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Chapter 3: Analyzing The Marketing Environment Introduction To develop effective marketing strategies, we must first understand the environment in which marketing operates. In this chapter, well see that marketing operates in a complex and changing environment. Other actors in this environmentsuppliers, intermediaries, customers, competitors, publics, and othersmay work with or against the company. Major environemental forces demographic, economic, natural, technological, political, and culturalshape marketing opportunities, pose threats, and affect the companys ability to build customer relationships.

Marketing EnvironmentThe Marketing Environment refers to the actors and forces outside of the marketing department that affect marketing management ability to build and maintain successful relationships with target customers. The Marketing Environment is made up of: The microenvironment consists of the actors close to the company that affect its ability to serve its customers. These forces are partially controllable by the company. The macroenvironment consists of the larger societal forces that affect the microenvironment. These forces are uncontrollable by the company.

1- The Company: Marketers must work in harmony with other company departments to create customer value and relationships.Walmarts marketers cant promise us low prices unless its operations department delivers low costs.think consumer. According to a former Xerox CEO, to provide a great customer experience, Xerox must find out what customers are facingwhat their problems and opportunities are. Everyone at Xerox shares this responsibility. That includes people and departments that have not always been customer-facing, like finance, legal, and human resources.7

2- Suppliers: provide the resources needed by the company to produce its goods and servicesSupply shortages or delays, labor strikes, and other events can cost sales in the short run and damage customer satisfaction in the long run

DENSO Australia Wins Toyota Supplier Of The YearToyotas competitors often alienate suppliers through self-serving, heavy-handed dealings.According to one supplier, U.S. automakers set annual cost-reduction targets [forthe parts they buy]. To realize those targets, theyll do anything. [Theyve unleashed] areign of terror, and it gets worse every year. By contrast, rather than bullying suppliers,Toyota partners with them and helps them meet its very high expectations. Toyotalearns about their businesses, conducts joint improvement activities, helps train supplieremployees, gives daily performance feedback, and actively seeks out supplier concerns.It even recognizes top performers with annual performance awards. Highsupplier satisfaction means that Toyota can rely on suppliers to help it improve its ownquality, reduce costs, and quickly develop new products. Even after the recent massiverecall following unanticipated acceleration problems with some Toyota models, thecompany didnt point blame at the accelerator part supplier. Instead, Toyota took blamefor a faulty part design and even issued a statement supporting the long-term and valuedsupplier. In all, creating satisfied suppliers helps Toyota produce lower-cost,higher-quality cars, which in turn results in more satisfied customers8

3- Marketing Intermediaries: They include resellers, physical distribution firms, marketing services agencies, and financial intermediariesResellers are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers who buy and resell merchandise.

www.CokeSolutions.com, provides retailers with a wealthof information, business solutions, and merchandising tips9Physical distribution firms help the company stock and move goods from their points of origin to their destinations.Marketing services 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.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.Microenvironment: Marketing Intermediaries

4- Competitors: The marketing concept states that, to be successful, a company must provide greater customer value and satisfaction than its competitors do.5- Publics: it is any group that has an actual or potential interest in or impact on an organizations ability to achieve its objectivesFinancial publics. This group influences the companys ability to obtain funds. Banks, investment analysts, and stockholders are the major financial publics. Media publics. This group carries news, features, and editorial opinion. It includes newspapers, magazines, television stations, and blogs and other Internet media. Government publics. Management must take government developments into account. Marketers must often consult the companys lawyers on issues of product safety, truth in advertising, and other matters.Citizen-action publics. A companys marketing decisions may be questioned by consumer organizations, environmental groups and others. Its public relations department can help it stay in touch with consumer and citizen groups.MicroenvironmentPublics : 126- Customers:Consumer markets consist of individuals and households that buy goods and services for personal consumption. Business markets buy goods and services for further processing or use in their production processes.Reseller markets buy goods and services to resell at a profit. Government markets consist of government agencies that buy goods and services to produce public services or transfer the goods and services to others who need them.International markets consist of these buyers in other countries, including consumers, producers, resellers, and governments.MicroenvironmentDifference between customer and consumer ?

