© 2016 Cengage Learning. All Rights Reserved.MKTG10.docx

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© 2016 Cengage Learning. All Rights Reserved.
MKTG10
Lamb, Hair, and McDaniel
Chapter 4
The Marketing Environment
Chapter 4 The Marketing Environment
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The External
Marketing Environment
Discuss the external environment of marketing, and explain how
it affects a firm
4-1
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Target Market
A group of people or organizations for which an organization
designs, implements, and maintains a marketing mix intended to
meet the need of that group, resulting in mutually satisfying
exchanges.
Companies may add or change their target market as products
and services evolve. Much of this has to do with the customer
and the external market.
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Understanding the External Environment
Unless marketing managers understand the external
environment, the firm cannot intelligently plan for the future.
when a company implements strategies that attempt to shape the
external environment within which it operates.
Environmental Management is…
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The factors within the external environment that are important
to marketing mangers can be classified as social, demographic,
economic, technological, political and legal, and
competitive.You must first understand how customers buy,
where they buy, what they buy, and when they buy.You must
understand what drives consumer decisions.You must identify
the most valuable customers and understand their needs.You
must understand the competition.
Understanding the External Environment
Describe the social factors
that affect marketing
Social Factors
4-2
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Social FactorsSocial change is perhaps the most difficult
external variable for marketing managers to forecast, influence,
or integrate into marketing plans. Social factors influence the
products people buy, the price paid, the effectiveness of specific
promotions, and how, where, and when people expect to
purchase products.
Values
Attitudes
Lifestyles
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American Values
A value is a strongly held and enduring belief. The four basic
values shown influenced the attitudes and lifestyles during the
first 200 years of the United States. Values are formed through
interactions with family, friends, and influencers.
Self-Sufficiency – Every person should stand
on his or her two feet
Upward Mobility –Success comes with getting an
education, working hard and, playing by the rules
Work Ethic – Hard work, dedication to family, and
frugality are moral and right
Conformity – No one should expect to be treated
differently than everybody else

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The Influence of Values on Buying Habits
Values influence our buying habits. Consumers demand high-
quality goods that save energy, time, and calories! Furthermore,
the products must be durable and not break down. This slide
shows the ranked characteristics of product quality that are
important to consumers.
Reliability
Durability
Easy maintenance
Ease of use
Trusted brand name
Low price
Ranked Characteristics of Product Quality
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Component Lifestyles
The practice of choosing goods and services that meet one’s
diverse needs and interests rather than conforming to a single,
traditional lifestyle.
Today’s consumers want multifunctional products
No longer defined only by occupationA lifestyle is a mode of
living. People are choosing products and services that meet
diverse needs and interests rather than conforming to traditional
stereotypes. The unique lifestyles of every consumer can
require a different marketing mix.
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The Role of Social Media in Communication
Social networking has changed the game when it comes to
opinion sharing. Now, consumers can reach many people at once
with their views—and can respond to brands and events in real
time.
Teenagers and young adults are more likely to view social
networks as a valuable source of information.There is some
evidence that social media users feel a greater sense of
companionship and support than non-social media
users.Successful use of social media requires more than
receiving likes on Facebook, but creating a relationship based
on shared interests with the consumer.

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How Firms Use Social Media
A starting point for a firm using social media is to monitor what
is being said about the brand.
In addition to monitoring, the firm must respond to both
positive and negative buzz about the company or brand.
Social media can also be used to amplify a promotional
campaign by inviting consumers to join the conversation about a
brand.
If Facebook were a country, it would be the world’s third
largest behind China and India.
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Explain the importance
to marketing managers of

current demographic trends
Demographic Factors
4-3
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Demographic Factors
People are the basis for any market
Demographic characteristics relate to buyer behavior
Demographic cohorts have their own needs, values, and
consumption patterns.An uncontrollable variable in the external
environment is demography: the study of people’s vital
statistics, such as age, race and ethnicity, and location.
Demographic characteristics are strongly related to consumer
buyer behavior.
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Tweens
Pre- and early adolescents, age eight to twelve
Population of 20 million
Directly spend about $43 billion annually
In total, $180 billion is spent on tweens annually
Respond very favorably to having control over their own
experiences
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Teens
Population of about 25 million
95 percent of U.S. Teens are on the Internet
Many teens pass technology down to their parents
90 percent of teens are into social networking
Teens seek peer affirmation
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Generation Y - Millennials
Born between 1979 and 1994
Surpassed population of baby boomers
Two stages:
Those born in 1994 are just entering young adulthood.
Those born in 1979 have established careers and have started
families.
Purchasing power of $200 billion annually
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Generation X
Population of 50 million
Independent, resilient, adaptable, cautious, and skeptical
Have an estimated 31 percent of total income dollars
Saving money is a major priority for Gen Xers
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Baby Boomers
Boomers control 67 percent ($28 trillion) of the country’s
wealth
They outspend younger adults by 2:1 on a per-capita basis when
making online purchases
Boomers are willing to change brands and try new things
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Growing Ethnic Markets
Explain the importance to
marketing managers of
growing ethnic markets
4-4
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Growing Ethnic MarketsThe minority population today is about
118 millionThe United States will flip completely to a majority-
minority makeup in 2041As the demographic environment of
America evolves, so too must the marketing mix change to
reach growing target markets
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Marketing to Hispanic Americans
The term Hispanic encompasses people of many different
backgrounds
Nearly 60 percent of Hispanics are of Mexican descent
The diversity of the Hispanic population and the language
differences create many challenges for those trying to target this
market
Hispanics, especially recent immigrants, often prefer products
from their native countries
Hispanics will choose brands that reflect their native values and
culture

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Marketing to African Americans
53 percent of African Americans are under the age of 35
More firms are creating products for the African American
market
44 percent of all African American households earn $50,000 or
more and 23 percent earn more than $75,000
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Marketing to Asian Americans
The Asian American population reached 19 million in 2015, 6%
of the population.
Asian American population growth has been fueled primarily by
immigration
Although Asian Americans embrace the values of the larger
U.S. population, they also hold on to the cultural values of their
particular subgroup

Asian Americans like to shop at stores owned and managed by
other Asian Americans
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Identify consumer and
marketer reactions to the
state of the economy
Economic Factors
4-5
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Economic Factors
Consumers’

Income
The four economic areas of greatest concern to marketers are
consumers’ incomes are:
Purchasing Power
Inflation
Recession
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Consumers’ Incomes
Median U.S. household income
in 2015 was approximately $52,000
Average family incomes, when adjusted for inflation, fell
around eight percent between 2007 and 2012
With jobs scarce, many people have accepted pay cuts to keep
their current jobs or less-paying available jobs
Education is the primary determinant of earning potential
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measured by comparing income to the relative cost of a standard
set of goods and services in different geographic areas, usually
referred to as the cost of living.
Purchasing Power is…
*Increased standards of living are a function of purchasing
power.When income is high relative to cost of living, people
have more discretionary income. That means they have more
money to spend on nonessential items.
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a measure of the decrease in the value of money, expressed as
the percentage reduction in value since the previous year.
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Inflation is…In times of low inflation, businesses seeking to
increase their profit margins can do so only by increasing their
efficiency.The buyer will not pay more for a product than the
subjective value he/she places on it.
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a period of economic activity characterized by negative growth,
which reduces demand for goods and services.
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A recession is…Beginning in December 2007, the collapse of
inflated housing prices triggered what became the global
recession of 2007–2009. The declining stock market, growing
unemployment, and collapsing home prices have all taken a toll
on consumer confidence and influenced all kinds of purchasing
decisions
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Identify the impact of
technology on a firm
Technological Factors
4-6
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Research
Basic Research
Applied
Research
Pure research that aims to confirm an existing theory or to learn
more about a concept phenomenon.
An attempt to develop new or improved products
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Stimulating Innovation
Build scenarios
Enlist the Web
Talk to early adopters
Use marketing research
Create an innovative environment
Cater to entrepreneurs

