The External Marketing Environment

1. The External Marketing Environment Lamb, Hair, McDaniel, MKTG 5 , chapter 4

2. Learning Objectives: • LO 1: What is the external environment and how does it affect a firm? • LO 2: What are social factors and how do they affect marketing? • LO 3: What are the current demographic trends and why are they important for strategic marketing planning? • LO 4: Which economic factors impact marketing decisions? • LO 5: What impact does technology have on firms? • LO 6: Which political and regulatory factors have the most influence on marketing?

3. LO 1: What is the external environment? • Firms do not compete in a vacuum. • External environment includes: social/cultural trends, demographic factors, economic conditions, political/legal climate (including regulations), technological innovations, and competitive forces. • Companies cannot control external environment but they can MANAGE it through strategies designed to shape their environment.

4. LO 1 (cont.): How does the environment affect a firm? • Changes in the external environment influence: • Market (consumers, business buyers, government buyers) • Suppliers • Distributors • Competitors • The Firm Itself! • Companies must continuously adapt to changes in the external environment while trying to predict future changes. • With shorter product (and sometimes, entire industry) cycles, the company’s ability to anticipate changes is a source of competitive advantage.

5. LO 2: What are social factors and how do they affect marketing? • Social factors include: attitudes, values and lifestyles. • Social factors – most difficult to forecast, influence, and integrate into marketing plans. • Social factors influence: • what people buy • how much they are willing to pay • how they react to specific promotions • buying decisions (when, where, and how consumers purchase)

6. Self-Sufficiency Getting off the grid Meaningful green Upward Mobility EcoTechMed Work Ethic Conformity American Values Core American Values Emerging Trends

7. 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, social class, and/or income

8. Changing 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.

9. There Is Never Enough Time • It is estimated that over 80percent of the working population is worried about having too little time. • About 40 percent of American adults get less than 7hours of sleep on weekdays. • About 74percent of working adults engage in multitasking.

10. LO 3: What are the current demographic trends and why are they important? • There are three types of market: consumer, business, government. Yet, Peopleare the basis for any market. • Demographic characteristics relate to buyer behavior • Demographic cohorts have their own needs, values, and consumption patterns.

11. TWEENS • Pre- and early adolescents, age8to12 • Population of 20 million • Directly spend about $50billion annually • Parents spend $150billion on tweens annually • View TV ads as “just advertising”

12. 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

13. 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: • Inquisitive, Quick shoppers, Opinionated, Want fulfillment, • Diverse, Multitaskers, Time managers, Environmentally aware.

14. Generation X • Born between 1965 and 1978 • Population of 40 million • Independent, resilient, adaptable, cautious, and skeptical • 71percent have children under age 18 • Home ownership is an important goal • Avid buyers of the latest clothes, technology, and recreational products

15. 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

16. Growing Ethnic Markets • Estimated purchasing power of ethnic markets in 2013: • 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.

17. 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.

18. 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.

19. 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.

20. LO 4: Which economic factors impact marketing? • Consumers’ Incomes: affect the products consumers buy and the prices they are willing to pay. • Purchasing Power: compares income with the cost of living. • Inflation: is always associated with increased prices. When inflation is low, profitability can only come from improved efficiencies (i.e., lower costs). • Recession: affects consumer confidence and their spending. Consumers turn to cheaper brands.

21. 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.

22. LO 5: What impact does technology have on firms? • Basic Research - Pure research that aims to confirm an existing theory or to learn more about a concept phenomenon. • Applied Research– Research aimed at resolving a business problem (e.g., developing new or improved products).

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

24. LO 6: Which political and regulatory factors affect marketing? • Laws and regulations protect: • New technology • Society • Consumers • Businesses • State Laws vary State by State: • Oregon: limits utility advertising to 0.5 percent of net income. • California: bans trans fats in restaurants and bakeries.

25. 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