CHAPTER 2THE CHANGING
MARKETING ENVIRONMENT
2 - 2
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
2 - 3
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
2 - 4
COMPANY’SMARKETINGPROGRAM
Demo-graphics
Economicconditions
Politicaland legal
forces
Social and cultural
forces
Competition
Technology
The Marketing Program
2 - 5
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
2 - 6
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
2 - 7
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
2 - 8
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!!!
2 - 11
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
2 - 12
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
2 - 13
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
2 - 14
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)
2 - 15
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
2 - 16
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
2 - 17
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
2 - 18
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
2 - 19
COMPANY’SMARKETINGPROGRAM
SuppliersMarketinginter-mediaries
Marketinginter-mediaries
Themarket
The Company’s Marketing Program
2 - 20
Production Finance Personnel
• Company’s location• Its research and
development strength
• Its image
Controllable Factors in the Marketing Plan
Internal Factors
Nonmarketing Factors
2 - 21
COMPANY’SNONMARKETING
RESOURCES
Financialresources
Researchand
development
Com
pany
imag
eLocation
Prod
uctio
nfa
cilit
ies
Human
resources
2 - 22
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