Scanning the Marketing Environment

Needs, Trends & Fads in the Macro environment

Companies recognize and respond to the unmet needs & trends in the
Macro environment

Trends
• Is a direction or sequence of events that has some momentum and
durability.
• Have staying power, they take longer to build, and their effects may be
felt for years, even decades.
• Arise from the culture and contain the essence of a people.
• They are more predictable and durable than fads
Fads
• Are unpredictable, short-lived and without social, economic and political
significance.
• Are fast-moving and cross international and cultural boundaries easily.
Mega trends
• Are large social, economic, political and technological changes that are
slow to form and once in place they influence us for some time,7 – 10
years or longer.
• Trends and mega trends merit close attention.
 Identifying the Major Forces
The 6 major “non controllables” which a company, suppliers,
competition
must monitor and to which it must respond as they
shape opportunities and pose threats.
1. Demographic
2. Economic
3. Natural/Physical
4. Technological
5. Political-legal
6. Social-cultural

Egs: Opening of major new markets: China, India, Arabic

countries
Rapid propagation of global lifestyles resulting from the growth of
global communications
 All forces into being

• Increasing population growth (demographics) leads

to more resource depletion & pollution (natural)
which leads consumers to call for more laws
(political/legal).
• The restrictions stimulate more technological
solutions & pdts (technology) which if they are
affordable (economic) may actually change people’s
attitudes & behavior (social/cultural)
 Demographic Environment
• Demographic trends are highly reliable for the short
and intermediate run
• Worldwide population growth
• Population age mix
• Ethnic markets
• Educational groups
• Household patterns
• Geographical shifts in population
Worldwide Population Growth
• The main demographic force is population.
• Resources need to support increased population growth
• Population growth is highest in countries/communities that can least
afford it
• Growing population = growing human needs # growing markets
unless these mkts have sufficient purchasing power
• If population demands too hard against the available resources,
costs will shoot up & profit margins will decline
• Eg: China & regulation of 1 child per family….entry of Lego & Mattel
into the chinese market
Population Age Mix
• The population can be divided into 6 age groups:
Preschool, School-age children, Teens, Young adults (25 – 40), Middle-
age adults (40 – 65), Older adults (>65)
• For marketers this age mix signals the kinds of products & services that
will be in high demand

Eg: Increase in the segment of older adults….increased demand for

assisted living communities, medical aid, healthier food options.
Stores catering to senior citizens will have larger print signs, safe
restrooms
Ethnic and racial makeup
• Need to careful of over generalising about ethnic groups and
note that diversity goes beyond ethnic and racial groups.
• As even within each ethnic group, there are consumers who are
as different from each other

Educational Groups
There are 5 educational groups:
• Illiterates
• High school dropouts
• High school diplomas
• College degrees
• Professional degrees
• Higher the number of educated people calls for a high demand of
quality books, magazine, travel
Household Patterns
• The change from the “traditional household” (joint families) to
different household patterns each with a distinctive set of needs
and buying habits.
• Marketers must increasingly consider the special needs of non-
traditional households, because they are now growing more rapidly
than traditional households.
• Each group will have a distinctive set of eeds & buying habits.
• Nuclear families, single/divorced will need smaller houses,
appliances, food package sizes

Geographical Shifts in Population

• Migration from rural to urban and then to suburban areas
• Location makes a difference in their goods and service preference.
• Movement from Rajastan to Mumbai will lessen the demand for
warm clothing& home heating appliances, but an increased need
for ACs
• Cities have an increased demand for movies, expensive
restaurants, entertainment places
 Economic Environment
• Markets require purchasing power as well as people. They must
pay close attention to major trends in income & consumer
spending patterns.

• Available purchasing power in an economy depends on:

 Income distribution
 Savings, Debt, and Credit availability
Income distribution: A major determinant is a country’s industrial structure
• Subsistence economies
• Raw material exporting economies
• Industrializing economies
• Industrial economies

Marketers distinguish countries into 5 diff income distribution patterns:

1. Very low incomes
2. Mostly low incomes
3. Very low, very high incomes
4. Low, medium, high incomes
5. Mostly medium incomes

Eg: The market for a new Lamborghini in countries with type 1 & 2
income patterns would be very small.

