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Section 4
THE ENVIRONMENT AND MARKETING
STRATEGY
Chapter 11. Introduction to the Environment
Chapter 12. Culture and Cross-Cultural Influences
Chapter 13. Subculture and Social Class
Chapter 14. Reference Groups and Family
Chapter 11
INTRODUCTION TO THE ENVIRONMENT
AUTHORS' OVERVIEW OF THE CHAPTER
This first chapter in Section Four introduces the topic of the environment--the third main element in the Wheel of
Consumer Analysis. Although environmental factors may seem relatively simple to analyze, research has been
hindered by complex disagreements about how to conceptualize the environment and how environmental situations
affect consumers' behavior, affect, and cognitions.
Defining The Environment. We begin the chapter with a discussion of some of these basic conceptual issues and
problems in environmental research. For instance, researchers do not agree on how the environment should be
defined and studied. We describe the environment as all social and physical stimuli in the external world of the
consumer. However, marketers are especially interested in the functional or perceived environment which includes
all the physical and social stimuli that are attended to and comprehended by an individual consumer.
Levels of the Environment. Next we discuss levels of environments. We distinguish between the macro and micro
environment. The macro environment concerns broad, general physical and social factors. The macro environment
could include the economic conditions of a country or state, the climate of a region, the geography of an area, or the
types of people who inhabit a country. The micro environment, in contrast, concerns the physical and social
characteristics of a person's immediate surroundings. The micro environment could include the time of day, the
temperature, a room, and the people who are close to you. Each level of environment may be useful for certain
purposes. In general, the macro environment is relevant for determining the aggregate behavior of large groups of
people or entire societies. The micro environment is relevant for understanding the behavior of individuals or small
groups of people.
In earlier chapters, we distinguished three types of environments--the physical, social, and marketing environments.
For pedagogical purposes, we discussed them separately. However, these three environmental factors obviously
overlap, and they influence each other as well as consumers' affect, cognitions and behaviors. We discuss all three
types of environments in this chapter, but especially the physical and marketing environments.
The Social Environment. The social environment includes all types of social interactions between people. Social
interactions can vary from direct, active, face-to-face communications with people to more passive and indirect
interactions at a distance. At a macro level, social factors include the large-scale social influences of culture,
subculture and social class. The micro level includes the more immediate social influences of reference groups and
family. Exhibit 11.1 (page 268 in the text) summarizes these social influences. These macro and micro social
factors are discussed in much greater detail in Chapters 12, 13, and 14.
The Physical Environment. The physical environment consists of tangible, spatial aspects of the environment such
as objects, stores, and shopping areas. Intangible, nonspacial factors are also considered part of the physical
environment such as the temperature, the time of year or day, and the noise level. (Several of these factors are
associated with the design of retail stores and are discussed in more detail in Chapter 19 on Channel Strategy.) Here,
we briefly discuss several aspects of the physical environment--including time, weather, and lighting--and describe
how they can affect consumers' behaviors, affect and cognitions.
The Marketing Environment. Then, we discuss the marketing environment--those aspects of the social and physical
environment that are under the direct control of marketing managers. These factors include the "4 P's" of marketing
strategy--price, product, promotion and distribution (place). A substantial portion of the stimuli in consumers' social
and physical environments is marketing oriented. These factors can influence consumers' behaviors and their
affective and cognitive responses. One can also consider general business strategies (such as mergers and
acquisitions) as part of the marketing environment. These factors can have indirect influences on consumers'
behaviors, affect, and cognition.
Situations. In the second part of the chapter, we discuss the important concept of situations. Many researchers treat
environmental factors in terms of situations. In this text, we distinguish between a "raw" environment (the physical
and social characteristics of a store) and situations that take place in the environment (events that may occur in the
store). Situations are much more than just the physical and social environment. Situations always involve a human
actor who is behaving, thinking, and feeling in an environment (shopping in the store). Situations are defined and
interpreted by consumers themselves, often in terms of important goals and objectives. Thus, consumer situations
have beginnings, middles and ends roughly comparable to the stages of goal activation, problem solving, and
resolution.
In this text, we consider a situation to be a set of environmental characteristics and the associated behaviors of one or
more actors, along with the affective and cognitive responses that go with them. Thus, situations can be described in
terms of the interactions between the components of the Wheel of Consumer Analysis over a specific period of time.
Situations vary in complexity. Complex situations (shopping for a new car) may involve multiple behaviors and
many different affective and cognitive responses occurring in several environments over a considerable length of
time. Other situations occur in a single environment, quickly, and involve simple behaviors and affect/cognition
(buying a soda at a vending machine). Situations also vary in their frequency; some situations are new and unique,
while others are recurring.
Marketers need to understand how consumers perceive various types of marketing-related situations. For instance,
eating in a fast food restaurant can have different meanings and can involve quite different experiences, including
different behaviors. The relevant affective and cognitive responses and behaviors depend on how the consumer
interprets the situation. Consider the differences between eating at a fast food restaurant for a quick business lunch,
for an easy dinner with the kids, and for a rest break on a long car trip. Marketers can segment consumer markets in
terms of how consumers perceive (construct) situations regarding the product or service.
To help understand situations, we identify four marketing-related situations and briefly discuss the environmental
factors and key behaviors that are relevant in each of them.

Information acquisition situations include physical and social stimuli in the environments where
consumers acquire information about products, prices, promotions, and places to buy. Two important
behaviors in these situations are information contact and communication (with marketers and with other
consumers).

Shopping situations include the physical environment of stores and buildings where shopping behaviors
occur, as well as other environments in which consumers shop, such as telephone or mail order shopping.
Two important behaviors in shopping situations are product and store contact (how does the consumer
come into contact with products and stores?).

