Dwyer MKTG 300: CH 3 - The Marketing Environment

Wealth

related to income, but distinct; while income represents how much money someone receives, wealth represents how much a person has accumulated in financial resources over time

3 important diversity trends

(1) increasing diversity in ethnic backgrounds in the US -Hispanic population is growing faster than any group -1 in 4 Americans is now considered a member of a racial minority -marketers are responding by creating products and services targeting these groups speecifically as well as using more targeted marketing mix elements (2) nature of the family unit is changing dramatically -"Modern Family" increasingly reflects the reality of nontraditional households -couples are waiting later to have children and there has been a sharp increase in recent years of cohabitation -marketers find it necessary to address the changing household thru multiple marketing mix combinations (3) there has been a shift in values to consider ethical and moral issues more important -some marketers have embraced the concept that a corporate culture with social responsibility appeals to consumers

2 major components of the marketing environment

(1) micro-environment (2) macro-environment

To provide a more thorough understanding of the marketing environment, it is split into two pieces:

(1) one part of the environment is more central day-to-day business decisions (2) the other includes broader influences that generally impact the business indirectly

4 basic consumer bill of rights

(1) right to be informed (2) right to safety (3) right to choose (4) right to be heard

Macro-environment factors (elements) include

(1) social/cultural (2) political/regulatory/legal (3) economic (4) natural/environmental (5) technological

The micro-environment factors (elements) include

(1) the market (2) customers (3) competitors (4) suppliers (5) intermediaries (6) publics

Customers in the micro-environment

-can be end users of the product or service or resellers who buy the product or service to exchange with others -can be loyal to a brand, switchers, or non-users in the category

Macro-environment ex

-ex: population trends, social and cultural beliefs, legal regulations, and so on, all have an impact on Ben & Jerry's marketing, but they do not have the direct impact of the micro-environment elements -if eating habits are changing or if there are new pending legal restrictions that could impact the business, these would be important macro-environment elements for them to consider -spending habits and lifestyle preferences would also be important to consider as these trends might impact Ben & Jerry's business -the company's marketers should be keeping a finger on the pulse of what is happening in the external environment not just today, but also in the near future to anticipate changes

What were the important characteristics Robert Egger was looking for when selecting Los Angeles for the LA Kitchen?

-had a large and growing population of elderly in need of prepared meals -conveniently located near a large supply of food growers -visible social profile with high crime and poverty rates, which he new would draw attn to the social mission of the kitchen -right environment for the concept, with a large customer base, local food suppliers, and a visible market for his social mission

Competitors in the micro-environment

-primary competitors: offer similar product and target same customers -secondary competitors: offer diff products that might be seen as substitutes -unexpected competitors: offer something new that replaces the need for a product

If you worked for a car company, would you prefer to make marketing decisions in the US or China?

-there is no correct answer -evolving market has in some ways more opportunity but carries more risk as well

Publics in the micro-environment

3rd parties (not the buyer or seller in the exchange) who have an interest in the company, market, or exchange

Marketing environment vs personal environment

Everything you can see, hear, and touch is part of your environment and can influence your behavior. You are probably sitting in a chair bc there is one, and because it is generally more comfortable than standing while you read. Perhaps your classroom is cool, so you wear warm clothing. If you are studying with friends in you apartment, you will behave differently than if you are in a formal classroom setting. You know it is more appropriate to be quiet in the library, and it is more acceptable to talk when you are in a restaurant at the student union. If you have allocated 2 chapters to read this chapter before class then you will read it differently than if you are just reading this the day before the exam and have allocated only 30 minutes to learn the material

