Service Marketing Environment and Other Factors Affecting Marketing Environment

SERVICE MARKETING ENVIRONMENT AND OTHER FACTORS AFFECTING MARKETING
ENVIRONMENT
CHAPTER-1
INTRODUCTION
1.1 INTRODUCTION TO SERVICE MARKETING
ENVIRONMENT
The world economy nowadays is increasingly characterized as a service economy. This is
primarily due to the increasing importance and share of the service sector in the economies of
most developed and developing countries. In fact, the growth of the service sector has long
been considered as indicative of a countrys economic progress.
Economic history tells us that all developing nations have invariably experienced a shift from
agriculture to industry and then to the service sector as the main stay of the economy.
This shift has also brought about a change in the definition of goods and services themselves.
No longer are goods considered separate from services. Rather, services now increasingly
represent an integral part of the product and this interconnectedness of goods and services is
represented on a goods-services continuum.
The American Marketing Association defines services as - Activities, benefits and
satisfactions which are offered for sale or are provided in connection with the sale of goods.
Services marketing is a sub field of marketing, which can be split into the two main areas of goods
marketing (which includes the marketing of fast moving consumer goods (FMCG) and durables) and
services marketing. Services marketing typically refers to both business to consumer (B2C) and business to
business (B2B) services, and includes marketing of services like telecommunications services, financial
services, all types of hospitality services, car rental services, air travel, health care services and
professional services. The range of approaches and expressions of a marketing idea developed with the
hope that it be effective in conveying the ideas to the diverse population of people who receive it.
Services Marketing refers to the marketing of services as against tangible products.

As already discussed, services are inherently intangible, are consumed simultaneously at the
time of their production, cannot be stored, saved or resold once they have been used and
service offerings are unique and cannot be exactly repeated even by the same service
provider.

ENVIRONMENT
Marketing of services is a relatively new phenomenon in the domain of marketing, having

gained in importance as a discipline only towards the end of the 20th century.
Services marketing first came to the fore in the 1980s when the debate started on whether
marketing of services was significantly different from that of products so as to be classified as
a separate discipline. Prior to this, services were considered just an aid to the production and
marketing of goods and hence were not deemed as having separate relevance of their own.
The 1980s however saw a shift in this thinking. As the service sector started to grow in
importance and emerged as a significant employer and contributor to the GDP, academics and
marketing practitioners began to look at the marketing of services in a new light. Empirical
research was conducted which brought to light the specific distinguishing characteristics of
services.
By the mid 1990s, Services Marketing was firmly entrenched as a significant sub discipline
of marketing with its own empirical research and data and growing significance in the
increasingly service sector dominated economies of the new millennium. New areas of study
opened up in the field and were the subject of extensive empirical research giving rise to
concepts such as - the product-service spectrum, relationship marketing, franchising of
services, customer retention etc.
MEANING OF SERVICE
A service is the action of doing something for someone or something. It is largely intangible
(i.e. not material). You cannot touch it. You cannot see it. You cannot taste it. You cannot hear
it. You cannot feel it. So a service context creates its own series of challenges for the
marketing manager since he or she must communicate the benefits of a service by drawing
parallels with imagery and ideas that are more tangible.
Search quality is the perception in the mind of the consumer of the quality of the product
prior to purchase through making a series of searches. So this is simple in relation to a
tangible product because you might look at size or colour for example. Therefore search
quality relates more to products and services.

ENVIRONMENT
1.2 DEFINITION AND CHARACTERISTICS Of SERVICE

MARKETING
The American Marketing Association defines services as - Activities, benefits and
satisfactions which are offered for sale or are provided in connection with the sale of goods.
The defining characteristics of a service are:
Intangibility: Services are intangible and do not have a physical existence. Hence services
cannot be touched, held, tasted or smelt. This is most defining feature of a service and that
which primarily differentiates it from a product. Also, it poses a unique challenge to those
engaged in marketing a service as they need to attach tangible attributes to an otherwise
intangible offering.
1. Heterogeneity/Variability:
Given the very nature of services, each service offering is unique and cannot be
exactly repeated even by the same service provider. While products can be mass
produced and be homogenous the same is not true of services. eg: All burgers of a
particular flavor at McDonalds are almost identical. However, the same is not true of
the service rendered by the same counter staff consecutively to two customers.
2. Perishability:
Services cannot be stored, saved, returned or resold once they have been used. Once
rendered to a customer the service is completely consumed and cannot be delivered to
another customer. eg: A customer dissatisfied with the services of a barber cannot
return the service of the haircut that was rendered to him. At the most he may decide
not to visit that particular barber in the future
3. Inseparability/Simultaneity of production and consumption:
This refers to the fact that services are generated and consumed within the same time
frame. Eg: a haircut is delivered to and consumed by a customer simultaneously
unlike, say, a takeaway burger which the customer may consume even after a few
hours of purchase. Moreover, it is very difficult to separate a service from the service
3

