978-0134492513 Chapter 3 Lecture Notes Part 1

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Chapter 3

ANALYZING THE MARKETING ENVIRONMENT

MARKETING STARTER: CHAPTER 3

KELLOGG: Losing its Snap, Crackle, and Pop? _______________________

Synopsis

For decades, Kellogg has been the world’s largest cereal maker. Throughout its history, Kellogg has capitalized on

trends and shifts, and sometimes led them. As recently as the 1980s, Kellogg almost by itself grew the entire cereal

category by 50 percent in just five years by targeting baby boomers with products positioned on nutrition and

convenience. But, now, people increasingly reach for granola bars or Greek yogurt. Cold cereal consumption has

declined. Families no longer gather around the breakfast table; it’s more likely a grab-and-go breakfast. Additionally,

consumers are more health-conscious. Kellogg’s problem is that many of its cereals are carb-heavy, processed foods

made from corn, oats, wheat, and rice. Kellogg has reduced the sugar content in some of its children’s cereals, while

adding healthier extensions to other brand lines. It bought Kashi, a brand known for natural and organic ingredients.

At the same time, it has added numerous less-than-healthy extensions. It also now sells cookies, crackers, pizzas,

and frozen entrees in addition to breakfast foods. The mix of moves that match the trends in the U.S. food culture

along with actions that are out of sync with the direction of the food culture makes it difficult to determine the

direction in which Kellogg is really heading. Will Kellogg adapt to where its customers are heading and resume its

leadership position? Time will tell.

Discussion Objective

A brief discussion of the Kellogg story will help to illustrate how leading companies sometimes must react to

changes in the environment. While the breakfast-eating behavior has changed, along with changes in family

structure and habits, Kellogg has lagged in adapting to the changes. Here, the discussion goal is to link Kellogg’s

threats, opportunities, and performance to the changes occurring in the firm’s microenvironment and

macroenvironment. This discussion provides a useful transition from the marketing management model provided in

Chapter 2 to the concepts of analyzing the marketing environment presented in Chapter 3.

Starting the Discussion

To kick off the Kellogg discussion, pull up the Kellogg website at www.kelloggcompany.com. Ask students to

select products they recognize as Kellogg products. Ask students why they think Kellogg’s product family includes

some brands, such as Gardenburger, Famous Amos, and Pringle’s, along with numerous cereals. Be sure the students

notice the kinds of products associated with some of the brands, such as Special K, at

https://www.specialk.com/en_US/products.html. What do they think of this family of products? The key question is

this: how has Kellogg handled changes in the marketing environment? Use the following questions to focus the

discussion.

Discussion Questions

1. What appear to be Kellogg’s unique strengths in analyzing the marketing environment? Which key

principles from this chapter were available to company planners in anticipating, capitalizing on, and even

helping shape the new marketing environment? (Here, you will want to focus the discussion on competitors

and publics, along with the demographic, economic, and cultural environments. As people’s views of

themselves and society have changed, has Kellogg impacted those changes?)

2. How have changes in the marketing environment created opportunities and threats for Kellogg? (Be sure to

include the time period back to at least 2000. Focus on changes in lifestyle, customer needs, business

processes, and competition. Kellogg’s approach to marketing has impacted its performance. While over the

decades, it has experienced incredible success, which forces might threaten that success?)

3. How does the chapter-opening Kellogg story relate to what comes later in the chapter? (This question

transitions the discussion to Chapter 3 topics such as the impact of the actors and forces in the

microenvironments and macroenvironments and how companies must respond. The key point: the best

companies do not merely respond to changes. They help to shape and drive those changes. And companies

that don’t respond tend to struggle.)

CHAPTER OVERVIEW

Use Power Point Slide 3-1 Here

This chapter shows that marketing does not operate in a vacuum but rather in a complex and

changing environment. Other actors in this environment—suppliers, intermediaries, customers,

competitors, publics, and others—may work with or against the company. Major environmental

forces—demographic, economic, natural, technological, political, and cultural—shape marketing

opportunities, pose threats, and affect the company’s ability to build customer relationships. To

develop effective marketing strategies, you must first understand the environment in which

marketing operates.

CHAPTER OBJECTIVES

Use Power Point Slide 3-2 here

1. Describe the environmental forces that affect the company’s ability to serve its customers.

2. Explain how changes in the demographic and economic environments affect marketing

decisions.

3. Identify the major trends in the firm’s natural and technological environments.

4. Explain the key changes in the political and cultural environments.

5. Discuss how companies can react to the marketing environment.

CHAPTER OUTLINE

p. 67 INTRODUCTION

Kellogg, the worldwide cereal leader, has been around for

109 years. Twenty years ago, almost single-handedly,

Kellogg grew the entire cereal category by 50 percent in

just five years by targeting baby boomers with products

positioned on nutrition and convenience.

But in the 21st century, demographic, cultural, and lifestyle

changes are moving customers away from Kellogg and its

product line.

Kellogg has offered healthier options, including gluten-free

and GMO-free products. However, in a seeming conflict of

image and appeal, it has also introduced less-healthy

product extensions.

P. 67

Photo: Kellogg

Opening Vignette Questions

1. How is Kellogg addressing the changing

marketing environment?

2. Analyze the company’s attitude toward

marketplace change. How has this attitude

impacted its success?

3. Do you believe that Kellogg can regain the

stronghold it has historically held in its markets?

Why or why not?

