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

Animal Welfare

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

Environmental Issues

(Precious Woods)

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.