Chapter 4

Analyzing the Marketing Environment

TOOLS FOR INSTRUCTORS

1.Brief Chapter Outline

2.Learning Objectives

3.Chapter Overview (“Summing Up”)

4.Extended Chapter Outline with Teaching Tips

1.Topics, key terms, and boxed inserts referenced to PPT slide

5.PowerPoint Slides with Teaching Notes

6.Answers to End of Chapter Learning Aids

7.Chapter Case Study

8.Supplemental Case Study

9.Additional Teaching Tips

BRIEF CHAPTER OUTLINE

A Marketing Environment Analysis Framework

The Immediate Environment

Macroenvironmental Factors

Corporate Social Responsibility

Summing Up

End of Chapter Learning Aids

Chapter Case Study: Google and the YouTube Acquisition

LEARNING OBJECTIVES

1.How do customers, the company, competitors, and corporate partners affect marketing strategy?

2.Why do marketers have to think about their macroenvironment when they make decisions?

3.How do corporate social responsibility programs help various stakeholders?

CHAPTER OVERVIEW (“SUMMING UP”)

How do customers, the company, competitors, and corporate partners affect marketing strategy?

Everything a firm does should revolve around the customer; without the customer, nothing gets sold. Firms must discover their customers’ wants and needs and then be able to provide a

valuable product or service that will satisfy those needs. If there were only one firm and many customers, a marketer’s life would be a piece of cake. But because this situation rarely occurs,

firms must monitor their competitors to discover how they might be appealing to their customers. Without competitive intelligence, a firm’s customers might soon belong to its

competitors. However, through marketing, life certainly would be easier without competitors, it would be difficult, if not impossible, without corporate partners. Good marketing firms work

closely with their suppliers, marketing research firms, consultants, and transportation firms to coordinate the extensive process of discovering what customers want and getting it to them

when and where they want it. Each of these activities—discovering customer needs, studying competitive actions, and working with corporate partners—helps add value to firms’ products

and services.

Why do marketers have to think about their macroenvironment when they make decisions?

To be successful, marketers must understand fully what is going on outside their firm. For instance, what are the chances that a fast-food hamburger restaurant would be successful in a

predominantly Hindu neighborhood? Right—not very good. Marketers must be sensitive to such cultural issues to be successful, and then they must also consider customer demographics—age,

income, market size, education, gender, and ethnicity—to identify specific customer groups. In any society, major social trends influence the way people live. Understanding these trends—

such as green marketing, privacy issues, and the time-poor society—can help marketers serve their customers better. Furthermore, in no other time in history has technology moved so rapidly and had such a pervasive influence on the way we live. Not only do marketers help

develop technologies for practical, everyday uses, but technological advances also help marketers provide consumers with more products and services more quickly and efficiently. In

addition, the general state of the economy influences how people spend their discretionary income. When the economy is healthy, marketing grows relatively easy. But when the economy gets bumpy, only well-honed marketing skills can yield long-term successes. Naturally, all firms

must abide by the law, but many legal issues also affect marketing directly. These laws can be

broken into those that pertain to competitive practices, such as antitrust legislation, and those designed to protect consumers from unfair or dangerous practices, such as warning labels on

cigarette packages and continuity labels on packaged food.

How do corporate social responsibility programs help various stakeholders?

To answer this question, we first have to identify the various stakeholders of a company, namely, customers, employees, stockholders, and the community. In turn, CSR benefits these

stakeholders as follows:

•Customers. When companies adopt CSR, customers know that they can trust the firms to provide healthy, ethically acceptable products and services. Many customers also feel better

about buying from a company that engages in additional responsible practices, which provides them with additional value by allowing them to feel good about buying from that company.

•Employees. A firm committed to CSR likely treats its employees with decency and respect. In addition, for many employees (especially members of Generation Y), working for an

irresponsible firm would be antithetical to their own morals and values.

