Chapter 3

ANALYZING THE MARKETING ENVIRONMENT

MARKETING STARTER: CHAPTER 3
MICROSOFT: Adapting to the Fast-Changing Marketing Environment
CHAPTER OVERVIEW
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This chapter shows that marketing does not operate in a vacuum but rather in a complex and
changing environment. Other actors in this environment—suppliers, intermediaries, customers,
competitors, publics, and others—may work with or against the company. Major environmental
forces—demographic, economic, natural, technological, political, and cultural—shape marketing
opportunities, pose threats, and affect the company’s ability to build customer relationships. To
develop effective marketing strategies, you must first understand the environment in which
marketing operates.

CHAPTER OBJECTIVES
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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.

CHAPTER OUTLINE
p. 64 INTRODUCTION P. 65
Photo: Microsoft
PPT 3-3 Microsoft has undergone a dramatic transformation to better
align itself with the new digital world. More than just
making the software that makes PCs run, Microsoft now
wants to empower every person and every organization on
the planet to achieve more, regardless of what device or
operating system they use.

p. 66 More than any other group in a company, marketers must be

the trend trackers and opportunity seekers.

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PPT 3-4 A company’s marketing environment consists of the
actors and forces outside marketing that affect marketing
management’s ability to build and maintain successful
relationships with target customers.

Describe the environmental forces that affect the Learning Objective

PPT 3-5 company’s ability to serve its customers. 1

THE MICROENVIRONMENT AND

p. 66 MACROENVIRONMENT

The microenvironment consists of the actors close to the

company that affect its ability to service its customers. p. 67
PPT 3-6 Key Terms:
The macroenvironment consists of larger societal forces Marketing
that affect the microenvironment. environment,
PPT 3-7 Microenvironment,
Macroenvironment

p. 66 THE MICROENVIRONMENT
PPT 3-8
PPT 3-9 Marketing management’s job is to build relationships with p. 67
customers by creating customer value and satisfaction. Figure 3.1: Actors
in the
p. 67 The Company Microenvironment
PPT 3-10
All the interrelated groups within the company form the
internal environment. All groups must work in harmony to
provide superior customer value and relationships.

Suppliers
PPT 3-11
Suppliers provide the resources needed by the company to
produce its goods and services. The company must treat p. 67
suppliers as partners to provide customer value. Photo: IKEA
p. 68
PPT 3-12 Marketing Intermediaries
Marketing intermediaries help the company to promote,
sell, and distribute its products to final buyers.

 Resellers are distribution channel firms that help the

company find customers or make sales to them.
These include wholesalers and retailers.

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  Physical distribution firms help the company to
stock and move goods from their points of origin to
their destinations.

 Marketing services 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 p. 68
markets. Key Term:
Marketing
 Financial intermediaries include banks, credit intermediaries
companies, insurance companies, and other
businesses that help finance transactions or insure
against the risks associated with the buying and
p. 68 selling of goods.
PPT 3-13
Today’s marketers recognize the importance of working
with their intermediaries as partners rather than simply as
channels through which they sell their products. p. 68
Photo: Coca-Cola
Competitors

Marketers must gain strategic advantage by positioning

p. 69-70 their offerings strongly against competitors’ offerings in the
PPT 3-14 minds of consumers.

No single competitive marketing strategy is best for all

companies.

Publics

A public is any group that has an actual or potential interest

in or impact on an organization’s ability to achieve its
objectives.

 Financial publics influence the company’s

ability to obtain funds.
 Media publics carry news, features, and editorial
opinion.
 Government publics. Management must take
government developments into account.
 Citizen-action publics. Consumer organizations,
environmental groups, and others may question a p. 68
company’s marketing decisions. Key Term: Public

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  Internal publics include workers, managers,
volunteers, and the board of directors. p. 69
 General public. The general public’s image of Ad:
p. 69 the company affects its buying. Tide Loads of Hope
PPT 3-15  Local publics include neighborhood residents
and community organizations.
Customers

There are five types of customer markets. The company

may target any or all of these.

1. Consumer markets are individuals and households

that buy goods and services for personal
consumption.
2. Business markets buy goods and services for further
processing or for use in their production process.
3. Reseller markets buy goods and services to resell at
a profit.
4. Government markets are composed of government
agencies that buy goods and services to produce
public services.
5. International markets are buyers in other countries,
including consumers, producers, resellers, and
governments.

p. 70 THE MACROENVIRONMENT – larger societal forces p. 70

PPT 3-16 that affect the actors in the microenvironment (consists Figure 3.2: Major
of demographic, economic, natural, technological, Forces in the
political, and cultural environments) Company’s
p. 70 Macroenvironment
PPT 3-17 Explain how changes in the demographic and economic
environments affect marketing decisions.

p. 70 Learning Objective
PPT 3-18 Demographic Environment 2

Demography is the study of human populations in terms of

size, density, location, age, gender, race, occupation, and
other statistics. p. 70
Key Term:
The demographic environment involves people, and people Demography
make up markets.

Demographic trends include changing age and family

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 structures, geographic population shifts, educational
characteristics, and population diversity.

