The External Marketing Environment - Ms. Shaffer

The External Marketing Environment - Ms. Shaffer

External Environment Internal (within the organization) Marketing mix External Environment (uncontrollable) Social Social Change Change Demographics Demographics

Ever-Changing Marketplace Economic Economic Conditions Conditions Product Product Distribution Distribution Promotion Promotion Price Price Competition Competition

Environmental Scanning Target Market Technology Technology Political Political&& Legal LegalFactors Factors The External Marketing Environment

STRATEGIC 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 Technological Competitive Demographic Political Economic Legal 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

Belief Self-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. 2.

3. 4. 5. 6. Reliability Durability Easy Maintenance Ease of Use A trusted brand name 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 Status 85% 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 peoples 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 Y Characteristics 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 dont 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 Yers 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. Dont like canned talks or sales pitched ideas. Like to design and do own thing. Environmental Scan: Generation X Characteristics 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 lifes. 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 Xers like hotels with sports bars & Quality fitness centers.

Careful shoppers when it comes to household Heavily targeted to by traveling furnishings. Will shop around. Not very companies. brand loyal. Most likely group to travel midweek. Work from home. Environmental Scan: Baby Boomer Characteristics of Baby Boomers (1946 - 1964) Population 77 million Life expectancy is increasing & this generation feels they are just reaching their best years.

Large purchasing power. 50 -60 year olds spend $1 trillion annually 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 Want to keep working to stay Not as brand loyal as they once were. mentally and physically It used to be old people only tried one active. brand & stuck with it forever. No longer as true. 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. 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 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 populations 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 Marketers 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 dont 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 dont keep up with trends & government regulation. Tobacco companies advertising is limited due to their carelessness Laws 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: Hispanics African Americans Asian Americans

Multiculturalism and Growing Ethnic Market 43

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