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Lamb, Hair, McDaniel 2011-2012 CHAPTER 4 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 © Mark Herreid/Shutterstock.com The Marketing Environment The External Marketing Environment Discuss the external environment of marketing, and explain how it affects a firm LO1 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2 Target Market A defined group most likely to buy a product • Changes as consumers age • External elements change consumers’ desires LO1 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3 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. LO1 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4 Social Factors Describe the social factors that affect marketing LO2 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5 Social Factors Attitudes Values Lifestyle LO2 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6 Social Factors Social Factors Influence: Products purchased Prices paid for products Effectiveness of promotions How, where, and when people purchase LO2 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7 American Values Core American Values Emerging Trends Self-Sufficiency Getting off the grid Upward Mobility Meaningful green Work Ethic EcoTechMed Conformity LO2 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8 The Influence of Values on Buying Habits Ranked Characteristics of Product Quality Reliability Durability Easy maintenance Ease of use Trusted brand name Low price LO2 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9 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 LO2 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10 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 LO2 than any other social change. Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11 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. LO2 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12 Demographic Factors Explain the importance to marketing managers of current demographic trends LO3 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13 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. LO3 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14 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” LO3 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15 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 LO3 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16 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: LO3 Chapter 4 – – – – Inquisitive Opinionated Diverse Time managers Quick shoppers Want fulfillment Multitaskers Environmentally aware Copyright ©2012 by Cengage Learning Inc. All rights reserved 17 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 LO3 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18 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 LO3 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19 Growing Ethnic Markets Explain the importance to marketing managers of growing ethnic markets LO4 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20 Growing Ethnic Markets Estimated purchasing power of ethnic markets in 2013: – – – LO4 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 21 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. LO4 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22 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. LO4 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23 Marketing to Asian Americans 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. LO4 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24 Economic Factors Identify consumer and marketer reactions to the state of the economy LO5 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25 Economic Factors Consumers’ Income Purchasing Power Inflation Recession LO5 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26 Consumers’ Incomes • 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. LO5 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27 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. LO5 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28 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. LO5 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29 Recession Recession is… a period of economic activity characterized by negative growth, which reduces demand for goods and services. LO5 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30 Technological Factors Identify the impact of technology on a firm LO6 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31 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 LO6 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32 Stimulating Innovation Build scenarios Enlist the Web Talk to early adopters Use marketing research Create an innovative environment Cater to entrepreneurs LO6 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33 Political and Legal Factors Discuss the political and legal environment of marketing LO7 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34 Political and Legal Factors Laws and Regulations Protect: New technology Society Businesses Consumers LO7 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35 Federal Legislation Regulate competitive environment Regulate pricing practices Control false advertising 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 LO7 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36 State Laws • Legislation that affects marketing varies state by state. • • Oregon: limits utility advertising to 0.5 percent of net income. California: bans trans fats in restaurants and bakeries. LO7 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37 Regulatory Agencies 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 LO7 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 38 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 consumers • Empowers consumers with information • Communicates with consumers about fraud and identity theft LO7 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 39 Consumer Privacy Government Actions CAN-SPAM Act Children’s Online Privacy Protection Act Rule LO7 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 40 Competitive Factors Explain the basics of foreign and domestic competition LO8 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 41 Competitive Factors How many competitors? Control How big are competitors? How interdependent is the industry? LO8 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 42 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. LO8 Chapter 4 Copyright ©2012 by Cengage Learning Inc. All rights reserved 43