9 Social Responsibility, Ethics, and the Marketing Environment Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Social Responsibility, Ethics, and the Marketing Environment CHAPTER 3 Marketing Lamb, Hair, McDaniel 9 Designed by Eric Brengle B-books, Ltd. Prepared by Deborah Baker Texas Christian University

Corporate Social Responsibility Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Corporate Social Responsibility LOI The idea that socially responsible companies will outperform their peers by focusing on the world’s social problems and viewing them as opportunities to build profits and help the world at the same time. Sustainability Notes: The newest theory in social responsibility is sustainability. It is a view that companies can’t thrive for long in a world where people are suffering and desperately poor. However, skeptics say business should focus on making a profit and leave social and environmental problems to nonprofit organizations and government. Discussion/Team Activity: Discuss the pros and cons of the idea of sustainability.

Corporate Social Responsibility Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Corporate Social Responsibility Philanthropic Contribute resources to the community; improve quality of life Ethical Do what is right, just, and fair. Avoid harm. Legal Obey the law. Law is society’s codification of what is right and wrong. Online Federal Trade Commission As a marketing manager, how would you use the FTC Web site in designing a new marketing campaign? Notes: The regulatory agencies shown on this slide are the three federal agencies most directly and actively involved in marketing affairs. Economic Be profitable. Profit is the foundation on which all the other responsibilities rest. LO9

Code of Ethics LO2 Code of Ethics Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Code of Ethics LO2 Code of Ethics A guideline to help marketing managers and other employees make better decisions. Online University of British Columbia Centre for Applied Ethics Research corporate codes of ethics through the Applied Ethics Resources page. Compare the codes of three companies. What common themes do you find? Notes: A national study found that 60 percent of companies surveyed maintained a code of ethics, 33 percent offered ethics training, and 33 percent employed an ethics officer. A code of ethics should not be too vague or too detailed. Exhibit 3.2 is a simple set of ethical guidelines. Discussion/Team Activity: Discuss companies with highly praised codes of ethics. http://www.ethicsweb.ca Online

In groups of 2-3, use the Internet to research the code of ethics for a business. write your own personal code of ethics based on those found for the business.

External Marketing Environment Chapter 3 Social Responsibility, Ethics, and the Marketing Environment External Marketing Environment LO3 Demographics Social Change Economic Conditions Political & Legal Factors Technology Competition Environmental Scanning Target Market External Environment (uncontrollable) Ever-Changing Marketplace Product Distribution Promotion Price Internal (within the organization) Marketing mix Notes: This slide demonstrates the continuous evolution in the external marketing environment. The external environmental factors include demographics, social change, economic conditions, political and legal factors, technology, and competition. The external environment can not be controlled by management. However, the marketing mix (the Four Ps) can be controlled and reshaped to influence the target market. The target market is a defined group that is most likely to buy a firm’s products. Discussion/Team Activity: Discuss the evolution and changes in the computer industry during the last twenty years. How has the external environment changed? How has the target market and marketing mix changed? What external environmental conditions are challenging the computer industry today? What reshaping would you recommend to enhance a decline in computer sales?

Social Factors LO4 Attitudes Values Lifestyle Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Social Factors Values Attitudes Lifestyle Notes: Social change is the most difficult external variable for marketing managers to forecast, influence, or integrate intomarketing plans. Social factors influence the products people buy, the price paid, the effectiveness of specific promotions, and how, where, and when people expect to purchase products. LO4

Social Factors LO4 Social Factors Influence: Products purchased Chapter 3 Social Responsibility, Ethics, and the Marketing Environment LO4 Social Factors Influence: Products purchased Prices paid for products Effectiveness of promotions How, where, and when people purchase

Demographic Factors LO5 Demography Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Demographic Factors LO5 Demography The study of people’s vital statistics, such as their age, race and ethnicity, and location. Notes: The next uncontrollable variable in the external environment is demography: the study of people’s vital statistics, such as age, race and ethnicity, and location. Demographic characteristics are strongly related to consumer buyer behavior.

