BMKT 3331 Study Guide Overview

BMKT 3331 Study Guide, chapters 1-4
Know the definitions, be able to differentiate among concepts
and terms. Associate terms with examples. Don’t confuse
‘street language’ with appropriate marketing terminology. Read
all chapters thoroughly.
Chapter 1
Marketing definition and its focus; read text material
Target market
Exchange concept
Marketing concept – what does it mean?
Marketing strategy
Product, price, promotion and distribution variables – the
marketing mix; know all
aspects of each
Market opportunity
Marketing environment definition; know the six components
well
Customer relationship management
Marketing management
Effectiveness and efficiency
What is customer value?
Relationship marketing
Chapter 2
The Strategic Planning Process – understand the sequence of the

process
Mission statement
Marketing strategy
Market opportunity
Marketing plan definition; purposes of a marketing plan
Core competencies
Competitive advantage
SWOT analysis - know and give examples for strengths,
weaknesses, opportunities and
threats
Corporate strategy
Strategic business unit and all aspects of this model
What is a market?
Boston Consulting Group matrix and its four components
Competitive Growth Strategies – know definitions and develop
examples for all four
quadrants
Market share
Customer Relationship Management definition
Sustainable competitive advantage
First-mover and late-mover advantage
Chapter 3
Environmental scanning and analysis

Proactive and reactive responses
Know PEST, C, L/R aspects of the external environment
Types of competition
Know the four economic cycles or forces, e.g., prosperity,
recession, etc., their
characteristics, and the marketing strategies for each
Income definition, disposable and discretionary
Willingness to spend
Major legislation: Sherman Antitrust Act
Procompetitive legislation
Chapter 4
Social responsibility
Economic, legal, ethical and philanthropic levels of social
responsibility
Marketing ethics
Opportunity
Cause related marketing
Green marketing
Ethical issue; ethical issues in product, promotion, pricing and
distribution
What are examples of ethical issues in the areas of product,
price, promotion, and

distribution?
Three factors that influence ethical decision making.
Understand principles
that affect behavior in the workplace
Corporate culture
The effect of co-workers on the ethical decision-making process
How can an organization improve ethical behavior?
Codes of conduct
© South-Western, Cengage Learning.
All rights reserved.
An Overview of Strategic Marketing
Chapter 1: Marketing Strategy and Customer Relationships
objectives
LEARNING
1–*To be able to define marketing as focused on customersTo
identify some important marketing terms, including target
market, marketing mix, marketing exchanges, and marketing
environmentTo become aware of the marketing concept and
marketing orientationTo understand the importance of building
customer relationshipsTo recognize the role of marketing in our
society

1–*
Defining MarketingThe process of creating, distributing,
promoting, and pricing goods, services, and ideas to facilitate
satisfying exchange relationships with customers and develop
and maintain favorable relationships with stakeholders in a
dynamic environment.
1–*
COMPONENTS OF STRATEGIC MARKETING
figure 1.1
1–*
Marketing Focuses on Customers
The purchasers of organizations’ products,
the focal point of all marketing

1–*
Target Market
A specific group of customers on whom an organization focuses
its marketing effortsCrocs now offers styles specific to each
target market.
Courtesy crocs.com.
The Four Ps…
Otherwise known as the Marketing Mix
Four marketing activities—product, distribution, promotion, and
pricing—that a firm can control to meet the needs of customers
within its target market. They are variables because they
respond to company needs/requirements.
1–*
1–*
The Marketing Mix Variables

1–*
Product Variable
Goods
Services
Ideas
1–*
Think about it…Is this ad demonstrating
a product,
a service or
an idea?
Courtesy Norwegian Cruise Lines.
1–*
The Distribution VariableMake products available in quantities
desiredMinimize
costs:InventoryTransportationStorageSelect/Motivate
intermediariesEstablish/Maintain inventory
controlDevelop/Manage transportation &
storage systems

1–*
The Promotion VariableInform individuals or groups about the
organization and its products/servicesAdvertisingPublic
relationsPersonal sellingPromotionsStreet teamsViral marketing
1–*
The Price Variable
Determining product prices
Determines the value
of the exchange.
© Used By Permission.
Who are Wal-Mart’s target customers?Lower to middle-class
AmericansBlue-collar - people who work in the tradesLimited
or fixed incomeYoung families to the elderly
1–*

The Marketing Mix
Begins with
defining the target
market’s needs.
1–*
Customer
Needs
What are their
needs?AffordabilityValuePriceQualityVarietyOne-stop shopping
1–*
Wal-Mart must first define the target market and their
needs.After this has been determined it can proceed to establish
its unique marketing mix.
.
1–*
.
1 | *
The Marketing Mix
Customer
Needs
Product
Price
Promotion
Distribution
*

The Distribution Variable
In dealing with the distribution variable, a marketing manager
makes products available in the quantities desired to as many
target market customers as possible, keeping total inventory,
transportation, and storage costs as low as possible.

1 | *
Customer
Needs
The Marketing Mix
Product
*

A product can be a good, a service, or an idea.
Good—a physical entity you can touch
Service—the application of human and mechanical efforts to
people or objects to provide intangible benefits to customers
Idea—concept, philosophy, image, or issue
The product variable also involves creating or modifying brand
names and packaging and may include decisions regarding
warranty and repair services.
Product variable decisions and related activities are important
because they are directly involved with creating products that
meet customers’ needs and wants.
.
1 | *
Product variable
What types of products satisfy the target market’s need for
value and price?National brands at 15 - 20% reductions.Hanes,
Proctor & Gamble, Black and Decker, Sony, major electronic
firms, and other well-known national products.Financial
services such as credit cards, debit cards, bill payment, money
transfers, check cashing and check printing. Walmart offers a
store credit card without an annual fee.Increased range of
organic options and fresh produce.Wide assortment but limited
within product categories.
.

