CHAPTER THREE Analyzing the Marketing Environment Mkt 202 Lecturer: NNA

Chapter Learning Outcomes Topic Outline 3.1 The Company’s Microenvironment 3.2 The Company’s Macroenvironment 3.3 Demographic Environment 3.4 Economic Environment 3.5 Natural Environment 3.6 Technological Environment 3.7 Political and Social Environment 3.8 Cultural Environment 3.9 Responding to the Marketing Environment Ch 3 - 2 Copyright © 2011 Pearson Education

The Marketing Environment The marketing environment includes the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with customers. Ch 3 - 3 Copyright © 2011 Pearson Education

The Company’s Microenvironment A microenvironment consists of the actors close to the company that affect its ability to serve its customers, the company, suppliers, marketing intermediaries, customer markets, competitors, and publics. Ch 3 - 4 Copyright © 2011 Pearson Education

The Company’s Microenvironment Top management Finance R&D Purchasing Operations Accounting Note to Instructor Discussion Questions What types of collaboration does there need to be between the departments? How might projects be integrated between marketing and finance? How might projects be integrated between marketing and information systems? This question on finance could lead to a discussion about budgeting for marketing. The collaboration between marketing and IS could lead to discussions of market research, ordering systems, and customer relationship management systems.

The Company’s Microenvironment Suppliers Provide the resources to produce goods and services Treated as partners to provide customer value

The Company’s Microenvironment Marketing Intermediaries Marketing Intermediaries help the company to promote, sell and distribute its products. Resellers are distribution channel firms that help the company find customers or make sales to them. Physical distribution firms help the company stock and move goods from their points of origin to their destinations. Marketing services agencies are the marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets. Financial intermediaries include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods. Note to Instructor Resellers are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers that buy and resell merchandise. Physical distribution firms help the company to stock and move goods from their points of origin to their destinations. Distributors and agents are organizations based in the markets that generally have a contractual relationship with the principal company to buy their products and to distribute them in the local market. Marketing services agencies are the marketing research firms, advertising agencies, media firms, and marketing consultancy firms that help the company target and promote its products to the right markets. Financial intermediaries include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods. Ch 3 - 8 Copyright © 2011 Pearson Education

The Company’s Microenvironment Competitors Firms must gain strategic advantage by positioning their offerings against competitors’ offerings. Note to Instructor Students should note that the competition is just a click away with online purchasing. This link goes to Bizrate—one of many comparison shopping sites online. Enter a product like coffee makers to see the competing products and retailers for this category. Ch 3 - 9 Copyright © 2011 Pearson Education

The Company’s Microenvironment Publics are any groups that have an actual or potential interest in or impact on an organization’s ability to achieve its objectives. They include: Financial publics Media publics Government publics Citizen-action publics Local publics The general public Internal publics Note to Instructor A good example of local publics is the BurJuman Breast Cancer Awareness campaign in UAE. It has run successfully for a number of years in partnership with Welcare Hospital. This campaign is supported by a number of major companies, including Kodak, ENOC/EPPCO, the Ministry of Social Affairs, TECOM Investments (Dubai Technology, Electronic Commerce, and Media Free Zone), Hertz, and GEMS (Global Education Management Systems). These organizations recognize the importance of community publics through their involvement in raising community awareness of this important health issue. Ch 3 - 10 Copyright © 2011 Pearson Education

The Company’s Macroenvironment Ch 3 - 11 Copyright © 2011 Pearson Education

Demographic Environment Demography Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. The demographic environment is important because it involves people, and people make up markets. Demographic trends include age, family structure, geographic population shifts, educational characteristics, and population diversity. Ch 3 - 12 Copyright © 2011 Pearson Education

Demographic Environment Changing Age Structure of the Population Traditionalists Baby Boomers Generation X Generation Y Generation Z Discussion Questions What type of information boomers might be seeking? Emirates NDB is one of many companies in the financial sector which are successfully targeting the generation of people nearing or entering retirement. Ch 3 - 13 Copyright © 2011 Pearson Education

