The Marketing Environment 3 The Marketing Environment

ROAD MAP: 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.

Marketing Environment The marketing environment consists of actors and forces outside the organization that affect management’s ability to build and maintain relationships with target customers. Environment offers both opportunities and threats. Marketing intelligence and research used to collect information about the environment.

Marketing Environment Includes: Microenvironment: actors close to the company that affect its ability to serve its customers. Macroenvironment: larger societal forces that affect the microenvironment. Considered to be beyond the control of the organization. Microenvironment includes: the company itself, supplies, marketing channel firms, customer markets, competitors, and publics. Macroenvironment includes: demographic, economic, natural, technological, political, and cultural forces.

The Company’s Microenvironment Company’s Internal Environment: Areas inside a company. Affects the marketing department’s planning strategies. All departments must “think consumer” and work together to provide superior customer value and satisfaction.

Actors in the Microenvironment

The Company’s Microenvironment Suppliers: Provide resources needed to produce goods and services. Important link in the “value delivery system.” Most marketers treat suppliers like partners.

The Company’s Microenvironment Marketing Intermediaries: Help the company to promote, sell, and distribute its goods to final buyers Resellers Physical distribution firms Marketing services agencies Financial intermediaries Resellers are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers who buy and resell merchandise. Resellers often perform important functions more cheaply than the company can perform itself. However, seeking and working with resellers is not easy because of the power that some demand and use. Physical distribution firms help the company to stock and move goods from their points of origin to their destinations. Examples would be warehouses (that store and protect goods before they move to the next destination). Marketing services agencies (such as marketing research firms, advertising agencies, media firms, etc.) help the company target and promote its products to the right markets. Financial intermediaries (such as banks, credit companies, insurance companies, etc.) help finance transactions and insure against risks associated with buying and selling goods.

Partnering With Intermediaries Coca-Cola provides Wendy’s with much more than just soft drinks. It also pledges powerful marketing support.

The Company’s Microenvironment Customers: Five types of markets that purchase a company’s goods and services

The Company’s Microenvironment Competitors: Those who serve a target market with products and services that are viewed by consumers as being reasonable substitutes Company must gain strategic advantage against these organizations Publics: Group that has an interest in or impact on an organization's ability to achieve its objectives

Types of Publics Financial Public: influence the company’s ability to obtain funds. Banks, investment houses, and stockholders and the major financial publics. Media Publics: carry news, features, and editorial opinion. They include newspapers, magazines, and radio and television stations. Government Publics: Management must take government developments into account. Marketers must often consult the company’s lawyers on issues of product safety, truth in advertising, and other matters. Citizen-Action Publics: A company’s marketing decisions may be questioned by consumer organizations, environmental groups, minority groups, and others. Its public relations department can help it stay in touch with consumer and citizen groups. Local Publics: include neighborhood residents and community organizations. Large companies usually appoint a community relations office to deal with the community, attend meetings, answer questions, and contribute to worthwhile causes. General Public: A company needs to be concerned about the general public’s attitude toward its products and activities. The public’s image of the company affects its buying. Internal Publics: include workers, managers, volunteers, and the board of directors. Large companies use newsletters and other means to inform and motivate their internal publics. When employees feel good about their company , this positive attitude spills over to external publics.

The Macroenvironment The company and all of the other actors operate in a larger macroenvironment of forces that shape opportunities and pose threats to the company.

The Company’s Macroenvironment

The Company’s Macroenvironment Demographic: The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. Marketers track changing age and family structures, geographic population shifts, educational characteristics, and population diversity.

The Seven U.S. Generations

Baby Boomers 78 million born between 1946 and 1964 Account for 28% of population Earn more than half of all personal income Almost 25% belong to racial or ethnic minority Spend a lot on anti-aging products and services Are likely to postpone retirement

Generation X 45 million born between 1965 and 1976 Defined by their shared experiences Increasing divorce rates More of their mothers employed First generation of latchkey kids Cynical of frivolous marketing pitches Care about the environment Prize experience, not acquisition

Generation Y 72 million born between 1977 and 1994 Have large amount of disposable income Comfortable with computer technology Tend to be impatient and “Now-Oriented” Many product lines targeted at Gen Ys

Changing American Family Household makeup: Married couples with children = 34%, and falling Married couples and people living with other relatives = 22% Single parents = 12% Single persons and adult “live-togethers” = 32%

The Changing American Family Non-family households—single live-alones or adult live-togethers of one or both sexes—make up a full 32 percent of U.S. households. Today’s marketers must incorporate “the likes of Murphy Brown, Ally McBeal, and Will and Grace into their business plans.”

Geographic Shifts in Population 16% of U.S. residents move each year General shift toward the Sunbelt states City to suburb migration continues More people moving to “micropolitan” areas More people telecommute Micropolitan area: small cities located beyond congested metropolitan areas.

