Marketing Environment and market segmentation, Internal and external Factor influence marketing environment, PESTLE

1. Chapter 3

4. The marketing environment refers to all internal and
external factors, which directly or indirectly influence the
organization’s decisions related to marketing activities.
Marketers try to predict the changes, which might take
place in future, by monitoring the marketing environment.
These changes may create threats and opportunities for
the business. With these changes, marketers continue to
modify their strategies and plans.

5. “The Marketing Environment includes the Internal factors
(employees, customers, shareholders, retailers &
distributors, etc.) and the External factors( political, legal,
social, technological, economic) that surround the business
and influence its marketing operations.”

6.  Internal factors are within the control of an
organization;
Organization’s strengths, weaknesses, and
competencies form part of internal factors.
 Whereas, external factors do not fall within its
control.
The external factors include government,
technological, economic, social, and competitive forces;

8. Forces or conditions or surroundings within the boundary
of the organization are the elements of the internal
environment of the organization. The internal
environment generally consists of those elements that
exist within or inside the organization

9. Elements of internal environment are;
1. Owners and Shareholders.
2. Board of Directors.
3. Employees.
4. Organizational Culture.
5. Resources of the Organization.
6. Organization’s image/goodwill.

10. Owners and Shareholders
Owners are people who invested in the company and have
property rights and claims on the organization. Owners
can be an individual or group of persons who started the
company; or who bought a share of the company in the
share market.
They have the right to change the company’s policy at any
time.Owners of an organization may be an individual in
the case of sole proprietorship business, partners in a
partnership firm, shareholders or stockholders in a limited
company or members in a cooperative society. In public
enterprises, the government of the country is the owner.
Whoever the owners, they are an integral part of the
organization’s internal environment. Owners play an
important role in influencing the affairs of the business.

11. Board of Directors
The board of directors is the governing body of the
company who is elected by stockholders, and they are
given the responsibility for overseeing a firm’s top
managers such as the general manager
Employees
Employees or the workforce, the most important element
of an organization’s internal environment, which performs
the tasks of the administration. Individual employees and
also the labor unions they join are important parts of the
internal environment.
If managed properly they can positively change the
organization’s policy. But ill-management of the workforce
could lead to a catastrophic situation for the company.

12. Organizational Culture
Organizational culture is the collective behavior of
members of an organization and the values, visions,
beliefs, habits that they attach to their actions.
An organization’s culture plays a major role in shaping its
success because the culture is an important determinant
of how well their organization will perform
A strong culture helps a firm achieve its goals better than
a firm having a weak culture. Culture in an organization
develops and ‘blossoms’ over many years, starting from the
practices of the founder(s).
Since culture is an important internal environmental
concern for an organization, managers need to understand
its influence on organizational activities.

13. Resources of the Organization
An organization s resources can be discussed under five
broad heads: physical resources, human resources;
financial resources, informational resources, and
technological resources.
Physical resources include land and buildings,
warehouses, all kinds of materials, equipment and
machinery.
Examples are office buildings, computers, furniture, fans,
and air conditioners.
Human resources include all employees of the
organization from the top level to the lowest level of the
organization. Examples are teachers in a university,
marketing executives in a manufacturing company, and
manual workers in a factory.

14. Financial resources include capital used for financing the
operations of the organization including working capital.
Examples are investment by owners, profits, reserve
funds, and revenues received out of a sale.
Informational resources encompass ‘usable data needed to
make effective decisions.
Examples are sales forecasts, price lists from suppliers,
market-related data, employee profile, and production
reports.

15. Organization’s image/goodwill
The reputation of an organization is a very valuable
intangible asset. High reputation or goodwill develops a
favorable image of the organization in the minds of the
public (so to say, in the minds of the customers).
‘No- reputation’ cannot create any positive image. A
negative image destroys the organization’s efforts to
attract customers in a competitive world.

16.  There are some other internal factors
1. Company's mission, vision and businessobjectives
2. Company Culture
3. Company image and Goodwill
4. Marketing Strategy
5. Technical Capacity
6. Managerial Skills and Abilities Structure and Processes
7. Finance and Sales force
8. Production and Research
9. Internal Processes and Procedures
10. Allocation of responsibilities
11. Resource availability
12. Attitude of stakeholders
13. Organisation culture

17. Factors outside or organization are the elements of the
external environment. The organization has no control
over how the external environment elements will shape
up.
The external environment embraces all general
environmental factors and an organization’s specific
industry-related factors.