•Stockholders. When a CSR, initiative such as using more efficient packaging, improves a company’s profits by reducing costs, stockholders enjoy an immediate improvement in their

investment. Some investors also choose which stocks to buy on the basis of the company’s responsible stances.

•Community. This last stakeholder can consist of a local, national, or global community. The benefits of CSR in all cases are multitudinous— cleaner air and water, aid to the underprivileged

and healthier product options all can result from CSR by companies.

EXTENDED CHAPTER OUTLINE WITH TEACHING TIPS

1.A MARKETING ENVIRONMENT ANALYSIS FRAMEWORK

2.THE IMMEDIATE ENVIORNMENT (PPT slide 4-4)

1.Successfully Leveraging Company Capabilities

2.Competitors and Competitive Intelligence

3.Corporate Partners

Check Yourself: Several questions are offered for students to check their understanding of core concepts .

1.What are the components of the immediate environment? (PPT slide 4-11)

Answer: The components of the immediate environment are the company’s capabilities, competitors, and competitive intelligence, and the company’s corporate partners.

2.MACROENVIRONMENTAL FACTORS (PPT slide 4-12)

1.Culture (PPT slide 4-14)

1.Country Culture

2.Regional Culture

2.Demographics (PPT slide 4-16)

1.Generational Cohorts (PPT slide 4-17 & 18)

2.Income (PPT slide 4-20)

3.Education (PPT slide 4-21)

4.Gender (PPT slide 4-22)

5.Ethnicity (PPT slide 4-23)

3.Social Trends (PPT slide 4-25)

1.Greener Consumers (PPT slide 4-26)

2.Marketing to Children (PPT slide 4-27)

3.Privacy Concerns (PPT slide 4-28)

4.The Time-Poor Society(PPT slide 4-29)

4.Technological Advances (PPT slide 4-31)

1.Economic Situation (PPT slide 4-32)

2.Political/Regulatory Environment (PPT slide 4-33)

Check Yourself: Several questions are offered for students to check their understanding of core concepts. (PPT slide 4-34)

3.What are the six key macro economic factors?

Answer: The six key macro economic factors are culture, demographics, political/legal, social trends, economic and technology.

4.Differentiate between country culture and regional culture.

Answer: Country culture includes artifacts, behavior, dress, physical settings, ceremonies, and so on but also includes subtle aspects of culture. Regional culture applies to a region’s references to product categories. In marketing, the only thing that changes in country culture is language, but firms face challenges developing

promotional materials that transcend regional boundaries.

5.Identify the different generational cohorts. What key dimension is used to classify an individual into a given cohort?

Answer: Baby Boomers, Generation Xers, seniors, Generation Y and tweens make up different generational cohorts. The key dimension used to classify an individual into a

given cohort is the generation they were born in.

6.What are some important social trends shaping consumer values these days?

Answer: The green movement, privacy concerns, time-poor lifestyles, and responsible marketing to children are some important social trends shaping consumer values these

days.

7.CORPORATE SOCIAL RESPONSIBILITY (PPT slide 4-35)A. Inputs

1.Consumer

2.Company

3.Cause/Issue

2.Output (PPT slide 4-37)

Check Yourself: Several questions are offered for students to check their understanding of core concepts. (PPT slide 4-38)

8.How has corporate social responsibility evolved since the turn of the 20th Century?

Answer: Today, companies are undertaking a wide range of corporate social responsibility initiatives, such as establishing corporate charitable foundations,

supporting and associating with existing nonprofit groups, supporting minority activities, and following responsible marketing, sales, and production practices.

9.Identify the inputs and outputs of the corporate social responsibility framework?

Answer: The inputs and outputs of the corporate social responsibility framework include consumer, company and cause. Within inputs include demographics, social trends,

strategy, industry, salient reputation and fit. Within outputs include awareness and purchase, employee well-being and financial concerns, and awareness and support.

