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Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 1
MKTG
Designed byAmy McGuire, B-books, Ltd.
Prepared byDeborah Baker, Texas Christian University
Lamb, Hair, McDaniel 2008-2009
Social
Responsibility, Ethics,
and the Marketing Environment
3CHAPTER
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Learning Outcomes
Discuss corporate social responsibility
Describe the role of ethics and ethical decisions in business
Discuss the external environment of marketing, and explain how it affects a firm
LO1
LO2
LO3
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Learning Outcomes
Describe the social factors that affect marketing
Explain the importance to marketing managers of current demographic trends
Explain the importance to marketing managers of multiculturalism and growing ethnic markets
LO4
LO5
LO6
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Learning Outcomes
Identify consumer and market reactions to the state of the economy
Identify the impact of technology on a firm
Discuss the political and legal environment of marketing
Explain the basics of foreign and domestic competition
LO7
LO8
LO9
LO10
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LO1
Corporate Social Responsibility
The idea that socially The idea that socially
responsible companies will responsible companies will
outperform their peers by outperform their peers by
focusing on the world’s social focusing on the world’s social
problems and viewing them problems and viewing them
as opportunities to build as opportunities to build
profits and help the world at profits and help the world at
the same time.the same time.
SustainabilitySustainability
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REVIEW LEARNING OUTCOMELO1
Corporate Social Responsibility
EthicalEthicalDo what is right.Do what is right.
LegalLegalObey the Law.Obey the Law.
EconomicEconomicBe profitable.Be profitable.
PhilanthropicPhilanthropicBe a good citizen.Be a good citizen.
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Ethical Behavior in Business
LO2
EthicsEthics
MoralsMorals
The moral principles or values
that generally govern the
conduct of an individual.
The rules people develop as a result of cultural values and norms.
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Ethical Development Levels
LO2
PreconventionalMorality
ConventionalMorality
PostconventionalMorality
MoreMature
MoreChildlike
• Based on what will be punished or rewarded
• Self-centered, calculating, selfish
• Moves toward the expectations of society
• Concerned over legality and the opinion of others
• Concern about how they judge themselves
• Concern if it is right in the long run
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Ethical Decision Making
LO2
Influential Factors
Extent of Problems
Top Management Actions
Potential Consequences
Social Consensus
Probability of Harm
Time UntilConsequences
Number Affected
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Code of Ethics
LO2
A guideline to help marketing
managers and other employees
make better decisions.
Code of EthicsCode of Ethics
http://www.ethicsweb.ca
Online
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Creating Ethical Guidelines
LO2
Helps identify acceptable business practices
Helps control behavior internally
Avoids confusion in decision making
Facilitates discussion about right and wrong
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Ethical Norms and Values for Marketers
LO2
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External Marketing EnvironmentLO3
DemographicsDemographics
SocialChangeSocial
Change
EconomicConditionsEconomicConditions
Political & Legal FactorsPolitical &
Legal Factors
TechnologyTechnology
CompetitionCompetition
EnvironmentalScanning
Target Market
External Environment (uncontrollable)
Ever-ChangingMarketplace
ProductDistributionPromotion
Price
ProductDistributionPromotion
Price
Internal (within the
organization)
Marketing mix
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Target MarketLO3
A defined group most likely to
buy a firm’s product.
Target MarketTarget Market
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LO4
Social Factors
ValuesValues
AttitudesAttitudes
LifestyleLifestyle
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LO4
Social Factors
Social Factors Influence:Social Factors Influence:
Products purchasedProducts purchased
Prices paid for productsPrices paid for products
Effectiveness of promotionsEffectiveness of promotions
How, where, and when people purchaseHow, where, and when people purchase
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LO4
Social Factors
Self-SufficiencySelf-Sufficiency
Upward MobilityUpward Mobility
Work EthicWork Ethic
ConformityConformity
Core American Values
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LO4
The Influence of Values on Buying Habits
Ranked Characteristics of Product Quality
Reliability
Durability
Easy maintenance
Ease of use
Trusted brand name
Low price
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LO4
Component Lifestyles
ComponentLifestyles
ComponentLifestyles
The practice of choosing goods
and services that meet one’s
diverse needs and interests
rather than conforming to a
single, traditional lifestyle.
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LO4
Role of Families and Working Women
Growth of dual-income families results in increased purchase power
Approximately 60% of work-age females are in the workforce
Women expect different things in life
– purchase bulk of technology products
– do most of the grocery shopping
– second largest group of home buyers after couples
Single households outnumber married households with kids
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REVIEW LEARNING OUTCOMELO4
Social Factors that Affect Marketing
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Demographic FactorsLO5
DemographyDemography The study of people’s
vital statistics, such as
their age, race and
ethnicity, and location.