ENVIRONMENT
provider. Eg: the barber is necessarily a part of the service of a haircut that he is
delivering to his customer.
4. Customers do not obtain ownership of services
5. Service products are ephemeral and cannot be inventoried
6. Intangible elements dominate value creation
7. Greater involvement of customers in production process
8. Other people may form part of product experience
9. Greater variability in operational inputs and outputs
10. Many services are difficult for customers to evaluate
11. Time factor is more important--speed may be key
12. Delivery systems include electronic and physical channels
1.3 MEANING OF SERVICE MARKETING & SERVICE

MARKETING ENVIRONMENT
SERVICE MARKETING
The promotion of economic activities offered by a business to its clients. Service marketing
might include the process of selling telecommunications, health treatment, financial,
hospitality, car rental, air travel, and professional services
SERVICE MARKETING ENVIRONMENT

The environment in which the services is delivered and where the firm and customer interact
CLASSIFICATION OF SERVICE MARKETING

1) By Market Segmentation
2) By Degree Of Tangibility
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ENVIRONMENT
3) By Skills Of The Service Provider

4) By Goals Of The Provider
5) By Degree Of Regulation
6) By Degree Of Labour Intensiveness
1.4 SIGNIFICANCE OF SERVICE MARKETING

ENVIRONMENT
Proper marketing of services contributes substantially to the process of development. If
innovative marketing principles are followed in services marketing, the socio-economic
transformation will take place at a much faster rate. In future, the service sector would
operate in a conducive environment offering great potential. If the opportunities are properly
utilised by the service sector, it will lead to an all round development of the economy. The
significance of the service economy may be discussed under the following headings:
1. Generation of employment opportunities
2. Optimum utilisation of resources
3. Capital formation
4. Increased standard of living
5. Use of environment-friendly technology.
Given the intangibility of services, marketing them becomes a particularly challenging and
yet extremely important task.
A key differentiator:
Due to the increasing homogeneity in product offerings, the attendant services provided are
emerging as a key differentiator in the mind of the consumers. Eg: In case of two fast food
chains serving a similar product (Pizza Hut and Dominos), more than the product it is the
service quality that distinguishes the two brands from each other. Hence, marketers can
leverage on the service offering to differentiate themselves from the competition and attract
consumers.
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ENVIRONMENT
Importance of relationships:
Relationships are a key factor when it comes to the marketing of services. Since the product
is intangible, a large part of the customers buying decision will depend on the degree to
which he trusts the seller. Hence, the need to listen to the needs of the customer and fulfill
them through the appropriate service offering and build a long lasting relationship which
would lead to repeat sales and positive word of mouth.
Customer Retention:
Given todays highly competitive scenario where multiple providers are vying for a limited
pool of customers, retaining customers is even more important than attracting new ones.
Since services are usually generated and consumed at the same time, they actually involve the
customer in service delivery process by taking into consideration his requirements and
feedback. Thus they offer greater scope for customization according to customer
requirements thus offering increased satisfaction leading to higher customer retention
.Generation of employment Opportunities
The components of the service sector are wide and varied. For example, the service sector
includes personal care services, education services, medicare services, communication
services, tourism services, hospitality services, banking services, insurance services,
transportation services, consultancy services, etc The organised and systematic development
of the service sector would create enormous employment opportunities. Application of
marketing principles in the I service sector is instrumental to the development of the
economy. However, it is appropriate to mention that India has not been successful in utilising
the potential of the service sector. As seen in Table 1.1, in USA about 80 per cent of job
opportunities are offered by the service sector compared to India's 60%. So, the significance
of the service sector lies in its capacity to create job opportunities. If the service sector is
properly developed, it will solve the problem of unemployment in India to a great extent.
After liberalisation policy, the service sector in India has been emerging as a dominant
component in the economy. .
Optimum Utilisation of Resources

