Principles of Marketing

(MKTG2001)
Part 2 – Understanding the
Marketplace & Customer Value
Analyzing the Marketing Environment (Chapter 3)

Lecture #3
Lecturer: Donna-Kay Smith
Date: June 3, 2016
Contents
 The Microenvironment

 The Macroenvironemnt
 The Demographic Marketing Environment
 The Economic Environment
 The Natural Environment
 The Technological Environment
 The Political and Social Environment
 The Cultural Environment

 Responding to the Marketing Environment

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

 The marketing environment influences the company’s ability

to transact business effectively with target markets.

 Two (2) environmental forces affect a company’s ability to

serve its customers:
 Microenvironment
 Macroenvironment
The Microenvironment

 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

 Marketing success requires building relationships

with six (6) actors which make up the company’s
value delivery network.
 All actors partner within each other to improve the
performance of the entire system.
The Microenvironment:
Actors in the Microenvironment
The Microenvironment:
The Company
 This encompasses the company’s internal environment,
consisting of:
 Top management
 Finance
 R&D
 Purchasing
 Operations
 Accounting

 All units within the company share responsibility for

understanding customer needs and creating value for
customers.
The Microenvironment:
Suppliers
 Suppliers provide the resources to produce goods
and services.

 Marketers should treat suppliers as partners to

provide customer value.

 Marketers must watch supply availability and

costs because supply shortages and delays can
impact the company’s ability to serve customers.
 Shortage as a resource can increase cost of sales (short
term) and damage customer satisfaction (in long run).
The Microenvironment:
Marketing Intermediaries
 Marketing Intermediaries help the company to
promote, sell and distribute its products to final buyers.

 Partnering with intermediaries helps to optimize the

performance of the entire of the entire system
involved in meeting customer needs and building
relationships.

 Intermediaries provide insights on how to improve

customer value.
The Microenvironment:
Marketing Intermediaries
 The four (4) types are:
The Microenvironment:
Marketing Intermediaries
 Resellers
– These are distribution channel firms that help the company find
customers and sell to them.
 E.g. retail and wholesale
 Larger re-sellers have enough power to dictate terms to companies

 Physical distribution firms – These help the company stock and move goods from
points of origin to destinations.

 Marketing services agencies – These are companies that help target and promote
to the right markets.
 E.g. market research firms, advertising agencies, media firms, marketing consulting firms.

 Financial intermediaries – Includes businesses that help finance transactions or

insure against risks associated with buying and selling of goods.
 E.g. banks
The Microenvironment:
Competitors
 Firms must gain strategic advantage by positioning
their offerings against competitors’ offerings.

 Competitors vie with the company in an effort to

serve customers better. Therefore, the company
must provide customer value and satisfaction better
than competitors do.

 Understanding competitors help to determine the

competitive strategies.
The Microenvironment:
Publics
 Any group that has an actual or potential interest in or impact on an organization’s ability
to achieve its objectives. Seven (7) types are:
 Financial publics – Influences the company’s ability to obtain funds e.g. banks, investment analysts.

 Media publics – Carries news, features, opinions and other contents – E.g. TV stations, Newspaper,
Blogs and Social Media

 Government publics – Assist the company to take government issues into account. E.g. lawyers

 Citizen-action publics – May question company’s marketing decisions OR help stay in touch with
consumer and citizen groups.

 Local publics – Neighborhood residents, Community organizations.

 General public – Pertains to attitudes of the public towards goods and services. The public’s perception
affects its buying behavior.

 Internal public – Includes board of directors, workers, managers, volunteers

The Microenvironment:
Customers
 Five types of customers exist.

 A company may target one or all.

 These are:
 Consumer markets – Consists of individuals and households that buy goods for
personal consumption.
 Business markets – Buy goods and services for further processing or to use in
their own production process.
 Reseller Markets – Missing from slide. Buy goods and services to re-sell for profit.
 Government Markets – Consists of government agencies that buy goods and
services to produce public service goods or re-sell to others who need them.
 International markets – Consists of buyers in other countries, consisting of
consumers, business, goverment and resellers.
The Macroenvironment

 The macroenvironment consists of larger

societal forces that affect the micro-
environment.

