Marketing Environment

The Marketing Environment

Environmental Variables There are two categories of variables in the marketing environment that shall shape all aspects of a company's strategic plans:
1. Macro environmental category includes: demographic; economic; social-cultural; competitive; political-legal; and technology variables.
2. Microenvironmental category includes: the company itself; customer served by the company; suppliers; distributors; market intermediaries that assist in making and marketing company's products and services; and special publics that influence the success of the company's strategic plans.
Demographic Environment Demographic characteristics are often strongest variables predicting consumer behavior, such as: age; gender; family; size; family life cycle; income; occupation; education; religion; race; and nationality.
1. Population Trends and Development a. Population Growth Rate: Population grwoth rate is increasing per year, leading to a world population of over 8 billion in year 2010 and associated problems of overcrowding, pollution, global warming, declining resources, and a deteriorating quality of life. Most of this growth, however, would take place in less-developed regions, containing 70 percent of the world's population. The Philippines is expected to have 92 million populations in 2010. b. Population Age Mix: Population age mix worldwide ranged from countries with an extremely young (and fast growing) population, like the Philippines and Mexico; to countries like Japan and Singapore, with comparatively elderly and slow-growing population. The 20-34 and 34-54 age groups would show appreciable increases, and these were the two most potentially profitable age-group segments. After the 34-54 age group, the over 65 group would experience the second largest growth of all group segments (20 percent).
2. Dispersion, Ethnicity, Education Worldwide, the first decade of the 21st century saw history's greatest migration and populations within and between nations, resulting from things like the breakup of the Soviet bloc, the expansion of regional trading blocs like the EU, APEC and NAFTA, and the ethnic turmoil in the Balkans and other nation in Asia. Other demographic units are: ethnic groups with unique needs and educational-level-driven groups must be addressed.
Economic Environment In general, spending patterns were defined in terms of three concepts:
1) Disposable income or what consumer had left to spend after taxes were paid.
2) Discretionary income or what consumeres had left to spend after taxes and necessities were paid for.
3) Engel's Laws. In 1857, Ernst Engel, a Prussian statistician, composed three general statements or laws regarding the impact of changes in household income on consumer spending. Engel stated, as family spendable income increases (that is, as more discretionary income is available), the percentage: 1) spent on basic necessities like food and clothing decreases: 2) spent on housing remains constant (except for utilities like fuel and electricity, which decreases) 3) spent on other items, such as recreation, education, self-help, and luxury items increases.

Social-Cultural Environment The following are social and cultural trends that would shape and direct demands: A number of researches have attempted to categories social classes in terms of such salient characteristics as income, occupation, attitude, interests and opinions of members, lifestyle preferences, and purchasing patterns.
Lower-Upper class: Higher income or wealth earned through exceptional ability in business or professions; active in social, civic affairs; buy status-symbol products for selves and children (expensive and the likes). Include nouveau riche, whose pattern of ostentation is designed to impress classes above and below them. Main ambition: to be accepted, and have children accepted, by members of upper-upper class.
Upper-Middle class: Professionals, independent business people, and corporate managers who possess either family status or usual wealth; are primarily concerned abour careers for selves and children. Highly civic-minded joiners; they like to deal in ideas and "high culture", entertain friends and clients at home. Represent a quality market for good homes, clothes, furniture, appliances, personal computers and softwares, and vacation amenities.
Culture Affect How People Behave and Buy Culture is a complex whole, learned and shared by members of a society, encompassing beliefs, values, language, religion, art, morals, law, education, customs, habits, and capabilities.
Values Guide Behavior The "values" component of culture defined as widely held beliefs that some activities, relationships, feelings, or goals are important to a community's identity or well-being, has the following characteristics of interest to marketers: (1) values guide culturally appropriate behavior; (2) they are difficult to change; (3) they are widely accepted; and, (4) they incline people to respond to specific stimuli in standard ways.

