1. Copyright ©2009 by Cengage Learning Inc. All rights reserved 1 Prepared by Amit Shah Frostburg State University CHAPTER 4 Designed by Eric Brengle B-books, Ltd. Marketing Lamb, Hair, McDaniel 10 The Marketing Environment

2. Copyright ©2009 by Cengage Learning Inc. All rights reserved Learning Outcomes 2 LO I LO 2 LO 3 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

3. Copyright ©2009 by Cengage Learning Inc. All rights reserved Learning Outcomes 3 Explain the importance to marketing managers of multiculturalism and growing ethnic markets Identify consumer and marketer reactions to the state of the economy Identify the impact of technology on a firm LO 5 LO 6 LO 4

4. Copyright ©2009 by Cengage Learning Inc. All rights reserved Learning Outcomes 4 Discuss the political and legal environment of marketing Explain the basics of foreign and domestic competition LO 8 LO 7

5. Copyright ©2009 by Cengage Learning Inc. All rights reserved The External Marketing Environment 5 Discuss the external environment of marketing, and explain how it affects a firm LO 1

6. Copyright ©2009 by Cengage Learning Inc. All rights reserved Target Market 6 LO 1 Target Market A defined group most likely to buy a firm’s product.

7. Copyright ©2009 by Cengage Learning Inc. All rights reserved External Marketing Environment 7 LO 1 Demographics Social Change Social Change Economic Conditions Economic Conditions Political & Legal Factors Political & Legal Factors Technology Competition Environmental Scanning Target Market External Environment (uncontrollable) Ever-Changing Marketplace Product Distribution Promotion Price Product Distribution Promotion Price Internal (within the organization) Marketing mix

8. Copyright ©2009 by Cengage Learning Inc. All rights reserved Social Factors 8 Describe the social factors that affect marketing LO 2

9. Copyright ©2009 by Cengage Learning Inc. All rights reserved Social Factors 9 LO 2 Values Attitudes Lifestyle

10. Copyright ©2009 by Cengage Learning Inc. All rights reserved Social Factors 10 LO 2 Social Factors Influence: Products purchased Prices paid for products Effectiveness of promotions How, where, and when people purchase

11. Copyright ©2009 by Cengage Learning Inc. All rights reserved Social Factors 11 LO 2 Self-Sufficiency Upward Mobility Work Ethic Conformity Core American Values

12. Copyright ©2009 by Cengage Learning Inc. All rights reserved The Influence of Values on Buying Habits 12 LO 2 Ranked Characteristics of Product Quality Reliability Durability Easy maintenance Ease of use Trusted brand name Low price

13. Copyright ©2009 by Cengage Learning Inc. All rights reserved Component Lifestyles 13 LO 2 Component Lifestyles 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.

14. Copyright ©2009 by Cengage Learning Inc. All rights reserved Role of Families and Working Women Growth of dual-income families results in increased purchasing power Approximately 63% of work-age females are in the workforce Women expect different things in life – purchase bulk of technology products – second largest group of home buyers after couples Single households outnumber married households with kids 14 LO 2

15. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME 15 LO 2 Social Factors that Affect Marketing

16. Copyright ©2009 by Cengage Learning Inc. All rights reserved Demographic Factors 16 Explain the importance to marketing managers of current demographic trends LO 3

17. Copyright ©2009 by Cengage Learning Inc. All rights reserved Demographic Factors 17 LO 3 Demography The study of people’s vital statistics, such as their age, race and ethnicity, and location.

18. Copyright©2009 by Cengage Learning Inc. All rights reserved Tweens 18 LO 3  Pre- and early adolescents, age 9 to 14  Population of 20 million  Purchasing power of $21 billion in 2008  View TV ads as “just advertising”  Emerging as “the richest generation” and the “most influential generation in history”

19. Copyright©2009 by Cengage Learning Inc. All rights reserved Teens 19 LO 3  Population of 25 million in U.S.  Purchasing power of $195 billion annually  Approximately 72 hours per week tuned in electronically  68 percent of teens have created profiles on MySpace, Zanga, or Facebook  Shopping has become social sport: 62 percent love to shop

20. Copyright©2009 by Cengage Learning Inc. All rights reserved Generation Y  Born between 1979 and 1994  Population of 73 million  Purchasing power of $200 billion annually  Researchers have found Gen Yers to be: –Impatient –Family-oriented –Inquisitive –Opinionated –Diverse –Time managers –“Street Smart” –Connected 20 LO 3

21. Copyright©2009 by Cengage Learning Inc. All rights reserved Generation X  Born between 1965 and 1978  Population of 40 million  Savvy and cynical consumers  More protective and involved with their kids  Value the importance of education  Avid buyers of the latest clothes, technology, and recreational products 21 LO 3

22. Copyright©2009 by Cengage Learning Inc. All rights reserved Baby Boomers  Born between 1946 and 1964  Population of 77 million— the largest demographic segment  $2 trillion in spending power a year  Income will continue to grow as they keep working  Four segments of baby boomers: “Looking for balance” “Confident and living well” “At ease” “Overwhelmed” 22 LO 3

23. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME 23 LO 3 Current Demographic Trends Age Tweens 8 to 14 yrs 29 million Gen Y 1979-1994 60 million Gen X 1965-1978 40 million Baby Boom 1946-1964 77 million

24. Copyright ©2009 by Cengage Learning Inc. All rights reserved Growing Ethnic Markets 24 Explain the importance to marketing managers of multiculturalism and growing ethnic markets LO 4

25. Copyright ©2009 by Cengage Learning Inc. All rights reserved Growing Ethnic Markets 25 LO 4  Spending power of ethnic markets in 2008: – Hispanics-- $1 trillion – African Americans-- $921 billion – Asian Americans-- $526 billion  Diversity can result in bottom-line benefits to companies.