1 | *
Customer
Needs
Product
The Marketing Mix
Price
*

The Price Variable
The price variable relates to decisions and actions associated
with establishing pricing objectives and policies and deter
mining product prices. Price is a critical component of the
marketing mix because customers are concerned about the value
obtained in an exchange.
Marketing mix variables are often viewed as controllable
because they can be modified; however, economic conditions,
competitive structure, or government regulations may limit how
much marketing managers can alter them.
..
1 | *
Price variableWal-Mart is a discounter. Its advertised products
are lower than that of the competition, e.g., grocery and
department stores.Uses psychological pricing or odd-even
prices, e.g., $9.79 instead of $10.00They buy in large quantities
to achieve discounts and economies of scale.An efficient supply
chain allows retailers to pass down cost savings to their
customers; Wal-Mart eliminates the middle-man.
..
Price Variable, con’tWal-Mart matches local prices at most
stores.Walmart is getting aggressive with price matching,
offering identical prices to Amazon on more than half (53%) of
all products.

1–*
.
1 | *
Customer
Needs
Product
Price
The Marketing Mix
Promotion
.
*

The Promotion Variable
The promotion variable relates to activities used to inform
individuals or groups about an organization and its products.
Promotion can be aimed at increasing public awareness of an
organization and of new or existing products.
Promotional activities can also educate customers about product
features or urge people to take a particular stance on a political
or social issue.
1 | *
Promotion variableTheir advertising media ranges from TV ads,
billboards, social media, and even their eCommerce
platform.Designs advertising campaigns that support its low
price image - ‘falling prices.’“Save Money, Live Better”Focuses
on employment of the average American…the Wal-Mart
greeter.Meets the needs of the average American family on a
tight budget.Increasing hourly wage in 2018.

..
1 | *
The Marketing Mix
Customer
Needs
Product
Price
Promotion
Distribution
..
*

In dealing with the distribution variable, a marketing manager
makes products available in the quantities desired to as many
target market customers as possible, keeping total inventory,
transportation, and storage costs as low as possible.
.
1 | *
Distribution variableState-of-the-art warehousing facility in San
Marcos, Texas.Now adding Neighborhood Markets and Walmart
Express stores; going after Dollar Stores’ business; purchased
Jet.com to improve its online business.Strategic geographic
location of physical outlets is also an important part of
marketing strategy.
.
*
Distribution Variable, con’tNo longer the largest retailer but
solid growth in key international markets, including Mexico and

Canada; a sharpened focus in China.Now combines store
accessibility with eCommerce site.
1–*
The marketing mix, then, works to
1. meet the needs of a particular target market
2. through product, price, promotion, and distribution strategies
3. aimed to attract, capture, and retain this market.
.
1–*
.
Value Driven MarketingValueA customer’s subjective
assessment of benefits relative to the costs in determining the
worth of a productCustomer value = customer benefits –
customer costsCustomer benefitsAnything desired by the
customer that is received in an exchangeCustomer
costsAnything a customer gives up in an exchange for
benefitsMonetary price of the benefitSearch costs (time and
effort) to locate the productRisks associated with the exchange
1–*
1–*
Relationships with CustomersExchangeThe provision or transfer
of goods, services, or ideas in return for something of value
Figure 1.2 – Exchange Between Buyer and Seller

1–*
Marketing Environment
These forces affect a marketer’s ability to facilitate value-
driven exchanges in three ways:
1. Influence customers by affecting their lifestyle, standards of
living, and preferences and needs for products
2. Help to determine whether and how a marketing manager can
perform certain marketing activities
3. The marketing environment affects a marketing manager’s
decisions and actions by influencing buyers’ reactions to the
firm’s marketing mix
Prius
1–*
Prius
Marketing EnvironmentEffects of these forces on buyers/sellers
can be dramatic and difficult to predictImpact on value can be
extensive as market changes can affect how consumers perceive
certain productsUnlike marketing mix variables, a firm has little

control over marketing environment forces
1–*
.
1–*
The Marketing ConceptA philosophy that an organization
should try to provide products that satisfy customers’ needs
through a coordinated set of activities that also allows the
organization to achieve its goals.
.
Coke and the marketing conceptSatisfying the customer’s
needsSelling happiness
.
1–*
.
1–*
THE EVOLUTION OF THE MARKETING CONCEPT
figure 1.3

1–*
Marketing Orientation
An organization-wide commitment to researching and
responding to customer needs.
1–*
Managing Customer RelationshipsCustomer Relationship
MarketingEstablishing long-term, mutually satisfying buyer-
seller relationships allowing for cooperation and mutual
dependencyIncreased value of customer (loyalty) over time
results in increased profitability.
Starbucks Rewards
Customer Relationship Marketing (CRM)Establishing long-
term, mutually satisfying buyer–seller relationshipsFocuses on
value enhancement through the creation of more satisfying
exchangesContinually deepens the buyers’ trust in the
companyIncreases the firm’s understanding of the customer’s
needs
1–*

1–*
Importance of Marketing in the Global Economy
Creates
Career
Prospects
Promotes Welfare
of Consumers
and Society
Connects
People
through
Technology
Enhances
Consumer
Awareness
Fuels
the Global
Economy
Is Important

to Business
and the
Economy
Is Used by
Non-Profits
Consumes Large
Proportion of
Buyers’ Dollars
Global
Economy
1–*
Green Marketing
Involves stakeholder assessment to create meaningful long-term
relationships with customers while maintaining, supporting, and
enhancing the natural environment
GE’s Tier 4 locomotive will cut particulate matter (PM)
emissions by 70 percent and nitrogen oxide (NOx) emissions by
76 percent, compared to GE’s current Tier 3 machines.
1–*

Think about it….How does marketing benefit the United Negro
College Fund?
Courtesy United Negro College Fund
Chapter Quiz
Marketing is best defined as
developing a product and matching it with its market.
advertising and selling products.
creating marketing mixes to facilitate satisfying exchange
relationships with customers.
transferring goods to stores to make them available.
a process of bringing buyers and sellers together.
1–*
Chapter Quiz
A marketing manager decides what combination of variables is
needed to satisfy customers’ needs for a general type of
product. What are the essential variables that the marketing
manager combines?
Product variables, price variables, distribution variables, and
promotion variables
Marketing environment variables
Product variables and promotion variables
Product variables, price variables, and customer variables
Product variables, price variables, customer variables, and

promotion variables.
1–*
Chapter Quiz
A pair of Nike running shoes has average marketing costs and
sells for $120. Approximately how many of the buyer’s dollars
go to marketing costs?
$25
$35
$60
$75
$85
1–*
Chapter Quiz
The focal point of all marketing activities is
profits.
promotion and selling.
the marketing concept.
customers.
competitors
1–*
1–*

