Analyzing the Marketing Environment (Chapter 3)

Lecture #3
Lecturer: Donna-Kay Smith
Date: June 3, 2016
 The Microenvironment
 The Macroenvironemnt
 The Demographic Marketing Environment
 The Economic Environment
 The Natural Environment
 The Technological Environment
 The Political and Social Environment
 The Cultural Environment

 Responding to the Marketing Environment

 The marketing environment – Includes the actors and
forces outside marketing that affect marketing
management’s ability to build and maintain successful
relationships with customers
 The marketing environment influences the company’s
ability to transact business effectively with target
markets.
 Two (2) environmental forces affect a company’s
ability to serve its customers:
 Microenvironment
 Macroenvironment
 Microenvironment consists of the actors close to
the company that affect its ability to serve its
customers, the company, suppliers, marketing
intermediaries, customer markets, competitors,
and publics

 Marketing success requires building

relationships with six (6) actors which make up
the company’s value delivery network.
 All actors partner within each other to improve the
performance of the entire system.
 This encompasses the company’s internal
environment, consisting of:
 Top management
 Finance
 R&D
 Purchasing
 Operations
 Accounting

 All units within the company share responsibility

for understanding customer needs and creating
value for customers.
 Suppliers provide the resources to produce
goods and services.

 Marketers should treat suppliers as partners to

provide customer value.

 Marketers must watch supply availability and

costs because supply shortages and delays can
impact the company’s ability to serve customers.
 Shortage as a resource can increase cost of sales
(short term) and damage customer satisfaction (in
long run).
 Marketing Intermediaries help the company to
promote, sell and distribute its products to final
buyers.
 Partnering with intermediaries helps to optimize
the performance of the entire of the entire
system involved in meeting customer needs and
building relationships.
 Intermediaries provide insights on how to
improve customer value.
 The four (4) types are:
Physical
Resellers distribution
firms

Marketing
Financial
services
intermediaries
agencies
 Resellers – These are distribution channel firms that help the company
find customers and sell to them.
 E.g. retail and wholesale
 Larger re-sellers have enough power to dictate terms to companies

 Physical distribution firms – These help the company stock and move
goods from points of origin to destinations.
 Marketing services agencies – These are companies that help target and
promote to the right markets.
 E.g. market research firms, advertising agencies, media firms, marketing
consulting firms.

 Financial intermediaries – Includes businesses that help finance

transactions or insure against risks associated with buying and selling of
goods.
 E.g. banks
 Firms must gain strategic advantage by
positioning their offerings against competitors’
offerings.
 Competitors vie with the company in an effort to
serve customers better. Therefore, the company
must provide customer value and satisfaction
better than competitors do.
 Understanding competitors help to determine
the competitive strategies.
 Any group that has an actual or potential interest in or impact on an
organization’s ability to achieve its objectives. Seven (7) types are:
 Financial publics – Influences the company’s ability to obtain funds e.g. banks,
investment analysts.

 Media publics – Carries news, features, opinions and other contents – E.g. TV
stations, Newspaper, Blogs and Social Media

 Government publics – Assist the company to take government issues into

account. E.g. lawyers

 Citizen-action publics – May question company’s marketing decisions OR help

stay in touch with consumer and citizen groups.

 Local publics – Neighborhood residents, Community organizations.

 General public – Pertains to attitudes of the public towards goods and services.
The public’s perception affects its buying behavior.

 Internal public – Includes board of directors, workers, managers, volunteers

 Five types of customers exist.
 A company may target one or all.
 These are:
 Consumer markets – Consists of individuals and households that buy
goods for personal consumption.
 Business markets – Buy goods and services for further processing or
to use in their own production process.
 Reseller Markets – Missing from slide. Buy goods and services to re-
sell for profit.
 Government Markets – Consists of government agencies that buy
goods and services to produce public service goods or re-sell to others
who need them.
 International markets – Consists of buyers in other countries,
consisting of consumers, business, goverment and resellers.
 The macroenvironment consists of larger
societal forces that affect the micro-
environment.

