IGNOU : M.COM : MCO 6 : UNIT 5 : Q - 5. Discuss various bases on which an organizational market may be segmented.

 Ans. Bases for Segmenting Organizational Markets 

Organizational markets can be segmented with many of the same variables used in segmenting the consumer markets. For example, we can segment organizational markets on a geographic basis. Some industries are geographically concentrated. For example, in India most of the companies belonging to textile industry are located in Maharashtra and Gujrat. Any company that sells to this industry could use geographic segmentation. 

 Also, like consumers, businesses have demographics that can be used to segment market. For example, the size of a company (measured by sales volume or number of employees), the company's type of business (advertising agencies typically focus on cither clients that market to consumers or companies that sell to other businesses), or the company's method of buying (some rely on price and select the lowest bidder, while others use criteria such as quality or delivery time). Companies can also segment their organizational markets on the benefit desired by buyer and on product usage rates. We will discuss briefly the specific segmentation approaches for organizational markets below. In particular, there are three commonly used bases: 1) type of customer 2) size of customer; and 3) type of buying situation. Let us learn them. 

 a) Type of Customer Segmentation : A common way lo segment industrial markets is by end users. Different users often seek different benefits and can be approached with different marketing mixes. For example, a company that sells small electric motors would have broad potential market among many different industries such as automobiles, electrical appliances, government departments etc. , However, this company will do better by segmenting its potential market by type of customer and then specializing to meet the needs of businesses in limited number of these segments. 

 b) Customer Size Segmentation : Customer size is another variable used for segmenting organizational markets. Many companies set up separate systems for dealing with major and minor customers. For example, a company which manufactures office furniture, may divide its customers into two groups as major accounts and minor accounts. Accounts of large and reputed companies come under major accounts. Such accounts are handled by national account managers working with district field managers. Smaller accounts are categorized as dealer accounts. These accounts are handled by the field personnel working with franchised dealers who sell company's products. 

 c) Type of Buying Situations Segmentation : While discussing organizational markets we have identified three types of buying situations: new buy, modified rebuy, and straight rebuy. These buying situations, as you know, are different from each other in a significant way. An industrial seller can segment his market on this basis of buying situations and adopt marketing strategies accordingly.

IGNOU : M.COM : MCO 6 : UNIT 5 : Q - 4. Critically evaluate four important bases for segmenting consumer markets.

Ans. Bases for Segmenting Consumer Markets

As stated earlier there is no single way of segmenting a market. A marketer has to try different segmentation variables, alone and in combination, to find the best way to view the market structure. Eight major categories of consumer characteristics provide the most popular bases for consumer market segmentation. They include: geographic factors, demographic factors, psychological factors, sociocultural variables, use-related characteristics, use-situation factors, benefit sought, and hybrid segmentation forms such as demographic/psychographic profiles, geodemographic factors, and values and lifestyles. Hybrid segmentation forms a combination of several segmentation bases to create rich and comprehensive profiles of particular consumer segments. All eight segmentation bases are divided further into specific variables.

Geographic Segmentation : This calls for dividing the market on the basis of location. A company may divide the market into different geographical areas such as nations, regions, states, cities, urban/rural areas, or neighbourhoods and then decides to operate in one or few geographical areas, or to operate in all areas but pay attention to geographical differences in consumer needs and wants. The basic reason of using geographic base for segmentation is that people who live in the same area share some similar needs and wants that these needs and wants differ from those people living in other areas. For example, certain food and beverages sell better in one region than in others. Take the example of coffee which is consumed in India, but it is more consumed in South India than any other region. A company who is marketing coffee may keep the taste and flavour preferences in the different regions and accordingly it may come out with different variants of coffee in terns of taste and flavours which may be liked by people belonging to different regions. In the context of India, another variation may be found in terms of purchasing pattern among urban and rural consumers. Companies, if they observe divergent pattern of purchasing in a specific product category among the people of these areas then they may develop products and marketing mixes to suit the consumers' tastes and preferences belonging to urban or rural areas. 

Demographic Segmentation : Demographic segmentation consists of dividing the market into groups on the basis of demographic characteristics of consumers such as age, sex, family size, income, occupation, education, religion, nationality, etc. Demography refers to the vital and the measurable statistics of population. Demographic variables are the most popular bases for distinguishing customer groups. One of the reasons for preferring demographic bases is that consumer wants, preferences and usage rates are, often highly associated with demographic characteristics. Another reason is that demographic variables are easier to measure than most other types of variables, even when the target market is described in non-demographic terms (say, a personality type), it should be linked back to demographic characteristics in order to know the size of the target market and reach it effectively.

• Age and life cycle stage : Because product needs and interest often vary with consumer age, marketers have found age to be particularly useful demographic variable for distinguishing segments. Many marketers have carved themselves a niche in the marketplace by concentrating on a specific age segment. For instance, children of six months age differ from children of three months age in their food requirements and consumption potential.
• Sex (Gender) : Segmentation of markets based on sex or gender has long been useful in the case of products such as clothing, cosmetics, and magazines. Gender has long been a distinguishing segmentation variable. Women have traditionally been the main users of such products as hair coloring, shampoo, and cosmetics and men have been the main users of tools and shaving goods. However, sex roles, in the recent years, have blurred considerably, and gender is no longer an accurate way of distinguishing consumers in some product categories. For example, women are buying all types of household products and men have become significant users of skin care, shampoo and cologne and hair care products. 
• Marital Status : another way of segmenting a market is on the basis of marital status. Traditionally the family has been the focus of most marketing efforts, and many products and services; the household continues to be the relevant consuming unit. Marketers are interested in the number and kinds of households that own and/or buy certain products they are also interested in determining the demographic and media profiles of household decision makers (the person involved in the actual selection of the product) to develop appropriate marketing strategies. 
• Income, Education, and Occupation : In the recent years the popularity of income as segmenting variable of a market has been decreased. Although income has long been an important variable for distinguishing market segments, a major problem with segmenting the market on the basis of income alone is that income simply indicates the ability (or inability) to pay for a product. For this reason, marketers often combine income with some other demographic variable(s) to define their target market, more accurately. For example, very often marketers combine income with age to identify the important affluent elderly and affluent younger segments.

Psychographic Segmentation : Demographic data are used to segment markets because these data are related to behaviour and are relatively easy to gather. However, demographics are not in themselves the causes of behaviour. Consumers do not buy products purely on the demographic variables but these variables may correlate with certain psychological characteristics of consumers. Therefore, marketers have gone beyond demographic attributes in an effort to better understand why consumers behave as they do. They now engage in psychological segmentation, which involve examining attribute such as personality, and lifestyles. When demographic and psychological attributes are combined, richer description of segments is produced. Let us learn some of the psychographic bases of segmentation. 

• Lifestyle Segmentation : Lifestyle relates to activities, interests, and opinions. A person's lifestyle reflects how he spends his time and what his beliefs are on various social, economic, and political issues. People are found to exhibit many types of lifestyles and their lifestyles undoubtedly affect what goods they purchase and what brands they prefer. Marketers are aware of this and attempt to segment their markets based on lifestyle characteristics. One theory relating to lifestyles is that lifestyles are shaped partly by whether consumers are time constrained or money-constrained. Consumers who experience time-constrain i.e., paucity of time at their disposal, are prone to multitasking, that is, doing two or more things at the same time. Companies aiming to serve them will try to create convenient services for this group.
• Personality Segmentation : Marketers also use personality variables Lo segment markets. An individual's personality characteristics are described in terms of traits that influence behaviour. In trying to segment a market on personality traits marketers endow their products with what is known as brand personality that corresponds to target group personality. Then they project this brand personality through their promotional campaigns. For example, Bajaj Scooter has been projected most often as "Trusted friend" and Red and White Cigarettes as 'Daring" Lipton Tiger Tea as "valiant". 
• Value Segmentation : Some marketers try to segment a particular market by values. According to psychologists, values are a reflection of our needs adjusted for the realities of the world in which we live. In other words values are the belief systems that underlie consumer attitudes and behaviours. Research at the Survey Research Center at the University of Michigan has identified nine basic values that relate to purchase behaviour. These are known as List of Values (LOV). These values are: a. Self-respect b. Self-fulfillment c. Sense of accomplishment d. Fun and enjoyment in life e. Security f. Being well respected g. Sense of belonging h. Having warm relationship i. Excitement.

