1. The Marketing Environment
Marketing for Hospitality and Tourism
Kotler, Bowen, Makens and Baloglu
The Marketing Environment
Chapter 4

2. Learning Objectives
List and discuss the importance of the elements of the company’s microenvironment, including the company, suppliers, marketing intermediaries, customers, and public.
Describe the macroenvironmental forces that affect the company’s ability to serve its customers.
Explain how changes in the demographic and economic environments affect marketing, and describe the levels of competition.

3. Learning Objectives (cont.)
Identify the major 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 be proactive rather than reactive when responding to environmental trends.

4. Microenvironment Management Orientations Customers Competitors
The Company
Competitors
Customers
Intermediaries
Publics
Suppliers
Management
Orientations
The success of marketing plans requires working closely with the company’s microenvironment
The Company
Marketing decisions must be made within the strategies and plans made by top management
Existing Competitors
Existing customers are part of the microenvironment because we can identify and observe them closely
Companies must gain strategic advantage by strongly positioning their product in the minds of consumers (See Slides 5-6)
Suppliers
Suppliers are firms and individuals that provide the resources needed by the company to produce its goods and services
Marketing Intermediaries
Marketing intermediaries help the company promote, sell, and distribute its goods to the final buyers (See Slide 7)
Customers
Consumer markets consist of individuals and households that purchase hospitality services for leisure activities, medical needs, and gatherings such as reunions, weddings, or funerals. Business markets buy hospitality services to facilitate their business.
Publics
Public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives (See Slide 8)

5. Analyzing Competitors
Share of
Market
Share of
Heart
Share of
Mind
In general a company should monitor three variables when analyzing each of its competitors:
Share of market
The competitor’s share of the target market.
Share of mind
The percentage of customers who named the competitor in responding to the statement, “Name the first company that comes to mind in this industry.”
Share of heart
The percentage of customers who named the competitor in responding to the statement, “Name the company from whom you would prefer to buy the product.”

6. Levels of Competitors
Companies that offer similar services to the same customers at a similar price
Companies that make the same product or class of products
Companies that supply the same service
Companies that compete for the same consumer dollars
Every company faces four levels of competitors:
A company can view its competitors as other companies that offer similar products and services to the same customers at a similar price
A company can see its competitors as all companies making the same product or class of products
A company can see its competitors more broadly as all companies supplying the same service
A company can see its competition even more broadly as all companies that compete for the same consumer dollars

7. Marketing Services Agencies Financial Intermediaries
Intermediaries are business firms that help hospitality companies find customers or make sales
The Internet has created both disintermediation and pricing transparency
Disintermediation is the elimination of intermediaries
Marketing services agencies are suppliers that help the firm formulate and implement its marketing strategy and tactics
Public relations agencies, advertising agencies, and direct mail houses
Financial intermediaries are firms that help hospitality companies finance their transactions or insure the risks associated with the buying and selling of goods and services
Banks, credit companies, insurance companies

8. Citizen-Action Publics
Types of Publics
Financial Publics
Media Publics
Government Publics
Citizen-Action Publics
We identify seven types of publics:
Financial publics
Influence the company’s ability to obtain funds
Banks, investment houses, and stockholders are the major financial publics
Media publics
Carry news, features, and editorial opinions
Includes newspapers, magazines, and radio and television stations
Government publics
Management must take government developments into account
Citizen-action publics
A company’s marketing decisions may be questioned by consumer organizations, environmental groups, minority groups, and others
Local publics
Includes neighborhood residents and community organizations
General public
A company needs to be concerned about the general public’s attitude toward its products and activities
Internal publics
Includes workers, managers, volunteers, and the board of directors
When employees feel good about their company, this positive attitude spills over to external publics.
Local Publics
General Public
Internal Publics

9. Macroenvironments Management Orientations Cultural Economic Natural
Demographic
Economic
Cultural
Political
Technological
Natural
Management
Orientations
The company and all of the other actors operate in a larger macroenvironment of forces that shape opportunities and pose threats to the company
Competitors
The entrance of future competitors is often difficult to predict and can have a major effect on existing businesses
Demographic Environment
Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics (See Slide 10)
Economic Environment
The economic environment consists of factors that affect consumer purchasing power and spending patterns (See Slide 11)
Natural Environment
The natural environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities (See Slide 12)
Technological Environment
The most dramatic force shaping our destiny is technology, which has given us wireless access to the Internet
The end result is that speed at which business is occurring has increased dramatically
One of the most powerful changes is from social media - social media is changing how we market to customers, creating a powerful media for customers to interact with other customers and with organizations
Political Environment
The political environment is made up of laws, government agencies, and pressure groups that influence and limit the activities of various organizations and individuals in society (See Slide 13)
Cultural Environment
The cultural environment includes institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors (See Slide 14)

