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Chapter
3
Marketing Strategy
Chapter 3
Environmental Analysis
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Environmental Analysis
• Any effort at environmental analysis must be wellorganized, systematic, and supported by sufficient
resources (e.g., people, financial, information).
• Environmental analysis should be an ongoing effort.
• A comprehensive environmental analysis can lead to
better planning and decision making, but it should be
combined with the manager's intuition and judgment
to make the results of the analysis useful for
planning purposes.
• Environmental analysis empowers the marketing
manager because it encourages both analysis and
synthesis of information.
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Data Versus Information
• Managers are more likely to be overwhelmed with
data rather than face a shortage.
• Data does not become informative until it is
transformed in a manner that makes it useful to
decision makers.
• Environmental analysis is valuable only to the extent
that it improves the quality of the resulting plans and
decisions.
• Perpetually analyzing data without making any
decisions is usually not worth the added expense.
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Three Key Environments
• Analysis of the external environment
(macroenvironmental) should include all the external
factors— competitive, economic, political, legal/ regulatory,
technological, and sociocultural—that can exert direct and
indirect pressures on both domestic and international
marketing activities.
• The marketing manager should examine the customer
environment (5 W’s) to assess the current and future
situation with respect to customers in the firm's target
markets.
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• Finally, a critical evaluation of the firm's current and
anticipated internal environment (microenvironmental)
with respect to its objectives and performance, allocation of
resources, structural characteristics, and political and power
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Four Basic Types of Competition
Brand Competitors: market products that are similar in
features and benefits to the same customers at similar prices
Product Competitors: compete in the same product class,
but with products that are different in features, benefits, and
price
Generic Competitors: market very different products that
solve the same problem or satisfy the same basic need
Total Budget Competitors: compete for the limited
financial resources of the same customers
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Stages of Competitive Analysis
1) Identify all current and potential brand, product, generic, and total
budget competitors
2) Assess each key competitor in terms of relevant characteristics,
such as size, profitability, growth, objectives, strategies, etc.
3) Assess each key competitor’s strengths and weaknesses, as well as
the major competencies that each competitor possesses
4) Focus on each competitor’s marketing capabilities in terms of their
products, pricing, distribution, and promotion
5) Estimate each competitor’s most likely strategies and responses
under different environmental situations, as well as their reactions
to the organization’s own marketing efforts
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Economic Conditions
• A thorough examination of economic factors requires
marketing managers to gauge and anticipate the general
economic conditions of the nation, region, state, and local
area in which they operate.
• Economic factors to consider include inflation, employment
and income levels, interest rates, taxes, trade restrictions and
tariffs, current and future stages of the business cycle
(prosperity, stagnation, recession, depression, and recovery),
consumers' overall impressions of the economy and their
ability and willingness to spend, and current and anticipated
spending patterns of consumers in the firm's target market.
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Political Trends
• Many marketers view political factors as being
beyond their control and do little more than adjust
the firm's strategies to accommodate changes in
those factors.
• Other firms take a more proactive stance by seeking
to influence elected officials.
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Legal and Regulatory Factors
• The marketing manager should carefully examine
recent court decisions and recent rulings of federal,
state, local and self-regulatory trade agencies to
determine their effects on marketing activities.
• Companies that engage in international marketing
activities should also consider changes in the trade
agreements between nations.
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Political & Legal Factors
Legislation
Legislation
Impact
Impact on
on Marketing
Marketing
Sherman
Sherman Act
Act
(1890)
(1890)
Prohibits
Prohibits combination,
combination,contracts,
contracts,or
or
conspiracies
conspiracies to
totrade
trade or
or monopolization
monopolization
Clayton
Clayton Act
Act
(1914)
(1914)
Prohibits,
Prohibits,price
price discrimination,
discrimination,tying
tyingclauses,
clauses,
and
andexclusive
exclusive dealer
dealer arrangements
arrangements
FTC
Created
FTC Act
Act
Createdthe
the FTC
FTC and
and gave
gave itit investigatory
investigatory power
power
to
(1914)
to deal
deal with
with antitrust
antitrust powers
powers
(1914)
RobinsonRobinson- Prohibits sellers from offering different deals to
Prohibits sellers from offering different deals to
Patman
Act
Patman Act
different
different customers
customers for
forlike
like grade
grade && quantity
quantity
(1936)
(1936)
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Changes in Technology
• Many changes in technology assume a frontstage
presence in that they are most noticeable to
customers.
• Technological changes can also assume a
backstage presence when their advantages are not
necessarily apparent to consumers.
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Sociocultural Factors
• Sociocultural factors are those social and cultural
influences can cause changes in attitudes, beliefs,
norms, customs, and lifestyles.
– There are many changes taking place in the demographic
makeup of the U.S. population.
– Changes in cultural values can also create challenges and
opportunities for marketers.
