Marketing Management Marketing’s Relationship to the Firm and Society Paul Dishman, Ph.D....

Marketing Management

Marketing’s Relationship to theFirm and Society

Paul Dishman, Ph.D.Department of Business Management

Marriott School of Management

Brigham Young University

Lecture 3

Paul Dishman, Ph.D.


Competitors

Marketingintermediaries

PublicsSuppliers

Mar

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info

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ion

syst

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Marketing

planningsystem

Marketing

organization

system Mar

ketin

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orga

niza

tion

and

impl

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tatio

n

Product

Promotion

Place PriceTargetcustomers

EconomicEconomicenvironmentenvironment

Social/Social/culturalcultural

environmentenvironment

TechnicalTechnicalenvironmentenvironment

Political/Political/legallegal

environmentenvironment

Paul Dishman, Ph.D.


Environmental ForcesEnvironmental Forces

Social

Economic

Technological

Regulatory

Competitive

Paul Dishman, Ph.D.


Social ForcesSocial Forces

1. Demographic shifts

2. Cultural changes

Paul Dishman, Ph.D.


Social TrendsSocial Trends• move toward “natural” and healthful

products and lifestyles• growing number and importance of

older Americans• population shifts to remote suburbs and

small towns• greater desire for product simplicity and

honesty in advertising

Paul Dishman, Ph.D.


The Population TrendThe Population Trend• 1999 U.S. Population estimated at 272

million

• number of people ages 20-34 has declined since 1990 and the number over 65 has increased

• mature households (age 50+) represent the fastest growing age segment and possess 75% of the net worth of U.S. households

Paul Dishman, Ph.D.


Population Shifts in the U.S.Population Shifts in the U.S.• In the 1980s and 1990s the U.S. population has

shifted toward Western and Sunbelt states.

• Through 2025 three states--California, Texas, and Florida--will account for 45 percent of the net population change in the U.S.

• From the 1930s to 1980s the population shifted from cities to suburbs.

• 1990s the population is shifting again from suburbs to more remote suburbs called exurbs and to smaller towns called penturbia.

Paul Dishman, Ph.D.


Major Population SegmentsMajor Population Segments• Baby Boomers: generation of 78 million born between 1946

and 1965, accounts for 56-58 percent of purchases of most

consumer product and service categories.

• Generation X: 17 % of the U.S. population born between

1965 and 1976. Consumers who are self-reliant,

entrepreneurial, supportive of diversity; better educated

than previous generations; not prone to extravagance and

likely to prefer lifestyles, products, and services that are

very different from baby boomers.

• Baby Boomlet: Americans born after 1976; also described

as Generation Y or the Net Generation.

Paul Dishman, Ph.D.


The Net GenerationThe Net Generation• 80 million people under the age of 22 who have

grown up with the new technologies, becoming

authorities in their use.

• As the Internet has become the focus of the digital

age, the Net Generation has become the first

group to use it consistently for:

- entertainment -

communication

- information/education - shopping

Paul Dishman, Ph.D.


Changes in the American FamilyChanges in the American Family

• 30 years ago 40% of all households consisted of married couples with children; this number has declined to 25%.

• 25% of all households consist of people who live alone

• 28% of married households are without children• the fastest growing types of households are those

with– single parents– other family members– unrelated persons

Paul Dishman, Ph.D.


Racial and Ethnic DiversityRacial and Ethnic Diversity• Slightly more than one in four U.S. residents is

African-American, Hispanic, Asian, or a representative of another racial or ethnic group.

• The racial and ethnic composition of the U.S. population is expected to change even more by 2010, as since 1990:– Hispanic population growth 35+%– Asian population growth 35+%– African-American population growth 11+%– white population growth 3.6%

Paul Dishman, Ph.D.


The Changing Role of WomenThe Changing Role of Women

• The percentage of women in the work force rose from 46 to 60 percent between 1975 and 1998.

• Women account for 11% of the officers and directors of the 500 largest corporations in the U.S.

• Women account for more than half of all:– financial managers– accountants and auditors– technical writers– economists– public relations specialists– authors

Paul Dishman, Ph.D.


Economic ForcesEconomic Forces

1. Macroeconomic conditions

2. Consumer income

Paul Dishman, Ph.D.


Economic CyclesEconomic Cycles

Economic Conditions

Time

Levels of Business Activity

Recovery Prosperity Recession Depression Recovery

Paul Dishman, Ph.D.


