Chapter 4 The Marketing Environment

4 The Marketing Environment

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Learning Outcomes 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 Chapter 4

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Learning Outcomes 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 Chapter 4

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The External Marketing Environment

Discuss the external environment of marketing, and explain how it affects a firm

Chapter 4

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Target Market A defined group most likely to buy a product • Changes as consumers age • External elements change consumers’ desires

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The External Environment • Unless marketing managers understand the external environment, the firm cannot intelligently plan for the future.

Environmental Management

is…

when a company implements strategies that attempt to shape the external environment within which it operates.

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Social Factors

Describe the social factors that affect marketing

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Social Factors Attitudes

Values

Lifestyle

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Social Factors Social Factors Influence:

Products purchased Prices paid for products Effectiveness of promotions How, where, and when people purchase Chapter 4

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American Values Core American Values

Emerging Trends

Self-Sufficiency

Getting off the grid

Upward Mobility

Meaningful green

Work Ethic

EcoTechMed

Conformity

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The Influence of Values on Buying Habits Ranked Characteristics of Product Quality Reliability Durability Easy maintenance Ease of use Trusted brand name Low price

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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

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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. Chapter 4

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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.

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Demographic Factors

Explain the importance to marketing managers of current demographic trends

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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.

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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”

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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

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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: – – – – Chapter 4

Inquisitive Opinionated Diverse Time managers

Quick shoppers Want fulfillment Multitaskers Environmentally aware

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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 Chapter 4

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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

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Growing Ethnic Markets

Explain the importance to marketing managers of growing ethnic markets

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Growing Ethnic Markets 

Estimated purchasing power of ethnic markets in 2013: – –

–

Chapter 4

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. Copyright ©2012 by Cengage Learning Inc. All rights reserved

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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.

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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.

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Marketing to Asian Americans

Chapter 4



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.

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Economic Factors

Identify consumer and marketer reactions to the state of the economy

Chapter 4

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Economic Factors Consumers’ Income

Purchasing Power

Inflation

Recession Chapter 4

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Consumers’ Incomes

Chapter 4

•

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. Copyright ©2012 by Cengage Learning Inc. All rights reserved

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Purchasing Power Purchasing Power is… a comparison of income versus the relative cost of a set standard of goods and services in different geographic areas.

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Inflation Inflation is…

© iStockphoto.com/Valentin Mosichev

a measure of the decrease in the value of money, expressed as the percentage reduction in value since the previous year.

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Recession Recession is… a period of economic activity characterized by negative growth, which reduces demand for goods and services.

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Technological Factors

Identify the impact of technology on a firm

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Research

Basic Research

Applied Research

Chapter 4

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

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Stimulating Innovation Build scenarios Enlist the Web Talk to early adopters Use marketing research Create an innovative environment Cater to entrepreneurs

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Political and Legal Factors

Discuss the political and legal environment of marketing

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Political and Legal Factors Laws and Regulations Protect:

   

Chapter 4

New technology Society Businesses Consumers

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Federal Legislation Regulate competitive environment

Regulate pricing practices Control false advertising

Chapter 4

Sherman Act Clayton Act Federal Trade Commission Act Celler-Kefauver Antimerger Act Hart-Scott-Rodino Act Foreign Corrupt Practices Act

Robinson-Patman Act

Wheeler-Lea Act

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State Laws •

Legislation that affects marketing varies state by state. • •

Chapter 4

Oregon: limits utility advertising to 0.5 percent of net income. California: bans trans fats in restaurants and bakeries.

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Regulatory Agencies

Chapter 4

Consumer Product Safety Commission

Protects consumer safety in and around their homes

Federal Trade Commission

Prevents unfair methods of competition in commerce

Food & Drug Administration

Enforces safety regulations for food and drug products

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Bureaus of the FTC • Reviews mergers and acquisitions Bureau of Competition

• Challenges anti-competitive conduct • Promotes competition • Provides information

• Enforces federal laws that protect Bureau of Consumer Protection

Chapter 4

consumers • Empowers consumers with information • Communicates with consumers about fraud and identity theft

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Consumer Privacy Government Actions  CAN-SPAM Act  Children’s Online Privacy Protection Act Rule

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Competitive Factors

Explain the basics of foreign and domestic competition

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Competitive Factors How many competitors?

Control

How big are competitors? How interdependent is the industry?

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Competitive Factors Competition for Market Share and Profits • Firms must work harder to maintain profits and market share.

Chapter 4

Global Competition • More foreign firms are entering U.S. market. • Foreign firms in U.S. now compete on product quality.

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Chapter 4 Video Method Review the videos from chapters 2 and 3. How do the decision Method makes reflect the marketing environment?

Chapter 4

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