Purchasing situations include the stimuli present in the environment where the actual purchase takes
place (a retail store or a living room for catalog sales). The purchasing environment may or may not
have substantial overlap with the shopping environment. Two important behaviors in purchasing
situations are funds access (how consumers get access to their money) and the final transaction (the
actual purchase).

Consumption situations include the physical and social stimuli present in the environments where
consumers use and consume a product or service as well as the consumption behaviors, and related
affective and cognitive responses.

Disposition situations concern the physical and social stimuli present when consumers dispose (get rid
of) products. The key behaviors concern actual disposal of the product (placing an ad in the paper for a
used car, showing it to possible buyers, etc.).
Marketers will find it useful to identify and study how the environmental, behavioral and cognitive/affective factors
interact in these four situations. They can use this understanding to develop more effective marketing strategies to
influence consumers' behaviors in each situation.
KEY CONCEPTS AND ISSUES
 Functional environment
 Differences between physical, social and marketing environments
 Elements of marketing strategy--product, promotion, price and place factors--as major environmental
stimuli affecting consumers' cognitions and behaviors
 Key aspects of the macro social environment--culture, subculture, and social class
 Key aspects of the micro social environment--reference groups and family
 Aspects of the physical environment and their influence on consumers' affect, cognition and behavior
 Situations as goal directed behaviors, along with affective and cognitive responses in an environment
 Aspects of situational analysis
 Types of marketing situations--information, shopping, purchasing, consumption, and disposition
situations
OUTLINE OF CHAPTER TOPICS
Chapter 11. INTRODUCTION TO THE ENVIRONMENT
A. Megaresorts in Las Vegas
B. The Environment
C. Aspects of the Environment
1. The social environment
2. The physical environment
a. Time
b. Weather
c. Lighting
3. Marketing implications
D. Situations
1. Analyzing situations
2. Generic consumer situations
a. Information acquisition situations
b. Shopping situations
c. Purchasing situations
d. Consumption situations
e. Disposition situations
3. Marketing implications
E. Back to.. Megaresorts in Las Vegas
F. Marketing Strategy in Action: America's Movie Theaters
TEACHING OBJECTIVES
Upon completion of this chapter, students should be able to:
 describe the functional or perceived environment.
 distinguish between aspects of the social, physical, and marketing environments.
 recognize and define the key aspects of the social environment--culture, subculture, social class,
reference groups, and family.
 recognize that the four major strategic elements in the marketing mix--product, promotion, price and
place factors--are stimuli in the physical and social environment that can affect consumers' affect,
cognitions and behaviors.
 define a situation and describe its relationship with the environmental factors, behaviors, and affect and
cognition.
 describe five different marketing situations--information, shopping, purchase, consumption and
disposition situations--and identify the key behaviors in each.
TEACHING IDEAS AND SUGGESTIONS
Overview. This introductory chapter for the environmental section presents fairly simple, but important concepts.
One class period should be sufficient to cover this material, but an additional period could be usefully devoted to
situations if you are interested in exploring such factors. In this chapter, students examine the physical and social
factors in the environment. They also will see how the concept of situations incorporates environments and
behaviors (as well as affect and cognition). In situations, marketers study how environmental factors interact with
behaviors, affect, and cognitions to influence consumers.
Some students may need to be reminded that the environmental factors covered in this chapter constitute the third
major factor in our organizing model, the Wheel of Consumer Analysis.

Show the wheel of consumer analysis and point out how/where environmental factors fit and remind
students of the sections on affect/cognition and behavior already covered in the course.
What is the Environment? Students should have a clear sense of what is meant by the environment. The text
presents definitions.

You might review, briefly, the concept of the functional (perceived) environment. Since marketers
usually deal with groups of people (in segments), the functional environment, as interpreted by
consumers, is of most interest.
Possible Mini-Lecture: Social, Physical, and Marketing Environments. Although the distinction between the
social, physical, and marketing environments is fairly simple, it can confuse some students. These distinctions may
be worth a brief review in class.

Begin by reviewing the differences between the social and physical environment as covered in the text.
The physical environment concerns all nonhuman factors, including spatial elements (places and
objects) and nonspatial concepts (temperature, noise, etc.). The opening example in this chapter
describes the physical environments of elaborately decorated resort hotels in Las Vegas, which
were designed to influence customers' behaviors.
Another example comes from Las Vegas, Nevada. There, in late 1989, Stephen Wynn
opened a new, $620 million hotel and casino, called the Mirage. The physical features of
this environment were designed to be the basic attraction. The hotel had a five-story
volcano outside that "exploded" every five minutes. Inside, white tigers “roamed” in
glassed cages, sharks swam in a 20,000 gallon aquarium, and dolphin played in a tank
near the pool. The site was planted with over 1,000 palm trees. In addition, Wynn built a
$37 million private golf course, planted with 10,000 pine trees that looked more like
North Carolina than the Nevada desert. Finally, the lavish 29-story hotel itself was
spectacular, gleaming white and huge, with over 3,000 rooms!
Consumers had better be attracted to this physical environment in droves. Critics
estimated that Wynn would need to take in over $1 million per day just to break even, a
figure only Caesar’s Palace, the city's busiest casino, has achieved. [Source: Ronald
Grover, "Tigers, A Volcano, and Steve Wynn," Business Week, November 20, 1989, pp.
70-71.]
The social environment concerns social (personal) interactions between people. Social factors can
be analyzed at a macro level (culture or society) or at a micro level (interpersonal interactions
between a husband and wife). Aspects of the social environment can be analyzed in terms of
several levels from the broadest cultural factors to subcultures to social class to more immediate
factors such as reference groups and family (see Exhibit 11.1, page 268).