6

ENVIRONMENT
India is bestowed with rich resources. Particularly, the human resources available in India
favour the growth of the service sector. While the labour content in most manufacturing
activities is dropping steadily with use of technology, the labour content in the service sector
is comparitively high. As India is rich in human resources, service sector can grow steadily.
Moreover, service sector offers excellent export opportunities too. In fact, the important
agenda of the World Trade Organisation (WTO) is opening up of market for services. So, by
exploiting these factors, India can maximise its services export. Though its performance in
the export of computer software is quite commendable already, it should concentrate on other
areas as well. Service firms such as personal care services, the entertainment services,
tourism services, hotel service contribute to the growth of the economy without consuming
any natural resources. In a sense, the growth of service firms of this kind conserve natural
resources. Thus, services marketing help conserve the valuable resources for future
generations.
Capital Formation
There are indications that Services will grow more rapidly in the near future. Economic,
social and political factors signal an expansion of the service sector. Investments and job
generations are far greater in the service sector compared to manufacturing. It is estimated
that telecom alone will account for an investment of Rs. 150,000 crores in the coming years.
Investment encourages capital formation. For the development of a - 2 - nation, the flow of
capital should be directed towards the most productive uses. If investments are made in the
service sector, it will contribute to the nation-building process. With increased developmental
activities, the per capita income increases which, in turn, facilitates capital formation.
Performance of profitable services can absorb higher investments, thereby accelerating the
rate of capital formation
Increasing the Standard of Living

The standard of living of the people in any country would be decided on the basis of quality
and standard of products consumed or services availed in the day-to-day living. Any
development is transparent only when the living conditions of the masses improve. When
compared with developed countries, the standard of living in India is far from satisfactory.
Standard of living cannot be improved by offering more opportunities for earnings. On the
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ENVIRONMENT
other hand, the standard of living is determined by the availability of goods and services for
citizens and a wise spending on them. The development of services industry is sure to
promote the standard of living of the people.
Use of Environment-friendly Technology:

Now-a-days, almost all services are found technology-driven. Developed countries are
making full use of latest technology while rendering services. Technologies used by service
generating organisations such banks, insurance companies, tourism, hotel services, ,
mmunicatiW1 services. and. education services are not detrimental in any way to the
environment. On the contrary, technologies used in manufacturing organisations may have
harmful effects on the environment. So, services industry do not pollute the environment
which is indeed laudable.

ENVIRONMENT
CHAPTER -2
SERVICE MARKETING ENVIRONMENT
2.1 SERVICE MARKETING ENVIRONMENT
All organizations operate within the marketing environment. The marketing environment is
made up of two parts
Micro environment
Macro environment

ENVIRONMENT
Micro Environment
The micro environment is the internal environment of the organization .The factors to be
analyzed in the internal environment will include the following
1Company management structure

2Customers
3 Suppliers
4 Channel members
5 Competitors
6 Other publics which may include
7 Government and political bodies
8 Pressure groups
9 Financial institutions
10 Shareholders
In effect any person or organization which can influence the companys marketing activities
and marketing success in way should be included here. The list is not absolutely
comprehensive as individual organizations may need to consider special influences.
. The political legal , economic , social and technological forces exert the same type of
services as they do on products ; however certain environment features have a greater impact
on service
Macro Environment
The macro environment represents all the outside influences which have impact on an
organizations marketing or business activity. It includes economic and political factors and
socio-cultural trends, for example the external environment influences will effect all
organizations within a sector to a greater or lesser degree. The internal environment relates to
a particular organization and its publics.
10

ENVIRONMENT
The environmental factors are :

1. Political legal environment
2.Economic environment
3.Socio-cultural environment
4.Technological environment
1. Political Legal Environment
There is considerable influence of the political legal environment on service marketing .
Service industries are often more closely regulated than most other forms of private
enterprise. Many service firms are being subject to government regulations in addition to the
usual taxes and legislation. Service providers must understand and recognize the impact of
such regulation on their competitive strategies.
Regulation generally influences service business in four ways.
Regulation generally influences the range and type of competition.
Regulation reduces the marketers array of options and introduces certain rigidities into the
marketing process.
Decision of the regulatory agencies being the binding part of the marketing decision
making process must be focused at understanding and predicting those agencies action
Pressure groups may be established to lobby and effect change or modify , the directions
being taken by the regulatory bodies.
2. Economic Environment
In economic environment changing life style , changing world ,changing economies and
changing technological advances and changing consumer needs have contributed to increase
spending on consumer services. Technological innovations have also helped to create a higher
standard of living for a common man, who presently spends a larger portion of his or her
increased disposable income of services.But the. role of technology has also aided in
circumventing barriers to trade , especially in its role in designing and delivering services.
The urbanization has widened the demand for personal and public services . The
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ENVIRONMENT
demographic shift towards an older population in some countries has resulted in new service
demands such as better healthcare , convenience products etc. In the global environment , due
to cross country cultural issues , trade barrier ( both tariff and non-tariff) tend to become more
restrictive in marketing of services.
3. Socio-Cultural Environment
Socio- cultural forces are set factors including life style , social values and beliefs that affect
the marketing activities of an organization. These factors have significant impact on the
marketing of services . The marketers have found the intensive use of consultants and
counselors in their personal family and working lives. Health, Beauty, travel, culture, and
higher education have partly replaced durable goods as status. symbols in the mind of many
consumers . There had been an increasing trend in the services like security , insurance, legal,
medical and investment. Globally , the cultural dimensions affect services in a more
pronounced manner than do goods. Due to inseparability characteristic of services the firms
may need to adapt their offerings to suit local taste and preferences . KFC and McDonalds
had to adapt its products in India to suit local polates. Business negotiations are very much
subject to local norms and local systems. Language is a major cultural influence
4.Technological Environment
Technology has influenced our life styles, consumption pattern and our economic well being
tremendously. Just think of internet , worldwide web (www) , E-commerce , video
conferencing. World has become too small and boundary less. The service economies will be
technologically driven soon. Instead of expecting service providers to improve results ;
management must see what kind of organizational structure , incentives , technology and
skills can improve overall productivity
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ENVIRONMENT
ENVIRONMENT FOR SERVICE MARKETING

