978-1292220178 Chapter 3 Solution Manual

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Discussion Questions

3-1 Name and describe the types of publics in a company’s marketing environment. (AASCB: Communication)

Answer:

The company’s marketing environment includes various publics. A public is any

group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives.

We can identify seven types of publics:

.Financial publics. This group influences the company’s ability to obtain funds. Banks, investment analysts,

and stockholders are the major financial publics.

.Media publics. This group carries news, features, editorial opinions, and other content. It includes

television stations, newspapers, magazines, and blogs and other social media.

3-2 What are publics in the marketing context? Why are they important to marketers? (AACSB: Communication;

Reflective Thinking)

Answer:

Publics (either organized as a group or not) have either a direct or indirect association with an organization.

 3-3 Describe Generation Z. What differentiates GenZers from other demographic groups, such as baby boomers,

Generation X, and millennials? (AACSB: Communication; Reflective Thinking)

Answer: Student answers will vary based on their personal response. Refer to the MyLab for an opportunity to

3-4 Discuss the impact of the changing age structure of the population on consumer spending and buying behavior.

Why is this trend important to marketers? (AACSB: Communication; Reflective Thinking)

Answer:

Changes in demographics mean changes in markets, so they are very important to marketers.

The U.S. population contains several generational groups. Here are the four largest groups—the baby boomers,

Generation X, the millennials, and Generation Z—and their impact on today’s marketing strategies. The baby

The Gen Xers are a more skeptical bunch. They are sensible shoppers who research products heavily before

they consider a purchase, prefer quality to quantity, and tend to be less receptive to overt marketing pitches.

Born between 1977 and 2000, millennials number 83 million or more, dwarfing the Gen Xers and becoming

larger even than the baby boomer segment. In the post-recession era, the millennials are the most financially

The approximately 82 million Gen Zers make up the important kids, tweens, and teens markets. They spend an

estimated $44 billion annually of their own money and influence up to $600 billion of family spending. These

Generational Marketing. Some experts warn that marketers need to be careful about turning off one generation

each time they craft a product or message that appeals effectively to another. Others caution that each

generation spans decades of time and many socioeconomic levels. For example, marketers often split the baby

 3-5 Why should marketers play close attention to the political environment? (AASCB: Communication)

Answer: The political environment includes all the agencies, groups, organizations, rules, regulations and

Critical Thinking Exercises

 3-6 In 1965, more than 40 percent of American adults were smokers. That percentage has now fallen to less than

18 percent. Tobacco companies have dealt with this threat by developing new markets overseas and also

developing alternative nicotine products such as electronic cigarettes (e-cigarettes). Research this product and

the regulatory environment regarding this product, then write a report advising tobacco companies on the

opportunities and threats posed by this technology. (AACSB: Communication; Reflective Thinking)

Answer:

Student answers will vary. As this is a fluid area in terms of regulation, sources of information are changing.

One recommended source is the FDA website, which includes regulations issued in August 2016:

http://www.fda.gov/TobaccoProducts/Labeling/RulesRegulationsGuidance/ucm394909.

The European Union approved tough rules on electronic cigarettes that are similar to the ones for ordinary

cigarettes, such as bans on advertising and a limit on the amount of nicotine they dispense (see David Jolly,

3-7 Form a small group and discuss cultural trends in the United States. Research one of them in depth and create a

presentation on the trend’s impact on marketing. (AACSB: Communication; Reflective Thinking)

Answer:

The major cultural values of a society are expressed in people’s views of themselves and others as well as in

their views of organizations, society, nature, and the universe. Trends within each of these should be the group

focus in their research and presentation. One significant cultural change in the United States has been the

3-8 Visit www.causemarketingforum.com to learn about companies that have won Halo Awards for outstanding

cause-related marketing programs. Present an award-winning case study to your class. (AACSB:

Communication; Use of IT)

Answer:

Students’ responses will vary. Students can click on the “Events/Awards” tab at the top of this Web site to learn

APPLICATIONS AND CASES

Online, Mobile, and Social Media Marketing: Sharing Economy

Changes in the technological environment have created amazing opportunities for new business models while at the

same time threatening traditional ones. For example, Airbnb has shaken up the hospitality industry by allowing

people to rent out spare rooms or their entire homes to strangers. The Uber and Lyft ride-sharing businesses allow

consumers to find a ride from people looking to earn extra money with their vehicles. And with Uber you don’t have

to worry about having enough cash or giving your credit card to the driver—payments and tips are all done through

the Uber app. Traditional hotel and cab companies are crying foul, claiming that these businesses are not playing by

the same regulatory rules to which they are subject. Others are concerned about safety amid reports of riders

allegedly being attacked, kidnappings, and driver accidents, questioning the thoroughness of background checks on

the 160,000-plus Uber drivers around the world. Some countries, states, and cities in the United States have banned

Uber because of these issues.

