a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the need of that group, resulting in mutually satisfying exchanges. The uncontrollable elements in the center of the environment continually evolve and create changes in the target market. In contrast, managers can shape and reshape the marketing mix to influence the target market. That is, managers react to changes in the external environment and attempt to create a more effective marketing mix.
When a company implements strategies that attempt to shape the external environment within which it operates. e.g extensive lobbying by FedEx has enabled it to acquire virtually all the Japanese routes it has sought. Factors within the external environment that are important to marketing managers: social, demographic, economic, technological, political and legal, and competitive.
Social change is perhaps the most difficult external variable for marketing managers to forecast, influence, or integrate into marketing plans. Social factors include our attitudes, values, and lifestyles. Social factors influence the products people buy; the prices paid for products; the effectiveness of specific promotions; and how, where, and when people expect to purchase products.
Self-Sufficiency; Upward Mobility; Work Ethic; Conformity
the practice of choosing goods and services that meet one’s diverse needs and interests rather than conforming to a single, traditional lifestyle. In the past, a person’s profession—for instance, banker—defined his or her lifestyle. Today, a person can be a banker and also a gourmet, fitness enthusiast, dedicated single parent, and Internet guru. Each of these lifestyles is associated with different goods and services and represents a target audience
the study of people’s vital statistics, such as age, race and ethnicity, and location
In addition to social and demographic factors, marketing managers must understand and react to the economic environment. The three economic areas of greatest concern to most marketers are consumers’ incomes, inflation, and recession.
a comparison of income versus the relative cost of a standard set of goods and services in different geographic areas Another way to think of purchasing power is income minus the cost of living (i.e., expenses). In general, a cost of living index takes into account housing, food and groceries, transportation, utilities, health care, and miscellaneous expenses such as clothing, services, and entertainment
a measure of the decrease in the value of money, expressed as the percentage reduction in value since the previous year.Thus, in simple terms, an inflation rate of 5 percent means you will need 5 percent more units of money than you would have needed last year to buy the same basket of products.
a period of economic activity characterized by negative growth, which reduces demand for goods and services.More precisely, a recession is defined as occurring when the gross domestic product falls for two consecutive quarters.
Gross Domestic Product (GDP)
the total market value of all final goods and services produced during a period of time. *GDP is one the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific time period – you can think of it as the size of the economy. It’s usually expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year.*
pure research that aims to confirm an existing theory or to learn more about a concept or phenomenon. Basic research aims to confirm an existing theory or to learn more about a concept or phenomenon. e.g. high-energy physics.
research that attempts to develop new or improved products. e.g. aircraft design
Approaches to keeping innovation strong
Build scenarios; Enlist the Web (create websites for ideas); Talk to early adopters; use Market Research; Create and Innovative environment (freedom to fail); Cater to Entrepreneurs
Consumer Product Safety Commission (CPSC)
a federal agency established to protect the health and safety of consumers in and around their homes. It can also ban dangerous products from the marketplace.
Food and Drug Administration (FDA)
a federal agency charged with enforcing regulations against selling and distributing adulterated, misbranded, or hazardous food and drug products
Federal Trade Commission
a federal agency empowered to prevent persons or corporations from using unfair methods of competition in commerce.
Federal Trade Commission Bureau’s
Its responsibilities have grown so large that the FTC has created several bureaus to better organize its operations. One of the most important is the Bureau of Competition, which promotes and protects competition. The FTC’s Bureau of Consumer Protection works for the consumer to prevent fraud, deception, and unfair business practices in the marketplace. Another important FTC Bureau is the Bureau of Economics. It provides economic analysis and support to antitrust and consumer protection investigations. Many consumer protection issues today involve the Internet.
The competitive environment encompasses the number of competitors a firm must face, the relative size of the competitors, and the degree of interdependence within the industry. Management has little control over the competitive environment confronting a firm.
people born between 1979 and 1994
people born between 1965 and 1978
people born between 1946 and 1964
Discuss the external environment of marketing and explain how it affects a firm.
The external marketing environment consists of social, demographic, economic, technological, political and legal, and competitive variables. Marketers generally cannot control the elements of the external environment. Instead, they must understand how the external environment is changing and the impact of that change on the target market. Then marketing managers can create a marketing mix to effectively meet the needs of target customers.
Describe the social factors that affect marketing.
Within the external environment, social factors are perhaps the most difficult for marketers to anticipate. Several major social trends are currently shaping marketing strategies. First, people of all ages have a broader range of interests, defying traditional consumer profiles. Second, social media, Web-based, and mobile technology change how people and marketers interact by allowing one-to-one, one-to-many, and many-to-many communications. Because Facebook is about human-to-human interaction, companies are turning to it and other forms of social media with ever-increasing speed.
Explain the importance to marketing managers of current demographic trends.
Today, several basic demographic patterns are influencing marketing mixes. The U.S. population grew by 27 million from 2000 to 2010, but growth was unevenly distributed. Marketers are also faced with increasingly experienced consumers among the younger generations such as tweens and teens. And because the population is also growing older, marketers are offering more products that appeal to middle-aged and older consumers.
Explain the importance to marketing managers of growing ethnic markets.
About one in three U.S. residents is a member of a minority group. By 2050, about one in three U.S. residents will be Hispanic. Many companies are now creating departments and product lines to effectively target multicultural market segments. Companies have quickly found that ethnic markets are not homogeneous.
Identify consumer and marketer reactions to the state of the economy.
In recent years, U.S. incomes have risen at a slow pace. During a time of inflation, marketers generally attempt to maintain level pricing to avoid losing customer brand loyalty. During times of recession, many marketers maintain or reduce prices to counter the effects of decreased demand; they also concentrate on increasing production efficiency and improving customer service.
Identify the impact of technology on a firm.
Monitoring new technology and encouraging research and development (R&D) of new technology are essential to keeping up with competitors in today’s marketing environment. Innovation through R&D needs to be stimulated by upper management and fostered in creative environments. Although developing new technology internally is a key to creating and maintaining a long-term competitive advantage, external technology is also important to managers.
Discuss the political and legal environment of marketing.
All marketing activities are subject to state and federal laws and the rulings of regulatory agencies. Marketers are responsible for remaining aware of and abiding by such regulations. Some key federal agencies that affect marketing are the Consumer Product Safety Commission, the Food and Drug Administration, and the Federal Trade Commission. Many laws, including privacy laws, have been passed to protect the consumer as well. In 2012, the FTC called for online data collectors to adopt better privacy policies and asked Congress to pass comprehensive privacy legislation.
Explain the basics of foreign and domestic competition.
The competitive environment encompasses the number of competitors a firm must face, the relative size of the competitors, and the degree of interdependence within the industry. Declining population growth, rising costs, and shortages of resources have heightened domestic competition.
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