ENVIRONMENT FOR SERVICE MARKETING
INTERNAL MARKETING ENVIRONMENT
Internal marketing describes the programmes that instil and maintain a strong service
mentality in the mindset of employees. Most of the employees in an organisation serve the
external customer. The efforts of all of them should be coordinated to serve the customers
well. Customer-service heavily depends upon the service employees. Internal marketing
addresses those employees who act as an internal market within an organisation. Employees
are given the status of 'customers' with the same level of importance attached to the external
customers. So, customer satisfaction can be guaranteed only by satisfying the employees
(internal customers). In addition to their external marketing plans and strategies, service
organisations pay a lot of attention to their internal marketing programmes. The importance of
internal marketing is evident from the statement of Jan Car/zon. "If you don't serve customers
you better serve somebody else in the organisation"
DEFINITION OF INTERNAL MARKETING

The following are some important definitions offered for the term internal marketing.
I. "The means of applying the philosophy and marketing to people who serve the external
customers so that; (a) the best possible people can be employed and retained; and (b) they do
the best possible work". - Berry
2. "The term internal marketing has been coined to characterise the set of activities a firm
must undertake to woo and win over the hearts and minds of its employees to achieve service
excellence".
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ENVIRONMENT
Objectives Of Internal Marketing

According to Gronroos, there are three objectives of internal marketing. (Figure
12.1)
Objectives of internal marketing
Overall objectives
Tactical level objectives
Strategic level objectives
The overall objectives of internal marketing is to create customer conscious and careoriented personnel. Internal marketing has strategic objectives to create an internal
environment that supports the customer conscious personnel. Internal marketing works
through supportive management methods, personnel policy internal trading policy and
planning and control procedures. The tactical level objectives related to sale of services,
supporting services, campaigns and single marketing efforts to the employees are based on the
following principles:
(i)
(ii)
The personnel in a service organisation constitute its primary market

The employees are expected to understand their role in creating customer satisfaction
(iii)
and actively supporting a given service.

The employees should follow the policies and procedures laid down by the company
(iv)
in order to support the services needed for custom contact.

The service organisation should launch all service schemes only aft, getting the full
(v)
acceptance of customers.
Internal marketing calls for an internal information channel i. e., personal selling is
required internally.
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ENVIRONMENT
EXTERNAL MARKETING ENVIRONMENT

External marketing is directed at those individuals and groups that buy goods and services
from an organisation. External marketing involves traditional marketing efforts such as
market research, personal selling, advertising, direct mail, sales promotion, pricing and public
relations. The organisation makes promises which correspond with the personal needs and
wishes of the target group of customers. External marketing helps to build the customer's
understanding of the quality of service an organisation can deliver. The service provider
should understand the needs of the customer. This necessitates segmentation of the market on
a suitable basis - demographic, psychographic or usage pattern. Having identified the service
market, the organisation finds suitable ways to compete in that segment. This is achieved by
designing an appropriate marketing mix. The concept of external marketing differs from the
concept of internal marketing
DIFFERENCE BETWEEN INTERNAL AND EXTERNAL

MARKETING ENVIRONMENT
External marketing
Internal marketing
Environment
Environment
There is interaction between the organisation There is interaction between the organisation
and customers.
and its employees
Customers influence the operations of the Management plays a crucial role in finalising
organization
tasks and directing employees
Organisation makes promises to its customers Internal marketing enables the employees to
fulfill the promises made during external
marketing
Customers derive benefits from the service Employees
offering
External
marketing
aims
at
derive
benefits
from
compensation plan adopted by the company.