Sociocultural Segmentation : Sociological (i.e., group) and anthropological (i.e., cultural) variables-that is sociocultural variables-provide further bases for market segmentation. We will briefly discuss three bases under this head. These are: family life cycle, social class, and culture. Let us learn them.

• Family Life Cycle Segmentation : This is based on the premise that many families pass through similar phases in their formation, growth, and final dissolution. At each phase, the family unit needs different products and services. Family life cycle is a composite variable based explicitly on marital and family status, but implicitly including relative age, income, and employment status. Each of the stages in the traditional family life cycle (i.e., bachelorship, newly married couple, couple with small children, couples with grown up children, and retired people with no children) represents an important target segment to a variety of marketers. For example, Life Insurance Corporation of India (LIC) has different life insurance policies for young married couples, couples with grown up children and for retired persons. 
• Social Class Segmentation : Social class is a potential market segmentation variable. It is traditionally measured by a weighted index of several demographic variables, such as education, occupation, income (we have already discussed social class influence in Unit 4). The concept of social class implies that people belonging to different social classes vary in terms of values, product preferences, and buying habits. Therefore, marketers have used their knowledge of social class differences to appeal to specific segments. 

Culture Segmentation : Some marketers have found it useful to segment their markets on the basis of cultural heritage, because members of the same culture tend to share the same values, beliefs, and customs. Marketers who use cultural segmentation stress specific, widely held cultural values which they hope consumers will identify. Cultural segmentation is particularly successful in international marketing, but in such instances, it is important for the marketer to understand fully the beliefs, values, and customs of the countries in which the product marketed. Within the larger culture, there exist subcultures. These subcultures sometime exhibit distinct purchase preferences. If this is the case then marketers may segment a particular market on the basis of subcultures. Also culturally distinct segments can be prospects for the same product but often are targeted more efficiently with different promotional appeals.

Use -Related Segmentation : An extremely popular and effective form of segmentation is based on the user -related variables. We will briefly discuss three bases of segmentation under this category. These are: user rate, awareness status, and loyalty status. 

• User Rate Segmentation : Here the marketer differentiates among heavy users, medium users, light users, and non users of a specific product, service, or brand. Normally a company is most interested in the heavy users of its product because heavy users are often a small percentage of the market but account for a high percentage of total consumption. For example, research has consistently indicated that between 25 and 35 percent of beer drinkers account for more than 70 percent of all beer consumed. In many frequently purchased product categories less than 50 percent of all users account for 80 to 90 percent of total purchases.
• Awareness Status Segmentation : This is also known as buyer-readiness stage segmentation. A market consists of people in different stages of readiness to buy a product. Marketers have to determine what percent of potential consumers are aware of the product, interested in the product, or need to be informed about the product. The relative numbers make big difference in designing the marketing program. 
• Loyalty Status Segmentation : Sometimes brand loyalty is used as the basis of segmentation. Buyers can be divided into four groups according to brand loyalty status: (I) hard-core loyals (who always buy one brand), (2) soft-core loyals or split loyals (who are loyal to two or three brands), (3) shifting loyals (who shift from one brand to another), and (4) switchers (who show no loyalty to any brand).

Benefit Segmentation : Marketing people constantly attempt to isolate the one articular benefit char they should communicate to consumers. Segmenting the market on the basis of benefit sought by various consumers has been a popular segmenting base for many products and services. For example, motorcycle manufacturers tried to segment chis market on the basis of benefits sought by various consumers. Hero Honda emphasized fuel consumption, Kawasaki Bajaj and Yamaha emphasized on power and style. Benefit segmentation can be used to position various brands within the same product category. The classic case of successful benefit segmentation is the market for toothpaste: Colgate for total dental care, Close-up with a special appeal that stresses bright teeth, Forhans appeals to the protection of gums. 

 Hybrid Segmentation : Marketers commonly segment markets by combining several segmentation variables rather than relying on a single segmentation base. We will discuss two hybrid segmentation approaches i.e., psychographic/demographic profiles, and geodemographics. These two approaches provide marketers with more accurately defined consumer segments than can be derived using a single segmentation base.

• Psychographic-demographic Profiles : Psychographic and demographic profiles are highly complementary approaches that work best when used together, By combining the knowledge gained from both demographic and psychographic studies, marketers are provided with powerful information about their target markets. The demographic information provide the marketer about the prospective customers' age, education, income, etc. and the psychographic information provides the basis of the prospective consumers personality, and lifestyle pattern.
• Geodemographic Segmentation : This type of hybrid segmentation scheme is based on the notion that people who live close to one another are likely to have similar financial means, tastes, preferences, lifestyles, and consumption habits. , Many marketing research firms collect information on geodemographic clusters and then provide this information to advertisers for developing effective advertising campaigns.

IGNOU : M.COM : MCO 6 : UNIT 5 : Q - 3. What is market segmentation ? Explain the importance of segmenting markets.

 Ans. Market segmentation as the process of dividing the total market for a product or service into several smaller groups, such that the members of each group arc similar with respect to the factors that influence demand. Therefore, companies through market segmentation divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs.

The strategy of market segmentation involves the development of two or more different marketing programs for a given product or service, with each marketing 11rogram aimed at a different market segment. A strategy of marketing segmentation requires that the company first clearly defines the number and nature of the customer groupings (market segments) to which, it intends to offer its product or service. This is necessary (though not sufficient) condition for optimizing efficiency of marketing effort against those segments or the total market where it is likely to yield higher returns on the effort and investment. Some people criticize that marketers create the segments. This is not true. They do not create the segments but they first identify the segments and then decide to focus on one or more segments with different marketing mixes.

IMPORTANCE OF MARKET SEGMENTATION

Market segmentation being customer-oriented is in consonance with the marketing concept philosophy. In market segmentation, a company first identifies the needs of consumers within a segment: and then decides if it is practical to develop a product and marketing mix to satisfy those needs. By practicing market segmentation n company may obtain the following advantages and benefits. 

• By tailoring marketing programs to each market segment, a company can do a better marketing job and can make more efficient use of its marketing resources.
• A small company with limited resources may be ill a better position to compete more effectively in one or two small market segments, whereas the same company would be overwhelmed by the competition from bigger companies if it aimed for a major segment.
• A company with effective market segmentation strategy can create a more finetuned product or service offering and price it appropriately for the target segment.
• The company can more easily select the most appropriate distribution network and communication strategy, and it will be able to understand its competitors in a better way, which are serving the same segment.
• By developing strong position in a specialized market segments, a medium sized company can grow rapidly.
• Even very large companies with the vast resources at their disposal are abandoning mass marketing strategies and embracing market segmentation as more effective strategy to reach various market segments in broad product market. For example, Hindustan Lever Ltd (HLL), one of the most admired companies, has developed a number of detergent brands to cater to the needs of various segments in detergent market. This has been done by HLL after it faced stiff competition in the 1970s from a small and lesser known Nirma Chemicals Ltd, in the form of Nirma brand. As a result of Nirma's onslaught HLL came up with an economical brand named Wheel to cater to the needs of middle class and economy conscious detergent buyers. 