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© 2015 Cengage Learning Inc. All Rights Reserved
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Stimulating Innovation
7Building Scenarios – Teams to imagine detailed opportunities
and threats for companiesEnlisting the Web – Few companies
have created web sites that act as literal marketplaces of ideas
where they can go and look for help.Talking to Early Adopters –
These individuals tend to be innovators in their own right.
They are always looking for new things.Using Marketing
Research – Customer thoughtsCreating an Innovative
Environment – Freedom to fail. Encourage sharing ideas and
top management leads by example.Catering to Entrepreneurs –
Reserve blocks of time for scientists or engineers to work on
their own ideas (3M)
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Discuss the political and
legal environment

of marketing
Political and
Legal Factors
4-7
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Political and Legal Factors
New technology
Society
Businesses
Consumers
Laws and Regulations Protect:
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Notes:Business needs government regulations to protect
innovators of new technology, the interests of society in
general, one business from another, and consumers.
Government needs business for generation of taxes. Every

aspect of the marketing mix is subject to laws and restrictions.
It is the responsibility of marketing managers to understand and
conform to these laws, while creating new programs to
accomplish marketing objectives.
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Political and Legal Factors
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Business needs government regulations to protect innovators of
new technology, the interests of society in general, one business
from another, and consumers.
Government needs business for generation of taxes.
Every aspect of the marketing mix is subject to laws and
restrictions. It is the responsibility of marketing managers to
understand and conform to these laws, while creating new
programs to accomplish marketing objectives.
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Federal Legislation
Sherman ActClayton ActFederal Trade Commission Act Celler-
Kefauver Antimerger ActHart-Scott-Rodino ActForeign Corrupt
Practices Act

Regulate
competitive
environment
Robinson-Patman Act
Regulate
pricing
practices
Wheeler-Lea Act
Control
false
advertising
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State LawsLegislation that affects marketing varies state by
state. For example:Oregon limits utility advertising to 0.5
percent of net incomeCalifornia has enacted legislation to lower
the energy consumption of refrigerators, freezers, and air
conditionersCalifornia and North Carolina, are considering a tax
on all in-state commercial advertising

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Regulatory Agencies
Most involved in marketing
Consumer Product Safety Commission
Food and Drug Administration
Federal Trade Commission
Protects consumer safety in
and around their homes
Enforces safety regulations
for food and drug products
Prevents unfair methods of
competition in commerce
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Bureaus of the FTC
Reviews mergers and acquisitions Challenges anti-competitive
conduct Promotes competition Provides informationEnforces
federal laws that protect consumersEmpowers consumers with
informationCommunicates with consumers
about fraud and identity theft
Bureau of Competition
Bureau of Consumer Protection
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Consumer Privacy
Despite federal efforts, online tracking is on a tear. A vast
amount of personal data is collected through apps.
CAN-SPAM Act – regulate unsolicited email advertising
Children’s Online Privacy Protection Act Rule
Government Actions

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Explain the basics
of foreign and domestic competition
Competitive Factors
4-8
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Competitive Factors
Control
How many competitors?
How big are competitors?

How interdependent is
the industry?
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Competitive Factors
The competitive environment encompasses the number of
competitors a firm must face, the relative size of the
competitors, and the degree of interdependence within the
industry.
Management has little control over the competitive
environment.
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Competitive Factors
Market Share
and ProfitsFirms must work harder to maintain profits and

market share.
Global
CompetitionMore foreign firms
are entering U.S. market.
Foreign firms in U.S. now compete on product quality.
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MKTG10
Chapter 5
Developing a
Global Vision
Chapter 5 Developing a Global Vision
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Discuss the importance of global marketing
Rewards of Global Marketing and the
Shifting Global Business Landscape
5-1
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Rewards of Global Marketing
Recognizing and reacting to international marketing
opportunities
Using effective global marketing strategies
Being aware of threats from foreign competitors
Note: Over the past two decades, world trade has climbed from
$200 billion a year to more than $18 trillion.
Having a global vision means…
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Notes:
Over the past two decades, world trade has climbed from $200
billion a year to more than $18 trillion.

Discussion/Team Activity: Discuss ways that small- and
medium-sized firms can compete in a global environment with
limited resources.
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Importance of Global Marketing to the U. S.
The United States derives 14 percent of gross domestic product
(GDP) from world trade, while France, the United Kingdom,
and Germany derive 28, 30, and 46 percent of their respective
GDPs from world trade.
Gross domestic product (GDP) is the total market value of all
final goods and services (tires are not counted twice) produced
in a country for a given time period (usually a year or a quarter
of a year)
The main types of goods that the United States exports are
automobiles, agricultural goods, machines, airplanes,
computers, chemicals, and petroleum products
287,000 small and medium size firms export goods from the
U.S.
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Job Outsourcing and Inshoring
Outsourcing (sending U.S. jobs abroad) has been highly

controversial for several decades
Outsourcing saves money but has also cost Americans jobs
Millions fear losing jobs
Sometimes there is the threat of outsourcing if workers do not
accept pay cuts.
Inshoring is returning production jobs to the United States
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Benefits of Globalization
Expands economic freedom
Spurs competition
Raises productivity and living standards
Offers access to foreign capital, global export markets, and
advanced technology
Promotes higher labor and environmental standards
Acts as a check on government power
Traditional economic theory says that globalization relies on
competition to drive down prices and increase product and
service quality. Business goes to the countries that operate most
efficiently and/or have the technology to produce what is
needed.
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Discuss the impact of
multinational firms on the world economy
Multinational Firms
5-2
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Multinational Firms
Multinational corporations are those heavily engaged in
international trade, moving products and services across
national boundaries. A multinational company may have several
worldwide headquarters.
The role of multinational corporations in developing nations is a
subject of controversy. Critics claim that the wrong kind of
technology is transferred to developing nations. For example,
capital-intensive technology does not substantially increase
employment.
Multinationals sometimes support oppressive regimes if it is in
their best interests.
Another criticism is that firms take more wealth out than they
bring in.
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Stages of Global
Business Development
1
2
4
3
Companies operate in one country and sell into others
Set up foreign subsidiaries to handle sales
Virtual operation
Operate an entire line of business in
another country
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Notes:
Multinationals often develop their global business in stages, as
shown on this slide.
Are Multinationals Beneficial?
ProsAccount for 19 percent of U.S. private JobsProvide 25
percent of private wages74 percent of R&D spending48 percent
of total exports of goods

ConsTechnology is capital intensive and does not necessarily
increase employmentSupport governments that benefit the
company, not necessarily the country and its peopleMay take
away more wealth than they generate
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Multinationals are taking a proactive role in being good global
citizens to counter criticism
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Global Marketing Standardization
Global
Marketing
Standardization
Multidomestic
strategy
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Global Marketing
Multinational corporations operate somewhat differently in each
country, with a strategy of providing different product features,
packaging, and advertising.
Communication and technology have made the world smaller,
and thus the emergence of global markets for standardized
products, as opposed to segmented foreign markets with
different products.
This concept is global marketing standardization.
Even though global marketing standardization should enable
companies to lower production and marketing costs, success is
based on variation, not on offering the same product
everywhere. One method of this type of variation is through a
multidomestic strategy.
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Describe the external
environment facing
global marketers
External Environment
Facing Global Marketers
5-3

