1. Marketing Management Marketing’s Relationship to the Firm and Society Paul Dishman, Ph.D. Department of Business Management Marriott School of Management Brigham Young University Lecture 3

2. Paul Dishman, Ph.D. Marketing Management Competitors Marketing intermediaries Publics Suppliers Marketing information system Marketing planning system Marketing organization system Marketing organization and implementation Product Promotion PlacePrice Target customersEconomicenvironmentSocial/culturalenvironmentTechnicalenvironmentPolitical/legalenvironment

3. Paul Dishman, Ph.D. Marketing Management Environmental Forces Social Economic Technological Regulatory Competitive

4. Paul Dishman, Ph.D. Marketing Management Social Forces 1.Demographic shifts 2.Cultural changes

5. Paul Dishman, Ph.D. Marketing Management Social Trends move toward “natural” and healthful products and lifestyles growing number and importance of older Americans population shifts to remote suburbs and small towns greater desire for product simplicity and honesty in advertising

6. Paul Dishman, Ph.D. Marketing Management The Population Trend 1999 U.S. Population estimated at 272 million number of people ages 20-34 has declined since 1990 and the number over 65 has increased mature households (age 50+) represent the fastest growing age segment and possess 75% of the net worth of U.S. households

7. Paul Dishman, Ph.D. Marketing Management Population Shifts in the U.S. In the 1980s and 1990s the U.S. population has shifted toward Western and Sunbelt states. Through 2025 three states--California, Texas, and Florida--will account for 45 percent of the net population change in the U.S. From the 1930s to 1980s the population shifted from cities to suburbs. 1990s the population is shifting again from suburbs to more remote suburbs called exurbs and to smaller towns called penturbia.

8. Paul Dishman, Ph.D. Marketing Management Major Population Segments Baby Boomers: generation of 78 million born between 1946 and 1965, accounts for 56-58 percent of purchases of most consumer product and service categories. Generation X: 17 % of the U.S. population born between 1965 and 1976. Consumers who are self-reliant, entrepreneurial, supportive of diversity; better educated than previous generations; not prone to extravagance and likely to prefer lifestyles, products, and services that are very different from baby boomers. Baby Boomlet: Americans born after 1976; also described as Generation Y or the Net Generation.

9. Paul Dishman, Ph.D. Marketing Management The Net Generation 80 million people under the age of 22 who have grown up with the new technologies, becoming authorities in their use. As the Internet has become the focus of the digital age, the Net Generation has become the first group to use it consistently for: - entertainment- communication - information/education- shopping

10. Paul Dishman, Ph.D. Marketing Management Changes in the American Family 30 years ago 40% of all households consisted of married couples with children; this number has declined to 25%. 25% of all households consist of people who live alone 28% of married households are without children the fastest growing types of households are those with –single parents –other family members –unrelated persons

11. Paul Dishman, Ph.D. Marketing Management Racial and Ethnic Diversity Slightly more than one in four U.S. residents is African-American, Hispanic, Asian, or a representative of another racial or ethnic group. The racial and ethnic composition of the U.S. population is expected to change even more by 2010, as since 1990: –Hispanic population growth 35+% –Asian population growth 35+% –African-American population growth 11+% –white population growth 3.6%

12. Paul Dishman, Ph.D. Marketing Management The Changing Role of Women The percentage of women in the work force rose from 46 to 60 percent between 1975 and 1998. Women account for 11% of the officers and directors of the 500 largest corporations in the U.S. Women account for more than half of all: –financial managers –accountants and auditors –technical writers –economists –public relations specialists –authors

13. Paul Dishman, Ph.D. Marketing Management Economic Forces 1.Macroeconomic conditions 2.Consumer income

14. Paul Dishman, Ph.D. Marketing Management Economic Cycles Economic Conditions Time Levels of Business Activity RecoveryProsperityRecessionDepressionRecovery

15. Paul Dishman, Ph.D. Marketing Management dramatic growth of electronic commerce increase in per-capita income and standard of living U.S. firms adjust to crises in international markets economic growth reduces concern about inflation and budget deficit Economic Trends

16. Paul Dishman, Ph.D. Marketing Management Consumer Expectations Consumer expectations of an inflationary or recessionary U.S. economy is an important element of environmental scanning. Consumer spending, which accounts for two-thirds of U.S. economic activity, is affected by expectations of the future.

17. Paul Dishman, Ph.D. Marketing Management University of Michigan Consumer Sentiment Index and Automobile Sales 50 70 90 110 130 150 170 190 30 6.0 8.0 10.0 12.0 14.0 18.0 16.0 Consumer Sentiment Index (CSI)Vehicle sales (millions of units) CSI Vehicle sales Note: The consumer sentiment index is calculated by subtracting the share of consumers who think it is a bad time to buy from those who think it is a good time to buy and then adding 100. 1970197219741976197819801982198419861988199019921994 1996 1998

18. Paul Dishman, Ph.D. Marketing Management Consumer Income A consumer’s ability to buy is related to income, which consists of: –gross income: the total amount of money made in one year by a person, household, or family unit; –disposable income: the money a consumer has left after paying taxes –discretionary income: the money that remains after paying for taxes and necessities.

19. Paul Dishman, Ph.D. Marketing Management Average Annual Household Spending by Category

20. Paul Dishman, Ph.D. Marketing Management Income distribution of U.S. households Under $10,000: 11 % $10,000–$14,999: 8 % $25,000–$34,999: 13 % $35,000–$49,999: 16 % $50,000–$74,999: 18 % $75,000–$99,999: 9 % $100,000 or more: 9 % $15,000–$24,999: 15 %

21. Paul Dishman, Ph.D. Marketing Management Technological Forces 1.Changing technology 2.Technology’s impact on customer value

22. Paul Dishman, Ph.D. Marketing Management Technological Trends increased use of information and communication technology growing focus on the Internet as consumers and businesses go online expanded computer power and growth of “smart” products growing use of electronic money or “e-cash ”

23. Paul Dishman, Ph.D. Marketing Management Regulatory Forces 1.Laws protecting competition 2. Laws affecting marketing mix actions 3.Self-regulation

24. Paul Dishman, Ph.D. Marketing Management Laws Wacky, Outdated Laws Still on the Books In Utah, birds have the right of way on all highways. In Omaha, Nebraska, barbers are forbidden from shaving their customers’ chests. In Oklahoma people who make “ugly faces” at a dog may be fined and/or jailed. In Georgia, it is illegal to change the clothes on a storefront mannequin unless the shades are down. In South Bend, IN, monkeys are forbidden to smoke cigarettes. In Alaska, it is illegal to serve alcoholic beverages to a moose.

25. Paul Dishman, Ph.D. Marketing Management Regulatory Trends increasing emphasis on free trade and deregulation greater concern for pollution and global warming new legislation related to information collection and privacy new legislation to encourage consumer savings

26. Paul Dishman, Ph.D. Marketing Management Legislation Protecting Competition Major legislation has been passed to encourage competition, which is deemed desirable because it permits the consumer to determine which competitors will succeed or fail. Relevant legislation includes: Sherman Antitrust Act (1890) - forbids restraint of trade Clayton Act (1914) - forbids actions that lessen competition Robinson-Patman Act (1936) - unlawful to discriminate in prices charged for same product

27. Paul Dishman, Ph.D. Marketing Management Other Legislation Other Federal legislation is aimed at: products companies consumers (consumerism) both company and consumer pricing (fixing/unfair/discriminatory) distribution (exclusive dealing, requirement contracts, exclusive territorial distributorships, and typing arrangements) Advertising and promotion controls self-regulation