BA104 Chapter 3

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Understanding the Marketing
Environment, Ethical Behavior,
and Social Responsibility Roger A. Kerin
Steven W. H artley
MARKETING
THE CORE
Eighth Edition
CHAPTER
3

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LEARNING OBJECTIVES (1 of 2)
After reading Chapter 3, you should be able to:
1. Explain the purpose of environmental
scanning.
2. Describe social forces such as demographics
and culture.
3. Discuss how economic forces affect marketing.
4. Describe how technological change can affect
marketing.
5. Discuss the forms of competition that exist in a
market.
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LEARNING OBJECTIVES (2 of 2)
After reading Chapter 3, you should be able to:
6. Explain how regulatory forces ensure
competition and protect producers and
consumers.
7. Identify factors that influence ethical and
unethical marketing decisions.
8. Describe the different concepts of social
responsibility.
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FORTUNE’S BUSINESSPERSON OF THE YEAR:
“I’M IN THIS TO BUILD SOMETHING COOL!”
Facebook:
• CEO Mark Zuckerberg
• 2.2 billion active users,
about 25% of the world
population
• Environmental forces
influence Facebook
• Facebook in the future?
©David Paul Morris/Bloomberg via Getty Images
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ENVIRONMENTAL SCANNING
Environmental scanning asks, “What
trends might affect marketing in the
future?” A few examples include:
• Brand advocates
• Virtual reality
• Augmented reality
• “Gig” economy
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FIGURE 3-1 Environmental forces affect the
organization, its suppliers, and its customers.
Access the text alternative for these images.
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SOCIAL FORCES
DEMOGRAPHICS — WORLD POPULATION
Demographics is a social force.
• The world population is 7.4 billion, growing
to 9.8 billion by 2050!
• India will have the largest population in the
world in 2050–1.71 billion people.
• China will have 1.3 billion people by 2050.
• There will be declining populations in Japan,
Russia, and Germany.
World Population
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SOCIAL FORCES
GENERATIONAL COHORTS
Baby Boomers: 1946 to 1964
• Retiring at rate of 10,000 every 24 hours
• All will be 65+ by 2030
Generation X: 1965 to 1976
• 50 million people
Generation Y (Millennials): 1977 to 1994
• 75 million people
Generation Z: 1995 to 2010
• Broadest diversity
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Which Generational Cohort Is Reached?
Merrill Lynch IHG Athleta
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MAKING RESPONSIBLE DECISIONS
BALANCING PROFITS AND PURPOSE – MILLENNIAL
STYLE
Expect brands/companies to embrace social
change, corporate social responsibility, and
environmental stewardship.
Net Impact – a nonprofit for students who want
to “use business to improve the world.”
Net Impact
Website
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SOCIAL FORCES
DEMOGRAPHICS—RACIAL AND ETHNIC DIVERSITY
Composition trends and multicultural
marketing
• African Americans
• Hispanics
• Asian Americans
U.S. Census Bureau
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SOCIAL FORCES
CULTURE—CHANGING ATTITUDES OF MEN AND WOMEN
Cultural changes in attitudes and roles of
men and women in the marketplace:
• Gender stereotypes
• Fashion
• Careers
• Sports
• Technology

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SOCIAL FORCES
CULTURE—CHANGING VALUES
Culture:
• Values, ideas, and attitudes
shared by members of a
group.
• Values may change over
time.
Colgate Super
Bowl Ad
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ECONOMIC FORCES
MACROECONOMIC CONDITIONS
Economy – Income, expenditures, and
resources
Macroeconomics – Performance of the
economy based on indicators (e.g.
inflation, deflation, GDP)
• Inflation – Production costs and prices
increase
• Recession – Periods of declining
economic activity
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ECONOMIC FORCES
CONSUMER INCOME
Microeconomics – ability of consumers
to buy
• Gross income
• Disposable income
• Discretionary income
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Courtesy of Cunard Line

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TECHNOLOGICAL FORCES
TECHNOLOGY OF TOMORROW
Technology
• Artificial intelligence capabilities
• Automation (drones, cars, robots, etc.)
• Internet of Things (IoT)
• Wearable technology
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What Products/Services Might Be
Replaced by These?
IBM Watson
Slack Phone
Apple Pay
IBM Watson
Slack Phone
Apple Pay
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©dpa picture alliance archive/Alamy Stock Photo; Slack; ©Bryan Thomas/Getty Images

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TECHNOLOGICAL FORCES
TECHNOLOGY’S IMPACT ON CUSTOMER VALUE
Impact on customer value:
• Plummeting costs
• New focus on quality, service,
relationships
• Thousands of new products
• Changes production of
existing products
• Recycling
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TECHNOLOGICAL FORCES
TECHNOLOGY ENABLES DATA ANALYTICS
Marketspace
Electronic commerce
Internet of things
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©Askold Romanov/Getty Images

