Successful companies take an outside-inside view of their business. They recognize that the marketing environment is constantly spinning new opportunities and threats and understand the importance of continuously monitoring and adapting to that environment. One company that has continually reinvented one of its brands to keep up with the changing marketing environment is Mattel with its Barbie doll:1
NALYZING NEEDS AND TRENDS IN THEMACROENVIRONMENT
Successful companies recognize and respond profitably to unmet needs and
trends. Companies could make a fortune if they could solve any of these problems: a cure for cancer, chemical cures for mental diseases, desalinization of seawater, nonfattening tasty nutritious food, practical electric cars, and affordable housing.
Enterprising individuals and companies manage to create new solutions to unmet needs. Club Mediterranee emerged to meet the needs of single people for exotic va-cations; the Walkman and CD Man were created for active people who wanted to lis-ten to music; Nautilus was created for men and women who wanted to tone their bodies; Federal Express was created to meet the need for next-day mail delivery.
Many opportunities are found by identifying trends. Analyzing
■ A trend is a direction or sequence of events that have some momentum and Marketing durability. Opportunities One major trend is the increasing participation of women in the workforce, which has spawned the child day-care business, increased consumption of microwavable foods, and office-oriented women’s clothing.
Simplex Knowledge More and more workplaces and child-care centers are installing monitoring setups such as the “I See You” equipment from Sim-plex Knowledge in White Plains, New York. Not created to monitor child-care providers, the system allows parents to see their children at different points throughout the day. Via still photos taken by a camera in the child-care cen-ter and posted on a secure Web site on the Internet, working parents who long to spend more time with their young ones get reassuring glimpses throughout the day.2
Shops at Somerset Square Although shopping malls are in decline, there’s been a boom in niche malls that cater to the needs of working women. Shops at Somerset Square in Glastonbury, Connecticut, is one such open-air shop-ping center. It features a customized retail mix of specialty shops, targeted promotions, and phone-in shopping, in which shoppers phone ahead with sizes and color preferences while store employees perform a “wardrobing” ser-vice. Many of the stores also informally extend hours for working women who find time to shop only before or after work.3
We can draw distinctions among fads, trends, and megatrends. A fad is “unpre-dictable, short-lived, and without social, economic, and political significance.”4 A company can cash in on a fad such as Pet Rocks or Cabbage Patch dolls, but this is more a matter of luck and good timing than anything else.
Trends are more predictable and durable. A trend reveals the shape of the future. According to futurist Faith Popcorn, a trend has longevity, is observable across several market areas and consumer activities, and is consistent with other significant indicators occurring or emerging at the same time.5 (See the Marketing Insight “Faith Popcorn Points to 16 Trends in the Economy.”)
John Naisbitt, another futurist, prefers to talk about megatrends, which are “large social, economic, political and technological changes [that] are slow to form, and once in place, they influence us for some time—between seven and ten years, or longer.”6 Naisbitt and his staff spot megatrends by counting the number of times hard-news items on different topics appear in major newspapers. The 10 megatrends Naisbitt has identified are:
1 The booming global economy
2 A renaissance in the arts
3 The emergence of free-market socialism
4 Global lifestyles and cultural nationalism
5 The privatization of the welfare state
6 The rise of the Pacific Rim
7 The decade of women in leadership
8 The age of biology
9 The religious revival of the new millennium
10 The triumph of the individual
Trends and megatrends merit marketers’ close attention. A new product or mar-keting program is likely to be more successful if it is in line with strong trends rather than opposed to them. But detecting a new market opportunity does not guarantee its success, even if it is technically feasible. For example, today some companies have created portable “electronic books” in which different book disks can be inserted for reading. But there may not be a sufficient number of people in-terested in reading a book on a computer screen or willing to pay the required price. Scanning the This is why market research is necessary to determine an opportunity’s profit potential.
DEMOGRAPHIC ENVIRONMENT
The first macro environmental force that marketers monitor is population because people make up markets. Marketers are keenly interested in the size and growth rate of population in different cities, regions, and nations; age distribution and ethnic mix; educational levels; household patterns; and regional characteristics and movements.
The second cause for concern is that population growth is highest in countries and communities that can least afford it. The less developed regions of the world currently account for 76 percent of the world population and are growing at 2 percent per year, whereas the population in the more developed countries is growing at only
The explosive world population growth has major implications for business. A growing population does not mean growing markets unless these markets have sufficient purchasing power. Nonetheless, companies that carefully analyze their markets can find major opportunities. For example, to curb its skyrocketing population, the Chinese government has passed regulations limiting families to one child per family. Toy marketers, in particular, are paying attention to one consequence of these regulations: These children are spoiled and fussed over as never before. Known in China as “little emperors,” Chinese children are being showered with everything from candy to computers as a result of what’s known as the “six pocket syndrome.” As many as six adults—parents, grandparents, great-grandparents, and aunts and uncles—may be indulging the whims of each child. This trend has encouraged such companies as Japan’s Bandai Company (famous for its Mighty Morphin’ Power Rangers), Denmark’s Lego Group, and Mattel to enter the Chinese market.11
Population Age Mix
National populations vary in their age mix. At one extreme is Mexico, a country with a very young population and rapid population growth. At the other extreme is Japan, a country with one of the world’s oldest populations. Milk, diapers, school supplies, and toys would be important products in Mexico. Japan’s population would consume many more adult products.
A population can be subdivided into six age groups: preschool, school-age children, teens, young adults age 25 to 40, middle-aged adults age 40 to 65, and older adults age 65 and up. For marketers, the most populous age groups shape the marketing envi-ronment. In the United States, the “baby boomers,” the 78 million people born be-tween 1946 and 1964, are one of the most powerful forces shaping the marketplace. Baby boomers are fixated on their youth, not their age, and ads geared to them tend to capitalize on nostalgia for their past, such as those for the newly redesigned Volks-wagen Beetle or the Mercedes-Benz ad featuring the rock music of Janis Joplin. Boomers grew up with TV advertising, so they are an easier market to reach than the 45 million born between 1965 and 1976, dubbed Generation X (and also the shadow generation, twentysomethings, and baby busters). Gen-Xers are typically cynical about hard-sell marketing pitches that promise more than they can deliver. Ads created to woo this market often puzzle older people, because they often don’t seem to “sell” at all:12
Miller Brewing Company Instead of the usual macho men, scantily clad women, beauty shots of beer and mountain vistas, Miller’s new beer ads tar-geted to 21- to 27-year-olds feature the on-screen legend “It’s time to embrace your inner idiot” and images of a frenetic, sloppy hot-dog eating contest.13
Diesel Jeans Diesel jeans ads revolve around a celebration of the bizarre, and they playfully poke fun at mainstream situations. Called “Reasons for Living,” the ads reverse our code of ethics with images like one of humans serving a roasted girl to pigs sitting at a dining table laden with exotic foods.14
Finally, both baby boomers and Gen-Xers will be passing the torch to the latest demographic group, the baby boomlet, born between 1977 and 1994. Now number-ing 72 million, this group is almost equal in size to baby boomers. One distinguish-ing characteristic of this age group is their utter fluency and comfort with computer and Internet technology. Douglas Tapscott has christened them Net-Gens for this rea-son. He says: “To them, digital technology is no more intimidating than a VCR or a toaster.” See the Marketing Memo “Tapping into the Internet Generation.”15
But do marketers have to create separate ads for each generation? J. Walker Smith, co-author of Rocking the Ages: The Yankelovich Report on Generational Marketing, says that marketers do have to be careful about turning off one generation each time they craft a message that appeals effectively to another. “I think the idea is to try to be broadly inclusive and at the same time offer each generation something specifically designed for it. Tommy Hilfiger has big brand logos on his clothes for teenagers and little pocket polo logos on his shirts for baby boomers. It’s a brand that has a more inclusive than exclusive strategy.”16
Tapping into the Internet Generation
Net-Gens already influence adult purchases more than any preceding generation. The Alliance for Converging Technologies esti-mates that American preteens and teens spend $130 billion of their own dollars an-nually and influence upward of $500 billion of their parents’spending.How do you mar-ket to this group? Don Tapscott, author of
Growing Up Digital:The Rise of the Net Gen-eration (www.growingupdigital.com), ad-vises marketers to keep five things in mind:
1 Options are a must—choice is one of their most deeply held values.
2 Customize to meet their needs. These are the kids who build their own levels in video games and write their own Web pages, and they want things their way.
3 Let them have the option of changing their minds. They’re growing up in a world where fixing mistakes takes a stroke of the mouse, and they believe that changing their minds should be equally painless.
4 Let them try before they buy. They’re users and doers.They reject expert opin-ions in favor of forming their own.
5 Never forget that they will choose func-tion over form. “Unlike baby boomers, who witnessed the technological revo-lution,”Tapscott says,“N-Geners have no awe of new technology. They have grown up with computers and treat them like any other household appli-ance. This is an audience that cares about what the technology will do, not the technology itself.”
Source: Excerpted from Lisa Krakowka,“In the Net,” American Demographics, August 1998, p. 56.
Ethnic Markets
Countries also vary in ethnic and racial makeup. At one extreme is Japan, where al-most everyone is Japanese; at the other is the United States, where people from come virtually all nations. The United States was originally called a “melting pot,” but there are increasing signs that the melting didn’t occur. Now people call the United States a “salad bowl” society with ethnic groups maintaining their ethnic differences, neigh-borhoods, and cultures. The U.S. population (267 million in 1997) is 73 percent white. African Americans constitute another 13 percent, and Latinos another 10 percent. The Latino population has been growing fast, with the largest subgroups of Mexican (5.4 percent), Puerto Rican (1.1 percent), and Cuban (0.4 percent) descent. Asian Ameri-cans constitute 3.4 percent of the U.S. population, with the Chinese constituting the largest group, followed by the Filipinos, Japanese, Asian Indians, and Koreans, in that order. Latino and Asian American consumers are concentrated in the far western and southern parts of the country, although some dispersal is taking place. Moreover, there are nearly 25 million people living in the United States—more than 9 percent of the population—who were born in another country.