Demographic Environment Traditionalists Traditionalists includes people born between 1922 and 1945. This generation tends to display the following traits: Extreme company loyalty, believing that they’ll work for the same company for their entire lives Structured and disciplined Supportive of hierarchy Less tech savvy Note to Instructor The Gen Xers are displacing the lifestyles, culture, and materialistic values of the baby boomers. Many companies are focusing on Gen Xers as a major target segment. For example, Dubai Islamic Bank targets its sharia-compliant Takaful product at this age group. The Al Islami Takaful Program is a sharia-compliant alternative to conventional life nsurance products. The appeal of Takaful programs is that they offer various plan options which combine savings and investments to suit particular customer needs, circumstances, and priorities. Dubai Islamic Bank promotes the plans by emphasizing the focus on offering investors peace of mind and taking care of the future of their loved ones. The Takaful programs include a provision for the payment of Takaful benefits to investors’ beneficiaries or heirs in the event of their death. Overall, the programs have particular appeal to those with families to support, by giving the investor comfort in the knowledge that the future of their loved ones is provided for. As the bank’s marketing literature puts it: “As an individual you have many dreams… A day when your child graduates from a prestigious university A day when your child gets married A day when you relax in the comfort of your dream home A day when you start leading a retired life with enough savings to take care of you and much more.” Emirates NDB is one of many companies in the financial sector which are successfully targeting the generation of people nearing or entering retirement. Ch 3 - 14 Copyright © 2011 Pearson Education

Demographic Environment Changing Age Structure of the Population Baby boomers include people born between 1946 and 1964 Baby boomers “think young” no matter how old they are Baby boomers retire later and work more after retirement Discussion Questions What type of information boomers might be seeking? Emirates NDB is one of many companies in the financial sector which are successfully targeting the generation of people nearing or entering retirement. Ch 3 - 13 Copyright © 2011 Pearson Education

Demographic Environment Generation X Generation X includes people born between 1965 and 1976. This generation tends to display the following traits: Skepticism Cautious economic outlook Less materialistic Family comes first Research products before considering a purchase Note to Instructor The Gen Xers are displacing the lifestyles, culture, and materialistic values of the baby boomers. Many companies are focusing on Gen Xers as a major target segment. For example, Dubai Islamic Bank targets its sharia-compliant Takaful product at this age group. The Al Islami Takaful Program is a sharia-compliant alternative to conventional life nsurance products. The appeal of Takaful programs is that they offer various plan options which combine savings and investments to suit particular customer needs, circumstances, and priorities. Dubai Islamic Bank promotes the plans by emphasizing the focus on offering investors peace of mind and taking care of the future of their loved ones. The Takaful programs include a provision for the payment of Takaful benefits to investors’ beneficiaries or heirs in the event of their death. Overall, the programs have particular appeal to those with families to support, by giving the investor comfort in the knowledge that the future of their loved ones is provided for. As the bank’s marketing literature puts it: “As an individual you have many dreams… A day when your child graduates from a prestigious university A day when your child gets married A day when you relax in the comfort of your dream home A day when you start leading a retired life with enough savings to take care of you and much more.” Emirates NDB is one of many companies in the financial sector which are successfully targeting the generation of people nearing or entering retirement. Ch 3 - 14 Copyright © 2011 Pearson Education

Demographic Environment Millennial Millennials (Generation Y or Echo Boomers) include those born between 1977 and 2000: Comfortable with technology Family Oriented Ambitious Team Players Communicators Note to Instructor One thing that all Millennials have in common is their utter fluency and comfort with computer, digital, and Internet technology. “Whereas Gen X spent a lot of time in front of the TV,” says one expert, the Millennials “are always ‘on.’ They’re consumers of every imaginable means of communication: TV, radio, cell phone, Internet, video games—often simultaneously. Ch 3 - 15 Copyright © 2011 Pearson Education

Demographic Environment Linksters Linksters (Generation Z) include those born after the year 2000: Regards technology as a lifestyle Very liberal/ Open to change Believes in a flat organizational structure Highly dependent on the Internet Note to Instructor One thing that all Millennials have in common is their utter fluency and comfort with computer, digital, and Internet technology. “Whereas Gen X spent a lot of time in front of the TV,” says one expert, the Millennials “are always ‘on.’ They’re consumers of every imaginable means of communication: TV, radio, cell phone, Internet, video games—often simultaneously. Ch 3 - 15 Copyright © 2011 Pearson Education

Demographic Environment Generational marketing Generational marketing is important in segmenting people by lifestyle, life stage and common values, rather than by age. (Chapter 7 will explain more) Note to Instructor Real Marketing 3.1 considers an example of how companies are responding to the changing habits and work patterns of customers and the cultural diversity of their markets. ExxonMobil, recognizing the importance of value-added services for customers visiting its numerous filling stations, opened a chain of convenience stores called On the Run. Located at key Esso and Mobil retail sites, the convenience stores have been successfully introduced to the Egyptian market. The aim of On the Run is to offer motorists and others fast-food, pastries, drinks, and convenience items. The key to the approach is the three terms fast, fresh and friendly. In Egypt, the On the Run concept is appealing to consumers who like to buy quality groceries on the go, particularly on their way to work, on their way home, and while traveling. In fact, the brand has become so strong that it attracts a large number of premium customers,who value freshness, speed, and quality of service. Ch 3 - 16 Copyright © 2011 Pearson Education

