CHAPTER

Eighth Edition

MARKET IN G
TH E CO RE

3
Understanding the Marketing
Environment, Ethical Behavior,
and Social Responsibility Roger A. Kerin
Steven W. H artley

©2020 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom.  No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
 • 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.
©2020 McGraw-Hill Education. 3-2
 • 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.

©2020 McGraw-Hill Education. 3-3

 • 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 ©David Paul Morris/Bloomberg via Getty Images

• Environmental forces
influence Facebook
• Facebook in the future?

©2020 McGraw-Hill Education. 3-4

 • 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

©2020 McGraw-Hill Education. 3-5

 • FIGURE 3-1 Environmental forces affect the
organization, its suppliers, and its
customers.

Access the text alternative for these images.

©2020 McGraw-Hill Education. 3-6
 • 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
©2020 McGraw-Hill Education. 3-7
 • 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
©2020 McGraw-Hill Education. 3-8
• Which Generational Cohort Is Reached?

Merrill Lynch IHG Athleta

©2020 McGraw-Hill Education. 3-9

 • 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

©2020 McGraw-Hill Education. 3-10

 • SOCIAL FORCES
DEMOGRAPHICS—RACIAL AND ETHNIC DIVERSITY

Composition trends and multicultural

marketing
• African Americans
U.S. Census Bureau
• Hispanics
• Asian Americans

©2020 McGraw-Hill Education. 3-11

 • 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

©2020 McGraw-Hill Education. 3-12

 • 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

©2020 McGraw-Hill Education. 3-13

 • 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
©2020 McGraw-Hill Education. 3-14
 • ECONOMIC FORCES
CONSUMER INCOME

Microeconomics – ability of consumers

to buy
• Gross income
• Disposable income
• Discretionary income

Courtesy of Cunard Line

©2020 McGraw-Hill Education. 3-15

 • TECHNOLOGICAL FORCES
TECHNOLOGY OF TOMORROW

Technology
• Artificial intelligence capabilities
• Automation (drones, cars, robots, etc.)
• Internet of Things (IoT)
• Wearable technology

©2020 McGraw-Hill Education. 3-16

 • What Products/Services Might Be
Replaced by These?

IBM Watson IBM Watson

Slack Phone
Slack Phone

Apple Pay

Apple Pay

3-17
©2020 McGraw-Hill Education. ©dpa picture alliance archive/Alamy Stock Photo; Slack; ©Bryan Thomas/Getty Images
 • 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

©2020 McGraw-Hill Education. 3-18

 • TECHNOLOGICAL FORCES
TECHNOLOGY ENABLES DATA ANALYTICS

Marketspace

Electronic commerce

Internet of things

©2020 McGraw-Hill Education. 3-19

©Askold Romanov/Getty Images
 • 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

©2020 McGraw-Hill Education. 3-20

 • REGULATORY FORCES
PROTECTING COMPETITION

Regulation
Protecting competition:
• Sherman Antitrust Act (1890)
• Clayton Act (1914)
• Robinson-Patman Act (1936)

©2020 McGraw-Hill Education. 3-21

 • 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

©2020 McGraw-Hill Education. 3-22

 • 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)

©2020 McGraw-Hill Education. 3-23

 • 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

©2020 McGraw-Hill Education. 3-24

Source: Federal Trade Commission
 • 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

©2020 McGraw-Hill Education. 3-25

Better Business Bureau. Used with permission.
 • 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.

©2020 McGraw-Hill Education. 3-26

 • FIGURE 3-2 A framework for
understanding ethical behavior.

Access the text alternative for these images.

©2020 McGraw-Hill Education. 3-27
 • ETHICAL MARKETING BEHAVIOR
SOCIETAL CULTURE AND NORMS

Culture – learned and shared

Societal values and attitudes

• They are relative.
• They affect ethical and legal relationships.

©2020 McGraw-Hill Education. 3-28

 • 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

©2020 McGraw-Hill Education. 3-29

 • 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

©2020 McGraw-Hill Education. 3-30

 • MAKING RESPONSIBLE DECISIONS
CORPORATE CONSCIENCE IN THE COLA WAR

“Hey, Pepsi,
want to buy
Coke’s
marketing plan
for its new
product?”

©2020 McGraw-Hill Education. 3-31

©Cliff Tew
 • ETHICAL MARKETING BEHAVIOR
CORPORATE CULTURE AND EXPECTATIONS

Corporate culture
AMA Ethics

Code of ethics

Ethical behavior of top management and

coworkers
• Whistle-blowers

©2020 McGraw-Hill Education. 3-32

 • ETHICAL MARKETING BEHAVIOR
PERSONAL MORAL PHILOSOPHY AND ETHICS

Moral idealism
Example: 3M’s Scotchgard

Utilitarianism
The greatest good for the greatest
number.

