1. The Marketing Environment
Lamb, Hair, McDaniel
Chapter 4 The Marketing Environment
CHAPTER 4
The Marketing Environment
Although managers can control the marketing mix, they cannot control elements in the external environment.
© Mark Herreid/Shutterstock.com

2. Chapter 4 The Marketing Environment
Learning Outcomes
LO 1 Discuss the external environment of marketing, and explain how it affects a firm
LO 2 Describe the social factors that affect marketing
LO 3 Explain the importance to marketing managers of current demographic trends
LO 4 Explain the importance to marketing managers of growing ethnic markets

3. Chapter 4 The Marketing Environment
Learning Outcomes
LO 5 Identify consumer and marketer reactions to the state of the economy
LO 6 Identify the impact of technology on a firm
LO 7 Discuss the political and legal environment of marketing
LO 8 Explain the basics of foreign and domestic competition

4. The External Marketing Environment
Chapter 4 The Marketing Environment
The External Marketing Environment
Discuss the external environment of marketing, and explain how it affects a firm
LO1 4

5. Target Market LO1 A defined group most likely to buy a product
Chapter 4 The Marketing Environment
Target Market
A defined group most likely to buy a product
Changes as consumers age
External elements change consumers’ desires
LO1 5

6. The External Environment
Chapter 4 The Marketing Environment
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.
LO1 6

7. Describe the social factors that affect marketing
Chapter 4 The Marketing Environment
Social Factors
Describe the social factors that affect marketing
LO2 7

8. Social Factors LO2 Attitudes Values Lifestyle
Chapter 4 The Marketing Environment
Social Factors
Values
Attitudes
Lifestyle
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.
LO2 8

9. Social Factors LO2 Social Factors Influence: Products purchased
Chapter 4 The Marketing Environment
Social Factors
Social Factors Influence:
Products purchased
Prices paid for products
Effectiveness of promotions
How, where, and when people purchase
LO2 9

10. American Values LO2 Core American Values Emerging Trends
Chapter 4 The Marketing Environment
American Values
Core American Values
Emerging Trends
Self-Sufficiency
Upward Mobility
Work Ethic
Conformity
Getting off the grid
Meaningful green
EcoTechMed
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.
LO2 10

11. The Influence of Values on Buying Habits
Chapter 4 The Marketing Environment
Ranked Characteristics of Product Quality
Reliability
Durability
Easy maintenance
Ease of use
Trusted brand name
Low price
Notes:
Values influence our buying habits. Consumers demand high-quality goods that save energy, time, and calories! Furthermore, the products must be durable and not break down. This slide shows the ranked characteristics of product quality that are important to consumers.
Discussion/Team Activity:
1. Discuss products that demonstrate high quality standards in each of the ranking categories.
LO2 11

12. Component Lifestyles LO2
Chapter 4 The Marketing Environment
Component Lifestyles
The practice of choosing goods and services that meet one’s diverse needs and interests rather than conforming to a single, traditional lifestyle.
Notes:
A lifestyle is a mode of living. People are choosing products and services that meet diverse needs and interests rather than conforming to traditional stereotypes.
The unique lifestyles of every consumer can require a different marketing mix.
Today’s consumers want multifunctional products
No longer defined only by occupation
LO2 12

13. Role of Families and Working Women
Chapter 4 The Marketing Environment
Growth of dual-income families results in increased purchasing power
Approximately 59 percent of work-age females are in the workforce
Working wives bring in 45 percent of the total family earnings.
The phenomenon of working women has probably had a greater effect on marketing than any other social change.
Notes:
The phenomenon of working women has had a greater effect on marketing than has any other social change. Furthermore, the growth of dual-income families has resulted in increased purchasing power.
As women’s earnings grow, so do their levels of expertise, experience, and authority. Women expect different things in life.
LO2 13

14. There Is Never Enough Time
Chapter 4 The Marketing Environment
There Is Never Enough Time
It is estimated that over 80 percent of the working population is worried about having too little time.
About 40 percent of American adults get less than 7 hours of sleep on weekdays.
About 74 percent of working adults engage in multitasking.
Notes:
Research shows that the percentage of people who say they never have enough time to do all that they need to do keeps increasing.
LO2 14

15. Demographic Factors LO3
Chapter 4 The Marketing Environment
Demographic Factors
Explain the importance to marketing managers of current demographic trends
LO3 15

