Marketing: An Introduction Armstrong, Kotler, Trifts, Buchwitz, Gaudet 5th Canadian Edition With DUANE WEAVER

CHAPTER 4 Analyzing the Marketing Environment with Duane Weaver

Outline Environmental Forces MicroEnvironment MacroEnvironment Macro: Demographics Generational Groups Canadian Impacts Outlines learning objectives from this chapter. Each ensuing slide is headed by one of these 5 items.

Environmental Forces Forces that affect firm’s success Microenvironment: Forces with direct impact to the company Internal & External Macroenvironment: External forces with direct impact across industries LO 1: Describe the environmental forces that affect the company’s ability to serve its customers Microenvironment is comprised of forces both controllable and uncontrollable Macroenvironment often referred to in categories of Competition, Regulation, Economic, Social, Technological (CREST) CREST forces ultimately expose sources of Opportunities and/or Threats

Environment Impact on Decisions Microenvironment Stakeholders (aka: publics): Groups with interest in or impact on a firm’s ability to achieve objectives Strategic decisions must consider impact on all stakeholders Strengths & Weaknesses Opportunities & Threats Financial Media Government Citizen action The Company Suppliers Marketing Intermediaries Customers Competitors Publics LO 1: Describe the environmental forces that affect the company’s ability to serve its customers Financial publics. This group influences the company’s ability to obtain funds. Banks, investment houses, and stockholders are the major financial publics. Media publics. This group carries news, features, and editorial opinion. It includes 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. This group includes neighbourhood residents and community organizations. Large companies usually appoint a community relations officer to deal with the community, attend meetings, answer questions, and contribute to worthwhile causes. For example, Ronald McDonald House Charities recognize the importance of community publics. 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. This group includes 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.

Environment Impact on Decisions Macroenvironmental Forces: external & non controllable Main sources of opportunities and threats Strategic decisions stem from developing trends LO 2: Explain how changes in the demographic and economic environments affect marketing decisions Forces in the macroenvironment can be categorized as: Demographic Economic Natural Technological Political Cultural

Environment Impact on Decisions Macro: Demographics 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. LO 2: Explain how changes in the demographic and economic environments affect marketing decisions Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics Marketers watch, anticipate and react to changing age and family structures, geographic population shifts, educational characteristics, and population diversity

Environment Impact on Decisions Three largest generational groups: Baby Boomers 1947-1966 9.8 million Wealthy but hard hit by recession Generation X 1967-1976 7 million Highly educated Experientially driven Millennials or Generation Y 1977-2000 10.4 million Tech savvy Personally centered LO 2: Explain how changes in the demographic and economic environments affect marketing decisions Baby Boomers 9.8 million people born between 1947 and 1966 one-third of population Wealthiest generation that controls over 50% of country’s wealth Recession hit Baby Boomers hard, eating into nest eggs and retirement prospects Boomers “think young;” strong targets for financial services Gen X 7 million born between 1967 and 1976 Defined by shared experiences: Increased parental divorce rates and more employed mothers resulted in latchkey kids Less materialistic; prize experiences Skeptical of marketing Most educated generation to date Face economic pressures; spend carefully Millennials: 10.4 million born between 1977 and 2000 larger than Generation X/Baby Boomers Includes tweens, teens, and young adults Fluent with digital technology Personalization and product customization are key to marketing success

Just so you Know Hog Wild Generational Marketing When it celebrated its110th year of operations in 2013, Harley Davidson ® was simultaneously confronted with an inevitable fork in the road. It’s target market, male baby boomers, were slowly but surely aging away from profitability. While a significant number of Gen X and millennials would be there to carry the torch, HD ® saw the looming threat of the demographic shift. Faced with the dilemma of introducing a new product for a new market, while still maintaining a current product for a current market – all the while protecting the brand that got you there in the first place – how would you advise the motorcycle company to proceed? Visit www.harley-davidson.com to see how it approaches generational marketing

