Kotler Pom15 Im 03

Chapter 3
ANALYZING THE MARKETING ENVIRONMENT

LECTURE STARTER: CHAPTER 3
YouTube: Adapting to the Fast-Changing

Marketing Environment
Synopsis
YouTube, the Internet video-sharing giant, burst onto the scene only a few short years ago. Last year, it captured
more than 1 trillion video views worldwide, giving it a 43 percent share of the online video market. Rather than
simply surviving in its chaotic environment, YouTube is thriving, leading the way in shaping how video is produced,
distributed, and monetized. Instead of simply providing more access to traditional Hollywood-type content,
YouTube created its Partner Program, which encourages aspiring Web video producers to create original new
content for YouTube. More than 30,000 partners in 27 countries now participate in the Partner Program, producing
new content and sharing the revenue that YouTube generates from ads that accompany their videos. Not only is
YouTube generating mind-numbing traffic, its also making money. YouTube generates more than $1 billion in
annual revenue for Google, its parent company. YouTube is also developing an advertising model thats built around
the way people use the site, a model that best suits the needs of users, content providers, advertisers, and its own
bottom line. To remain on top, YouTube will have to be nimble in adapting to the ever-changing marketing
environmentor better, in leading the change. Change will be the only constant.
Discussion Objective
A brief discussion of the YouTube story will help to illustrate how leading companies dont just react to changes in
the environment they lead those changes. Going far beyond mere survival, YouTube reinvents itself regularly with
new, forward-thinking ideas on how to produce, distribute, and monetize online video. The companys humble
beginnings and nimble marketplace approach paint a clear picture of the impact of the marketing environment on
marketing strategy. Here, the discussion goal is to link YouTubes threats, opportunities, and performance to the
rapid changes occurring in the firms microenvironment and macroenvironment. This discussion provides a useful
transition from the marketing management model provided in Chapter 2 to the concepts of analyzing the marketing
environment presented in Chapter 3.
Starting the Discussion

To kick off the YouTube discussion, pull up the YouTube website at www.youtube.com and ask the students to select
a few of their favorite videos. Watch two or three as a class. What makes these videos useful or entertaining? Would
they be willing to also view advertising content in order to watch their favorite videos? Ask students what they
believe YouTube does uniquely well, and view a few more examples based on student answers. Be sure to view at
least one video from the Partner Program. Finally, how have the students noticed that YouTube has changed over the
past year. What do they think of those changes? The key question is this: how and how well has YouTube anticipated
and even shaped new demands in the changing marketing environment? Use the following questions to focus the
discussion.
Discussion Questions
1. What appear to be YouTubes unique strengths in analyzing the marketing environment? Which key
principles from this chapter did company planners put to especially good use in anticipating, capitalizing on
and even helping shape the new marketing environment? (Here, you will want to focus the discussion on
competitors and publics, along with the demographic, economic, technological, can cultural environments.
As peoples views of themselves and society have changed, how has YouTube helped drive those changes?)
Copyright 2014 Pearson Education

2. How have changes in the marketing environment created opportunities and threats for YouTube? (Be sure
to include the time period all the way back to YouTubes early days as a place where regular folks could
upload low-quality homemade video clips. Focus on changes in technology, customers needs, business
processes, and competition. YouTubes approach to technology created incredible opportunities and
advantages for the company. At the same time, which forces might threaten its success?)
3. How does YouTubes Partner Program represent a fundamental shift in how companies profit from their
products and services? (Encourage students to consider the revolutionary concept of taking on outside
content producers and sharing advertising revenues with them. It is also useful to discuss how this
represents key insights into the marketing environment. Accompany this question with a viewing of partner
Ray Williams Johnsons YouTube channel, =3).
4. How does the chapter-opening YouTube story relate to what comes later in the chapter? (This question
transitions the discussion to Chapter 3 topics such as the impact of the actors and forces in the micro- and
macroenvironments and how companies must respond. The key point: the best companies do not merely
respond to changes. They help to shape and drive those changes.)
CHAPTER OVERVIEW
Use Power Point Slide 3-1 Here
This chapter shows that marketing does not operate in a vacuum but rather in a complex and
changing environment. Other actors in this environmentsuppliers, intermediaries, customers,
competitors, publics, and othersmay work with or against the company. Major environmental
forcesdemographic, economic, natural, technological, political, and culturalshape marketing
opportunities, pose threats, and affect the companys ability to build customer relationships. To
develop effective marketing strategies, you must first understand the environment in which
marketing operates.
CHAPTER OBJECTIVES
Use Power Point Slide 3-2 Here
1. Describe the environmental forces that affect the companys ability to serve its customers.
2. Explain how changes in the demographic and economic environments affect marketing
decisions.
3. Identify the major trends in the firms natural and technological environments.
4. Explain the key changes in the political and cultural environments.
5. Discuss how companies can react to the marketing environment.
CHAPTER OUTLINE
p. 68 INTRODUCTION

YouTube, the Internet video-sharing giant, burst onto the P. 69
scene only a few short years ago. Ad: Kraft and
YouTube
Last year, it captured more than 1 trillion video views
worldwide, giving it a 43 percent share of the online video
market.
Rather than simply surviving in its chaotic environment,

YouTube is thriving, leading the way in shaping how video
is produced, distributed, and monetized.
YouTube is also developing an advertising model that best

suits the needs of users, content providers, advertisers, and
its own bottom line.
To remain on top, YouTube will have to be nimble in

adapting to the ever-changing marketing environmentor
better, in leading the change.
Opening Vignette Questions

