Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 4 The Marketing Environment © Mark Herreid/Shutterstock.com

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 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 growing ethnic markets Learning Outcomes

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 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 foreign and domestic competition Learning Outcomes

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4 The External Marketing Environment Discuss the external environment of marketing, and explain how it affects a firm LO 1

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5 Target Market A defined group most likely to buy a product Changes as consumers age External elements change consumers’ desires LO 1

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6 The External Environment Unless marketing managers understand the external environment, the firm cannot intelligently plan for the future. when a company implements strategies that attempt to shape the external environment within which it operates. Environmental Management is… LO 1

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7 Social Factors Describe the social factors that affect marketing LO 2

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8 Social Factors Values Attitudes Lifestyle LO 2

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9 Social Factors Social Factors Influence: Products purchased Prices paid for products Effectiveness of promotions How, where, and when people purchase LO 2

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10 American Values Self-Sufficiency Upward Mobility Work Ethic Conformity Core American Values LO 2 Getting off the grid Meaningful green EcoTechMed Emerging Trends

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11 The Influence of Values on Buying Habits Ranked Characteristics of Product Quality Reliability Durability Easy maintenance Ease of use Trusted brand name Low price LO 2

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12 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. Today’s consumers want multifunctional products No longer defined only by occupation LO 2

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13 Role of Families and Working Women Growth of dual-income families results in increased purchasing power Approximately 59 percent of work-age females are in the workforce Working wives bring in 45 percent of the total family earnings. The phenomenon of working women has probably had a greater effect on marketing than any other social change. LO 2

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14 There Is Never Enough Time It is estimated that over 80 percent of the working population is worried about having too little time. About 40 percent of American adults get less than 7 hours of sleep on weekdays. About 74 percent of working adults engage in multitasking. LO 2

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15 Demographic Factors Explain the importance to marketing managers of current demographic trends LO 3

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16 Demographic Factors People are the basis for any market Demographic characteristics relate to buyer behavior Demographic cohorts have their own needs, values, and consumption patterns. LO 3

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17 Tweens  Pre- and early adolescents, age 8 to 12  Population of 20 million  Directly spend about $50 billion annually  Parents spend $150 billion on tweens annually  View TV ads as “just advertising” LO 3

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18 Teens  Population of about 25 million  Spend approximately 72 hours per week tuned in electronically  View shopping as a social sport  58 percent shop online LO 3

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19 Generation Y  Born between 1979 and 1994  Surpassed population of baby boomers in 2010  Two Stages: 1) Those born in 1994 fit closer to the Teen cohort. 2) Those born in 1979 have established careers and started families.  Purchasing power of $200 billion annually  Researchers have found Gen Yers to be: –InquisitiveQuick shoppers –OpinionatedWant fulfillment –DiverseMultitaskers –Time managersEnvironmentally aware LO 3

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20 Generation X  Born between 1965 and 1978  Population of 40 million  Independent, resilient, adaptable, cautious, and skeptical  71 percent have children under age 18  Home ownership is an important goal  Avid buyers of the latest clothes, technology, and recreational products LO 3

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21 Baby Boomers  Born between 1946 and 1964  Population of 75 million  Working longer to compensate for economic downturn, which affected retirement savings  The market of services directed at seniors is one of the fastest growing business markets LO 3

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22 Growing Ethnic Markets Explain the importance to marketing managers of growing ethnic markets LO 4

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23 Growing Ethnic Markets  Estimated purchasing power of ethnic markets in 2013: – Hispanics: $1.4 trillion – African Americans: $1.2 billion – Asian Americans: $752 billion  The minority population of the United States in 2011 reached 110 million.  Companies are recognizing that diversity can result in bottom-line benefits. LO 4

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24 Marketing to Hispanic Americans  The Hispanic population’s diversity creates challenges for targeting this market.  Hispanics tend to be brand loyal, but are not aware of many mainstream U.S. brands.  68 percent of U.S. Hispanics have home Internet access. LO 4

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25 Marketing to African Americans  47 percent are between 18 and 49 years  More firms are creating products for the African American market.  Promotional dollars and media choices directed toward African Americans continue to increase. LO 4

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26 Marketing to Asian Americans  Younger, better educated, and have highest average income of all groups  Early adopters of latest digital gadgets.  Cultural diversity within the Asian American market complicates promotional efforts. LO 4

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27 Economic Factors Identify consumer and marketer reactions to the state of the economy LO 5

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28 Economic Factors Purchasing Power Inflation Recession LO 5 Consumers’ Income

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29 Consumers’ Incomes Median U.S. household income in 2010 was approximately $52,000. Incomes have risen at a slow pace in recent years. Education is the primary determinant of earning potential. LO 5

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30 Purchasing Power LO 5 a comparison of income versus the relative cost of a set standard of goods and services in different geographic areas. Purchasing Power is…

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31 Inflation LO 5 a measure of the decrease in the value of money, expressed as the percentage reduction in value since the previous year. Inflation is… © iStockphoto.com/Valentin Mosichev

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32 Recession LO 5 a period of economic activity characterized by negative growth, which reduces demand for goods and services. Recession is…

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33 Technological Factors Identify the impact of technology on a firm LO 6

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34 Research 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

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35 Stimulating Innovation LO 6 Build scenarios Enlist the Web Talk to early adopters Use marketing research Create an innovative environment Cater to entrepreneurs

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36 Political and Legal Factors Discuss the political and legal environment of marketing LO 7

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37 Political and Legal Factors  New technology  Society  Businesses  Consumers Laws and Regulations Protect: LO 7

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 38 Federal Legislation Sherman Act Clayton Act Federal Trade Commission Act Celler-Kefauver Antimerger Act Hart-Scott-Rodino Act Foreign Corrupt Practices Act Sherman Act Clayton Act Federal Trade Commission Act Celler-Kefauver Antimerger Act Hart-Scott-Rodino Act Foreign Corrupt Practices Act Regulate competitive environment Robinson-Patman Act Regulate pricing practices Wheeler-Lea Act Control false advertising LO 7

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 39 State Laws Legislation that affects marketing varies state by state. Oregon: limits utility advertising to 0.5 percent of net income. California: bans trans fats in restaurants and bakeries. LO 7

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 40 Regulatory Agencies 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

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 41 Bureaus of the FTC LO 7 Reviews mergers and acquisitions Challenges anti-competitive conduct Promotes competition Provides information Enforces federal laws that protect consumers Empowers consumers with information Communicates with consumers about fraud and identity theft Bureau of Competition Bureau of Consumer Protection

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 42 Consumer Privacy  CAN-SPAM Act  Children’s Online Privacy Protection Act Rule Government Actions LO 7

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 43 Competitive Factors Explain the basics of foreign and domestic competition LO 8

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 44 Competitive Factors How many competitors? How big are competitors? How interdependent is the industry? Control LO 8

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 45 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

Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 46 Chapter 4 Video Method Review the videos from chapters 2 and 3. How do the decision Method makes reflect the marketing environment?