Chapter 4 Analyzing the Marketing Environment

TOOLS FOR INSTRUCTORS

Brief Chapter Outline Learning Objectives Chapter Overview (Summing Up) Extended Chapter Outline with Teaching Tips
Topics, key terms, and boxed inserts referenced to PPT slide .1

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PowerPoint Slides with Teaching Notes Answers to End of Chapter Learning Aids Chapter Case Study Supplemental Case Study Additional Teaching Tips

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BRIEF CHAPTER OUTLINE

A Marketing Environment Analysis Framework The Immediate Environment Macroenvironmental Factors Corporate Social Responsibility Summing Up End of Chapter Learning Aids Chapter Case Study: Google and the YouTube Acquisition

LEARNING OBJECTIVES

How do customers, the company, competitors, and corporate partners affect marketing strategy? Why do marketers have to think about their macroenvironment when they make decisions? How do corporate social responsibility programs help various stakeholders?

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CHAPTER OVERVIEW (SUMMING UP)

How do customers, the company, competitors, and corporate partners affect marketing strategy?

Everything a firm does should revolve around the customer; without the customer, nothing gets sold. Firms must discover their customers wants and needs and then be able to provide a valuable product or service that will satisfy those needs. If there were only one firm and many customers, a marketers life would be a piece of cake. But because this situation rarely occurs, firms must monitor their competitors to discover how they might be appealing to their customers. Without competitive intelligence, a firms customers might soon belong to its competitors. However, through marketing, life certainly would be easier without competitors, it would be difficult, if not impossible, without corporate partners. Good marketing firms work closely with their suppliers, marketing research firms, consultants, and transportation firms to coordinate the extensive process of discovering what customers want and getting it to them when and where they want it. Each of these activitiesdiscovering customer needs, studying competitive actions, and working with corporate partnershelps add value to firms products and services.

Why do marketers have to think about their macroenvironment when they make decisions?

To be successful, marketers must understand fully what is going on outside their firm. For instance, what are the chances that a fast-food hamburger restaurant would be successful in a predominantly Hindu neighborhood? Rightnot very good. Marketers must be sensitive to such cultural issues to be successful, and then they must also consider customer demographicsage, income, market size, education, gender, and ethnicityto identify specific customer groups. In any society, major social trends influence the way people live. Understanding these trends such as green marketing, privacy issues, and the time-poor societycan help marketers serve their customers better. Furthermore, in no other time in history has technology moved so rapidly and had such a pervasive influence on the way we live. Not only do marketers help develop technologies for practical, everyday uses, but technological advances also help marketers provide consumers with more products and services more quickly and efficiently. In addition, the general state of the economy influences how people spend their discretionary income. When the economy is healthy, marketing grows relatively easy. But when the economy gets bumpy, only well-honed marketing skills can yield long-term successes. Naturally, all firms must abide by the law, but many legal issues also affect marketing directly. These laws can be

broken into those that pertain to competitive practices, such as antitrust legislation, and those designed to protect consumers from unfair or dangerous practices, such as warning labels on cigarette packages and continuity labels on packaged food.

How do corporate social responsibility programs help various stakeholders?

To answer this question, we first have to identify the various stakeholders of a company, namely, customers, employees, stockholders, and the community. In turn, CSR benefits these stakeholders as follows: Customers. When companies adopt CSR, customers know that they can trust the firms to provide healthy, ethically acceptable products and services. Many customers also feel better about buying from a company that engages in additional responsible practices, which provides them with additional value by allowing them to feel good about buying from that company. Employees. A firm committed to CSR likely treats its employees with decency and respect. In addition, for many employees (especially members of Generation Y), working for an irresponsible firm would be antithetical to their own morals and values. Stockholders. When a CSR, initiative such as using more efficient packaging, improves a companys profits by reducing costs, stockholders enjoy an immediate improvement in their investment. Some investors also choose which stocks to buy on the basis of the companys responsible stances. Community. This last stakeholder can consist of a local, national, or global community. The benefits of CSR in all cases are multitudinous cleaner air and water, aid to the underprivileged and healthier product options all can result from CSR by companies.

EXTENDED CHAPTER OUTLINE WITH TEACHING TIPS

A MARKETING ENVIRONMENT ANALYSIS FRAMEWORK

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THE IMMEDIATE ENVIORNMENT (PPT slide 4-4)

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Successfully Leveraging Company Capabilities Competitors and Competitive Intelligence

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Corporate Partners

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Check Yourself: Several questions are offered for students to check their understanding of core concepts.

