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Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
3-1
CHAPTER
CONTENTS
PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES ........................................... 3-3
LEARNING OBJECTIVES (LO) ......................................................................................... 3-4
KEY TERMS ........................................................................................................................... 3-4
LECTURE NOTES
• Chapter Opener: Fortune’s Businessperson of the Year .............................................. 3-5
• Environmental Scanning (LO 3-1) ............................................................................... 3-6
• Social Forces (LO 3-2) ................................................................................................. 3-6
• Understanding Ethical Marketing Behavior in Marketing (LO 3-7) ........................... 3-19
• Understanding Social Responsibility for Sustainable Marketing (LO 3-7; LO 3-8) .. 3-23
APPLYING MARKETING KNOWLEDGE ...................................................................... 3-27
BUILDING YOUR MARKETING PLAN .......................................................................... 3-30
VIDEO CASE (VC)
IN-CLASS ACTIVITIES (ICA)
• ICA 3-1: An Environmental Scan for Truvía .............................................................. 3-35
CONNECT EXERCISES …………………………………………...…………..….… 3-51
• Economic Forces Click and Drag*
• Geek Squad Video Case Video Case
• iSeeit! Video Case: Macroenvironmental Scanning Video Case
UNDERSTANDING THE MARKETING
ENVIRONMENT, ETHICAL BEHAVIOR, AND
SOCIAL RESPONSI ILITY
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
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• Performing an Environmental Scan of Today’s Marketplace Click and Drag*
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
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POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
Textbook Figures Slide
Marketing Matters, Making Responsible Decisions, and/or Marketing inSite
Making Responsible Decisions—Sustainability: Balancing profits and purpose ............................. 3-10
Video Links
3-1: Colgate Super Bowl Ad ............................................................................................................. 3-13
3-3: Toyota Video Case ..................................................................................................................... 3-38
In-Class Activities (ICA)
ICA 3-2: Competitive Intelligence ..................................................................................................... 3-46
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
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LEARNING OBJECTIVES (LO)
After reading this chapter students should be able to:
LO 3-2: Describe social forces such as demographics and culture.
LO 3-4: Describe how technological changes can affect marketing.
LO 3-6: Explain how regulatory forces ensure competition and protect producers and
consumers.
LO 3-8: Describe the different concepts of social responsibility.
KEY TERMS
baby boomers
Generation Y
cause marketing
Green marketing
competition
Internet of Things
Code of ethics
moral idealism
Consumer Bill of Rights
marketspace
consumerism
multicultural marketing
culture
regulation
demographics
self-regulation
economy
social forces
environmental scanning
Social responsibility
ethics
technology
Generation X
utilitarianism
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
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LECTURE NOTES
Fortune’s Businessperson of the Year: “I’m in this to Build Something Cool!”
• Facebook:
• The rapid growth of Facebook is due to its ability to adapt to a rapidly changing
marketing environment.
• Facebook and the Influence of Environmental Forces
a. Social forces. Changed as people:
b. Economic forces.
c. Technological forces.
• Software integration, server speed, and data storage make Facebook fast and
convenient.
d. Competitive forces.
e. Legal and regulatory forces. Facebook:
• Facebook in the Future
a. Facebook wants to:
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
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b. Facebook purchased VR headset company Oculus VR for $2 billion in
anticipation of customer interest in VR-based communication. Also, Facebook is
testing augmented reality ads in Messenger with select brands.
• Many businesses operate in environments where important forces change—
anticipating and responding to these changes is key to marketing success and failure.
I. ENVIRONMENTAL SCANNING [LO 3-1]
Environmental scanning is the process of continually acquiring information on events
occurring outside the organization to identify and interpret potential trends.
[DICA 3-1: What’s Trending Now?]
• [Figure 3-1] Environmental trends typically arise from five sources: social,
[ICA 3-1: An Environmental Scan for Truvía]
A. An Environmental Scan of Today’s Marketplace
• An environmental scan of the marketplace might uncover key trends such as
brand advocates and new application of virtual reality and augmented reality.
II. SOCIAL FORCES [LO 3-2]
• Social forces of the environment include the demographic characteristics of the
population and its culture.
• Changes in these forces can have a dramatic impact on marketing strategy.
A. Demographics
• Demographics describe a population according to selected characteristics such as
age, gender, ethnicity, income, and occupation.
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
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1. The Population at a Glance.
a. There are about 7.4 billion people in the world.
b. By 2050, the population is likely to grow to 9.8 billion.
• The major increases (or population explosion) will occur in the developing
c. The U.S. population:
• Is becoming larger, older, and more diverse.
2. Generational Cohorts. [Definition of a cohort: A group of people banded
together or treated as a group—Oxford-American Online Dictionary]
a. Baby boomers.