1. How has YouTube managed to survive and
thrive in a hyper-competitive marketing
environment?
2. Analyze the companys attitude toward
marketplace change. How has this attitude
influenced its success?
3. Do you believe that YouTube can retain the
stronghold it now commands in its market
niche? Why or why not?
4. In such a rapidly changing marketing
environment, what might YouTube be doing in
five years? Ten years?
More than any other group in the company, marketers must

be the trend trackers and opportunity seekers.
PPT 3-3 A companys marketing environment consists of the p. 70

actors and forces outside marketing that affect marketing Key Term:
managements ability to build and maintain successful Marketing
relationships with target customers. Environment
p. 71
PPT 3-4 The microenvironment consists of the actors close to the Key Terms:
company that affect its ability to service its customers. Microenvironment,
Macroenvironment

The macroenvironment consists of larger societal forces
that affect the microenvironment.
Assignments, Resources
Use Additional Project 1 here
Use Discussion Question 1 here
Use Web Resource 1 here
Use Video Case here
Troubleshooting Tip
This is an intense chapter, and it presents a lot of
information that might make some students heads
swim. If it hasnt happened before, this is where
students really begin to get the picture that
marketing managers need to be highly analytical
people. It helps to present the in-depth discussion of
current macro trends as something that needs to be
understood, but not memorized.
p. 71 THE MICROENVIRONMENT Chapter Objective 1
PPT 3-5 Marketing managements job is to build relationships with p. 71

customers by creating customer value and satisfaction. Figure 3.1: Actors
in the
PPT 3-6 The Company Microenvironment
All the interrelated groups form the internal environment.

All groups must work in harmony to provide superior
customer value and relationships.
PPT 3-7 Suppliers
Suppliers provide the resources needed by the company to

produce its goods and services.

Marketing managers must watch supply availability
supply shortages or delays, labor strikes, and other events
can cost sales in the short run and damage customer
satisfaction in the long run.
Marketing managers also monitor the price trends of their

key inputs.
PPT 3-8 Marketing Intermediaries

p. 72
Marketing intermediaries help the company to promote, Key Term:
sell, and distribute its products to final buyers. Marketing
PPT 3-9 Resellers are distribution channel firms that help the Intermediaries
company find customers or make sales to them.
These include wholesalers and retailers.
Physical distribution firms help the company to

stock and move goods from their points of origin to
their destinations.
Marketing services agencies are the marketing p. 72

research firms, advertising agencies, media firms, PhotoIKEA
and marketing consulting firms that help the
company target and promote its products to the right
markets.
Financial intermediaries include banks, credit

companies, insurance companies, and other
businesses that help finance transactions or insure
against the risks associated with the buying and
selling of goods.
Todays marketers recognize the importance of working

with their intermediaries as partners rather than simply as
channels through which they sell their products.
PPT 3-10
Competitors
Marketers must gain strategic advantage by positioning

their offerings strongly against competitors offerings in the
minds of consumers.
No single competitive marketing strategy is best for all

companies.

PPT 3-11 Publics p. 73
Key Term: Public
A public is any group that has an actual or potential interest
in or impact on an organizations ability to achieve its
objectives. p. 73
Ad: Life is Good
Financial publics influence the companys Company
ability to obtain funds.
Media publics carry news, features, and editorial
opinion.
Government publics. Management must take
government developments into account.
Citizen-action publics. A companys marketing
decisions may be questioned by consumer
organizations, environmental groups, and others.
Local publics include neighborhood residents
and community organizations.
General public. The general publics image of
the company that affects its buying.
Internal publics include workers, managers,
volunteers, and the board of directors.
PPT 3-12
Customers
There are five types of customer markets. The company

may target any or all of these:
1. Consumer markets: individuals and households that

buy goods and services for personal consumption.
2. Business markets: buy goods and services for further
processing or for use in their production process.
3. Reseller markets: buy goods and services to resell at
a profit.
4. Government markets: composed of government
agencies that buy goods and services to produce
public services.
5. International markets: buyers in other countries,
including consumers, producers, resellers, and
governments.
Use Additional Project 2 and 3 here
Use Outside Example 1 here
p. 74

PPT 3-13 THE MACROENVIRONMENT Chapter Objective 2
PPT 3-14 Demographic Environment p. 74

Key Term:
Demography is the study of human populations in terms of Demography
size, density, location, age, gender, race, occupation, and
other statistics. p. 75
Ad: Sony
Changes in the world demographic environment have major
implications for business.
Thus, marketers keep close track of demographic trends and

developments in their markets, both at home and abroad.
p. 74
Changing Age Structure of the Population Figure 3.2: Major
Forces in the
The U.S. population is currently about 313 million and may Companys
reach almost 364 million by the year 2030. Macroenvironment
PPT 3-15
The single most important demographic trend in the United
States is the changing age structure of the population.
Baby Boomers. The postWorld War II baby boom

produced 78 million baby boomers, born between 1946
and 1964.
Baby boomers account for nearly 25 percent of the p. 74

population, spend about $2 trillion annually, and hold 80 Key Term:
percent of the nations financial assets. Baby Boomer
As they reach their peak earning and spending years,

boomers will continue to constitute a lucrative market for
many products and services. p. 70
Ad: ElderTreks
It would be a mistake to think of older boomers as phasing
out or slowing down. Todays boomers think young no
matter how old they are.
Use Real Marketing 3.1 here
Use Small Group Assignment 1 here
PPT 3-16 Generation X. The baby boom was followed by a birth p. 77

dearth, creating another generation of 49 million people Key Term:
born between 1965 and 1976. Generation X