©2020 McGraw-Hill Education. 3-33

 • 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

©2020 McGraw-Hill Education. 3-34

 • SOCIAL RESPONSIBILITY IN MARKETING
THREE CONCEPTS OF SOCIAL RESPONSIBILITY
(2 of 2)

Social Responsibility
• Triple-bottom line: People, planet, profit

Green Marketing P&G Video

Cause Marketing

©2020 McGraw-Hill Education. 3-35

 • 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
©2020 McGraw-Hill Education. 3-36
 • 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.

©2020 McGraw-Hill Education. 3-37

 • VIDEO CASE 3
TOYOTA: WHERE THE FUTURE IS
AVAILABLE NOW

Toyota
Video Case

©2020 McGraw-Hill Education. 3-38

 • VIDEO CASE 3
Toyota (1 of 4)

1. Describe Toyota’s transition from an

automobile company to a mobility
company.

©2020 McGraw-Hill Education. 3-39

 • VIDEO CASE 3
Toyota (2 of 4)

2. How does Toyota’s corporate

philosophy relate to the concepts of
societal responsibility, stakeholder
responsibility, and profit
responsibility?

©2020 McGraw-Hill Education. 3-40

 • VIDEO CASE 3
Toyota (3 of 4)

3. How does Toyota’s Mirai fit with the

goals of the Challenge 2050
initiative?

©2020 McGraw-Hill Education. 3-41

 • VIDEO CASE 3
Toyota (4 of 4)

4. What new mobility products and

services is Toyota considering for the
future? What activities would you
recommend for Toyota as it prepares
for the future?

©2020 McGraw-Hill Education. 3-42

 • DIGITAL IN-CLASS ACTIVITY 3-
1
WHAT’S TRENDING NOW?

©2020 McGraw-Hill Education. 3-43

 • DIGITAL IN-CLASS ACTIVITY 3-1
WHAT’S TRENDING NOW?

Learning Objectives:
1. Understand environmental forces and
their impact on organizations,
products, and services.
2. Examine social forces and how they
impact consumers’ lifestyles.
3. Analyze current social trends.

©2020 McGraw-Hill Education. 3-44

 • DIGITAL IN-CLASS ACTIVITY 3-1
WHAT’S TRENDING NOW?

Activity #1 Steps:
1. What are social forces?
2. How do social forces impact trends and
behaviors?
3. What are the Top 20 Trends identified in
the Trend Hunter video?
4. For each trend, what are examples in
products or services
5. What other products or services are
influenced by these trends?
Top 20
Trends Video
©2020 McGraw-Hill Education. 3-45
 • DIGITAL IN-CLASS ACTIVITY 3-1
WHAT’S TRENDING?

Activity #1 Example:
Trend Trend Examples of Trends
Number

1 Fast-fad Lifestyle • Emphasizes esthetics

• Starbucks Unicorn beverage
• Rainbow cosmetic kits

3 Invisible Tech • Subtle technology devices

• Inconspicuous fitness trackers
• Technology embedded in clothing

12 Fitcation • Wellness vacations

• Floating workout tours
• Luxury fitness retreats

©2020 McGraw-Hill Education. 3-46

 • DIGITAL IN-CLASS ACTIVITY 3-1
WHAT’S TRENDING?
Activity #2:
1. Select and examine the different
categories of trends on the Trend
Hunter Web site.
2. For each category, what are
examples of products and services
impacted?
Trend Hunter
3. What other products and services Web Site
could be influenced in this
category?

©2020 McGraw-Hill Education. 3-47

 • DIGITAL IN-CLASS ACTIVITY 3-1
WHAT’S TRENDING?
Activity #2 Example:

Trend Topic Examples of Trends

Culture • Celebrity athleisure apparel

• Revived classic gaming consoles
• E-sports leagues

Business • Self-service convenience stores

• Pop-up stores and restaurants
• Augmented shopping systems

Fitcation • Fast sustainable houses

• Fast food recycling initiatives
• Vegan home cooking options

©2020 McGraw-Hill Education. 3-48

 • IN-CLASS ACTIVITY 3-1

AN ENVIRONMENTAL SCAN
FOR TRUVÍA

©2020 McGraw-Hill Education. 3-49

 • ICA 3-1
Truvía

Environmental Scanning

• What is Truvía?

• Truvía Ad

©2020 McGraw-Hill Education. 3-50

 • Environmental Scan

©2020 McGraw-Hill Education. 3-51

 • IN-CLASS ACTIVITY 3-2

COMPETITIVE INTELLIGENCE

©2020 McGraw-Hill Education.

 • Competitive Intelligence Brief Handout

Fuld & Company

Website

©2020 McGraw-Hill Education. 3-53