Principles of Marketing Chapter 3: Analyzing the Marketing Environment

1. Principles of MarketingChapter 3:Analyzing the Marketing Environment

2. Competition for aDifferential Advantage • Easiest way to gain a differential advantage is by, first, understanding and addressing one’s customers’ wants/needs better than the competition. Dr. James Carver – Auburn University

3. Marketing Environment • Consists of actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. • Review: What was the 2nd point in the marketing concept? Dr. James Carver – Auburn University

4. Marketing Environment Microenvironment Macroenvironment Larger societal forces that affect the microenvironment (i.e., shape opportunities & pose threats to the company) Demographic Economic Natural Technological Political Cultural • Actors close to the company that affect its ability to serve its customers. • Company itself • Suppliers • Marketing intermediaries • Customer markets • Competitors • Publics Dr. James Carver – Auburn University

5. Demography • The study of human populations in terms of: • Market (~Physical) Characteristics • Location*, • Size*, or • Density* • All termed, yet not defined in text (Rosenbloom ‘04,’08,’12; Dunne, Lusch, Carver ‘11,’13) • Population (~Personal) Characteristics • Age Distribution, • Education, • State of Marriage*, • Household Structure, • Ethnic Makeup, etc. • All updated per the U.S. Bureau of Census, Statistical Abstract of the United States: 2012 and/or any other cites included within the following notes. Dr. James Carver – Auburn University

6. “Physical” Characteristicsof a Market* • Common variables include: • Location • Geographical extent of a market, its location, and its distance from the firm • Size • The number of customers making up a market • Not the dollar volume b/c it can vary significantly and is not necessarily correlated with number of customers • Where firms = 1 person or customer (i.e., in b2b markets) • Density • The number of customers per unit of area Dr. James Carver – Auburn University

7. “Shifting” in Market Geography* • American’s mobility is increasing • Change residence approx. 12 times on average • This is twice that of British & French and 4 times Irish • 12% of population moved in 2010 • 75% remained in same county • 25% to new county but same state • 8% moved to new state • Total is more than 100% due to moving more than once in the year Dr. James Carver – Auburn University

8. “Shifting” in Market Geography* • Moving South and West over last 200 years • Eight fastest growing between 2000 and 2010 • Nevada, Arizona, Utah, Idaho, Texas, North Carolina, Georgia, and Florida respectively • Projected growth between now and 2050 • South and West by 44% and 45% respectively • Midwest only 10% and Northeast by only 7% • Micromarketing • Tailoring merchandise and marketing programs to the specific needs and wants of one’s targeted neighborhood or community Dr. James Carver – Auburn University

9. Age Distribution* • “Graying of America” • Overall increase in the median age • 1980 = 30 yrs.; 2010 ≈ 37 yrs. • Largely due to Boomers, but tempered by GenY • Boomers: 1946 to 1964 • 78 million • GenX or “Baby Busters”: 1965 to 1977* (book states till 1976) • 47 million • GenY, “Millennials” or “Echo Boomers”: 1978 to 1994 • 80 million Dr. James Carver – Auburn University

10. Education* • Single greatest predictor of income potential • As of 2010… • 87% over 25 had a high school degree • 30% had a bachelor’s or advanced degree • 30% of each men & women receiving college degrees • Yet 30% more women enrolled each year since 2000 • By 2020, 60% of all degrees will be given to women • “Average American” • 33.6 million over age 25with “some college” Dr. James Carver – Auburn University

11. State of Marriage* • Average age when people marry is increasing • 1970: • Less than 10% of males & 6% of females 30-34 not married • 2010: • 37% of males & 27% of females 30-34 not married • Increasingly never marrying too… • 15% of males & 11% of females between 45 and 54 never married Dr. James Carver – Auburn University

12. Household Structure • Household are the basic unit for most consumer products. Thus, • Markets are commonly understood and measured in terms of households. • But what’s the “typical” household? Dr. James Carver – Auburn University

