1. The Marketing Environment Principles of Marketing Chapter 3 Updated 2003

2. External Marketing Environment Marketers must alter marketing mix (4 p’s) because of changes in the environment. Marketers can control marketing mix, but not external environment that continually mold & reshape the target market.

3. Environmental Scanning Organizations assemble a team of specialists to continually collect and evaluate environmental information. Goal is to identify future market opportunities and threats.

4. Environmental Management When a company implements strategies that attempt to shape the external environment within which it operates. Try to influence technological, competitive, and political/legal environments.

5. Uncontrollable External Environmental Factors 1. Social 2. Demographic 3. Economic 4. Technological & Resource 5. Political & Legal 6. Competitive

6. 1. Social Factors Most difficult variable to forecast, influence or integrate into marketing plans. Attitudes Values Lifestyles

7. Social Factors... Influence: products people buy, prices paid for products, effectiveness of specific promotions, and the how, where, when people expect to purchase products.

8. Changing Role of Families & Working Women Greater effect on marketing than any other social change. 58% of all females between 16 and 65 years old are now in the workforce. Two-career families have greater HH income, but less available time for family activities.

9. Changing Role of Families & Working Women... Women are very concerned about the environment. Surge in daycare centers, preschools, adult-care centers. Women pay more for products/services than men.

10. 2. Demographic Factors Age, race, ethnicity, location Strongly related to consumer buyer behavior. Good predictors of how the target market will respond to a specific marketing mix.

11. Generations DescriptionYears BornMillions/peopleCharacteristics Generation “Next” or Millennials 1982-2002 (1980 – 2002) 70 millionTech-savvy Educated Multicultural Generation “Y” (subset of “X”) 1976-1981 (1979 – 1994) 81 million (X + Y) Edgy, focused on urban style, retro style Generation “X”1961-1981 (1965-1978) See aboveCynical, media savvy, rebellious Baby Boomers1946-1964 (1946-1964) 76 millionHigh disposable income, value- driven Silent Generation 1925 - 194535 millionConformists, now grandparents of “Millennials”

12. Personalized Economy Delivers goods/services at a good value on demand. Customization Cable TV channels Immediacy Banks in grocery stores Value price competitively/create innovations

13. Americans On the Move Average U.S. citizen moves every 6 years. Reasons: employment “young” retirees telecommuters commercial development in rural areas

14. Growing Ethnic Markets 1960: 90% of U.S. pop. was white 1990: 80% of U.S. pop. was white Three primary racial/ethnic minorities: African-Americans U.S. Hispanics Asian-Americans

15. Multiculturalism All major ethnic groups in an area are roughly equally represented. Hispanic is the largest minority group now in U.S. Census (1990) identified 110 different ethnic groups in U.S.

16. Strategies for Marketing in a Diverse Society 1. Many niches within ethnic markets - requires micromarketing strategies. 2. Maintain brand’s core identity while straddling different languages, cultures, ages, incomes. 3. Seek common interests, motivations or needs among ethnic groups - “stitching niches”

17. 3. Economic Factors 1. Rising Incomes 2. Inflation 3. Recession

18. Rising Incomes 2/3 of all American HH’s earn a “middle class” income: $18,000 - $75,000. Over 8% of HH’s earn over $75,000, up from 2.6% in 1980. Trend toward dual-income families leading contributor. Provides more discretionary income.

19. Inflation Inflation causes consumers to do two things: Decrease brand loyalty to search for lowest prices Take advantage of coupons and sales to stock up on items

20. Recession Period of economic activity when income, production, and employment fall – which reduces demand. This can be countered by: Improving existing products/introducing new ones. Maintain & expand customer services. Emphasize top-of-the-line products and promote product value.

21. 4. Technological & Resource Factors New technology can assist firm in coping with many other environmental factors. Example: New processes can reduce production costs and help firm fight inflation/recession.

22. Technological & Resource Factors... U.S. is not creating new technology as fast as in the past. U.S. companies have trouble transforming results of basic/pure research into goods/services. Applied research attempts to develop new or improved products.

23. Technological & Resource Factors... Many U.S. companies seek short-term profits and take minimal risk. This leads to development of line extensions vs. new innovations. Several political/cultural alterations could encourage innovations. Tax incentives Changes in org. structure Company encouragement of risk taking

24. 5. Political & Legal Govt. establishes many operating rules for businesses. Legal rules/restrictions affect every aspect of the marketing mix. Govt. needs business to generate revenue. Regulate competitive environment

25. Regulatory Agencies Consumer Product Safety Commission Federal Trade Commission Food and Drug Administration

26. 6. Competitive Factors # competitors a firm must face Relative size of competitors Degree of interdependence within industry

27. Basic Models of Competition Monopoly Firm is the industry Utility co.’s, Monopolistic Competition Large # suppliers offer similar, but not identical products. Laundries, hair stylists, lawyers

28. Basic Models of Competition... Oligopoly Small # firms dominate market Auto, tire, etc. Pure Competition Large # of sellers marketing a standardized product

29. Global Competition In the past, foreign firms entered U.S. markets by emphasizing price, now it’s quality. U.S. companies battle one another in global markets as intensively as in the U.S.

30. Ethical Decision Making Extent of ethical problems within organization Top-management actions on ethics Potential magnitude of the consequences Social consensus Probability of harmful outcome Length of time between decision/consequences # of people affected See Exhibit 3.6, page 83

31. Corporate Social Responsibility Business’s concern for society’s welfare Pyramid of Corporate Responsibility (Exhibit 3.8, page 86) Economic – be profitable Legal – obey the law Ethical – be ethical Philanthropic – be a good corporate citizen