• Include the generation of 73 million children born between 1946 and
b. Generation X.
• Includes the 50 million people born between 1965 and 1976.
• Is also known as the “baby bust” due to the yearly decline in the number
of births.
c. Generation Y (Millennials).
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
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• Includes Americans born between 1977 and 1994, the years many baby
boomers began having children.
• The term millennials refers to younger members of Generation Y
d. Generation Z.
• Includes Americans born between 1995 and 2010. They embrace
diversity, inclusivity, and prefer a natural look.
MAKING RESPONSIBLE DECISIONS
Sustainability: Balancing Profits and Purpose – Millennial Style
• Millennials are technologically savvy, innovative, and ambitious. They are
determined to make the world a better place.
3. Racial and Ethnic Diversity.
a. The racial and ethnic mix of the U.S. population has changed significantly.
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
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c. Hispanics, African Americans, and Asian Americans spend more than $1.4
trillion, $1.2 trillion, and $891 billion each year, respectively.
d. Multicultural marketing programs:
B. Culture
• Culture incorporates the set of values, ideas, and attitudes that are learned and
shared among the members of a group.
[Video 3-1: Colgate Super Bowl Ad]
• An increasingly important value for consumers in the United States and around
the globe is sustainability and protecting the environment; 82% of today’s
shoppers consider themselves environmentally friendly.
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
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LEARNING REVIEW
3-1. Describe four generational cohorts.
Answer: (1) Baby boomers are the generation of 73 million children among the U.S.
population born between 1946 and 1964. These Americans are growing older and will
3-2. Why are many companies developing multicultural marketing programs?
Answer: Multicultural marketing programs consist of combinations of the marketing
mix that reflect the unique attitudes, ancestry, communication preferences, and
3-3. How are important values such as sustainability reflected in the marketplace
today?
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III. ECONOMIC FORCES [LO 3-3]
The economy pertains to the income, expenditures, and resources that affect the cost of
running a business and household.
A. Macroeconomic Conditions
• Companies monitor inflationary or recessionary economic states based on GDP
(gross domestic product), employment, and price changes (inflation or deflation).
a. In an inflationary economy:
• The cost to produce and buy products and services rises as prices increase.
• If prices rise faster than consumer incomes, purchases decline.
• Example:
– College tuition and fees have increased 160 percent since 2000
while…
b. In a recessionary economy:
• Activity is slow or declining.
• Businesses decrease production, unemployment rises, and consumers have
less money to spend.
• Consumer spending is two-thirds of U.S. economic activity and is affected by
consumer expectations of the future.
B. Consumer Income
A consumer’s ability to buy is related to income, which consists of gross, disposable,
and discretionary components.
1. Gross income is the total amount of money made in one year by a person,
household, or family unit. Also known as “money income” at the Census Bureau.
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2. Disposable Income.
a. Disposable income is the money a consumer has left after paying taxes to use
for necessities such as food, housing, clothing, and transportation.
b. If taxes rise faster or fall than incomes, consumers will either have less or
d. During a recession, spending, debt, and the use of credit all decline.
3. Discretionary Income.
a. Discretionary income is money that remains after paying for taxes and
necessities.
b. The problem in defining what is discretionary versus disposable income is
determining what is a luxury what is a necessity product or service.
c. The Department of Labor monitors consumer expenditures through its annual
Consumer Expenditure Survey. Recent reports indicate that consumers spend:
f. The Bureau of Labor Statistics reports that:
• During the 1990s and 2000s, the savings rate had declined to 2 percent.
• In 2008:
• Recent data indicate that the savings rate is now 5.5 percent.
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IV. TECHNOLOGICAL FORCES [LO 3-4]
• Technology refers to inventions or innovations from applied science or engineering
research.
A. Technology of Tomorrow
Some of the most recent dramatic technological changes are:
2. Automation will become prevalent in products ranging from autonomous cars,
delivery drones, robots in the home and office.
4. Wearable technology will take new forms, from biometric monitors to visual
displays, to exoskeletons to enhance mobility.
• Other technologies are likely to replace or become substitutes for existing
products and services such as telephones, gasoline-powered vehicles, and
traditional medical equipment.
Some trends are already realized in today’s marketplace. Examples include:
• IBM partnered with Salesforce.com to use artificial intelligence to
B. Technology’s Impact on Customer Value
Advances in technology have important effects on marketing:
• The cost of technology is decreasing dramatically. As a result, consumers now
assess value based on other dimensions, like quality, service, and relationships.
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C. Technology Enables Data Analytics
• The marketspace is an information- and communication-based electronic
exchange environment mostly occupied by sophisticated computer and
telecommunication technologies and digitized offerings.
• Electronic commerce is any activity that uses some form of electronic
communication in the inventory, exchange, advertisement, distribution, and
payment of products and services.
