Chapter 4

Environmental Analysis And The Marketing

Audit
 The Changing Business Environment (The New Marketing
Reality)
If there is a single issue or theme which now links all types and sizes of
organization, it is that of the far faster pace of environmental change and the
consequently greater degree of environmental uncertainty.
This change and uncertainty has been manifested in a wide variety of ways,
and has led to a series of environmental pressures and challenges with which
managers need to come to terms.
As the company’s external environment changes, so opportunities and threats
emerge and disappear.
 Because of this, the marketing planner needs to recognize the fundamental
necessity for an environmental monitoring process that is capable of
identifying in advance opportunities and threats, so that the effects of
threats are minimized and that opportunities are seized.
 Therefore, the marketing planner should concern with matching the
capabilities of the organization with the demands of the environment. In
doing this, the planner is faced with a difficult problem.
 
 The Nature of the Marketing Environment

An organization’s marketing environment is made up of those forces outside the

organization that exert some degree of influence upon the ways in which
marketing management develops relationship with the firm’s target markets.
Environment: the micro-environment and the macro-environment.
The micro-environment: those elements that are closest to the company and that
exert the greatest and most direct influence over its ability to deal with its
markets.
The macro-environment: the broader set of forces that have a bearing
upon the company, to form what we can loosely refer to as the non-
controllable elements of marketing, which in many ways act as a series
of constraints on the parameters within which the marketing planner is
required to operate.
Because these elements are non-controllable, the marketing planner
may well adopt a highly proactive stance in an attempt to alter the
nature and impact of the environment upon the organization.
 Responding To The Changing Env’t
One of the principal themes is that the marketing environment is changing ever
more dramatically and, for many organizations, ever more unpredictably.

Faced with this, the marketing planner can take one of three approaches:
1. To ignore what is happening and accept the consequences of strategic drift
and wear-out
2. To respond quickly or slowly, but largely reactively
3. To try to predict the nature of the changes and then manage them
proactively
 In deciding whether to respond quickly or slowly, the planner needs to
think about the opportunities or threats posed by the changes taking
place, the time for which any window of opportunity is likely to be
open, and the organization’s ability to respond.

 The third option is in many ways the most desirable, but is typically
dependent upon the quality of the environmental monitoring system
and the planner’s ability to identify how to respond and potentially
the most difficult

"When the rate of change inside the company is exceeded by

the rate of change outside the company, the end is near”
Jack Welch Former GE CEO
 The Parable of the Boiled Frog /The Boiled Frog Syndrome/
All organizations are faced with a series of environmental changes and
challenges.

The principal difference between the effective and the ineffective

organization is how well it responds, something that was encapsulated
several years ago in one of the most popular of management fables, the
parable of the boiled frog.

What is now referred to as ‘the boiled frog syndrome’ is based on the idea
that, if you drop a frog into a pan of hot water, it leaps out. If, however, you
put a frog into a pan of lukewarm water and turn the heat up very slowly, it
sits there quite happily not noticing the change in the water’s temperature.
The frog, of course, eventually dies.
 Faced with sudden and dramatic environmental change, the need for a
response is obvious.
 Faced with a much slower pace of change, the pressures to respond are far
less (this is the ‘we are doing reasonably well and can think about doing
something else at some time in the future’ phenomenon), with the result that
the organization becomes increasingly distant from the real demands of its
customers and other stakeholders.

 Given this, think seriously about whether you are one of the frogs that is
sitting quite happily in a pan of increasingly hot water. If so, why, what
are the possible consequences and what, if anything, are you going to do
about it?
 PEST Analysis: The Political, Economic, Social and
Technological Environments
Effective marketing planning is based on two important analytical ingredients.
First, market opportunity must be analysed and, second, the company’s ability
to take advantage of these opportunities and cope with threats must be
assessed.
 
