Lamb, Hair, McDaniel MKTG2008-2009 3 Social Responsibility, Ethics, and the Marketing Environment CHAPTER Designed by Amy McGuire, B-books, Ltd. Chapter 3 Prepared by Deborah Baker, Texas Christian University Copyright ©2009 Cengage Learning Inc. All rights reserved. 1 Learning Outcomes LO1 Discuss corporate social responsibility LO2 Describe the role of ethics and ethical decisions in business LO3 Discuss the external environment of marketing, and explain how it affects a firm Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 2 Learning Outcomes LO4 Describe the social factors that affect marketing LO5 Explain the importance to marketing managers of current demographic trends LO6 Explain the importance to marketing managers of multiculturalism and growing ethnic markets Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 3 Learning Outcomes LO7 Identify consumer and market reactions to the state of the economy LO8 Identify the impact of technology on a firm LO9 Discuss the political and legal environment of marketing LO10 Explain the basics of foreign and domestic competition Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 4 Corporate Social Responsibility Sustainability The idea that socially responsible companies will outperform their peers by focusing on the world’s social problems and viewing them as opportunities to build profits and help the world at the same time. LO1 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 5 LO1 REVIEW LEARNING OUTCOME Corporate Social Responsibility Philanthropic Be a good citizen. Ethical Do what is right. Legal Obey the Law. Economic Be profitable. Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 6 Ethical Behavior in Business Ethics Morals 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. LO2 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 7 Ethical Development Levels More Childlike Preconventional Morality More Mature LO2 Chapter 3 • Based on what will be punished or rewarded • Self-centered, calculating, selfish Conventional Morality • Moves toward the expectations of society • Concerned over legality and the opinion of others Postconventional Morality • Concern about how they judge themselves • Concern if it is right in the long run Copyright ©2009 Cengage Learning Inc. All rights reserved. 8 Ethical Decision Making Influential Factors Extent of Problems Probability of Harm Top Management Actions Time Until Consequences Potential Consequences Number Affected Social Consensus LO2 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 9 Code of Ethics Code of Ethics A guideline to help marketing managers and other employees make better decisions. LO2 http://www.ethicsweb.ca Online Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 10 Creating Ethical Guidelines Helps identify acceptable business practices Helps control behavior internally Avoids confusion in decision making Facilitates discussion about right and wrong LO2 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 11 Ethical Norms and Values for Marketers LO2 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 12 LO3 External Marketing Environment Internal (within the organization) External Environment (uncontrollable) Social Change Demographics Ever-Changing Marketplace Marketing mix Economic Conditions Product Distribution Promotion Price Competition Target Market Political & Legal Factors Environmental Scanning Chapter 3 Technology Copyright ©2009 Cengage Learning Inc. All rights reserved. 13 LO3 Target Market Target Market A defined group most likely to buy a firm’s product. Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 14 Social Factors Attitudes Values Lifestyle LO4 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 15 Social Factors Social Factors Influence: Products purchased Prices paid for products Effectiveness of promotions LO4 Chapter 3 How, where, and when people purchase Copyright ©2009 Cengage Learning Inc. All rights reserved. 16 Social Factors Core American Values Self-Sufficiency Upward Mobility Work Ethic LO4 Chapter 3 Conformity Copyright ©2009 Cengage Learning Inc. All rights reserved. 17 The Influence of Values on Buying Habits Ranked Characteristics of Product Quality Reliability Durability Easy maintenance Ease of use Trusted brand name LO4 Chapter 3 Low price Copyright ©2009 Cengage Learning Inc. All rights reserved. 18 Component Lifestyles Component Lifestyles The practice of choosing goods and services that meet one’s diverse needs and interests rather than conforming to a single, traditional lifestyle. LO4 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 19 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 LO4 Chapter 3 Single households outnumber married households with kids Copyright ©2009 Cengage Learning Inc. All rights reserved. 20 LO4 REVIEW LEARNING OUTCOME Social Factors that Affect Marketing Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 21 LO5 Demographic Factors Demography Chapter 3 The study of people’s vital statistics, such as their age, race and ethnicity, and location. Copyright ©2009 Cengage Learning Inc. All rights reserved. 