Q8 .

Discuss the Components of marketing environment of a firm

Ans :- It includes various definitions like:

1. “A firm’s marketing environment includes all the factors and forces outside marketing that affect
marketing management’s ability to maintain or develop successful transactions with its target
customers.” – By Philip Kotler.

2. “A marketing manager must analyze customer needs and select marketing strategy variables within
the framework of the marketing environment and how it is varying or changing”. – By E. J. Mc Carthy.

Components of Marketing Environment:

The marketing environment can be categorized into tw0 different parts:

(i) Micro Marketing Environment

(ii) Macro Marketing Environment

1. Micro Marketing Environment:

This type of marketing environment consists of the factors that influence marketing activities directly.
The factors or forces are controllable in nature. These controllable factors are covered as under:

(i) Market Intermediaries:

Market intermediaries are like middlemen, (i.e., retailers, wholesalers, agents, etc) distributing agencies.
Financial institutions and market service agencies who come to aid of the company in promoting,
distributing, and selling of goods to the ultimate consumers or buyers.

These intermediaries directly affect marketing decisions.

(ii) Suppliers:

The single peoples or firms who provide resources for the production of goods and services are called
suppliers.

The business firm should go for developing specifications, analyzing and identifying the suppliers,
searching the potential suppliers and thereafter chooses the supplier who is able to provide the best mix
of reliability, quality, warranties, and credit facilities.

(iii) Competitors:

Who sell the products and services of a similar description in the same potential market, known as
competitors. In changing, scenario identification and monitoring of competitors is very essential.

The famous author Philip Kotler has explained the kinds of competition like desire, generic, form, and
brand competitions) and has reviewed by pointing out that, “a business firm must keep four basic
dimensions in mind, which can be called the four C’s of the market, i.e., competitors,
customers, channels, and its own features of a business firm.
(iv) Public:

It is very necessary to satisfy peoples. Philip Kotler said that the companies must put their initial energy
into effectively managing their relationships with their buyers, distributors and suppliers, their overall
growth will be affected by how other peoples in the society view their activity.

So, the factors of the business firm do affect the interests of the general public.

(v) Customers:

Customers also influence marketing decisions because modern marketing is totally based on the
satisfaction of customers. There are five types of customers like;

(a) Industrial consumers, (b) Ultimate consumers, (c) Intermediaries consumers, (d) International
consumers, (e) Government consumers.

2. Macro Marketing Environment:

Macro environment means those factors which are external to the business firm and are quite
uncontrollable. These are economic conditions, demography, socio and cultural forces, competitions,
political and legal forces. These factors do not influence marketing decisions directly but indirectly.

So, The uncontrollable forces or factors of the macro marketing environment affecting the company are
covered as under:

(i) Demographic Factors:

Demography is a factor by which we can study about the human population and its distribution. These
demographic features relate to the growth of population like sex ration, birth and death rates, age
group, ethnic group, rate of literacy and religious structure.

All these demographic factors monitor the volume and nature of the demand for products.

(ii) Natural and Physical Factors:

Natural and physical factors that are forecast, sea, oil, food products, minerals, quite often change the
type and level of resources available to a marketer for his production.

Every nation is trying to recycle or conserve their natural resources because the world is facing a crisis of
natural resources. For Example, India is facing a crisis of problem of petroleum products and imports
petrol and other related products. All these conditions are bound to have an impact on marketing
decisions.

(iii) Economic Factors:

Economic factors include GNP, income distribution, cost of living, consumer saving, interest rates, etc.
These forces or factors determine the spending pattern and purchasing power of consumers. So, the
knowledge and study of economic factors are important for preparing effective marketing strategies.

(iv) Social and Cultural Factors:

The meaning of ‘social responsibility’ is directly affecting the current marketing programme. The
involvement of socially responsible marketing is that business houses should avoid producing socially
harmful products like a smokeless cigarette, soapless soap, high tech food, diet beer, and so on.

In this calculation, the manufacturer must consider cultural and social factors and try to introduce “ECO
Mark” products.

