1. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared by Deborah Baker, Texas Christian University Lamb, Hair, McDaniel 2007-2008 Social Responsibility, Ethics, and the Marketing Environment 3 CHAPTER

2. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 2 Learning Outcomes Discuss corporate social responsibility Describe the role of ethics and ethical decisions in business Discuss the external environment of marketing, and explain how it affects a firm LO 1 LO 2 LO 3

3. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 3 Learning Outcomes 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 4 LO 5 LO 6

4. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 4 Learning Outcomes Identify consumer and market 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 7 LO 8 LO 9 LO 10

5. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 5 What do these firms have in common?

6. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 6 Discuss corporate social responsibility Corporate Social Responsibility Corporate Social Responsibility LO 1

7. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 7 LO 1 Corporate Social Responsibility The idea that socially responsible companies will outperform their peers by focusing on the world’s social problems and viewing them as opportunities to build profits and help the world at the same time. Sustainability

8. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 8 REVIEW LEARNING OUTCOME LO 1 Corporate Social Responsibility Ethical Do what is right. Legal Obey the Law. Economic Be profitable. Philanthropic Be a good citizen.

9. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 9 Social Responsibility Management philosophy in which organizations engage in activities that have a positive effect on society and promote the public good Tools of social responsibility environmental stewardship cause marketing cultural diversity LO 2

10. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 10 Environmental Stewardship Firms make choices that protect the environment Green marketing describes a type of environmental stewardship in which firms choose packages, product designs, and other aspects of the marketing mix that are earth friendly

11. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 11 Stonyfield Farm and Green Marketing

12. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 12 Cause Marketing Strategy of joining forces with a not-for- profit organization to tackle a social problem Straight donations to a charity Donations linked to consumer sales response

13. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 13 Ford & Breast Cancer Research

14. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 14 Promoting Cultural Diversity Cultural diversity programs ensure that marketing policies and hiring practices give people an equal chance to work for the company and buy its products See Fortune’s Best Companies for Minorities McDonald’s ranked #1 in 2004

15. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 15 Describe the role of ethics and ethical decisions in business Ethical Behavior in Business LO 2

16. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 16 Ethical Behavior in Business LO 2 Ethics Morals The moral principles or values that generally govern the conduct of an individual. The rules people develop as a result of cultural values and norms.

17. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 17 Ethical Development Levels LO 2 Preconventional Morality Conventional Morality Postconventional Morality More Mature More Childlike Based on what will be punished or rewarded Self-centered, calculating, selfish Moves toward the expectations of society Concerned over legality and the opinion of others Concern about how they judge themselves Concern if it is right in the long run

18. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 18 Ethical Decision Making LO 2 Influential Factors Extent of Problems Top Management Actions Potential Consequences Social Consensus Probability of Harm Time Until Consequences Number Affected

19. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 19 Biz Flix LO 2 Jaws

20. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 20 Code of Ethics LO 2 A guideline to help marketing managers and other employees make better decisions. Code of Ethics http://www.ethicsweb.ca Online

21. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 21 Kellogg’s Code of Ethics

22. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 22

23. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 23 Creating Ethical Guidelines LO 2  Helps identify acceptable business practices  Helps control behavior internally  Avoids confusion in decision making  Facilitates discussion about right and wrong

24. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 24 Ethical Norms and Values for Marketers LO 2

25. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 25 Discuss the external environment of marketing, and explain how it affects a firm The External Marketing Environment The External Marketing Environment LO 3

26. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 26 External Marketing Environment LO 3 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

27. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 27 Target Market LO 3 A defined group most likely to buy a firm’s product. Target Market

28. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 28 Describe the social factors that affect marketing Social Factors LO 4

29. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 29 LO 4 Social Factors Values Attitudes Lifestyle

30. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 30 LO 4 Social Factors Social Factors Influence: Products purchased Prices paid for products Effectiveness of promotions How, where, and when people purchase

31. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 31 LO 4 Social Factors Self-Sufficiency Upward Mobility Work Ethic Conformity Core American Values

32. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 32 LO 4 The Influence of Values on Buying Habits Ranked Characteristics of Product Quality Reliability Durability Easy maintenance Ease of use Trusted brand name Low price

33. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 33 LO 4 Component Lifestyles Component Lifestyles 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.

34. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 34 LO 4 Role of Families and Working Women  Growth of dual-income families results in increased purchase power  Approximately 63% of work-age females are in the workforce  Women expect different things in life –purchase bulk of technology products –do most of the grocery shopping –second largest group of home buyers after couples  Single households outnumber married households with kids

35. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 35 REVIEW LEARNING OUTCOME LO 4 Social Factors that Affect Marketing

36. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 36 Explain the importance to marketing managers of current demographic trends Demographic Factors LO 5

37. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 37 Demographic Factors LO 5 Demography The study of people’s vital statistics, such as their age, race and ethnicity, and location.

38. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 38 Tweens LO 5 Pre- and early adolescents, age 8 to 14 Population of 29 million Purchasing power of $39 billion in 2007 View TV ads as “just advertising” Emerging as “the richest generation” and the “most influential generation in history”

39. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 39 Generation Y LO 5 Born between 1979 and 1994 Population of 60 million Purchasing power of $200 billion annually Researchers have found Gen Yers to be: Impatient Family-oriented Inquisitive Opinionated Diverse Time managers “Street Smart” Word of mouth marketing is effective Online http://www.mountaindew.com http://www.northface.com

40. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 40 Generation X LO 5 Born between 1965 and 1978 Population of 40 million Savvy and cynical consumers Time is at a premium, and outsourcing is utilized Entering their money- making years

41. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 41 Baby Boomers LO 5 Born between 1946 and 1964 Population of 77 million—the largest demographic segment $1 trillion in spending power for people aged 50 to 60 Income will continue to grow as they keep working

42. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 42 REVIEW LEARNING OUTCOME LO 5 Current Demographic Trends Age Tweens 8 to 14 yrs 29 million Gen Y 1979-1994 60 million Gen X 1965-1978 40 million Baby Boom 1946-1964 77 million

43. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 43 Explain the importance to marketing managers of multiculturalism and growing ethnic markets Growing Ethnic Markets LO 6

44. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 44 Growing Ethnic Markets LO 6  Spending power of ethnic markets by 2008:  Hispanics: $1 trillion  African Americans: $921 billion  Asian Americans: $526 billion  Diversity can result in bottom-line benefits to companies.

45. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 45 Marketing to Hispanic Americans LO 6  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.  Nearly half of adult U.S. Hispanics have home Internet access.

46. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 46 Marketing to African Americans LO 6  Many firms are creating products for the African American market.  Promotional dollars and media choices directed toward African Americans continue to increase.

47. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 47 Marketing to Asian Americans LO 6  Younger, better educated, and have highest average income of all groups  Many products have been developed for Asian American market.  Cultural diversity within the Asian American market complicates promotional efforts.

48. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 48 REVIEW LEARNING OUTCOME LO 6 Multiculturalism and Growing Ethnic Markets

49. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 49 Identify consumer and marketer reactions to the state of the economy Economic Factors LO 7

50. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 50 Economic Factors LO 7 Distribution of Consumer Income Inflation Recession

51. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 51 Consumers’ Incomes LO 7  Median U.S. household income in 2007 projected at $45,000  Incomes have risen at a slow pace.  Education is the primary determinant of earning potential.  Consumers are strapped for cash.

52. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 52 The Financial Power of Women LO 7  Women bring in half of the household income.  Women control 51.3 percent of the private wealth in the U.S.  Women control 80 percent of household spending.  Women are now the primary buyers in male-dominated categories:  68% of new cars  66% of computers  66% of home improvements  53% of investments  51% of consumer electronics

53. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 53 Purchasing Power LO 7 A comparison of the relative cost of a set standard of goods and services in different geographic areas. Purchasing Power Purchasing Power

54. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 54 Inflation LO 7 A measure of the decrease in the value of the money, expressed as the percentage reduction in value since the previous year. Inflation

55. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 55 Recession LO 7 A period of economic activity characterized by negative growth, which reduces demand for goods and services. Recession

56. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 56 Recession Marketing Strategies LO 7  Improve existing products and introduce new ones  Maintain and expand customer services  Emphasize top-of-the-line products and promote product value

57. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 57 Identify the impact of technology on a firm Technological Factors LO 8

58. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 58 Research LO 8 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

59. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 59 Technological Factors LO 8  U.S. excels at basic and applied research.  Many firms use the market concept to guide research.  New technology internally creates a long-term competitive advantage.  External technology  Creates more efficient operation or better products  May render existing products obsolete

60. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 60 Technological Factors LO 8  Innovation is becoming a global process.  New technologies create new opportunities  RSS (Really Simple Syndication)  Blogging

61. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 61 REVIEW LEARNING OUTCOME LO 8 Impact of Technology on a Firm Basic Research Basic Research Marketing Mix Applied Research Applied Research Technology Advances

62. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 62 Discuss the political and legal environment of marketing Political and Legal Factors Political and Legal Factors LO 9

63. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 63 LO 9 Political and Legal Factors  New technology  Society  Businesses  Consumers Laws and Regulations Protect:

64. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 64 LO 9 Federal Legislation 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

65. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 65 LO 9 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 Online http://www.ftc.gov

66. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 66 LO 9 Powers of the FTC Cease-and-Desist Order Consent Decree Affirmative Disclosure Corrective Advertising Restitution Counteradvertising

67. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 67 LO 9 Consumer Privacy  Gramm-Leach-Bliley Act  Health Insurance Portability and Accountability Act (HIPPA)  California’s Notice of Security Breach Law Government Actions Government Actions

68. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 68 REVIEW LEARNING OUTCOME LO 9 Political and Legal Environment of Marketing

69. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 69 Explain the basics of foreign and domestic competition Competitive Factors LO 10

70. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 70 Competitive Factors LO 10 How many competitors? How big are competitors? How interdependent is the industry? Control

71. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 71 Competitive Factors LO 10 Competition for Market Share and Profits Global Competition  Firms must work harder to maintain profits and market share.  More foreign firms are entering U.S. market.  Foreign firms in U.S. now compete on product quality.

72. Chapter 3Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 72 REVIEW LEARNING OUTCOME LO 10 Political and Legal Environment Mature Industries Slow Growth / No Growth Highly Competitive Marketplace Can only increase market share by taking it from a competitor.