1 Lamb, Hair, McDaniel CHAPTER 4 The Marketing Environment

2 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 Outcomes

3 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 Outcomes

4 The External Marketing Environment 4 Discuss the external environment of marketing, and explain how it affects a firm LO 1

5 Target Market 5 Defined group most likely to buy a product Changes as consumers age External elements change consumers’ desires LO 1

6 External Marketing Environment 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 LO 1

7 Understanding Competition TJ Maxx offers designer brands at discount prices 2009 campaign compares the stores prices to those at boutiques and department stores: – cial_6/ cial_6/ – Acknowledging budgetary restraints will drive budget conscious shoppers to the store LO 1

8 Social Factors 8 Describe the social factors that affect marketing LO 2

9 Social Factors 9 Values Attitudes Lifestyle LO 2

10 Social Factors 10 Social Factors Influence: Products purchased Prices paid for products Effectiveness of promotions How, where, and when people purchase LO 2

11 Social Factors 11 Self-Sufficiency Upward Mobility Work Ethic Conformity Core American Values LO 2

12 The Influence of Values on Buying Habits 12 Ranked Characteristics of Product Quality Reliability Durability Easy maintenance Ease of use Trusted brand name Low price LO 2

13 Component Lifestyles 13 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 LO 2

14 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 Demographic Factors 15 Explain the importance to marketing managers of current demographic trends LO 3

16 Demographic Factors 16 People are the basis for any market Demographic characteristics relate to buyer behavior Uncontrollable Defined characteristics define marketing direction LO 3

17 Tweens 17  Pre- and early adolescents, age 9 to 14  Population of 29 million  Purchasing power of $39 billion in 2009  View TV ads as “just advertising”  Emerging as “the richest generation” and the “most influential generation in history” LO 3

18 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 18 LO 3

19 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 19 LO 3

20 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” 20 LO 3

21 Current Demographic Trends Age Tweens 8 to 14 yrs 29 million Gen Y million Gen X million Baby Boom million LO 3

22 Growing Ethnic Markets 22 Explain the importance to marketing managers of multiculturalism and growing ethnic markets LO 4

23 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. LO 4

24 Marketing to Hispanic Americans 24  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:  LO 4

25 Marketing to African Americans  Many firms are creating products for the African American market.  Promotional dollars and media choices directed toward African Americans continue to increase. LO 4

26 Marketing to Asian Americans 26  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. LO 4

27 Ethnic and Cultural Diversity 27  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 LO 4

28 Multiculturalism and Growing Ethnic Markets 28 LO 4

29 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 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, Lisa Biank Fasig, "An Expanding Business for an Expanding Market," Business Courier of Cincinnati, September 7, 2007 LO 4

30 Economic Factors 30 Identify consumer and marketer reactions to the state of the economy LO 5

31 Economic Factors Consumer’s Income Inflation Recession LO 5

32 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. 32 LO 5

33 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 33 LO 5

34 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 34 LO 5

35 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) LO 5

36 Economic Factors 36 LO 5

37 Technological Factors 37 Identify the impact of technology on a firm LO 6

38 Research 38 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 LO 6

39 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: – advertising-blogs/ advertising-blogs/ LO 6

40 Political and Legal Factors 40 Discuss the political and legal environment of marketing LO 7

41 Political and Legal Factors 41  New technology  Society  Businesses  Consumers Laws and Regulations Protect: LO 7

42 Federal Legislation 42 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 LO 7

43 Regulatory Agencies 43 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 LO 7

44 Powers of the FTC 44 Cease-and-Desist Order Consent Decree Affirmative Disclosure Corrective Advertising Restitution Counteradvertising LO 7

45 Consumer Privacy 45  Gramm-Leach-Bliley Act  Health Insurance Portability and Accountability Act (HIPPA)  California’s Notice of Security Breach Law Government Actions LO 7

46 Political and Legal Environment of Marketing 46 LO 7

47 Competitive Factors 47 Explain the basics of foreign and domestic competition LO 8

48 Competitive Factors How many competitors? How big are competitors? How interdependent is the industry? Control LO 8

49 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. LO 8