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The Customer Environment
• Information should be collected that identifies
– The firm's current and potential customers
– The prevailing needs of current and potential customers
– The basic features of the firm's and competitors' products
that are perceived as meeting customers' needs
– Anticipated changes in customers' needs
• In assessing the firm's target markets, the marketing
manager should attempt to understand all relevant
buyer behavior and product usage statistics.
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5-W Model
• Who Are Our Current and Potential Customers?
• What Do Our Customers Do with Our Products?
• Where Do Our Customers Purchase Our Products?
• When Do Our Customers Purchase Our Products?
• Why (and How) Do Our Customers Select Our
Products?
• Why Do Potential Customers Not Purchase Our
Products?
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Who Are Our Current and Potential
Customers?
• The manager should consider
– demographic characteristics (gender, age, income, occupation,
education, ethnic background, family life cycle, etc.)
– geographic characteristics (where customers live, density of the
target market, etc.)
– psychographic characteristics (attitudes, opinions, interests, motives,
lifestyles, etc.) in defining the firm's target markets.
• Depending on the type of products sold by the firm, purchase
influencers, such as children or spouses, may be important as
well.
• For business-to-business marketers, the analysis should
focus on the decision-making unit (DMU).
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What Do Our Customers Do with Our
Products?
• The "what" question entails an assessment of how
customers consume and dispose of the firm's products.
• Here the marketing manager might be interested in
– identifying how often products are consumed (sometimes called
the usage rate)
– differences between heavy and light users of products
– whether complementary products are used during consumption
– what customers do with the firm's products after consumption
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Where Do Our Customers Purchase Our
Products?
• Until recently, most firms looked solely at traditional
channels of distribution, such as brokers, wholesalers, and
retailers.
• Many other forms of distribution are available today, most
notably nonstore retailing, which includes
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–
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vending machines
door-to-door selling
direct marketing through catalogs or infomercials
electronic merchandising through computers and interactive
television
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When Do Our Customers Purchase Our
Products?
• The "when" question refers to any situational influences that
may cause customer purchasing activity to vary over time,
including the seasonality of the firm's products and the
variability in purchasing activity caused by promotional
events.
• The "when" question also includes more subtle influences
that can affect purchasing behavior, such as
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–
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physical and social surroundings
time perceptions
the purchase task
time of day
time available to search for alternatives
what the purchase is intended to accomplish.
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Why (and How) Do Our Customers Select
Our Products?
• The "why" question involves identifying the basic needsatisfying benefits provided by the firm's products.
• The potential benefits provided by the features of competing
products should also be analyzed.
• It is also important to identify potential changes in customers'
current needs and the needs that customers may have in the
future.
• The "how" part of this question refers to the means of
payment that customers use when making a purchase.
• How can we practice CRM
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Why Do Potential Customers Not
Purchase the Organization’s Products?
• Noncustomers have a basic need that the product does not fulfill
• The product does not match noncustomers’ lifestyles or image
• Competing products have better features or benefits
• The product is too expensive for some customers
• Noncustomers may have high switching costs
• Noncustomers are simply unaware of the product’s existence
• Noncustomers have misconceptions about the product
• Poor distribution makes the product hard to find
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Internal Environment
• First, the marketing manager must periodically
assess the firm's current marketing goals, objectives,
and performance.
• Second, the marketing manager should review the
current and anticipated levels of organizational
resources that can be used for marketing purposes.
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• Finally, the marketing manager should review
current and anticipated structural issues that could
affect marketing activities.
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Collecting Environmental Data &
Information
• The marketing manager should invest time and money
to perform research to uncover data that is pertinent to
the development of the marketing plan.
– This effort will always involve the collection of secondary
data, which is compiled inside or outside the organization
for some purpose other than the current analysis.
– If the required data or information is not available, primary
data may have to be collected through marketing research.
– Accessing secondary data sources is usually preferable as a
first option because they can be obtained more quickly and
at less cost than collecting primary data.
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Sources of Environmental Data
• Internal sources may also be a good source of data on customer needs,
attitudes, and behavior. The organization's own records are the best
source of data on current objectives, performance, and available
resources.
• The sheer volume of available information on the economy, our
population, and business activities is the major strength of most
government data sources.
• The articles and research reports that are available in periodicals and
books provide a gamut of information about many organizations,
industries, and nations.
• Commercial sources are almost always relevant to a specific issue
because they deal with the actual behaviors of customers in the
marketplace.
• The best approach to secondary data collection is one that blends data and
information from a variety of sources.
• If needed secondary data is not available, out of date, inaccurate or
unreliable, or irrelevant to the specific problem at hand, the manager may
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Overcoming Problems in Data Collection
• One of the most common problems is an incomplete
or inaccurate assessment of the situation for which
data is being gathered to address.
• Another common difficulty is the expense of
collecting environmental data.
• A third issue is the time it takes to collect
environmental data.
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• A final challenge is finding a way to organize the
vast amount of data and information that are
collected during the environmental analysis.