External 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
Technology
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 people’s 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 don’t 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 Y’ers 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.
Don’t 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 Entering the most money grossing years
worked.
of their lives
(45 – 54)
Their whole life has been bombarded
with advertisements.
Savy & cynical consumer.
Very busy life’s. Spend 78% more than the
average person on personal services. Spend
15% less on household supplies.
Male Gen X’ers 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.
A lot of companies avoid this age group
due to small population size. Exception
is furniture companies.
Environmental Scan: Baby Boomer
Characteristics of Baby Boomers (1946 - 1964)
Population 77 million
Large purchasing power.
50 -60 year olds spend $1 trillion
annually
Life expectancy is increasing
& this generation feels they
are just reaching their best
years.
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 population’s 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 Marketer’s 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 don’t 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 don’t
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 Markets
43