Chapter 2 The External Marketing Environment Copyright © 2013 Pearson Canada Inc.

1-2 Marketing Defined “The activities, institutions, and processes for creating, communicating, and delivering, offerings that have value for customers, clients, partners, and society at large.”

The Marketing Mix NEEDS ProductPrice Promotion (Mktg Communications) Place (Distribution) Customer Customer’s Needs Organization’s Needs TradeConsumerB2B Customer

Copyright © 2013 Pearson Canada Inc.1-4 The Marketing Process Assess Customer Needs Identify and Select a Target Develop Marketing Strategy Develop Customer Relationship Strategy Evaluation and Control Marketing Plan Develop Implement Evaluate

The Marketing Process Assess Customer Needs Identify and Select Target Market Develop Marketing Strategy Product Price Mkt. Comm. Distribution Test MarketingRoll-out (Full Scale) Evaluation And Control

Copyright © 2013 Pearson Canada Inc.1-6 Developing a Marketing Strategy: The Marketing Mix Product Price Marketing Communications Distribution Marketing Mix Consumer or Business Customer

Copyright © 2013 Pearson Canada Inc.2-7 External Forces Influence Marketing Decisions Economic Competitive Social Demographic Technology Legal and Regulatory Marketing Plan Customers A business must anticipate change and react accordingly with its marketing strategies. Analysis Objective Setting External Forces

Copyright © 2013 Pearson Canada Inc.2-8 Economic Forces A variety of economic factors influence the state of the economy. GDP Growth Canadian $ Interest Rates Employment Consumer Spending Imports and Exports The relationship between these influences is dynamic. A marketer must adjust marketing strategies accordingly.

Copyright © 2013 Pearson Canada Inc.2-9 Competitive Forces Monopoly Oligopoly One firm serves market; government regulations protect consumers. (e.g. your local cable company). The competitive environment an organization operates in must be considered: A few large firms dominate the market; aggressive marketing and a follow-the-leader mindset among competitors. (e.g. mobile phone services).

Copyright © 2013 Pearson Canada Inc.2-10 Competitive Forces Monopolistic Competition Pure Competition Many competitors with unique marketing strategies; intensity of marketing is based on position (Hyundai) h?v=6v9yuBDmmAQ All firms market a uniform product; no noticeable differentiation; market supply and demand dictates price. (e.g. dollar store items).

Copyright © 2013 Pearson Canada Inc.2-11 Competitor Strategies Direct Competition Indirect Competition Competition from alternative products or services: Coke, Pepsi, RC Cola, private label Cola Competition from substitute products that offer customers the same benefit. Coke also competes with Gatorade, Dasani, Fruitopia and Red Bull. Marketers must consider the strategies of direct and indirect competitors.

Copyright © 2013 Pearson Canada Inc.2-12 Competitive Position The strength of a brand or company relative to its competitors is determined by market share. Market Share is: “the sales volume of a brand or company expressed as a percentage of total market sales volume.” The Think Marketing box on p. 36 illustrates how Home Depot analyzes external forces.

Copyright © 2013 Pearson Canada Inc.2-13 Market Share Market share can be based on unit sales volume or dollar sales volume. Example dollar calculation: Market Share = Brand Dollar Sales / Market Dollar Sales x 100 Example: = $2,500,000 / $10,000,000 x 100 = 25% Think - How much of the market do we control – for now?

Copyright © 2013 Pearson Canada Inc.2-14 Competitive Position Leader Challenger Follower Nicher Largest in market share and leader in strategic actions: Coca-Cola; Tim Hortons, Subway. A brand that is generally satisfied with its market share position: Dr. Pepper, Mr. Sub. A brand or company that focuses all resources on one segment of market: Porter Airlines. A brand striving to gain leadership via aggressive marketing actions: Pepsi-Cola challenges Coca-Cola.

Copyright © 2013 Pearson Canada Inc.2-15 Social Forces Marketers must be aware of and react to social changes that are taking place. Three dominant social trends prevail: 1.Canadian families lead hectic lifestyles. 2.Canadians are expressing a strong concern for health and welfare. 3.There is a genuine concern for the natural environment.