Author Douglas Coupland calls them Generation X. Others
call them the baby busters. p. 72
Ad: Dairy Queen
Increasing parental divorce rates and higher employment for
their mothers made them the first generation of latchkey
kids.
The GenXers developed a more cautious economic outlook,

and are a more skeptical bunch.
Millennials (also called Generation Y or the echo p. 78

PPT 3-17 boomers). Born between 1977 and 2000, these children of Key Term:
the baby boomers number 83 million or more. Millennials
(Generation Y)
This group includes several age cohorts:
Tweens (age 1012)
Teens (age 1318) p. 73
Young adults (age 1933) Ad: Keds
Millennials are fluent in and comfortable with digital

technology. It is a way for life for them.
PPT 3-18 Generational marketing. Rather than risk turning off one
generation in favor of another, marketers need to form
precise age-specific segments within each group.
It may be more useful to segment people by lifestyle, life

stage, or common values they seek in the products they buy.
Use Individual Assignment 1 here
Use Think-Pair-Share 1 here
Use Web Resources 2, 3, 4 here
p. 79 The Changing American Family
The traditional household consists of a husband, wife, and

children (and sometimes grandparents).
PPT 3-19 In the United States:
Married couples with children make up only 20

percent of the households;

Married couples without children make up 29
percent;
Single parents comprise 17 percent.
Nonfamily households make up 34 percent.
Both husband and wife work in 59 percent of all married-

couple families.
Use Additional Project 4 here
PPT 3-20 Geographic Shifts in Population p. 79
About 12 percent of all U.S. residents move each year. The

U.S. population has shifted toward the Sunbelt states.
Americans have been moving from rural to metropolitan

areas.
Such population shifts interest marketers because people in

different regions buy differently.
PPT 3-21 A Better-Educated, More White-Collar, More Ad: Grind

Professional Population
The U.S. population is becoming better educated.
In 2010, 87 percent of the U.S. population over age 25 had

completed high school, and 30 percent had completed
college.
Between 2010 and 2020, of 30 detailed occupations

projected to have the fastest employment growth, 17 require
some type of postsecondary education.
PPT 3-22 Increasing Diversity
The United States has become more of a salad bowl in

which various groups have mixed together but have
maintained their diversity by retaining important ethnic and
cultural differences.
The U.S. population is about 65 percent white, with around

16 percent Hispanic and 13 percent African-American. The

Asian-American population now totals just under 5 percent
of the population.
By 2050, Hispanics will grow to around 30 percent, p. 81

African-Americans will remain at about 13 percent, and Ad: Samsung
Asians will increase to 8 percent.
Diversity goes beyond ethnic heritage. Many companies

explicitly target gay and lesbian consumers.
According to one estimate, the 6 to 7 percent of U.S. adults

who identify themselves as lesbian, gay, bisexual, and
transgender (LGBT) have buying power of more than $790
billion.
Another attractive segment is the 54 million adults with

disabilities, representing more than $220 billion in annual
spending power.
Use Outside Example 2 here
p. 81 Economic Environment
p. 81
PPT 3-23 The economic environment consists of factors that affect Key Term:
consumer purchasing power and spending patterns. Economic
Environment
Industrial economies constitute rich markets for many
different kinds of goods.
Subsistence economies consume most of their own

agricultural and industrial output, and offer few marketing
opportunities.
In between are developing countries, which can offer

outstanding marketing opportunities.
Changes in Consumer Spending p. 82

Photo: Tata Motors
In recent years, American consumers fell into a
consumption frenzy, amassing record levels of debt.

However, thanks to the Great Recession, consumers now
face repaying debts acquired during earlier spending
splurges.
PPT 3-24 Value marketing means just the right combination of

product quality and service at a fair price.
Income Distribution
Income distribution in the United States is highly skewed.

The rich have grown richer, the middle class has shrunk,
and the poor have remained poor.
This uneven distribution of income has created a tiered

market.
PPT 3-25 The Natural Environment Chapter Objective 3
The natural environment involves the natural resources p. 82

that are needed as inputs by marketers, or that are affected Key Term: Natural
by marketing activities. Environment
Trends in the natural environment:

p. 83
1. Growing shortages of raw materials. Ad: Timberland
2. Increased pollution.
3. Increased government intervention.
Companies are developing strategies and practices that

support environmental sustainability. p. 83
Key Term:
Environmental
Sustainability

Use Individual Assignment 2 here
Use Marketing by the Numbers here
p. 84 Technological Environment p. 84
Key Term:
PPT 3-26 The technological environment is perhaps the most Technological

dramatic force now shaping our destiny. Environment
Technology has released such wonders as antibiotics,

robotic surgery, miniaturized electronics, smartphones, and p. 80
the Internet. Photo: Walmart
These new technologies can offer exciting opportunities for

marketers.
The United States leads the world in research and

development spending.
Use Small Group Assignment 2 here
Use Marketing Technology here
p. 85 The Political and Social Environment Chapter Objective 4
PPT 3-27 Marketing decisions are strongly affected by developments p. 85

in the political environment. This consists of laws, Key Term: Political
government agencies, and various pressure groups. Environment
Legislation Regulating Business p. 86

Table 3.1: Major
Governments develop public policy to guide commerce. U.S. Legislation
Affecting
Increasing Legislation. Legislation affecting business Marketing
around the world has increased steadily over the years.
Business legislation has been enacted for a number of

reasons:
1. To protect companies from each other.