 Five (5) forces shape opportunities and pose

threats to the company
 Some are unforeseeable and cannot be controlled
 Others can be managed through skilful
management.
 The macroenvironment consists of larger
societal forces that affect the micro-
environment.

 Five (5) forces shape opportunities and pose

threats to the company
 Some are unforeseeable and cannot be controlled
 Others can be managed through skilful
management.
 Demography – The study of human
populations-- size, density, location, age,
gender, race, occupation, and other statistics

 Demographic environment – Involves people,

and people make up markets
 Demographic trends – Shifts in age, family
structure, geographic population, educational
characteristics, and population diversity.
 The population consists of several
generational groups:
 Baby boomers
 Generation X
 Milennials (or Generation Y)
 Generation Z
 Baby Boomers – People born people born between 1946 and
1964.
 As at 2016, these persons are 52 -70 years.
 They grew up Post World War II.
 Great Recession hit these persons hard and they are now spending
more carefully and re-thinking purpose and value of their work.
 These include the most affluent Americans – In the USA market
these are the wealthiest generation.
 Instead of overlooking this aged group, Companies are reaching out to
them in various forms. Amazon created a special site for them “50+
Active & Healthy Living” focusing on health care, dietary and medical
needs among others.
 Generation X – People born between 1965 and 1976.
 As at 2016, these persons are 40 - 69 years.
 Represents a relatively small generation.
 They are the first generation to grow up in the
Internet era and embrace the benefits of new
technology.
 Characteristics:
 Cautious economic outlook - Sceptical and tend to
research products before buying
 Less materialistic - They Prize experiences over acquisition.
 Family comes first.
 Generation Y (aka Millennials or Echo boomers) – People born
between 1977 and 2000.
 As at 2016, these persons are 16 - 39 years.
 They represent the largest generation.
 Their attractiveness is due to the size of the market.

 Characteristics:
 Comfortable with technology
 The most financially strapped – Due to the Great Recession
 Face higher unemployment and greater debt.
 Technology is a way of life – They are the first to grow up with
computers, mobile devices and online social media.
 They seek opportunities to share their own brand experience and
share them with others.
 Reasonable prices appeal to them.
 Generation Y/ Milennials –Generation Z – People born
after 2000.
 As at 2016, these persons are 15 years and under.
 Represents the kids, tweens and teens market.
 Characteristics:
 They greatly influence the spending of their parents.
 Represent tomorrow’s markets and are now forming brand
relationships that will affect their buying well into the future.
 Blend digital and offline world seamlessly.
 Prefer shopping online for electronics, books and music and do
their product research before buying.
 Marketers must appeal to their senses and they have short
attention spans.
 Generational Marketing – Important in
segmenting people by lifestyle of life state
instead of age.
 The traditional household consists of husband wife and children.
However most are moving away from this.
 There is a rise in:
 Single-parent household
 Same sex households.

 More people are:

 Divorcing or separating
 Choosing not to marry
 Choosing to marry later
 Marrying without intending to have children

 Increasing number of working women

 Increasing number of stay-at-home dads
 This is a period of great movement within countries and between
countries.
 Population growth in U.S. West and South and decline in Midwest
and Northeast
 People are moving towards micropolitan areas – i.e. small cities
located beyond congested metropolitan areas.
 Change in where people work:
 Telecommuting - Given rise to applications that allows persons
to connect remotely
 Home office

 Changes in the Workforce

 More educated
 More white collar
 Markets are becoming more diverse
 International
 National

 This includes:
 Ethnicity
 Homosexuals (Gay and lesbian)
 Disabled
 Economic environment consists of factors that affect
consumer purchasing power and spending patterns.
 Nations vary based on level and distribution of income.
 Marketers should pay attention to income distribution as well as
income levels, cost of living.
 Rich has grown richer, the middle class has shrunk and the poor
have remained poor.