Tweens LO5 Pre- and early adolescents, age 8 to 14 Chapter 3 Social Responsibility, Ethics, and the Marketing Environment LO5 Pre- and early adolescents, age 8 to 14 Population of 29 million Purchasing power of $39 billion in 2007 View TV ads as “just advertising” Emerging as “the richest generation” and the “most influential generation in history” Notes: Age group cohorts have been given the names of tweens, Generation Y, Generation X, and baby boomers. Each cohort has its own needs, values, and consumption patterns.

Generation Y LO5 Born between 1979 and 1994 Population of 60 million Chapter 3 Social Responsibility, Ethics, and the Marketing Environment LO5 Born between 1979 and 1994 Population of 60 million Purchasing power of $200 billion annually Researchers have found Gen Yers to be: Impatient Family-oriented Inquisitive Opinionated Diverse Time managers “Street Smart” Word of mouth marketing is effective Online Mountain Dew The North Face Mountain Dew and The North Face are brands preferred by Generation Y. Visit each company’s Web site and identify the elements that make the site appealing to Gen Yers. Do there seem to be any elements that might have crossover appeal for Generation X? Which ones? Discussion/Team Activity: Identify some mature brands favored by the baby boomers. Discuss how these brands might successfully market to Generation Y. Online http://www.mountaindew.com http://www.northface.com

Generation X LO5 Born between 1965 and 1978 Population of 40 million Chapter 3 Social Responsibility, Ethics, and the Marketing Environment LO5 Born between 1965 and 1978 Population of 40 million Savvy and cynical consumers Time is at a premium, and outsourcing is utilized Entering their money-making years Discussion/Team Activity: 1. Name some ways that companies have marketed successfully to Generation Xers.

Baby Boomers LO5 Born between 1946 and 1964 Chapter 3 Social Responsibility, Ethics, and the Marketing Environment LO5 Born between 1946 and 1964 Population of 77 million— the largest demographic segment $1 trillion in spending power for people aged 50 to 60 Income will continue to grow as they keep working Four segments of baby boomers: “Looking for balance” “Confident and living well” “At ease” “Overwhelmed” Notes: Four segments: Looking for balance. Very active and saving time is important. Opportunities for travel-related businesses and food-service businesses. Confident and living well. Highest incomes of all segments and enjoy being the first to purchase a new product. Stylish and trendy. Opportunities for luxury goods and services. At ease boomers. Do not worry about future, job, or financial security. Home-centric and family-oriented. Opportunities for traditional household products. Brand names resonate strongly. Overwhelmed boomers. Lowest income of all segments and worry about the future. Health is a big concern. Below average on accepting technology and on using electronic, digital, and tech products.

Marketing to Hispanic Americans Chapter 3 Social Responsibility, Ethics, and the Marketing Environment LO6 The population’s diversity creates challenges for targeting this group. Hispanics tend to be brand loyal, but are not aware of many U.S. brands. Nearly half of adult U.S. Hispanics have home Internet access.

Marketing to African Americans Chapter 3 Social Responsibility, Ethics, and the Marketing Environment LO6 Many firms are creating products for the African American market. Promotional dollars and media choices directed toward African Americans continue to increase.

Marketing to Asian Americans Chapter 3 Social Responsibility, Ethics, and the Marketing Environment LO6 Younger, better educated, and have highest average income of all groups Many products have been developed for Asian American market. Cultural diversity within the Asian American market complicates promotional efforts.

Consumers’ Incomes Chapter 3 Social Responsibility, Ethics, and the Marketing Environment LO7 Median U.S. household income in 2007 projected at $45,000 Incomes have risen at a slow pace. Education is the primary determinant of earning potential. Consumers are strapped for cash. Notes: U.S. incomes have continued to rise, but at a slower pace. Only 1 percent of those with a high-school education earn over $100,000 annually. Income for the median household has risen only 11 percent since 1990, but household spending has jumped by 30 percent. Debt outstanding leaped by 80 percent.

