Chapter 2 The Changing Marketing Environment

CHAPTER 2THE CHANGING

MARKETING ENVIRONMENT

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Chapter GoalsTo gain an understanding of: The concept of monitoring a firm’s

environment How external forces influence a firm’s

marketing program: Demographics, economics, competition,

social/cultural milieu, technology, political/legal systems

How suppliers and intermediaries impact the marketing program

How nonmarketing resources within the firm influence the way in which it practices marketing

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The External Macroenvironment the external environment is changing very

rapidly, with considerable implications for marketing

macro forces are factors over which the company has no short-term control

micro forces are those that operate at the firm level

the external macroenvironment affects different firms at a different pace and in different ways

the better we understand the changing marketing environment and its effects, the better we can develop effective marketing programs

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COMPANY’SMARKETINGPROGRAM

Demo-graphics

Economicconditions

Politicaland legal

forces

Social and cultural

forces

Competition

Technology

The Marketing Program

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Demographic Change refers to the changing nature of the population most obvious change is the aging population smaller families; more single-person

households smaller, non-traditional households more part-time employment more dual-income households changing patterns of immigration; ethnic mix must consider the implications of these

changes

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Different age groups buy different products or services. What are the implications of these changes (1996-2006)?

Under age 25: Grow by 4.8%. 25-34 years old: Decline by 5%. 35-44 years old: Increase by 4.5%. 45-64 years old: Grow by 2.5 million,

or 39.5%. Over age 65: Grow by 20%.

The Importance of Changing Demographics

Source: Statistics Canada Projections

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Changing Ethnicity

Chinese growing to be second largest language group in Canada

Over one million Chinese live in Canada: 80% in British Columbia and

Ontario Have unique buying habits and

needs Make an “ethnic” market segment

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Economic Change consider the effect on consumers of:

recession (business cycle) changes in interest rates inflation unemployment

how are consumers likely to respond? they often shop around more; store

and brand loyalty suffer when consumers are uncertain

2 - 9 With little inflation, companies are

having trouble raising prices. Instead they are:

Redesigning products for ease of manufacture or to cut out costly, superfluous features.

Using price-driven costing rather than cost-plus pricing.

Emphasizing everyday low prices, rather than sporadic rebates and discounts.

Forging closer links with customers to speed up new product development.

Introducing “bare-bones” products. Investing in high-tech equipment to cut

costs.

Price Policy Must Respond to Economic Conditions

2 - 10 Research has identified five distinct

groups: Luxury lovers — 29 percent. Flaunt

their affluence. Savvy affluents — 23 percent. Seek

bargains, hide their wealth. Trailblazers — 21 percent. Love

adventure travel, active investors. Contented affluents —14 percent.

“Old money,” country-club set, believe in large estate for their children.

Strained affluents —13 percent. Have large debt burden, believe strongly in image.

Are Wealthy Consumers All the Same? No!!!

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Competitive ChangeCompetition takes place at three

levels:1. directly at the brand or store

level2. at the level of substitute

products/services3. From marketers of all

products and services competing for the same consumer dollar

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Social and Cultural Change

the way in which we lead our lives is also changing: lifestyles and values

greater emphasis on quality of life changing gender roles different attitudes toward physical

activity, exercise, and diet among certain segments

increased emphasis on quality and value

environmentalism has affected marketing

increased demands for convenience

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Trends in Attitude Change Changing male/female roles Emphasis on quality of life Growing interest in physical fitness,

health and wellness Growing focus on service quality Aging population Growth in influence of young buyers Growing environmental awareness

and concern

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True-Blue Greens - Change their personal behaviour and purchases to aid the environment.

Greenback Greens - Support environmental political candidates and donate money to environmental causes but are not as willing to change their habits.

Sprouts - Make a few environmental friendly purchases.

Grousers - Grudgingly acknowledge environmental mandates.

Basic browns - Most apathetic and their ranks are growing.

“Green” Consumers(from Roper Starch Worldwide)

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Technological Change Advancing technology creates new forms

of competition and communications; fax, ATM’s, CD-ROM, cellular, Internet

Also creates new industries to be supplied

Also has important effects on how people spend their time: working and shopping from home, voice mail, surfing the Net

Think about the fact that today technology is accepted by consumers, expected by them, transparent to them, and often disposable

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Impact of Technological Change Launches entirely new industries, such as

multimedia, digital communications and electronic commerce

Alters or virtually destroys existing industries, such as the effect of e-mail on regular mail and even fax

Stimulates other markets and industries, such as the effect of the debit card and Internet shopping on the retailing industry

Over 40% of Canadians had Internet access in 1999

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Political and Legal Change government and laws affect

marketing at many levels legislation often has implications for

marketing; some more direct than others

considerable amount of consumer protection legislation in effect in Canada

many industries are directly affected by legislation; packaging, labelling, advertising

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The External Microenvironment external to the firm, but part of its

marketing system because of its close relationship

its market; the people or organizations whose wants and needs the firm intends to satisfy

its suppliers; the other firms upon whom the firm relies to provide quality products and services so that it can serve its customers

marketing intermediaries; other firms that represent the channel of distribution for the firm’s products and services

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COMPANY’SMARKETINGPROGRAM

SuppliersMarketinginter-mediaries

Marketinginter-mediaries

Themarket

The Company’s Marketing Program

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Production Finance Personnel

• Company’s location• Its research and

development strength

• Its image

Controllable Factors in the Marketing Plan

Internal Factors

Nonmarketing Factors

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COMPANY’SNONMARKETING

RESOURCES

Financialresources

Researchand

development

Com

pany

imag

eLocation

Prod

uctio

nfa

cilit

ies

Human

resources

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The New Internal Market Internal marketing ensures that

employees are ‘on side’ with the goals of the organization

The employees have a direct impact on product and service quality, dependability, and overall productivity

The employees are an “internal market” which impact every department within the firm

A satisfied internal market will be better able to satisfy the external (customer) market