The Marketing Environment

1. The MarketingEnvironment Chapter 4

2. Objectives • Know the environmental forces that affect the company’s ability to serve its customers. • Realize how changes in the demographic and economic environments affect marketing decisions.

3. Objectives • Identify the major trends in the firm’s natural and technological environments. • Know the key changes in the political & cultural environments. • Understand how companies can react to the marketing environment.

4. “Millennial fever” set the stage to bring back the VW Beetle VW’s investment: $ 560 million Demand quickly outstripped supply c Volkswagen • The new VW beetle enjoyed cross-generational appeal • Earned many awards • VW’s Beetle now accounts for over 25% of company sales Discussion:Is VW’s next nostalgia venture, the “flower-power” Microbus, as likely to succeed?

5. Key Environments • Marketing Environment • The actors and forces that affect a firm’s ability to build and maintain successful relationships with customers.

6. Key Environments • Aspects of the marketing environment: • Microenvironment: • Actors close to the company • Macroenvironment • Larger societal forces

7. Figure 4-1: Actors in the Microenvironment

8. The Microenvironment • Departments within the company impact marketing planning.

9. The Microenvironment • Suppliers help to create and deliver customer value. • Treat suppliers as partners.

10. The Microenvironment • Marketing intermediaries help to sell, promote, and distribute goods. • Intermediaries take many forms. • Resellers • Physical distribution firms • Marketing services agencies • Financial intermediaries

11. The Microenvironment • Customer markets must be studied. • Market types • Consumer • Business • Government • Reseller • International

12. The Macroenvironment • Successful companies provide better customer value than the competition • Size and industry position help to determine the competitive strategy.

13. Government Media Financial Local General Internal The Microenvironment • Various publics must also be considered. • Citizen Action Groups

14. Figure 4-2: Major Macroenvironmental Forces

15. The Macroenvironment • Key Demographic Trends • World population growth • Now 6.2 billion • Projected to reach 7.9 billion by 2025

16. The Macroenvironment • Key Demographic Trends • Changing age structure • The U.S. population consists of seven generational groups. • Baby boomers, Generation X and Generation Y are key groups. • Distinct segments typically exist within these generational groups.

17. Born between 1946 and 1964 Represent 28% of the population; earn 50% of personal income Many mini-segments exist within the boomer group Entering peak earning years as they mature Lucrative market for travel, entertainment, housing and more Baby boomers Generation X Generation Y The Macroenvironment Key Generations

18. Discussion Question The “graying of America” refers to the fact that as baby boomers get older, the average age of the U.S. population increases. Today, baby boomers are a great target for exotic travel. Think ahead to 20 years in the future. For what types of products and services will baby boomers represent a prime target?

19. Born between 1965 and 1976 First latchkey children Maintain a cautious economic outlook Share new cultural concerns Represent $125 billion in annual purchasing power Will be primary buyers of most goods by 2010 Baby boomers Generation X Generation Y The Macroenvironment Key Generations

20. Discussion Question Generation X has been described in the past as “working to live” rather than “living to work.” Do you think that this statement reflects Generation X’s true priorities in life? Why or why not?

21. Born between 1977 and 1994 72 million strong; almost as large a group as their baby boomer parents New products, services, and media cater to Generation Y Computer, Internet and digitally saavy Challenging target for marketers Baby boomers Generation X Generation Y The Macroenvironment Key Generations

22. Figure 4-3: Seven U.S. Generations

23. The Macroenvironment • Key Demographic Trends • Changing American household • Geographic population shifts • Better-educated, more white-collar workforce • IncreasingDiversity

24. Marriage

25. Geographic Mobility • Population Growth The number of adults aged 55 to 64 will increase 47.6 % from 2000 to 2010 • 16% of U.S. residents move each year • More than 50% of baby boomers live in these 9 states as of 2000 California, Texas, New York, Florida, Pennsylvania, Illinois, Ohio, Michigan, New Jersey

26. The Macroenvironment • The Economic Environment • Affects consumer purchasing power and spending patterns. • U.S. consumersnow spend carefully and desire greater value.

