Marketing Environment

Chapter 3: The Marketing Environment

• The marketing environment includes the actors and forces outside marketing.
• These factors affect marketing management's ability to build and maintain successful relationships.

Analyzing the Marketing Environment

• The Company's Microenvironment.
• The Company's Macroenvironment.

The Company’s Microenvironment

• The microenvironment includes: the company, suppliers, marketing intermediaries, customer markets, competitors, and publics.

Actors in the Microenvironment

• The actors in the microenvironment are: the company, suppliers, marketing intermediaries, competitors, publics and customers.

The Company

• The company's departments include: top management, finance, R&D, purchasing, operations, and accounting.

Suppliers

• Suppliers provide resources to produce goods and services.
• Partners are treated as partners to provide customer value.

Marketing Intermediaries

• They help the company to promote, sell, and distribute its product to the final buyers.

Competitors

• Firms must gain a strategic advantage by positioning their offering against competitor's offerings.

Publics

• Any group has an actual or potential interest in or impact on an organization's ability to achieve its objectives.
• Publics include: financial, media, government, citizen-action, local, general and internal.

Customers

• A customer is a person or organization that buys goods or services from a store or business.

The Company’s Macroenvironment

• The macroenvironment consists of: demographic, economic, natural, technological, political, and cultural forces.

Demographic Environment

• Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics.
• It's important because involves people, and people make up markets.
• More people divorcing or separating.
• More people are choosing not to marry.
• More people are choosing to marry later.
• There is an increased number of working women.
• There are more stay-at-home dad's

Natural Environment

• Natural environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities.
• Trends: Shortage of raw materials increased pollution, Increase government intervention and environmentally sustainable strategies.

Technological Environment

• The most dramatic force is changing the marketplace.
• Technology creates new products and opportunities.

Political Environment

• The this environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society.

Cultural Environment

• This environment consists of forces that affect a society's basic values, perception, and behaviors.

Responding to the Marketing Environment

• Uncontrollable: React and adapt to forces in the environment.
• Proactive: Aggressive actions to affect forces in the environment.
• Reactive: watching and reacting to forces in the environment.

Model of Consumer Behavior

• Marketing stimuli are product, price, place, promotion.
• Other stimuli are economic, technological, political, cultural.
• Buyer characteristics - how they perceives and responds to stimuli.
• Buyer decision process - the process itself [after perception].
• Purchase (Product, Brand, Source, Amount, Mode of payment).
• No purchase

Factors Affecting the consumer behavior

• Cultural, social, personal and psychological factors.

Types Of Buying Decision Behavior

• Complex and Variety-seeking
• Dissonance-reducing and Habitual

The Buyer Decision Process

• Need recognition. Recognize a problem or a need.
• Internal stimuli (hunger, thirst, sex).
• Internal stimuli are high enough to be a drive.
• External stimuli (e.g. break from work).
• Information search.

The Buyer Decision Process (cont)

• If drive is strong and a satisfying product at hand, may be skipped
• If drive not strong enough, may store need in memory and do an information search
• Evaluation of alternatives.
• If decision to buy based on one attribute – easy to predict and optimize for.
• Usually many attributes with weights.
• Purchase decision.

The Buyer Decision Process (cont)

• Purchase intention does not necessarily become a decision; some obstacles.
• Attitudes of others (husband feels strongly negatively).
• Unexpected situational factors (loses a job).
• Post purchase behavior.
• Consumer's expectations vs. perceived performance.
• Every purchased is a compromise, customer wonders about pros/cons.
• Some 96% of dissatisfied customers never tell the company!

Participants in the Business Buying Process

• Users – who will use the product or service.
• Influencers – help define specifications, e.g. technical personnel.
• Buyers – formal authority, major role in selecting and negotiating, influence specifications slightly.
• Deciders – formal or informal power to select or approve final suppliers; in routine buying often same as buyers.
• Gatekeepers – control the flow of information between participants, e.g. purchasing agents have authority to prevent seller from seeing the buyer.

Market Segmentation, Targeting, and Positioning for Competitive Advantage

• Segmentation due to customers being too scattered.
• Segmentation due to customers being too varied in buying practices. Companies vary in their ability to serve a segment.

Steps in Better Marketing

• Market segmentation
• Market targeting,
• Market positioning

Levels of Segmentation

• Mass marketing – mass producing, distributing, and promoting the same product to all consumers.
• Segment marketing - broad segment, adapt offering to closely match the needs of the market.
• Niche marketing - focus on subgroups within segments.

