The Marketing EnvironmentThe Marketing Environment

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• Describe the environmental forces that Describe the environmental forces that affect the company’s ability to serve its affect the company’s ability to serve its customers.customers.

• Explain how changes in the demographic Explain how changes in the demographic and economic environments affect and economic environments affect marketing decisions.marketing decisions.

• Identify the major trends in the firm’s Identify the major trends in the firm’s natural and technological environments.natural and technological environments.

• Explain the key changes in the political and Explain the key changes in the political and cultural environments.cultural environments.

• Discuss how companies can react to the Discuss how companies can react to the marketing environment.marketing environment.

ROAD MAP: Previewing the ConceptsROAD MAP: Previewing the Concepts

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Marketing Marketing EnvironmentEnvironment

• The marketing environment consists of The marketing environment consists of actors and forces outside the actors and forces outside the organization that affect management’s organization that affect management’s ability to build and maintain relationships ability to build and maintain relationships with target customers.with target customers.

• Environment offers both opportunities Environment offers both opportunities and threats.and threats.

• Marketing intelligence and research used Marketing intelligence and research used to collect information about the to collect information about the environment.environment.

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• Includes:Includes:– Microenvironment: actors close to the Microenvironment: actors close to the

company that affect its ability to serve company that affect its ability to serve its customers.its customers.

– Macroenvironment: larger societal Macroenvironment: larger societal forces that affect the microenvironment.forces that affect the microenvironment.•Considered to be beyond the control of the Considered to be beyond the control of the

organization.organization.

Marketing Marketing EnvironmentEnvironment

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The Company’s The Company’s MicroenvironmentMicroenvironment

• Company’s Internal Environment: Company’s Internal Environment: – Areas Areas inside inside a company.a company.– Affects the marketing department’s Affects the marketing department’s

planning strategies.planning strategies.– All departments must “think All departments must “think

consumer” and work together to consumer” and work together to provide superior customer value and provide superior customer value and satisfaction.satisfaction.

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Actors in the Actors in the MicroenvironmentMicroenvironment

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• Suppliers: Suppliers: – Provide resources Provide resources

needed to produce needed to produce goods and services.goods and services.

– Important link in Important link in the “value delivery the “value delivery system.”system.”

– Most marketers Most marketers treat suppliers like treat suppliers like partners.partners.

The Company’s The Company’s MicroenvironmentMicroenvironment

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The Company’s The Company’s MicroenvironmentMicroenvironment

• Marketing Intermediaries: Marketing Intermediaries: – Help the company to promote, sell, and Help the company to promote, sell, and

distribute its goods to final buyersdistribute its goods to final buyers•ResellersResellers

•Physical distribution firmsPhysical distribution firms

•Marketing services agenciesMarketing services agencies

•Financial intermediariesFinancial intermediaries

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Partnering With Partnering With IntermediariesIntermediaries

Coca-Cola provides Wendy’s with much more than just soft drinks. It also pledges powerful marketing support.

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• Customers:Customers: – Five types of Five types of

markets that markets that purchase a purchase a company’s company’s goods and goods and servicesservices

The Company’s The Company’s MicroenvironmentMicroenvironment

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The Company’s The Company’s MicroenvironmentMicroenvironment

• Competitors: Competitors: – Those who serve a target market with Those who serve a target market with

products and services that are viewed by products and services that are viewed by consumers as being reasonable substitutesconsumers as being reasonable substitutes

– Company must gain strategic advantage Company must gain strategic advantage against these organizationsagainst these organizations

• Publics: Publics: – Group that has an interest in or impact on Group that has an interest in or impact on

an organization's ability to achieve its an organization's ability to achieve its objectivesobjectives

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Types of Types of PublicsPublics

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The MacroenvironmentThe Macroenvironment

• The company and all of the other The company and all of the other actors operate in a larger actors operate in a larger macroenvironment of forces that macroenvironment of forces that shape opportunities and pose threats shape opportunities and pose threats to the company.to the company.

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The Company’s The Company’s MacroenvironmentMacroenvironment

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The Company’s The Company’s MacroenvironmentMacroenvironment

• Demographic: Demographic: – The study of human populations in terms The study of human populations in terms

of size, density, location, age, gender, of size, density, location, age, gender, race, occupation, and other statistics.race, occupation, and other statistics.

– Marketers track changing age and family Marketers track changing age and family structures, geographic population shifts, structures, geographic population shifts, educational characteristics, and educational characteristics, and population diversity.population diversity.

