Numerous factors have influence over a firm’s ability to create value for customers, including the internal and external environments. The internal environment are elements that are inside the organization. The marketing department must work with internal stakeholders, such as other departments and top management, to communicate organizational policies and information gained from the external environment. As is often the case, departments within an organization will have differing views on the types of products offered, the price they should be sold for, etc. Marketing’s primary function lies in its connection with the external environment. However, as the focus moves to the outer rings into the micro and macro environments, the organization loses some level of control.
An organizations ability to compete lies in the external environment. While most efforts are centered in the microenvironment (where the company has some degree of control), firm’s must also be aware of events happening in the macroenvironment (companies have little control). The Microenvironment consists of customers, competitors, suppliers, partners, and others that influence a firm’s ability to sell, distribute, promote, and develop products and services. Each of these must be considered when making strategic decisions. The macroenvironment consists of technology, political, social and cultural, legal, and economic. While outside marketing’s direct control, a firm must be aware of elements in order to take advantage of opportunities and to control for threats that result from changes. For example, the recent economic downturn has left many firms with excess capacity (think GM and Chrysler).
The Macroenvironment contains forces that are uncontrollable, but have an influence on the microenvironment. Economic environment are factors that influence buyers purchase ability such as inflation rates, income levels, and unemployment. These factors influence both the B2B market and the consumer market. Social and Cultural Environment shape the needs and wants of consumers. The 2008-09 recession (an economic influence) altered some consumers attitudes toward buying locally grown foods and/or encouraged some to plant a garden. The Competitive Environment includes factors related to the number of and potential action of competitors. The Legal Environment involves the rules that govern business practices and include actions to protect consumers and businesses from unfair practices. This element becomes even more complicated as companies seek to expand globally. The Political Environment has influence in a company’s domestic market and in global markets. While the U.S. has a stable political structure, other countries can not say the same. Governmental actions can alter the playing field for some businesses and industries (there is considerable debate occurring in the U.S. over health care and energy which can have significant influence over firms in these industries). The Technological Environment can alter marketing due to scientific advancements that lead to new innovations. These innovations can make entire product categories obsolete (type writers for example).
Consumers account for a large portion of spending in the US economy. Consumer products are purchased to satisfy individual wants and needs. Consumers base much of their purchase decisions on the expected utility (value) they perceive the product will deliver. When the utility is high, a surplus has occurred, meaning that the company undercharged for their product.
Graphical representation of consumer and business markets. Here the baker purchases raw materials (flour, eggs, etc) to make bread, which it then sells in bulk to grocers. Consumers purchase a single loaf.
Business markets purchase products to fulfill their needs, but the needs will differ than those of consumers. Business’ purchase products to create other products or to provide services to customers. Businesses are classified using the North American Industrial Classification System (NAICS). An example is shown on the next slide.
The NAICS classifies businesses in the US, Canada, and Mexico based on their principal activities. Businesses are further broken down to allow for more precise organization. The US government uses the NAICS as a means to provide statistical data as related to the economy. Business use the classification in cultivating sales leads, as well as other related activities.
In B2B there are three basic classifications of purchases: New Task, Modified Rebuy, and Straight Rebuy. New Task – First time or unique purchase of a product/service. Requires extensive effort to determine what to purchase as well as who to purchase from. Modified Rebuy – Company has experience with product already but is considering alternatives (products or vendors) Straight Rebuy – Company reorders current product from current vendor.
This table outlines the differences between B2B and Consumer Markets.
Chapter Objectives <ul><li>What are the components of the marketing environment? How do those elements affect marketing strategy? </li></ul><ul><li>What are consumer markets? </li></ul><ul><li>How are business markets similar to consumer markets? How are they different? </li></ul>
Overview <ul><li>“ The world moves pretty fast. If you don’t look around once in awhile, you could miss it.” </li></ul><ul><li>Ferris Bueller </li></ul>
Objective 1 <ul><li>What are the components of the marketing environment? How do those elements affect marketing strategy? </li></ul>
<ul><li>The Marketing Environment is a set of forces, some controllable and some uncontrollable, that influence the ability of a business to create value and attract and serve customers. </li></ul>
Organization Internal Environment External Environment Loss of Control
Objective 2 <ul><li>What are consumer markets? </li></ul>
<ul><li>Consumer Markets are the end user of the product or service and include individuals and households that are potential or actual buyers of products or services . </li></ul>
Consumer Markets $10 Trillion <ul><li>4 states account for 1/3 rd of buying power: </li></ul><ul><ul><li>California </li></ul></ul><ul><ul><li>Texas </li></ul></ul><ul><ul><li>Florida </li></ul></ul><ul><ul><li>New York </li></ul></ul>U.S. Consumer Buying Power in 2007
Objective 3 <ul><li>How are business markets similar to consumer markets? How are they different? </li></ul>
Consumer / Business Markets Consumer Market Business Market
<ul><li>Business Markets include individuals and organizations that are potential or actual buyers of goods and services that are used in, or in support of, the production of other products or services that are supplied to others. </li></ul>
Business Markets Manufacturers Intermediaries Universities Governments
NAICS Level Code Description Sector 51 Information Subsector 513 Broadcasting and telecommunications Industry Group 5133 Telecommunications Industry 51332 Wireless telecom carriers (except satellite) U.S. Industry 513321 Paging