Then, ask students to discuss those aspects of the social and physical environment that are under the
control of the marketing manager (see page 270 in the text). We might call this the “marketing
environment.”
Many of the social and physical stimuli that are under the control of the marketing manager will be
related to the product or service being marketed. Essentially, these are the "4 P's" of marketing-price, product, promotion, and place (distribution). The stimuli associated with each of these
marketing strategies are experienced by consumers as aspects of their immediate environment.
Thus, marketing strategies are part of the environment. The marketing environment can influence
consumers' affect, cognitions and behaviors.
Marketing strategies often involve creating many specific physical features in the
consumers' environment. Consider how promotional strategies can change the store
environment. For example, Sunkist once created an in-store promotion that involved a
large "tube pole display"--a sturdy cardboard tube holding a large, colorful picture of an
attractive model in a swimming suit relaxing in a bright orange innertube. Six-packs of
the soda were stacked around the tube pole.
Marketing strategies can also influence other (nonmarketing) aspects of the overall environment.
The Wheel of Consumer Analysis illustrates this point. Essentially, we have divided the overall
environment into two broad categories--the marketing environment (stimuli under the control of
the marketing manager) and everything else (all other aspects of the physical and social
environment). We separated the two because our focus in this text is on developing marketing
strategies.

To help students understand these distinctions, ask them to identify various aspects of the social,
physical, and marketing environments in a somewhat complex purchase situation such as shopping for a
personal computer at a local retailer.
In-Class Exercise: Marketing Mix Variables as Environmental Stimuli. Students should recognize that
marketing strategies create changes in consumers' social and physical environments.

To further reinforce this point, ask students to describe how a new product introduction, or a special
price promotion, or an advertising campaign, or a change in retail store all involve changes in the
environment.

Alternatively, describe a couple of specific marketing strategies derived from the business press, or
assign the Marketing Strategy in Action case--America's Movie Theaters.
These examples can stimulate a detailed analysis of environmental factors that can influence
consumer behavior.

Students should identify the specific social and physical stimuli that were created or changed by
marketing strategies. These factors are considered part of the marketing environment, since they
are under the control of the marketing manager. Students should also discuss the likely impacts of
these environmental factors on consumers.
Emphasize that the influence of the environmental factors in a marketing strategy depends on
consumers' behaviors, their affective and cognitive responses, and how these environmental factors
interact with behaviors, affect, and cognition.

Ask students to discuss these reciprocal interactions in terms of the Wheel of Consumer Analysis (show
a transparency of the model to guide the discussion).
For instance, certain behaviors may be necessary for consumers to come into contact with the
marketing strategy (to see the ad consumers must first read the newspaper). Then, the ad must be
interpreted. The resulting affect and cognition might influence subsequent behaviors such as going
to the store to look at the product, and so on. In addition, consumers' cognitive reactions to the
marketing strategy are strongly influenced by their mental processes and the knowledge they have
stored in memory. In turn, the marketing strategy might change knowledge in memory, which
could influence behavior, and so on.
Possible Mini-Lecture: Situations. Understanding situations is extremely important for developing effective
marketing strategies. The text describes a view of situations based on the Wheel of Consumer Analysis. From this
perspective, situations are the combination of environmental factors, affective and cognitive responses, and overt
behaviors that occur over a period of time.
The text defines the concept of situations. Students should understand that a situation is not just a set of
environmental factors (a situation is more than a "raw" environment). Rather, situations always involve an actor
who is behaving, thinking, and feeling in an environment. Consumer-oriented situations, therefore, involve a
consumer (with knowledge, involvement, goals and values) who is acting (behaving to achieve his/her goals) in an
environment (physical and social features) over a period of time. This should sound familiar to students--these are
the elements in the Wheel of Consumer Analysis.
Situations are “constructed” (perceived, defined, identified) by the people who act in those situations. Situations are
defined in terms of their meaning to those people. Many consumer situations are organized in terms of the
consumers' purchase goals and objectives (shopping for a new jacket; celebrating a birthday at a restaurant; getting
gas for one's car). Because situations occur over a period of time, they have a beginning, a middle, and an end-again, defined in terms of the goals (activating the goal, pursuing the goal, achieving the goal).
Thus, situations are meaningful combinations of environmental stimuli and events, behaviors in those environments,
and the accompanying affective and cognitive responses.
Situations, as defined above, are important to marketers. Situations provide the context in which behaviors and
affective and cognitive processes occur. Marketers cannot understand consumers' behaviors or their affective and
cognitive responses without understanding the situational context in which they occur. Also, situations can be a
useful way of segmenting a consumer market.
In-Class Exercise: Analyzing Situations. Students should have some practice in analyzing situations. The text
gives an example of a simple situational analysis.

Ask two or three students to describe a simple situation in which they use some product such as salty
snack products (chips or pretzels) or soft drinks.
Students could follow the same format in the text by describing the environment in which they
often consume snacks, the major goal they seek to achieve, their affective feelings and cognitive
beliefs, and the major behaviors in that situation. Students can also give an overall label to each
snacking situation. Most students should be able to identify the same factors in other snacking
situations.

Then, ask students to discuss the marketing implications of these snacking situations (assuming that they
represent sizable market segments).
In-Class Exercise: Types of Situations. It is important that marketers understand the various situations that
consumers find meaningful. To that end, we identified five generic marketing situations (see Exhibit 11.2). These
broad, abstract situations are relevant starting points for consumer behavior analyses. But, for many marketing
purposes, it will be necessary to conduct more detailed analyses to understand the details and nuances of specific
situations.

Select a product purchase such as buying a personal CB player, or any other product of interest.

Ask students to discuss the key environmental characteristics (both social and physical) in each type of
situation and the major behaviors of interest. The major affective and cognitive responses could also be
discussed.
Information Acquisition Situations

Environmental factors include ads, brochures, news articles, media (TV, newspapers,
magazines), clutter from competing ads.

Behaviors include searching for relevant information looking at newspaper ads, seeking advice
from friends, reading articles in stereo magazines.