Because of these factors and the benefits from the market segmentation most of the companies both in consumer and industrial markets are practicing this strategy. Because of obvious benefits, today not only market segmentation is practiced by the companies manufacturing goods and services but it has also been adopted by retailers. Many marketing experts are of the view that the days of mass marketing have gone and even if some companies are following mass marketing its days are numbered. Therefore, today companies use market segmentation to stay focused rather than scattering their marketing resources. 

IGNOU : M.COM : MCO 6 : UNIT 5 : Q - 2. Briefly discuss various types of organizational market.

 Ans. Types of Organizational Markets 

 There are four types of organizational markets: the industrial market, the reseller market, the government market, and the institutional market.

1. The Industrial Market : It is also called producer or business market. It consists of all the individuals and organizations that buy or acquire goods and services that enter into the production of other products and services that are sold, rented or supplied to others. The major industries making up the organizational market are agriculture, forestry and fisheries; mining; manufacturing; construction; transportation; communication; public utilities; banking; finance, and insurance; distribution; and services. For example, Maruti Udyog purchases large number of raw materials, component parts, machinery, and supplies. After manufacturing different brands of passenger cars it sells to final consumers and organizations. Within the industrial market, customers tend to be larger and fewer than in consumer markets. But even here, great variations are found. First, the number of industrial firms making up the market varies from one (monopsony), to few (oligopsony), to many. Secondly, we can also distinguish between industrial markets made up of only large films, or a few large and many small firms, or only small firms.

2. The Reseller Market : It consists of all the individuals and organizations that acquire goods for the purpose of reselling or renting them to others at a profit. The basic activity of resellers-unlike industrial or business market-is buying products from manufacturing organizations and reselling these products essentially in the same form to the resellers' customers. In economic terms resellers create time, place and possession utilities rather than form utility. Resellers also buy many goods and services for use in operating their businesses-items such as office supplies and equipment, warehouses, materials handling equipment, legal services, and electrical services. In the case of the resellers like small wholesale and retail organizations, buying is done by one or a few individuals. In large reseller's organizations, buying is done by a buying committee made up of experts on demand, supply, and prices. One of the major problems a reseller faces is to determine its unique assortment-the combination of products and services that it will offer to its customers. The wholesaler or retailer can choose any four of the following assortment strategies: 

• Executive Assortment : It represents the line of only one manufacturer. For example, an exclusive show room of cars from a single manufacturer. 
•  Deep Assortment : It represents a given homogenous product family in depth, drawing on many manufacturers products. For example, a TV dealer who keeps many brands of TVs from different manufacturers. 
•  Broad Assortments : They represent a wide range of product lines that still fall within the natural coverage of reseller's type of business. For example, an electronic goods dealer that keeps different electronic goods from various manufacturers. 
•  Scrambled Assortment : It represents many unrelated product families. For example, a grocery store or a super market that keeps thousands of products and brands in different product categories from hundreds of manufacturers, This choice of assortment may be available to a single reseller also. For example, a camera store may decide to sell only Kodak cameras (exclusive assortment), many brands of cameras (deep assortment), cameras, tape recorders, TVs, music systems (broad assortment), and many different products altogether (scrambled assortment). 

c) The Government Market : In most countries, government organizations are a major buyer of goods and services. The government market consists of central, slate, and local governmental units that purchase or rent goods for carrying out the main functions of government. The government market constitutes a huge market potential for many companies. For example, government market buys hundreds of products and services from large number of companies. The governmental agencies buy amazing range of products and services; they buy every thing from toiletries, clothing, furniture, computers, vehicles, and fuel to sculpture, fire engines, weapons, and practically everything. 

Government purchasing processes are different from those in the private sector of the industrial or business market. A unique feature of the government buying is the competitive bidding system. Much government procurement, by law, must be done on a bid basis. That is, the government agency advertises for bids using a standard format called a request for proposal (RFP), or quotation that states specifications for the intended purchase. Then it must accept the lowest bid that meets these specifications. An alternative to this system, the government may sometimes negotiate a purchase contract with an individual supplier. This system is used when government wants to purchase a specialized product that has no comparable products on which to base bidding specifications. In India, most of the government purchases for standard products are based on the rates approved by the Directorate General of Supplies and Disposal (DGS&D). From time to time DGS&D decides the rates of various products and services which are needed by governmental agencies. Despite the vast opportunities available from the government market, many companies are reluctant to sell because they are intimidated by the red tape. 

d) The Institutional Market : This is also known as non-profit organization or "nonbusiness" business market. This market consists of various non-profit institutions other than the government market. This includes: educational institutions (schools, colleges, universities, and research laboratories), hospitals, nursing homes, religious institutions, etc. Many non-profit institutions have low budgets and captive clienteles. For example, many universities, colleges and governmental hospitals work on funds provided by the government and in most of the cases these are limited. Therefore, those companies who wish to sell to this market should keep in mind the inherent budget constraints. 

IGNOU : M.COM : MCO 6 : UNIT 5 : Q - 1. Describe the distinguishing characteristics of organizational market.

 Ans. Characteristics of Organizational Market

After discussing various types of organizational market we now describe briefly the distinguishing - - characteristics of organizational market - which make it different from consumer market. These characteristics are more or less applicable to all types of organizational market, but these are more applicable to industrial or business market. These are: 

Fewer Buyers : Normally organizational buyers are less in number compared with consumers. Therefore, an industrial marketer normally deals with fewer buyers than does the consumer marketer. For instance, if a MRF a leading tyre manufacturing company wants to sell its tyres in the industrial market, it may concentrate on one of the big automobile manufacturing concerns. When the same company wishes to sell tyres to consumers (vehicle owners) it has to contact lakhs of vehicle owners. 

Larger Buyers : Organizational buyers normally require large quantities of goods whereas personal consumers require smaller quantities. Thus industrial buyers are large scale buyers. Even among industrial buyers a few large buyers normally account for most of the purchasing. In such industries as automobiles, telephone, soaps, cigarette, synthetic yarn etc., a few top manufacturers account for more than a substantial part of total production. Such industries account for a major share of 1 raw material bought in the market.

Geographical Concentration : Organizational buyers are mainly concentrated in few places like, Mumbai, Kolkata, Delhi, Chennai, Bangalore, Pune, Hyderabad, etc., whereas consumers are spread throughout the country. For example, most of the companies in textile sector are located in the western belt of India. Because of this geographical concentration of industrial markets, the marketers need not establish distribution network throughout the country. This helps in reducing the cost of distribution. 

 Derived Demand : The demand for industrial goods is ultimately derived from the demand for consumer goods. For instance, Maruti Udyog Ltd. purchases steel and produces cars for the consumer market. If the consumer demand for cars drops, so will the demand for the steel and all the other products used to make cars. Therefore, industrial marketers sometimes promote their products directly to final consumers to increase business demand. For example, Intel Corporation, the largest supplier of computer processors engages in mass media advertising quite often. 

Inelastic Demand : Demand for many industrial goods and services is inelastic and not much affected by price changes, especially in the short run, because producers can not make quick changes in production schedules. For example, footwear manufacturers will not buy much more leather if the prices of leather fall. Nor will they buy less leather if the prices rise unless they can find satisfactory substitutes. In case of price increase of industrial product such as key raw material, the manufacturers will increase the price of the finished product. In this way they pass on the price increase to the ultimate consumers. 