CONSUMERS are those that would use the product

CUSTOMER are those that would buy it..ex wholesalers' and retailers

13Macroenvironment 1- The Demographic Environment: Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics.Ex: Chinas one-child rule created a generation of people who have been pampered by parents and grandparents and have the means to make indulgent purchases.Also, Millennials (Americans born between 1977 and 2000) share a complete ease and comfort with digital technology.Key U.S. Demographic TrendsChanging Age StructurePopulation is getting olderChanging Family StructureMarrying later, fewer children, working women, and nonfamily householdsGeographic ShiftsMoving to the Sunbelt and suburbs (MSAs)Increased EducationIncreased college attendanceand white-collar workersGrowing Ethnic and Racial Diversity73% Caucasian, 12% African-American, 10% Hispanic & 3.4% AsianDemographic EnvironmentDemography is the study of human populations in terms of size,density, location, age, sex, race, occupation, and other aggregate statistics.Key Aspects of the US demographic environment include:Age Structures (esp.. Baby Boomers). The post W.W.II Baby Boom is the mostsignificant demographic feature by its sheer size: 75 million or over 1/3 of the US population. This bulge in age distribution leads growth strategiesin industries serving age-specific markets. Where boomers go, marketers must follow. Discussion Note: More proactively, marketers need to identify emerging boomer needs to plan strategically for an aging population that also lives longer than previous ones.Family Structure. The typical American family rarely exists anymore. Increasing age of those marrying, delayed child-bearing, increased two-income families, and non-family households are key demographic trends.Geographic Population Shifts. Americans are mobile. Trends include movement to Sunbelt states, rural to urban shifts, and present urbanitesmoving to suburbs.Trends in Education. Americans are becoming more educated and white-collar. Increasing Ethnic Diversity. The United States population is 73% white, 12% black, with the remaining percentage mostly Hispanic (22 million) and Asian (7 million).Key U.S. Demographic TrendsThis CTR relates to the material on pp. 74-79.

Macroenvironment 2- The Economic Environment: consists of economic factors that affect consumer purchasing power and spending patterns. Marketers in all industries are looking for ways to offer todays more financially cautious buyers greater valuejust the right combination of product quality and good service at a fair price.Economic EnvironmentChangesin ConsumerSpendingPatternsEconomicDevelopment Changes in IncomeKeyEconomicConcerns forMarketersEconomic EnvironmentThis CTR relates to the material on pp. 79-82.The Economic Environment The Economic Environment consists of factors that affect consumer purchasing power and spending patterns. Key considerations include:Economic Development. Nations vary greatly in their levels of and distribution of income, often as a result of their stage of economic development. Typical distinctions include: Subsistence Economies. These consume most of their own agricultural and industrial output. These countries are poor targets for most products. Industrial Economies. These offer rich markets for many different kinds of goods.Changes in Income. Rising incomes for most consumers have only kept pace with inflation. As a result, consumers are more sensitive to Value Marketing - the careful promotion of a high degree of quality and performance for the price. Income distribution is also of key importance: Upper-class consumers are not affected by current economic events. Middle-class consumers can afford the good life most of the time, but are careful about spending. Working-class consumers must budget carefully. Underclass consumers are often unable to participate fully in the marketing system.Changing Consumer Spending Patterns. Knowledge of Engels Laws remains important: As income rises, the percentage spent on food declines, the percentage spent on housing remains constant, and the percentage spent on savings and other categories increases.3- The Natural Environment: involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities.Marketers should be aware of several trends in the natural environment, They are the growing shortages of raw materials, increased pollution and increased government intervention.PepsiCo markets hundreds of products that are grown, produced, and consumed worldwide. Making and distributing these products requires water, electricity, and fuel. In 2007, the company set as its goal to reduce water consumption by 20 percent, electricity consumption by 20 percent, and fuel consumption by 25 percent per unit of production by 2015.Macroenvironment Natural EnvironmentFactors Affectingthe NaturalEnvironment More GovernmentInterventionShortages of Raw MaterialIncreased Costsof EnergyHigher PollutionLevelsNatural EnvironmentThere are several areas affecting marketing that stem from the natural environment. Shortages of Raw Materials. Shortages both increase demand and sprout counter-movements aimed at conservation. Discussion Note: Both sides of the "green" movement utilize sophisticated database marketing and lobbying techniques. Energy Costs. The cost of energy makes long-term growth of high energy industries and goods difficult to predict. Increased Pollution. Industrial growth almost always damages the natural environment. The so-called green movement seeks to operate businesses in such a way so as not to damage the natural environment. The varying political power of greens in different countries is a consideration in global marketing efforts.Government Intervention in Natural Resource Management. Changing philosophies on the role of government in managing natural resources also blends into the legal environment. Marketers must take care in identifying natural environmental trends.Discussion Note: You might further expand this discussion by pointing out that even agencies like the EPA vary greatly in the amount of environmental regulation they perform depending upon funding and the agenda of whoever occupies the White House.4- The Technological Environment: Forces that create new technologies, creating new product and market opportunities.Transistors hurt the vacuum-tube industry, CDs hurt phonograph records, and digital photography hurt the film business. When old industries fought or ignored new technologies, their businesses declined.

