Chapter Three

1. Chapter Three The Marketing Environment

2. 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. Copyright 2007, Prentice Hall, Inc.

3. Challenges Faces shifting consumer lifestyles and preferences for healthier foods. Low ratings of food and service quality. Atmosphere not upscale. Image is perceived as being uncultured, uncool, and unclassy by younger target markets. Marketing Initiatives Focus on core competency of consistent products and reliable service. Offers upscale alternatives including McCafe and Bistro Gourmet. Eliminates “supersize,” offers healthier food options, and introduces Go Active! Adult Happy Meal. Case Study McDONALD’S – Facing New Challenges Copyright 2007, Prentice Hall, Inc.

4. Marketing Environment • Consists of actors and forces outside 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. Copyright 2007, Prentice Hall, Inc.

5. 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. • Considered to be beyond the control of the organization. Copyright 2007, Prentice Hall, Inc.

6. Marketing Environment • Actors in the microenvironment include: • The company itself • Suppliers • Marketing intermediaries • Customers • Competitors • Publics Copyright 2007, Prentice Hall, Inc.

7. The Microenvironment • Company’s Internal Environment: • Areas insidea company. • Affects the marketing department’s planning strategies. • All departments must “think consumer” and work together to provide superior customer value and satisfaction. Copyright 2007, Prentice Hall, Inc.

8. The Microenvironment • Suppliers: • Provide resources needed to produce goods and services. • Important link in the “value delivery system.” • Most marketers treat suppliers like partners. Copyright 2007, Prentice Hall, Inc.

9. 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 Copyright 2007, Prentice Hall, Inc.

10. The Microenvironment • Customers: • Five types of markets that purchase a company’s goods and services. • Consumer • Business • Reseller • Government • International Copyright 2007, Prentice Hall, Inc.

11. The Microenvironment • Competitors: • Those who serve a target market with products and services that are viewed by consumers as being reasonable substitutes. • Company must gain strategic advantage against these organizations. Copyright 2007, Prentice Hall, Inc.

12. 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 Copyright 2007, Prentice Hall, Inc.

13. 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. Copyright 2007, Prentice Hall, Inc.

14. The Macroenvironment • Forces in the macroevironment can be categorized as: • Demographic • Economic • Natural • Technological • Political • Cultural Copyright 2007, Prentice Hall, Inc.

15. 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. Copyright 2007, Prentice Hall, Inc.

16. Demographic Environment • The 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. Copyright 2007, Prentice Hall, Inc.

17. Demographic Environment • Baby Boomers: • 78 million born between 1946 and 1964. • Equal 28% of population. • Earn more than 50% of all personal income. • Almost 25% belong to racial or ethnic minority. • Spend a lot on anti-aging products and services. • Are likely to postpone retirement. Copyright 2007, Prentice Hall, Inc.

18. Demographic Environment • Generation X: • 45 million born between 1965 and 1976. • Defined by shared experiences: • Increasing divorce rates. • More of their mothers employed. • First generation of latchkey kids. • Cynical of frivolous marketing pitches. • Care about the environment. • Prize experience, not acquisition. Copyright 2007, Prentice Hall, Inc.

19. Demographic Environment • Generation Y: • 72 million born between 1977 and 1994. • Have large amount of disposable income. • Comfortable with computer technology. • Tend to be impatient and “Now-Oriented.” • Many product lines targeted at those who are part of Generation Y: • Teen and young adult games • Clothes, furniture, food Copyright 2007, Prentice Hall, Inc.

20. Demographic Environment • Changing American family and household makeup: • Married couples with children = 34%, and falling. • Married couples and people living with other relatives = 22%. • Single parents = 12%. • Single persons and adult “live-togethers” (also called nonfamily households) = 32% Copyright 2007, Prentice Hall, Inc.

21. 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 moving to “micropolitan” areas. • More people telecommute. • 1 in 5 people now work out of their home. Copyright 2007, Prentice Hall, Inc.

22. Demographic Environment • Better Educated Population: • 1980: • 69% of people over age 25 completed high school. • 17% had completed college. • 2003: • 85% of people over age 25 completed high school. • 27% had completed college. Copyright 2007, Prentice Hall, Inc.

23. Demographic Environment • Greater 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%. • 2002 – 2012: • Professionals should increase by 25% while manufacturing is expected to increase 3%. Copyright 2007, Prentice Hall, Inc.

24. Demographic Environment • Increasing diversity: • U.S. is a “salad bowl” mixing together various groups, each of which retains its ethnic and cultural differences. • Ethnic segments are growing as a percentage of the U.S. population and growth is projected to continue. • Increased marketing efforts towards: • Gay and lesbian consumers • People with disabilities Copyright 2007, Prentice Hall, Inc.

25. Changes in Income 1980s – consumption frenzy 1990s – “squeezed consumer” 2000s – value marketing Income Distribution Upper class Middle class Working class Underclass Economic Environment • Consists of factors that affect consumer purchasing power and spending patterns. Copyright 2007, Prentice Hall, Inc.

26. 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. Copyright 2007, Prentice Hall, Inc.

27. Technological Environment • Most dramatic force shaping our destiny. • Changes rapidly. • Creates new markets and opportunities. • Challenge is to make practical, affordable products. • Safety regulations result in higher research costs and longer time between conceptualization and introduction of product. Copyright 2007, Prentice Hall, Inc.

28. 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. Copyright 2007, Prentice Hall, Inc.

29. Cultural Environment • The institutions and other forces that affect a society’s basic values, perceptions, preference, 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. Copyright 2007, Prentice Hall, Inc.

30. Cultural Environment • Society’s major cultural views are expressed in people’s views of: • Themselves • Others • Organizations • Society • Nature • The universe Copyright 2007, Prentice Hall, Inc.

31. Responding to theMarketing Environment • Environmental Management Perspective • Taking a proactive approach to managing the environment by taking aggressive (rather than reactive) actions to affect the publics and forces in the marketing environment. Copyright 2007, Prentice Hall, Inc.

32. Responding to theMarketing Environment • Manage the environment by: • Hiring lobbyists • Running “advertorials” • Pressing law suits • Filing complaints • Forming agreements to control channels Copyright 2007, Prentice Hall, Inc.

33. 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. Copyright 2007, Prentice Hall, Inc.