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TweensLO5
Pre- and early adolescents, age 8 to 14
Population of 29 million
Annual purchasing power of $39 billion
View TV ads as “just advertising”
Emerging as “the richest generation” and the “most influential generation in history”
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Generation YLO5
Born between 1979 and 1994Population of 60 millionPurchasing power of $200 billion annuallyResearchers have found Gen Yers to be:
ImpatientFamily-orientedInquisitiveOpinionatedDiverseTime managers“Street Smart”
Word of mouth marketing is effective
Online
http://www.mountaindew.comhttp://www.northface.com
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Generation XLO5
Born between 1965 and 1978
Population of 40 million
Savvy and cynical consumers
Time is at a premium, and outsourcing is utilized
Entering their money-making years
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Baby BoomersLO5
Born between 1946 and 1964
Population of 77 million—the largest demographic segment
$1 trillion in spending power for people aged 50 to 60
Income will continue to grow as they keep working
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REVIEW LEARNING OUTCOMELO5
Current Demographic Trends
AgeTweens
8 to 14 yrs29 million
Gen Y
1979-199460 million
Gen X
1965-197840 million
Baby Boom
1946-196477 million
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Growing Ethnic MarketsLO6
Spending power of ethnic markets by 2011:
Hispanics: $1.2 trillion
African Americans: $921 billion
Asian Americans: $526 billion
Diversity can result in bottom-line benefits to companies.
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Marketing to Hispanic AmericansLO6
The population’s diversity creates challenges for targeting this group.
Hispanics tend to be brand loyal, but are not aware of many U.S. brands.
Nearly half of adult U.S. Hispanics have home Internet access.
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Marketing to African AmericansLO6
Many firms are creating products for the African American market.
Promotional dollars and media choices directed toward African Americans continue to increase.
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Marketing to AsianAmericans
LO6
Younger, better educated, and have highest average income of all groups
Many products have been developed for Asian American market.
Cultural diversity within the Asian American market complicates promotional efforts.
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Multiculturalism and Growing Ethnic Markets
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Economic Factors
LO7
Distribution of Consumer Income
Inflation
Recession
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Consumers’ Incomes
LO7
Median U.S. household income in 2007 was $45,000
Incomes have risen at a slow pace.
Education is the primary determinant of earning potential.
Consumers are strapped for cash.
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The Financial Power of Women
LO7
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 60% of home improvements 53% of investments 51% of consumer electronics
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Purchasing Power
LO7
A comparison of the relative cost of
a set standard of goods and services
in different geographic areas.
PurchasingPower
PurchasingPower
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Inflation
LO7
A measure of the decrease in the
value of the money, expressed as the
percentage reduction in value since
the previous year.
InflationInflation
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Recession
LO7
A period of economic activity
characterized by negative growth,
which reduces demand for goods
and services.
RecessionRecession
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Recession Marketing Strategies
LO7
Improve existing products and introduce new ones
Maintain and expand customer services
Emphasize top-of-the-line products and promote product value
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Research
LO8
Basic ResearchBasic Research
Applied ResearchApplied Research
Pure research that aims to confirm an existing theory or to learn more about a concept phenomenon.
An attempt to develop new or improved products
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Technological Factors
LO8
U.S. excels at basic and applied research.
Many firms use the market concept to guide research.
New technology internally creates a long-term competitive advantage.
External technology Creates more efficient operation or better products May render existing products obsolete
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Technological Factors
LO8
Innovation is becoming a global process.
New technologies create new opportunitiesRSS (Really Simple
Syndication)Blogging
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Impact of Technology on a Firm
BasicResearch
BasicResearch
MarketingMix
MarketingMix
AppliedResearch
AppliedResearch
TechnologyAdvances
TechnologyAdvances
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LO9
Political and Legal Factors
New technology Society Businesses Consumers
Laws and Regulations Protect:Laws and Regulations Protect:
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LO9
Federal Legislation
Sherman ActClayton ActFederal Trade Commission Act Celler-Kefauver Antimerger ActHart-Scott-Rodino Act
Sherman ActClayton ActFederal Trade Commission Act Celler-Kefauver Antimerger ActHart-Scott-Rodino Act
Regulate competitiveenvironment
Robinson-Patman ActRobinson-Patman ActRegulate pricing practices
Wheeler-Lea ActWheeler-Lea ActControl falseadvertising
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LO9
Regulatory Agencies
Consumer Product Safety Commission
Consumer Product Safety Commission
Federal Trade Commission
Federal Trade Commission
Food & Drug AdministrationFood & Drug
Administration
Protects consumer safety in and around their homes
Prevents unfair methods ofcompetition in commerce
Enforces safety regulations for food and drug products
Online
http://www.ftc.gov
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LO9
Powers of the FTC
Cease-and-Desist OrderCease-and-Desist Order
Consent DecreeConsent Decree
Affirmative DisclosureAffirmative Disclosure
Corrective AdvertisingCorrective Advertising
RestitutionRestitution
CounteradvertisingCounteradvertising
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LO9
Consumer Privacy
Gramm-Leach-Bliley Act
Health Insurance Portability and Accountability Act (HIPPA)
California’s Notice of Security Breach Law
Government ActionsGovernment Actions
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Political and Legal Environment of Marketing
3.3
3.4
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Competitive Factors
LO10
How many competitors?
How big are competitors?
How interdependent isthe industry?
Control
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Competitive Factors
LO10
Competition for Market Share and Profits
Global Competition
Firms must work harder to maintain profits and market share.
More foreign firms are entering U.S. market.
Foreign firms in U.S. now compete on product quality.
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REVIEW LEARNING OUTCOMELO1
0
Political and Legal Environment
Mature Industries
Slow Growth / No Growth
Highly Competitive Marketplace
Can only increasemarket share bytaking it from a competitor.