18. 1. Micro Environment:
Micro environment refers to the environment, which is
closely linked to the organization, and directly affects
organizational activities. It can be divided into supply side
and demand side environment. Supply side environment
includes the suppliers, marketing intermediaries, and
competitors who offer raw materials or supply products.
On the other hand, demand side environment includes
customers who consume products

19. i. Suppliers:
It provides raw material to produce goods and services.
Suppliers can influence the profit of an organization
because the price of raw material determines the final price
of the product. Organizations need to monitor suppliers on
a regular basis to know the supply shortages and change in
the price of inputs.

20. ii. Marketing Intermediaries:
It helps organizations in establishing a link with
customers. They help in promoting, selling, and
distributing products.
Marketing intermediaries include the following:
a. Resellers:
It purchases the products from the organizations and sell to
the customers. Examples of resellers are wholesalers and
retailers.
b. Distribution Centers:
It helps organizations to store the goods. A warehouse is an
example of distribution center.

21. c. Marketing Agencies:
It promotes the organization’s products by making the
customers aware about benefits of products. An advertising
agency is an example of marketing agency.
d. Financial Intermediaries:
It provides finance for the business transactions. Examples
of financial intermediaries are banks, credit organizations,
and insurance organizations

22. iii. Customers:
Customers buy the product of the organization for final
consumption. The main goal of an organization is customer
satisfaction. The organization undertakes the research and
development activities to analyze the needs of customers
and manufacture products according to those needs.
iv. Competitors:
It helps an organization to differentiate its product to
maintain position in the market. Competition refers to a
situation where various organizations offer similar
products and try to gain market share by adopting different
marketing strategies.

23. 2. Macro Environment:
Macro environment involves a set of environmental factors
that is beyond the control of an organization. These factors
influence the organizational activities to a significant
extent. Macro environment is subject to constant change.
The changes in macro environment bring opportunities and
threats in an organization.

24. We can use the PESTLE model for the identification and analysis of
the factors in the macro environment.
1.Political factors.
2.Economic factors.
3.Sociocultural factors.
4.Technological factors.
5.Legal factors.
6.(Natural) Environmental factors.
Along with these, we can add additional factors that suit the current
modern business atmosphere.
7.Demographic factors.
8.International factors.

25. 1.Political Factors
 The political factors of the general environment refer to the business-
government relationship and the overall political situation of a country.
 A good business-government relationship is essential to the economy and
most importantly for the business.
 The government of a country intervenes in the national economy through
setting policies/rules for business In our country, we see many such policies –
import policy, export policy, taxation policy, investment policy, drug policy,
competition policy, consumer protection policy, etc.
 Sometimes, the government pursues a nationalization policy for state
ownership of a business.
 Some countries, such as India, pursue state-driven mercantilism to reduce
imports and increase exports. Some countries; have liberalized their economy
and shifted from centrally managed economy to a capitalist economy or
welfare economy.

26. 2.Economic factor
Economic environment affects the organization’s costs
structure and customers’ purchasing power. The purchasing
power of a customer depends on the current income, prices of
the product, savings, and credit availability.
The factors economic environment is as follows:
a. Inflation:
It influences the customers’ demand for different products. For
example, higher petrol prices lead to a fall in demand for cars.
b. Interest Rates:
It determines the borrowing activities of the organization. For
example, increase in interest rates for loan may lead
organizations to cut their important activities.

27. c. Unemployment:
It leads to a no income state, which affects the purchasing
power of an individual.
d. Customer Income:
It regulates the buying behavior of a customer. The change
in the customer’s income leads to changed spending
patterns for the products, such as food and clothing.
e. Monetary and Fiscal Policy:
It affects all the organizations. The monetary policy
stabilizes the economy by controlling the interest rates and
money supply in an economy; whereas, fiscal policy
regulates the government spending in various areas by
collecting the revenue from the citizens by taxing their
income.

