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Lamb, Hair, McDaniel

CHAPTER 4

The Marketing Environment

2010-2011

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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 multiculturalism and growing ethnic markets

Learning OutcomesLearning Outcomes

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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 competition

Learning OutcomesLearning Outcomes

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The ExternalMarketing Environment

4

Discuss the external environment of

marketing and explain

how it affects a firm

LO1

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Target Market

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Defined group most likely to buy a product

• Changes as consumers age

• External elements change consumers’ desires

LO1

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External Marketing Environment

DemographicsDemographics

SocialChangeSocial

Change

EconomicConditionsEconomicConditions

Political & Legal FactorsPolitical &

Legal FactorsTechnologyTechnology

CompetitionCompetition

EnvironmentalScanning

Target Market

External Environment (uncontrollable)

Ever-ChangingMarketplace

ProductDistributionPromotion

Price

ProductDistributionPromotion

Price

Internal (within the

organization)Marketing mix

LO1

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Understanding Competition

• TJ Maxx offers designer brands at discount prices

• 2009 campaign compares the stores prices to those at boutiques and department stores:

– http://www.metacafe.com/watch/2591384/tj_maxx_commercial_6/

– Acknowledging budgetary restraints will drive budget conscious shoppers to the store

LO1

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Social Factors

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Describe the social factors that affect marketing

LO2

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Social Factors

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ValuesValues

AttitudesAttitudes

LifestyleLifestyle

LO2

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Social Factors

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Social Factors Influence:Social Factors Influence:

Products purchasedProducts purchased

Prices paid for productsPrices paid for products

Effectiveness of promotionsEffectiveness of promotions

How, where, and when people purchaseHow, where, and when people purchase

LO2

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Social Factors

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Self-SufficiencySelf-Sufficiency

Upward MobilityUpward Mobility

Work EthicWork Ethic

ConformityConformity

Core American Values

LO2

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The Influence ofValues on Buying Habits

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Ranked Characteristics of Product Quality

Reliability

Durability

Easy maintenance

Ease of use

Trusted brand name

Low price

LO2

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Component Lifestyles

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The practice of choosing goods and

services that meet one’s diverse needs

and interests rather than conforming to

a single, traditional lifestyle.

Today’s consumers want multifunctional products

•No longer defined only by occupation

LO2

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Role of Families and Working Women

• Growth of dual-income families results in increased purchasing power

• Approximately 60% 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

14LO2

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Demographic Factors

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Explain the importance to marketing managers of

current demographic trends

LO3

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Demographic Factors

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People are the basis for any market

• Demographic characteristics relate to buyer behavior

• Tailoring products to what customers value is key to sales

• Demographic cohorts have their own needs, values, and consumption patterns.

LO3

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Tweens

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Pre- and early adolescents, age 8 to 14

Population of 29 million

Purchasing power of $39 billion annually

Parents spend $150 billion on tweens annually

View TV ads as “just advertising”

LO3

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Generation Y

Born between 1979 and 1994

Population of 60 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

18LO3

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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

19LO3

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Baby Boomers

Born between 1946 and 1964

Population of 77 million—the largest demographic segment

Income will continue to grow as they keep working

Working longer to compensate for economic downturn, which affected retirement savings

May brand-hop more than younger consumers

20LO3

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Current Demographic Trends

AgeTweens

8 to 14 yrs29 million

Gen Y

1979-199460 million

Gen X

1965-197840 million

Baby Boom

1946-196477 million

LO3

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Growing Ethnic Markets

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Explain the importance to marketing managers of

multiculturalism and growing ethnic markets

LO4

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Growing Ethnic Markets

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.

LO4

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Marketing to Hispanic Americans

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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.

The NBA expands its appeal with pages appealing directly to the spanish-language market:

http://www.nba.com/enebea/ LO4

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Marketing toAfrican Americans

Many firms are creating products for the African American market.

Promotional dollars and media choices directed toward African Americans continue to increase.

LO4

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Marketing to Asian Americans

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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.

