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1)IDENTIFY AND EXPLAIN MACRO
AND MICRO ENVOIRMENTAL
FACTORS WHICH INFLUENCEMAKRETING DECESIONS :-
Macro !"#ro!$!%a& Fac%or' ar:
1.political
2.Economical3.sociological
4.Technological
5.envoirmental
6.legal
M#cro !"o#r$!%a& (ac%or' : 1.customer
2.employess
3.suppliers
4.shareholders
5.media 6.competitors
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Macro !"#ro!$!%a& Fac%or' ar:
There are many factors in the macro-environment that will eect
the decisions of the managers of any organisation. Ta! changes"
new laws" trade #arriers" demographic change and governmentpolicy changes are all e!amples of macro change.
• Po&#%#ca& (ac%or' These refer to government
policy such as the degree of intervention in the economy.$hat goods and services does a government want toprovide% To what e!tent does it #elieve in su#sidising &rms%$hat are its priorities in terms of #usiness support% 'olitical
decisions can impact on many vital areas for #usiness suchas the education of the wor(force" the health of the nationand the )uality of the infrastructure of the economy such asthe road and rail system.
• Eco!o$#c (ac%or'. These include interest rates"
ta!ation changes" economic growth" in*ation and e!changerates. +s you will see throughout the ,oundations ofEconomics, #oo( economic change can have a maor impact
on a &rm/s #ehaviour. or e!ample0
- higher interest rates may deter investment #ecause it
costs more to #orrow
- a strong currency may ma(e e!porting more dicult
#ecause it may raise the price in terms of foreign currency
- in*ation may provo(e higher wage demands from
employees and raise costs
- higher national income growth may #oost demand for
a &rm/s products
• Soc#a& (ac%or'. hanges in social trends can impact
on the demand for a &rm/s products and the availa#ility andwillingness of individuals to wor(. n the " for e!ample" thepopulation has #een ageing. This has increased the costs for
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&rms who are committed to pension payments for theiremployees #ecause their sta are living longer. t also meanssome &rms such as +sda have started to recruit olderemployees to tap into this growing la#our pool. The ageing
population also has impact on demand0 for e!ample"demand for sheltered accommodation and medicines hasincreased whereas demand for toys is falling.
• Tc*!o&o+#ca& (ac%or': new technologies
create new products and new processes. '3 players"computer games" online gam#ling and high de&nition T7sare all new mar(ets created #y technological advances.8nline shopping" #ar coding and computer aided design are
all improvements to the way we do #usiness as a result of#etter technology. Technology can reduce costs" improve)uality and lead to innovation. These developments can#ene&t consumers as well as the organisations providing theproducts.
• E!"#ro!$!%a& (ac%or': environmental
factors include the weather and climate change. hanges intemperature can impact on many industries including
farming" tourism and insurance. $ith maor climate changesoccurring due to glo#al warming and with greaterenvironmental awareness this e!ternal factor is #ecoming asigni&cant issue for &rms to consider. The growing desire toprotect the environment is having an impact on manyindustries such as the travel and transportation industries9for e!ample" more ta!es #eing placed on air travel and thesuccess of hy#rid cars: and the general move towards moreenvironmentally friendly products and processes is aectingdemand patterns and creating #usiness opportunities.
• L+a& (ac%or': these are related to the legal
environment in which &rms operate. n recent years in the there have #een many signi&cant legal changes thathave aected &rms/ #ehaviour. The introduction of agediscrimination and disa#ility discrimination legislation" an
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increase in the minimum wage and greater re)uirements for&rms to recycle are e!amples of relatively recent laws thataect an organisation/s actions. ;egal changes can aect a&rm/s costs 9e.g. if new systems and procedures have to #e
developed: and demand 9e.g. if the law aects the li(elihoodof customers #uying the good or using the service:.
D#,r!% ca%+or#' o( &a #!c&./:
co!'.$r &a'0 these are designed to protect customers
against unfair practices such as misleading descriptions of the
product
co$%#%#o! &a'0 these are aimed at protecting small &rms
against #ullying #y larger &rms and ensuring customers are not
e!ploited #y &rms with monopoly power
$&o2$!% &a'0 these cover areas such as redundancy"
dismissal" wor(ing hours and minimum wages. They aim to
protect employees against the a#use of power #y managers
*a&%* a!/ 'a(%2 &+#'&a%#o!0 these laws are aimed atensuring the wor(place is as safe as is reasona#ly practical. They
cover issues such as training" reporting accidents and the
appropriate provision of safety e)uipment
M#cro !"o#r$!%a& (ac%or' :
C.'%o$r'8rganisations survive on the #asis of meeting the needs" wants
and providing #ene&ts for their customers. ailure to do so will
result in a failed #usiness strategy.
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E$&o2'
Employing the correct sta and (eeping these sta motivated is
an essential part of the strategic planning process of an
organisation. Training and development plays an essential roleparticular in service sector mar(eting in-order to gain a
competitive edge. This is clearly apparent in the airline industry.
S.&#r'
ncrease in raw material prices will have a (noc( on aect on the
mar(eting mi! strategy of an organisation. 'rices may #e forced
up as a result. loser supplier relationships is one way of ensuringcompetitive and )uality products for an organisation.
S*ar*o&/r'
+s organisation re)uire greater inward investment for growth they
face increasing pressure to move from private ownership to
pu#lic. <owever this movement unleashes the forces of
shareholder pressure on the strategy of organisations. =atisfying
shareholder needs may result in a change in tactics employed #y
an organisation. any internet companies who share prices
roc(eted in 1>>> and early 2??? have seen the share price
tum#le as they face pressures from shareholders to turn in a
pro&t. n a mar(et which has very )uic(ly #ecome overcrowded
many havel failed.
M/#a
'ositive or adverse media attention on an organisations product
or service can in some cases ma(e or #rea( an organisation..
onsumer programmes with a wider and more direct audience
can also have a very powerful and positive impact" hforcing
organisations to change their tactics.
