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Copyright 2007 Dr. Yoon

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Topic 6Topic 6

Capturing Marketing Insights from the Changing Environment

Marketing Management(MAR4803)

by Kanghyun Yoon


1-2Issues To Be DiscussedIssues To Be Discussed

• What do companies need to know about market environmental? Let’s consider the following issues to indicate how to identify marketing insights from the changing environment.

• Issue 1: Why is environmental analysis important? – An important underlying model is ….

• Issue 2: How to identify marketing opportunities/threats from the environment?

• Issue 3: How to develop a well-defined target market to introduce a new product?

• Issue 4: How to set up marketing intelligent system to convert marketing opportunities into profitable business?


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Issue 1: Why is the environmental analysis

important?

Issue 1: Why is the environmental analysis

important?


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Importance of Environmental AnalysisImportance of Environmental Analysis

• Consider the following wisdom:– “It is useless to tell a river to stop running; the best thing is to learn how to

sail in the direction it is flowing.”

• Importance of implementing environmental analysis:– The company operates in a larger macroenvironment of uncontrollable forces

and megatrends that shape opportunities and pose threats to the company.

– A major purpose of environmental scanning is to discern new opportunities from the changing environment.

– Thus, the companies should monitor the changing environment and continuously adapt their businesses to their best opportunities, using their resources (i.e., SWOT analysis).

• How to identify uncontrollable forces and trends?– From fads, trends, and megatrends to unmet needs of consumers.

– Examples:» Ten megatrends that shape the consumer landscape.

» How business and marketing are changing?


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• Why is each environmental factor important to monitor or scan?

– Demographic factors: monitors changing nature of population in terms of age, sex, race, occupation, location and other statistics.

– Economic factors: factors that affect consumer buying power and spending patterns.

– Natural factors: natural resources needed as inputs by marketers or that are affected by marketing activities.

– Technological factors: forces that create new product and market opportunities.

– Political/Legal factors: laws, agencies and groups that influence or limit marketing actions.

– Cultural/Social factors: forces that affect a society’s basic values, perceptions, preferences, and behaviors.

Macro-Environmental FactorsMacro-Environmental Factors


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Changing Age StructurePopulation is getting olderChanging Age StructurePopulation is getting older

Changing Family StructureMarrying later, fewer children,

working women, and nonfamily households

Changing Family StructureMarrying later, fewer children,

working women, and nonfamily households

Geographic ShiftsMoving to the Sunbelt and suburbs (MSA’s)

Geographic ShiftsMoving to the Sunbelt and suburbs (MSA’s)

Increased EducationIncreased college attendance

and white-collar workers

Increased EducationIncreased college attendance

and white-collar workers

Growing Ethnic and Racial Diversity73% Caucasian, 12% African-American,

10% Hispanic & 3.4% Asian

Growing Ethnic and Racial Diversity73% Caucasian, 12% African-American,

10% Hispanic & 3.4% Asian

Demographic EnvironmentDemographic Environment


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Economic EnvironmentEconomic Environment

Changesin Consumer

SpendingPatterns

Changesin Consumer

SpendingPatterns

EconomicDevelopment

EconomicDevelopment

Changes in Income

Changes in IncomeKey

EconomicConcerns for

Marketers

KeyEconomic

Concerns forMarketers


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Natural EnvironmentNatural Environment

Factors Affecting

the Natural

Environment

More GovernmentIntervention

More GovernmentIntervention

Shortages of Raw Material

Shortages of Raw Material

Increased Costsof Energy

Increased Costsof Energy

Higher PollutionLevels

Higher PollutionLevels


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Technological EnvironmentTechnological Environment

Rapid Pace of Change

Rapid Pace of Change

High R & D Budgets

High R & D Budgets

Focus on MinorImprovements

Focus on MinorImprovements

IncreasedRegulationIncreasedRegulation

Issues in the TechnologicalEnvironment

Issues in the TechnologicalEnvironment


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Political/Legal EnvironmentPolitical/Legal Environment

GreaterConcern for

Ethics

GreaterConcern for

Ethics

IncreasedLegislation

IncreasedLegislation

Changing Enforcement

Changing EnforcementKey

Trends in thePolitical

Environment

KeyTrends in the

PoliticalEnvironment


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Cultural/Social EnvironmentCultural/Social Environment

OfOrganizations

OfNature

OfOneself

OfSociety

Ofthe Universe

OfOthers

ViewsThat Express

Values

ViewsThat Express

Values


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Issue 2: How to identify marketing

opportunities/threats?

Issue 2: How to identify marketing

opportunities/threats?


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SWOT AnalysisSWOT Analysis

• The starting point of strategic planning is ….– To identify business opportunities or threats by monitoring uncontrollable

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

– Then, the companies should find the strategic fit between company’s capabilities and its changing marketing environment.

– It is SWOT analysis.

• SWOT analysis consists of:– internal capabilities of company: Strengths and Weaknesses

– external uncontrollable factors: Opportunities and Threats

• The goals of SWOT analysis – To identify business/marketing opportunities or problems from the changing

environment.

– Find the best strategic fit between company’s capabilities and its changing market environment to serve customers effectively.


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Market Opportunity AnalysisMarket Opportunity Analysis

• A major purpose of environmental scanning is ….– To discern new opportunities from the changing environment.

