DIPLOMA IN MARKETING MANAGEMENT

Principles of Marketing (POM)

Module Code: DIM101

Analyzing the Marketing

Environment
Shyaman Karunanayaka
Zonal Manager – Merchant Bank Of Sri Lanka and Finance PLC
MBA in Marketing – University of Colombo
B.Com (Special)- University of Sri Jayewardenepura
Certified Professional Marketer- Asia (SLIM)
Recommended reading
Analyzing the Marketing Environment
• Introduction
• Marketing operates in a complex and changing environment.
• Various actors and forces influence marketing opportunities and challenges.
• Key Actors in the Marketing Environment
• Suppliers, intermediaries, customers, competitors, publics, and others.
• These actors can either collaborate with or pose challenges to the company.
• Major Environmental Forces
• Demographic, economic, natural, technological, political, and cultural forces.
• These forces shape marketing opportunities and threats.
• Understanding the marketing environment is essential for developing effective
marketing strategies.
• Companies need to adapt to changing environments to engage customers and build
relationships
 Marketing Environment
• Definition of Marketing Environment
• Consists of actors and forces outside marketing that affect marketing management's ability to
build and maintain successful relationships with target customers.
• Companies must adapt to or lead changes in the environment,
• Role of Marketers
• Marketers must be environmental trend trackers and opportunity seekers.
• Have disciplined methods for collecting information and developing insights.
• Spend more time in customer and competitor environments.
• Microenvironment vs. Macroenvironment
• Microenvironment: Actors close to the company that affect its ability to engage and serve
customers.
• Includes the company, suppliers, marketing intermediaries, customer markets, competitors, and publics.
• Macroenvironment: Larger societal forces affecting the microenvironment.
• Includes demographic, economic, natural, technological, political, and cultural forces.
• Importance of Studying the Environment
• Marketers can adapt strategies to meet new challenges and opportunities.
• Helps in understanding the market landscape and adjusting tactics accordingly
The Microenvironment
 The Company
• Internal Environment
• Consists of interrelated groups within the company.
• Includes top management, finance, R&D, purchasing, operations, human resources, and
accounting.
• Role of Top Management
• Sets the company's mission, objectives, strategies, and policies.
• Provides the framework within which marketing decisions are made.
• Marketing's Interaction with Other Departments
• Marketing managers must work closely with other departments.
• All departments share the responsibility for understanding customer needs and creating
customer value.
• Collaboration Across Departments
• Marketing takes the lead in understanding and meeting customer needs.
• Other departments, such as manufacturing, finance, legal, and human resources, support this
goal.
• Conclusion
• Collaboration among different departments is essential for successful marketing.
• All departments play a role in creating customer value and achieving company objectives
 Suppliers
• Role of Suppliers
• Suppliers provide resources needed for production.
• Supplier problems can impact marketing, affecting supply availability, costs, and
customer satisfaction.
• Supplier Relationships
• Marketers treat suppliers as partners in creating and delivering customer value.
• Example: Morrison's supermarket in the UK has developed healthy, long-term
relationships with its suppliers.
• Examples of Supplier Relationships
• Morrison's premium brand of milk supports dairy farmers who supply the milk.
• Encourages farmers to complete annual surveys to further develop relationships.
• Conclusion
• Strong supplier relationships are crucial for a company's success.
• Suppliers play a key role in delivering customer value and should be treated as partner
 Marketing Intermediaries
• Definition of Marketing Intermediaries
• Marketing intermediaries help the company promote, sell, and distribute its products to final buyers.
• Include resellers, physical distribution firms, marketing services agencies, and financial intermediaries.
• Types of Marketing Intermediaries
• Resellers: wholesalers and retailers that buy and resell merchandise.
• Physical distribution firms: help stock and move goods.
• Marketing services agencies: help target and promote products.
• Financial intermediaries: help finance transactions or insure against risks.
• Example: Apple and its Marketing Intermediaries
• Apple sells its products through authorized resellers and owns retail locations worldwide.
• Authorized resellers are considered partners and receive support for store renovations and product
displays.