Feelings and cognitions could include interest, boredom, anxiety, beliefs and attitudes about
alternatives, intentions to buy.
Shopping Situations

Environmental factors include the store location, the layout of the store, the merchandise
displayed for sale, salespeople in the store, other people shopping in the store, temperature,
crowding and noise in the store.

Behaviors include traveling to the store, looking for the products in the store, trying the different
brands, talking to the salesperson.

Feelings and cognitions could include knowledge of store location, feelings of hassle, interest
and excitement of seeing different models, changes in beliefs, attitudes, and purchase intentions.
Purchasing Situations

Environmental factors could include the cash register counter, credit policies, and the
salesperson.

Behaviors include paying with your credit card or by writing a check, filling out the warranty
card, carrying the product out of the store.

Feelings and cognitions could include anxiety at whether a good decision was made, pride of
ownership, excitement, and satisfaction in making a good buy, relief, intentions to take good
care of it.
Consumption Situations


Environmental factors include social and physical aspects of where ever one listens to the CD
player (e.g., in one's living room or bedroom, or car).

Behaviors include unpacking and "assembling" the player; using the controls; listening to it in
one's living room, bedroom, or car; carrying it with you while jogging along the beach.

Feelings and cognitions could include relaxation or arousal, pride, status feelings, beliefs about
the product, attitudes and intentions.
Throughout the discussion, reinforce the point that all marketing strategies are experienced by
consumers as aspects of the social and physical environments in these situations.
Implementing a new marketing strategy necessarily changes consumers' environments. In turn,
these environmental factors may influence consumers' affect, cognitions and behaviors. (The
effects of specific marketing strategies are covered in more detail in the last chapters of the text.)

Challenge students to identify the specific social and physical stimuli that marketers control in some of
the situations/environments discussed in class. Ask students to speculate about the probable success of
these strategies and how/why they worked.
In-Class Exercise: Comparing Marketing Situations/Environments. Students should understand how to look at
marketing problems or concepts from a "situational" perspective. It is useful to analyze many marketing issues and
problems in terms of the components of situations.

Ask students to describe the "contents" of the various marketing situations for several alternative
marketing channels--such as retail stores, catalogs, Web, and a flea market.
Each channel of distribution can be analyzed in terms of the five generic situations described
above--information acquisition, shopping, purchasing, consumption, and disposition. For each
channel, students should be able to identify the key environmental characteristics, the major
behaviors, and the critical affect and cognition factors in each situation.

As a guide to the discussion, show a transparency in the shape of a matrix.
List the five main situations down the left and the four channel types across the top. Students
should be able to "fill in" each cell with the environmental, behavioral, and cognitive/affective
factors of greatest importance. This exercise should point out the advantages and special insights
that can be gained by looking closely at the characteristics of different situations.
Possible Mini-Lecture and In-Class Exercise: Mobile Shopping Environments.

Challenge students to identify the important environmental factors and situations in this description of an
increasingly popular type of shopping environment.
Several companies have experimented with movable shopping environments. KFC, for example, rolled out a new
concept in 1991—mobile merchandising. They build a KFC restaurant in a 42-foot-long trailer. Towed by a truck,
the mobile KFC unit can be set up at fairs, outdoor concerts, and amusement parks to pursue customers wherever
they go. KFC is not alone. Pizza Hut and Taco Bell also have mobile kiosks and carts in place, many in airports.
Why go to the trouble? One reason is that the fast-food industry has already taken most of the best fixed locations on
street corners and in malls. With a mobile unit, if customers don’t show up, you move the restaurant to another spot.
Another advantage is cost. The mobile units are much less expensive than a fixed site. A Taco Bell cart in an airport
runs about $30,000 and the larger KFC truck costs about $200,000, compared to the about $1 million for a bricksand-mortar fast-food restaurant.
Sometimes these unusual shopping environments create interesting consumer behavior problems. For instance, Pizza
Hut discovered that some customers didn’t believe the pizzas at the mobile airport kiosk were made fresh on-site. So
the company redesigned the ovens (changed the purchasing environment) so customers could see the pizzas going
into the oven.
Marketers of mobile restaurants must be especially conscious of consumers’ consumption environments. In most of
these moving restaurants, the range of products available is limited to foods that people can eat on their feet.
Therefore, KFC sells only chicken nuggets and sandwiches in its mobile restaurant. [Source: Marj Charlier,
“Restaurants Mobilize to Pursue Consumers,” The Wall Street Journal, June 10, 1991, pp. B1, B5.]

Ask students to discuss some of the following questions about this example.
o
Analyze the mobile shopping strategy in terms of the situations outlined in the text. What
environmental and behavioral factors are relevant in the information contact, shopping, purchasing,
consumption, and communication situations?
o
Identify some of the major environmental factors that affect consumers’ tendencies to buy at these
mobile shopping areas.
o
What types of benefits and values do various types of consumers receive from buying food from
these mobile units?
o
What are some of the ways different consumers might view food that is served at these mobile
units?
o
Speculate about the longer-range impact of these mobile shopping environments. Will they
become more prevalent? In what new locations might we see them? Will they remain exclusively
a fast food domain?
PROJECT
This project is similar to the exercises described above. It is intended to give students experience in analyzing
aspects of the marketing environment. If a shorter project is desired, split the class into groups and assign each
group a different aspect of the marketing environment to analyze. Have students write up their analysis to be handed
in for evaluation. Alternatively, ask them to bring their analysis to class prepared to present it for class discussion.
The Marketing Environment
This project is intended to give you experience in analyzing aspects of the marketing environment.

Describe the various components of the marketing environment for a retail business of your choice.
Pick a store that you are familiar with--perhaps a clothing store, or a favorite restaurant.

Discuss the information, shopping, purchasing, and consumption environments in this overall marketing
environment.

Then, describe and evaluate the store's marketing strategies for each part of the marketing environment.
What is the store doing and what do you think about it?