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Co$%#%or'
The name of the game in mar(eting is dierentiation. $hat
#ene&t can the organisation oer which is #etter then their
competitors. an they sustain this dierentiation over a period oftime from their competitors%. ompetitor anlaysis and monitoring
is crucial if an organisation is to maintain its position within the
mar(et.
M#cro E!"#ro!$!%a&Fac%or3S%a4*o&/r A!a&2'#'
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5 OUTLINE THE FACTORS WHICHINFLUENCE THE CHOICE OF TARGETING
STRATEGY :-
Targeting strategy decisions are influenced by:
• mar(et maturity
• diversity of #uyers/ needs and preferences
• strength of the competition
• the volume of sales re)uired for pro&ta#ility
+ competitive advantage could simply #e de&ned as the
advantage or a#ility a &rm has over its rivals in the industry@ or
the a#ility a &rm has to outperform its industry rivals.
+ &rm is said to have a competitive advantage when it has the
capa#ilities or means to push out its rivals in striving for the
favour of customers. This applies internationally or locally as well
as to #oth services and products.Thus" a sustaina#le competitive
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advantage is the persistence the &rm applies despite eorts #y
competitors or potential entrants to copy or overta(e it.
=ustaina#ility therefore" re)uires that strategic assets are not
easily availa#le to others and imperfectly mo#ile. This will #e
considered later.
'orter 91>>?: states that" though not all nations are in the
forefront of competition" the home nation which shapes the
competitive advantage is the starting point for a &rm/s
competitive advantage and also from which it must #e sustained.
<owever" in whatever &eld of endeavor" competitive advantage
creation must #e a choice of management and it must really &t to
achieve results. t must #e noted here that competitive advantage
can normally #e traced to one of three roots0
=uperior resources" superior s(ills and superior positions.
ompetitive strategy is one of the ways in which a #usiness
relates to its environment #y competing with other &rms who are
also trying to adapt within the operating environment. t is with
this aspect- the competitive strategy which if appropriately
chosen and implemented appropriately give the &rm a
competitive advantage over its rivals.
t must #e noted here that the prescriptive view of strategic
planning emphasiBes the importance of the organiBational
environment as a source of threats and opportunities and the
need for eective responses #y the organiBation if survival was to
#e assured and the success achieved. The response is later
formulated into plan which formulates maor decisions a#out
entry into new mar(ets or development of new products andservices guided #y set goals. nder the in*uence of 'orter/s
writings in the 1>C?s the emphasis shifted from the plan to the
selection of an appropriate generic strategy to position the
#usiness unit in its competitive environment. 'orter" arguing that
the environment poses threats and #rings opportunities than with
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trends and events" suggested that the environment could #e
analyBed using the &ve forces analysis to identify the issues which
aect the level of competition in an industry@ after which a
strategy is formulated to com#at it.
The resultant strategy" which he referred to as generic"
distinguished some strategic options the &rm can possess0
ost leadership0 the #usiness could position itself as oering a low
cost product as a standard price i.e. cost leadership strategy.
osts are reduced at every element of the value chain. 'roducers
can e!ploit the #ene&ts of a #igger margin than the competitors.
Toyota is a good e!ample of an organiBation that produces )uality
cars at low price coupled with a #rand and mar(eting s(ills to usea premium pricing policy.
t could oer a product that was dierent from that oered #y
rivals. .e. dierentiation. This allows companies to ma(e prices
less sensitive and focus on value that generates a comparatively
higher price and a #etter margin. Even though additional costs
will #e incurred pursuing dierentiation" it is possi#le that this will
#e oset #y the increased revenue generated #y the sales.
Dy focusing on a small #ut well-de&ned part of the mar(et" for
instance a particular #uying group or product area or
geographical area. +lso (nown as niche" this is usually suita#le for
a small company i.e. focus strategy.
eneric ompetitive strategy" usually used after competitive
analysis or as a response to competitors advantage" is de&ned as
the #asis on which a strategic #usiness unit 9=D: might achieve
or counter competitive advantage in its mar(et. 9Fohnson and
=choles" 5th Edition.:
Duilding on 'orter/s 91>C?: generic competitive strategies"
Dowman et al argues that organiBations achieve competitive
advantage #y providing their customers with what they want" or
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need #etter or more eectively than competitors and ma(ing it
dicult for competitors to imitate. This was later developed into
&ve generic strategies which would #e used in this discussion.
Thus" the generic competitive strategies are the fundamental
activities on which an =D see(s to achieve a lastingadvantageous position in its environment and gaining the favor of
sta(eholders #y meeting the e!pectations of #uyers" users or
other sta(eholders
The following are Dowman/s &ve-generic competitive strategy
options and e!amples of organiBations who applied them to gain
competitive advantage0 no frills strategy" low price strategy"
hy#rid strategy" focused dierentiation strategy and added value
or dierentiation strategy.
n #rief" a no frills strategy com#ines a low price" low perceived
added value and targets a price-sensitive mar(et. Go frills
strategy is now a popular strategy with low-cos airlines Easy Fet
and Hyanair see(ing to enter the airline industry to compete with
li(es of 7irgin and is a determinant in the mar(et. This" therefore"
aords the &rm the needed competitive edge over its competitors
who charge higher price. This strategy is a success #ecause therecould possi#ly #e a segment of the mar(et that overloo(s the low
)uality of the commodity provided it ful&lls the same purpose.
To o#tain the competitive advantage using no &lls strategy
revenues must increase and the product must really #e price-
sensitive. Easy Fet frills strategy seems to #e going on well as a
result of the cost savings techni)ues they are using. or instance
no tic(eting" no tic(et agents" no in-*ight food or drin( for
customers as well as the short-haul *ight. Gow" almost allsupermar(ets in the use no frills strategy #y introducing own
#rands the price of which have #een reduced to attract customers
in order to gain a competitive advantage.
