Chapter 2(3.2,3.4) The Marketing Environment

Our changing world Changing attitudes to: work leisure lifestyle new gender and family roles communication revolution tougher market conditions cultural and security threats.

External macro-environment

The six interrelated macro-environmental forces demographics economic conditions competition social and cultural forces political and legal forces technology.

Demographics The statistical study of human population and its distribution, e.g. age, gender, income, religion. ageing population—baby boomers (pre-1965) Generation ‘X’—mid-1960s–1970s. single people two-person households increasing cultural diversity moving north, tremendous growth is occurring in southeast Queensland.

Economic conditions In order for an economy to exist there must be a ‘market’. A ‘market’ exists where consumers have money to spend and are willing to spend it. The economic environment is a significant force that affects the marketing of any organisation, e.g. unemployment, inflation, and interest rates. Economic conditions influence business cycles, which includes: prosperity, recession and recovery in the economy. This has an impact on what people buy, when and how.

Competition Companies face competition from three main sources: 1. Brand—from manufacturers of similar products. 2. Substitute products—dissimilar products satisfying the same needs. 3. Indirect—other firms trying to win customers’ purchasing power.

Competition (continued) Increasing pressures of international competition: Competitors often enjoy the benefits of lower wages, better productivity or favourable exchange rates. Activity in world markets: Firms opt to expand to overseas markets.

Competition (continued) A marketing program is influenced by four types of competitive structures: 1. pure competition 2. monopolistic competition 3. oligopoly 4. monopoly.

Pure competition A market structure where a large number of sellers sell an undifferentiated product. Pure competition is rarely, if ever, attained in the real world. It is a theoretical concept, an ideal. e.g. some agricultural products (fruits etc.).

Monopolistic competition Marketers attempt to gain differential advantage over their competitors. Marketer aims to get the buyer to perceive an attractive difference in their offerings. Marketers have more control over products and price owing to perceived differences.

Oligopoly A market structure in which only a few large sellers, marketing essentially similar products, account for almost all of an industry’s sales, e.g. air travel, beer, cigarettes.

Monopoly A market structure where there is only one supplier of a product, for which there are no close substitutes, e.g. CSR (sugar refining), electricity and gas suppliers (usually government owned). Monopolies are becoming rare in Australia (e.g. even Telstra now has competition). Sometimes patent protection can provide firms with something close to a monopoly.

Social and cultural forces Marketers are faced with changing socio-cultural patterns, lifestyles, social values and beliefs. Changes that have significant marketing implications: emphasis on quality of life changing gender roles attitudes towards health, nutrition and well-being impulse buying desire for convenience and a premium on time.

Social and cultural forces (continued) Our lifestyles, social values and beliefs are changing much faster then they used to. Some of the changes that have significant marketing implications are: quantity of possessions or quality of life? changing gender roles attitudes towards health, nutrition and well being. impulse buying and consumer debt desire for the convenience and a premium on time.

Industry life cycles Introduction—new products or services motivate prospective customers. For example, third-generation telephones. Growth stage—once a product has proved successful in satisfying customer needs, rapid growth can occur. For example, personal notebooks and espresso coffee making machines. Maturity stage—profitability tends to taper off as the market and has been largely exploited by both the innovating firm and the competitors that have been attracted to the industry. For example, large sized four wheel drives, and desk top computers.

Industry life cycles (continued) Decline stage – Growth might begin to decline as substitute products begin to appear or customer needs change. For example, fax machines, drive- in movies and CDs. If new technology solutions appear, then the growth cycle can begin again—often with a fresh set of competing firms.

Political and legal forces The five categories affecting political–legal influences on marketing are: 1. monetary and fiscal policies. 2. social legislation and regulations. 3. relationships with individual industries. 4. legislation specifically related to marketing. 5. the provision of information and the purchase of products.

Technology Technology has had an impact on our lifestyles, work, leisure, consumption patterns and economic well-being. Technology is a mixed blessing: it can improve our lives in one area while creating environmental and social problems in another.

Monitoring the environment Marketing intelligence involves: monitoring business trends and new developments studying population growth models (ABS) reviewing government publications, industry periodicals and news releases attending conferences and exhibitions.

External micro-environment Micro-forces that are external to the firm but over which it has direct involvement: customers suppliers marketing middlemen specific competitors other publics.

External micro-environment

Suppliers and the firm’s market Customers—people or organisations with needs or wants, purchasing power, buying behaviour. Suppliers—organisations that provide the firm with the items it needs to conduct business. Marketing middlemen—firms or individuals who help to sell and distribute another firm's goods or services.

Suppliers and the firm’s market (continued) Specific competitors—satisfying a customer’s wants better than its competitors can. Other publics—a range of groups that can have an influence on the firm, e.g., media, community, shareholders.

Marketing intermediaries Defined as independent business organisations that directly assist the flow of products and services between a marketing organisation and its markets. Resellers—wholesalers and retailers: the middlemen. Facilitating organisations—provide transportation, warehousing, financing and other supportive services needed to complete the exchange between buyers and sellers. They complete the trade or channels of distribution.

Internal environment The firm’s marketing system is also shaped by the micro-environmental forces within the firm, i.e.: The relationship between the different functions in a firm. The environment and resources within the marketing department.

Internal and non-marketing resources Insert Fig 2.3 p 53

The firm’s entire environment and marketing program