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1 Chapter 3 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson The Marketing Environment The Marketing Environment and Marketing Ethics and Marketing Ethics Prepared by Prepared by Deborah Baker Deborah Baker Texas Christian University Texas Christian University Chapter 3

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  • The Marketing Environment and Marketing EthicsPrepared byDeborah BakerTexas Christian UniversityChapter 3

  • Learning Objectives

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

    2. Describe the social factors that affect marketing. 3. Explain the importance to marketing managers of current demographic trends.

  • Learning Objectives (continued)

    4. Explain the importance to marketing managers of multiculturalism and growing ethnic markets. 5. Identify consumer and marketer reactions to the state of the economy. 6. Identify the impact of technology on a firm.

  • Learning Objectives (continued)7. Discuss the political and legal environment of marketing. 8. Explain the basics of foreign and domestic competition.

    9. Describe the role of ethics and ethical decisions in business. 10. Discuss corporate social responsibility.

  • Learning Objective Discuss the external environment of marketing, and explain how it affects a firm.1

    On Linehttp://www.levi.com

  • Target MarketA defined group most likely to buy a firms product.1

  • External Marketing Environment1

  • External Marketing Environment1

  • Learning Objective Describe the social factors that affect marketing. 2

  • Social Factors2

  • American Values2

  • The Influence of Values on Buying Habits2

  • The Poverty of TimeA lack of time to do anything but work, commute to work, handle family situations, do housework, shop, eat, sleep...2

  • Component LifestylesThe practice of choosing goods and services that meet ones diverse needs and interests rather than conforming to a single, traditional lifestyle.2

  • Role of Families & Women58% of all females (ages 16-65) are in the workforce Purchasing power from dual-career families is rising Traditional purchasing roles and patterns are changing2

  • Who Holds the Purse Strings?2

  • Learning Objective Explain the importance to marketing managersof current demographic trends.3

  • Demographic Factors3Click Screen for Ads

  • The Demographic Facts of life3

  • Age Groups: Generation YBorn between 1979 and 1994Size creates immense marketing impactRespond to ads differentlyLove customized products and services3

    On Linehttp://www.generation-y.com

    On Linehttp://www.mountaindew.comhttp://www.northface.com

  • Age Groups: Generation XBorn between 1965 and 1978 Savvy and cynical consumers Indulge themselves with meals/alcohol, clothing, and electronics3

  • Age Groups: Baby BoomersBorn between 1946 and 1964Cherish youth, convenience, and individualityIn the nesting stage of lifeIndividualism has led to a personalized economy3

  • Personalized EconomyDelivering customized goods and services at a good value on demand.3

  • Age Groups: Older ConsumersAge 55 plus Healthier, wealthier, better educatedDefinite about wants and needs Have unique behavior patternsNot happy with advertising treatment 3

    On Linehttp://www.gct.comhttp://www.maupintour.com

  • Learning Objective Explain the importance to marketing managers of multiculturalism and growing ethnic markets.4

  • Growing Ethnic MarketsU.S. population is becoming a multicultural society and workforceTrend in U.S. is toward greater multiculturalismGrowth in three ethnic minorities:African-AmericansU.S. HispanicsAsian-Americans


  • MulticulturalismWhen all major ethnicgroups in an area-- such as a city, county, or census tract--are roughly represented.4

    On Linehttp://www.bet.comhttp://www.multiculturalmarketingresources.com

  • Learning Objective Identify consumer and marketer reactions to the state of the economy.5

  • Economic Factors5

  • Rising Incomes66% of U.S. households earn middle-class income Over 10% earn over $75,000, primarily from dual-income families More discretionary income for high-end goods and services


  • Inflation

    Prices rise with no wage increase Purchasing Power decreases Increase profit margins by increasing efficiency Consumers reaction:Search for lowest pricesRely on coupons and sales 5

  • Recession

    Income, production and employment fall Reduced demand for goods and services 5

  • Recession Marketing Strategies5

  • Learning Objective Identify the impact of technology on a firm.6

  • Basic and Applied Research6

  • Technological & Resource FactorsNew technology is a weapon against inflation and recession U.S. excels at basic and applied research Information technology and the Internet have increased productivity6

