The External Marketing
Environment
Lamb, Hair, McDaniel, MKTG 5 , chapter 4
Learning Objectives:
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LO 1: What is the external environment and how does it affect a firm?
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LO 2: What are social factors and how do they affect marketing?
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LO 3: What are the current demographic trends and why are they
important for strategic marketing planning?
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LO 4: Which economic factors impact marketing decisions?
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LO 5: What impact does technology have on firms?

LO 6: Which political and regulatory factors have the most influence on
marketing?
LO 1: What is the external environment?

Firms do not compete in a vacuum.
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External environment includes: social/cultural trends,
demographic factors, economic conditions,
political/legal climate (including regulations),
technological innovations, and competitive forces.

Companies cannot control external environment but
they can MANAGE it through strategies designed to
shape their environment.
LO 1 (cont.): How does the environment
affect a firm?

Changes in the external environment influence:
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Market (consumers, business buyers, government buyers)
Suppliers
Distributors
Competitors
The Firm Itself!
Companies must continuously adapt to changes in the
external environment while trying to predict future
changes.
With shorter product (and sometimes, entire industry)
cycles, the company’s ability to anticipate changes is a
source of competitive advantage.
LO 2: What are social factors and how do
they affect marketing?

Social factors include: attitudes, values and lifestyles.
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Social factors – most difficult to forecast, influence, and
integrate into marketing plans.
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Social factors influence:

what people buy
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how much they are willing to pay
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how they react to specific promotions
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buying decisions (when, where, and how consumers purchase)
American Values
Core American Values
Emerging Trends
Self-Sufficiency
Getting off the grid
Upward Mobility
Meaningful green
Work Ethic
EcoTechMed
Conformity
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.
 Today’s consumers want multifunctional products
 No longer defined only by occupation, social class,
and/or income
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Changing Role of Families and
Working Women
Growth of dual-income families results in increased
purchasing power.
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Approximately 59 percent of work-age females are
in the workforce.
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Working wives bring in 45 percent of the total family
earnings.
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The phenomenon of working women has probably
had a greater effect on marketing than any other
social change.
There Is Never Enough Time
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It is estimated that over 80 percent of the working
population is worried about having too little time.
About 40 percent of American adults get less than 7
hours of sleep on weekdays.
About 74 percent of working adults engage in
multitasking.
LO 3: What are the current demographic
trends and why are they important?
There are three types of market: consumer, business,
government. Yet, People are the basis for any market.
 Demographic characteristics relate to buyer
behavior
 Demographic cohorts have their own needs,
values, and consumption patterns.
TWEENS
 Pre- and early adolescents, age 8 to
12
 Population of 20 million
 Directly spend about $50 billion annually
 Parents spend $150 billion on tweens annually
 View TV ads as “just advertising”
TEENS
 Population of about 25 million
 Spend approximately 72 hours per week tuned in
electronically
 View shopping as a social sport
 58 percent shop online
Generation Y
 Born between 1979 and 1994
 Surpassed population of baby boomers in 2010
 Two Stages: 1) Those born in 1994 fit closer to the
Teen cohort. 2) Those born in 1979 have
established careers and started families.
 Purchasing power of $200 billion annually
 Researchers have found Gen Yers to be:
Inquisitive, Quick shoppers, Opinionated, Want fulfillment,
Diverse, Multitaskers, Time managers, Environmentally aware.
Generation X
 Born between 1965 and 1978
 Population of 40 million
 Independent, resilient, adaptable, cautious, and skeptical

71 percent have children under age 18
 Home ownership is an important goal
 Avid buyers of the latest clothes, technology, and
recreational products
Baby Boomers
 Born between 1946 and 1964
 Population of 75 million
 Working longer to compensate for economic
downturn, which affected retirement savings
 The market of services directed at seniors is one
of the fastest growing business markets
Growing Ethnic Markets

Estimated purchasing power of ethnic markets in
2013:
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Hispanics: $1.4 trillion
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African Americans: $1.2 billion
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Asian Americans: $752 billion

The minority population of the United States in
2011 reached 110 million.
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Companies are recognizing that diversity can result
in bottom-line benefits.
Hispanic Americans
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The Hispanic population’s diversity creates challenges
for targeting this market.
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Hispanics tend to be brand loyal, but are not aware of
many mainstream U.S. brands.

68 percent of U.S. Hispanics have home Internet
access.
Marketing to African Americans
 47 percent are between 18 and 49 years.
 More firms are creating products for the African
American market.
 Promotional dollars and media choices directed
toward African Americans continue to increase.
Marketing to Asian Americans
 Younger, better educated, and have highest average
income of all groups.
 Early adopters of latest digital gadgets.
 Cultural diversity within the Asian American
market complicates promotional efforts.
LO 4: Which economic factors impact
marketing?
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Consumers’ Incomes: affect the products consumers
buy and the prices they are willing to pay.
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Purchasing Power: compares income with the cost of
living.
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Inflation: is always associated with increased prices.
When inflation is low, profitability can only come
from improved efficiencies (i.e., lower costs).
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Recession: affects consumer confidence and their
spending. Consumers turn to cheaper brands.
Consumers’ Incomes
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Median U.S. household income
in 2010 was approximately $52,000.
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Incomes have risen at a slow pace in recent years.
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Education is the primary determinant of earning
potential.
LO 5: What impact does technology have on
firms?
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Basic Research - Pure research that aims to
confirm an existing theory or to learn more about a
concept phenomenon.
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Applied Research – Research aimed at resolving a
business problem (e.g., developing new or improved
products).
Stimulating Innovation
Build scenarios
Enlist the Web
Talk to early adopters
Use marketing research
Create an innovative environment
Cater to entrepreneurs
LO 6: Which political and regulatory factors
affect marketing?
 Laws and regulations protect:
New technology
Society
Consumers
Businesses
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State Laws vary State by State:
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Oregon: limits utility advertising to 0.5 percent of net
income.
California: bans trans fats in restaurants and bakeries.
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