(v) Political and Legal Factors:

Political and legal forces include monetary and fiscal policies, industrial policy, social legislation, foreign
policy, etc.

(vi) Technological Factors:

Technological improvement may create new opportunities for the business firm. In the production
process changing technology may affect the demand for resources and professional services also. In fact,
technological factors help to shape changes in the lifestyle of the buyers and further demand in the
future.

Q.7 Explain the Methods commonly used for allocation of budget for
marketing communication.

Ans BUDGETING METHODS

There are several allocation methods used in developing a budget. The most common are listed below:

 Percentage of Sales method

 Objective and Task method
 Competitive Parity method
  Market Share method
 Unit Sales method
 All Available Funds method
 Affordable method

It is important to notice that most of these methods are often combined in any number of ways,
depending on the situation. Because of this, these methods should not be seen as rigid but as building
blocks that can be combined, modified, or discarded as necessary. Remember, a business must be
flexible—ready to change course, goals, and philosophy when the market and the consumer demand
such a change.

Percentage of Sales Method

Due to its simplicity, the percentage of sales method is the most commonly used by small businesses.
When using this method an advertiser takes a percentage of either past or anticipated sales and
allocates that percentage of the overall budget to advertising. But critics of this method charge that
using past sales for figuring the advertising budget is too conservative, that it can stunt growth.
However, it might be safer for a small business to use this method if the ownership feels that future
returns cannot be safely anticipated. On the other hand, an established business, with well-established
profit trends, will tend to use anticipated sales when figuring advertising expenditures. This method can
be especially effective if the business compares its sales with those of the competition (if available)
when figuring its budget.

Objective and Task Method

Because of the importance of objectives in business, the task and objective method is considered by
many to make the most sense and is therefore used by most large businesses. The benefit of this
method is that it allows the advertiser to correlate advertising expenditures with overall marketing
objectives. This correlation is important because it keeps spending focused on primary business goals.

With this method, a business needs to first establish concrete marketing objectives, often articulated in
the "selling proposal," and then develop complementary advertising objectives articulated in the
"positioning statement." After these objectives have been established, the advertiser determines how
much it will cost to meet them. Of course, fiscal realities need to be figured into this methodology as
well. Some objectives (expansion of area market share by 15 percent within a year, for instance) may
only be reachable through advertising expenditures beyond the capacity of a small business. In such
cases, small business owners must scale down their objectives so that they reflect the financial situation
under which they are operating.
Competitive Parity Method
While keeping one's own objectives in mind, it is often useful for a business to compare its advertising
spending with that of its competitors. The theory here is that if a business is aware of how much its
competitors are spending to advertise their products and services, the business may wish to budget a
similar amount on its own advertising by way of staying competitive. Doing as one's competitor does is
not, of course, always the wisest course. And matching another's advertising budget dollar for dollar
does not necessarily buy one the same marketing outcome. Much depends on how that money is spent.
However, gauging one's advertising budget on other participants' in the same market is a reasonable
starting point.

Market Share Method

Similar to competitive parity, the market share method bases its budgeting strategy on external market
trends. With this method a business equates its market share with its advertising expenditures. Critics of
this method contend that companies that use market share numbers to arrive at an advertising budget
are ultimately predicating their advertising on an arbitrary guideline that does not adequately reflect
future goals.

Unit Sales Method

This method takes the cost of advertising an individual item and multiplies it by the number of units the
business wishes to sell. This method is only effective, of course, when the cost of advertising a single
unit can be reasonably determined.

All Available Funds Method

This aggressive method involves the allocation of all available profits to advertising purposes. This can
be risky for a business of any size it means that no money is being used to help the business grow in
other ways (purchasing new technologies, expanding the work force, etc.). Yet this aggressive approach
is sometimes useful when a start-up business is trying to increase consumer awareness of its products or
services. However, a business using this approach needs to make sure that its advertising strategy is an
effective one and that funds which could help the business expand are not being wasted.