  • Using Technology to Boost Productivity6

  • Learning Objective Discuss the political and legal environment of marketing.7

  • Political and Legal Factors Laws and Regulations Protect


  • Federal LegislationSherman ActClayton ActFederal Trade Commission Act Robinson-Patman ActWheeler-Lea Amendments to the FTC ActLanham ActCeller-Kefauver Antimerger ActHart-Scott-Rodino Act


  • Regulatory Agencies7

    On Linehttp://www.ftc.gov

  • Regulatory Agencies7

    On Linehttp://www.fda.gov

  • Learning Objective Explain the basics of foreign and domestic competition.8

  • Competitive FactorsHow many competitors? How big are competitors? How interdependent is the industry?


  • Competitive Factors8Competition for Market Shareand ProfitsGlobal Competition

  • Global CompetitionMore foreign firms are entering U.S. market Foreign firms in U.S. now compete on product quality Global markets are highly competitive 8

  • Learning Objective Describe the role of ethics and ethical decisions in business.9

  • Ethics and Morals9

  • Ethical Behavior in Business9

  • Ethical Development Levels9

  • Morality and Business EthicsPreconventionalMoralityChildlike levelBased on what will be punished or rewarded Self-centered, calculating, selfish9

  • Morality and Business EthicsConventionalMoralityMoves toward the expectations of societyConcerned over legality and the opinion of othersWhen in Rome, do as the Romans9

  • Morality and Business EthicsPostconventionalMoralityMorality of the mature adultConcern about how they judge themselvesConcern if it is right in the long run9

  • Ethical Decision Making9

  • Code of EthicsA guideline to help marketing managers and other employees make better decisions.9

    On Linehttp://www.ethics.ubc.ca/ resources/business

  • Creating Ethical GuidelinesHelp identify acceptable business practices Help control behavior internally Reduce confusion in decision making Facilitate discussion about right and wrong


  • Unethical Practices9

  • Learning Objective Discuss corporate social responsibility.10

  • Corporate Social Responsibility10

    On Linehttp://www.equalexchange.comhttp://www.crest.com

    On LineLevi StraussHas Levis recovered from its failure to see changes in its external environment? How is the company using its Web site to rebuild its brand in the younger age groups?Notes:This slide demonstrates the continuous evolution in the external marketing environment. The external environmental factors include demographics, social change, economic conditions, political and legal factors, technology, and competition. The external environment can not be controlled by management. However, the marketing mix (the Four Ps) can be controlled and reshaped to influence the target market. The target market is a defined group that is most likely to buy a firms products.

    Discussion/Team Activity:Discuss the evolution and changes in the computer industry during the last twenty years. How has the external environment changed? How has the target market and marketing mix changed? What external environmental conditions are challenging the computer industry today? What reshaping would you recommend to enhance the drop in computer sales?Notes:Social change is 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. Notes: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. They are:Self-sufficiency: Every person should stand on his or her own 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.Conformity: No one should expect to be treated differently from everybody else. Values are formed through interaction with family, friends, and influencers such as teachers, religious leaders and politicians. The environment can also play a role in shaping values.

    Discussion/Team Activity:What environmental influences have affected the values of Americans? Examples: Great Depression, Womens Role in the Workplace, Hippie Revolution of 1960s

    Notes: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.

    Discussion/Team Activity:1. Discuss products that demonstrate high quality standards in each of the ranking categories. Notes:Consumers place value on nonmaterial accomplishments, such as having control of their lives and taking time off work. This was clearly demonstrated after the September 11 terrorist attack. A poverty of time means that people will decrease the amount of time spent doing things they dislike. This includes performing less housework and home maintenance, and dining out more. The purchase of brand names makes buying decisions quicker and easier. Small shops are favored over large ones, and technology is used to reduce transaction times.