2. To protect consumers from unfair business practices.
3. To protect the interests of society against
unrestrained business behavior.
Because government agencies have discretion in enforcing

laws, they can have an impact on a companys marketing
performance.
p. 85 Increased Emphasis on Ethics and Socially Responsible

Actions
PPT 3-28
Socially Responsible Behavior. Enlightened companies

encourage their managers to do the right thing.
The boom in Internet marketing has created a new set of

social and ethical issues.
Cause-Related Marketing. To exercise their social

responsibility and build more positive images, many
companies are now linking themselves to worthwhile p. 87
causes. Ad: P&G Duracell
Use Critical Thinking Exercises 2 and 3 here
Use Marketing Ethics here
Troubleshooting Tip
Examples of companies who successfully adapt to
changing forces and factors will help students
internalize the messages in this chapter.
p. 88 The Cultural Environment

p. 88
PPT 3-29 The cultural environment consists of institutions and other Key Term: Cultural
forces that affect a societys basic values, perceptions, Environment
preferences, and behaviors.
PPT 3-30 The Persistence of Cultural Values
Core beliefs and values are passed on from parents to

children and are reinforced by schools, churches, business,
and government.
Secondary beliefs and values are more open to change.
PPT 3-31 Shifts in Secondary Cultural Values
Marketers want to predict cultural shifts in order to spot

new opportunities or threats.
Peoples Views of Themselves. People vary in their

emphasis on serving themselves versus serving others.
Peoples Views of Others. In past decades, observers have p. 89

noted several shifts in peoples attitudes toward others. Ad: Benjamin
Trend trackers see a new wave of cocooning. Moore
PPT 3-32 Peoples Views of Organizations. By and large, people are

willing to work for major organizations and expect them to

carry out societys work. Many people today see work as a
required chore to earn money to enjoy their nonwork hours.
Peoples Views of Society. People vary in their attitudes

toward society. This influences their consumption patterns
and marketplace attitudes.
PPT 3-33 Peoples Views of Nature. Recently, people have

recognized that nature is finite and fragile, and that it can be
destroyed by human activities.
This renewed love of things natural has created a 63-

million-person lifestyles of health and sustainability
market.
The U.S. organic-food market generated nearly $29 billion

in sales last year, more than doubling over the past five
years.
Peoples Views of the Universe. In general, religious p. 90

conviction and practice have been dropping off gradually Ad: Toms of Maine
through the years.
Use Critical Thinking Exercise 1 here
p. 91 RESPONDING TO THE MARKETING Chapter Objective 5

ENVIRONMENT
PPT 3-34
Many companies think the marketing environment is an
uncontrollable element to which they must react and adapt.
Other companies take a proactive stance toward the

marketing environment.
Rather than assuming that strategic options are bounded by

the current environment, these firms develop strategies to
change the environment.
By taking action, companies can often overcome seemingly

uncontrollable environmental events.
Use Real Marketing 3.1 here

Use Company Case here
END OF CHAPTER MATERIAL
Company Case Notes
1. Compare and contrast a companys microenvironment with a companys macroenvironment.

(AASCB: Communication)
Answer:
The microenvironment consists of the actors close to the company that affect its
ability to serve its customersthe company, suppliers, marketing intermediaries, customer
markets, competitors, and publics. The macroenvironment consists of the larger
societal forces that affect the microenvironmentdemographic, economic, natural,
technological, political, and cultural forces.
2. Describe the five types of customer markets. (AACSB: Communication)
Answer:
The company might target any or all five types of customer markets. Consumer markets
consist of individuals and households that buy goods and services for personal consumption.
Business markets buy goods and services for further processing or use in their production
processes, whereas reseller markets buy goods and services to resell at a profit. Government
markets consist of government agencies that buy goods and services to produce public
services or transfer the goods and services to others who need them. Finally, international
markets consist of these buyers in other countries, including consumers, producers, resellers,
and governments.
3. Compare and contrast core beliefs/values and secondary beliefs/values. Provide an example
of each and discuss the potential impact marketers have on each. (AACSB: Communication;
Reflective Thinking)
Answer:

Core beliefs and values are passed on from parents to children and are reinforced by schools,
churches, business, and government. Secondary beliefs and values are more open to change.
Believing in marriage is a core belief; believing that people should get married early in life is
a secondary belief. Marketers have some chance of changing secondary values but little
chance of changing core values.
4. How should marketers respond to the changing environment? (AACSB: Communication)
Answer:
Many companies view the marketing environment as an uncontrollable element to which

they must react and adapt. They passively accept the marketing environment and do not try
to change it. They analyze the environmental forces and design strategies that will help the
company avoid the threats and take advantage of the opportunities the environment provides.
Other companies take a proactive stance toward the marketing environment. Rather than
simply watching and reacting, these firms take aggressive actions to affect the publics and
forces in their marketing environment. Such companies hire lobbyists to influence
legislation affecting their industries and stage media events to gain favorable press coverage.
They run advertorials (ads expressing editorial points of view) to shape public opinion. They
press lawsuits and file complaints with regulators to keep competitors in line, and they form
contractual agreements to better control their distribution channels. By taking action,
companies can often overcome seemingly uncontrollable environmental events. Marketing
management cannot always control environmental forces. In many cases, it must settle for
simply watching and reacting to the environment. For example, a company would have little
success trying to influence geographic population shifts, the economic environment, or major
cultural values. But whenever possible, smart marketing managers will take a proactive
rather than reactive approach to the marketing environment.
Critical Thinking Exercises
1. The Wall Street Reform and Consumer Protection Act of 2010 created the Consumer
Financial Protection Bureau (CFPB). Learn about this act and the responsibilities of the
CFPB, then write a brief report of how it impacts businesses and consumers. (AACSB:
Communication; Use of IT)
Answer:
The CFPB is an independent regulatory agency within the Federal Reserve, and its mission is
to help consumers regarding financial products and services. At the time of this writing, the
CFPB still was not officially operating, and the advisor, Elizabeth Warren, still had not been
nominated by the President nor confirmed by Congress. There is controversy surrounding

the focus and power this new regulatory body will have, which causes uncertainty for
businesses. Students should not have difficulty finding information the Act and CFPB, and
some resources follow:
To learn more about Wall Street reform, visit: www.whitehouse.gov/wallstreetreform.

