The Marketing Environment

Principles of MarketingChapter 3Updated 2003

External Marketing Environment Marketers must alter marketing

mix (4 p’s) because of changes in the environment.

Marketers can control marketing mix, but not external environment that continually mold & reshape the target market.

Environmental Scanning Organizations assemble a team of

specialists to continually collect and evaluate environmental information.

Goal is to identify future market opportunities and threats.

Environmental Management When a company implements

strategies that attempt to shape the external environment within which it operates.

Try to influence technological, competitive, and political/legal environments.

Uncontrollable External Environmental Factors

1. Social2. Demographic3. Economic4. Technological & Resource5. Political & Legal6. Competitive

1. Social Factors Most difficult variable to forecast,

influence or integrate into marketing plans.

Attitudes Values Lifestyles

Social Factors . . . Influence:

products people buy, prices paid for products, effectiveness of specific promotions,

and the how, where, when people expect to

purchase products.

Changing Role of Families & Working Women

Greater effect on marketing than any other social change.

58% of all females between 16 and 65 years old are now in the workforce.

Two-career families have greater HH income, but less available time for family activities.

Changing Role of Families & Working Women . . .

Women are very concerned about the environment.

Surge in daycare centers, preschools, adult-care centers.

Women pay more for products/services than men.

2. Demographic Factors Age, race, ethnicity, location Strongly related to consumer

buyer behavior. Good predictors of how the target

market will respond to a specific marketing mix.

GenerationsDescription Years Born Millions/

peopleCharacteristics

Generation “Next” or Millennials

1982-2002(1980 – 2002)

70 million Tech-savvyEducatedMulticultural

Generation “Y”(subset of “X”)

1976-1981(1979 – 1994)

81 million(X + Y)

Edgy, focused on urban style, retro style

Generation “X”

1961-1981(1965-1978)

See above Cynical, media savvy, rebellious

Baby Boomers

1946-1964(1946-1964)

76 million High disposable income, value-driven

Silent Generation

1925 - 1945 35 million Conformists, now grandparents of “Millennials”

Personalized Economy Delivers goods/services at a good

value on demand. Customization

Cable TV channels Immediacy

Banks in grocery stores Value

price competitively/create innovations

Americans On the Move Average U.S. citizen moves every 6

years. Reasons:

employment “young” retirees telecommuters commercial development in rural

areas

Growing Ethnic Markets 1960: 90% of U.S. pop. was white 1990: 80% of U.S. pop. was white Three primary racial/ethnic

minorities: African-Americans U.S. Hispanics Asian-Americans

Multiculturalism

All major ethnic groups in an area are roughly equally represented.

Hispanic is the largest minority group now in U.S.

Census (1990) identified 110 different ethnic groups in U.S.

Strategies for Marketing in a Diverse Society

1. Many niches within ethnic markets - requires micromarketing strategies.

2. Maintain brand’s core identity while straddling different languages, cultures, ages, incomes.

3. Seek common interests, motivations or needs among ethnic groups - “stitching niches”

3. Economic Factors

1. Rising Incomes2. Inflation3. Recession

Rising Incomes 2/3 of all American HH’s earn a

“middle class” income: $18,000 - $75,000.

Over 8% of HH’s earn over $75,000, up from 2.6% in 1980.

Trend toward dual-income families leading contributor.

Provides more discretionary income.

Inflation Inflation causes consumers to do

two things: Decrease brand loyalty to search for

lowest prices Take advantage of coupons and sales

to stock up on items

Recession Period of economic activity when

income, production, and employment fall – which reduces demand.

This can be countered by: Improving existing products/introducing new

ones. Maintain & expand customer services. Emphasize top-of-the-line products and

promote product value.

4. Technological & Resource Factors New technology can assist firm in

coping with many other environmental factors. Example: New processes can reduce

production costs and help firm fight inflation/recession.

Technological & Resource Factors . . . U.S. is not creating new technology

as fast as in the past. U.S. companies have trouble

transforming results of basic/pure research into goods/services.

Applied research attempts to develop new or improved products.

Technological & Resource Factors . . . Many U.S. companies seek short-term

profits and take minimal risk. This leads to development of line

extensions vs. new innovations. Several political/cultural alterations

could encourage innovations. Tax incentives Changes in org. structure Company encouragement of risk taking

5. Political & Legal Govt. establishes many operating

rules for businesses. Legal rules/restrictions affect every

aspect of the marketing mix. Govt. needs business to generate

revenue. Regulate competitive environment

Regulatory Agencies Consumer Product Safety

Commission Federal Trade Commission Food and Drug Administration

6. Competitive Factors # competitors a firm must face Relative size of competitors Degree of interdependence within

industry

Basic Models of Competition Monopoly

Firm is the industry Utility co.’s,

Monopolistic Competition Large # suppliers offer similar, but

not identical products. Laundries, hair stylists, lawyers

Basic Models of Competition. . . Oligopoly

Small # firms dominate market Auto, tire, etc.

Pure Competition Large # of sellers marketing a

standardized product

Global Competition In the past, foreign firms entered

U.S. markets by emphasizing price, now it’s quality.

U.S. companies battle one another in global markets as intensively as in the U.S.

Ethical Decision Making Extent of ethical problems within

organization Top-management actions on ethics Potential magnitude of the consequences Social consensus Probability of harmful outcome Length of time between

decision/consequences # of people affected See Exhibit 3.6, page 83

Corporate Social Responsibility Business’s concern for society’s

welfare Pyramid of Corporate Responsibility

(Exhibit 3.8, page 86) Economic – be profitable Legal – obey the law Ethical – be ethical Philanthropic – be a good corporate

citizen