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External Environment Facing Global Marketers
Natural Resources
Demographic Makeup
Economic Development
Culture
Political Structure
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Culture
Culture
The common set of values shared by its citizens that determine
what is socially acceptable.
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Culture
Culture underlies the family, the educational system, religion,
and the social class system.
A company with no understanding of a country’s culture is
doomed to failure. Furthermore, cultural blunders lead to
misunderstandings and perceptions of rudeness or even
incompetence.
Language is an important aspect when translating product
names, slogans, production instructions, and promotional
messages.
Each country has its own unique customs and traditions that
determine business practices and influence negotiations.
3
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Culture
Factors to keep in mind when dealing with different cultures:
1. Language and cultural idioms
2. Customs and traditions
3. Values and expectations of sales presentations

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Economic Factors
Developed
Country
Less Developed
Country
Complex, sophisticated
industries
Basic industries
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Notes:The second factor in the external environment is the level
of economic development in countries where a global marketer
operates. In general, complex and sophisticated industries are
found in developed countries, and more basic industries are
found in less developed nations.
The Global Economy

“If America sneezes, then the rest of the world catches a cold.”
Understanding and forecasting growth and demand globally
requires understanding countries around the world.
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Economic DevelopmentThe BRIC (Brazil, Russia, India, and
China) countries will play an increasingly important role in the
global economy for years to come By 2020, Brazil’s market will
top $1.6 trillionThe consumer markets in India and China are
together projected to top $10 trillion in 2020
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Economic Development:
China and IndiaChina and India have two of the highest growth
rates in the worldHave the world’s two largest populations, but
among highest levels of income disparityBoth India and China
have exploded in spending power, particularly in the upper
classes
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Notes:Because of their cultural diversity, market success in
China and India is rarely possible without finely segmenting the
local market in each country.Relations between the United
States and China have not always been smooth. China is
committed to protecting its businesses and asserting new global
strength, which has resulted in several legislative stalemates
with the United States.
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Political Structure and Actions
No private ownership
Minimal individual freedom
Little central government
Maximum personal freedom
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Notes:Government policies run the gamut from no private
ownership and minimal individual freedom to little central
government and maximum personal freedom. As rights of
private property increase, government-owned industries tend to
decrease. The least regulated and most efficient economies and
concentrated among countries with well established common-
law traditions, including Australia, Canada, New Zealand, the

United Kingdom, and the United States. Others are Singapore
and Hong Kong.
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Legal Considerations
Tariff
Quota
Boycott
Exchange Control
Market Grouping
Trade Agreement
A tax levied on goods
Entering a country
Limit on the amount of a
product entering a country
Exclusion of products from
a country
Foreign exchange must be
sold to a control agency
Common trade alliance
An agreement to stimulate
international trade
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Discussion/Team Activity:
Discuss examples of each of the legal considerations described

above.
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Political and Legal Considerations
The Uruguay Round made changes
in world trading practices
Entertainment, pharmaceuticals,
integrated circuits, and software
Financial, legal, and accounting services
Agriculture
Textiles and apparel
And created a new trade organization:
The World Trade Organization
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Notes:The Uruguay Round, adopted in 1994 and signed by 159
nations, is an agreement to lower trade barriers worldwide. The
agreement has reduced tariffs by one-third worldwide and
should raise global income by $235 billion annually. The
agreement covers services, intellectual property rights, and
trade-related investment measures such as exchange controls.
The Uruguay Round made the following changes in world
trading practices:
• Protection of patents, copyrights, and trademarks for 20 years.
• Licensing standards for professionals cannot discriminate
against foreign applicants.

• Reduction in farm subsidies in Europe, opening new
opportunities for U.S. exports.
• The phase-out of strict quotas limiting imports from
developing countries.
• A new trade agreement, the World Trade Organization (WTO),
replaced the old General Agreement on Tariffs and Trade
(GATT).
1. Discuss the impact of counterfeit products on global trade.
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Uruguay Round
The Uruguay Round, adopted in 1994 and signed by 151
nations, is an agreement to lower trade barriers worldwide. The
agreement has reduced tariffs by one-third worldwide and
should raise global income by $235 billion annually. The
agreement covers services, intellectual property rights, and
trade-related investment measures such as exchange controls.
3
Notes:
Making successful sales presentations abroad requires a
thorough understanding of the country’s culture.
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Uruguay Round
2. The Uruguay Round made the following changes in world
trading practices:
• Protection of patents, copyrights, and trademarks for 20 years.
• Licensing standards for professionals cannot discriminate
against foreign applicants.
• Reduction in farm subsidies in Europe, opening new
opportunities for U.S. exports.
• The phase-out of strict quotas limiting imports from
developing countries.
• A new trade agreement, the World Trade Organization (WTO),
replaced the old General Agreement on Tariffs and Trade
(GATT).
3
Notes:
Making successful sales presentations abroad requires a
thorough understanding of the country’s culture.
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Doha RoundBegan in 2001Highly contentious from the
beginningStalemate over lowering tariffs on industrial goods in
exchange for cutting U.S. farm subsidiesMore protectionism has
made talks increasingly difficult
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Political and Legal Considerations
CAFTA-DR
NAFTA
European Union
Agreements
and Organizations
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Notes:The trend toward globalization has resulted in the
creation of additional agreements and organizations,
specifically the Dominican Republic-Central America Free
Trade Agreement, the North American Free Trade Agreement,
the European Union, the World Bank, and the International

Monetary Fund.NAFTA, ratified in 1993, created the world’s
largest free trade zone. The agreement includes Canada, the
United States, and Mexico. The main impact of NAFTA has
been the opening of Mexican markets to U.S. companies. The
real question is whether NAFTA can continue to deliver rising
prosperity in its member countries.The newest trade
agreement—the Dominican Republic-Central America Free
Trade Agreement—was instituted in 2005. It will reduce tariffs
to CAFTA countries—the US, Costa Rica, Dominican Republic,
El Salvador, Guatemala, Honduras, and Nicaragua. The
European Union was ratified in 1993 by twelve member
countries in Europe. The EU currently has 28 member states.
The Greek financial crisis in early 2010 highlighted financial
problems in other EU nations such as Hungary, Italy, Portugal,
and Spain. The EU Commission and the courts have not always
been kind to U.S. multinationals.
Discussion/Team Activity:Access the NAFTA Website at
http://www.nafta-sec-alena.org/ for more information.Discuss
the pros and cons of NAFTA as it affects the U.S. economy.
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Agreements and Organizations
The trend toward globalization has resulted in the creation of
additional agreements and organizations, specifically the
Dominican Republic-Central America Free Trade Agreement,
the North American Free Trade Agreement, the European
Union, the World Bank, and the International Monetary Fund.
NAFTA, ratified in 1993, created the world’s largest free trade
zone. The agreement includes Canada, the United States, and
Mexico. The main impact of NAFTA has been the opening of
Mexican markets to U.S. companies. The real question is