Environment Impact on Decisions Canadian Impacts Canadian family/household are changing: Growing market of “non-traditional” households Growing “crowded nest” syndrome Fewer families have children More dual-income families Demographics LO 2: Explain how changes in the demographic and economic environments affect marketing decisions - Canadian family/household are changing: Growing “crowded nest” syndrome Fewer families have children Average Canadian household shrank to 2.5 people More dual-income families Needs of non-traditional households must be considered by marketers

Environment Impact on Decisions Canadian Impacts Geographic shifts in population: Growth rates across Canada are not uniform Rural to urban migration continues Buying habits differ by region Growth in telecommuting market Demographics LO 2: Explain how changes in the demographic and economic environments affect marketing decisions Growth rates (2005-2009) across provinces and territories are not uniform Rural to urban (city, suburb) migration continues People in different regions buy differently Shift in where people live is changing how they work Marketers targeting growing telecommuting market

Environment Impact on Decisions Canadian Impacts Better educated, white-collar population: Increased demand for higher quality Increased understanding of value Creates demand in different products Demographics LO 2: Explain how changes in the demographic and economic environments affect marketing decisions As of 2004, 59.1% of people had university degrees or post-secondary certificates

Environment Impact on Decisions Canadian Impacts Increasing diversity: Large and growing visible minority market Growth in recognized disabilities Acceptance of LGBT and gay marriages Demographics LO 2: Explain how changes in the demographic and economic environments affect marketing decisions visible minorities This group is growing 5 times faster than the whole population and has huge purchasing power Marketers target specially designed ads, products, and promotions at ethnic groups Marketing efforts are increasing toward: LGBT community People with disabilities LGBT = lesbian, gay, bisexual and transgender

Environment Impact on Decisions Canadian Impacts Factors that affect spending Changes in income Consumption frenzy, record personal debt Economic crisis leading to consumer frugality Value marketing is key to success Changes in spending patterns Engel’s laws note that consumers at different income levels have different spending patterns Economics LO 2: Explain how changes in the demographic and economic environments affect marketing decisions Engel’s laws note that as family income rises, the percentage spent on food declines, the percentage spent on housing remains about constant (except for such utilities as gas, electricity, and public services, which decrease), and both the percentage spent on most other categories and that devoted to savings increase.

Economic Changes Changes in income Income distribution 1980’s – consumption frenzy. 1990’s – “squeezed consumer.” 2000’s – value marketing. Income distribution Upper class – major market for luxury goods. Middle class – careful but has the good life. Working class – sticks to the basics. Underclass – counts every penny first. LO 3: Identify the major trends in the firm’s natural and technological environments Environmental sustainability—an effort to create a world economy that the planet can support indefinitely.

Technological Environment Technology advances Creating new markets and opportunities Increasing obsolescence Accelerating customer needs Resulting in constantly evolving regulations LO 3: Identify the major trends in the firm’s natural and technological environments Government bans unsafe products and sets safety standards Regulations result in higher research costs, and longer time to market for new products

Political Environment Regulatory Trends: Evolving laws influence organizations Marketing activities face: Increasing legislation Changing government agency enforcement Society’s emphasis on ethics and socially responsible behavior LO 4: Explain the key changes in the political and cultural environments

Cultural Environment Secondary CORE Standard acceptable belief system that affects a society’s basic values Core beliefs slow to change Secondary beliefs are more open to change Secondary CORE LO 4: Explain the key changes in the political and cultural environments

Cultural Environment Society’s major cultural views are expressed in people’s views of: Themselves Others Organizations Society Nature The Universe LO 4: Explain the key changes in the political and cultural environments

Responding to the Marketing Environment Reactive Proactive Wait for change; then react Anticipate change; act now Missed opportunities Seized opportunities Damage from threats Mitigate impact of threats LO 5: Discuss how companies can react to the marketing environment Reactive responses: Many firms are passive and simply react to changes in the marketing environment Proactive responses: Some attempt to manage the marketing environment via aggressive actions designed to affect the publics and forces in the marketing environment