Chapter 3

The Marketing Environment

McDonalds

Background

1955- Ray Kroc, bought a string of seven restaurants owned by Richard & Maurice McDonald for $2.7 million.

More than 31, 800 restaurants worldwide Serve 50 million customers per day Sales of $60 billion annually Brand Symbol- The Golden Arches Nation’s most visited fast food chain

Problems

1997-2003 :Market share fell by 3% 2002 :Company posted First ever quarterly

loss Consumers were looking for fresher, better

tasting food & upscale atmospheres. Americans seeking healthier options Faced litigations & lawsuits for health

problems & obesity

Solution

2003- Turn-around plan “ Plan to Win” Back to Basics: Speedy service, training

employees, re-imaging restaurants, “forever young” brand.

If You Cant Lick ‘Em join ‘Em: Experimented new restaurant concepts to expand customer base.

“Its what I eat and what I do..i’m lovin’ it”: Launched an education campaign to build awareness to living balanced, active lifestyles.

McDonalds assembled a Global Advisory Council in the areas of nutrition, wellness & activity to provide input on menu choice, variety & promoting physical fitness.

Introduced a trimmer Ronald McDonald. Expanded his role as Chief Happiness Officer to be global ambassador of fun & fitness.

Refreshed its Goactive.com website, offering tips on leading a balanced active lifestyle.

McDonalds Passport to Play in-school program.

Improving the Fare: McDonalds has worked to provide more choice & variety on its menu. Go Active Happy Meal Chicken McNuggets Premium Salads

Current Situation

Sales have increased by 33% & profits have tripled.

“ Customers need change & we want to change with them”

Marketing Environment

The actors & forces outside marketing that affect marketing management’s ability to build & maintain successful relationships with target consumers

Marketing Environment is made up of :

1. Micro environment

2. Macro environment

Microenvironment

The actors close to the company that affect its ability to serve its customers-- the

Company Suppliers Marketing Intermediaries Customer Markets Competitors Publics

The Company

Marketing Management takes company groups into account:

Top Management Finance R&D Purchasing Operations Accounting

All these groups should” think consumer”.

Providing superior customer value & satisfaction!

Suppliers

Provide resources needed by the company to produce its goods & services

Marketing managers must watch supply availability- supply shortages or delays, labor strikes, monitor price trends

Marketing Intermediaries

Help the company to promote, sell & distribute its products to final buyers. Include:

Resellers Physical distribution firms Marketing service agencies Financial intermediaries

Resellers: Are distribution channel firms that help the company find customers or make sale to them. Eg, Walmart, Target, Home Depot

Physical Distribution firms: Help the company to stock & move goods from their points of origin to their destinations.

Marketing Services Agencies: Are the marketing research firms, advertising agencies, media firms, & marketing consultant firms.

Customers

Company needs to study five types of customer markets:

Consumer markets Business Markets Reseller Markets Government Markets International markets

Consumer markets: consist of individuals & households that buy goods & products for personal consumption.

Business Markets: buy goods & services for further processing or for use in production process.

Government Markets: Made up of government agencies that buy goods & services to produce public services.

International Markets: consist of buyers in other countries, including consumers, producers, resellers & governments.

Competitors

To be successful a company must provide greater customer value & satisfaction than its competitors.

They must also gain strategic advantage by positioning their offerings against competitors offerings in consumers minds.

Publics

Any group that has an actual or potential interest in or impact on an organizations capability to achieve its objectives.

Macro environment

The larger societal forces that affect the microenvironment:

Demographic Economic Natural Technological Political Cultural

Demographic Environment: The study of human population in terms of:

Size Density Location Age Gender Race Occupation

Changing Age Structure of the Population Changing American Family Geographic shifts in Population Better educated more white-collar, more

professional population. Increasing Diversity

Changing Age Structure

2006- US population stood at 300 million. 2030- May reach 364 million. US population contains several generational

groups: The Baby Boomers Generation X Generation Y

The Baby Boomers: The 78 million people born during the baby boom following World War 11 (1946- 1964). Form the most affluent American group. Create diverse target segment for business. Age: Early 40’s to late 60’s Constitute a lucrative market for housing,

financial services, travel & entertainment & retirement schemes.