IMPORTANT TERMS
Marketing
Customers
Target market
Marketing mix
Products
Exchanges
Stakeholders
Marketing environment
Marketing concept
Marketing orientation
Relationship marketing
Customer relationship management (CRM)
Value
Marketing management
Green marketing
In dealing with the distribution variable, a marketing man-
ager makes products available in the quantities desired to as
many target market customers as possible, keeping total
inventory, transportation, and storage costs as low as
possible.
A
product
can be a good, a service, or an idea.
Good—a physical entity you can touch
Service—the application of human and mechanical
efforts to people or objects to provide intangible
benefits to customers
Idea—concept, philosophy, image, or issue
The product variable also involves creating or modifying
brand names and packaging and may include decisions
regarding warranty and repair services.

Product variable decisions and related activities are
important because they are directly involved with creating
products that meet customers’ needs and wants.
The Price Variable
The price variable relates to decisions and actions
associated with establishing pricing objectives and policies
and deter
mining product prices. Price is a critical
component of the marketing mix because customers are
concerned about the value obtained in an exchange.
Marketing mix variables are often viewed as controllable
because they can be modified; however, economic condi-
tions, competitive structure, or government regulations may
limit how much marketing managers can alter them.
The Promotion Variable
The promotion variable relates to activities used to inform
individuals or groups about an organization and its
products.
Promotion can be aimed at increasing public
awareness of an organization and of new or existing
products.
Promotional activities can also educate customers
about product features or urge people to take a
particular stance on a political or social issue.
Planning, Implementing, and Controlling Marketing Strategies
Chapter 2
Strategic Planning
Increasing competition means companies have to spend more

time on strategic planning: How to use the firm’s resources to
achieve objectives and satisfy the customer…the marketing
concept
Through the Strategic Planning Processa firm establishes an
organizational mission and goals,corporate strategy,marketing
objectives,marketing strategy and a marketing plan.The
strategic plan should be guided by a concern for customer
satisfaction.
*
Components of the Strategic Planning Process
Organizational Mission Statements and GoalsA mission
statement is a long-term view, or vision, of what the
organization wants to becomeThe goals of any organization
should derive from its mission statementAn organization’s
mission statement should answer two questions:Who are our
customers?What is our core competency?
Corporate Identity
Corporate identity—unique symbols, personalities, and
philosophies designed to support all the firm’s activities.
Managing identity requires:Broadcasting a company’s mission,

goals, and values Sending a consistent imageImplementing a
visual identity with stakeholders
Level of Strategic Planning
Mission Statement
Corporate Strategy
Business-Unit Strategy
Marketing Strategy
Marketing Mix
Elements
I. A mission statement
Is a long-term view, or vision, of what the organization wants to
become. It gives direction by answering the question, “Who are
our customers?” “What is our core competency?”It provides
direction only, not a detailed plan.
II. Developing Corporate StrategiesIt starts at the corporate
level with corporate strategy,a plan for using resources in
marketing, production, finance, R&D, and human resources in
an effort to reach the organization’s goals.
Corporate strategy planners are concerned with Organizational
cultureCompetitionDifferentiationDiversificationInterrelationsh
ips among business unitsEnvironmental and social issuesThey
attempt to match the resources of the organization with the
opportunities and threats in the environment

III. Business Unit Strategies...A strategic business unit (SBU)
is a division, product line, or other profit center within the
company.The revenues, costs, investment, and strategic plans of
each SBU are separate from each other and can be individually
evaluated.SBUs have differing growth rates, opportunities,
competition, and profit scenarios.A tool used to evaluate this is
the BCG Matrix…some definitions first…
*
What is a market?
It’s a group of individuals who have needs for a product in a
product class and have the ability,willingness,and authority
to purchase those products.
What is market share?It’s the percentage of a market that
actually buys a specific product from a particular company, e.g.,
H-E-B’s market share.Market growth and market share are the
two axis used in the Boston Consulting Group’s matrix.Strategic
planners allocate scarce resources among strategic business
units (SBUs).
GROWTH SHARE MATRIX DEVELOPED BY THE BOSTON
CONSULTING GROUP

figure 2.3
Boston Consulting Group’s market-growth/market-share matrix
Enables a company to classify its products.A product’s market
growth rate and its market share are important considerations in
determining its marketing strategy.Using the BCG matrix,
market share determines a product’s future cash contributions
and cash requirements. How much can we invest in this product
and how much cash will it need in the future?
Stars...Have a dominant share of the market,good prospects for
growth,use more cash than they generate,add capacity,
andincrease market share.Examples???
Cash cows...Have a dominant share of the market butlow
prospects for growth.Typically generate more cash than is
required to maintain market share.
Dogs...Poor or subordinate share of the market andlow
prospects for growth. Deliver cash or otherwise
liquidate.Products are often found in established markets.

Question marks...Have a small share of a growing market
andrequire a large amount of cash to build market share.Either
invest heavily, sell it off, or invest nothing, and generate
whatever cash is possible.
Organizations need products that generate cash, profit, and are
potential stars.
Market Growth/ Market Share Matrix for
Coca-Cola
Look at the following Coca-Cola products. Determine whether
they qualify as dogs, cash cows, stars, or question marks. Coca-
Cola soft drinkEnergy drink Full ThrottleHi-C juice
drinkDasani Bottled WaterOdwallaFanta
Competitive Growth Strategies
After analyzing each product or business unit a firm may want
to increase sales…
Competitive
Growth Strategies
Competitive Growth StrategiesMarket penetration is a strategy
of increasing sales in current markets with current
productsUnder Armor sells athletic footwear, clothing, and
accessories, and maintains a leadership position in the
market.Market development is a strategy of increasing sales of