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The ne!t generic strategy is the low price strategy. This strategy
pursues a lower price than pertains in the mar(et whilst trying to
maintain similar value of product or service as those oered #y
competitor ali(e. There is the potential of price war among
competitors and in the long run consumers are li(ely to lose asthe &rms might not #e a#le to sustain the lower-price-good-value
strategy. Gotwithstanding the price war and low margins" there
are some suggested ways in which a low-priced strategy can
#ring a#out a &rms competitive advantage. The mar(et segment
must #e low-price sensitive" and also the =D has a cost
advantage over its competitors.
<owever" in practice" the lower price strategy usually #rought
a#out #y lowering operational cost alone does not give the &rm
the competitive advantage if the &rm is not a#le to sustain it in
the long-term as there are now more &rms entering the mar(et
#ecause of low or no entry #arriers li(e small capital re)uirements
and also how ecient the sta might #e.
<y#rid competitive strategy see(s to achieve dierentiation and a
price lower than that of competitors simultaneously. This is not an
easy strategy to pursue #ecause to dierentiate a product orservice involves some money and increases cost the very thing
the low price see(s to reduce. This strategy is &t for the IJ
industry as the li(es of Ho#ert Iyas are not a#le to stand the
competition. The success of this is dependent on providing uni)ue
more ecient products or services to consumers whilst at the
same time operating at a lower cost to #e a#le to lower its price
#elow the industry level. The success of this strategy could
further #e enhanced if the &rm has economies of scale and canincrease volume of sales more than its competitors" there#y"
reducing its #ase cost as a result. +sda/s eorge #rand is an
e!ample of a generic hy#rid strategy in a =D.
+nother strategy is dierentiation strategy. This see(s to provide
products or services completely dierent from those of its
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competitors #y adding features valued #y consumers. The main
o#ective of using this is to either maintain the mar(et share or
increase mar(et share relative to its competitors. + clear e!ample
of this is aircraft manufacturer +ir#us/s wider fuselages" coc(pits
designed for use in more than one aircraft and electrical ratherthan mechanical *ight controls.
Those features have helped +ir#us win customers li(e Gew Jor(-
#ased Fet #lue@ although Fet Dlue is staed with former employees
from Doeing. 9ortune" Europe Edition 22 Govem#er 1Ath 2??3@
pp34: This strategy could #e used to achieve a competitive
advantage which is its ultimate aim #y the &rm investing more in
HKI" uni)ue designs and features. The mar(eting-#ased
approaches in terms of good mar(eting communication 9e!ample
advertising the products or services: as well as the #rand power
to win the loyalty of consumers. 9E!ample +ir#us:
The &fth generic competitive strategy is the focused
dierentiation strategy which see(s to provide high perceived
value@ ustifying a su#stantial price premium usually to a selected
mar(et" segment. t is usually adopted to counter or to compete
others in seemingly similar segment. This could therefore #eargued that focused dierentiation is ust an e!tension of any of
the four strategies so far considered depending on the
competitors in this new segment which is usually middle to high
income earners. + convincing e!ample is the introduction of ;e!us
in 1>C> #y Toyota to compete with other lu!ury #rands of D$
and ercedes DenB new series.
or the focused dierentiation strategy to #e used to o#tain a
competitive advantage over competitors in the industry" the#usiness unit must &nd ways to ma(e the production more
ecient to #e a#le to pass on the savings to customers. The
#usiness unit must identify new segments and must also #e
prepared to aggressively create new mar(et segment where it is
#elieved &rst movers get huge advantage. +gain Toyota prides
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itself in this #y #eing the &rst to introduce a
#rand"scion"speci&cally for young #uyers in Fanuary" 2??3 which
was a success and the introduction of hy#rids in 1>>A selling
12A"??? far more than <onda.9 <y#rid uses two engines and is
environmentally friendly.: 9ortune" Europe Edition" Gum#er 24Iecem#er 22 2??3@ pp5A:.
The essence of the various strategies discussed so far is to create
or add value to the products or services in order to give improved
and or enough satisfaction to the customer so that the &rm will
gain a competitive advantage over its rivals. <owever" it is one
thing for a &rm to gain a competitive advantage and another to
sustain the competitive advantage so gained. =o when a &rm is
a#le to get a competitive advantage over its competitors" it
#ecomes e!pedient to try to sustain this advantage.
=ome of the ways to sustain the competitive advantage is #y
what is descri#ed as isolating mechanism. This is the application
of forces li(e #arriers of imitation which limit the e!tent to which a
competitive advantage can #e duplicated or matched or even
possi#ly scrapped through the resource creation activities of other
&rms. Though similar in principle to the #arrier of entry force"whereas the entry #arriers protect pro&ta#ility of an entire
industry" isolating mechanisms sustain the competitive advantage
of a single &rm. or e!ample legal #arriers li(e trademar(s"
patents or intellectual property rights as in icrosoft/s case.
t could also #e for the mere fact that the leading &rm ma(es it
dicult for the competitor to catch up with the &rm/s technology
#ecause it entered the mar(et earlier and it continues to research
and might #e a#le to move to a superior position #y the time itscompetitors catch up. This is (nown as the early mover
advantage. Decause the #usiness unit has entered the mar(et
earlier" the past success in the mar(et is #elieved to sustain the
&rm.
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n my own opinion #ased on the discussions a#ove" if really
sustaina#le competitive advantage is the persistence of a &rm/s
a#ility to outperform its industry" then suce it to say that" as
much as gathering and use of competitive information as
illustrated in the =ears/ story a#ove can give a &rm a 9sustaina#le:competitive advantage" it is really dicult if not impossi#le to
sustain any competitive advantage for a very long time. This is so
#ecause of the rate of technological changes" changes in #usiness
strategies" and the fact that customers/ loyalty can wane and
aect sales leading to a fall in mar(et share and thus competitive
advantage. Doeing was overta(en #y +ir#us in the aviation
industry at some time. =ears/ leadership was ta(en away #y $al-
mart.
n spite of the availa#ility of choice of the &ve generic strategies"
it is supposed that the onus of their success rests with
management and how the technology and the information
gathered are #lended for use. This is so #ecause a careful
monitoring and evaluation constantly and the right identi&cation
and proper timing of a particular segment are (eys to the success
of these strategies due to mar(et dynamism.
