1. Analyzing the Marketing Environment
Chapter Three
Analyzing the Marketing Environment

2. Chapter Overview
To correctly identify opportunities and monitor threats, a company must begin with a full understanding of the marketing environment.
By studying the environment, companies can better:
Adapt to change
Prepare long-range strategy
Meet the needs of customers
Respond to competitors

3. The Marketing Environment
The Marketing Environment includes the actors and forces outside marketing that affect marketing management’s ability to:
Provide value
Build and maintain successful relationships

4. A Case Study McDonald’s – Challenges and Reactions
Shifting consumer lifestyles
Low ratings of food and service quality
Image of being unclassy and uncool to younger target markets
Marketing Initiatives
Focus on core competency of consistent products and reliable service
Healthier food options with elimination of “supersize” , addition of salads, etc.

5. The Marketing Environment
Microenvironment consists of the actors close to the company that affect its ability to serve its customers:
The Company Itself
Suppliers
Marketing Intermediaries
Competitors
Publics
Customers

6. The Company’s Microenvironment
Actors in the Microenvironment

7. The Company’s Microenvironment
The Company Itself
Marketing must consider other parts of the organization including finance, R&D, purchasing and operations
Marketing decisions must relate to broader company goals and strategies
Discussion Questions
What types of collaboration does there need to be between the departments?
How might projects be integrated between marketing and finance?
How might projects be integrated between marketing and information systems?
This question on finance could lead to a discussion about budgeting for marketing. The collaboration between marketing and IS could lead to discussions of market research, ordering systems, and customer relationship management systems.

8. The Company’s Microenvironment
Suppliers
Provide the resources to produce goods and services
Are an important link in the company’s overall customer “value delivery network”
Help to create and deliver customer value and must be treated as partners

9. The Company’s Microenvironment
Types of Marketing Intermediaries
Resellers
(Wholesalers & Retailers)
Physical Distribution Firms
Marketing Services Agencies
Financial Intermediaries

10. The Company’s Microenvironment
Marketing Intermediaries
Help the company to promote, sell and distribute its products to final buyers
As with suppliers, effective partner relationship management is essential
The text explains how Coke delivers value for their marketing intermediaries:
They understand each retailer partner’s business
The conduct consumer research and share with partners
They develop marketing programs and merchandising for partners

11. The Company’s Microenvironment
Competitors
Firms must gain strategic advantage by positioning their offerings against competitors’ offerings
Conducting competitor analysis is critical for success
Successful companies provide better customer value than the competition
Students should note that the competition is just a click away with online purchasing. This link goes to Bizrate—one of many comparison shopping sites online. Enter a product like coffee makers to see the competing products and retailers for this category.

12. The Company’s Microenvironment
Publics
Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives
Media publics
Government publics
Citizen-action publics
Local publics
General public
Internal publics
In slideshow view, click on movie icon to launch Tom’s Shoes video snippet. See accompanying DVD for full video segment.

13. The Company’s Microenvironment
Customer Markets
Customer markets must be studied
Consumer
Business
Government
Reseller
International

14. The Company’s Macroenvironment
The Larger Societal Forces

15. The Company’s Macroenvironment
Demographic Environment
Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics
Demographic environment is important because it involves people, and people make up markets
Demographic trends include family structure, geographic population shifts, educational characteristics, and population growth and diversity

16. The Company’s Macroenvironment
Demographic Environment
Changing Age Structure of the Population
Any population contains several generational groups. The three largest are Baby Boomers, Generation X and the Millennials (Generation Y).
Segmenting by generational groups helps to develop effective marketing strategies
There are many Web sites targeted to boomers including this link to Boomers International. Before following the link it might be interesting to ask the following:
Discussion Questions
What type of information boomers might be seeking?

17. The Company’s Macroenvironment
Demographic Environment
Baby Boomers include people born between 1946 and 1964 (mid forties to mid sixties)
Most affluent generation
Account for 30% of the population yet hold 75% of financial assets
Diverse group with many mini-segments
Entering peak earning years as they mature
Profitable market for travel, entertainment, housing and more
There are many Web sites targeted to boomers including this link to Boomers International. Before following the link it might be interesting to ask the following:
Discussion Questions
What type of information boomers might be seeking?

18. Many products are targeted to Baby boomers’ growing health issues and concerns
Think ahead to 20 years in the future. For what types of products and services will baby boomers represent a prime target?

