Chapter 4 ♦ The Marketing Environment 4-1
CHAPTER 4 The Marketing Environment
CHAPTER FEATURES
Chapter Features
Key Points
✓ Marketing & You
Students are given a survey to determine their perceptions of time
and ability to work under pressure.
✓ Customer Experience
In response to a global study that found the definition of beauty had
become limiting and unattainable, Dove launched a number of
successful advertising campaigns to challenge conventional
USING THIS MANUAL
Chapter four includes eight learning outcomes that help students become more familiar with the marketing environment.
Daimler and BMW have taken note, launching and expanding their
own car-sharing services. As new consumer patterns emerge,
companies will have to respond to keep up.
4-2 Chapter 4 ♦ The Marketing Environment
LEARNING OUTCOMES
1 Discuss the external environment of marketing and explain how it affects a firm
The external marketing environment consists of social, demographic, economic, technological, political and legal, and
2 Describe the social factors that affect marketing
Within the external environment, social factors are perhaps the most difficult for marketers to anticipate. Several major
3 Explain the importance to marketing managers of current demographic trends
Today, several basic demographic patterns are influencing marketing mixes. Because the U.S. population is growing at a
4 Explain the importance to marketing managers of growing ethnic markets
Hispanics are the fastest growing segment of the population followed by African Americans. Many companies are now
5 Identify consumer and marketer reactions to the state of the economy
In recent years, U.S. incomes have risen at a slow pace. At the same time, the financial power of women has increased,
6 Identify the impact of technology on a firm
Monitoring new technology is essential to keeping up with competitors in today’s marketing environment. The United
7 Discuss the political and legal environment of marketing
All marketing activities are subject to state and federal laws and the rulings of regulatory agencies. Marketers are
Chapter 4 ♦ The Marketing Environment 4-3
8 Explain the basics of foreign and domestic competition
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. Declining population growth, rising costs, and
shortages of resources have heightened domestic competition.
CHAPTER OUTLINE
PowerPoint 4-5:
Factors in the External
1 Discuss the external environment of marketing, and
explain how it affects the firm
I. The External Marketing Environment
If there is one constant in the external environment (outside the firm) where
firms work and compete, it is that things are constantly changing. If the
Review Question 1.1
A. Understanding the External Environment
Unless marketing managers understand the external environment, the firm
cannot intelligently plan for the future. Many organizations assemble a team
of specialists to continually collect and evaluate environmental information, a
process called environmental scanning. The goal is to identify market
opportunities and threats.
Some of the key areas that firms should in the external environment are:
B. Environmental Management
No one business is large or powerful enough to create major change in the
4-4 Chapter 4 ♦ The Marketing Environment
Review Question 1.2
managers can be classified as:
• social,
2 Describe the social factors that affect marketing
II. Social Factors
PowerPoint 4-7:
Social Factors
Social factors include our attitudes, values and lifestyles. They influence the
products people buy, the prices paid for products, the effectiveness of specific
promotions, and how, where, and when people expect to purchase products.
Review Question 2.1
PowerPoint 4-9:
PowerPoint 4–10:
Influence of Values on
A. American Values
1. Self-sufficiency: Every person should stand on his or her own two
feet.
4. Conformity: No one should expect to be treated differently from
anybody else.
U.S. Consumers rank the characteristics of product quality as:
• Reliability
Customer Experience
Seeing Real Beauty
According to a global study conducted by Dove, only 2 percent of women consider
themselves beautiful, and 81 percent of American strongly agreed that the media
B. Personality Traits vary by Region
Even after controlling for variables such as race, income, and education
levels, a state’s dominant personality turns out to be strongly linked to
certain outcomes.
Chapter 4 ♦ The Marketing Environment 4-5
PowerPoint 4–11:
Component Lifestyles
PowerPoint 4-12:
Role of Families and
Working Women
C. The Growth of Component Lifestyles
D. The Changing Roles of Families and Working Women
The phenomenon of working women has arguably had a greater effect on
marketing than any others social change.
• The growth of dual-income families has resulted in increased
purchasing power.
E. There is Never Enough Time
Research shows that the percentage of people who say they never have enough
time to do all that they need to do keeps inching up. To manage their scarce
time, about 74 percent of working adults engage in multitasking—doing more
than one thing at a time. Recent research has found that:
• With rising gas prices and busy schedules, consumers are more likely
to consolidate shopping trips.
PowerPoint 4–14:
Demographic Factors
3 Explain the importance to marketing managers of current
demographic trends
III. Demographic Factors
Demography is the study of people’s vital statistics, such as their age, race
and ethnicity, and location.
Tweens
A. Population – The most basic statistic of all
4-6 Chapter 4 ♦ The Marketing Environment
PowerPoint 4–17:
Teens
PowerPoint 4–18:
Generation Y
Review Question 3.2
PowerPoint 4–19:
Generation X
PowerPoint 4–20:
Baby Boomers
• Being happy is more important than anything else to tweens
C. Teens
• Population of 25 million in U.S.