Levels of Segmentation (cont)

• Micromarketing
• Local Marketing - cities, neighborhoods, specific stores
• Individual Marketing - one-to-one or customized marketing

Requirements for Effective Segmentation

• Size, purchasing power, and profiles can be measured (measurable).
• Can be effectively reached and served (move in same places?) (accessible).
• Substantial – must be large or profitable enough (people taller than 10 feet not good).
• Requirements for Effective Segmentation.
• Two segments that react the same way are not actually separate segments (differentiable).
• Effective programs can be designed for the segment, matches company capabilities (actionable).

Market Targeting

• Selecting market segments entails: segment size and segment growth.
• Target market is a set of buyers who share common needs or characteristics that the company decides to serve.

Market Targeting (cont)

• Social Targeting: Targetting vulnerable or disadvantaged consumers with controversial or potentially harmful products.
• Examples: aggressive marketing to children, cheap beer for black people.
• Issue is not who is targeted but how and for what.

Market Positioning

• Product position is defined by consumer perception of an important attribute.
• Product position strategy entails: identifying a set of possible competitive advantages to build on. Choosing the right competitive advantages. Selecting an overall positioning strategy think about the customer's entire experience with the product or service (Product, Service, Channels, People, Image).

Product and Services Strategy

• Product - Anything offered to a market: attention, acquisition, use or consumption. It might satisfy a want or need.
• Service - A form of product, activity or benefit that one party can offer: is essentially intangible and does not ownership of anything.

Levels Of Product

• Core product – What is the buyer really buying?
• Actual Product - Fulfills the core product benefits.
• Attributes: Quality level, Features, Design,Brand name, Packaging.
• Augmented Product - Additional benefits not part of the actual product/service as well as warranty, repair services, toll-free help number.

Product Classifications

• Consumer: convenience, shopping, specialty, and unsought products.
• Industrial products - Products and services purchased for further processing or for use in conducting a business.
• Raw materials – farm products, natural products.
• Capital items - Aid in buyer's production or operations.
• Installations - - Fixed equipment (generators, drill presses, large computer systems,...)
• Supplies and services - Operating supplies (lubricants, coal, paper, pencils).

Definition of Price

• Price is the amount of money charged for a product or service, or the sums of the values that consumers exchange to have the product or service.
• Historically price is the major factor affecting buyer choice.
• Price is the only part of the marketing mix that brings revenue.
• Price is among themost flexible elements

Factors to Consider When Setting Prices

• Internal Factors
• Marketing objectives, marketing mix strategy, costs organizational considerations.
• Nature of the market and demand, consumer perceptions of price and value, competition and environment factors, and external factors.

General Pricing Approaches

• Cost-based pricing: add a standard mark-up to product cost. Must take variable costs into account; sales volume needs to determine per-unit fixed costs.
• Value-based pricing: Offering just the right combination of quality and good service at a fair price. Set based on customer perceptions of customers value of product/service.
• Competition based pricing: Set prices on the prices that competitors charge for similar products. Setting prices based on the prices that competitors charge for similar products.
• Sealed bid pricing: Used when companies bid for jobs, bid is set based on competitors' bids (with attention to its costs, of course).

Product Mix Pricing Strategies

• Setting price steps in a product line, based on consumer evaluations of different product features, and competitors' prices.
• Product line pricing often relies on the well known price points.
• Optional-product and Accessory:
• Pricing of optional product/service
• Captive-product and bundle pricing is products that must be used along with a main product.
• Combining several product and offering the bundle at a reduced price.
• Product bundle pricing is like season tickets or hotel rooms (entertainment services, or computer plus software). Discount and allowance pricing, cash discount, quantity discount, functional discount, seasonal discount or allowances. Customer-segment that different prices are different from (pricing for same product/service (ie museums for adults/students). Product-form pricing that product price is priced different between what is being used versus if it was not being used between customer segments

Product Mix Pricing Strategies cont.

• Location pricing -Different prices for different locations, even though cost of offering is the same in some locations
• Time pricing - Price varies by season, month, day, or even hour.
• Pyschological pricing is the used of consumer prices considering psychology of consumer.

An overview of the marketing environment, including the micro and macro factors that influence marketing management's ability to build and maintain successful customer relationships. Key components include the company, suppliers, marketing intermediaries, customer markets, competitors, and publics.