Fluctuating Demand : The demand for industrial goods and services tends to be more volatile than for consumer goods and services. This is especially true of the demand for new plant and equipment. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for necessary plant and equipment to produce the additional quantity in order to meet the increased demand. Economists refer to this as the acceleration principle. 

Professional Purchasing : Most of the organizations have professionally trained personnel in the purchasing division. Goods are purchased by these specialists. There are professional journals which provide information for the benefit of these professional buyers. Consumers, on the other hand are less trained in the art of careful buying. In industrial purchasing, if the buying decision is complex; it is likely that several persons will participate in the decision-making process. Purchase committee comprising experts and top management are common in the purchase of major goods. In addition to this, many of the buying instruments-such as purchase contracts-are not found in consumer buying.

Close Supplier-Customer Relationship : With the smaller customer base and the importance and power of the larger customers, industrial sellers are frequently required to customize their offerings, practices, and performance to meet the needs of individual customers. 

 Multiple Buying Influences : More people typically influence business buying decisions. Buying committees are common in the purchase of major goods; marketers have to send well trained and experienced sales people and often sales teams to deal with these well-trained buyers.

Multiple Sales Calls : With the more people involved in the process, the sales representatives or sales teams from the industrial supplier are required to call many times before getting an order from an industrial buyer. A long period, ranging from a few weeks to few months is required to get an order for major capital equipment from an industrial buyer. 

Direct Purchasing : Organizational buyers particularly business buyers often buy directly from manufacturers rather than through intermediaries, especially products that are technically coinplex or expensive. 

 Reciprocity : Organizational buyers often select suppliers who also in turn buy from them. For example a paper manufacturer who buys chemicals from a chemical company that is buying a considerable quantity of its paper. Even in this reciprocal buying situation the buyer will make sure to get the supplies at a competitive price, of proper quality and service. 

 Leasing : In case of major and expensive equipment many industrial buyers lease rather than buy in order to conserve funds, get the latest products, receive better service, and gain tax advantages. The lessor often makes more profit and sells to customers who could not afford outright purchase of equipment, There are certain income tax benefits according to Indian Income Tax Act given to both lessor and leasee.

IGNOU : M.COM : MCO 6 : UNIT 4 : Q - 5. Explain various cultural factors which influence buyer behaviour.

 

Ans. Cultural Factors

Cultural Factors exert the broadest and deepest influence on buyer behaviour. The marketers need to understand the roles played by the buyer's culture, sub-culture and the social class Let us learn these factors in detail. Culture: Culture is that complex whole which includes knowledge, belief, art, law, morals, customs, and any other capabilities and habits acquired by humans as a member of society. In the context of buyer behaviour we may define culture as the Buyer Behaviour sum total of learned beliefs, values, and customs that serve to direct the buyer Sehaviour of members of a particular society. It is the most basic cause of a person's wants and behaviour. Human behaviour is largely learned. Growing up in a society, a child learns basic values, perceptions, wants and behaviour from the family and other important institutions.

Marketing managers must understand both the existing cultural values and the emerging cultural values of the societies they serve. They must always try to spot cultural shifts in order to imagine new products that might be wanted. Some cultural trends affecting the buying behaviour of Indian consumers include the following :

·       Gender roles are losing their identity

·       Greater concern about health and fitness (has created a huge industry for exercise equipment and clothing, low calorie foods, health and fitness services).

·       There has been a shift toward informality (it has resulted in more demand for casual clothing, sports shoes, lighter entertainment etc.)

·       There is an increased desire for leisure time (it has resulted in more demand for convenience products and services such as microwave ovens, fast food etc.)

·       In metros, two-income families are becoming the norm (some view it as a necessity to achieve a reasonable standard of living; this is also bound to affect their ability to buy, choice of products, time available for purchase and consumption)

Sub-culture : In any society as heterogeneous as the one in India, there are bound to be subcultures. Subcultures are groups in a culture that exhibit characteristic behaviour patterns sufficient to distinguish them from other groups within the same culture. The behaviour patterns that distinguish subcultures are based on factors such as race, nationality, religion and urban-rural identification. A subculture takes on importance in marketing if it constitutes a significant part of the population and specific purchasing patterns can be traced to it. Each subculture has different attitudes, beliefs, customs and languages that must be taken into consideration by the firms attempting to sell to them.

Social Class : Social class is a ranking within a society determined by the members of the society. Social classes are relatively permanent and ordered divisions in a society whose member share similar values, interests, and behaviours. Social class is not determined by a single factor such as. income but is measured as a combination of occupation, income, education, wealth, and other variables. The lilies between social classes are normally not fixed and rigid; people belonging to one social class call move to a higher class or lower class. Marketers are interested in social class because the buying behaviour of people is strongly influenced by the class to which they belong or which they aspire. Social class is not an indication of spending capability; rather it is an indication of preferences and life-style. For example, a young manager might be having the same income as that of a middle aged foreman in a steel factory, but they probably have quite different family backgrounds, tastes, and aspirations.

a)     The Upper Class : People who are in the top strata of the society. This class includes two groups: (1) socially prominent "old families," often with inherited wealth, and (2) newly rich corporate executives, owners of large businesses, and highly-paid professionals. They live in large houses in exclusive neighbourhoods and exhibit a sense of social responsibility. The upper class patronizes exclusive and fancy shops. They go for expensive goods and services, but they do not display their wealth in a conspicuous manner. They form a very small part of the society. In terms of percentage they may range between 2 to 3 percent.

b)     The Upper-middle Class : This class comprises moderately successful businessmen, professionals and owners of medium to small size companies. People belonging to this class are well educated, and they crave for success in life. They may engage in conspicuous consumption as compared to upper class. This class buys products that signifies its class status. In terms of percentage they may range between 12 to 15 percent.

c)      The Lower-middle Class : This class comprises office employees-both government and private, junior executives, teachers, technicians, and small business owners. People from this class crave for respectability by engaging in those activities, which are approved by the society as "right things". They are future oriented, strive to move up in the next higher social class, exhibit self confidence, and are risk takers. In terms of percentage they may range between 30 to 40 percent.

d)     The Upper-lower Class : People in this class are blue-collar workers, semi skilled workers, and lower grade service personnel such as clerks etc. they are more tied with their families and male female roles are sharply defined. They live in smaller houses. They patronize products keeping an eye on economy aspect of purchase. In terms of percentage they may range between 30 to 35 percent.

e)     The Lower-lower Class : They belong to the lowest strata of the society. 'This class includes unskilled workers, the unemployed, uneducated and low-income earners. They live in substandard houses. Their priority is to purchase only essential things. They are not in the position of purchasing durable products. In terms of percentage they may range between 20 to 25 percent. In some developing and poor countries their percentage may go up to 40 percent.

The conclusions from social class research are:

·       There are substantial differences among these classes with respect to buying behaviour.

·       Because of this diversity, different social classes are likely to respond differently to a seller's marketing program. Thus it may be necessary to tailor marketing programs, which are in tune with the characteristics of a specific social class.

 

 

IGNOU : M.COM : MCO 6 : UNIT 4 : Q - 4. Why are social factors important for understanding buyer behaviour? Discuss various social factors which influence the buyer behaviour.

 Ans.

Social Factors

In addition to psychological and personal factors, buyer behaviour is influenced by social factors. These social factors influence the buyers in different ways. For some products the influence of social factors is quite pronounced and for others it may not be that pronounced. Important social factors which have certain bearings on buyer behaviour are : reference groups, family, and social roles and statuses. Let us learn them.

