Chapter Two
The Environment of Marketing
in the Twenty-First Century
Chapter Objectives
Provide an overview of the marketing
microenvironment
Provide an overview of the socio-cultural
environment (macroenvironment)
Address the economic and natural
environment components of the
macroenvironment
Examine changes in the technological
environment
Address the political/legal environment
Environmental Scanning*
What's New
Purpose
The Role of Serendipity
Implications, e.g. Scenario Planning
The Microenvironment
Identify strengths and weaknesses in the
elements of the microenvironment (SWOT*)
The Company
Developing a Marketing Mindset
All employees should know who the firm’s
customers are and what is promised to them.
Companies that share information across
departments are more successful.
Consistent message helps retain customers.
Costs of acquiring 1 new customer is equal
to the cost of retaining 6 current customers.
Suppliers, Distributors, and Other
Facilitators of Marketing
Suppliers:
Changes in the price of raw materials
Justifying price changes to customers
and maintain customer base
Distributors:
Task—Convenient, timely, and safe
distribution of the products to customers
Distributors deliver and advertise a
manufacturer’s product
Customers
Types of customers:
Consumers
Manufacturers
Governments
Institutions
Other businesses
Retailers
Different customers need different
marketing plans.
Competition
“Why would a consumer buy
our product as opposed to
our competitor’s?”
Develop a differential
advantage strategy in
order to convince
customers to buy.
What is a “Competitor?”*
1st Layer: Direct competition
2nd Layer: Related competition
3rd Layer: Generic competition
Black Eye Pea
Bob Evans
Denny’s
Taco Bell
Meet the needs and
wants of customers
more effectively and
efficiently than
competitors.
TGI Friday’s
Chick-Fil-A
Applebee’s
McDonald’s
Arby’s
Taco-Tico
Chili’s
Burger King
Red
Jack-in-the-Box
Lobster
Subway
Hardee’s KFC
Cracker
Wendy’s
Pizza Hut
Barrel
Fast food (non-hamburger)
Golden
Ruby Tuesday
Corral
Dine-in restaurants
The Macroenvironment
Identify opportunities and threats related to the:
Marketing has no control over the macroenvironment, but the
company needs to monitor it in order to identify trends.
The Socio-Cultural Environment
Culture/Subculture*
Roles*
Psychographics* of consumers:
–
–
–
–
–
Lifestyles
Values
Attitudes
Interests
Opinions
Demographics of consumers:
–
–
–
–
–
–
Gender
Age
Social class
Ethnicity
Education
Income
Discuss the following questions:
– In what ways does the
buying behavior of you and
your parents differ?
– In what ways does the
buying behavior of you and
your grandparents differ?
– What selling strategies
would work best for:
You
Your parents
Your grandparents
*Reactive vs. Proactive,
e.g., Wilson and Revlon
An Age Categorization
of Socio-Demographic Groups
Senior
Empty 14%
Nester
13%
Older
Boomer
24%
Gen. Y
5%
Gen. X
18%
Younger
Boomer
26%
An Age Categorization of
Socio-Demographic Groups
Generation Y
Individuals between 18–24
5% of total spending power
Clothes, automobiles, and
college constitute main
expenditures
90% live at home or in
rentals.
Most spending revolves
around personal
appearance and fun.
Older Boomers
Individuals between 45–54
Account for 24% of total
spending
Expenditures:
– Home improvement
– Children’s education
– Luxuries and Leisure
– Insurance
Generation X
Individuals between 25–34
18% of total spending
power
Food, housing,
transportation, and
personal services
constitute expenditures.
Time is premium as they
strive to balance work and
family.
Empty Nesters
Individuals between 55–64
Expenditures:
– Home mortgages
– New furniture
– New automobiles
– Luxury products
– Insurance
Over 80% own their homes
Young Boomers
Individuals between 35–44
Account for 50% of total
spending
60% own their own homes.
Mortgage expenditures, home
furnishing, renovations, and
family purchases account for
most spending.
Focus is home and family.
Seniors
Individuals over 65
Account for 14% of all
spending
Health Care is number one
spending item. Six times more
than the average person.
Spend most money on homerelated expenses
Spending Power: An Overview
Demographic
Group
Age
Total
Number
of Households
(Millions)
Avg.
Number
in Household
Spending
Power
(Billions)
Annual
Average
Household
Income
Annual
Average
Spending
per
Household
Gen. Y
18–24
8.3
1.9
$187
$19,744
$22,563
Gen. X
25–34
18.9
2.9
$736
$45,498
$38,945
Young Boomer
35–44
23.9
3.3
$1,100
$56,500
$45,149
Older Boomer
45–54
21.9
2.7
$1,000
$58,889
$46,160
Empty Nester
55–64
14.1
2.1
$557
$48,108
$39,340
65+
22.1
1.7
$588
$25,220
$26,533
Senior
Ethnic Diversity and Subcultures
The United States is a melting pot:
– Ethnic Diversity
– Diverse Religions
-- Different Cultural Values
-- Different Norms
Values are constantly changing.
Based on careful study of cultural
differences, Bank of America has
developed targeted advertising
messages for different cultural
subgroups, here Asians and
Hispanics.
Marketing must study the different subcultures in order to provide goods
and services that meet the diverse needs of consumers most effectively.
The Economic Environment
Determines consumers’ income, spending, borrowing decisions, and savings
Impacts the use of resources, the production of goods and services, and the
allocation of goods and services
Economic Development: The
Rostow Modernization Model
Traditional society
Transitional society
Take-Off
The Drive to Maturity
High Mass Consumption
Elasticity*
Elastic:
Px Q=
Inelastic:
Px Q=
TR
TR
Walt Disney markets two distinct Pooh
bears to match its two-tiered market.
Natural Environment
Involves the natural
resources that are
needed as inputs by
marketers or that are
affected by marketing
activities.
- Shortage of Raw Materials
- Increased Energy Costs
- Higher Pollution Costs
- Changing Role of Government
The Technological Environment
Primary driver of change
Primary driver of new
product development
Leads to increased
competition
Improves our standard
of living
Changing Technology
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The Political Environment
Political Risk related to Economic Performance
– High inflation, unemployment, and taxes
– Regulatory restrictions
Political Risk related to Government Economic Policy
– Change in leading party relationship to businesses
– Change in tax policy and industry regulations
Risks related to Labor and Action Groups
Data Mining and Politics
– Labor unions can influence national policies, disrupt production, and create
negative press.
Risks related to Terrorism
– In recent years terrorist attacks have been increasing in frequency.
– Companies must guard against terrorism/create safe environment for employees.
Regulation*
Protect marketplace: Sherman Act, Clayton Act, FTC Act, Whealer-Lea Act
Protect companies: Robinson-Patman Act, Copyrights/Trademarks/Patents
Protect consumers: Kennedy’s Consumer Bill of Rights (The right to be heard,
be informed, be safe, choose)