Copyright © 2013 Pearson Canada Inc.2-16 Concern for Health: Applied Becel was an innovator. From the day it was introduced to market it was positioned as a “good for you” product.

Copyright © 2013 Pearson Canada Inc.2-17 Concern for the Environment: Applied Toyota leads the way in the automobile industry with its environmentally friendly vehicles.

Copyright © 2013 Pearson Canada Inc.2-18 Demographic Forces Demographics: the study of the characteristics of the population. Size - # of people Age Gender Education Location Family Formation and Household Size

Copyright © 2013 Pearson Canada Inc.2-19 Demographic Forces Spending Power and Wealth Education Multiculturalism See Think Marketing Box on p.43 for details on Home Depot’s ethnic marketing programs. Mercedes appeals to high income boomers.

Copyright © 2013 Pearson Canada Inc.2-20 Demographic Forces

Boom Bust Echo

Tweens Pre- and early adolescents, age 8 to 14 Access to information and growing purchasing power Emerging as “the richest generation” and the “most influential generation in history”

Generation Y Born between 1979 and 1994 Population of 7.4 million in Canada Researchers have found Gen Yers to be: – Impatient – Family-oriented – Inquisitive – Opinionated – Diverse – Time managers – “Street Smart” Word of mouth marketing is effective Online

Participation Mark (1%) Mountain Dew and The North Face are brands preferred by Generation Y. Visit each company’s Web site and identify the elements that make the site appealing to Gen Yers. Do there seem to be any elements that might have crossover appeal for Generation X? Which ones?

Generation X Born between 1965 and 1979 Population of over 4.5 million in Canada Savvy and cynical consumers Time is at a premium, and outsourcing is utilized Entering their money- making years

Baby Boomers Born between 1946 and 1964 Population of 9 million + in Canada—the largest demographic segment Expect to remain in the workforce longer than previous generations Income will continue to grow as they keep working Parents are called “Traditionalists”

Four segments of the baby-boomer cohort: 1.Looking for balance. Very active and saving time is important. Opportunities for travel-related businesses and food-service businesses. 2.Confident and living well. Highest incomes of all segments and enjoy being the first to purchase a new product. Stylish and trendy. Opportunities for luxury goods and services. 3.At-ease boomers. Do not worry about future, job, or financial security. Home- centric and family-oriented. Opportunities for traditional household products. Brand names resonate strongly. 4.Overwhelmed boomers. Lowest income of all segments and worry about the future. Health is a big concern. Below average on accepting technology and on using electronic, digital, and tech products.

Copyright © 2013 Pearson Canada Inc.2-28 Canada’s Ethnic Population

Copyright © 2013 Pearson Canada Inc.2-29 Technological Forces Many experts believe technology is the single biggest force that will shape and reshape the marketplace. Database Management and CRM programs Interactive Communications online and on smartphones Mobility is fastest growing MKTG sector Growth of E-Marketing and E-Commerce

Copyright © 2013 Pearson Canada Inc.2-30 E-Commerce in Canada

Copyright © 2013 Pearson Canada Inc.2-31 Legal and Regulatory Forces Industry Canada and the Competition Act govern business practice in Canada. The objectives of the Act are: 1.To maintain and encourage competition. 2.To ensure that small- and medium-sized businesses have an equitable opportunity to participate in the Canadian economy. 3.To provide consumers with product choice and competitive prices.

Copyright © 2013 Pearson Canada Inc.2-32 Self-Regulation Many industries establish their own regulations that all members must follow. The Canadian Marketing Association has its own Code of Ethics and Standards of Practice. Complete details about the CMA’s regulations are available at

Copyright © 2013 Pearson Canada Inc.1-33 Visual Model

Copyright © 2013 Pearson Canada Inc.2-34 Visual Model

For Wednesday Participation mark 1%- hand in observations and answers to questions on slide 24. Handout course outlines Handout Marketing Plan Project Assignment Think about who you would like to work with in your group for the MPP. (6 people to a group)