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Marketing Environment, Social Factors, Ethics & CSR
- 1. Chapter 2 The Marketing Environment, Social Responsibility, and Ethics Copyright © 2019 by Nelson Education Ltd. 1
- 2. Learning Outcomes 1. Discuss the external environment of marketing, and explain how it affects a firm 2. Describe the competitive factors that affect marketing 3. Describe the regulatory factors that affect marketing Copyright © 2019 by Nelson Education Ltd. 2
- 3. Copyright © 2019 by Nelson Education Ltd. 3 Learning Outcomes 4. Describe the economic factors that affect marketing 5. Describe the social factors that affect marketing 6. Explain the importance to marketing managers of current demographic trends
- 4. Copyright © 2019 by Nelson Education Ltd. 4 Learning Outcomes 7. Describe the technological factors that affect marketing 8. Discuss corporate social responsibility 9. Describe the role of ethics and ethical decisions in business
- 5. Marketing Mix LO 1 Target Market Price Promo Place Product Copyright © 2019 by Nelson Education Ltd. 5
- 6. The External Marketing Environment LO 1 Consumers Changes in the external environment cause new consumers to come and current ones to go Copyright © 2019 by Nelson Education Ltd. 6
- 7. Understanding the External Environment The CREST Model LO 1 Copyright © 2019 by Nelson Education Ltd. 7
- 8. Competitive Environment Forces of Competition LO 2 Copyright © 2019 by Nelson Education Ltd. 8
- 9. Regulatory Factors caution risk LO 3 Copyright © 2019 by Nelson Education Ltd. 9
- 10. Regulatory Forces—Legislation Federal Legislation Competition Act Consumer Packaging and Labelling Act Privacy Act Provincial and Territorial Laws Quebec’s Bill 101 Alberta Liquor Law versus LCBO Self-Regulation ASA CAB LO 3 Copyright © 2019 by Nelson Education Ltd. 10
- 11. Regulatory Forces—Specialized Federal Legislation Specialized Federal Legislation Affecting Business LO 3 Copyright © 2019 by Nelson Education Ltd. 11
- 12. Regulatory Forces—Consumer Privacy • PA • PIPEDA • Canada’s Anti-Spam Legislation, CASL – Effective July 1, 2014 • Did the consumer consent to receiving message? • Do you have a record of consent? • Can they unsubscribe? • Enforced by CRTC, the Competition Bureau and the Privacy Commissioner • http://fightspam.gc.ca/eic/site/030.nsf/eng/00288.html LO 3 Copyright © 2019 by Nelson Education Ltd. 12
- 13. Economic Factors Consumer Purchasing Behaviour Consumer Income/Purchasing Power Inflation Recession LO 4 Copyright © 2019 by Nelson Education Ltd. 13
- 14. Economic Factors—Consumer Incomes • Median total family income = $78,870 • Education is the primary determinant of earning potential • Today 1/4 of all Canadians spend more than 30% of income on shelter, far exceeding the affordable housing standards • As a result, many Canadians have turned to credit LO 4 Copyright © 2019 by Nelson Education Ltd. 14
- 15. Consumer Incomes—Debt • For every $1.00 earned, Canadians are $1.65 in debt LO 4 Copyright © 2019 by Nelson Education Ltd. 15
- 16. Economic Factors—Purchasing Power • Income in comparison to cost of living • Discretionary income –High income relative to cost of living –More money to spend LO 4 Copyright © 2019 by Nelson Education Ltd. 16
- 17. Economic Factors—Inflation • Impacts consumer’s purchasing power if salary increases don’t keep up with inflation • Inflation pressures consumers to make more economical purchases and still maintain their standard of living • Marketers must be very cognizant of inflation on consumer’s ability to purchase LO 4 Copyright © 2019 by Nelson Education Ltd. 17
- 18. Economic Factors—Recession • A period of economic activity characterized by negative growth • In a recession, consumers consider the price–value relationship deliberately before making purchases • The recession of 2008–2009 had less of an impact on Canada than the rest of the G7 countries—yet impact was felt and today high unemployment rates continue LO 4 Copyright © 2019 by Nelson Education Ltd. 18
- 19. Recession—Consumer Response • To cope during a recession: – consumers switch to store brands, which on average cost less than manufacturers’ brands – Increase use of couponing – Group couponing sites LO 4 Copyright © 2019 by Nelson Education Ltd. 19
- 20. Economic Factors—Recession • Geographically isolated: – Decline in oil prices – Alberta GDP 6.5% – Fort McMurray wildfires • Environmental influence LO 4 Copyright © 2019 by Nelson Education Ltd. 20
- 21. Social Factors • Tough to forecast, influence, or integrate into marketing plans • Influence other environmental forces LO 5 Copyright © 2019 by Nelson Education Ltd. 21
- 22. Social Factors—Marketing Oriented Values Influence Consumers Attitudes Values Lifestyles LO 5 Copyright © 2019 by Nelson Education Ltd. 22
- 23. Social Factors—Marketing Values Four values that strongly influence attitudes/lifestyle – self-sufficiency – upward mobility – work ethic – fairness Perception of Canadians by others – trustworthy – family-oriented – conservative – eco-conscious LO 5 Copyright © 2019 by Nelson Education Ltd. 23 Results in