current products in new marketsYum Brands introduction of
Pizza Hut in South AfricaSephora introduces products in China,
2010.
Competitive Growth StrategiesProduct development is a
strategy of increasing sales by improving present products or
developing new products for current marketsApple introduced a
smartwatch to their lineDiversification allows firms to make
better and wider use of their managerial, technological, and
financial resourcesCoke’s 2018 purchase of Topo ChicoCoke’s
development of Fairlife, a milk product.
Now the firm is ready to begin planning…The Strategic
Planning Process begins with an analysis of the marketing
environment: P, E, S, T, C, L/R forces that can threaten and
influence the firm’s goals andcreate favorable opportunities.
Assess the firm’s resources and opportunities…the
organization’s financial and human resources and
capabilities,goodwill, reputation, and brand names, and core
competencies… the things a firm does extremely well.How will
they change in the future?
What are the core competencies?The things a firm does
extremely well which give it an advantage over competition
McDonald’s consistent fast food quality Starbuck’s gourmet
coffee drinks BMW’s production of sporty, luxury automobiles
Apple’s trendy, desirable electronics devices

Analysis also involves opportunities in the marketplace...Market
opportunities exist when the right combination of
circumstances and timing allow a company to reach a particular
target market.China and India offer a large market opportunity
with a large potential market and a growing middle class, e.g.
tech firms.McDonald’s line of latte drinks, Sigg’s line of water
bottles.
Is Toyota’s Tundra a good example of a market opportunity?
Why? Why not?
Opportunities like this are often called strategic windows -
temporary periods of optimum fit between the market’s needs
and the firm’s capabilities in that market.
A sustainable competitive advantage occurs when
A company has matched its core competency to opportunities it
has discovered in the marketplace.It’s a strength that cannot be
copied in the near future.The product can be cheaper, more
widely available, stronger service support, higher quality,
etc.Trader Joe’s competitive advantage?
Customers want fewer choices, low prices for high-quality
products, the company's brand. Customers trust the brand.
*

2–*
Assessing Organizational Resources and Opportunities
Core
Competencies
Strategic
Windows
Market
Opportunities
Competitive
Advantage
The place where opportunities, core competencies
and strategic windows meet.
I. The strategic planning process begins with an analysis of the
marketing environment….
It analyses the organization’s strengths, weaknesses and
identifies opportunities and threats within the marketing
environment (SWOT analysis).
1. StrengthsStrengths refer to core competencies and
competitive advantages that give the firm an advantage in
meeting its target market needs.They are internal.‘Strengths’

should be customer-focused. Do the strengths meet the
customer’s needs? How do they help the company reach its
objectives?
Strategic planning begins with an assessment of the
external environmental factors
SWOT Analysis
2. WeaknessesAre internal limitations a company faces in
developing or implementing a marketing strategy, e.g., Pepsi
and Coke are experiencing declining market share as people
lose interest in “carbonates” as a category.Walmart’s
weaknesses in online sales and technological
innovation.Weaknesses should be examined from a customer
perspective as they often perceive weaknesses that a company
cannot see.
Strengths and weaknesses are internal factors that give an
organization certain advantages and disadvantages in meeting
target market needs.Opportunities and threats exist in the
external environment (external); they exist independently of the
firm and affect operations.
3. OpportunitiesRefer to favorable conditions in the
environment that could produce rewards for the organization if
acted upon properly.Green products and services, Avis and
Zipcar (car sharing), Millenials prefer ‘experiences’ over
‘things.’ Airbnb, Uber and Lyft. Others?
4. ThreatsRefer to conditions or barriers that may prevent the

firm from reaching its objectives, e.g., revisions to NAFTA.The
president has imposed tariffs on solar panels, washing
machines, steel (25%) and aluminum (10%) from the European
Union, Canada and Mexico. The tariffs angered trading
partners, who implemented retaliatory tariffs on U.S. goods,
e.g., Harley.
4. Threats25 percent tariff on imports of U.S. liquefied natural
gas, a major blow to an emerging American business.American
farms find it difficult to stay price competitive with retaliatory
tariffs.The recent tariffs on newsprint jeopardize U.S.
newspapers’ ability to operate profitably.
New York Times, Aug. 8, 2018
The Four-Cell SWOT Matrix
You are opening a gluten-free restaurant. You decide to perform
a SWOT analysis. Classify the following statements as
strengths, weaknesses, opportunities, or threats. Gluten allergies
are rising in the U.S.You have hired a talented cook
specializing in gluten-free recipes.A popular restaurant in your
town has recently begun offering several gluten-free menu
options.You do not have the money to purchase new kitchen
equipment, so you have to make do with used equipment.More
and more people are viewing gluten as unhealthy.You do not
have any money for marketing.There is a recession and more
people are opting not to eat out.Your recipes are unique and are
hard to copy.

First Mover AdvantageFirst-mover advantage – creative
companies can achieve a long-term competitive advantage by
being first in the marketplaceIt builds a company’s reputation as
a pioneer and market leader.Market is free of
competition.Company can protect its trade secrets or technology
through patents.
First-Mover Risks – being first has its problemsHigh cost
associated with creating a new productMarket research, product
development, production, and marketing costsProduct may fail
due to market uncertainty; it may not meet consumer’s
expectations or needs.
Razor is spending up to $1 million per week to sue unauthorized
manufacturers. Its patent has been difficult to enforce.
Late Mover Advantage
Late market entrants can also achieve long-term competitive
advantages.Learn from first mover’s mistakes and thus create an
updated/improved product design and marketing strategy, e.g.,
Facebook learned from the mistakes of Myspace.
Lower initial costs since first mover has developed an
infrastructure and educated buyers about the product
*

