Marketing Environment
- 1. Internal and External Factors which Influence Marketing Strategies and Activities The Marketing Environment Module-2 Market Analysis & Selection
- 2. Learning Objectives 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 main 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 react to the marketing environment.
- 3. Marketing Environment All the actors and forces influencing the company’s ability to transact business effectively with it’s target market. Includes: Microenvironment - forces close to the company that affect its ability to serve its customers. Macro environment - larger societal forces that affect the whole microenvironment.
- 4. The Marketing Environment Company Demographic Economic Natural Technological Political Cultural Company Customers Intermediaries Suppliers Competitors Publics
- 5. The Company’s Microenvironment The forces close to the company that affect its ability to serve its customers – They include : the company, market channel firms, customer markets, competitors and publics, which combine to make up the firm’s value delivery system.
- 6. The Microenvironment Company Customers Publics Suppliers Competitors Intermediaries Forces Affecting a Company’s Ability to Serve Customers
- 7. The Company’s Microenvironment Company’s Internal Environment - In designing marketing plans, marketing management must take other company groups, such as top management, finance, research and development (R&D), purchasing, manufacturing and accounting, into consideration. Suppliers - provide the resources needed to produce goods and services. Marketing Intermediaries - help the company to promote, sell, and distribute its goods to final buyers.( Details of intermediaries follows………)
- 8. Intermediaries… Resellers : the individuals and organizations that buy goods and services to resell at a profit. Physical distribution firms : warehouse, transportation and other firms that help a company to stock and move goods from their point of origin to their destinations. Marketing-service agencies : marketing research firms, advertising agencies, marketing consulting firms and other service providers that help a company to target and promote its products to the right markets. Financial intermediaries : banks, credit companies and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.
- 9. The Company’s Microenvironment Customers - five types of markets that purchase a company’s goods and services. (a diagrammatic rep. follows…) The company must study its customer markets closely and keep up to date with changing customer requirements. The company must communicate with its customers, and must listen to them closely.
- 10. Customer Markets Company Consumer Markets International Markets Government Markets Business Markets Reseller Markets
- 11. Competitors – those who serve a target market with similar products and services The marketing concept states that, to be successful, a company must provide greater customer value and satisfaction than its competitors. Thus, marketers must do more than simply adapt to the needs of target consumers. They must also gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. They must strive to anticipate competitor activity and strategy.
- 12. Publics - any group that perceives itself having an interest in a company’s ability to achieve its objectives Financial publics influence the company’s ability to obtain funds. Banks, investment houses and stockholders are the principal financial publics. Media publics are those that carry news, features and editorial opinion. They include newspapers, magazines and radio and television stations. Government publics Management must take government developments into account. Marketers must often consult the company’s lawyers on issues of product safety, truth in advertising and other matters . To be continued ….,
- 13. Publics… Citizen action publics A company’s marketing decisions may be questioned by consumer organizations, environmental groups, minority groups and other pressure groups. Local publics Every company has local publics, such as neighborhood residents and community organizations. General public A company needs to be concerned about the general public’s attitude towards its products and activities. The public image of the company affects its buying. Internal publics A company’s internal publics include its workers, managers, volunteers and the board of directors .
- 14. Company’s Macro environment The larger societal forces that affect the whole microenvironment - demographic, economic, natural, technological, political and cultural forces .
- 15. The Company’s Macro environment The larger societal forces that affect the whole microenvironment - demographic, economic, natural, technological, political and cultural forces.
- 16. The Macro environment Demographic Technological Cultural Economic Political Natural Forces that Shape Opportunities and Pose Threats to a Company
- 17. The Company’s Macro environment Demographic - monitors population in terms of age, sex, race, occupation, location and other statistics. Economic - factors that affect consumer buying power and patterns. Natura l - natural resources needed as inputs by marketers or that are affected by marketing activities.
- 18. Key Demographic Trends Changing Age Structure Population is getting older Changing Family Structure Marrying later, fewer children, working women, and nonfamily households Geographic Shifts Moving to the Urban and suburbs Increased Education Increased college attendance and white-collar workers Growing Ethnic and Racial Diversity
- 19. Economic Environment Changes in Consumer Spending Patterns Economic Development Changes in Income Key Economic Concerns for Marketers
- 20. General Economic Conditions Business cycle : fluctuations in the economy that follow the general pattern of prosperity, recession, depression and recovery. Prosperity : A period during which unemployment is low and total income is relatively high. Recession : A period during which unemployment rises and total buying power declines. Depression : A period during which unemployment is extremely high, wages are very low, total disposable income is at a minimum and consumers lack confidence in the economy. Recovery : The stage of the business cycle in which the economy moves from depression or recession to prosperity.