- 24. Social Factors—Component Lifestyles • Component lifestyles: –Today’s consumer lives a diverse and uniquely rich lifestyle not defined by stereotypes, enhancing the complexity of marketing to them! •A banker can be a baker •A teacher a rock climber LO 5 Copyright © 2019 by Nelson Education Ltd. 24
- 25. Social Factors—Family • The role of the family hasn’t changed but the makeup of Canadian families has— DIVERSITY • Two key resources required for families—time and money— are in short supply – Creating challenges for families – Opportunities for marketers LO 5 Copyright © 2019 by Nelson Education Ltd. 25
- 26. Demographic Factors Strongly related to behaviour Age Race and ethnicity Location LO 6 Copyright © 2019 by Nelson Education Ltd. 26
- 27. Demographic Factors Gen-Z—Snowflakes—Tweens 1995‒2009 • Attitudes • Access to information • Brand consciousness • Technical sophistication LO 6 Copyright © 2019 by Nelson Education Ltd. 27
- 28. Demographic Factors Gen-Y—Millennials 1979‒2000 • Struggling • Entrepreneurial • Heightened social responsibility • High expectations and entitlement = work life balance LO 6 Copyright © 2019 by Nelson Education Ltd. 28 Networking and social media skills
- 29. Demographic Factors Gen-Y—Millennials 1979‒2000 • Impatient • Family oriented • Inquisitive yet opinionated • Diverse • Good time managers • Savvy and connected • Life-balance seekers LO 6 Copyright © 2019 by Nelson Education Ltd. 29
- 30. Demographic Factors Gen-X 1966‒1978 • Time poor—service dependent • Boomers working longer impacts the careers of Gen-X • Funding retirement of boomers • Tend to get forgotten LO 6 Copyright © 2019 by Nelson Education Ltd. 30
- 31. Demographic Factors Baby Boomers 1947‒1965 • Active, affluent • But some, having been hurt by the recession, worry about retirement, so they are working longer • Younger boomers financially stretched as they support children who are challenged to establish careers LO 6 Copyright © 2019 by Nelson Education Ltd. 31
- 32. Demographic Factors—Population Shifts • More than 50% of the Canadian population lives in four major urban regions • Most of Canada’s growth from immigration • 90% of new immigrants live in a large metropolitan market • Movement to suburb or surrounding urban municipality LO 6 Copyright © 2019 by Nelson Education Ltd. 32
- 33. Demographic Factors—Ethnic and Cultural Diversity • Multiculturalism – More than 200 languages spoken – Greatest evidence in large urban centres – Impact on marketers is tremendous LO 6 Copyright © 2019 by Nelson Education Ltd. 33
- 34. Technological Factors External technology is important Operate more efficiently and build a better product Make current products obsolete and create disruptive innovations LO 7 Copyright © 2019 by Nelson Education Ltd. 34
- 35. Corporate Social Responsibility Cost of Doing Business Today Triple Bottom Line Care for the planet Care for people Profitability LO 8 Copyright © 2019 by Nelson Education Ltd. 35
- 36. Corporate Social Responsibility LO 8 Copyright © 2019 by Nelson Education Ltd. 36
- 37. Corporate Social Responsibility—Green Marketing LO 8 Copyright © 2019 by Nelson Education Ltd. 37
- 38. Ethical Behaviour in Business • Ethics—standard of behaviour by which conduct is judged –laws are the values and standards enforced by courts –ethics are the moral principles and values • Morals—rules developed as a result of cultural norms and values LO 9 Copyright © 2019 by Nelson Education Ltd. 38
- 39. Ethical Behaviour in Business Morality and Business Ethics • The values you use to make decisions in business have been acquired since birth through family, as well as educational and cultural institutions. – The development of an ethical base • the reflection of the consequence of the behaviour • the rules • an individual’s moral character LO 9 Copyright © 2019 by Nelson Education Ltd. 39
- 40. Ethical Behaviour in Business Morality and Business Ethics Ethical Development Preconventional morality Conventional morality Postconventional morality LO 9 Copyright © 2019 by Nelson Education Ltd. 40
- 41. Ethical Behaviour in Business Factors Influencing Ethical Decision Making Extent of ethical problems within the organization Top-management actions on ethics Potential magnitude of the consequences Social consensus Probability of harmful outcome Length of time between decision and onset of consequences Number of people affected LO 9 Copyright © 2019 by Nelson Education Ltd. 41
- 42. Ethical Behaviour in Business Code of Ethics • A guideline to help marketing managers and others make better decisions Advantage • Helps employees identify the business practices their firm recognizes as being acceptable • Can be an effective internal control on behaviour – more desirable than external controls such as government regulation • Helps employees avoid confusion when determining whether their decisions are ethical • The process of formulating the code of ethics facilitates discussion among employees LO 9 Copyright © 2019 by Nelson Education Ltd. 42
Editor's Notes
- The marketing mx is under the control of the firm and is designed to appeal to a group of potential buyers—the target market.
