1. Insert Chapter Picture Here Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 1 Prepared by Deborah Baker Texas Christian University CHAPTER 3 Designed by Eric Brengle B-books, Ltd. Marketing Lamb, Hair, McDaniel 9 Social Responsibility, Ethics, and the Marketing Environment

2. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 2 Learning Outcomes LO I LO 2 LO 3 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

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

4. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 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 9 LO IO LO 8 LO 7

5. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 5 Discuss corporate social responsibility Corporate Social Responsibility LO I

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

7. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 7 REVIEW LEARNING OUTCOME LO I Corporate Social Responsibility Ethical Do what is right. Legal Obey the Law. Economic Be profitable. Philanthropic Be a good citizen.

8. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 8 Describe the role of ethics and ethical decisions in business Ethical Behavior in Business LO 2

9. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 9 LO 2 Ethical Behavior in Business 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.

10. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 10 LO 2 Ethical Development Levels 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

11. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 11 LO 2 Ethical Decision Making Influential Factors Extent of Problems Top Management Actions Potential Consequences Social Consensus Probability of Harm Time Until Consequences Number Affected

12. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 Biz Flix Jaws 12 LO 2

13. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 13 LO 2 Code of Ethics A guideline to help marketing managers and other employees make better decisions. http://www.ethicsweb.ca Online

14. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 14 Creating Ethical Guidelines  Helps identify acceptable business practices  Helps control behavior internally  Avoids confusion in decision making  Facilitates discussion about right and wrong LO 2

15. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 15 LO 2 Ethical Norms and Values for Marketers Exhibit 3.3

16. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 16 Discuss the external environment of marketing, and explain how it affects a firm The External Marketing Environment LO 3

17. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 17 LO 3 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

18. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 18 LO 3 Target Market A defined group most likely to buy a firm’s product.

19. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 19 Describe the social factors that affect marketing Social Factors LO 4

20. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 20 LO 4 Social Factors Values Attitudes Lifestyle

21. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 21 LO 4 Social Factors Social Factors Influence: Products purchased Prices paid for products Effectiveness of promotions How, where, and when people purchase

22. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 22 LO 4 Social Factors Self-Sufficiency Upward Mobility Work Ethic Conformity Core American Values

23. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 2 23 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

24. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 24 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.

25. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 25  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 LO 4 Role of Families and Working Women

26. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 26 REVIEW LEARNING OUTCOME LO 4 Social Factors that Affect Marketing

27. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 27 Explain the importance to marketing managers of current demographic trends Demographic Factors LO 5

28. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 28 LO 5 Demographic Factors Demography The study of people’s vital statistics, such as their age, race and ethnicity, and location.

29. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 29 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”

30. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 30 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

31. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 31 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

32. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 32 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  Four segments of baby boomers: “Looking for balance” “Confident and living well” “At ease” “Overwhelmed”

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

34. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 34 Explain the importance to marketing managers of multiculturalism and growing ethnic markets Growing Ethnic Markets LO 6

35. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 35 LO 6 Growing Ethnic Markets  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.

36. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 36 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.

37. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 37 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.

38. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 38 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.

39. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 39 REVIEW LEARNING OUTCOME LO 6 Multiculturalism and Growing Ethnic Markets

40. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 40 Identify consumer and marketer reactions to the state of the economy Economic Factors LO 7

41. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 41 LO 7 Economic Factors Distribution of Consumer Income Inflation Recession

42. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 42 LO 7 Consumers’ Incomes  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.

43. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 43 LO 7 The Financial Power of Women  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

44. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 44 LO 7 Purchasing Power Purchasing Power Purchasing Power A comparison of the relative cost of a set standard of goods and services in different geographic areas.

45. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 45 LO 7 Inflation A measure of the decrease in the value of the money, expressed as the percentage reduction in value since the previous year.

46. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 46 LO 7 Recession A period of economic activity characterized by negative growth, which reduces demand for goods and services.

47. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 2 47 LO 7 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

48. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 48 Identify the impact of technology on a firm Technological Factors LO 8

49. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 49 LO 8 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

50. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 50 LO 8 Technological Factors  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

51. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 51 LO 8 Technological Factors  Innovation is becoming a global process.  New technologies create new opportunities – RSS (Really Simple Syndication) – Blogging

52. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 52 REVIEW LEARNING OUTCOME LO 8 Impact of Technology on a Firm Basic Research Basic Research Marketing Mix Applied Research Applied Research Technology Advances

53. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 53 Discuss the political and legal environment of marketing Political and Legal Factors LO 9

54. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 54 Political and Legal Factors LO 9  New technology  Society  Businesses  Consumers Laws and Regulations Protect:

55. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 55 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

56. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 56 LO 9 Regulatory Agencies Online http://www.ftc.gov 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

57. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 57 LO 9 Powers of the FTC Cease-and-Desist Order Consent Decree Affirmative Disclosure Corrective Advertising Restitution Counteradvertising

58. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 58 LO 9 Consumer Privacy  Gramm-Leach-Bliley Act  Health Insurance Portability and Accountability Act (HIPPA)  California’s Notice of Security Breach Law Government Actions

59. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 59 REVIEW LEARNING OUTCOME LO 9 Political and Legal Environment of Marketing

60. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 60 Explain the basics of foreign and domestic competition Competitive Factors LO IO

61. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 61 LO IO Competitive Factors How many competitors? How big are competitors? How interdependent is the industry? Control

62. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 62 LO IO 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.

63. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 3 63 REVIEW LEARNING OUTCOME Political and Legal Environment LO IO Mature Industries Slow Growth / No Growth Highly Competitive Marketplace Can only increase market share by taking it from a competitor.