16. Demographic Factors LO3 People are the basis for any market
Chapter 4 The Marketing Environment
Demographic Factors
People are the basis for any market
Demographic characteristics relate to buyer behavior
Demographic cohorts have their own needs, values, and consumption patterns.
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.
LO3 16

17. Tweens LO3 Pre- and early adolescents, age 8 to 12
Chapter 4 The Marketing Environment
Pre- and early adolescents, age 8 to 12
Population of 20 million
Directly spend about $50 billion annually
Parents spend $150 billion on tweens annually
View TV ads as “just advertising”
Notes:
Marketers refer to designated age-cohort groups by these name: tweens, teens, Generation Y, Generation X, and baby boomers. Each cohort has its own needs, values, and consumption patterns.
LO3 17

18. Teens LO3 58 percent shop online Population of about 25 million
Chapter 4 The Marketing Environment
Population of about 25 million
Spend approximately 72 hours per week tuned in electronically
View shopping as a social sport
58 percent shop online
LO3 18

19. Generation Y LO3 Born between 1979 and 1994
Chapter 4 The Marketing Environment
Born between 1979 and 1994
Surpassed population of baby boomers in 2010
Two Stages: 1) Those born in 1994 fit closer to the Teen cohort. 2) Those born in 1979 have established careers and started families.
Purchasing power of $200 billion annually
Researchers have found Gen Yers to be:
Inquisitive Quick shoppers
Opinionated Want fulfillment
Diverse Multitaskers
Time managers Environmentally aware
Discussion/Team Activity:
Identify some mature brands favored by the baby boomers. Discuss how these brands might successfully be marketed to Generation Y.
LO3 19

20. Generation X LO3 71 percent have children under age 18
Chapter 4 The Marketing Environment
Born between 1965 and 1978
Population of 40 million
Independent, resilient, adaptable, cautious, and skeptical
71 percent have children under age 18
Home ownership is an important goal
Avid buyers of the latest clothes, technology, and recreational products
Discussion/Team Activity:
1. Name some ways that companies have marketed successfully to Generation Xers.
LO3 20

21. Baby Boomers LO3 Born between 1946 and 1964 Population of 75 million
Chapter 4 The Marketing Environment
Born between 1946 and 1964
Population of 75 million
Working longer to compensate for economic downturn, which affected retirement savings
The market of services directed at seniors is one of the fastest growing business markets
LO3 21

22. Growing Ethnic Markets
Chapter 4 The Marketing Environment
Growing Ethnic Markets
Explain the importance to
marketing managers of growing ethnic markets
LO4 22

23. Growing Ethnic Markets
Chapter 4 The Marketing Environment
Growing Ethnic Markets
Estimated purchasing power of ethnic markets in 2013:
Hispanics: $1.4 trillion
African Americans: $1.2 billion
Asian Americans: $752 billion
The minority population of the United States in 2011 reached 110 million.
Companies are recognizing that diversity can result in bottom-line benefits.
Notes:
LO4 23

24. Marketing to Hispanic Americans
Chapter 4 The Marketing Environment
Marketing to Hispanic Americans
The Hispanic population’s diversity creates challenges for targeting this market.
Hispanics tend to be brand loyal, but are not aware of many mainstream U.S. brands.
68 percent of U.S. Hispanics have home Internet access.
Notes:
Nearly 60% of Hispanic Americans are of Mexican descent; Puerto Ricans make up just under 10% of Hispanics; and others groups (Central Americans, Dominicans, South Americans, and Cubans) each account for less than 5 percent of all Hispanics
Hispanics will choose brands that reflect their native values and culture.
LO4 24

25. Marketing to African Americans
Chapter 4 The Marketing Environment
Marketing to African Americans
47 percent are between 18 and 49 years
More firms are creating products for the African American market.
Promotional dollars and media choices directed toward African Americans continue to increase.
Notes:
LO4 25

26. Marketing to Asian Americans
Chapter 4 The Marketing Environment
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.
Notes:
Asian Americans represent only 4.2% of the U.S. population
Have the highest average family income of all groups - $66,500
48% of all Asian Americans have at least a bachelor’s degree
Key groups of Asian Americans are:
Chinese
Filipino
Japanese
Vietnamese
Korean
Indian
Pakistani
LO4 26

