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Copyright 2007 Dr. Yoon
1-1
Topic 6Topic 6
Capturing Marketing Insights from the Changing Environment
Marketing Management(MAR4803)
by Kanghyun Yoon
Copyright 2007 Dr. Yoon
1-2Issues To Be DiscussedIssues To Be Discussed
• What do companies need to know about market environmental? Let’s consider the following issues to indicate how to identify marketing insights from the changing environment.
• Issue 1: Why is environmental analysis important? – An important underlying model is ….
• Issue 2: How to identify marketing opportunities/threats from the environment?
• Issue 3: How to develop a well-defined target market to introduce a new product?
• Issue 4: How to set up marketing intelligent system to convert marketing opportunities into profitable business?
Copyright 2007 Dr. Yoon
1-3
Issue 1: Why is the environmental analysis
important?
Issue 1: Why is the environmental analysis
important?
Copyright 2007 Dr. Yoon
1-4
Importance of Environmental AnalysisImportance of Environmental Analysis
• Consider the following wisdom:– “It is useless to tell a river to stop running; the best thing is to learn how to
sail in the direction it is flowing.”
• Importance of implementing environmental analysis:– The company operates in a larger macroenvironment of uncontrollable forces
and megatrends that shape opportunities and pose threats to the company.
– A major purpose of environmental scanning is to discern new opportunities from the changing environment.
– Thus, the companies should monitor the changing environment and continuously adapt their businesses to their best opportunities, using their resources (i.e., SWOT analysis).
• How to identify uncontrollable forces and trends?– From fads, trends, and megatrends to unmet needs of consumers.
– Examples:» Ten megatrends that shape the consumer landscape.
» How business and marketing are changing?
Copyright 2007 Dr. Yoon
1-5
• Why is each environmental factor important to monitor or scan?
– Demographic factors: monitors changing nature of population in terms of age, sex, race, occupation, location and other statistics.
– Economic factors: factors that affect consumer buying power and spending patterns.
– Natural factors: natural resources needed as inputs by marketers or that are affected by marketing activities.
– Technological factors: forces that create new product and market opportunities.
– Political/Legal factors: laws, agencies and groups that influence or limit marketing actions.
– Cultural/Social factors: forces that affect a society’s basic values, perceptions, preferences, and behaviors.
Macro-Environmental FactorsMacro-Environmental Factors
Copyright 2007 Dr. Yoon
1-6
Changing Age StructurePopulation is getting olderChanging Age StructurePopulation is getting older
Changing Family StructureMarrying later, fewer children,
working women, and nonfamily households
Changing Family StructureMarrying later, fewer children,
working women, and nonfamily households
Geographic ShiftsMoving to the Sunbelt and suburbs (MSA’s)
Geographic ShiftsMoving to the Sunbelt and suburbs (MSA’s)
Increased EducationIncreased college attendance
and white-collar workers
Increased EducationIncreased college attendance
and white-collar workers
Growing Ethnic and Racial Diversity73% Caucasian, 12% African-American,
10% Hispanic & 3.4% Asian
Growing Ethnic and Racial Diversity73% Caucasian, 12% African-American,
10% Hispanic & 3.4% Asian
Demographic EnvironmentDemographic Environment
Copyright 2007 Dr. Yoon
1-7
Economic EnvironmentEconomic Environment
Changesin Consumer
SpendingPatterns
Changesin Consumer
SpendingPatterns
EconomicDevelopment
EconomicDevelopment
Changes in Income
Changes in IncomeKey
EconomicConcerns for
Marketers
KeyEconomic
Concerns forMarketers
Copyright 2007 Dr. Yoon
1-8
Natural EnvironmentNatural Environment
Factors Affecting
the Natural
Environment
More GovernmentIntervention
More GovernmentIntervention
Shortages of Raw Material
Shortages of Raw Material
Increased Costsof Energy
Increased Costsof Energy
Higher PollutionLevels
Higher PollutionLevels
Copyright 2007 Dr. Yoon
1-9
Technological EnvironmentTechnological Environment
Rapid Pace of Change
Rapid Pace of Change
High R & D Budgets
High R & D Budgets
Focus on MinorImprovements
Focus on MinorImprovements
IncreasedRegulationIncreasedRegulation
Issues in the TechnologicalEnvironment
Issues in the TechnologicalEnvironment
Copyright 2007 Dr. Yoon
1-10
Political/Legal EnvironmentPolitical/Legal Environment
GreaterConcern for
Ethics
GreaterConcern for
Ethics
IncreasedLegislation
IncreasedLegislation
Changing Enforcement
Changing EnforcementKey
Trends in thePolitical
Environment
KeyTrends in the
PoliticalEnvironment
Copyright 2007 Dr. Yoon
1-11
Cultural/Social EnvironmentCultural/Social Environment
OfOrganizations
OfNature
OfOneself
OfSociety
Ofthe Universe
OfOthers
ViewsThat Express
Values
ViewsThat Express
Values
Copyright 2007 Dr. Yoon
1-12
Issue 2: How to identify marketing
opportunities/threats?
