Chapter Three

The Marketing Environment

Roadmap: Previewing the Concepts

1. Describe the environmental forces that affect

the company’s ability to serve its customers.
2. Explain how changes in the demographic and
economic environments affect marketing
decisions.
3. Identify the major trends in the firm’s natural
and technological environments.
4. Explain the key changes in the political and
cultural environments.
5. Discuss how companies can react to the
marketing environment.
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 Case Study
McDONALD’S – Facing New Challenges
Challenges
 Faces shifting consumer
lifestyles and preferences
for healthier foods.
 Low ratings of food and
service quality.
 Atmosphere not upscale.
 Image is perceived as
being uncultured, uncool,
and unclassy by younger
target markets.
Copyright 2007, Prentice Hall, Inc.
Marketing Initiatives
 Focus on core competency
of consistent products and
reliable service.
 Offers upscale alternatives
including McCafe and
Bistro Gourmet.
 Eliminates “supersize,”
offers healthier food
options, and introduces Go
Active! Adult Happy Meal.
3-3
 Marketing Environment

 Consists of actors and forces outside the

organization that affect management’s ability
to build and maintain relationships with
target customers.
– Studying the environment allows marketers to
take advantage of opportunities as well as to
combat threats.
– Marketing intelligence and research are used to
collect information about the environment.

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 Marketing Environment

 Includes:
– Microenvironment: actors close to the
company that affect its ability to serve its
customers.
– Macroenvironment: larger societal forces
that affect the microenvironment.
• Considered to be beyond the control of
the organization.

Copyright 2007, Prentice Hall, Inc. 3-5

 Marketing Environment

 Actors in the microenvironment

include:
– The company itself
– Suppliers
– Marketing intermediaries
– Customers
– Competitors
– Publics

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 The Microenvironment

 Company’s Internal Environment:

– Areas inside a company.
– Affects the marketing department’s
planning strategies.
– All departments must “think
consumer” and work together to
provide superior customer value and
satisfaction.
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 The Microenvironment

 Suppliers:
– Provide resources needed to produce
goods and services.
– Important link in the “value delivery
system.”
– Most marketers treat suppliers like
partners.

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 The Microenvironment

 Marketing intermediaries:
– Help the company to promote, sell, and
distribute its goods to final buyers
• Resellers
• Physical distribution firms
• Marketing services agencies
• Financial intermediaries

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 The Microenvironment

 Customers:
– Five types of markets that purchase a
company’s goods and services.
• Consumer
• Business
• Reseller
• Government
• International

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 The Microenvironment

 Competitors:
– Those who serve a target market with
products and services that are viewed by
consumers as being reasonable
substitutes.
– Company must gain strategic advantage
against these organizations.

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 The Microenvironment
 Publics:
– Any group that has an interest in or impact
on an organization's ability to achieve its
objectives.
• Financial public
• Media public
• Government public
• Citizen-action public
• Local public
• General public
• Internal public
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 The Macroenvironment

 The company and all of the other actors

operate in a larger macroenvironment
of forces that shape opportunities and
pose threats to the company.

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 The Macroenvironment

 Forces in the macroevironment can be

categorized as:
– Demographic
– Economic
– Natural
– Technological
– Political
– Cultural

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 Demographic Environment

 Demographics:
The study of human populations in
terms of size, density, location, age,
gender, race, occupation, and other
statistics.
– Marketers track changing age and family
structures, geographic population shifts,
educational characteristics, and
population diversity.
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 Demographic Environment

 The changing age structure of the U.S.

population is the single most important
demographic trend.
– Baby boomers, Generation X, and
Generation Y are the key groups.

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 Demographic Environment

 Baby Boomers:
– 78 million born between 1946 and 1964.
– Equal 28% of population.
– Earn more than 50% of all personal
income.
– Almost 25% belong to racial or ethnic
minority.
– Spend a lot on anti-aging products and
services.
– Are likely to postpone retirement.
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 Demographic Environment

 Generation X:
– 45 million born between 1965 and 1976.
– Defined by shared experiences:
• Increasing divorce rates.
• More of their mothers employed.
• First generation of latchkey kids.
– Cynical of frivolous marketing pitches.
– Care about the environment.
– Prize experience, not acquisition.
Copyright 2007, Prentice Hall, Inc. 3-18
 Demographic Environment