whether NAFTA can continue to deliver rising prosperity in its
member countries.
3
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Agreements and Organizations
The newest trade agreement—the Dominican Republic-Central
America Free Trade Agreement—was instituted in 2005. It will
reduce tariffs to CAFTA countries—the US, Costa Rica,
Dominican Republic, El Salvador, Guatemala, Honduras, and
Nicaragua.
The European Union was ratified in 1993 by twelve member
countries in Europe. The EU currently has 27 member states.
The Greek financial crisis in early 2010 highlighted financial
problems in other EU nations such as Hungary, Italy, Portugal,
and Spain. The EU Commission and the courts have not always
been kind to U.S. multinationals.
3
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5.1
Members of the G-20
Chapter 2 Strategic Planning for Competitive Advantage
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Notes:The World Bank offers low-interest loans to developing
nations.The International Monetary Fund (IMF) was founded in
1945, one year after the creation of the World Bank, to promote
trade through financial cooperation and eliminate trade barriers
in the process.The Group of Twenty (G20) is a forum for
international economic development that promotes discussion
between industrial and emerging-market countries on key issues
related to global economic stability.
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The G-20
The World Bank offers low-interest loans to developing nations.
The International Monetary Fund (IMF) was founded in 1945,
one year after the creation of the World Bank, to promote trade
through financial cooperation and eliminate trade barriers in the
process.
The Group of Twenty (G20) is a forum for international
economic development that promotes discussion between
industrial and emerging-market countries on key issues related
to global economic stability.
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Demographic Makeup
Marketing Considerations:
Population density
Urban or rural
Personal Income and distribution of wealth
Age
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Natural Resources
Shortages in natural resources create:
International dependencies
Shifts of wealth
Inflation and recession
Export opportunities if resources are abundant
Stimulus for military interventionPetroleum shortages have
created wealth for oil-producing countries such as Norway,
Saudi Arabia, and the United Arab Emirates. Petroleum is not

the only natural resource that affects international marketing.
Warm climate and lack of water mean that many of Africa’s
countries will remain importers of foodstuffs. The United
States, on the other hand, must rely on Africa for many precious
metals.
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Identify the various ways of entering the
global marketplace
Global Marketing by
the Individual Firm
5-4
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Why “Go Global?”
Earn additional profits
Leverage a unique product or technological advantage
Possess exclusive market information

Saturated domestic markets
Excess capacity
Utilize economies of scale
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Notes:
Many firms form multinational partnerships—called strategic
alliances—to assist them in penetrating global markets;
strategic alliances are examined in Chapter 7.
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5.2
Risk Levels for Five Methods of Entering the Global
Marketplace
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Notes:Exhibit 5.2 diagrams the risk levels for entering the
global marketplace. Five methods of entering global markets
are shown on this slide, in order of risk. Exporting is usually
the least complicated and least risky alternative for entering the
global marketplace, however it also has the lowest rate of
return. On the other hand, direct investment offers the highest
rate of return, but is accompanied by the highest risk.

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Entering the Global Marketplace
Licensing and Franchising
Legal process allowing use of manufacturing/patents/knowledge
Contract
Manufacturing
Private-label manufacturing
by a foreign country
Joint Venture
Domestic firm buys/joins a foreign company to create new
entity
Export
Sell domestically produced products to buyers in other
countries
Direct Investment
Active ownership of a foreign company/manufacturing facility
*
Discuss examples of companies that have entered the global
marketplace in each of the ways described on this slide.
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Export Intermediaries
Instead of selling directly to foreign buyers, a company may

decide to sell to intermediaries located in its domestic market.
Buyer for Export
Assumes all ownership risks and sells globally for its own
account.
Export Broker
Plays the traditional broker’s role by bringing buyer and
seller together.
Export Agent
Acts like a manufacturer’s agent for the exporter in the
foreign market.
*
List the basic elements
involved in developing
a global marketing mix
The Global Marketing Mix
5-5
*

The Global Marketing Mix
The first step in creating a marketing mix is developing a
thorough understanding of the global target market…
HOWEVER
…global marketing research is conducted in
vastly
different environments.
*
*
Product and Promotion
*
One Product,
One Message
Product
Adaptation
Promotion
Adaptation
Product
Invention
Same
Message
Change
Message
Same
Product

Change
Product
*
Notes:
An important decision is to alter the product or the promotion
for the global market.One Product, One Message: Global
marketing standardization means developing a single product
for all markets and promoting it the same way worldwide.
However, even a same product/same message strategy may
require changes to suit local needs.Product Invention: This
refers to creating a new product or drastically changing an
existing product. For example, consumers in different countries
use products differently, requiring different product
characteristics. Product Adaptation: Products, including
packaging, are slightly altered to meet local conditions.
Promotion Adaptation: The same basic product is maintained,
but the promotional strategy is altered to position the product
effectively in different countries. Promotion varies in different
countries. Language barriers, translation problems, and cultural
differences create headaches.
Product
*
An important decision is to alter the product or the promotion
for the global market.
One Product, One Message: Global marketing standardization
means developing a single product for all markets and
promoting it the same way worldwide. However, even a same
product/same message strategy may require changes to suit local

needs.
Product Invention: This refers to creating a new product or
drastically changing an existing product. For example,
consumers in different countries use products differently,
requiring different product characteristics.
5
*
Product
*
Product Adaptation: Products, including packaging, are slightly
altered to meet local conditions.
Promotion Adaptation: The same basic product is maintained,
but the promotional strategy is altered to position the product
effectively in different countries. Promotion varies in different
countries. Language barriers, translation problems, and cultural
differences create headaches.
5
*
Place (Distribution)

*Adequate distribution is necessary for success in global
markets
Lack of distribution infrastructure and cultural differences
create problemsLogistics and shipping costs have been a
growing challenge for U.S. companies looking to move
production overseas. Global trade has added to strains and
charges for all forms of transportation.
*
Pricing
*
Must consider transportation and insurance costs, taxes and
tariffs
Determine what customers will spend
Ensure that foreign buyers will pay price
May need to simplify a product to lower price
Don’t assume that low-income countries are willing to accept
lower quality
*

Exchange Rates…
reflect he price of one’s currency in terms of another country’s
currency.
Floating Exchange Rates…
*
*
Dumping
*
The sale of an exported product at a price lower than that
charged for the same or a like product in the “home” market of
the exporter.
Dumping is regarded as a form of price discrimination that can
potentially harm the importing nation’s competing industries.
*

Dumping
*
Dumping may occur as a result of exporter business strategies
that include:
Trying to increase an overseas market share
Temporarily distributing products to overseas markets to offset
slack demand at home
Lowering unit costs by exploiting large-scale production
Attempting to maintain stable prices during periods of exchange
rate fluctuations
*
Countertrade
*
A common type of countertrade is straight barter. A second
form is the compensation agreement where a company provides
technology and equipment for a plant, and agrees to take full or
partial payment in goods produced by that plant.
*

Discover how the Internet is affecting
global marketing
The Impact of the Internet
5-6
*
*
The Impact of the Internet
Opening an e-commerce site puts a company in the international
marketplace
The Internet-based economy remains hindered by brick and
mortar rules, regulations, and habits
For example, Lands’ End is not allowed to mention its
unconditional refund policy on its e-commerce site in Germany
because German retailers, which normally do not allow returns
after fourteen days, sued and won a court ruling blocking
mention of it.
*