Each group has certain specific wants and buying habits. Several food, clothing, and furniture companies have directed their products and promotions to one or more of these groups.17 For instance, Sears is taking note of the preferences of different ethnic groups:
■ Sears If a Sears, Roebuck and Company store has a shopping base that is at least 20 percent Latino, it is designated as a Hispanic store for the purpose of Sears’s Hispanic marketing program. More than 130 stores in southern Cal-ifornia, Texas, Florida, and New York have earned this label. “We make a spe-cial effort to staff those stores with bilingual sales personnel, to use bilingual signage, and to support community programs,” says a Sears spokesperson. Choosing merchandise for the Latino marketplace is primarily a color and size issue. “What we find in Hispanic communities is that people tend to be smaller than the general market, and that there is a greater demand for special-occasion clothing and a preference for bright colors. In hardlines, there isn’t much difference from the mainstream market.”
Analyzing Marketing Opportunities
Yet marketers must be careful not to overgeneralize about ethnic groups. Within each ethnic group are consumers who are as different from each other as they are from Americans of European background. “There is really no such thing as an Asian mar-ket,” says Greg Macabenta, whose ethnic advertising agency specializes in the Filipino market. Macabenta emphasizes that the five major Asian American groups have their own very specific market characteristics, speak different languages, consume different cuisines, practice different religions, and represent very distinct national cultures.18
Educational Groups
The population in any society falls into five educational groups: illiterates, high school dropouts, high school degrees, college degrees, and professional degrees. In Japan, 99 percent of the population is literate, whereas in the United States 10 percent to 15 percent of the population may be functionally illiterate. However, the United States has one of the world’s highest percentages of college-educated citizenry, around 36 percent. The high number of educated people in the United States spells a high demand for quality books, magazines, and travel.
Household Patterns
The “traditional household” consists of a husband, wife, and children (and sometimes grandparents). Yet, in the United States today, one out of eight households are “di-verse” or “nontraditional,” and include single live-alones, adult live-togethers of one or both sexes, single-parent families, childless married couples, and empty nesters. More people are divorcing or separating, choosing not to marry, marrying later, or marrying without the intention to have children. Each group has a distinctive set of needs and buying habits. For example, people in the SSWD group (single, separated, widowed, divorced) need smaller apartments; inexpensive and smaller appliances, fur-niture, and furnishings; and food packaged in smaller sizes. Marketers must increas-ingly consider the special needs of nontraditional households, because they are now growing more rapidly than traditional households.
The gay market, in particular, is a lucrative one. A 1997 Simmons Market Research study of readers of the National Gay Newspaper Guild’s 12 publications found that, compared to the average American, respondents are 11.7 times more likely to be in professional jobs, almost twice as likely to own a vacation home, eight times more likely to own a computer notebook, and twice as likely to own individual stocks.19 Insurance companies and financial services companies are now waking up to the needs and potential of not only the gay market but also the nontraditional household market as a whole:
American Express Financial Advisors,Inc. Minneapolis-based American Ex-press Financial Advisors, Inc., launched print ads that depict same-sex cou-ples planning their financial futures. The ads ran in Out and The Advocate, the two highest-circulation national gay publications. The company’s direc-tor of segment marketing, Margaret Vergeyle, said: “We’re targeting gay au-diences with targeted ads and promotions that are relevant to them and say that we understand their specific needs. Often, gay couples are very concerned about issues like Social Security benefits and estate planning, since same-sex marriages often are not recognized under the law.”20
John Hancock Mutual Life Insurance Company The John Hancock Mutual Insurance Company has been focusing on single parents and working women with two series of ads on cable television channels. The company is focusing on a very specific segment of women whose financial needs happen to be even more critical because of their situation. The slogan for the ads: “Insur-ance for the unexpected. Investments for the opportunities.”21
Geographical Shifts in Population
This is a period of great migratory movements between and within countries. Since Scanning the the collapse of Soviet eastern Europe, nationalities are reasserting themselves and form-Marketing ing independent countries. The new countries are making certain ethnic groups Environment unwelcome (such as Russians in Latvia or Muslims in Serbia), and many of these groups are migrating to safer areas. As foreign groups enter other countries for polit-ical sanctuary, some local groups start protesting. In the United States, there has been opposition to the influx of immigrants from Mexico, the Caribbean, and certain Asian nations. Yet many immigrants have done very well. Forward-looking companies and entrepreneurs are taking advantage of the growth in immigrant populations and mar-keting their wares specifically to these new members of the population.
Businesses with potential to cash in on the rural rebound might be those that cater to the growing SOHO (small office–home office) segment. For instance, makers of RTA (ready to assemble) furniture might find a strong consumer base among all the cashed-out former city residents setting up offices in small towns or telecommuting from there to larger companies.
Location makes a difference in goods and service preferences. The movement to the Sunbelt states has lessened the demand for warm clothing and home heating equipment and increased the demand for air conditioning. Those who live in large cities such as New York, Chicago, and San Francisco account for most of the sales of expensive furs, perfumes, luggage, and works of art. These cities also support the opera, ballet, and other forms of culture. Americans living in the suburbs lead more casual Analyzing lives, do more outdoor living, and have greater neighbor interaction, higher incomes, Marketing and younger families. Suburbanites buy vans, home workshop equipment, outdoor Opportunities furniture, lawn and gardening tools, and outdoor cooking equipment. There are also regional differences: People in Seattle buy more toothbrushes per capita than people in any other U.S. city; people in Salt Lake City eat more candy bars; people from New Orleans use more ketchup; and people in Miami drink more prune juice.
Shift from a Mass Market to Micromarkets
The effect of all these changes is fragmentation of the mass market into numerous mi-cromarkets differentiated by age, sex, ethnic background, education, geography, lifestyle, and other characteristics. Each group has strong preferences and is reached through in-creasingly targeted communication and distribution channels. Companies are aban-doning the “shotgun approach” that aimed at a mythical “average” consumer and are increasingly designing their products and marketing programs for specific micromarkets. Demographic trends are highly reliable for the short and intermediate run. There is little excuse for a company’s being suddenly surprised by demographic develop-ments. The Singer Company should have known for years that its sewing machine business would be hurt by smaller families and more working wives, yet it was slow in responding. In contrast, think of the rewards marketers reap when they focus on a demographic development. Some marketers are actively courting the home office segment of the lucrative SOHO market. Nearly 40 million Americans are working out of their homes with the help of electronic conveniences like cell phones, fax ma-chines, and handheld organizers. One company that is shifting gears to appeal to this micromarket is Kinko’s Copy Centers:
ECONOMIC ENVIRONMENT
Markets require purchasing power as well as people. The available purchasing power in an economy depends on current income, prices, savings, debt, and credit avail-ability. Marketers must pay close attention to major trends in income and consumer-spending patterns.
Income Distribution
Nations vary greatly in level and distribution of income and industrial structure. There are four types of industrial structures:
1 Subsistence economies: In a subsistence economy, the vast majority of peopleengage in simple agriculture, consume most of their output, and barter therest for simple goods and services. These economies offer few opportunitiesfor marketers.
2 Raw-material-exporting economies: These economies are rich in one or more natural resources but poor in other respects. Much of their revenue comes Scanning the from exporting these resources. Examples are Zaire (copper) and Saudi Arabia Marketing (oil). These countries are good markets for extractive equipment, tools and Environment supplies, materials-handling equipment, and trucks. Depending on the number of foreign residents and wealthy native rulers and landholders, they are also a market for Western-style commodities and luxury goods.
1 Industrializing economies: In an industrializing economy, manufacturing begins to account for 10 percent to 20 percent of gross domestic product. Examples include India, Egypt, and the Philippines. As manufacturing increases, the country relies more on imports of raw materials, steel, and heavy machinery and less on imports of finished textiles, paper products, and processed foods. Industrialization creates a new rich class and a small but growing middle class, both demanding new types of goods.
2 Industrial economies: Industrial economies are major exporters of manufac-tured goods and investment funds. They buy manufactured goods from one another and also export them to other types of economies in exchange for raw materials and semifinished goods. The large and varied manufacturing activities of these nations and their sizable middle class make them rich mar-kets for all sorts of goods.
Marketers often distinguish countries with five different income-distribution patterns:
(1) very low incomes; (2) mostly low incomes; (3) very low, very high incomes; (4) low, medium, high incomes; and (5) mostly medium incomes. Consider the market for Lam-borghinis, an automobile costing more than $150,000. The market would be very small in countries with type 1 or 2 income patterns. One of the largest single markets for Lam-borghinis turns out to be Portugal (income pattern 3)—one of the poorer countries in Western Europe, but one with enough wealthy families to afford expensive cars.
Since 1980, the wealthiest fifth of the U.S. population has seen its income grow by 21 percent, while wages for the bottom 60 percent have stagnated or even dipped. According to Census Bureau statisticians, the 1990s have seen a greater polarization of income in the United States than at any point since the end of World War II. This is leading to a two-tier U.S. market, with affluent people buying expensive goods and working-class people spending more carefully, shopping at discount stores and fac-tory outlet malls, and selecting less expensive store brands. Conventional retailers who offer medium-price goods are the most vulnerable to these changes. Companies that respond to the trend by tailoring their products and pitches to these two very different Americas stand to gain a lot:26
Analyzing Marketing Opportunities
The Walt Disney Company The Walt Disney Company, which owns the rights to A. A. Milne’s Winnie-the-Pooh and his make-believe friends, is mar-keting two distinct Poohs. The original line-drawn figures appear on fine china, pewter spoons, and expensive kids’ stationery found in upscale spe-cialty and department stores like Nordstrom and Bloomingdales. A plump, cartoonlike Pooh, clad in a red T-shirt and a goofy smile, adorns plastic key chains, polyester bedsheets, and animated videos. This downscaled Pooh sells at Wal-Mart and other discount stores.
