Chapter 03 Modified

3
Principles of Marketing
The
Marketing Environment
Learning Objectives
After studying this chapter, you should be able to:
1. Describe the environmental forces that affect the
company’s ability to serve its customers
2. Explain how changes in the demographic and
economic environments affect marketing decisions
3. Identify the major trends in the firm’s natural and
technological environments
4. Explain the key changes in the political and cultural
environments
5. Discuss how companies can react to the marketing
environment
3-2
Chapter Outline
1. The Company’s Microenvironment

2. The Company’s Macroenvironemnt
3. Responding to the Marketing
Environment
3-3
The Marketing Environment
The marketing environment includes the

actors and forces outside marketing that
affect marketing management’s ability to
build and maintain successful relationships
with customers
3-4
The Marketing Environment
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
3-5
The Company’s Microenvironment
Macroenvironment consists of the larger societal

forces that affect the microenvironment
• Demographic
• Economic
• Natural
• Technological
• Political
• Cultural
3-6
Marketing success requires building relationships

with these elements of its microenvironment:
•The Company
•Suppliers
•Marketing intermediaries
•Customers
•Competitors
•Publics
3-7
The Company
In designing marketing plans, marketing management takes
other company groups into account—groups such as:
 Top management sets the company’s mission,
objectives, broad strategies, and policies.
 Other departments have an impact on the marketing
department’s plans and actions. These departments are:
 Finance
 R&D
 Purchasing
 Operations
 Accounting
3-8
Suppliers
 Suppliers form an important link in the company’s overall
customer value delivery network.
 They provide the resources to produce goods and
services.
 They are treated as partners to provide customer value.
 Marketing managers must watch supply availability and
costs.
 Supply shortages or delays, labor strikes, and other events
can cost sales in the short run and damage customer
satisfaction in the long run.
3-9
Marketing Intermediaries
• Help the company to promote, sell,
and distribute its products to final
buyers
• Include:
• Resellers
• Physical distribution firms
• Marketing services agencies
• Financial intermediaries
3-10
Resellers are the distribution channel firms

that help the company find customers or
make sales to them
• Include:
• Wholesalers
• Retailers
3-11
Physical distribution firms are the

distribution channel firms that help the
company to stock and move goods from
their points of origin to their final destination
3-12
Marketing service 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
3-13
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
3-14
Customers
Customer markets consist of individuals and

households that buy goods and services for
personal consumption
Business markets buy goods and services for

further processing or for use in their
production process
3-15
Customers
Reseller markets buy goods and services to resell at

a profit
Government markets buy goods and services to

produce public services or transfer goods and
services to others who need them
International markets consist of buyers in other

countries including consumers, producers, resellers,
and governments
3-16
Competitors
 The marketing concept states that, to be
successful, a company must provide greater
customer value and satisfaction than its
competitors do.
 Firms must gain strategic advantage by
positioning their offerings against
competitors’ offerings
3-17
Publics
Any group that has an actual or potential interest

in or impact on an organization’s ability to
achieve its objectives
• Financial publics
• Media publics
• Government publics
• Citizen-action publics
• Local publics
• General public
• Internal publics
3-18
Publics
Financial publics influence the company’s

ability to obtain funds—banks, investment
houses, and stockholders
Media publics carry news, features, and
editorial opinion—newspapers, magazines,
and radio and television stations
Government publics influence product safety
and truth in advertising
3-19
Publics
Citizen-action publics include consumer

organizations, environment groups, and minority
groups
Local publics include neighborhood residents and
community organizations
General publics influence the company’s public image
Internal publics include workers, managers,
volunteers, and directors
3-20
The Company’s Macroenvironment
• Demographic environment
• Economic environment
• Natural environment
• Technological environment
• Political environment
• Cultural environment
3-21
Demographic Environment
Demography is the study of human populations in