Social Media
Global marketers use social media:Because it is popular around
the worldTo understand customersFor global brand building
*
1. Because Facebook, YouTube, and other social media are
popular around the world, firms both large and small have
embraced social media marketing.
2. Global marketers use social media not only for understanding
consumers but also to build their brands as they expand
internationally.
*
*
MKTG10
Chapter 6
Consumer Decision Making
Chapter 6 Consumer Decision Making
*

Explain why marketing managers
should understand
consumer behavior
The Importance of Understanding
Consumer Behavior
6-1
*
*
Understanding Consumer Behavior
Understanding consumer behavior can help marketing managers
adapt the marketing mix to influence consumer purchasing
decisions.
consumers make purchase decisions
consumers use and
dispose of product
Consumer behavior
= HOW

*
Notes:
For example, if a manager knows through research that gas
mileage is the most important attribute for a certain target
market, the manufacturer can redesign the product, and create
the appropriate marketing mix, to meet that criterion.
*
ValueValue is a personal assessment of the net worth one
obtains from making a purchase
Purchases are made based upon perceived value, which is what
you expect to get
Utilitarian value is derived from a product or service that helps
the consumer solve problems and accomplish tasks
Hedonic value is an end in itself rather than as a means to an
end
*
Analyze the components

of the consumer decision-making process
The Consumer
Decision-Making Process
6-2
*
© 2015 by Cengage Learning Inc. All Rights Reserved.
*
Consumer
Decision-Making Process
2The consumer decision-making process represents a general
five-step process that moves the consumer from recognition of a
need to the evaluation of a purchase decision. It is a guideline
for studying how consumers make decisions. Note that
consumer decisions may not proceed in order through all the
processes, and in fact, may end at any time without a purchase
decision.
*

*
6.1
The Consumer Decision-Making Process
*
Notes:
The consumer decision-making process is shown here and
described on subsequent slides.
*
Need Recognition
Need recognition is the first stage in the decision-making
process
Result of an imbalance between actual and desired states.
*
Notes:
The first stage in the decision-making process is need
recognition.
When “Need” Turns to GreedIn 2011, a woman allegedly pepper
sprayed a crowd of shoppers reaching for discounted Xbox

360s. Black Friday:Retailers offer their best bargains of the
yearConsumers camp out for days at stores’ front doorsViolent
incidents were reported in at least seven states during the 2011
Black Friday sales, most occurring at or near Walmart stores.
Michael Martinez, “Woman Surrenders in Black Friday Pepper
Spray Incident,” CNN, November 26, 2011,
http://articles.cnn.com/2011-11-26/us/us_california-pepper-
spray-suspect_1_pepper-spray-woman-surrenders-video-
game?_s=PM:US (Accessed May 3, 2012).
*
*
*
Need Recognition
Want-got gap is the difference
Present
Status
Preferred State
Marketing helps consumers recognize
an imbalance between present status and preferred state. Often
this is advertising and sales.
Internal
Stimuli
External

Stimuli
*
*
Stimulus
Any unit of input affecting one or more of the five senses: Sight
Smell Taste Touch Hearing
*
*
Understanding Needs and Wants
If marketers don’t understand the target market’s needs, the
right good or service may not be produced.
An excellent way to understand needs is to view them as job
statements or outcome statements.
Marketers selling their products in global markets must observe
the needs and wants of consumers in various regions.

*
Notes:
As Ted Levitt said, “People don’t want to buy a quarter-inch
drill. They want a quarter-inch hole.”
*
Information Search
Internal Information Search
Recall information in memory
This includes prior experience or prior knowledge about a
product.
External Information search
Seek information in outside environment
Nonmarketing controlled sources include personal experience,
personal sources, and public sources such as Underwriters
Laboratories.
Marketing-controlled information is biased toward a specific
product because it originates with marketers promoting that
product. These sources include mass-media advertising, sales
promotion, salespeople, product labels and packaging, and the
Internet.
2
*

*
External Information Searches
Need More
Information
More Risk
Less knowledge
Less product experience
High level of interest
Lack of confidence
Less Risk
More knowledge
More product experience
Low level of interest
Confidence in decision
Need Less
Information
*
Notes:
The extent to which an individual conducts an external source
depends on such factors as the perceived risk of purchasing a
product, knowledge, prior experience, and level of interest in
the good or service. The external search is also influenced by
the consumer’s confidence in her decision-making ability. If a
consumer has prior experience, he/she will spend less time

searching.
Discuss information searches conducted for products or services
recently evaluated or purchased. Characterize this discussion
based on the factors described on this slide.
*
Evoked or Consideration Set
*
*
Evaluation of Alternatives and Purchase

Purchase!
Analyze product
attributes
Rank attributes by
importance
Use cutoff criteria
Evoked Set

*
Notes:Once the evoked set is constructed, the consumer is ready
to make a decision. One way to make a choice is to pick
product attributes that are important to him/her, then exclude all
products in the set that do not have that attribute. Another way
to narrow the number of choices is to use cutoffs, or minimum
or maximum levels of an attribute that an alternative must have.
Many times, price is an important cutoff attribute. The goal of
the marketing manager is to determine which attributes have the
most influence on a consumer’s choice, and design a marketing
mix that stresses those attributes to the consumer. A single
attribute, such as price, may not always explain a consumer’s
evaluation of products. Attributes that the marketer may
consider important are not always important to the consumer.
Brand names, such as Johnson & Johnson, have a significant
impact over the choice of products.
*
Once the evoked set is constructed, the consumer is ready to
make a decision.
One way to make a choice is to pick product attributes that are
important to him/her, then exclude all products in the set that do
not have that attribute.
Another way to narrow the number of choices is to use cutoffs,
or minimum or maximum levels of an attribute that an
alternative must have. Many times, price is an important cutoff
attribute.
2

*
*
The goal of the marketing manager is to determine which
attributes have the most influence on a consumer’s choice, and
design a marketing mix that stresses those attributes to the
consumer.
A single attribute, such as price, may not always explain a
consumer’s evaluation of products. Attributes that the marketer
may consider important are not always important to the
consumer.
Brand names, such as Johnson & Johnson, have a significant
impact over the choice of products.
2
*
*
Purchase
To buy

or not to buy...
Ultimately, the consumer has to decide whether to buy or not to
buy.
*
Notes:Following the evaluation of alternatives, the consumer
decides which product to buy or decides not to buy at all.
Ultimately, the consumer must specifically decide:
• Whether to buy
• When to buy
• What to buy (product type and brand)
• Where to buy (type of retailer, specific retailer, online or in
store)
• How to pay
*
Purchase
Following the evaluation of alternatives, the consumer decides
which product to buy or decides not to buy at all.
Ultimately, the consumer must specifically decide:
• Whether to buy
• When to buy
• What to buy (product type and brand)
• Where to buy (type of retailer, specific retailer, online or in
store)
• How to pay
2

*
Notes:
*
Purchase
3. The Great Recession has affected peoples’ willingness to
make unplanned purchases:
• 54 percent of consumers said they were buying fewer items
on impulse.
• 59 percent reported that more than half of their purchases
were bought on sale.
• 65 percent reported that they would wait to purchase an item
until it went on sale.
2
*
Notes:
Explain the consumer’s postpurchase evaluation process

Postpurchase Behavior
6-3
*
*
Cognitive Dissonance
3When buying products, consumers expect certain outcomes
from the purchase. Once a purchase decision is made, the next
step in the process is the evaluation of the product after
purchase. Consumers expect certain outcomes from the
purchase, and how well these expectations are met determines
the level of customer satisfaction. For the marketer, an
important element of any postpurchase evaluation is reducing
any lingering doubts that the decision was sound. Consumers try
to reduce dissonance by justifying their decision.
Inner tension that a consumer experiences after recognizing an
inconsistency between behavior and values or opinions.
*