Values Categories that Help Researchers Values can be perceived from a number of perspectives helpful to researchers in defining market opportunities.
1) Core and secondary values: Core values are highly persistent, secondary values are much more likely to change. Examples: persistent core values include getting married and raising families; secondary values including getting married later in life and raising smaller families. Emerging secondary values, such as new appreciation for low-fat foods, can represent opportunities for marketers who can relate their offerings to these values; disappearing secondary values, such as the communist menace, can lose opportunities for marketers who stay with them too long.
2) Subculture and culture value: Subcultures are separate segments of a culture organized around such factors as race, nationality, religion, or geographic location. Common values shared by members of discrete subculture: in food, recreation, politics, religion, child rearing, and so on-frequently represent marketing opportunities not available in the culture at large.
3) Instrumental and terminal values: Instrumental values focus on modes of conduct; terminal values deal with end-state of existence. For example, a member of our society might believe that ambition and self-discipline (instrumental values) will lead to prosperity and happiness (terminal values).
4) Material and nonmaterial values: Material values pertain mainly to things people buy (“store brands are as good as advertised brands”) and places where they buy them (“Target has the best selection and prices”). Nonmaterial values, which pertain to ideas, customs and beliefs, can also condition consumer behaviour, especially toward less tangible services and religious or political orientations.
Values Can Define Needs Values can also be related with products. Example, widely held values pertaining to the desirability of getting worried and raising families imply spending on a broad range of products, such as matrimonial services, furniture, appliances, clothing, vacations, baby food, and doctors’ visits
The Marketer’s Task: Fund and Use Predisposing Variables In accommodating marketing plans to cultural values, the marketer’s first task is to identify variables, or combinations of variables, most likely to predispose people to buy the marketed product. The marketer’s second task is to then incorporate predisposing variables into such marketing plan aspects as the market targeted and the marketing mix aimed at this market.
Identifying Significant Cultural Variables There are three approaches for identifying significant cultural variables, such as: observational fieldwork; content analysis; and value measurement surveys, as advanced by R.L. Sandhusen.
1) Observational Fieldwork: This involves trained researchers observing the behaviour of a small sample of people from the studied culture. Example: Researchers might observe people responses to Real Estate Housing Models at trade shows. Field observation normally takes place in a natural environment, with or without the subject’s awareness.
2) Content Analysis: Researchers make inferences about changing social and cultural values based on the content of verbal and pictorial communications. Example: The way minority groups and females are depicted on television or in newspaper articles could lead to broader inferences about value changes in the entire culture.
3) Value Measurement Surveys: This approach involves the direct measurement of value using scaled questionnaires, called value instruments, to show how people feel about various values and related behaviors. Two examples of these direct measurement surveys are: (1) the Rokeach Value Survey (RVS), and (2) SRI International’s Value and Lifestyle Survey (VALS). The Rokeach Value Survey (RVS) scale groups and profiles respondents in terms of (1) terminal values designed to measure the relative importance of “end-states” of existence (personal goals), (2) instrumental values designed to measure the relative importance of various approaches an individual goals, and (3) related buying behaviors. Example: one RVS identified the following value clusters as defining liberals and traditionals.
Political-Legal Environment The same as the social and cultural forces that produce them, political and legal forces tend to change slowly and can yield helpful clues for positioning and promoting products. There are five areas where government legislation and policies established by government regulatory agencies would most affect strategic marketing plans:
1) General monetary and fiscal policies, which determine how much the government will spend for goods and services, how much money is made available to consumers, and how much discretionary income people, will have left taxes and necessities are paid for.
2) Broad social legislation and accompanying regulatory agency policies, such as civil rights and environmental protection laws.
3) Government relations with individual industries, such as subsidies for agriculture and shipbuilding and import quotas on foreign products.
4) Legislation relating to marketing, including laws and statutes designed to (1) maintain a competitive environment, (2) regulate competition, (3) protect consumers and (4) deregulate specific industries. For examples: Laws Maintaining a Competitive Environment; Laws Regulating Competition; Laws Protecting Consumers; and Laws Deregulating Specific Industries.
5) Information that helps marketers, such as census information, which helps marketers, define markets demographically and geographically.
Technological Environment This is sometimes ignored by marketing people as not being their concern, but such change can create and destroy markets. The Swiss watch industry held a dominant share of the world market for mechanical movements, but failed to appreciate the significance of the threat from electronic watches; the industry was almost wiped out, and through it managed to survive and adopt, it has never recovered its previous position. In modern economics, a strong technological base, fuelled by public and private research and development expenditures, supports competitive strength and a solid growth rate. Technology affects all elements of the marketing mix, creating new goods and services to sell, improving existing products, and reducing prices through cost efficient manufacturing and distribution processes. The impact of technology in the 21st century was accelerating dramatically, with the Internet transforming the way companies promoted and distributed products, and spawning whole new business, such as Web page designers, new types of software firms, interactive advertising agencies, and companies that allowed customers to negotiate business transaction over the web. Other technological breakthroughs included industrial and medical use of lasers, superconductor transmission of electricity, molecular computer switches, wireless communication products, biologically enhanced seeds, and genetically engineered proteins that fight disease. Indeed, analysing the technological environment surrounding business world, marketers perceived many opportunities to benefits from such technological approaches as telemarketing and TV/computer home shopping, and target market opportunities created by cable television and satellite TV.
Competitive Environment Having identified threats and opportunities in demographic, economic, socio-cultural, political-legal, and technological environments, marketer now turned his/her analytical attentions to threats and opportunities in the competitive environment, where he/she perceived four kinds of competition: (1) brand competition from other manufacturers, (2) form competition from other forms, (3) generic competition from producers of products different from your products, (4) desire competition, encompassing all other desires prospective customers might satisfy before purchasing a product/service.
Monopoly exist when a product or services is provided by the government, a private regulated monopoly, or a private monopoly.
Oligopoly consists of a few large sellers of similar products dominating the market, with many smaller sellers following their lead.
Pure competition means that many sellers are offering similar products to many buyers, each with fast, full knowledge of market transactions.
Monopolistic competition consists few or many, firms offer products that, at least, are perceived as different by customer.