Write up your analysis to be handed in for evaluation, or come to class prepared to present your analysis
to the class for discussion.
NOTES AND ANSWERS TO REVIEW AND DISCUSSION QUESTIONS
1.
Go to the Mirage homepage at www.themirage.com and explore the various environments at this hotel—
including a volcano that erupts every few minutes, a tropical rain forest, a giant aquarium with live sharks,
gourmet restaurants, waterfalls and connected lagoons, a spa, a European-style shopping boulevard, Siegfried
& Roy’s jungle habitat for white tigers, a pool for Atlantic bottlenose dolphins, and over 3,000 deluxe rooms
and suited. Describe how these environments might appeal to consumers in different market segments. How
might these environments influence consumers’ behaviors (stay at the Mirage and gable there)?
This is a web exercise aimed at getting students to find information about the Mirage from the web. It also
aims at getting them to think about the various environmental factors that influence consumers. This, the
use of several different, but related, elements at the Mirage hotel like the waterfalls, the volcano, etc., are
deigned to keep consumers interested in the hotel. They are also designed to create an atmosphere of
outdoors and relaxation in a luxurious setting. Having other things to do besides gamble may stimulate
consumers to stay longer. Thus, there is diversion for those who do not wish to gamble but who are
traveling with consumers who do.
2. Consider the distinction between macro and micro environments for grocery shopping. Which of these are more
important for marketing strategy?
The macro environment concerns big, broad, general, abstract characteristics of a society's environment
such as cultural values, national disposable income, numbers of people, etc. The micro environment, in
contrast, concerns smaller, more tangible features of a person's immediate environment.
A simple answer to which level is most important is that both levels of environmental analysis can be used
to develop effective marketing strategies. Which level is most relevant and important depends on what
level of marketing strategy is being considered. If broad marketing strategies are being considered--should
we expand from 100 stores to 150 stores in the next year--then managers would want to analyze the broader
aspects of the macro environment. If the strategy under consideration is "smaller" and more focused
(Should we build a store in community G?), or should we run this ad campaign, then it probably is
appropriate to analyze the environment at a more micro level.
3.
Contrast the two approaches marketers can take to analyzing environmental effects—considering the direct
effects of specific environmental factors versus considering environmental factors in the context of situations.
Under what circumstances might each of these two approaches be more appropriate?
The differences between the “environmental” and “situational” approaches are the basis for the organization
and content of this chapter.
The text makes the point that analysis of environmental factors within a situational context will be
appropriate in many circumstances. This approach is completely consistent with the Wheel of Consumer
Analysis, the conceptual framework for this text. In particular, when consumers have a clear goal in mind,
they tend to structure environmental factors, behaviors, and affective and cognitive responses in terms of
situations. Shopping is a good example.
In other cases, it can be useful to examine the direct effects of specific environmental factors on behaviors
or affect and cognition, or both. Such an approach may be useful for initial exploration or understanding of
particular environmental effects. Also, this approach is useful in simple situations where consumers do not
have clear goals or where the role played by the environmental stimuli is the predominant factor compared
to other influences.
4.
Use the situation of shopping for a personal CD player to describe the relationships between the physical and
social environments. Point out those aspects that marketers could control.
This review/application question concerns the differences and interrelationships between these two "types"
of environments.
The CD player example should have enough relevance and consensual meaning for undergraduate students
to generate a good discussion. Students should develop specific examples of the physical and social factors
in each environment that influence similar factors in other environments. Students should also discuss how
these environmental factors influence consumers' behaviors, affect and cognition.
For instance, spatial and nonspatial elements in the physical environment constrain specific
strategies in the marketing environment (You can't build a new store on the corner if the current
owner won't sell). Marketing strategies can affect the general social environment.
For instance, in 1990, marketing strategies to promote the Simpsons (a cartoon family on TV) were
so effective that they influenced the general physical and social environments (people were talking
about the Simpsons, new stories were written about them, various commentators analyzed what
this craze meant about American society, and so on).
5. What is a situation? Use several of your own recent purchases to show how situations differ from environments.
The definition answer to this question is covered on pages 270-271 in the text. The section on situations in
the Teaching Ideas and Suggestions above reviews this point in detail. Reviewing this material is
recommended since some students may find the definition of situations somewhat complex and a bit subtle.
Situations are not the same as the so-called "raw" environment. The term “environment” refers only to the
physical and social features or stimuli in the environment.
Students should recognize that the "raw" environment does not include a goal-oriented actor (a person who
is pursuing goals and objectives, perhaps even trying to satisfy basic values). Therefore, the environment
does not include people's affective and cognitive interpretations of the environment, or their behavioral
responses to it. Of course, the raw environment can not account for the reciprocal interactions between
these factors.
In contrast, situations involve an actor (a consumer) who is acting (behavior) in an environment with some
purpose (affect and cognition are present). Students should recognize that situations are structured,
perceived, or constructed by consumers. That is, people define situations that are meaningful to them. In
terms of the Wheel of Consumer Analysis, situations are meaningful "chunks" of the reciprocal interactions,
over time, between environment, behavior, and affect and cognition.
Thus, consumers might describe a situation using terms from all three domains--environment,
behavior, and affect and cognition. Situations often are defined in terms of the behavior involved
(with the specific goals left unstated)--I am having lunch. I am shopping. I am watching TV. But
behaviors are not random. People do have some purpose in mind for nearly all voluntary
behaviors.
6. Are environmental factors more important influences for new or recurring situations? Why?
This question requires some deeper thinking. One possible answer is that consumers are less likely to have
established affective and cognitive responses (relevant knowledge and involvement) or behavioral response
patterns in new or unusual situations. Therefore, consumer responses are more likely to be influenced by
the stimuli in the environment. If the new situation is a common one for other consumers, though, the
differences may disappear very quickly through vicarious learning or cognitive processing.
A more detailed approach to the question would be to look at each of the types of generic marketing
situations (shopping, consumption, communication, etc.) and consider how consumers' responses will differ
for new and recurring situations.
7. Use the Wheel of Consumer Analysis to describe how affect, cognitions and behaviors interact with
environmental factors in a textbook purchase situation.
This application question should help students recognize the usefulness of the situation concept, even in
cases where consumers' choices are restricted (about the only choices in textbook buying are which retail
outlet to make the purchase and whether to buy a new or used book).
Students should examine the components of the Wheel of Consumer Analysis for the five generic
marketing-oriented situations covered in the text.

