2011.2.04 marketing
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Lamb, Hair, McDaniel
CHAPTER 4
The Marketing Environment
2010-2011
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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 multiculturalism and growing ethnic markets
Learning OutcomesLearning Outcomes
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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 competition
Learning OutcomesLearning Outcomes
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The ExternalMarketing Environment
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Discuss the external environment of
marketing and explain
how it affects a firm
LO1
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Target Market
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Defined group most likely to buy a product
• Changes as consumers age
• External elements change consumers’ desires
LO1
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External Marketing Environment
DemographicsDemographics
SocialChangeSocial
Change
EconomicConditionsEconomicConditions
Political & Legal FactorsPolitical &
Legal FactorsTechnologyTechnology
CompetitionCompetition
EnvironmentalScanning
Target Market
External Environment (uncontrollable)
Ever-ChangingMarketplace
ProductDistributionPromotion
Price
ProductDistributionPromotion
Price
Internal (within the
organization)Marketing mix
LO1
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Understanding Competition
• TJ Maxx offers designer brands at discount prices
• 2009 campaign compares the stores prices to those at boutiques and department stores:
– http://www.metacafe.com/watch/2591384/tj_maxx_commercial_6/
– Acknowledging budgetary restraints will drive budget conscious shoppers to the store
LO1
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Social Factors
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Describe the social factors that affect marketing
LO2
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Social Factors
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ValuesValues
AttitudesAttitudes
LifestyleLifestyle
LO2
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Social Factors
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Social Factors Influence:Social Factors Influence:
Products purchasedProducts purchased
Prices paid for productsPrices paid for products
Effectiveness of promotionsEffectiveness of promotions
How, where, and when people purchaseHow, where, and when people purchase
LO2
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Social Factors
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Self-SufficiencySelf-Sufficiency
Upward MobilityUpward Mobility
Work EthicWork Ethic
ConformityConformity
Core American Values
LO2
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The Influence ofValues on Buying Habits
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Ranked Characteristics of Product Quality
Reliability
Durability
Easy maintenance
Ease of use
Trusted brand name
Low price
LO2
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Component Lifestyles
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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
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Role of Families and Working Women
• Growth of dual-income families results in increased purchasing power
• Approximately 60% of work-age females are in the workforce
• Women expect different things in life – purchase bulk of technology products – second largest group of home buyers after couples
• Single households outnumber married households with kids
14LO2
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Demographic Factors
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Explain the importance to marketing managers of
current demographic trends
LO3
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Demographic Factors
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People are the basis for any market
• Demographic characteristics relate to buyer behavior
• Tailoring products to what customers value is key to sales
• Demographic cohorts have their own needs, values, and consumption patterns.
LO3
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Tweens
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Pre- and early adolescents, age 8 to 14
Population of 29 million
Purchasing power of $39 billion annually
Parents spend $150 billion on tweens annually
View TV ads as “just advertising”
LO3
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Generation Y
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”– Connected
18LO3
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Generation X Born between 1965 and 1978
Population of 40 million
Savvy and cynical consumers
More protective and involved with their kids
Value the importance of education
Avid buyers of the latest clothes, technology, and recreational products
19LO3
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Baby Boomers
Born between 1946 and 1964
Population of 77 million—the largest demographic segment
Income will continue to grow as they keep working
Working longer to compensate for economic downturn, which affected retirement savings
May brand-hop more than younger consumers
20LO3
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Current Demographic Trends
AgeTweens
8 to 14 yrs29 million
Gen Y
1979-199460 million
Gen X
1965-197840 million
Baby Boom
1946-196477 million
LO3
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Growing Ethnic Markets
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Explain the importance to marketing managers of
multiculturalism and growing ethnic markets
LO4
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Growing Ethnic Markets
Spending power of ethnic markets in 2008:
– Hispanics: $1 trillion– African Americans: $921 billion– Asian Americans: $526 billion
Diversity can result in bottom-line benefits to companies.
LO4
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Marketing to Hispanic Americans
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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.
68% of U.S. Hispanics have home Internet access.
The NBA expands its appeal with pages appealing directly to the spanish-language market:
http://www.nba.com/enebea/ LO4
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Marketing toAfrican Americans
Many firms are creating products for the African American market.
Promotional dollars and media choices directed toward African Americans continue to increase.
LO4
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Marketing to Asian Americans
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Younger, better educated, and have highest average income of all groups
Sometimes called a “marketer’s dream”
Many products have been developed for Asian American market.
