p. 68

PPT 3-4

INTRODUCTION

Microsoft, the PC software leader, has been around for nearly 40 years and at times has “owned” as much as 90 percent of the sales of operating systems, and productivity software (Microsoft Office).

But as the 21^st century continued, technology changes forced Microsoft to change and adapt to the move by consumers to digital devices.

Microsoft is moving from being known as a software company.  It developed the Surface tablet, purchased Nokia to gain access to smartphone technology, and now offers numerous digital and cloud services.  

p. 69

Photo: Microsoft

Ø Opening Vignette Questions

1. How has Microsoft managed to adapt in a hyper-competitive marketing environment?

2. Analyze the company’s attitude toward marketplace change. How has this attitude influenced its success?

3. Do you believe that Microsoft can regain the stronghold it historically has held in its markets? Why or why not?

4. In such a rapidly changing marketing environment, what might Microsoft be doing in five years? Ten years?  

p. 70

PPT 3-5

p. 71

PPT 3-6

PPT 3-7

More than any other group in the company, marketers must be the trend trackers and opportunity seekers.

A company’s marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.

The microenvironment consists of the actors close to the company that affect its ability to service its customers.

The macroenvironment consists of larger societal forces that affect the microenvironment.

p. 70

Key Term: Marketing Environment

p. 71

Key Terms: Microenvironment, Macroenvironment

Assignments, Resources

Use Additional Project 1 here

Use Video Case here

Ø Troubleshooting Tip

This is an intense chapter, and it presents a lot of information that might make some students’ heads swim. If it hasn’t 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

PPT 3-8

PPT 3-9

PPT 3-10

PPT 3-11

p. 72

PPT 3-12

PPT 3-13

p. 73

PPT 3-14

PPT 3-15

p. 74

PPT 3-16

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

THE  MICROENVIRONMENT

Marketing management’s job is to build relationships with customers by creating customer value and satisfaction.

The Company

All the interrelated groups form the internal environment. All groups must work in harmony to provide superior customer value and relationships.

Suppliers

Suppliers provide the resources needed by the company to produce its goods and services.  The company must treat suppliers as partners to provide customer value.

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.

Marketing Intermediaries

Marketing intermediaries help the company to promote, sell, and distribute its products to final buyers.

· Resellers are distribution channel firms that help the 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 research firms, advertising agencies, media firms, 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.

Today’s marketers recognize the importance of working with their intermediaries as partners rather than simply as channels through which they sell their products.

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.

Publics

A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives.

· Financial publics influence the company’s 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 company’s marketing decisions may be questioned by consumer organizations, environmental groups, and others.

· Local publics include neighborhood residents and community organizations.

· General public. The general public’s image of the company that affects its buying.

· Internal publics include workers, managers, volunteers, and the board of directors.

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.

Learning Objective 1

p. 71

Figure 3.1: Actors in the Microenvironment

p. 72

Key Term: Marketing Intermediaries

p. 72

Photo: Coca-Cola

p. 73

Key Term: Public

p. 73

Ad: Office Depot Foundation

PPT 3-17

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

Ø Assignments, Resources

Use Discussion Question 3-1 here

Use Additional Project 2 and 3 here

Use Outside Example 1 here

p. 74

PPT 3-18

PPT 3-19

p. 75

PPT 3-20

p. 75

PPT 3-21

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

THE MACROENVIRONMENT

Demographic Environment

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

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.

Changing Age Structure of the Population

The U.S. population is currently about 320 million and may reach almost 364 million by the year 2030.

The single most important demographic trend in the United States is the changing age structure of the population.

Baby Boomers. The post–World War II baby boom produced 78 million baby boomers, born between 1946 and 1964.

Baby boomers account for nearly 35 percent of the population and hold 70 percent of the nation’s disposable income.

As they reach their peak earning and spending years, boomers will continue to constitute a lucrative market for many products and services.

It would be a mistake to think of older boomers as phasing out or slowing down. Today’s boomers think “young” no matter how old they are.

Learning Objective 2

p. 74

Figure 3.2: Major Forces in the Company’s Macroenvironment

p. 75

Key Term: Demography

p. 75

Ad: BOOM! Magazine

p. 75

Key Term:

Baby Boomers

Ø Assignments, Resources

Use Small Group Assignment 1 here

p. 76

p. 77

PPT 3-22

Generation X. The baby boom was followed by a “birth dearth,” creating another generation of 49 million people born between 1965 and 1976. Author Douglas Coupland calls them Generation X.  

The GenXers developed a more cautious economic outlook, and are a more skeptical bunch, though they are more likely to be receptive to irreverent ad pitches that make fun of convention and tradition.

Millennials (also called Generation Y or the “echo” boomers). Born between 1977 and 2000, these children of the baby boomers number 83 million or more.  Though they are larger than the baby boomer segment, they are the most financially strapped generation.  Just because of their numbers, though, they make up a huge and attractive market, now and in the future.

Generation Z, born after 2000, includes several age cohorts:

· Kids (under age 10)

· Tweens (age 8–12)

· Teens (age 13–18)

They represent tomorrow’s markets and are now forming brand relationships that will affect their buying well into the future.

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.

p. 76

Key Term: Generation X

p. 76

Photo: Lowe’s

p. 77

Key Term: Millennials (Generation Y)

p. 77

Ad: GE Artistry

p. 77

Key Term: Generation Z

Ø Assignments, Resources

Use Individual Assignment 1 here

Use Think-Pair-Share 1 here

p. 78

PPT 2-23

The Changing American Family and Changes in the Workforce

The “traditional household” consists of a husband, wife, and children (and sometimes grandparents).