3-9 Describe how Uber’s business model works and the role technology has played in its success. What are the

arguments for banning these types of businesses? What are the arguments for defending them? (AACSB:

Communication; Use of IT; Reflective Thinking)

Answer:

Uber is not in the taxi business; instead it matches drivers in cars to potential passengers and takes a piece of the

According to the Web site www.uberatc.com/about, founded in 2015, the Uber Advanced Technologies Center

is the Pittsburgh division of the elite Uber Engineering Team; a high-performance culture marked by

A graphic of Uber’s business model is found at

Several issues have surfaced since this non-regulated service began. Taxi services have been negatively

impacted by Uber. Although taxi companies are bound by laws and regulations in the cities where they operate,

Uber is not held to the same standard. Students can find information on the controversy surrounding Uber by

searching “Uber controversy” online. Some results are given in the following:

Dara Kerr, “Uber’s Year of Prosperity and Controversy,” cnet, December 26, 2014,

Hannah Jane Parkinson, “Uber Offices Raided in Paris by French Police in ‘Car-pooling’ Controversy,”

“Are Car Ride Apps Legal? Controversy Over Lyft, Uber, Sidecar and More Grows,” Today, June 12, 2014,

3-10 Describe examples of two other businesses based on the sharing economy model and create a new business

idea based on this concept. (AACSB: Communication; Reflective Thinking)

Answer:

Students can find examples by searching terms such as “sharing economy,” “collaborative consumption,” or

“peer economy.”

Examples include Airbnb (lodging), DogVacay (dog boarding), RelayRides and Getaround (car borrowing),

TaskRabbit and Zaarly (people to do tasks for you), Liquid (bike sharing), Lending Club (peer-to-peer loans),

Marketing Ethics: How Young Is Too Young?

Consumers in the UK seem to be at the mercy of their own insurers. Hidden within the fine print of the renewal

notices is the true cost of renewing the insurance, often as much as a 100 percent increase. This is despite the fact

that there have been no claims on the insurance and perhaps the value of the insured asset has fallen since last year.

Unwittingly, consumers have signed up for continuous payment to authorities. In effect, this means that consumers

have agreed to continue to buy the insurance year over year, regardless of an increase in price, unless they contact

the insurer and cancel it. If only cancelling insurance was that simple. If consumers fail to read the small print in

their contracts carefully, they are hit by a cancellation fee. With higher percentages of consumers checking insurance

quotes on price comparison websites, insurers still take the chance of inertia when the consumers receive their

renewal notices. Insurers seem to rely on the fact that a certain percentage of consumers do not bother to read the

documents, and if they do, they do not readily notice that the price is far higher than the previous year. The Financial

Conduct Authority, which has responsibility for dealing with disputes arising out of financial services, receives

around 500 complaints a year regarding insurance renewal. From April 2017, UK insurers are required to include

text on their renewal communication to encourage consumers to shop around for the best deal. In cases when

consumers have renewed with the same insurer four times, an additional message is required in the renewal

communication to encourage shopping around. Insurers are also required to disclose last year’s premium alongside

this year’s for clear comparison.

3-11 Discuss the aspects of the competitive environment of the insurance industry that might encourage this type of

practice.

Answer:

Student answers will vary to some extent. The key point is that it seems that many insurers are using this

technique and that few of them have developed a system by which loyal customers are rewarded rather than

3-12 Discuss whether or not technology and access to price comparison Web sites can banish this type of fraudulent

practice in the insurance industry.

Answer:

Theoretically, consumers should be accessing comparison sites and making reasoned decisions based on price

and service comparison. In reality, many consumers are lazy, too busy, or feel that they can trust their insurers to

Marketing by the Numbers: Demographic Trends

Marketers are interested in demographic trends related to variables such as age, ethnicity, and population. The U.S.

Census Bureau provides considerable demographic information that is useful for marketers. For example, the

following table provides a sample of such population data (see www.censusscope.

org/2010Census/PDFs/RaceEth-States.pdf):

3-13 What percentage change in the total and Hispanic populations occurred in each state between 2000 and 2010?

