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The Changing Marketing Environment

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Chapter Goals

To gain an understanding of:

• The concept of environmental scanning.

• How external forces influence a firm’s marketing program:

• Demography, economics, competition, social/cultural milieu, technology, political/legal systems.

•How suppliers and intermediaries impact the marketing program (also external.)

•How ‘non-marketing resources’ within the firm influence the way in which it practices marketing (impact?)

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Chapter Goals

To gain an understanding of:

• The nature and scope of planning and how it fits within the management process.

• Similarities and differences among mission, objectives, strategies and tactics.

• The essential difference between strategic company planning and strategic marketing planning.

• The steps involved in strategic marketing planning.

• The purpose and contents of an annual marketing plan.

• How planning models can be useful aids in developing a marketing program.

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The 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 (all firms.)

• Micro forces are those that operate at the firm level (particular firm.)

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Macroenvironment (Cont’d)

• The external (macro)environment 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 (respond, or hopefully anticipate!)

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COMPANY’S

MARKETING

PROGRAM

Demo-

graphics

Economic

conditions

Political

and legal

forces

Social

and cultural

forces

Competition

Technology

The Marketing

Program

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Demographic Change

• Refers to the changing nature of the population – who’s making up the marketplace (and their characteristics.)

• Most obvious change is the aging population.

• Smaller families; more single-person households.

• Smaller, non-traditional households.

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• More part-time employment.

• More dual-income households.

• Changing patterns of immigration; ethnic mix.

• Must consider the implications of these changes.

• Further confounded when various types of information are combined – but, more clearly defines potential market.

Demographic Change (Cont’d)

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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%.

The Importance of Changing Demographics

Source: Statistics Canada Projections

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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 (effect of cultural background - more later.)

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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.

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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.

Price Policy Must Respond to Economic Conditions

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Research has identified five distinct groups:

• Luxury lovers — 29 percent. Flaunt their affluence.

• Savvy affluents — 23 percent. Seek bargains, may hide their wealth.

• Trailblazers — 21 percent. Love adventure travel, active investors.

• Contented affluents —14 percent. “Old money,” country-club set, blue-bloods with estates and trust funds for their children.

• Strained affluents —13 percent. Have large debt burden, believe strongly in image.

Are Wealthy Consumers

All the Same? Nope!

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Competition

Competition takes place at three levels:

1. Directly at the brand or store level.

2. At the level of substitute products or services.

3. From marketers of all products and services competing for the same consumer dollar.

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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.

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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.

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• 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.

“Green” Consumers

(from Roper Starch Worldwide)

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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.

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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.

• About 60% of Canadians had Internet access in 2002.

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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.

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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.

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COMPANY’S

MARKETING

PROGRAM

Suppliers

Marketing

inter-

mediaries

Marketing

inter-

mediaries

The

market

The Company’s

Marketing Program

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• Production

• Finance

• Personnel

• Company’s location

• Its research and development strength

• Its image

Controllable Factors in

the Marketing Plan

Internal Factors

Nonmarketing

Factors

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COMPANY’S

NONMARKETING

RESOURCES

Financial

resources

Research

and

development

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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.

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PLANNING

Analyze situation

Set goals

Select strategies

and tactics

IMPLEMENTATION

Organize

Staff

Direct

EVALUATION

Compare

performance

with goals

Feedback, so management can adapt future plans and their

implementation to the changing environment

The Management Process

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Strategic Marketing Management

• Strategic management involves planning, implementation, and evaluation.

• Implies ongoing revision of the marketing program, based upon feedback.

• Consistent with the firm’s mission statement and based upon clear goals and objectives.

• Strategies suggest how firm will reach its goals.

• Tactics relate to how strategies will be implemented.

• Policies guide how the firm does business.

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Strategic company planning

1. Define org. mission

2. Conduct situation analysis

3. Set org. objectives

4. Select appropriate strategies

Strategic marketing planning

1. Conduct situation anal.

2. Develop marketing obj.

3. Determine positioning and

differential advantage

4. Select target markets,

measure market demand

5. Design strategic

marketing mix

Annual marketing planning

Prepare annual marketing plan

for each major product and

company division

PLANNING SEQUENCE

IMPLEMENTATION AND EVALUATION

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Strategic Marketing Planning

• Strategic planning is based upon what is happening in the firm’s environment.

• Matches resources with the opportunities, changes, and characteristics of the marketplace.

• Must be consistent with the firm’s mission.

• Objectives must be actionable and measurable.

• Formulation of objectives is often based upon an analysis of strengths, weaknesses, opportunities, and threats (SWOT).

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The Planning Process

• Involves carrying out a situational analysis; Often including a SWOT analysis.

• Setting realistic marketing objectives.

• Determining strategies for positioning and for gaining a differential advantage on competitors.

• Selection of appropriate target market segments and an assessment of market demand.

• Identifying a strategic marketing mix that will appeal to the target segments.

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Annual Marketing Planning

• Short-term plan prepared for a firm’s major functions.

• Summarizes strategies that will be used to achieve specific objectives over the year.

• Points out other activities that must be performed in implementation and evaluation.

• Outlines who is responsible and what resources are to be made available.

• Represents a “road map” to guide marketing activity over the coming year.

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Contents of the Annual Plan • Executive summary

• Situation analysis -- including resources

• Objectives tailored to organizational goals

• Strategies relating to segments and marketing mix

• Tactics --activities to carry out strategies

• Financial schedules -- projections

• Timetable to guide implementation

• Evaluation of performance against goals

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Strategic Business Units (SBU) • To make planning more effective, a large,

diverse organization may divide itself into smaller planning units called Strategic Business Units

• The unit should:

• Be a separately identifiable business

• Have a distinct mission

• Have separate competitors

• Have a separate group of executives charged with profit responsibility

• Have its own strategic plan

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The Boston Consulting

Group Matrix

• Using this model, a strategic business unit (SBU) can be classified according to two factors: its market share relative to competitors, and the growth rate of the industry in which the SBU operates.

• The resulting 2 x 2 grid has 4 quadrants that represent distinct categories of SBUs or major products.

• Each category is assigned a name that reflects its market share, industry growth rate, cash needs, and appropriate strategies.

• A company should seek a balanced portfolio of SBUs with a mix of stars, cash cows, and questions marks, but hopefully no dogs.

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Stars

Cash cows Dogs

Question marks

High Low

High

Low

COMPANY’S MARKET SHARE IN

DU

ST

RY

GR

OW

TH

RA

TE

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Product-Market Growth Matrix

• Growth requires examination of both products and markets; what needs changing?

• Should you stay and fight? Or should you forge an alliance to meet the challenge?

• market penetration: sell more of present products/services to present markets.

• market development: sell present products to new markets or segments.

• product development: new products/services for existing markets.

• diversification: new products to new markets.

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PRESENT PRODUCTS

PRESENT

MARKETS

NEW PRODUCTS

NEW

MARKETS

Market

penetration

Market

development

Product

development

Diversification

The product-market growth matrix depicts the options available in considering markets and products.

Product Market Growth Matrix