Issue 2: How to identify marketing
opportunities/threats?
Copyright 2007 Dr. Yoon
1-13
SWOT AnalysisSWOT Analysis
• The starting point of strategic planning is ….– To identify business opportunities or threats by monitoring uncontrollable
forces and megatrends in a larger macroenvironment that shape opportunities and pose threats to the company.
– Then, the companies should find the strategic fit between company’s capabilities and its changing marketing environment.
– It is SWOT analysis.
• SWOT analysis consists of:– internal capabilities of company: Strengths and Weaknesses
– external uncontrollable factors: Opportunities and Threats
• The goals of SWOT analysis – To identify business/marketing opportunities or problems from the changing
environment.
– Find the best strategic fit between company’s capabilities and its changing market environment to serve customers effectively.
Copyright 2007 Dr. Yoon
1-14
Market Opportunity AnalysisMarket Opportunity Analysis
• A major purpose of environmental scanning is ….– To discern new opportunities from the changing environment.
• Three main sources of market opportunities:– To supply something that is in short supply.
– To supply an existing product or service in a new or superior way.» Problem detection method
» Ideal method
» Consumption chain method
– To supply a totally new product or service.
• Converting opportunities into different forms of values:– Introducing hybrid products or services; Making a buying process more
convenient or efficient; Offering a product at a much lower price; Providing more information and advice; Customizing a product or service; Introducing a new capability; Delivering a product or service faster; and so on.
• Market Opportunity Analysis (MOA):– Opportunity and threat matrix
Copyright 2007 Dr. Yoon
1-15
Issue 3: How to develop a target market?
Issue 3: How to develop a target market?
Copyright 2007 Dr. Yoon
1-16Segmentation, Targeting, and PositioningSegmentation, Targeting, and Positioning
1. Identify Basesfor Segmenting the Market
2. Develop Profilesof Resulting Segments
3. Evaluate Attractiveness of Each Segment Using Measures
4. Select Target Segment(s)Using Several Criteria
5. Develop Positioningfor Each Target Segment
6. Develop MarketingMix for Each Target Segment Market
Positioning
MarketTargeting
Market Segmentation
Copyright 2007 Dr. Yoon
1-17
Step 1: Market SegmentationBases for Segmenting Consumer Markets
Step 1: Market SegmentationBases for Segmenting Consumer Markets
Geographic
DemographicAge, gender, family size and life cycle, or income
PsychographicSocial class, lifestyle, or personality
BehavioralOccasions, benefits, uses, or responses
Nations, states, regions or cities
Copyright 2007 Dr. Yoon
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Using Multiple SegmentationBases: Geodemographics
Using Multiple SegmentationBases: Geodemographics
Copyright 2007 Dr. Yoon
1-19
Step 1: Market SegmentationRequirements for Effective Segmentation
Step 1: Market SegmentationRequirements for Effective Segmentation
• Size, purchasing power, profiles of segments can be measured.
• Segments must be effectively reached and served.
• Segments must be large or profitable enough to serve.
Measurable Measurable
AccessibleAccessible
SubstantialSubstantial
DifferentialDifferential
ActionableActionable
• Segments must respond differently to different marketing mix elements & actions.
• Must be able to attract and serve the segments.
Copyright 2007 Dr. Yoon
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Step 2: Market TargetingEvaluating Market Segments
Step 2: Market TargetingEvaluating Market Segments
• Market Size & Growth– Analyze sales, growth rates, and expected profitability.