26. Copyright©2009 by Cengage Learning Inc. All rights reserved Marketing to Hispanic Americans 26 LO 4  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.  68% of U.S. Hispanics have home Internet access.

27. Copyright©2009 by Cengage Learning Inc. All rights reserved Marketing to African Americans 27 LO 4  Many firms are creating products for the African American market.  Promotional dollars and media choices directed toward African Americans continue to increase.

28. Copyright©2009 by Cengage Learning Inc. All rights reserved Marketing to Asian Americans 28 LO 4  Younger, better educated, and have highest average income of all groups  Sometimes called a “marketer’s dream  Many products have been developed for Asian American market.  Cultural diversity within the Asian American market complicates promotional efforts.

29. Copyright©2009 by Cengage Learning Inc. All rights reserved Ethnic and Cultural Diversity 29 LO 4  Multiculturalism: occurs when all major ethnic groups in an area (city, county, or census tract) are roughly equally represented  U.S. trend is toward greater multiculturalism  America’s racial and ethnic patterns have taken on distinctly regional dimensions

30. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME 30 LO 4 Multiculturalism and Growing Ethnic Markets

31. Copyright ©2009 by Cengage Learning Inc. All rights reserved Economic Factors 31 Identify consumer and marketer reactions to the state of the economy LO 5

32. Copyright ©2009 by Cengage Learning Inc. All rights reserved Economic Factors 32 LO 5 Consumer’s Income Inflation Recession

33. Copyright ©2009 by Cengage Learning Inc. All rights reserved Consumers’ Incomes Median U.S. household income in 2008 was approximately $49,000. Incomes have risen at a slow pace. Education is the primary determinant of earning potential. 33 LO 5

34. Copyright ©2009 by Cengage Learning Inc. All rights reserved The Financial Power of Women Women bring in half or more of the household income Women control 51.3 percent of the private wealth in the U.S. Women control 80 percent of household spending 34 LO 5

35. Copyright ©2009 by Cengage Learning Inc. All rights reserved Purchasing Power 35 LO 5 Purchasing Power Purchasing Power A comparison of the relative cost of a set standard of goods and services in different geographic areas.

36. Copyright ©2009 by Cengage Learning Inc. All rights reserved Inflation 36 LO 5 Inflation A measure of the decrease in the value of the money, expressed as the percentage reduction in value since the previous year.

37. Copyright ©2009 by Cengage Learning Inc. All rights reserved Recession 37 LO 7 Recession A period of economic activity characterized by negative growth, which reduces demand for goods and services.

38. Copyright ©2009 by Cengage Learning Inc. All rights reserved 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 38 LO 5

39. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME 39 LO 5 Economic Factors

40. Copyright ©2009 by Cengage Learning Inc. All rights reserved Technological Factors 40 Identify the impact of technology on a firm LO 6

41. Copyright ©2009 by Cengage Learning Inc. All rights reserved Research 41 LO 6 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

42. Copyright ©2009 by Cengage Learning Inc. All rights reserved 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 42 LO 6

43. Copyright ©2009 by Cengage Learning Inc. All rights reserved Technological Factors 43 Innovation is becoming a global process. 25 most innovative firms achieved average profit margin growth of 3.4% per year LO 6

44. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME 44 LO 6 Impact of Technology on a Firm Basic Research Basic Research Marketing Mix Applied Research Applied Research Technology Advances

45. Copyright ©2009 by Cengage Learning Inc. All rights reserved Political and Legal Factors 45 Discuss the political and legal environment of marketing LO 7

46. Copyright ©2009 by Cengage Learning Inc. All rights reserved Political and Legal Factors 46 LO 7  New technology  Society  Businesses  Consumers Laws and Regulations Protect:

47. Copyright ©2009 by Cengage Learning Inc. All rights reserved Federal Legislation 47 LO 7 Sherman Act Clayton Act Federal Trade Commission Act Celler-Kefauver Antimerger Act Hart-Scott-Rodino Act 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

48. Copyright ©2009 by Cengage Learning Inc. All rights reserved Regulatory Agencies 48 LO 7 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

49. Copyright ©2009 by Cengage Learning Inc. All rights reserved Powers of the FTC 49 LO 7 Cease-and-Desist Order Consent Decree Affirmative Disclosure Corrective Advertising Restitution Counteradvertising

50. Copyright ©2009 by Cengage Learning Inc. All rights reserved Consumer Privacy 50 LO 7  Gramm-Leach-Bliley Act  Health Insurance Portability and Accountability Act (HIPPA)  California’s Notice of Security Breach Law Government Actions

51. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME 51 LO 7 Political and Legal Environment of Marketing

52. Copyright ©2009 by Cengage Learning Inc. All rights reserved Competitive Factors 52 Explain the basics of foreign and domestic competition LO 8

53. Copyright ©2009 by Cengage Learning Inc. All rights reserved Competitive Factors 53 LO 8 How many competitors? How big are competitors? How interdependent is the industry? Control

54. Copyright ©2009 by Cengage Learning Inc. All rights reserved 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. 54 LO 8

55. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Political and Legal Environment 55 LO 8 Mature Industries Slow Growth / No Growth Highly Competitive Marketplace Can only increase market share by taking it from a competitor.