1. C HAPTER 3 The Marketing Environment

2. Copyright 2007, Prentice-Hall Inc.3-2  Describe the environmental forces that affect the company’s ability to serve its customers.  Explain how changes in the demographic and economic environments affect marketing decisions.  Identify the major trends in the firm’s natural and technological environments.  Explain the key changes in the political and cultural environments.  Discuss how companies can react to the marketing environment. Roadmap: Previewing the Concepts

3. Copyright 2007, Prentice-Hall Inc.3-3 Challenges  Faces shifting consumer lifestyles and preferences for healthier foods.  Low ratings of food and service quality.  Atmosphere not upscale.  Image is perceived as being uncultured, uncool, and unclassy by younger target markets. Marketing Initiatives  Focus on core competency of consistent products and reliable service.  Offers upscale alternative including McCafe and Bistro Gourmet.  Eliminates “supersize,” offers healthier food options, and introduces Go Active! Adult Happy Meal. McDONALD’S – Facing Challenges

4. Copyright 2007, Prentice-Hall Inc.3-4 Marketing Environment  Consists of actors and forces outside the organization that affect management’s ability to build and maintain relationships with target customers. –Studying the environment allows marketers to take advantage of opportunities as well as to combat threats. –Marketing intelligence and research are used to collect information about the environment.

5. Copyright 2007, Prentice-Hall Inc.3-5 Figure 3-1 Actors in the Microenvironment

6. Copyright 2007, Prentice-Hall Inc.3-6  Company’s Internal Environment: –Areas inside of a company. –Affects the marketing department’s planning strategies. –All departments must “think consumer” and work together to provide superior customer value and satisfaction. The Microenvironment

7. Copyright 2007, Prentice-Hall Inc.3-7  Suppliers: –Provide resources needed to produce goods and services. –Important link in the “value delivery system.” –Most marketers treat suppliers like partners – relationship management of suppliers is critical. The Microenvironment

8. Copyright 2007, Prentice-Hall Inc.3-8  Marketing intermediaries: –Help the company to promote, sell, and distribute its goods to final buyers  Resellers  Physical distribution firms  Marketing services agencies  Financial intermediaries The Microenvironment

9. Copyright 2007, Prentice-Hall Inc.3-9 Partnering with Intermediaries Coca-Cola’s partnership efforts help intermediaries to market more effectively. Coca-Cola shares research results related to the beverage market, such as consumer preference and demographic data. They’ve even analyzed creative aspects of drive- through menu board design that could be improved. Marketing in Action

10. Copyright 2007, Prentice-Hall Inc.3-10  Customers: –Five types of markets that purchase a firm’s goods and services.  Consumer  Business  Reseller  Government  International The Microenvironment

11. Copyright 2007, Prentice-Hall Inc.3-11 The Microenvironment  Competitors: –Those who serve a target market with products and services that are viewed by consumers as being reasonable substitutes. –Company must gain strategic advantage against these organizations.

12. Copyright 2007, Prentice-Hall Inc.3-12 Marketing in Action Comparative advertising is often used to promote a company’s or brand’s strategic advantage. Comparative advertising may name or show a specific competitor, or refer to the competition indirectly via comparisons to “other brands” or “the leading brand.” Promoting Strategic Advantages

13. Copyright 2007, Prentice-Hall Inc.3-13 The Microenvironment  Publics: –Any group that has an interest in or impact on an organization's ability to achieve its objectives.  Types of Publics: –Financial –Media –Government –Citizen-action –Local –General –Internal

14. Copyright 2007, Prentice-Hall Inc.3-14 The Macroenvironment The company and all of the other actors operate in a larger MACROENVIRONMENT of forces that shape opportunities and pose threats to the company.