The National Basketball Association The National Basketball Association sells front-row seats in New York’s Madison Square Garden for $1,000 apiece. Yet, worried they might lose fans who can’t afford the typical $200 for a fam-ily night out at a sports event, NBA marketers have launched an array of much more affordable merchandise and entertainment properties such as traveling basketball exhibitions.
Savings, Debt, and Credit Availability
Consumer expenditures are affected by consumer savings, debt, and credit availabil-ity. The Japanese, for example, save about 13.1 percent of their income, whereas U.S. consumers save about 4.7 percent. The result has been that Japanese banks were able to loan money to Japanese companies at a much lower interest rate than U.S. banks could offer to U.S. companies. Access to lower interest rates helped Japanese compa-nies expand faster. U.S. consumers also have a high debt-to-income ratio, which slows down further expenditures on housing and large-ticket items. Credit is very available in the United States but at fairly high interest rates, especially to lower-income bor-rowers. Marketers must pay careful attention to major changes in incomes, cost of liv-ing, interest rates, savings, and borrowing patterns because they can have a high impact on business, especially for companies whose products have high income and price sensitivity.
NATURAL ENVIRONMENT
The deterioration of the natural environment is a major global concern. In many world cities, air and water pollution have reached dangerous levels. There is great con-cern about certain chemicals creating a hole in the ozone layer and producing a “green-house effect” that will lead to dangerous warming of the earth. In Western Europe, “green” parties have vigorously pressed for public action to reduce industrial pollu-tion. In the United States, several thought leaders have documented ecological dete-rioration, whereas watchdog groups such as the Sierra Club and Friends of the Earth carried these concerns into political and social action.
New legislation passed as a result has hit certain industries very hard. Steel com-panies and public utilities have had to invest billions of dollars in pollution-control equipment and more environmentally friendly fuels. The auto industry has had to introduce expensive emission controls in cars. The soap industry has had to increase its products’ biodegradability.
Marketers need to be aware of the threats and opportunities associated with four trends in the natural environment: the shortage of raw materials, the increased cost of energy, increased pollution levels, and the changing role of governments.
Shortage of Raw Materials
The earth’s raw materials consist of the infinite, the finite renewable, and the finite nonrenewable. Infinite resources, such as air and water, pose no immediate problem, although some groups see a long-run danger. Environmental groups have lobbied for a ban on certain propellants used in aerosol cans because of the potential damage they can cause to the ozone layer. Water shortages and pollution are already major problems in some parts of the world. Scanning the
Finite renewable resources, such as forests and food, must be used wisely. Forestry Marketing companies are required to reforest timberlands in order to protect the soil and to en-Environment sure sufficient wood to meet future demand. Because the amount of arable land is fixed and urban areas are constantly encroaching on farmland, food supply can also be a major problem. Finite nonrenewable resources—oil, coal, platinum, zinc, silver— will pose a serious problem as the point of depletion approaches. Firms making prod-ucts that require these increasingly scarce minerals face substantial cost increases. They may not find it easy to pass these cost increases on to customers. Firms engaged in research and development have an excellent opportunity to develop substitute mate-rials. Increased Energy Costs
One finite nonrenewable resource, oil, has created serious problems for the world economy. Oil prices shot up from $2.23 a barrel in 1970 to $34.00 a barrel in 1982, creating a frantic search for alternative energy forms. Coal became popular again, and companies searched for practical means to harness solar, nuclear, wind, and other forms of energy. In the solar energy field alone, hundreds of firms introduced first-generation products to harness solar energy for heating homes and other uses. Other firms searched for ways to make a practical electric automobile, with a potential prize of billions for the winner.
The development of alternative sources of energy and more efficient ways to use energy and the weakening of the oil cartel led to a subsequent decline in oil prices. Lower prices had an adverse effect on the oil-exploration industry but considerably improved the income of oil-using industries and consumers. In the meantime, the search continues for alternative sources of energy.
Increased Pollution Levels
Some industrial activity will inevitably damage the natural environment. Consider the dangerous mercury levels in the ocean, the quantity of DDT and other chemical pollutants in the soil and food supply, and the littering of the environment with bottles, plastics, and other packaging materials.
Research has shown that about 42 percent of U.S. consumers are willing to pay higher prices for “green” products. This willingness creates a large market for pollu-tion-control solutions, such as scrubbers, recycling centers, and landfill systems. It leads to a search for alternative ways to produce and package goods. Smart compa-nies are initiating environment-friendly moves to show their concern. 3M runs a Pol-lution Prevention Pays program that has led to a substantial reduction in pollution and costs. Dow built a new ethylene plant in Alberta that uses 40 percent less energy and releases 97 percent less wastewater. AT&T uses a special software package to choose the least harmful materials, cut hazardous waste, reduce energy use, and improve prod-uct recycling in its operations. McDonald’s and Burger King eliminated their poly-styrene cartons and now use smaller, recyclable paper wrappings and paper napkins.27
New concern over the toxic nature of dry cleaning solvents has opened up op-portunities for a new breed of “green cleaners,” although these new businesses face an uphill battle. See the Marketing for the Millennium “A New Guard of Green Clean-ers Vies for Concerned Customers.”
Changing Role of Governments
Governments vary in their concern and efforts to promote a clean environment. For example, the German government is vigorous in its pursuit of environmental qual-ity, partly because of the strong green movement in Germany and partly because of the ecological devastation in the former East Germany. Many poor nations are doing little about pollution, largely because they lack the funds or the political will. It is in the richer nations’ interest to help the poorer nations control their pollution, but even the richer nations today lack the necessary funds. The major hopes are that compa-nies around the world will accept more social responsibility and that less expensive devices will be invented to control and reduce pollution.
TECHNOLOGICAL ENVIRONMENT
Analyzing Marketing One of the most dramatic forces shaping people’s lives is technology. Technology has Opportunities released such wonders as penicillin, open-heart surgery, and the birth-control pill. It Accelerating Pace of Technological Change Many of today’s common products were not available 40 years ago. John F. Kennedy did not know personal computers, digital wristwatches, video recorders, or fax ma-chines. More ideas are being worked on; the time lag between new ideas and their successful implementation is decreasing rapidly; and the time between introduction and peak production is shortening considerably. Ninety percent of all the scientists who ever lived are alive today, and technology feeds upon itself.
The advent of personal computers and fax machines has made it possible for peo-ple to telecommute—that is, work at home instead of traveling to offices that may be 30 or more minutes away. Some hope that this trend will reduce auto pollution, bring the family closer together, and create more home-centered entertainment and activ-ity. It will also have substantial impact on shopping behavior and marketing perfor-mance. Unlimited Opportunities for Innovation
Scientists today are working on a startling range of new technologies that will revolutionize products and production processes. Some of the most exciting work is being done in biotechnology, solid-state electronics, robotics, and materials sciences.28 Researchers are working on AIDS cures, happiness pills, painkillers, totally safe con-traceptives, and nonfattening foods. They are designing robots for firefighting, un-derwater exploration, and home nursing. In addition, scientists also work on fantasy products, such as small flying cars, three-dimensional television, and space colonies. The challenge in each case is not only technical but also commercial—to develop af-fordable versions of these products.
Companies are already harnessing the power of virtual reality (VR), the combi-nation of technologies that allows users to experience three-dimensional, computer-generated environments through sound, sight, and touch. Virtual reality has already been applied to gathering consumer reactions to new automobile designs, kitchen lay-outs, exterior home designs, and other potential offerings.
Varying R&D Budgets
The United States leads the world in annual R&D expenditures ($74 billion), but nearly 60 percent of these funds are still earmarked for defense. There is a need to transfer more of this money into research on material science, biotechnology, and microme-chanics. Japan has increased its R&D expenditures much faster than has the United States and is spending it mostly on nondefense-related research in physics, biophysics, and computer science.29
A growing portion of U.S. R&D expenditures is going into the development side of R&D, raising concerns about whether the United States can maintain its lead in basic science. Many companies are content to put their money into copying com-petitors’ products and making minor feature and style improvements. Even basic-research companies such as DuPont, Bell Laboratories, and Pfizer are proceeding cautiously. Much of the research is defensive rather than offensive. And, increasingly, research directed toward major breakthroughs is being conducted by consortiums of companies rather than by single companies.
Increased Regulation of Technological Change
As products become more complex, the public needs to be assured of their safety. Consequently, government agencies’ powers to investigate and ban potentially unsafe products have been expanded. In the United States, the Federal Food and Drug Administration must approve all drugs before they can be sold. Safety and health reg-ulations have also increased in the areas of food, automobiles, clothing, electrical appliances, and construction. Marketers must be aware of these regulations when proposing, developing, and launching new products.