- 21. Consumer Demand and Spending Behaviour Buying power : Resources such as goods, services and financial holdings that can be traded in an exchange situation. Income : The amount of money received through wages, rents, investments, pensions and subsidy payments for a given period. Disposable income : After-tax income, which is used for spending or saving. Discretionary income : Disposable income that is available for spending and saving after an individual has purchased the basic necessities of food, clothing and shelter. Wealth : The accumulation of past income, natural resources and financial resources. Willingness to spend : A disposition towards using buying power, influenced by the ability to buy, expected satisfaction from a product and numerous psychological and social forces. To be cont’d…..
- 22. Consumer Demand and Spending Behaviour… Consumer spending patterns : Information indicating the relative proportions of annual family expenditures or the actual amount of money spent on certain goods and services. Comprehensive spending patterns : The percentages of family income allocated to annual expenditures for general classes of goods and services. Product-specific spending patterns : The annual monetary amounts families spend for specific products from within a general product class.
- 23. Natural Environment Factors Affecting the Natural Environment More Government Intervention Shortages of Raw Material Increased Costs of Energy Higher Pollution Levels
- 24. Natural Environment Natural resources that are needed as inputs by marketers or that are affected by marketing activities . Issues Shortage of raw materials Increased cost of energy Increased pollution Government intervention in natural resource management
- 25. The Company’s Macro environment Technological - forces that create new product and market opportunities. Political - laws, agencies and groups that influence or limit marketing actions. Cultural - forces that affect a society’s basic values, perceptions, preferences, and behaviors.
- 26. Technological Environment Rapid Pace of Change High R & D Budgets Focus on Minor Improvements Increased Regulation Issues in the Technological Environment
- 27. Technological Environment Technology: the knowledge of how to accomplish tasks and goals. Forces that create new technologies, creating new product and market opportunities. Issues Fast pace of technological change High R&D budgets Concentration on minor improvements Increased regulation Effect of technology on society Effect of technology on marketing Technology assessment
- 28. Political Environment Greater Concern for Ethics Increased Legislation Changing Enforcement Key Trends in the Political Environment
- 29. Cultural Environment Of Organizations Of Nature Of Oneself Of Society Of the Universe Of Others Views That Express Values
- 30. Environmental Analysis …. PEST (STEP) analysis POLITICAL ECONOMIC SOCIAL/CULTURAL TECHNOLOGICAL SLEPT analysis SOCIAL/CULTURAL LEGAL ECONOMIC POLITICAL TECHNOLOGICAL To be continued…..
- 31. Environmental Analysis …. BPEST analysis BUSINESS POLITICAL ECONOMIC SOCIAL/CULTURAL TECHNOLOGICAL PESTLE analysis POLITICAL ECONOMIC SOCIAL/CULTURAL TECHNOLOGICAL LEGAL ENVIRONMENTAL/ECOLOGICAL
- 32. Examining and Responding to the Marketing Environment Environmental scanning : the process of collecting information about the forces on the marketing environment. Environmental analysis : the process of assessing and interpreting gathered through environmental scanning. Environmental management perspective : the firm takes aggressive actions to affect the publics and forces rather than simply watching it and reacting to it.
- 33. Responding to the Marketing Environment Reactive : Passive Acceptance and Adaptation Companies design strategies that avoid threats and capitalize upon opportunities. Proactive : Environmental Management Use of lobbyists, PR, advertorials, lawsuits, complaints, and contractual agreements to influence environmental forces .
- 34. The marketing Environment and Strategic Opportunities Strategic windows : major developments or opportunities triggered by changes in the marketing environment . new technology new markets new distribution channels market re-definition new legislation and regulation financial and political shocks
- 35. Additional Reading Dibb, Simkin,Pride & Ferrell, Marketing Concepts & Strategies, 4th Euro ed,, Houghton Mifflin, 2001, chapter 2 Kotler, Armstrong,Saunders & Wong, Marketing Principles, 3rd Euro ed, FT Prentice Hall, 2001, chapter 4
Editor's Notes
- #7: Microenvironmental Forces Suppliers . Suppliers are the firms and persons that provide the resources needed by the company and competitors to produce goods and services. Company . Marketing plans must accommodate the needs of other functional areas of the firm to coordinate product/service delivery effectively (See following CTR and notes. Competitors . Competitors are usually considered those companies also serving a target market with similar products and services, although broader definitions may apply. Publics . Publics consist of any group that perceives itself having an interest in the actions of the firm. Publics can have positive as well as negative influences on the company's objectives. Intermediaries . Intermediaries include various middlemen and distribution firms as well as marketing service agencies and financial institutions. Customers . Customers consist of consumer, industrial, reseller, government, and international markets.
