a visible way. The drastic and dynamic steps will definitely keepthe company better placed. ---------------------- Knowledge Assessment - I State whether the following statements are true or false: 1. The exchange process between the firm and its customers depends upon business decisions taken by the firm, and these decisions again, are affected by the marketing environment. 2. If a company does not adapt to its environment, it would succeed in the long-run. 3. Marketing environment, generally guarded by the management of a company, is called uncontrollable environment 4. Knowledge of environment changes provides intellectual stimulation to planners and decision-making authorities. 5. Environmental analysis helps in identifying only business opportunities in the market. 6. A keen watch on the trends in the environment would help to sensitize the firm's management to the changing technology, competition, government policies and changing needs of the customers. 7. Search of alternatives and choice of strategy to deal with the environment are parts of image building process. 8. Strategists can gather qualitative information regarding business environment and utilize it in formulating effective plants. 9. If a firm is sensitive to the external environment, it will come out with new products and services to meet the requirements of the customers. 10. Business environment helps to identify the individual strengths and weaknesses in view of the technological and global developments. Answers: 1. True, 2. False, 3. False, 4. True, 5. False, 6. True, 7. False, 8. True 9. True 10. True SESSION 2: MACRO ENVIRONMENT FACTORS Marketing system of a business organization is surrounded by many kinds of environments with which it interacts.The Firm’s marketing activity depends uponits business planning by looking outside at what its customers require, rather than deciding inwardly at what it would prefer to produce. The firm has to be aware of what is going on in its marketing environment and appreciate how environmentalchange can lead to change indemand pattern for its products. Just as the human body may have problems, if it fails to adjust to environmental change;a business may also fail if it does not adapt to external changes such as new sources of competition or changes in consumers’ preferences. Macroenvironment and micro environment are very crucial for the firm in spite of being much apart from firm’s internal settings. The macro-environment refers to external forces that are part of the larger society andso are beyond the control of firm’s management. These forces do not concern the immediate environment of the firm but make an effect on firm's ability to market its productseffectively. By studying these factors firmscan only prepare themselves for the changes taking place in environment. The macro environmental factors/ forceswhich affect organization's marketing decisions and activities are as follows: i. Demographic forces ii. Politico-legal forces iii. Economic forces iv. Natural or physical forces v. Technological forces vi. Socio-cultural forces (i) Demographic forces: A firm must gather demographic environmental information first of all, even before setting up the business.Demography refers to studying human population in terms of size, density, location, age, gender, race, literacy and occupation. The demographic environment is of great interest to the marketers because these factorsconstitute potential market for company's products. If the total population consists more of children,there will be more demand for toys, baby foods, children accessories and diapers. With more of elderly people in a locality/city, there will be more demand for medicines, wellness products, and walking sticks etc. On the contraryif there ismore of young population, the producers will producevariety of cosmetics, personality improvement products, designer fashionable clothes and lifestyle goods to meet their demand. The changing habits, tastes and life styles of the population also give directions to the marketers, e.g.,in metropolitan cities there is moredemand for fast foods, electronic home appliances and crèches etc. So demography is a very important factor to study for marketers as it helps to divide the population into market segments and target markets. (ii) Political and Legalforces: Federal, State and Local bodies generally set rules or restrictions on the conduct of businesses. The political environment includes all laws, government agencies and constitutional provisions affecting or limiting businessorganizations within a society. It is essential for marketers to be aware ofsuch provisions,  incentives,Government'sinterventionand restrictions in business as these factors make great influence on business decisions.The viability of a business depends upon firm's ability to meet the challenges arising out of the politico-legal environment. Following are the important components of the politico-legal environment: i. The constitutional framework-directive principles, fundamental rights of citizens, and division of legislative powers between central and state governments. ii. Political institutions like government and allied agencies iii. The extent and nature of government intervention in business iv. Commercial and economic laws and government policies under the laws relating to licensing, monopolies, foreign investment, etc. v. Government policies related to imports and exports vi. Government policies related to small scale industries, sick industries, consumer protection, control of environmental pollution, etc. vii. Government policies related to pricing and distribution of essential commodities. viii. Court decisions for the protection of consumers, environment and ecological balance. If Government policy of liberalisation with an objective of inflow of foreign capital and technology into the country has encouraged multinational companies to enter into Indian marketson the one hand, ithas created new challenges for the Indian businesson the other. Some products are regulated by both state and federal laws. For example ban on sale of 'Maggi' by the Government was a big blow to Nestle company. There are even restrictions for some products as to who the target market may be,so subliminal messages have to be indicated. For example,' Cigarettes should not be marketed to younger children' or 'Smoking is injurious to health' is denoted on packets by the cigarette companies. As laws and regulations change often, this is a very important aspect for a marketer to monitor. Marketing decisions cannot be taken without taking into account the developments in political and legal field. Government agencies, political parties, pressure groups and laws create tremendous pressures and constraints for marketing management. Laws affect product design, pricing, and promotion. Irrespective of the political ideologies, intervention in the marketing process has almost become common in every nation.  The marketing managers are required to have adequate knowledge and understanding of political and legal forces for accomplishing their tasks. (iii) Economic Forces Another aspect of the macro-environment is the economic environment.The marketing managers every day face a bout of economic factors, assess its impact and change their action plan accordingly. Sometimes economic news spreads optimism; like Improvement in growth rate, higher demand, low interest rates and declining unemployment. On other times it may cause nervousness indicating industrial recession, price rise, increase in taxation, declining employment and demand etc. Naturally, business thrives when the economy is growing, prices are stable, and people have employment as well as high purchasing power creating demand. Marketing products is easier, when consumers are willing to buy, but is very difficult when people have less money to spend. Inflation is a sustained rise in the prices of goods and services. As a result, the purchasing power of rupee or real value of money gets reduced. For the same quantity and quality of goods, people are forced to pay higher prices. Inflation of mild dose is good for the economy but wild rise is bad for the society particularly middle and poor classes. The consumers would spend less and less on luxuries and would concentrate on basic necessities of life. Thus inflation poses a great problem in managing marketing programmes. To check price rise interest rates are pushed upwards which affects expansion plan of the organizations. The tax rate, exchange rate, foreign trade policy or industrial policy etc., all have tremendous impact on business decision making. (iv) Natural or physical forces The natural environment is another important factor of the macro-environment. This includes the natural resources that a company uses as inputs that affect their marketing activities. The concern in this area is the shortages of raw materials, increasedair pollution, noise pollution, land pollution, water pollution, and so on. As raw materials become increasingly scarcer, the ability to create a company’s product gets much harder. Also, pollutioncauses huge social cost, i.e. deterioration of the environment around us.The ecologists and sociologistsassess social cost which  negatively affects a company’s reputation if they are known for damaging the physicalenvironment.A marketer also has to calculate social net profitability (social benefit minus social cost) of its business activity. He has to consider the physical environmental factors such as the quantity and quality of existing forest wealth, possibility of artificial rain, the exploitation of sea products like fish, the health hazards due to pollution, etc. The Indian government has introducedthe concept of ‘corporate social responsibility of business’ as well as “Eco mark" for marketing eco- friendly products. To maintain ‘ecological balance’ the marketing managers are expected to: i. Control the environmental consequences of the product adopting green production processes and bio-degradable packaging. ii. Follow the environmental criteria while deciding on product ingredients, design and packaging; iii. Respond to the issues raised by the environmentalists and consumerists (v) Technological forces: The technological environment is one of the fastest changing factors in the macro- environment. Technological environment refers to the state of tec