Demographic Environment Increased Diversity Markets are becoming more diverse International National Includes: Ethnicity Language Note to Instructor Companies in the Arab world are targeting ethnic groups with specific products, services, and promotions. Western Union, for example, refined ethnic marketing and brought mobile remittances to the region. Labor migration and the money-transfer market are both booming. Immigrants send money to their families in their country of origin, through remittances. This boom results from an increase in economic migration, as more people travel to seek work and a better quality of life. The remittance market totals about US$290 billion globally, with an annual growth rate of 8 percent. In 2006 Arab world remittances totalled US$59 billion. Western Union has noticed that there are some differences between people of different nationalities. In general it finds that expatriates from South Asia or the Arab world are more price sensitive, while Europeans tend to look more for convenience, security, and speed. Western Union aims to work in a wide range of languages to tailor its marketing to each group, insuring that it offers the most suitable value proposition. Ch 3 - 20 Copyright © 2011 Pearson Education

Copyright © 2011 Pearson Education Economic Environment Economic Environment The economic environment consists of factors that affect consumer purchasing power and spending patterns. Industrial economies are richer markets. Subsistence economies consume most of their own agriculture and industrial output. Changes in consumer spending Income distribution Ch 3 - 21 Copyright © 2011 Pearson Education

Copyright © 2011 Pearson Education Natural Environment Natural Environment The natural environment involves the natural resources that are needed as inputs by marketers, or that are affected by marketing activities. Trends Shortages of raw materials Increased pollution Increase government intervention Environmentally sustainable strategies Note to Instructor This Web link connects you to Masdar company in Abu Dhabi. The site shows you Masdar’s different units and Masdar City--a zero- waste, zero-emissions city. “Masdar is a long term investment into a more sustainable future, reflecting the ambitious aims set out by Abu Dhabi’s leadership in its 2030 vision”. Ch 3 - 24 Copyright © 2011 Pearson Education

Technological Environment The technological environment is the most dramatic force in changing the marketplace. One of the most dramatic forces shaping our destiny It creates new products and opportunities. Safety of new product always a concern. Note to Instructor New technologies create new markets and opportunities. However, every new technology replaces an older technology. Transistors hurt the vacuum-tube industry; xerography hurts the carbon-paper business; CDs hurt phonograph records; and digital photography hurts the film business. When old industries fought or ignored new technologies, their businesses declined. Thus, marketers should watch the technological environment closely. Companies that do not keep up will soon find their products outdated. And they will miss new product and market opportunities. Dicussion Question Ask students what changes they have seen in technology in the past four years including medical products, communications, and media. They will most likely talk about the use of artificial organs and stem cell research, the growth of PDA’s like the iPod, and the use of new media products including DVR or TiVo. Ch 3 - 25 Copyright © 2011 Pearson Education

Political Environment The political environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society. Ch 3 - 26 Copyright © 2011 Pearson Education

Political Environment Increased Emphasis on Ethics and Socially Responsible Actions Socially responsible behavior Enlightened companies encourage their managers to work beyond what the regulatory system allows and simply do the right thing Many companies are now developing policy guideline and other responses to complex social responsibility issues Cause-related marketing Many companies are now linking themselves to worthwhile causes E.g. Toyota campaign of 100 cars E.g. The P&G Tide loads of hope program Note to Instructor Companies in the Arab world are slowly adopting cause-related marketing campaigns. As part of its social awareness initiative ‘Making it Our Business,’ Dubai Chamber of Commerce and Industry collaborates with Vital Voices Global Partnership and the US Middle East Partnership for Breast Cancer Awareness and Research, in the ongoing fight against breast cancer. Ch 3 - 28 Copyright © 2011 Pearson Education

Copyright © 2011 Pearson Education Cultural Environment The cultural environment consists of institutions and other forces that affect a society’s basic values, perceptions, and behaviors. Persistence of Cultural Values Core beliefs and values are persistent and are passed on from parents to children and are reinforced by schools, mosques, businesses, and governments. Secondary beliefs and values are more open to change and include people’s views of themselves, others, organizations, society, nature, and the universe. Ch 3 - 29 Copyright © 2011 Pearson Education