- #11: Customer Markets This CTR corresponds to Figure 3-2 on p. 73 and relates to the material on p. 72. Types of Customer Markets The company is concerned with five types of customer markets, including: Consumer Markets. These consist of individuals and households that buy goods and services for personal consumption. Business Markets. These buy goods and services for further processing or for use in their production process. Reseller Markets. Resellers buy goods and services for repackaging and reselling at a profit. Discussion Note: Students may have heard that these “middlemen” raise costs to end-users. You might point out that in most cases, resellers actually lower costs by performing marketing functions less expensively than could manufacturers. Government Markets. Governments buy goods and services to produce public services or to transfer them to needy constituents. International Markets. A growing concern for almost all marketers, these consist of those various types of buyers located in other countries.
- #17: The Macroenvironment This CTR corresponds to Figure 3-4 on p. 75 and relates to the material on pp. 74-92. Teaching Tip: This CTR overviews the major forces in the company’s macroenvironment. You might use it as an introduction before exploring each area in detail. Each of the six major forces is covered in greater detail on subsequent CTRs. Macroenvironmental Forces Demographic. The demographic environment monitors population characteristics on such items as size, density, age, location. Economic. The economic environment includes income and spending pattern concerns. Natural . The natural environment addresses pollution concerns, energy costs, raw materials availability, and growing government roles in resource management. Technological. The technological environment includes such issues as the fast pace of change, emerging product forms, and high R&D. Political . The political environment addresses the role of government and policy in the regulation of business. Cultural . The cultural environment recognizes the influence of values and beliefs of a society on purchase decisions and consumption patterns.
- #19: Demographic Environment Demography is the study of human populations in terms of size, density, location, age, sex, race, occupation, and other aggregate statistics. Key Aspects of the US demographic environment include: Age Structures (esp.. Baby Boomers). The post W.W.II Baby Boom is the most significant demographic feature by its sheer size: 75 million or over 1/3 of the US population. This bulge in age distribution leads growth strategies in industries serving age-specific markets. Where boomers go, marketers must follow. Discussion Note: More proactively, marketers need to identify emerging boomer needs to plan strategically for an aging population that also lives longer than previous ones. Family Structure. The typical American family rarely exists anymore. Increasing age of those marrying, delayed child-bearing, increased two- income families, and non-family households are key demographic trends. Geographic Population Shifts. Americans are mobile. Trends include movement to Sunbelt states, rural to urban shifts, and present urbanites moving to suburbs. Trends in Education. Americans are becoming more educated and white-collar. Increasing Ethnic Diversity . The United States population is 73% white, 12% black, with the remaining percentage mostly Hispanic (22 million) and Asian (7 million). Key U.S. Demographic Trends This CTR relates to the material on pp. 74-79.
- #20: Economic Environment This CTR relates to the material on pp. 79-82. The Economic Environment The Economic Environment consists of factors that affect consumer purchasing power and spending patterns. Key considerations include: Economic Development . Nations vary greatly in their levels of and distribution of income, often as a result of their stage of economic development. Typical distinctions include: Subsistence Economies. These consume most of their own agricultural and industrial output. These countries are poor targets for most products. Industrial Economies. These offer rich markets for many different kinds of goods. Changes in Income . Rising incomes for most consumers have only kept pace with inflation. As a result, consumers are more sensitive to Value Marketing - the careful promotion of a high degree of quality and performance for the price. Income distribution is also of key importance: Upper-class consumers are not affected by current economic events. Middle-class consumers can afford the “good life” most of the time, but are careful about spending. Working-class consumers must budget carefully. Underclass consumers are often unable to participate fully in the marketing system. Changing Consumer Spending Patterns . Knowledge of Engel’s Laws remains important: As income rises, the percentage spent on food declines, the percentage spent on housing remains constant, and the percentage spent on savings and other categories increases.