A summary of the Act can be found at:
http://banking.senate.gov/public/_files/070110_Dodd_Frank_Wall_Street_Reform_comprehe
nsive_summary_Final.pdf. Summary of points for consumers:
www.whitehouse.gov/blog/2010/07/21/top-10-things-you-may-not-know-about-wall-street-
reform-and-consumer-protection-act. The CFPBs Web site is at www.consumerfinance.gov/.
How the Act will affect businesses:
http://blog.johnsonbank.com/acrossthetable/2011/03/23/how-the-dodd-frank-wall-street-
reform-will-affect-businesses/.
2. Cause-related marketing has grown considerably over the past ten years. Visit
www.causemarketingforum.com to learn about companies that have won Halo Awards for
outstanding cause-related marketing programs. Present an award-winning case study to your
class. (AACSB: Communication; Use of IT)
Answer:
Students responses will vary. Students can click on Events/Awards tab at the top of this
Web site to learn about past winners of this award. Past recipients are highlighted with short
explanations of their campaigns.
3. Various federal agencies impact marketing activities. Research each agency below, discuss
the elements of marketing that are impacted by that agency, and present a recent marketing
case or issue on which each agency has focused. (AACSB: Communication; Reflective
Thinking)
a. Federal Trade Commission (www.ftc.gov)
b. Food and Drug Administration (www.fda.gov)
c. Consumer Product Safety Commission (www.cpsc.gov)
Answer:
All of these federal agencies have some authority over marketing activities. Clicking on the
About link on most of these Web sites provides information concerning each agencys
jurisdiction. Searching the news releases provides information on recent cases or issues dealt
with by each agency.
a. The Federal Trade Commission (FTC) has consumer protection and competitive
jurisdiction. It has the authority to investigate and adjudicate unfair and deceptive
acts or practices along with the authority to enact sanctions against offending
businesses. The agency focuses on many different issues, and some examples
include deceptive advertising, negative option rules, and tips for consumers about
layaway plans.

b. The Food and Drug Administration (FDA) is concerned with public health by
regulating human and veterinary drugs, medical devices, biological products, the
food supply, and cosmetics. It does not regulate advertising (excluding
prescription drugs and medical devices), alcohol, and many household goods.
c. The Consumer Product Safety Commission (CPSC) protects the public from risks
of serious injury or death from consumer products, such as toys, power tools, and
household chemicals.
Marketing Technology: Crowdfunding
If you have a great product idea but no money, never fear, theres Kickstarter, an online
crowdfunding site. Founded in 2008, Kickstarter enables companies to raise money from
multiple individuals and has helped launch more than 60,000 projects. Pebble Technology
Corporation created a smart wristwatch called Pebble, which works with iPhones or Android
phones, but didnt have the funding to produce and market the device. So young CEO Eric
Migicovsky turned to Kickstarter for crowdfunding. His modest goal was to raise $100,000, but
the company raised $1 million in only one day and a total of $10.27 million in just over one
month! Nearly 70,000 people pre-ordered the $115 watch, and Pebble now has to deliver on the
promise. Kickstarter takes a 5 percent fee on the total funds raised and Amazon Payments
handles the processing of the funds. Kickstarter charges pledgers credit cards and the project
creator receives the funds within only a few weeks. The JOBS Act legislation signed into law in
2012 provides a legal framework for this type of financing, which is expected grow even faster
as a result. However, Kickstarter and similar sites dont guarantee that the projects will delivered
as promised, and some people are concerned that crowdfunding will beget crowdfrauding.
1. Find another crowdfunding site and describe two projects featured on that site. (AACSB:
Communication; Use of IT; Reflective Thinking)
Answer:
There are several crowdfunding platforms. RocketHub.com and AngelList.com are two
examples. Crowdfunding is used for all sorts of projects such as supporting the arts,
reducing deforestation, and sending high-schoolers to competitions as well as supporting
startup businesses.
2. Learn more about the JOBS Act and how it impacts crowdfunding for startup businesses.
What protections are in place for investors with regard to crowdfrauding? (AACSB:
Answer:
Students will be able to find articles about this topic and the JOBS Act by searching JOBS
Act and crowdsourcing. For example, the following article discusses how crowdsourcing

