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Discuss how companies can react to the marketing environment. Chapter Overview In order to correctly identify opportunities and monitor threats, the company must begin with a thorough understanding of the marketing environment in which the firm operates. The marketing environment consists of all the factors and forces outside marketing that affect the marketing managements ability to develop and maintain successful relation-ships with its target customers.
Though these factors and forces may vary depending on the specific company and industrial group, they can generally be divided into broad micromanagement and nongovernmental components. For most companies, the micromanagement components are: the company, suppliers, marketing channel firms (intermediaries), customer markets, competitors, and publics. The nongovernmental components are thought o be: demographic, economic, natural, technological, political, and cultural forces.
The wise marketing manager knows that he or she cannot always affect environmental forces. Smart managers can take a proactive, rather than reactive, approach to the marketing environment. As a company’s marketing management collects and processes data on these environ-meets, it must be ever vigilant in its efforts to apply what it learns to developing opportunities and dealing with threats. Studies have shown that excellent companies not only have a keen sense of customer but an appreciation of the environmental forces swirling around them.
By constantly looking at the dynamic changes that are occurring in the aforementioned environments, companies are better prepared to adapt to change, prepare long-range strategy, meet the needs of today’s and tomorrows customers, and compete with the intense competition present in the global marketplace. Chapter Outline The Company’s Micromanagement The Company a. In designing marketing plans, marketing management takes other company groups into account. These interrelated groups form the internal environment. B. Marketing managers must work closely with other company departments.
Suppliers c. Suppliers form an important link in the company’s overall customer value delivery system. D. Marketing managers must watch supply availability. They also monitor the price trends of their key inputs. E. Most marketers today treat their suppliers as partners in creating and delivering customer value. Marketing Intermediaries f. Marketing intermediaries help the company to promote, sell, and distribute its goods to final buyers. I. Resellers are distribution channel firms that help the company find customers or make sales to them. Ii. Hysterical distribution firms help the company to stock and move goods from their points of origin o their destinations. Iii. 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. Iv. Financial intermediaries help finance transactions or insure against the risks associated with the buying and selling of goods. G. Marketing intermediaries form an important component of the company’s overall value delivery system. . Today’s marketers recognize the importance of working with their intermediaries as partners rather than simply as channels through which they sell their products. Customers I. The company needs to study five types of customer markets closely. I. Consumer markets consist of individuals and households that buy goods and services for personal consumption. Ii. Business markets buy goods and services for further processing or for use in their production process. Iii. Reseller markets buy goods and services to resell at a profit. Iv.
Government markets are made up of government agencies that buy goods and services to produce public services or transfer the goods and services to others who need them. V. International markets consist of buyers in other countries, including consumers, producers, resellers, and governments. Competitors j. Marketers must gain strategic advantage by positioning their offers strongly against competitors’ offerings in the minds of consumers. K. No single competitive marketing strategy is best for all companies. Each firm should consider its own size and industry position compared to those of Its competitors.
Publics l. A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. I. Financial publics influence the company’s ability to obtain funds. Ii. Media publics carry news, features, ND editorial opinion. Iii. Government publics regulate public safety, truth in advertising, and other matters. Iv. Citizen-action publics include consumer organizations, environ-mental groups, minority groups, and others. V. Local publics include neighborhood residents and community organizations. Vi.
The general public may be concerned about the company’s products and activities. Vii. Internal publics include workers, managers, volunteers, and the board of directors. 2. The Company’s Micromanagement Demographic Environment a. Demography is the study of human populations in terms of size, density, action, age, gender, race, occupation, and other statistics. It involves people, and people make up markets. B. Changes in the world demographic environment have major implications for business. C. The single most important demographic trend in the United States is the changing age structure of the population. . Figure 3. 3 shows the seven generational groups in the United States. I. The post-World War II baby boom produced 78 million baby boomers, born between 1946 and 1964. A. The baby boomers have become one of the most powerful forces shaping the marketing environment. B. Today’s baby boomers account for about 28 percent Of the population, but earn more than half of all personal income. C. Baby boomers cross all walks of life, creating a diverse set of target segments for businesses. D. Boomers span a 20-year age range, and almost 25 percent of boomers belong to a racial or ethnic minority. I. The baby boom was followed by a “birth dearth,” creating another generation of 49 million people born between 1 964 and 1976. They are called Generation X, because they lie in the shadow of the boomers and lack obvious distinguishing characteristics. A. They are defined as much by their shared experiences as by their age. Increasing divorce rates and higher employment for their mothers made them the first generation of latchkey kids. B. They have developed a more cautious economic outlook. They care about the environment and respond favorably to socially responsible companies. . The Genders are a skeptical bunch, cynical of frivolous marketing pitches that promise easy success. Iii. Generation Y is also called echo boomers. Born between 1977 and 1994, these children of the baby boomers now number 72 million, dwarfing the Genders and almost equal in size to the baby boomer segment. A. The echo boom has created a large teen and young adult market. The nation’s teens spend $175 billion a year and influence another 330 billion in family spending. Iv. Do marketers have to create separate products and marketing programs for each generation?