15. Copyright 2007, Prentice-Hall Inc.3-15 Figure 3-2 Forces in the Macroenvironment

16. Copyright 2007, Prentice-Hall Inc.3-16 Demographic Forces  Demographics: –The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics.  Free demographic information can be found on the Web. http://www.census.gov

17. Copyright 2007, Prentice-Hall Inc.3-17  Marketers track changing age and family structures, geographic population shifts, educational characteristics, and population diversity. –The changing age structure of the U.S. population is the single most important demographic trend. –Baby boomers, Generation X, and Generation Y are the key groups. Demographic Forces

18. Copyright 2007, Prentice-Hall Inc.3-18 Demographic Forces  Baby Boomers: –78 million born between 1946 and 1964. –Equal 28% of population. –Earn more than 50% of all personal income. –Almost 25% belong to racial or ethnic minority. –Spend a lot on anti-aging products and services. –Are likely to postpone retirement.

19. Copyright 2007, Prentice-Hall Inc.3-19 Marketing in Action As baby boomers age, their desire for vitality and continued good health will become increasingly important. Many marketers are already attempting to satisfy these needs by developing new goods, drugs, and services. Targeting Boomers’ Needs

20. Copyright 2007, Prentice-Hall Inc.3-20 Demographic Forces  Generation X : –Born between 1965 and 1976. –Defined by shared experiences. –Cynical of frivolous marketing pitches. –Cares about the environment. –Prize experience, not acquisition.  Generation Y: –Born between 1977 and 1994. –Large disposable income. –Comfortable with technology. –Tend to be impatient and “Now-Oriented.” –Targeted by many product lines.

21. Copyright 2007, Prentice-Hall Inc.3-21 Marketing in Action The ad shown at left plays to the fact that brands successfully targeting Gen Y are those that are perceived as hip and popular. It also recognizes that Gen Y’s composition is more racially diverse, with 1 in 3 members considering themselves to be non-Caucasian. Reaching Out to Generation Y

22. Copyright 2007, Prentice-Hall Inc.3-22 Demographic Forces  Changing American family and household makeup: –Married couples with children equal 34%, and this percentage is falling. –Married couples and people living with other relatives equals 22%. –Single parents equal 12%. –Single persons and adult “live-togethers” (also called nonfamily households) = 32%

23. Copyright 2007, Prentice-Hall Inc.3-23 Marketing in Action Dream Dinners was created to help working women who haven’t time to prepare or cook dinner themselves, but who want their families to eat well. Changing American Household

24. Copyright 2007, Prentice-Hall Inc.3-24  Geographic Shifts in Population: –14% of U.S. residents move each year. –General shift toward the Sunbelt states. –City to suburb migration continues. –More people moving to “micropolitan” areas. –More people telecommute.  1 in 5 people now work out of their home. Demographic Forces

25. Copyright 2007, Prentice-Hall Inc.3-25 Demographic Forces  Better Educated Population: –1980:  69% of people over age 25 completed high school.  17% had completed college. –2003:  85% of people over age 25 completed high school.  27% had completed college.

26. Copyright 2007, Prentice-Hall Inc.3-26  Greater White-Collar Population –1950 – 1985:  White-collar workers increased from 41% to 54% while blue-collar workers decreased from 47% to 33%. –1983 – 1999:  Professionals and managers increased from 23% to greater than 30%. –2002 – 2012:  Professionals should increase by 25% while manufacturing is expected to increase 3%. Demographic Forces

27. Copyright 2007, Prentice-Hall Inc.3-27 How might age-related generational characteristics affect Walt Disney World? What about changes in the composition of households? Education and work force status? Explain. Let’s Talk! http://disneyworld.disney.go.com/wdw/parks/parkOverview?id=ParkOverviewPage

28. Copyright 2007, Prentice-Hall Inc.3-28  Increasing diversity: –U.S. is a “salad bowl,” mixing together various groups, each of which retains its ethnic and cultural differences.  Ethnic segments are growing as a percentage of the U.S. population and growth is projected to continue. –Increased marketing efforts towards:  Gay and lesbian consumers  People with disabilities Demographic Forces

29. Copyright 2007, Prentice-Hall Inc.3-29 Diversity Related Marketing Specialty consultants are often hired to research and target diverse markets. Marketing in Action http://www.outnowconsulting.com/index.htm

30. Copyright 2007, Prentice-Hall Inc.3-30 Economic Forces  Changes in Income –1980s – consumption frenzy –1990s – “squeezed consumer” –2000s – value marketing  Income Distribution –Upper class –Middle class –Working class –Underclass  Consists of factors that affect consumer purchasing power and spending patterns.