*
Postpurchase Behavior
Consumers can reduce dissonance by:
Seeking information that reinforces positive ideas about the
purchase
Avoiding information that contradicts the purchase decision
Revoking the original decision by returning the product
*
Notes:
In some instances, people deliberately seek contrary
information in order to refute it and reduce dissonance.
Discuss any of your purchases that generated cognitive
dissonance and what was done to address the situation. What
role, if any, did marketing play in minimizing cognitive
dissonance? What was the outcome? Discuss ways in which the
provider of the products/services might have reduced this inner
tension.
Identify the types of consumer buying decisions and discuss the
significance of consumer involvement
Types of Consumer Buying Decisions
and Consumer Involvement

6-4
*
*
Consumer Buying Decisions
and Consumer Involvement
Routine
Response
Behavior
Limited
Decision
Making
Extensive
Decision
Making
More
Involvement
Less
Involvement
*

Notes:
Consumer buying decisions fall along a continuum of three
broad categories: Routine response behavior, limited decision
making, and extensive decision making.Routine response
behavior: Frequently purchased, low-cost goods and services,
with low involvement on search and decisions by consumers
before making the purchase. Consumers buy first and evaluate
later.Limited decision making: Consumer has previous product
experience but is unfamiliar with the current brands available.
A moderate effort is spent searching for information or in
considering alternatives. Extensive decision making: Applies to
unfamiliar, expensive products, or an infrequently bought item.
The most complex type of consumer buying decisions, and is
associated with high involvement on the part of the consumer.
Discussion/Team Activity:Name products that fall into each of
the decision making descriptions, and describe the decision
making process for each.
*
Routine response behavior: Frequently purchased, low-cost
goods and services, with low involvement on search and
decisions by consumers before making the purchase. Consumers
buy first and evaluate later.
Limited decision making: Consumer has previous product
experience but is unfamiliar with the current brands available.
A moderate effort is spent searching for information or in
considering alternatives.
Extensive decision making: Applies to unfamiliar, expensive
products, or an infrequently bought item. The most complex

type of consumer buying decisions, and is associated with high
involvement on the part of the consumer.
4
*
The amount of time and effort a buyer invests in the search,
evaluation, and decision processes of consumer behavior.
Involvement
*
*
*
6.2
Continuum of Consumer Buying
DecisionsRoutineLimitedExtensiveInvolvementLowLow to
ModerateHighTimeShortShort to ModerateLongCostLow Low to
ModerateHighInformation SearchInternal OnlyMostly
InternalInternal and ExternalNumber of
AlternativesOneFewMany

*
Notes:
Exhibit 6.2 illustrates the continuum of consumer buying
decisions.
*
Routine Response Behavior
Little involvement in selection process
Frequently purchased low cost goods
May stick with one brand
Buy first/evaluate later

Quick decision
*
*
Limited Decision Making
Low levels of involvement
Low to moderate cost goods
Evaluation of a few alternative brands
Short to moderate time to decide
*
*
Extensive Decision Making
High levels of involvement
High cost goods

Evaluation of many brands
Long time to decide
May experience cognitive dissonance
*
*
Factors Determining the Level of Consumer Involvement
Social Visibility
Interest
Perceived Risk of Negative Consequences
Previous Experience
*
Notes:
The level of involvement in the purchase depends on the
following factors: Previous experience: When consumers have
had previous experience with a product or repeat trials, the level
of involvement typically decreases and quick choices are made.
Interest: Involvement is directly related to consumer interests,
such as cars, motorcycles, or electronics. Perceived risk of
negative consequences: As the risk increases, so does the
consumer level of involvement. Risks include financial risks,

social risks, and psychological risk. Social visibility:
Involvement increases as the social visibility of a product
increases. These products that make a statement about the user
may include cars, jewelry, furniture, and clothing.
*
Determinants of Involvement
Product involvement means that a product category has high
personal relevance.
Situational involvement means that the circumstances of a
purchase may temporarily transform a low-involvement decision
into a high-involvement one.
Shopping involvement represents the personal relevance of the
process of shopping. Modern shoppers tend to browse less and
make fewer impulse buys because they shop on a mission.
Enduring involvement represents an ongoing interest in some
product or activity. The consumer is always searching for
opportunities to consume the product or participate in the
activity.
Emotional involvement represents how emotional a consumer
gets during some specific consumption activity.
4
*
Not All Involvement Is The Same
*

Enduring Involvement
Emotional Involvement
Situational Involvement
Shopping Involvement
Product Involvement
*
*
Types of Involvement
Product involvement means that a product category has high
personal relevance.
Situational involvement means that the circumstances of a
purchase may temporarily transform a low-involvement decision
into a high-involvement one.
Shopping involvement represents the personal relevance of the
process of shopping. Modern shoppers tend to browse less and
make fewer impulse buys because they shop on a mission.
Enduring involvement represents an ongoing interest in some
product or activity. The consumer is always searching for
opportunities to consume the product or participate in the
activity.
Emotional involvement represents how emotional a consumer
gets during some specific consumption activity.
4
*

*
Marketing Implications
of Involvement
High-involvement
purchases require:
Extensive and
Informative promotion
to target market
Low-involvement
purchases require:
In-store promotion,
eye-catching package
design, and good
displays. Coupons,
and two-for-one offers
*
Notes:For high involvement products, a good ad gives
consumers the information they need for making the purchase
decision, as well as specifying the benefits and advantages of
owning the product.For low-involvement purchases, customers
may not recognize their wants until they are in the store. In-

store promotion and package design are important tools for
catching the customer’s attention. Good displays can help
explain a product’s purpose and create recognition of a want.
Identify and understand the cultural factors that affect consumer
buying decisions
Cultural Influences on
6-5
*
*
Factors Influencing Buying Decisions
Social

Factors
Individual
Factors
Psycho-logical
Factors
Cultural
Factors
CONSUMER
DECISION-
MAKING
PROCESS
BUY or
DON’T BUY
*
Notes:
The consumer decision-making process is strongly influenced
by cultural, social, individual, and psychological factors.
*
Components of Culture

Myths
Language
Values
Customs
Rituals
Laws
*
Notes:
1. This list contains the defining components of culture. Push
students to think about American cultural elements for each
category.
*
Culture is. . .
Learned
Functional
Pervasive
Dynamic
*
Notes:
Culture is:Pervasive: Cultural values influence individual life,
yet most are completely unaware of its presence. What people
eat, how they dress, and what language they speak are all
cultural dimensions. Functional: By establishing expectations,
culture gives order to society, such as laws. Learned: Culture is

not genetic. Instead, consumers must learn what is acceptable
from family and friends. Dynamic: It adapts to changing needs
and an evolving environment. The rapid growth of technology
has accelerated the rate of cultural change.
*
Culture is…
Pervasive: Cultural values influence individual life, yet most
are completely unaware of its presence. What people eat, how
they dress, and what language they speak are all cultural
dimensions.
Functional: By establishing expectations, culture gives order to
society, such as laws.
Learned: Culture is not genetic. Instead, consumers must learn
what is acceptable from family and friends.
Dynamic: It adapts to changing needs and an evolving
environment. The rapid growth of technology has accelerated
the rate of cultural change.
5
*
*
Value
5The most defining element of a culture is its values. People
with similar value systems tend to react alike to prices and
other marketing-related inducements. Values also correspond to

consumption patterns.
An enduring belief that a specific mode of conduct is personally
or socially preferable to another mode of conduct.
*
*
Subculture
A homogeneous group
of people who share elements of the overall culture as well as
cultural elements unique to their own group.
*
Notes:
In the United States alone, countless subcultures can be
identified, and many are concentrated geographically. The
United States’ growing Hispanic population has made South and
Central American subcultures a prime focus for many
companies with large marketing budgets.