Generation X: The 45 million people born between 1965-1976 in the “birth dearth” following the baby boom. First generation latchkey kids Grown up during times of recession & corporate

downsizing Care about environment, are less materialistic Want better quality of life, more interested in job

satisfaction Family first, career second Represent $1.4 trillion in annual purchasing

power

Generation Y: The 72 million children of baby boomers born between 1977- 1994. Fluent with the computer, digital & Internet

technology. Provided creative marketing opportunities for

products like clothes, movies, beverages. Automobile industry aggressively targeting

Gen Y.

Changing American Family

23%- Married couples with children 28%- Married couples without children 16%- Single Parents 32%- Non-family households Divorced/ Separated Increase in working women

Geographic Shifts in Population

Migratory movements between & within countries

Buying differs according to different regions Shift from rural to metropolitan areas Micropolitan areas Shift in workplaces “telecommute”

Better-Educated, More White-Collar, More Professional Population

85% >25 yrs- completed high school 25%- completed college Rising no of educated people increases

demand for quality products, books, magazines, travel & Internet services.

High school/ college/ universities More white collar jobs

Increasing Diversity

US home of diversity 67%- White 14.4%- Hispanics 13.4%- African Americans Large companies like P& G, Sears, Levis

Strauss targeting diverse groups. Targeting Disabled people

Economic Environment

Factors that affect consumer buying power & spending patterns

Changes in Income Early 2000- Recession “Squeezed consumer” Value marketing- greater quality at fair price

Income Distribution Upper-class consumers Middle-class consumers Working class Underclass

Natural Environment

Natural resources that are needed as inputs by marketers or that are affected by marketing activities Shortages of raw material (air, water, forests,

coal, oil) Increased pollution Increased govt intervention Environmentally sustainable strategies

Technological Environment

Forces that create new technologies, new product & market opportunities

Antibiotics Robotic Surgery Miniaturized Electronics Laptops Cellphones Internet Nuclear Missiles Chemical Weapons Credit cards

Political Environment

Laws, government agencies & pressure groups that influence & limit various organizations & individuals in a given society Increasing legislation

Competition Fair Trade practices Environmental protection Product safety Truth in advertising Consumer Privacy Packaging & labeling

Cause Related marketing: Exercising social responsibility & building a positive image, companies are now linking themselves to worthwhile causes.

Primary form of corporate giving. Lets companies “do well by doing good”.

Linking purchases of a company’s products or services with fund raising activities or charitable organizations.

Ariel: gave Rs1 to needy chidren on purchase of detergent pack

Cultural Environment

Institutions & other forces that affect society’s basic values, perceptions, preferences & behaviors Core beliefs: passed on from parents to

children & re-enforced by schools, businesses & governments.

Secondary beliefs: are open to change.

Shifts in Secondary Cultural Values

People’s view of themselves People’s view of others People’s view of Organizations People’s view of Society People’s view of Nature People’s view of the Universe

People’s view of themselves Personal pleasure Fun, change, escape Self-realization through religion, occupation

People use products, brands & services as means of self expression

Marketers can target products & services based on self views.

MasterCard: “ There are some things in life that money can’t buy. For everything else there’s a MasterCard”

People’s view of others

“Cocooning”- people are going out less with others & staying home more to enjoy home comforts.

Trend of upgrading outdoor living spaces. Adding outdoor barbeques, jacuzzis for family

& friends.

People’s view of Organizations

Attitude variability towards corporations, govt agencies, trade unions, universities etc.

Work seen as required chore to earn money-not to see work as a satisfaction source.

People’s view of Society Sept 11 Iraq War

Patriotic Products & promotions

People’s view of Nature Rising trend towards natural organic things BodyShop Earthbound Farm- largest producer of organic

salads, fruits & vegetables

People’s View of the Universe Spiritualism- finding solace in religion-

Hinduism, Christianity, Islam, & Judism