The Financial Power of Women Chapter 3 Social Responsibility, Ethics, and the Marketing Environment LO7 Women bring in half of the household income. Women control 51.3 percent of the private wealth in the U.S. Women control 80 percent of household spending. Women are now the primary buyers in male-dominated categories: 68% of new cars 66% of computers 66% of home improvements 53% of investments 51% of consumer electronics

Using your handout, predict how you think each of these environmental factors might affect a company’s success: Consumer values Role of working women Ethnic diversity Income/Purchasing power

Inflation LO7 Inflation Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Inflation LO7 Inflation A measure of the decrease in the value of the money, expressed as the percentage reduction in value since the previous year. Notes: In inflationary times, marketers must be aware that inflation causes consumers to either build up or diminish brand loyalty. Even though most consumers try hard to maintain their standard of living, they try to make more economical purchases. The buyer will not pay more for a product than the subjective value he/she places on it.

Recession LO7 Recession Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Recession LO7 Recession A period of economic activity characterized by negative growth, which reduces demand for goods and services. Notes: In 2001, the United States experienced a recession from the slowdown in the high-tech sector, overextended consumer credit, and the terrorist attacks. The recession lasted until early 2003.

Recession Marketing Strategies Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Recession Marketing Strategies Improve existing products and introduce new ones Maintain and expand customer services Emphasize top-of-the-line products and promote product value LO7

Technological Factors Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Technological Factors U.S. excels at basic and applied research. Many firms use the market concept to guide research. New technology internally creates a long-term competitive advantage. External technology Creates more efficient operation or better products May render existing products obsolete Notes: The United States excels at both basic and applied research. Many firms are using the marketing concept to guide their research, rather than invent for the sake of invention. Discussion/Team Activity: List and discuss companies that excel at creating new products designed around customer needs/wants. LO8

Political and Legal Factors Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Political and Legal Factors New technology Society Businesses Consumers Laws and Regulations Protect: Notes: Business needs government regulations to protect new technology innovations, the interests of society, one business from another, and consumers. Government needs business for generation of taxes. The private sector serves as a counterweight to government. Every aspect of the marketing mix is subject to laws and restrictions. It is the responsibility of marketing managers to understand and conform to these laws, while creating new programs to accomplish marketing objectives. LO9

Regulate competitive environment Regulate pricing practices Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Federal Legislation Sherman Act Clayton Act Federal Trade Commission Act Celler-Kefauver Antimerger Act Hart-Scott-Rodino Act Regulate competitive environment Robinson-Patman Act Regulate pricing practices Wheeler-Lea Act Control false advertising Notes: Exhibit 3.6 states the impact on marketing from each of these Federal acts. LO9

Regulatory Agencies LO9 Consumer Product Safety Commission Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Regulatory Agencies Consumer Product Safety Commission Protects consumer safety in and around their homes Federal Trade Commission Prevents unfair methods of competition in commerce Food & Drug Administration Enforces safety regulations for food and drug products Online Federal Trade Commission As a marketing manager, how would you use the FTC Web site in designing a new marketing campaign? Notes: The regulatory agencies shown on this slide are the three federal agencies most directly and actively involved in marketing affairs. Online http://www.ftc.gov LO9

Control Competitive Factors LOIO How many competitors? Chapter 3 Social Responsibility, Ethics, and the Marketing Environment Competitive Factors LOIO How many competitors? How big are competitors? How interdependent is the industry? Control Notes: The competitive environment encompasses the number of competitors a firm must face, the relative size of the competitors, and the degree of interdependence within the industry. Management has little control over the competitive environment.

Using your handout, predict how you think each of these environmental factors might affect a company’s success: New technology Laws Competition