• Structural Characteristics– Consider the effects of competitors, availability of
substitute products, the expectation of market saturation, entry/exit barrier, environmental changes, and so on.
• Strategic Fits– Company objectives, company skills & resources relative
to the segment(s), current image, competitive advantages, and so on.
Copyright 2007 Dr. Yoon
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Selecting Target Segment(s)Selecting Target Segment(s)
Segment 1Segment 1
Segment 2Segment 2
Segment 3Segment 3
Segment 1Segment 1
Segment 2Segment 2
Segment 3Segment 3
CompanyMarketing
Mix
CompanyMarketing
Mix
CompanyMarketing
Mix
CompanyMarketing
Mix
CompanyMarketing Mix 1
CompanyMarketing Mix 1
CompanyMarketing Mix 2
CompanyMarketing Mix 2
CompanyMarketing Mix 3
CompanyMarketing Mix 3
MarketMarket
A. Undifferentiated Marketing
B. Differentiated Marketing
C. Concentrated Marketing
Copyright 2007 Dr. Yoon
1-22
Levels of Market SegmentationLevels of Market Segmentation
Mass MarketingSame product to all consumers
(no segmentation)
Mass MarketingSame product to all consumers
(no segmentation)
Segment MarketingDifferent products to one or more segments
(some segmentation)
Segment MarketingDifferent products to one or more segments
(some segmentation)
MicromarketingProducts to suit the tastes of individuals or locations
(complete segmentation)
MicromarketingProducts to suit the tastes of individuals or locations
(complete segmentation)
Niche MarketingDifferent products to subgroups within segments
( more segmentation)
Niche MarketingDifferent products to subgroups within segments
( more segmentation)
Copyright 2007 Dr. Yoon
1-23
Step 3: Positioning for Competitive AdvantageStep 3: Positioning for Competitive Advantage
• Many ads claims are the careful efforts of companies to exhibit the benefits they offer through product and to differentiate themselves from competition.
• Product features are important, but what is more important is the subjective benefits or values that customers perceive.
• So, we need to consider the position of a product in consumers’ minds, e.g., the place the product occupies, relative to competing products.
– For example, Volvo’s positions on “safety.”
• Marketers should develop an effective positioning strategy for both an existing and a new product.
– Positioning strategy should deliver a message that my product delivers the benefits the customers want and it is better than competitor’s products.
– A key tool for benefit positioning: perceptual maps and value maps.
Copyright 2007 Dr. Yoon
1-24Sources of Competitive AdvantagesSources of Competitive Advantages
Against aCompetitor
Against aCompetitor
UsageOccasions
UsageOccasions
Away fromCompetitors
Away fromCompetitors
ProductAttributes
ProductAttributes
ProductClass
ProductClass
BenefitsOffered
BenefitsOffered
UsersUsers
BB
AA
EEDD
CCHHGG
FF
Copyright 2007 Dr. Yoon
1-25
Issue 4: How to set up a market intelligent
system?
Issue 4: How to set up a market intelligent
system?
Copyright 2007 Dr. Yoon
1-26ReferenceReference
• Blackwell, Roger D., Paul W. Miniard, and James F. Engel (2001), Consumer Behavior, 9th ed., Harcourt College Publishers.
• Ferrell, O. C. and Michael D. Hartline (2008), Marketing Strategy, 4th ed., Thomson: South-Western, Ohio.
• Kotler, Philip and Kevin Lane Keller (2007), A Framework for Marketing Management, 3rd ed., Pearson: Prentice-Hall, New Jersey.
• Kotler, Philip and Kevin Lane Keller (2007), Marketing Management, 12th ed., Pearson: Prentice-Hall, New Jersey.
• Kotler, Philip and Gary Armstrong (2004), Principles of Marketing, 10th ed., Prentice Hall.
• Lehmann, Donald R. and Russell S. Winer (2005), Analysis for Marketing Planning, 6th ed., McGraw-Hill, Boston.
• Winer, Russell S. (2007), Marketing Management, 3rd ed., Pearson: Prentice-Hall, New Jersey.
• Zikmund, William G. (2003), Essentials of Marketing Research , 2nd ed., Thomson: South-Western. (see chapter 1)