The Marketing Environment Chapter 4 The Marketing Environment Chapter 4 The Marketing Environment MKTG10 Lamb, Hair, and McDaniel © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment LEARNING OUTCOMES 4-1 Discuss the external environment of marketing and explain how it affects a firm 4-2 Describe the social factors that affect marketing 4-3 Explain the importance to marketing managers of current demographic trends 4-4 Explain the importance to marketing managers of growing ethnic markets © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment LEARNING OUTCOMES 4-5 Identify consumer and marketer reactions to the state of the economy 4-6 Identify the impact of technology on a firm 4-7 Discuss the political and legal environment of marketing 4-8 Explain the basics of foreign and domestic competition © 2016 Cengage Learning. All Rights Reserved.

The External Marketing Environment Chapter 4 The Marketing Environment The External Marketing Environment 4-1 Discuss the external environment of marketing, and explain how it affects a firm © 2016 Cengage Learning. All Rights Reserved. 4

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment Target Market A group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the need of that group, resulting in mutually satisfying exchanges. © 2016 Cengage Learning. All Rights Reserved. 5

Understanding the External Environment Chapter 4 The Marketing Environment Understanding the External Environment Unless marketing managers understand the external environment, the firm cannot intelligently plan for the future. Environmental Management is… when a company implements strategies that attempt to shape the external environment within which it operates. Notes: The factors within the external environment that are important to marketing mangers can be classified as social, demographic, economic, technological, political and legal, and competitive. You must first understand how customers buy, where they buy, what they buy, and when they buy. You must understand what drives consumer decisions. You must identify the most valuable customers and understand their needs. You must understand the competition. © 2016 Cengage Learning. All Rights Reserved. 6

Describe the social factors that affect marketing Chapter 4 The Marketing Environment Social Factors 4-2 Describe the social factors that affect marketing © 2016 Cengage Learning. All Rights Reserved. 7

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment Social Factors Social factors include: 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. Values Attitudes Lifestyles Notes: Social change is perhaps the most difficult external variable for marketing managers to forecast, influence, or integrate into marketing 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. © 2016 Cengage Learning. All Rights Reserved. 8

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment Values A value is a strongly held and enduring belief. http://www.stevepavlina.com/blog/2004/11/list-of-values/ Human values give us a sense of what is or isn’t important in one’s life. Values are believed to strongly influence attitudes and lifestyles Notes: A value is a strongly held and enduring belief. The four basic values shown influenced the attitudes and lifestyles during the first 200 years of the United States. They are: Self-sufficiency: Every person should stand on his or her own two feet. Upward mobility: Success comes with getting an education, working hard, and playing by the rules. Work ethic: Hard work, dedication to family, and frugality are moral and right. Conformity: No one should expect to be treated differently from everybody else. Values are formed through interaction with family, friends, and influencers such as teachers, religious leaders, and politicians. The environment can also play a role in shaping values. U.S. consumers rank the characteristics of product quality as (1) reliability, (2) durability, (3) easy maintenance, (4) ease of use, (5) a trusted brand name, and (6) a low price. Discussion/Team Activity: What environmental influences have affected the values of Americans? Examples: Great Depression, Women’s Role in the Workplace, Hippie Revolution of 1960s, the September 11 terrorist attack. © 2016 Cengage Learning. All Rights Reserved. 9

© 2016 Cengage Learning. All Rights Reserved. An example of American Values The American society is greatly influenced by a set of four values: Self-sufficiency: Every person should stand on his or her own two feet. Upward mobility: Success comes with getting an education, working hard, and playing by the rules. Work ethic: Hard work, dedication to family, and frugality are moral and right. Conformity: No one should expect to be treated differently from everybody else People typically form values through interactions with family, friends, and other influencers. © 2016 Cengage Learning. All Rights Reserved.

The Role of Social Media in Communication and shaping our behavior Chapter 4 The Marketing Environment The Role of Social Media in Communication and shaping our behavior Social media are making profound changes in the way we obtain and consume information. Social networking has changed the game when it comes to opinion sharing. Now, consumers can reach many people at once with their views—and can respond to brands and events in real time. Teenagers and young adults are more likely to view social networks as a valuable source of information. Notes: There is some evidence that social media users feel a greater sense of companionship and support than non-social media users. Successful use of social media requires more than receiving likes on Facebook, but creating a relationship based on shared interests with the consumer. © 2016 Cengage Learning. All Rights Reserved. 11

How Firms Use Social Media Chapter 4 The Marketing Environment How Firms Use Social Media A starting point for a firm using social media is to monitor what is being said about the brand. In addition to monitoring, the firm must respond to both positive and negative buzz about the company or brand. Social media can also be used to amplify a promotional campaign by inviting consumers to join the conversation about a brand. Notes: If Facebook were a country, it would be the world’s third largest behind China and India. © 2016 Cengage Learning. All Rights Reserved. 12

