Chapter 1 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 4 The Marketing Environment © Mark Herreid/Shutterstock.com 1 © iStokphoto.com/Siniša Botaš

Learning Outcomes Discuss the external environment of marketing, and explain how it affects a firm Describe the social factors that affect marketing Explain the importance to marketing managers of current demographic trends Explain the importance to marketing managers of growing ethnic markets 2

Identify consumer and marketer reactions to the state of the economy Identify the impact of technology on a firm Discuss the political and legal environment of marketing Explain the basics of foreign and domestic competition Learning Outcomes

The External Marketing Environment The external environment of marketing and how it affects a firm 1 4

Target Market “A group of people or organizations for which a firm designs, implements and maintains a marketing mix intended to meet the needs of that group.” (or, the group most likely to buy a product) Age affects consumers behavior, needs & desires External elements affect consumers’ needs and desires 5 1

The External Environment Unless marketing managers understand the external environment, the firm cannot intelligently plan for the future. When a firm implements strategies that attempt to shape the external environment within which it operates. Environmental Management 6 1

7 Environmental Scanning- Remember this Slide? (Ch. 2) Helps identify Opportunities and Threats Designing a marketing strategy is based on six major environmental forces or factors:  Economic  Political/Legal  Technological  Social  Competitive  Demographic 5

8 Social Factors (1) 2 Factors affecting marketing 1.Social 2.Demographic 3.Economic 4.Technological 5.Political/Legal 6.Competitive

Social Factors Values Attitudes Lifestyle 9 2 Remember “values” from Chapter 3?

American Values Self-Sufficiency Upward Mobility Work Ethic Conformity Core American Values Getting off the grid Meaningful green EcoTechMed 10 2 Emerging Trends

The Influence of Values on Buying Habits Ranked Characteristics of Product Quality Reliability Durability Easy maintenance Ease of use Trusted brand name Low price 11 2

Component Lifestyles The practice of choosing goods & services that meet one’s diverse needs and interests rather than conforming to a single, traditional lifestyle. Today’s consumers want multifunctional products Consumers are no longer defined by their occupation Component lifestyles increase the complexity of buying habits

Changing Roles of Families and Working Women Growth of dual-income families has resulted in increased purchasing power Approx. 59% of females aged are working Working wives bring in 45% of family income Working women have had a greater effect on marketing than any other social change. (remember cause-related marketing, chapter 3?) 13 2

Technology and Time Use Leisure time = less than 6 hours a day !! About 40 percent of American adults check work on vacation !! Constant digital immersion can decrease a person’s attention span. _video&playnext=1&list=PL56210C21DA3C7A2B 14 2

The importance to marketing managers of current demographic trends 15 Demographic Factors (2) 3

Demographic Factors People are the basis for any market Demographic characteristics are strongly related to buyer behavior Demographic cohorts have their own needs, values, and consumption patterns 16 3

Tweens  Pre- and early adolescents  Ages  Population of 20 million  They spend about $50 billion annually  Their parents spend $150 billion annually  They view TV ads as “just advertising” 17 3

Teens  Ages  Population of about 25 million  They spend approximately 72 hours per week tuned in electronically  They view shopping as a social sport  FB: 50 million teens (effect on marketers?) 18 3

Generation Y Born between 1979 and 1994 Ages Surpassed population of baby boomers Those born in 1994 fit closer to the Teens Those born in 1979 have established careers and started families Purchasing power of $200 billion annually 19 3

Generation X Born between 1965 and 1978 Ages Population of 40 million Independent, resilient, adaptable, cautious, skeptical 71 percent have children under the age of 18 Home ownership is an important goal Avid buyers of the latest clothes, technology, and recreational products 20 3

Baby Boomers Born between 1946 and 1964 Ages Population of 75 million Working longer to compensate for economic downturn, which affected retirement savings Services directed at seniors is one of the fastest growing business markets 21 3

Growing Ethnic Markets The importance to marketing managers of growing ethnic markets 22 4

Growing Ethnic Markets Estimated purchasing power of ethnic markets in 2013: Hispanics: $1.5 trillion African Americans: $1.2 billion Asian Americans: $775 billion The minority population of the United States in 2011 reached 110 million. 23 4

Marketing to Hispanic Americans  Hispanic population’s diversity creates challenges for targeting this market.  12 million Hispanics aged in the U.S.  94 percent of U.S. Hispanics have home Internet.  Highly responsive to new media: mobile marketing and social media marketing. 24 4

Marketing to African Americans 47 percent are between 18 and 49 years old More firms are creating products for the African American market. Promotional dollars and media choices directed toward African Americans continue to increase. 25 4

Marketing to Asian Americans Younger, better educated, and have highest average income of all groups Early adopters of latest digital gadgets Cultural diversity within the Asian American market complicates promotional efforts 26 4

Consumer and marketer reactions to the state of the economy 27 Economic Factors (3) 5

Economic Factors b-Purchasing Power c-Inflation d-Recession / a-Consumers Income 28 5

a- Consumers’ Incomes Median U.S. household income in 2010 was approximately $50,000 Incomes have risen at a slow pace in recent years Education is the primary determinant of earning potential 29 5

A comparison of income versus the relative cost of a set standard of goods and services in different geographic areas. b-Purchasing Power 30 5

A measure of the decrease in the value of money, expressed as the percentage reduction in value since the previous year c- Inflation

A period of economic activity characterized by negative growth, which reduces demand for goods and services d- Recession

The impact of technology on a firm 33 Technological Factors (4) 6

Research Basic Research Applied Research Pure research that aims to confirm an existing theory or to learn more about a concept phenomenon. An attempt to develop new or improved products 34 6

The political and legal environment of marketing 35 7 Political and Legal Factors (5)

Political and Legal Factors  New technology  Society  Businesses  Consumers Laws and Regulations Protect:

Federal Legislation Sherman Act Clayton Act Federal Trade Commission Act Celler-Kefauver Antimerger Act Hart-Scott-Rodino Act Foreign Corrupt Practices Act Sherman Act Clayton Act Federal Trade Commission Act Celler-Kefauver Antimerger Act Hart-Scott-Rodino Act Foreign Corrupt Practices Act Regulate competitive environment Robinson-Patman Act-- $$$ Regulates pricing practices Wheeler-Lea Act Controls false advertising 37 7

State Laws Legislation that affects marketing varies state by state. California: bans trans fats in restaurants and bakeries NYC: soft drink ban, prohibits servings of no larger than 16 ounces (Mayor Bloomberg) 38 7

Regulatory Agencies Consumer Product Safety Commission Federal Trade Commission Food & Drug Administration Protects consumer safety in and around their homes Prevents unfair methods of competition in commerce Enforces safety regulations for food and drug products 39 7

Competitive Factors (6) Competition for 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. 40 8