REVIEW

The marketing environment includes controllable and uncontrollable forces that affect marketing decisions. The marketing environment has two major components: the micro-environment and the macro-environment. 1. The micro-environment includes the forces affecting marketing decisions that can be affected by and affect the immediate marketing situation. 2. The macro-environment includes forces that cannot be controlled or directly influenced by the manager or company but that influence the marketing situation indirectly. The micro-environment factors include: 1. The market: Markets can be mature and established or evolving. 2. Customers: Can be end users of the product or service or resellers who buy the product or service to exchange with others. Can be loyal to a brand, switchers, or non-users in the category. 3. Competitors: Primary competitors offer similar product and target same customers. Secondary competitors offer different products that might be seen as substitutes. Unexpected competitors offer something new that replaces the need for a product. 4. Suppliers: Provide raw materials, components, supplies, and services for a company. 5. Intermediaries: Provide marketing and logistics support for a company to help facilitate exchanges. 6. Publics: Third parties (not the buyer or seller in the exchange) who have an interest in the company, market, or exchange. Macro-environment (SPENT) 1. Social/cultural: Members of a group will share cultural values and, when combined with demographics, can help marketers make better decisions. 2. Political/Legal/Regulatory: Laws protect companies from other companies and customers from companies. Governments create entities to enforce the laws, such as the FTC, FDA, and CSPC. 3. Economic/Financial: Wealth and income vary widely and affect customer willingness and ability to spend. 4. Natural/Environmental: There is an increased interest in sustainability, which has increased the importance of companies using sustainability as a marketing tool. 5. Technological: Technology integration has increased as tools become more powerful. The paradox of technology is that it can have both positive and negative consequences for both customers and companies. Technology is becoming increasingly important to marketers.

Companies that provide transportation and logistics services acting as intermediaries

UPS, JB Hunit, Ryder, and DHL provide transportation and logistics services. B&Js ice cream needs to be refrigerated and yet must travel long distances to get to stores -intermediaries make sure the ice cram gets to the store in good shape and tastes as intended

Ex of secondary competitors

Uber's secondary competitors would be rental car companies and public transportation

Ex of logistics company acting as intermediary

XPO, the largest of these companies in North America, has grown by acquiring other companies but has focused on technology to provide ways of improving automation and shipment visibility

Most anything in your immediate environment can affect you behavior, but how is the opposite true?

You have the ability to affect your immediate environment as well. You can move the chair to a more comfortable position. You can turn on the lights to see better. You can ask your friends to stop talking so loudly so you can concentrate better. You can decide to go out with your friends a half hour later to give you more time to study.

Market

a collection of buyers and sellers interested in making similar or relate exchanges

Federal laws are often supplemented by state laws, which means...

a company has to be aware of the laws in any state where the company does business -in fact, this is true in a global sense as well -ex: UK, Ireland, and the Netherlands can advertise to children; Greece can only do so during certain hours; Sweden does not allow ads that appear to be aimed at children under 12 ***what's allowed in one market may not be allowed under another

Ex's of intermediaries that provide marketing support

advertising agencies, research firms, and consulting companies

Gross income

amount a person has coming in, so think of gross income as how much you might earn in salary or receive as other income before taxes, insurance, or other optional reductions and before any spending

Disposable income

amount available after deductions to pay basic living expenses like rent, utilities, and transportation

Micro-environment includes...

anything in the environment that directly affects or is directly affected by the marketing manager's decisions -managers need to understand and evaluate the micro-environment on a regular basis

Marketing environment includes...

anything that influences or is influenced by decisions that are made to facilitate an exchange

Macro-environment elements

are more difficult to manage than micro-environment elements bc they aren't directly controlled by the company -rather, they are general trends in the external environment

Social/cultural elements in the macro-environment

as customers are the most important element in the micro-environment, trends related to customers would be the most important element of the macro-environment

Note that a market might be considered an established market in one location but in another location might be considered an evolving market -ex

automobiles would be considered an established market in the US, but in China, over half of cars purchased are actually purchased by someone who has never purchased a car before -it's estimated that 1.2M new cars are added to the roads in China each month -new competitors and new customers are entering the market at a rapid pace, which makes the market more unpredictable than the US car market

Elements of the micro-environment can be...

be monitored and in some sense controlled or at least influenced if your marketing dept is good

