Chapter 3

Analyzing
the
Chapter 1

Marketing
Environment

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 Rest Stop: Previewing the Concepts

 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.
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 Case Study
McDonald’s – Responding to Change
Challenges
 Faced shifting consumer
lifestyles and a sales growth
slump of 3% between 1997
and 2000. Posted first
quarterly loss in 2002.
 McDonald’s was losing share
to the “fast casual” restaurant
segment because consumers
wanted healthier, better-
tasting food in more upscale,
fashionable surroundings.
 Named as the defendant in a
highly publicized law suit.
 Response: Introduced “Plan
to Win” in early 2003.
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“Plan to Win”
 Focused on consistent products and
reliable service—core
competencies.
 Introduced the “It’s what I eat and
what I do. . . I’m loving it” ad
campaign and revamped Web site to
help consumers understand how to
live balanced, active lives. Involved
nutrition experts in menu redesign.
 Added upscale restaurants, such as
McCafe coffee shops and offered
healthier food options: Go Active!
Adult Happy Meal; white meat
McNuggets; various salads.
 Results: Increased sales by 42%
while profits quadrupled.
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 Marketing Environment
 Consists of actors and forces outside of the
organization that affect management’s
ability to build and maintain relationships
with target customers.
► Studying the environment allows marketers to take
advantage of opportunities as well as to combat
threats.
► Marketing intelligence and research are used to
collect information about the environment.
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 Marketing Environment
 Includes:
►Microenvironment:
Actors close to the company that affect its
ability to serve its customers.
►Macroenvironment:
Larger societal forces that affect the
microenvironment.

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 The Microenvironment
 Company itself
 Suppliers
 Marketing intermediaries
 Customers
 Competitors
 Publics

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 The Microenvironment
 The company itself:
►Areas/departments inside of a company.
►Affects the marketing department’s planning
strategies.
►All departments must “think consumer” and
work together to provide superior customer
value and satisfaction.

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 The Microenvironment
 Suppliers:
►Provide resources needed to produce goods
and services.
►Important link in the “value delivery
system.”
►Most marketers treat suppliers like partners.

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 The Microenvironment
 Marketing intermediaries:
►Help the company to promote, sell, and
distribute its goods to final buyers.
• Resellers
• Physical distribution firms
• Marketing services agencies
• Financial intermediaries

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 The Microenvironment
 Customers:
►Five types of markets that may purchase a
company’s goods and services.
• Consumer
• Business
• Reseller
• Government
• International
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 The Microenvironment
 Competitors:
►Those who serve a target market with
products and services that are viewed by
consumers as being reasonable substitutes
for the firm’s products or services.
►Company must seek to gain strategic
advantage against these organizations.

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 The Microenvironment
 Publics:
► Any group that has an interest in or impact on an
organization’s ability to achieve its objectives.
• Financial public
• Media public
• Government public
• Citizen-action public
• Local public
• General public
• Internal public
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 The Macroenvironment
 The company and all of the other actors
operate in a larger macroenvironment of
forces that shape opportunities and pose
threats to the company.

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 The Macroenvironment
 Forces in the macroenvironment can be
categorized as:
►Demographic

►Economic

►Natural

►Technological

►Political

►Cultural

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 Demographic Environment
 Demographics:
►The study of human populations in terms of
size, density, location, age, gender, race,
occupation, and other statistics.
►Marketers track changing age and family
structures, geographic population shifts,
educational characteristics, and population
diversity at home and abroad.
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 Demographic Environment
 The changing age structure of the U.S.
population is the single most important
demographic trend.
►Baby boomers, Generation X, and the
Millennials are key generational groups.

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 Demographic Environment
 Baby boomers:
►78 million born between 1946 and 1964.
►Nearly 30% of population.
►Spend $2.3 trillion annually and hold ¾ of
the nation’s financial assets.
►Spend $30 billion annually on anti-aging
products and services; strong market for
financial services, new housing, travel, etc.
►Are likely to postpone retirement.
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 Demographic Environment
 Generation X:
►49million born between 1965 and 1976.
►Defined by shared experiences:
• Increased parental divorce rates and more
employed mothers made Generation X the
first of the latchkey kids.
• Gen X developed a more cautious economic
outlook due to recessions and downsizing
that were common when they grew up.

