Week 2 - 09.20.04
The Marketing
Environment
Marketing Environment
Micro Environment
is not totally controllable
Social
Change
Demographics
Competition
Ever-Changing
Marketplace
Economic
Conditions
Suppliers
Internal
Environment
Environmental
Scanning
Technology
Intermediaries
Target
Market
Political &
Legal Factors
External-Macro Environment
is not controllable
Marketing Environment
Marketing Environment- consists of the actors
and forces outside marketing that affect
marketing management’s ability to develop and
maintain successful relationships with its target
customers.
Includes:
Microenvironment - forces close to the company that
affect its ability to serve its customers.
Macroenvironment - larger societal forces that affect
the microenvironment.
The Company’s
Microenvironment
Company’s Internal Environment- functional
areas inside a company that have an impact
on the marketing department’s plans.
Suppliers - provide the resources needed to
produce goods and services and are an
important link in the “value delivery
system”.
Marketing Intermediaries - help the
company to promote, sell, and distribute its
goods to final buyers. i.e. resellers.
Company’s Internal
Environment
The Company’s
Microenvironment
Competitors - those who serve a target
market with similar products and services
against whom a company must gain
strategic advantage.
Publics - any group that perceives itself
having an interest in a company’s ability to
achieve its objectives.
Competition Story
Weyerhaeuser’s Personal Care Products Division launched Ultrasofts in early 1990. It used Wegman’s Food Markets
chain as its distributor. Much fanfare and major advertising accompanied the product launch; 50,000 customers
received promotional discounts. The product was technically superior to Pampers and Huggies, the leading U.S.
premium brands. The diaper had extra cushy waistbands and cuffs to prevent leakage. It was softer than competitive
products because it had a cloth-like covering instead of the plastic covering typical of competitive products. Its superabsorbent pulp material woven into the pad kept babies drier than did other diaper brands. Ultrasofts cost $8.39 for a
package of thirty-two diapers, about $1.60 less than competing brands. Pilot tests in the market showed that parents
preferred Ultrasofts two-to-one over leading brands.
Despite these technological advantages and consumer support, Ultrasofts failed. Weyerhaeuser’s competitive strategy
was simply deficient in dealing with the fierce competition in the diaper industry. Weyerhaeuser did not have good
estimates of demand for the product and market share distributions. Its strategy of supplying through a regional
distributor limited its demand. Suppliers of lining materials did not want to enter into long-term contracts for small
quantities. Weyerhaeuser’s own production plant in Bowling Green, Kentucky, was too small for large-scale
production, which prevented the company from exploiting economies of scale.
Weyerhaeuser also underestimated the fight for shelf space in the fiercely competitive retailing industry. Within six
months of launching Ultrasofts, the company raised prices by 22% to cover extra manufacturing costs. It also cut back
on promotions. Simultaneously, Procter & Gamble and Kimberly-Clark – big national competitors – responded to
Weyerhaeuser’s entry into the market by aggressively promoting their own brands. They gave special price discounts
to retailers and customers. Retailers became reluctant to give shelf space to Ultrasofts. Customers switched to lowerpriced alternatives. Within a year of launching Ultrasofts, Weyerhaeuser withdrew it from the market and sustained a
large, unspecified loss.
Exhibit 2.9a: Perceptual Map Comparing Variety and
Service
1-2-3
PUBLICS
Types of Publics
Citizen
Action
Publics
Company
I n t hi s a d,
Wal - Mar t
r ec og ni z e s t he
i mp or t a nc e of
b ot h i t s l o ca l
a nd e mp l o ye e
p ub l i cs .
Major Forces in the
Company’s Macroenvironment
The Company’s
Macroenvironment
 Customers - five types of markets that purchase a
company’s goods and services.
 Demographic - studies populations in terms of size,
density, location, age, gender, race, occupation and other
statistics.
 Economic - factors that affect consumer purchasing
power and spending patterns.
 Natural - natural resources needed as inputs by
marketers or that are affected by marketing activities.
Types of Customer
Markets
Reseller
Markets
Company
back
Key U.S. Demographic
Trends
Changing Age Structure
Population is aging; many divisions
Changing American Family
Later marriage, fewer children, working
women, and nontraditional households
Geographic Shifts
Moving to the Sunbelt, suburbs,
“micropolitan areas”
Better-Educated & More White-Collar
Increased college attendance
and white-collar workers
back
Increasing Diversity
72% Caucasian, 13% African-American,
11% Hispanic & 3% Asian
Age Distribution of the U.S.
Population
(78 million people born 1946-1964)
One of the most powerful forces shaping the
marketing environment, 30% of population
(45 million people born 1965-1976)
More skeptical, cynical of frivolous
marketing pitches promising easy success
(72 million people born 1977-1994)
Fluent and comfortable with computer,
digital, and Internet technology (Net-Gens)
GEN Y vs GEN X
GEN Y vs GEN X
GEN Y : Talk to them,
Possible?
Would you segment your market using
generations (GEN Y, GEN X, Baby boomers)
if you were in the soft drink market? Why ?
Who would you target and why?
Let’s compare Coke and Pepsi. According to
you who is the best in terms of reaching the
generation Y? What about other products?
How
Generation Y
Honda Element Analysis
Economic Environment
Economic
Development
Changes in Income:
Value Marketing
Changing Consumer
Spending Patterns
Key
Economic
Concerns for
Marketers
Natural Environment
Shortages of
Raw Materials
Environmentally
Sustainable
Strategies
Factors
Affecting
the
Natural
Environment
Governmental
Intervention
Increased
Pollution
The Company’s
Macroenvironment
Technological - forces that create new
technologies, creating new product and
market opportunities.
Political - laws, agencies and pressure
groups that influence and limit
organizations and individuals in a given
society.
Cultural - institutions and other forces that
affect a society’s basic values, perceptions,
preferences, and behaviors.
Technological Environment
Faster pace of technological change; products are
outdated at a rapid pace.
Almost unlimited opportunities being developed
daily in health care, space industry, robotics, and
bio-genetic field.
Challenge is not only technical, but also
commercial – make practical, affordable versions
of products.
Increased regulation concerning product safety,
individual privacy, and other areas that affect
technological changes.
Political Environment
Includes Laws, Government Agencies, Etc. that Influence
& Limit Organizations/ Individuals in a Given Society
Increasing
Legislation
Changing
Government
Agency
Enforcement
Increased
Emphasis on
Ethics &
Socially
Responsible
Actions
Cultural Environment
People’s View of
Themselves
People’s View of
People’s View of
Others
the Universe Cultural Values
of a
People’s View of
Society
People’s View of
Nature
Organizations
People’s View
of Society
Responding to the
Marketing Environment
Environmental Management Perspective
Taking a proactive approach to managing
the microenvironment and the
macroenvironment by taking aggressive
(rather than passive) actions to affect the
publics and forces in the marketing
environment.
How? Hire lobbyists , run “advertorials”,
press law suits, file complaints, and form
agreements.
WAL-MART CASE