terms of size, density, location, age, gender, race,
occupation, and other statistics
Demographic environment is important because it
involves people, and people make up markets
Demographic trends include age, family structure,
geographic population shifts, educational
characteristics, and population diversity
3-22
Increasing Population
 One of the main characteristic of Asian
population is the rapid growth in its urban
population.
 India is facing two-third population increase
in urban areas over the next two decades.
3-23
A Growing Middle Class
 India is facing a growing middle class with
population rapidly evolving from lower
income ‘deprived households and aspirers
stages’ towards middle income and
developing stages of ‘strivers’ and ‘seekers’
with a consistent increase in high income
elite group of ‘global’.
3-23
Growth in Rural Population
 The MGI India Consumer Demand Model forecasts
an increase in Indian rural population in future.
 The main constraints for marketers in rural
markets lack of purchasing power and proper
infrastructure such as road and telecommunication
connectivity and reliable supply of electricity,
which affect distribution infrastructure.
3-23
A Changing Family Structure
 The traditional joint family system is evolving
into the nuclear or DISK (dual-income-single-
kid) family system with both husband and
wife working taking help of baby sitters and
crèches to raise their children.
 The growing number of nuclear families has
led to the problem of old, retired parents.
3-23
Changing Role of Women
 The larger number of women are getting
higher and professional education, working in
the corporate world beyond traditionally
looking after the household only.
 They have become an active member of the
family and many products are developed
specially for them.
3-23
A Better-Educated, More White Collared, More Professional
Population
 The trend in subcontinent towards higher and
professional qualification is well in accordance with
the need of the modern, dynamic and evolving
world.
 The rising number of educated people will increase
the demand for quality products, books, magazines,
travel, personal computers and internet services.
3-23
Increasing Diversity
 The global trend towards diversity is going to
impact us at any stage in near future.
 With people from different nationalities and racial
and ethnic backgrounds mixing together with each
other globally especially in developed countries like
USA.
 This makes marketers to look for the requirements
of these heterogeneous segments in a better way.
3-23
Economic Environment
Economic environment consists of factors
that affect consumer purchasing power and
spending patterns
• Subsistence economies consume most of their
own agriculture and industrial output
• Industrial economies are richer markets
• Developing economies offer outstanding
opportunities for right kind of products
3-31
The Global Financial Crisis
Value marketing involves ways to offer

financially cautious buyers greater value—
the right combination of quality and service
at a fair price
3-32
Changes in Income
• Income distribution
• Upper-class consumers
• Middle-class consumers
• Working-class consumers
• Underclass consumers
3-33
Changes in Consumer Spending Patterns
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
3-34
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
• Increased government intervention
• Environmentally sustainable strategies
• Green marketing
3-35
Technological Environment
Most dramatic force in changing the marketplace with

many positive and negative effects
• Rapid change
• Provides new markets and new opportunities
• Internet
• Medicine
• Miniaturization
• Weapons
• Credit cards
• Communication
3-37
Political Environment
Political environment consists of laws,

government agencies, and pressure groups
that influence or limit various organizations
and individuals in a given society
3-38
• Legislation regulating business

• Public policy to guide commerce—sets of laws
and regulations that limit business for the good
of society at large
• Increasing legislation
• Protect companies
• Protect consumers
• Protect the interests of society
3-39
Changing Government Agency Enforcement
• Federal Trade Commission

• Food and Drug Administration
• Federal Communications Commission
• Federal Energy Regulatory Commission
• Federal Aviation Administration
• Consumer Product Safety Commission
• Environmental Protection Agency
3-40
Increased Emphasis on Ethics and Socially Responsible
Actions
Socially responsible behavior occurs when

firms actively seek out ways to protect the
long-term interests of their consumers and
the environment
• Cause-related marketing
3-41
Cultural Environment
Cultural environment consists of institutions

and other forces that affect a society’s basic
values, perceptions, and behaviors
3-42
Persistence of Cultural Values
Core beliefs and values have a high degree

of persistence, are passed on from parents
to children, and are reinforced by schools,
churches, businesses, and government
Secondary beliefs and values are more open
to change
3-43
Shifts in Secondary Cultural Values
Major cultural values of a society are expressed in

people’s view of:
• Themselves
• Others
• Organization
• Society
• Nature and the universe
3-44
• People’s view of themselves

• Yankelovich Monitor’s consumer segments:
• Do-It-Yourselfers—recent movers
• Adventurers
• People’s view of others
3-45
• People’s view of organizations

• People’s view of society
• Patriots defend it
• Reformers want to change it
• Malcontents want to leave it
3-46
• 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
3-47
Responding to the Marketing
Environment
Views on Responding
• Uncontrollable
• Reacting and adapting to forces in the
environment
• Proactive
• Taking aggressive actions to affect forces in the
environment
• Reactive
• Watching and reacting to forces in the
environment
3-48

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3

1. The Company’s Microenvironment

The marketing environment includes the

Microenvironment consists of the actors

Macroenvironment consists of the larger societal

Marketing success requires building relationships

Resellers are the distribution channel firms

Physical distribution firms are the

Marketing service agencies are the

Financial intermediaries include banks,

Customer markets consist of individuals and

Business markets buy goods and services for

Reseller markets buy goods and services to resell at

Government markets buy goods and services to

International markets consist of buyers in other

Any group that has an actual or potential interest

Financial publics influence the company’s

Citizen-action publics include consumer

Demography is the study of human populations in

Value marketing involves ways to offer

Ernst Engel—Engel’s Law

Natural environment involves the natural resources

Most dramatic force in changing the marketplace with

Political environment consists of laws,

• Legislation regulating business

• Federal Trade Commission

Socially responsible behavior occurs when

Cultural environment consists of institutions

Core beliefs and values have a high degree

Major cultural values of a society are expressed in

• People’s view of themselves

• People’s view of organizations

• People’s view of nature

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