Reference Groups : A reference group is any person or group that serves as a point of comparison (or reference) for an individual in forming either general or specific values, attitudes, or behaviouc From the buyer behaviour perspective, reference groups are groups that serve as frames of reference for individuals in their purchase or consumption decisions. This may consist of all the groups that have a direct (face[1]to-face) or indirect influence on the person's attitudes or behaviour.

Reference groups can be classified in terms of a person's membership or degree of involvement with the group, as well as in terms of the positive or negative influences they have on his or her values, attitudes, and behaviour. These groups are as follows:

a) A contractual Group : This is a group in which a person holds membership or has regular face-to-face contact and of whose values, attitudes, and standards he or she approves. Thus, a contractual group is likely to have a congruent intluence on an individual's attitudes or behaviour. This group includes friends, family members, neighbours, and company-workers.

b) An aspirational Group : In this group, a person does not hold membership and does not have face-to-face contact but wants to be a member. Thus, it often serves as positive influence on that attitudes or behaviour. Young people would like to be associated as well as like to emulate sports heroes, movie stars, prominent personalities etc. for them these work as aspirationalgroups.

c) A disclaimant Group : In this group, a person holds membership or has face[1]to-face contact but disapproves the group's values, attitudes or behaviour. Thus, the person tends to adopt attitudes and behaviour that are in opposition to the norms of the group. For example, neighborhood friends who have been dropped out of school.

d) An avoidance Group : In this group, a person does not hold membership and does not have face-to-face contact and of whose values, attitudes, and behaviours he or she disapproves. Thus, the person tends to adopt attitudes and behaviour that are in opposition to those of the group. For example, one may vocally reject the actions of those peers who do not demonstrate adequate respect for their parents and religion.

Family : A family is a group of two or more people related by blood, marriage, or atloption living together in a household. Because of strong bond and close continuous interaction family members may strongly influence buyer behaviour. During their lives many people belong to at least two types of families:

b) Family of Orientation : The buyer's parents make up the family of orientation: Even if the buyer no longer interacts very much with his or her parents, the parents can still significantly influence the buyer's unconscious behaviour. In countries like India where parents continue to live with their children; their influence can be profound.

Family of Procreation : It consists of the buyer, his/her spouse and children. It exerts a more direct influence on everyday buying behavior. The family is the most important consumer buying organization in society, and it has been researched extensively. Marketers are especially interested the relative roles and influence of husband, wife, and children on the purchase of a large variety of products and services. Research has shown that husband-wife involvement varies significantly across different product categories and the stage in the buying process. Marketers have acknowledged the role of family in general and involvement of husband-wife dyad in the purchase decision-making process in particular. However, one of the trickiest problems for marketers is to figure out who makes purchase decisions for a household. The problem being that there is rarely consensus among couples themselves. The information about who influences the purchase decision within a family setup serves as the basic input in designing the marketing communication and subsequently in media selection.

Research on family-member influence in durable goods buying is more abundant than that on frequently purchased items. Even a casual observer would probably agree that important, one-time purchases are likely to involve more than one household member. In contrast to non-durables, purchases of durable goods are often preceded by a progression of interrelated decisions and activities through time. Husbands, wives, and children have more opportunities to become involved at one or more steps in the process. One can presume that family members are also more motivated to participate, since the purchase of an automobile, for example, often precludes other acquisitions, given families' budget constraints.

Roles and Status : In life a person performs various roles and may belong to many groups such as family, clubs and work environment. The person's position can be defined in terms of both role and status. A role is a prescribed pattern-of behaviour expected of a person in a given situation by virtue of the person's position in that situation. Each role carries a status reflecting the general esteem given to it by society. For example the role of a product manager has more status in a society than the role of a son. As a product manager, a consumer will buy the kind of clothing that reflects his role and status. People often choose products that show their status in a society.

IGNOU : M.COM : MCO 6 : UNIT 4 : Q - 3. How do perception and learning influence the buyer behaviour ? Elaborate with the help of suitable examples.

Ans. Perception : Another important psychological factor, which may influence the consumers, is perception. How a motivated person acts depends on his or her perception of the prevailing situation. It has been found quite often that two people with the same level of motivation and in the same situation act differently because of differing perceptions. For example a consumer who visits a superstore for the purpose of purchasing a colour television, on being confronted with an over enthusiastic salesperson may consider this sales person as being too pushy without understanding his needs. Another consumer may perceive the same salesperson as being genuine and sincere. This happens because the difference in the perception of the salesperson by the two consumers.

Why do people have different perceptions of the same situation? The answer is that people learn by the flow of information through their five sense organs. However, they receive, organize and interpret this sensory information according to their prior experiences in an individual way. We may define perception as a process through which individuals select, organize, and interpret information into a meaningful and coherent picture of the world. Perception is an individual process; it depends on internal factors such as a person's beliefs, experiences, needs, moods, and expectations. The perception process is also influenced by the characteristics of a stimulus (such as its size, colour, and intensity) and the context in which it is received.

Learning : Learning involves changes in an individual's behaviour arising from observation and experience. Learning plays an important role at every stage of the buying decision process. No universally workable and acceptable learning theory has emerged. However, from marketing perspective consumer learning can be thought of as the process by which individuals acquire purchase and consumption knowledge and experience that they apply to future purchase related behaviour.

Despite their different viewpoints, learning experts in general agree that for occurring learning, certain basic elements must be present. Four basic elements that are fundamental to learning process are:

Drives : A drive is a strong internal stimulus that calls for action. A drive becomes a inotive when it is directed toward a particular stimulus.

Cues : Are minor stimuli or signals from the environment that determine the pattern of response. Cues are the stimuli that give direction to the drives. For example an advertisement of a brand of soft drink may serve as a cue for those who are feeling thirsty. Cues serve to direct consumer drives when they are consistent with consumer expectations. Therefore, it is necessary for the marketers to provide only those cues, which are in tune with the consumer expectations.

Response : How individuals react to drives and configuration of cues-how they behave-constitute their response. It is the behavioural reactions to the drives and cues. Learning can occur even when responses are not overt. Many cues may lead to the formation of positive attitudes and in future these attitudes may lead to behaviour.

Reinforcement : This results when the response is rewarding. Reinforcement can be either positive or negative. For example, if a consumer purchases a specific brand and he finds it satisfying and next time he needs that product there is likelihood that he may purchase the same brand. The response has been reinforced. In addition the same consumer may develop a positive attitude towards other brands manufactured by the same company. In case the response is not rewarding, then the consumer may not purchase the brand and may develop negative feelings towards other products manufactured by that company.

IGNOU : M.COM : MCO 6 : UNIT 4 : Q - 2. Describe Maslow's hierarchy of need theory. Discuss its significance for understanding the buyer behaviour.

 Ans. Maslow's Hierarchy of Need Theory of Motivation : Abraham Maslow tried to explain that people have hierarchy of needs at particular time, which they want to satisfy. According to him the most pressing human needs are required to be satisfied first and the least pressing are at the last. In terms of hierarchy they may be arranged as 1) physiological needs, 2) safety needs, 3) social needs, 4) esteem needs, and 5) self-actualization needs.

Maslow's Hierarchy of needs theory is based on the following premises:

•  All human beings acquire a similar set of needs through genetic endowment and social interaction. Social Factors Reference groups, Family, and Roles and statuses.
• Some needs are more basic or critical than others.

The more basic needs must be satisfied to a minimum level before other needs are activated. 

As the basic needs become satisfied, more advanced needs come into play.

• These needs can be arranged in a hierarchy.