Late Mover RisksFirst mover may have technology patents that
prevent the late mover from reverse engineering its product or
producing a product that is too similar.For the customer,
switching to the late mover’s product is too expensive or time-
consuming. Timing determines the amount of late-mover
advantage that is actually possible.
“After a splash launch, Amazon’s smartphone failed to catch on,
making a big disappointment for the online retailing giant.”
Marketing objectives
Are based on the SWOT analysis and should turn strengths into
opportunities and convert weaknesses or threats.Should be
clear, measurable, and specify a time for accomplishment andbe
consistent with SBU and corporate strategy.
With this information, a company can establish or revise its
mission and goals, then develop corporate strategies to achieve
those goals.
It should begin to develop a marketing strategy.
IV. Marketing StrategiesFirst, select a target market,then create
the marketing mix.Marketing mix decisions should be consistent
with business unit and corporate strategies andflexible enough
to respond to changes in market conditions, competition, and
customer needs.A sustainable competitive advantage means the

competition can’t copy it in the foreseeable future.Amazon’s
shipping relies on advanced logistics and an extensive network
of distribution centers.
Marketing Implementation asks...What specific actions will be
taken?How will these activities be performed?When will these
activities be performed?Who is responsible for the completion
of these activities?how much will these activities cost?
V. Creating the Marketing PlanA systematic process of
evaluating marketing opportunities and resources,determining
marketing objectives,defining marketing strategies,
andestablishing guidelines for implementation and control of
the marketing program.“Seat of your pants” strategies are no
longer an option.
The outcome is the Marketing PlanIt outlines and explains all
the activities necessary to implement and evaluate marketing
strategies for one year.They can be short-range, long range, and
are always modifiable.Planning is necessary to develop,
coordinate, and control marketing activities effectively.
*

Components of the Marketing PlanExecutive summary – a
synopsis of the entire marketing plan; an overview; furnished to

people outside the organization, e.g., bankers, suppliers,
investors.
Lastly…evaluation and controlStandards assess the actual
performance. Differences between planned and actual
performance need to be monitored.A marketing audit isolates
weaknesses in the marketing plan and recommends actions to
improve performance.
Using BCG’s product-portfolio analysis, how would you
classify the following products?Toyota Camry
cash cowFitbit
starColgate’s Total toothpaste
cash cowBlackBerry phonesBounty paper towels
cash cowLandlines
Miller Light
cash cowBlack and white televisions
dogL.A. Lakers
dogsSpurs
?Nissan’s Leaf ElectricVehicle
?Kodachromedog

Social Responsibility and Ethics in Marketing
Chapter 4
4–*
The Nature of Social Responsibility
4–*
Social Responsibility
It’s an organization’s obligation to maximize its positive impact
and minimize its negative impact on society
Social responsible activities can:Improve employee
performanceImprove customer loyalty to the
organizationGenerate positive publicityBoost sales
Socially responsible efforts:Attract goodwill, publicity, and
potential customers and employeesGenerate indirect long-term
benefits such as greater employee commitment and improved

business performance
4–*
4–*
Dimensions of Social ResponsibilityMarketing Citizenship
Is the adoption of a strategic focus that fulfills the economic,
legal, ethical and philanthropic social responsibilities expected
by shareholders.Stakeholder orientation – Understanding and
addressing the needs of all stakeholders, including communities
and special-interest groups
All companies have an economic responsibility to be profitable.
Why?Provide a return on investment to their owners and
investorsCreate jobs for the communityContribute goods and
services to the economyEngage in fair competitionFirms need to
find a balance in stakeholder interests while recognizing that a
firm must make a profit to be sustainable in the long
run.Pyramid of Corporate Social Responsibility…
4–*
..
4–*
THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY
Walmart?

figure 4.1
..
.
4–*
Corporate PhilanthropyPhilanthropic responsibilities are not
required of a company, but they promote human welfare or
goodwillCause Related MarketingThe practice of linking
products to a particular social cause on an ongoing or short term
basis.Yoplait’s “Save the Lids” campaignTom’s ShoesStrategic
PhilanthropyUsing organizational core competencies and
resources to address stakeholders interests to achieve both
organizational and social benefits.
.
Strategic Philanthropy
Home Depot pairs with Peter Facinelli, of Twilight fame, and
MasterCard to raise money for Habitat for Humanity
.
4–*
.

Social Responsibility Issues
4–*
SustainabilitySustainability – The potential for the long-term
well-being of the natural environment, including all biological
entities, as well as the interaction among nature and individuals,
organizations, and business strategiesCompanies are adopting
eco-friendly business practicesProducts have been certified
“green” by environmental organizations
4–*
.
4–*
Green MarketingIt’s understanding what the “customer”
(stakeholder) wants to create meaningful long-term
relationships while maintaining, supporting, and enhancing the
natural environment
© Used By Permission.
.
Consumerism and Community RelationsConsumerism is the
efforts of independent individuals, groups, and organizations to
protect the rights of consumersBeing a good community citizen

means avoiding harmful actions that could damage the
communityA marketer can significantly improve a community’s
quality of life through:Employment opportunitiesEconomic
developmentFinancial contributions to educational, health,
cultural, and recreational causes
4–*
4–*
Ethical DimensionsMarketing EthicsPrinciples and standards
that define acceptable marketing conduct as determined by
various stakeholdersEthical IssueAn identifiable problem,
situation, or
opportunity requiring a choice among
several actions that must be evaluated
as right or wrong, ethical or unethical.
Marketing EthicsWhen marketing activities deviate from
accepted standards, the exchange process can break down,
resulting in customer dissatisfaction, lack of trust, and
lawsuitsTrust is an important concern for marketers because it
is the foundation for long-term relationshipsConsumer lack of
trust has increased in recent years due to the financial crisis and
deep recessionOnce trust is lost, it can take a lifetime to
rebuildThe way to deal with ethical issues is proactively during
the strategic planning process, not after major problems
materialize
4–*

Marketing Mix Ethical IssuesProduct related ethical issues arise
when marketers fail to disclose risks associated with a product
or information regarding the function, value, or use of a
product.Misleading brand names…orange juice made from
concentrate is not “fresh orange juice.”Products can be
dangerous…diet pillsUse of antibiotics on animals used for
foodProduct recalls occur when companies ask customers to
return defective products
4–*
In 2008 J&J tried to secretly recall a batch of Motrin that had
failed quality tests but still had been released for sale. J&J
hired contractors to secretly go into stores that sold Motrin and
had them buy up all of the Motrin that they could find. This is
unethical because J&J failed to alert the public to the
potentially harmful effects of their mistake. Chobani – mold
growing in yogurt – product criticized for not having adequate
quality control.
In 2008, Johnson and Johnson tried to secretly recall a batch of
Motrin that had failed quality tests but still had been released
for sale. Johnson and Johnson hired contractors to secretly go
into stores that sold Motrin and had them buy up all of the
Motrin that they could find. This is unethical because Johnson
and Johnson failed to alert the public to the potentially harmful
effects of their mistake.
Read more: http://healthmad.com/home-health/johnson-
johnsons-unethical-product-recall-headache/#ixzz26Aii89Ru
*