POWERPOINT SLIDES WITH TEACHING NOTES

Power Point SlideTeaching Notes

4-1 :Analyzing the Marketing Environment

4-2 :Learning ObjectivesThese questions are the learning objectives guiding the chapter and will

be explored in more detail in the following slides.

4-3 :Analyzing the Marketing EnvironmentAsk students: How does Earth Rewards help the environment? Is it enough to

make a difference to the environment? The consumer?

A possible answer might refer to the increased use of credit cards and its

impact on the economy. More specifically, are people overspending

due to high credit amounts? Be sure to explore the area on calculating carbon

impact. This is a very innovative program

4-4 :A Marketing Environment Analysis Framework

In all marketing activities, the consumer is at the center. Anything that affects

consumers affects marketers. Any change in one of these environments

likely requires an adjustment to the firm’s marketing mix. By identifying

potential environmental trends, firms often can take proactive steps .

4-5 :Discussion QuestionAns.B

Explanation: In earlier marketing eras, particularly the production era, firms focused on what they could produce.

The classic quote from Henry Ford “The customer can have any color they want, so long as it is black” typified the lack of customer focus during his time. Today,

firms need to focus on creating value for customers.

4-6 :The Immediate EnvironmentThe immediate environment includes the firm and its immediate influences, such as competition and corporate partners .

4-7 :Successfully Leveraging Company CapabilitiesAsk students: What are Pepsi’s core competencies? What do they do well?

Answer: They know how to bottle beverages, distribute them to stores, and

promote their brand .

Ask students: How they capitalized on their core competencies in the face of

changing market trends?

Answer: The trend toward more diet-conscious consumers has led to the

development of low-calorie alternatives to sodas. Both Coke and Pepsi

understood the market had changed and introduced bottled water products with

great success. In 2004, Americans consumed 23 gallons of bottled water

per person—ten times as much as in 1980 .

4-8 :Competitors and Competitive Intelligence

Group activity: Ask students to brainstorm a list of possible CI sources. Have them discuss what they can learn from each source. Do they know of any

illegal sources? Legal sources include public material, interviewing customers and analyzing marketing tactics? Illegal

sources include breaking into the competitor’s headquarters, posing as a

potential customer, and taking aerial photographs of a competitor’s plant.

4-9 :Gillette vs. SchickThere is an example in the text of Gillette filing for patent infringement against Schick very quickly after the Quattros release. This quick filing leads one to

believe that Gillette knew about the launch through competitive intelligence.

4-10 :Corporate PartnersFirms must work together to create a seamless system that delivers goods and

services to customers when and where they want them. Many attribute a key reason for Wal-Mart’s success is their

close relationships with their suppliers .

4-11 :Check Yourself1 .The company’s capabilities, competitors, and competitive

intelligence, and the company’s corporate partners.

4-12 :Macroenvironmental FactorsThis slide can be used to review this topic instead of the following slides, which

provide more in-depth discussions .

4-13 :Discussion QuestionAns. E.

Explanation: A firm’s macroenvironment includes political/legal, cultural,

demographic, economic, social, and technology. Factors the firm cannot control but, which can influence the success or failure of their marketing

strategies.

4-14 :CultureFirms often remove brands from the market because of their poor overall

sales, but this strategy can backfire when those brands have strong regional

support .

For example, the removal of a chowder cracker caused such upheaval among

Northeastern consumers that the firm hired a tall ship to reintroduce the

cracker to its New England market, where consumers had threatened to

boycott all products from the company if the cracker was not returned .

4-15 :Controversy Surrounds All Catholic Town

This video looks at the controversy surrounding a Catholic town and addresses the topic of marketing

sustainable living .

4-16 :DemographicsAsk students: What are some typical demographics ?

Answer: age, gender, income, education.

Demographic segmentation is probably the most common form of segmentation

because the information is so widely available .

4-17 :Generational CohortsGroup activity: Have students brainstorm a list of the defining

characteristics of their generation .

Ask students: How does your generation differ from previous generations, such as

their parents — the Baby Boomers. What macroenvironmental forces have

had the most impact on your generation ?