• Apple also works with authorized service providers for repair and maintenance services.
• Partners receive reimbursements, access to products and information, technical support, and inclusion
in Apple's locator system.
• Conclusion
• Marketing intermediaries play a crucial role in the distribution and promotion of products.
• Building partnerships with intermediaries can enhance the company's ability to deliver value to
customers
 Competitors
• The Marketing Concept
• To be successful, a company must provide greater customer value and satisfaction than its
competitors.
• Marketers must gain strategic advantage by positioning their offerings strongly against
competitors in the minds of consumers.
• Competitive Marketing Strategies
• No single strategy is best for all companies.
• Each firm should consider its size and industry position compared to its competitors.
• Strategies for Large Firms
• Large firms with dominant positions can use certain strategies that smaller firms cannot
afford.
• However, being large is not enough, and there are both winning and losing strategies for large
firms.
• Strategies for Small Firms
• Small firms can develop strategies that give them better rates of return than large firms
 Publics
• Definition of Publics
• Any group that has an actual or potential interest in or impact on an organization's
ability to achieve its objectives.
• Types of Publics
• Financial Publics: Influence the company's ability to obtain funds (e.g., banks,
investment analysts, stockholders).
• Media Publics: Carry news, features, and editorial opinions (e.g., TV stations,
newspapers, magazines, blogs, social media).
• Government Publics: Influence government developments (e.g., product safety, truth in
advertising).
• Citizen-Action Publics: Question company's marketing decisions (e.g., consumer
organizations, environmental groups).
• Internal Publics: Include workers, managers, volunteers, and board of directors.
• General Public: Attitude affects buying behavior.
• Local Publics: Local community residents and organizations
 Customers
• Importance of Customers
• Customers are the most important actors in the company's microenvironment.
• The aim is to engage target customers and create strong relationships with them.
• Types of Customer Markets
• Consumer Markets: Individuals and households buying goods and services for personal
consumption.
• Business Markets: Buy goods and services for further processing or use in production
processes.
• Reseller Markets: Buy goods and services to resell at a profit.
• Government Markets: Government agencies buying goods and services for public services or
transfer to others.
• International Markets: Buyers in other countries, including consumers, producers, resellers,
and governments.
• Conclusion
• Understanding and engaging with different types of customer markets is crucial for the
company's success.
• Building strong relationships with customers leads to loyalty and long-term success in the
marketplace
The Macro environment
The Demographic Environment
• Definition of Demography
• Demography is the study of human populations in terms of size, density, location, age,
gender, race, occupation, and other statistics.
• Importance of the Demographic Environment
• The demographic environment is crucial for marketers as it involves people, who make up
markets.
• World population is growing rapidly, expected to exceed 8 billion by 2030.
• Implications for Business
• Changes in the demographic environment have major implications for businesses.
• Marketers analyze age and family structures, geographic shifts, educational characteristics,
and population diversity
• Conclusion
• Understanding demographic trends is essential for marketers to adapt strategies
and meet the needs of changing populations.
• Demographic changes present both opportunities and challenges for businesses
 The Demographic Environment
• The Changing Age Structure of the Population
• The Baby Boomers.
• Generation X.
• Millennials.
• Generation Z.
• Generational Marketing
• The Changing American Family
• Geographic Shifts in Population
• A Better-Educated, More White-Collar, More Professional Population
• Increasing Diversity
 The Changing Age Structure of the Population
Baby Boomers (1946-1964)
• Born between 1946 and 1964 (78 million people)
• Largest and wealthiest generation in U.S. history
• Control 70% of disposable income
• Spend money on financial services, housing, cars, travel, etc.
• Open to new brands
• Want to feel young
• The baby boomers are the generation born after World War II. They are the
largest generation in U.S. history and control a significant amount of
disposable income. Baby boomers are a lucrative target market for many
businesses. They are open to new brands and want to feel young.
Generation X (1965-1976)