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COMPETITIVE FORCES
ALTERNATIVE FORMS OF COMPETITION
Competition
• Pure competition – Many sellers
• Monopolistic competition – Many sellers
with substitutable products
• Oligopoly – Few sellers
• Pure monopoly – Only one seller
Small businesses as competitors
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REGULATORY FORCES
PROTECTING COMPETITION
Regulation
Protecting competition:
• Sherman Antitrust Act (1890)
• Clayton Act (1914)
• Robinson-Patman Act (1936)
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Can you think of any products protected by trademarks
that are still in danger of becoming generic?
Consider:
Band-Aid
Coke
Clorox
Crock Pot
Frisbee
Kleenex
Popsicle
Q-Tip
Scotch tape
Vaseline
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REGULATORY FORCES (1 of 2)
PROTECTING PRODUCERS AND CONSUMERS
Patent Law
Copyright Law
Digital Millennium Copyright Act (1998)
Fair Packaging and Labeling Act (1966)
Child Protection Act (1966)
Consumer Product Safety Act (1972)
Infant Formula Act (1980)
Nutritional Labeling and Education Act (1990)
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REGULATORY FORCES (2 of 2)
PROTECTING PRODUCERS AND CONSUMERS
Consumerism
FTC Act of 1914
Deceptive Mail Prevention and Enforcement
Act (1999)
Telephone Consumer Protection Act (1991)
Controlling the Assault of Non-Solicited
Pornography and Marketing (CAN-SPAM) Act
(2004)
Lanham Act (1946) FTC Video
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Source: Federal Trade Commission

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REGULATORY FORCES
CONTROL THOUGH SELF-REGULATION
Self-Regulation
• Major TV networks use self-regulation to
set guidelines for TV ads for children.
Better Business Bureau (BBB)
• Voluntary alliance of companies.
• Maintain fair practices.
BBB Web site
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Better Business Bureau. Used with permission.

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UNDERSTANDING ETHICAL
MARKETING BEHAVIOR
Ethics – The moral principles and values
that govern the actions and decisions of
an individual or group.
Numerous factors influence ethical
marketing behavior.
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FIGURE 3-2 A framework for understanding
ethical behavior.
Access the text alternative for these images.
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ETHICAL MARKETING BEHAVIOR
SOCIETAL CULTURE AND NORMS
Culture – learned and shared
Societal values and attitudes
• They are relative.
• They affect ethical and legal relationships.
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ETHICAL MARKETING BEHAVIOR (1 of 2)
BUSINESS CULTURE AND INDUSTRY PRACTICES
Business culture
Ethics of exchange
Caveat emptor
Consumer guarantees the Bill Of Rights
(1962) right to:
1. Safety
2. Choose
3. Be informed
4. Be heard
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ETHICAL MARKETING BEHAVIOR (2 of 2)
BUSINESS CULTURE AND INDUSTRY PRACTICES
Ethics of competition
Business culture affects ethical
behavior in competition
Economic espionage
Bribes and kickbacks
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MAKING RESPONSIBLE DECISIONS
CORPORATE CONSCIENCE IN THE COLA WAR
“Hey, Pepsi,
want to buy
Coke’s
marketing plan
for its new
product?”
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©Cliff Tew