 Five (5) forces shape opportunities and pose

threats to the company
 Some are unforeseeable and cannot be controlled
 Others can be managed through skilful
management.
The Macroenvironment

 The macroenvironment consists of larger

societal forces that affect the micro-
environment.

 Five (5) forces shape opportunities and pose

threats to the company
 Some are unforeseeable and cannot be controlled
 Others can be managed through skilful
management.
The Macroenvironment:
Major Forces
The Macroenvironment:
Demographic
 Demography – The study of human
populations-- size, density, location, age,
gender, race, occupation, and other statistics

 Demographic environment – Involves people,

and people make up markets
 Demographic trends – Shifts in age, family
structure, geographic population, educational
characteristics, and population diversity.
The Macroenvironment:
Demographic - Population Age-Structure

 The population consists of several

generational groups:
 Baby boomers
 Generation X
 Milennials (or Generation Y)
 Generation Z
The Macroenvironment:
Demographic - Population Age-Structure
 Baby Boomers – People born people born between 1946 and 1964.

 As at 2016, these persons are 52 -70 years.

 They grew up Post World War II.

 Great Recession hit these persons hard and they are now spending
more carefully and re-thinking purpose and value of their work.

 These include the most affluent Americans – In the USA market

these are the wealthiest generation.
 Instead of overlooking this aged group, Companies are reaching out to
them in various forms. Amazon created a special site for them “50+ Active
& Healthy Living” focusing on health care, dietary and medical needs
among others.
The Macroenvironment:
Demographic - Population Age-Structure
 Generation X – People born between 1965 and 1976.

 As at 2016, these persons are 40 - 69 years.

 Represents a relatively small generation.

 They are the first generation to grow up in the Internet era and
embrace the benefits of new technology.

 Characteristics:
 Cautious economic outlook - Sceptical and tend to research products
before buying
 Less materialistic - They Prize experiences over acquisition.
 Family comes first.
The Macroenvironment:
Demographic - Population Age-Structure
 Generation Y (aka Millennials or Echo boomers) – People born between 1977
and 2000.

 As at 2016, these persons are 16 - 39 years.

 They represent the largest generation.

 Their attractiveness is due to the size of the market.

 Characteristics:
 Comfortable with technology
 The most financially strapped – Due to the Great Recession
 Face higher unemployment and greater debt.
 Technology is a way of life – They are the first to grow up with computers, mobile
devices and online social media.
 They seek opportunities to share their own brand experience and share them with
others.
 Reasonable prices appeal to them.
The Macroenvironment:
Demographic - Population Age-Structure
 Generation Y/ Milennials –Generation Z – People born after 2000.

 As at 2016, these persons are 15 years and under.

 Represents the kids, tweens and teens market.

 Characteristics:
 They greatly influence the spending of their parents.
 Represent tomorrow’s markets and are now forming brand relationships
that will affect their buying well into the future.
 Blend digital and offline world seamlessly.
 Prefer shopping online for electronics, books and music and do their product
research before buying.
 Marketers must appeal to their senses and they have short attention spans.
The Macroenvironment:
Demographic - Population Age-Structure

 Generational Marketing – Important in

segmenting people by lifestyle of life state
instead of age.
The Macroenvironment:
Demographic – Changing Amerian Family
 The traditional household consists of husband wife and children. However
most are moving away from this.

 There is a rise in:

 Single-parent household
 Same sex households.

 More people are:

 Divorcing or separating
 Choosing not to marry
 Choosing to marry later
 Marrying without intending to have children

 Increasing number of working women

 Increasing number of stay-at-home dads

The Macroenvironment:
Demographic – Geographic Shifts
 This is a period of great movement within countries and between countries.

 Population growth in U.S. West and South and decline in Midwest and
Northeast

 People are moving towards micropolitan areas – i.e. small cities located
beyond congested metropolitan areas.

 Change in where people work:

 Telecommuting - Given rise to applications that allows persons to connect
remotely
 Home office

 Changes in the Workforce

 More educated
 More white collar
The Macroenvironment:
Demographic – Increasing Diversity
 Markets are becoming more diverse
 International
 National

 This includes:
 Ethnicity
 Homosexuals (Gay and lesbian)
 Disabled
The Macroenvironment:
Economic
 Economic environment consists of factors that affect consumer
purchasing power and spending patterns.