The Social, Cultural And Demographic Environments
Characteristics in this environment are important to marketers because they are
closely related to the demand for many products. Change in demographics
signal, the rise of new markets and the elimination of others. They help us
anticipate the needs and wants of the population
A detailed understanding of the size, structure, composition, culture,
communication, thinking process and trends of the population is therefore of
fundamental importance to the marketing planner.
 Changes In This Environment
1. The growth in the number of one-person households:
The size of SSWD group (single, separated, widowed, divorced) has grown
dramatically over the past few years:
FACTORS: young adults leaving home earlier
later marriage,
a rise in the divorce rate,
social and geographic mobility
higher income levels that give people the freedom to live alone
an increase in demand for more starter homes, smaller appliances, food that can be
purchased in smaller portions, and a greater emphasis upon convenience products
generally
2. Family Size:
 An increase in the number of group households. These are households
with three or more people of sharing expenses by living together,
particularly in the larger cities.
 An explosion in the world’s population: The world population exceed
8.1 billion by the year 2030. The world's large and highly diverse
population poses both opportunities and challenges. A growing
population means growing human needs to satisfy.
 A slowdown in birth rates
 An ageing population
 Changing family structures as a result of:
a. Later marriage, Fewer children, Increased divorce rates, More
working wives, An increase in the number of career women
 Changing Gender Roles:
 Increasing number of two income households, female roles related to
families, jobs recreation and buying behavior are changing dramatically.
Ex: men shop for groceries, cook food, while more women higher
involvement in different social activities. growing number of “house
husbands” stay at home and for child care and homemaking
 Changing role of women: Now a days more and more women are working
outside home. has stimulated the demand for day-care centers and nursery
schools.
To summarize, marketers keep close track of cultural, social and
demographic trends and developments in their markets, both at home
and abroad. They need to track changing age and family structures,
geographic population shifts, educational characteristics, cultural
shifts, social influences, and population diversity.
The Political (Legal) Environment
Marketing decisions are typically affected in a variety of ways by developments in the political and
legal environments. This part of the environment is composed of laws, pressure groups and
government agencies, all of which exert some sort of influence and constraint on organizations and
individuals in society.
 Employment law
 Consumer protection law
 Taxation law
 Environmental protection law
 Healthy and safety regulations
Free movement of products throughout the EU allows organizations to operate in 27 countries
Middle east
The Economic Environments
Within the majority of small and medium-sized enterprises (SMEs), the
economic environment
is typically seen as a constraint, since the ability of a company to exert any
sort of influence on this element of the environment is, to all intents and
purposes, negligible.
 Globalization
 GDP
 monetary policies
 Economic growth
 Government spending
 Unemployment policy
 Exchange rates
 Taxation
 Inflation rates
The Technological Environment
New inventions and development
Rate of technology transfer
 Political (incl. Legal) Economic Sociocultural Technological

Environmental regulations and Economic growth Income distribution Government research

protection spending
Tax policies Interest rates & monetary Demographics, Population Industry focus on
policies growth rates, Age technological effort
distribution
International trade regulations and Government spending Labor / social mobility
restrictions
Contract enforcement law Unemployment policy Lifestyle changes
Consumer protection
Employment laws Taxation Work/career and leisure Life cycle and speed of
attitudes technological
Entrepreneurial spirit obsolescence
Government organization / Exchange rates Education Energy use and costs
attitude
Competition regulation Inflation rates Fashion, hypes (Changes in) Information
Technology
Political Stability Stage of the business cycle Health consciousness & (Changes in) Internet
welfare, feelings on safety
Safety regulations Consumer confidence Living conditions (Changes in) Mobile
Technology
 SWOT: Description

• A SWOT analysis generates information that is

helpful in matching an organization or group’s
goals, programs, and capacities to the social
environment in which it operates.
• It is an instrument within strategic planning.
• When combined with dialogue it is a
participatory process (1)
SWOT/OTSW Strategic
Planning Process (1)

Factors Internal
to program
Strengths Weakness

Opportunities Threats
Factors External
to program
Chapter Five: Managing the Marketing
Mix Strategies
Product Strategy
 Chapter Five
Managing the Marketing Mix
Strategies
 Managing the Marketing Mix Strategies