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ETHICAL MARKETING BEHAVIOR
CORPORATE CULTURE AND EXPECTATIONS
Corporate culture
Code of ethics
Ethical behavior of top management and
coworkers
• Whistle-blowers
AMA Ethics
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ETHICAL MARKETING BEHAVIOR
PERSONAL MORAL PHILOSOPHY AND ETHICS
Moral idealism
Example: 3M’s Scotchgard
Utilitarianism
The greatest good for the greatest
number.
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SOCIAL RESPONSIBILITY IN MARKETING
THREE CONCEPTS OF SOCIAL RESPONSIBILITY
(1 of 2)
Social Responsibility
1. Profit responsibility: Obligation to
maximize profits for stockholders
2. Stakeholder responsibility: Obligations to
those who can affect achievement of
objectives
3. Societal responsibility: Obligations to
preserve environment and to the general
public
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SOCIAL RESPONSIBILITY IN MARKETING
THREE CONCEPTS OF SOCIAL RESPONSIBILITY
(2 of 2)
Social Responsibility
• Triple-bottom line: People, planet, profit
Green Marketing
Cause Marketing
P&G Video
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MARKETING MATTERS
Will Consumers Switch Brands for a Cause?
Yes, if …
Cause marketing raised more than $12
billion raised in 2016.
85% of consumers have favorable opinion of
companies that support their causes.
80% will switch brands.
Cause Marketing
Forum
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SUSTAINABLE DEVELOPMENT:
DOING WELL BY DOING GOOD
Sustainable Development: Conduct
business to protect the environment
while making economic progress
90% of U.S. citizens are concerned about
working conditions outside the United
States.
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Environmental Scanning
Environmental scanning is the process of
continually acquiring information on events
occurring outside the organization to identify
and interpret potential trends.
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Social Forces
Social forces are the demographic
characteristics of the population and its
culture.
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Demographics
Demographics describe a population
according to selected characteristics such
as age, gender, ethnicity, income, and
occupation.
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Baby Boomers
Baby Boomers include the generation of 76
million children born between 1946 and
1964. They are the wealthiest generation in
U.S. history, accounting for an estimated
50% of all consumer spending.
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Generation X
Generation X includes the 50 million people
born between 1965 and 1976. Also called
the baby bust. This generation of consumers
are self-reliant, supportive of racial and
ethnic diversity, and better educated than
any previous generation.
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Generation Y
Generation Y includes the 72 million
Americans born between 1977 and 1994.
Also called the echo-boom. Members are
interested in distinctive, memorable, and
personal experiences. The term millennials
is often used to refer to this generation.
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Generation Z
Generation Z includes those born between
1995 and 2010. They embrace the broadest
definitions of diversity and inclusivity to
include race, ethnicity, the LGBT
community, different body types, and those
with physical challenges.
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Multicultural Marketing
Multicultural marketing consists of
combinations of the marketing mix that
reflect the unique attitudes, ancestry,
communication preferences, and lifestyles of
different races.
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Culture
Culture consists of the set of values, ideas,
and attitudes that are learned and shared
among the members of a group.
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Economy
The economy pertains to the income,
expenditures, and resources that affect the
cost of running a business and household.
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Technology
Technology consists of the inventions or
innovations from applied science or
engineering research.
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Marketspace
Marketspace is an information- and
communication-based electronic exchange
environment mostly occupied by
sophisticated computer and
telecommunication technologies and
digitized offerings.
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Electronic Commerce
Electronic commerce (e-commerce) are
the activities that use electronic
communication in the inventory, promotion,
distribution, purchase, and exchange of
products and services.

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Internet of Things
Internet of Things (IoT) is the network of
products embedded with connectivity-
enabled electronics.

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Competition
Competition consists of the alternative
firms that could provide a product to satisfy
a specific market’s needs.
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Barriers to Entry
Barriers to entry are business practices
or conditions that make it difficult for new
firms to enter the market.

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Regulation
Regulation consists of the restrictions state
and federal laws place on business with
regard to the conduct of its activities.
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Consumerism
Consumerism is a grassroots movement
started in the 1960s to increase the
influence, power, and rights of consumers in
dealing with institutions.
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Self-Regulation
Self-regulation is an alternative to
government control where an industry
attempts to police itself.
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Ethics
Ethics are the moral principles and values
that govern the actions and decisions of an
individual or group.
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Caveat Emptor
Caveat emptor is the legal concept of “let
the buyer beware” that was pervasive in the
American business culture before the 1960s.
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Consumer Bill of Rights (1962)
The Consumer Bill of Rights (1962) is a
law that codified the ethics of exchange
between buyers and sellers, including the
rights to safety, to be informed, to choose,
and to be heard.
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Green Marketing
Green marketing consists of marketing
efforts to produce, promote, and reclaim
environmentally sensitive products.
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Cause Marketing
Cause marketing occurs when the
charitable contributions of a firm are tied
directly to the customer revenues produced
through the promotion of one of its products.
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Moral Idealism
Moral idealism is a personal moral
philosophy that considers certain individual
rights or duties as universal, regardless of
the outcome.
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Utilitarianism
Utilitarianism is a personal moral
philosophy that focuses on the “greatest
good for the greatest number” by assessing
the costs and benefits of the consequences
of ethical behavior.
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Economic Espionage
Economic espionage is the clandestine
collection of trade secrets or proprietary
information about a company’s competitors.
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Code of Ethics
A code of ethics is a formal statement of
ethical principles and rules of conduct.
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Social Responsibility
Social responsibility is the idea that
organizations are part of a larger society and
are accountable to that society for their
actions.
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Sustainable Development
Sustainable development involves
conducting business in a way that protects
the natural environment while making
economic progress.
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Self-Regulation
Self-regulation is an alternative to
government control where an industry
attempts to police itself.

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Gross Income
Gross income is the total amount of
money made in one year by a person,
household, or family unit.
Also known as money income at the
Census Bureau.

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Disposable Income
Disposable income is the money a
consumer has left after paying taxes to
use for necessities such as food,
housing, clothing, and transportation.

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Discretionary Income
Discretionary income is the money that
remains after paying for taxes and
necessities.