10. Demographic Trends in the US
Changing Age Structure of the Population
Increasing Diversity
The Changing American Family
The demographic environment is of major interest to marketers because it involves people, and people make up markets
the most important demographic trends in the United States
Changing Age Structure of the Population
The single most important demographic trend in the United States is the changing age structure of the population (See Slide 11)
Increasing Diversity
The United States seems to have become more of a “salad bowl” in which various groups have mixed together but have maintained their diversity by retaining and valuing important ethnic and cultural differences
The Changing American Family
In the United States today, married couples with children make up only 22 percent of the nation’s 117 million households, married couples without children make up 29 percent, and single parents comprise another 11 percent
A full 38 percent are nonfamily households— single live-alones or adult live-togethers of one or both sexes
Geographic Shifts in Population
Americans, for example, are a mobile people, with about 15 percent of all U.S. residents moving each year
Over the past two decades, the U.S. population has shifted toward the Sunbelt states
The West and South have grown, whereas the Midwest and Northeast have lost population
A Better Educated, More White-Collar, More Professional Population
The U.S. population is becoming better educated
The rising number of educated people will increase the demand for quality products including luxury hotels, travel, wine, and dining at restaurants that have interesting menus
Geographic Shifts in Population
A Better Educated, More Professional Population

11. Generations in the US Baby Boomers Millennial Generation X
The single most important demographic trend in the United States is the changing age structure of the population
The Baby Boomers
The post–World War II baby boom produced 78 million baby boomers, born between 1946 and Over the years, the baby boomers have been one of the most powerful forces shaping the marketing environment. Today’s baby boomers account for nearly 25 percent of the population, spend about $2 trillion annually, and hold three quarters of the nation’s financial assets
Generation X
The baby boom was followed by a “birth dearth,” creating another generation of 49 million people born between 1965 and 1976
The Generation Xers are defined as much by their shared experiences as by their age. Having grown up during times of recession and corporate downsizing, they developed a more cautious economic outlook. They care about the environment and respond favorably to socially responsible companies
Millennials
Born between 1977 and 2000, these children of the baby boomers number 83 million, dwarfing the Gen Xers and larger even than the baby boomer segment
With total purchasing power of more than $733 billion, Gen Y represents a huge and attractive market. One thing all of the Millennials have in common is their utter fluency and comfort with computer, digital, and Internet technology

12. Economic Trends in the US
Changes
In Income
The Global
Economy
The economic environment consists of factors that affect consumer purchasing power and spending patterns
Some countries have subsistence economies
They consume most of their own agricultural and industrial output
These countries offer few market opportunities
At the other extreme are industrial economies
These constitute rich markets for many different kinds of goods
Following are some of the major economic trends in the United States
Changes in Income
We are now facing the age of the “squeezed consumer.” Along with rising incomes in some segments have come increased financial burdens
The Global Economy
Today the travel industry operates in a global environment
The Super Rich
There now exists a group that is unfamiliar to most people but is a viable market segment for hospitality and tourism. The world’s Super Rich represent 0.5% of the world’s population but over 38.5% of its wealth. Despite a recession, global wealth reached a high of $231 trillion in Individuals with a net worth of $50 million or more are located primarily in North America, Europe and Asia/Pacific.
The Super Rich

13. Natural Environment Growing Shortages of Raw Materials Increased
Government
Intervention
Increased
Pollution
Environmental concerns have grown steadily during the past three decades
Marketers should be aware of several trends in the natural environment:
Growing shortages of raw materials
Increased pollution
Increased government intervention in natural resource management