Pricing IssuesCommon ethical issues in pricing are price fixing
(collusion), predatory pricing, and failure to disclose the full
price of a product.Examples include raising prices during peak
sales periods…pricing low to drive competitors out of
business…fictitious pricing.Price gouging – exorbitant drug
prices for Hepatitis C: $84,000/yr.Kymriah and made
by Novartis - $475,000
4–*
*
DOJ Looking into Possible Airline Collusion to Keep Fares
HighPossible Airline Collusion Some of America’s biggest
airlines may have colluded to keep airfares high while limiting
routes and affordable seats.
4–*

Promotion IssuesFalse or misleading advertising and
manipulative or deceptive sales promotions, tactics, and
publicity are examples.Greenwashing – Occurs when products
are promoted as being more environmentally friendly than they
really areInsurance scams…aggressive telemarketing of
questionable production…bait and switch. Others?
4–*
Tyson Foods Injects Chickens with Antibiotics Before They
Hatch to Claim "Raised without Antibiotics”
In 2008, Johnson and Johnson tried to secretly recall a batch of
Motrin that had failed quality tests but still had been released
for sale. Johnson and Johnson hired contractors to secretly go
into stores that sold Motrin and had them buy up all of the
Motrin that they could find. This is unethical because Johnson
and Johnson failed to alert the public to the potentially harmful
effects of their mistake.
Read more: http://healthmad.com/home-health/johnson-
johnsons-unethical-product-recall-headache/#ixzz26Aii89Ru
*
Promotion Issues…
What about promoting violent video games? Is it ethical?
.
4–*
.

Distribution IssuesEthical issues in distribution involve
relationships among producers and marketing
intermediariesManipulating a product’s availability for purposes
of exploitationUsing coercion to force intermediaries to behave
in a specific mannerChannel surfing – Shipping surplus
inventory to wholesalers and retailers at an excessive rate
4–*
Counterfeiting
Ethical Dimensions of Managing Supply Chain
RelationshipsGood supply chain ethics ensures the integrity of
the product and the firm’s operations in serving customersIt is
essential for all companies that work with global suppliers to
adopt a Global Supplier Code of Conduct and ensure that it is
communicated to suppliersLawsuits were filed against Costco
because it was alleged to have sold farmed prawns from
Thailand that made use of slave labor.
4–*
4–*
FACTORS THAT INFLUENCE THE ETHICAL DECISION-
MAKING PROCESS IN MARKETING
figure 4.4

Individual FactorsPeople base decisions about right and wrong
on values and principles learned in the family, at school, at
church, and in social groups. What about the media?46% of
employees have stolen from his or her organization.
4–*
4–*
OpportunityConditions that limit barriers or provide rewards.If
a marketer takes advantage of an opportunity to act unethically
and is rewarded or suffers no penalty, he or she may repeat such
acts as other opportunities arise.The larger the rewards and the
milder the punishment for unethical conduct, the greater is the
likelihood that unethical behavior will occur.
Organizational RelationshipsMarketers resolve ethical issues on
the basis of what they learn from others in the
organization.Superiors, peers, and subordinates influence the
ethical decision making process.Corporate culture is the set of
values, beliefs, goals, norms, and rituals that members of an

organization share.Therefore…
4–*
Organizational Relationships
4–*
An organization’s culture gives its members meaning and
suggests behavioral rules. “How do I solve difficult problems
here?”
Top management sets the tone for the entire organization!
The more a person is exposed to unethical activity by others the
more likely it is that he or she will behave unethically. Moral
relativism - if everybody does it…
Organizational pressure plays a key role in creating ethical
issues.

4–*
TYPES AND INCIDENCES OF OBSERVED MISCONDUCT
figure 4.4
Improving Ethical Conduct in Marketing
1. Hire ethical employees
2. Eliminate unethical employees
3. Improve screening techniques and enforce the firm’s ethical
standards.
4–*
4–*
Improving Ethical Conduct In Marketing
Codes of
Conduct
Ethics
Officers

Implementing Ethical
and
Legal Compliance
Programs
Ethical Conduct
Improving Ethical Conduct in MarketingCodes of conduct are
rules and standards that describe what the company expects of
its employees.They reduce opportunities for unethical behavior
and employees know what is expected of them and what kind of
punishment they face if they violate the rules.See AMA Code of
Ethics.
4–*
It is unacceptable for managers to punish those who report
ethical misconduct
However, research shows that approximately one-third of
whistle-blowers experience some type of retaliation
4–*

4–*
Social Responsibility and Ethics Improve Marketing
Performance
Overall Strategic Marketing Planning
Ethics
Individual and
group decisions
Social Responsibility
The total effect of marketing decisions on society
Consumers want to buy from companies associated with ethical
practices and socially responsible causes
4–*
IMPORTANT TERMS
Social responsibility
Marketing citizenship
Marketing ethics
Cause-related marketing
Strategic philanthropy
Green marketing
Ethical issue
Organizational (corporate) culture
Codes of conduct

3
The Marketing Environment
1
Copyright © Houghton Mifflin Company. All rights reserved.
3 | 2
Objectives
To recognize the importance of environmental scanning and
analysis
To understand how competitive and economic factors affect
organizations’ ability to compete
To recognize the customers’ ability and willingness to buy
products
To identify the types of political forces in the marketing
environment
2
3 | 3
Objectives (cont’d)
To understand how laws, government regulations, and self-
regulatory agencies affect marketing activities
To explore the effects of new technology on society and on
marketing activities
To analyze sociocultural issues marketers must deal with as
they make decisions