22 LO5 Tweens 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” Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 23 LO5 Generation Y Born between 1979 and 1994 Population of 60 million Purchasing power of $200 billion annually Researchers have found Gen Yers to be: Impatient Family-oriented Inquisitive Opinionated Diverse Time managers “Street Smart” Word of mouth marketing is effective http://www.mountaindew.com http://www.northface.com Online Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 24 LO5 Generation X Born between 1965 and 1978 Population of 40 million Savvy and cynical consumers Time is at a premium, and outsourcing is utilized Entering their moneymaking years Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 25 LO5 Baby Boomers 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 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 26 LO5 REVIEW LEARNING OUTCOME Current Demographic Trends Age Chapter 3 Tweens Gen Y Gen X Baby Boom 8 to 14 yrs 29 million 1979-1994 60 million 1965-1978 40 million 1946-1964 77 million Copyright ©2009 Cengage Learning Inc. All rights reserved. 27 LO6 Growing Ethnic Markets 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. Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 28 LO6 Marketing to Hispanic Americans 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. Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 29 LO6 Marketing to African Americans Many firms are creating products for the African American market. Promotional dollars and media choices directed toward African Americans continue to increase. Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 30 LO6 Marketing to Asian Americans 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. Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 31 LO6 REVIEW LEARNING OUTCOME Multiculturalism and Growing Ethnic Markets Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 32 Economic Factors Distribution of Consumer Income Inflation LO7 Chapter 3 Recession Copyright ©2009 Cengage Learning Inc. All rights reserved. 33 Consumers’ Incomes 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. LO7 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 34 The Financial Power of 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: LO7 Chapter 3 68% of new cars 66% of computers 60% of home improvements 53% of investments 51% of consumer electronics Copyright ©2009 Cengage Learning Inc. All rights reserved. 35 Purchasing Power Purchasing Power A comparison of the relative cost of a set standard of goods and services in different geographic areas. LO7 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 36 Inflation Inflation A measure of the decrease in the value of the money, expressed as the percentage reduction in value since the previous year. LO7 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 37 Recession Recession A period of economic activity characterized by negative growth, which reduces demand for goods and services. LO7 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 38 Recession Marketing Strategies Improve existing products and introduce new ones Maintain and expand customer services Emphasize top-of-the-line products and promote product value LO7 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 39 Research Basic Research Pure research that aims to confirm an existing theory or to learn more about a concept phenomenon. An attempt to develop new or Applied Research improved products LO8 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 40 Technological Factors 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 LO8 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 41 Technological Factors Innovation is becoming a global process. New technologies create new opportunities RSS (Really Simple Syndication) Blogging LO8 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 42 LO8 REVIEW LEARNING OUTCOME Impact of Technology on a Firm Basic Research Applied Research Technology Advances Marketing Mix Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 43 Political and Legal Factors Laws and Regulations Protect: New technology Society Businesses Consumers LO9 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 44 Federal Legislation Regulate competitive environment Sherman Act Clayton Act Federal Trade Commission Act Celler-Kefauver Antimerger Act Hart-Scott-Rodino Act Regulate pricing practices Robinson-Patman Act Control false advertising Wheeler-Lea Act LO9 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 45 Regulatory Agencies Consumer Product Safety Commission Protects consumer safety in and around their homes Federal Trade Commission Prevents unfair methods of competition in commerce Food & Drug Administration Enforces safety regulations for food and drug products LO9 http://www.ftc.gov Online Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 46 Powers of the FTC Cease-and-Desist Order Consent Decree Affirmative Disclosure Corrective Advertising Restitution LO9 Chapter 3 Counteradvertising Copyright ©2009 Cengage Learning Inc. All rights reserved. 47 Consumer Privacy Government Actions Gramm-Leach-Bliley Act Health Insurance Portability and Accountability Act (HIPPA) California’s Notice of Security Breach Law LO9 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 48 LO9 REVIEW LEARNING OUTCOME Political and Legal Environment of Marketing 3.3 3.4 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 49 Competitive Factors How many competitors? Control How big are competitors? How interdependent is the industry? LO10 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 50 Competitive Factors Competition for Market Share and Profits Firms must work harder to maintain profits and market share. Global Competition More foreign firms are entering U.S. market. Foreign firms in U.S. now compete on product quality. LO10 Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 51 LO10 REVIEW LEARNING OUTCOME Political and Legal Environment Highly Competitive Marketplace Mature Industries Slow Growth / No Growth Can only increase market share by taking it from a competitor. Chapter 3 Copyright ©2009 Cengage Learning Inc. All rights reserved. 52