 Generation Y:
– 72 million born between 1977 and 1994.
– Have large amount of disposable income.
– Comfortable with computer technology.
– Tend to be impatient and “Now-Oriented.”
– Many product lines targeted at those who
are part of Generation Y:
• Teen and young adult games
• Clothes, furniture, food

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 Demographic Environment

 Changing American family and

household makeup:
– Married couples with children = 34%, and
falling.
– Married couples and people living with
other relatives = 22%.
– Single parents = 12%.
– Single persons and adult “live-togethers”
(also called nonfamily households) = 32%
Copyright 2007, Prentice Hall, Inc. 3-20
 Demographic Environment

 Geographic Shifts in Population:

– 14% of U.S. residents move each year.
– General shift toward the Sunbelt states.
– City to suburb migration continues.
– More people moving to “micropolitan”
areas.
– More people telecommute.
• 1 in 5 people now work out of their
home.

Copyright 2007, Prentice Hall, Inc. 3-21

 Demographic Environment

 Better Educated Population:

– 1980:
• 69% of people over age 25 completed
high school.
• 17% had completed college.
– 2003:
• 85% of people over age 25 completed
high school.
• 27% had completed college.

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 Demographic Environment

 Greater White-Collar Population

– 1950 – 1985:
• White-collar workers increased from 41% to
54% while blue-collar workers decreased from
47% to 33%.
– 1983 – 1999:
• Professionals and managers increased from
23% to greater than 30%.
– 2002 – 2012:
• Professionals should increase by 25% while
manufacturing is expected to increase 3%.

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 Demographic Environment

 Increasing diversity:
– U.S. is a “salad bowl” mixing together
various groups, each of which retains its
ethnic and cultural differences.
• Ethnic segments are growing as a
percentage of the U.S. population and
growth is projected to continue.
– Increased marketing efforts towards:
• Gay and lesbian consumers
• People with disabilities
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 Economic Environment
 Consists of factors that affect consumer
purchasing power and spending patterns.

 Changes in Income  Income Distribution

– 1980s – – Upper class
consumption frenzy – Middle class
– 1990s – “squeezed – Working class
consumer” – Underclass
– 2000s – value
marketing

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 Natural Environment

 Involves natural resources that are

needed as inputs by marketers or that
are affected by marketing activities.
 Factors include:
– Shortages of raw materials.
– Increased pollution.
– Increased government intervention.
– Environmentally sustainable strategies.

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 Technological Environment

 Most dramatic force shaping our destiny.

 Changes rapidly.
 Creates new markets and opportunities.
 Challenge is to make practical, affordable
products.
 Safety regulations result in higher research
costs and longer time between
conceptualization and introduction of
product.

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 Political Environment

 Includes laws, government agencies, and

pressure groups that influence or limit
various organizations and individuals in a
given society.
 Areas of concern:
– Increasing legislation.
– Changing government agency enforcement.
– Increased emphasis on ethics and socially
responsible behavior.

Copyright 2007, Prentice Hall, Inc. 3-28

 Cultural Environment

 The institutions and other forces that affect a

society’s basic values, perceptions,
preference, and behaviors.
– Core beliefs and values are passed on from
parents to children and are reinforced by
schools, churches, business, and government.
– Secondary beliefs and values are more open to
change.
• Marketers may be able to change secondary
beliefs, but NOT core beliefs.

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 Cultural Environment

 Society’s major cultural views are

expressed in people’s views of:
– Themselves
– Others
– Organizations
– Society
– Nature
– The universe

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 Responding to the
Marketing Environment

 Environmental Management
Perspective
– Taking a proactive approach to managing
the environment by taking aggressive
(rather than reactive) actions to affect the
publics and forces in the marketing
environment.

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 Responding to the
Marketing Environment

 Manage the environment by:

– Hiring lobbyists
– Running “advertorials”
– Pressing law suits
– Filing complaints
– Forming agreements to control channels

Copyright 2007, Prentice Hall, Inc. 3-32

Rest Stop: Reviewing the Concepts

1. Describe the environmental forces that affect

the company’s ability to serve its customers.
2. Explain how changes in the demographic and
economic environments affect marketing
decisions.
3. Identify the major trends in the firm’s natural
and technological environments.
4. Explain the key changes in the political and
cultural environments.
5. Discuss how companies can react to the
marketing environment.
Copyright 2007, Prentice Hall, Inc. 3-33