 Three are three (3) types:

 Industrial economies – Rich markets for many different kinds if
products
 Subsistence economies
 Developing economies – Offer outstanding marketing
opportunities for the right kinds o products.
 Consumers are more frugal and have now adopted
back-to-basics sensibility in lifestyle and spending
patterns.
 They are buying less and looking for greater value.

 Value marketing – Offering financially cautious

buyers greater value—the right combination of
quality and service at a fair price.
 Natural environment: natural resources that are
needed as inputs by marketers or that are affected
by marketing activities

 Trends
 Increased shortages of raw materials
 Increased pollution
 Increased government intervention in natural resource
management
▪ This has led to increased environmentally sustainable strategies
 Technological environment creates both
opportunities and challenges.

 Most dramatic force in changing the marketplace

 Companies are using Radio Frequency Identification (RFDI)
transmitters to track productions through various points in
the distribution channel

 Technology impacts the way we do business

 New products, opportunities
 Concern for the safety of new products
 Political environment - Laws, government agencies, and
pressure groups that influence or limit various organizations
and individuals in a given society.

 The three (3) purpose of regulation are:

 Protect companies from each other and prevent unfair competition
 Protect consumers from unfair business practices - It is important not
to deceive consumers through packaging and pricing or invade
consumer privacy
 Protect the interests of society against unrestrained business
behaviour – Ensures that firms take responsibility for the social costs
of their production or products.
 Cause-Related Marketing: Companies are linking
themselves to worthwhile causes to exercise social
responsibility and build a worthy cause. Some companies
aim to use business to make the world a better place. Its
about linking the purchases of a product/service to a worthy
cause. This increases the company’s public image.
 Cultural environment consists of institutions and other forces
that affect a society’s basic values, perceptions, and
behaviors.

 Cultural factors strongly affect how people think and how

they consume. So marketers are keenly interested in the
cultural

 Cultural characteristics which affect marketing decision

making:
 The persistence of Cultural Values
 Shifts in Secondary Cultural Values
 The 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.

 Secondary beliefs and values are more open to

change and include people’s views of themselves,
others, organization, society, nature, and the
universe.
Shifts in Secondary Cultural Values
 People’s View of themselves –People use
products/services/brands as a means of self expression
and buy offerings that match their view of themselves.
They are individualistic
 People’s View of Others – People are using social media
interact ore with others
 People’s view of organisations – Within organizations
there has been decline in organizational loyalty. People
see work as a means of income. Organizations must find
new ways to win consumer and employee confidence.
Shifts in Secondary Cultural Values (Cont’d)
 People’s view of society – People’s orientation t society influence
consumption patterns ad attitudes towards marketplace.
 People’s view of nature – The renewed love of natural things has
created the need for lifestyles of health and sustainability-
organic, fuel efficient cars, cruelty-free
 People’s view of the universe – people vary in their view of the
universe and their place in it. More emphasis is being placed on
spirituality and it impacts the TV shows people watch and the
books they read and the services they buy. People have been
moving away from materialism and dog-eat-dog ambition to seek
more permanent values like family, community and greater sense
of right and wrong.
 Responses typically take one of the following
forms:
Uncontrollable Proactive Reactive

• Reacting and • Taking • Watching and

adapting to aggressive reacting to
forces in the actions to forces in the
environment affect forces environment
in the
environment
 Uncontrollable – Some companies passively accept the marketing
environment
 Proactive – They run advertorials and blogs to shape public
opinion. Hire lobbyists to influence legislation affecting their
industries and stage media events to gain favourable press
coverage. By taking action companies overcome seemingly
uncontrollable environmental events.
 Reactive – Marketers cannot always control environmental forces
and in some cases may have to be reactive. E.g. geographic
population shifts, economic environment.
 However, where possible smart marketers try to be proactive
rather than reactive.
 The End

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