Let us take an example to explain this theory in the context of buyer behavior : Suppose a consumer is interested in buying digital video camera. We may presume that this consumer has satisfied his physiological, safety, and social needs and his interest in buying digital video camera might come from a strong need for fulfilling esteem needs or it might have come from satisfying self-actualization need he wants to be a creative person to show his talent in photography.

Maslow's theory is a good guide to general behaviour. It is important to remember that any given consumption behaviour can satisfy more than one need. Likewise, the same consumption behaviour can satisfy different needs at different times.

The major problem with Maslow's theory is that it can not be tested empirically; there is no way to measure precisely how satisfied one need must be before the next higher need becomes operative. But despite the criticisms Maslow's hierarchy is a useful tool for understanding consumer motivations and is a readily adaptable to marketing strategy, primarily because consumer goods often serve to satisfy each of the need levels. This hierarchy offers a useful, comprehensive framework for marketers trying to develop appropriate advertising appeals for their products.

IGNOU : M.COM : MCO 6 : UNIT 4 : Q - 1. What do you mean by buyer behaviour? Why is understanding of buyer behaviour important for marketers

 Ans. Various experts have defined buyer/Consumer behaviour differently. According to Schiffman and Kanuk consumer behaviour is the behaviour that buyers or consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs. Moven has defined it as the study of decision- making units arid the process involved in acquiring, consuming, and disposing of goods, services, experiences, and ideas.

IMPORTANCE OF UNDERSTANDING BUYER BEHAVIOUR

All marketing strategies and tactics are based on explicit or implicit beliefs about buyer behaviour. The study of buyers helps firms and organizations improve their marketing strategies by understanding issues such as:

• How buyers think, feel, reason, and select between different alternatives (e.g., brands, products)? Buyer Behaviour.
• How is the buyer influenced by his or her environment (e.g., culture, family, signs, and media)? 
• Helps in understanding the behaviour buyers display while shopping or making other marketing decisions.
• How buyer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the buyer; and
• How marketers can improve their promotional campaigns and marketing strategies to target the buyer more effectively'? 

There are four main applications of buyer behavior which are discussed below: 

• The most obvious is for marketing strategy-i.e., for making better marketing decisions. For example, by understanding that buyers are more receptive to food advertising when they are hungry, we learn to schedule snack advertisements late in the afternoon. 
• A second application is public policy. In the 1980s, when Accutane, a near miracle cure for acne, resulted in severe birth defects in pregnant women, Federal Drug Administration (FDA) of US took the step of requiring that very graphic pictures of deformed babies be shown on the medicine containers.
• Social marketing involves getting ideas across to buyers rather than selling something. Understanding buyer behaviour will help in espousing for social causes such as planned families, prohibition, equality of girl child etc. Government agencies with the help of buyer behaviour knowledge may develop appropriate promotional strategies for greater acceptance of social causes. 
• As a final benefit, studying buyer behaviour should make us better buyers. Common sense suggests, for example, that if you buy a 200 ml liquid bottle of laundry detergent, you should pay less per ml than if you bought two 100 ml bottles. In practice, however, you often pay a size premium by buying the larger quantity. In other words, in this case, knowing this fact will sensitize you to the need to check the unit cost labels to determine if you are really getting a bargain.

In today's world of high technology, buyer tastes are also changing rapidly. To survive in such a rapidly changing market, a firm has to constantly understand the latest consumer trends and tastes. Buyer behaviour provides invaluable clues and guidelines to marketers on new technological frontiers which they should explore. For example, let us consider the advent of colour television in India. When we switched over from black and white transmission to colour transmission in the early eighties, the buyers exhibited a desire to purchase colour TVs for closer-to-life picture viewing.

IGNOU : M.COM : MCO 6 : UNIT 3 : Q - 4. What is marketing research ? How does it differ from marketing information system?

 Ans. American Marketing Association (AMA) which is considered to be the leading body of marketing professionals and academicians in the world. Earlier, AMA had defined marketing research as "the systematic gathering, recording and analyzing of data about problems related to the marketing of goods and services".

"Marketing research is the [unction which links the consumer, customer, and public to the marketer through information information used to identify and define marketing opportunities and problems: generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. 

 Marketing research specifies the information required to address these issues: designs the method for collecting information; manages and implements the data collection process; analyses the results; and communicates the findings and their implications."

These definitions clearly point to the following three key characteristics of marketing research which enable us to differentiate it from other components of marketing information system

a) Marketing research is a systematic process of data collection. By the term 'systematic' we mean that marketing research is a formal and planned process. It is decided beforehand as to what the marketing problem is and what information is required to be collected to solve the given marketing problem. It is also decided in advance as to which methods will be used to collect the desired information and from which sources. 

b) Objectivity in data collection and analysis is the second important characteristic feature of marketing research. The marketing researcher does his or her best lo ensure that the information being collected is free from personal biases and prejudices. Those data collection methods and sources are used which appeal- to be relatively more objective and reliable.

c) The other major characteristic of marketing research is its clear cut focus on a given marketing problem. This is quite in contrast to internal reporting and marketing intelligence systems where information of general nature is collected without any specific problem in mind. For instance, while going through the monthly sales report or talking to a salesman, one might come to know that some products are not doing well in the market. This insight though useful is not a part of marketing research as it has not been collected purposively in a formal manner. The management has come to know of this development just by chance while casually glancing over the monthly sales report or talking to salesman in a routine manner.

IGNOU : M.COM : MCO 6 : UNIT 3 : Q - 3. What considerations one should keeping mind while designing a marketing information system for a firm?

Ans.  DEVELOPING AN EFFECTIVE MA TING INFO ION SYSTEM

To be useful to the marketing managers, it is imperative that the marketing information system be carefully designed and set up in the organization. A system developed haphazardly 01. copied blindly form other organizations might prove to be a drag on the company resources. The following steps can be helpful in developing an effective marketing information system : 

1) Determining Decision Makers' Information Requirements : The first and foremost step in designing an efficient and effective marketing information system is to ascertain information needs of the decision makers. The system should be so designed that it is able to timely and efficiently supply the information required by the managers in decision making. A marketing information system should be able to supply the information for making both the strategic and tactical decisions. Strategic decisions are the decisions which have long term implications and entail major investments. Whether to enter into a given market or not, which market segments in the given market to be targeted and what positioning strategy should be used are examples of strategic decisions. The tactical marketing decisions, on the other hand, are the decisions having short term implications and are made at the lower levels of management. Should a company react to changes in price by the competitors, and, if yes, by what amount; what distribution mode to adopt to deliver the goods to a particular customer by a stipulated date, etc. are the decisions which come under the category of tactical decisions.

The determination of information needs of the managers is a delicate task and should be handled with utmost care. Supply of more information is as dysfunctional as is the provision of less than sufficient information for effective decision making. 

2) Establishing Data Collection and Storing Procedures : Elaborate procedures should be laid down to ensure timely and efficient collection, processing and storage of information in the organization. In the absence of such procedures and guidelines, either right type of data might not be gathered or else these might not be properly processed and stored to be of any use to the decision makers. There should also be a clearly laid down provision for periodically updating the data so as to keep the management abreast of latest developments in the market. 

3) Determining Procedures for Information Utilization : Procedures are also required in respect of the analysis and usage of the collected marketing information in the organization. Marketing managers should be well aware of what information is available in the organization and how they can use the same in decision making. Steps must be taken to ensure that the information is timely supplied to the managers as and when the require it. The decision makers should be made familiar with the procedure used in data collection and processing stages so that they can assess the extent to which they can rely upon the information. The system should be so designed that it is user friendly and, if required, managers on their own should be able to retrieve and make use of the stored information.

