The Marketing Environment

1. Week 2 - 09.20.04 The Marketing Environment

2. Social Change Micro Environment is not totally controllable Demographics Competition Ever-Changing Marketplace Suppliers Economic Conditions Technology Target Market Intermediaries Political & Legal Factors External-Macro Environment is not controllable Marketing Environment Internal Environment Environmental Scanning

3. 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.

4. 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.

5. Company’s Internal Environment

6. 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.

7. 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.

8. Exhibit 2.9a: Perceptual Map Comparing Variety and Service 1-2-3

9. Types of Publics Citizen Action Publics Government Publics Local Publics General Public Media Publics Financial Publics Internal Publics Company

10. Major Forces in the Company’s Macroenvironment

11. 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.

12. Types of Customer Markets Reseller Markets Government Markets Business Markets Consumer Markets International Markets Company back

13. Key U.S. Demographic Trends Changing Age Structure Population is aging; many divisions Changing American Family Later marriage, fewer children, working women, and nontraditional households Geographic Shifts Moving to the Sunbelt, suburbs, “micropolitan areas” Better-Educated & More White-Collar Increased college attendance and white-collar workers Increasing Diversity 72% Caucasian, 13% African-American, 11% Hispanic & 3% Asian back

14. Age Distribution of the U.S. Population Baby Boomer Generation (78 million people born 1946-1964) One of the most powerful forces shaping the marketing environment, 30% of population Generation X (45 million people born 1965-1976) More skeptical, cynical of frivolous marketing pitches promising easy success Echo Boomer Generation (72 million people born 1977-1994) Fluent and comfortable with computer, digital, and Internet technology (Net-Gens)

15. GEN Y vs GEN X

16. GEN Y vs GEN X

17. GEN Y : Talk to them, Possible? • 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? How

18. Generation Y

19. Honda Element Analysis

20. Economic Development Changes in Income: Value Marketing Key Economic Concerns for Marketers Changing Consumer Spending Patterns Economic Environment

21. Natural Environment Shortages of Raw Materials Factors Affecting the Natural Environment Environmentally Sustainable Strategies Increased Pollution Governmental Intervention

22. 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.

23. 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.

24. Political Environment Includes Laws, Government Agencies, Etc. that Influence & Limit Organizations/ Individuals in a Given Society Increasing Legislation Changing Government Agency Enforcement Increased Emphasis on Ethics & Socially Responsible Actions

25. Cultural Environment People’s View of Themselves People’s View of Others People’s View of the Universe Cultural Values of a Society People’s View of Nature People’s View of Organizations People’s View of Society

26. 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.

27. WAL-MART CASE