Reflective Paper

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Unit 6

Analyzing the Consumer Environment

Unit 6: Learning Objectives

Describe the environmental forces that affect the company’s ability to serve its customers.

Explain how changes in the demographic and economic environments affect marketing decisions.

Identify the major trends in the firm’s natural and technological environments.

Explain the key changes in the political and cultural environments.

Discuss how companies can react to the consumer environment.

Outlines learning objectives from this chapter.

Environmental Forces

The Marketing Environment

Factors and outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.

What’s happening to Sony?

LO 1: Describe the environmental forces that affect the company’s ability to serve its customers.

Microenvironment is comprised of forces both controllable and uncontrollable
Macroenvironment often referred to in categories of Competition, Regulation, Economic, Social, Technological (CREST)
CREST forces ultimately expose sources of Opportunities and/or Threats

Environmental Forces

Microenvironment:

Forces with direct impact to the company

Internal (depts like Finance and HR) & external (e.g. competitors and the market)

Macroenvironment:

External forces with direct impact across industries
- Competition, Regulation, Economic, Social, Technological (CREST)

LO 1: Describe the environmental forces that affect the company’s ability to serve its customers.

Microenvironment is comprised of forces both controllable and uncontrollable
Macroenvironment often referred to in categories of Competition, Regulation, Economic, Social, Technological (CREST)
CREST forces ultimately expose sources of Opportunities and/or Threats

The Microenvironment

Controllable

Uncontrollable

LO 1: Describe the environmental forces that affect the company’s ability to serve its customers.

Includes internal forces (e.g., company, suppliers, intermediaries) which the firm can control
Includes external forces (markets, competitors, publics) for which the behaviour is outside the firm’s control

- Company forces include: corporate culture, leadership, ownership, finance, R&D, purchasing, operations, accounting

These in turn can have great impact on marketing decisions and planning strategies
All departments must work together to provide superior customer value

- Suppliers:

- Important link in the overall customer value delivery system

- Provide resources needed to produce goods and services

- Most marketers treat suppliers like partners in creating and delivering customer value

- Intermediaries:

- Help the company to promote, sell, and distribute its goods to final buyers

- Resellers

- Physical distribution firms

- Marketing services agencies

- Financial intermediaries

The Microenvironment

Marketing Intermediaries

Resellers

Physical distribution firms

Marketing service agencies

The four types of marketing intermediaries are agents, distributors, wholesalers and retailers. Company, intermediary, and supplier forces are internal and thus controllable by the firm

LO 1: Describe the environmental forces that affect the company’s ability to serve its customers.

- Company, intermediary, and supplier forces are internal and thus controllable by the firm

Competition is the “C” of CREST and is an external, non-controllable force
Competition comes in five different forms
Competitive landscapes include pure competition, monopolistic competition, oligopolies, and monopolies

The Microenvironment

Publics

Financial publics

Media publics

Government publics

Citizen-action publics

Legal publics

General public

Public are any group of people who have an actual or potential interest in what the company does. Understanding publics is the basis of public relations and crisis communication

LO 1: Describe the environmental forces that affect the company’s ability to serve its customers.

The Macroenvironment

How these factors affect marketing decisions?

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

- Forces in the macroenvironment can be categorized as:

- Demographic

- Economic

- Natural

- Technological

- Political

- Cultural

The Demographic Environment

Demography:

Study of human populations (size, density, location, age, gender, race, occupation, and other statistics)

Strategic decisions often based upon shifts in demographics (e.g. changing age, family structure and population diversity)

Changing age demographics of the Canadian population is both an opportunity and a threat

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

- Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics

- Marketers watch, anticipate, and react to changing age and family structures, geographic population shifts, educational characteristics, and population diversity

The average age of the Canadian resident population was about 40.8 years in 2018, with Newfoundland and Labrador having the oldest average population, and Nunavut having the youngest average population. Additionally, the majority of Canadians, both males and females, are single. The next largest group of Canadians are married, but not separated.