19. The Company’s Macroenvironment
Demographic Environment
Generation X includes people born between 1965 and 1976 (34 to 45 years old)
Baby busters
First “latchkey” children
High parental divorce rates
Grew up during recession, have a cautious economic outlook
Less materialistic
Family comes first, career second
Lag behind on retirement savings

20. The Company’s Macroenvironment
Demographic Environment
Millennials (Gen Y or Echo Boomers) include those born between 1977 and 2000
Larger group than baby boomers
Youngest are about 10 and the oldest are 33 and have been working for a few years
Comfortable with technology
Always “on” and connected
Challenging target for marketers

21. Why Generation Y?

22. The Company’s Macroenvironment
Demographic Environment
Generational Marketing is important in segmenting people by lifestyle of life state instead of age

23. The Company’s Macroenvironment
Demographic Environment
Changing definition of a household. More people are:
Divorcing or separating
Choosing to marry later or not to marry
Marrying without intending to have children
Increased number of working women
Stay-at-home dads

24. Divorces Per 100 Marriages
Source: IHT (OECD 2002)

25. The Company’s Macroenvironment
Demographic Environment
Geographic population shifts:
People are moving from rural to urban areas
Changes in where people work
Telecommuting
Home office

26. The Company’s Macroenvironment
Demographic Environment
Changes in the Workforce:
More educated
More white collar
Greater diversity
Students are probably very familiar with job search sites such as this link to monster.com. It might be interesting to compare the listings for white collar versus blue collar job opportunities including the associated pay and benefits.

27. The Company’s Macroenvironment
Increased Diversity
Markets are becoming more diverse
More International
Diversity includes:
Age
Ethnicity & Race
Disabled

28. The Company’s Macroenvironment
Economic Environment
Economic Environment consists of factors that affect consumer purchasing power and spending patterns
Consumers now spend carefully and desire greater value
Value marketing: Ways to offer financially cautious buyers greater value - the right combination of quality and service at a fair price
Marketers must monitor changes to prosper with a trend not suffer from it.

29. The Company’s Macroenvironment
Economic Environment
Changes in Consumer Spending Patterns
Ernst Engel (German Economist) proposed Engel’s Laws. As family income rises:
The percentage spent on food declines
The percentage spent on housing remains about constant (except utilities which decrease)
The percentage spent on savings, insurance and most other categories increases

30. The Company’s Macroenvironment
Natural Environment
Natural Environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities
Concern for the environment has grown:
Shortages of raw materials
Increased pollution
Increase government intervention
Environmentally sustainable strategies
Marketers should help find solutions
This Web link connects to greenbiz.com. There are several Web sites like this that provide information on business as to how to practice green strategies including green marketing.

31. The Company’s Macroenvironment
Natural Environment
Many companies use recycling to help protect natural resources

32. The Company’s Macroenvironment
Technological Environment
Most dramatic force in changing the marketplace
New technologies create new opportunities and markets but make old technologies obsolete
Discussion Question
Ask students what changes they have seen in technology in the past four years including medical products, communications, and media.
They will most likely talk about the use of artificial organs and stem cell research, the growth of PDA’s like the iPod, and the use of new media products including DVR or TiVo.

33. As technology changes, consumers have new needs
As technology changes, consumers have new needs. This product helps the consumer with the problem of multiple chargers

34. The Company’s Macroenvironment
Political Environment
Political Environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society

35. Key Trends In The Political Environment
Increasing legislation regulating business
Laws protect companies, consumers and the interests of society
Increased emphasis on ethics (socially responsible behavior & cause-related marketing)

36. The Company’s Macroenvironment
Cultural Environment
Cultural Environment consists of institutions and other forces that affect a society’s basic values, perceptions, and behaviors

37. Persistence of Cultural Values
Cultural Environment
Persistence of Cultural Values
Core Beliefs and Values are persistent and are passed on from parents to children and are reinforced by schools, churches, businesses, and government (For example, believing in marriage) Secondary Beliefs and Values are more open to change (For example, believing you should get married early in life)

38. Includes people’s views of…
Shifts in Secondary Cultural Values
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 in many countries
Nature
Seek to master it?
In harmony with it?
Feel ruled by it?
Universe
Includes renewed interest in religion and spirituality

39. Responding to the Marketing Environment
Views on Responding
Uncontrollable
React and adapt to forces in the environment
Proactive
Aggressive actions to affect forces in the environment
Reactive
Watching and reacting to forces in the environment

40. Responding to the Marketing Environment
Views on Responding
“There are three kinds of companies: those who make things happen, those who watch things happen, and those who wonder what happened.”