What are the components of the immediate environment? (PPT slide 4-11) Answer: The components of the immediate environment are the companys capabilities, competitors, and competitive intelligence, and the companys corporate partners.

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MACROENVIRONMENTAL FACTORS (PPT slide 4-12) Culture (PPT slide 4-14) Country Culture Regional Culture .1 .2 .1

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Demographics (PPT slide 4-16) Generational Cohorts (PPT slide 4-17 & 18) Income (PPT slide 4-20) Education (PPT slide 4-21) Gender (PPT slide 4-22) Ethnicity (PPT slide 4-23) .1 .2 .3 .4 .5

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Social Trends (PPT slide 4-25) Greener Consumers (PPT slide 4-26) Marketing to Children (PPT slide 4-27) Privacy Concerns (PPT slide 4-28) The Time-Poor Society(PPT slide 4-29) .1 .2 .3 .4

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Technological Advances (PPT slide 4-31) Economic Situation (PPT slide 4-32) Political/Regulatory Environment (PPT slide 4-33) .1 .2

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Check Yourself: Several questions are offered for students to check their understanding of core concepts. (PPT slide 4-34)

What are the six key macro economic factors? Answer: The six key macro economic factors are culture, demographics, political/legal, social trends, economic and technology.

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Differentiate between country culture and regional culture. Answer: Country culture includes artifacts, behavior, dress, physical settings, ceremonies, and so on but also includes subtle aspects of culture. Regional culture applies to a regions references to product categories. In marketing, the only thing that changes in country culture is language, but firms face challenges developing promotional materials that transcend regional boundaries.

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Identify the different generational cohorts. What key dimension is used to classify an individual into a given cohort? Answer: Baby Boomers, Generation Xers, seniors, Generation Y and tweens make up different generational cohorts. The key dimension used to classify an individual into a given cohort is the generation they were born in.

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What are some important social trends shaping consumer values these days? Answer: The green movement, privacy concerns, time-poor lifestyles, and responsible marketing to children are some important social trends shaping consumer values these days.

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CORPORATE SOCIAL RESPONSIBILITY (PPT slide 4-35) A. Inputs Consumer Company Cause/Issue .1 .2 .3 .2

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Output (PPT slide 4-37)

Check Yourself: Several questions are offered for students to check their understanding of core concepts. (PPT slide 4-38)

How has corporate social responsibility evolved since the turn of the 20th Century? Answer: Today, companies are undertaking a wide range of corporate social responsibility initiatives, such as establishing corporate charitable foundations, supporting and associating with existing nonprofit groups, supporting minority activities, and following responsible marketing, sales, and production practices.

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Identify the inputs and outputs of the corporate social responsibility framework? Answer: The inputs and outputs of the corporate social responsibility framework include consumer, company and cause. Within inputs include demographics, social trends, strategy, industry, salient reputation and fit. Within outputs include awareness and purchase, employee well-being and financial concerns, and awareness and support.

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POWERPOINT SLIDES WITH TEACHING NOTES

Power Point Slide 4-1: Analyzing the Marketing Environment

Teaching Notes

4-2: Learning Objectives

These questions are the learning objectives guiding the chapter and will

be explored in more detail in the following slides.

4-3: Analyzing the Marketing Environment Ask students: How does Earth Rewards help the environment? Is it enough to make a difference to the environment? The consumer? A possible answer might refer to the increased use of credit cards and its impact on the economy. More specifically, are people overspending due to high credit amounts? Be sure to explore the area on calculating carbon impact. This is a very innovative program

4-4: A Marketing Environment In all marketing activities, the consumer is at the center. Anything that affects Analysis Framework consumers affects marketers. Any change in one of these environments likely requires an adjustment to the firms marketing mix. By identifying potential environmental trends, firms often can take proactive steps.

4-5: Discussion Question

Ans.

Explanation: In earlier marketing eras, particularly the production era, firms focused on what they could produce. The classic quote from Henry Ford The customer can have any color they want, so long as it is black typified the lack of customer focus during his time. Today, firms need to focus on creating value for customers.

4-6: The Immediate Environment The immediate environment includes the firm and its immediate influences, such as competition and corporate partners.

4-7: Successfully Leveraging Company Capabilities

Ask students: What are Pepsis core competencies? What do they do well? Answer: They know how to bottle beverages, distribute them to stores, and promote their brand. Ask students: How they capitalized on their core competencies in the face of changing market trends? Answer: The trend toward more dietconscious consumers has led to the development of low-calorie alternatives to sodas. Both Coke and Pepsi understood the market had changed and introduced bottled water products with great success. In 2004, Americans consumed 23 gallons of bottled water per personten times as much as in 1980.

