Lecture 2

1. 0 Marketing: Creating and capturing customer value Lecture 2 Analyzing the marketing environment

2. 0 Lecture Objectives By the end of this lecture, you should be able to • Describe the environmental forces that affect the company’s ability to serve its customers. • Explain how changes in the demographic and economic environments affect marketing decisions. • Identify the main trends in the firm’s natural and technological environments. • Explain the key changes in the political and cultural environments. • Discuss how companies can react to the marketing environment. 2

3. Company-wide strategic planning: Defining marketing’s role • A company’s marketing environment consists of the actors and forces outside of marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. • Companies constantly watch and adapt to the changing environment.

4. Actors in the marketing environment Armstrong, Adam, Denize, Kotler (2015) p 72

5. The company

6. Actors in the marketing environment: Suppliers Suppliers form an important link in the company’s overall customer value delivery system. Most marketers today treat their suppliers as partners in creating and delivering customer value.

7. Physical distribution firms • Inventory & move goods • Resellers • Find & sell to customers Types of marketing intermediaries Marketing service agencies Research, advertising, media & consulting • Financial intermediaries • Finance transactions or insure against risk Financial intermediaries: Banks and insurance companies are among the many financial intermediaries that comprise the broader value network in which a business operates. Managing these relationships is also important.

8. Actors in the marketing environment: Intermediaries, market research firms and advertising agencies Armstrong, Adam, Denize (2015) p 74

9. Actors in the marketing environment: Competitors To be successful, a company must provide greater value than its competitors. • Marketers must do more than simply adapt to the needs of target consumers; they must gain strategic advantage by positioning their offerings strongly against competitors.

10. Actors in the marketing environment: Publics Financial public Media Publicsare… any group that has an actual or potential interest in or impact on an organisation’s ability to achieve its objective. Government Internal public Publics Citizens’ action groups General public Local public

11. Actors in the marketing environment: Customers Companies might target any or all of five types of customer markets: Consumer markets Business markets Reseller markets Government markets International markets Each market type has special characteristics that calls for careful study by the seller.

12. What do you think? Consider the marketer of a new energy drink. How would each of the micro-environmental factors be involved in their marketing efforts?

13. The company’s macroenvironment Armstrong, Adam, Denise, Kotler (2015) p 76

14. Demographic environment • Population size, density & diversity • Demography is the study of human populations in terms of… • Location & geographic population shifts • Age & gender • Family size & structure • Educational characteristics • Occupation • Race/Ethnicity • Other relevant demographic statistics • Marketers keep close track of demographic trends & developments

15. Demographic environment: Changing age structure Born 1946–64 Born 1965–76 Born 1977–2000

16. What do you think? Do marketers need to develop separate products or marketing programs for each of the different generations?

17. Changing age structure: Generational segments Armstrong, Adam, Denize, Kotler (2015) pp77-78

18. Increasing number of working women • Decline in household size Demographic environment: Changing family structure Rise of single parent families & families with no children

19. Economic environment The economic environment consists of factors that affect consumer purchasing power & spending patterns, including changes in… • Income & income distribution • Interest rates Armstrong, Adam, Denize, Kotler (2015) p 82

20. Natural environment • The natural environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities. Key natural environment issues: • Shortages of raw materials • Increasing pollution • Rise in government intervention

21. Technological environment • Perhaps the most dramatic force shaping our future, the technological environment,involves forces that create new technologies, new products and market opportunities.

22. Technological environment Armstrong, Adam, Denize, Kotler (2015) p 92

23. Think about this How have new technologies influenced what you buy, how you pay and how you shop?

24. Political and social environment The political environment consists of laws, government agencies and pressure groups that influence or limit various organisations and individuals in a given society. Key political issues: • Legislation affecting business: • Increasing legislation • Changing government agency enforcement • Emphasis on ethics and socially responsible behaviour: • Social responsibility • Cause-related marketing

25. Cultural environment • The cultural environment is made up of institutions and other forces that affect a society’s basic values, perceptions, preferences and behaviours. The persistence of culture Core beliefs & values: relatively resistant to change Secondary beliefs & values: more open to change

26. Universe • Organisations • Nature • Society • Others • Themselves Cultural environment: People’s views of… 26

27. Armstrong, Adam, Denize, Kotler (2015) pp 84-89 Responding to the marketing environment

28. Responding to the marketing environment Despite the unpredictability of the external environment, enlightened marketing managers take a proactive– rather than reactive – approach to the marketing environment.

29. Summary • Everything a firm does should revolve around their customers. • Collaboration with partners and an understanding of their competitors helps to add value. • A firm must also understand cultural issues and demographics to identify specific customer groups. • The economy will influence patterns of consumer spending. • Technological advances helps marketers provide consumers with more products, and provide services more efficiently.