FGaucher 04 The Marketing Environment V2.1

Chapter Four
Analyzing the Marketing Environment
Chapter 4 - slide 1
The Marketing Process
Create Value Manage Relationships Capture Value
1 2 3 4 5
Understand the Design a Capture

Construct the Build Customer
Customer and Marketing
Marketing Plan Relationships Value
Marketplace Strategy
Analyzing the Segmenting & Product and Customer

Marketing Targeting Service design Create Satisfied,
Relationship
Environment Loyal customers
Management
Pricing
Research Value Proposition: Partners Increase share of
Differentiating and Relationship Market and share
Positioning Distribution Management of Customer
Marketing
Information
System Promotion:
communicate the
value proposition
Chapter 4 - slide 2
The Marketing Environment
▪ The marketing environment includes the actors and

forces outside marketing that affect marketing
strategies
▪ To understand marketing, and to develop effective
marketing strategies, you must first understand the
environment in which marketing operates.
Chapter 4 - slide 3
▪ To understand the environment in which marketing operates.
▪ To understand the customers and their needs and develop

appropriates marketing strategies surrounding those needs
Chapter 4 - slide 4
Environmental scanning
Can be a formal mechanism within a firm, or merely the result of salespeople
and managers consciously monitoring changes in the environment.
Steps
1. Determine the environmental areas that need to be monitored;
2. Determine how the information will be collected, including
information sources, the information frequency, and who will be
responsible;
3. Implement the data collection plan
4. Analyze and interpret the data (turn data into relevant information)
5. Use them in the market planning process, take decisions.
Chapter 4 - slide 5
Analyzing the Marketing Environment
Chapter 4 - slide 6
▪ Microenvironment
▪ Consists of the actors close to the company that affect its
ability to serve its customers, the company, suppliers,
marketing intermediaries, customer markets,
competitors, and publics
▪ Macroenvironment
▪ demographic, economic, natural, technological, political,
and cultural forces.
Chapter 4 - slide 7
Marketing Principals
Microenvironment
Chapter 4 - slide 8
The Company’s Microenvironment
▪ Actors in the Microenvironment
Chapter 4 - slide 9
THE COMPANY
▪ Top management
▪ Finance
▪ R&D
Ensure value creation and
▪ Purchasing
capture capabilities
▪ Operations
▪ Accounting
▪ Human Resources
Chapter 4 - slide 10
THE SUPPLIERS
▪ Provide the resources to produce goods and services
▪ Suppliers are part of the company value network
▪ A value network is a set of connections between organizations and/or
individuals interacting with each other to benefit the entire group. A
value network allows members to buy and sell products as well as
share information.
▪ Suppliers are partners to provide customer value. Disruption within
the value chain can seriously affect a company’s marketing plan.
▪ Example: The outsourcing of food and beverage operations to hotels
Suppliers: from channels to partners and ecosystems
▪ today’s marketers recognize the importance of working with their intermediaries as
partners rather than simply as channels through which they sell their products.
▪ Suppliers: from channels to partners and ecosystems
▪ When Coca-Cola signs on as the exclusive beverage provider for a fast-food chain,
such as McDonald’s, Wendy’s, or Subway, it provides much more than just soft drinks.
It also pledges powerful marketing support.
▪ Coca-Cola assigns cross-functional teams dedicated to understanding the finer
points of each retail partner’s business. It conducts a staggering amount of research
on beverage consumers and shares these insights with its partners.
▪ It analyzes the demographics of U.S. zip code areas and helps partners determine
which Coke brands are preferred in their areas. Coca-Cola has even studied the
design of drive-through menu boards to better understand which layouts, fonts, letter
sizes, colors, and visuals induce consumers to order more food and drink. Based on
such insights, the Coca-Cola Food Service group develops marketing programs and
merchandising tools that help its retail partners improve their beverage sales and
profits.
▪ There are several ways to partner with a

