1. Copyright © Houghton Mifflin Company. All rights reserved. 3–13–1 Chapter Outline The Marketing Environment –Responding to the Marketing Environment –The Environmental Forces: Competitive, Economic, Political, Legal and Regulatory, Technological, Sociocultural Social Responsibility and Ethics in Marketing –Economic Dimension –Legal Dimension –Ethical Dimension –Philanthropic Dimension –Incorporating Social Responsibility and Ethics into Strategic Planning

2. Copyright © Houghton Mifflin Company. All rights reserved. 3–23–2 The Marketing Environment Environmental Scanning –The process of collecting information about forces in the marketing environment Observation Secondary sources Market research Environmental Analysis –The process of assessing and interpreting the information gathered through environmental scanning Accuracy Consistency Significance

3. Copyright © Houghton Mifflin Company. All rights reserved. 3–33–3 The Marketing Environment (cont’d) Responding to Environmental Forces –Reactive approach Passive view of environment as uncontrollable Current strategy is cautiously adjusted to accommodate environmental changes –Proactive approach Actively attempts to shape and influence environment Strategies are constructed to overcome market challenges and take advantage of opportunities

4. Copyright © Houghton Mifflin Company. All rights reserved. 3–43–4 Competitive Forces Monitoring Competition –Helps determine competitors’ strategies and their effects on firm’s own strategies –Guides development of competitive advantage and adjusting firm’s strategy –Provides ongoing information about competitors –Assists in maintaining a marketing orientation

5. Copyright © Houghton Mifflin Company. All rights reserved. 3–53–5 Economic Forces Buying Power –Resources, such as money, goods, and services, that can be traded in an exchange –Income Disposable income Discretionary income –Credit –Wealth

6. Copyright © Houghton Mifflin Company. All rights reserved. 3–63–6 Economic Forces (cont’d) Willingness to Spend –An inclination to buy because of expected satisfaction from a product, influenced by the ability to buy and numerous psychological and social forces –Expectations influencing the willingness to spend: Future employment Income levels Prices Family size General economic conditions (e.g., rising prices)

7. Copyright © Houghton Mifflin Company. All rights reserved. 3–73–7 American Customer Satisfaction Index Source: American Customer Satisfaction Index, www.theacsi.org/, accessed Oct. 11, 2002. FIGURE 3.1

8. Copyright © Houghton Mifflin Company. All rights reserved. 3–83–8 Business Cycle A pattern of economic fluctuations that has four stages: Prosperity Recession Depression Recovery Positive Economic Indicators Time

9. Copyright © Houghton Mifflin Company. All rights reserved. 3–93–9 Stages in the Business Cycle

10. Copyright © Houghton Mifflin Company. All rights reserved. 3–10 Legal and Regulatory Forces: Major Laws

11. Copyright © Houghton Mifflin Company. All rights reserved. 3–11 Major Laws (cont’d)

12. Copyright © Houghton Mifflin Company. All rights reserved. 3–12 Major Laws (cont’d)

13. Copyright © Houghton Mifflin Company. All rights reserved. 3–13 Regulation Regulatory Agencies –Federal Trade Commission (FTC) influences marketing activities most; can seek civil penalties and require corrective advertising Self-Regulatory Forces –Better Business Bureau –National Advertising Review Board (NARB)

14. Copyright © Houghton Mifflin Company. All rights reserved. 3–14 Major Regulatory Agencies

15. Copyright © Houghton Mifflin Company. All rights reserved. 3–15 Major Regulatory Agencies (cont’d)

16. Copyright © Houghton Mifflin Company. All rights reserved. 3–16 Technological Forces Technology –The application of knowledge and tools to solve problems and perform tasks more efficiently Impact of Technology –Dynamic means constant change –Reach refers to how technology quickly moves through society. –The self-sustaining nature of technology as the catalyst for even faster development

17. Copyright © Houghton Mifflin Company. All rights reserved. 3–17 Sociocultural Forces –The influences in a society and its culture(s) that change people’s attitudes, beliefs, norms, customs, and lifestyles Demographic Diversity and Characteristics –Increasing proportion of older consumers –Entering another baby boom –Increasingly multicultural U.S. society Cultural Values –Primary source of values is the family –Values influence: Eating habits (healthier foods) Alternative health and medical treatment choices

18. Copyright © Houghton Mifflin Company. All rights reserved. 3–18 Social Responsibility and Ethics in Marketing Social Responsibility –An organization’s obligation to maximize its positive impact and minimize its negative impact on society Marketing citizenship –The adoption of a strategic focus for fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected by stakeholders Stakeholders –Constituents who have a “stake” or claim in some aspect of the company’s products, operations, markets, industry, and outcomes

19. Copyright © Houghton Mifflin Company. All rights reserved. 3–19 The Pyramid of Corporate Social Responsibility FIGURE 3.3 Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” adaptation of Figure 3, p. 42. Reprinted from Business Horizons, July/Aug. 1991. Copyright © 1991 by the Trustees at Indiana University, Kelley School of Business. Used with permission.