Paradox of technology for business (sellers) ex

bookstores initially used technology to manage accounting and sales, track customers, and manage inventory -however, what most bookstores didn't realize was that technology could be used to replace the physical bookstores

Marketing managers have to make decisions taking into consideration...

both controllable and uncontrollable factors

One of Ben & Jerry's strengths

brand -some customers are loyal to B&J's brand while others are loyal to diff brands -we can quantify the number of customers loyal to a brand and compare the number loyal to one brand vs another

Primary competitors

brands in the same market targeting the same customer group

How to distinguish between economies?

by how developed they are -economies grow in stages

The influence of inflation and interest rates on consumer economic health will differ depending on...

how much money consumers have to spend in the first place -those who have more to spend will be better off than those who have less to spend when inflation and interest rates are high

Why do people join groups?

in part bc the group has a unique subset of cultural values (church, social club, political party)

Publics in micro-environments

include groups not directly involved in the business that have an interest in the business

The customers in micro-envrionments

include opposite partner in an exchange and have the most significant impact on an exchange bc different customers want different things from an exchange

Macro-environment

includes forces that cannot be controlled or directly influenced by the manager or company but that influence the marketing situation indirectly

Micro-environment

includes the forces affecting marketing decisions that can be affected by and affect the immediate marketing situation

How much money customers have to spend is based on tow related but separate factors:

income and wealth

One of the more prominent issues tied to technological environment

increasing capability to integrate and leverage technology -companies and their partners collect any info about you they can and then sell this info to other companies who integrate public info such as you name and email address with info collected via technology elsewhere -while great for marketers, individuals have shown an increased interest in privacy and info control

Technological components of macro-envrionment

increasingly important element of the marketing environment -companies have new ways to interact with customers, and customers can interact with each other as well, reviewing companies, offering advice, and even helping design and fund products

Logistics companies play an important role as ___________ in supply chains.

intermediaries -sometimes these companies work in a specific geographic area or market specialty and can provide distribution services for multiple companies -other times they align themselves to a specific brand and do not work for direct competitors -in recent years logistics companies have found themselves merging, acquiring competitors and reinventing themselves

Ex of publics in micro-environments

investors, consumer groups, gov't, and others that take an interest in the market can all be considered publics -investors don't have an immediate role in the business, but they do have an influence since the company must take into consideration how their actions will impact investors -consumer groups might also influence the business decisions for a company if they take an interest in the industry or company (just ask Chevy or Nike). Both had instances where consumer groups took issue with the product (Chevy) or business practices (Nike) that impacted sales and pushed the companies to change their business practices -Consumer Reports publishes tests and reviews many product categories, and the results are available to consumers

Natural or environmental component of the macro-environment includes

issues related to natural resources and sustainability

Paradox of technology

it offeres both benefits and negative consequences at the same time in a market for both customers and sellers

Unexpected competitors

less common, but in many ways more dangerous -offers the same core benefit but with an entirely different produce

Component of a situational analysis

looking internally and externally at what is happening in and around the marketing environment which the marketing plan must be developed and implemented

Paradox of technology for customers

makes it easier for to find info such as reviews of a seller -can also make it more difficult for customers by providing too much info

Micro-environment ex -what would be some of the key marketing decisions they have to make regularly?

marketing managers for Ben & Jerry's ice cream -must decide how to make the ice cream and what they think would encourage ppl to buy it. -they have to decide which ingredients, which flavors, and which prices -they also need to decide how to persuade customers to buy their ice cream instead of another brand. -making these decisions requires marketing managers to consider what their customers want, what their competitors offer, whether or not they can get the best ingredients, and so on -in short, they need to understand what they want to happen and determine how they can actively influence their environment to make it happen in a particular way

Income and wealth distribution in an economy make a significant difference in...

marketing opportunities

The most common intermediaries offer...

marketing support, providing financing support to customers or logistic services including transportation, warehousing, and so on

The market in the micro-environment

markets can be mature and established or evolving

Sustainability

means not using up natural resources -companies have used the term to refer to efforts to create more environmentally friendly approaches to business