What conclusions can be drawn from this analysis? (AACSB: Communication; Analytical Reasoning;

Reflective Thinking)

Answer:

Students often have difficulty with percentage change calculations and often make the mistake of dividing by

the final figure instead of the initial figure.

For 2000-2010 percentage change in total population by state:

9,883,640 – 9,938,444

% changeMI = —————————————— x 100 = – 0.55%

37,253,956 – 33,871,648

% changeCA = —————————————— x 100 = 9.9%

For 2000-2010 percentage change in the Hispanic population by state:

853,689 – 435,227

% changeGA = ——————————— x 100 = 96.1%

436,358 – 323,877

% changeMI = ——————————— x 100 = 34.7%

14,013,719 – 10,966,556

% changeCA = —————————————— x 100 = 27.8%

Conclusions: Georgia and California had modest growth in overall population, and Michigan experienced a

decline. However, all three states experienced considerable increases in the Hispanic population. Marketers

3-14 Research another demographic trend and create a presentation to marketers regarding the significance of the

trend you analyzed. (AACSB: Communication; Reflective Thinking)

Answer:

Students’ responses will vary. Instructors may want to assign specific demographic variables for students to

analyze so that students can learn about a variety of trends.

There are several excellent resources on global demographic trends and their impact. For example, the

following illustrates how population shifts will reshape the global workforce:

Other excellent sources on the impact of global demographic trends include

Company Case Notes

Fitbit: Riding the Fitness Wave to Glory

Synopsis

This case chronicles how Fitbit went from a tiny startup with little more than a balsa wood box and a circuit board to

the pioneer of one of the hottest tech categories—wearable tech. In just a handful of years, Fitbit’s product line has

expanded, and its revenues have doubled year-over-year. The company is certainly doing some things right. But it’s

also a case of having the right product at the right time. Based on trends in the marketing environment, Fitbit has

successfully ridden the fitness wave to become a thriving tech company that appears to have a very promising

future.

Teaching Objectives

The teaching objectives for this case are to:

1. Identify how microenvironmental factors can affect a strong, established business.

2. Identify how macronenvironmental factors can affect a strong, established business.

3. Identify strategic issues in responding to environmental factors.

4. Formulate recommendations for a company in crisis.

Discussion Questions

1. What microenvironmental factors have affected Fitbit since it opened for business?

As you discuss both the micro and macro environments, consider a quote from the case: “To hear Park tell

it, ‘It was the right product at the right time at the right price point.’” There is a certain amount of luck in

The Company – New startup company. Hardly a marketing company to begin with, the marketing

Competitors – In a class by itself at first, this both played in its favor and against it. Any pioneer, while

not faced with direct competition, faces the battle of educating consumers as to what its product is and

Suppliers – For a new company, this is challenging, but not an insurmountable task. There are no

shortage of companies that specialize in manufacturing high-tech gadgets for the high-tech brands and

Partnering and working with such a company becomes key to success.

Marketing intermediaries – This is more challenging than issues with suppliers. As a new company

Customers – Fitbit clearly has paid attention to customer needs by listening to their feedback and

integrating such needs into successive products.

2. What macroenvironmental factors have affected Fitbit?

Economic – While not discussed, Fitbit launched just after The Great Recession had become a harsh

Natural – Not discussed in the case, the nature of Fitbit’s devices required testing for all climates and

Technological – This is huge. Clearly, Fitbit was a tech company. But as the case points out, being a

pioneer of a new high-tech hardware gadget is an almost impossible task. Getting the hardware right

Political – The biggest issue mentioned in the case is compliance with HIPAA. The depth of this hurdle

Cultural – The U.S. and world cultures were fast adopting the use of social media. Health trends also

3. How should Fitbit overcome the threats and obstacles it faces?

To a great extent, as it has been in the past—by paying attention to customers, markets, and trends. While it

launched without competition, the competition it now faces is extreme. But by constantly attempting to open

4. What factors in the marketing environment not mentioned in this case could affect Fitbit?

Student responses will vary. This should be an opportunity to pull collective knowledge and ideas from the

group.

Teaching Suggestions

Give students a few minutes to respond privately or in small groups to the following questions:

Do you exercise?

How much importance do you place on wellness?

Do you use a wearable fitness device?

What are the biggest reasons why you use one? Or, why have you not adopted one?

For those who own one: What things do you like/not like about your fitness device?

For those who do not own one: What would it take for you to adopt the use of a wearable fitness

device?

Lead a discussion on these questions. Then, transition into a discussion on the Fitbit case.

This case also works well with the consumer behavior chapter (Chapter 5), the new products chapter (Chapter 9),

and the competitive advantage chapter (Chapter 18).