Managing Products
 Product Levels: The Customer Value Hierarchy
• In planning its market offering, the marketer needs to address five product levels.
Each level adds more customer value, and the five constitute a customer value
hierarchy.
i. Core benefit
ii. basic product/actual/generic
iii. Expected product
iv. Augmented product
v. potential product
• The new competition is not between what companies produce in their
factories, but between what they add to their factory output in the form of
packaging, services, advertising, customer advice, financing, delivery
arrangements, warehousing, and other things that people value.
 PLC strategies
• Introduction
• Growth
• Maturity
• Decline
 Product Differentiation
• FORM: the size, shape, or physical structure of a product. Although cell phone can be
differentiated by size, shape, color
• FEATURES: distinguishing characteristics: what is does, its specifications,. Most
products can be offered with varying features that supplement its basic function.
• PERFORMANCE: the level at which the product's primary characteristics operate.
• DURABILITY: a measure of the product's expected operating life under natural
conditions, is a valued attribute for certain products.
• RELIABILITY: is a measure of the probability that a product will not malfunction or
fail within a specified time period.
• STYLE: the product's look and feel to the buyer. Car buyers pay a premium for infiniti
because of their extraordinary look.
 STRETCHING
• Every company's product line covers a certain part of the total possible range. For
example, BMW automobiles are located in the upper price range of the automobile
market.
• Line stretching: when a company lengthens its product line beyond its current
range. The company can stretch its line down-market, up-market, or both ways.
1. Down-Market Stretch A company positioned in the middle market may want to
introduce a lower-priced line for any of three reasons:
• A company faces a number of naming choices in deciding to move down-market.
i. Use the name
ii. Introduce lower-priced offerings using a sub-brand name
iii. Introduce the lower-priced offerings under a different name, without
mentioning the original
2. Up-Market Stretch Companies may wish to enter the high end of the
market for more growth, higher margins, or simply to position
themselves as full-line manufacturers. Many markets have spawned
surprising upscale segments
• Same name, entirely new names, including the original name
3. Two-Way Stretch Companies serving the middle market might
decide to stretch their line in both directions.
 Co-Branding
• BRANDING Products are often combined with products from other
companies in various ways. A rising phenomenon is the emergence of
co-branding—also called dual branding or brand bundling—in which
two or more well-known existing brands are combined into a joint
product and/or marketed together in some fashion.
Advantage
• can generate greater sales from the existing target market as well as
open additional opportunities with new consumers and channels
• can reduce the cost of product introduction because two well-known
images are combined, accelerating potential adoption
 Packaging
• Well-designed packages can create convenience and promotional
value.
• We must include packaging as a styling weapon, especially in food
products, cosmetics, and small consumer appliances.
• The package is the buyer's first encounter with the product and is
capable of turning the buyer on or off.
• Packaging: Various factors have contributed to the growing use of
packaging as a marketing tool:
a) Self-service. An increasing number of products are sold on a self-service
basis.
b) Consumer affluence: consumers are willing to pay a little more for the
convenience, appearance, dependability, and prestige of better packages.
c) Company and brand image. Packages contribute to instant recognition of
the company or brand.
d) Innovation opportunity. Innovative packaging can bring large benefits to
consumers and profits to producers. Companies are incorporating unique
materials and features such as resealable spouts and openings.
• Developing an effective package requires a number of decisions. From the
perspective of both the firm and consumers, packaging must achieve a number of
objectives:

1. Identify the brand,

2. Convey descriptive and persuasive information,

3. Facilitate product transportation and protection,

4. Assist at-home storage, and

5. Aid product consumption.

• To achieve the marketing objectives for the brand and satisfy the desires of consumers,
the aesthetic and functional components of packaging must be chosen correctly. Aesthetic
considerations relate to a package's size and shape, material, color, text and graphics.

After packaging is designed, it must be tested

• Engineering tests are conducted to ensure that the package stands up under normal
conditions

• visual tests, to ensure that the script is legible and the colors harmonious;

• dealer tests, to ensure that dealers find the packages attractive and easy to handle; and

• consumer tests, to ensure favorable consumer response.

 SERVICE STRATEGIES

• Intangibility
• Variability
• Inseparability
• Perishability
 Managing the Marketing Mix Strategies

price: the value placed on goods or services being exchanged

Price
Price is more than just the cost of an item.
Price is also the value that the item holds for the consumer.
 Pricing strategies
Discount
• Cash discount
• Quantity discount:
• Functional discount:
• Seasonal discount:
 Price differentiation
• Companies often adjust their price to accommodate differences in
customers, products, occasions,…
Customer segment pricing: different group of customers pay different price
for the same product. Museums for students, cinema and concert for couples
Product form pricing: different versions of the product are priced differently
but not proportionally to their cost
Channel pricing: a different price depend on the channel: coca at
supermarket, restaurant, vending machine
Image pricing: based on the image difference. Different price for differently
branded and packaged products
Location pricing: difference at different locations. Ex VIP

Time pricing based on season, day, hour,…

Yield pricing: hospitality and tourism industry. Discount for early purchase
and high for late, low rate for unsold inventories
 Managing the Marketing Mix Strategies

Promotion
Developing Effective Communications
1. Identifying the target audience
2. Determining the objectives
3. Designing the communications
4. Selecting the channels: personal or not
5. Establishing the budget
affordable method
percentage of sales
competitive parity Promotion y
objective and task method
• Factors in Setting the Marketing Communications Mix
type of product market
buyer-readiness stage
product life cycle stage
What is Advertising?
Advertising is the non-personal communication of marketing related information
to a target audience usually paid for by the advertiser, delivered through mass
media in order to reach the specific objective of the sponsor.