To help organize and focus the discussion, make a transparency of a matrix with the five situations down
the left and the components of the Wheel of Consumer Analysis across the top.
The five situations are information acquisition, shopping, purchasing, consumption, and
disposition. Students should "fill in" the cells by identifying the key aspects of the environment,
the major behaviors, and the critical affective and cognitive factors in each situation.
8. How can marketers use situational analysis to segment markets? Identify some product categories in which the
approach has been used to the advantage of the marketing organization.
This more difficult question focuses on applications of situational analysis.
Marketers seek groups of consumers who have similar ways of structuring or perceiving situations.
Marketers often focus on the consumption situation, although the information acquisition, shopping, and
purchasing situations could also be examined. Different consumers may see the product consumption
situation in rather different ways. These differences in consumers' perception of the consumption situations
are likely to involve different affect and cognition and different consumption behaviors. If many consumers
share a common view of a consumption situation, that might be a viable segment.
Marketers could develop a variety of marketing strategies in response to segments based on consumption
situations. This could include developing products to appeal to one particular consumption situation, or
developing different products for several consumption situations. Examples of situational segmentation are
in the food, beverage, clothing, and medical products areas. Gatorade, for instance, is targeted at a
particular consumption situation--a replenishing drink after hard exercise.
As students get into the "swing" of this question, you probably won't have any shortage of examples of
marketing strategies based on different consumption situations.
9. For each of the five generic marketing situations, identify uncontrollable and controllable factors that should be
considered in the development of marketing strategies.
This review question forces students to consider the environmental content of the generic marketing
situations discussed in the text. The five generic situations are listed in Exhibit 11.2. They include
information acquisition, shopping, purchasing, consumption, and disposition.

If you discuss the question in class, make up a transparency showing a matrix of situations by
controllable and uncontrollable factors.
Students should be able to recognize that some environmental factors are not controllable by the marketing
manager. Behaviors associated with these characteristics would not be influenced. These factors could be
considered aspects of the marketing environment. Other environmental factors can be controlled by the
marketing manager, which could influence the probabilities of behavioral responses.
How specific factors are classified will depend in part on how we define the marketing manager's position,
the amount of his/her budget, and the time frame being considered.
NOTES TO DISCUSSION QUESTIONS FOR MARKETING STRATEGY IN ACTION-America's Movie Theaters
Overview. This case concerns the problems facing the movie industry. The focus is on how environmental changes
impacted the end point in the distribution system--the neighborhood movie theater. Thus, the case is primarily
concerned with environmental factors and the strategies used by the movie industry in responding to these
environmental changes over time.
Some facts of interest. The movie theater industry is huge, worth about a $5 billion a year in 1984, with nearly 1.2
billion tickets sold. Faced at the time with severe competition from the home video cassettes and other types of
entertainment businesses, the movie industry was fighting for survival. As mentioned in the case, theaters suffered a
12 percent drop in attendance in 1985. Movie attendance declined still further in 1986 (just over 1 billion tickets
sold).
Although not mentioned in the case, the movie market had improved considerably by 1988 and 1989. In 1988 the
movie industry saw record sales of $4.5 billion, and 1989 was expected to top $5 billion. Part of the upturn was due
to increases in ticket prices, with some theaters charging as much as $7.50 per person (the average price of a U.S.
movie ticket in 1988 was about $4.10, up from $3.50 in 1985).
But most experts attributed the increase to a batch of good movies that stimulated increased movie going.
For instance, by late fall of 1989 seven movies had topped $100 million at the box office, a far greater
number than previous years.
Another reason for the recent upturn in movie revenues is that producers are beginning to target the large
number of baby boomers, consumers in their 30s and 40s who are beginning to go to the movies more often,
partly of course as a result of better products being offered to them. Despite the improved financial
situation, however, movie theater managers should not become complacent about the need to attend to
environmental factors, the focus of this case. (see Laura Landro, "It's a Record Race for Movie Makers,"
Wall Street Journal, November 3, 1989, p. B1)
Another factor not mentioned in the case is a different market, the so-called discount movie houses. In contrast to
the elegant first-run movie theaters, discount theaters are often a bit frayed around the edges. But the tickets go for
as little as $1 or $2. These theaters serve the family market, lower income consumers, and consumers who feel
prices of $5 and $6 are just too expensive. The environmental considerations for these theaters will be different from
the first-run houses. (see Richard Turner, "A Showdown for Discount Movie Houses," Wall Street Journal, July 18,
1989, p. B1)
Suggestions for Discussion Questions.
1. The VCR is a physical aspect of the environment that has affected movie going behavior in the United States.
Compare and contrast the consumption situations of watching a movie in a theater versus seeing the same movie
at home on your DVD player or VCR. Discuss the reciprocal interactions among environment, behavior, and
cognitive and affective responses. What long-term effects do you think the in-home VCR environments will have
on movie going? What can movie theaters do to improve the situation?
For the first part of this question, students should easily identify the key differences in the physical and
social environments between these two consumption situations. This question also gives them practice in
thinking about and applying the Wheel of Consumer Analysis again. Students should especially consider
the reciprocal interactions (over time) between the model components--the environmental, behavioral, and
affective and cognitive factors. Students also should generate some ideas about the implications of their
analyses.
The second part of the question focuses on the competition between DVDs/VCRs and movie going, but
other forms of generic competition are also relevant. Obviously, DVDs/VCRs have cut into the market for
movie going. Probably the decrease in movie going is greater for certain segments of the market, such as
older people. The case mentions several strategies the theater owners might try to make movie going more
attractive, including cleaning up and remodeling their theaters. Of course, the biggest influence on movie
going is the movies themselves. In the late 1980s and early 1990s, the number of "good" movies increased,
and so did ticket sales (and prices, too). Perhaps the studios were feeling the pinch from VCRs, and worked
harder to produce more appealing films.
Interestingly, the VCR has not been the disaster for movie makers that it once seemed. As the popularity of
VCRs and watching movies at home has increased, the rental market has become a big business opportunity
for the movie producers. For popular movies, film producers can expect to sell as many as 500,000
cassettes at about $70 each to the rental companies.

