Analyzing the Marketing Environment Chapter 3

Rest Stop: Previewing the Concepts

• • • • • Describe the environmental forces that affect the company’s ability to serve its customers Explain how changes in the demographic and economic environments affect marketing decisions Identify the major trends in the firm’s natural and technological environments Explain the key changes in the political and cultural environments Discuss how companies can react to the marketing environment 3-2

First Stop: YouTube: Adapting to the Fast Changing Marketing Environment • • • Begins in 2005 For sharing low-quality homemade video clips • • • • • Adapts to the market Provides access to films and TV episodes Spurs creation of original content Creates niche, special-interest channels Introduces a mobile app Develops an advertising model for the site 3-3

Marketing environment • The actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers 3-4

Marketing Environment

• • Studying the marketing environment allows marketers to take advantage of opportunities and combat threats Marketing intelligence and research are used to collect information about the environment 3-5

Microenvironment

• The actors close to the company that affect its ability to serve its customers— the company, suppliers, marketing intermediaries, customer markets, competitors, and publics 3-6

Figure 3.1 - Actors in the Microenvironment

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The Microenvironment – The Company

• • • Other company groups must be considered when designing marketing plans Marketing decisions are made within the broader strategies made by top management All departments share responsibility for understanding customer needs and creating value 3-8

The Microenvironment - Suppliers

• Provide resources needed to produce goods and services L’Oréal builds long-term supplier relationships based on mutual benefit and growth 3-9

The Microenvironment – Marketing Intermediaries • Firms that help the company promote, sell, and distribute its goods to final buyers Resellers Physical distribution firms Marketing services agencies Financial intermediaries 3-10

The Microenvironment - Competitors

• • A company must provide greater customer value and satisfaction than its competitors do The company must position its offerings strongly against competitors’ offerings in the minds of consumers 3-11

The Microenvironment - Publics

• Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives Financial publics Media publics Government publics Citizen-action publics Local publics General public Internal publics 3-12

The Microenvironment - Publics

Recognizing the importance of community publics, P&G’s Tide Loads of Hope program washes, dries, and folds loads of clothes for families struck by local disasters 3-13

The Microenvironment - Customers

Consumer markets Buy for personal consumption Business markets Buy for use in production processes Reseller markets Buy to resell at a profit Government markets Buy for public purposes International markets Buyers in other countries 3-14

Macroenvironment

• Consists of the broader forces that affect the actors in the microenvironment

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Figure 3.2 - Actors in the Macroenvironment

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The Demographic Environment

• • Demography: The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics The changing age structure of the U.S. population is a significant demographic trend 3-17

Baby Boomers

• • • • 78 million people born between 1946 and 1964 • • Wealthiest generation in history Account for 50% of consumer spending Hold ¾ of the nation’s financial assets Recession hit baby boomers hard, eating into savings and retirement prospects Represent strong targets for financial services 3-18

Generation X

• • • • • 49 million, born from 1965 to 1976 Most educated generation to date Less materialistic than other groups Skeptical of marketing Careful spenders Virginia tourism now aims its well-known “Virginia is for Lovers” campaign at Gen Xer families, who want new experiences close to home 3-19

Millennials

• • • • • 83 million, born between 1977 and 2000 $733 billion in purchasing power Ethnically diverse Fluent with digital technology Personalization and product customization are key to marketing success 3-20

Millennials The Keds campaign—“How Do You Do?”— engages Millennials through print ads, a micro Web site, YouTube videos, Twitter, Facebook, brand ambassadors, artists, and a mobile campus tour 3-21

Fuel for Thought

• • Do marketers need to create separate products and marketing programs for each generation?

Discuss products or services for which generational marketing will be effective and those for which other types of segmentation are more appropriate.

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The Changing American Family • • • • Traditional households in decline Married couples with children = 23% • • • Non-traditional households are growing Married without children = 29% Single parents = 17% Non-family households = 32% More working women and stay-at-home dads 3-23

Geographic Shifts in Population • • • • About 15 percent of U.S. residents move each year Population shift toward the Sunbelt states Midwest and Northeast losing population • • People moving to suburbs and micropolitan areas Increasing numbers of telecommuters Booming SOHO market 3-24

Geographic Shifts in Population Cisco targets the growing telecommuter market with WebEx, which lets people meet and collaborate online, no matter what their work location 3-25

A More White-Collar Population • • • • U.S. population becoming better educated Workforce becoming more white-collar Job growth strongest for professional workers and weakest for manufacturing workers Number of professional workers expected to increase 3-26

