Marketing Practices Week 1

1. Principles of Marketing
Analyzing the Marketing Environment
Week 2
Copyright © 2016 Pearson Education, Inc. 3-1

2.  Objective 1: Describe the environmental forces that affect the company’s ability to serve its
customers.
 Objective 2: Explain how changes in the demographic and economic environments affect
marketing decisions.
 Objective 3: Identify the major trends in the firm’s natural and technological environments.
 Objective 4: Explain the key changes in the political and cultural environments.
 Objective 5: Discuss how companies can react to the marketing environment.
Learning Objectives
Analyzing the Marketing Environment
Copyright © 2016 Pearson Education, Inc. 3-2

3. The Marketing Environment
 The marketing firm operates within a complex and dynamic external
environment. It is the task of the marketing-oriented organisation to link the
resources of the organisation to the requirements of customers. This is done
within the framework of opportunities and threats in the external environment.
 The marketing environment refers to the internal and external influences that
affect the marketing function.

4. The Marketing Environment
 A company’s marketing environment consists of
the actors and forces outside marketing that
affect marketing management’s ability to build
and maintain successful relationships with target
customers. (Phillip Kotler)

5. Key Environments
Aspects of the Marketing Environment:
• Micro Environment: Actors close to the company
• Macro Environment: Larger societal forces

6. The Micro Environment consists of the actors close to the company that
affect its ability to serve its:
• Customers
• The Company
• Suppliers
• Marketing Intermediaries
• Customer Markets
• Competitors
• Publics
The Micro Environment

7. Actors in the
Micro Environment

8. The Company
 In designing marketing strategies, marketing
division must take other company’s divisions into
account.
 All of these interrelated groups form the internal
environment. All groups should work in harmony to
provide superior customer value and relationships.

9. Internal environment includes:
• Top management
• Finance
• R&D
• Purchasing
• Operations
• Accounting
The Company

10. Suppliers
 Suppliers are other business organisations and individuals who provide the
organisation with raw materials, parts, components, supplies or services
required to produce and supply products to customers. Suppliers form an
important link in the organisations overall customer value delivery system.
Supplier problems can seriously affect marketing.
 Marketing managers must watch supply availability—supply shortages or delays,
labour strikes, and other events can cost sales in the short run and damage
customer satisfaction in the long run.

11. • Provide the resources to produce goods and services
• Treated as partners to provide customer value
Suppliers

12. Marketing Intermediaries
 Marketing intermediaries help to sell, promote, and distribute goods.
 Intermediaries take
many forms.
 Resellers
 Physical
distribution firms
 Marketing services
agencies
 Financial
intermediaries

13. Marketing Intermediaries
 Many organisations rely on marketing intermediaries to ensure that their
products reach the final consumer.
 Marketing intermediaries help the company to promote, sell, and distribute its
products to final buyers.
 Some organisations supply directly to the retailer whilst others use a complex
“chain” including intermediaries such as wholesalers, agents and distributors.

14. Marketing Intermediaries
 Marketers recognize the importance of working with their intermediaries as
partners rather than simply as channels through which they sell their products.
 It must partner effectively with marketing intermediaries to optimize the
performance of the total system.
 Like suppliers, marketing intermediaries form an important component of the
organisation overall value delivery system.

15.  Resellers are the distribution channel firms that help the company find customers or make sales to
them. These include: Wholesalers and Retailers
 Physical distribution firms are the distribution channel firms that help the company to stock and
move goods from their points of origin to their final destination.
 Marketing service agencies are the marketing research firms, advertising agencies, media firms,
and marketing consulting firms that help the company target and promote its products to the right
markets. (e.g. Maverick Communications Ltd, Huge)
 Financial intermediaries include banks, credit companies, insurance companies, and other
businesses that help finance transactions or insure against the risks associated with the buying
and selling of goods.
Marketing Intermediaries

16. Customers
 Customers are crucial and most important actors in the organisation’s micro
environment.
 In a commercial environment, no customers means no business.
 An organisation should be concerned about the constantly changing
requirements of its customers and should keep in touch with these changing
needs by designing and implementing an appropriate information gathering
system.

17. Customers
 The organisation can only influence their decisions by offering products and
services that would delight them.
 Thus, identifying, anticipating and satisfying/delighting their requirements are a
crucial issue for marketers.

18.  Customer markets consist of individuals and households that buy goods and services
for personal consumption.
 Business markets buy goods and services for further processing or for use in their
production process.
 Reseller markets buy goods and services to resell at a profit.
 Government markets buy goods and services to produce public services or transfer goods
and services to others who need them.
 International markets consist of buyers in other countries including consumers,
producers, resellers, and governments
Customers

19. • Firms must gain strategic advantage by positioning their offerings
against competitors’ offerings.
• Each firm should consider its own size and industry position
compared to those of its competitors.
Competitors

20. Competitors
 The marketing concept states that to be successful, an organisation must provide
greater customer value and satisfaction than its competitors.
 Marketers must gain strategic advantage by positioning their offerings strongly
against competitors’ offerings in the minds of consumers.