In the United States:

· Married couples with children make up only 19 percent of the households;

· Married couples without children make up 28 percent;

· Single parents comprise 18 percent.

· Nonfamily households make up 34 percent.

Both husband and wife work in 58 percent of all married-couple families.

p. 79

Photo: Modern Family

Ø Assignments, Resources

Use Additional Project 4 here

Use Think-Pair-Share 2 here

PPT 3-24

PPT 3-25

Geographic Shifts in Population

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.

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 64 percent white, with around 17 percent Hispanic and 13 percent African-American. The Asian-American population now totals more than 5 percent of the population.

By 2050, Hispanics will grow to more than 30 percent, African-Americans will be almost 15 percent, and 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 $830 billion.

Another attractive segment is the 57 million adults with disabilities, representing from $200 to $500 billion in annual spending power.

p. 79

p. 80

Ad: GoToMeeting

p. 81

Ad: Samsung

Ø Assignments, Resources

Use Discussion Question 3-2 and 3-3 here

Use Think-Pair-Share 3 here

Use Outside Example 2 here

p. 82

PPT 3-26

PPT 3-27

PPT 3-28

PPT 3-29

PPT 3-30

PPT 3-31

p. 83

PPT 3-32

PPT 3-33

PPT 3-34

Economic Environment

The economic environment consists of factors that affect consumer purchasing power and spending patterns.

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

Before the Great Recession, American consumers fell into a consumption frenzy, amassing record levels of debt.

However, the consumers now have adopted a back-to-basics sensibility in their lifestyles and spending patterns.

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.

Review Learning Objective 2: Explain how changes in the demographic and economic environments affect marketing decisions.

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

The Natural Environment

The natural environment involves the natural resources that are needed as inputs by marketers, or that are affected by marketing activities.

Trends in the natural environment:

1. Growing shortages of raw materials.

2. Increased pollution.

3. Increased government intervention.

4. Companies developing strategies and practices that support environmental sustainability.

p. 82

Key Term: Economic Environment

p. 82

Photo: Azul Brazilian Airlines

Learning Objective 3

p. 83

Key Term: Natural Environment

p. 84

Ad: Timberland

p. 84

Key Term: Environmental Sustainability

Ø Assignments, Resources

Use Real Marketing 3.1 here

Use Marketing by the Numbers here

Use Individual Assignment 2 here

Use Think-Pair-Share 4 here

p. 84

PPT 3-35

PPT 3-36

Technological Environment

The technological environment is perhaps the most dramatic force now shaping our destiny.

Technology has released such wonders as antibiotics, robotic surgery, miniaturized electronics, smartphones, and the Internet.

These new technologies can offer exciting opportunities for marketers.

In the United States, government agencies investigate and regulate products.  These regulations can impact new technologies and new product development.

Review Learning Objective 3: Identify the major trends in the firm’s natural and technological environments.

p. 84

Key Term: Technological Environment

p. 86

Photo: Disney

Ø Assignments, Resources

Use Critical Thinking Exercise 3-8 here

Use Online, Mobile, and Social Media Marketing here

Use Small Group Assignment 2 here

p. 87

PPT 3-37

p. 88

PPT 3-38

p. 89

PPT 3-39

Explain the key changes in the political and cultural environments.

The Political and Social Environment

Marketing decisions are strongly affected by developments in the political environment. This consists of laws, government agencies, and various pressure groups.

Legislation Regulating Business

Governments develop public policy to guide commerce.

Increasing Legislation. Legislation affecting business 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 company’s marketing performance.

Increased Emphasis on Ethics and Socially Responsible Actions

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 causes.

Learning Objective 4

p. 87

Key Term: Political Environment

p. 88

Table 3.1: Major U.S. Legislation Affecting Marketing

p. 89

Ad: Warby Parker

Ø Assignments, Resources

Use Critical Thinking Exercises 3-6 and 3-7 here

Use Marketing Ethics here

Ø Troubleshooting Tip

Examples of companies who successfully adapt to changing forces and factors will help students internalize the messages in this chapter.

p. 90

PPT 3-40

PPT 3-41

PPT 3-42

p. 91

p. 92

PPT 3-43

The Cultural Environment

The cultural environment consists of institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviors.

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.

Shifts in Secondary Cultural Values

Marketers want to predict cultural shifts in order to spot new opportunities or threats.

People’s Views of Themselves. People vary in their emphasis on serving themselves versus serving others.

People’s Views of Others. In past decades, observers have noted several shifts in people’s attitudes toward others. Trend trackers see a new wave of “cocooning.”

People’s Views of Organizations. By and large, there has been a decline of loyalty toward companies.

People’s Views of Society. People vary in their attitudes toward society. This influences their consumption patterns and marketplace attitudes.

People’s 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 41-million-person “lifestyles of health and sustainability” market.

The U.S. organic-food market generated nearly $81 billion in sales last year, more than doubling over the past five years.

People’s Views of the Universe. In general, religious conviction and practice have been dropping off gradually through the years. 

Review Learning Objective 4: Explain the key changes in the political and cultural environments.

p. 90

Key Term: Cultural Environment

p. 91

Ad: Yogi Tea

p. 92

Ad: Tom’s of Maine

Ø Assignments, Resources

Use Discussion Question 3-4 here

Use Critical Thinking Exercise 3-7 here

p. 93

PPT 3-44

PPT 3-45

PPT 3-46

Discuss how companies can react to the marketing environment.

RESPONDING TO THE MARKETING ENVIRONMENT

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.

Review Learning Objective 5: Discuss how companies can react to the marketing environment.

Learning Objective 5

Ø Assignments, Resources

Use Real Marketing 3.2 here

Use Discussion Question 3-5 here

Use Company Case here