Priciples of Marketing

by Philip Kotler and Gary Armstrong

Chapter 3
Analyzing the Marketing
Environment

PEARSON
Objective Outline
The Microenvironment
The Macroenvironment
1 Describe the environmental forces that affect the
company’s ability to serve its customers.

The Demographic Environment

The Economic Environment
2 Explain how changes in the demographic and
economic environments affect marketing decisions.
Objective Outline

The Natural Environment

3 The Technological Environment
Identify the major trends in the firm’s natural and
technological environments.

The Political and Social Environment

The Cultural Environment
4 Explain the key changes in the political and cultural
environments
Objective Outline

Responding to the Marketing Environment

Discuss how companies can react to the marketing
5 environment.
Preview
Marketing
Microenvironment Macroenvironment
Environment
• It is the actors • It consists of the • The
and forces actors close to macroenvironment
outside the company that consists of the
marketing that affect its ability larger societal
affect marketing to serve its forces that affect
management’s customers, the the
ability to build company, microenvironment
and maintain suppliers, —demographic,
successful marketing economic, natural,
relationships intermediaries, technological,
with target customer political, and
customers. markets, cultural forces.
competitors, and
publics.
The Microenvironment
 Marketing success requires building relationships with
other company departments, suppliers, marketing
intermediaries, competitors, various publics, and
customers, which combine to make up the company’s
value delivery network.
The Company
 With marketing taking the lead, all departments—from
manufacturing and finance to legal and human resources—
share the responsibility for understanding customer needs and
creating customer value.

Top
management

accounting finance

Marketing
management

Research and
operations development

purchasing
Suppliers

 Suppliers provide the resources needed by the

company to produce its goods and services.
 Most marketers today treat their suppliers as
partners in creating and delivering customer
value.

Apple’s supplies in the world

Marketing Intermediaries
 Marketing intermediaries help the company promote,
sell, and distribute its products to final buyers.
 Physical distribution firms help the company 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.
 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.
Competitors
 Marketers also must gain strategic advantage by
positioning their offerings strongly against competitors’
offerings in the minds of consumers.
 Each firm should consider its own size and industry
position compared to those of its competitors.

V.S
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.
 We can identify seven types of publics:
Publics
• Influences the company’s ability to obtain funds
Financial
A public is any group that has an actual or potential
• Banks, investment analysts, and stockholders are the
interest in or impact
publics on an organization’s
major financial publics. ability to
achieve its objectives.
 We can identify sevennews,
• Carries typesfeatures,
of publics:
and editorial opinion.
Media
• It includes newspapers, magazines, television stations,
publics and blogs and other Internet media.

• Management must take government developments into

Governm account.
ent • Marketers must often consult the company’s lawyers
Publics on issues of product safety, truth in advertising, and
other matters.
Publics
• A company’s marketing decisions may be questioned
Citizen- by consumer organizations, environmental groups,
action minority groups, and others.
publics • Its public relations department can help it stay in touch
with consumer and citizen groups.
• This group includes neighborhood residents and
community organizations.
Local
• Large companies usually create departments and
Publics programs that deal with local community issues and
provide community support.

• A company needs to be concerned about the general

General
public’s attitude toward its products and activities.
public • The public’s image of the company affects its buying.
Publics

Internal • This group includes workers, managers, volunteers,

publics and the board of directors.
Customers
 The company might target any or all five types of
customer markets:

Consumer
markets

International Business
markets markets

Government Reseller
markets markets
Customers

 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
 Reseller markets: Buy goods and services to
resell at a profit.
Customers

 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.
 International markets: Consist of these buyers
in other countries, including customers,
producers, resellers, and governments
The Macroenvironment
The Demographic Environment

 Demography is the study of human populations

in terms of size, density, location, age, gender,
race, occupation, and other statistics.
The Changing Age Structure of the
Population

Baby Generation
boomers X

Generation
Y
The Changing Age Structure of the
Population

The Baby Boomers

The post-World War II baby boom produced 78 million baby

boomers, who were born between 1946 and 1964. Over the years,
The baby boomers have been one of the most powerful forces
shaping the marketing environment.
The youngest boomers are now moving into their fifties; the oldest
are in their late sixties and entering retirement. The maturing
Boomers are rethinking the purpose and value of their work,
resposibilities, and relationships.
The Changing Age Structure of the
Population
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 because they lie
Baby
in the shadow of the boomers and lackGeneration
obvious distinguishing
characteristics. boomers X

From a marketing standpoint, the Gen Xers are a more skeptical

bunch. They tend to research products before they consider a
purchase, prefer quality Generation
to quantity, and tend to be less receptive
to overt marketing pitches. Y
The first to grow up in the Internet era, Generation X is a highly
connected generation that embraces the benefits of new technology.
They are increasingly displacing the lifestyles, culture, and values
of the baby boomers.
The Changing Age Structure of the
Population

Millennials (Generation Y)

Born between 1977 and 2000, these children of the baby

boomers number 83 million or more, dwarfing the Gen Xers
and becoming larger even than the baby boomer segment. One
thing that Millennials have in common is their utter fluency
and comfort with digital technology.
The Changing Age Structure of the
Population

Generational Marketing

Marketers often split the baby boomers into three smaller groups—
leading-edge boomers, core boomers, and trailing-edge boomers—
each with its own beliefs and behaviors. Similarly, they split the
Millennials into teens and young adults.