• dramatic growth of electronic commerce• increase in per-capita income and

standard of living• U.S. firms adjust to crises in international

markets• economic growth reduces concern about

inflation and budget deficit

Economic TrendsEconomic Trends

Paul Dishman, Ph.D.


Consumer ExpectationsConsumer Expectations Consumer expectations of an inflationary or

recessionary U.S. economy is an important element of environmental scanning. Consumer spending, which accounts for two-thirds of U.S. economic activity, is affected by expectations of the future.

Paul Dishman, Ph.D.


University of Michigan Consumer University of Michigan Consumer Sentiment Index and Automobile SalesSentiment Index and Automobile Sales

507090

110130150170190

30 6.08.010.0

12.014.0

18.016.0

Consumer Sentiment Index (CSI) Vehicle sales (millions of units)

CSIVehicle sales

Note: The consumer sentiment index is calculated by subtracting the share of consumers who think it is a bad time to buy from those who think it is a good time to buy and then adding 100.

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

Paul Dishman, Ph.D.


Consumer IncomeConsumer Income A consumer’s ability to buy is related to income,

which consists of:

– gross income: the total amount of money made

in one year by a person, household, or family

unit;

– disposable income: the money a consumer has

left after paying taxes

– discretionary income: the money that remains

after paying for taxes and necessities.

Paul Dishman, Ph.D.


Average Annual Household Average Annual Household Spending by CategorySpending by Category

Source: Bureau of Labor Statistics, 1987 and 1997, Consumer Expenditure Surveys; calculations by the Author$0 2000 4000 6000 8000 10000

Food

AlcoholicBeverages

Housing

Apparel andServices

Transportation

Health Care

Entertainment

Personal Care Products and Services

Readings

Education

Tobacco Products

Miscellaneous

19971987

Paul Dishman, Ph.D.


Income distribution of U.S. Income distribution of U.S. householdshouseholds

Under $10,000:11%

$10,000–$14,999:8%

$25,000–$34,999:13%

$35,000–$49,999:16%

$50,000–$74,999:18%

$75,000–$99,999:9%

$100,000 or more:9%

$15,000–$24,999:15%

Paul Dishman, Ph.D.


Technological ForcesTechnological Forces

1. Changing technology

2. Technology’s impact on customer value

Paul Dishman, Ph.D.


Technological TrendsTechnological Trends

• increased use of information and communication technology

• growing focus on the Internet as consumers and businesses go online

• expanded computer power and growth of “smart” products

• growing use of electronic money or “e-cash”

Paul Dishman, Ph.D.


Regulatory ForcesRegulatory Forces

1. Laws protecting competition

2. Laws affecting marketing mix actions

3. Self-regulation

Paul Dishman, Ph.D.


LawsLawsWacky, Outdated Laws Still on the Books

• In Utah, birds have the right of way on all highways.

• In Omaha, Nebraska, barbers are forbidden from shaving their customers’ chests.

• In Oklahoma people who make “ugly faces” at a dog may be fined and/or jailed.

• In Georgia, it is illegal to change the clothes on a storefront mannequin unless the shades are down.

• In South Bend, IN, monkeys are forbidden to smoke cigarettes.

• In Alaska, it is illegal to serve alcoholic beverages to a moose.

Paul Dishman, Ph.D.


Regulatory TrendsRegulatory Trends

• increasing emphasis on free trade and deregulation

• greater concern for pollution and global warming

• new legislation related to information collection and privacy

• new legislation to encourage consumer savings

Paul Dishman, Ph.D.


Legislation Protecting CompetitionLegislation Protecting Competition

Major legislation has been passed to encourage competition, which is deemed desirable because it permits the consumer to determine which competitors will succeed or fail. Relevant legislation includes:

Sherman Antitrust Act (1890)

- forbids restraint of trade

Clayton Act (1914)

- forbids actions that lessen competition

Robinson-Patman Act (1936)

- unlawful to discriminate in prices charged for same product

Paul Dishman, Ph.D.


Other LegislationOther LegislationOther Federal legislation is aimed at:• products

• companies

• consumers (consumerism)

• both company and consumer

• pricing (fixing/unfair/discriminatory)

• distribution (exclusive dealing, requirement contracts, exclusive territorial distributorships, and typing arrangements)

• Advertising and promotion controls

• self-regulation

Marketing Management Marketing’s Relationship to the Firm and Society Paul Dishman, Ph.D....

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