Better Educated Population 1980: 69% of people over age 25 completed high school 17% had completed college 2002: 84% of people over age 25 completed high school 27% had completed college Currently, ⅔ of high school grads start college

More White-Collar Population 1950 – 1985: Proportion of white-collar workers increased from 41% to 54% Proportion of blue-collar workers decreased from 47% to 33% Proportion of service workers increased from 12% to 14% 1983 – 1999: Proportion of managers and professionals increased from 23% to >30%

Increasing Diversity U.S. is a “salad bowl” Increased marketing to: Various groups mixed together, each retaining its ethnic and cultural differences Increased marketing to: Gay and lesbian consumers People with disabilities www.peapod.com

Diversity-Based Advertising Based on careful study of cultural differences, Bank of America has developed targeted advertising messages for different cultural subgroups, here Asians and Hispanics.

Economic Environment Consists of factors that affect consumer purchasing power and spending patterns. Changes in Income 1980’s – consumption frenzy 1990’s – “squeezed consumer” 2000’s – value marketing Income Distribution Upper class Middle class Working class Underclass

Income Distribution Walt Disney markets two distinct Pooh bears to match its two-tiered market.

Natural Environment Involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities.

Factors Impacting the Natural Environment Shortages of Raw Materials Increased Pollution Increased Government Intervention Environmentally Sustainable Strategies

Environmental Responsibility McDonald’s has made a substantial commitment to the so-called “green movement.”

Technological Environment Most dramatic force now shaping our destiny.

Technological Environment Changes rapidly. Creates new markets and opportunities. Challenge is to make practical, affordable products. Safety regulations result in higher research costs and longer time between conceptualization and introduction of product.

Discussion Questions Within the last ten years, which technological force has had the greatest impact on marketing? In what areas of marketing has this impact been seen? What technological force has impacted you the most? In what ways has this occurred?

Political Environment Includes Laws, Government Agencies, and Pressure Groups that Influence or Limit Various Organizations and Individuals In a Given Society. Increasing Legislation Changing Government Agency Enforcement Increased Emphasis on Ethics & Socially Responsible Actions Cause-Related Marketing

Cause-Related Marketing KitchenAid donates $50 to breast cancer research for every pink mixer it sells and encourages consumers to host a “Cook for the Cure” dinner party.

Cultural Environment The institutions and other forces that affect a society’s basic values, perceptions, preference, and behaviors.

Cultural Environment Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government. Secondary beliefs and values are more open to change.

Cultural Environment Yankelovich Monitor has identified eight major consumer value themes: Paradox Trust not Go it alone Smarts really count No sacrifices Stress hard to beat Reciprocity is the way to go Me 2 www.yankelovich.com

Society’s Major Cultural Views Are Expressed in People’s Views of: Cultural Environment Society’s Major Cultural Views Are Expressed in People’s Views of: Themselves Others Organizations Society Nature The Universe

Responding to the Marketing Environment Environmental Management Perspective Taking a proactive approach to managing the environment by taking aggressive (rather than reactive) actions to affect the publics and forces in the marketing environment. This can be done by: Hiring lobbyists Running “advertorials” Pressing lawsuits Filing complaints Forming agreements to control channels

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.

Q: Your company receives a general letter from the NAACP that expresses the organization's concern over the failure of consumer-products firms to market actively to African Americans. To which of the following publics should your company respond? 1. Local  2. Financial  3. Citizen action  4. Government AK, 7e – Chapter 3

Q: You and your marketing team must develop a plan to sell new furnace equipment to steel manufacturers. This plan targets which of the following customer markets? 1. Business market  2. Consumer market  3. International market  4. Government market AK, 7e – Chapter 3

Q: To market this furnace equipment more effectively, your team might seek the assistance of all of the following marketing intermediaries EXCEPT: 1. resellers  2. financial institutions  3. suppliers  4. physical distribution firms AK, 7e – Chapter 3

Q: Consumers who value experience over the accumulation of wealth, who seek out the best value, and who typically skeptical of marketing messages make up which of the following consumer groups? 1. Generation Y  2. Generation X  3. Baby Boomers  4. all of the above AK, 7e – Chapter 3

Q: Based on recent geographic shifts in population, you would most likely open your new branch of a sporting goods company in which of the following areas? 1. The South  2. The Northeast  3. The Midwest  4. Canada AK, 7e – Chapter 3

Q: From a demographic point of view, your new Internet-service company stands a good chance of succeeding because: 1. the U.S. population is becoming more ethnically diverse.  2. the U.S. population is growing older.  3. the U.S. population is more inclined toward citizen action.  4. the U.S. population is becoming better educated. AK, 7e – Chapter 3

Q: As new evidence of tobacco's harmful effects has emerged, state and federal agencies, courts, and legislatures are trying to impose ever more stringent regulations on tobacco advertising. Should governments tightly regulate the advertising of industries that deal in potentially harmful consumer products such as cigarettes? 1. Yes 2. No AK, 7e – Chapter 3