platforms and the Crowdfunding Professional Association
(http://crowdfundingprofessional.org/) are preparing for the crowdfunding elements of the
implementation of the JOBSA Act in 2013:
www.forbes.com/sites/alanhall/2012/06/28/hearings-on-jobs-prepare-the-u-s-for-expanded-
crowdfunding. The following article discusses limits placed on crowdfunding that restricts
how much can be invested to limit how much each investor could potentially be defrauded:
www.businessweek.com/articles/2012-04-26/will-crowdfunding-beget-crowdfrauding
Marketing Ethics: Targeting Children Online
The almost 24 percent of the U.S. population under 18 years old wields billions of dollars in
purchasing power. Companies such as eBay and Facebook want to capitalize on those dollars
legitimately, that is. EBay is exploring ways to allow consumers under 18 years old to set up
legitimate accounts to by buy and sell goods. Children already trade on the site, either through
their parents accounts or through accounts set up after they lie about their ages. Similarly, even
though children under 13 are not allowed to set up Facebook accounts, about 7.5 million of them
have accounts, and nearly 5 million account holders are under 10 years old. That translates to
almost 20 percent of U.S. 10-year-olds and 70 percent of 13-year-olds active on Facebook.
Many of these accounts were set up with parental knowledge and assistance. Both eBay and
Facebook say that protections will be put in place on childrens account and that parents will be
able to monitor to their childrens accounts.
1. Debate the pros and cons of allowing these companies to target children. Are these efforts
socially-responsible behavior? (AACSB: Communication; Reflective Thinking; Ethical
Reasoning)
Answer:
One argument in favor of allowing childrens accounts is the fact that parental involvement
will be necessary to set up such an account and parents will be able to monitor their
childrens activities. Even though many parents help their children set up illegitimate
accounts, once they do that they do not have access to the account unless the child gives it to
them. So the proposed system is actually better for parents. Of course, the issue of privacy
will be a major concern. Furthermore, there is child-inappropriate content on both of these
sites. The companies claim they will be able to block a childs access to that content, so
having a minor account would be better because currently, children with illegitimate accounts
are not blocked from anything. One could argue that the companies are being socially
responsible because the kids are already on these sites, and if the companies had minor
accounts, parents would be able to monitor their childrens behavior and some content will
not be accessible to these children. However, the fact that the companies will be actively
marketing to children raises issues.

2. Review the Childrens Online Privacy Protection Act at www.coppa.org/. Explain how eBay
and Facebook can target this market and still comply with this act. (AACSB:
Answer:
This rule applies to the online collection of personal information of children under the age of
13. The rule applies to information that can identify an individual, such as name, address, e-
mail address, and phone number. Web sites must seek verifiable consent from a parent,
which is one of the biggest hurdles for eBay and Facebook. However, there are identity
verification providers that can assist these companies, and Facebook was purportedly
consulting with these companies.
Marketing by the Numbers: Demographic Trends
Do you know Danica from the Philippines, Peter from London, Nargis from India, Marina from
Russia, Chieko from Japan, or Miran from the United States? These are some of the babies
whose parents claimed they were the 7th billion human born into the world. The world
population continues to grow, even though women are having fewer children than before.
Markets are made up of people, and to stay competitive, marketers must know where populations
are located and where they are going. The fertility rate in the United States is declining and the
population is aging, creating opportunities as well as threats for marketers. That is why tracking
and predicting demographic trends are so important in marketing. Marketers must plan to
capitalize on opportunities and deal with the threats before it is too late.
1. Develop a presentation on a specific demographic trend in the United States. Explain the
reasons behind this trend and discuss the implications for marketers. (AACSB:
Communication; Analytical Reasoning)
Answer:
Students selection of demographic trends will vary and instructors may want to assign
specific trends to obtain more diversity in trends. Some recent newsworthy trends include
that racial and ethnic groups are growing more rapidly than the non-Hispanic population. In
fact, the percentage of minority births outnumbered white births in 2011. An overall trend is
the reduction in the fertility rate in the United States from 2.12 children per woman in 2007
to 1.87 in 2012. This has been attributed to the poor economic climate since 2008. Fewer
births mean fewer future customers for marketers.
There are several sources on demographic trends in the United States:

Congressional report on the changing demographic profile of the United States available at
www.fas.org/sgp/crs/misc/RL32701.pdf. Six Disruptive Demographic Trends available at
www.kenan-flagler.unc.edu/~/media/files/kenaninstitute/UNC_KenanInstitute_2010Census.
Information on the rise of Asian Americans available at www.pewsocialtrends.org/.

2. Discuss global demographic trends. What are the implications of those trends and how
should marketers respond to them? (AACSB: Communication; Reflective Thinking)
Answer:
Students responses will vary. There are several excellent resources on global demographic
trends and their impact. For example, the working-age population (ages 20-59) will grow
rapidly in Asia but not in western cultures such as the United States and Europe. See
www.rand.org/publications/randreview/issues/2011/winter/world.html for an interactive map
of the world showing the fall and rise of the working-age population. U.S. companies must
plan to expand in the regions with the greatest growth potential.
Other excellent sources on the impact of global demographic trends include http://business-
transition.com/article/how-demographic-trends-are-driving-economic-changes and
www.minyanville.com/business-news/editors-pick/articles/bug-2526-hedge-hedging-hedge-
funds/6/20/2012/id/41864.
Company Case Notes
Xerox: Adapting to the Turbulent Marketing Environment
Synopsis
For many years, Xerox was synonymous for photocopy. And in certain respects, it still is. But
that has become more of a detriment than a benefit. As new technologies quickly and
dramatically reduced the need for copying hard documents in the late 1990s, Xerox found itself
in trouble. This case illustrates how Xerox made some bold and difficult decisions to both cut
costs and redefine the nature of its business. Today, Xerox is more about business services and
solutions than it is about copying documents. With a much broader market that has various
growth opportunities, Xerox has the potential to remain one of the top business-to-business
corporations.
Teaching Objectives
The teaching objectives for this case are to:
1. Identify how microenvironmental factors can affect a strong, established business.

2. Identify how macronenvironmental factors can affect a strong, established business.
3. Identify strategic issues in responding to environmental factors.
4. Formulate recommendations for a company in crisis.