*
Social Class
A group of people in a society who are considered nearly equal
in status or community esteem, who regularly socialize among
themselves both formally and informally, and who share
behavioral norms.
*
Notes:
One view of contemporary U.S. status structure is shown in
Exhibit 6.4.
SOURCE: Adapted from Richard P. Coleman, “The Continuing
Significance of Social Class to Marketing,” Journal of
Consumer Research, December 1983, 267; Dennis Gilbert and
Joseph A. Kahl, The American Class Structure: A Synthesis
(Homewood, IL: Dorsey Press, 1982), ch. 11.
*
6.4
U.S. Social ClassesUpper ClassesCapitalist Class1%People
whose investment decisions shape the national economy;
income mostly from assets, earned or inherited; university
connectionsUpper Middle Class14%Upper-level managers,
professionals, owners of medium-sized businesses; well-to-do,
stay-at-home homemakers who decline occupational work by
choice; college educated; family income well above national
averageMiddle ClassesMiddle Class33%Middle-level white-

collar, top-level blue-collar; education past high school typical;
income somewhat above national average; loss of manufacturing
jobs has reduced the population of this classWorking
Class32%Middle-level blue-collar, lower-level white-collar;
income below national average; largely working in skilled or
semi-skilled service jobsLower ClassesWorking Poor11-
12%Low-paid service workers and operatives; some high school
education; below mainstream in living standard; crime and
hunger are daily threatsUnderclass8-9%People who are not
regularly employed and who depend primarily on the welfare
system for sustenance; little schooling; living standard below
poverty line
Notes:
1. As you can see from Exhibit 6.4, the upper and upper middle
classes comprise the small segment of affluent and wealthy

Americans.
2. In terms of consumer buying patterns, the affluent are more
likely to own their own home and purchase new cars and trucks
and are less likely to smoke.
*
Social Class Measurements
Wealth
Other Variables
Income
Education
Occupation
*
*
The Impact of
Social Class on Marketing
Indicates which medium to use for advertising
Helps determine the best distribution for products

*
Notes:
Marketers are interested in social class for the reasons of
determining which medium to use for advertising, and for
determining where best to distribute their products.
Identify and understand the social factors that affect consumer
buying decisions
Social Influences on
6-6
*
*
Social Influences
Reference Groups
Opinion Leaders
Family Members

*
Notes:
Consumers interact socially with reference groups, opinion
leaders, and family members to obtain product information and
decision approval.
*
6.5
Types of Reference Groups
*
*
Reference Groups
Reference groups are characterized as either direct or indirect.
Direct reference groups may be primary or secondary. Primary
membership groups include all groups with which people
interact regularly in an informal way, such as family, friends,
and coworkers. People associate with secondary membership
groups less consistently and more formally. This includes clubs,
professional groups, and religious groups.
Indirect reference groups include aspirational reference groups,
such as organizations that a person would like to join. On the

other hand, a nonaspirational reference group is one that
someone wants to avoid being identified with.
6
*
*
Influences of
Reference Groups
They serve as information sources and influence perceptions.
They affect an individual’s aspiration levels.
Their norms either constrain or stimulate consumer behavior.
*
Notes:For marketers, reference groups have three implications,
as stated on this slide. However, marketers must also consider
that people with well-formed networks of somewhat overlapping
reference groups and those with strong personal values are less
susceptible to reference group influences.
The first to try new products and services out of pure curiosity.

May be challenging to locate.
Marketers are increasingly using social media to determine and
attract opinion leaders.
*
Opinion Leaders
*
Notes:Opinion leaders are often the first to try new products.
Technology companies have found that teenagers, because of
their willingness to experiment, are key opinion leaders for the
success of new technologies.Opinion leadership is a casual,
face-to-face phenomenon. Locating opinion leaders can be a
challenge. Marketers may try to create opinion leaders, such as
cheerleaders or civic leaders.On a national level, companies
sometimes use prominent public figures, such as movie stars,
sports figures, and celebrities to promote products.
Name examples of opinion leaders, and the promoted
products/services, in each of the categories shown on this slide.
*
Opinion Leaders
Opinion leaders are often the first to try new products.
Technology companies have found that teenagers, because of
their willingness to experiment, are key opinion leaders for the
success of new technologies.
Opinion leadership is a casual, face-to-face phenomenon.
Locating opinion leaders can be a challenge. Marketers may try
to create opinion leaders, such as cheerleaders or civic leaders.

On a national level, companies sometimes use prominent public
figures, such as movie stars, sports figures, and celebrities to
promote products.
6
*
*
Family
Initiators
Influencers
Decision Makers
Purchasers
Consumers
Purchase Process Roles in the Family
*
Notes:The family is the most important social institution for
many consumers, influencing values, attitudes, and buying
behavior. Purchase decisions vary significantly among family
members, who assume a variety of roles in the purchase
process.Initiators are the ones who suggest or initiate the

purchase process.
Influencers are those members whose opinions are valued.
Decision makers actually makes the decision to buy or not to
buy.
The purchaser is the one who exchanges money for the product.
The consumer is the one who uses the product. Children can
have great influence over the purchase decision.
*
Family
The family is the most important social institution for many
consumers, influencing values, attitudes, and buying behavior.
Purchase decisions vary significantly among family members,
who assume a variety of roles in the purchase process.
Initiators are the ones who suggest or initiate the purchase
process.
Influencers are those members whose opinions are valued.
Decision makers actually makes the decision to buy or not to
buy.
The purchaser is the one who exchanges money for the product.
The consumer is the one who uses the product.
Children can have great influence over the purchase decision.
6

*
Identify and understand the individual factors that affect
consumer buying decisions
Individual Influences on
6-7
*
Individual Influences
*
Gender
Age/Family
Life Cycle
Personality,
Self-Concept, and Lifestyle
*

Notes:
A person’s buying decisions are also influenced by unique
personal characteristics, such as gender; age and life cycle
stage; and personality, self-concept, and lifestyle. The
physiological differences in men and women result in the need
for different products. Trends in gender marketing are
influenced by the changing roles of men and women. The age
and family life cycle can have a significant impact on consumer
behavior. Consumer tastes in clothes, food, cars, and recreation
are often age related. Related to age is the family life cycle, an
orderly series of stages through which consumers’ attitudes and
behavior evolve through maturity, experience, and changing
income and status. Personality is a broad concept combining
psychological makeup and environmental forces. Self-concept
combines the ideal self-image and the real self-image.
Consumers seldom buy products that jeopardize their self-
image. A lifestyle is a mode of living as identified by a person’s
activities, interests, and opinions.
*
GenderPhysiological differences between men and women often
result in different needs, such as health and beauty
products.Trends in gender marketing are influenced by the
changing roles of men and women in society.
*

*
Age and Family Life Cycle StageConsumer tastes in food,
clothing, cars, furniture, and recreation are often age
related.Marketers define target markets according to life cycle
stages such as “young singles” or “young married with
children.”How old a consumer is generally indicates what
products he or she may be interested in purchasing.Related to a
person’s age is his or her place in the family life cycle. The
family life cycle is an orderly series of stages through which
consumers’ attitudes and behavioral tendencies evolve through
maturity, experience, and changing income and status.
7
*
*
Personality, Self-Concept, and LifestylePersonality combines
psychological makeup and environmental forcesHuman behavior
depends largely on self-conceptSelf-concept combines ideal
self-image and real self-image.
*

Identify and understand the psychological factors that affect
consumer buying decisions
Psychological Influences on
6-8
*
Psychological Influences
Perception
Motivation
Learning
*
*
Notes:
The psychological influences are the factors consumers use to
interact with their world. They are the tools used to recognize
feelings, gather and analyze information, formulate thoughts
and opinions, and take action.