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The Seven U.S. GenerationsThe Seven U.S. Generations

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Baby BoomersBaby Boomers

• 78 million born between 1946 and 196478 million born between 1946 and 1964

• Account for 28% of populationAccount for 28% of population

• Earn more than half of all personal Earn more than half of all personal incomeincome

• Almost 25% belong to racial or ethnic Almost 25% belong to racial or ethnic minorityminority

• Spend a lot on anti-aging products and Spend a lot on anti-aging products and servicesservices

• Are likely to postpone retirementAre likely to postpone retirement

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Generation XGeneration X

• 45 million born between 1965 and 45 million born between 1965 and 19761976

• Defined by their shared experiencesDefined by their shared experiences– Increasing divorce ratesIncreasing divorce rates– More of their mothers employedMore of their mothers employed– First generation of latchkey kidsFirst generation of latchkey kids

• Cynical of frivolous marketing pitchesCynical of frivolous marketing pitches

• Care about the environmentCare about the environment

• Prize experience, not acquisitionPrize experience, not acquisition

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Generation YGeneration Y

• 72 million born between 1977 and 199472 million born between 1977 and 1994

• Have large amount of disposable incomeHave large amount of disposable income

• Comfortable with computer technologyComfortable with computer technology

• Tend to be impatient and “Now-Oriented”Tend to be impatient and “Now-Oriented”

• Many product lines targeted at Gen YsMany product lines targeted at Gen Ys

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• Pair with another student to discuss Pair with another student to discuss the following questions:the following questions:– In what ways does the buying behavior In what ways does the buying behavior

of you and your parents differ?of you and your parents differ?– In what ways does the buying behavior In what ways does the buying behavior

of you and your grandparents differ?of you and your grandparents differ?– What selling strategies would work best What selling strategies would work best

for:for:•YouYou

•Your parentsYour parents

•Your grandparentsYour grandparents

Interactive Student Assignment

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Changing American FamilyChanging American Family

• Household makeup:Household makeup:– Married couples with children = 34%, and Married couples with children = 34%, and

fallingfalling– Married couples and people living with other Married couples and people living with other

relatives = 22%relatives = 22%– Single parents = 12%Single parents = 12%– Single persons and adult “live-togethers” = Single persons and adult “live-togethers” =

32%32%

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The Changing American The Changing American FamilyFamily

Non-family households—single live-alones or adult live-togethers of one or both sexes—make up a full 32 percent of U.S. households. Today’s marketers must incorporate “the likes of Murphy Brown, Ally McBeal, and Will and Grace into their business plans.”

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Geographic Shifts in Geographic Shifts in PopulationPopulation

• 16% of U.S. residents move each year16% of U.S. residents move each year

• General shift toward the Sunbelt statesGeneral shift toward the Sunbelt states

• City to suburb migration continuesCity to suburb migration continues

• More people moving to “micropolitan” More people moving to “micropolitan” areasareas

• More people telecommuteMore people telecommute

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Better Educated PopulationBetter Educated Population

• 1980:1980:– 69% of people over age 25 completed 69% of people over age 25 completed

high schoolhigh school– 17% had completed college17% had completed college

• 2002:2002:– 84% of people over age 25 completed 84% of people over age 25 completed

high schoolhigh school– 27% had completed college27% had completed college

• Currently, Currently, ⅔ ⅔ of high school grads start of high school grads start collegecollege

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More White-Collar More White-Collar PopulationPopulation

• 1950 – 1985:1950 – 1985:– Proportion of white-collar workers Proportion of white-collar workers

increased from 41% to 54%increased from 41% to 54%– Proportion of blue-collar workers Proportion of blue-collar workers

decreased from 47% to 33%decreased from 47% to 33%– Proportion of service workers increased Proportion of service workers increased

from 12% to 14%from 12% to 14%

• 1983 – 1999:1983 – 1999:– Proportion of managers and professionals Proportion of managers and professionals

increased from 23% to >30%increased from 23% to >30%

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Increasing DiversityIncreasing Diversity

• U.S. is a “salad bowl”U.S. is a “salad bowl”– Various groups mixed together, each Various groups mixed together, each

retaining its ethnic and cultural retaining its ethnic and cultural differencesdifferences

• Increased marketing to:Increased marketing to:– Gay and lesbian consumersGay and lesbian consumers– People with disabilitiesPeople with disabilities

•www.peapod.comwww.peapod.com

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Diversity-Based AdvertisingDiversity-Based Advertising

Based on careful study of cultural differences, Bank of America has developed targeted advertising messages for different cultural subgroups, here Asians and Hispanics.

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Economic EnvironmentEconomic Environment

• Changes in IncomeChanges in Income– 1980’s – consumption 1980’s – consumption

frenzyfrenzy– 1990’s – “squeezed 1990’s – “squeezed

consumer”consumer”– 2000’s – value 2000’s – value

marketingmarketing

• Income Income DistributionDistribution– Upper classUpper class– Middle classMiddle class– Working classWorking class– UnderclassUnderclass

Consists of factors that affect consumer purchasing power and spending

patterns.