4) Proper Linkages among Components of Marketing Information System : Each of the four components or sub-systems of the marketing information system, viz., internal reporting system, marketing intelligence system, marketing research system and analytical marketing system, should be properly linked with each other and their should be utmost coordination among them to ensure attainment of the common end, i.e., provision of timely and reliable information to the marketing decision makers. In a nutshell, what the company should strive for is an integrated marketing information system.

5) Efficient, Reliable and Flexible System : A good marketing system is one that is able to provide quickly and reliable information to the decision makers at the minimum possible costs to the company. Furthermore, the marketing information should be so designed that it is capable of coping with the changing marketing environment and informational requirements of the decision makers in the organization.

In brief, a good marketing information system is one that is user oriented. It should be able to meet the managers' current as well as future information needs. Both the operating and supporting systems should be installed as capable of supplying information required for day to day decision making as well as for strategic marketing analysis and planning.

IGNOU : M.COM : MCO 6 : UNIT 3 : Q - 2. What is marketing information system? What are its major components?

 Ans. Marketing Information System

Marketing information system can be defined as a set of procedures and methods for the regular and planned collection, analysis and presentation of information for use in making marketing decisions. As a set of procedures and methods, marketing information system ensures timely collection and supply of objective, reliable and valid information to the marketing managers on a regular basis to enable them to make informed decisions. Marketing information system is an elaborate system that comprises of various subsystems used by an organization for collecting, processing and storing information required from time to time by the marketing managers.

Components of Marketing Information System 

The four components are : internal reporting system, marketing intelligence system, marketing research system and analytical marketing system. These are discussed in detail in the following paragraphs.

a) Internal Reporting System : Every company has a system of reporting events and decisions within the organization. This is known as internal reporting system. The internal reporting system supplies management with variety of information, including the ones related to marketing operations and decisions. The internal reporting system basically disseminates result data such as orders received, sales made, inventory levels, accounts receivables and bills payables. The system enables the marketing managers to know as to which one of its products and brands are selling well in which markets and in which seasons. All this information can be very useful to the managers in deciding as to in which product lines and markets to invest more, and from which product lines and markets the firm should divest. The system can be extremely useful to the marketing managers if it is able to provide all such information quickly and accurately. 

b) Marketing Intelligence System : It supplies the management with the happening data. Marketing intelligence system refers to informal search of information on a continuous basis from various sources - both internal and external to the organization. Managers, for example, can gather valuable information by talking to different executives working in the company, company sales force, dealers, wholesalers, retailers, customers and other participants in the market.

Observation of events as and when they occur in the market is an important way of collecting the market information. Just walking around the market place and observing what products are displayed in the window displays and shelves in the retail stores, which types of people are buying which types of products/brands and how competitors are advertising and promoting their products in the market can provide valuable insights to the marketing managers in devising their marketing strategies.

c) Marketing Research System : While the other two systems discussed above provide information of general nature to the marketing managers, marketing research system aims at collecting and disseminating information relating to a specific marketing problem faced by the decision makers of the firm. First a formal plan is developed to decide as to which specific information is needed and then this information is collected from such specific secondary and primary data sources as can supply the required information at minimum costs to the firm.

Though marketing intelligence system appears quite similar to marketing research system, the two systems are different from each other. While marketing intelligence system collects information of general nature on a regular basis, marketing research system is employed for gathering specific information as required to solve a specific marketing problem. The other major point of difference between the two subsystems is that while the former collects information more on a regular basis through ways such as daily reading of newspapers or frequently visiting the marketplace to observe retailers and competitors behaviours, marketing research studies are conducted mostly on adhoc basis as and when some a specific marketing problem arises.

d) Analytical Marketing System : It is concerned with building and using marketing models and techniques to analyze the information available with the organization and/or to better understand, predict and control the marketing process. It so happens that the three systems describe above provide so voluminous data to the managers that is not possible for the marketing managers to directly assimilate and use them in decision making. Analytical marketing system comes to a great rescue to the marketing managers by condensing and simplifying the collected data, and presenting them in a form easily understandable to the marketing managers. 

IGNOU : M.COM : MCO 6 : UNIT 3 : Q - 1. What are the different types of information that a marketing manager needs for making marketing decisions?

 Ans. INFORMATION NEEDS IN MARKETING

Marketing information system plays an important role in providing all that information that the marketing managers need in making strategic as well as tactical marketing decisions. Marketing managers need a variety of information so as to be able to discover market opportunities and threats, select target markets, develop suitable marketing mix strategies and periodically evaluate the firm's marketing performance. Exactly what information is needed depends upon the specific marketing management task being faced by the manager Marketing Information and his accumulated experience/knowledge and time frame involved in the decision making and Research. Broadly speaking, a marketing manager faces two broad types of marketing tasks: (1) market opportunity/threat analysis, and (2) search for causes/alternatives, for making marketing decisions.

1. Market Opportunity /Threat Analysis The first task relates to market opportunity/threat analysis. This is accomplished by undertaking either situation analysis or company performance analysis. Situation analysis involves a detailed analysis of various components of company's marketing environment. The information needed by the marketing manager to understand marketing environment is as follows: 

• Demographic environment : Population size and growth rate, gender ratio, age structure, population density and mobility.
• Competitive environment : Extent and nature of competition in the market. 
• Support environment : Availability, quality and cost of power, labour, raw materials, components and machines; quality and costs of advertising and research services, availability and costs of middlemen, etc.
• Economic environment : GNP and per capita income; interest rate; inflation; economic and commercial policies.
• Technological environment : Level and cost of technology adoption.
• Socio-cultural environment : Religions, languages, education levels, aesthetics, beliefs and attitudes, lifestyles and business customs. 
• Political and legal environment : Ideology of different political parties, stability of government, various marketing legislations. 

Most of this information is usually collected from the external secondary data sources.

The other kind of analysis undertaken to understand market opportunities/threats is referred to as company performance analysis. By undertaking an analysis of the company's past performance, a manager is able to identify products/brands and market segments where company is doing well, and as such constitute opportunities for the company for further growth and investments. Product lines or market segments where company is not performing well or where company is witnessing constant decline in its sales/profits represent areas of threats and concerns for the company. For undertaking such an analysis, a marketing manager requires sales and marketing expenses data for the company as well as for the industry as a whole. For an effective analysis, overall sales and marketing expenses figures alone are not sufficient. What is required is product-, brand-, area- and period-wise breakup of the company and industry sales and marketing expenses. Most of this information is collected from the company's accounting records and the trade and industry publications. 

2. Search for Causes or Alternatives 

The other kind of managerial task faced by a marketing manager relates to search for causes or alternatives pertaining to a marketing problem. In case a marketing manager finds a product not performing as per the companies expectations, he needs information about possible causes of poor product performance in the market. Since the reasons might relate to short term as well as long term factors, and might have their origin in price and non-price factors such as product quality, image, promotion or distribution; a marketing manager needs detailed information on all such aspects before he car1 be sue as to what exactly are the factors responsible for poor product performance. In a similar vein, a marketing manager requires information from a variety of sources such as customers, retailers/distributors, salesman and competitors to identify possible alternatives for improving the product acceptance and sales in the market. The information needed in this connection is generally collected from the secondary as well as primary data sources both internal and external to the company.

Once the marketing manager knows as to what reasons are responsible for poor performance of a product in the market and what alternatives exist to improve the company sales in future, he needs to make a final decision about the specific course of action to be taken among several alternatives. To be able to make a final decision, marketing manager requires information about the possible costs and outcomes associated with each of the identified alternatives along with the information about uncertainties associated with each outcome. Most of this information is collected first hand from the sources internal and external to the organization. 