POLITICAL-LEGAL ENVIRONMENT
Analyzing Marketing Marketing decisions are strongly affected by developments in the political and legal Opportunities environment. This environment is composed of laws, government agencies, and pres-
sure groups that influence and limit various organizations and individuals. Sometimes these laws also create new opportunities for business. For example, mandatory recy-cling laws have given the recycling industry a major boost and spurred the creation of dozens of new companies making new products from recycled materials:
■ Wellman In 1993, Wellman introduced Ecospun Post Consumer Recycled (PCR) fiber, made from recycled soda bottles, and sold 800,000 pounds in that first year alone. Today, Wellman boasts 15 million pounds in sales and is partnering with domestic fabric mills like Milliken & Company, Malden Mills, and Dybersburg. At the outdoor Retailer Winter Market in 1998, Wellman introduced its new EcoSpun Squared fiber, which has moisture-management properties and was designed specifically for a performance-apparel market anxious to jump aboard the recycling bandwagon. Legislation Regulating Business
Business legislation has three main purposes: to protect companies from unfair com-petition, to protect consumers from unfair business practices, and to protect the in-terests of society from unbridled business behavior. A major purpose of business legislation and enforcement is to charge businesses with the social costs created by their products or production processes. Legislation affecting business has steadily in-creased over the years. The European Commission has been active in establishing a new framework of laws covering competitive behavior, product standards, product li-ability, and commercial transactions for the 15 member nations of the European Union. Ex-Soviet nations are rapidly passing laws to promote and regulate an open market economy. The United States has many laws on its books covering such issues as competition, product safety and liability, fair trade and credit practices, and pack-aging and labeling.30 Several countries have gone further than the United States in passing strong consumer-protection legislation. Norway bans several forms of sales promotion—trading stamps, contests, premiums—as inappropriate or “unfair” in-struments for promoting products. Thailand requires food processors selling national brands to market low-price brands also so that low-income consumers can find econ-omy brands. In India, food companies need special approval to launch brands that duplicate what already exists on the market, such as another cola drink or brand of rice. A central concern about business legislation is: At what point do the costs of reg-ulation exceed the benefits? The laws are not always administered fairly; regulators and enforcers may be lax or overzealous. Although each new law may have a legiti-mate rationale, it may have the unintended effect of sapping initiative and retarding economic growth.
Marketers must have a good working knowledge of the major laws protecting com-Scanning the petition, consumers, and society. Companies generally establish legal review proce-Marketing dures and promulgate ethical standards to guide their marketing managers. As more Environment and more business takes place in cyberspace, marketers must establish new parame-ters for doing business ethically. Although America Online has been hugely success-ful and is the country’s most popular on-line service provider, it has lost millions of dollars due to consumer complaints regarding unethical marketing tactics:
SOCIAL-CULTURAL ENVIRONMENT
Society shapes our beliefs, values, and norms. People absorb, almost unconsciously, a worldview that defines their relationship to themselves, to others, to organizations, to society, to nature, and to the universe.
■ Views of themselves: People vary in the relative emphasis they place on self-gratification. In the United States during the 1960s and 1970s, “pleasure seekers” sought fun, change, and escape. Others sought “self-realization.” People bought products, brands, and services as a means of self-expression. They bought dream cars and dream vacations and spent more time in health activities (jogging, ten-nis), in introspection, and in arts and crafts. Today, in contrast, people are adopting more conservative behaviors and ambitions. They have witnessed
Analyzing harder times and cannot rely on continuous employment and rising real income. Marketing They are more cautious in their spending pattern and more value-driven in their Opportunities purchases.
Views of others: Some observers have pointed to a countermovement from a “me society” to a “we society.” People are concerned about the homeless, crime and victims, and other social problems. They would like to live in a more humane society. At the same time, people are seeking out their “own kind” and avoiding strangers. People hunger for serious and long-lasting relationships with a few others. These trends portend a growing market for social-support products and services that promote direct relations between human beings, such as health clubs, cruises, and religious activity. They also suggest a growing market for “so-cial surrogates,” things that allow people who are alone to feel that they are not, such as television, home video games, and chat rooms on the Internet.
■ Views of organizations: People vary in their attitudes toward corporations, govern-ment agencies, trade unions, and other organizations. Most people are willing to work for these organizations, although they may be critical of particular ones. But there has been an overall decline in organizational loyalty. The massive wave of company downsizings has bred cynicism and distrust. Many people today see work not as a source of satisfaction but as a required chore to earn money to en-joy their nonwork hours.
This outlook has several marketing implications. Companies need to find
new ways to win back consumer and employee confidence. They need to make
sure that they are good corporate citizens and that their consumer messages are
honest. More companies are turning to social audits and public relations to im
prove their image with their publics.
Views of society: People vary in their attitudes toward their society. Some defend it (preservers), some run it (makers), some take what they can from it (takers), some want to change it (changers), some are looking for something deeper (seekers), and some want to leave it (escapers).32 Often consumption patterns reflect social attitude. Makers tend to be high achievers who eat, dress, and live well. Changers usually live more frugally, driving smaller cars and wearing simpler clothes. Escapers and seekers are a major market for movies, music, surfing, and camping.
■ Views of nature: People vary in their attitude toward nature. Some feel subjugated by it, others feel harmony with it, and still others seek mastery over it. A long-term trend has been humankind’s growing mastery of nature through technology. More recently, however, people have awakened to nature’s fragility and finite re-sources. They recognize that nature can be destroyed by human activities.
Love of nature is leading to more camping, hiking, boating, and fishing.Business has responded with hiking boots, tenting equipment, and other gear.Tour operators are packaging more tours to wilderness areas. Marketing commu-nicators are using more scenic backgrounds in advertising. Food producers havefound growing markets for “natural” products, such as natural cereal, natural icecream, and health foods. Two natural-food grocery stores, Whole Foods Marketsand Fresh Fields, merged in 1997 with sales of $1.1 billion.
Views of the universe: People vary in their beliefs about the origin of the universe and their place in it. Most Americans are monotheistic, although religious con-viction and practice have been waning through the years. Church attendance has fallen steadily, with the exception of certain evangelical movements that reach out to bring people back into organized religion. Some of the religious im-pulse has been redirected into an interest in Eastern religions, mysticism, the oc-cult, and the human potential movement.
As people lose their religious orientation, they seek self-fulfillment and immedi-ate gratification. At the same time, every trend seems to breed a countertrend, as in-dicated by a worldwide rise in religious fundamentalism. Here are some other cultural characteristics of interest to marketers: the persistence of core cultural values, the ex-istence of subcultures, and shifts of values through time.
High Persistence of Core Cultural Values
The people living in a particular society hold many core beliefs and values that tend Scanning the to persist. Most Americans still believe in work, in getting married, in giving to char-Marketing ity, and in being honest. Core beliefs and values are passed on from parents to Environment children and are reinforced by major social institutions—schools, churches, business, and government. Secondary beliefs and values are more open to change. Believing in the institution of marriage is a core belief; believing that people ought to get married early is a secondary belief. Thus family-planning marketers could make some head-way arguing that people should get married later rather than that they should not get married at all. Marketers have some chance of changing secondary values but little chance of changing core values. For instance, the nonprofit organization Mothers Against Drunk Drivers (MADD) does not try to stop the sale of alcohol, but it does promote the idea of appointing a designated driver who will not drink that evening. The group also lobbies to raise the legal drinking age.
Existence of Subcultures
Each society contains subcultures, groups with shared values emerging from their spe-cial life experiences or circumstances. Star Trek fans, Black Muslims, and Hell’s Angels all represent subcultures whose members share common beliefs, preferences, and be-haviors. To the extent that subcultural groups exhibit different wants and consump-tion behavior, marketers can choose particular subcultures as target markets.
Marketers sometimes reap unexpected rewards in targeting subcultures. For instance, marketers have always loved teenagers because they’re society’s trendsetters in fashion, music, entertainment, ideas, and attitudes. Marketers also know that if they attract someone as a teen, there’s a good chance they’ll keep the person as a customer in the years ahead. Frito-Lay, which draws 15 percent of its sales from teens, says it has seen a rise in chip-snacking by grown-ups. “We think it’s because we brought them in as teenagers,” says a Frito-Lay marketing director.33
Shifts of Secondary Cultural Values Through Time
Although core values are fairly persistent, cultural swings do take place. The advent in the 1960s of hippies, the Beatles, Elvis Presley, and other cultural phenomena had a major impact on young people’s hairstyles, clothing, sexual norms, and life goals. Today’s young people are influenced by new heroes and fads: Pearl Jam’s Eddie Ved-der, Michael Jordan, and rollerblading.
Marketers have a keen interest in spotting cultural shifts that might bring new marketing opportunities or threats. Several firms offer social-cultural forecasts. The Yankelovich Monitor interviews 2,500 people each year and tracks 35 social trends, such as “antibigness,” “mysticism,” “living for today,” “away from possessions,” and “sensuousness.” It describes the percentage of the population who share the attitude as well as the percentage who do not. For example, the percentage of people who value physical fitness and well-being has risen steadily over the years, especially in the under-30 group, the young women and upscale group, and people living in the West. Marketers of health foods and exercise equipment cater to this trend with ap-propriate products and communications. In 1995, Taco Bell unveiled a new lower-fat “Border Lights” menu. The Center for Science in the Public Interest, a consumer ad-vocacy group in Washington, praised the new menu as being “more than a market-ing gimmick.”34
Successful companies realize that the marketing environment presents a never-ending series of opportunities and threats. The major responsibility for identifying significant changes in the macroenvironment falls to a company’s marketers. More than any other group in the company, marketing managers must be the trend trackers and opportunity seekers.
Analyzing 2. Many opportunities are found by identifying trends (directions or sequences of Marketing events that have some momentum and durability) and megatrends (major social, Opportunities economic, political, and technological changes that have long-lasting influence).
1 Within the rapidly changing global picture, marketers must monitor six major en-vironmental forces: demographic, economic, natural, technological, political-legal, and social-cultural.
2 In the demographic environment, marketers must be aware of worldwide popula-tion growth; changing mixes of age, ethnic composition, and educational levels; the rise of nontraditional families; large geographic shifts in population; and the move to micromarketing and away from mass marketing.
3 In the economic arena, marketers need to focus on income distribution and levels of savings, debt, and credit availability.
4 In the natural environment, marketers need to be aware of raw-materials shortages, increased energy costs and pollution levels, and the changing role of governments in environmental protection.
5 In the technological arena, marketers should take account of the accelerating pace of technological change, opportunities for innovation, varying R&D budgets, and the increased governmental regulation brought about by technological change.
6 In the political-legal environment, marketers must work within the many laws reg-ulating business practices and with various special-interest groups.