achieving Internal marketing increases job satisfaction
customer satisfaction
among employees.
Demand from customers fluctuates as there Feedback is obtained
from
employees.
are frequent changes in the needs of Training and appraisal of employees are
customers.
suitably adopted.
Market research is conducted on customer Needs of employees are not at al1 fluctuating.
trends, competitors' strategy etc., in the The genuine requirements of the employees
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ENVIRONMENT
market.
In external marketing, promotion mix consists Promotional
of advertising, sales promotion, publicity, etc
aspects
consist
of
salary
increases, awards, recognition given to the

employees
External
marketing
focuses
on
quality, Internal marketing pays attention to values,
cultural and social factors, standards of living attitudes, beliefs and personalities of service
and the needs and wants of
employees. customers
It requires feedback and control.
It requires vision and planning.
External marketing pays attention to good Counselling is given to employees to tone up
public relations.
Relationship" is the focal point
Operations in external markets
HR skills
"Partnership" is the focal point.
are Relationship with employees is constrained
constrained by trends, fashions and money by available resources and other institutional
power.
factors.
5 External marketing focuses on operational Strategic and tactical levels are in focus.
levels.
Retention of customers is critical
Retention of employees is critical.
Target groups are individual and Institutional Target groups are employees.
customers.
Customers are offered incentives in the form Incentives may be financial and nonfinancial;
of discounts, premiums, gifts and contests, etc bonus, commission, free housing facilities,
free medical facilities, etc
2.2SERVICE MARKETING TRIANGLE

Services marketing is about promises. Promises are made and promises are kept to customers.
Service triangle is the strategic framework which "reinforces the importance of people in the
ability of firms to keep their promises and succeed in building customer relationships" - (MJ.
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ENVIRONMENT
Bitner) A services triangle is made up of three types of marketing, namely I. External

marketing 2. Interactive marketing and 3. Internal marketing.
Figure 12.2 - Services Triangle The triangle shows three interlinked groups that work together
to develop, promote and deliver services. The key players are company, customers and the
providers. Providers can be employees of the firm, subcontractors or outsourced entities who
actually deliver the company's services. External marketing sets up customers' expectations
and makes promises to customers. In interactive marketing or real-time marketing, promises
are kept by the firms' employees, subcontractors or agents (service providers). If promises are
not kept, customers become dissatisfied and may switch firms. Internal marketing consists of
the activities that management engages itself in order to aid the providers to deliver on the
service promise - recruiting, training motivating and rewarding. All the three sides of the
triangle should be properly aligned. They work together to ensure what is promised through
the external marketing is delivered. To achieve this, the enabling activities should be aligned
with the role of service providers.
2.3SERVICE MARKETING MIX
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ENVIRONMENT
The 7 Ps of Services Marketing

The first four elements in the services marketing mix are the same as those in the traditional
marketing mix. However, given the unique nature of services, the implications of these are
slightly different in case of services.
1. Product: In case of services, the product is intangible, heterogeneous and
perishable. Moreover, its production and consumption are inseparable. Hence, there is
scope for customizing the offering as per customer requirements and the actual
customer encounter therefore assumes particular significance. However, too much
customization would compromise the standard delivery of the service and adversely
affect its quality. Hence particular care has to be taken in designing the service
offering.
2. Pricing: Pricing of services is tougher than pricing of goods. While the latter can be
priced easily by taking into account the raw material costs, in case of services
attendant costs - such as labor and overhead costs - also need to be factored in. Thus a
restaurant not only has to charge for the cost of the food served but also has to
calculate a price for the ambience provided. The final price for the service is then
arrived at by including a mark up for an adequate profit margin.
3. Place: Since service delivery is concurrent with its production and cannot be stored or
transported, the location of the service product assumes importance. Service providers
have to give special thought to where the service would be provided. Thus, a fine dine
restaurant is better located in a busy, upscale market as against on the outskirts of a
city. Similarly, a holiday resort is better situated in the countryside away from the rush
and noise of a city.
4. Promotion: Since a service offering can be easily replicated promotion becomes
crucial in differentiating a service offering in the mind of the consumer. Thus, service
providers offering identical services such as airlines or banks and insurance
companies invest heavily in advertising their services. This is crucial in attracting
customers in a segment where the services providers have nearly identical offerings.
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ENVIRONMENT
We now look at the 3 new elements of the services marketing mix - people, process and
physical evidence - which are unique to the marketing of services.
5. People: People are a defining factor in a service delivery process, since a service is
inseparable from the person providing it. Thus, a restaurant is known as much for its
food as for the service provided by its staff. The same is true of banks and department
stores. Consequently, customer service training for staff has become a top priority for
many organizations today.
6. Process: The process of service delivery is crucial since it ensures that the same
standard of service is repeatedly delivered to the customers. Therefore, most
companies have a service blue print which provides the details of the service delivery
process, often going down to even defining the service script and the greeting phrases
to be used by the service staff.
7. Physical Evidence: Since services are intangible in nature most service providers
strive to incorporate certain tangible elements into their offering to enhance customer
experience. Thus, there are hair salons that have well designed waiting areas often
with magazines and plush sofas for patrons to read and relax while they await their
turn. Similarly, restaurants invest heavily in their interior design and decorations to
offer a tangible and unique experience to their guests
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ENVIRONMENT
CHAPTER-3
FACTORS AFFECTING MARKETING ENVIRONMENT
Introduction:
A variety of environmental forces influence a companys marketing system. Some of them
are controllable while some others are uncontrollable. It is the responsibility of the marketing
manager to change the companys policies along with the changing environment.
According to Philip Kotler, A companys marketing environment consists of the internal
factors & forces, which affect the companys ability to develop & maintain successful
transactions & relationships with the companys target customers.
The Environmental Factors may be classified as:

