1 Chapter 4: The Marketing Environment Designed & Prepared by Laura Rush B-books, Ltd. Introduction to Copyright Cengage Learning 2013 All Rights Reserved

2 Learning Outcomes LO 1 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 LO 2 LO 3 LO 4 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 LO 4 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. LO 1 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 LO 2 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. LO 2 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. LO 2 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 LO 3 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 LO 3 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 LO 3 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 LO 3 Copyright Cengage Learning 2013 All Rights Reserved

12 Baby Boomers Born between 1946 and 1964 Population of 75 million Boomers are postponing retirement – The 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. LO 3 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. LO 4 Copyright Cengage Learning 2013 All Rights Reserved

14 Economic Factors Consumer’s Income Inflation Recession LO 5 Copyright Cengage Learning 2013 All Rights Reserved

15 Purchasing Power Purchasing Power- A comparison of the relative cost of a set standard of goods and services in different geographic areas. LO 5 Copyright Cengage Learning 2013 All Rights Reserved

16 Research Basic research – pure research that aims to confirm an existing theory or to learn more about a concept or phenomenon Applied research – an attempt to develop new or improved products LO 6 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. LO 6 Copyright Cengage Learning 2013 All Rights Reserved

18 Political and Legal Factors  New technology  Society  Businesses  Consumers Laws and Regulations Protect: LO 7 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 Actions Federal Level State Level LO 7 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. LO 8 Copyright Cengage Learning 2013 All Rights Reserved