LO4

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Ethnic and Cultural Diversity

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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

LO4

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Multiculturalism and Growing Ethnic Markets

28LO4

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Why Multicultural Marketing?

“[With ethnic marketing] you're going to get more share of the heart, more share of the mind, and ultimately, more share of the wallet.”

About one in three U.S. residents is a minority, representing over 100.7 million people.

7 states more than tripled their Hispanic population between 1990 and 2000: Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee, and Nevada.

Twenty percent of babies born in the United States are Latino.

SOURCE: Mike Robinson, CEO LaVerdad Marketing & Media, http://www.laverdadmarketing.com/la_casa.htm; Lisa Biank Fasig, "An Expanding Business for an Expanding Market," Business Courier of Cincinnati, September 7, 2007

LO4

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Economic Factors

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Identify consumer and marketer reactions to the

state of the economy

LO5

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Economic Factors

Purchasing Power

Inflation

Recession

LO5

Consumer’s Income

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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.

32LO5

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The FinancialPower 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

33LO5

Beyon

d

the B

ook

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RecessionMarketing Strategies

• Improve existing products and introduce new ones

• Maintain and expand customer services

• Emphasize top-of-the-line productsand promote product value

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Thriving in an Economic Downturn

Wal-Mart saw double-digit profit growth during the recent economic downturn. How? A shift in strategy it calls Win/Play/Draw:

• Win: Outmaneuver competitors with low prices on hot products (flat-screen TVs)

• Play: Reduce range of offerings to feature “hot sellers” (its $20 L.e.i. jeans)

• Draw: Keep a stock of one-stop-shopping essentials (hardware, pharmacy items)

LO5

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Economic Factors

36LO5

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Technological Factors

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Identify the impact of technology on a firm

LO6

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Research

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Basic ResearchBasic Research

Applied ResearchApplied 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

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RSS and Blogging

• RSS feeds deliver updated news content according to users interests

• Blogs allow marketers a way to look into consumer opinions with a simple search

• Many blogs devoted to discussing advertisements, here are 10 popular ones:

– http://www.blogs.com/topten/10-popular-advertising-blogs/

LO6

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Political and Legal Factors

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Discuss the political and legal environment

of marketing

LO7

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Political and Legal Factors

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New technology Society Businesses Consumers

Laws and Regulations Protect:Laws and Regulations Protect:

LO7

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Federal Legislation

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Sherman ActClayton ActFederal Trade Commission Act Celler-Kefauver Antimerger ActHart-Scott-Rodino Act

Sherman ActClayton ActFederal Trade Commission Act Celler-Kefauver Antimerger ActHart-Scott-Rodino Act

Regulate competitive

environment

Robinson-Patman Act Robinson-Patman ActRegulate pricing

practices

Wheeler-Lea Act Wheeler-Lea ActControl

falseadvertising

LO7

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Regulatory Agencies

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Consumer Product Safety Commission

Consumer Product Safety Commission

Federal Trade Commission

Federal Trade Commission

Food & Drug AdministrationFood & Drug

Administration

Protects consumer safety in and around their homes

Prevents unfair methods ofcompetition in commerce

Enforces safety regulations for food and drug products

LO7

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Powers of the FTC

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Cease-and-Desist OrderCease-and-Desist Order

Consent DecreeConsent Decree

Affirmative DisclosureAffirmative Disclosure

Corrective AdvertisingCorrective Advertising

RestitutionRestitution

CounteradvertisingCounteradvertising

LO7

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Consumer Privacy

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Gramm-Leach-Bliley Act

Health Insurance Portability and Accountability Act (HIPPA)

California’s Notice of Security Breach Law

Government ActionsGovernment Actions

LO7

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Political and Legal Environment of Marketing

46LO7

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Competitive Factors

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Explain the basics of competition

LO8

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Competitive Factors

How many competitors?

How big are competitors?

How interdependent isthe industry?

Control

LO8

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Competitive Factors

Competition for MarketShare 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.

LO8