    Discussion/Team Activity:What businesses and services provide helpful solutions to the poverty of time issue? Notes: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. Notes:1. The phenomenon of working women has had a greater effect on marketing than has any other social change. Notes:As shown in Exhibit 3.2, cost is more prominent in purchasing decisions made by women whereas quality is more relatively more important to men.

    This exhibit also reveals where women act as principal decision makers. When purchasing big-ticket items women remain active in the purchase decision, and are more likely to make these decisions with a spouse.

    VideoCadillacSeries of AdvertisementsIn these advertisements, Cadillac appears to be appealing to a different target market of buyers. What demographic trends seem to be influencing Cadillac? What factors in the advertisements indicate Cadillacs new marketing strategy? How is this different from Cadillacs perceived image in the marketplace and its traditional target market?

    Notes:The next uncontrollable variable in the external environment is demography: the study of peoples vital statistics, such as age, race and ethnicity, and location. Demographic characteristics are strongly related to consumer buyer behavior.Notes:As shown in Exhibit 3.3, the United States is growing slower than the rest of the world. The longer life span indicates a growing market for products and services targeted toward the elderly. Discussion/Team Activity:Look through the table and determine some of the other demographic factor trends in the United States and worldwide. Discuss the opportunities and implications of each of these trends for marketers.

    On LineGeneration YView the site designed to reach members of Generation Y. How successfully does it do this? Explain. Can you find a similar type site for Generation X?

    Notes:Cohort age groups (Generation Y, Generation X, and baby boomers) each have their own needs, values, and consumption patterns. Generation Y members are sixty million strong, and constitute a significant challenge to marketers because of the size. What if Generation Y does not respond to the mature brands favored by the baby boomers or Generation X? Generation Y has grown up in a media-saturated, brand-conscious world, and respond to ads differently. Generation Ys love for customized products and services include (in rank order) clothes, shoes, travel planning, computers, and electronics. Discussion/Team Activity:Identify some mature brands favored by the baby boomers. Discuss how these brands might successfully market to Generation Y.

    Notes:Generation X is the first generation of latchkey children, and consists of 40 million consumers.

    Generation X is likelier than the previous generation to be unemployed, underemployed, and living at home with parents. Having been bombarded with multiple media since birth, Generation X-ers are savvy and cynical consumers. Discussion/Team Activity:1. Name some ways that companies have marketed successfully to Generation X-ers. Notes:Almost 78 million baby boomers exist, creating a huge market. They still cling to youth and continue to be active.

    The children of baby boomers were indulged, college educated, and encouraged to be competitive.

    Baby boomers in the nesting stage are becoming homebodies.

    Furniture, family counseling and wellness programs, books and magazines, health and medical products, and discount investment brokers should profit.

    Notes:Business who deliver customers what they want when they want it know their customers extremely well. Discussion/Team Activity:Name some companies who deliver customized goods and services to meet their customer needs. Discuss their reasons for success.

    On LineGrand Circle TravelMaupintourHow does Grand Circle Travel dispel the stereotypes about seniors on its Web page? Compare it to Maupintours site. Given that both companies target seniors, which company does this more effectively? Why do you think this is so?

    Notes:Consumers age 50 years of age or older will make up 40 percent of the population by 2005.

    Mature consumers believe that marketers and advertisers do not have their interests in mind when developing products, designing packaging, and preparing advertising.

    Discussion/Team Activity:1. Discuss marketing opportunities for older consumers. Notes:1. The ethnic minorities above will grow in size and in share of the population, while the white majority declines as a percentage of the total. Other ethnic groups will further enrich U.S. society. On LineBlack Entertainment TelevisionHow rich is the Home Center content on BETs Web site? What concerns does Fannie Mae address that seem to be specific to African Americans? What general concerns are explained.

    Notes:The trend in the United States is toward greater multiculturalism.

    The marketers task is more challenging in a diverse society because of differences in educational level and in demand for goods and services. Ethnic markets are not homogeneous. There are many niches within ethnic markets that require micromarketing strategies.

    Discussion/Team Activity:Discuss ways companies can successfully reach multicultural markets.