Thus, marketers need to form more precise age-specific

segments within each group. More important, defining people
by their birth date may be less effective than segmenting
them by their lifestyle, life stage, or the common values they
seek in the products they buy.
The Changing American Family

 More people are:

• Divorcing or separating
• Choosing not to marry
• Choosing to marry later
• Marrying without intending to have children
• Increasing number of working women
• Increasing number of stay-at-home dads
Geographic Shifts Population
 The shift in where people live has also caused a shift in where
they work.
 For example, the migration toward micropolitan and suburban
areas has resulted in a rapid increase in the number of people
who “telecommute”—work at home or in a remote office and
conduct their business by phone or the Internet.
 This trend, in turn, has created a booming SOHO (small
office/home office) market.
A Better-Educated, More White-Collar,
More Professional Population
 Changes in the Workforce
• More educated
• More white collar
Increasing Diversity

 Markets are becoming more diverse

• International
• National
 Includes:
• Ethnicity
• Disabled
The Economic Environment
 The economic environment consists of economic factors
that affect consumer purchasing power and spending
patterns.
 Some countries have industrial economies, which
constitute rich markets for many different kinds of goods.
 At the other extreme are subsistence economies; they
consume most of their own agricultural and industrial
output and offer few market opportunities.
 In between are developing economies that can offer
outstanding marketing opportunities for the right kinds of
products.
Changes in Consumer Spending
 In turn, value marketing has become the watchword for
many marketers.
 Marketers in all industries are looking for ways to offer
today’s more financially frugal buyers greater value—just
the right combination of product quality and good service
at a fair price.
Income Distribution

 Marketers should pay attention to income

distribution as well as income levels.
 Over the past several decades, the rich have
grown richer, the middle class has shrunk, and
the poor have remained poor.
The Natural Environment
 The natural environment involves the physical
environment and the natural resources that are needed as
inputs by marketers or that are affected by marketing
activities.
 Marketers should be aware of several trends:
• Increased shortages of raw materials
• Increased pollution
• Increased government intervention
 The environmental sustainability is the developing
strategies and practices that create a world economy that
the planet can support indefinitely.
The Technological Environment

 The technological environment is perhaps the

most dramatic force now shaping our destiny.
 Marketers should watch the technological
environment closely. Companies that do not keep
up will soon find their products outdated. If that
happens, they will miss new product and market
opportunities.
The Political and Social Environment

 The political environment consists of laws,

government agencies, and pressure groups that
influence or limit various organizations and
individuals in a given society.
Legislation Regulating Business

 Business legislation has been enacted for a

number of reasons:
• Protect companies from each other
• Protect consumers from unfair business practices
• Protect the interests of society against unrestrained
business behavior.
Increased Emphasis on Ethics and
Socially Responsible Actions
 Socially Responsible Behavior:
• Enlightened companies encourage their managers to look
beyond what the regulatory system allows and simply “do the
right thing.”
• These socially responsible firms actively seek out ways to
protect the long-run interests of their consumers and the
environment.
Increased Emphasis on Ethics and Socially
Responsible Actions
 Caused-Related Marketing:
• Cause-related marketing has become a primary form of
corporate giving. It lets companies “do well by doing good”
by linking purchases of the company’s products or services
with benefiting worthwhile causes or charitable organizations.
• It has some controversy. Critics worry that cause-related
marketing is more a strategy for selling than a strategy for
giving ─ that “cause related” marketing is really “cause-
exploitative” marketing.
The Cultural Environment

 Cultural environment consists of institutions

and other forces that affect a society’s basic
values, perceptions, preferences, and behaviors
 Video

 Effects of Internal Environment & External

Environment in Marketing
https://www.youtube.com/watch?v=ADm3Hdhh34I
The Persistence of Cultural Values
 People in a given society hold many beliefs and values.
Their core beliefs and values have a high degree of
persistence.
 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.
Shifts in Secondary Cultural Values

 People’s Views of Themselves.

• People vary in their emphasis on serving themselves
versus serving others.
• People use products, brands, and services as a means of
self-expression, and they buy products and services that
match their views of themselves.
Shifts in Secondary Cultural Values
 People’s Views of Organizations.
• In recent years, some analysts have voiced concerns that the
Internet age would result in diminished human interaction, as
people buried their heads in their computers or e-mailed and
texted rather than interacting personally.
• Instead, today’s digital technologies seem to have launched an
era of what one trend watcher calls “mass mingling.”
• Rather than interacting less, people are using online social
media and mobile communications to connect more than ever.
• And, often, more online and mobile interactions result in
more offline mingling
Shifts in Secondary Cultural Values
 People’s Views of Organizations.
• People vary in their attitudes toward corporations,
government agencies, trade unions, universities, and other
organizations.
• The past two decades have seen a sharp decrease in
confidence in and loyalty toward America’s business and
political organizations and institutions.
• Many people today see work not as a source of satisfaction
but as a required chore to earn money to enjoy their non-work
hours.
• This trend suggests that organizations need to find new ways
to win consumer and employee confidence.
Shifts in Secondary Cultural Values
 People’s Views of Nature.
• People vary in their attitudes toward the natural world—some
feel ruled by it, others feel in harmony with it, and still others
seek to master it.
• A long-term trend has been people’s growing mastery over
nature through technology and the belief that nature is
bountiful.
• More recently, however, people have recognized that nature is
finite and fragile; it can be destroyed or spoiled by human
activities.
Shifts in Secondary Cultural Values
 People’s Views of Universe.
• People vary in their beliefs about the origin of the universe
and their place in it.
• In recent years, some futurists have noted a renewed interest
in spirituality, perhaps as a part of a broader search for a new
inner purpose.
• This affects consumers in everything from television shows
they watch and the books they read to the products and
services they buy.
Responding to the Marketing
Environment

Uncontrollable Proactive Reactive

• React and • Aggressive • Watching and

adapt to actions to reacting to
forces in the affect forces forces in the
environment in the environment
environment
 Reading (In Class)

Applications & Cases

Chapter-03, Book 17th Edition

1. Uber, Online Media Marketing

2. Cosmetics, Marketing Ethic.
The End