1. The Marketing Environment
Chapter 3

2. Learning Goals Understand environmental forces
Learn how demographic and economic factors affect marketing
Identify trends in the firm’s natural and technological environments
Explore key changes in political and cultural environments
Realize how companies react to the marketing environment

3. The 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
Goal 1: Understand environmental factors

4. The Marketing Environment
Demographic
Company
Economic
Cultural
Company
Publics
Suppliers
Competitors
Customers
Natural
Political
Intermediaries
Technological

5. Goal 1: Describe environmental factors
Microenvironment
Actors
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
The company
Suppliers
Marketing intermediaries
Customers
Competitors
Publics
Goal 1: Describe environmental factors

6. Goal 1: Describe environmental factors
Microenvironment
Actors
Marketers must watch supply availability and pricing
Effective partnership relationship management with suppliers is essential
The company
Suppliers
Marketing intermediaries
Customers
Competitors
Publics
Goal 1: Describe environmental factors

7. Goal 1: Describe environmental factors
Microenvironment
Actors
Help to promote, sell and distribute goods to final buyers
Include resellers, physical distribution firms, marketing services agencies and financial intermediaries
Effective partner relationship management is essential
The company
Suppliers
Marketing intermediaries
Customers
Competitors
Publics
Goal 1: Describe environmental factors

8. Goal 1: Describe environmental factors
Microenvironment
Actors
The five types of customer markets
Consumer
Business
Reseller
Government
International
The company
Suppliers
Marketing intermediaries
Customers
Competitors
Publics
Goal 1: Describe environmental factors

9. Goal 1: Describe environmental factors
Microenvironment
Actors
Conducting competitor analysis is critical for success of the firm
A marketer must monitor its competitors’ offerings to create strategic advantage
The company
Suppliers
Marketing intermediaries
Customers
Competitors
Publics
Goal 1: Describe environmental factors

10. Goal 1: Describe environmental factors
Microenvironment
Actors
A 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
The company
Suppliers
Marketing intermediaries
Customers
Competitors
Publics
Goal 1: Describe environmental factors

11. Macroenvironmental Forces Goal 1: Describe environmental factors
The Macroenvironment
Macroenvironmental Forces
Demographic
Economic
Natural
Technological
Political
Cultural
Goal 1: Describe environmental factors

12. Demographic Environment
The study of human populations in terms of size, density, location, age, gender, race, occupation and other statistics
Goal 2: Learn how demographic & economic factors affect marketing

13. Key U.S. Demographic Trends
This CTR relates to the material on pp
Changing Age Structure
Population is getting older
Changing Family Structure
Marrying later, fewer children,
working women, and nonfamily households
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).
Geographic Shifts
Moving to the Sunbelt and suburbs (MSA’s)
Increased Education
Increased college attendance
and white-collar workers
Growing Ethnic and Racial Diversity
73% Caucasian, 12% African-American,
10% Hispanic & 3.4% Asian

14. Demographic Environment
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
Goal 2: Learn how demographic & economic factors affect marketing

15. Demographic Environment
Key Generations
Born between 1946 and 1964
Represent 28% of the population; earn 50% of personal income
Many mini-segments exist within the boomer group
Entering peak earning years as they mature
Baby Boomers
Generation X
Generation Y
Goal 2: Learn how demographic & economic factors affect marketing

16. Demographic Environment
Key Generations
Born between 1965 and 1976
First latchkey children
Maintain a cautious economic outlook
Respond to socially responsible companies
Will be primary buyers of most goods by 2010
Baby Boomers
Generation X
Generation Y
Goal 2: Learn how demographic & economic factors affect marketing

17. Demographic Environment
Key Generations
Born between 1977 and 1994
72 million strong; almost as large a group as their baby boomer parents
New products, services, and media cater to GenY
Challenging target for marketers
Baby Boomers
Generation X
Generation Y
Goal 2: Learn how demographic & economic factors affect marketing

18. Economic Environment Key Economic Concerns for Marketers Economic
This CTR relates to the material on pp
Economic Environment
Economic
Development
Changes
in Income
Key
Economic
Concerns for
Marketers
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.
Changes
in Consumer
Spending
Patterns

19. Economic Environment Influences buying power and spending patterns.
Economies are spread between subsistence economies and industrial economies.
Income distribution availability of disposable income determines consumption levels.
Consumer’s advance their consumption rather than postponing consumption due to availability of easy credit facilities.
Engel’s law states that as the family incomes increase the percentage spent on food items declines, housing remains constant while for others it increases.

20. Natural Environment More Government Intervention Factors Affecting the
Higher Pollution
Levels
Shortages of
Raw Material
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.
Increased Costs
of Energy

21. Goal 3: Identify trends in natural and technological environments
Natural Environment
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
Goal 3: Identify trends in natural and technological environments

22. 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
Goal 3: Identify trends in natural and technological environments

23. 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
Goal 4: Explore political and cultural environments

24. Goal 4: Explore political and cultural environments
Made up of institutions and other forces that affect a society’s basic values, perceptions, preferences and behaviors.
Goal 4: Explore political and cultural environments

25. Marketing Management Cultural Environment Includes people’s views of…
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
Society
Patriotism on the rise
Nature
“lifestyles of health and sustainability” (LOHAS) consumer segment
Universe
Includes religion and spirituality
Goal 4: Explore political and cultural environments

26. 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.”
Goal 5: Realize how companies react to the marketing environment

27. Responding to the Marketing Environment
Environmental Management Perspective Taking a proactive approach to managing the microenvironment and the macroenvironment to affect changes that are favorable for the company. How? Hire lobbyists , run “advertorials”, file law suits and complaints, and form agreements.