4-18 :Seniors, Boomers and X and Y’ersAsk students: What does the phrase “generation gap” mean to you? How do

you experience this gap between your generation and that of your parents or

grandparents? In what ways do you believe your generation is similar to that

of your parents or grandparents ?

4-19 :Discussion QuestionAns.B

Explanation: Baby boomers are huge, affluent, and individualistic generational

cohort. Because they tend to be very youth conscious, they are big purchasers

of products and services related to staying young.

4-20 :IncomeThe “middle-class squeeze” is a very real global phenomenon. Many developing

countries face similar income inequities to those found in the United States. Pay gaps also cause problems for many new college graduates who find they cannot

afford to live on their own and must move back in with their parents.

4-21 :EducationAsk students: Do you plan to continue your education after graduation?

Many students believe they will never return to school after they finish their

Bachelors’ degree, but modern conditions make this choice more and

more unlikely. Lifelong learning of new skills and new knowledge has become key to survival in the global economy

4-22 :GenderWomen now make up more than 60% of the college population .

Ask students? How do you believe this will affect the workplace in the future?

Ask students? Do you believe that there are still significant gender differences?

What are they ?

4-23 :EthnicityAsk students: What steps can and should marketers take to respond to the

changing ethnic mix of the United States ?

Many marketers already have adjusted their marketing mix to meet the needs of ethnically diverse segments better. This

YouTube video is for a Carlos Mencia Bud Light superbowl ad about teaching

English. (always check YouTube links before class).

4-24 :Discussion QuestionAns.E

Explanation: Demographics, including race, gender, income, and marital status

are standard characteristics used to define potential target market segments.

4-25 :Social TrendsThis graphic introduces four significant social trends .

4-26 :Greener ConsumersGreen consumers purchase products based on issues beyond the tangible product. These issues can include a

variety of social causes such as environmental awareness, protection of

animals, HIV/AIDS awareness and prevention, etc. Consumers who

purchase these products do so to support these causes .

4-27 :Targeting Kids: Is it wrong?This ad is clearly targeted to kids and tweens. This might be an interesting

time to discuss the challenges in marketing to children, especially for

products such as candy. Ask students: Should candy advertising to children be

regulated? Why? How much?

4-28 :Privacy ConcernsIn recent years, firms have had to inform consumers of the steps they take to

protect their privacy. The government also has instituted new rules for privacy

protection.

Ask students: Have you ever had a privacy problem with a credit card or

when using the Internet ?

4-29 :Time Poor SocietyWith more time spent at work, the amount of time available for home or

leisure activities has shrunk. In turn, services that complete the tasks that

people no longer have the time to do, such as housecleaning, errands, and

cooking, have grown.

Ask students: What other entrepreneurial marketing opportunities

have a time-poor society provided? They will mention many food products,

Blackberry’s, TiVo.

4-30 :McDonald’s MomsSalad, coffee, and yogurt. How McDonald’s is listening the consumer by

offering healthier food and new facility make-overs which have lead to increased

market share .

4-31 :Technological AdvancesArguably the single most important change in the way we live is the introduction of new technology .

Ask students: What new technologies have you seen at retailers? This web link is for the shoppers tool page of Stop and

Shop a large east coast grocery retailer. They offer self-scanners, computer kiosk

deli ordering and self checkout.

4-32 :Economic SituationDepending on the time of year, discuss projections about Christmas shopping,

vacation planning, or home buying. Various economic factors affect each of these areas. The web link leads to the

Consumer Confidence Index which takes into account how consumers feel about

how the economy is doing. This economic indicator relates directly to

spending .

4-33 :Political/Regulatory Environment :Competitive Practice and Trade Legislation

This list includes the major legislation designed to ensure a competitive

marketplace and clearly demonstrates the U.S. government’s long history of

enacting laws that protect fair trade .

4-34 :Check Yourself 1.Culture, demographics, social issues, technological advances,

economic situation, and political/regulatory

environment.