1. Internal Factor
2. External Factor
External Factors may be further classified into:

External Micro Factors & External Macro Factors
Companys Internal Environmental Factors:

A Companys marketing system is influenced by its capabilities regarding production,
financial & other factors. Hence, the marketing management/manager must take into
consideration these departments before finalizing marketing decisions. The Research &
Development Department, the Personnel Department, the Accounting Department also have
an impact on the Marketing Department. It is the responsibility of a manager to companyordinate all department by setting up unified objectives.
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ENVIRONMENT
External Micro Factors:

1. Suppliers:
They are the people who provide necessary resources needed to produce goods &
services. Policies of the suppliers have a significant influence over the marketing
managers decisions because, it is laborers, etc. A company must build cordial & longterm relationship with suppliers.
2. Marketing Intermediaries:
They are the people who assist the flow of products from the producers to the consumers;
they include wholesalers, retailers, agents, etc. These people create place & time utility. A
company must select an effective chain of middlemen, so as to make the goods reach the
market in time. The middlemen give necessary information to the manufacturers about the
market. If a company does not satisfy the middlemen, they neglect its products & may
push the competitors product.
3. Consumers:
The main aim of production is to meet the demands of the consumers. Hence, the
consumers are the center point of all marketing activities. If they are not taken into
consideration, before taking the decisions, the company is bound to fail in achieving its
objectives. A companys marketing strategy is influenced by its target consumer. Eg: If a
manufacturer wants to sell to the wholesaler, he may directly sell to them, if he wants to
sell to another manufacturer, he may sell through his agent or if he wants to sell to
ultimate consumer he may sell through wholesalers or retailers. Hence each type of
consumer has a unique feature, which influences a companys marketing decision.
4. Competitors:
A prudent marketing manager has to be in constant touch regarding the information
relating to the competitors strategies. He has to identify his competitors strategies, build
his plans to overtake them in the market to attract competitors consumers towards his
products.
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ENVIRONMENT
Any company faces three types of competition:

a) Brand Competition:
It is a competition between various companies producing similar products. Eg: The
competition between BPL & Videcon companies.
b) The Product Form Competition:

It is a competition between companies manufacturing products, which are substitutes
to each other Eg: Competition between coffee & Tea.
c) The Desire Competition:

It is the competition with all other companies to attract consumers towards the
company. Eg: The competition between the manufacturers of TV sets & all other
companies manufacturing various products like automobiles, washing machines, etc.
Hence, to understand the competitive situation, a company must understand the nature
of market & the nature of customers. Nature of the market may be as follows:
I. Perfect Market
II. Oligopoly
III. Monopoly
IV. Monopolistic Market
V. Duopoly
5. Public:
A Companys obligation is not only to meet the requirements of its customers, but also to
satisfy the various groups. A public is defined as any group that has an actual or potential
ability to achieve its objectives. The significance of the influence of the public on the
company can be understood by the fact that almost all companies maintain a public
relation department. A positive interaction with the public increase its goodwill
irrespective of the nature of the public. A company has to maintain cordial relation with
all groups, public may or may not be interested in the company, but the company must be
interested in the views of the public.
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ENVIRONMENT
Public may be various types. They are:

