Lecture 2 (Chapter 4)

The marketing environment

Adele Berndt
The External environment

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THE IMPORTANCE OF THE
ENVIRONMENT
• Environmental scanning
• Constant change
• Necessitates organisational action

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Target Market
• Group of people or organizations for which an
organization designs, implements, and maintains
a marketing mix
• To meet the need of that group, resulting in mutually
satisfying exchanges
Understanding the
External Environment
• Involves:
• Understanding current customers
• Understanding how customers make decisions
• Identifying the most valuable customers and
understanding their needs
• Understanding the competition
• Important for marketing managers in order to
plan for the future
Social Factors

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Social Factors
• Social change is the most difficult external
variable for marketing managers to forecast,
influence, or integrate into marketing plans
• Influence:
• Products people buy
• Price paid
• Effectiveness of specific promotions
• How, where, and when people expect to purchase
products
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See the video on Canvas

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Component Lifestyles
• Practice of choosing goods and services that
meet one’s diverse needs and interests
• Increase the complexity of consumers’ buying
habits
 LO 2

Social Media
• Changed the way information is obtained
• Made consumers:
• Interact
• Share beliefs, values, ideas, and interests
• Purchase at a dizzying rate
• Used by firms to:
• Engage customers in their products and services
• Humanize brands
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Demographic factors

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THE DEMOGRAPHIC
ENVIRONMENT
• Different generational cohorts (Tweens; Generation Y,
Baby Boomers)
• Changing family structures
• Geographic shifts in the population (rural/urban)
• A better-educated, more white collar and more
professional population

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STATISTICS - SWEDEN
• Population: 10,085,007 (As of 14 March 2019) (49.8% male)
• Birth rate: 332 average per day
• Death rate: 260 average per day
• Population increase (growth) per day: 229
• Mother’s mean age at first birth: 29.1
• Infant mortality rate: 2.6 deaths/1,000 live births

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• Life expectancy at birth: 81.1 years
• Male: 78.8 years
• Female: 83.5 years
• Urbanization: 86.1% of total population
• 99% of adult population (aged 15 years and above) in
Sweden are able to read and write
• Median age: 40.9
Swedish age spread (pyramid)

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 Happiest country to be old is Sweden, survey
finds

Ageing population to cripple spending

Swedes sh
ould work
Reinfeldt until they
're 75 :

The best and worst countries to grow old:

Sweden tops the list, U.S. comes in 8th

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So what does this mean for
marketing?
Increase in number and range
• Products for the elderly
• Services targeting this group

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NOTE: WE DO NOT EXPECT YOU TO LEARN
THESE STATISTICS FOR ANY EXAM! I USE
THEM TO ILLUSTRATE MY EXAMPLES!

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Economic factors

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 LO 5

Economic Factors

Consumers’ Purchasing
incomes power

Inflation Recession
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Technology and innovation

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 LO 6

Technology and
Innovation
• Technological success is based upon innovation
• Corporate structure and management actions
are required to bring new technology
• Workers should be encouraged to innovate
 LO 6

Research
• Types
• Basic research: Pure research that aims to confirm an
existing theory or to learn more about a concept or
phenomenon
• Applied research: Research that attempts to develop
new or improved products
 LO 6

Stimulating Innovation
• Companies limit innovation to areas they are
already familiar with
• Different approaches to innovation include:
• Building scenarios
• Enlisting the Web
• Talking to early adopters
• Using marketing research
• Creating an innovative environment
• Catering to entrepreneurs
• New technologies, products and services
• Smart TV
• Social media (Youtube; Facebook; Whatsapp;
Instagram etc)
• Affects the way in which marketing (and
marketing communication) is done

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Virtually drink a Coke

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Political and legal factors
Political and Legal Factors

• Business needs government regulation to

protect innovators of new technology, the
interests of society, and consumers
• Government needs business in order to generate
taxes
SOME SWEDISH EXAMPLES…
• Konsumentverket
• Revisorsnämnden
• Marknadsdomstolen
• Fastighetsmäklarnämnden
• Skatteverket
• Migrationsverket
• Allmänna reklamationsnämnden
• Länsstyrelserna
• Statistiska Centralbyrån
• Universitetskanslersämbetet (UKÄ)
CONSUMER PRIVACY

• What companies know about you e.g. you ICA card

• Do we want them to know?
• Algorithms that “predict” what you are interested in
• Cookies and apps…
Competitive factors
Competitive Factors
• Selling similar products to similar consumers
• Differentiation can be the key to gaining
competitive advantage
• Market share and profits
• Firms must work harder to maintain their profits
Mercedes Benz

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BMW’s response

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GLOBAL COMPETITION
• More foreign firms are entering markets around the
world
• Foreign firms in the U.S. now compete on product
quality

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MCQ
The marketing team of 7 Star Inc., a company manufacturing
smartphones, is currently studying the size, density, location,
age, and occupation of its target market. Which of the
following environments is being studied in this scenario?
A. demographic environment
B. economic environment
C. technological environment
D. cultural environment
The marketing environment at IKEA influences the profits of
the business but it is important that that they do
environmental scanning.
• What is meant by the term “environmental scanning”
(1)
• Explain four (4) environmental influences, showing
clearly how they would affect IKEA’s profits. (4 points)
Answer: p. 48-67
NOTE: it is also possible to ask for 2 environmental influences
for 2 points. This would require more discussion than in
question 5 above.