 Nations vary based on level and distribution of income.

 Marketers should pay attention to income distribution as well as income
levels, cost of living.
 Rich has grown richer, the middle class has shrunk and the poor have
remained poor.

 Three are three (3) types:

 Industrial economies – Rich markets for many different kinds if products
 Subsistence economies
 Developing economies – Offer outstanding marketing opportunities for
the right kinds o products.
The Macroenvironment:
Economic
 Consumers are more frugal and have now adopted
back-to-basics sensibility in lifestyle and spending
patterns.
 They are buying less and looking for greater value.

 Value marketing – Offering financially cautious

buyers greater value—the right combination of
quality and service at a fair price.
The Macroenvironment:
Environmental
 Natural environment: natural resources that are
needed as inputs by marketers or that are affected
by marketing activities

 Trends
 Increased shortages of raw materials
 Increased pollution
 Increased government intervention in natural resource
management
▪ This has led to increased environmentally sustainable strategies
The Macroenvironment:
Technological
 Technological environment creates both
opportunities and challenges.

 Most dramatic force in changing the marketplace

 Companies are using Radio Frequency Identification (RFDI)
transmitters to track productions through various points in
the distribution channel

 Technology impacts the way we do business

 New products, opportunities
 Concern for the safety of new products
The Macroenvironment:
Political
 Political environment - Laws, government agencies, and
pressure groups that influence or limit various organizations
and individuals in a given society.

 The three (3) purpose of regulation are:

 Protect companies from each other and prevent unfair competition
 Protect consumers from unfair business practices - It is important not
to deceive consumers through packaging and pricing or invade
consumer privacy
 Protect the interests of society against unrestrained business
behaviour – Ensures that firms take responsibility for the social costs
of their production or products.
The Macroenvironment:
Political
 Cause-Related Marketing: Companies are linking
themselves to worthwhile causes to exercise social
responsibility and build a worthy cause. Some companies
aim to use business to make the world a better place. Its
about linking the purchases of a product/service to a worthy
cause. This increases the company’s public image.
The Macroenvironment:
Cultural
 Cultural environment consists of institutions and other forces
that affect a society’s basic values, perceptions, and
behaviors.

 Cultural factors strongly affect how people think and how

they consume. So marketers are keenly interested in the
cultural

 Cultural characteristics which affect marketing decision

making:
 The persistence of Cultural Values
 Shifts in Secondary Cultural Values
The Macroenvironment:
Cultural

 The persistence of Cultural Values

 Core beliefs and values are persistent and 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 and include people’s views of themselves,
others, organization, society, nature, and the
universe.
The Macroenvironment:
Cultural
Shifts in Secondary Cultural Values

 People’s View of themselves –People use products/services/brands

as a means of self expression and buy offerings that match their
view of themselves. They are individualistic

 People’s View of Others – People are using social media interact

ore with others

 People’s view of organisations – Within organizations there has

been decline in organizational loyalty. People see work as a means
of income. Organizations must find new ways to win consumer and
employee confidence.
The Macroenvironment:
Cultural
Shifts in Secondary Cultural Values (Cont’d)

 People’s view of society – People’s orientation t society influence

consumption patterns ad attitudes towards marketplace.

 People’s view of nature – The renewed love of natural things has

created the need for lifestyles of health and sustainability- organic,
fuel efficient cars, cruelty-free

 People’s view of the universe – people vary in their view of the

universe and their place in it. More emphasis is being placed on
spirituality and it impacts the TV shows people watch and the books
they read and the services they buy. People have been moving away
from materialism and dog-eat-dog ambition to seek more
permanent values like family, community and greater sense of right
Responding to the Marketing
Environment
 Responses typically take one of the following
forms:
Responding to the Marketing
Environment
 Uncontrollable – Some companies passively accept the marketing
environment

 Proactive – They run advertorials and blogs to shape public opinion.

Hire lobbyists to influence legislation affecting their industries and
stage media events to gain favourable press coverage. By taking action
companies overcome seemingly uncontrollable environmental events.

 Reactive – Marketers cannot always control environmental forces and

in some cases may have to be reactive. E.g. geographic population
shifts, economic environment.

 However, where possible smart marketers try to be proactive rather

than reactive.
 The End

Any questions?