Challenge students to consider the variety of new entertainment technologies that are available to
American consumers and their effects on movie going.
These include radio, CDs, network and cable television, amusement parks, and many others. As
these became popular, peoples' physical and social environments changed as did their
entertainment behaviors and related affective and cognitive responses. In the mid-1980s, many
people (but certainly not all) seemed to have become less active and more willing to pay for their
entertainment, especially in their homes. These changes created new market opportunities for
stereo equipment, furniture, tape rentals, and so on.
2. What macroenvironmental factors might affect movie going behaviors (both decrease and increase)? Consider
their impacts on different market segments. What marketing implications does your analysis have for theater
owners or movie companies?

Physical Environment
Students might identify some of the relevant aspects of the physical environment that have changed
over the past 30 years or so. The case briefly identified several of these--the proliferation of small,
tacky theaters; the gradual erosion of cleanliness; the sky high prices for snacks; and higher-priced
tickets in many theaters. All of these environmental factors probably decreased the probability of
attending a movie in a theater.
Other environmental factors include the increasing range of alternatives on which people could
spend their leisure time, including vastly expanded TV programming with the proliferation of TV
channels.
Another factor alluded to in the case is the quality of movies that were being produced. Perhaps
1985-86 was a kind of low water mark, with few great movies being produced.
Finally, of course, students should consider the VCR revolution of the 1980s and the more recent
proliferation of DVDs (as discussed in Question 1 above).
Of course, these environmental factors did not influence every segment of society in the same way.
Teenagers were still heavy moviegoers in the early and mid 1980s. But many young adults and
middle-aged people decreased their movie attendance.

Social Environment
Students should also mention influences of the social environment. Although not mentioned in the
case, movie going was once a part of the social fabric of America. For many people, even whole
families, movie going was a regular activity in their week. This gradually died out, and movie
going lost some of this social character (except perhaps for diehard fans and dating teenagers).

Ask students to discuss some of those "old" meanings and behaviors and consider how these
meanings for movie going have changed over the past 30 years.

Ask students to discuss the current meanings of "going to a movie."
Determining the meaning of movie going relates to concepts covered in Chapter 4 on
consumers' Product Knowledge and Involvement. Students might approach this task by
identifying their own means-ends chains of meanings for movie attendance.
To do so, they should go through the process of eliciting salient decision criteria
for "going to the movies," and then ladder off the most important of these,
following procedures described on pages 84-85 in the text.

Ask the class to discuss the means-ends chains that they produced, and describe their implications
for developing marketing strategies.

Further, ask students to speculate about how the dominant means-ends chains might differ for the
two segments of the movie-going market--teenagers versus young adults under 30.

Finally, ask students to discuss the ramifications of these meanings.
This requires attention to the environmental, behavioral, and affect and cognition factors,
and to their reciprocal interactions during the movie going situation. Use the Wheel of
Consumer Analysis to stimulate and organize the discussion.

Another important change in the macro social environment concerns demographic factors.
Although the total population of the U.S. is growing, the number of people under 30 is shrinking.
In the mid-1980s, these people bought about 2/3 of movie tickets, and were the prime target
market for movie theaters.

Ask students to discuss what happens when the population of potential moviegoers ages?
Often their movie going behavior decreases. Messy theaters filled with noisy teenagers
are not attractive environments for many older consumers.
Students should consider the impacts that these changes are likely to have and the strategies that
the movie theater industry might develop in response to these environmental factors.
One example is to develop more upscale movie theaters, as described in the case.
Another strategy is to encourage film studios to create more adult oriented, high quality
movies. Film studios did develop more films that appeal to baby boomer adults, and the
strategy paid off in 1988 and 1989 with record ticket sales.

Marketing Environment
The macro marketing environment also had an important influence on people's movie going. One
point (not mentioned in the case) concerns the movie theater industries (over?) expansion. From
1980 to 1985, the number of screens in the U.S. and Canada surged 22 percent to an estimated
21,500 screens. (The movie industry tends to treat U.S. and Canada as a single market.)

Ask students to reflect on what impact having a very large number of screen choices has on
consumers' cognitions and behaviors.
For example, the initial proliferation of movie screens generated pressure to produce
more movies to show on these screens. Many of these films were B-grade quality or less.
According to Frank Price, chief of Universal Studios, "More production almost always
means more bad pictures, not more good ones." For instance, Cannon Group makes lurid,
"exploitation" films with very low budgets (like Death Wish III). These films are
shown in theaters and then usually quickly converted into media for the home market.
With these two potential markets, a film with a budget under $3 million--compared with
the average of $15 million for a film from a major studio--is virtually assured of making a
profit. Thus in 1985, 445 movies were released, the most in a decade. At that time,
however, few big studios were making money on feature films. In fact, in late 1985,
studios slashed production of new films drastically.

