MARKETING MIX AND ENVIRONMENT
THE MARKETING MIX
The major marketing decisions can be classified in one of the following four categories:
• Place (distribution)
These variables are known as the marketing mix or the 4 P’s of marketing. They are the variables that marketing managers can control or manipulate in order to best satisfy customers in the target market.The firm attempts to generate a positive response in the target market by blending these four marketing mix variables in an optimal manner.
The product is the physical good or intangible service offered to the consumer, In the case of physical products, it also refers to any services or conveniences that are part of the offering.
Product decisions include aspects such as function, appearance, packaging, service, branding, etc. The details on product decisions were discussed in chapter 3.
Pricing decisions takes into account profit margins and the probable pricing response of competitors. Pricing includes not only the list price, but also discounts, financing, and other options’ such as leasing. Refer to chapter 8 for details on pricing.
Place (or distribution) decisions are those associated with channels of distribution that serve as the means for getting the product to the target customers. The distribution system performs transactional, logistical, and facilitating functions. Distribution decisions include market coverage, channel member selection, logistics, and levels of service.
Promotion decisions are those related to communicating and selling to potential consumers. It involves creating awareness of the company and its products. Promotion decisions include advertising, public relations, sales promotion, etc. The details on promotion can be found in chapter 9 of this book.
Marketing Mix for Services
Services are intangible products such as legal, medical, barbing services, etc. The characteristics of service products mean they must be marketed in a somewhat different way from intangible products.
Philip Kotler argues that traditional ‘4 ps’ marketing approaches often work well for physical products but additional elements are required in service businesses. Similarly service marketing experts agree that the traditional marketing mix of the ‘4 ps’ needs to be extended to 7 Ps. These three additional Ps are ‘people’, physical evidence’ and process’. For example, if you walk into a banking hall and the staffs you see are shabbily dressed (people), the environment is not tidy (physical evidence), and the service is very slow (process); all these signs may suggest distress. The bank will seem healthy if your experience is opposite.
THE MARKETING ENVIRONMENT
The marketing environment is made up of all the things that affect the way a firm operates. Some of the factors in a firm’s marketing environment can be controlled by the firm but some are uncontrollable. Firms need to understand their marketing environment so that they can take advantage of positive factors and manage the impact of negative factors. A firm’s marketing environment can be split into three: internal environment, micro environment and macro environment.
The internal environment is made up of factors within the firm itself. Examples include employees, and other factors of production like machine, money, and materials. These factors can be controlled by the firm, for example, if employees embark on strike action because of poor salary, management can decide to negotiate and adjust salary in order to solve the problem.
The micro environment is made of factors close to a business that have direct impact on its business operations and success. Before making decisions, organisations should carry out a full analysis of their micro environment. The common micro environment factors are: customers, employees, suppliers, shareholders, media, and competitors.
Customers – All businesses need customers to survive and therefore they should do everything possible to satisfy them. The firm’s marketing plan should aim to attract and retain customers through products that meet their “needs and wants” as well as excellent customer service.
Distributors – Wholesalers, retailers, agents and brokers play important role in getting the goods to the consumers. Most of them also promote the products of the firm significantly. Organisations should ensure that their distributors are motivated.
Suppliers – Suppliers provide organisations with the materials they need to carry out their business activities. A supplier’s behaviour will directly impact the business it supplies. For example if a supplier provides a poor service this could increase timescales or affect product quality. An increase in raw material prices will affect an organization’s marketing mix strategy and may even force price increases. Close supplier relationships are an effective way to remain competitive and secure quality products.
Shareholders – In small businesses this factor may not apply because there may not be other people who invested money in the company. But as organisations require investment to grow, they may decide to raise money by floating on the stock market i.e. move from private to public ownership. The introduction of public shareholders brings new pressures as they want a return from the money they have invested in the company. Shareholders pressure to increase profits will affect organisational strategy. Relationship with shareholders needs to be managed carefull; so as to avoid things like untimely withdrawal of investments.
Media – Organisations need to manage the media (radio, television, newspapers, etc.) so that the media will help to promote the positive things about the organisation and reduce the impact of negative comments that could affect their reputation.
Competitors – The competitive environment affects the number and types of competitors the marketing manager must face, and how they may behave. Although marketing managers usually cannot control these factors, they can choose strategies that avoid head-on competition. And where competition is inevitable, they can plan for it. Competitor analysis and monitoring is crucial if an organization is to maintain or improve its position within the market.
Macro (External) Marketing Environment
The macro or external marketing environment takes into account all external factors that can influence an organisation, but are outside their control.
FACTORS AFFECTING THE MACRO MARKETING
There are six major macro marketing environment forces to deal with: political, legal, economic, socio-cultural, technological, and international (PLESTI).
• The political and legal environment includes all laws, government policies, and lobbying groups that influence or restrict individuals or organisations. For example, if government bans the importation of a particular product, like automobiles; those involved in importation will be negatively affected, while local automobile assemblers will benefit.
• The economic environment consists of all factors such as salary levels, credit trends and pricing patterns that affect consumer spending habits and purchasing power. For example, if there is high unemployment in a country, people’s spending power will be low and this will affect all businesses.
• The socio-cultural environment includes institutions and other forces that affect the basic values, behaviours, and preferences of the society all of which have an effect on consumer marketing decisions.
• The technological environment consists of those forces that affect the technology with which can create new products, new markets and new marketing opportunities.
• The international environment also affects an organization in the sense that if there are changes in the laws and government policies in a country where a firm does business, for example, increase in tariffs, it will affect its operations.
Marketing environments are continuously changing and businesses operating in such turbulent environments need to be flexible. Globalization and lower barriers to entry now mean that there are even greater threats of substitute products and new entrants to the markets.
Even though the marketer has no direct control over the macro external environment, a greater understanding and awareness of these changing market conditions can be achieved through external analysis. External analysis will help identify future events, uncover possible threats and realise potential opportunities. This can be done through environmental scanning and management.
Environmental Scanning and Management
It is crucial for marketers to continuously monitor trends and developments in the business environment. Environmental scanning is the process of collecting information about the external marketing environment in order to identify and interpret potential trends. The goal is to analyse the information and determine whether these trends represent opportunities or threats to the company. This in turn allows a firm to determine the best response to a particular environmental change.
Environmental scanning is a vital component of effective environmental management. Environmental Management is the attainment of organisational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social-Rural environments. This influence can result from a number of activities by the firm’s mana. Political power in the form of lobbying among legislative groups and contributions by Paction committees (PACs) may result in modifications of regulations, laws, or tariff restrictions.
Marketing decisions generally fall into the following four controllable categories: Product Place (distribution), and Promotion. These four P’s are the parameters that the marketing manager can control, subject to the internal, micro and external constraints of the marketing environment. The goal is to make decisions that center the four P’s on the customers in the target market in order to create perceived value and generate a positive response.
The marketing environment is made up of all of the things that affect the way a firm operates. Some of the factors in a firm’s marketing environment can be controlled by the firm but some are uncontrollable. Firms need to understand their marketing environment so that they can make the most of positive factors and manage the impact of negative factors.