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The Marketing
Environment and
Sustainability
Trier 2
Previewing concepts (1)
• Describe the environmental forces
that affect a company’s ability to
serve its customers
• Explain how changes in the demographic
and economic environments affect marketing
decisions
Previewing concepts (2)
• Identify the major trends in the firm’s
natural and technological
environments
• Explain the key changes in the
political and cultural environments
• Discuss how companies can react to the
marketing environment
Prelude case:
Big food has a lot on its plate
For decades people have known the
impact of an unhealthy diet and what
constitutes healthy eating, yet
people continue to eat their way to ill
health. Since this is not a new
problem, what accounts for the
sudden upsurge in public and
political concern for obesity?
What is the
marketing environment?
The marketing environment is made the
actors and forces outside marketing that
affect marketing management’s ability to
develop and maintain successful
relationships with its target customers.
Microenvironment v’s Macroenvironment
Figure 4.1
The microenvironment
The company’s
internal environment
• Top management
• Finance
• Research and
development
• Purchasing
• Manufacturing
• Accounting
What are suppliers?
Suppliers are firms and individuals that provide the resources needed by the company and its competitors to produce goods and services.
Suppliers form an important link in the company’s overall customer value delivery system.
Marketing intermediaries
• Resellers
• Physical distribution firms
• Marketing services agencies
• Financial intermediaries
What are resellers?
Resellers are distribution channel
firms that help the company find
customers or make sales to them.
Resellers are individuals and
organisations that buy goods and
resell at a profit.
What are
physical distribution firms?
Physical distribution firms are
warehouse, transportation, and other
firms that help a company to stock
and move goods from their points of
origin to their destinations.
What are
marketing services agencies?
Marketing services agencies are
marketing research firms, advertising
agencies, media firms, marketing
consulting firms, and other service
providers that help a company to
target and promote its products to the
right markets.
What are
financial intermediaries?
Financial intermediaries include
banks, credit companies, insurance
companies, and other businesses that
help finance transactions or insure
against risks associated with buying
and selling goods.
Publics
• Financial publics
• Media publics
• Government publics
• Citizen action publics
• Local publics
• General public
• Internal publics
Publics:
– Financial publics influence the company’s ability to
obtain funds.
– Media publics carry news, features, and editorial
opinion.
– Government publics regulate public safety, truth in
advertising, and other matters.
– Citizen-action publics include consumer organisations,
environmental groups, minority groups, and others.
– Local publics include neighborhood residents and
community organisations.
– The general public may be concerned about the
company’s products and activities.
– Internal publics include workers, managers, volunteers,
and the board of directors
The company’s
macroenvironment
MONITORING AND RESPONDING TO
ENVIRONMENTAL CHANGE
• Organisations that do not adapt may decline
• To avoid this, organisations must:
– understand what is going on in their business environment
– respond and adapt to this change
• Information about the environment is crucial, but won’t produce decisions
Demographic environment
• Demography is the study of human
populations in terms of size, density,
location, age, gender, and race
occupation
• Demographic trends include population growth,
changing age and household structure,
pressures for migration and population diversity
Generational Groups
American generational groups
Baby boomers
GenXers
Generation Y
Echo boomers
What are the equivalent German generational groups?
Demographics
• Today’s population of approx 6.3 billion is expected to increase to 8.9 billion by 2050.
• Ageing population and increased life expectancy in first world countries.
• Low birth rate in first world countries.
• Changing family patterns, increased amount of working women and single women.
• Rising number of educated people
• Increasing diversity
• Changing consumer spending patterns
Question?
• Should marketers create
separate products and
marketing programmes for
different generational groups?
e.g The ‘Grey’ market for cruise holidays, banking services,
retailing, healthcare, etc.
Changes in Leisurely Activities
• Earlier retirements
• Desire for travel
abroad
• Active holiday
agendas
Source: © Saga Holidays http://www.holidays.saga.co.uk
World Population Growth
0
1
2
3
4
5
6
7
1650 1700 1750 1800 1850 1900 1950 2000
Billi
on
s o
f p
eo
ple
1820
1 billion 1930
2 billion
1987
5 billion
Figure 4.6
Europe’s ageing population
Older people living alone:
a growing trend
The changing household
CHANGING SOCIAL TRENDS RESULT IN
NEW PATTERNS OF DEMAND
• More affluent, working
mothers has led to
growth in kindergartens
• What other social trends
have marketers reacted
to?