- #24: Natural Environment There are several areas affecting marketing that stem from the natural environment. Shortages of Raw Materials. Shortages both increase demand and sprout counter-movements aimed at conservation. Discussion Note: Both sides of the "green" movement utilize sophisticated database marketing and lobbying techniques. Energy Costs. The cost of energy makes long-term growth of high energy industries and goods difficult to predict. Increased Pollution . Industrial growth almost always damages the natural environment. The so-called “green movement” seeks to operate businesses in such a way so as not to damage the natural environment. The varying political power of “greens” in different countries is a consideration in global marketing efforts. Government Intervention in Natural Resource Management. Changing philosophies on the role of government in managing natural resources also blends into the legal environment. Marketers must take care in identifying natural environmental trends. Discussion Note: You might further expand this discussion by pointing out that even agencies like the EPA vary greatly in the amount of environmental regulation they perform depending upon funding and the agenda of whoever occupies the White House.
- #27: Technological Environment This CTR relates to the material on pp. 83-84. Technological Environment Key forces operating in the technological environment include: Fast Pace of Technological Change . Anyone trying to learn all the features of their current software programs before they are updated and outdated understands this force. Teaching Tip: You might point out to students raised on Star Trek and Star Wars how much of yesterday's sci-fi is already coming true. Cellular phones as Star Trek-type communicators might get class discussion going. High R&D Budgets . The United States spends more on research and development than any other country. Placing marketing personnel on research teams can help focus research efforts on consumer needs and practical applications. Focus on Minor Improvements . Risk factors associated with high costs of development often lead to minor improvements over substantive product changes. Discussion Note: While minor improvements help keep products "fresh" to the market, marketers must anticipate that changing consumer needs will limit the competitiveness of too little innovation. Increased Government Regulation . Faster introduction of increasingly complex products often leads to greater regulation as consumers seek assurances that products are tested and safe.
- #29: Political Environment This CTR relates to the material on pp. 84-87. Political Environment The political macroenvironmental forces consist of laws, government agencies, and interest groups that seek regulation of business activities to forward their own interests. Business in general, more than other groups, uses lobbying efforts to try and obtain legislation favorable to their competitive interests. Key considerations include: Legislation. Laws generally attempt to protect companies from each other to create more competition that in turn creates more value for the consumer. Laws also aim at protecting consumers from unfair and sometimes dangerous business practices. Laws sometimes seek to protect society as a whole from practices that endanger whole communities or other publicly owned resources such as rivers, forests, and parks. Enforcement . The effect of laws depends upon the emphasis given to enforcing them within the regulatory agency responsible for administering the law. Regulation varies in intensity with political agendas of sitting presidents and budget allocations. Public interest groups too affect the degree of legislative activity and administrative enforcement. Increased Emphasis on Ethics . At both the grassroots and corporate level, more US companies are showing a greater concern for more ethical conduct and more socially responsible action. Discussion Note: Ethical companies often enjoy better consumer relations and public image. Bottom line contributions can be defensive. For example, when Johnson & Johnson behaved responsibly after the Tylenol poisonings, they did not suffer expensive lawsuits and were able to recapture all of their original market share when the product was re-introduced.
- #30: Technological Environment This CTR relates to the material on pp. 87-92. Cultural Environment The key elements of the cultural macroenvironment include: Persistence of Cultural Values. Core beliefs and values are relatively enduring and must be considered by marketers positioning products. For example, product innovations that conflict with core values are unlikely to be adopted. Shifts in Secondary Values. These change over time and change more often than core values and may provide positioning opportunities. Cultural values are expressed in people’s views on the following: View of Themselves. People vary in their emphasis on how important serving themselves is compared to serving others. Personal ambition and materialism have increased significantly over time in the US. View of Others. Recently, there has been a trend toward more altruistic behavior, at least among some segments of the population. Discussion Note: You might link ambition and altruism to baby boomers and baby busters, respectively. It wont’ hold up forever, but might generate class participation. View of Organizations. Most people are willing to work for large companies but also believe that the companies are out for themselves. View of Society. Trends like “Buy American” are reflects of this view. View of Nature. This trend has changed over the last few decades from dominate and control to coexist and preserve. View of Universe. Linked in the US to religious observance, this trend has seen an overall decline among most and a simultaneous passionate activism among a small, but powerful group, usually called the “religious right.”