External Environment

SocialChangeSocial

Change

EconomicConditionsEconomic

Conditions

EnvironmentalScanning

Ever-ChangingMarketplace

Political & Legal FactorsPolitical &

Legal FactorsTechnologyTechnology

CompetitionCompetitionTarget Market

External Environment (uncontrollable)

ProductDistributionPromotion

Price

ProductDistributionPromotion

Price

Internal (within the

organization)Marketing mix

DemographicsDemographics

The External Marketing EnvironmentSTRATEGIC MARKETING

P. 73 - 97

Warm-up Quiz Jay owns a sporting goods store that exclusively distributes products to high school athletic teams. One of her clients overpaid and she notified them of this and refunded their money. This is a form of which social responsibility?

◦ Economic◦ Ethical◦ Legal◦ Philanthropical

Warm Up Age Group

◦ ____ ____________ a. 10 years old

◦ ____ _____________ b. 65 years old

◦ ____ _____________ c. 48 years old

◦ ____ _____________ d. 33 years old

◦ Tweens, Generation X, Generation Y, Baby Boomers

THE EXTERNAL ENVIRONMENT TARGET MARKET: A DEFINED GROUP MOST LIKELY TO BUY YOUR PRODUCT

◦ Target Markets change over time forcing marketing mix strategies to be altered◦ Environmental changes◦ If Pac Sun wants to keep you in their target market they would adjust

◦ Products◦ Prices◦ Promotional Strategies◦ Distribution Methods

Environmental Scanning◦ In order to plan for the future marketers must conduct environmental scans

◦ Goal is to gather data about external factors (opportunities & threats)◦ Social • Demographic • Economic◦ Technological • Political • Legal◦ Competitive

◦ Environmental Management◦ Occurs when a company implements strategies that attempt to shape the external environment

within which it operates

Environmental Scanning Social change is the hardest to determine.

◦ Attitudes◦ Values◦ Lifestyles

Social Factors Influence◦ Products purchased◦ Prices paid for products◦ Effectiveness of promotions◦ How, Where, & When people purchase

Societal Factors During the first 200 years of the United States, four basic values

strongly influenced attitudes & lifestyles

American Values BeliefSelf-Sufficiency Every person should stand on their own two feet

Upward Mobility Success would come to anyone who got an education, worked hard, and played by the rules

Work Ethic Hard work, dedication to family, and frugality were moral and right

Conformity No one should expect to be treated differently from everybody else

Environmental Scan Values influence what people view as important, what actions to take, & how one behaves in social settings◦ People form values through interactions with friends, family, teachers,

religious leaders, & politicians

Values influence buying habits◦ Consumers in todays society are demanding, inquisitive, &

discriminating◦ Low tolerance for poor craftsmanship, products that break down

The Influence of Values on Buying Habits US consumers rank that characteristics of product quality as follows:

1. Reliability2. Durability3. Easy Maintenance4. Ease of Use5. A trusted brand name6. A low price

*Nutrition and environmental concerns were also strong factors

Environmental Scan: Growth of Component Lifestyles

Lifestyle◦ A mode of living; the way people decide to live their lives

Component Lifestyle◦ The practice of choosing goods and services that meet ones diverse needs and interests rather than

conforming to a single, traditional lifestyle

◦ In the past peoples professions would dictate your lifestyle◦ Banker 40 years ago all had similar lifestyles. ◦ Bankers today vary a lot more. May like to cook, workout, use technology, be a single parent.◦ Each lifestyle factor brings about a different target market. ◦ A banker could buy suits at Brooks Brothers and socks at Target

◦ We shop how we want which brings about more complexity & requires a different marketing mix

Environmental Scan: Changing Role of Families & Working Women

Growth of dual income families has brought about more purchasing power◦ Approximately 63% of all females between the ages of 16 – 65 years old are in the workforce◦ There are more than 9 million women-owned businesses in the United States