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment Demographic Factors 4-3 Explain the importance to marketing managers of current demographic trends © 2016 Cengage Learning. All Rights Reserved. 13

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment Demographic Factors Demography is the study of people’s vital statistics, such as age, race, ethnicity and location. Demographic variable is extremely important to marketing managers Demographics are significant because the basis for any market is people. Demographic characteristics relate to buyer behavior Demographic cohorts have their own needs, values, and consumption patterns. Notes: An 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. © 2016 Cengage Learning. All Rights Reserved. 14

Identify consumer and marketer reactions to the state of the economy Chapter 4 The Marketing Environment Economic Factors 4-5 Identify consumer and marketer reactions to the state of the economy © 2016 Cengage Learning. All Rights Reserved. 15

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment Economic Factors The four economic areas of greatest concern to marketers are consumers’ incomes, purchasing power, inflation, and recession. Consumers’ Income Purchasing Power Inflation Recession Notes: The four economic areas of greatest concern to marketers are consumers’ incomes, purchasing power, inflation, and recession. © 2016 Cengage Learning. All Rights Reserved. 16

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment Consumers’ Incomes As disposable income rise, more families and individuals can afford the ‘good life’. Education is the primary determinant of earning potential Earnings/ income define our shopping behavior Notes: Income fell the most in the South, West, and Florida. These areas also had the largest declines in home values and housing construction. With jobs scarce, many people have accepted pay cuts to keep their current jobs or taken less-paying—but available—jobs. © 2016 Cengage Learning. All Rights Reserved. 17

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment Purchasing Power is… measured by comparing income to the relative cost of a standard set of goods and services in different geographic areas, usually referred to as the cost of living. Notes: Increased standards of living are a function of purchasing power. When income is high relative to cost of living, people have more discretionary income. That means they have more money to spend on nonessential items. © 2016 Cengage Learning. All Rights Reserved. 18

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment Inflation is… a measure of the decrease in the value of money, expressed as the percentage reduction in value since the previous year. Notes: 1. In times of low inflation, businesses seeking to increase their profit margins can do so only by increasing their efficiency. 2. The buyer will not pay more for a product than the subjective value he/she places on it. © 2016 Cengage Learning. All Rights Reserved. 19

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment A recession is… a period of economic activity characterized by negative growth, which reduces demand for goods and services. Notes: Beginning in December 2007, the collapse of inflated housing prices triggered what became the global recession of 2007–2009. The declining stock market, growing unemployment, and collapsing home prices have all taken a toll on consumer confidence and influenced all kinds of purchasing decisions. © 2016 Cengage Learning. All Rights Reserved. 20

Technological Factors Chapter 4 The Marketing Environment Technological Factors 4-6 Identify the impact of technology on a firm © 2016 Cengage Learning. All Rights Reserved. 21

Technological Factors Chapter 4 The Marketing Environment Technological Factors Technology is the most dramatic variable of all external environment Its dynamic, always changing, and hence needs to be carefully watched and updated. Technology and innovation provides a firm with competitive advantage. © 2016 Cengage Learning. All Rights Reserved. 22

Political and Legal Factors Chapter 4 The Marketing Environment Political and Legal Factors 4-7 Discuss the political and legal environment of marketing © 2016 Cengage Learning. All Rights Reserved. 23

Political and Legal Factors Chapter 4 The Marketing Environment Political and Legal Factors Business needs government regulations to protect innovators of new technology, the interests of society in general, one business from another, and consumers. Government needs business for generation of taxes. 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. Notes: Business needs government regulations to protect innovators of new technology, the interests of society in general, one business from another, and consumers. Government needs business for generation of taxes. 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. © 2016 Cengage Learning. All Rights Reserved. 24

of foreign and domestic competition Chapter 4 The Marketing Environment Competitive Factors 4-8 Explain the basics of foreign and domestic competition © 2016 Cengage Learning. All Rights Reserved. 25

© 2016 Cengage Learning. All Rights Reserved. Competitive Factors Chapter 4 The Marketing Environment 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. © 2016 Cengage Learning. All Rights Reserved. 26

© 2016 Cengage Learning. All Rights Reserved. Chapter 4 The Marketing Environment Competitive Factors Market Share and Profits Firms must work harder to maintain profits and market share. Global Competition More foreign firms are entering U.S. market. Foreign firms in U.S. now compete on product quality. Notes: Technological advances can usher in a whole new set of competitors that can change a firm’s business model. Many foreign competitors are considering the U.S. to be a ripe target market. In the past, foreign firms penetrated U.S. markets on price. Today, they compete on product quality. Global competition is discussed in Chapter 5. © 2016 Cengage Learning. All Rights Reserved. 27