21. Any group that has an actual or potential interest in or impact on an
organization’s ability to achieve its objectives:
• Financial publics
• Media publics
• Government publics
• Citizen-action publics
• Local publics
• General public
• Internal publics
Publics

22. • Financial publics influence the company’s ability to obtain funds—banks,
investment houses, and stockholders.
• Media publics carry news, features, and editorial opinion—newspapers,
magazines, and radio and television stations.
• Government publics influence product safety and truth in advertising.
Publics

23. • Citizen-action publics include consumer organizations, environment
groups, and minority groups
• Local publics include neighborhood residents and community
organizations
• General publics influence the company’s public image
• Internal publics include workers, managers, volunteers, and the board of
directors
Publics

24. The Macro Environment
 The macro environment includes the major societal forces that affect not only the
organisation, but also on its competitors and on elements in the micro-
environment.
 The macro environment tends to be harder to influence than the micro
environment, but this does not mean that organisations must simply remain
passive; the inability to control does not imply the inability to influence.

25. The Macro Environment
The main forces in the organizations macro-environment. It is commonly denoted as the PESTEL forces.
 Political Environment
 Economic Environment
 Social and Cultural Environment
 Technological Environment
 Ecological Environment
 Legal Environment

27. Political Environment
 The political environment can be one of the less predictable elements in an
organisation’s marketing environment. Marketers need to monitor the changing
political environment because political changes can profoundly affect a firm’s
marketing.
 The political environment consists of laws, government agencies, and pressure
groups that influence and limit various organizations and individuals in a given
society.

28. • Legislation regulating business
• Public policy to guide commerce—sets of laws and regulations that limit business for
the good of society at large
• Increasing legislation to:
• Protect companies
• Protect consumers
• Protect the interests of society
Political Environment

29. Increased Emphasis on Ethics and Socially Responsible Actions
• Socially responsible behaviour occurs when firms actively seek out ways
to protect the long-term interests of their consumers and the environment
• Cause-related marketing
Political Environment

30. Economic Environment
 The economic environment consists of factors that affect consumer purchasing
power and spending patterns and is basically about the level of demand in the
economy and is the most visible aspect in the macro environment.
 Economic factors are of concern to marketers because they are likely to influence,
among other things, demand, costs, prices and profits.
 Some of the key aspects of the economic environment are as Income distribution,
Inflation level, Economic Boom and Recession, Investment Policy, Interest Rates,
saving habits etc.

31. • Economic environment consists of factors that affect
consumer purchasing power and spending patterns.
• Subsistence economies consume most of their own agriculture
and industrial output.
• Industrial economies are richer markets.
Economic Environment

32. Changes in Income
• Value marketing involves ways to offer financially cautious buyers greater
value—the right combination of quality and service at a fair price.
• Income distribution
• Upper-class consumers
• Middle-class consumers
• Working-class consumers
• Underclass consumers
Changing consumer spending pattern
Economic Environment

33. Economic Environment
 Ernst Engel—Engel’s Law
 As income rises:
 The percentage spent on food declines
 The percentage spent on housing remains constant
 The percentage spent on savings increases
Changes in Consumer Spending Patterns

34. Social Environment
• Of all the elements making up the macro environment, perhaps socio-cultural factors are
the most difficult to evaluate, and hence pose the greatest challenge to the marketing
organisation.
• Social and cultural change manifests itself in changing tastes, purchasing behaviour and
priorities of consumers and marketers need to understand and identify these changing
trends.
Some of the socio-cultural forces are as follows:
• Demographic forces: This refers to the structure of population in term of factors such as
age, family size, ethnicity, income distribution and wealth concentration. These variables
will determine the marketing mix strategies.

35. Demographics
• Demography is the study of human populations in terms
of size, density, location, age, gender, race, occupation,
and other statistics.
• Demographic environment is important because it
involves people, and people make up markets.
• Demographic trends include age, family structure,
geographic population shifts, educational characteristics,
and population diversity.
Social Environment

36. Demographics
Changing Age Structure of the Population
• Generational marketing is important in segmenting people
by lifestyle of life state instead of age.
Social Environment

37. Demographics
Changing Age Structure of the Population
• Baby boomers include people born between
1946 and 1964
• Includes most affluent business people
• Over the years, the baby boomers have been one of the
most powerful forces shaping the marketing environment
through every stage of life through which they migrate.
The youngest boomers are now in their fifties; the oldest
are in their late sixties and well into retirement
• Wealthiest generation in Us history
Social Environment

38. Demographics
Changing Age Structure of the Population
• Generation X includes people born between
1965 and 1976. They tend to:
• Have high divorce rates
• Are concerned about the environment
• Respond to socially responsible companies
• Are less materialistic
• Emphasize quality of life
• Consumer organizations, environment groups, and minority groups
Social Environment

39. Demographics
Changing Age Structure of the Population
• Generation Y (Millennials) includes people
born between 1977 and 2000.
• The Internet generation
• The Millennials were the first generation to grow up in a
world filled with computers, mobile phones, satellite TV,
iPods and iPads, and online social networks.
• As a result, they engage with brands in an entirely new
way, such as with mobile or social media
Social Environment

40. Social Environment
Demographics
Generation Z – born after 2000
- The GenZers make up important kids, tweens, and teens markets who
spend an estimated $43 billion annually of their own money and influence
a total of almost $200 billion of their own and parents’ spending.
- These young consumers also represent tomorrow’s markets—they are
now forming brand relationships that will affect their buying well into the
future.