◦ Generate $3.6 trillion in revenue◦ Buy $55 billion of the $95 billion spent on electronics yet do not recognize them as the #1

market◦ Do the majority of grocery shopping (read inserts, cut out coupons, view specials) ◦ Spend on average an hour a day outside of work on internet

The phenomenon of working women has probably had the biggest impact on marketing compared to any other societal change

Environmental Scan: Changing Role of Families & Working Women

Marital Status85% chance you will marry at least once (used to be 95%)

42% of the workforce is single

40% of home buyers

35% of voters

1/3 children born today are in single parent homes

Single working women are the 2nd largest buying group of homes

Environmental Scan: Time Every year more people claim to “never have enough time”

◦ 77% of Americans say they do not have enough time to complete tasks

◦ Over 31% of male college-educated employees work at least 50 hours a week

◦ 40% of Americans get less than 7 hours of sleep a day

◦ 60% of meals are rushed

◦ Less time for families

◦ Using technology to keep tabs on loved ones

Societal Factors that Affect Marketing

Environmental Scan:Demographic Factors

Demography◦ The study of people’s vital statistics such as

◦ Race◦ Ethnic ity ◦ Location◦ Age

◦ Tweens◦ Generation Y◦ Generation X◦ Baby Boomers

Environmental Scan:Tweens

Characteristics of a Tween: Ages 8-14 (10-12)

Watch Cable designed just for them Strong attitudes & purchasing power

Internet Savy Spend an average of $1,500/year

Know what they want & they often get it Parents spend $126 billion / year

Population of 29 million Emerging as the richest & most powerful generation

Environmental Scan: Generation YCharacteristics of Generation Y (1979 – 1994)

Population 60 million Impatient: Have lived their wholes lives in an automated world

Opinionated:Have been encourage to share opinions & feel their opinion is always needed and welcomed.

Diverse:Most ethinically diverse generation the nation has ever seen. Most don’t identify with 1 race. Very accepting.

3 times larger than Generation X

Family Oriented:Stable childhoods. Led companies to be “family friendly” e.g. Baby Gap

Time Managers:Very scheduled lives. As kids they had soccer, teeball, camp, etc..

Most sophisticated media generation. Website, cd, dvd.

Most Gen Y’ers are children of baby boomers (echo boomers)

Inquisitive: Want to know Why? Why thing work, why things happen, & how it can happen

Street Smart:They have seen a lot. The internet and television have exposed them to 24 hour updates of violence, war, sexuality at very young ages. Not easily shocked. More aware.

Attach value to celebrity endorsement, yet enjoy vintage items as well.

Spend $200 billion annually Over lifetime will spend $10 trillion Word of mouth advertisement works well.

Don’t like canned talks or sales pitched ideas. Like to design and do own thing.

Environmental Scan: Generation XCharacteristics of Generation X (1965 - 1978)

Population: 40 million First group of latchkey children. Both parents worked.

Entering the most money grossing years of their lives (45 – 54)

Their whole life has been bombarded with advertisements.Savy & cynical consumer.

Very busy life’s. Spend 78% more than the average person on personal services. Spend 15% less on household supplies.

A lot of companies avoid this age group due to small population size. Exception is furniture companies.

Male Gen X’ers like hotels with sports bars & Quality fitness centers.

Careful shoppers when it comes to household furnishings. Will shop around. Not very brand loyal.

Heavily targeted to by traveling companies. Most likely group to travel midweek. Work from home.

Environmental Scan: Baby BoomerCharacteristics of Baby Boomers (1946 - 1964)

Population 77 million Large purchasing power. 50 -60 year olds spend $1 trillion annually

Looking for Balance:27% are very busy. Appeal to companies with time saving products. Travel & Food Companies benefit from this group.

At Ease:31% of all baby boomers. At peace with themselves & do not worry about the future. They express little interest in travel or luxury brands. Very home-centric & family oriented. Enjoy established and trusted brands.

