1. The Marketing Environment
Chapter 4 The Marketing Environment
The Marketing Environment
Chapter 4
Lamb, Hair, McDaniel
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Chapter 4 The Marketing Environment 1
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 3 4
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Chapter 4 The Marketing Environment 5
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 6 7 8
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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 1
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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 1
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6. 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. 1
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7. Describe the social factors that affect marketing
Chapter 4 The Marketing Environment
Social Factors
Describe the social factors that affect marketing 2
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Chapter 4 The Marketing Environment
Social Factors
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. 2
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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. 2
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10. 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:
Discuss products that demonstrate high quality standards in each of the ranking categories. 2
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11. 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 2
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12. The Role of Social Media in Communication
Chapter 4 The Marketing Environment
The Role of Social Media in Communication
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. 2
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13. 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. 2
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Chapter 4 The Marketing Environment
Demographic Factors
Explain the importance to marketing managers of current demographic trends 3
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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:
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. 3
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Chapter 4 The Marketing Environment
Tweens
Pre- and early adolescents, age eight to twelve
Population of 20 million
Directly spend about $30 billion annually
Parents spend $180 billion on tweens annually
Respond very favorably to having control over their own experiences
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. 3
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Chapter 4 The Marketing Environment
Teens
Population of about 25 million
95 percent of U.S. Teens are on the Internet
View shopping as a social sport
75 percent of teens are into social networking
On average, just over $156 is spent on or by every American teen each week 3
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Chapter 4 The Marketing Environment
Generation Y
Born between 1979 and 1994
Surpassed population of baby boomers
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
Discussion/Team Activity:
Identify some mature brands favored by the baby boomers. Discuss how these brands might successfully be marketed to Generation Y. 3
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Generation X
Chapter 4 The Marketing Environment
Born between 1965 and 1978
Population of 50 million
Independent, resilient, adaptable, cautious, and skeptical
Gen Xers face a 59 percent decline in net worth from 2005 to 2010
Xers spend 62 percent more on housing, 50 percent more on apparel, and 27 percent more on entertainment
Discussion/Team Activity:
Name some ways that companies have marketed successfully to Generation Xers. 3
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Chapter 4 The Marketing Environment
Baby Boomers
Born between 1946 and 1964
Boomers are carrying substantial financial burdens, including their children’s educations, mortgages, and health care
Boomers spend $1.8 trillion annually on food, cars, personal care, and other personal products
Boomers are willing to change brands and try new things 3
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21. Growing Ethnic Markets
Chapter 4 The Marketing Environment
Growing Ethnic Markets
Explain the importance to
marketing managers of growing ethnic markets 4
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22. Growing Ethnic Markets
Chapter 4 The Marketing Environment
Growing Ethnic Markets
The United States Hispanic consumer market is now larger than all but 13 world economies
African American buying power increased 73 percent between 2000 and 2012
Asian American buying power increased 165 percent between 2000 and 2012
About one in three U.S. residents is a member of a minority group
The United States will flip to majority-minority completely in 2041 4
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23. Marketing to Hispanic Americans
Chapter 4 The Marketing Environment
Marketing to Hispanic Americans
The term Hispanic encompasses people of many different backgrounds
Nearly 60 percent of Hispanics are of Mexican descent
The diversity of the Hispanic population and the language differences create many challenges for those trying to target this market
Hispanics, especially recent immigrants, often prefer products from their native country
Notes:
Nearly 60 percent of Hispanic Americans are of Mexican descent; Puerto Ricans make up just under 10 percent 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. 4
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24. Marketing to African Americans
Chapter 4 The Marketing Environment
Marketing to African Americans
47 percent of African Americans are between 18 and 49 years old
More firms are creating products for the African American market
In 2012, there were 2.8 million African Americans earning more than $75,000 annually 4
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25. Marketing to Asian Americans
Chapter 4 The Marketing Environment
Marketing to Asian Americans
The Asian American population is the fastest growing among minority groups
It quadrupled to about 17 million between 1980 and 2012
Although Asian Americans embrace the values of the larger U.S. population, they also hold on to the cultural values of their particular subgroup
Asian Americans like to shop at stores owned and managed by other Asian Americans
Notes:
Asian Americans represent only 6 percent of the U.S. population
Have the highest average family income of all groups: $68,780
52 percent of all Asian Americans over the age of 25 have at least a bachelor’s degree
Key groups of Asian Americans are:
Chinese
Filipino
Japanese
Vietnamese
Korean
Indian
Pakistani 4
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26. 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 5
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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. 5
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Chapter 4 The Marketing Environment
Consumers’ Incomes
Median U.S. household income in 2012 was approximately $50,000
Average family incomes, when adjusted for inflation, fell around eight percent between 2007 and 2011
Education is the primary determinant of earning potential
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. 5
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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. 5
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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. 5
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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. 5
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32. Technological Factors
Chapter 4 The Marketing Environment
Technological Factors
Identify the impact of technology on a firm 6
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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 6
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34. 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
Notes:
Companies attempting to innovate often limit their searches to areas they are already familiar with.
Cater to entrepreneurs 6
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35. Political and Legal Factors
Chapter 4 The Marketing Environment
Political and Legal Factors
Discuss the political and legal environment of marketing 7
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36. 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. 7
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37. 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 7
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Chapter 4 The Marketing Environment
State Laws
Legislation that affects marketing varies state by state. For example:
Oregon limits utility advertising to 0.5 percent of net income
California has enacted legislation to lower the energy consumption of refrigerators, freezers, and air conditioners
California and North Carolina, are considering a tax on all in-state commercial advertising 7
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39. Regulatory Agencies 7 Consumer Product Safety Commission
Chapter 4 The Marketing Environment
Regulatory Agencies
Consumer Product Safety Commission
Food & Drug Administration
Federal Trade Commission
Protects consumer safety in and around their homes
Enforces safety regulations
for food and drug products
Prevents unfair methods of
competition in commerce
Notes:
The regulatory agencies shown on this slide are the three federal agencies most directly and actively involved in marketing affairs. 7
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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 7
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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.
Successful tracking has created a $31 billion online-advertising business that is growing rapidly. In 2012, there were more than 300 companies collecting data about users.
Despite federal efforts, online tracking is on a tear. A vast amount of personal data is collected through apps. 7
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42. of foreign and domestic competition
Chapter 4 The Marketing Environment
Competitive Factors
Explain the basics
of foreign and domestic competition 8
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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. 8
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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. 8
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Chapter 4 Video
GaGa’s Inc.
GaGa’s Inc. produces a frozen dessert called Sherbetter in a variety of flavors. GaGa’s is very small product line and Jim King, the founder and CEO, discusses the challenges his company faces in their product category. He also reveals other environmental challenges to his product.
CLICK TO PLAY
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