Macroenvironment Shortage of raw material as water that seem to be infinite resources. Nonrenewable resources as oil, coal and various minerals. Increased pollution, as chemical and nuclear wastes, quantity of chemical pollutants in the soil205- The Political and Social Environment: Laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society.Macroenvironment Shortage of raw material as water that seem to be infinite resources. Nonrenewable resources as oil, coal and various minerals. Increased pollution, as chemical and nuclear wastes, quantity of chemical pollutants in the soil21Political EnvironmentGreaterConcern forEthicsIncreasedLegislationChanging EnforcementKeyTrends in thePoliticalEnvironmentPolitical EnvironmentThis CTR relates to the material on pp. 84-87.Political EnvironmentThe political macroenvironmental forces consist of laws, government agencies, and interest groups that seek regulation of business activities to forward their own interests. Business in general, more than other groups, uses lobbying efforts to try and obtain legislation favorable to their competitive interests. Key considerations include: Legislation. Laws generally attempt to protect companies from each other to create more competition that in turn creates more value for the consumer. Laws also aim at protecting consumers from unfair and sometimes dangerous business practices. Laws sometimes seek to protect society as a whole from practices that endanger whole communities or other publicly owned resources such as rivers, forests, and parks.Enforcement. The effect of laws depends upon the emphasis given to enforcing them within the regulatory agency responsible for administering the law. Regulation varies in intensity with political agendas of sitting presidents and budget allocations. Public interest groups too affect the degree of legislative activity and administrative enforcement.Increased Emphasis on Ethics. At both the grassroots and corporate level, more US companies are showing a greater concern for more ethical conduct and more socially responsible action.Discussion Note: Ethical companies often enjoy better consumer relations and public image. Bottom line contributions can be defensive. For example, when Johnson & Johnson behaved responsibly after the Tylenol poisonings, they did not suffer expensive lawsuits and were able to recapture all of their original market share when the product was re-introduced.6- The Cultural Environment: Institutions and other forces that affect societys basic values, perceptions, preferences, and behaviors.Macroenvironment Shortage of raw material as water that seem to be infinite resources. Nonrenewable resources as oil, coal and various minerals. Increased pollution, as chemical and nuclear wastes, quantity of chemical pollutants in the soil23Cultural EnvironmentOfOrganizationsOfNatureOfOneselfOfSocietyOfthe UniverseOfOthersViewsThat ExpressValuesTechnological EnvironmentThis CTR relates to the material on pp. 87-92.Cultural EnvironmentThe key elements of the cultural macroenvironment include: Persistence of Cultural Values. Core beliefs and values are relatively enduring and must be considered by marketers positioning products. For example, product innovations that conflict with core values are unlikely to be adopted. Shifts in Secondary Values. These change over time and change more often than core values and may provide positioning opportunities. Cultural values are expressed in peoples views on the following:View of Themselves. People vary in their emphasis on how important serving themselves is compared to serving others. Personal ambition and materialism have increased significantly over time in the US.View of Others. Recently, there has been a trend toward more altruistic behavior, at least among some segments of the population.Discussion Note: You might link ambition and altruism to baby boomers and baby busters, respectively. It wont hold up forever, but might generate class participation.View of Organizations. Most people are willing to work for large companies but also believe that the companies are out for themselves.View of Society. Trends like Buy American are reflects of this view.View of Nature. This trend has changed over the last few decades from dominate and control to coexist and preserve. View of Universe. Linked in the US to religious observance, this trend has seen an overall decline among most and a simultaneous passionate activism among a small, but powerful group, usually called the religious right.Responding to the Marketing EnvironmentEnvironmental Management Perspective Taking a proactive approach to managing the microenvironment and the macroenvironment to affect changes that are favorable for the company. How? Hire lobbyists , run advertorials, file law suits and complaints, and form agreements.