Changes in the world demographic environment have major

implications for business.

Thus, marketers keep close track of demographic trends and

developments in their markets, both at home and abroad.

p. 70 The Changing Age Structure of the Population

PPT 3-19
The U.S. population is currently stands at more than 328
million and may reach almost 360 million by the year 2030.

The single most important demographic trend in the United

States is the changing age structure of the population.
p. 71
Baby Boomers. The post–World War II baby boom Key Term:
produced 72 million baby boomers, born between 1946 and Baby boomers
1964.

Baby boomers account for nearly 22 percent of the U.S. p. 72

population and control 42 percent of the nation’s spending Photo: Lowe’s
power.

Adults over 50 now account for 80 percent of luxury travel

spending in America.

Boomers buy products that help them deal with issues of

aging but appreciate marketers who appeal to their youthful
thinking.

p. 71 Generation X. The baby boom was followed by a “birth p. 71

dearth,” creating another generation of 55 million people Key Term:
born between 1965 and 1980. Author Douglas Coupland Generation X
calls them Generation X.

The GenXers developed a more cautious economic outlook, p. 72

and are a more skeptical bunch, though they are more likely Photo: Lowe’s
to be receptive to irreverent ad pitches that make fun of
convention and tradition.

p. 72 Millennials (also called Generation Y or the echo p. 72

boomers). Born between 1981 and 1996, these children of Key Term:
the baby boomers number 75 million or more. The 20- to Millennials

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 30-something millennials wield substantial buying power (Generation Y)
and make up a huge and attractive market. They are
comfortable with digital technology; it is a way of life. p. 73
They seek authenticity, value, and opportunities to shape Ad: Chime
their own brand experiences and share them with others.

Generation Z, born between 1997 and 2012, totals

approximately 80 million, which makes them 26% of the
population. They are the most ethnically and culturally p. 73
diverse generation. They spend an estimated $43 billion to Key Term:
p. 73 $143 billion annually of their own money and influence up Generation Z
to $333 billion of family spending. They have digital in
their DNA.

Generation Alpha, born after 2012, will grow larger than

millennials by 2025. They will be the most formally
educated generation ever, the most technology-supplied
generation ever, and globally wealthiest generation ever.
Gen Alphas are important future consumers who are just
beginning to establish brand preferences.

Generational marketing. Rather than risk turning off one

generation in favor of another, marketers need to form
precise age-specific segments within each group.

It may be more useful to segment people by lifestyle, life p. 73

stage, or common values they seek in the products they buy. Key Term:
Generation Alpha
Psychographics – how people choose to spend their time
PPT 3-20 and money.

p. 74
Photo: Generational
marketing
p. 74 The Changing American Family
PPT 3-21
The “traditional household” consists of a husband, wife, and
children (and sometimes grandparents).

In the United States:

 Married couples with children under 18 represent

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 only 19 percent of U.S. households.
 Married couples without children make up 30
percent. p. 76
 Single parents comprise 8 percent. Photo: Slack
 Nonfamily households make up 35 percent.

Among households made up of married couples with

children, 62 percent are dual-income households; only the
husband works in 28 percent. Women make up 57 percent
of the workforce today.
p. 75 Geographic Shifts in Population

About 10 percent of all U.S. residents move each year. The

U.S. population has shifted toward the Sunbelt states.

Americans have been moving from rural to metropolitan

areas. New trend is to move to micropolitan areas – small
cities located beyond congested metropolitan areas. Perks
include lower crime, less traffic and lower taxes.

p. 76 Such population shifts interest marketers because people in

different regions buy differently.

A Better-Educated, More White-Collar, More

Professional Population
The U.S. population is becoming better educated. In 2012,
88 percent of the U.S. population over age 25 had
completed high school, and 32 percent had a bachelor’s
degree or better, up from 66 percent and 16 percent,
PPT 3-22 respectively, in 1980.
p. 76
Increasing Diversity Ad: Toyota

The United States has become more of a “salad bowl” in

which various groups have mixed together but have
maintained their diversity by retaining important ethnic and
cultural differences.

The U.S. population is about 60 percent non-Hispanic

white, with around 19 percent Hispanic and over 13 percent
African-American. The Asian-American population now
totals about 6 percent of the population.

By 2060, Hispanics will grow to about 28 percent, African-

Americans will be about 15 percent, and Asians will

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 increase to 9 percent.

Diversity goes beyond ethnic heritage. Many companies

explicitly target gay and lesbian consumers.

According to one estimate, the 4.5 percent of U.S. adults

who identify themselves as lesbian, gay, bisexual, and
transgender (LGBT) have buying power of more than $1
trillion.

One in four adults has a disability, representing a market of

anywhere from $200 to $500 billion in annual spending
power. One study found that this segment spends $17.3
billion on 73 million business or leisure trips every year.

p. 77 Economic Environment p. 77
PPT 3-23 Key Term:
The economic environment consists of factors that affect Economic
consumer purchasing power and spending patterns. environment

Before the Great Recession, American consumers fell into a

consumption frenzy, amassing record levels of debt.