4. In such a rapidly changing marketing

environment, what might Kellogg be doing in

five years? Ten years?

p. 68

PPT 3-3

PPT 3-4

p. 68

PPT 3-5

PPT 3-6

More than any other group in a company, marketers must be

the trend trackers and opportunity seekers.

Describe the environmental forces that affect the

company’s ability to serve its customers.

THE MICROENVIRONMENT AND

MACROENVIRONMENT

A company’s marketing environment consists of the

actors and forces outside marketing that affect marketing

management’s ability to build and maintain successful

relationships with target customers.

The microenvironment consists of the actors close to the

company that affect its ability to service its customers.

The macroenvironment consists of larger societal forces

that affect the microenvironment.

Learning Objective

p. 68

Key Terms:

Marketing

environment,

Microenvironment,

Macroenvironment

Assignments, Resources

Use Additional Project 1 here

Use Video Case here

Troubleshooting Tip

This is an intense chapter that presents a lot of

information that might make some students’ heads

swim. If it hasn’t happened before, this is where

students really begin to get the picture that

marketing managers need to be highly analytical. It

helps to present the in-depth discussion of current

macro trends as something that needs to be

understood, not memorized.

p. 68

PPT 3-7 THE MICROENVIRONMENT

PPT 3-8

p. 69

PPT 3-9

PPT 3-10

p. 70

PPT 3-11

p. 70

PPT 3-12

Marketing management’s job is to build relationships with

customers by creating customer value and satisfaction.

The Company

All the interrelated groups form the internal environment.

All groups must work in harmony to provide superior

customer value and relationships.

Suppliers

Suppliers provide the resources needed by the company to

produce its goods and services. The company must treat

suppliers as partners to provide customer value.

Marketing Intermediaries

Marketing intermediaries help the company to promote,

sell, and distribute its products to final buyers.

Resellers are distribution channel firms that help the

company find customers or make sales to them.

These include wholesalers and retailers.

Physical distribution firms help the company to

stock and move goods from their points of origin to

their destinations.

Marketing services agencies are the marketing

research firms, advertising agencies, media firms,

and marketing consulting firms that help the

company target and promote its products to the right

markets.

Financial intermediaries include banks, credit

companies, insurance companies, and other

businesses that help finance transactions or insure

against the risks associated with the buying and

selling of goods.

Today’s marketers recognize the importance of working

with their intermediaries as partners rather than simply as

channels through which they sell their products.

Competitors

p. 69

Figure 3.1: Actors

in the

Microenvironment

p. 69

Photo: Honda

p. 70

Key Term:

Marketing

intermediaries

p. 70

Photo: Coca-Cola

p. 71

PPT 3-13

p. 72

PPT 3-14

Marketers must gain strategic advantage by positioning

their offerings strongly against competitors’ offerings in the

minds of consumers.

No single competitive marketing strategy is best for all

companies.

Publics

A public is any group that has an actual or potential interest

in or impact on an organization’s ability to achieve its

objectives.

Financial publics influence the company’s

ability to obtain funds.

Media publics carry news, features, and editorial

opinion.

Government publics. Management must take

government developments into account.

Citizen-action publics. Consumer organizations,

environmental groups, and others may question a

company’s marketing decisions.

Local publics include neighborhood residents

and community organizations.

General public. The general public’s image of

the company affects its buying.

Internal publics include workers, managers,

volunteers, and the board of directors.

Customers

There are five types of customer markets. The company

may target any or all of these.

1. Consumer markets are individuals and households

that buy goods and services for personal

consumption.

2. Business markets buy goods and services for further

processing or for use in their production process.

3. Reseller markets buy goods and services to resell at

a profit.

4. Government markets are composed of government

agencies that buy goods and services to produce

public services.

p. 71

Key Term: Public

p. 71

Ad: The Home

Depot Foundation

5. International markets are buyers in other countries,

including consumers, producers, resellers, and

governments.

Review Learning Objective 1: Describe the environmental

forces that affect the company’s ability to serve its

customers.

Assignments, Resources

Use Discussion Questions 3-1 and 3-2 here

Use Additional Project 2 and 3 here

Use Outside Example 1 here

p. 72

PPT 3-15

PPT 3-16

p. 72

PPT 3-17

p. 73

PPT 3-18

Explain how changes in the demographic and economic

environments affect marketing decisions.

THE MACROENVIRONMENT

Demographic Environment

Demography is the study of human populations in terms of

size, density, location, age, gender, race, occupation, and

other statistics.

The demographic environment involves people, and people

make up markets.

Demographic trends include changing age and family

structures, geographic population shifts, educational

characteristics, and population diversity.

Changes in the world demographic environment have major

implications for business.

Thus, marketers keep close track of demographic trends and

developments in their markets, both at home and abroad.

The Changing Age Structure of the Population

The U.S. population is currently about 323 million and may

reach almost 364 million by the year 2030.

The single most important demographic trend in the United

States is the changing age structure of the population.

Baby Boomers. The post–World War II baby boom

produced 78 million baby boomers, born between 1946

Learning Objective

p. 72

Figure 3.2: Major

Forces in the

Company’s

Macroenvironment

p. 73

Key Term:

Demography

p. 73

Key Term:

Baby boomers

and 1964.

Baby boomers account for nearly 26 percent of the

population and control 70 percent of the nation’s disposable

income, as well as half of all consumer spending.

As they reach their peak spending years, boomers will

continue to constitute a lucrative market for many products

and services.

It would be a mistake to think of older boomers as phasing

out or slowing down. Today’s boomers think “young” no

matter how old they are.

p. 73

Photo: Walgreens

Assignments, Resources

Use Small Group Assignment 1 here