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1
Chapter 4: The Marketing Environment
Designed & Prepared by Laura RushB-books, Ltd.
Introduction to
Copyright Cengage Learning 2013
All Rights Reserved
2
Learning Outcomes
LO1 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 multiculturalism and growing ethnic markets
LO2
LO3
LO4
Copyright Cengage Learning 2013
All Rights Reserved
3
Learning Outcomes
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
LO4
LO4
LO4
LO4
Copyright Cengage Learning 2013
All Rights Reserved
4
Factors in the External Environment
• Understanding current customers.• Understanding what drives consumer
decisions.• Identifying the most valuable
customers and understanding their needs.
• Understanding the competition.
LO1 Copyright Cengage Learning 2013
All Rights Reserved
5
The Influence of Values on Buying Habits
Ranked Characteristics of Product Quality
Reliability
Durability
Easy maintenance
Ease of use
Trusted brand name
Low price
LO2 Copyright Cengage Learning 2013
All Rights Reserved
6
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.
LO2 Copyright Cengage Learning 2013
All Rights Reserved
7
Role of Families and Working Women
• Growth of dual-income families results in increased purchasing power
• Approximately 59% of work-age females are in the workforce
• Working wives bring in 45 percent of the total family earnings.
LO2 Copyright Cengage Learning 2013
All Rights Reserved
8
Tweens
• Pre- and early adolescents, age 8 to 12
• Population of 20 million• Direct purchasing power of $50
billion in 2010• View TV ads as “just advertising”• Want to have control over
experiences
LO3 Copyright Cengage Learning 2013
All Rights Reserved
9
Teens
• Population of 25 million in U.S.• Approximately 72 hours per week
tuned in electronically• 73 percent of teens are active in
social networking• 91 percent prefer to have real
friends over online friends• 62 percent love to shop
LO3 Copyright Cengage Learning 2013
All Rights Reserved
10
Generation Y
• Born between 1979 and 1994
• Largest cohort: more than 75 million members
• Purchasing power of $200 billion annually
• Currently in several different life stages, from mid teens to early thirties
LO3 Copyright Cengage Learning 2013
All Rights Reserved
11
Generation X
• Born between 1965 and 1978
• Population of 40 million
• Savvy and cynical consumers
• Protective and involved with their kids
• Value the importance of education
• Avid buyers of the latest clothes, technology, and recreational products
LO3 Copyright Cengage Learning 2013
All Rights Reserved
12
Baby Boomers
• Born between 1946 and 1964
• Population of 75 million
• Boomers are postponing retirement – The 2007-2009 downturn has resulted in loss of $2 trillion.
• Income will continue to grow as they keep working
• Confident, socially conscious group that believes old age starts at 80.
LO3 Copyright Cengage Learning 2013
All Rights Reserved
13
Growing Ethnic Markets
• Spending power of ethnic markets in 2013:
– Hispanics--$1.4 trillion– African Americans—$1.2 trillion– Asian Americans--$752 billion
• Diversity can result in bottom-line benefits to companies.
LO4 Copyright Cengage Learning 2013
All Rights Reserved
14
Economic Factors
Consumer’s Income
Inflation
Recession
LO5 Copyright Cengage Learning 2013
All Rights Reserved
15
Purchasing Power
Purchasing Power- A comparisonof the relative cost of a set
standard of goods and services indifferent geographic areas.
LO5 Copyright Cengage Learning 2013
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16
Research
Basic research – pure research that aims to confirm an
existing theoryor to learn more about a concept
or phenomenon
Applied research – an attempt to developnew or improved products
LO6 Copyright Cengage Learning 2013
All Rights Reserved
17
Technological Factors
• Innovation is becoming a global process.
• The most innovative firms have an average profit margin growth of 3 percent higher than the typical firm.
LO6 Copyright Cengage Learning 2013
All Rights Reserved
18
Political and Legal Factors
New technology Society Businesses Consumers
Laws and Regulations Protect:Laws and Regulations Protect:
LO7 Copyright Cengage Learning 2013
All Rights Reserved
19
Consumer Privacy
Gramm-Leach-Bliley Act
Health Insurance Portability and Accountability Act (HIPPA)
California’s Notice of Security Breach Law
Government ActionsGovernment Actions
FederalLevel
State Level
LO7 Copyright Cengage Learning 2013
All Rights Reserved
20
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.
LO8 Copyright Cengage Learning 2013
All Rights Reserved