Chapter 2 The Changing Marketing Environment Copyright © 2001 by McGraw-Hill Ryerson Limited Sommers  Barnes Ninth Canadian Edition Presentation by Karen A. Blotnicky Mount Saint Vincent University, Halifax, NS

Copyright © 2001 McGraw-Hill Ryerson Limited Chapter Goals To gain an understanding of: The concept of monitoring a firm’s environment How external forces influence a firm’s marketing program: Demography, economics, competition, social/cultural milieu, technology, political/legal systems How suppliers and intermediaries impact the marketing program How nonmarketing resources within the firm influence the way in which it practices marketing

Copyright © 2001 McGraw-Hill Ryerson Limited The External Macroenvironment implicationsthe external environment is changing very rapidly, with considerable implications for marketing macro macro forces are factors over which the company has no short-term control micro micro forces are those that operate at the firm level the external macroenvironment affects different firms at a different pace and in different ways the better we understand the changing marketing environment and its effects, the better we can develop effective marketing programs

Copyright © 2001 McGraw-Hill Ryerson Limited COMPANY’S MARKETING PROGRAM Demo- graphics Economic conditions Political and legal forces Social and cultural forces Competition Technology The Marketing Program

Copyright © 2001 McGraw-Hill Ryerson Limited Demographic Change refers to the changing nature of the population most obvious change is the aging population smaller families; more single-person households smaller, non-traditional households more part-time employment more dual-income households changing patterns of immigration; ethnic mix must consider the implications of these changes

Copyright © 2001 McGraw-Hill Ryerson Limited Different age groups buy different products or services. What are the implications of these changes ( )? Under age 25: Grow by 4.8% years old: Decline by 5% years old: Increase by 4.5% years old: Grow by 2.5 million, or 39.5%. Over age 65: Grow by 20%. The Importance of Changing Demographics Source: Statistics Canada Projections

Copyright © 2001 McGraw-Hill Ryerson Limited Changing Ethnicity Chinese growing to be second largest language group in Canada Over one million Chinese live in Canada: 80% in British Columbia and Ontario Have unique buying habits and needs Make an “ethnic” market segment

Copyright © 2001 McGraw-Hill Ryerson Limited Economic Change consider the effect on consumers of: recession (business cycle) changes in interest rates inflation unemployment how are consumers likely to respond? they often shop around more; store and brand loyalty suffer when consumers are uncertain

Copyright © 2001 McGraw-Hill Ryerson Limited With little inflation, companies are having trouble raising prices. Instead they are: Redesigning products for ease of manufacture or to cut out costly, superfluous features. Using price-driven costing rather than cost-plus pricing. Emphasizing everyday low prices, rather than sporadic rebates and discounts. Forging closer links with customers to speed up new product development. Introducing “bare-bones” products. Investing in high-tech equipment to cut costs. Price Policy Must Respond to Economic Conditions

Copyright © 2001 McGraw-Hill Ryerson Limited Research has identified five distinct groups: Luxury lovers Luxury lovers — 29 percent. Flaunt their affluence. Savvy affluents Savvy affluents — 23 percent. Seek bargains, hide their wealth. Trailblazers Trailblazers — 21 percent. Love adventure travel, active investors. Contented affluents Contented affluents —14 percent. “Old money,” country-club set, believe in large estate for their children. Strained affluents Strained affluents —13 percent. Have large debt burden, believe strongly in image. Are Wealthy Consumers All the Same? No!!!

Copyright © 2001 McGraw-Hill Ryerson Limited Competitive Change Competition takes place at three levels : 1. directly at the brand or store level 2. at the level of substitute products/services 3. From marketers of all products and services competing for the same consumer dollar

Copyright © 2001 McGraw-Hill Ryerson Limited Social and Cultural Change lifestylesvaluesthe way in which we lead our lives is also changing: lifestyles and values greater emphasis on quality of life changing gender roles different attitudes toward physical activity, exercise, and diet among certain segments increased emphasis on quality and value environmentalism has affected marketing increased demands for convenience

Copyright © 2001 McGraw-Hill Ryerson Limited Trends in Attitude Change Changing male/female roles Emphasis on quality of life Growing interest in physical fitness, health and wellness Growing focus on service quality Aging population Growth in influence of young buyers Growing environmental awareness and concern

Copyright © 2001 McGraw-Hill Ryerson Limited True-Blue Greens True-Blue Greens - Change their personal behaviour and purchases to aid the environment. Greenback Greens Greenback Greens - Support environmental political candidates and donate money to environmental causes but are not as willing to change their habits. Sprouts Sprouts - Make a few environmental friendly purchases. Grousers Grousers - Grudgingly acknowledge environmental mandates. Basic browns Basic browns - Most apathetic and their ranks are growing. “Green” Consumers (from Roper Starch Worldwide)

Copyright © 2001 McGraw-Hill Ryerson Limited Technological Change Advancing technology creates new forms of competition and communications; fax, ATM’s, CD-ROM, cellular, Internet Also creates new industries to be supplied Also has important effects on how people spend their time: working and shopping from home, voice mail, surfing the Net Think about the fact that today technology is accepted by consumers, expected by them, transparent to them, and often disposable

Copyright © 2001 McGraw-Hill Ryerson Limited Impact of Technological Change Launches entirely new industries, such as multimedia, digital communications and electronic commerce Alters or virtually destroys existing industries, such as the effect of on regular mail and even fax Stimulates other markets and industries, such as the effect of the debit card and Internet shopping on the retailing industry Over 40% of Canadians had Internet access in 1999

Copyright © 2001 McGraw-Hill Ryerson Limited Political and Legal Change government and laws affect marketing at many levels legislation often has implications for marketing; some more direct than others considerable amount of consumer protection legislation in effect in Canada many industries are directly affected by legislation; packaging, labelling, advertising

Copyright © 2001 McGraw-Hill Ryerson Limited The External Microenvironment external to the firm, but part of its marketing system because of its close relationship marketits market ; the people or organizations whose wants and needs the firm intends to satisfy suppliers ;its suppliers ; the other firms upon whom the firm relies to provide quality products and services so that it can serve its customers marketing intermediaries marketing intermediaries ; other firms that represent the channel of distribution for the firm’s products and services

Copyright © 2001 McGraw-Hill Ryerson Limited COMPANY’S MARKETING PROGRAM Suppliers Marketing inter- mediaries Marketing inter- mediaries The market The Company’s Marketing Program

Copyright © 2001 McGraw-Hill Ryerson Limited Production Finance Personnel Company’s location Its research and development strength Its image Controllable Factors in the Marketing Plan Internal Factors Nonmarketing Factors

Copyright © 2001 McGraw-Hill Ryerson Limited COMPANY’S NONMARKETING RESOURCES Financial resources Research and development Company image Location Production facilities Human resources

Copyright © 2001 McGraw-Hill Ryerson Limited The New Internal Market Internal marketing ensures that employees are ‘on side’ with the goals of the organization The employees have a direct impact on product and service quality, dependability, and overall productivity The employees are an “internal market” which impact every department within the firm A satisfied internal market will be better able to satisfy the external (customer) market