4-8: Competitors and Competitive Intelligence

Group activity: Ask students to brainstorm a list of possible CI sources. Have them discuss what they can learn from each source. Do they know of any illegal sources? Legal sources include public material, interviewing customers and analyzing marketing tactics? Illegal sources include breaking into the competitors headquarters, posing as a potential customer, and taking aerial photographs of a competitors plant.

4-9: Gillette vs. Schick There is an example in the text of Gillette filing for patent infringement against Schick very quickly after the Quattros release. This quick filing leads one to believe that Gillette knew about the launch through competitive intelligence.

4-10: Corporate Partners

Firms must work together to create a seamless system that delivers goods and services to customers when and where they want them. Many attribute a key reason for Wal-Marts success is their close relationships with their suppliers.

4-11: Check Yourself

1. The companys capabilities, competitors, and competitive intelligence, and the companys corporate partners.

4-12: Macroenvironmental Factors This slide can be used to review this topic instead of the following slides, which provide more in-depth discussions.

4-13: Discussion Question

Ans. E. Explanation: A firms macroenvironment includes political/legal, cultural, demographic, economic, social, and technology. Factors the firm cannot control but, which can influence the success or failure of their marketing strategies.

4-14: Culture

Firms often remove brands from the market because of their poor overall sales, but this strategy can backfire when those brands have strong regional support. For example, the removal of a chowder cracker caused such upheaval among Northeastern consumers that the firm hired a tall ship to reintroduce the cracker to its New England market, where consumers had threatened to boycott all products from the company if the cracker was not returned.

4-15: Controversy Surrounds All Catholic Town

This video looks at the controversy surrounding a Catholic town and addresses the topic of marketing sustainable living.

4-16: Demographics

Ask students: What are some typical demographics? Answer: age, gender, income, education. Demographic segmentation is probably the most common form of segmentation because the information is so widely available.

4-17: Generational Cohorts

Group activity: Have students brainstorm a list of the defining characteristics of their generation. Ask students: How does your generation differ from previous generations, such as their parents the Baby Boomers. What macroenvironmental forces have had the most impact on your generation?

4-18: Seniors, Boomers and X and Yers

Ask students: What does the phrase generation gap mean to you? How do you experience this gap between your generation and that of your parents or grandparents? In what ways do you believe your generation is similar to that of your parents or grandparents?

4-19: Discussion Question

Ans.

Explanation: Baby boomers are huge, affluent, and individualistic generational cohort. Because they tend to be very youth conscious, they are big purchasers of products and services related to staying young.

4-20: Income The middle-class squeeze is a very real global phenomenon. Many developing countries face similar income inequities to those found in the United States. Pay gaps also cause problems for many new college graduates who find they cannot afford to live on their own and must move back in with their parents.

4-21: Education

Ask students: Do you plan to continue your education after graduation? Many students believe they will never return to school after they finish their Bachelors degree, but modern conditions make this choice more and more unlikely. Lifelong learning of new skills and new knowledge has become key to survival in the global economy

4-22: Gender Women now make up more than 60% of the college population. Ask students? How do you believe this will affect the workplace in the future? Ask students? Do you believe that there are still significant gender differences? What are they?

4-23: Ethnicity Ask students: What steps can and should marketers take to respond to the changing ethnic mix of the United States? Many marketers already have adjusted their marketing mix to meet the needs of ethnically diverse segments better. This YouTube video is for a Carlos Mencia Bud Light superbowl ad about teaching English. (always check YouTube links before class).

4-24: Discussion Question

Ans.

Explanation: Demographics, including race, gender, income, and marital status are standard characteristics used to define potential target market segments.

4-25: Social Trends

This graphic introduces four significant social trends.

4-26: Greener Consumers

Green consumers purchase products based on issues beyond the tangible product. These issues can include a variety of social causes such as environmental awareness, protection of animals, HIV/AIDS awareness and prevention, etc. Consumers who purchase these products do so to support these causes.

4-27: Targeting Kids: Is it wrong?

This ad is clearly targeted to kids and tweens. This might be an interesting time to discuss the challenges in marketing to children, especially for products such as candy. Ask students: Should candy advertising to children be regulated? Why? How much?

4-28: Privacy Concerns In recent years, firms have had to inform consumers of the steps they take to protect their privacy. The government also has instituted new rules for privacy protection. Ask students: Have you ever had a privacy problem with a credit card or when using the Internet?

