Chapter 2 The Changing Marketing Environment

1. Chapter 2The Changing Marketing Environment

2. Chapter Goals To gain an understanding of: • The concept of monitoring a firm’s environment • How external forces influence a firm’s marketing program: • Demographics, economics, competition, social/cultural milieu, technology, political/legal systems • How suppliers and intermediaries impact the marketing program • How nonmarketing resources within the firm influence the way in which it practices marketing

3. The External Macroenvironment • the external environment is changing very rapidly, with considerable implications for marketing • macro forces are factors over which the company has no short-term control • microforces are those that operate at the firm level • the external macroenvironment affects different firms at a different pace and in different ways • the better we understand the changing marketing environment and its effects, the better we can develop effective marketing programs

4. The Marketing Program Economic conditions Demo- graphics Competition COMPANY’S MARKETING PROGRAM Social and cultural forces Technology Political and legal forces

5. Demographic Change • refers to the changing nature of the population • most obvious change is the aging population • smaller families; more single-person households • smaller, non-traditional households • more part-time employment • more dual-income households • changing patterns of immigration; ethnic mix • must consider the implicationsof these changes

6. The Importance of Changing Demographics Different age groups buy different products or services. What are the implications of these changes (1996-2006)? • Under age 25: Grow by 4.8%. • 25-34 years old: Decline by 5%. • 35-44 years old: Increase by 4.5%. • 45-64 years old: Grow by 2.5 million, or 39.5%. • Over age 65: Grow by 20%. Source: Statistics Canada Projections

7. Changing Ethnicity • Chinese growing to be second largest language group in Canada • Over one million Chinese live in Canada: • 80% in British Columbia and Ontario • Have unique buying habits and needs • Make an “ethnic” market segment

8. Economic Change • consider the effect on consumers of: • recession (business cycle) • changes in interest rates • inflation • unemployment • how are consumers likely to respond? • they often shop around more; store and brand loyalty suffer when consumers are uncertain

9. Price Policy Must Respond to Economic Conditions With little inflation, companies are having trouble raising prices. Instead they are: • Redesigning products for ease of manufacture or to cut out costly, superfluous features. • Using price-driven costing rather than cost-plus pricing. • Emphasizing everyday low prices, rather than sporadic rebates and discounts. • Forging closer links with customers to speed up new product development. • Introducing “bare-bones” products. • Investing in high-tech equipment to cut costs.

10. Are Wealthy Consumers All the Same? No!!! Research has identified five distinct groups: • Luxury lovers— 29 percent. Flaunt their affluence. • Savvy affluents— 23 percent. Seek bargains, hide their wealth. • Trailblazers — 21 percent. Love adventure travel, active investors. • Contented affluents—14 percent. “Old money,” country-club set, believe in large estate for their children. • Strained affluents—13 percent. Have large debt burden, believe strongly in image.

11. Competitive Change Competition takes place at three levels: 1. directly at the brand or store level 2. at the level of substitute products/services 3. From marketers of all products and services competing for the same consumer dollar

12. Social and Cultural Change • the way in which we lead our lives is also changing: lifestyles and values • greater emphasis on quality of life • changing gender roles • different attitudes toward physical activity, exercise, and diet among certain segments • increased emphasis on quality and value • environmentalism has affected marketing • increased demands for convenience

13. Trends in Attitude Change • Changing male/female roles • Emphasis on quality of life • Growing interest in physical fitness, health and wellness • Growing focus on service quality • Aging population • Growth in influence of young buyers • Growing environmental awareness and concern

14. “Green” Consumers(from Roper Starch Worldwide) • True-Blue Greens -Change their personal behaviour and purchases to aid the environment. • Greenback Greens -Support environmental political candidates and donate money to environmental causes but are not as willing to change their habits. • Sprouts-Make a few environmental friendly purchases. • Grousers -Grudgingly acknowledge environmental mandates. • Basic browns -Most apathetic and their ranks are growing.

15. Technological Change • Advancing technology creates new forms of competition and communications; fax, ATM’s, CD-ROM, cellular, Internet • Also creates new industries to be supplied • Also has important effects on how people spend their time: working and shopping from home, voice mail, surfing the Net • Think about the fact that today technology is accepted by consumers, expected by them, transparent to them, and often disposable

16. Impact of Technological Change • Launches entirely new industries, such as multimedia, digital communications and electronic commerce • Alters or virtually destroys existing industries, such as the effect of e-mail on regular mail and even fax • Stimulates other markets and industries, such as the effect of the debit card and Internet shopping on the retailing industry • Over 40% of Canadians had Internet access in 1999

17. Political and Legal Change • government and laws affect marketing at many levels • legislation often has implications for marketing; some more direct than others • considerable amount of consumer protection legislation in effect in Canada • many industries are directly affected by legislation; packaging, labelling, advertising

18. The External Microenvironment • external to the firm, but part of its marketing system because of its close relationship • its market; the people or organizations whose wants and needs the firm intends to satisfy • its suppliers; the other firms upon whom the firm relies to provide quality products and services so that it can serve its customers • marketing intermediaries; other firms that represent the channel of distribution for the firm’s products and services

19. The Company’s Marketing Program Marketing inter- mediaries Marketing inter- mediaries COMPANY’S MARKETING PROGRAM The market Suppliers

20. Controllable Factors in the Marketing Plan • Production • Finance • Personnel Internal Factors • Company’s location • Its research and development strength • Its image Nonmarketing Factors

21. Financial resources Human resources Production facilities COMPANY’S NONMARKETING RESOURCES Company image Location Research and development

22. The New Internal Market • Internal marketing ensures that employees are ‘on side’ with the goals of the organization • The employees have a direct impact on product and service quality, dependability, and overall productivity • The employees are an “internal market” which impact every department within the firm • A satisfied internal market will be better able to satisfy the external (customer) market