20. Copyright © Houghton Mifflin Company. All rights reserved. 3–20 Ethical Dimension Marketing Ethics –Principles and standards that define acceptable marketing conduct as determined by various stakeholders Ethical Issue –An identifiable problem, situation, or opportunity requiring a choice among several actions that must be evaluated as right or wrong, ethical or unethical

21. Copyright © Houghton Mifflin Company. All rights reserved. 3–21 Influence Factors of Ethical Standards Ethical Standards CompanyIndustryGovernmentCustomers Interest Groups Society Influence Factors

22. Copyright © Houghton Mifflin Company. All rights reserved. 3–22 Ethical Issues in Marketing

23. Copyright © Houghton Mifflin Company. All rights reserved. 3–23 Philanthropic Dimension Cause-Related Marketing –The practice of linking products to a particular cause on an ongoing or short-term basis Strategic Philanthropy –The synergistic use of organizational core competencies and resources to address key stakeholders’ interests and achieve both organizational and social benefits

24. Copyright © Houghton Mifflin Company. All rights reserved. 3–24 Green Marketing The specific development, pricing, promotion, and distribution of products that do not harm the natural environment

25. Copyright © Houghton Mifflin Company. All rights reserved. 3–25 Foundations of Consumerism Consumerism –The organized efforts of individuals, groups, and organizations to protect the rights of consumers Lobbying government officials and agencies Letter-writing campaigns and boycotts Public service announcements Coverage by the news media and the Internet –Consumer “Bill of Rights” Right to safety Right to be informed Right to choose Right to be heard

26. Copyright © Houghton Mifflin Company. All rights reserved. 3–26 Incorporating Social Responsibility and Ethics into Strategic Planning Overall Strategic Marketing Planning Ethics Individual and group decisions Ethics Individual and group decisions Social Responsibility The total effect of marketing decisions on society Social Responsibility The total effect of marketing decisions on society

27. Copyright © Houghton Mifflin Company. All rights reserved. 3–27 Benefits of Codes of Conduct and Social Responsibility Codes of Conduct (Ethics) –Formalized rules and standards that describe what the company expects of its employees Social responsibility and ethics improve marketing performance. –Socially responsible companies (and their employees) can better respond to stakeholder demands. –A company’s reputation for social responsibility is important to consumers’ buying decisions. –Social responsibility and ethical behavior reduce the costs of legal violations, civil litigation, and damaging publicity.

28. Copyright © Houghton Mifflin Company. All rights reserved. 3–28 Important Terms Environmental Scanning –The process of collecting information about forces in the marketing environment Environmental Analysis –The process of assessing and interpreting the information gathered through environmental scanning Buying Power –Resources, such as money, goods, and services, that can be traded in an exchange

29. Copyright © Houghton Mifflin Company. All rights reserved. 3–29 Important Terms Disposable Income –After-tax income Discretionary Income –Disposable income available for spending and saving after an individual has purchased the basic necessities of food, clothing, and shelter Willingness to Spend –An inclination to buy because of expected satisfaction from a product, influenced by the ability to buy and numerous psychological and social forces Business Cycle –A pattern of economic fluctuations that has four stages: prosperity, recession, depression, and recovery

30. Copyright © Houghton Mifflin Company. All rights reserved. 3–30 Important Terms Federal Trade Commission (FTC) –An agency that regulates a variety of business practices and curbs false advertising, misleading pricing, and deceptive packaging and labeling Better Business Bureau –A local, nongovernmental regulatory agency, supported by local businesses, that helps settle problems between customers and specific business firms National Advertising Review Board (NARB) –A self-regulatory unit that considers challenges to issues raised by the National Advertising Division of the Council of Better Business Bureaus about an advertisement

31. Copyright © Houghton Mifflin Company. All rights reserved. 3–31 Important Terms Technology –The application of knowledge and tools to solve problems and perform tasks more efficiently Sociocultural Forces –The influences in a society and its culture(s) that change people’s attitudes, beliefs, norms, customs, and lifestyles

32. Copyright © Houghton Mifflin Company. All rights reserved. 3–32 Important Terms Social Responsibility –An organization’s obligation to maximize its positive impact and minimize its negative impact on society Marketing Citizenship –The adoption of a strategic focus for fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected by stakeholders Stakeholders –Constituents who have a “stake” or claim in some aspect of the company’s products, operations, markets, industry, and outcomes

33. Copyright © Houghton Mifflin Company. All rights reserved. 3–33 Important Terms Marketing Ethics –Principles and standards that define acceptable marketing conduct as determined by various stakeholders Ethical Issue –An identifiable problem, situation, or opportunity requiring a choice among several actions that must be evaluated as right or wrong, ethical or unethical Codes of Conduct –Formalized rules and standards that describe what the company expects of its employees

34. Copyright © Houghton Mifflin Company. All rights reserved. 3–34 Important Terms Cause-Related Marketing –The practice of linking products to a particular cause on an ongoing or short-term basis Strategic Philanthropy –The synergistic use of organizational core competencies and resources to address key stakeholders’ interests and achieve both organizational and social benefits Green Marketing –The specific development, pricing, promotion, and distribution of products that do not harm the natural environment Consumerism –Organized efforts by individuals, groups, and organizations to protect consumers’ rights

35. Copyright © Houghton Mifflin Company. All rights reserved. 3–35 Average U.S. Family Income According to the 2000 Census, the average U.S. family earned $63,410 annually, and the breakdown of earnings was: Less than $15,00010.4% $15,000–$34,99923.3% $35,000–$49,99916.8% $50,000–$74,99922.0% $75,000–$99,99912.3% $100,000–$149,9999.7% $150,000+5.5% Source: 2000 U.S. Census.

36. Copyright © Houghton Mifflin Company. All rights reserved. 3–36 Ranking Products Consumers Would Cut Back on if Spending Decreased Source: USA Today, October 1, 2001 p. 3D. Used by permission.

37. Copyright © Houghton Mifflin Company. All rights reserved. 3–37 Type and Observations of Ethical Misconduct Source: Joseph Joshua, Ethics Resource Center, 2000 National Business Ethics Survey: How Employees Perceive Ethics at Work, p. 30. Used with permission.

38. Copyright © Houghton Mifflin Company. All rights reserved. 3–38 Will Consumers Pay an Extra 25¢/Gallon to Reduce Pollution and Global Warming? Source: “Americans Split on Paying Higher Prices to Reduce Pollution,” USA Today, September 4, 2001, p. A1. Used with permission