28. 3.Socio-Cultural Factor:
Socio-cultural environment comprises forces, such as society’s basic
values, attitudes, perception, and behavior. These forces help in
determining that what type of products customers prefer, what
influences the purchase attitude or decision, which brand they
prefer, and at what time they buy the products. The socio-cultural
environment explains the characteristics of the society in which the
organization exists. The analysis of socio-cultural environment
helps an organization in identifying the threats and opportunities
in an organization.
For example, the lifestyles of people are changing day-by-day. Now,
the women are perceived as an active earning member of the family.
If all the members of a family are working then the family has less
time to spend for shopping. This has led to the development of
shopping malls and super markets, where individuals could get
everything under one roof to save their time.

29. 4. Technological Factor:
Technology contributes to the economic growth of a
country. It has become an indispensible part of our lives.
Organizations that fail to track ongoing technological
changes find it difficult to survive in today’s competitive
environment.
Technology acts as a rapidly changing force, which creates
new opportunities for the marketers to acquire the market
share. Marketers with the help of technology can create
and deliver products matching the life style of customers.
Thus, marketers should observe the changing trends in
technology.

30. Following points explain the technological trends that affect the
marketing environment:
a. Pace of Technological Change:
It leads to product obsolescence at a rapid pace. If the pace of
technological change is very rapid then organizations need to modify
their products as and when required. On the other hand, if the
technology is not changing at a rapid pace then there is no need for
the organization to bring constant changes in the product.
b. Research and Development:
It helps in increasing growth opportunities for an organization. Many
organizations have developed a separate team for R&D to bring
innovation in its products. Pharmaceutical organizations, such as
Ranbaxy and Cipla, have started putting greater force in R&D and
these efforts have led to great opportunities in global market

31. 5. Legal Factor
Legal environment consists of legal bodies and government
agencies that influence and limit the organizations and
individuals. Every organization should take care of the fact
that marketing activities should not harm the political and
legal environment prevailing in a country. The political and
legal environment has a serious impact on the economic
environment of a country. For example, in some regions of
Uttar Pradesh, Reliance Fresh had to shut down its stores
because of the lack of political support.
Various legislations affecting the marketing activities are
a. Anti-pollution laws, which affect the production or
manufacturing of various products.
b. Customer legislation, which tries to protect the customer’s
interest.

32. The important acts set by the Indian government, which
effect the marketing environment of an organization:
i. Prevention of Food and Adulteration – 1954
ii. Drugs Control Act – 1954
iii. Company Act – 1956
iv. Standard Weights and Measurement Act – 1956
v. MRTP- Monopoly and Restrictive Trade Practices – 1969
vi. Display of Price Order – 1963
vii. Indian Patents Act – 1970
viii. Packaged Commodities Order – 1975
ix. Environment Act – 1986
x. Consumer Protection Act – 1986

33. 6. Natural Environmental factor
Natural environment consists of natural resources, which
are needed as raw materials to manufacture products by
the organization. The marketing activities affect these
natural resources, such as depletion of ozone layer due to
the use of chemicals. The corrosion of the natural
environment is increasing day-by-day and is becoming a
global problem.

34. Following natural factors affect the marketing activities of
an organization in a great way:
a. Natural Resources:
It serves as raw material for manufacturing various
products. Every organization consumes natural resources
for the production of its products. Organizations are
realizing the problem of depletion of resources and trying
best to use these resources judiciously. Thus, some
organizations have indulged in de-marketing their
products. For example, Indian Oil Corporation (IOC) tries
to reduce the demand for its products by promoting
advertisements, such as Save Oil, Save India.

35. b. Weather:
It leads to opportunities or threats for the organizations. For
example, in summer, demand for water coolers, air conditioners,
cotton clothes, and water increases while in winter, the demand
for woolen clothes and room heaters rises. The marketing
environment is greatly influenced by the weather conditions of a
country.
c. Pollution:
It includes air, water, and noise pollution, which lead to
environmental degradation. Now-a-days, organizations tend to
promote environment friendly products through its marketing
activities. For example, the organizations promote the usage of
jute and paper bags instead of plastic bags.

36. 7. Demographic Factor:
Demographic environment is the scientific study of human
population in terms of elements, such as age, gender,
education, occupation, income, and location. It also
includes the increasing role of women and technology.
These elements are also called as demographic variables.
Before marketing a product, a marketer collects the
information to find the suitable market for the product.
Demographic environment is responsible for the variation
in the tastes and preferences and buying patterns of
individuals. The changes in demographic environment
persuade an organization to modify marketing strategies
to address the altering needs of customers.