13. Household Structure* • The “typical” household (as of 2010): • No kids in over 55% of all households • Combo of: “empty nesters”, DINKS, “home aloners”, etc. • Over ¼ are “home aloners” (approx. 31.4 million) • Unmarried “Mingles” have grown 383% since 1980 & represent over 6% of all households • “Boomerang Effect” is increasing • 50% of 2008 grads returned home; 4 out of 10 were still there over a year later (Monster Survey in “They’re Baaa-aack,” St. Louis Post-Dispatch, May 3, 2008: 23) • “Sandwich generational”, or “trigenerational”, families on the rise (parents, grandparents, and children) live together in the same house. Dr. James Carver – Auburn University

14. Ethnic Makeup* • Movement towards Emerson’s “Melting Pot” • Non-Hispanic whites • Today: 68%; Projected 2050: 46% • Hispanics • Today: 15%; Projected 2050: 30% • African-American • Today: 13%; Projected 2050: 15% • Asian-American • Today: 5%; Projected 2050: 10% Dr. James Carver – Auburn University

15. Ethnic Makeup* • Ethnic segments will continue to grow as a percentage of the U.S. population. Thus, • Understand Hispanic shoppers • 65% are under 35 • An average of 9 yrs. younger than overall U.S. population • Teen pop. projected to rise 62% by 2020; 10% for all teens • Understand that Hispanic shoppers are not homogeneous • Mexicans, Cubans, Spanish, etc. are all different • 2nd generation and beyond are more mainstream • Remember that African-Americans represent a significant population base, and the Asian-Americans population is expected to double by 2050. Dr. James Carver – Auburn University

16. Economic Environment • Consists of factors that affect consumer purchasing power and spending patterns. • Marketers must monitor such things as: • Changes in income • Consumer savings • Income distribution Dr. James Carver – Auburn University

17. Economic Environment – Income Distribution* • The distribution of wealth is non-uniform. • African-American: $38,200 • Hispanic: $40,000 • White: $61,200 • Asian-Pacific Islander: $74,600 • However, income mobility is quite high in the U.S. • Over 50% of all taxpayers moved up at least one quintile (1/5 of the population) in 10 years • Over 75% of top-one percent in ‘96 fell at least one quintile by 2005 • Income is stratified, but not constant as often purported • U.S. Treasury Department, Income Mobility in the U.S. From 1996 to 2005, November 13, 2007. Dr. James Carver – Auburn University

18. Economic Environment– Personal Savings* • Many criticize the U.S. economic system as not rewarding personal savings. • 1981 high of 8.8% to 6.5% in 1990 to dismal 1.4% in 2005 • Trend is reversing due to “Great Recession” • 5.9% and 5.8% in 2009 and 2010 respectively (percent of disposable) • Yet government reporting neglects to account for: • Investment in the stock market • Overlooks the wealth effect* • Can increase overall spending without concurrent rise in disposable income Dr. James Carver – Auburn University

19. Natural Environment • Involves natural resources that are needed as inputs by marketers or that are affected by marketing activities. • Key trends include: • Shortage of raw materials. • Increased pollution. • Increased government intervention. • Many firms now focus on creating environmentally-sustainable strategies. Dr. James Carver – Auburn University

20. 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. • Government bans unsafe products and sets safety standards, resulting in higher research costs, and longer time to market for new products. Dr. James Carver – Auburn University

21. Political Environment • Includes laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society. • Marketing activities face: • Increasing legislation. • Changing government agency enforcement. • Increased emphasis on ethics and socially responsible behavior (including cause-related marketing). Dr. James Carver – Auburn University

22. 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, businesses, and government. • Secondary beliefs and values are more open to change. • Marketers may be able to change secondary beliefs, but NOT core beliefs. Dr. James Carver – Auburn University

23. Cultural Environment • Society’s major cultural views are expressed in people’s views of: • Themselves • Others • Organizations • Society • Nature • The universe Dr. James Carver – Auburn University