Handouts for Marketing Management

Analyzing the Marketing Environment

Analyzing Needs and Trends in the Macroenvironment.

Successful companies are those that can recognize and respond profitably to unmet needs and trends in the macroenvironment.

Opportunities are also found by identifying trends. A trend is a direction or sequence of events which have some momentum and durability. For example, one major trend is the “increasing participation of women in the workforce.” This trend has profound the implications for economic growth, family, business life, political power, and goods-and-service preferences. Identifying a trend, ferreting out the likely consequences and determining company opportunities are critical skills.

FAD – is unpredictable, short-lived, and without social, economic and political significance.
TREND – predictable and durable. * Reveals the shape of the future.
A trend according to futurist Faith Popcorn, has longevity, is observable across several market areas and consumer activities and is consistent with other significant indicators occurring at the same time. Popcorn has identified ten major trends and their implications for business decision making.

FAITH POPCORN POINTS TO TEN TRENDS IN THE ECONOMY Faith Popcorn runs a marketing consultancy firm called BrainReserve, which she started in 1974. Her clients include AT&T, Citibank, Black & Decker, Hoffman La Roche, Nissan, Rubbermaid, and many others. Her firm offers several services. Brad Renewal, which attempts to breathe new life into fading brands; BrainJam, which uses a list of trends to generate new ideas; FutureFocus, which develops marketing strategies and concepts that create long term competitive advantages; and Trendbank, which is proprietary database made up of culture monitoring and consumer interviews. Popcorn and her associates have identified ten major trends:

1. Cashing out: Cashing out is the impulse to change one’s life to a slower but more rewarding pace. 2. Cocooning: Cocooning is the impulse to stay inside when the outside gets too tough and scary. More people are turning their home into a nest. 3. Down-Aging: Down-aging is the tendency to act and feel younger than one’s age. 4. Egonomics: Egonomics is the desire of persons to develop individuality so that one is seen and treated as different than anyone else. It is not egomania but simply the wish to individualize oneself through one’s possessions and experience. 5. Fantasy adventure: Fantasy adventure meets the growing needs of people for emotional escapes to offset their daily routines. 6. 99 Lives: 99 lives is the desperate state of people who must juggle many roles and responsibilities. 7. S.O.S (Save Our Society): S.O.S is the drive on the part of a growing number of people to make society more socially responsible along the three critical Es: Environment, Education and Ethics. These individuals are joining groups to promote more social responsibility on the part of companies and other citizens. 8. Small Indulgences. This describes the need on the part of stressed-out consumers for occasional emotional fixes. 9. Staying Alive: Staying alive is about people’s drive to live longer and better lives. 10. The Vigilante Consumer: Vigilante consumers are those who will no longer tolerate shoddy products and inept service.

John Naisbitt, another futurist, prefers to talk about megatrends – which are “large social, economic, political and technological changes that are slow to form, and once in place, they influence us for some time – between seven and ten years or longer

Deciphering and Responding to the Major Macroenvironment Forces

Companies and their suppliers, marketing intermediaries, customers, competitors and publics all operate in a larger macroenvironment of forces and trends that shapes opportunities and poses threats. These forces represent “noncontrollables” which the company must monitor and respond to.

Within the rapidly changing global picture, the firm must monitor SIX MAJOR FORCES namely demographic, economic, natural, technological, political and cultural forces.

DEMOGRAPHIC ENVIRONMENT

The first environmental force to monitor is population because people make up markets. Marketers are keenly interested in the size and growth rate of population in different cities, regions and nations; age distribution and ethnic mix; educational levels; household patterns; ad regional characteristics and movements.

ECONOMIC ENVIRONMENT

Markets require purchasing power as well as people. The available purchasing power in an economy depends on current income, prices, savings, and debt and credit availability. Marketers must pay close attention to major trends in income and consumer-spending patterns.

INCOME DISTRIBUTION * Nations vary greatly in the level and distribution of income. A major determinant is the nation’s industrial structure. Four types of industrial structures can be distinguished:

1. Subsistence economies: In a subsistence economy, the vast majority of people engage in simple agriculture. They consume most of their output and barter the rest for simple goods and services. They offer few opportunities for marketers.

2. Raw-Material-Exporting economies: These economies are rich in one or more natural resources but poor in other respects. Much of their revenue comes from exporting these resources.

3. Industrializing economies: In an industrializing economy, manufacturing begins to account for between 10 to 20% of the country’s gross national product. As manufacturing increases, the country relies more on imports of raw materials, steel and heavy machinery and less on imports of finished textiles, paper products, and processed foods. The industrialization creates a new rich class and a small but growing middle class, both demanding new types of goods, some of which can be satisfied only by imports.

4. Industrial Economies: Industrial economies are major exporters of manufactured goods and investment funds. They buy manufactured goods from each other and also exports them to other types of economies in exchange for raw materials and semi finished goods. The large and varied manufacturing activities of these industrial nations and their sizable middle class make them rich for all sorts of goods.

Income distribution is related to a country’s industrial structure but is also affected by the political system. The marketer distinguishes countries with five different income-distribution patterns: 1.) very low incomes; 2.) mostly low incomes; 3.) very low, very high incomes; 4.) low medium, high incomes; 5.) mostly medium incomes.

SAVINGS, DEBT, CREDIT AVAILABILITY: Consumer expenditures are affected by consumers, savings, debt and credit availability.

NATURAL ENVIRONMENT

The deteriorating condition of the natural environment is bound to be one of the major issues facing business and the public.

*Shortage of raw materials: The earth’s materials consist of the infinite, the finite renewable and the finite nonrenewable.

An infinite resource, such as air, poses no immediate problem, although some groups see a long-run danger.

Finite renewable resource, such as forests and food, have to be used wisely. Forestry companies are required to reforest timberlands in order to protect the soil and to ensure sufficient wood to meet future demand.

Finite nonrenewable resource – oil, platinum, zinc, silver – will pose a serious problem as their time of depletion approaches.

*Increased Cost of Energy *Increased levels of pollution Some industrial activity will inevitably damage the quality of the natural environment. *Changing role of governments in environment protection.

TECHNOLOGICAL ENVIRONMENT The most dramatic force shaping people’s lives in technology.

POLITICAL ENVIRONMENT Marketing decisions are strongly affected by developments in the political environment. The environment is composed of laws, government agencies and pressure groups that influence and limit various organizations and individuals in society.

CULTURAL ENVIRONMENT The society that people grow up in shapes their basic beliefs, values and norms.