3
3 | 4
Chapter Outline
Examining and Responding to the Marketing Environment
P-E-S-T + C & L/R Forces
4
3 | 5
Examining and Responding to the
Environmental Scanning
- Collecting information about forces in the marketing
environment through
Observation
Secondary sources
Market research
5
3 | 6
Marketing Environment (cont’d)

Environmental Analysis
Assessing and interpreting the information gathered through
environmental scanning
Accuracy
Consistency
Significance
6
3 | 7
Marketing Environment (cont’d)
Responding to Environmental Forces
Reactive approach
“The environment is uncontrollable.” Passive
Current strategy is cautiously adjusted to accommodate
environmental changes
Proactive approach
“We will actively attempt to shape and influence environment.”
Lobbyists and media efforts
Strategies are constructed to overcome market challenges and
take advantage of opportunities
7
3 | 8
Environmental Forces

Strategic
Planning
Competition
Economic forces
Political forces
Legal and Regulatory forces
Technological
forces
Sociocultural
forces
3 | 9
Competitive ForcesTypes of Competition Product
competitorsOther organizations that compete in the same class
but market products with different features, benefits,
prices.Brand competitorsFirms that market products with
similar features and benefits to the same customers at similar
prices, e.g., Coke and PepsiGeneric competitorsFirms that
provide very different products that satisfy the same basic
customer need, e.g., water instead of CokeTotal budget
competitorsFirms that compete for the limited financial
resources from the same customers
9
Competitive ForcesBrandProductGenericTotal BudgetChevrolet
TahoeOther pickup trucksSedans, SUVsCar rental agencies,
moving companiesHouses, computers, other large
purchasesLevi’s jeansOther affordable jeansDesigner

jeansOther clothesOther small purchasesTravelocityOther travel
websites like ExpediaTravel websites like Hotwire (less
certainty) Travel agency, booking directlyComputers, dining,
entertainment purchases
SELECTED CHARACTERISTICS OF COMPETITIVE
STRUCTURES
3 | 12
Economic Forces
Business Cycle
A pattern of economic fluctuations

Prosperity
Recession
Depression
Recovery
Positive Economic Indicators
Time
12
3 | 13
Prosperity:
low unemployment
high total income
Marketers should expand product offerings
to take advantage of increased buying power
Economic Forces
13

3 | 14
In a prosperous economy...
As wages rise and taxation remains stable, disposable income
increases.
This gives Americans more after-tax income to spend which
leads to more discretionary income…money left over after
necessities are met.
3 | 15

Recession -
unemployment rises
total buying power declines
customers are price and
value conscious
Marketers should emphasize
value and utility.
Depression -

high unemployment
low wages
minimum income
Economic Forces
15

3 | 16
Economic Forces
Recovery
Economy moves to
prosperity
High unemployment
begins to decline
Disposable income
increases
Ability and willingness to
buy rises
Marketers should be flexible in their marketing strategies.
16

3 | 17
Economic Forces (cont’d)
Buying Power
Resources, such as money, goods, and services, that can be
traded in an exchange
1. Income
Disposable income
after-tax income used to
purchase necessities
Discretionary income
entertainment, vacations
Wealth
The accumulation of past income, natural resources, and
financial resources.

17
3 | 18
Economic Forces (cont’d)
Credit
It allows us to spend future income
now or in the near future.
It increases current buying power at
the expense of future buying power.
What are some of the factors
affecting credit use?
18
4. Willingness to Spend
An inclination to buy because of expected satisfaction from a
product, influenced by the ability to buy and numerous
psychological and social forces
Decisions are based on:
Future employment
Income levels
Prices
Family size

General economic conditions (e.g., rising prices)
3 | 20
Political Forces
Reasons for Maintaining Relations with Elected Officials and
Politicians
To influence the creation of laws and regulations affecting
businesses
Governments are potentially large customers
Political officials can assist in securing foreign markets
Campaign contributions of corporate-related individuals and
PACs may provide influence
Lobbyists communicate businesses’ concerns about issues
affecting their industries and markets
How do the discussion of gun control, oil drilling, tax law
reformation, and the Patient Protection and Affordable Care Act
(PPACA) fit into this?
20

3 | 21
Legal and Regulatory Forces
Federal LAWS that influence marketing decisions and activities
Sherman Antitrust Act (1890)
Clayton Act (1914)
Federal Trade
Commission Act (1914)
Robinson-Patman Act (1936)

21
3 | 22
Legal and Regulatory Forces (cont’d)
Procompetitive Legislation
Preserve competition (Sherman Antitrust Act of 1890).
Prevent restraint of trade and
monopolizing of markets
Prevent illegal competitive
trade practices
22
3 | 23
Consumer Protection Legislation
Adulterated and mislabeled
food and drugs
Deceptive trade practices
and the sale of hazardous
products
The invasion of personal
privacy and the misuse of
personal information by
firms

23
3 | 24
Regulatory Agencies…have the power to enforce laws and can
establish operating rules and regulations to guide industry
practices.
FTC influences marketing activities most; can seek civil
penalties and require corrective advertising
Self-Regulatory Forces
Better Business Bureau
National Advertising Review
Board (NARB)
Texas Alcohol Commission
Texas State Board of Pharmacy
24
Political and regulatory forces
take the form of
Trade policy: NAFTA, tariffs on Chinese, Canadian and
German products
Tax policy: Tax Cuts and Jobs Act and
Environmental regulations: Trump’s loosening of EPA
environmental regulations.

Federal Trade Commission Enforcement Tools
Technological Forces
Constant change
It moves quickly through society
It’s a catalyst for even faster development
3 | 28
Technological Forces (cont’d)
Mobile devices and consumers’ increasing use of the Internet
have changed:
How people communicate
How marketers reach consumers
Technology can improve productivity
Expanding opportunities for e-commerce
Negative impacts of technology include:
Concerns over privacy
Intellectual property protection issues
28

Sociocultural Forces
The influences in a society and its culture(s) that change
people’s:

Attitudes
Beliefs
Norms
Customs
Lifestyles
They determine what, where,
how, and when people buy
products.
Sociocultural forces include demographics,
cultural values, and consumerism
U.S. Population Projections by Race
America’s Changing Demographics
New Census Projections
Demographic Terms: Immigration, fertility rates, age
www.census.gov
3 | 32
The Proportion of Households in America with Married Couples
Has Declined Over the Last Four Decades
2013: 48%; 2014: 53% Year Number of Married Couples % of
All Households 2003 57.3 million 51.5% 199353.155.1
198349.959.5 197346.367.8 196340.974.0
Source: U.S. Census Bureau as reported in American
Demographics, April 2004, p. 41.

