The Marketing Environment

Week 2 - 09.20.04Week 2 - 09.20.04

CompetitionCompetition

SuppliersSuppliers

IntermediariesIntermediaries

Marketing Environment

DemographicsDemographics

SocialChangeSocial

Change

EconomicConditionsEconomicConditions

Political & Legal FactorsPolitical &

Legal Factors

TechnologyTechnology Target Market

Internal Environment

Internal Environment

External-Macro Environment External-Macro Environment is not controllableis not controllable

Ever-ChangingEver-ChangingMarketplaceMarketplace

Micro Environment Micro Environment is not totally controllableis not totally controllable

EnvironmentalEnvironmentalScanningScanning

Marketing Environment

Marketing Environment- consists of the actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful relationships with its target customers.

Includes: Microenvironment - forces close to the company

that affect its ability to serve its customers. Macroenvironment - larger societal forces that

affect the microenvironment.

The Company’s Microenvironment

Company’s Internal Environment- functional areas inside a company that have an impact on the marketing department’s plans.

Suppliers - provide the resources needed to produce goods and services and are an important link in the “value delivery system”.

Marketing Intermediaries - help the company to promote, sell, and distribute its goods to final buyers. i.e. resellers.

Company’s Internal Environment

The Company’s Microenvironment

Competitors - those who serve a target market with similar products and services against whom a company must gain strategic advantage.

Publics - any group that perceives itself having an interest in a company’s ability to achieve its objectives.

Competition Story

Weyerhaeuser’s Personal Care Products Division launched Ultrasofts in early 1990. It used Wegman’s Food Markets chain as its distributor. Much fanfare and major advertising accompanied the product launch; 50,000 customers received promotional discounts. The product was technically superior to Pampers and Huggies, the leading U.S.

premium brands. The diaper had extra cushy waistbands and cuffs to prevent leakage. It was softer than competitive products because it had a cloth-like covering instead of the plastic covering typical of competitive products. Its super-absorbent pulp material woven into the pad kept babies drier than did other diaper brands. Ultrasofts cost $8.39 for a package of thirty-two diapers, about $1.60 less than competing brands. Pilot tests in the market showed that parents

preferred Ultrasofts two-to-one over leading brands.Despite these technological advantages and consumer support, Ultrasofts failed. Weyerhaeuser’s competitive strategy

was simply deficient in dealing with the fierce competition in the diaper industry. Weyerhaeuser did not have good estimates of demand for the product and market share distributions. Its strategy of supplying through a regional

distributor limited its demand. Suppliers of lining materials did not want to enter into long-term contracts for small quantities. Weyerhaeuser’s own production plant in Bowling Green, Kentucky, was too small for large-scale

production, which prevented the company from exploiting economies of scale.Weyerhaeuser also underestimated the fight for shelf space in the fiercely competitive retailing industry. Within six

months of launching Ultrasofts, the company raised prices by 22% to cover extra manufacturing costs. It also cut back on promotions. Simultaneously, Procter & Gamble and Kimberly-Clark – big national competitors – responded to

Weyerhaeuser’s entry into the market by aggressively promoting their own brands. They gave special price discounts to retailers and customers. Retailers became reluctant to give shelf space to Ultrasofts. Customers switched to lower-priced alternatives. Within a year of launching Ultrasofts, Weyerhaeuser withdrew it from the market and sustained a

large, unspecified loss.

Exhibit 2.9a: Perceptual Map Comparing Variety and Service

1-2-3

Types of Publics

PUBLICS

I n this ad,Wal -Martrecogni zes thei mportance ofboth i ts localand employeepubl i cs.

Company

CitizenActionPublics

LocalPublics G

eneral

Public

Intern

al

Publics

Government

Publics

Med

iaPu

blic

s

Financi

al

Public

s

Major Forces in the Company’s Macroenvironment

The Company’s Macroenvironment

Customers - five types of markets that purchase a company’s goods and services.

Demographic - studies populations in terms of size, density, location, age, gender, race, occupation and other statistics.

Economic - factors that affect consumer purchasing power and spending patterns.

Natural - natural resources needed as inputs by marketers or that are affected by marketing activities.

Types of Customer Markets

Government Markets

International

Markets

ResellerMarkets

Business

Markets

Con

sum

er M

arke

ts

Company back

Key U.S. Demographic Trends

Changing Age StructurePopulation is aging; many divisions

Changing American FamilyLater marriage, fewer children, workingwomen, and nontraditional households

Geographic ShiftsMoving to the Sunbelt, suburbs,

“micropolitan areas”

Better-Educated & More White-Collar Increased college attendance

and white-collar workers

Increasing Diversity72% Caucasian, 13% African-American,

11% Hispanic & 3% Asian

back

Age Distribution of the U.S. Population

(78 million people born 1946-1964) One of the most powerful forces shaping

the marketing environment, 30% of population

(45 million people born 1965-1976) More skeptical, cynical of frivolous marketing pitches promising easy

success (72 million people born 1977-1994)

Fluent and comfortable with computer, digital, and Internet

technology (Net-Gens)

GEN Y vs GEN X

GEN Y vs GEN X

GEN Y : Talk to them, Possible?

How

Would you segment your market using generations (GEN Y, GEN X, Baby boomers) if you were in the soft drink market? Why ?

Who would you target and why?

Let’s compare Coke and Pepsi. According to you who is the best in terms of reaching the generation Y? What about other products?

Generation Y

Honda Element Analysis

EconomicDevelopment

EconomicDevelopment

Changes in Income:Value Marketing

Changes in Income:Value Marketing

Changing ConsumerSpending Patterns

Changing ConsumerSpending Patterns

KeyEconomic

Concerns forMarketers

KeyEconomic

Concerns forMarketers

Economic Environment

Natural Environment

Factors Affecting

the Natural

Environment

Shortages of Raw Materials

Increased Pollution

GovernmentalIntervention

Environmentally SustainableStrategies

The Company’sMacroenvironment

Technological - forces that create new technologies, creating new product and market opportunities.

Political - laws, agencies and pressure groups that influence and limit organizations and individuals in a given society.

Cultural - institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviors.

Technological Environment

Faster pace of technological change; products are outdated at a rapid pace.

Almost unlimited opportunities being developed daily in health care, space industry, robotics, and bio-genetic field.

Challenge is not only technical, but also commercial – make practical, affordable versions of products.

Increased regulation concerning product safety, individual privacy, and other areas that affect technological changes.

Increasing LegislationIncreasing Legislation

Changing Government

AgencyEnforcement

Changing Government

AgencyEnforcement

Includes Laws, Government Agencies, Etc. that Influence & Limit Organizations/ Individuals in a Given Society

Includes Laws, Government Agencies, Etc. that Influence & Limit Organizations/ Individuals in a Given Society

IncreasedEmphasis on

Ethics &Socially

ResponsibleActions

IncreasedEmphasis on

Ethics &Socially

ResponsibleActions

Political Environment

Cultural Environment

People’s View of Organizations

People’s View of Organizations

People’s View of Nature

People’s View of Nature

People’s View of Themselves

People’s View of Themselves

People’s View of Society

People’s View of Society

People’s View ofthe Universe

People’s View ofthe Universe

People’s View of Others

People’s View of Others

Cultural Valuesof a

Society

Cultural Valuesof a

Society

Responding to the Marketing Environment

Environmental Management Perspective

Taking a proactive approach to managing the microenvironment and the macroenvironment by taking aggressive (rather than passive) actions to affect the publics and forces in the marketing environment.

How? Hire lobbyists , run “advertorials”, press law suits, file complaints, and form agreements.

WAL-MART CASEWAL-MART CASE