1. What microenvironmental factors have affected Xeroxs performance since the late
1990s?
Company Xerox lost its way for a time. It took new leadership (Burns), an some fast
moves cost-cutting moves to avoid bankruptcy. But the biggest changes at Xerox revolved
around the question, What business is Xerox really in? Xerox needed to begin the
process of redefining itself in terms of the products it made and the markets where it
competed.
Marketing Intermediaries Xerox needed a way to establish new channels in order to
get into back office of the business world. It acquired Affiliated Computer Services for
that purpose. ACS essentially becomes a division of Xerox rather than a true
intermediary. However, ACS plays the role that intermediaries play.
Competitors The shift in strategy took Xerox into competition with new companies like
HP and IBM.
Customers One could easily argue that the nature of customer needs changed with so
many changes in the macroenvironment as noted below. As the case points out, while
Xerox was busy perfecting copy machines, customers were looking for more sophisticated
document management solutions.
2. What macroenvironmental factors have affected Xeroxs performance during that same
period?
Economic Just as Xerox was beginning to see sings of life, the Great Recession hit
causing the companys revenues and stock prices to plummet.
Technological This is probably the biggest category for this case. With the advent of e-
mail and telecommuting technologies, documents had gone digital. With that, there was
far less need for regular old photocopies. On the positive side, Xerox has made massive
efforts to acquire and develop new technologies, like those that allow it to analyze real-
time parking and traffic data.
Cultural One point here might simply be to point out that in the past 10 years, the
patterns of communication for the cultures of the world have shifted. People do not think
to stick things in the mail the way they used to. They send things electronically instead.
People do more texting than talking. Shifts such as this have major implications for the
old, new, and potential businesses where Xerox competes.
3. By focusing on the business services industry, has Xerox pursued the best strategy? Why
or why not?
It is clear that Xerox had to do something. Any company that sticks with a business model
as the market changes because that is what it has always done will sooner or later face
extinction (Consider Kodak). The In-N-Out case for chapter 1 illustrates a company that
has had great success on its model of no change. But thats because its customers still
need and want what it sells. If anything were to happen that led society to shun beef, In-
N-Out would have a problem.
There may not be an easy answer to this question as it certainly implies subjectivity.

However, there are a couple of things that provide justification that Xerox did the best
thing. First, business services was an area of growth at the time. With so many changes
in technology, businesses were desperate for companies to help them manage the parts of
their business that didnt relate to their actual products and services. Second, business
services and solutions was a step that built upon Xeroxs background and strengths. They
were essentially a document company. They just had to break out from the parameters of
a traditional photocopy machine.
4. What alternative strategy might Xerox have followed in responding to the first signs of
declining revenues and profits?
As noted above, riding out the storm really wasnt an option. At least, it was not an
option that would have led to any kind of future for the company. Students may have
various suggestions for this. One option might have been to take its core imaging
technologies and find new uses in other markets, like the medical field or digitally
archiving the libraries and documents of the world. However, both of those options are
mature and full of competition.
5. Given Xeroxs current situation, what recommendations would you make to Burns for the
future of Xerox?
Xerox needs to remain open to new market possibilities. As it has acquired and developed
many new technologies, it should consider any options for such. It should also remain
focused on areas with growth potential. The mobile market is booming. How can Xerox
expand its competencies and technologies into business and consumer markets through
mobile devices?
Teaching Suggestions
As a business-to-business case, this one may be a bit more difficult for students to relate to. Start
by having students visit (during or prior to class) www.xerox.com. Have them browse the
services and products tabs to become familiar with the nature of Xeroxs current business
world.
This case also works well with the marketing strategy chapter (Chapter 2).
ADDITIONAL PROJECTS, ASSIGNMENTS, AND EXAMPLES

Projects

1. Define the marketing environment for Starbucks (www.starbucks.com). Keep in mind that a
companys marketing environment consists of the actors and forces outside marketing that
affect marketing managements ability to build and maintain successful relationships with
target customers. (Objective 1)
2. What are the fundamental differences between consumer markets, business markets, and
reseller markets? (Objective 1)
3. Consider your college/university. What are the publics to which it must pay attention?
(Objective 1)
4. Over 14 percent of the U.S. population moves every year. How is this good for marketers?
(Objective 2)
Small Group Assignments
1. Form students into groups of three to five. Each group should read Real Marketing 3.2:
When the Dialog Gets Nasty: Turning Negatives into Positives. Each group should answer
the following questions and share their findings with the class (Objective 3)
a. How has Internet technology, especially social media, shifted the power differential away
from large organizations and toward individual consumers?
b. How has this change enhanced the marketplace for consumers? How might it also
damage the marketplace?
c. As an officer of a major bank or corporation, what would be your philosophical approach
to dealing with highly visible, noisy consumer complaints online? Would you give in to
the angry consumers demands every time? Explain.
2. Form students into groups of three to five. Each group should read the opening vignette to
the chapter on YouTube. Each group should answer the following questions and share their
finding with the class. (Objective 3)
a. How has YouTube managed to survive and thrive in a hyper-competitive marketing

environment?
b. Analyze the companys attitude toward marketplace change. How has this attitude
influenced its success?
c. Do you believe that YouTube can retain the stronghold it now commands in its market
niche? Why or why not?
d. In such a rapidly changing marketing environment, what might YouTube be doing in five
years? Ten years?
Individual Assignments
1. Go online and compare the marketing strategies of McDonalds (www.mcdonalds.com),

Wendys (www.wendys.com), and Burger King (www.burgerking.com). What age group is
each targeting? Do you agree with their strategy? (Use Web Resource 2, 3, and 4 here)

(Objective 2)
2. Take a look at Apples Web site (www.apple.com). What, if anything, do you see them doing
to try and remain successful as the economy softens and consumers become more hesitant to
make purchases? (Use Web Resource 5 here) (Objective 2)
Think-Pair-Share
Consider the following questions, formulate and answer, pair with the student on your right,
share your thoughts with one another, and respond to questions from the instructor.
1. What are the fundamental differences between Generation X and Generation Y?