• Born between 1965 and 1976 (49 million people)

• Skeptical shoppers (doubt as to the truth of something) who research products
before buying
• Less materialistic than boomers, value experiences
• More receptive to irreverent advertising
• First generation to grow up in the internet era
• Now in their 40s and hold significant buying power

Generation X is the generation born between the baby boomers and millennials.
They are a smaller generation than the boomers, but they still hold a significant
amount of buying power. Gen Xers are skeptical shoppers who value experiences
over possessions. They are more receptive to irreverent advertising and are the
first generation to grow up in the internet era
Millennials (1977-2000)

• Born between 1977 and 2000 (83 million people)

• Most financially strapped generation due to recession
• Tech-savvy and comfortable with digital technology
• Seek authenticity and experiences
• Impatient and prefer mobile communication

Millennials are the generation born between the baby boomers and
Generation Z. They are the most financially strapped generation due to the
recession, but they are also a large and tech-savvy generation. Millennials seek
authenticity and experiences and prefer mobile communication
Generation Z (After 2000)

• Born after 2000 (82 million people)

• Most digitally connected generation
• Influential in family spending decisions
• Blend online and offline worlds
• Do product research before buying

Generation Z is the generation born after 2000. They are the most digitally
connected generation and are influential in family spending decisions. Gen
Zers blend online and offline worlds and do product research before buying
 Summary
• The U.S. population is rapidly aging, with the median age increasing from
28 in 1970 to 38.7 in 2016.
• Baby boomers are a wealthy generation with significant purchasing power,
open to new brands and experiences.
• Generation X is smaller but has substantial income, prioritizing family and
quality in their purchases.
• Millennials are financially strapped but highly connected, seeking
authentic brand experiences and immediate gratification.
• Generation Z is fluent in digital technology, blending online and offline
worlds seamlessly, and engaging in extensive product research
 The Changing American Family
• Traditional family (husband, wife, children) is declining
• Less than half of households today contain married couples (down from
76% in 1940)
• More people are delaying marriage, divorced or choosing not to marry at all
• Increase in non-family households (singles or unrelated adults living
together)
• More working women (47% of workforce)
• Dual-income households are becoming the norm (60% of married couples
with children)
• Marketing is changing to reflect the evolving family structure
• Ads are showing more involved fathers and same-sex couples
 Geographic Shifts in Population
• U.S. population is shifting towards the Sunbelt states (West and South)
• People in different regions buy differently (e.g., winter clothing)
• Americans have been moving from rural to metropolitan areas, suburbs, and
micropolitan areas
• Micropolitan areas: small cities with advantages of metro areas (jobs, amenities) but
without the congestion
• 10% of the U.S. population now resides in micropolitan areas
• Shift in where people live has caused a shift in where they work (telecommuting)
• Telecommuting: working from home or remotely using phone or internet
• SOHO (small office/home office) market is booming due to telecommuting
• 37% of employed individuals do some or all of their work at home
• Many marketers are targeting the telecommuting market
• Cloud computing applications allow people to collaborate anywhere with internet
access
• Companies like ShareDesk offer shared office space for telecommuter
Sri Lanka's Changing Landscape
• Urban Migration: People moving from rural areas to cities (Colombo,
Western Province) for jobs, education, and urban lifestyle.
• Business Opportunities: Housing, modern goods & services, targeting
disposable income in cities.
• Regional Differences: Adapt marketing to product needs (rural vs
urban) and income levels.
• Young Population: Target products and services towards a youthful
demographic (median age 32).
• Tourism Focus: Tailor offerings in coastal areas to cater to tourists
A Better-Educated, More White-Collar, More Professional
Population
• U.S. population is becoming better educated:
• 88% of population over 25 completed high school (2012) vs. 66% (1980)
• 32% hold a bachelor's degree or higher (2012) vs. 16% (1980)
• Workforce is becoming more white-collar:
• Job growth strongest for professional workers, weakest for manufacturing
• Most of the fastest growing occupations require postsecondary education
• Impact on Businesses:
• Consumers will have different needs and wants
• Buying habits may change due to higher education level
Sri Lanka's Growing Education and Professionalism
• Rising Education Levels: Sri Lanka boasts a high literacy rate (over 96%) and
increasing educational attainment.
• Shifting Workforce: The job market is seeing a growth in professional and
service-based sectors compared to traditional industries.
