Lamb, Hair, McDaniel

1. Lamb, Hair, McDaniel 2010-2011 CHAPTER 4 The Marketing Environment

2. 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 multiculturalism and growing ethnic markets

3. 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 competition

4. The ExternalMarketing Environment Discuss the external environment of marketing, and explain how it affects a firm LO1 4

5. Target Market • Defined group most likely to buy a product • Changes as consumers age • External elements change consumers’ desires LO1 5

6. External Marketing Environment External Environment (uncontrollable) Social Change Internal (within the organization) Demographics Ever-Changing Marketplace Marketing mix Economic Conditions Product Distribution Promotion Price Competition Target Market Political & Legal Factors Technology Environmental Scanning LO1

7. 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

8. Social Factors Describe the social factors that affect marketing LO2 8

9. Social Factors Attitudes Values Lifestyle LO2 9

10. Social Factors Social Factors Influence: Products purchased Prices paid for products Effectiveness of promotions How, where, and when people purchase LO2 10

11. Social Factors Self-Sufficiency Upward Mobility Work Ethic Conformity Core American Values LO2 11

12. The Influence ofValues on Buying Habits Ranked Characteristics of Product Quality Reliability Durability Easy maintenance Ease of use Trusted brand name Low price LO2 12

13. 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 13

14. Role of Families and Working Women LO2 • Growth of dual-income families results in increased purchasing power • Approximately 63% 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 14

15. Demographic Factors Explain the importance to marketing managers of current demographic trends LO3 15

16. Demographic Factors • People are the basis for any market • Demographic characteristics relate to buyer behavior • Uncontrollable • Defined characteristics define marketing direction LO3 16

17. Tweens • Pre- and early adolescents, age 9 to 14 • Population of 29 million • Purchasing power of $39 billion in 2009 • View TV ads as “just advertising” • Emerging as “the richest generation” and the “most influential generation in history” LO3 17

18. Generation Y LO3 • Born between 1979 and 1994 • Population of 73 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 18

19. Generation X LO3 • 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 19

20. Baby Boomers LO3 • Born between 1946 and 1964 • Population of 77 million—the largest demographic segment • $2 trillion in spending power a year • Income will continue to grow as they keep working • Four segments of baby boomers: “Looking for balance” “Confident and living well” “At ease” “Overwhelmed” 20

21. Age Tweens Gen Y Gen X Baby Boom 8 to 14 yrs29 million 1979-199460 million 1965-197840 million 1946-196477 million Current Demographic Trends LO3 21

22. Growing Ethnic Markets Explain the importance to marketing managers of multiculturalism and growing ethnic markets LO4 22

23. 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

24. Marketing to Hispanic Americans • 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 24

25. 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

26. Marketing to Asian Americans • 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 26

27. Ethnic and Cultural Diversity • 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 27

28. Multiculturalism and Growing Ethnic Markets LO4 28

29. “[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. Why Multicultural Marketing? 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

30. Economic Factors Identify consumer and marketer reactions to the state of the economy LO5 30

31. Economic Factors Consumer’s Income Inflation Recession LO5

32. Consumers’ Incomes LO5 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. 32

33. The FinancialPower of Women LO5 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 33

34. RecessionMarketing Strategies LO5 Improve existing products and introduce new ones Maintain and expand customer services Emphasize top-of-the-line productsand promote product value 34

35. 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

36. Economic Factors LO5 36

37. Technological Factors Identify the impact of technology on a firm LO6 37

38. Research Pure research that aims to confirm an existing theory or to learn more about a concept phenomenon. Basic Research Applied Research An attempt to develop new or improved products LO6 38

39. 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

40. Political and Legal Factors Discuss the political and legal environment of marketing LO7 40

41. Political and Legal Factors Laws and Regulations Protect: • New technology • Society • Businesses • Consumers LO7 41

42. Federal Legislation • Sherman Act • Clayton Act • Federal Trade Commission Act • Celler-Kefauver Antimerger Act • Hart-Scott-Rodino Act Regulate competitive environment Robinson-Patman Act Regulate pricing practices Wheeler-Lea Act Controlfalse advertising LO7 42

43. 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 43

44. Powers of the FTC Cease-and-Desist Order Consent Decree Affirmative Disclosure Corrective Advertising Restitution Counteradvertising LO7 44

45. Consumer Privacy Government Actions • Gramm-Leach-Bliley Act • Health Insurance Portability and Accountability Act (HIPPA) • California’s Notice of Security Breach Law LO7 45

46. Political and Legal Environment of Marketing LO7 46

47. Competitive Factors Explain the basics of foreign and domestic competition LO8 47

48. Competitive Factors How many competitors? How big are competitors? How interdependent isthe industry? Control LO8

49. Competitive Factors LO8 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.