5.04 million males and 5.12 million females between the ages of 45 and 64 living in Canada, which was the most out of any age group. The next largest age group was between the ages of 25 and 44, with 5.04 million males and 4.98 million females.

Ethnically diverse, ageing and geographically distributed population

The Demographic Environment

Three Largest Generational Groups

Baby Boomers

1947–1966
9.8 million
Wealthy but hard hit by recession

Generation X

1967–1976
7 million
Highly educated
Experientially driven

Millennials

(Gen Y)

1977–2000
10.4 million
Tech savvy
Personally centered

- More employed mothers

- Less materialistic

- Skeptical of marketing
- Spend money carefully

- Controls over 50% of country’s wealth

- Strong targets for financial services

- Includes tweens, teens, and young adults

- Fluent with digital technology

- Personalization and product customization are key to marketing success

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

- Baby Boomers

- 9.8 million people born between 1947 and 1966

- One-third of the population

- Wealthiest generation; controls over 50% of country’s wealth

- Recession hit Baby Boomers hard, eating into nest eggs and retirement prospects

- Boomers “think young;” strong targets for financial services

- Gen X

- 7 million born between 1967 and 1976

- Defined by shared experiences:

- Increased parental divorce rates and more employed mothers resulted in latchkey kids

- Less materialistic; prize experiences

- Skeptical of marketing

- Most educated generation to date

- Face economic pressures; spend carefully

- Millennials:

- 10.4 million born between 1977 and 2000

- Larger group than Generation X/Baby Boomers

- Includes tweens, teens, and young adults

- Fluent with digital technology

- Personalization and product customization are key to marketing success

Targeting Gen Xers and Millennials

Targeting Gen Xers:

Dairy Queen Ad

Targeting Millennials:

The Kia Soul

Successful in serving a segment of Gen-Xers who value family, life experiences, and environmental sustainability

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

- Targeting Gen-Xers: MEC has been highly successful in serving a segment of Gen-Xers who value family, life experiences, and environmental sustainability.

The Demographic Environment

Generation z

Born after 2000
Make up important kid, tween (8-12 years old), and teen markets
5.6 million
Fluent with digital technology

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

The Demographic Environment

Canadian family/households are changing:

Growing market of “non-traditional” households

Growing “crowded nest” syndrome

Fewer families have children

More dual-income families

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

- Canadian family/household are changing:

- Growing “crowded nest” syndrome

- Fewer families have children

- Average Canadian household shrank to 2.5 people

- More dual-income families

- Needs of non-traditional households must be considered by marketers

The Demographic Environment

Geographic Shifts in Population

Growth rates across Canada are not uniform

Rural to urban migration continues

Buying habits differ by region

Growth in telecommuting market

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

- Growth rates across provinces and territories are not uniform

- Rural to urban (city, suburb) migration continues

- People in different regions buy differently

- Shift in where people live is changing how they work

- Marketers targeting growing

The Demographic Environment

Better Educated, White-Collar Population :

Increased demand for higher quality

Increased understanding of value

Creates demand in different products
- Household consumption: Food, clothing, housing and leisure, etc.

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

- As of 2004, 59.1% of people had university degrees or post-secondary certificates

The Demographic Environment

Increasing Diversity:

Large and growing visible minority market

Growth in recognized disabilities

Acceptance of LGBT and gay marriages

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

Visible minorities
This group is growing 5 times faster than the whole population and has huge purchasing power
Marketers target specially designed ads, products, and promotions at ethnic groups
Marketing efforts are increasing toward:
LGBT (lesbian, gay, bisexual and transgender) community
People with disabilities

The Economic Environment

Nations vary greatly in their levels and distribution of income

Industrial economies
- Produce material goods intended for the market (facilities, supplies, work, knowledge)

Subsistence economies
- Traditional economy,
rural, non-developed countries

Developing economies
- Emerging markets
- Infrastructure and level of hygiene are still developing

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

The Economic Environment

Factors that affect spending

Changes in income

Consumption frenzy, record personal debt
Economic crisis leading to consumer frugality
Value marketing is key to success

Changes in spending patterns

Engel’s laws note that consumers at different income levels have different spending patterns
- Family income rises, the percentage spent on food declines, the percentage spent on housing remains about constant

LO 2: Explain how changes in the demographic and economic environments affect marketing decisions.