7 In the social-cultural arena, marketers must understand people’s views of themselves, others, organizations, society, nature, and the universe. They must market prod-ucts that correspond to society’s core and secondary values, and address the needs of different subcultures within a society.
NALYZING NEEDS AND TRENDS IN THEMACROENVIRONMENT
Successful companies recognize and respond profitably to unmet needs and
trends. Companies could make a fortune if they could solve any of these problems: a cure for cancer, chemical cures for mental diseases, desalinization of seawater, nonfattening tasty nutritious food, practical electric cars, and affordable housing.
Enterprising individuals and companies manage to create new solutions to unmet needs. Club Mediterranee emerged to meet the needs of single people for exotic va-cations; the Walkman and CD Man were created for active people who wanted to lis-ten to music; Nautilus was created for men and women who wanted to tone their bodies; Federal Express was created to meet the need for next-day mail delivery.
Many opportunities are found by identifying trends. Analyzing
■ A trend is a direction or sequence of events that have some momentum and Marketing durability. Opportunities One major trend is the increasing participation of women in the workforce, which has spawned the child day-care business, increased consumption of microwavable foods, and office-oriented women’s clothing.
Simplex Knowledge More and more workplaces and child-care centers are installing monitoring setups such as the “I See You” equipment from Sim-plex Knowledge in White Plains, New York. Not created to monitor child-care providers, the system allows parents to see their children at different points throughout the day. Via still photos taken by a camera in the child-care cen-ter and posted on a secure Web site on the Internet, working parents who long to spend more time with their young ones get reassuring glimpses throughout the day.2
Shops at Somerset Square Although shopping malls are in decline, there’s been a boom in niche malls that cater to the needs of working women. Shops at Somerset Square in Glastonbury, Connecticut, is one such open-air shop-ping center. It features a customized retail mix of specialty shops, targeted promotions, and phone-in shopping, in which shoppers phone ahead with sizes and color preferences while store employees perform a “wardrobing” ser-vice. Many of the stores also informally extend hours for working women who find time to shop only before or after work.3
We can draw distinctions among fads, trends, and megatrends. A fad is “unpre-dictable, short-lived, and without social, economic, and political significance.”4 A company can cash in on a fad such as Pet Rocks or Cabbage Patch dolls, but this is more a matter of luck and good timing than anything else.
Trends are more predictable and durable. A trend reveals the shape of the future. According to futurist Faith Popcorn, a trend has longevity, is observable across several market areas and consumer activities, and is consistent with other significant indicators occurring or emerging at the same time.5 (See the Marketing Insight “Faith Popcorn Points to 16 Trends in the Economy.”)
John Naisbitt, another futurist, prefers to talk about megatrends, which are “large social, economic, political and technological changes [that] are slow to form, and once in place, they influence us for some time—between seven and ten years, or longer.”6 Naisbitt and his staff spot megatrends by counting the number of times hard-news items on different topics appear in major newspapers. The 10 megatrends Naisbitt has identified are:
1 The booming global economy
2 A renaissance in the arts
3 The emergence of free-market socialism
4 Global lifestyles and cultural nationalism
5 The privatization of the welfare state
6 The rise of the Pacific Rim
7 The decade of women in leadership
8 The age of biology
9 The religious revival of the new millennium
10 The triumph of the individual
Trends and megatrends merit marketers’ close attention. A new product or mar-keting program is likely to be more successful if it is in line with strong trends rather than opposed to them. But detecting a new market opportunity does not guarantee its success, even if it is technically feasible. For example, today some companies have created portable “electronic books” in which different book disks can be inserted for reading. But there may not be a sufficient number of people in-terested in reading a book on a computer screen or willing to pay the required price. Scanning the This is why market research is necessary to determine an opportunity’s profit potential.
DEMOGRAPHIC ENVIRONMENT
The first macro environmental force that marketers monitor is population because people make up markets. Marketers are keenly interested in the size and growth rate of population in different cities, regions, and nations; age distribution and ethnic mix; educational levels; household patterns; and regional characteristics and movements.
The second cause for concern is that population growth is highest in countries and communities that can least afford it. The less developed regions of the world currently account for 76 percent of the world population and are growing at 2 percent per year, whereas the population in the more developed countries is growing at only
The explosive world population growth has major implications for business. A growing population does not mean growing markets unless these markets have sufficient purchasing power. Nonetheless, companies that carefully analyze their markets can find major opportunities. For example, to curb its skyrocketing population, the Chinese government has passed regulations limiting families to one child per family. Toy marketers, in particular, are paying attention to one consequence of these regulations: These children are spoiled and fussed over as never before. Known in China as “little emperors,” Chinese children are being showered with everything from candy to computers as a result of what’s known as the “six pocket syndrome.” As many as six adults—parents, grandparents, great-grandparents, and aunts and uncles—may be indulging the whims of each child. This trend has encouraged such companies as Japan’s Bandai Company (famous for its Mighty Morphin’ Power Rangers), Denmark’s Lego Group, and Mattel to enter the Chinese market.11
Population Age Mix
National populations vary in their age mix. At one extreme is Mexico, a country with a very young population and rapid population growth. At the other extreme is Japan, a country with one of the world’s oldest populations. Milk, diapers, school supplies, and toys would be important products in Mexico. Japan’s population would consume many more adult products.
A population can be subdivided into six age groups: preschool, school-age children, teens, young adults age 25 to 40, middle-aged adults age 40 to 65, and older adults age 65 and up. For marketers, the most populous age groups shape the marketing envi-ronment. In the United States, the “baby boomers,” the 78 million people born be-tween 1946 and 1964, are one of the most powerful forces shaping the marketplace. Baby boomers are fixated on their youth, not their age, and ads geared to them tend to capitalize on nostalgia for their past, such as those for the newly redesigned Volks-wagen Beetle or the Mercedes-Benz ad featuring the rock music of Janis Joplin. Boomers grew up with TV advertising, so they are an easier market to reach than the 45 million born between 1965 and 1976, dubbed Generation X (and also the shadow generation, twentysomethings, and baby busters). Gen-Xers are typically cynical about hard-sell marketing pitches that promise more than they can deliver. Ads created to woo this market often puzzle older people, because they often don’t seem to “sell” at all:12
Miller Brewing Company Instead of the usual macho men, scantily clad women, beauty shots of beer and mountain vistas, Miller’s new beer ads tar-geted to 21- to 27-year-olds feature the on-screen legend “It’s time to embrace your inner idiot” and images of a frenetic, sloppy hot-dog eating contest.13
Diesel Jeans Diesel jeans ads revolve around a celebration of the bizarre, and they playfully poke fun at mainstream situations. Called “Reasons for Living,” the ads reverse our code of ethics with images like one of humans serving a roasted girl to pigs sitting at a dining table laden with exotic foods.14
Finally, both baby boomers and Gen-Xers will be passing the torch to the latest demographic group, the baby boomlet, born between 1977 and 1994. Now number-ing 72 million, this group is almost equal in size to baby boomers. One distinguish-ing characteristic of this age group is their utter fluency and comfort with computer and Internet technology. Douglas Tapscott has christened them Net-Gens for this rea-son. He says: “To them, digital technology is no more intimidating than a VCR or a toaster.” See the Marketing Memo “Tapping into the Internet Generation.”15
But do marketers have to create separate ads for each generation? J. Walker Smith, co-author of Rocking the Ages: The Yankelovich Report on Generational Marketing, says that marketers do have to be careful about turning off one generation each time they craft a message that appeals effectively to another. “I think the idea is to try to be broadly inclusive and at the same time offer each generation something specifically designed for it. Tommy Hilfiger has big brand logos on his clothes for teenagers and little pocket polo logos on his shirts for baby boomers. It’s a brand that has a more inclusive than exclusive strategy.”16
Tapping into the Internet Generation
Net-Gens already influence adult purchases more than any preceding generation. The Alliance for Converging Technologies esti-mates that American preteens and teens spend $130 billion of their own dollars an-nually and influence upward of $500 billion of their parents’spending.How do you mar-ket to this group? Don Tapscott, author of
Growing Up Digital:The Rise of the Net Gen-eration (www.growingupdigital.com), ad-vises marketers to keep five things in mind:
1 Options are a must—choice is one of their most deeply held values.
2 Customize to meet their needs. These are the kids who build their own levels in video games and write their own Web pages, and they want things their way.
3 Let them have the option of changing their minds. They’re growing up in a world where fixing mistakes takes a stroke of the mouse, and they believe that changing their minds should be equally painless.
4 Let them try before they buy. They’re users and doers.They reject expert opin-ions in favor of forming their own.
5 Never forget that they will choose func-tion over form. “Unlike baby boomers, who witnessed the technological revo-lution,”Tapscott says,“N-Geners have no awe of new technology. They have grown up with computers and treat them like any other household appli-ance. This is an audience that cares about what the technology will do, not the technology itself.”
Source: Excerpted from Lisa Krakowka,“In the Net,” American Demographics, August 1998, p. 56.
Ethnic Markets
Countries also vary in ethnic and racial makeup. At one extreme is Japan, where al-most everyone is Japanese; at the other is the United States, where people from come virtually all nations. The United States was originally called a “melting pot,” but there are increasing signs that the melting didn’t occur. Now people call the United States a “salad bowl” society with ethnic groups maintaining their ethnic differences, neigh-borhoods, and cultures. The U.S. population (267 million in 1997) is 73 percent white. African Americans constitute another 13 percent, and Latinos another 10 percent. The Latino population has been growing fast, with the largest subgroups of Mexican (5.4 percent), Puerto Rican (1.1 percent), and Cuban (0.4 percent) descent. Asian Ameri-cans constitute 3.4 percent of the U.S. population, with the Chinese constituting the largest group, followed by the Filipinos, Japanese, Asian Indians, and Koreans, in that order. Latino and Asian American consumers are concentrated in the far western and southern parts of the country, although some dispersal is taking place. Moreover, there are nearly 25 million people living in the United States—more than 9 percent of the population—who were born in another country.