1.Country Culture is the entire country but regional culture is

based on the region or area within the country.

1.Tweens, Gen Y, Gen X, Baby Boomers, Seniors

2.Age

1.Greener consumers, marketing to children, privacy concerns,

and time-poor societies.

4-35 :Corporate Social ResponsibilityExplain to students that companies are involved in a host of activities. Ask

students: Why might some social commentators suggest that CSR is

unnecessary? Students will realize that some say the main objective of a

company should be to make money. But an understanding of CSR moves many beyond a shareholder perspective to

recognize that they must appeal to a vast variety of stakeholders including

countries, suppliers, the environment, employees and customers.

4-36 :What are customer’s concerns?Students should mention the environment, privacy, health, children’s

rights

4-37 :The Output for Companies

4-38 :Check Yourself 1.Today, companies are undertaking a wide range of

corporate social responsibility initiatives, such as establishing

corporate charitable foundations, supporting and

associating with existing nonprofit groups, supporting

minority activities, and following responsible marketing, sales, and

production practices. Social responsibility is even one of the

eight key measures that Fortune magazine uses to create its list of

the most admired companies

2.Inputs and outputs are both consumer, company, and cause.

ANSWERS TO END OF CHAPTER LEARNING AIDS

Marketing Applications

1 .Assume you are going to open a new store. Describe it. Who are your competitors ?

What would you do to monitor your competitors’ actions? Who are your customers? What are you going to do to appeal to them? What are your social responsibilities, and how will you meet

them?

Instructor’s Notes

This question asks students to think about the kind of business they might start, as well as the competitive environment in which that business might operate. In particular, the question

challenges them to think about their potential competitors and how they might stay abreast and ahead of any competitive actions. The social responsibility answer should include suggestions

how to contribute back to the community and implementing good business practices (example: limit pollution output beyond that which is required by law).

2 .In which generational cohort do you belong? What about your parents? How do you approach buying a computer differently than your parents would? What about buying an outfit to wear to a party? How can firms use their knowledge of generational cohorts to market their

products and services better?

Instructor’s Notes

Students need to think about the characteristics of their own and their parents’ generations and apply those characteristics to understand the potential differences in purchasing behavior and

marketing responses.

Possible Response:

I am in the Generation Y cohort, whereas my parents are Baby Boomers. When buying a car, I focus on price, customizable features, and sportiness, but my parents probably focus on

safety, fuel economy, and performance. When buying an outfit to a party, I consider what my peers and celebrities are wearing far more than my parents do. In both cases, I shop online,

unlike my parents.

Firms can use their knowledge of generational cohorts to focus on key messages that will resonate with a particular targeted cohort, understand what information the cohorts care

about most, and allocate marketing spending to the promotional channels that will reach the broadest number of people within the targeted cohort(s).

3 .How can firms use customer demographics like income, market size, education, and ethnicity to market to their customers better?

Instructor’s Notes

Demographic data indicates more than just income distribution, levels of education, or ethnicity within a particular geographic area; as this question prompts students to recognize, these data

can be used to improve marketing.

Firms can use demographic data to target their products or services toward the customer segment that gets the most benefit from it or offers the most lucrative profit opportunity for the firm. Market size data similarly could help a firm determine whether a potential market is worth

pursuing; if insufficient customers exist in the market to justify the expenditure to serve it, a firm can avoid making a costly mistake by analyzing demographic data. Firms can use customer

demographics to assess their customers’ needs and therefore position themselves to deliver better value for those customers’ desired merchandise and services.

4 .Identify some of the ethnicity changes in the United States. Describe how they might affect the marketing practices of (a) a regional newspaper in Texas, (b) food retailers in cities, and (c) a

home furnishing store in New York City.