(Objective 2)
2. How has the typical family changed just in your lifetime? (Objective 2)
3. Overall, the U.S. population is becoming better educated. What implications does this create
for marketers? (Objective 2)
4. What is the one most significant trend in the natural environment, in your opinion, and how
is it impacting marketing activities? (Objective 3)
Outside Examples
1. Take a look at Wendys (www.wendys.com). How is this company attempting to set

themselves apart from their primary competitors of McDonalds (www.mcdonalds.com)
and Burger King (www.burgerking.com)? What publics do they appear to be
concentrating on? Why do you believe this is the case? (Objective 1)
Possible solution. Wendys positions itself as the homespun, homemade fast-food

hamburger. From a review of its Web site, it becomes evident that they are trying to
connect with the everyday American. They portray a folksier, easygoing personality than
do their primary competitors. Wendys concentrates primarily on local publics and the
general public.
2. Most students taking this class and reading the text have probably never watched Spanish
language programming. But as the Hispanic population in the United States has grown at
a feverish pace, one conglomerate has gone about its business quietly. In the process,
Univision Communications, Inc. has the lions share of the media market for this
burgeoning demographic group.
Univisions portfolio includes the television networks Univision, Telefutura, and

Galavision. But the empire also covers other media outlets with Univision Radio,
Univision Music Group, and Univision Online. (Use Web Resource 6 here) (Objective 2)
a. Has Univisions growth and expansion reflected the Hispanic population growth or
facilitated it?

b. What kind of companies should be marketing their products and services on
Univision outlets? Do you think the nature of Spanish language advertising has
changed over time?
Possible Solution:
a. Univisions growth has both reflected and facilitated the Hispanic population growth
in the United States. It has facilitated Hispanic growth by providing a communication
vehicle for those entering (or contemplating entering) the country. It has reflected
Hispanic growth by continually expanding its reach within the United States and
proving more content to its viewers.
b. Any company interested in reaching this growing market should consider advertising
through this outlet. In this country, Spanish language advertising has become much
more mainstream and accepted over time. Today, it is not at all uncommon to see
and/or hear messages directed specifically to Hispanics through traditional English-
language media.
Web Resources
1. http://247.prenhall.com
This is the link to the Prentice Hall support link.
2. www.mcdonalds.com
This is the place to go to learn all about McDonalds marketing strategies.
3. www.wendys.com
Wendys homepage.
4. www.bugerking.com
Go here to learn about the King.
5. www.youtube.com
Go here to learn about how this Internet video-sharing giant continually seeks out and
exploits new marketplace opportunities.
6. www.univision.net
This is Univisions home. Take a look at the wide variety of marketing tools available.

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Chapter 3

ANALYZING THE MARKETING ENVIRONMENT

YouTube: Adapting to the Fast-Changing

Starting the Discussion

Copyright 2014 Pearson Education

Copyright 2014 Pearson Education

Rather than simply surviving in its chaotic environment,

YouTube is also developing an advertising model that best

To remain on top, YouTube will have to be nimble in

Opening Vignette Questions

More than any other group in the company, marketers must

PPT 3-3 A companys marketing environment consists of the p. 70

Copyright 2014 Pearson Education

p. 71 THE MICROENVIRONMENT Chapter Objective 1

PPT 3-5 Marketing managements job is to build relationships with p. 71

All the interrelated groups form the internal environment.

PPT 3-7 Suppliers

Suppliers provide the resources needed by the company to

Copyright 2014 Pearson Education

Marketing managers also monitor the price trends of their

PPT 3-8 Marketing Intermediaries

Physical distribution firms help the company to

Marketing services agencies are the marketing p. 72

Financial intermediaries include banks, credit

Todays marketers recognize the importance of working

Marketers must gain strategic advantage by positioning

No single competitive marketing strategy is best for all

Copyright 2014 Pearson Education

There are five types of customer markets. The company

1. Consumer markets: individuals and households that

Copyright 2014 Pearson Education

PPT 3-14 Demographic Environment p. 74

Thus, marketers keep close track of demographic trends and

Baby Boomers. The postWorld War II baby boom

Baby boomers account for nearly 25 percent of the p. 74

As they reach their peak earning and spending years,

PPT 3-16 Generation X. The baby boom was followed by a birth p. 77

Copyright 2014 Pearson Education

The GenXers developed a more cautious economic outlook,

Millennials (also called Generation Y or the echo p. 78

Millennials are fluent in and comfortable with digital

It may be more useful to segment people by lifestyle, life

p. 79 The Changing American Family

The traditional household consists of a husband, wife, and

PPT 3-19 In the United States:

Married couples with children make up only 20

Copyright 2014 Pearson Education

Both husband and wife work in 59 percent of all married-

PPT 3-20 Geographic Shifts in Population p. 79

About 12 percent of all U.S. residents move each year. The

Americans have been moving from rural to metropolitan

Such population shifts interest marketers because people in

PPT 3-21 A Better-Educated, More White-Collar, More Ad: Grind

The U.S. population is becoming better educated.

In 2010, 87 percent of the U.S. population over age 25 had

Between 2010 and 2020, of 30 detailed occupations

PPT 3-22 Increasing Diversity

The United States has become more of a salad bowl in

The U.S. population is about 65 percent white, with around

Copyright 2014 Pearson Education

By 2050, Hispanics will grow to around 30 percent, p. 81

Diversity goes beyond ethnic heritage. Many companies

According to one estimate, the 6 to 7 percent of U.S. adults