Each group has certain specific wants and buying habits. Several food, clothing, and furniture companies have directed their products and promotions to one or more of these groups.17 For instance, Sears is taking note of the preferences of different ethnic groups:
■ Sears If a Sears, Roebuck and Company store has a shopping base that is at least 20 percent Latino, it is designated as a Hispanic store for the purpose of Sears’s Hispanic marketing program. More than 130 stores in southern Cal-ifornia, Texas, Florida, and New York have earned this label. “We make a spe-cial effort to staff those stores with bilingual sales personnel, to use bilingual signage, and to support community programs,” says a Sears spokesperson. Choosing merchandise for the Latino marketplace is primarily a color and size issue. “What we find in Hispanic communities is that people tend to be smaller than the general market, and that there is a greater demand for special-occasion clothing and a preference for bright colors. In hardlines, there isn’t much difference from the mainstream market.”
Analyzing Marketing Opportunities
Yet marketers must be careful not to overgeneralize about ethnic groups. Within each ethnic group are consumers who are as different from each other as they are from Americans of European background. “There is really no such thing as an Asian mar-ket,” says Greg Macabenta, whose ethnic advertising agency specializes in the Filipino market. Macabenta emphasizes that the five major Asian American groups have their own very specific market characteristics, speak different languages, consume different cuisines, practice different religions, and represent very distinct national cultures.18
Educational Groups
The population in any society falls into five educational groups: illiterates, high school dropouts, high school degrees, college degrees, and professional degrees. In Japan, 99 percent of the population is literate, whereas in the United States 10 percent to 15 percent of the population may be functionally illiterate. However, the United States has one of the world’s highest percentages of college-educated citizenry, around 36 percent. The high number of educated people in the United States spells a high demand for quality books, magazines, and travel.
Household Patterns
The “traditional household” consists of a husband, wife, and children (and sometimes grandparents). Yet, in the United States today, one out of eight households are “di-verse” or “nontraditional,” and include single live-alones, adult live-togethers of one or both sexes, single-parent families, childless married couples, and empty nesters. More people are divorcing or separating, choosing not to marry, marrying later, or marrying without the intention to have children. Each group has a distinctive set of needs and buying habits. For example, people in the SSWD group (single, separated, widowed, divorced) need smaller apartments; inexpensive and smaller appliances, fur-niture, and furnishings; and food packaged in smaller sizes. Marketers must increas-ingly consider the special needs of nontraditional households, because they are now growing more rapidly than traditional households.
The gay market, in particular, is a lucrative one. A 1997 Simmons Market Research study of readers of the National Gay Newspaper Guild’s 12 publications found that, compared to the average American, respondents are 11.7 times more likely to be in professional jobs, almost twice as likely to own a vacation home, eight times more likely to own a computer notebook, and twice as likely to own individual stocks.19 Insurance companies and financial services companies are now waking up to the needs and potential of not only the gay market but also the nontraditional household market as a whole:
American Express Financial Advisors,Inc. Minneapolis-based American Ex-press Financial Advisors, Inc., launched print ads that depict same-sex cou-ples planning their financial futures. The ads ran in Out and The Advocate, the two highest-circulation national gay publications. The company’s direc-tor of segment marketing, Margaret Vergeyle, said: “We’re targeting gay au-diences with targeted ads and promotions that are relevant to them and say that we understand their specific needs. Often, gay couples are very concerned about issues like Social Security benefits and estate planning, since same-sex marriages often are not recognized under the law.”20
John Hancock Mutual Life Insurance Company The John Hancock Mutual Insurance Company has been focusing on single parents and working women with two series of ads on cable television channels. The company is focusing on a very specific segment of women whose financial needs happen to be even more critical because of their situation. The slogan for the ads: “Insur-ance for the unexpected. Investments for the opportunities.”21
Geographical Shifts in Population
This is a period of great migratory movements between and within countries. Since Scanning the the collapse of Soviet eastern Europe, nationalities are reasserting themselves and form-Marketing ing independent countries. The new countries are making certain ethnic groups Environment unwelcome (such as Russians in Latvia or Muslims in Serbia), and many of these groups are migrating to safer areas. As foreign groups enter other countries for polit-ical sanctuary, some local groups start protesting. In the United States, there has been opposition to the influx of immigrants from Mexico, the Caribbean, and certain Asian nations. Yet many immigrants have done very well. Forward-looking companies and entrepreneurs are taking advantage of the growth in immigrant populations and mar-keting their wares specifically to these new members of the population.
Businesses with potential to cash in on the rural rebound might be those that cater to the growing SOHO (small office–home office) segment. For instance, makers of RTA (ready to assemble) furniture might find a strong consumer base among all the cashed-out former city residents setting up offices in small towns or telecommuting from there to larger companies.
Location makes a difference in goods and service preferences. The movement to the Sunbelt states has lessened the demand for warm clothing and home heating equipment and increased the demand for air conditioning. Those who live in large cities such as New York, Chicago, and San Francisco account for most of the sales of expensive furs, perfumes, luggage, and works of art. These cities also support the opera, ballet, and other forms of culture. Americans living in the suburbs lead more casual Analyzing lives, do more outdoor living, and have greater neighbor interaction, higher incomes, Marketing and younger families. Suburbanites buy vans, home workshop equipment, outdoor Opportunities furniture, lawn and gardening tools, and outdoor cooking equipment. There are also regional differences: People in Seattle buy more toothbrushes per capita than people in any other U.S. city; people in Salt Lake City eat more candy bars; people from New Orleans use more ketchup; and people in Miami drink more prune juice.
Shift from a Mass Market to Micromarkets
The effect of all these changes is fragmentation of the mass market into numerous mi-cromarkets differentiated by age, sex, ethnic background, education, geography, lifestyle, and other characteristics. Each group has strong preferences and is reached through in-creasingly targeted communication and distribution channels. Companies are aban-doning the “shotgun approach” that aimed at a mythical “average” consumer and are increasingly designing their products and marketing programs for specific micromarkets. Demographic trends are highly reliable for the short and intermediate run. There is little excuse for a company’s being suddenly surprised by demographic develop-ments. The Singer Company should have known for years that its sewing machine business would be hurt by smaller families and more working wives, yet it was slow in responding. In contrast, think of the rewards marketers reap when they focus on a demographic development. Some marketers are actively courting the home office segment of the lucrative SOHO market. Nearly 40 million Americans are working out of their homes with the help of electronic conveniences like cell phones, fax ma-chines, and handheld organizers. One company that is shifting gears to appeal to this micromarket is Kinko’s Copy Centers:
ECONOMIC ENVIRONMENT
Markets require purchasing power as well as people. The available purchasing power in an economy depends on current income, prices, savings, debt, and credit avail-ability. Marketers must pay close attention to major trends in income and consumer-spending patterns.
Income Distribution
Nations vary greatly in level and distribution of income and industrial structure. There are four types of industrial structures:
1 Subsistence economies: In a subsistence economy, the vast majority of peopleengage in simple agriculture, consume most of their output, and barter therest for simple goods and services. These economies offer few opportunitiesfor marketers.
2 Raw-material-exporting economies: These economies are rich in one or more natural resources but poor in other respects. Much of their revenue comes Scanning the from exporting these resources. Examples are Zaire (copper) and Saudi Arabia Marketing (oil). These countries are good markets for extractive equipment, tools and Environment supplies, materials-handling equipment, and trucks. Depending on the number of foreign residents and wealthy native rulers and landholders, they are also a market for Western-style commodities and luxury goods.
1 Industrializing economies: In an industrializing economy, manufacturing begins to account for 10 percent to 20 percent of gross domestic product. Examples include India, Egypt, and the Philippines. As manufacturing increases, the country relies more on imports of raw materials, steel, and heavy machinery and less on imports of finished textiles, paper products, and processed foods. Industrialization creates a new rich class and a small but growing middle class, both demanding new types of goods.
2 Industrial economies: Industrial economies are major exporters of manufac-tured goods and investment funds. They buy manufactured goods from one another and also export them to other types of economies in exchange for raw materials and semifinished goods. The large and varied manufacturing activities of these nations and their sizable middle class make them rich mar-kets for all sorts of goods.
Marketers often distinguish countries with five different income-distribution patterns:
(1) very low incomes; (2) mostly low incomes; (3) very low, very high incomes; (4) low, medium, high incomes; and (5) mostly medium incomes. Consider the market for Lam-borghinis, an automobile costing more than $150,000. The market would be very small in countries with type 1 or 2 income patterns. One of the largest single markets for Lam-borghinis turns out to be Portugal (income pattern 3)—one of the poorer countries in Western Europe, but one with enough wealthy families to afford expensive cars.
Since 1980, the wealthiest fifth of the U.S. population has seen its income grow by 21 percent, while wages for the bottom 60 percent have stagnated or even dipped. According to Census Bureau statisticians, the 1990s have seen a greater polarization of income in the United States than at any point since the end of World War II. This is leading to a two-tier U.S. market, with affluent people buying expensive goods and working-class people spending more carefully, shopping at discount stores and fac-tory outlet malls, and selecting less expensive store brands. Conventional retailers who offer medium-price goods are the most vulnerable to these changes. Companies that respond to the trend by tailoring their products and pitches to these two very different Americas stand to gain a lot:26
Analyzing Marketing Opportunities
The Walt Disney Company The Walt Disney Company, which owns the rights to A. A. Milne’s Winnie-the-Pooh and his make-believe friends, is mar-keting two distinct Poohs. The original line-drawn figures appear on fine china, pewter spoons, and expensive kids’ stationery found in upscale spe-cialty and department stores like Nordstrom and Bloomingdales. A plump, cartoonlike Pooh, clad in a red T-shirt and a goofy smile, adorns plastic key chains, polyester bedsheets, and animated videos. This downscaled Pooh sells at Wal-Mart and other discount stores.