a. Press:
This is one of the most important group, which may make or break a company. It
includes journalists, radio, television, etc. Press people are often referred to as
unwelcome public. A marketing manager must always strive to get a positive
coverage from the press people.
b. Financial Public:
These are the institutions, which supply money to the company. Eg: Banks, insurance
companies, stock exchange, etc. A company cannot work without the assistance of
these institutions. It has to give necessary information to these public whenever
demanded to ensure that timely finance is supplied.
c. Government:
Politicians often interfere in the business for the welfare of the society & for other
reasons. A prudent manager has to maintain good relation with all politicians
irrespective of their party affiliations. If any law is to be passed, which is against the
interest of the company, he may get their support to stop that law from being passed in
the parliament or legislature.
d. General Public:
This includes organisations such as consumer councils, environmentalists, etc. as the
present day concept of marketing deals with social welfare, a company must satisfy
these groups to be successful.
External Macro Environment:

These are the factors/forces on which the company has no control. Hence, it has to frame its
policies within the limits set by these forces:
1. Demography Factor:
It is defined as the statistical study of the human population & its distribution. This is one
of the most influencing factors because it deals with the people who form the market. A
23

ENVIRONMENT
company should study the population, its distribution, age composition, etc before
deciding the marketing strategies. Each group of population behaves differently
depending upon various factors such as age, status, etc. if these factors are considered, a
company can produce only those products which suits the requirement of the consumers.
In this regard, it is said that to understand the market you must understand its
demography.
2. Economic Factors :
A company can successfully sell its products only when people have enough money to
spend. The economic environment affects a consumers purchasing behavior either by
increasing his disposable income or by reducing it. Eg: During the time of inflation, the
value of money comes down. Hence, it is difficult for them to purchase more products.
Income of the consumer must also be taken into account. Eg: In a market where both
husband & wife work, their purchasing power will be more. Hence, companies may sell
their products quite easily.
3. Physical Environment or Natural Forces:

A company has to adopt its policies within the limits set by nature. A man can improve
the nature but cannot find an alternative for it.
Nature offers resources, but in a limited manner. A product manager utilizes it efficiently.
Companies must find the best combination of production for the sake of efficient
utilization of the available resources. Otherwise, they may face acute shortage of
resources. Eg: Petroleum products, power, water, etc.
4. Technological Factors:
From customers point of view, improvement in technology means improvement in the
standard of living. In this regard, it is said that Technologies shape a Persons Life.
Every new invention builds a new market & a new group of customers. A new technology
improves our lifestyle & at the same time creates many problems. Eg: Invention of
various consumer comforts like washing machines, mixers, etc have resulted in
improving our lifestyle but it has created severe problems like power shortage.
24

ENVIRONMENT
Eg: Introduction to automobiles has improved transportation but it has resulted in the
problems like air & noise pollution, increased accidents, etc. In simple words, following
are the impacts of technological factors on the market:
a) They create new wants
b) They create new industries
c) They may destroy old industries
d) They may increase the cost of Research & Development.
5. Social & Cultural Factors :

Most of us purchase because of the influence of social & cultural factors. The lifestyle,
values, believes, etc are determined among other things by the society in which we live.
Each society has its own culture. Culture is a combination of various factors which are
transferred from older generations & which are acquired. Our behaviour is guided by our
culture, family, educational institutions, languages, etc.
The society is a combination of various groups with different cultures & subcultures.
Each society has its own behavior. A marketing manager must study the society in which
he operates.
Consumers attitude is also affected by their society within a society, there will be various
small groups, each having its own culture.
Eg: In India, we have different cultural groups such as Assamese, Punjabis, Kashmiris,
etc. The marketing manager should take note of these differences before finalizing the
marketing strategies.
Culture changes over a period of time. He must try to anticipate the changes new
marketing opportunities
25

ENVIRONMENT
SOME OTHER FACTORS AFFECTING MARKET

ENVIRONMENT
Customers
As all businesses need customers, they should be Centred (Orientated) around customers. The
firm's marketing plan should aim to attract and retain customers through products that meets
their "wants and needs" and excellent customer service.
Employees
Employing staff with relevant skills and experience is essential. This process begins at
recruitment stage and continues throughout an employee's employment via ongoing training
and promotion opportunities. Training and development play a critical role in achieving a
competitive edge; especially in Service Sector Marketing. If a business employs staff without
motivation, skills or experience it will affect customer service and ultimately sales.
Suppliers
Suppliers provide businesses 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 product quality. An
increase in raw material prices will affect an organisation'sMarketing Mix strategy and may
even force price increases. Close supplier relationships are an effective way to remain
competitive and secure quality products.
Shareholders
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 public shareholders want a return from the money they
have invested in the company. Shareholder pressure to increase profits will affect
organisational strategy. Relationships with shareholders need to be managed carefully as
rapid short term increases in profit could detrimentally affect the long term success of the
business.
26