However, consumers have now adopted a back-to-basics

sensibility in their lifestyles and spending patterns. p. 78
Photo: Target
Value marketing means just the right combination of
product quality and service at a fair price.

Income Distribution

Income distribution in the United States is highly skewed.

The rich have grown richer, the middle class has shrunk,
and the poor have remained poor.

This uneven distribution of income has created a tiered

market.

Identify the major trends in the firm’s natural and

technological environments.

PPT 3-24 The Natural Environment Learning Objective

3

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 The natural environment involves the natural resources
PPT 3-25 that are needed as inputs by marketers, or that are affected
by marketing activities. p. 78
Key Term: Natural
Trends in the natural environment: environment

p. 78 1. Growing shortages of raw materials

PPT 3-26 2. Increased pollution p. 79
3. Increased government intervention Ad: Walmart
4. Companies developing strategies and practices that
support environmental sustainability. This means
PPT 3-27 meeting present needs without compromising the p. 79
ability of future generations to meet their needs. Key Term:
Environmental
sustainability
PPT 3-28

PPT 3-29

p. 80 Technological Environment p. 80
PPT 3-30 Key Term:
The technological environment is perhaps the most Technological
dramatic force now shaping our destiny. environment

Technology has released such wonders as antibiotics,

robotic surgery, miniaturized electronics, smartphones, and p. 81
the internet. Our attitude toward technology depends on Photo: Disney
whether we are more impressed with its wonders or its
blunders.

New technologies can offer exciting opportunities for

marketers.

In the United States, government agencies investigate and

regulate products. These regulations can impact new
technologies and new product development.

p. 81 Explain the key changes in the political and cultural Learning Objective
PPT 3-29 environments. 4

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PPT 3-30 The Political and Social Environment
p. 81
Marketing decisions are strongly affected by developments Key Term: Political
in the political environment. This consists of laws, environment
government agencies, and various pressure groups that
influence or limit various organizations and individuals in a
given society.

Legislation Regulating Business

Governments develop public policy to guide commerce.

p. 82
Legislation affecting business around the world has
increased steadily over the years.

Business legislation has been enacted for a number of

reasons:

1. To protect companies from each other p. 83

2. To protect consumers from unfair business practices Table 3.1: Major
3. To protect the interests of society against U.S. Legislation
unrestrained business behavior Affecting
Marketing
Because government agencies have discretion in enforcing
laws, they can have an impact on a company’s marketing
performance.

PPT 3-31 Increased Emphasis on Ethics and Socially Responsible

Actions

p. 82 Socially Responsible Behavior. Enlightened companies

encourage their managers to “do the right thing.” Most
companies have created codes of ethics to guide responses p. 84
to complex social responsibility issues. Ad: Ben & Jerry’s

The boom in internet marketing has created a new set of

social and ethical issues. Critics worry most about online
privacy issues.
p. 84
Cause-Related Marketing. To exercise their social
responsibility and build more positive images, many
companies are now linking themselves to worthwhile
causes.
p. 85 The Cultural Environment
PPT 3-32

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 The cultural environment consists of institutions and other p. 85
forces that affect a society’s basic values, perceptions, Key Term: Cultural
preferences, and behaviors. environment

The Persistence of Cultural Values

p. 86
p. 87 Core beliefs and values are passed on from parents to Photo:
PPT 3-33 children and are reinforced by schools, churches, Aerie
businesses, and government. Core beliefs are hard to
PPT 3-34 change.

Secondary beliefs and values are more open to change.

PPT 3-35
Shifts in Secondary Cultural Values

Marketers want to predict cultural shifts in order to spot

new opportunities or threats.

People’s Views of Themselves. People vary in their

emphasis on serving themselves versus serving others.

People’s Views of Others. In past decades, observers have p. 87

noted several shifts in people’s attitudes toward others. Photo: Alone
Trend trackers see a new wave of “cocooning.” Connects together
with social media, not people.

People’s Views of Organizations. By and large, there has

been a decline of loyalty toward companies.

People’s Views of Society. People vary in their attitudes

toward society, which influences their consumption patterns
and marketplace attitudes.
p. 89
People’s Views of Nature. Recently, people have Ad: Love Beauty
PPT 3-35 recognized that nature is finite and fragile, and that it can be and Planet
destroyed by human activities.
p. 88
This renewed love of things natural has created a sizable
market of consumers who seek out everything from natural,
organic, and nutritional products to fuel-efficient cars and
alternative medicines.

The U.S. organic-food market now generates $44 billion in

annual retail sales and is expected to reach $70 billion by
the year 2025.

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 People’s Views of the Universe. In general, religious
conviction and practice have been dropping off gradually
through the years.

p. 89 Discuss how companies can react to the marketing Learning Objective

PPT 3-36 environment. 5

PPT 3-37 RESPONDING TO THE MARKETING

ENVIRONMENT

Many companies think the marketing environment is an

uncontrollable element to which they must react and adapt.

Other companies take a proactive stance toward the

marketing environment. Rather than assuming that strategic
options are bounded by the current environment, these firms
develop strategies to change the environment.

By taking action, companies can often overcome seemingly

uncontrollable environmental events.

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