• What changes should
they be anticipating?
The cultural environment
• Made up of institutions and other forces that
affect a society’s basic values, perceptions,
preferences, and behaviours.
• Persistence of cultural values
» Core beliefs and values are passed on from parents
to children and are reinforced by schools, churches,
business, and government.
» Secondary beliefs and values are more open to
change.
Cultural characteristics affecting
marketing decision making
• The major cultural values of a society are
expressed
– People’s views of themselves
– People’s views of others
– People’s views of organisations
– People’s views of society
– People’s views of nature
– People’s views of the universe
Common EU migration patterns
• Older people from former
industrialised regions in the Benelux
countries, Germany, and Britain
to the ‘sun belts’
• Younger people from the less economically
advanced eastern European states of the EU to
the richer western EU states
The economic environment
• The factors that affect consumer
buying power and spending patterns
• Nations very in their levels and
distribution of income
– Subsistence economies
– Industrial economies
European Union
enlargement and integration
• Goal to achieve economic integration among member states
• Established in 1993 by the Treaty on European Union (The Maastricht Treaty)
• Largest economy in the world – GDP of €11.6 trillion
– 35% of world’s GDP
– World’s largest exporter
– World’s second largest importer
Income distribution
Upper income
Middle income
Lower income
Underclass
WIDER measures
world wealth distributions
What are Engel’s Laws?
Ernst Engel found that as family
income rises, the percentage spent
on food declines, the percentage
spent on housing remains constant,
and the percentage spent on other
categories and savings increases.
Income distribution
– Consumers at different income levels
have different spending patterns.
– Engel’s laws are differences in how
people shift their spending across food,
housing, transportation, healthcare, and
other goods and services categories as
family income rises.
What factors are part of the
political environment?
The political environment includes
laws, government agencies, and
pressure groups that influence and
limit various organisations and
individuals in a given society.
Political/Regulatory
• National and local
government
• EU
• Regulatory bodies
• Trade associations
Legislation has increased steadily
• Legislation
» implications of legislation can be complicated.
» There are many laws created at different levels.
» The regulations change often.
• legislation has been enacted for a number of reasons.
– The first is to protect companies from each other.
– The second is to protect consumers from unfair business
practices.
– The third is to protect the interests of society against
unrestrained business behaviour.
Public policy implications
• Laws are created at different levels
• Member states vary in the extent to
which they comply with EU legislation
• Regulations are constantly changing
Ethics and socially responsible actions
– Business is also governed by social codes and rules of
professional ethics.
– Enlightened companies encourage their managers to
look beyond what the regulatory system allows and
simply “do the right thing.” These socially responsible
firms actively seek out ways to protect the long-run
interests of their consumers and the environment.
– Cause-related marketing has become a primary form of
corporate giving as companies link purchases of the
company’s product with charitable organisations.
e.g. Pampers, Tipperary mineral water
Corporate and social responsibility (CSR) -
Societal and ethical marketing
• An emergent and growing marketing philosophy.
• As companies strive to find effective ways to attract and retain
customers.
• Importance of handling marketing responsibly in a way that
contributes to the well being of society.
• Links between good ethics, market share and profitability.
• Not only consider its customers and its profitability but also the good
of the wider community (local and globally).
CSR and its impact on the marketing process
• Internalisation of costs (making the polluters pay).
• Green taxes.
• Legislation.
• Support for cleaner technology.
• Redesigned products for recycling.
• Reverse distribution channels to receive products for
recycling.
• Consumer education on sustainability.
Marks & Spencer participates
in cause-related marketing
UK report ‘Who are the Ethical consumers?’
The potential for ethical products and services in the UK could be as
high as 30% of consumer markets.
52% of consumers had recommended companies because of the
companies’ responsible reputation.
44% of consumers had avoided a product or service because of a
company’s behaviour.
Questionable Marketing Practices
• Not all marketers follow the marketing concept, however. Some companies use questionable marketing practices and actions.
• Example: Sale of alcohol; Cosmetics and beauty care products/services; kids toys.