4-29: Time Poor Society

With more time spent at work, the amount of time available for home or leisure activities has shrunk. In turn, services that complete the tasks that people no longer have the time to do, such as housecleaning, errands, and cooking, have grown. Ask students: What other entrepreneurial marketing opportunities have a time-poor society provided? They will mention many food products, Blackberrys, TiVo.

4-30: McDonalds Moms

Salad, coffee, and yogurt. How McDonalds is listening the consumer by offering healthier food and new facility make-overs which have lead to increased market share.

4-31: Technological Advances

Arguably the single most important change in the way we live is the introduction of new technology. Ask students: What new technologies have you seen at retailers? This web link is for the shoppers tool page of Stop and Shop a large east coast grocery retailer. They offer self-scanners, computer kiosk deli ordering and self checkout.

4-32: Economic Situation

Depending on the time of year, discuss projections about Christmas shopping, vacation planning, or home buying. Various economic factors affect each of these areas. The web link leads to the Consumer Confidence Index which takes into account how consumers feel about how the economy is doing. This economic indicator relates directly to spending.

4-33: Political/Regulatory Environment: Competitive Practice and Trade Legislation

This list includes the major legislation designed to ensure a competitive marketplace and clearly demonstrates the U.S. governments long history of enacting laws that protect fair trade.

4-34: Check Yourself

Culture, demographics, social issues, technological advances, economic situation, and political/regulatory environment. Country Culture is the entire country but regional culture is based on the region or area within the country. Tweens, Gen Y, Gen X, Baby Boomers, Seniors Age Greener consumers, marketing

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to children, privacy concerns, and time-poor societies.

4-35: Corporate Social Responsibility

Explain to students that companies are involved in a host of activities. Ask students: Why might some social commentators suggest that CSR is unnecessary? Students will realize that some say the main objective of a company should be to make money. But an understanding of CSR moves many beyond a shareholder perspective to recognize that they must appeal to a vast variety of stakeholders including countries, suppliers, the environment, employees and customers.

4-36: What are customers concerns?

Students should mention the environment, privacy, health, childrens rights

4-37: The Output for Companies

4-38: Check Yourself

Today, companies are undertaking a wide range of corporate social responsibility initiatives, such as establishing corporate charitable foundations, supporting and associating with existing nonprofit groups, supporting minority activities, and following responsible marketing, sales, and production practices. Social responsibility is even one of the eight key measures that Fortune magazine uses to create its list of the most admired companies Inputs and outputs are both consumer, company, and cause.

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ANSWERS TO END OF CHAPTER LEARNING AIDS

Marketing Applications

1. Assume you are going to open a new store. Describe it. Who are your competitors? What would you do to monitor your competitors actions? Who are your customers? What are you going to do to appeal to them? What are your social responsibilities, and how will you meet them?

Instructors Notes

This question asks students to think about the kind of business they might start, as well as the competitive environment in which that business might operate. In particular, the question challenges them to think about their potential competitors and how they might stay abreast and ahead of any competitive actions. The social responsibility answer should include suggestions how to contribute back to the community and implementing good business practices (example: limit pollution output beyond that which is required by law).

2. In which generational cohort do you belong? What about your parents? How do you approach buying a computer differently than your parents would? What about buying an outfit to wear to a party? How can firms use their knowledge of generational cohorts to market their products and services better?

Instructors Notes

Students need to think about the characteristics of their own and their parents generations and apply those characteristics to understand the potential differences in purchasing behavior and marketing responses.

Possible Response:

I am in the Generation Y cohort, whereas my parents are Baby Boomers. When buying a car, I focus on price, customizable features, and sportiness, but my parents probably focus on safety, fuel economy, and performance. When buying an outfit to a party, I consider what my peers and celebrities are wearing far more than my parents do. In both cases, I shop online, unlike my parents. Firms can use their knowledge of generational cohorts to focus on key messages that will resonate with a particular targeted cohort, understand what information the cohorts care about most, and allocate marketing spending to the promotional channels that will reach the broadest number of people within the targeted cohort(s).

3. How can firms use customer demographics like income, market size, education, and ethnicity to market to their customers better?

Instructors Notes

Demographic data indicates more than just income distribution, levels of education, or ethnicity within a particular geographic area; as this question prompts students to recognize, these data can be used to improve marketing.

