Environment

The Marketing Environment

Dr. Manish Agarwal

Learning Objectives External Marketing Environment Social Factors Demographic Factors Growing Ethnic Markets Economic Factors Technological & Resource Factors Political & Legal Factors Competitive Factors

External Marketing Environment Marketers must alter marketing

mix (4 p’s) because of changes in the environment.

Marketers can control marketing mix, but not external environment that continually mold & reshape the target market.

Environmental Scanning Organizations assemble a team of

specialists to continually collect and evaluate environmental information.

Goal is to identify future market opportunities and threats.

Environmental Management When a company implements

strategies that attempt to shape the external environment within which it operates.

Try to influence technological, competitive, and political/legal environments.

Uncontrollable External Environmental Factors

1. Social2. Demographic3. Economic4. Technological & Resource5. Political & Legal6. Competitive

1. Social Factors Most difficult variable to forecast,

influence or integrate into marketing plans.

Attitudes Values Lifestyles

Social Factors . . . Influence:

products people buy, prices paid for products, effectiveness of specific promotions,

and the how, where, when people expect to

purchase products.

Marketing-Oriented Values of the Late ‘90’s

Nearly 1/4 of adults are interested in new kinds of products/services.

Today’s consumers are demanding, inquisitive, discriminating.

Insist on high quality goods that save time & energy

Component Lifestyles

People are choosing goods/services that meet their diverse needs/interests rather than conforming to a single, traditional lifestyle.

Increase the complexity of consumers’ buying habits.

Changing Role of Families & Working Women

Greater effect on marketing than any other social change.

58% of all females between 16 and 65 years old are now in the workforce.

Two-career families have greater HH income, but less available time for family activities.

Changing Role of Families & Working Women . . .

Women are very concerned about the environment.

Surge in daycare centers, preschools, adult-care centers.

Women pay more for products/services than men.

2. Demographic Factors Age, race, ethnicity, location Strongly related to consumer

buyer behavior. Good predictors of how the target

market will respond to a specific marketing mix.

Generation “Y”Born to Shop

People under the age of 16. Nearly 60% of children under age 6

have working mothers. Nearly 60% of HH’s with children

under age 7 have computers. More than 1/3 of elementary

school students are Black or Hispanic.

Generation “X”Savvy & Cynical People between the ages of 18 and

29 years old. High aspirations. Low expectations. Willing to spend money on

“indulgent” items. Do not want to be marketed to.

Baby BoomersAmerica’s Mass Market Born between 1946-1964. Cherish convenience. Focus on family, health, finances,

reading materials. Importance of individualism has

led to a personalized economy.

Personalized Economy Delivers goods/services at a good

value on demand. Customization

Cable TV channels Immediacy

Banks in grocery stores Value

price competitively/create innovations

Older ConsumersNot Just Grandparents

55 years old + Healthier, wealthier and better

educated than earlier generations. Only 26% of population, but buys:

50% of domestic cars 50% of all silverware almost 50% of all home remodeling 80% of travel dollars

Indians On the Move Average Indian citizen moves

every 6 years. Reasons:

employment “young” retirees telecommuters commercial development in rural

areas

Multiculturalism

All major ethnic groups in an area are roughly equally represented.

Asians are nation’s fastest growing minority group, increasing 108% in 80’s.

Last census (1990) identified 110 different ethnic groups in U.S.

Strategies for Marketing in a Diverse Society

1. Many niches within ethnic markets - requires micromarketing strategies.

2. Maintain brand’s core identity while straddling different languages, cultures, ages, incomes.

3. Seek common interests, motivations or needs among ethnic groups - “stitching niches”

3. Economic Factors

1. Rising Incomes2. Inflation3. Recession

Rising Incomes 2/3 of all American HH’s earn a

“middle class” income: $18,000 - $75,000.

Over 8% of HH’s earn over $75,000, up from 2.6% in 1980.

Trend toward dual-income families leading contributor.

Provides more discretionary income.

Inflation Inflation causes consumers to do

two things: Decrease brand loyalty to search for

lowest prices Take advantage of coupons and sales

to stock up on items

Recession Period of economic activity when

income, production, and employment fall – which reduces demand.

This can be countered by: Improving existing products/introducing new

ones. Maintain & expand customer services. Emphasize top-of-the-line products and

promote product value.

4. Technological & Resource Factors New technology can assist firm in

coping with many other environmental factors. Example: New processes can reduce

production costs and help firm fight inflation/recession.

Technological & Resource Factors . . . India is not creating new

technology as fast as in the past. Indian companies have trouble

transforming results of basic/pure research into goods/services.

Applied research attempts to develop new or improved products.

Technological & Resource Factors . . . Indian companies seek short-term

profits and take minimal risk. This leads to development of line

extensions vs. new innovations. Several political/cultural alterations

could encourage innovations. Tax incentives Changes in org. structure Company encouragement of risk taking

5. Political & Legal Govt. establishes many operating

rules for businesses. Legal rules/restrictions affect every

aspect of the marketing mix. Govt. needs business to generate

revenue. Regulate competitive environment

Regulatory Agencies Consumer Protection Act Labour law (Employee Protection) Food and Drug Administration

6. Competitive Factors # competitors a firm must face Relative size of competitors Degree of interdependence within

industry

Basic Models of Competition Monopoly

Firm is the industry Utility co.’s,

Monopolistic Competition Large # suppliers offer similar, but

not identical products. Laundries, hair stylists, lawyers

Basic Models of Competition. . . Oligopoly

Small # firms dominate market Auto, tire, etc.

Pure Competition Large # of sellers marketing a

standardized product

Global Competition In the past, foreign firms entered

Indian markets by emphasizing price, now it’s quality.

companies battle one another in global markets as intensively as in the India.