Increasing Diversity • • • • Ethnic groups have mixed together but maintained diversity by retaining cultural differences An attractive diversity segment for marketers is the 54 million U.S. adults with disabilities Many major companies also explicitly target gay and lesbian consumers Marketers design products, ads, and promotions for different groups 3-27

Increasing Diversity Samsung features people with disabilities in its mainstream advertising and signs endorsement deals with Paralympic athletes 3-28

The Economic Environment

• Economic factors that affect consumer purchasing power and spending patterns

Industrial economies

• Rich markets for many different kinds of goods

Subsistence economies

• Consume most of their own agricultural and industrial output • Offer few market opportunities

Developing economies

• Offer outstanding marketing opportunities for the right kinds of products 3-29

Changes in Consumer Spending • • • • Changes in spending 1990s—consumption frenzy, record debt Economic crisis leads to consumer frugality Value marketing is key to success 3-30

Income Distribution

• • • Top 5 percent of American earners get nearly 22 percent of the country’s adjusted gross income Bottom 40 percent of American earners get just 12.6 percent of the total income Unequal distribution of income has created a tiered market 3-31

Income Distribution

• To capture India’s growing middle class, Tata Motors introduced the small, affordable Tata Nano 3-32

The Natural Environment

• • • Involves natural resources that are needed as inputs by marketers or that are affected by marketing activities • • • Key trends include: Shortages of raw materials Increased pollution Increased government intervention Firms focus on creating environmentally sustainable strategies 3-33

Environmental sustainability • Developing strategies and practices that create a world economy that the planet can support indefinitely 3-34

The Natural Environment

• • • PepsiCo reduces its footprint A solar-panel field generates heat used in Frito-Lay’s SunChips plant SunChips come in the world’s first 100% compostable package 3-35

The Technological Environment

• • Companies that do not keep up with technological changes will soon find their products outdated Marketers should be aware of government regulations when applying new technologies and developing new products 3-36

Technological environment • Forces that create new technologies, creating new product and market opportunities 3-37

The Technological Environment

• Many firms use RFID technology to track products through various points in the distribution channel Walmart encourages suppliers shipping products to its distribution centers to apply RFID tags to their pallets

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The Political and Social Environment

• • Includes laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society • • • Business legislation is enacted: To protect companies from each other To protect consumers from unfair business practices To protect the interests of society against unrestrained business behavior 3-39

Socially Responsible Behavior

• • Actively seek out ways to protect the long-run interests of consumers and the environment Develop policies and other responses to address social responsibility issues 3-40

Cause-Related Marketing

• To exercise their social responsibility and build more positive images, many companies are now linking themselves to worthwhile causes TOMS Shoes pledges: “No complicated formulas, it’s simple . . . you buy a pair of TOMS and we give a pair to a child on your behalf.”

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Cultural environment • Institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors 3-42

The Cultural Environment

• • • •

Core beliefs and values

Passed on from parents to children Reinforced by schools, churches, business, and government •

Secondary beliefs and values

More open to change than core beliefs 3-43

The Cultural Environment

• • • • • • • Society’s major cultural views are expressed in people’s views of: Themselves Others Organizations Society Nature The universe 3-44

Marketing at Work

• • The Pepsi Refresh Project makes “doing good” a major element of the brand’s mission The project awards thousands of dollars in grants to fund worthwhile ideas 3-45

Responding to the Marketing Environment

• • Reactive firms – Passive, simply react to changes in the marketing environment Proactive firms - Manage the marketing environment via actions designed to affect the publics and forces in the marketing environment 3-46

Responding to the Marketing Environment

• • • • • • Examples of proactive responses Hiring lobbyists Running advertorials Pressing lawsuits Filing complaints with regulators Forming agreements to control distribution channels 3-47

Marketing at Work

• • The Internet makes it easier for consumers to share information about products It is essential for companies to manage their online reputations well Boeing’s embarrassing blunder over young Harry Winsor’s airplane design made instant national news, a potential disaster that Boeing managed to turn positive 3-48

Rest Stop: Reviewing the Concepts

• • • • • Describe the environmental forces that affect the company’s ability to serve its customers Explain how changes in the demographic and economic environments affect marketing decisions Identify the major trends in the firm’s natural and technological environments Explain the key changes in the political and cultural environments Discuss how companies can react to the marketing environment 3-49

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Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 3-50