- A target market is a defined group of potential customers that managers feel is most likely to buy a firm’s product. Over time, managers alter the marketing mix to keep pace with the changing composition of the target market brought on by the changes in the environment in which consumers live, work, and make purchasing decisions. Also, as markets mature, some new consumers become part of the target market; others drop out. Those who remain may have different tastes, needs, incomes, lifestyles, and buying habits than the original target consumers.
- To collect and evaluate environmental information, companies perform a process called environmental scanning. The factors within the environment that are important to scan on a continual basis are competitive, regulatory, economic, social, and technological factors—or more easily remembered as “CREST.”
- The competitive environment encompasses the competitors a firm must face (both directly and indirectly), 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. https://hbr.org/1979/03/how-competitive-forces-shape-strategy —the five forces of competition. Competition isn’t always about increasing market share. Competition can be between suppliers and the company, and in that case it is over dollars. Firms must work harder—turning to innovation to capture data on their competitors as their competitors are as well.
- Marketers need a thorough understanding of the laws established by the various levels of government and regulatory agencies that govern marketing-related issues.
- Federal legislation is administered by the Competition Bureau. Some of the areas that are legislated include competition, packaging, and privacy—see Exhibit 2-3. In Canada our constitution divides legal jurisdictions between the provincial and the federal government. Under provincial legislation, for example, is Quebec’s Bill 101. Many business groups in Canada have formed associations to police themselves—the Advertising Standards Council is one such example.
- An increasingly important area for awareness of is consumer privacy. Firms must be able to justify the type of information they have and how it is to be used. In addition, firms must be aware of legislation with respect to the storage of information and the sale or transfer of information. Federal legislation with respect to privacy includes the Privacy Act (PA), the Personal Information Protection and Electronic Documents Act (PIPEDA), and the Canadian Anti-Spam Legislation, whose intent is to protect against the most damaging and deceptive forms of spam.
- The three areas of greatest concern are the above.
- Median income —half of all Canadian households earn less then $78,870. The benefits of higher education include higher earnings, greater savings, higher earning growth, and higher income in retirement.
- As of 2016, the average Canadian is now $1.65 in debt for every dollar they earn—this can result in reduced spending over time as the debt catches up with the consumer.
- In general, a cost-of-living index takes into account the costs of housing, food and groceries, transportation, utilities, healthcare, and miscellaneous expenses, such as clothing, services, and entertainment. The cost of living is generally higher in major urban markets. For example, a worker living in Toronto must earn nearly three times as much to have the same standard of living as someone in Sydney, Nova Scotia. Discretionary income is important to marketers as it identifies the consumer’s ability to spend and the ability to purchase higher-priced goods and services.
- Inflation is a measure of the decrease in the value of money, generally expressed as the percentage reduction in value since the previous year, which is the rate of inflation. Thus, in simple terms, an inflation rate of 5 percent means 5 percent more money is needed today to buy the same basket of products that was purchased last year.
- A recession is a period of economic activity characterized by negative growth. A recession occurs when the gross domestic product falls for two consecutive quarters. During a recession, consumers are more apt to consider the price‒value relationship when deliberating over a purchase.
- A recession is a period of economic activity characterized by negative growth. A recession occurs when the gross domestic product falls for two consecutive quarters. During a recession, consumers are more apt to consider the price‒value relationship when deliberating over a purchase.
- Wildfires in 2016 led to the evacuation of over 80,000 residents of Fort McMurray, Alberta, and temporarily shut down production of oil sands operations. The cost of the shutdown alone shaved another 0.33 percent off Alberta’s GDP.