1. Pervasiveness: Advertising permits the seller to repeat a message many times. It

also allows the buyer to receive and compare the messages of various competitors.
2. Amplified expressiveness: Advertising provides opportunities for dramatizing the
company and its products through the artful use of print, sound and color.
3. Impersonality: The audience does not feel obligated to pay attention or respond to
advertising. Advertising is a monologue in front of, not a dialogue with, the audience.
Deciding on Reach, Frequency, and Impact

 Reach: The number of different persons or households exposed to a

particular media schedule at least once during a specified time period.
 Frequency: The number of times within the specified time period that
an average person or household is exposed to the message.
 Impact: The qualitative value of an exposure through a given medium
(thus a food ad in Good Housekeeping would have a higher impact
than in Fortune magazine).
 Sales Promotion
Objectives
Obtaining Trial and Repurchase
Increasing consumption of an established brand
Defending current customers
Targeting specific market segment
Enhancing integrated marketing communications and building brand equity
Sales promotion tools offer three distinctive benefits:
1. Communication: They gain attention and may lead the consumer to the product.
2. Incentive: They incorporate some concession, inducement, or contribution that gives
value to the consumer.
3. Invitation: They include a distinct invitation to engage in the transaction now.
 Consumer-Oriented Sales Promotion: activities include sampling, couponing,
premiums, contests and sweepstakes, refunds, and rebates, bonus packs, price-offs,
frequency programs, and event marketing.

 Trade-oriented Sales Promotion includes trade contests and incentives, trade

allowances, point-of-purchase displays, sales training programs, trade shows,
cooperative advertisings, trade shows, cooperative advertising, and other programs
designed to motivate distributors and retailers to carry a product and make an extra
effort to push it to their customers.
 Sales Promotion targeted to salespeople
Objectives
A) Obtain distribution and support for new products
2) Maintain Trade Support for Established Brands
3) Encourage retailers to display established brands
 Personal Selling
• Personal selling is a face-to-face presentation of a product or an idea to a
potential customer by a representative of the company or organization.

• most effective tool at later stages of the buying process, particularly in

building up buyer preference, conviction, and action. Personal selling has
three distinctive qualities:

• Distinctive features of PS:

 Information is presented personally
There is immediate feedback
Adjustments can be immediate
 Types of selling

a.Responsive selling: the sales person reacts to the buyer’s demands

b.Trade selling: order taking role with more emphasis on service.
c. Missionary selling: explain a new product to the market. The major
task is to build goodwill or to educate the actual or potential user
d. Technical selling: solve problems with expertise and experience
 Additional forms of promotion
• Ambush marketing: The presentation of marketing
messages at an event that is sponsored by an unrelated
business or a competitor.
• Attempting to build an association with the event but
without sponsorship agreement
• Product placement: The paid inclusion of products in
movies, television shows, video games, songs and books.
• A plug: When the media overtly promotes a product
within a program rather than as a separate advertisement
• Viral marketing: The use of social networks to spread a
marketing message.
 Managing the Marketing Mix Strategies

Place/Distribution
A distribution channel is a set of independent organizations involved in the
process of making a product or service available to the consumer or business
user

Used to move the customer towards the product

Distribution Channel Functions
Information
Promotion
Contact
Matching
Negotiation
Physical distribution
 Why Use Marketing Intermediaries?

• Selling through wholesalers and retailers usually is much more

efficient and cost effective than direct sales

©2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ 07458 Kotler, Bowen, and Makens
 Channel-Design Decisions
Designing a marketing channel system involves
analyzing customer needs
establishing channel objectives
identifying major channel alternatives
evaluating major channel alternatives
 NUMBER OF INTERMEDIARIES
Companies have to decide on the number of intermediaries to use at each channel level
1) Exclusive distribution: severely limiting the number of intermediaries. It is used
when the producer wants to maintain control over the service level and outputs
offered by the resellers.
2) Selective distribution involves the use of more than a few but less than all of the
intermediaries
3) Intensive distribution: placing the goods as many outlets as possible.
Used for products for which the consumer requires a great deal of location
convenience
increases product and service availability
may also result in retailers competing aggressively.
Conflict, Cooperation and Competition

• No matter how well channels are designed and managed, there will be some

conflict, if for no other reason than that the interests of independent business

entities do not always coincide.

• Channel conflict is generated when one channel member's actions prevent the

channel from achieving its goal.

• What types of conflict arise in channels? What causes channel conflict? What can

be done to resolve conflict situations?

 Channel Conflict
• Horizontal conflict is conflict between firms at the same level of the
channel

• Vertical conflict, which is more common, refers to conflicts between

different levels of the same channel

• Multichannel conflict exists when the manufacturer has established

two or more channels that sell to the same market.

©2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ 07458 Kotler, Bowen, and Makens
 Causes of Channel Conflict
• Goal incompatibility. ex, the manufacturer may want to achieve rapid market
penetration through a low-price policy. Dealers, in contrast, may prefer to work with
high margins and pursue short-run profitability.
• Unclear roles and rights. Territory boundaries, roles in their position, unclear
function, ..
• Differences in interest
This Is Strategic Marketing

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