• Skilled Workforce: This trend is creating a more skilled and educated
workforce.
• Implications for Businesses:
• Potential for increased demand for complex products and services.
• Need for marketing strategies that resonate with a more professional demographic
 Increasing Diversity
• Population Trends: The U.S. population is rapidly aging due to falling
birthrates and longer life expectancies. The median age has increased from 28
in 1970 to 38 in 2016.
• Generational Groups: Four major groups are impacting marketing strategies:
Baby Boomers, Generation X, Millennials, and Generation Z.
• Baby Boomers: Born between 1946 and 1964, they are the wealthiest
generation in U.S. history, controlling a significant portion of the nation's
disposable income. They are open to new brands and tend to stay active and
socially engaged as they age.
• Generation X: Born between 1965 and 1976, they are characterized by being
more skeptical shoppers who value quality over quantity. They are the most
educated generation to date and have substantial purchasing powe
 Increasing Diversity -Diversity in Marketing
• Ethnic Diversity: The U.S. population is becoming more diverse, with Hispanics,
African Americans, and Asian Americans growing as a percentage of the
population. By 2060, Hispanics are projected to be 28% of the population, African
Americans 14%, and Asian Americans 9%.
• Marketing Strategies: Companies are targeting diverse communities through
specific products, ads, and promotions. For example, Southwest Airlines sponsors
the Chinese New Year Festival and Parade in San Francisco to reach Asian American
consumers.
• LGBT ( Lesbian, Gay, Bisexual, and Transgender) and Disability Inclusion: Brands
are increasingly targeting the LGBT community and consumers with disabilities.
Companies like Allstate, adidas, and Wells Fargo have launched campaigns
specifically tailored to these groups, demonstrating a commitment to diversity and
inclusion.
• Future Outlook: As the U.S. population continues to diversify, successful marketers
will need to adapt their strategies to cater to the needs and preferences of these
growing segments
 The Economic Environment
• The Impact of the Economic Environment on Consumers
• Consumer spending is heavily influenced by economic factors.
• The Great Recession (2008-2009) caused a shift in consumer behavior:
• Less spending
• Focus on value (quality + good service at a fair price)
• Example: Target's marketing shifted to emphasize "Pay Less" in their slogan.
Income Distribution and Marketing Strategies
• Income distribution in the US is unequal:
• Top 5% earners capture 22% of income
• Bottom 40% earners capture only 11% of income
• This creates a tiered market:
• Some companies target the affluent (e.g., Nordstrom, Neiman Marcus)
• Others target budget-conscious consumers (e.g., Dollar General, Five Below)
• Some cater across income levels (e.g., Ford with Fiesta and Lincoln Navigator)
• Marketers need to consider income distribution when developing strategies
Shifting Consumer Priorities in Sri Lanka
• Rising cost of living: Inflation has driven up the prices of essential goods, impacting
purchasing power.
• Focus on value: Consumers are seeking products that offer good quality at affordable
prices.
• Increased price sensitivity: Sri Lankans are becoming more conscious of prices and
are actively looking for deals and discounts.
• Growth of budget-conscious shopping: The popularity of discount stores and budget
retailers is rising
Adapting Marketing Strategies for the Sri Lankan Market
• Cater to value-conscious consumers: Develop products and services that offer good
quality at competitive prices.
• Highlight value propositions: Emphasize features and benefits that resonate with
budget-conscious consumers.
• Promotional strategies: Utilize promotions, discounts, and loyalty programs to
attract customers.
• Consider offering tiered product lines: Cater to different income segments by
offering a range of products at varying price points
 The Natural Environment
• Definition: The natural environment encompasses the physical environment and
natural resources needed as inputs by marketers or affected by marketing activities.
• Impact of Physical Environment: Unexpected events like weather and natural
disasters can significantly impact businesses and their marketing strategies. For
example, severe weather can boost demand for certain products like salt and winter
clothing.
• Environmental Sustainability: Concerns over environmental sustainability have
grown due to air and water pollution, global warming, and resource shortages.
Companies must consider the long-term impact of their operations on the
environment.
• Government Intervention: Governments are increasingly involved in natural
resource management, creating regulations to control pollution and promote
sustainability. Companies should work to develop solutions to environmental
challenges.
• Corporate Responses: Many companies are responding to consumer demands by
developing more environmentally responsible products and practices. Nike, for
example, has committed to reducing its environmental impact across its value chain
by using recycled materials, reducing waste, and increasing energy efficiency