D. Generation Y
• Born between 1979 and 1994
• Population of 753 million
• Purchasing power of $200 billion annually
• Researchers have found Gen Yers to be:
▪ Impatient
E. Generation X
• Born between 1965 and 1978
• Population of 40 million
F. Baby Boomers
• Born between 1946 and 1964
• Population of 75 million
Review Question 4.2
4 Explain the importance to marketing managers of
growing ethnic markets
IV. Growing Ethnic Markets
PowerPoint 4–22:
Growing Ethnic Markets
The minority population of the United States reached 110 million in 2010.
Spending power of ethnic markets in 2013 is predicted to be:
Chapter 4 ♦ The Marketing Environment 4-7
PowerPoint 4–24:
Marketing to Hispanic
PowerPoint 4–25:
Marketing to African
Americans
PowerPoint 4–26:
Marketing to Asian
Diversity can result in bottom-line benefits to companies.
A. Marketing to Hispanic Americans
• The population’s diversity creates challenges for targeting this group.
B. Marketing to African Americans
• Many firms—several owned by African Americans—are creating
products for the African American market.
C. Marketing to Asian Americans
• Younger, better educated, and have highest average income of all
PowerPoint 4–28:
Economic Factors
5 Identify consumer and marketer reactions to the state of
the economy
V. Economic Factors
The three economic areas of greatest concern are consumers’ incomes,
inflation, and recession.
PowerPoint 4–30:
PowerPoint 4–31:
Purchasing Power
PowerPoint 4–32:
Inflation
A. Consumers’ Incomes
B. Purchasing Power
Purchasing power is measured by comparing income to the relative cost
• Rising incomes don’t necessarily mean a higher standard of living
C. Inflation
4-8 Chapter 4 ♦ The Marketing Environment
PowerPoint 4-33:
Recession
Review Question 5.1
Inflation is the measure of the decrease in the value of money, expressed
as the percentage reduction in value since the previous year.
D. Recession
A recession is a period of economic activity characterized by negative
growth, which reduces demand for goods and services.
6 Identify the impact of technology on a firm
VI. Technological Factors
Review Question 6.1
Without investment in R&D, the United States cannot compete in a
knowledge-based global economy.
PowerPoint 4–37:
Research
Technological Factors
A. Research
Applied research, in contrast, attempts to develop new or improved
products.
B. Stimulating Innovation
To keep innovation strong, companies may:
• Build scenarios
• Cater to entrepreneurs
Although developing new technology internally is critical, external
technology is also important for two reasons:
1. By acquiring the technology, the firm may be able to operate more
efficiently or create a better product.
7 Discuss the political and legal environment of marketing
VII. Political and Legal Factors
Business needs government regulation to protect:
In exchange, government needs business because the marketplace generates
taxes that support a number of vital programs.
PowerPoint 4–43:
Federal Legislation
A. Federal Legislation
1. To regulate the competitive environment, the following laws were
passed:
a. Sherman Act of 1890
2. To regulate pricing practices, the Robinson-Patman Act of 1936
was passed.
B. State Laws
Legislation that affects marketing varies state by state. For example, many states
PowerPoint 4–44:
Regulatory Agencies
C. Regulatory Agencies
Federal regulators generally have the greatest clout.
1. The Consumer Product Safety Commission protects the health
and safety of consumers in and around their homes.
4-10 Chapter 4 ♦ The Marketing Environment
Powers of the FTC
Review Question 7.1
3. The Federal Trade Commission is a federal agency that is
empowered to prevent persons or corporations from using unfair
methods of competition in commerce.
Powers of the FTC include:
PowerPoint 4–46:
Consumer Privacy
Review Question 7.2
D. The Battle over Consumer Privacy
1. The CAN-SPAM Act of 2004 prohibits commercial e-mailers from
using a false address and presenting false or misleading information
in Internet spam.
4. Two other key laws have been passed to protect consumers from
identity theft:
a. The Gramm-Leach-Bliley Act is aimed at financial companies
and requires corporations to tell their customers how they use
Ethics in Marketing
Making the Sale at All Costs
Even if a firm offers the best product or service at a fair price, its international
Review Question 8.1
PowerPoint 4–48:
Competitive Factors
8 Explain the basics of foreign and domestic competition
VIII. Competitive Factors
The competitive environment encompasses the number of competitors a
firm must face, the relative size of the competitors, and the degree of
Chapter 4 ♦ The Marketing Environment 4-11
PowerPoint 4–50:
Competitive Factors
interdependence within the industry.
A. Competition from Market Share and Profits
B. Global Competition
TERMS
applied research
inflation
baby boomers
purchasing power
basic research
recession
component lifestyles
target market recession
demography
Suggested Homework:
• The end of each chapter contains numerous questions that can be assigned or used as the basis for longer
investigations into marketing.
REVIEW AND APPLICATIONS
1.1 What is the purpose of environmental scanning? Give an example.
1.2 Form six teams. Each team is responsible for one of the uncontrollable elements in the marketing
environment. Your boss, the company president, has asked each team to provide a one-year and a five-year
forecast of what major trends the firm will face. The firm is in the telecommunications equipment industry.
It has no plans to become a telecommunications service provider, for example, Verizon and AT&T. Each
team should use the library, the Internet, and other data sources to make its forecasts. Each team should
examine a minimum of one data source. The team should then pool its data and prepare its
recommendation. A spokesperson for each team should present the findings to class.