Life expectancy is increasing & this generation feels they are just reaching their best years.

Most likely group to relocate, go back to school, take on new jobs, travel due to empty nest, support children, remarry, inherit money, pursue new hobbies, deal with health issues

Confident & Living Well:23% of baby boomers. Have the highest incomes & relish the opportunity to be the first purchasers of a product. Tech oriented and care about being stylish and trendy. The most active group of baby boomers. Travel frequently & are targeted by luxury brands.

Overwhelmed:Represent less than 20% of baby boomers. Lowest income segment of generation. They worry about their future & financial security. They are the least active and most unhealthy. Considered to be the least social group & the least comfortable with technology

Want to keep working to stay mentally and physically active.

Not as brand loyal as they once were. It used to be old people only tried one brand & stuck with it forever. No longer as true.

Growing Ethnic Markets Spending power of ethnic markets:

– Hispanics--$1 trillion– African Americans--$921 billion– Asian Americans--$526 billion

Diversity can result in bottom-line benefits to companies.

Example Pepsi created products based on ethnicity: Guacamole Doritos & Gatorade Extremo Mountain Code Red

Marketing to Hispanic Americans The population’s diversity creates challenges for targeting this group.

Citizens come from Mexico, Central America, Puerto Rico, Cuba, etc..

Hispanics tend to be brand loyal, but are not aware of many U.S. brands.

Wal-mart now prints circulars in English & Spanish and provides the free magazine Viviendo (living)

Nearly half of adult U.S. Hispanics have home Internet access. Younger generations look online to gain information v. play games

Marketing to African Americans Many firms are creating products for the African American market.

Examples: Allstate, M&M, Revlon, Johnson, Gillette, & Pepsi

Many entrepreneurs come from this demographic. Create products that are unique and fill a niche.

Promotional dollars and media choices directed toward African Americans continue to increase.

BET, Essence Magazine, Radio Stations (4 hours / day)

Marketing to Asian Americans Represent 4.2% of population yet known as the Marketer’s Dream

Younger, better educated, and have highest average income of all groups

Cultural diversity within the Asian American market complicates promotional efforts.

Korean & Chinese are much more traditional Filipino is more Americanized

Economic Factors Three factors that greatly impact the economy are:

◦ Incomes◦ Inflation◦ Recession

Consumer Income Median U.S. household income in the United States is $50,054.

◦ Maryland ($69,272 ), North Carolina #39 ($43,674), Mississippi ($36,646)◦ South & Midwest are the poorest areas

◦ See more Dollar Stores

Incomes have risen at a slow pace.

Education is the primary determinant of earning potential.◦ Only 1% of citizens with only a high school education earn over

$100,000◦ 13% of college graduates earn $100,000+

Consumers are strapped for cash.◦ Use credit to continue standard of living◦ Median household debt has increased by 80%

Consumer Income: Women Women bring in half of the household income. Women control 51.3 percent of the private wealth in the U.S. Women control 80 percent of household spending. Women are now the primary buyers in male-dominated categories:

◦ 68% of new cars◦ 66% of computers◦ 66% of home improvements◦ 53% of investments◦ 51% of consumer electronics

Environmental Scan: Economic Factors

Purchasing Power: ◦ A term that measures a comparison of income versus the relative cost of set standard of goods and

services in different geographic areas.◦ Usually referred to as the cost of living◦ Cost of living

◦ Housing◦ Food & Groceries◦ Utilities◦ Health care◦ Miscellaneous Expenses: Clothing, Services, & Entertainment◦ Transportation

Purchasing Power = Income – Cost of Living New York has a high cost of living. If three times higher than Michigan. Earning $300,000 in New York = $100,000 in Michigan

Economic Factor: Inflation A measure of the decrease in the value of the money, expressed as the percentage reduction in value since the previous year.