37. 8. International Factors
Virtually every organization is affected by international
factors. It refers to the degree to which an organization is
involved in or affected by businesses in other countries.
Global society concept has brought all the nation together
and modern network of communication and transportation
technology, almost every part of the world is connected.

39.  Meaning
 Market segmentation is defined as the segmentation or
division of markets into various homogenous couples of
customers.
 Market segmentation is a marketing strategy that involves
dividing a broad target market into subsets of consumers who
have common needs, and then designing and implementing
strategies to target their needs and desires using media
channels and other touch-points that best allow to reach them.
 Definition
 According to Philip Kotler, “Market segmentation is sub-dividing
a market into distinct and homogeneous subgroups of customers,
where any group can conceivably be selected as a target market to
be met with distinct marketing mix”

40. The bases for market
segmentation can be broadly
classified into following
groups:
1. Customer based
segmentation
2. Product related
segmentation
3. Competition Based
Segmentation:

41. 1. Customer Based Segmentation:
Customer based segmentation further classifies as follows:
a. Geographic segmentation
The starting point of all market segmentation is the
geographic location of customers. It helps the firm in
planning the marketing offer. The common method is to
classify according to rural and urban, metro or non-metro
markets. There are also other classifications like district
and block markets. We all know that here was the
perception that the rural markets are different from urban
markets and naturally the product promotion, pricing and
distribution were accordingly designed to meet those
markets.

42. b. Demographic segmentation
Factors like age, gender, income, occupation, family size, education; marital
status is used singly or in combination to segment the market.
i. Age:
Age is one of the most important factors for segmenting the market. The market
the producer should know for what age group his product could be most suited so
that he can plan his pricing policy, advertisement policy, marketing policy and
strategy accordingly.
For example, Cloth market or Garment market may be segmented on this basis
of age as –
Children b/w the age group of 3-12yrs
Children b/w the age group of 13-15yrs
Teenagers’ b/w the age group of 16-20yrs
Adults’ b/w the age group of 21-30yrs and so on

43. ii. Income:
The manufacturer should also bear in mind while preparing
his marketing policy, the income of the prospective buyers
of his product. Consumer’s needs, behaviour, persuasion
etc. differ in different income groups. For example, people
in high-income group prefer quality of goods, design,
fashion-oriented products, etc. hence they can be motivated
on these factors. People in low-income group attract
towards low price.

44. iii. Gender
Marketers may also be divided on the basis of Gender i.e.,
male and female. Some products are exclusively produced
for women while some others are for men. For example, Lip
Stick is meant for a woman and on the other hand Shaving
cream is only meant for men.
iv. Occupation:
Occupation is also another variable in segmenting the
market. An individual’s employment does definitely affect
the consumption; different categories of segments can be
identified like doctors, consultants, entrepreneurs, lecturers
etc.

45. v. Education:
Education of the consumer also affects the preference and
taste. The choice of literate person would obviously differ
from that of an illiterate, as a literate he would be having a
lot of exposure to the outside worlds where as an illiterate
although exist the same environment would lack the ability
to understand, when we look at all these aspects it is easy
to indicate that education plays an important role in the life
of an individual as it creates awareness about the
environment, the availability of different products in the
market and awareness about their rights.
Accordingly based on education, the Indian Market can be
segmented as illiterates, literates-high school, college and
university educated

46. vi. Marital Status:
Marital status is another demographics variable used. The
behavioral of single and married people differs. Married
people are more conservative than unmarried people.
vii. Family Size and Structure:
Markets may also be segmented on the basis of size of
family. Refrigerators and cookers are produced in different
sizes to suit the needs of families of different sizes.

47. c. Psychographics segmentation
No two consumers act in the same manner though they
two may be of the same age, from the same profession,
same education and have same income. Each of the
customers may have different attitudes because of
personality and life-style differences. Markets are using
psychographics variables to segment their market.
Psychographic segmentation is focused on your
customers’ personalities and interests. Here we might
look at customers and define them by their:

48. Personality traits
Hobbies
Life goals
Values
Beliefs
Lifestyles
Compared to demographic segmentation, this can be a
harder set to identify. Good research is vital and, when
done well, psychographic segmentation can allow for
incredibly effective marketing that consumers will feel
speaks to them on a much more personal level.