Inflation

measures the sustained increase in prices for the same item over time

Facebook and Weixin are social media giants that are more valuable than their counterparts bc...

more ppl use them

3 main agencies that US Federal Gov't has to oversee legal issues that affect marketing practice

(1) Consumer Product Safety Commission (CPSC) (2) Food and Drug Administration (FDA) (3) Federal Trade Commission (FTC)

Different types of customers in micro-environments

(1) end consumers (2) resellers

2 basic types of markets

(1) established markets (2) evolving markets

4 levels of income

(1) gross income (2) net income (3) disposable income (4) discretionary income

Several important trends that were taking shape that would benefit the LA Kitchen business model at the time

-number of elderly ppl was increasing -growing interest in more and natural and less processed foods bc these were typically healthier -interest was also increasing in companies that had a social missions, especially those that provided a more sustainable form of social aid such as providing jobs, training, and education

Most basic element of the micro-environment

the market itself

One of the most important aspects of technology is that a specific technology in many ways becomes more valuable than...

the more people use it -your phone wouldn't be as useful if nobody else had a phone you could text or call

Wealthiest 8 people people in the world's wealth equal to

the wealth of the poorest half of the world's population

Evolving markets

those that are changing rapidly and therefore do not have stable competitors or customers -while all markets change over time, evolving markets do so at a rapid pace and are more unpredictable

Sustainability ex

-Apple powers its new HQ with renewable energy and provides free recycling for its products -Starbucks, GE, and Disney have programs in place to control and reduce their carbon footprint -Coca Cola has improved its water use efficiency to reduce water usage by 21% since 2004 ***these companies have made the strategic decision that protect the environment is a corporate culture goal, but it also resonates with customers, which is another reason companies are talking about sustainability initiatives

Ex of a market

-Ben & Jerry's is a manufacturer -customers buy their ice cream in grocery stores, perhaps selecting Cherry Garcia or Chunky Monkey instead of Haagen-Dazs Butter Pecan -the collection of potential customers and sellers is part of the same market as are those that are related to or facilitate those exchanges

Cultural trends ex's

-aging -diversity

Cultural trend of age that affect marketing

-aging of the population makes generation an important marketing consideration -different generations view the world differently based on their life experiences -Baby Boomers (born bt 1946-64) are now getting older, and products and services targeting this group have followed their aging -Gen X (born bt 1965-76) are more skeptical and grew up in a time of political unrest and instability in the home; this group has the threat that as they enter their max earning years, they will have to pay for the social services and debts incurred by the Baby Boomers; might acutally be the 1st generation in recent history to be less well off than its parents -Gen Y (Millenials) are tech savvy, are generally not brand loyal, and are open to new methods to communicate with them; also look for balance in their home life, having seen parents work long hours in corporate jobs with little time off; almost same size as Boomers, so it will be an important force in most market for years to come; Gen Z (born after 2000) is relatively young and has yet to form a consistent identity; highly tech capable ***the changing importance and relative influence of these groups is significant for marketing practices

Ex of unexpected competitors

As air travel has become increasingly expensive and business travelers have less time to travel, business travelers have been increasingly taking advantage of options that allow them to conduct business meetings w/o the expense and time required for business travel -Skype, Zoom, GoToMeeting -these companies provide business partners with a way to digitally meet, which saves money and time, replacing the air travel required to meet in person

Ex of competitors

B&J's typical customer is upscale, socially committed, indulgent, somewhat quirky, and not price sensitive -other brands clearly target the same customer group

Ex of effects of demographic trends

B&Js must consider if older consumers eat more or less ice cream or have less money to spend on treats and whether ice cream is more popular in the city or countryside

Ex of suppliers

In B&J's case, the company chooses suppliers that also share its environmental goals, meaning B&J's might spend more on the almonds from a supplier that shares its environmentally friendly values -doing so gives B&J's a marketing advantage by adding value to its customers -if they only buy from companies that also operate in an environmentally friendly way, they can use this fact in its marketing -companies are increasingly choosing suppliers who echo or enhance their marketing goals for strategic advantage