Instructor’s Notes

Because of immigration and increasing birth rates among various ethnic and racial groups, the United States continues to grow more diverse. 39 Approximately 80 percent of all population

growth in the next 20 years is expected to come from Black, Hispanic, and Asian communities. Minorities now represent approximately one-quarter of the population; by 2050, they will

represent about 50 percent, and nearly a quarter of the population will be Hispanic. Most of the foreign-born American population and recent immigrants tend to concentrate in a handful of

metropolitan areas, such as New York, Los Angeles, San Francisco, and Chicago .

The marketing practices of a regional newspaper in Texas might target Spanish speakers; food retailers in cities might change their menus to appeal to more and different ethnicities; and a

home furnishing store in New York City might adjust their product offerings and price points to appeal to different growing ethnic groups.

5 .Identify some recent technological innovations in the marketplace and describe how they have affected consumers’ everyday activities.

Instructor’s Notes

Some technological innovations in the marketplace with the commercial successes of iPhones, cellular telephones, MP3 players, Internet access, personal digital assistants (PDAs), WiFi, and digital cameras. Flat-screen and high-definition televisions, as well as video on demand, have changed the way we view television, and their impact is only expected to increase in the next

few years. On the retail side, firms are able to track an item from the moment it was manufactured, through the distribution system, to the retail store, and into the hands of the

final consumer using little radio-frequency identification device (RFID) chips that are affixed to the merchandise. Because they are able to determine exactly how much of each product is at a

point in the supply chain, retailers also can communicate with their suppliers—probably over the Internet—and collaboratively plan to meet their inventory needs. “Alpha moms” now

average 87 minutes online every day .

QUIZ YOURSELF

1 .When marketers look at advertising media they often begin with viewer or listener profiles such as, age, income, gender, and race. They then compare the media profile with their target

audience. These marketers are using _________ to see if the media “fits” with their advertising agenda.

a. country culture

b. regional culture

c. demographics

d. macromarketing measures

e. scenario planning

2 .Many American consumers are purchasing hybrid automobiles even though they are more expensive and sometimes less fuel efficient when compared to compact conventional autos.

Automobile marketers recognize these consumers:

a. value contributing to a greener environment.

b. are economically irrational.

c. are responding to global corporate pressure for social responsibility.

d. would prefer an SUV.

e. all of the above.

NET SAVVY

1 .Seventh Generation is the leading brand of nontoxic, environmentally safe household products in the United States. Visit its Web site (http://www.seventhgeneration.com) and

review the philosophy behind the business. Next, review the site to identify the products the company offers. Briefly summarize some of the consumer trends you note, and describe the

ways in which its products address the wants and needs of its customers.

Instructor’s Notes

To explore the topic of green marketing, this question uses a single company as an example. In addition to the company’s principles and products, students must consider larger trends that

Seventh Generation attempts to address through its marketing efforts.

1.In general, the focus of the company is being a responsible corporate citizen by offering environmentally friendly products, giving back to the community, and taking a leadership position in pursuing socially responsible business practices

with both customers and suppliers.

2.Seventh Generation addresses such trends as product recycling, animal testing, and greater efficiency to mitigate humanity’s impact on the environment. These

efforts also can save consumers money, because they can consume less by using products like Liquid Laundry Detergent, Dish Soap, and White Paper Towels.

2 .The Internet has been a double-edged sword for consumers. On the one hand, it provides easy access to many businesses and sources for information. On the other hand, consumers

must give up some of their privacy to access this information. The Electronic Privacy Information Center (http://www.epic.org), founded in 1994, attempts to focus public attention on privacy issues. Browse through its Web site. What steps does EPIC suggest consumers take to protect

their privacy online? What policy recommendations does it make regarding legal restrictions on companies?

Instructor’s Notes

From their review of the privacy survival guide, students should gain an understanding of potential privacy violations and available protections.

3.Order a credit report annually to ensure that I have not been a victim of identity theft.

4.Register with the national “Do Not Call” list to stop telemarketers from invading my privacy by calling me at home.

5.Inform financial institutions that I wish to opt out of having my personal information sold or shared with outside parties.