celebrity chef or branded restaurant.
▪ Example
▪ W Dallas – Victory hotel signed an
agreement with Culinary Concepts
Hospitality Group (CCHG) to develop a new
restaurant concept
▪ The outsourcing of food and beverage
operations allows the hotel to concentrate
on lodging while letting a food and beverage
specialist handle this area within the hotel.
MARKETING INTERMEDIARIES
▪ Firms that help the company to promote, sell and distribute
its products to final buyers
Types of Marketing Intermediaries
▪ 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.
COMPETITORS
▪ Firms must gain strategic advantage by positioning their
offerings against competitors’ offerings
▪ Fierce competitive forces shaping all markets
▪ Being good is no longer good enough. We must strive for excellence.
▪ About 40 percent of the customers that rate a hotel or restaurant as
being good return, and the figure jumps to 90 percent when customers
give a rating of excellent.
▪ Competition needs to be broadly defined
COMPETITORS
▪ Competitors should be defined broadly across 4 levels:
▪ Four levels of competitors (e.g. McDonald’s)
1. companies that offer similar products and services to the same customers at
a similar price.
▪ Burger King, Wendy’s, and Hardee’s.
2. companies making the same product or class of products.
▪ all fast-food restaurants, including KFC, Taco Bell, Jamba Juice, and Arby’s
3. companies supplying the same service.
▪ Restaurants and other suppliers of prepared food, such as the deli section of a
supermarket.
4. companies that compete for the same consumer dollars.
▪ the self-provision of the meal by the consumer
CUSTOMERS
Example of different consumers markets in hospitality
▪ Leisure
▪ Individuals and households
▪ Commercial (business travelers)

▪ Government
▪ Meeting and groups
▪ Corporate
▪ SMERFE (social, military, ethnic, religious, fraternal, and educational)
▪ Resellers
▪ For example, a tour operator may purchase airline seats, hotel rooms, ground
transportation, and restaurant meals to package a tour, which will be resold to the
consumer market.
Marketing Principals
Macroenvironment
The Company’s Macroenvironment
COMPETITIVE FORCES
▪ Two forces that affect the competition are the ability of
companies to enter and exit markets.
▪ Entry barriers prevent firms from getting into a business, and
barriers to exit prevent them from leaving.
▪ Low barriers to entry characterize the restaurant industry.
▪ Hotels have moderately high barriers of entry, due to the costs of
building a hotel and the scarcity of good locations.
DEMOGRAPHIC ENVIRONMENT
Demography is the study of human populations in terms of size,
density, location, age, gender, race, occupation, and other
statistics
▪ Demographic trends include age, family structure, geographic
population shifts, educational characteristics, and population
diversity
▪ Demographic environment is important for marketing
because it involves people, and people make up markets
▪ Changing age structure of the population
▪ Generation Marketing
▪ Baby boomers include people born between 1946 and 1964
▪ Generation X includes people born between 1965 and 1976
▪ Millennials (gen Y or echo boomers) include those born
between 1977 and 2000
▪ Generation Z
▪ Millennials (gen Y or echo boomers) include those born in the 80’s
and 90’s. Comfortable with technology
▪ Digital technologies are an integral part of the reality for them.
Millennials expect technology to simply work-so you'd better make
sure that it does.
▪ Millennials are a social generation-and they socialize while
consuming (and deciding to consume) your products and services.
▪ They collaborate and cooperate-with each other and, when possible,
with brands. Millennials have a positive, community-oriented ''we can
fix it together" mindset.
▪ They're looking for adventure (and whatever comes their way).
▪ They're passionate about values-including the values of companies
they do business with
▪ What matters to them is to “be” and not to “have”. They reject
unrestrained consumerism. They challenge brands that needs to
persuade them with more than mere material possessions.
Micah Solomon is a customer service consultant, customer
experience keynote speaker and bestselling author.
The family and the changing family
▪ The prevalent model is the traditional family
▪ Changes in the model:
▪ Divorcing or separating
▪ Choosing not to marry
▪ Choosing to marry later
▪ Marrying without intending to have children
▪ Increased number of working women
▪ Stay-at-home dads, etc.
Geographic shifts in Populations

▪ Growth in China West and South
and decline in other regions
▪ Moving from rural to
metropolitan areas
▪ Changes in where people work
▪ Telecommuting
▪ Home office
▪ Divorcing or separating
▪ Changes in the Workforce

▪ More educated
▪ More white collar
▪ Increased Diversity
Increased Diversity
Markets are becoming more diverse
▪ International
▪ National
Includes:
▪ Ethnicity
▪ Disabled
▪ Etc.
ECONOMIC ENVIRONMENT
▪ Economic environment consists of factors that affect
consumer purchasing power and spending patterns
▪ E.g. Companies that sell premium products are very sensitive to
economic signs. E.g. Apple
▪ Marketers must pay close attention to major trends and
consumer spending patterns
▪ Structural changes in incomes (shrunk of the middle class in
USA/Europe)
▪ Global Economic trends: Today the travel industry operates in a global
environment.
▪ Development of new tourist destination at the expense of others (e;g; Craotia)
▪ Currency rate change (e.g. USD vs Euro and other currencies determine US citizen
destinations in Europe or South America, etc.)
Changes in Consumer Spending Patterns