    Notes:1. The next external factor is the economic environment. Notes:Americans are buying more goods and services than ever before. The rising affluence is mainly from the increasing number of dual-income families. Families with incomes over $35,000 have the most discretionary income, and as a result, are the focus of many marketing efforts. Discussion/Team Activity:1. What companies market their products and services to families with high discretionary income?Notes:In 2001, the United States experienced a recession from the slowdown in the high-tech sector, overextended consumer credit, and the terrorist attacks.

    Discussion/Team Activity:Discuss some of the specific recession marketing strategies utilized by U.S. companies during 2001.

    Notes:The United States excels at both basic and applied research. The investment in information technology has helped the U.S. hold down inflation, maintain economic growth, and compete in world markets.

    Notes:Exhibit 3.5 shows examples of how information technology and the Internet have have been the innovations driving increased productivity for the past ten years.Notes:Business need government regulations to protect new technology innovations, the interests of society, 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. Notes:Exhibit 3.6 states the impact on marketing from each of these federal acts.

    On LineFederal Trade CommissionAs a marketing manager, how would you use the FTC Web site in designing a new marketing campaign?

    Notes:The regulatory agencies shown on this slide are the three federal agencies most directly and actively involved in marketing affairs. A description of each is shown on the next slide. On LineFood and Drug AdministrationWhat topics are currently receiving attention in FDA news? What effect has the attention had on market share?Notes: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.Notes:Firms find they must work harder to maintain profits and market share regardless of the competitive environment. For example, American Airlines sued numerous entities to halt Legend Airlines from operating at Dallass Love Field. When none of that worked, AMR leased an abandoned terminal.

    The development of new and improved products has been a successful strategy for Procter & Gambles Tide Detergent. In fact, Tide has spawned more than sixty variations of itself. Notes:

    Many foreign competitors are considering the U.S. to be a ripe target market. In the past, foreign firms penetrated U.S. markets on price. Today, they compete on product quality.

    Global competition is discussed in Chapter 4.

    Notes:Firms must compete in an ethical manner regardless of pressures from competition or the external environment. Morals can be considered a foundation for good ethical behavior, and are usually characterized as good or bad. Discussion/Team Activity:Discuss the ethical issues in the news regarding Enron, WorldCom, and other firms in 2002.

    Notes:Ethical values are situation specific and time oriented, and everyone must have an ethical base to conduct in the business world and in personal life. One approach toward ethical values is to develop a personal set of ethics to examine the consequences of an act. A second stresses the importance of rules. Examples of Rules: * Always treat others as you would like to be treated. * It is wrong to lie, bribe, or exploit. A third approach emphasizes the development of moral character in individuals, as shown in the three levels of ethical development on the next slide.

    Notes:There is no cut-and-dried answer in making ethical decisions. The factors shown on this slide tend to influence ethical decision making and judgments.

    On LineUniversity of British Columbia Centre for Applied EthicsResearch corporate codes of ethics through the Applied Ethics Resources page. Compare the codes of three companies. What common themes do you find?

    Notes:A national study found that 60 percent of companies surveyed maintained a code of ethics, 33 percent offered ethics training, and 33 percent employed an ethics officer.

    A code of ethics should not be too vague or too detailed. Exhibit 3.9 demonstrates an example of a simple set of ethical guidelines. Discussion/Team Activity:Discuss companies with highly praised codes of ethics. These include Johnson & Johnson, Boeing, and Hewlett-Packard.

    Notes:Exhibit 3.8 shows examples of ethical issues marketing managers face.

    On LineEqual ExchangeCrest ToothpasteHow are these companies publicizing their community involvement on the Web? Describe the community activities of each. Does the marketing of community involvement enhance the image of the companies?

    Notes:Corporate social responsibility is a businesss concern for societys welfare. The components are:Economic: Profit is the foundation on which all other responsibilities rest.Legal responsibilities: Law is societys codification of right and wrong. Play by the rules of the gameEthical responsibilities: Do what is right, just, and fair. Avoid harm.Philanthropic responsibilities: Contribute resources to the communication; improve the quality of life.