27. The Macroenvironment • The Economic Environment • Two types of national economies: • subsistence • industrial

28. 2000 Median Household income

29. 2004 Mean Household income

30. The Macroenvironment • The Natural Environment • Concern for the natural environment has grown steadily, increasing the importance of these trends: • Shortage of rawmaterials • Increased pollution • Increased governmental intervention

31. China Looming • China second largest consumer of oil (after the U.S.) Currently at 8% • China has been responsible for nearly two-fifths of the increase in global consumption since 2000. • China's surge in energy demand is also the main reason for the doubling in the world price of coal over the past year. Last year China consumed 40% of all the coal and 30% of all the steel in the world.

32. The Macroenvironment Many companies use recycling to help protect natural resources

33. The Macroenvironment • Key Technological Trends • The technological environment is characterized by rapid change. • New technologies create new opportunities and markets but make old technologies obsolete. • The U.S. leads the world in research and development spending.

34. The Macroenvironment • The Political Environment • Includes laws, governmental agencies, and pressure groups that impact organizations and individuals.

35. The Macroenvironment • The Political Environment • Key trends include: • Increased legislation to protect businesses as well as consumers. • Changes in governmental agency enforcement. • Increased emphasis on ethical behavior and social responsibility.

36. The Macroenvironment Cause-related marketing is one method of demonstrating social responsibility

37. The Macroenvironment • The Cultural Environment • Is composed of institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviors.

38. Core beliefs are persistent Passed from parents to children; reinforced by society Shape attitudes and behavior Secondary cultural values change and shift more easily Society’s cultural values are expressed through people’s views of: Themselves Others Organizations Society Nature The Universe The Macroenvironment The Cultural Environment

39. Responding to the Marketing Environment • Reactive:Passive Acceptance and Adaptation • Companies design strategies that avoid threats and capitalize upon opportunities. • Proactive:Environmental Management • Use of lobbyists, PR, advertorials, lawsuits, complaints, and contractual agreements to influence environmental forces.

40. Objectives • Be able to define the consumer market and construct a simple model of consumer buyer behavior. • Know the four major factors that influence consumer buyer behavior.

41. Objectives • Understand the major types of buying decision behavior and the stages in the buyer decision process. • Be able to describe the adoption and diffusion process for new products.

42. Harley “Hogs” account for 1/5 of U.S. cycle sales Sales have exceeded supply for years 1986-2000: Four stock splits, increase of 7,100% Fiercely loyal clientele revolves around 7 core customer types Harley owners use their bikes to express their lifestyle and attitudes Advertising reflects the Harley mystique c Harley-Davidson

43. Adventure loving traditionalist Sensitive pragmatist Stylish Status Seekers Laid-back campers Classy capitalists Cool-headed loners Cocky misfits All wanted Independence, Freedom and Power 7 core customer types

44. Definitions • Consumer Buying Behavior • Buying behavior of individuals and households that buy products for personal consumption. • Consumer Market • All individuals/households who buy products for personal consumption.

45. Figure 6-1: Model of Buyer Behavior

46. Model of Consumer Behavior • Stimulus Response Model • Marketing and other stimuli enter the buyer’s “black box” and produce certain choice / purchase responses. • Marketers must figure out what is inside of the buyer’s “black box” and how stimuli are changed to responses. ?

47. Figure 6-2: Factors Influencing Consumer Behavior

48. Culture Subculture Hispanic consumers African Americans Asian Americans Mature consumers Social Class Characteristics Affecting Consumer Behavior Key Factors • Cultural • Social • Personal • Psychological

49. Characteristics Affecting Consumer Behavior • Hispanics • 35 million consumers purchase $425 billion worth of goods and services. • Expected to grow 64% in 20 years. • Spanish media makes group easy to reach. • Brand loyal group.

50. Sears uses the Fiesta mobile to visit Hispanic neighborhoods regularly