Some experts caution that each generation spans decades of time and many socioeconomic levels. Others warn that marketers have to be careful about turning off one generation each time they craft a product or message that appeals effectively to another. E. The ‘traditional household” consists of a husband, wife, and children (and sometimes grandparents). I. In the Asia today, marketers must be careful bout turning off one generation each time they craft a product or message that appeals effectively to another. Ii. Marketers need to form more precise age-specific segments within each group. . This is a period of great migratory movements between and within countries. I. Len Asia, there is a migration from the rural to the urban cities although much of the shift is to outlying areas around mega-cities and medium-sized towns rather than major cities. Ii. China, for example, saw urban migration increasing. G. Better educated. I. The rising number of educated people will increase the demand for better laity products, books, magazines, travel, personal computers, and Internet services. Ii. The workforce is also becoming more white collar. Japan has 99% of its population literate. . Countries vary with their ethnic and racial makeup. I. Marketers are facing increasingly diverse markets, both at home and abroad. Ii. Most large companies now target specially designed products and promotions to one or more ethnic groups. Economic Environment I. The economic environment consists of factors that affect consumer purchasing power and spending patterns. J. Nations vary greatly in their levels of distribution of income. I. Subsistence economies are ones in which the population consumes most of their own agricultural and industrial output. Ii.
Industrial economies are those with rich markets for many different kinds of goods. K. Value marketing has become the watchword for many marketers. They are looking for ways to offer today’s more financially cautious buyers greater value. I. Marketers should pay attention to income distribution as well as average income. I. In most parts Of developed Asia, the top is populated by upper-class consumers, whose spending patterns are not affected by current economic events. Ii. The middle class is somewhat careful bout its spending, but can still afford the good life some of the time. Iii.
The working class must stick close to the basics of food, clothing, and shelter. Iv. The underclass must count their pennies when making even the most basic purchases. M. Consumers at different income levels have different spending patterns. Some of these differences were noted over a century ago by Ernst Engel, who studied how people shifted their spending as their income rose. Engel’s laws generally have been supported by later studies. Natural Environment n. The natural environment involves the natural resources that are needed s inputs by marketers or that are affected by marketing activities. O.
Environmental concerns have grown steadily during the past three decades. P. Marketers should be aware of several trends in the natural environment. I. The first involves growing shortages of raw materials. Air and water may seem to be infinite resources, but some groups see long-run dangers. Ii. A second environmental trend is increased pollution. Industry will almost always damage the quality of the natural environment. Iii- A third trend is increased government intervention in natural resource management. The overspent of different countries vary in their concern and efforts to promote a clean environment. . Concern for the natural environment has spawned the so-called green movement. Enlightened companies are developing environmentally sustainable strategies and practices in an effort to create a world economy that the planet can support indefinitely. Technological Environment r. The technological environment is perhaps the most dramatic force now shaping our destiny. S. New technologies create new markets and opportunities. However, every new technology replaces on older technology. Marketers should watch the tech analogical environment closely. Political Environment t.
The political environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society. U. Well-conceived legislation can encourage competition and ensure fair markets for goods and services. Governments develop public policy to guide commerce. V. Understanding the public policy implications of a particular marketing activity is not a simple matter. Marketers must work hard to keep up with changes in regulations and their interpretations. W. Business legislation has been enacted for a number of reasons. I.
The first is to protect companies from each other. Ii. The second purpose Of government regulation is to protect consumers from unfair business practices. Iii. The third is to protect the interests of society against unrestrained business behavior. Iv. International marketers will encounter dozens, or even hundreds, of agencies set up to enforce trade policies and regulations. X. Business is also governed by social codes and rules of professional ethics. I. Enlightened companies encourage their managers to look beyond what the regulatory system allows and simply “do he right thing. These socially responsible firms actively seek out ways to protect the long-run interests of their consumers and the environment. Ii. The recent rash of business scandals and increased concerns about the environment have created fresh interest in the issues of ethics and social responsibility. Iii. The boom in e-commerce and Internet marketing has created a new set of social and ethical issues. Online privacy issues are the primary concern. Y. To exercise their social responsibility and build more positive images, companies are now linking themselves to worthwhile causes. Cause-related marketing has become a primary form of corporate giving. Ii. Cause-related marketing has stirred some controversy. Critics worry that cause-related marketing is more a strategy for selling than a strategy for giving. Iii. Elf handled well, cause-related marketing can greatly benefit both the company and the cause. Cultural Environment z. The cultural environment is made up of institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviors. People grow up in a particular society that shapes their basic beliefs and values. I.
Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government. Ii. Secondary beliefs and values are more open to change. AAA. Although core values are fairly persistent, cultural swings do take place. Marketers want to predict cultural shifts in order to spot new opportunities or threats. B. The major cultural values Of a society are expressed in people’s views. I. People vary in their emphasis on serving themselves versus serving others. Ii. Recently, observers have noted a shift from a “me society’ to a ‘ u society’ in which more people want to be with and serve others. I. People vary in their attitudes toward corporations, government agencies, trade unions, universities, and other organizations. By and large, people are willing to work for major organizations and expect them, in turn, to carry out society work. Iv. People vary in their attitudes toward their society. V. People vary in their attitudes toward the natural world. Vi. People vary in their beliefs about the origin of the universe and their place in it. 3. Responding to the Marketing Environment c. Many companies view the marketing environment as an uncontrollable element in which they must react and adapt.