Firms can use demographic data to target their products or services toward the customer segment that gets the most benefit from it or offers the most lucrative profit opportunity for the firm. Market size data similarly could help a firm determine whether a potential market is worth pursuing; if insufficient customers exist in the market to justify the expenditure to serve it, a firm can avoid making a costly mistake by analyzing demographic data. Firms can use customer demographics to assess their customers needs and therefore position themselves to deliver better value for those customers desired merchandise and services.

4. Identify some of the ethnicity changes in the United States. Describe how they might affect the marketing practices of (a) a regional newspaper in Texas, (b) food retailers in cities, and (c) a home furnishing store in New York City.

Instructors Notes

Because of immigration and increasing birth rates among various ethnic and racial groups, the United States continues to grow more diverse. 39 Approximately 80 percent of all population growth in the next 20 years is expected to come from Black, Hispanic, and Asian communities. Minorities now represent approximately one-quarter of the population; by 2050, they will represent about 50 percent, and nearly a quarter of the population will be Hispanic. Most of the foreign-born American population and recent immigrants tend to concentrate in a handful of metropolitan areas, such as New York, Los Angeles, San Francisco, and Chicago.

The marketing practices of a regional newspaper in Texas might target Spanish speakers; food retailers in cities might change their menus to appeal to more and different ethnicities; and a home furnishing store in New York City might adjust their product offerings and price points to appeal to different growing ethnic groups.

5. Identify some recent technological innovations in the marketplace and describe how they have affected consumers everyday activities.

Instructors Notes

Some technological innovations in the marketplace with the commercial successes of iPhones, cellular telephones, MP3 players, Internet access, personal digital assistants (PDAs), WiFi, and digital cameras. Flat-screen and high-definition televisions, as well as video on demand, have changed the way we view television, and their impact is only expected to increase in the next few years. On the retail side, firms are able to track an item from the moment it was manufactured, through the distribution system, to the retail store, and into the hands of the final consumer using little radio-frequency identification device (RFID) chips that are affixed to the merchandise. Because they are able to determine exactly how much of each product is at a point in the supply chain, retailers also can communicate with their suppliersprobably over the Internetand collaboratively plan to meet their inventory needs. Alpha moms now average 87 minutes online every day.

QUIZ YOURSELF

1. When marketers look at advertising media they often begin with viewer or listener profiles such as, age, income, gender, and race. They then compare the media profile with their target audience. These marketers are using _________ to see if the media fits with their advertising agenda. a. country culture b. regional culture c. demographics d. macromarketing measures e. scenario planning

2. Many American consumers are purchasing hybrid automobiles even though they are more expensive and sometimes less fuel efficient when compared to compact conventional autos. Automobile marketers recognize these consumers: a. value contributing to a greener environment. b. are economically irrational. c. are responding to global corporate pressure for social responsibility. d. would prefer an SUV. e. all of the above.

NET SAVVY

1. Seventh Generation is the leading brand of nontoxic, environmentally safe household products in the United States. Visit its Web site (http://www.seventhgeneration.com) and review the philosophy behind the business. Next, review the site to identify the products the company offers. Briefly summarize some of the consumer trends you note, and describe the ways in which its products address the wants and needs of its customers.

Instructors Notes

To explore the topic of green marketing, this question uses a single company as an example. In addition to the companys principles and products, students must consider larger trends that Seventh Generation attempts to address through its marketing efforts.

In general, the focus of the company is being a responsible corporate citizen by offering environmentally friendly products, giving back to the community, and taking a leadership position in pursuing socially responsible business practices with both customers and suppliers. Seventh Generation addresses such trends as product recycling, animal testing, and greater efficiency to mitigate humanitys impact on the environment. These

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efforts also can save consumers money, because they can consume less by using products like Liquid Laundry Detergent, Dish Soap, and White Paper Towels.

2. The Internet has been a double-edged sword for consumers. On the one hand, it provides easy access to many businesses and sources for information. On the other hand, consumers must give up some of their privacy to access this information. The Electronic Privacy Information Center (http://www.epic.org), founded in 1994, attempts to focus public attention on privacy issues. Browse through its Web site. What steps does EPIC suggest consumers take to protect their privacy online? What policy recommendations does it make regarding legal restrictions on companies?

Instructors Notes

From their review of the privacy survival guide, students should gain an understanding of potential privacy violations and available protections. Order a credit report annually to ensure that I have not been a victim of identity theft. Register with the national Do Not Call list to stop telemarketers from invading my privacy by calling me at home. Inform financial institutions that I wish to opt out of having my personal information sold or shared with outside parties. .3

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