6)EXPLAIN HOW PRICES ARE SET TO
REFLECT AN ORGANISATIONS
O78ECTIVES AND MARKET CONDITONS:-
8ne of the four maor elements of the mar(eting mi! is price.
'ricing is an important strategic issue #ecause it is related to
product positioning. urthermore" pricing aects other mar(eting
mi! elements such as product features" channel decisions" and
promotion.
$hile there is no single recipe to determine pricing" the following
is a general se)uence of steps that might #e followed for
developing the pricing of a new product0
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1. Develop marketing strategy - perform marketing analysis, segmentation, targeting, and
positioning.
2. Make marketing mix decisions - define the product, distribution, and promotional
tactics.
3. Estimate the demand curve - understand how quantity demanded aries with price.
!. Calculate cost - include fi"ed and ariable costs associated with the product.
#. Understand environmental factors - ealuate likely competitor actions, understand
legal constraints, etc.
$. Set pricing objectives - for e"ample, profit ma"imi%ation, reenue ma"imi%ation, or
price stabili%ation &status quo'.
(. Determine pricing - using information collected in the aboe steps, select a pricing
method, deelop the pricing structure, and define discounts.
Mar4%#!+ S%ra%+2 a!/ %*
Mar4%#!+ M#9
Defore the product is developed" the mar(eting strategy is
formulated" including target mar(et selection and product
positioning. There usually is a tradeo #etween product )uality
and price" so price is an important varia#le in positioning.
Decause of inherent tradeos #etween mar(eting mi! elements"
pricing will depend on other product" distri#ution" and promotion
decisions.
E'%#$a% %* D$a!/ C.r"
Decause there is a relationship #etween price and )uantity
demanded" it is important to understand the impact of pricing on
sales #y estimating the demand curve for the product.
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or e!isting products" e!periments can #e performed at prices
a#ove and #elow the current price in order to determine the price
elasticity of demand. nelastic demand indicates that price
increases might #e feasi#le.
Ca&c.&a% Co'%'
f the &rm has decided to launch the product" there li(ely is at
least a #asic understanding of the costs involved" otherwise" there
might #e no pro&t to #e made. The unit cost of the product sets
the lower limit of what the &rm might charge" and determines the
pro&t margin at higher prices.
The total unit cost of a producing a product is composed of thevaria#le cost of producing each additional unit and &!ed costs
that are incurred regardless of the )uantity produced. The pricing
policy should consider #oth types of costs.
E!"#ro!$!%a& Fac%or'
'ricing must ta(e into account the competitive and legal
environment in which the company operates. rom a competitivestandpoint" the &rm must consider the implications of its pricing
on the pricing decisions of competitors. or e!ample" setting the
price too low may ris( a price war that may not #e in the #est
interest of either side. =etting the price too high may attract a
large num#er of competitors who want to share in the pro&ts.
rom a legal standpoint" a &rm is not free to price its products at
any level it chooses. or e!ample" there may #e price controls
that prohi#it pricing a product too high. 'ricing it too low may #econsidered predatory pricing or ,dumping, in the case of
international trade. 8ering a dierent price for dierent
consumers may violate laws against price discrimination. inally "
collusion with competitors to &! prices at an agreed level is illegal
in many countries.
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Pr#c#!+ O;c%#"'
The &rm/s pricing o#ectives must #e identi&ed in order to
determine the optimal pricing. ommon o#ectives include the
following0
• Current profit maximization - seeks to ma"imi%e current profit, taking into account
reenue and costs. )urrent profit ma"imi%ation may not be the best ob*ectie if it results
in lower long-term profits.
• Current revenue maximization - seeks to ma"imi%e current reenue with no regard to
profit margins. The underlying ob*ectie often is to ma"imi%e long-term profits by
increasing market share and lowering costs.
• Maximize uantity - seeks to ma"imi%e the number of units sold or the number of
customers sered in order to decrease long-term costs as predicted by the e"perience
cure.
• Maximize profit margin - attempts to ma"imi%e the unit profit margin, recogni%ing that
quantities will be low.
• !uality leadership - use price to signal high quality in an attempt to position the product
as the quality leader.
• "artial cost recovery - an organi%ation that has other reenue sources may seek only
partial cost recoery.
• Survival - in situations such as market decline and oercapacity, the goal may be to
select a price that will coer costs and permit the firm to remain in the market. +n this
case, surial may take a priority oer profits, so this ob*ectie is considered temporary.
• Status uo - the firm may seek price stabili%ation in order to aoid price wars and
maintain a moderate but stable leel of profit.
or new products" the pricing o#ective often is either to ma!imiBe
pro&t margin or to ma!imiBe )uantity 9mar(et share:. To meet
these o#ectives" s(im pricing and penetration pricing strategies
often are employed. Foel Iean discussed these pricing policies in
his classic <DH article entitled" 'ricing 'olicies for Gew 'roducts.
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S4#$ r#c#!+ attempts to ,s(im the cream, o the top of
the mar(et #y setting a high price and selling to those customers
who are less price sensitive. =(imming is a strategy used to
pursue the o#ective of pro&t margin ma!imiBation.
=(imming is most appropriate when0
Iemand is e!pected to #e relatively inelastic@ that is" the
customers are not highly price sensitive.
;arge cost savings are not e!pected at high volumes" or it is
dicult to predict the cost savings that would #e achieved at high
volume.
The company does not have the resources to &nance the large
capital e!penditures necessary for high volume production with
initially low pro&t margins.
P!%ra%#o! r#c#!+ pursues the o#ective of )uantity
ma!imiBation #y means of a low price. t is most appropriate
when0
Iemand is e!pected to #e highly elastic@ that is" customers areprice sensitive and the )uantity demanded will increase
signi&cantly as price declines.