31. Copyright 2007, Prentice-Hall Inc.3-31 Disney’s Two-Tiered Market Distinctly different items are targeted to each market. Marketing in Action

32. Copyright 2007, Prentice-Hall Inc.3-32 Natural Forces  Involves natural resources that are needed as inputs by marketers or that are affected by marketing activities.  Factors include: –Shortages of raw materials. –Increased pollution. –Increased government intervention. –Environmentally sustainable strategies.

33. Copyright 2007, Prentice-Hall Inc.3-33 Marketing in Action Environmental Sustainable Practices Some firms have adopted biodegradable packaging alternatives as part of their environmentally sustainable practices. Mondi Business Paper is one such firm – note that the paper itself is 100% recycled.

34. Copyright 2007, Prentice-Hall Inc.3-34 Technological Forces Technological forces are dramatically shaping our destiny. Watch the clip to learn how consumers’ usage of the WWW has impacted the promotional efforts of American Express. Video Snippet

35. Copyright 2007, Prentice-Hall Inc.3-35  Technology changes rapidly, creating new markets and opportunities for some, while making other products obsolete.  Challenge is to make practical, affordable products.  Safety regulations result in higher research costs and a longer time period between conceptualization and introduction of a product. Technological Forces

36. Copyright 2007, Prentice-Hall Inc.3-36 Let’s Talk! Genetically modified or cloned foods have met with strong resistance in Europe. How do you feel about eating genetically altered or cloned foods? How else might genetic engineering advances create new opportunities?

37. Copyright 2007, Prentice-Hall Inc.3-37  Includes laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society.  Areas of concern: –Increasing legislation. –Changing government agency enforcement. –Increased emphasis on ethics and socially responsible behavior. Political Forces

38. Copyright 2007, Prentice-Hall Inc.3-38 Marketing in Action Canada Dry donated $.10 to the Juvenile Diabetes Research Foundation of Canada for every 2 liter bottle & 12 pack sold during the promotional period. Learn more about the multi-tiered campaign by visiting the Web site. Diet Canada Dry – Cause-Related Marketing http://www.opticom-marketing.com/case-study-canada-dry.php

39. Copyright 2007, Prentice-Hall Inc.3-39 Cultural Forces The institutions and other forces that affect a society’s basic values, perceptions, preferences, and behavior.

40. Copyright 2007, Prentice-Hall Inc.3-40  Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government.  Secondary beliefs and values are more open to change. –Marketers may be able to change secondary beliefs, but NOT core beliefs. Cultural Forces

41. Copyright 2007, Prentice-Hall Inc.3-41  Society’s major cultural views are expressed in people’s views of: –Themselves –Others –Organizations –Society –Nature –The Universe Cultural Forces

42. Copyright 2007, Prentice-Hall Inc.3-42 Responding to the Marketing Environment  Environmental Management Perspective –Taking a proactive approach to managing the environment by taking aggressive (rather than reactive) actions to affect the publics and forces in the marketing environment.  Manage the environment by: –Hiring lobbyists –Running “advertorials” –Pressing law suits –Filing complaints –Forming agreements to control channels

43. Copyright 2007, Prentice-Hall Inc.3-43  Describe the environmental forces that affect the company’s ability to serve its customers.  Explain how changes in the demographic and economic environments affect marketing decisions.  Identify the major trends in the firm’s natural and technological environments.  Explain the key changes in the political and cultural environments.  Discuss how companies can react to the marketing environment. Rest Area: Reviewing the Concepts