principles of marketing chapter 3: analyzing the marketing environment

Principles of Marketing

Chapter 3:Analyzing the Marketing

Environment

Competition for aDifferential Advantage

• Easiest way to gain a differential advantage is by, first, understanding and addressing one’s customers’ wants/needs better than the competition.

Dr. James Carver – Auburn University

Marketing Environment

• Consists of actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.

• Review: What was the 2nd point in the marketing concept?


Marketing Environment

Microenvironment

• Actors close to the company that affect its ability to serve its customers.

Company itself Suppliers Marketing intermediaries Customer markets Competitors Publics

Macroenvironment

• Larger societal forces that affect the microenvironment (i.e., shape opportunities & pose threats to the company)

Demographic Economic Natural Technological Political Cultural


Demography

• The study of human populations in terms of:• Market (~Physical) Characteristics

Location*, Size*, or Density*

• All termed, yet not defined in text (Rosenbloom ‘04,’08,’12; Dunne, Lusch, Carver ‘11,’13)

• Population (~Personal) Characteristics Age Distribution, Education, State of Marriage*, Household Structure, Ethnic Makeup, etc.

• All updated per the U.S. Bureau of Census, Statistical Abstract of the United States: 2012 and/or any other cites included within the following notes.


“Physical” Characteristicsof a Market*

• Common variables include:Location

• Geographical extent of a market, its location, and its distance from the firm

Size• The number of customers making up a market

Not the dollar volume b/c it can vary significantly and is not necessarily correlated with number of customers

Where firms = 1 person or customer (i.e., in b2b markets)

Density• The number of customers per unit of area


“Shifting” in Market Geography*

• American’s mobility is increasingChange residence approx. 12 times on average

• This is twice that of British & French and 4 times Irish

12% of population moved in 2010• 75% remained in same county• 25% to new county but same state• 8% moved to new state

• Total is more than 100% due to moving more than once in the year


“Shifting” in Market Geography*

• Moving South and West over last 200 yearsEight fastest growing between 2000 and 2010

• Nevada, Arizona, Utah, Idaho, Texas, North Carolina, Georgia, and Florida respectively

Projected growth between now and 2050• South and West by 44% and 45% respectively• Midwest only 10% and Northeast by only 7%

Micromarketing• Tailoring merchandise and marketing programs to the

specific needs and wants of one’s targeted neighborhood or community


Age Distribution*

• “Graying of America”Overall increase in the median age

• 1980 = 30 yrs.; 2010 ≈ 37 yrs.

Largely due to Boomers, but tempered by GenY• Boomers: 1946 to 1964

78 million• GenX or “Baby Busters”: 1965 to 1977* (book states till 1976)

47 million

• GenY, “Millennials” or “Echo Boomers”: 1978 to 1994 80 million


Education*

• Single greatest predictor of income potential• As of 2010…

87% over 25 had a high school degree30% had a bachelor’s or advanced degree30% of each men & women receiving college degrees

• Yet 30% more women enrolled each year since 2000 By 2020, 60% of all degrees will be given to women

“Average American”• 33.6 million over age 25with “some college”


State of Marriage*

• Average age when people marry is increasing1970:

• Less than 10% of males & 6% of females 30-34 not married

2010:• 37% of males & 27% of females 30-34 not married

Increasingly never marrying too…• 15% of males & 11% of females between 45 and 54

never married


Household Structure

• Household are the basic unit for most consumer products. Thus,

Markets are commonly understood and measured in terms of households.

• But what’s the “typical” household?


Household Structure*

• The “typical” household (as of 2010):• No kids in over 55% of all households

Combo of: “empty nesters”, DINKS, “home aloners”, etc.

• Over ¼ are “home aloners” (approx. 31.4 million)• Unmarried “Mingles” have grown 383% since 1980 &

represent over 6% of all households• “Boomerang Effect” is increasing

50% of 2008 grads returned home; 4 out of 10 were still there over a year later (Monster Survey in “They’re Baaa-aack,” St. Louis Post-Dispatch, May 3, 2008: 23)

• “Sandwich generational”, or “trigenerational”, families on the rise (parents, grandparents, and children) live together in the same house.


Ethnic Makeup*

• Movement towards Emerson’s “Melting Pot”

Non-Hispanic whites• Today: 68%; Projected 2050: 46%

Hispanics• Today: 15%; Projected 2050: 30%

African-American• Today: 13%; Projected 2050: 15%

Asian-American• Today: 5%; Projected 2050: 10%


Ethnic Makeup*

• Ethnic segments will continue to grow as a percentage of the U.S. population. Thus,

• Understand Hispanic shoppers 65% are under 35 An average of 9 yrs. younger than overall U.S. population Teen pop. projected to rise 62% by 2020; 10% for all teens Understand that Hispanic shoppers are not homogeneous

• Mexicans, Cubans, Spanish, etc. are all different

2nd generation and beyond are more mainstream

• Remember that African-Americans represent a significant population base, and the Asian-Americans population is expected to double by 2050.


Economic Environment

• Consists of factors that affect consumer purchasing power and spending patterns.

• Marketers must monitor such things as:Changes in incomeConsumer savings Income distribution


Economic Environment – Income Distribution*

• The distribution of wealth is non-uniform. African-American: $38,200 Hispanic: $40,000 White: $61,200 Asian-Pacific Islander: $74,600

However, income mobility is quite high in the U.S.• Over 50% of all taxpayers moved up at least one quintile

(1/5 of the population) in 10 years• Over 75% of top-one percent in ‘96 fell at least one quintile

by 2005• Income is stratified, but not constant as often purported

• U.S. Treasury Department, Income Mobility in the U.S. From 1996 to 2005, November 13, 2007.


Economic Environment– Personal Savings*

• Many criticize the U.S. economic system as not rewarding personal savings.1981 high of 8.8% to 6.5% in 1990 to dismal 1.4% in

2005• Trend is reversing due to “Great Recession”

5.9% and 5.8% in 2009 and 2010 respectively (percent of disposable)

Yet government reporting neglects to account for:• Investment in the stock market

Overlooks the wealth effect*• Can increase overall spending without concurrent rise in disposable income


Natural Environment

• Involves natural resources that are needed as inputs by marketers or that are affected by marketing activities.Key trends include:

• Shortage of raw materials.• Increased pollution.• Increased government intervention.

Many firms now focus on creating environmentally-sustainable strategies.


Technological Environment

• Most dramatic force shaping our destiny.Changes rapidly, creating new markets and

opportunities and/or danger of products becoming obsolete.

Challenge is to make practical, affordable new products.

Government bans unsafe products and sets safety standards, resulting in higher research costs, and longer time to market for new products.


Political Environment

• Includes laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society.Marketing activities face:

• Increasing legislation.• Changing government agency enforcement.• Increased emphasis on ethics and socially responsible

behavior (including cause-related marketing).


Cultural Environment

• The institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviors.Core beliefs and values are passed on from parents

to children and are reinforced by schools, churches, businesses, and government.

Secondary beliefs and values are more open to change.

• Marketers may be able to change secondary beliefs, but NOT core beliefs.


Cultural Environment

• Society’s major cultural views are expressed in people’s views of:ThemselvesOthersOrganizationsSocietyNatureThe universe


principles of marketing chapter 3: analyzing the marketing environment

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