If inflation = 5% you will need to 5% more to buy the same product from the year before.

e.g.: $1.00 / item = $1.05 / item

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

Growth rates of production, employment, & income all fall below 0%. ◦ In a recession you don’t receive a lesser raise, you take a pay cut

To Offset a Recession Businesses:◦ Improve existing products and introduce new ones

◦ Maintain and expand customer services

◦ Emphasize top-of-the-line products and promote product value

Environmental Scan: Technological Factors

Utilizing technology assists with offsetting Inflation & Recession issues◦ Production can be more efficient with new machines

◦ Research◦ Basic Research: Pure research that aims to confirm an existing theory or to

learn more about a concept phenomenon.◦ Not aimed at a specific problem

◦ Applied Research: An attempt to develop new or improved products

Environmental Scan: Technological Factors

U.S. excels at basic and applied research.◦ Aircraft Design Industry #1 in world

Many firms use the market concept to guide research. ◦ Ask customers what they want

New technology internally creates a long-term competitive advantage.

External technology ◦ Creates more efficient operation or better products◦ May render existing products obsolete (e.g. Kodak)

Environmental Scan: Technological Factors

Global Innovation is becoming more popular◦ Companies like GE, Microsoft, & IBM have research labs in multiple

foreign countries such as China, Japan, India, Switzerland, & Canada

New technologies help create new opportunities◦ Blogs have become more popular◦ RSS Feeds: http://www.youtube.com/watch?v=0klgLsSxGsU ◦ Businesses used RSS to track consumer interests, trends, comments

being made about them, etc..

RSS: Real Simple Syndication

Environmental Scan: Political & Legal

Laws & Regulations Protect:◦ New technology◦ Society◦ Businesses◦ Consumers

Businesses need the government to protect innovators of new technology, the interests of society in general, businesses from each other, and consumers.

The government needs businesses because taxes support our nations infrastructure, education, military & other causes.

Environmental Scan: Political & Legal

Marketers can get in trouble if they don’t keep up with trends & government regulation.◦ Tobacco companies advertising is limited due to

their carelessnessLaws Affecting Marketing◦ Sherman Act prevents monopolies◦ Clayton Act outlaws buyer discrimination◦ FTC deals with antitrust & unfair competition◦ Celler-Kefauver maintains competition in workplace◦ Hart-Scott-Rodino Act deals with mergers◦ Lanham Act protects trademarks

Environmental Scan: Political & Legal

State Legislation also impacts marketing◦ Tax marketing efforts◦ Limits marketing budgets◦ Force products to meet regulatory

standards (energy efficient)

◦ Regulatory Agencies impacting marketing the most are ◦ CPSC, FTC, FDA

Environmental Scan: Competitive Factors

Competitive environment encompasses:◦ The number of competitors a firm must face◦ The relative size of the competitors◦ The degree of interdependence within the industry

◦ Competition is affected by◦ Population growth slowing down◦ Costs rising◦ Available resources being restricted

Environmental Scan: Competitive Factors

Pepsi focusing solely on ◦ Diet Pepsi◦ 25 & Under market◦ Sports fans◦ Hispanics & African Americans

Global Competition◦ The United States now must compete with foreign companies◦ Price no longer only factor in foreign companies success (quality)

◦ Example Sony, Nestle, & Rolls-Royce

Quiz on Monday Questions on Corporate Social Responsibility

◦ Know triangle

Ethics, Social Responsibility, Sustainability

Elements in the external marketing environment

Assignment Fishbowl debate

◦ English National Language in the United States

◦ Is college really the best option◦ Student loan debt

◦Which Generation has the strongest affect◦ Tweens, Gen Y, Gen X, Baby Boomer

Textbook Questions P. 98

Learning Objective #5 Marketing Mix

Create a product that is geared towards one of the following ethnic groups:

HispanicsAfrican AmericansAsian Americans

43

Multiculturalism and Growing Ethnic Markets