Go to mymktlab.com for the answers to the following Assisted-graded writing questions:

3-21 What is environmental sustainability and why has it grown in importance for marketers?

3-22 Discuss a recent change in the technological environment that impacts marketing. How has it affected buyer

behavior and how has it changed marketing?

ADDITIONAL PROJECTS, ASSIGNMENTS, AND EXAMPLES

Projects

1. Define the marketing environment for Starbucks (www.starbucks.com). Keep in mind that a company’s

marketing environment consists of the actors and forces outside marketing that affect marketing management’s

ability to build and maintain successful relationships with target customers. (Objective 1)

2. What are the fundamental differences between consumer markets, business markets, and reseller markets?

(Objective 1)

3. Consider your college/university. What are the publics to which it must pay attention? (Objective 1)

4. Over 14 percent of the U.S. population moves every year. How is this good for marketers? (Objective 2)

Small Group Assignments

1. Form students into groups of three to five. Each group should read Real Marketing 3.2: “In the Social Media

Age: When the Dialog Gets Nasty.” Each group should answer the following questions and share their findings

with the class (Objective 3)

a. How has Internet technology, especially social media, shifted the power differential away from large

organizations and toward individual consumers?

b. How has this change enhanced the marketplace for consumers? How might it also damage the marketplace?

c. As an officer of a major bank or corporation, what would be your philosophical approach to dealing with

highly visible, noisy consumer complaints online? Would you give in to the angry consumers’ demands

every time? Explain.

2. Form students into groups of three to five. Each group should read the opening vignette to the chapter on

Philips. Each group should answer the following questions and share their findings with the class. (Objective 3)

a. How is Philips addressing the changing marketing environment?

b. Analyze the company’s attitude toward marketplace change. How has this attitude impacted its success?

c. Do you believe that Philips can maintain its position in the Middle Eastern markets? Why or why not?

d. In such a rapidly changing marketing environment, what might Philips be doing in five years? Ten years?

Individual Assignments

1. Go online and compare the marketing strategies of McDonald’s (www.mcdonalds.com), Wendy’s

(www.wendys.com), and Burger King (www.burgerking.com). What age group is each targeting? Do you agree

with their strategy?

(Objective 2)

2. Take a look at Apple’s Web site (www.apple.com). What, if anything, do you see them doing to try and remain

successful when the economy softens and consumers become more hesitant to make purchases? (Objective 2)

Think-Pair-Share

Consider the following questions, formulate and answer, pair with the student on your right, share your thoughts

with one another, and respond to questions from the instructor.

1. What are the fundamental differences between Generation X and Generation Y?

(Objective 2)

2. How has the typical family changed just in your lifetime? (Objective 2)

3. Overall, the U.S. population is becoming better educated. What implications does this create for marketers?

(Objective 2)

4. What is the one most significant trend in the natural environment, in your opinion, and how is it impacting

marketing activities? (Objective 3)

Outside Examples

1. Take a look at Wendy’s (www.wendys.com). How is this company attempting to set itself apart from its

primary competitors of McDonald’s (www.mcdonalds.com) and Burger King (www.burgerking.com)?

What publics does it appear to be concentrating on? Why do you believe this is the case? (Objective 1)

Possible solution. Wendy’s positions itself as the homespun, homemade fast-food hamburger. From a

review of its Web site, it becomes evident that Wendy’s is trying to connect with the everyday American. It

portrays a folksier, easygoing personality than does its primary competitors. Wendy’s concentrates

primarily on local publics and the general public.

2. Most students taking this class and reading the text have probably never watched Spanish language

programming. But as the Hispanic population in the United States has grown at a feverish pace, one

conglomerate has gone about its business quietly. In the process, Univision Communications, Inc. has the

lion’s share of the media market for this burgeoning demographic group.

Univision’s portfolio includes the television networks Univision, Telefutura, and Galavision. But the

empire also covers other media outlets with Univision Radio, Univision Music Group, and Univision

Online. (Objective 2)

a. Has Univision’s growth and expansion reflected the Hispanic population growth or facilitated it?

b. What kind of companies should be marketing their products and services on Univision outlets? Do you

think the nature of Spanish language advertising has changed over time?

Possible Solution:

a. Univision’s growth has both reflected and facilitated the Hispanic population growth in the United

States. It has facilitated Hispanic growth by providing a communication vehicle for those entering (or

b. Any company interested in reaching this growing market should consider advertising through this

outlet. In the U.S., Spanish language advertising has become much more mainstream and accepted