▪ Changes in major economic variables have a large impact on
the marketplace.
▪ Ernst Engel—Engel’s Law
▪ As income rises:
▪ The percentage spent on food declines
▪ The percentage spent on housing remains constant
▪ The percentage spent on savings increases
The Economic Environment
▪ Purchasing Power
▪ Consumers have the ability to purchase products and services
▪ Consumer Price Index (CPI)
▪ CPI measures changes in the price level of a weighted average market
basket of consumer goods and services purchased by households.
▪ Disposable Income
▪ An individual's income that remains for spending after required
deductions such as taxes.
▪ Discretionary Income
▪ An individual's income that is available for spending after deducting
taxes and necessary expenditures on housing, food, and basic clothing.
NATURAL ENVIRONMENT
Natural environment involves the natural resources that are
needed as inputs by marketers or that are affected by marketing
activities
▪ Trends
▪ Shortages of raw materials
▪ Increased pollution
▪ Increase government intervention
▪ Environmentally sustainable strategies
Sustainable Development
▪ Sustainable development
▪ Development that meets the needs of the present without
compromising the ability of future generations to meet their
own needs.
Triple Bottom Line of Tourism
Sustainability
Triple Bottom Line Sustainability (TBLS), i.e. the

balancing of economic, social and
environmental agendas, is being increasingly
used as a framework for sustainable tourism
development, especially in rural areas.
Rhetoric or reality?
Read the Phd thesis, Green tourism planning: Triple bottom line sustainability - rhetoric or reality. A case study of
the Bluestone development
Elgammal, Islam
Cardiff Metropiltan University - https://repository.cardiffmet.ac.uk/handle/10369/6494
Environmental sustainability
▪ Environmental sustainability
▪ The ability to maintain reasonable levels of renewable and
non-renewable energy, waste, water, and pollution
indefinitely.
▪ Carbon footprint
▪ The total amount of greenhouse gas emissions caused by
people, organizations, products, and events through
everyday activities.
▪ Typically, companies that engage in “green” practices try
to reduce their carbon footprint by focusing on
▪ Energy Management
▪ Waste Management
▪ Water Conservation
▪ Managing Pollution
Economic Sustainability
▪ Economic Sustainability
▪ The ability to support a given level of economic production
indefinitely
▪ Economic sustainability is normally associated with
monetary goals like maintaining adequate profit margins,
providing an acceptable return on investment for owners
and shareholders, and being able to pay debts
▪ One of the main criticisms of corporations is that they
sacrifice long-term environmental sustainability for
short-term profits.
Social Sustainability
▪ Social Sustainability
▪ The ability of a country or a society to maintain an adequate
standard of living indefinitely
▪ Two of the underlying themes in social sustainability
are equity and diversity
▪ Equity focuses on the ability and willingness of a community to
provide opportunities and resources to all of its members,
regardless of race, religion, gender, income level, etc
▪ Diversity focuses on the extent to which society welcomes
members from all walks of life. It not only refers to one’s race
and income, but to one’s political and religious views
Corporate Social Responsibility
▪ Corporate social responsibility can be defined as the

continuing voluntary commitment by corporations to
behave ethically and contribute to the economic
development, social equity, and environmental protection
of society as a whole
▪ Some of the key aspects of the definition are:
▪ It is a continuing commitment, or a long-term initiative.
▪ It is voluntary, suggesting that organizations need to self-
regulate and encourage participation among both internal and
external stakeholders.
▪ It focuses on the triple bottom line – economic, social and
environmental impacts.
Managing for Sustainability
TECHNOLOGICAL ENVIRONMENT
▪ Most dramatic force in changing the marketplace
▪ Creates new products and opportunities like mass
customization
▪ IT will reshape dramatically the hospitality industry
▪ New entrants (AirBNB, etc.)
▪ Online experience
▪ IOT
▪ Blockchain
▪ Etc.
POLITICAL ENVIRONMENT
▪ Political environment consists of

▪ Legislations
▪ Government agencies,
▪ Pressure groups
▪ that influence or limit various organizations and
individuals in a given society
POLITICAL ENVIRONMENT
▪ Legislation regulating business