Ex of primary competitors

McDonalds vs Burger King Apple vs Samsung Huggies vs Pampers

Discretionary income

Once basic living expenses have been paid from disposable income, this is the remaining income -income that can be spent at consumer's discretion -this is the income marketers often covet, especially for products that are not considered to be necessities

Federal Trade Commission (FTC)

charged with keeping competition fair -has the power to force a company to stop advertising that is misleading, force additional advertising or communication to correct misinformation, and even force a company to pay damages to consumers for misleading claims -also tasked with monitoring privacy issues, which has been a more challenging problem as technology increasingly becomes a more powerful tool for collecting and analyzing customer data

Interest rates and inflation

closely tied to local economy and affect consumer spending

Marketing Environment

combination of controllable and uncontrollable forces that affect a marketing decision

Marketing intermediaries in micro-environment

companies that perform functions that help connect the company to the customer in some way

Suppliers in micro-environments

companies that provide materials or components that are used in final products the company exchanges -some offer additional benefits such as better service or purchase terms -some just fit better with company goals

Laws that affect marketing practice generally fall into one of the following categories:

competition, product safety, pricing, advertising and promotion, and pricing lists some of the key US laws that affect marketing -laws passed in the late 1800s and the early 1900s were intended to protect companies from each other to encourage competiton

Subsistence economy

consume virtually all of what they produce, which are primarily agricultural and basic manufacturing products -limited opportunities in such economies, and marketing plays a relatively small role

Higher inflation means

consumers won't be able to buy as much with the same amount of money -ex: Living in Prague, Czech Republic from 1993-2016, the avg inflation was about 4.58% -however during this time, there were fluctuations, with the highest rate in 1993 of almost 22% -this means if you bought a sandwich in 1992 for 100Kc then in 1993 that same sandwich would cost you 122 Kc -you can see that high inflation typically means less consumer spending

The marketing environment includes...

controllable and uncontrollable forces that affect marketing decisions

Most important elements in micro-envrionments

customers -most critical component marketers have to consider in their environment

Resellers -ex

don't use the product but rather buy it to exchange with others -grocery store would be considered reseller for Ben & Jerry's bc they buy it from Ben & Jerry's and then resell it to you

Established markets -ex

have relatively stable competitors and customers -bicycle market -most foods

Internet, apps, email, Bluetooth, wireless, smartphones, social media, and other technology have all...

expanded opportunities for marketing

Cultural backgrounds can...

explain some of the differences in how customers respond to marketing efforts

Demographic trends

extremely important to marketers -global population growing, but this is not true everywhere (Japan, Spain, and Ukraine are shrinking) -2 additional demographic global trends that are important for marketers are the aging population and the migration of ppl from rural area toward urban centers

Economic elements in macro-environment includes

financial and monetary influences on marketing -markets are becoming increasingly intertwined and businesses increasingly are global

Demographic trends represent...

group characteristics such as age, marital status, income, gender, and the like -while important, these characteristics often mask underlying differences that can be critical for marketers -bc everyone is different within these groups of ppl, marketers look to other classifications for groups that offer more consistency for marketing purpose

Striking aspect of technology is that it...

has a good side and a bad side

Companies are like your life in the way that

has an immediate environment that affects it -it can influence or control certain aspects of the environment but will also be affected by broader environmental forces that it cannot control and the company must adapt in some way to these forces

In many industries the use of natural resources and the impact on the environment by companies...

has become a focal point for both gov't regulation and consumer purchasing behavior

Political/Regulatory/Legal elements in the macro-environment

has increased in importance over recent year, and there are laws and restrictions for every element in the marketing mix

Mature economy

has transitioned into a service economy; has stable industry, established banking and financial institutions; and offers many marketing opportunities across a wide variety of sectiors -mature economies are typically more stable; although there can still be volatility, they are generally more predictable

