Principles of Marketing

1. 3 Principles of Marketing Analyzing the Marketing Environment

2. Learning Objectives After studying this chapter, you should be able to: • 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 3-2

3. Chapter Outline • The Company’s Microenvironment • The Company’s Macroenvironemnt • Responding to the Marketing Environment 3-3

4. 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 3-4

5. The Marketing Environment Marketing Environment 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 3-5

6. The Company’s Microenvironment Marketing Environment Macroenvironment consists of the larger societal forces that affect the microenvironment • Demographic • Economic • Natural • Technological • Political • Cultural 3-6

7. The Company’s Microenvironment • The Company • Suppliers • Marketing intermediaries • Customers • Competitors • Publics 3-7

8. The Company’s Microenvironment The Company Internal environment includes: • Top management • Finance • R&D • Purchasing • Operations • Accounting 3-8

9. The Company’s Microenvironment Suppliers • Provide the resources to produce goods and services • Treated as partners to provide customer value 3-9

10. The Company’s Microenvironment Marketing Intermediaries • Help the company to promote, sell, and distribute its products to final buyers • Include: • Resellers • Physical distribution firms • Marketing services agencies • Financial intermediaries 3-10

11. The Company’s Microenvironment Marketing Intermediaries Resellers are the distribution channel firms that help the company find customers or make sales to them • Include: • Wholesalers • Retailers 3-11

12. The Company’s Microenvironment Marketing Intermediaries Physical distribution firms are the distribution channel firms that help the company to stock and move goods from their points of origin to their final destination 3-12

13. The Company’s Microenvironment Marketing Intermediaries Marketing service agencies are the marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets 3-13

14. The Company’s Microenvironment Marketing Intermediaries Financial intermediaries include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods 3-14

15. The Company’s Microenvironment Customers Customer markets consist of individuals and households that buy goods and services for personal consumption Business markets buy goods and services for further processing or for use in their production process 3-15

16. The Company’s Microenvironment Customers Reseller markets buy goods and services to resell at a profit Government markets buy goods and services to produce public services or transfer goods and services to others who need them International markets consist of buyers in other countries including consumers, producers, resellers, and governments 3-16

17. The Company’s Microenvironment Competitors • those who serve a target market with similar or substitute offers (products, services) against whom a company must gain strategic advantage (provide greater value and satisfaction, position against). 3-17

18. The Company’s Microenvironment Publics Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives • Financial publics • Media publics • Government publics • Citizen-action publics • Local publics • General public • Internal publics 3-18

19. The Company’s Microenvironment Publics Financial publics influence the company’s ability to obtain funds—banks, investment houses, and stockholders Media publics carry news, features, and editorial opinion—newspapers, magazines, and radio and television stations Government publics influence product safety and truth in advertising 3-19

20. The Company’s Microenvironment Publics Citizen-action publics include consumer organizations, environment groups, and minority groups Local publics include neighborhood residents and community organizations General publics influence the company’s public image Internal publics include workers, managers, volunteers, and directors 3-20

21. The Company’s Macroenvironment • Demographic environment • Economic environment • Natural environment • Technological environment • Political environment • Cultural environment 3-21

22. The Company’s Macroenvironment Demographic Environment Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics Demographic environment is important because it involves people, and people make up markets Demographic trends include age, family structure, geographic population shifts, educational characteristics, and population diversity 3-22

23. The Company’s Macroenvironment Increasing population • Rapid growth in urban population in Asia • In India, urban population to rise to 523 million by 2025 Demographic Environment

24. The Company’s Macroenvironment A growing middle class • MGI has divided the Indian population into 5 economic classes • Division based on real annual disposable income Demographic Environment

25. The Company’s Macroenvironment Deprived households have an annual disposable income of less than Rs 90,000 • The poorest economic class • Mostly unskilled or semi-skilled workers on daily wages Demographic Environment

26. The Company’s Macroenvironment • Aspirers have an annual disposable income in the range of Rs 90,000 to Rs 200,000 – Spend most of their income on basic necessities – Small-time retailers, small farmers, etc. Demographic Environment

27. The Company’s Macroenvironment Seekers have an annual disposable income between Rs 200,000 and Rs 500,000. Mostly white-collar employees, mid-level government officials, newly employed postgraduates, medium-scale traders Demographic Environment

28. The Company’s Macroenvironment Strivers have an annual income ranging from Rs 500,000 to Rs 1,000,000 • Have a stable income source and access to amenities • Mostly professionals such as lawyers, CAs, senior government officials, rich farmers Demographic Environment

29. The Company’s Macroenvironment Global Indians have an annual disposable income in excess of Rs 1,000,000 • Creamy layer in society • Globe-trotters with a high standard of living Demographic Environment

30. The Company’s Macroenvironment Demographic Environment Growth in the rural population A changing family system The changing role of women Increasing diversity

31. The Company’s Macroenvironment Economic Environment Economic environment consists of factors that affect consumer purchasing power and spending patterns • Subsistence economies consume most of their own agriculture and industrial output • Industrial economies are richer markets 3-31

32. The Company’s Macroenvironment The global financial crisis of 2007–2009 has affected the consumption and production of many products Economic Environment

33. The Company’s Macroenvironment Natural Environment Natural environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities • Trends • Shortages of raw materials • Increased pollution • Increased government intervention • Environmentally sustainable strategies • Green marketing 3-35

34. The Company’s Macroenvironment Technological Environment Most dramatic force in changing the marketplace with many positive and negative effects • Rapid change • Provides new markets and new opportunities • Internet • Medicine • Miniaturization • Weapons • Credit cards • Communication 3-37

35. The Company’s Macroenvironment Political Environment Political environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society 3-38

36. The Company’s Macroenvironment Political Environment • Legislation regulating business • Public policy to guide commerce—sets of laws and regulations that limit business for the good of society at large • Increasing legislation • Protect companies • Protect consumers • Protect the interests of society 3-39

37. The Company’s Macroenvironment Political Environment Increased Emphasis on Ethics and Socially Responsible Actions Socially responsible behavior occurs when firms actively seek out ways to protect the long-term interests of their consumers and the environment • Cause-related marketing 3-41

38. The Company’s Macroenvironment Cultural Environment Cultural environment consists of institutions and other forces that affect a society’s basic values, perceptions, and behaviors 3-42

39. The Company’s Macroenvironment Cultural Environment Persistence of Cultural Values Core beliefs and values have a high degree of persistence, 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 3-43