ENVIRONMENT
Media
Positive media attention can make an organisation (or its products) and negative media
attention can break an organisation. Organisations need to mange the media so that the
media help promote the positive things about the organisation and reduce the impact of a
negative event on their reputation. Some organisations will even employ public relations (PR)
consultants to help them manage a particular event or incident.
Consumer television programmes with a wide and more direct audience can also have a very
powerful impact on the success of an organisation. Some businesses recognise this and will
change their reaction when consumers mention that they are going to contact a consumer
television programme or the newspapers about the business.
Competitors
The name of the game in marketing is differentiation. Can the organisation offer benefits that
are better than those offered by competitors? Does the business have a unique selling point
(USP)? Competitor analysis and monitoring is crucial if an organisation is to maintain or
improve its position within the market. If a business is unaware of its competitor's activities
they will find it very difficult to beat their competitors. The market can move very quickly
for example through a change in trading conditions, consumer behaviour or technological
developments. As a business it is important to examine competitors' responses to these
changes so that you can maximise the impact of your response.
27

ENVIRONMENT
CHAPTER-4
SUGGESTIONS &RECOMMENDATIONS
services marketing researchers will need to focus on customer's needs, attitudes. values and
behaviours. Customer research will help in understanding and anticipating customer needs
that can be met through product development or through differentiation. There is tremendous
scope for further research anlong bank customers and staff in Kerala, the state with highest
literacyacy and banking habits. It will enable monitoring of customer satisfaction with
personal service and with automated service-delivery methods in order to pinpoint areas
where service quality can be enhanced. Internal marketing will also be challenged to use
technology to more precisely identify and segment markets and prospects that can be targeted
with a special offer.
28

ENVIRONMENT
CHAPTER-5
CONCLUSION
The analysis above highlights the importance of understanding various environmental factors.
It is clear that macro and micro environmental factors have a direct impact on how an
organisation conducts business. From a recommendations point of view it is important to
highlight that firms must understand the macro environmental factors such as politics, social
behaviour, legal requirements and the economic state of a country as these are directly linked
to a businesss performance. Furthermore organisations need to understand the importance of
micro environmental factors which determine the competition level in the industry, the firms
ability to operate in the market and the consumer perception of the organisation in question.
By developing a marketing strategy that keeps in context all of the environmental factors an
organisation can enhance in position in the market and hence develop products most suited
for its core audience. This enables the firm to not only strengthen its position in the market
but
also
enhances
its
long
term
sustainability
in
the
industry
One factor can be part of a firm's micro environment and macro environment. The media can
be used to illustrate this:
- A one off media story about the firm may affect daily operations and will therefore be part
of the firm's micro environment;
- Whilst a general desire to avoid a negative media story may influence a firm's long term
business operations and therefore make up the firm's macro environment.
Firms should not concern themselves too much about which of the three categories a factor
fits into. Instead firms should ensure that they have correctly identified all of the factors
which make up their marketing environment and plan how to manage them for the firm's
benefit
29

ENVIRONMENT
CHAPTER-6
BIBLIOGRAPHY
WEBSITES
www.investopedia.com
www.economictimes.com
www.google.com
ARTICLES &JOURNALS
Levitt, T., (1981), Marketing Intangible Products and Product Intangibles
, Harvard Business Review, MayJune, pp. 94-102. Lovelock, C.H., (1983),
Classifying Services to Gain Strategic Marketing Insights,
Journal of Marketing, Vol. 47, Summer, pp. 9-20.
Shostack, L.G., (1977), Breaking Free from Product Marketing
, Journal of Marketing, Vol. 41, April, pp. 73- 80. Zeithaml, V.A.,
Parasuraman, A. and Berry, L., (1985),
Problems and Strategies in Services Marketing, Journal of Marketing, Vol.
49, Spring, pp. 33-46.
Kotler, Armstrong, Philip, Gary. Principles of Marketing. pearson education.
Jump up^ Kotler, Phillip and Gary Armstrong(2006), Principles of Marketing
(Version 12/E). Pearson Education Inc. New Jersey
30

ENVIRONMENT
31

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SERVICE MARKETING ENVIRONMENT AND OTHER FACTORS AFFECTING MARKETING

Services Marketing refers to the marketing of services as against tangible products.