The Technological Environment and Marketing
• Definition: The technological environment encompasses the wonders and blunders of
technology, shaping our destiny with advancements like antibiotics, smartphones, and the
internet, as well as challenges such as nuclear missiles and assault rifles.
• Opportunities for Marketers: New technologies offer exciting opportunities, such as RFID,
GPS, and Bluetooth, allowing tracking of products from production to disposal, personalized
experiences for customers, and improved logistics for businesses.
• RFID Technology: Many firms are using RFID technology to track products and customers,
with companies like Walmart, American Apparel, Macy’s, and Bloomingdales implementing
item-level RFID systems in their stores for improved inventory management and customer
experiences.
• Disney's MagicBand: Disney's MagicBand RFID wristband enhances the guest experience at
The Walt Disney World Resort, allowing entry to parks and attractions, purchases, hotel
room access, and personalized interactions with characters, showcasing the potential for
technology to enhance customer experiences and provide valuable data for businesses.
• Future Outlook: As technology continues to advance, marketers must stay abreast of new
developments and consider how they can leverage these technologies to enhance customer
experiences, improve operations, and stay competitive in the market.
By embracing technological advancements, companies can create innovative solutions that
benefit both consumers and businesses, revolutionizing the way products and services are
marketed and consumed.
 The Political and Social Environment
• Definition: The political environment consists of laws, government agencies, and
pressure groups that influence or limit various organizations and individuals in a
given society, significantly impacting marketing decisions.
• Legislation Regulating Business: Governments develop public policy to guide
commerce, including laws and regulations covering competition, fair-trade
practices, environmental protection, product safety, truth in advertising, consumer
privacy, packaging, labeling, pricing, and other areas.
• Impact on Marketing Activities: Marketers must navigate complex and constantly
changing regulations at the national, state, and local levels, ensuring compliance
and understanding the public policy implications of their marketing activities.
• International Considerations: International marketers encounter numerous
agencies enforcing trade policies and regulations, requiring awareness of and
compliance with laws and regulations in various countries.
• Ethical and Social Responsibility: Beyond written laws, businesses are governed by
social codes and rules of professional ethics, leading to increased emphasis on
ethics and socially responsible actions in marketing.
Cause-Related Marketing
• Definition: Cause-related marketing links companies to worthwhile causes,
enhancing their social responsibility image and benefiting both the company and
the cause.
• Examples of Cause-Related Marketing: Companies like P&G, Shake Shack, and
AT&T engage in cause-related marketing campaigns, such as Tide Loads of Hope, the
Great American Shake Sale, and the “It Can Wait” campaign, respectively.
• Values-Led Business: Some companies, like Warby Parker, are founded on cause-
related missions, integrating social responsibility into their business models and
emphasizing the importance of giving back.
• Benefits and Controversies: Cause-related marketing can benefit both the company
and the cause, but critics raise concerns about exploitation and the true motives
behind such campaigns, highlighting the need for transparency and genuine
commitment to social causes.
• Growth of Cause-Related Marketing: Spending on cause-related marketing has
significantly increased over the years, reflecting its popularity and effectiveness as a
marketing strategy
 The Cultural Environment
• Definition: The cultural environment includes institutions and forces that shape a
society's values, perceptions, preferences, and behaviors, influencing marketing
decisions.
• Persistence of Cultural Values: Core beliefs and values are deeply rooted and passed
down through generations, influencing attitudes and behaviors. Marketers have
limited ability to change core values but can impact secondary values.
• Shifts in Secondary Cultural Values: While core values remain stable, secondary
values can change over time, often influenced by popular culture and trends.
Marketers strive to anticipate and adapt to these shifts to capitalize on new
opportunities.
• People's Views of Themselves: Individuals vary in their self-perceptions, which
influence their consumption patterns and brand choices. Marketers can tailor their
messaging to align with consumers' self-views, as exemplified by Sperry's targeting of
adventurous millennials.
• Implications for Marketing: Understanding the cultural environment is crucial for
marketers to develop effective strategies that resonate with consumers' values and
beliefs. By aligning with cultural trends and values, marketers can enhance brand
perception and engage with consumers more meaningfully.
Key Terms
THANK YOU