Affordable Method
With this method, advertisers base their budgets on what they can afford. Of course, arriving at a
conclusion about what a small business can afford in the realm of advertising is often a difficult task, one
that needs to incorporate overall objectives and goals, competition, presence in the market, unit sales,
sales trends, operating costs, and other factors.

MEDIA SCHEDULING
Once a business decides how much money it can allocate for advertising, it must then decide where it
should spend that money. Certainly the options are many, including print media (newspapers,
magazines, direct mail), radio, television (ranging from 30-second ads to 30-minute infomercials), and
the Internet. The mix of media that is eventually chosen to carry the business's message is really the
heart of the advertising strategy.

Selecting Media
The target consumer, the product or service being advertised, and cost are the three main factors that
dictate what media vehicles are selected. Additional factors may include overall business objectives,
desired geographic coverage, and availability (or lack thereof) of media options.

Kim T. Gordon, author, marketing coach and media spokesperson offers three general rules to follow
when trying to select a media vehicle for advertising in an article entitled "Selecting the Best Media for
Your Ad."

Rule number 1: eliminate waste. The key to selecting the right media source is to choose the source
"that reaches the largest percentage of your particular target audience with the least amount of waste."
Paying to reach a larger number of people may not serve well if the audience reached has only a small
percentage of likely customers of your product. It may be preferable to advertise in a paper or magazine
with a smaller distribution if the readers of that paper or magazine are more likely to be in the market
for your product or service.

Rule number 2: follow your customer. Here again, the objective is to go to the sources used most by
your target market, especially a source that that audience looks to for information about your type of
product or service. Gordon explains that advertising "in search corridors—such as the Yellow Pages and
other directories—is often a cost-efficient solutions. They're the media customers turn to when they've
made a decision to buy something."

Rule number 3: buy enough frequency. We are constantly bombarded with advertisements and images
and in order to penetrate the consciousness it is important to be seen with some frequency. Gordon
emphasizes that it is "essential to advertise consistently over a protracted period of time to achieve
enough frequency to drive your message home."

Scheduling Criteria
The timing of advertisements and the duration of an advertising campaign are two crucial factors in
designing a successful campaign. There are three methods generally used by advertisers in scheduling
advertising. Each is listed below with a brief explanation.
  Continuity—This type of scheduling spreads advertising at a steady level over the entire
planning period (often month or year, rarely week), and is most often used when demand for a
product is relatively even.
 Flighting—This type of scheduling is used when there are peaks and valleys in product demand.
To match this uneven demand a stop-and-go advertising pace is used. Notice that, unlike
"massed" scheduling, "flighting" continues to advertise over the entire planning period, but at
different levels. Another kind of flighting is the pulse method, which is essentially tied to the
pulse or quick spurts experienced in otherwise consistent purchasing trends.
 Massed—This type of scheduling places advertising only during specific periods, and is most
often used when demand is seasonal, such as at Christmas or Halloween.

ADVERTISING NEGOTIATIONS AND DISCOUNTS

No matter what allocation method, media, and campaign strategy that advertisers choose, there are still
ways small businesses can make their advertising as cost effective as possible. Writing in The
Entrepreneur and Small Business Problem Solver, author William Cohen put together a list of "special
negotiation possibilities and discounts" that can be helpful to small businesses in maximizing their
advertising dollar:

 Mail order discounts—Many magazines will offer significant discounts to businesses that use
mail order advertising.
 Per Inquiry deals—Television, radio, and magazines sometimes only charge advertisers for
advertisements that actually lead to a response or sale.
 Frequency discounts—Some media may offer lower rates to businesses that commit to a certain
amount of advertising with them.
 Stand-by rates—Some businesses will buy the right to wait for an opening in a vehicle's
broadcasting schedule; this is an option that carries considerable uncertainty, for one never
knows when a cancellation or other event will provide them with an opening, but this option
often allows advertisers to save between 40 and 50 percent on usual rates.
 Help if necessary—Under this agreement, a mail order outfit will run an advertiser's ad until that
advertiser breaks even.
 Remnants and regional editions—Regional advertising space in magazines is often unsold and
can, therefore, be purchased at a reduced rate.
 Barter—Some businesses may be able to offer products and services in return for reduced
advertising rates.
 Seasonal discounts—Many media reduce the cost of advertising with them during certain parts
of the year.
  Spread discounts—Some magazines or newspapers may be willing to offer lower rates to
advertisers who regularly purchase space for large (two to three page) advertisements.
 An in-house agency—If a business has the expertise, it can develop its own advertising agency
and enjoy the discounts that other agencies receive.
 Cost discounts—Some media, especially smaller outfits, are willing to offer discounts to those
businesses that pay for their advertising in cash.