• Three main sources of market opportunities:– To supply something that is in short supply.

– To supply an existing product or service in a new or superior way.» Problem detection method

» Ideal method

» Consumption chain method

– To supply a totally new product or service.

• Converting opportunities into different forms of values:– Introducing hybrid products or services; Making a buying process more

convenient or efficient; Offering a product at a much lower price; Providing more information and advice; Customizing a product or service; Introducing a new capability; Delivering a product or service faster; and so on.

• Market Opportunity Analysis (MOA):– Opportunity and threat matrix


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Issue 3: How to develop a target market?

Issue 3: How to develop a target market?


1-16Segmentation, Targeting, and PositioningSegmentation, Targeting, and Positioning

1. Identify Basesfor Segmenting the Market

2. Develop Profilesof Resulting Segments

3. Evaluate Attractiveness of Each Segment Using Measures

4. Select Target Segment(s)Using Several Criteria

5. Develop Positioningfor Each Target Segment

6. Develop MarketingMix for Each Target Segment Market

Positioning

MarketTargeting

Market Segmentation


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Step 1: Market SegmentationBases for Segmenting Consumer Markets

Step 1: Market SegmentationBases for Segmenting Consumer Markets

Geographic

DemographicAge, gender, family size and life cycle, or income

PsychographicSocial class, lifestyle, or personality

BehavioralOccasions, benefits, uses, or responses

Nations, states, regions or cities


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Using Multiple SegmentationBases: Geodemographics

Using Multiple SegmentationBases: Geodemographics


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Step 1: Market SegmentationRequirements for Effective Segmentation

Step 1: Market SegmentationRequirements for Effective Segmentation

• Size, purchasing power, profiles of segments can be measured.

• Segments must be effectively reached and served.

• Segments must be large or profitable enough to serve.

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

ActionableActionable

• Segments must respond differently to different marketing mix elements & actions.

• Must be able to attract and serve the segments.


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Step 2: Market TargetingEvaluating Market Segments

Step 2: Market TargetingEvaluating Market Segments

• Market Size & Growth– Analyze sales, growth rates, and expected profitability.

• Structural Characteristics– Consider the effects of competitors, availability of

substitute products, the expectation of market saturation, entry/exit barrier, environmental changes, and so on.

• Strategic Fits– Company objectives, company skills & resources relative

to the segment(s), current image, competitive advantages, and so on.


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Selecting Target Segment(s)Selecting Target Segment(s)

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing Mix 1






MarketMarket

A. Undifferentiated Marketing

B. Differentiated Marketing

C. Concentrated Marketing


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Levels of Market SegmentationLevels of Market Segmentation

Mass MarketingSame product to all consumers

(no segmentation)

Mass MarketingSame product to all consumers

(no segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

MicromarketingProducts to suit the tastes of individuals or locations

(complete segmentation)

MicromarketingProducts to suit the tastes of individuals or locations

(complete segmentation)

Niche MarketingDifferent products to subgroups within segments

( more segmentation)

Niche MarketingDifferent products to subgroups within segments

( more segmentation)


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Step 3: Positioning for Competitive AdvantageStep 3: Positioning for Competitive Advantage

• Many ads claims are the careful efforts of companies to exhibit the benefits they offer through product and to differentiate themselves from competition.

• Product features are important, but what is more important is the subjective benefits or values that customers perceive.

• So, we need to consider the position of a product in consumers’ minds, e.g., the place the product occupies, relative to competing products.

– For example, Volvo’s positions on “safety.”

• Marketers should develop an effective positioning strategy for both an existing and a new product.

– Positioning strategy should deliver a message that my product delivers the benefits the customers want and it is better than competitor’s products.

– A key tool for benefit positioning: perceptual maps and value maps.


1-24Sources of Competitive AdvantagesSources of Competitive Advantages

Against aCompetitor

Against aCompetitor

UsageOccasions

UsageOccasions

Away fromCompetitors

Away fromCompetitors

ProductAttributes

ProductAttributes

ProductClass

ProductClass

BenefitsOffered

BenefitsOffered

UsersUsers

BB

AA

EEDD

CCHHGG

FF


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Issue 4: How to set up a market intelligent

system?

Issue 4: How to set up a market intelligent

system?


1-26ReferenceReference

• Blackwell, Roger D., Paul W. Miniard, and James F. Engel (2001), Consumer Behavior, 9th ed., Harcourt College Publishers.

• Ferrell, O. C. and Michael D. Hartline (2008), Marketing Strategy, 4th ed., Thomson: South-Western, Ohio.

• Kotler, Philip and Kevin Lane Keller (2007), A Framework for Marketing Management, 3rd ed., Pearson: Prentice-Hall, New Jersey.

• Kotler, Philip and Kevin Lane Keller (2007), Marketing Management, 12th ed., Pearson: Prentice-Hall, New Jersey.

• Kotler, Philip and Gary Armstrong (2004), Principles of Marketing, 10th ed., Prentice Hall.

• Lehmann, Donald R. and Russell S. Winer (2005), Analysis for Marketing Planning, 6th ed., McGraw-Hill, Boston.

• Winer, Russell S. (2007), Marketing Management, 3rd ed., Pearson: Prentice-Hall, New Jersey.

• Zikmund, William G. (2003), Essentials of Marketing Research , 2nd ed., Thomson: South-Western. (see chapter 1)

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