IGNOU : M.COM : MCO 6 : UNIT 2 : Q - 2. How do environmental factors affect marketing policies and strategies ?

Ans. You have studied that the marketing environment of a company comprises a variety of forces. Most of these forces are external to the company and may not be controllable by the marketing executives of the company. So the marketing system of the company has to operate within the framework of these ever changing environmental forces. This uncertain marketing environment offers both opportunities, and shocks and threats. Therefore, it is necessary for a company to scan the changing environment continuously, and change the marketing mix strategies in accordance with the trends and developments in the marketing environment.

The company responds to these environmental factors and forces by its policies depending on its own capabilities particularly the finance, sales force and technical facilities. Among all these environmental factors, some of them may be controllable by the organization to some extent, and others may be uncontrollable. Macro environmental factors are totally uncontrollable by the firm whereas micro environmental factors may be controlled to some extent. For instance, organization's internal environment can be controlled by the firm to a large extent. Similarly, the firm can exert some influence on suppliers, dealers and distributors by offering liberal terms. And through its advertising effort, a firm can influence the perspective and present consumers.

Each aspect of the environment has some relevance in marketing. It is easy to imagine how various environmental factors affect the demand and supply, the distribution and promotional policies, etc. For example, with the oil crisis there will be demand for more oil efficient machines. Similarly, the popularity of computers will create demand for more computer operators, voltage stabilizers, etc.

The following benefits of environment scanning have been suggested by various authorities -

• It creates an increased general awareness of environmental changes on the part of management. 
• It guides with greater effectiveness in matters relating to Government. 
• It helps in marketing analysis. 
• It suggests improvements in diversification and resource allocations. 
•  It helps firms to identify and capitalize upon opportunities rather than losing out to competitors.
• It provides a base of 'objective qualitative information' about the business environment that can subsequently be of value of designing the strategies.
• It provides a continuing broad-based education for executives in general, and the strategists in particular.  

IGNOU : M.COM : MCO 6 : UNIT 2 : Q- 1. What is marketing environment ? Describe the macro environment and micro environment of marketing.

 Ans. Marketing Environment -Marketing activities are influenced by several factors inside and outside a business firm. These factors or forces influencing marketing decision making are collectively called marketing environment. It comprises all those forces which have an impact on market and marketing efforts of the enterprise. According to Philip Kotler, marketing environment refers to "external factors and forces that affect the company's ability to develop and maintain successful transactions and relationships with its target customers." For example, the relevant environment to a car tyre manufacturer may be the car manufacturers and buyers, the tyre manufacturing technology, the tax structure, imports and export regulations, the distributors, dealers, competitors, etc. In addition to these, the company may have to consider its internal environment in terms of Finance, Purchasing, Accounting, Manufacturing Technology, R&D. Top Management, etc. However, this internal environment is controllable to a large extent. The external environment becomes important due to the fact that it is changing and there is uncertainty. Most of these external environmental factors are uncontrollable. There is both a threat and opportunity in these changes.

Micro Environment - Micro environmental factors which influence the marketing decisions of the company are: i) organization's internal environment, ii) suppliers, iii) marketing intermediaries, iv) competitors, and v) consumers. 

Organization's Internal Environment - Organization's financial, production and human resource capabilities influence its marketing decisions to a large extent. For instance, while deciding about the sales targets, it is necessary to see whether the existing production facilities are enough to produce the additional quantities or not. If the existing facilities are not enough and expansion to plant and machinery is required, it is necessary to think about financial capabilities. 

Suppliers - For production of goods or services you require a variety of inputs. The individuals or firms who supply such inputs are called suppliers. Success of the marketing organization depends upon the smooth and continuous supply of inputs in required quantities on reasonable terms. Hence suppliers assume importance. The timely supplies of specified quality and quantity makes the producer to keep up the delivery schedule and the quality of the final product.

Intermediaries - Normally, it is not possible for all the producers to sell their goods or services directly to the consumers. Producers use the services of a number of intermediaries to move their products to the consumers. The dealers and distributors, in other words the marketing intermediaries, may or may not be willing to extend their cooperation. These persons normally prefer well established brands. Newcomers may find it extremely difficult to find a willing dealer to stock his goods. From newcomers they may demand favourable terms by way of discount, credit, etc., and the producer may find it difficult to satisfy them.

Competitors - Competitors pose competition. Competitors' strategies also affect the marketing decisions. Apart from competition on the price factor, there are ,other forms of competition like production differentiation. There are also competitors who use brand name, dealer network, or close substitute products as the focal point. Their advertising may present several real or false attributes of their product. If one advertises that his product has an imported technology, the other may say that he is already exporting his product. Competitor's strategies sometimes may change an opportunity in the environment into a challenge. 

Customers - There are many types of customers. A firm may be selling directly to the ultimate users, the resellers, the industries, the Government or international buyers. It may be selling to any one or all of these customers. Each type of consumer market has certain unique characteristics and the marketer should be fully acquainted with the art of persuading and selling to these consumers. The environment presented by customer profile will have a direct influence on these marketing activities. 

Macro Environment - The macro environmental factors that exert influence on an organization's marketing system are: 1) physical environment, 2) technological environment, 3) political and legal environment, 4) economic environment, 5) demographic environment, and 6) social cultural environment.

Physical Environment - The earth's natural renewable resources (e.g. forest, food products from agriculture, etc.) and finite non-renewable resources (e.g, oil, coal, minerals, etc.), weather (climatic) conditions, landscapes and water resources are components of an environment which quite often change the level and type of resources available to a marketer for his production. For example, India does not have enough petroleum resources, and imports petrol and other products. Recently, the Gulf War drastically affected the supply of petrol and diesel in the country. This had lot of implications for the companies consuming petro-products.  

Technological Environment Technology is shaping the destiny of the people. The revolution in computers, electronics and communication in general may make one's production out of tune with the current products and services. For example, new printing technology like laser printing and desk top publishing, has already made the labour-intensive type-set printing uneconomical.  

Political and Legal Environment - Political changes bring ill new policies and laws relevant to industry. Government regulation continues with different intensities and the law and the rules framed thereunder are becoming complex. Many areas of business are brought under one law Marketing Environment or the other, and the marketer cannot escape from the influence of these laws. The tax laws for example, the sales tax. excise duty, income-tax, etc., have direct bearing on the costs and prices of the products and services marketed.  

Economic Environment - Under economic environment, a marketing manager generally studies the following factors and trends: 

 i) Trends in gross national product and real income growth; 

 ii) Pattern of income distribution; 

 iii) Variations in geographical income distribution and its trends; 

 iv) Expenditure pattern and trends. 

 v) Trends of consumer savings and how consumers like to hold their savings, i.e., either in the form of bank account, investments in bonds arid securities; purchase of real estate, insurance policies, or any other assets;

Demographic Environment - Marketers are keenly interested in the demographic characteristics such as the size of the population, its geographical distribution, density, mobility trends, age distribution, birth rate, death rate, the religious composition, etc. The changing life styles, habits and tastes of the population, have potentials for the marketer to explore. For example, when both husband and wife go for jobs, the demand for gadgets that make house keeping easier and the semi-cooked food products increase.

Socio-Cultural environment - There are core cultural values which are found stable and deep rooted, and hence change very little. There are also secondary cultural values which are susceptible to fast changes. Some of them like hair styles, clothing, etc. just fade. Even in a given culture, the entire population may not adopt the changes. There are different degrees with which people adopt them. Religion is also an important component of culture which has implications for the marketer. For example, Hindus worship the cow and do not eat beef. So the products made out of beef meat do not have demand.