Of course, small business owners must resist the temptation to choose an advertising medium only
because it is cost effective. In addition to providing a good value, the medium must be able to deliver
the advertiser's message to present and potential customers.

RELATIONSHIP OF ADVERTISING TO OTHER PROMOTIONAL TOOLS

Advertising is only part of a larger promotional mix that also includes publicity, sales promotion, and
personal selling. When developing an advertising budget, the amount spent on these other tools needs
to be considered. A promotional mix, like a media mix, is necessary to reach as much of the target
audience as possible.

The choice of promotional tools depends on what the business owner is attempting to communicate to
the target audience. Public relations-oriented promotions, for instance, may be more effective at
building credibility within a community or market than advertising, which many people see as inherently
deceptive. Sales promotion allows the business owner to target both the consumer as well as the
retailer, which is often necessary for the business to get its products stocked. Personal selling allows the
business owner to get immediate feedback regarding the reception of the business' product. And as Hills
pointed out, personal selling allows the business owner "to collect information on competitive products,
prices, and service and delivery problems."

Q.6 What are the Reasons for Growing Importance of Rural Marketing in
India

Ans 1. Population Growth:

Increased in population and, hence, increase in demand. At present rural population is account for
nearly 72 crores of total Indian population, three times more than urban population. More population
means more demand.
2. Agriculture Prosperity:
Market increases due to agrarian prosperity. Profitable farming and better marketing options in some
states have made a large number of villagers the potential consumers for FMCG (Fast Moving Consumer
Goods) companies. The greater the agriculture development in an area, the greater the rural market.

3. Rural Development Programme:

Large inflow of investment in rural development programme from government and other sources
contributed to improved life style of rural segments.

4. Intensive Interaction with Urban Population:

Increased contacts of rural people with urban counterpart due to rapid development of transportation
and telecommunication.

5. Increased Population Mobility:

Mobility of rural population to urban areas, metro cities and foreign countries intensified incomes and,
hence, purchasing power of rural people.

6. Increased Rural Attraction:

Increasing attraction of rich people to stay temporary or permanently in rural areas for better and
peaceful life. Agricultural land is being converted into luxurious farm-houses. Such move is leading to
tremendous development of rural market.

7. Improved Literacy Rate:

Increased literacy rate and education level among rural folks, and growth of academic and training
institutes in rural places have accelerated growth of rural market. Literacy level 25% before
independence – is now more than 67%.

8. Improved Rural Infrastructure:

Improved infrastructure has positive impacts on rural market in several ways. Availability of electricity,
education, health, transportation, communication and entertainment, and so on contributed to rural
development and, hence, rural market.
9. Growth of Agro-processing Industry:
Establishment and growth of agro-processing industries, and active involvement of the giant business
units (For example, Reliance Fresh) in distribution of agro-products like fruits, vegetables, serials, etc.,
have changed income and life style of rural people.

10. Political Influence of Rural Population:

Improved and increased political influence of rural people can significantly contribute to rural
development.

11. Foreign Income:

Inflow of foreign remittance (transfer funds) and foreign-made products into rural areas significant
fueled to rural market boom.

12. Reforms in Land Tenure System:

Significant changes in land tenure system causing a structural change in ownership pattern affected
positively the life of farmers.

13. Rural Development Priority:

Liberal assistance from national and international financial institutions and agencies for rural
development has changed rural lifestyle. World Bank has granted billions of rupee for rural
infrastructure.