Cultural diversity within the Asian American market complicates promotional efforts.
LO4
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Ethnic and Cultural Diversity
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Multiculturalism: occurs when all major ethnic groups in an area (city, county, or census tract) are roughly equally represented
U.S. trend is toward greater multiculturalism
America’s racial and ethnic patterns have taken on distinctly regional dimensions
LO4
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Multiculturalism and Growing Ethnic Markets
28LO4
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Why Multicultural Marketing?
“[With ethnic marketing] you're going to get more share of the heart, more share of the mind, and ultimately, more share of the wallet.”
About one in three U.S. residents is a minority, representing over 100.7 million people.
7 states more than tripled their Hispanic population between 1990 and 2000: Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee, and Nevada.
Twenty percent of babies born in the United States are Latino.
SOURCE: Mike Robinson, CEO LaVerdad Marketing & Media, http://www.laverdadmarketing.com/la_casa.htm; Lisa Biank Fasig, "An Expanding Business for an Expanding Market," Business Courier of Cincinnati, September 7, 2007
LO4
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Economic Factors
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Identify consumer and marketer reactions to the
state of the economy
LO5
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Economic Factors
Purchasing Power
Inflation
Recession
LO5
Consumer’s Income
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Consumers’ Incomes• Median U.S. household income
in 2008 was approximately $49,000.
• Incomes have risen at a slow pace.
• Education is the primary determinant of earning potential.
32LO5
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The FinancialPower of Women
• Women bring in half or more of the household income
• Women control 51.3 percent of the private wealth in the U.S.
• Women control 80 percent of household spending
33LO5
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RecessionMarketing Strategies
• Improve existing products and introduce new ones
• Maintain and expand customer services
• Emphasize top-of-the-line productsand promote product value
34LO5
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Thriving in an Economic Downturn
Wal-Mart saw double-digit profit growth during the recent economic downturn. How? A shift in strategy it calls Win/Play/Draw:
• Win: Outmaneuver competitors with low prices on hot products (flat-screen TVs)
• Play: Reduce range of offerings to feature “hot sellers” (its $20 L.e.i. jeans)
• Draw: Keep a stock of one-stop-shopping essentials (hardware, pharmacy items)
LO5
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Economic Factors
36LO5
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Technological Factors
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Identify the impact of technology on a firm
LO6
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Research
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Basic ResearchBasic Research
Applied ResearchApplied 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
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RSS and Blogging
• RSS feeds deliver updated news content according to users interests
• Blogs allow marketers a way to look into consumer opinions with a simple search
• Many blogs devoted to discussing advertisements, here are 10 popular ones:
– http://www.blogs.com/topten/10-popular-advertising-blogs/
LO6
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Political and Legal Factors
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Discuss the political and legal environment
of marketing
LO7
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Political and Legal Factors
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New technology Society Businesses Consumers
Laws and Regulations Protect:Laws and Regulations Protect:
LO7
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Federal Legislation
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Sherman ActClayton ActFederal Trade Commission Act Celler-Kefauver Antimerger ActHart-Scott-Rodino Act
Sherman ActClayton ActFederal Trade Commission Act Celler-Kefauver Antimerger ActHart-Scott-Rodino Act
Regulate competitive
environment
Robinson-Patman Act Robinson-Patman ActRegulate pricing
practices
Wheeler-Lea Act Wheeler-Lea ActControl
falseadvertising
LO7
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Regulatory Agencies
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Consumer Product Safety Commission
Consumer Product Safety Commission
Federal Trade Commission
Federal Trade Commission
Food & Drug AdministrationFood & Drug
Administration
Protects consumer safety in and around their homes
Prevents unfair methods ofcompetition in commerce
Enforces safety regulations for food and drug products
LO7
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Powers of the FTC
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Cease-and-Desist OrderCease-and-Desist Order
Consent DecreeConsent Decree
Affirmative DisclosureAffirmative Disclosure
Corrective AdvertisingCorrective Advertising
RestitutionRestitution
CounteradvertisingCounteradvertising
LO7
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Consumer Privacy
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Gramm-Leach-Bliley Act
Health Insurance Portability and Accountability Act (HIPPA)
California’s Notice of Security Breach Law
Government ActionsGovernment Actions
LO7
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Political and Legal Environment of Marketing
46LO7
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Competitive Factors
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Explain the basics of competition
LO8
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Competitive Factors
How many competitors?
How big are competitors?
How interdependent isthe industry?
Control
LO8
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Competitive Factors
Competition for MarketShare 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