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The Marketing Environment

•Chapter 5

•Powerpoint slides

•Extendit! version

•Instructor name

•Course name

•School name

•Date

Principles of Marketing: 6th Canadian Edition

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Learning Objectives

• After studying this chapter, 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 major 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

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The Marketing Environment

• Marketing environment:– Factors and forces outside of marketing’s direct control

– Affect management’s ability to develop and maintain successful transactions with target customers

• Microenviroment:– Forces close to the company

– That affect its ability to serve customers

• Macroenvironment:– Larger, societal forces that

affect the organization’s microenvironment

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The Company’s Microenvironment

• The company:– Management, finance, research & development, purchasing,

manufacturing, accounting, and human resources

– Each department will have their own objectives

– Need to work in harmony to create customer value

• Suppliers:– Those companies which

provide the resources needed

– Supply availability, pricing, quality are issues that influence the company’s ability to function

– Trend towards partnering

Figure 5.1

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The Company’s Microenvironment (continued)

• Marketing intermediaries:– Firms that help the company promote, sell, and distribute good to

final buyers

• Includes:– Resellers

– Physical distribution firms

– Marketing service agencies

– Financial intermediaries

• Intermediaries are now larger

• Partners in the overall value delivery system

Figure 5.1

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The Company’s Microenvironment (continued)

• Customers:– Consumer, business, reseller, government, institutional, and

international markets

• Competitors:– Company’s marketing strategy must be competitive

• Publics:– Financial

– Media

– Government

– Citizen-action groups

– Local

– General

– Internal

Figure 5.1

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The Company’s Macroenvironment

• Demographic environment:– The study of human populations

– Size, density, location, age, race, sex, occupation, and education

– Marketers are interested because markets are made up of people

• Trends of interest:– World population growth:

from 6.2 billion to 7.9 billion by 2025

– Majority of growth in developing countries

– Growth plus spending power creates emerging market opportunities: China

Figure 5.2

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The Demographic Environment

• Trends of interest:– Changing age structure within Canada

– Largest group boomers (born 1947 to 1966) are getting older

– Baby boom in Canada started and finished later than U.S.– Boomers form a wide range

from 38 to 57 years old

– Entering their peak earning years

– Families and mid-life crisis help to influence spending

– Generation X followed them in reduced numbers

– Generation Y: the children of the boomers

Figure 5.2

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The Demographic Environment

• Trends of interest:– Changing Canadian households

– The nuclear family has led to the “crowded nest” with boomerang kids, and extended families

– Delayed marriages

– Common-law arrangements

– Fewer children

– High divorce rate

– Single-parent families

– Alternative arrangements

– Working women: 48% of work force

– More dual-income families

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The Demographic Environment

• Trends of interest:– Geographic shifts in population

– Growth in population is not uniform

– Continued movement from rural to urban areas

– Immigration primarily to urban centers (next slide)

– Growth of suburban areas

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The Demographic Environment

• Trends of interest:– Better educated population

– Increase in post-secondary education

– Increased diversity

– Canada is more of a cultural mosaic, than the melting pot of the U.S.

– Ethnic markets are not easily targeted and served

– Diversity includes more than just ethnicity: gay/lesbian population

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The Company’s Macroenvironment

• Economic environment:– Any and all factors that affect consumer buying power and

spending patterns

– Types of economy will influence resources to work with

• Trends of interest:– Canadian economy has been in

a growth trend since the 1980’s, despite world events and decline in the U.S. economy

– Dual-income families working to keep up

– Mild recession in the early 1990’s squeezed consumers

Figure 5.2

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The Economic Environment

• Trends of interest:– Consumers looking for value in products and services

– Consumer debt levels rising, savings down– Saving for retirement for

boomers is a concern, but not (really) affecting their spending patterns!

– Changing spending patterns

• Engel’s laws: amount spent on various categories changes as income rises

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The Company’s Macroenvironment

• Natural environment:– Natural resources that are needed as inputs by marketers

or that are affected by marketing activities– Growing shortages of raw materials– Increased pollution (polluted lands, ecological lands)– Increased government intervention

– Canadian federal law: Environmental Protection Act (1989)

– Green movement

– Focus on environmental sustainability strategies

Figure 5.2

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The Company’s Macroenvironment

• Technological environment:– New technology creates new markets and opportunities

– Replaces existing products and services

– Research and development activity drives this sector– Canadian spending on R&D

is low, ranked 15th in the world

– Many government programs to encourage more R&D spending

– Government agencies to regulate new product safety

Figure 5.2

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The Company’s Macroenvironment

• Political environment:– Laws, government agencies, and pressure groups

– Influence and limit organizations and individuals within a society

• Trends of interest:– Cause-related

marketing

– Increasing Business legislation is used to protect consumers, businesses, and the interests of society

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The Company’s Macroenvironment

• Cultural environment:– Institutions and other forces that influence society’s basic values,

perceptions, preferences, and behaviors

– Core beliefs are passed on through family, friends, reinforced by institutions, and (somewhat) resistant to change

– Secondary beliefs are more open to change (tastes, leisure, sexuality)

– People’s views of:• Themselves (own identity),

others (relationship with others), society (pride of belonging to a society)

• Organizations (company trust)• Nature, the universe

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Responding to the Marketing Environment

• Passive approach:– Companies react to uncontrollable factors within their

environments

• Environmental management perspective:– Proactive approach to

influence and affect forces within their environment

– Use lobbyists to influence legislation

– Media events, advertorials to shape public opinion

– Use contractual agreements and legal action when necessary

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In Conclusion…

• The learning objectives for this chapter were:– 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 major 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