The Marketing Environment

Key Terms Demography Echo boomers (baby boomlet generation) Economic environment Environmental management perspective Financial intermediaries Generation X Macroenvironment Marketing environment

Key Terms Marketing intermediaries Marketing services agencies Microenvironment Political environment Suppliers

“It is useless to tell a river to stop running; the best thing is to learn how to swim in the direction it is flowing.” -Anonymous

Chapter Objectives List and discuss the importance of the elements of the company’s micro-environment Describe the macro-environmental forces that affect the company’s ability to serve its customers Explain how changes in demographic and economic environments affect marketing and describe the levels of competition

Chapter Objectives Identify the major trends in the firm’s natural and technological environments Explain the key changes that occur in the political and cultural environments Discuss how companies can be proactive rather than reactive when responding to environmental trends

The Company’s Microenvironment Suppliers Marketing Intermediaries

The Company’s Microenvironment

The Company Marketing managers must work with all departments of a company All Departments have an impact on the marketing department’s plans and actions “Think Consumer”

Suppliers Suppliers are firms and individuals that provide the resources needed by the company to produce its goods and services Suppliers can seriously affect marketing plans

Marketing Intermediaries Marketing intermediaries help the company promote, sell, and distribute its goods to the final buyers Marketing service agencies help formulate and implement marketing strategies Financial intermediaries help hospitality companies finance their transactions

The Company’s Macro-environment

Competitors To be successful, a company must satisfy needs and wants of consumers better than competitors A company should monitor three variables when analyzing each of its competitors Share of Market Share of Mind Share of Heart

Competition Is the “enemy” or anyone who competes for the same market customers? Understand the competition as well as the capabilities of your competitors Macro-competition Any business that competes for the same customers in the same product class at the same point in time

Competitive Intelligence Information on what the competition is doing, its position and intentions as well as its strengths and weaknesses Public information Media Trade press Trade associations Company brochures Flyers and advertisements Annual reports Talk directly to the competition or customers

Competitive Intelligence Actual market share The amount of business a firm actually receives in relative proportion to its direct competitors in the same product class Fair market share The amount of business a firm expects to receive in relative proportion to its direct competitors in the same product class

Market Share 300 220 500 350 1200 600 2600 1420 Hotel Actual Rooms Rooms Sold Occupancy % Fair Share % Actual Share % Rooms sold/actual rooms Your capacity/ Total capacity Your occupancy/ Total market occupancy A 300 220 73.3% (220/300) B 500 350 24.7% (350/1420) C 1200 YOUR HOTEL 600 23.1% (600/2600) TOTAL 2600 1420

Using Competitive Intelligence Sustainable competitive advantage happens when: Customers perceive a consistent difference in important attributes between one firm or property and its competition The difference is the result of a capability gap between the firm and its competitors Both the difference in important attributes and the capability gap can endure/bear over time

Choosing the Right Competition Success lies in thorough analysis of the current situation Determine which other firms in the same product class are pursuing the same customers at the same point in time

Demographic Environment Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics Demographics change over time and companies must keep up with them

Demographic Environment Baby boomers – 77 Million post-World War II babies born between 1946-1964 Generation X – 45 million born between 1965-1976, the “birth dearth” Generation Y (echo boomers) – 72 million born between 1977-1994 Generation Z (techno boomers) – born after -1996

Economic Environment The economic environment consists of factors that affect consumer purchasing power and spending patterns It is not enough to have people, the people must have buying power

Economic Environment Includes economics that effect hospitality including: recession Inflation employment levels personal discretionary income foreign exchange rates Foreign development and investment as economies grow stronger

The Global Economy Global economic dealings, such as currency exchange rates, have a large impact on travel and tourism across the world

Natural Environment The natural environment consists of natural resources required by marketers or affected by marketing activities Anyone involved in tourism is responsible for protecting the environment and ensuring sustainability

Ecological/natural environment Includes issues related to our natural environment Ecotourism Disposal Recycling Pollution Ecological gains in the hotel industry have largely taken place

Technological Environment The hospitality industry is greatly affected by changes in technology The Internet, computerized systems, key cards, etc. Faces opposition by those who believe it threatens privacy, simplicity, and even the human race The most dramatic force affecting tourism

Technological Environment Consideration of technology impact from both a consumer and business perspective Potentially a source of competitive advantage Instrumental in hospitality and tourism Have potential to increase customer satisfaction

Political Environment The political environment is made up of laws, government agencies, and pressure groups that influence and limit the activities of various organizations and individuals in society

Political Environment Has an impact on hospitality both in the current government and in destinations interested in developing tourism Government changes can affect business opportunities and influence global expansion Government interested in tax earnings and employment potentials

Political Trends Increased legislation and regulation affecting business Changing government Agency Enforcement Increased emphasis on socially responsible actions and ethics

Cultural Environment The cultural environment includes institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors Persistence of cultural values Subcultures

Regulatory environment Government regulations or ordinances that affect consumers and businesses Local State Federal Can have great impact on costs and profits Some countries have different and sometimes undeveloped regulatory and legal environments, or those that are not recognized or followed

Linked Environmental Factors Environmental factors can also work together to bring about change Americans now eat more meals prepared outside than inside the home Low-carb diets Grocery stores competing with restaurants

Responding to the Marketing Environment Many companies feel the marketing environment is uncontrollable An environmental management perspective takes action to sway the marketing environment Take a proactive rather than a reactive approach

Environmental Scanning Determine environmental areas that require monitoring Determine how the information will be collected Implement data collection plan Analyze data and use in market planning process

Environmental Scanning Examining the external environment to determine potential opportunities and threats that could affect a business Requires an awareness of what is going on in order to be proactive rather than reactive

Potential Competitors Technological Environment Sociocultural Environment Risk of Entry by Potential Competitors Bargaining Power of Suppliers Threat of Substitute Products Ecological Environment Rivalry Among Established Firms Regulatory Environment Economic Environment Bargaining Power Of Buyers Political Environment Five Forces Model

Using Marketing Information Simple data collection is not sufficient Information must be: Reliable Timely Used in decision making

Discussion Questions What environmental trends will affect the succes of a first class hotel chain, such as Hyatt or Hilton, over the next 10 years? If you were corporate director of marketing for this type of hotel, what plans would you make to deal with these trends? Explain how environmental trends have effected the food and the beverage offerings a business class hotel such as Sheraton etc.

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