▪ Increased legislation
▪ Local taxes on hospitality businesses
▪ Legislation to protect consumers from unfair business
practices, safety regulations, etc.
▪ Increased emphasis on ethics
▪ Socially responsible behavior
▪ Cause-related marketing
CULTURAL ENVIRONMENT
▪ Cultural environment consists of institutions and other
forces that affect a society’s basic values, perceptions,
and behaviors
▪ Marketers want to predict cultural shifts in order to spot
new opportunities or threats.
▪ 2 categories of values structure the human mind: core
and secondary beliefs.
Persistence of Cultural Values

▪ Core beliefs and values
▪ People in any society hold certain persisting core beliefs
and values.
▪ For example, most Americans believe in working, getting married,
giving to charity, and being honest;
▪ these beliefs shape the more specific attitudes and
behaviors found in everyday life.
▪ are passed on from parents to children and are reinforced
by schools, churches, businesses, and government.
▪ Core beliefs are persistent.
Persistence of Cultural Values

▪ Secondary beliefs and values
▪ are more open to change and include people’s views of
themselves, others, organization, society, nature, and the
universe.
▪ Marketers have some chance of changing secondary
values but little chance of changing core values.
▪ Believing in marriage is a core belief; believing that people
should get married early is a secondary belief.
▪ Not as hard to influence
CULTURAL ENVIRONMENT
▪ The Hyatt Hotel in Singapore

was designed without feng shui
in mind, and, as a result, it had
to be redesigned to boost
business.
▪ Feng Shui is all around Grand
Hyatt Singapore. Did you know
that there are 32 steps at the
grand staircase? In Cantonese,
the number '32' depicts
"business all the way".
Shifts in Secondary Cultural Values

▪ People’s view of themselves
▪ People use products, brands and services as a
mean of self-expression, and they buy
products and services that match their views
of themselves.
▪ Yankelovich Monitor’s consumer segments
▪ People’s view of others
▪ Shifts in people’s attitudes toward others has
been noted
▪ More “cocooning” (enjoy home and IT devices)

▪ People’s view of organizations
▪ decrease in confidence and loyalty towards business and
political organizations.
▪ Brand rebuilding, authenticity
▪ People’s view of society
▪ Patriots: Marketers respond with patriotic products and
promotions.

▪ People’s view of nature
▪ Some feel ruled by it
▪ Some feel in harmony with it
▪ Some seek to master it
▪ People’s view of the universe
▪ Renewed interest in spirituality
▪ Whole Foods’ mantra: “We believe in a virtuous circle entwining
the food chain, human beings and Mother Earth: each is reliant
upon the others through a beautiful and delicate symbiosis.”
Responding to the Marketing
Environment
Companies views on the environment
Uncontrollable Proactive Reactive
• React and adapt to • Aggressive actions • Watching and

forces in the to affect forces in reacting to forces in
environment the environment the environment
Environment
▪ Uncontrollable:
▪ The company views the marketing environment as an
“uncontrollable” element to which they must adapt.
▪ They passively accept the marketing environment and do
not try to change it.
▪ They analyze environmental forces and design strategies
that will help the company avoid the threats and take
advantage of the opportunities that the environment
provides.
Environment
▪ Proactive:
▪ firms take aggressive action to affect the publics and forces in their
marketing environment.
▪ Lobbyists are hired to influence legislation affecting their industries
▪ 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.
▪ They form contractual agreements to control their distribution
channels better.

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Chapter Four

Analyzing the Marketing Environment

Create Value Manage Relationships Capture Value

Understand the Design a Capture

Analyzing the Segmenting & Product and Customer

▪ The marketing environment includes the actors and

▪ To understand the environment in which marketing operates.

▪ To understand the customers and their needs and develop

▪ There are several ways to partner with a

▪ Commercial (business travelers)

Geographic shifts in Populations

▪ Changes in the Workforce

Changes in Consumer Spending Patterns

Triple Bottom Line Sustainability (TBLS), i.e. the

▪ Corporate social responsibility can be defined as the

▪ Political environment consists of

▪ Legislation regulating business

Persistence of Cultural Values

Persistence of Cultural Values

▪ The Hyatt Hotel in Singapore

Shifts in Secondary Cultural Values

Shifts in Secondary Cultural Values

Shifts in Secondary Cultural Values

Uncontrollable Proactive Reactive

• React and adapt to • Aggressive actions • Watching and

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