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Income DistributionIncome Distribution

Walt Disney markets two distinct Pooh bears to match its two-tiered market.

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Natural EnvironmentNatural Environment

• Involves the Involves the natural resources natural resources that are needed as that are needed as inputs by inputs by marketers or that marketers or that are affected by are affected by marketing marketing activities.activities.

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Factors Impacting the Natural Factors Impacting the Natural EnvironmentEnvironment

Shortages of Raw Materials

Increased Pollution

Increased Government Intervention

Environmentally Sustainable Strategies

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Environmental Environmental ResponsibilityResponsibility

McDonald’s has made a substantial commitment to the so-called “green movement.”

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Technological Technological EnvironmentEnvironment

•Most Most dramatic dramatic force now force now shaping our shaping our destiny.destiny.

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Technological EnvironmentTechnological Environment

• Changes rapidly.Changes rapidly.• Creates new markets Creates new markets

and opportunities.and opportunities.• Challenge is to make Challenge is to make

practical, affordable practical, affordable products.products.

• Safety regulations Safety regulations result in higher result in higher research costs and research costs and longer time between longer time between conceptualization and conceptualization and introduction of introduction of product.product.

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• Within the last ten years, which Within the last ten years, which technological force has had the technological force has had the greatest impact on marketing? In greatest impact on marketing? In what areas of marketing has this what areas of marketing has this impact been seen?impact been seen?

• What technological force has What technological force has impacted you the most? In what ways impacted you the most? In what ways has this occurred?has this occurred?

Discussion Questions

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Political EnvironmentPolitical Environment

Includes Laws, Government Agencies, and Pressure Groups that Influence or Limit Various Organizations and Individuals In a Given Society.

Increasing Legislation

Changing GovernmentAgency Enforcement

Increased Emphasis on Ethics& Socially Responsible Actions

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Cause-Related MarketingCause-Related Marketing

KitchenAid donates $50 to breast cancer research for every pink mixer it sells and encourages consumers to host a “Cook for the Cure” dinner party.

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Cultural EnvironmentCultural Environment

• The institutions The institutions and other forces and other forces that affect a that affect a society’s basic society’s basic values, values, perceptions, perceptions, preference, and preference, and behaviors.behaviors.

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Cultural EnvironmentCultural Environment

• Core beliefs and values are passed Core beliefs and values are passed on from parents to children and are on from parents to children and are reinforced by schools, churches, reinforced by schools, churches, business, and government.business, and government.

• Secondary beliefs and values are Secondary beliefs and values are more open to change.more open to change.

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Cultural EnvironmentCultural Environment• Yankelovich Monitor has identified Yankelovich Monitor has identified

eight major consumer value themes:eight major consumer value themes:1.1. ParadoxParadox

2.2. Trust notTrust not

3.3. Go it aloneGo it alone

4.4. Smarts really countSmarts really count

5.5. No sacrificesNo sacrifices

6.6. Stress hard to beatStress hard to beat

7.7. Reciprocity is the way to goReciprocity is the way to go

8.8. Me 2Me 2

• www.www.yankelovichyankelovich.com.com

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ThemselvesThemselves

OthersOthers

OrganizationsOrganizations

SocietySociety

NatureNature

The UniverseThe Universe

Cultural Cultural EnvironmentEnvironment

Society’s Major Cultural Views Are

Expressed in People’s Views of:

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Responding to the Marketing Responding to the Marketing EnvironmentEnvironment

• Environmental Management Perspective Environmental Management Perspective •Taking a proactive approach to managing Taking a proactive approach to managing

the environment by taking aggressive the environment by taking aggressive (rather than reactive) actions to affect the (rather than reactive) actions to affect the publics and forces in the marketing publics and forces in the marketing environment. environment.

•This can be done by:This can be done by:– Hiring lobbyistsHiring lobbyists– Running “advertorials”Running “advertorials”– Pressing lawsuitsPressing lawsuits– Filing complaintsFiling complaints– Forming agreements to control channelsForming agreements to control channels

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Rest Stop: Reviewing the Rest Stop: Reviewing the ConceptsConcepts

• Describe the environmental forces that Describe the environmental forces that affect the company’s ability to serve its affect the company’s ability to serve its customers.customers.

• Explain how changes in the demographic Explain how changes in the demographic and economic environments affect and economic environments affect marketing decisions.marketing decisions.

• Identify the major trends in the firm’s Identify the major trends in the firm’s natural and technological environments.natural and technological environments.

• Explain the key changes in the political and Explain the key changes in the political and cultural environments.cultural environments.

• Discuss how companies can react to the Discuss how companies can react to the marketing environment.marketing environment.