14. Role of Giant Business Tycoons:

Increased corporate business interest in rural areas resulted into rapid rural development and,
consequently, has fueled to growth of rural market. Corporate tycoons are liberally donating for
improving rural infrastructures.

15. Rapid Socio-economic Changes:

Socio-economic changes (e.g., lifestyle, habits and tastes, economic status, etc.) resulted into drastic
changes in living pattern of rural people resulted into greater potential for cosmetics and durable
products along with automobiles. After the basic needs of food, cloth and shelter, they are looking at
how to live better.
Q 3. What Benefits do an e retailer have over traditional store based retailing

Ans

1) Overcome Geographical Limitations

If you have a physical store, you are limited by the geographical area that you can service.
With an e-commerce website, the whole world is your playground. Additionally, the advent
of m-commerce, i.e., e-commerce on mobile devices, has dissolved every remaining
limitation of geography.

2) Gain New Customers with Search Engine Visibility

Physical retail is driven by branding and relationships. In addition to these two drivers,
online retail is also driven by traffic from search engines. It is not unusual for customers to
follow a link in search engine results and land on an e-commerce website that they have
never heard of. This additional source of traffic can be the tipping point for some e-
commerce businesses.

3) Lower Costs

One of the most tangible positives of e-commerce is the lowered cost. A part of these
lowered costs could be passed on to customers in the form of discounted prices. Here are
some of the ways that costs can be reduced with e-commerce:

 Advertising and marketing: Organic search engine traffic, pay-per-click, and social
media traffic are some of the advertising channels that can be cost-effective.
 Personnel: The automation of checkout, billing, payments, inventory management,
and other operational processes lowers the number of employees required to run an
e-commerce setup.
 Real estate: This one is a no-brainer. An e-commerce merchant does not need a
prominent physical location.

4) Locate the Product Quicker

It is no longer about pushing a shopping cart to the correct aisle or scouting for the desired
product. On an e-commerce website, customers can click through intuitive navigation or use
a search box to narrow down their product search immediately. Some websites remember
customer preferences and shopping lists to facilitate repeat purchase.

5) Eliminate Travel Time and Cost

It is not unusual for customers to travel long distances to reach their preferred physical
store. E-commerce allows them to visit the same store virtually, with just a few mouse
clicks.
6) Provide Comparison Shopping

E-commerce facilitates comparison shopping. There are several online services that allow
customers to browse multiple e-commerce merchants and find the best prices.

7) Enable Deals, Bargains, Coupons, and Group Buying

Though there are physical equivalents to deals, bargains, coupons, and group buying,
online shopping makes it much more convenient. For instance, if a customer has a deep
discount coupon for turkey at one physical store and toilet paper at another, she may find it
infeasible to avail of both discounts. But the customer could do that online with a few
mouse-clicks.

8) Provide Abundant Information

There are limitations to the amount of information that can be displayed in a physical store.
It is difficult to equip employees to respond to customers who require information across
product lines. E-commerce websites can make additional information easily available to
customers. Most of this information is provided by vendors and does not cost anything to
create or maintain.

9) Create Targeted Communication

Using the information that a customer provides in the registration form, and by placing
cookies on the customer's computer, an e-commerce merchant can access a lot of
information about its customers. It, in turn, can be used to communicate relevant messages.
An example: If you are searching for a certain product on Amazon.com, you will
automatically be shown listings of other similar products. Also, Amazon.com may email you
about related products.

10 ) Remain Open All the Time

Store timings are now 24/7/365. E-commerce websites can run all the time. From the
merchant's point of view, this increases the number of orders they receive. From the
customer's point of view, an "always open" store is more convenient.

11) Create Markets for Niche Products

Buyers and sellers of niche products can find it difficult to locate each other in the physical
world. Online, it is only a matter of the customer searching for the product in a search
engine. One example could be the purchase of obsolete parts. Instead of trashing older
equipment for lack of spares, today we can locate parts online with great ease.
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