The company in micro-environments

most directly controllable of all the potential influences on an exchange -companies will have specific strengths and weaknesses relative to their marketing ability -some companies have stronger, established brands -some have more money to use for marketing, while others have a lower cost structure

Competitors in micro-environments

most markets have capable competitors pursuing the same customers you are

Secondary competitors

offer different products that could be substituted for your produce

ACTS

picture attached

Developing economy

produce more than it consumes and offers opportunities for certain product categories but does not have the advance service economy of a mature economy -think of a developing economy as a transition point between a subsistence economy and a mature economy -transition provides opportunities but also has its dangers -marketing in developing countries is important, but it is not as established as in a mature economy -riskier and less predictable than mature economies

Consumer Bill of Rights

protect consumer directly from companies -4 basic rights articulated by JFK

Food and Drug Administration (FDA)

protects consumers from potentially dangerous food and drug products -has recently taken aggressive action against tobacco industry, and is now paying attention to fast food industry, pharmaceutical, and herbal supplements

Consumer Product Safety Commission (CPSC)

protects consumers from potentially dangerous products

Intermediaries in the micro-environment

provide marketing and logistics support for a company to help facilitate exchanges

Suppliers in the micro-environment

provide raw materials, components, supplies, and services for a company

End consumers -ex

purchase products to use personally -such as grocery shoppers who buy Ben & Jerry's to take home for desserts -businesses and govt's can also be end customers if they buy products to use directly or to include in products they sell -restaurant offering special dessert with Ben & Jerry's ice cream on top

Strategic decisions by companies who take a socially responsible approach to business

recycling, reusing, and minimizing pollution and waste -companies also use these efforts as a marketing advantage

Governments create __________ that oversee marketing practices

regulatory agencies

Interest rates

represent the current value of borrowing or loaning money -ex: a 5% interest rate for borrowing money for school would cost you less money in interest than an 8% interest loan -higher interest rates reduce ability to borrow money

Income

represents how much money a person receives from earnings and other sources -however, from a marketing perspective, it helps to differentiate between the money a person receives, and the money a person really has available to spend, so we identify 4 levels of income

Market Share

sales of one brand divided by the total sales divided by total sales in a market -describes the proportion of sales one company or brand typically has relative to the rest of the market -B&J's has 9% market share in US, ranks fourth in sales of all ice cream brands

Culture

shared beliefs, values, perceptions, preferences, and behaviors of a group -influenced by family, friends, and personal interactions and other institution in the environment such as schools, religion, gov't, and even businesses -we can think of culture for any group including a country, state, region, social club, or company

First element of a marketing plan

situational analysis

Apple has a major advantage in application space bc...

so many people use apps that are tied to Apple platform

Micro-environment

sometimes referred to as "internal environment," includes anything in the environment that directly affects or is directly affected by the marketing manager's decisions

Macro-environment

sometimes referred to as the "external environment," some elements in the environment that are more general trends the company does not directly influence -these elements have a more indirect impact on the company's marketing strategy

Advances happen at such a rapid pact it seems difficult for a marketing manager to...

stay ahead of the newest technology

Companies have to consider how their __________________ will be received or influence this third-party public that has real influence in a market

strategy decisions

Ranking economies

subsistence --> developing --> mature

Net income

take-home pay, whatever is left

Evolving market ex

technology markets are often considered evolving markets since they are constantly changing and companies that were once market leaders can soon become market losers when the market changes

Income difference has become quite important in many markets due to...

the great difference among those who have high incomes and those who have significantly lower incomes

While it may seem that the marketing environment includes virtually everything, a more accurate way to think about it is...

to consider the environment from an individual company or manager's position

Parts of your environment that you cannot control

weather, economy, financial situation, culture, fashion, rules/regulations

For a specific marketing decision, some things will be more relevant and influence the business in a more tangible way, while others...

will be less relevant and have less impact or might be considered to have an indirect impact on the business

Microsoft has a similar advantage...

with its Windows and Office platforms as they have become the standard programs for business applications