In the 2 tier US market, affluent people continue to buy expensive

goods but the working class spend more carefully, look for discounts,
buy at less expensive stores
Savings, Debt, and Credit availability
• Consumer expenditure is affected by consumer savings,
debts & credit availability
• Marketers must pay careful attention to any major changes in
incomes, cost of living, interest rates, savings, borrowing
patterns as they can have a high impact on business,
specially those pdts who have high income & price sensitivity.
• Eg: Japanese save 18% of their income, US consumers save
6%
• Japanese banks are able to grant loans at a lower rate of
interest than the US banks to their companies
• US consumers have a high debt to income ratio which retards
further expenditures on housing and larger items
 Natural/Physical Environment

• Environmentalists protect the physical environment from the cost

associated with producing and marketing pdts /services.
• Concerned with the social cost of consumption

• 7 environmental issues of concern:

1. Use of environmental friendly ingredients
2. Recyclable & non wasteful packaging
3. Animal testing of new pdts
4. Shortage of raw materials
5. Increased pollution levels
6. Increased energy consumption
7. Changing role of governments in environmental protection
1. Use of environmental friendly ingredients
• Biodegradable & natural ingredients
• Eg: BD plastics, Sony ‘s Milddisc brand of CD made from a
polymer derived from maize
• Challenge: High cost

2. Recyclable & non wasteful packaging

• Pressure on manufacturers/retailers to avoid over packaging…is
environmental friendly & makes commercial sense, substantial
saving
• Special companies to organize the collection & sorting of waste
for recycling
• Eg: Refill packs, removal of outer carton packaging, lightweight
plastic bottles from conventional glass pkging

3. Animal testing of new pdts

• Body shop was the 1st company to introduce their range of animal
friendly pdts
4. Shortage of raw materials
• Limiting the use of propellants like CFCs (Chlorofluorocarbons)
in refrigerators & aerosols
• Companies making pdts using resources like coal, oil, silver will
face cost increases on their depletion….which may or may not
be able to be passed on as an increased cost to the customer.
• R & D faces a good opportunity to develop new substitute
material

5. Increased energy consumption

• Has called for measures to conserve energy with a demand for
energy efficient housing, fuel efficient cars, using solar panels,
electric cars
6. Changing role of governments in environmental protection
• Govt may vary in their concern & efforts to promote a clean
environment
• Companies to accept more social responsibilities and less
expensive devises to control and reduce pollution
 Political /Legal Forces

• Mkting decisions can be influenced by this force which determine

the rules by which business is conducted

• Plays an imp role specially in international business

• To protect companies from unfair competition
• To protect consumers from unfair business practices
• Protect the interest of society from unethical business behaviour

• At what point do the costs of regulation exceed the benefits?

• Marketers must have a good working knowledge of the major laws

protecting competition, consumers and society.
 Political /Legal Forces

• Close relationships with politicians are often made by org both to

monitor the political mood & also to influence it
• Eg: Cigarette industry…..to protect themselves from the ban on
advertising

• Companies make contributions to the funds of political parties in

order to maintain favorable relationships

• Legal: Tobacco advertising is illegal in Italy, Direct alcohol

advertising in banned on India, on sports grounds in France
 Technological Forces

• One of the most dramatic forces shaping people’s lives is

technology.

• The economy’s growth rate is affected by how many major new

technologies are discovered.

• The marketer should monitor the following trends in

technology:
• Accelerating pace of change
• Unlimited opportunities for innovation
• Varying R & D budgets
 Technological Forces

• IT describes a broad range of innovations with the field of computing

& telecommunications

• Benefits of this advancements : MR thru emails, efficiency of sales

force thru sales force automation, videoconferencing

• CRM has improved thru database technology to enhance

relationships with customers

• Mobile phones….smaller, sleeker, trendier…download music, view

videos, email
 Social/Cultural Forces

Purchasing power is directed toward certain goods &

services according to people’s tastes and preferences:
• Views of themselves
• Views of others
• Views of organisations
• Views of society – consumption patterns often reflect a
social attitude
• Views of nature
• Views of the Universe
• High persistence of core cultural values – marketers have some
chance of changing secondary values but little chance of changing
core values

• Existence of subcultures – groups with shared values emerging from

the special life experiences or circumstances

• Shifts of secondary cultural values through time

 Responses to EC

Companies respond in diff ways to environmental change:

• Ignorance: If environmental scanning is poor, company many
not realize the salient forces are affecting their future
prospects.
They continue to be normal, ignoring the environ. issues that
are threatening their existence or opportunities that could be
seized

• Delay: Is to delay action due to bureaucratic decision making

processes that impair quick action.
Mkting myopia resulting in being more pdt focused rather than
customer
Technological myopia & psychological recoil where change is
always seen as a threat
• Retrenchment: Deals with efficiency problems but
disregards effectiveness issues.
As sales & profits decline…the mngt cut costs leading
to a period of higher profits but it does not tackle the
declining sales problem

• Gradual strategic repositioning: Involves a gradual

planned, continuous application to the changing
marketing environment

• Radical strategic repositioning: Sudden change in the

direction of the entire business.
Risky if not successful