;arge decreases in cost are e!pected as cumulative volume
increases.
The product is of the nature of something that can gain mass
appeal fairly )uic(ly.
There is a threat of impending competition.
+s the product lifecycle progresses" there li(ely will #e changes in
the demand curve and costs. +s such" the pricing policy should #e
reevaluated over time.
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The pricing o#ective depends on many factors including
production cost" e!istence of economies of scale" #arriers to
entry" product dierentiation" rate of product diusion" the &rm/s
resources" and the product/s anticipated price elasticity of
demand.
Pr#c#!+ M%*o/'
To set the specific price leel that achiees their pricing ob*ecties, managers may
make use of seeral pricing methods. These methods include:
• Cost#plus pricing - set the price at the production cost plus a certain profit margin.
• $arget return pricing - set the price to achiee a target return-on-inestment.
• %alue#based pricing - base the price on the effectie alue to the customer relatie to
alternatie products.
• "sychological pricing - base the price on factors such as signals of product quality,
popular price points, and what the consumer perceies to be fair.
+n addition to setting the price leel, managers hae the opportunity to design
innoatie pricing models that better meet the needs of both the firm and its
customers. or e"ample, software traditionally was purchased as a product in
which customers made a one-time payment and then owned a perpetual license to
the software. any software suppliers hae changed their pricing to a subscription
model in which the customer subscribes for a set period of time, such as one year.
fterwards, the subscription must be renewed or the software no longer will
function. This model offers stability to both the supplier and the customer since it
reduces the large swings in software inestment cycles.
Pr#c D#'co.!%' The normally )uoted price to end users is (nown as the list price.
This price usually is discounted for distri#ution channel mem#ers
and some end users. There are several types of discounts" as
outlined #elow.
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• !uantity discount - offered to customers who purchase in large quantities.
• Cumulative uantity discount - a discount that increases as the cumulatie quantity
increases. )umulatie discounts may be offered to resellers who purchase large quantities
oer time but who do not wish to place large indiidual orders.
• Seasonal discount - based on the time that the purchase is made and designed to reduce
seasonal ariation in sales. or e"ample, the trael industry offers much lower off-season
rates. /uch discounts do not hae to be based on time of the year0 they also can be based
on day of the week or time of the day, such as pricing offered by long distance and
wireless serice proiders.
• Cash discount - e"tended to customers who pay their bill before a specified date.
• $rade discount - a functional discount offered to channel members for performing their
roles. or e"ample, a trade discount may be offered to a small retailer who may not
purchase in quantity but nonetheless performs the important retail function.
• "romotional discount - a short-term discounted price offered to stimulate sales.
T2' o( Pr#c#!+ S%ra%+#'
There are a number of preailing pricing strategies used in marketing. rom
product to product, one or more of those pricing strategies may come into play
oer a products lifecycle.
Pr#c La/r
o
product that has a demonstrated benefit or attribute oer other products in thesame category can price itself far aboe the preailing pricing rates. Tide
laundry detergent is such a product in the laundry detergent segment. iquid
Tide can cost almost 1 times the amount of other brand name detergent
products like rm 4 5ammer or 6ain for the same amount of product. or
decades, Tide has made numerous product improements, and heay
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adertising spending communicated its superiority oer competitors and
*ustified its position as the pricing leader.
Pr#c Ma%c*#!+
o atching a competitie price is a tactic used by marketers to take the issue of
price off the table. This tactic is used by a company that may be stronger
competitiely on other features and benefits. 7rice matching puts a competitor
on the defensie. The gasoline industry sets price based upon the price of crude
oil primarily. 5oweer from block to block, there will be price matching and
een pricing wars among local competitors.
Pr#c U!/rc.%%#!+o product may undercut price with the recognition that it is in a difficult
position against a strong competitor and the only way to compete is to lose
money on price but make it up on the olume sold. This is known as price
undercutting. 8ith this strategy, unit sales olume becomes the measurement of
market success rather than dollar sales olume. The goal here is to make up the
loss reali%ed from a lower price with growth in unit sales from an attractie
price, which creates higher demand and thus higher total dollar olume.
Lo'% La/r
o nother pricing strategy is to sell a product at such a low price that the
company loses money with each purchase. This strategy is usually a short-term
strategy that the product employs to create demand for itself or another
company product selling in the same product category. manufacturer of bread
spreads might price its *elly as a lost leader and charge a premium for its peanut
butter. The perception by customers is that both products hae a good priceeen though one might be significantly aboe competitors pricing.
C&o' O.% a!/ Sa& Pr#c#!+
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o This pricing strategy is employed when the goal is to moe units of product
without regard to price. This is a technique often used by stores that are closing
or when new seasonal merchandise is due in the store but current stocks of last
seasons goods hae not been sold.
< ) ILUSTRATE HOW PROMOTIONAL
ACTIVITY IS INTEGRATED TO ACHIEVE
MARKETING ON8ECTIVES :-
ntegrated ar(eting ommunication 9: involves the idea that
a &rmLs promotional eorts should #e coordinated to achieve the
#est com#ined eects of the &rmLs eorts. Hesources are
allocated to achieve those outcomes that the &rm values the
most.
'romotion involves a num#er of tools we can use to increase
demand for our The most well (nown component of promotion is
advertising" #ut we can also use tools such as the following0
• "ublic relations &the firm9s staff proides information to the media in the hopes of
getting coerage'. This strategy has benefits &it is often less e"pensie and media
coerage is usually more credible than adertising' but it also entails a risk in that we
can9t control what the media will say. ote that this is particularly a useful tool for small
and growing businesses;especially those that make a product which is inherentlyinteresting to the audience.
• $rade promotion . 5ere, the firm offers retailers and wholesalers temporary discounts,
which may or may not be passed on to the consumer, to stimulate sales.
• Sales promotion& )onsumers are gien either price discounts, coupons, or rebates.
• "ersonal selling. /ales people either make <cold= calls on potential customers and>or
respond to inquiries.
