Articles synopsis paper

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MKTG10

Lamb, Hair, and McDaniel

Chapter 4

The Marketing Environment

Chapter 4 The Marketing Environment

The External
Marketing Environment

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

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Chapter 4 The Marketing Environment

Target Market

A group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the need of that group, resulting in mutually satisfying exchanges.

Companies may add or change their target market as products and services evolve. Much of this has to do with the customer and the external market.

Chapter 4 The Marketing Environment

Understanding the External Environment

Unless marketing managers understand the external environment, the firm cannot intelligently plan for the future.

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

Environmental Management is…

Chapter 4 The Marketing Environment

The factors within the external environment that are important to marketing mangers can be classified as social, demographic, economic, technological, political and legal, and competitive.
You must first understand how customers buy, where they buy, what they buy, and when they buy.
You must understand what drives consumer decisions.
You must identify the most valuable customers and understand their needs.
You must understand the competition.

Understanding the External Environment

Describe the social factors
that affect marketing

Social Factors

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Chapter 4 The Marketing Environment

Social Factors

Social change is perhaps the most difficult external variable for marketing managers to forecast, influence, or integrate into marketing plans.
Social factors influence the products people buy, the price paid, the effectiveness of specific promotions, and how, where, and when people expect to purchase products.

Values

Attitudes

Lifestyles

Chapter 4 The Marketing Environment

American Values

A value is a strongly held and enduring belief. The four basic values shown influenced the attitudes and lifestyles during the first 200 years of the United States. Values are formed through interactions with family, friends, and influencers.

Self-Sufficiency – Every person should stand

on his or her two feet

Upward Mobility –Success comes with getting an

education, working hard and, playing by the rules

Work Ethic – Hard work, dedication to family, and

frugality are moral and right

Conformity – No one should expect to be treated

differently than everybody else

Chapter 4 The Marketing Environment

The Influence of Values on Buying Habits

Values influence our buying habits. Consumers demand high-quality goods that save energy, time, and calories! Furthermore, the products must be durable and not break down. This slide shows the ranked characteristics of product quality that are important to consumers.

Reliability

Durability

Easy maintenance

Ease of use

Trusted brand name

Low price

Ranked Characteristics of Product Quality

Chapter 4 The Marketing Environment

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

A lifestyle is a mode of living. People are choosing products and services that meet diverse needs and interests rather than conforming to traditional stereotypes.
The unique lifestyles of every consumer can require a different marketing mix.

Chapter 4 The Marketing Environment

The Role of Social Media in Communication

Social networking has changed the game when it comes to opinion sharing. Now, consumers can reach many people at once with their views—and can respond to brands and events in real time.

Teenagers and young adults are more likely to view social networks as a valuable source of information.

There is some evidence that social media users feel a greater sense of companionship and support than non-social media users.
Successful use of social media requires more than receiving likes on Facebook, but creating a relationship based on shared interests with the consumer.

Chapter 4 The Marketing Environment

How Firms Use Social Media

A starting point for a firm using social media is to monitor what is being said about the brand.

In addition to monitoring, the firm must respond to both positive and negative buzz about the company or brand.

Social media can also be used to amplify a promotional campaign by inviting consumers to join the conversation about a brand.

If Facebook were a country, it would be the world’s third largest behind China and India.

Chapter 4 The Marketing Environment

Explain the importance
to marketing managers of
current demographic trends

Demographic Factors

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Chapter 4 The Marketing Environment

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.

An uncontrollable variable in the external environment is demography: the study of people’s vital statistics, such as age, race and ethnicity, and location.
Demographic characteristics are strongly related to consumer buyer behavior.

Chapter 4 The Marketing Environment

Tweens

Pre- and early adolescents, age eight to twelve

Population of 20 million

Directly spend about $43 billion annually

In total, $180 billion is spent on tweens annually

Respond very favorably to having control over their own experiences

Chapter 4 The Marketing Environment

Teens

Population of about 25 million

95 percent of U.S. Teens are on the Internet

Many teens pass technology down to their parents

90 percent of teens are into social networking

Teens seek peer affirmation

Chapter 4 The Marketing Environment

Generation Y - Millennials

Born between 1979 and 1994

Surpassed population of baby boomers

Two stages:

Those born in 1994 are just entering young adulthood.

Those born in 1979 have established careers and have started families.

Purchasing power of $200 billion annually

Chapter 4 The Marketing Environment

Generation X

Born between 1965 and 1978

Population of 50 million

Independent, resilient, adaptable, cautious, and skeptical

Have an estimated 31 percent of total income dollars

Saving money is a major priority for Gen Xers

Chapter 4 The Marketing Environment

Baby Boomers

Born between 1946 and 1964

Boomers control 67 percent ($28 trillion) of the country’s wealth

They outspend younger adults by 2:1 on a per-capita basis when making online purchases

Boomers are willing to change brands and try new things

Chapter 4 The Marketing Environment

Growing Ethnic Markets

Explain the importance to

marketing managers of
growing ethnic markets

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Chapter 4 The Marketing Environment

Growing Ethnic Markets

The minority population today is about 118 million
The United States will flip completely to a majority-minority makeup in 2041
As the demographic environment of America evolves, so too must the marketing mix change to reach growing target markets

Chapter 4 The Marketing Environment

Marketing to Hispanic Americans

The term Hispanic encompasses people of many different backgrounds

Nearly 60 percent of Hispanics are of Mexican descent

The diversity of the Hispanic population and the language differences create many challenges for those trying to target this market

Hispanics, especially recent immigrants, often prefer products from their native countries

Hispanics will choose brands that reflect their native values and culture

Chapter 4 The Marketing Environment

Marketing to African Americans

53 percent of African Americans are under the age of 35

More firms are creating products for the African American market

44 percent of all African American households earn $50,000 or more and 23 percent earn more than $75,000

Chapter 4 The Marketing Environment

Marketing to Asian Americans

The Asian American population reached 19 million in 2015, 6% of the population.