The National Basketball Association The National Basketball Association sells front-row seats in New York’s Madison Square Garden for $1,000 apiece. Yet, worried they might lose fans who can’t afford the typical $200 for a fam-ily night out at a sports event, NBA marketers have launched an array of much more affordable merchandise and entertainment properties such as traveling basketball exhibitions.
Savings, Debt, and Credit Availability
Consumer expenditures are affected by consumer savings, debt, and credit availabil-ity. The Japanese, for example, save about 13.1 percent of their income, whereas U.S. consumers save about 4.7 percent. The result has been that Japanese banks were able to loan money to Japanese companies at a much lower interest rate than U.S. banks could offer to U.S. companies. Access to lower interest rates helped Japanese compa-nies expand faster. U.S. consumers also have a high debt-to-income ratio, which slows down further expenditures on housing and large-ticket items. Credit is very available in the United States but at fairly high interest rates, especially to lower-income bor-rowers. Marketers must pay careful attention to major changes in incomes, cost of liv-ing, interest rates, savings, and borrowing patterns because they can have a high impact on business, especially for companies whose products have high income and price sensitivity.
NATURAL ENVIRONMENT
The deterioration of the natural environment is a major global concern. In many world cities, air and water pollution have reached dangerous levels. There is great con-cern about certain chemicals creating a hole in the ozone layer and producing a “green-house effect” that will lead to dangerous warming of the earth. In Western Europe, “green” parties have vigorously pressed for public action to reduce industrial pollu-tion. In the United States, several thought leaders have documented ecological dete-rioration, whereas watchdog groups such as the Sierra Club and Friends of the Earth carried these concerns into political and social action.
New legislation passed as a result has hit certain industries very hard. Steel com-panies and public utilities have had to invest billions of dollars in pollution-control equipment and more environmentally friendly fuels. The auto industry has had to introduce expensive emission controls in cars. The soap industry has had to increase its products’ biodegradability.
Marketers need to be aware of the threats and opportunities associated with four trends in the natural environment: the shortage of raw materials, the increased cost of energy, increased pollution levels, and the changing role of governments.
Shortage of Raw Materials
The earth’s raw materials consist of the infinite, the finite renewable, and the finite nonrenewable. Infinite resources, such as air and water, pose no immediate problem, although some groups see a long-run danger. Environmental groups have lobbied for a ban on certain propellants used in aerosol cans because of the potential damage they can cause to the ozone layer. Water shortages and pollution are already major problems in some parts of the world. Scanning the
Finite renewable resources, such as forests and food, must be used wisely. Forestry Marketing companies are required to reforest timberlands in order to protect the soil and to en-Environment sure sufficient wood to meet future demand. Because the amount of arable land is fixed and urban areas are constantly encroaching on farmland, food supply can also be a major problem. Finite nonrenewable resources—oil, coal, platinum, zinc, silver— will pose a serious problem as the point of depletion approaches. Firms making prod-ucts that require these increasingly scarce minerals face substantial cost increases. They may not find it easy to pass these cost increases on to customers. Firms engaged in research and development have an excellent opportunity to develop substitute mate-rials. Increased Energy Costs
One finite nonrenewable resource, oil, has created serious problems for the world economy. Oil prices shot up from $2.23 a barrel in 1970 to $34.00 a barrel in 1982, creating a frantic search for alternative energy forms. Coal became popular again, and companies searched for practical means to harness solar, nuclear, wind, and other forms of energy. In the solar energy field alone, hundreds of firms introduced first-generation products to harness solar energy for heating homes and other uses. Other firms searched for ways to make a practical electric automobile, with a potential prize of billions for the winner.
The development of alternative sources of energy and more efficient ways to use energy and the weakening of the oil cartel led to a subsequent decline in oil prices. Lower prices had an adverse effect on the oil-exploration industry but considerably improved the income of oil-using industries and consumers. In the meantime, the search continues for alternative sources of energy.
Increased Pollution Levels
Some industrial activity will inevitably damage the natural environment. Consider the dangerous mercury levels in the ocean, the quantity of DDT and other chemical pollutants in the soil and food supply, and the littering of the environment with bottles, plastics, and other packaging materials.
Research has shown that about 42 percent of U.S. consumers are willing to pay higher prices for “green” products. This willingness creates a large market for pollu-tion-control solutions, such as scrubbers, recycling centers, and landfill systems. It leads to a search for alternative ways to produce and package goods. Smart compa-nies are initiating environment-friendly moves to show their concern. 3M runs a Pol-lution Prevention Pays program that has led to a substantial reduction in pollution and costs. Dow built a new ethylene plant in Alberta that uses 40 percent less energy and releases 97 percent less wastewater. AT&T uses a special software package to choose the least harmful materials, cut hazardous waste, reduce energy use, and improve prod-uct recycling in its operations. McDonald’s and Burger King eliminated their poly-styrene cartons and now use smaller, recyclable paper wrappings and paper napkins.27
New concern over the toxic nature of dry cleaning solvents has opened up op-portunities for a new breed of “green cleaners,” although these new businesses face an uphill battle. See the Marketing for the Millennium “A New Guard of Green Clean-ers Vies for Concerned Customers.”
Changing Role of Governments
Governments vary in their concern and efforts to promote a clean environment. For example, the German government is vigorous in its pursuit of environmental qual-ity, partly because of the strong green movement in Germany and partly because of the ecological devastation in the former East Germany. Many poor nations are doing little about pollution, largely because they lack the funds or the political will. It is in the richer nations’ interest to help the poorer nations control their pollution, but even the richer nations today lack the necessary funds. The major hopes are that compa-nies around the world will accept more social responsibility and that less expensive devices will be invented to control and reduce pollution.
TECHNOLOGICAL ENVIRONMENT
Analyzing Marketing One of the most dramatic forces shaping people’s lives is technology. Technology has Opportunities released such wonders as penicillin, open-heart surgery, and the birth-control pill. It Accelerating Pace of Technological Change Many of today’s common products were not available 40 years ago. John F. Kennedy did not know personal computers, digital wristwatches, video recorders, or fax ma-chines. More ideas are being worked on; the time lag between new ideas and their successful implementation is decreasing rapidly; and the time between introduction and peak production is shortening considerably. Ninety percent of all the scientists who ever lived are alive today, and technology feeds upon itself.
The advent of personal computers and fax machines has made it possible for peo-ple to telecommute—that is, work at home instead of traveling to offices that may be 30 or more minutes away. Some hope that this trend will reduce auto pollution, bring the family closer together, and create more home-centered entertainment and activ-ity. It will also have substantial impact on shopping behavior and marketing perfor-mance. Unlimited Opportunities for Innovation
Scientists today are working on a startling range of new technologies that will revolutionize products and production processes. Some of the most exciting work is being done in biotechnology, solid-state electronics, robotics, and materials sciences.28 Researchers are working on AIDS cures, happiness pills, painkillers, totally safe con-traceptives, and nonfattening foods. They are designing robots for firefighting, un-derwater exploration, and home nursing. In addition, scientists also work on fantasy products, such as small flying cars, three-dimensional television, and space colonies. The challenge in each case is not only technical but also commercial—to develop af-fordable versions of these products.
Companies are already harnessing the power of virtual reality (VR), the combi-nation of technologies that allows users to experience three-dimensional, computer-generated environments through sound, sight, and touch. Virtual reality has already been applied to gathering consumer reactions to new automobile designs, kitchen lay-outs, exterior home designs, and other potential offerings.
Varying R&D Budgets
The United States leads the world in annual R&D expenditures ($74 billion), but nearly 60 percent of these funds are still earmarked for defense. There is a need to transfer more of this money into research on material science, biotechnology, and microme-chanics. Japan has increased its R&D expenditures much faster than has the United States and is spending it mostly on nondefense-related research in physics, biophysics, and computer science.29
A growing portion of U.S. R&D expenditures is going into the development side of R&D, raising concerns about whether the United States can maintain its lead in basic science. Many companies are content to put their money into copying com-petitors’ products and making minor feature and style improvements. Even basic-research companies such as DuPont, Bell Laboratories, and Pfizer are proceeding cautiously. Much of the research is defensive rather than offensive. And, increasingly, research directed toward major breakthroughs is being conducted by consortiums of companies rather than by single companies.
Increased Regulation of Technological Change
As products become more complex, the public needs to be assured of their safety. Consequently, government agencies’ powers to investigate and ban potentially unsafe products have been expanded. In the United States, the Federal Food and Drug Administration must approve all drugs before they can be sold. Safety and health reg-ulations have also increased in the areas of food, automobiles, clothing, electrical appliances, and construction. Marketers must be aware of these regulations when proposing, developing, and launching new products.