- Social factors are the most difficult external variable to forecast. They includes demographics as well as attitudes, values, and lifestyles. They influence what we buy , the prices we pay, the effectiveness of promotions, where we buy, how we buy, and when we buy. Social factors influence other environmental factors.
- Value—strongly held belief. Key determinants of what is important/not important, our actions, our behaviour. Formed through interactions with family, friends, and other key influencers in our life. The four values above are core values of Canadians. They result in the perception of Canadians by others—we are known to be tolerant and respectful of other cultures. Canadian flag on a backpack when travelling will spur conversation.
- Lifestyle is a mode of living—the way we decide to live our lives.
- Vanier Institute: http://vanierinstitute.ca/infographic-family-diversity-canada-2016-census-update/ Download this pdf on Family Diversity from the 2016 census and use as part of your discussion.
- Why does tailoring the merchandise to particular age groups matter? One reason is that each generation enters a life stage with its own tastes and biases, and tailoring products to what customers value is key to sales. The cohorts have been named Generation Z, Generation Y/Millennials, Generation X, and baby boomers.
- A very important segment Tremendous purchasing power with parents who will spend on them Cellphone ownership is staggering—25% in Grade 4, 50% in Grade 7—fastest-growing segment. Hard to influence with traditional marketing—92% recognize television advertising as just that. Older Gen Z (those born between 95 and 2000) = 2.1 million Canadians! These are heavy users of social media and avid shoppers with money to spend on themselves for fashion, fun, food, and entertainment.
- Because of economic necessity, many baby boomers in Canada are working well into their retirement age, thus shrinking the employment opportunities for Gen-Yers. As a result, Gen-Yers are facing unstable employment opportunities and struggling to establish themselves professionally. Those who have launched their careers often find themselves working side by side with baby boomers. They, as a result, are more entrepreneurial.
- Research has found Millennials to exhibit the above traits.
- Our prime minister, Justin Trudeau, is in this cohort. Squeezed in their career by boomers not retiring due to the recession of a few years ago and funding the retirement of those boomers who will be retiring due to the impending pension crisis.
- Large group—9 million Canadians, with the oldest just turning 70. There are now more people over 65 than there are aged 15 and younger. Discuss the impending influence of this large cohort on services in the next few years.
- As a result, these urban core areas are the focus of many marketing programs by firms that are interested in reaching a large national yet very multicultural market.
- Twenty percent of Canada’s population speaks a foreign language at least periodically, with Chinese languages dominating this statistic, followed by Punjabi. Over 2 million people speak neither of Canada’s official languages at home. What are the major implications for any marketing program? Have you seen shifts in marketing programs as a result of this?
- Basic versus applied research: applied research attempts to develop or improve products. Applied research will create disruptive innovations—such as driverless cars. https://www.fastcodesign.com/3066275/12-tech-trends-that-will-shape-our-lives-in-2017 lists the top 12 tech trends for 2017. Review these with the students to determine if any are disruptive—certainly, autonomous driving will be for the transportation industry.
- A businesses concern for social and environmental welfare. Since WWII the environmental forces have accelerated helping businesses grow at unprecedented rates but ultimately converging to a point where advancement has had some serious negative impacts—depletion of resources, alarming environmental concerns, and wealth inequality.
- This process of social acceleration, fuelled by the business cycle, has resulted in the need to implement heightened regulations of business practices regionally, federally, and internationally to protect people and the planet from the blind pursuit of profit by business. It has also introduced a permanent ethical dimension to business—corporate social responsibility. http://www.imaginecanada.ca Visit this website to help the students see the shift in corporate giving—how organizations are engaging their employees, sponsoring events that they believe in, and are giving with more than a cheque.
- Green marketing—the development and marketing of products designed to minimize negative effects on the physical environment. Not only can a company aid the environment through green marketing, but green marketing can often help the bottom line. Environmentally aware consumers tend to earn more and are more willing to pay a premium for green products.
- Defining the boundaries of ethicality and legality can be difficult. Often, judgment is needed to determine whether an action that may be legal is an ethical or unethical act. Also, judgment is required to determine whether an unethical act is legal or illegal. Morals are usually characterized as good or bad.
- Today’s business ethics consist of a subset of major life values learned since birth. The values business people use to make decisions have been acquired through family, educational, and religious institutions. Ethical values are situation specific and time oriented.
- The three levels of ethical development.
- The Canadian Marketing Association’s Code of Ethics and Standards of Practice is designed to establish and maintain standards for the conduct of marketing. Have the students visit the website and become familiar with the code.