49. 4. Behavioral segmentation:
Behavioral segmentation is possibly the most useful of all
for e-commerce businesses. As with psychographic
segmentation, it requires a little data to be truly effective
– but much of this can be gathered via your website itself.
Here we group customers with regards to their:
Spending habits
Purchasing habits
Browsing habits
Interactions with the brand
Loyalty to brand
Previous product ratings

50. 2. Product Related Segmentation:
Different customers use the same product in different
situations for example; Rasna – for parties, unexpected
guests, and a drink for quenching thirst etc. A market
makes the product versatile so that it can be used in
different situation. A consumer may buy different brands
of the same product for different situations for e.g., saree
for kitty party, work place.
Thus depending upon the situation, a product or a brand
may be selected by the customers. Knowing these
situations marketer can plan the positioning strategy.
Another product related variable is the benefit
segmentation. The marketer identifies benefits that the
customer looks for when buying a product.

51. 3. Competition Based Segmentation:
The success in marketing depends on the number of loyal
customers. Customer loyalty therefore is an important factor to
determine the competitive position of the firm.
On the basis of brand loyalty further the market could be
classified as:
i. Hard core loyal – These are the customers who buy the same
brand, for examples Newspaper readers, tea drinkers etc.
ii. Soft-core loyal – Customers who are loyal to two or three
brands in a product group, for e.g., Housewife buying toilet
soap (Lux, Cinthol, Pears). The marketers have to watch such
customers and shift them to the core loyal.

52. iii. Switchers – Customers who never stick to a brand.
This is a slipping market segment for the marketer. The
marketer has to find out why customers keep switching
from brand to brand and from the existing to the
competing brand. This can help the firm to strengthen its
competitive position in the market. The marketer should
also take into amount factors like price, non-availability of
brands, indifferent habit etc.

53. 1. A more precise definition of the market
2. A more effective marketing program
3. A better assessment of the competition
4. Better allocation of resources

54. Identifying the requirements for effective market
segmentation allows companies to create marketing
campaigns that are essential for their growth and
development. Here are the five criteria for effective
market segmentation
REQUIREMENTS FOR
EFFECTIVE
SEGMENTATION

55. 1.Measurable
The size and purchasing power profiles of your market
should be measurable, meaning there is quantifiable data
available about it. A consumer’s profiles and data provides
marketing strategists with the necessary information on
how to carry out their campaigns.
It would be difficult to create advertisements for markets
that have little to no data or for audiences that can’t be
measured. Always ask whether there is a market for the
kind of product or service that your business wants to
produce then define how many possible customers and
consumers are in that market.

56. 2. Accessible
Accessibility means that customers and consumers are
easily reached at an affordable cost. This helps determine
how certain ads can reach different target markets and
how to make ads more profitable.
A good question to ask is whether it’s more practical to
place ads online, on print, or out of house. For example,
gather data on the websites a specific target market
usually visits so you can place more advertisements on
those websites instead.

57. 3. Substantial
The market a brand should want to penetrate should be a
substantial number. You should clearly define a
consumer’s profiles by gathering data on their age, gender,
job, socio-economic status, and purchasing power.
It doesn’t make sense to try and reach an unjustifiable
number of people — you’re just wasting resources.
However, you also don’t want to market the brand to a
group too small that the business doesn’t become
profitable.

58. 4. Differentiable
When segmenting the market, you should make sure that
different target markets respond differently to different
marketing strategies. If a business is only targeting one
segment, then this might not be as much of an issue.
But for example, if your target market is college students,
then it’s essential to create a marketing strategy that both
freshman students and senior students react to in the
same positive way. This process ensures that you are
creating strategies that are more efficient and cost-
effective.

59. 5. Actionable
Lastly, your market segments need to be actionable,
meaning that they have practical value. A market segment
should be able to respond to a certain marketing strategy
or program and have outcomes that are easily
quantifiable.
As a business owner, it’s important to identify what kind
of marketing strategies work for a certain segment. Once
those strategies have been identified, ask yourself if the
business is capable of carrying out that strategy

60. Thank you