• Certain marketing practices hurt individual consumers, society as a whole, and other business firms.
Deceptive practices fall into three groups.
– Deceptive pricing - falsely advertising “factory” or
“wholesale” prices or a large price reduction from a
phony high retail list price.
– Deceptive promotion includes practices such as
misrepresenting the product’s features or performance
or luring the customers to the store for a bargain that is
out of stock.
– Deceptive packaging includes exaggerating package
contents through subtle design, using misleading
labeling, or describing size in misleading terms.
But just what is “deceptive”?
• The problem is defining what is “deceptive.”
The advertiser might claim that it is just
“puffery”—innocent exaggeration for effect.
Products lack the needed quality.
– One complaint is that many products are not made well
and services not performed well.
– A second complaint is that many products deliver little
benefit, or that they might even be harmful.
– A third complaint concerns product safety. Product
safety has been a problem for several reasons,
including company indifference, increased product
complexity, and poor quality control.
Citizen and public actions to regulate
marketing
• Because some people view business as the
cause of many economic and social ills,
grassroots movements have arisen from time
to time to keep business in line: 1)
consumerism, and 2) environmentalism.
What is the consumerism?
Consumerism is an organised movement of
citizens and government agencies to improve
the rights and power of buyers in relation to
sellers.
Should there be additional
consumer rights?
• The right to be well informed about important aspects of
the product
• The right to be protected against questionable products
and marketing practices
• The right to influence products and marketing practices
in ways that will improve ‘quality of life’
Figure 2.2. How might societal attitudes
influence marketing?
Environmental
issues
Animal
welfare
Business
ethics
Personal
ethics
Marketing
strategy
Health and
safety
Natural environment trends
• Growing shortage of raw materials
• Increased cost of energy
• Increased pollution and climate change
• Government intervention in natural resource
management
What is the environmentalism?
Environmentalism is an organised
movement of concerned citizens and
government agencies to protect and improve
people’s living environment.
Environmental campaigns seek to
encourage consumers to protect the
environment
What is
environmental sustainability?
Environmental sustainability is a
management approach that involves
developing strategies that both sustain the
environment and produce profits for the
company.
Figure 2.1
The environmental sustainability grid
Figure 2.1 Grid that companies can use to
gauge their progress
• At the most basic level, a company can practice pollution prevention.
• At the next level, companies can practice product stewardship—minimizing all environmental impacts through the full product life cycle. Many companies are adopting design for environment (DFE) to design products that are easier to recover, reuse, or recycle.
Pollution prevention: Ricoh
Product stewardship: Xerox
Figure 2.1 Grid that companies can use to
gauge their progress
– At the third level, companies look to the future and plan
for new environment technologies.
– Finally, companies can develop a sustainability vision
that serves as a guide to the future. This vision of
sustainability provides a framework for pollution control,
product stewardship, and environmental technology.
– Reality: Many companies today still focus on the lower-
left quadrant of the grid in Figure 2.1, investing most
heavily in pollution prevention.
New environmental technologies:
Wal-Mart
Sustainability vision:
Tesco
Health Concerns
(Heinz’s health agenda)
Marketing Ethics
• Each company and marketing manager must work out a philosophy of socially responsible and ethical behaviour.
• Under the societal marketing concept, each manager must look beyond what is legal and allowed and develop standards based on personal integrity, corporate conscience, and long-run consumer welfare.
Marketing Ethics
• Many industrial and
professional associations
have suggested codes of
ethics, and many companies
are now adopting their own
codes.
GE focuses on environmentally
sustainable marketing strategies
Trends in the
technological environment
• Fast pace of
technological change
• Increased regulation
The Technological Environment
It can influence:
• Products
• Materials/ components
• Production processes
• Administration/ distribution
• Marketing/ customers
Responding to the marketing environment
• Some companies view the marketing
environment as an uncontrollable element in
which they must react and adapt. They
passively accept the marketing environment
and do not try to change it.
• However, many companies now take a more
proactive approach toward the marketing
environment.
Exercise
• Interview three fellow students (not necessarily
from your class) on their feelings about the
environment. Do they buy environmentally
oriented products? Do they recycle? Are they
interested in environmental organisations?
Have them give examples of positive and
negative actions that they take daily with
respect to the environment.