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 Demographic Environment
 Generation X:
►Cares about the environment.
►Prizes experience, not acquisition.
►Family comes first, career second.
►Skeptical of marketing messages; researches
purchases carefully, uses communities to
share information.
►Represents close to $1.4 trillion in annual
purchasing power.
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 Demographic Environment
 Millennials:
► 83 million born between 1977 and 2000—larger
than baby boomer segment.
► Includes tweens, teens, and young adults.

► Ethnically diverse.

► Fluent with computer and digital technology.

► Personalization and product customization are key

to marketing success.

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 Demographic Environment
 The American family and household
makeup is changing:
► Traditional households are in decline:
• Married couples with children = 23%
► Non-traditional households are growing:
• Married without children = 29%
• Single parents = 16%
• Non-family households = 32%
► Special needs of non-traditional households are
increasingly being considered by marketers.
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 Demographic Environment
 Geographic shifts in population:
►14% of U.S. residents move each year.
►General shift toward the Sunbelt states.
►City to suburb migration continues.
►More people are moving to “micropolitan”
areas.
►More people telecommute:
• 1 in 10 people now work out of their home.
• Home office segment is being targeted.
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 Demographic Environment
 Better educated population:
►1980:
• 69% of people over age 25 completed high
school; 17% had completed college.
►2004:
• 86% of people over age 25 completed high
school; 28% had completed college.
►Increasing demand for quality products,
books/magazines, computers, travel, etc.
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 Demographic Environment
 Increasing white-collar population
► 1950—1985:
• White-collar workers increased from 41% to 54%,
while blue-collar workers decreased from 47% to
33%.
► 1983—1999:
• Professionals and managers increased from 23% to
greater than 30%.
► 2004—2012:
• Professionals should increase by 21% while
manufacturing is expected to decline by 5%.
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 Demographic Environment
 Increasing diversity:
►The United States is an ethnic “salad bowl.”
• Ethnic segments will continue to grow as a
percentage of the U.S. population.
• Marketers target specially designed ads,
products, and promotions at ethnic groups.
►Marketing efforts are increasing toward:
• Gay and lesbian consumers.
• People with disabilities.

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 Economic Environment
 Consists of factors that affect consumer
purchasing power and spending patterns.
 Changes in income  Income distribution
► 1990s—consumption ► Upper class: getting
frenzy, record debt wealthier
► 2000s—“squeezed ► Middle class: shrinking
consumer” in size
► Marketers focus on ► Working class
offering greater value ► Underclass: remain poor

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 Natural Environment
 Involves natural resources that are
needed as inputs by marketers or that
are affected by marketing activities.
 Factors include:
►Shortages of raw materials
►Increased pollution
►Increased government intervention
►Environmentally sustainable strategies

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 Technological Environment
 Most dramatic force shaping our destiny.
 Changes rapidly, creating new markets and
opportunities and/or danger of products
becoming obsolete.
 Challenge is to make practical, affordable
new products.
 Safety regulations result in higher research
costs and longer time between product
conceptualization and introduction.
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 Political Environment
 Includes laws, government agencies, and
pressure groups that influence or limit
various organizations and individuals in a
given society.
 Areas of concern:
► Increasing legislation.
► Changing government agency enforcement.
► Increased emphasis on ethics and socially
responsible behavior.
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 Cultural Environment
 The institutions and other forces that affect
a society’s basic values, perceptions,
preferences, and behaviors.
► Core beliefs and values are passed on from
parents to children and are reinforced by schools,
churches, business, and government.
► Secondary beliefs and values are more open to
change.
• Marketers may be able to change secondary beliefs,
but NOT core beliefs.

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 Cultural Environment
 Society’s major cultural views are expressed
in people’s views of:
►Themselves
►Others
►Organizations
►Society
►Nature
►The universe

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 Responding to the
Marketing Environment
 Reactive responses:
►Many firms simply react to changes in the
marketing environment.
 Proactive responses:
►Some firms attempt to manage the
marketing environment via aggressive
actions designed to affect the publics and
forces in the marketing environment.
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 Responding to the
Marketing Environment
 Examples of proactive responses:
►Hiring lobbyists
►Running “advertorials”

►Pressing law suits

►Filing complaints

►Forming agreements to control channels

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 Rest Stop: Reviewing the Concepts

 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.
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