• Many companies have adapted Internet-based technology to internally support
their electronic business strategies.
• Today’s technologies allow chips to be placed in almost anything and be
connected to a network almost anywhere.
•
• Network of products embedded with connectivity-enabled electronics is known as
the Internet of Things (IoT).
V. COMPETITIVE FORCES [LO 3-5]
• Competition refers to the alternative firms that could provide a product to satisfy a
specific market’s needs.
• Each organization must consider its present and potential competitors in designing its
marketing strategy.
A. Alternative Forms of Competition
There are four basic types of competition that follow a continuum:
• Pure competition.
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
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• Monopolistic competition.
a. Occurs when many sellers compete with substitutable products within a price
range.
• Oligopoly.
a. Occurs when just a few companies control the majority of industry sales.
c. Price competition reduces profits for the few firms involved.
• Pure monopoly.
a. Occurs when only one firm sells the product.
e. Examples:
• Microsoft—91 percent of the PC operating system market led to
investigations from the U.S. Justice Department and the European Union.
[ICA 3-2: Competitive Intelligence]
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C. Small Businesses as Competitors
• About 28.8 million employ 48 percent of all private sector employees.
• Small businesses:
a. Generate 63 percent of all new jobs annually.
LEARNING REVIEW
3-4. What is the difference between a consumer’s disposable and discretionary
income?
3-5. How does technology impact customer value?
3-6. In pure competition, there are a __________ number of sellers.
VI. REGULATORY FORCES [LO 3-6]
Regulation consists of restrictions state and federal laws place on business with regard to
the conduct of its activities. It exists to protect:
A. Protecting Competition
Major federal legislation has been passed to encourage fair competition because it
permits the consumer to determine which competitor will succeed or fail.
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• The Sherman Antitrust Act (1890) forbids:
• The Clayton Act (1914) forbids certain actions that are likely to lessen
competition, although no actual harm has yet occurred.
• The Robinson-Patman Act (1936).
B. Protecting Producers and Consumers
Several laws address the product component of the marketing mix:
1. Company Protection.
a. Patent law. Gives inventors the right to exclude others from making, using, or
selling products that infringe the patented invention.
b. Copyright law (©).
c. Digital Millennium Copyright Act (1998). Digital technology has required:
d. Federal laws also protect consumers and address the four elements of the
marketing mix. Product requirements are specified in laws:
• Fair Packaging and Labeling Act (1966).
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b. Many of these laws came about because of consumerism, a grassroots
movement started in the 1960s to increase the influence, power, and rights of
consumers in dealing with institutions.
c. Laws also address pricing, distribution, and promotion.
• FTC Act of 1914 established the Federal Trade Commission (FTC) to
monitor unfair business practices, including issuing cease and desist orders
and order corrective advertising.
• Deceptive Mail Prevention and Enforcement Act (1999)
d. Trademarks are intended to protect both the firm selling a trademarked product
and the consumer buying it.
a. The Lanham Act (1946) provides for the registration of a company’s
trademarks (® and ™).
• Historically, the first user had the exclusive right to use the particular
word, name, or symbol in its business.
F. Control through Self-Regulation
• Self-regulation. As an alternative to government control:
a. Is where an industry attempts to police itself.
b. Has three problems:
1. Noncompliance by members.
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• The Better Business Bureau (BBB):
LEARNING REVIEW
3-7. The __________ Act forbids actual monopolies, whereas the __________ Act
forbids actions that are likely to lessen competition.
3-8. The Federal Trade Commission (FTC) monitors ______.
3-9. How does the Better Business Bureau encourage companies to follow its standards
for commerce?
Answer: The Better Business Bureau (BBB) uses a Partner Code of Conduct to
VII. UNDERSTANDING ETHICAL MARKETING BEHAVIOR [LO 3-7]
• Ethics are the moral principles and values that govern the actions and decisions of an
individual or group.
[Figure 3-2] Several factors influence ethical marketing behavior.
A. Societal Culture and Norms
• Culture refers to the set of values, ideas, and attitudes that are learned and shared
among the members of a group.
a. Culture serves as a socializing force that determines what is considered to be
morally right and just.
Chapter 03 – Understanding the Marketing Environment, Ethical Behavior, and Social Responsibility
b. Moral standards are relative (different) to particular cultures.
B. Business Culture and Industry Practices
• Business cultures comprise:
• Business culture affects ethical conduct:
1. Ethics of Exchange.
a. Ethical exchanges between buyer and seller should result in both parties being
better off after a transaction.
c. In 1962, President John F. Kennedy outlined a Consumer Bill of Rights that
codified the ethics of exchange between buyers and sellers, which were the
right to:
• Safety.
2. Ethics of Competition.