27. Identify consumer and marketer reactions to the state of the economy
Chapter 4 The Marketing Environment
Economic Factors
Identify consumer and marketer reactions to the state of the economy
Notes:
1. The next external factor is the economic environment.
LO5 27

28. Economic Factors LO5 Purchasing Power Inflation Recession Consumers’
Chapter 4 The Marketing Environment
Economic Factors
Consumers’
Income
Purchasing Power
Inflation
Recession
Notes:
The four economic areas of greatest concern to marketers are consumers’ incomes, purchasing power, inflation, and recession.
LO5 28

29. Chapter 4 The Marketing Environment
Consumers’ Incomes
Median U.S. household income in 2010 was approximately $52,000.
Incomes have risen at a slow pace in recent years.
Education is the primary determinant of earning potential.
Notes:
U.S. incomes have continued to rise, but at a slower pace.
Only 1 percent of those with only a high-school education earn over $100,000 annually.
LO5 29

30. Purchasing Power Purchasing Power is… LO5
Chapter 4 The Marketing Environment
Purchasing Power is…
a comparison of income versus the relative cost of a set standard of goods and services in different geographic areas.
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.
LO5 30

31. Inflation Inflation is… LO5
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.
© iStockphoto.com/Valentin Mosichev
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.
LO5 31

32. Recession Recession is… LO5
Chapter 4 The Marketing Environment
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.
LO5 32

33. Technological Factors
Chapter 4 The Marketing Environment
Technological Factors
Identify the impact of technology on a firm
LO6 33

34. Research LO6 Basic Research Applied Research
Chapter 4 The Marketing Environment
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
LO6 34

35. Stimulating Innovation
Chapter 4 The Marketing Environment
Stimulating Innovation
Build scenarios
Enlist the Web
Talk to early adopters
Use marketing research
Create an innovative environment
Cater to entrepreneurs
Notes:
Companies attempting to innovate often limit their searches to areas they are already familiar with.
LO6

36. Political and Legal Factors
Chapter 4 The Marketing Environment
Political and Legal Factors
Discuss the political and legal environment of marketing
LO7 36

37. Political and Legal Factors
Chapter 4 The Marketing Environment
Political and Legal Factors
New technology
Society
Businesses
Consumers
Laws and Regulations Protect:
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.
LO7 37

38. Regulate competitive environment Regulate pricing practices
Chapter 4 The Marketing Environment
Federal Legislation
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
Regulate pricing practices
Wheeler-Lea Act
Control false
advertising
LO7 38

39. Chapter 4 The Marketing Environment
State Laws
Legislation that affects marketing varies state by state.
Oregon: limits utility advertising to 0.5 percent of net income.
California: bans trans fats in restaurants and bakeries.
LO7 39

40. Regulatory Agencies LO7 Consumer Product Safety Commission
Chapter 4 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
Notes:
The regulatory agencies shown on this slide are the three federal agencies most directly and actively involved in marketing affairs.
Enforces safety regulations for food and drug products
LO7 40

41. Bureaus of the FTC LO7 Reviews mergers and acquisitions
Chapter 4 The Marketing Environment
Bureaus of the FTC
Reviews mergers and acquisitions
Challenges anti-competitive conduct
Promotes competition
Provides information
Enforces federal laws that protect consumers
Empowers consumers with information
Communicates with consumers about fraud and identity theft
Bureau of Competition
Bureau of Consumer Protection
LO7 41

42. Consumer Privacy LO7 Government Actions CAN-SPAM Act
Chapter 4 The Marketing Environment
Consumer Privacy
CAN-SPAM Act
Children’s Online Privacy Protection Act Rule
Government Actions
Notes:
The popularity of the Internet for collecting consumer data has alarmed privacy-minded consumers.
The CAN-SPAM Act was passed to regulate unsolicited advertising.
LO7 42

43. of foreign and domestic competition
Chapter 4 The Marketing Environment
Competitive Factors
Explain the basics
of foreign and domestic competition
LO8 43

44. Competitive Factors Control LO8 How many competitors?
Chapter 4 The Marketing Environment
Competitive Factors
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.
LO8 44

45. Competition for Market Share
Chapter 4 The Marketing Environment
Competitive Factors
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.
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.
LO8 45

46. Chapter 4 Video
Method
Review the videos from chapters 2 and 3. How do the decision Method makes reflect the marketing environment?