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• 'n#store displays& irms often pay a great deal of money to hae their goods displayed
prominently in the store. ore desirable display spaces include: end of an aisle, free-
standing displays, and near the check-out counter. ?ccasionally, a representatie maydisplay the product.
• Samples
• "remiums
PROMOTIONAL O78ECTIVES AND
EFFECTIVENESS
enerally" a se)uence of events is needed #efore a consumer will
#uy a product. This is (nown as a Mhierarchy of eects.N The
consumer must &rst #e aware that the product e!ists. <e or she
must then #e motivated to give some attention to the product
and what it may provide. n the ne!t stage" the need is for the
consumer to evaluate the merits of the product" hopefully giving
the product a try. + good e!perience may lead to continued use.
Gote that the consumer must go through the earlier phases
#efore the later ones can #e accomplished.
'romotional o#ectives that are appropriate dier across the'roduct ;ife ycle 9';:. Early in the ';Oduring the introduction
stageOthe most important o#ective is creating awareness among
consumers. or e!ample" many consumers currently do not (now
the armin is ma(ing auto navigation devices #ased on the glo#al
position satellite 9'=: system and what this system can do for
them. + second step is to induce trialOto get consumers to #uy
the product for the &rst time. Iuring the growth stage" important
needs are persuading the consumer to #uy the product and prefer
the #rand over competing ones. <ere" it is also important to
persuade retailers to carry the #rand" and thus" a large proportion
of promotional resources may need to #e devoted to retailer
incentives. Iuring the maturity stage" the &rm may need to focus
on maintaining shelf space" distri#ution channels" and sales.
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Iierent promotional approaches will #e appropriate depending
on the stage of the consumerLs decision process that the
mar(eter wishes to in*uence. 'rior to the purchase" the mar(eter
will want to esta#lish a decision to purchase the product and the
speci&c #rand. <ere" samples might #e used to induce trial.Iuring the purchase stage" when the consumer is in the retail
store" eorts may #e made to ensure that the consumer will
choose oneLs speci&c #rands. 'aying retailers for preferred shelf
space as well as point of purchase 9'8': displays and coupons
may #e appropriate. +fter the purchase" an appropriate o#ective
may #e to induce a repurchase or to in*uence the consumer to
choose the same #rand again. Thus" the pac(age may contain a
coupon for future purchase.
There are two main approaches to promoting products. The
MpushN strategy is closely related to the Mselling conceptN and
involves MhardN sell and aggressive price promotions to sell at this
speci&c purchase occasion. n contrast" the MpullN strategy
emphasiBes creating demand for the #rand so that consumers will
come to the store with the intention of #uying the product.
<allmar(" for e!ample" has invested a great deal in creating a
preference for its greeting cards among consumers.
There are several types of advertising. n terms of product
advertising" the MpioneeringN ad see(s to create awareness of a
product and #rand and to instill an appreciation among
consumers for its possi#ilities. The competitive or persuasive ad
attempts to convince the consumer either of the performance of
the product andPor how it is superior in some way to that of
others. omparative advertisements are a prime e!ample ofthis. or instance" note the ads that show that some trash #ags
are more dura#le than others. Heminder advertising see(s to
(eep the consumer #elieving what other ads have already
esta#lished. or e!ample" oca ola ads tend not to provide new
information #ut (eep reinforcing what a great drin( it is.
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.'* a!/ .&& '%ra%+#' :-
ar(eting theory distinguishes #etween two main (inds of
promotional strategy - ,push, and ,pull,.
P.'*
+ MpushN promotional strategy ma(es use of a company/s sales
force and trade promotion activities to cra% co!'.$r
/$a!/ for a product.
The producer promotes the product to wholesalers" the
wholesalers promote it to retailers" and the retailers promote it to
consumers.
+ good e!ample of ,push, selling is mo#ile phones" where the
maor handset manufacturers such as Go(ia promote their
products via retailers such as arphone $arehouse. 'ersonal
selling and trade promotions are often the most eective
promotional tools for companies such as Go(ia - for e!ample
oering su#sidies on the handsets to encourage retailers to sell
higher volumes.
+ ,push, strategy tries to sell directly to the consumer" #ypassing
other distri#ution channels 9e.g. selling insurance or holidays
directly:. $ith this type of strategy" consumer promotions and
advertising are the most li(ely promotional tools.
P.&&
+ MpullN selling strategy is one that re)uires high spending on
advertising and consumer promotion to #uild up consumerdemand for a product.
f the strategy is successful" consumers will as( their retailers for
the product" the retailers will as( the wholesalers" and the
wholesalers will as( the producers.
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+ good e!ample of a pull is the heavy advertising and promotion
of children/sL toys Q mainly on television. onsider the recent DD
promotional campaign for its new pre-school programme Q the
im#les. +imed at two to four-year-olds" 13? episodes of im#les
have #een made and are featured everyday on digital children/schannel Dee#ies and DD2.
+s part of the promotional campaign" the DD has agreed a deal
with toy ma(er isher-'rice to mar(et products #ased on the
show" which it hopes will emulate the popularity of the Tweenies.
nder the terms of the deal" isher-'rice will develop"
manufacture and distri#ute a range of im#les products including
soft" plastic and electronic learning toys for the and reland.
n 2??1" DD $orldwide 9the commercial division of the DD:
achieved sales of R>?m from its children/s #rands and properties
last year. The demand created from #roadcasting of the im#les
and a maor advertising campaign is li(ely to MpullN demand from
children and encourage retailers to stoc( im#les toys in the
stores for hristmas 2??2.
ro$o%#o!a& $#9 &$!%' :-+ #usiness/ total mar(eting communications programme is called
the ,promotional mi!, and consists of a #lend of advertising"
personal selling" sales promotion and pu#lic relations tools. n this
revision note" we descri#e the four (ey elements of the
promotional mi! in more detail.
t is helpful to de&ne the four main elements of the promotional
mi! #efore considering their strengths and limitations.