32
3 | 33
Sociocultural Forces (cont’d)
Cultural Values
Primary source of values is the family
Values influence
Eating habits
Alternative health and medical treatment choices
Attitudes toward marriage; changing definition of the family
Concern for the natural environment
Diversity
Changes in cultural values alter people’s needs and desires for
products. Examples?
33
Consumerism
The organized efforts of individuals, groups, and organizations
to protect consumers’ rights

Lobbying government officials and agencies
Letter-writing/e-mail sending campaigns and boycotts
Marketing critics think that consumers are being exploited in
the marketplace.
Ralph Nader
34
3 | 35
Class Exercise
With which environmental force (competitive, economic,
political, legal and regulatory, technological, or sociocultural)
is each of the following most directly associated?
Prosperity
Federal Trade Commission
IPad
Development and widespread use of cellular phones
35
The goal of this exercise is to help students realize the
differences among the six marketing environmental forces.
Answers:
1. Prosperity economic
2. Federal Trade Commission regulatory
3. Personal computers that understand human speech
technological
4. Development and widespread use of cellular phones
technological
5. People’s willingness to spend economic

6. Contributions to campaign funds political
7. A society’s high material standard of living sociocultural
8. Sherman Antitrust Act legal
9. Better Business Bureau regulatory
10. Consumerism sociocultural
11. Discretionary income economic
12. Food and Drug Administration regulatory
13. A monopoly competitive
14. Government purchases of goods and services political
15. Group of people threatening to boycott the sponsors of a
television program that they believe contains too much sex and
violence sociocultural
3 | 36
Class Exercise (cont’d)
People’s willingness to spend
Citizens United
A society’s high material standard of living
Legalization of marijuana in Colorado
Better Business Bureau
Women in the military
Discretionary income
Food and Drug Administration
Selfies
36
3 | 37
Class Exercise (cont’d)
Government purchases of goods and services
Adult children living with their parents

37
3 | 38
After reviewing this chapter you should:
Recognize the importance of environmental scanning and
analysis.
Understand how competitive and economic factors affect
organizations’ ability to compete and customers’ ability and
willingness to buy products.
Be able to identify the types of political forces in the marketing
environment.
38
3 | 39
Understand how laws, government regulations, and self-
regulatory agencies affect marketing activities.
Know the effects of new technology on society and on
marketing activities.
Be able to analyze sociocultural issues that marketers must deal
with as they make decisions.
39

3 | 40
Chapter Quiz
If M&M Mars Candies found a magazine article that provided
key information on the television viewing habits of major candy
consumer groups, this would be an example of information
obtained through environmental
scanning.
forces.
analysis.
strategizing.
management.
40
A
B
B
A
3 | 41
Chapter Quiz
Which of the following would represent a brand competitor for
Ford’s Expedition sports utility vehicle?
Dodge Caravan
Chevrolet Suburban
Ford Ranger
Taxi ride
Chevrolet Blazer rented from Avis
41

3 | 42
Chapter Quiz
Mixed concrete cannot be shopped farther than twenty-five
miles because the concrete might harden in the truck. Citrus
County Concrete Company is the only supplier of mixed
concrete to customers within a thirty-mile radius. Citrus County
Concrete is an example of which competitive structure?
Monopoly
Oligopoly
Monopolistic competition
Pure competition
Monopsony
42
Economic forces
Economic forces in the marketing environment influence both
marketers’ and customers’ decisions and activities. Changes in
general economic conditions affect (and are affected by) supply
and demand, buying power, willingness to spend, consumer
expenditure levels, and the intensity of competitive behavior.
Fluctuations in the economy follow a general pattern often
referred to as the business cycle, which traditionally consists of
four stages:
Prosperity is a stage of the business cycle characterized by low
unemployment and relatively high total income, which together
cause buying power to be high. Marketers often expand their
product offerings to take advantage of increased buying power.
ECONOMIC FORCES

Economic forces in the marketing environment influence
both marketers’ and customers’ decisions and activities.
Changes in general economic conditions affect (and are
affected by) supply and demand, buying power, willingness
to spend, consumer expenditure levels, and the intensity of
competitive behavior.
Fluctuations in the economy follow a general pattern
often referred to as the
business cycle
, which tradi-
tionally consists of four stages:
Prosperity
is a stage of the business cycle character-
ized by low unemployment and relatively high total
income, which together cause buying power to be
high. Marketers often expand their product offerings
to take advantage of increased buying power.
Recession is a stage of the business cycle during which unem
ployment rises and total buying power declines, stifling both
consumer and business spending.
Marketers should focus on marketing research during a
recession to determine precisely what functions buyers want and
integrate these functions into their product.
Promotion efforts should emphasize value and utility.
Depression is a business cycle stage in which unem-ployment is
extremely high, wages are very low, total disposable income is
at a minimum, and consumers lack confidence in the economy.
Recession
is a stage of the business cycle during which
unem
ployment rises and total buying power declines,
stifling both consumer and business spending.

Marketers should focus on marketing research during
a recession to determine precisely what functions
buyers want and integrate these functions into their
product.
Promotion efforts should emphasize value and utility.
Depression
is a business cycle stage in which unem-
ployment is extremely high, wages are very low, total
disposable income is at a minimum, and consumers lack
confidence in the economy.
Recovery is a stage of the business cycle in which the economy
moves from depression or recession to prosperity. Marketers
should be as flexible as possible to be able to adjust their
strategies as economic gloom subsides and buying power
increases.
Recovery
is a stage of the business cycle in which the
economy moves from depression or recession to prosperity.
Marketers should be as flexible as possible to be able to
adjust their strategies as economic gloom subsides and
buying power increases.

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