41. Demographics
The Changing Family
More people are:
• Divorcing or separating
• Choosing not to marry
• Choosing to marry later
• Marrying without intending to have
children
• Higher divorce rates
• Increased number of working
women
• More stay-at-home dads
Social Environment

42. Social Environment
Demographics
Geographic Shifts in Population
• Trends include:
• Migratory movements between and
within countries
• Moving from rural to metropolitan areas
• Changes in where people work
• Telecommuting
• Home office
• Divorce or separation

43. Demographics
Changes in the Workforce
Trends include:
• More educated
• More white collar
• More professional
Social Environment

44. Demographics
Increasing Diversity
• Markets are becoming more diverse
• International
• National
• Trends include:
• Ethnicity
• Gay and lesbian
• Disabled
Social Environment

45. Social Environment
 Key Demographic Trends
 World population
growth
 Now 7.4 billion
 Projected to
reach 8.1 billion
by 2025

46. Social Environment
 Social Responsibility and Ethics: Derived in part from culture, ethical,
beliefs about how marketers should operate affect the ways in which
people respond to marketing initiatives.
 Changes in attitude towards health: Today, people are more concerned
of health than they were a few decades ago. An individual interest in
health and physical fitness in recent years seems to have cut across
most segments of our society.
 Participation in fitness activities from aerobics to yoga is on the
increase and thus marketers have responded with a wide range of
products and services for the health conscious population.

47. Cultural Environment
The cultural environment consists of institutions and other forces that affect a
society’s basic values, perceptions, and behaviors.
Social Environment

48. Persistence of Cultural Values
• Core beliefs and values have a high degree of persistence, are passed on from
parents to children, and are reinforced by schools, churches, businesses, and
government.
• Secondary beliefs and values are more open to change.
Shifts in Secondary Cultural Values
• Major cultural values of a society are expressed in people’s view of:
• Themselves
• Others
• Organization
• Society
• Nature and the universe
Social Environment

49. Shifts in Secondary Cultural Values
• People’s view of themselves
• Do-It-Yourselfers—recent movers
• Adventurers
• People’s view of others
• People’s view of organizations
• People’s view of society
• Patriots defend it
• Reformers want to change it
• Malcontents want to leave it
Social Environment

50. Shifts in Secondary Cultural Values
• People’s view of nature
• Some feel ruled by it
• Some feel in harmony with it
• Some seek to master it
• People’s view of the universe
• Renewed interest in spirituality
Social Environment

51. Technological Environment
• The technological environment is perhaps the most dramatic forces that
create new technologies, creating new product and market opportunities.
• The pace of technological change is becoming increasingly rapid and
marketers need to understand how technological development might affect
them.

52. • Most dramatic force in changing the marketplace with many positive and
negative effects
• Rapid change
• Provides new markets and new opportunities
• Internet
• Medicine
• Miniaturization
• Weapons
• Credit cards
• Communication
Technological Environment

53. Technological Environment
 Key Technological Trends
 The technological environment is characterized by rapid change.
 New technologies create new opportunities and markets but make old technologies
obsolete.
 The U.S. leads the world in research and development spending.

54. Ecological (Natural) Environment
• Ecological Environment is concerned of issues as to how the organisation interacts with and affects the natural
environment or the ecology.
• Ecological Environment issues relevant to marketing as follows:
• Resources Depletion: the impact of the use of certain materials to develop products which would lead to the
depletion of natural resources.
• Pollution Concerns:
Noise Pollution
Environmental Pollution
Eye pollution

55. • Natural environment involves the natural resources that are needed as
inputs by marketers or that are affected by marketing activities.
• Trends
• Shortages of raw materials
• Increased pollution
• Increased government intervention
• Environmentally sustainable strategies
• Green marketing
Ecological ( Natural) Environment

56. Ecological (Natural) Environment
Many companies use recycling to help protect natural
resources

57. Legal Environment
Changes in the political environment often lead to changes in legal environment and in the
existing laws enforced.
The legal environment sets the basic rules for how a business should operate in society.
Some of the laws an organisation should be aware of are as follows:
• Protection of intellectual rights
• Consumer Protection act
• Companies Act

58. Legal Environment
 Regulatory Commission
 Environmental Protection Laws
 Code of Takeovers and Mergers.
 Laws with regard to Media Freedom and Advertising
 Exchange Control

59. Views on Responding
• Uncontrollable
• Reacting and adapting to forces in the environment
• Proactive
• Taking aggressive actions to affect forces in the environment
• Reactive
• Watching and reacting to forces in the environment
Responding to the Marketing
Environment

60. Review Questions
 What is the Marketing Environment?
 What are the sectors of the Macro Environment?
 What does the Socio-cultural Environment entails?