POLITICAL-LEGAL ENVIRONMENT
Analyzing Marketing Marketing decisions are strongly affected by developments in the political and legal Opportunities environment. This environment is composed of laws, government agencies, and pres-
sure groups that influence and limit various organizations and individuals. Sometimes these laws also create new opportunities for business. For example, mandatory recy-cling laws have given the recycling industry a major boost and spurred the creation of dozens of new companies making new products from recycled materials:
■ Wellman In 1993, Wellman introduced Ecospun Post Consumer Recycled (PCR) fiber, made from recycled soda bottles, and sold 800,000 pounds in that first year alone. Today, Wellman boasts 15 million pounds in sales and is partnering with domestic fabric mills like Milliken & Company, Malden Mills, and Dybersburg. At the outdoor Retailer Winter Market in 1998, Wellman introduced its new EcoSpun Squared fiber, which has moisture-management properties and was designed specifically for a performance-apparel market anxious to jump aboard the recycling bandwagon. Legislation Regulating Business
Business legislation has three main purposes: to protect companies from unfair com-petition, to protect consumers from unfair business practices, and to protect the in-terests of society from unbridled business behavior. A major purpose of business legislation and enforcement is to charge businesses with the social costs created by their products or production processes. Legislation affecting business has steadily in-creased over the years. The European Commission has been active in establishing a new framework of laws covering competitive behavior, product standards, product li-ability, and commercial transactions for the 15 member nations of the European Union. Ex-Soviet nations are rapidly passing laws to promote and regulate an open market economy. The United States has many laws on its books covering such issues as competition, product safety and liability, fair trade and credit practices, and pack-aging and labeling.30 Several countries have gone further than the United States in passing strong consumer-protection legislation. Norway bans several forms of sales promotion—trading stamps, contests, premiums—as inappropriate or “unfair” in-struments for promoting products. Thailand requires food processors selling national brands to market low-price brands also so that low-income consumers can find econ-omy brands. In India, food companies need special approval to launch brands that duplicate what already exists on the market, such as another cola drink or brand of rice. A central concern about business legislation is: At what point do the costs of reg-ulation exceed the benefits? The laws are not always administered fairly; regulators and enforcers may be lax or overzealous. Although each new law may have a legiti-mate rationale, it may have the unintended effect of sapping initiative and retarding economic growth.
Marketers must have a good working knowledge of the major laws protecting com-Scanning the petition, consumers, and society. Companies generally establish legal review proce-Marketing dures and promulgate ethical standards to guide their marketing managers. As more Environment and more business takes place in cyberspace, marketers must establish new parame-ters for doing business ethically. Although America Online has been hugely success-ful and is the country’s most popular on-line service provider, it has lost millions of dollars due to consumer complaints regarding unethical marketing tactics:
SOCIAL-CULTURAL ENVIRONMENT
Society shapes our beliefs, values, and norms. People absorb, almost unconsciously, a worldview that defines their relationship to themselves, to others, to organizations, to society, to nature, and to the universe.
■ Views of themselves: People vary in the relative emphasis they place on self-gratification. In the United States during the 1960s and 1970s, “pleasure seekers” sought fun, change, and escape. Others sought “self-realization.” People bought products, brands, and services as a means of self-expression. They bought dream cars and dream vacations and spent more time in health activities (jogging, ten-nis), in introspection, and in arts and crafts. Today, in contrast, people are adopting more conservative behaviors and ambitions. They have witnessed
Analyzing harder times and cannot rely on continuous employment and rising real income. Marketing They are more cautious in their spending pattern and more value-driven in their Opportunities purchases.
Views of others: Some observers have pointed to a countermovement from a “me society” to a “we society.” People are concerned about the homeless, crime and victims, and other social problems. They would like to live in a more humane society. At the same time, people are seeking out their “own kind” and avoiding strangers. People hunger for serious and long-lasting relationships with a few others. These trends portend a growing market for social-support products and services that promote direct relations between human beings, such as health clubs, cruises, and religious activity. They also suggest a growing market for “so-cial surrogates,” things that allow people who are alone to feel that they are not, such as television, home video games, and chat rooms on the Internet.
■ Views of organizations: People vary in their attitudes toward corporations, govern-ment agencies, trade unions, and other organizations. Most people are willing to work for these organizations, although they may be critical of particular ones. But there has been an overall decline in organizational loyalty. The massive wave of company downsizings has bred cynicism and distrust. Many people today see work not as a source of satisfaction but as a required chore to earn money to en-joy their nonwork hours.
This outlook has several marketing implications. Companies need to find
new ways to win back consumer and employee confidence. They need to make
sure that they are good corporate citizens and that their consumer messages are
honest. More companies are turning to social audits and public relations to im
prove their image with their publics.
Views of society: People vary in their attitudes toward their society. Some defend it (preservers), some run it (makers), some take what they can from it (takers), some want to change it (changers), some are looking for something deeper (seekers), and some want to leave it (escapers).32 Often consumption patterns reflect social attitude. Makers tend to be high achievers who eat, dress, and live well. Changers usually live more frugally, driving smaller cars and wearing simpler clothes. Escapers and seekers are a major market for movies, music, surfing, and camping.
■ Views of nature: People vary in their attitude toward nature. Some feel subjugated by it, others feel harmony with it, and still others seek mastery over it. A long-term trend has been humankind’s growing mastery of nature through technology. More recently, however, people have awakened to nature’s fragility and finite re-sources. They recognize that nature can be destroyed by human activities.
Love of nature is leading to more camping, hiking, boating, and fishing.Business has responded with hiking boots, tenting equipment, and other gear.Tour operators are packaging more tours to wilderness areas. Marketing commu-nicators are using more scenic backgrounds in advertising. Food producers havefound growing markets for “natural” products, such as natural cereal, natural icecream, and health foods. Two natural-food grocery stores, Whole Foods Marketsand Fresh Fields, merged in 1997 with sales of $1.1 billion.
Views of the universe: People vary in their beliefs about the origin of the universe and their place in it. Most Americans are monotheistic, although religious con-viction and practice have been waning through the years. Church attendance has fallen steadily, with the exception of certain evangelical movements that reach out to bring people back into organized religion. Some of the religious im-pulse has been redirected into an interest in Eastern religions, mysticism, the oc-cult, and the human potential movement.
As people lose their religious orientation, they seek self-fulfillment and immedi-ate gratification. At the same time, every trend seems to breed a countertrend, as in-dicated by a worldwide rise in religious fundamentalism. Here are some other cultural characteristics of interest to marketers: the persistence of core cultural values, the ex-istence of subcultures, and shifts of values through time.
High Persistence of Core Cultural Values
The people living in a particular society hold many core beliefs and values that tend Scanning the to persist. Most Americans still believe in work, in getting married, in giving to char-Marketing ity, and in being honest. Core beliefs and values are passed on from parents to Environment children and are reinforced by major social institutions—schools, churches, business, and government. Secondary beliefs and values are more open to change. Believing in the institution of marriage is a core belief; believing that people ought to get married early is a secondary belief. Thus family-planning marketers could make some head-way arguing that people should get married later rather than that they should not get married at all. Marketers have some chance of changing secondary values but little chance of changing core values. For instance, the nonprofit organization Mothers Against Drunk Drivers (MADD) does not try to stop the sale of alcohol, but it does promote the idea of appointing a designated driver who will not drink that evening. The group also lobbies to raise the legal drinking age.
Existence of Subcultures
Each society contains subcultures, groups with shared values emerging from their spe-cial life experiences or circumstances. Star Trek fans, Black Muslims, and Hell’s Angels all represent subcultures whose members share common beliefs, preferences, and be-haviors. To the extent that subcultural groups exhibit different wants and consump-tion behavior, marketers can choose particular subcultures as target markets.
Marketers sometimes reap unexpected rewards in targeting subcultures. For instance, marketers have always loved teenagers because they’re society’s trendsetters in fashion, music, entertainment, ideas, and attitudes. Marketers also know that if they attract someone as a teen, there’s a good chance they’ll keep the person as a customer in the years ahead. Frito-Lay, which draws 15 percent of its sales from teens, says it has seen a rise in chip-snacking by grown-ups. “We think it’s because we brought them in as teenagers,” says a Frito-Lay marketing director.33
Shifts of Secondary Cultural Values Through Time
Although core values are fairly persistent, cultural swings do take place. The advent in the 1960s of hippies, the Beatles, Elvis Presley, and other cultural phenomena had a major impact on young people’s hairstyles, clothing, sexual norms, and life goals. Today’s young people are influenced by new heroes and fads: Pearl Jam’s Eddie Ved-der, Michael Jordan, and rollerblading.
Marketers have a keen interest in spotting cultural shifts that might bring new marketing opportunities or threats. Several firms offer social-cultural forecasts. The Yankelovich Monitor interviews 2,500 people each year and tracks 35 social trends, such as “antibigness,” “mysticism,” “living for today,” “away from possessions,” and “sensuousness.” It describes the percentage of the population who share the attitude as well as the percentage who do not. For example, the percentage of people who value physical fitness and well-being has risen steadily over the years, especially in the under-30 group, the young women and upscale group, and people living in the West. Marketers of health foods and exercise equipment cater to this trend with ap-propriate products and communications. In 1995, Taco Bell unveiled a new lower-fat “Border Lights” menu. The Center for Science in the Public Interest, a consumer ad-vocacy group in Washington, praised the new menu as being “more than a market-ing gimmick.”34
Successful companies realize that the marketing environment presents a never-ending series of opportunities and threats. The major responsibility for identifying significant changes in the macroenvironment falls to a company’s marketers. More than any other group in the company, marketing managers must be the trend trackers and opportunity seekers.
Analyzing 2. Many opportunities are found by identifying trends (directions or sequences of Marketing events that have some momentum and durability) and megatrends (major social, Opportunities economic, political, and technological changes that have long-lasting influence).
1 Within the rapidly changing global picture, marketers must monitor six major en-vironmental forces: demographic, economic, natural, technological, political-legal, and social-cultural.
2 In the demographic environment, marketers must be aware of worldwide popula-tion growth; changing mixes of age, ethnic composition, and educational levels; the rise of nontraditional families; large geographic shifts in population; and the move to micromarketing and away from mass marketing.
3 In the economic arena, marketers need to focus on income distribution and levels of savings, debt, and credit availability.
4 In the natural environment, marketers need to be aware of raw-materials shortages, increased energy costs and pollution levels, and the changing role of governments in environmental protection.
5 In the technological arena, marketers should take account of the accelerating pace of technological change, opportunities for innovation, varying R&D budgets, and the increased governmental regulation brought about by technological change.
6 In the political-legal environment, marketers must work within the many laws reg-ulating business practices and with various special-interest groups.
7 In the social-cultural arena, marketers must understand people’s views of themselves, others, organizations, society, nature, and the universe. They must market prod-ucts that correspond to society’s core and secondary values, and address the needs of different subcultures within a society.
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