- Engel’s laws note that as family income rises, the percentage spent on food declines, the percentage spent on housing remains about constant (except for such utilities as gas, electricity, and public services, which decrease), and both the percentage spent on most other categories and that devoted to savings increase.

Natural Environment

Natural resources used to produce goods

Shortage of raw materials

Increased pollution

Increased government intervention

Strategic decisions around creating environmentally-sustainable products

LO 3: Identify the major trends in the firm’s natural and technological environments.

- Environmental sustainability: an effort to create a world economy that the planet can support indefinitely.

Technological Environment

Technology Advances

Creating new markets and opportunities

Increasing obsolescence

Accelerating customer needs

Resulting in constantly evolving regulations

Marketers’ role and responsibilities in new technologies?
Regulations result in higher research costs, and longer time to market for new products

LO 3: Identify the major trends in the firm’s natural and technological environments.

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

Political Environment

Regulatory Trends - Evolving laws influence organizations
Business legislation:

Protects companies from each other

Protects consumers from unfair business practices

Protects the interests of society

Increased emphasis on ethics and socially responsible behaviour.

Business owners and managers pay close attention to the political environment to gauge how government actions will affect their company

LO 4: Explain the key changes in the political and cultural environments.

Cause-Related Marketing

Companies linking themselves with worthwhile causes

LO 4: Explain the key changes in the political and cultural environments.

The Cultural Environment

Standard acceptable belief system that affects a society’s basic values

Core beliefs slow to change
-Values that shape who we are. For example, people have a core belief of educating children, getting married, start working etc.

Secondary beliefs are more open to change
- Marketers maybe able to change

CORE

Secondary

LO 4: Explain the key changes in the political and cultural environments.

The Cultural Environment

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

Themselves

Others

Organizations

Society

Nature

The Universe

Define and describe your culture!

LO 4: Explain the key changes in the political and cultural environments.

Responding to the Marketing Environment

It’s not possible to control the natural environment or to influence demographics, but companies can influence the regulatory environment (through lobbying), public opinion (through public relations), technology (through product development), and even the cultural environment, to some extent.

Reactive (Many companies are Passive)	Proactive (Aggressive)
Wait for change; then react	Anticipate change; act now
Missed opportunities	Seized opportunities
Damage from threats	Mitigate impact of threats

LO 5: Discuss how companies can react to the marketing environment.

- Reactive responses:

- Many firms are passive and simply react to changes in the marketing environment

- Proactive responses:

- Some attempt to manage the marketing environment via aggressive actions designed to affect the publics and forces in the marketing environment

Responding to the Marketing Environment

Examples of Proactive Responses:

Hiring lobbyists (to influence)

Running ”advertorials”

Initiating lawsuits

Filing complaints with regulators

Forming agreements to control channels

LO 5: Discuss how companies can react to the marketing environment.

Video Sharing

What's Happening to Sony?

Reviewing the Concepts

Describe the environmental forces that affect the company’s ability to serve its customers.

- Microenvironment and Macroenvironment

2. Explain how changes in the demographic and economic environments affect marketing decisions.

Marketers watch, anticipate, and react to changing age and family structures, geographic population shifts, educational characteristics, and population diversity

Changes in income and spending pattern

4. Identify the major trends in the firm’s natural and technological environments.

-Strategic decisions around creating environmentally-sustainable products

-Creating new markets and opportunities; increasing obsolescence; accelerating customer needs; resulting in constantly evolving regulations

5. Explain the key changes in the political and cultural environments.
- Increased emphasis on ethics and socially responsible behavior

- Society’s major cultural views

6. Discuss how companies can react to the marketing environment.

- Reactive responses (passive) Vs. Proactive responses (aggressive)