=1) A/"r%#'#!+
+ny paid form of non-personal communication of ideas or
products in the ,prime media,0 i.e. television" newspapers"
magaBines" #ill#oard posters" radio" cinema etc. +dvertising is
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intended to persuade and to inform. The two #asic aspects of
advertising are the message 9what you want your communication
to say: and the medium 9how you get your message across:
=5) Pr'o!a& S&&#!+
8ral communication with potential #uyers of a product with the
intention of ma(ing a sale. The personal selling may focus initially
on developing a relationship with the potential #uyer" #ut will
always ultimately end with an attempt to ,close the sale,.
=6) Sa&' Pro$o%#o!
'roviding incentives to customers or to the distri#ution channel to
stimulate demand for a product.
=<) P.&#c#%2
The communication of a product" #rand or #usiness #y placing
information a#out it in the media without paying for the time or
media space directly. otherwise (nown as ,pu#lic relations, or 'H.
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A/"a!%a+' a!/ D#'a/"a!%a+' o( Eac*E&$!% o( %* Pro$o%#o!a& M#9
Mix Element (dvantages Disadvantages
(dvertising
6ood for building awareness
@ffectie at reaching a wide audience
Aepetition of main brand and product positioning helps build customer trust
+mpersonal - cannot answer all a
customers questions
ot good at getting customers tomake a final purchasing decision
"ersonal Selling
5ighly interactie - lots ofcommunication between the buyer and
seller
@"cellent for communicating
comple" > detailed product information
and features
Aelationships can be built up -
important if closing the sale make take
a long time
)ostly - employing a sales force hasmany hidden costs in addition to
wages
ot suitable if there are thousands
of important buyers
Sales "romotion
)an stimulate quick increases in sales
by targeting promotional incenties on particular products
6ood short term tactical tool
+f used oer the long-term,
customers may get used to the effect
Too much promotion may damagethe brand image
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"ublic )elations
?ften seen as more BcredibleB - since
the message seems to be coming from
a third party &e.g. maga%ine,newspaper'
)heap way of reaching many
customers - if the publicity is achieed
through the right media
Aisk of losing control - cannot
always control what other people
write or say about your product
>) ANAYLYSE THE ADDITIONALELEMNTS OF EXTENDED
MARKETING MIX:-
=T* < P?' o( Mar4%#!+)
ar(eting decisions generally fall into the following four
controlla#le categories0
Pro/.c%
Pr#c
P&ac =/#'%r#.%#o!)
Pro$o%#o!
The term ,mar(eting mi!, #ecame populariBed after Geil <.
Dorden pu#lished his 1>64 article" The Concept of the Marketing
Mix . Dorden #egan using the term in his teaching in the late
1>4?/s after Fames ulliton had descri#ed the mar(eting manager
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as a ,mi!er of ingredients,. The ingredients in Dorden/s mar(eting
mi! included product planning" pricing" #randing" distri#ution
channels" personal selling" advertising" promotions" pac(aging"
display" servicing" physical handling" and fact &nding and
analysis. E. Ferome carthy later grouped these ingredients intothe four categories that today are (nown as the 4 '/s of
mar(eting" depicted #elow0
T* Mar4%#!+ M#9
These four '/s are the parameters that the mar(eting manager
can control" su#ect to the internal and e!ternal constraints of the
mar(eting environment. The goal is to ma(e decisions that center
the four '/s on the customers in the target mar(et in order tocreate perceived value and generate a positive response.
Pro/.c% Dc#'#o!'
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The term ,product, refers to tangi#le" physical products as well as
services. <ere are some e!amples of the product decisions to #e
made0
Drand nameunctionality
=tyling
Suality
=afety
'ac(aging
Hepairs and =upport
$arranty
+ccessories and services
Pr#c Dc#'#o!'
=ome e!amples of pricing decisions to #e made include0
'ricing strategy 9s(im" penetration" etc.:
=uggested retail price
7olume discounts and wholesale pricing
ash and early payment discounts
=easonal pricing
Dundling
'rice *e!i#ility
'rice discrimination
D#'%r#.%#o! =P&ac) Dc#'#o!'
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Iistri#ution is a#out getting the products to the customer. =ome
e!amples of distri#ution decisions include0
Iistri#ution channels
ar(et coverage 9inclusive" selective" or e!clusive distri#ution:
=peci&c channel mem#ers
nventory management
$arehousing
Iistri#ution centers
8rder processing Transportation
Heverse logistics
Pro$o%#o! Dc#'#o!'
n the conte!t of the mar(eting mi!" promotion represents the
various aspects of mar(eting communication" that is" the
communication of information a#out the product with the goal ofgenerating a positive customer response. ar(eting
communication decisions include0
'romotional strategy 9push" pull" etc.:
+dvertising
'ersonal selling K sales force
=ales promotions
'u#lic relations K pu#licity
ar(eting communications #udget
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@)RECOMMEND MARKETING MIX FOR
TWO DIFFERENT SEGMENTS IN
CONSUMER MARKET:-
D$o+ra*#c S+$!%a%#o!
=ome demographic segmentation varia#les include0
+ge
ender
amily siBe
amily lifecycle
eneration0 #a#y-#oomers" eneration " etc.
ncome
8ccupation
Education
Ethnicity
Gationality
Heligion
=ocial class
Go+ra*#c S+$!%a%#o!
The following are some e!amples of geographic varia#les often
used in segmentation
Hegion0 #y continent" country" state" or even neigh#orhood
=iBe of metropolitan area0 segmented according to siBe of
population
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'opulation density0 often classi&ed as ur#an" su#ur#an" or rural
climate0 according to weather patterns common to certain
geographic regions
)EXPLAIN IN DIFFERENCES IN
MARKETING PRODUCTS AND SERVICES
TO ORGANISATIONS RATHER THAN
CONSUMERS :-
There are many dierences in mar(eting a product compared to aservice. 8ne dierence is that with a product" it is generally
something the consumer can touch. =ervices are more #ased on
creating an end result. +nother dierence that is normally found
in mar(eting a service compared to a product is the guarantee. t
is harder to guarantee a service" although it can #e done" while it
is fairly easy to guarantee a product. +nother #ig factor is cost.