14. Trends in the Political Environment
Increased Legislation and Regulation
Changing Government Agency Enforcement
The political environment is made up of laws, government agencies, and pressure groups that influence and limit the activities of various organizations and individuals in society
Increased Legislation and Regulation Affecting Business
As products become more complex, public concern about their safety increases
Governmental agencies have become involved in the investigation and regulation of everything from fire codes to food-handling practices
Changing Government Agency Enforcement
To enforce laws, Congress has established several federal regulatory agencies: the Federal Trade Commission, the Food and Drug Administration, the Interstate Commerce Commission, the Federal Communications Commission, the Federal Power Commission, the Civil Aeronautics Board, the Consumer Products Safety Commission, the Environmental Protection Agency, and the Office of Consumer Affairs
These agencies can have a major impact on a company’s marketing performance
International Politics
Sometimes hospitality companies and products are boycotted or worse through because of political differences between countries or groups with in a country.
Here are some of the actions that targeted companies can take:
Emphasize the company’s connections to the local community.
Adopt a low profile.
Counter lies and misinformation with professional public relations and advertising.
Be patient.
International Politics

15. Socially Responsible Behavior
Cultural Environment
Cultural
Environment
Cultural Values
Socially Responsible Behavior
The cultural environment includes institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors
Persistence of Cultural Values
People in any society hold certain persisting core beliefs and values
Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government
Secondary beliefs and values, however, are more open to change
Socially Responsible Behavior
Enlightened companies encourage their managers to look beyond what the regulatory system allows and simply “do the right thing.” These firms actively seek out ways to protect the long-run interests of their consumers and the environment.
Today, almost every aspect of marketing involves ethical and societal issues. These issues usually involve conflicting interests and well-meaning people can honestly disagree about the right course of action in a given situation.
Companies are now developing policies, guidelines, and other responses to complex social issues.

16. Environmental Scanning
Determine Environmental Areas to be Monitored
Determine How Information will be Collected
Many companies view the marketing environment as an “uncontrollable” element to which they must adapt
Other companies take an environmental management perspective
Rather than simply watching and reacting, these firms take aggressive action to affect the publics and forces in their marketing environment
Smart marketing managers take a proactive rather than a reactive approach to the publics and forces in their marketing environment.
Environmental Scanning
Determine the environmental areas that need to be monitored
Determine how the information will be collected, including information sources, the information frequency, and who will be responsible
Implement the data collection plan
Analyze the data and use them in the market planning process
Implement Data Collection Plan
Analyze Data and Use in Planning Process

17. Key Terms
Baby boomers the 78 million people born between 1946 and 1964.
Demography the study of human populations in terms of size, density, location, age, sex, race, occupation, and other statistics.
Disintermediation the elimination of intermediaries.
Echo boomers see Millennials. Born between 1977 and 1994, these children of the baby boomers now number 72 million, dwarfing the Gen Xers and almost equal in size to the baby boomer segment. Also known as Generation Y
Economic environment the economic environment consists of factors that affect consumer purchasing power and spending patterns. Markets require both power and people. Purchasing power depends on current income, price, saving, and credit; marketers must be aware of major economic trends in income and changing consumer spending patterns.
Environmental management perspective a management perspective in which a firm takes aggressive actions to affect the public and forces in its marketing environment rather than simply watching and reacting to it

18. Key Terms (cont.)
Environmental sustainability a management approach that involves developing strategies that both sustain the environment and produce profits for the company.
Financial intermediaries banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.
Generation X a generation of 45 million people born between 1965 and 1976; named Generation X because they lie in the shadow of the boomers and lack obvious distinguishing characteristics; other names include “baby busters,” “shadow generation,” or “yiffies”—young, individualistic, freedom-minded few.
Generation Y see Millennials.
Macroenvironment the larger societal forces that affect the whole microenvironment: competitive, demographic, economic, natural, technological, political, and cultural forces.

19. Key Terms (cont.)
Microenvironment the forces close to a company that affect its ability to serve its customers: the company, market channel firms, customer markets, competitors, and the public.
Millennials (also called Generation Y or the echo boomers). Born between and 2000, these children of the baby boomers number 83 million, dwarfing the Gen Xers and larger even than the baby boomer segment. This group includes several age cohorts: tweens (ages 8 to 12), teens (13 to 18), and young adults (the twentysomethings).
Political environment laws, government agencies, and pressure groups that influence and limit the activities of various organizations and individuals in society
Marketing environment the actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful transactions with its target customers.
Marketing intermediaries firms that help the company to promote, sell, and distribute its goods to final buyers; they include middlemen, physical distribution firms, marketing service agencies, and financial intermediaries
Marketing services agencies marketing research firms, advertising agencies, media firms, marketing consulting firms, and other service providers that help a company to target and promote its products to the right markets.

20. Key Terms (cont.)
Public any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives.
Suppliers firms and individuals that provide the resources needed by a company and its competitors to produce goods and services.