1. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition Chapter 3 The Marketing Environment

2. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-2 Learning Goals 1.Describe the environmental forces that affect the company’s ability to serve its customers 2.Explain how changes in the demographic and economic environments affect marketing decisions 3.Identify the major trends in the firm’s natural and technological environments 4.Explain the key changes in the political and cultural environments 5.Discuss how companies can react to the marketing environment

3. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-3 Case Study McDonald’s Challenges –Shifting consumer lifestyles –Low ratings of food and service quality –Atmosphere not upscale –Image of being unclassy, uncultured and uncool to younger target markets Marketing Initiatives –Focus on core competency of consistent products and reliable service –Upscale alternative including McCafe and Bistro Gourmet –Healthier food options with elimination of “supersize” and introduction of Go Active! Adult Happy Meal

4. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-4 Learning Goals 1.Describe the environmental forces that affect the company’s ability to serve its customers 2.Explain how changes in the demographic and economic environments affect marketing decisions 3.Identify the major trends in the firm’s natural and technological environments 4.Explain the key changes in the political and cultural environments 5.Discuss how companies can react to the marketing environment

5. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-5 Marketing Environment: –The actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers Microenvironment –Includes the actors close to the company Macroenvironment –Involves larger societal forces The Marketing Environment

6. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-6 Microenvironment The Company Marketing must consider other parts of the organization, including finance, R&D, purchasing, operations and accounting Marketing decisions must relate to broader company goals and strategies

7. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-7 Microenvironment Suppliers Marketers must watch supply availability and pricing Effective partnership relationship management with suppliers is essential

8. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-8 Microenvironment Marketing Intermediaries Help to promote, sell and distribute goods to final buyers Include resellers, physical distribution firms, marketing services agencies and financial intermediaries Companies must work with their intermediaries as partners rather than simply as channels through which they sell their products.

9. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-9 Microenvironment Customers The five types of customer markets –Consumer –Business –Reseller –Government –International

10. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-10 Microenvironment Competitors Conducting competitor analysis is critical for success of the firm A marketer must monitor its competitors’ offerings to create strategic advantage

11. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-11 Microenvironment Publics Any group that has an actual or potential interest in or impact on an organization Seven publics include: –Financial –Media –Government –Citizen-action –Local –General –Internal

12. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-12 Learning Goals 1.Describe the environmental forces that affect the company’s ability to serve its customers 2.Explain how changes in the demographic and economic environments affect marketing decisions 3.Identify the major trends in the firm’s natural and technological environments 4.Explain the key changes in the political and cultural environments 5.Discuss how companies can react to the marketing environment

13. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-13 Demographic Environment Demographic Environment: –The study of human populations in terms of size, density, location, age, gender, race, occupation and other statistics –World population will exceed 8.1 billion by 2030

14. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-14 Canada: population is expected to exceed 33 million by 2011 Changing age structure within Canada The Canadian population is getting older. The median age is 37.6 years (2001 Census) The three largest age groups are: the baby boomers, Generation X, and Generation Y. Demographic Environment

15. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-15 Discussion Question How might changes in consumer spending patterns affect Master Card? Changes in the age and family structure? Increasing diversity???

16. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-16 Key Generations –Baby Boomers –Generation X –Generation Y Born between 1946 and 1964 Baby boom in Canada started and finished later than U.S. Represent 30% of the population, make up 40% of the workforce and earn more than 50% of all personal income. Many mini-segments exist within the boomer group Entering peak earning years as they mature Demographic Environment

17. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-17 Demographic Environment Key Generations –Baby Boomers –Generation X –Generation Y Born between 1965 and 1976 First generation of latchkey children Maintain a cautious economic outlook Respond to socially responsible companies Skeptical, impatient, and highly mobile, Primary market by 2010

18. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-18 Demographic Environment Born between 1977 and 1994 Children of the baby boomers represent 20% of the population Range in age from preteens to mid-twenties. New products, services, and media cater to GenY Attractive and challenging target for marketers Key Generations –Baby Boomers –Generation X –Generation Y

19. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-19 Demographic Environment The Changing Canadian Household –The nuclear family has led to the “crowded nest” with boomerang kids, and extended families –Delayed marriages –Common-law arrangements –Fewer children –High divorce rate –Single-parent families –Alternative arrangements –Working women: 48% of work force –More dual-income families

20. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-20 Demographic Environment Geographic Shifts in Population –Growth in population is not uniform –Continued movement from rural to urban areas –Interprovincial moves –Growth of suburban areas –People who “telecommute” has increased creating a booming SOHO market

21. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-21 Demographic Environment Better Educated People –Increase in post-secondary education

22. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-22 Demographic Environment Increasing diversity –Canada is more of a cultural mosaic, than the melting pot of the U.S. –Ethnic markets are not easily targeted and served –Diversity includes more than just ethnicity: gay/lesbian population –Respecting diversity may be the key to economic survival for many companies

23. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-23 Economic Environment Factors that affect consumer buying power and spending patterns Types of economy will influence resources to work with

24. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-24 Economic Environment Changes in Income Marketers should pay attention to income distribution as well as average income. –Upper class, middle class, working class, and underclass The distribution of income has created a two-tiered market: the affluent and the less affluent

25. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-25 Economic Environment Changing Consumer Spending Patterns Engel’s laws: amount spent on various categories changes as income rises

26. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-26 Learning Goals 1.Describe the environmental forces that affect the company’s ability to serve its customers 2.Explain how changes in the demographic and economic environments affect marketing decisions 3.Identify the major trends in the firm’s natural and technological environments 4.Explain the key changes in the political and cultural environments 5.Discuss how companies can react to the marketing environment

27. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-27 Natural Environment Involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities Trends –Shortages of raw materials –Increased pollution –Increased government intervention –Canadian federal law: Environmental Protection Act (1989) –Green movement –Focus on environmental sustainability strategies

28. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-28 Technological Environment The most dramatic force shaping our destiny Rapidly changing force which creates many new marketing opportunities but also turns many existing products extinct Research and development is a key element –Canadian spending on R&D is low, ranked 15th in the world –Many government programs to encourage more R&D spending Government agencies to regulate new product safety

29. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-29 Learning Goals 1.Describe the environmental forces that affect the company’s ability to serve its customers 2.Explain how changes in the demographic and economic environments affect marketing decisions 3.Identify the major trends in the firm’s natural and technological environments 4.Explain the key changes in the political and cultural environments 5.Discuss how companies can react to the marketing environment

30. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-30 Political Environment Consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society –Legislation affecting businesses worldwide has increased –Laws protect companies, consumers and the interests of society –Increased emphasis on socially responsible actions

31. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-31 Cultural Environment Made up of institutions and other forces that affect a society’s basic values, perceptions, preferences and behaviors. Persistence of Cultural Values Secondary Cultural Values are more open to change –People’s views of themselves, others, organizations, society, nature, and the unniverse

32. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-32 Cultural Environment Includes people’s views of… Society –Patriotism on the rise Nature –“lifestyles of health and sustainability” (LOHAS) consumer segment Universe –Includes religion and spirituality Themselves –Identify with brands for self-expression Others –Recent shift from “me” to “we” society Organizations –Trend of decline in trust and loyalty to companies

33. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-33 Learning Goals 1.Describe the environmental forces that affect the company’s ability to serve its customers 2.Explain how changes in the demographic and economic environments affect marketing decisions 3.Identify the major trends in the firm’s natural and technological environments 4.Explain the key changes in the political and cultural environments 5.Discuss how companies can react to the marketing environment

34. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-34 Responding to the Marketing Environment “There are three kinds of companies: those who make things happen, those who watch things happen, and those who wonder what’s happened.”

35. Copyright © 2008 Pearson Education CanadaPrinciples of Marketing, Seventh Canadian Edition 3-35 Learning Goals 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