'ricing products is easier than pricing services. or e!ample" one
copywriter may charge U25? for the service of writing a salesletter while another copywriter may charge U1?"??? to write a
sales letter. $hich service is #etter% $hat is the price #ased on%
<ow does one copywriter ustify charging U25? and the other
ustify charging U1?"???% t can #e #ased on e!perience and proof
of #eing a#le to generate the results the consumer wants. =ervice
is more psychological mar(eting.
ar(eting products and services to an orginiBation is dierent due
to the fact that those within an orginiBation are usually employees
of their assigned departments. This changes the atmosphere to
where you will #e using more facts and hard data to present in
your advertisement. $hile a visual element will still #e used" the
photography and artwor( usually will want to relate to the reward
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a orginiBation will receive for doing #usiness with the advertiser.
n an orginiBation value and necessity are core concepts you want
to implement.
$hen mar(eting to an orginiBation your segment will go into
department channels as well as will need to target and addressthe proper decision ma(ers.
onsumer products and services have a greater focus on creating
desires and needs in a more social and less formal fashion. <ard
facts may #e good to present to the consumer #ut a focus more
on simple functions and social status #ecome core concepts in the
consumer mar(et. Iemographics and (ey mar(et channels can #e
less comple! in the consumer mar(et. This in part is due to
technology in today/s media environment allowing #etterstatistics on segmented mar(eting channels.
B ) EXPLAIN HOW AND WHY
INTERNATIONAL MARKETING DIFFERSFROM DOMESTIC MARKET :-
Iomestic mar(eting is the mar(eting practices within a
mar(eter/s home country. oreign mar(eting is the domestic
operations within a foreign country 9i.e." mar(eting methods used
outside the home mar(et:. omparative mar(eting analytically
compares two or more countries/ mar(eting systems to identify
similarities and dierences.
nternational mar(eting studies the ,how, and ,why, a product
succeeds or fails a#road and how mar(eting eorts aect the
outcome. t provides a micro view of the mar(et at the company
level.
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ultinational" glo#al" and world mar(eting are all the same thing.
ultinational mar(eting treats all countries as the world mar(et
without designating a particular country as domestic or foreign.
+s such" a company engaging in multinational mar(eting is a
corporate citiBen of the world" whereas international mar(etingimplies the presence of a home #ase. <owever" the su#tle
dierence #etween international mar(eting and multinational
mar(eting is pro#a#ly insigni&cant in terms of strategic
implications.
Po& I! E"r2 Na%#o! D#,r
+s any mar(eting student can tell you" the mar(et segment of the
nited =tates is dependent on many dierent factors" including
demographic and psychographic characteristics and #uying
#ehaviors. Each of these types of characteristics change from
nation to nation so mar(eting that doesn/t also change is doomed
to fail.
ood glo#al mar(eting considers these characteristics and how
they change what people want" need" and will #uy. Eective
glo#al mar(eting campaigns alter mar(eting strategies" tactics"and messages to match the people in each nation.
D$o+ra*#c C*arac%r#'%#c' C*a!+ 72
Na%#o!'
8nce you move #eyond mar(eting in the nited =tates" each
country is de&ned #y a dierent history and culture. Thus"
mar(eting to the same generation diers. or e!ample" what an
1C-year-old in the nited =tates wants" diers greatly from what
an 1C-year-old in =udan wants.
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P'2c*o+ra*#c C*arac%r#'%#c' Ar
A,c%/ 72 C.&%.r
+ maor part of the concept of mar(eting segments is
psychographic characteristics. These also #e dier across the
nations. Every single culture on Earth has its own morals" values
and culture" and that means dierent cultures will put dierent
pressures on their citiBens.Gorth orea puts the pressure of
following the ,lorious ;eader, on its citiBens" while Dritain is very
dierent. $hat one culture wants is very dierent from what
another culture considers accepta#le.8ver time" what a culture
considers to #e accepta#le changes. 8nce mar(eters focused on
women as #eing only housewives. n some countries that is still
accepta#le" and mar(eters still focus on that segment and
attitude. Dut in many nations" mar(eters no longer portray women
in that way.
7.2#!+ Por A!/ Ha#%' Var2
Throughout world mar(ets" people #uy dierently #ecause of
dierent #uying #ehaviors that have #een aected #y what theyneed" what they can #uy and how much money they have. 'eople
with more spending power have very dierent #uying ha#its from
those with less money to spend. This is true across the world and
within nations.
urthermore" people/s #uying ha#its change. or e!ample" in
Europe people #uy their food fresh for the meals they are having
that day" while in Gorth +merica" they #uy what they need for a
month at a time" and freeBe it or store it.
Gorth +mericans don/t want to (eep going out to #uy food"
Europeans don/t want to eat froBen food.
REFRENCES:-
3A
7/18/2019 Identify and Explain Macro and Micro Envoirmental Factors Which Influence Makreting Decesions
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http://www.learnmarketing.net/microenvironment.htm
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nceVtheVchoiceVofVtargetingVstartegiesWi!BB1SC48;r
http0PPeBinearticles.comP%=ustaining-ompetitive-
+dvantageKidX224?66>
http0PPwww.netm#a.comPmar(etingPpricingP
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http0PPwww.ehow.comPa#outV5561422Vtypes-pricing-strategies-
mar(eting.htmlWi!BB1lvi4Dt2
http://tutor2u.net/business/marketing/promotion_mix.asp
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http0PPwww.netm#a.comPmar(etingPmar(etPsegmentationP
http0PPwi(i.answers.comPSP<owVar(etingVproductsVandVservicesV toVorganisationVdiersVfromVmar(etingVproductsVandVservicesVto
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http0PPwi(i.answers.comPSPIistinguishVinternationalVmar(etingVfro
mVdomesticVmar(etingWi!BB1nh$oe
Co!%9% :-
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