Ask students to consider what a large number of crummy movies do to consumer's affective and
cognitive responses to films and their movie going behavior.
Probably these factors lead to increasingly negative attitudes toward films and movie
theaters, and to further decreases in attendance. Seeing many bad movies may numb
moviegoers and create negative attitudes toward films in general. Consumers may prefer
to see a lousy movie at home where the "ticket prices" (the rental fee for the videotape)
and the popcorn are cheaper.
Another implication of too many movie screens is the development of the discount movie theater
that shows second-run films at much lower prices, say $1 or $2, than a first-run theater. These
theaters can make money at such prices because the studio's share of the ticket price decreases the
longer the film is out. In the first week or two, the studio might demand as much as 90 percent of
the ticket price. But by the time the film reaches the discount theater (after several weeks) the
studio's take is much lower, generally around 35 percent. So, it is possible for discount theaters to
make money, even with low ticket prices.


Effects of Environmental Factors.

For each environmental factor discussed in class, encourage students to identify related changes in
consumers' affect, cognition and behavior.

Show the Wheel of Consumer Analysis to help students see how the environment influences affect,
cognition and behavior, and how these factors, in turn, influence the environment.
Implications for Marketing Strategies.

Direct the discussion to the possible strategies that the movie theater industry might try in response
to the various environmental factors.
The strategies discussed in the case involve spending money to remodel theaters or build
new, more elegant theaters, buy more comfortable seats, and develop a more profitable
concession stand.
Students should consider what overall effects these factors are likely to have on the
theater industry. What can they do besides fixing up their theaters and trying to make
movie going fun and exciting again? What if the films are still lousy?
One strategy not mentioned in the case concerns increasing profits by decreasing costs.
One large theater owner saved over $1 million per year by serving popcorn in coated
paper sacks instead of the stiff tubs most theaters use. Not only are the sacks cheaper, but
they save money on disposal because they take up less room at cleanup time. What other
cost saving strategies could a theater owner adopt?
3. Analyze the information acquisition, purchasing, and consumption environments of different movie theaters in
your local area. What recommendations do you have for changing these environments to increase sales and
profits?
This question focuses students on analyzing three important types of environments.

Encourage a free-ranging discussion, with students offering their ideas about all of these factors.
Of course, there are no right or wrong answers to this question. As students come up with
insightful ideas about these three environments, jot down their comments on the board as a record
and to stimulate their imaginations.
As for the information environment, students should mention ads in the local newspapers, movie reviews in
mass circulation magazines, and shows by film critics on TV. Aspects of the social environment are
relevant here, such as movie recommendations from friends.
The purchasing environment concerns key aspects of the theater ticket counter and lobby. Also the
concession stand is a part of the purchasing environment. Social factors include the number of other people
in the lobby area, the amount of crowding and noise they create, and the types of people who are there.
Students should discuss how these environmental factors affect consumers' affect, cognitions and behaviors.
The consumption environment concerns the physical environment of the theater, with its seats, decor, and
screen. In some theaters, this environment is small and cramped, trashy or dirty, with old, uncomfortable
seats, and a plain decor. In other theaters, the consumption environment may be clean and neat, large with
soaring ceilings and elegant decorations, a very large screen, plush comfortable seats.
Students should discuss the behaviors and the affective and cognitive reactions that such
environments elicit. Students should also mention aspects of the social environment in the
consumption situation, including the numbers and types of other customers and their behaviors.
4.
Analyze the effects of the consumption situation at movie theaters on consumers' purchase of snacks at the
concession stand. What could theater owners do to change the purchasing and the consumption environments
in their theaters to encourage higher levels of snack consumption and greater sales at concession stands?
This question asks students to consider how particular aspects of the purchase/consumption environment in
a movie theater might affect purchase of snack products.
Students should be able to think of key physical and social aspects of this environment and how they might
influence purchase behaviors. For instance, they might consider the design, decor, and size of the
concession area and its location in the lobby as relevant features of the environment that could influence
purchase behaviors. Social factors include how many clerks are working the concession area and their
behaviors and attitudes toward the customers. Other social factors include how crowded and congested the
concession stand gets. The specific snack products and the brands offered for sale constitute the choice
alternatives that are available for purchase. Along with their prices, these items are relevant aspects of this
environment.
Students should be able to offer their ideas about how these various environmental factors interact with
consumers' behaviors and their affective and cognitive responses. That is, they should analyze the
reciprocal interactions between the elements specified in the Wheel of Consumer Analysis.
Owners could change any of the environmental factors discussed above. For instance, they could put more
personnel behind the counter to reduce lines and encourage purchase.
Owners could consider two target segments: the 1/3 of customers who currently buy snacks at the
concession stand, and the 2/3 who do not buy anything. Rather different strategies to increase snack
purchases could be directed at both groups.
For instance, marketers might change the mix of products and brands offered for sale. If only
about 1/3 of movie goers actually buy anything at the concession stand because the concession
stand does not have what they want, theater owners might want to stock more popular brands in an
attempt to convert current nonbuyers. Even though the profit margins might be lower on such
brands, perhaps the increase in volume would compensate. Other types of snack products could be
offered for sale such as juice, yogurt, and fresh fruits.
Alternatively, owners might try strategies to increase the amount of snacks purchased by current
users. Lower prices might be tried, but probably would not be seen as an attractive option. It
might be better to offer special deals such as 20 percent off soft drinks with the purchase of a large
popcorn.
Owners might consider redesigning the lobby environments, especially in multiscreen theaters, to include a
much larger concession area with many more snack items available, perhaps including ice cream and
sandwiches. In addition, theater owners could arrange small tables and chairs in the lobby for customers to
sit and eat while waiting for the movie to start (rather than standing in line waiting outside to buy a ticket).
Some movie theaters in Denmark (and probably elsewhere) are designed like this; beer is even
available at the concession stand. Another idea would be for movie owners might connect
restaurants to the theater lobby, such as a pizza parlor.