Asian American population growth has been fueled primarily by immigration

Although Asian Americans embrace the values of the larger U.S. population, they also hold on to the cultural values of their particular subgroup

Asian Americans like to shop at stores owned and managed by other Asian Americans

Chapter 4 The Marketing Environment

Identify consumer and
marketer reactions to the
state of the economy

Economic Factors

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Chapter 4 The Marketing Environment

Economic Factors

Consumers’

Income

The four economic areas of greatest concern to marketers are consumers’ incomes are:

Purchasing Power

Inflation

Recession

Chapter 4 The Marketing Environment

Consumers’ Incomes

Median U.S. household income
in 2015 was approximately $52,000

Average family incomes, when adjusted for inflation, fell around eight percent between 2007 and 2012

With jobs scarce, many people have accepted pay cuts to keep their current jobs or less-paying available jobs

Education is the primary determinant of earning potential

Chapter 4 The Marketing Environment

measured by comparing income to the relative cost of a standard set of goods and services in different geographic areas, usually referred to as the cost of living.

Purchasing Power is…

Increased standards of living are a function of purchasing power.
When income is high relative to cost of living, people have more discretionary income. That means they have more money to spend on nonessential items.

Chapter 4 The Marketing Environment

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

Inflation is…

In times of low inflation, businesses seeking to increase their profit margins can do so only by increasing their efficiency.
The buyer will not pay more for a product than the subjective value he/she places on it.

Chapter 4 The Marketing Environment

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

A recession is…

Beginning in December 2007, the collapse of inflated housing prices triggered what became the global recession of 2007–2009.
The declining stock market, growing unemployment, and collapsing home prices have all taken a toll on consumer confidence and influenced all kinds of purchasing decisions

Chapter 4 The Marketing Environment

Identify the impact of
technology on a firm

Technological Factors

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Chapter 4 The Marketing Environment

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

Chapter 4 The Marketing Environment

Stimulating Innovation

Build scenarios

Enlist the Web

Talk to early adopters

Use marketing research

Create an innovative environment

Cater to entrepreneurs

Chapter 4 The Marketing Environment

Stimulating Innovation

Building Scenarios – Teams to imagine detailed opportunities and threats for companies
Enlisting the Web – Few companies have created web sites that act as literal marketplaces of ideas where they can go and look for help.
Talking to Early Adopters – These individuals tend to be innovators in their own right. They are always looking for new things.
Using Marketing Research – Customer thoughts
Creating an Innovative Environment – Freedom to fail. Encourage sharing ideas and top management leads by example.
Catering to Entrepreneurs – Reserve blocks of time for scientists or engineers to work on their own ideas (3M)

Chapter 4 The Marketing Environment

Discuss the political and
legal environment
of marketing

Political and
Legal Factors

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Chapter 4 The Marketing Environment

Political and Legal Factors

New technology

Society

Businesses

Consumers

Laws and Regulations Protect:

Chapter 4 The Marketing Environment

Notes:

Business needs government regulations to protect innovators of new technology, the interests of society in general, one business from another, and consumers.
Government needs business for generation of taxes.
Every aspect of the marketing mix is subject to laws and restrictions. It is the responsibility of marketing managers to understand and conform to these laws, while creating new programs to accomplish marketing objectives.

Political and Legal Factors

Business needs government regulations to protect innovators of new technology, the interests of society in general, one business from another, and consumers.

Government needs business for generation of taxes.

Every aspect of the marketing mix is subject to laws and restrictions. It is the responsibility of marketing managers to understand and conform to these laws, while creating new programs to accomplish marketing objectives.

Chapter 4 The Marketing Environment

Federal Legislation

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

Regulate
competitive
environment

Robinson-Patman Act

Regulate
pricing
practices

Wheeler-Lea Act

Control
false

advertising

Chapter 4 The Marketing Environment

State Laws

Legislation that affects marketing varies state by state. For example:
Oregon limits utility advertising to 0.5 percent of net income
California has enacted legislation to lower the energy consumption of refrigerators, freezers, and air conditioners
California and North Carolina, are considering a tax on all in-state commercial advertising

Chapter 4 The Marketing Environment

Regulatory Agencies

Most involved in marketing

Consumer Product Safety Commission

Food and Drug Administration

Federal Trade Commission

Protects consumer safety in
and around their homes

Enforces safety regulations

for food and drug products

Prevents unfair methods of

competition in commerce

Chapter 4 The Marketing Environment

Bureaus of the FTC

Reviews mergers and acquisitions
Challenges anti-competitive conduct
Promotes competition
Provides information

Enforces federal laws that protect consumers
Empowers consumers with information
Communicates with consumers

about fraud and identity theft

Bureau of Competition

Bureau of Consumer Protection

Chapter 4 The Marketing Environment

Consumer Privacy

Despite federal efforts, online tracking is on a tear. A vast amount of personal data is collected through apps.

CAN-SPAM Act – regulate unsolicited email advertising

Children’s Online Privacy Protection Act Rule

Government Actions

Chapter 4 The Marketing Environment

Explain the basics

of foreign and domestic competition

Competitive Factors

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Chapter 4 The Marketing Environment

Competitive Factors

Control

How many competitors?

How big are competitors?

How interdependent is
the industry?

Chapter 4 The Marketing Environment

Competitive Factors

The competitive environment encompasses the number of competitors a firm must face, the relative size of the competitors, and the degree of interdependence within the industry.

Management has little control over the competitive environment.

Chapter 4 The Marketing Environment

Competitive Factors

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.

Chapter 4 The Marketing Environment