Perception
*
Selective
Exposure
Selective
Distortion
Selective
Retention
Consumer notices certain stimuli and ignores others
Consumer changes or distorts information that conflicts
with feelings or beliefs
Consumer remembers only
that information that
supports personal beliefs
*
Notes:
People cannot perceive every stimulus in their environment.
They use selective exposure, along with the closely related
concepts of selective distortion and retention, to decide which
stimuli to notice and which to ignore.
Discuss examples representing each of the described perception
states.

Marketing Implications
of Perception
*
Important attributes
Price
Brand names
Quality and reliability
Threshold level of perception
Product or repositioning changes
Foreign consumer perception
Subliminal perception
*
Notes:Marketers must recognize the importance of cues or
signals in a consumers perception of products.Marketing
managers first identify the important attributes such as those
listed on this slide, then design signals to communicate these
attributes to consumers.
Motivation
*
A motive is the driving force that causes a person to take action
to satisfy specific needs
PhysiologicalSafetySocialEsteemSelf-actualization

*
*
6.6
Maslow’s Hierarchy of Needs
*
Notes:Maslow’s Hierarchy of Needs: A method of classifying
human needs and motivations into five categories in ascending
order of importance. Maslow’s Hierarchy of Needs, shown in
Exhibit 6.6 and here, arranges needs in ascending order of
importance.By studying motivation, marketers can analyze the
major forces influencing consumers’ purchase decisions. When
a product is purchased a need is usually fulfilled. These needs
become motives when aroused sufficiently. Motives are the
driving forces that cause a person to take action to satisfy those
needs.
Learning
*
Experiential
Conceptual
An experience changes behavior
Not learned through direct experience

*
Online:
Center for Science in the Public Interest (CSPI)
The CSPI regularly campaigns to change consumers’ beliefs
about products it perceives as dangerous or harmful. What
products are of interest to the CSPI at present? How should
companies respond if their products become targets of the
CSPI?
http://www.cspinet.org
Notes:Almost all consumer behavior results from learning, the
process that creates changes in behavior through experience and
practice.There are two types of learning: experiential and
conceptual. Reinforcement and repetition boost learning. This
is a key strategy in promotional campaigns because it can lead
to increased learning. Generally, to enhance learning,
advertising messages should be spread over time rather than
clustered together.
Learning
*
Almost all consumer behavior results from learning, the process
that creates changes in behavior through experience and
practice.
There are two types of learning: experiential and conceptual.
Reinforcement and repetition boost learning. This is a key
strategy in promotional campaigns because it can lead to
increased learning. Generally, to enhance learning, advertising
messages should be spread over time rather than clustered

together.
8
*
Beliefs and Attitudes
*
8
Belief
Attitude
An organized pattern of knowledge that an individual holds as
true about his or her world.
A learned tendency to respond consistently toward a given
object.
*
Beliefs and Attitudes

*
Beliefs and attitudes are closely linked to values.
If a product is meeting its profit goals, positive attitudes toward
the product need to be reinforced. If the brand is not
succeeding, the marketing manager must work to change the
consumers’ attitudes toward it.
Changes in attitudes can be accomplished in three ways:
• Changing beliefs about the brand’s attributes
• Changing the relative importance of these beliefs
• Adding new beliefs
8
*
Changing Beliefs
A marketer may want to…turn a neutral, negative, or incorrect
belief about a product attribute into a positive one.change the
relative importance of a belief.add a new belief.
*
8
*

MKTG10
Chapter 8
Segmenting and Targeting Markets
Chapter 8 Segmenting and Targeting Markets
*
Describe the characteristics
of markets and market segments
Markets and
Market Segments
8-1
*

*
Characteristics of a Market
All markets share several characteristics:
They are composed of people or organizations.These people or
organizations have wants and needs that can be satisfied by
particular product categories.They have the ability to buy the
products they seek.They are willing to exchange their resources,
usually money or credit, for desired products.
A group of people that lacks any one of these characteristics is
NOT a market.
*
Notes:
The term market means different things to different people. We
are all familiar with the supermarket, stock market, labor
market, fish market, and flea market. All these types of markets
share several characteristics. In sum, a market is (1) people or
organizations with (2) needs or wants and with (3) the ability
and (4) the willingness to buy.
*
Market Segmentation

Market
Market
Segment
Market
Segmentation
People or organizations with needs or wants and the ability and
willingness to buy.
A subgroup of people or organizations sharing one or more
characteristics that cause them to have similar product needs.
The process of dividing a market into meaningful, relatively
similar, identifiable segments or groups.
*
Notes:Within a market, a market segment is a subgroup of
people or organizations with one or more characteristics that
cause them to have similar product needs. Market
segmentation is the division of a market into meaningful,
relatively similar, and identifiable segments or groups.
The Concept of Market Segmentation
*
*
Notes:
This graphic illustrates the concept of market segmentation,
using age and gender as the bases.

Discuss other ways of segmenting the market in addition to age
and gender.
Explain the importance
of market segmentation
The Importance of
Market Segmentation
8-2
*
*
The Importance of Market Segmentation
Until the 1960s, market segmentation was not used extensively.
Consider Coca-Cola with its one product aimed at the entire soft
drink market. Today over a dozen different products are
marketed by the company to different market segments.
Market segmentation plays a key role in the marketing strategy
of organizations, leading to competitive advantage. The benefits
are described on this slide.

Markets have a variety of product needs and preferences.
Marketers can better define customer needs.
Decision makers can define objectives and allocate resources
more accurately.
2
*
Discuss criteria for
successful market
segmentation
Criteria for Successful
Segmentation
8-3
*
*

Why Market Segmentation?
Markets are segmented for three reasons:
Segmentation enables the identification of groups of customers
with similar needs, and the analysis of the buying behavior of
these groups.
Segmentation provides information for the specific matching of
the design of marketing mixes with the characteristics of the
segment.
Segmentation helps marketers satisfy customers wants and
needs while meeting the organization’s objectives.
3
*
*
Criteria for Segmentation
Substantiality
Identifiability
and Measurability
Accessibility
Responsiveness
Segment must be large enough to warrant a special marketing
mix.
Segments must be identifiable and their size measurable.
Members of targeted segments must be reachable with
marketing mix.
Unless segment responds to a marketing mix differently, no

separate treatment is needed.
*
Describe the bases
commonly used
to segment
consumer markets
Bases for Segmenting
Consumer Markets
8-4
*
*
Bases for Segmentation
Usage Rate
Benefits Sought
Psychographics
Demographics

Geography
*
Notes:
One or more of the characteristics listed above is used to
segment markets. They are described on subsequent slides.
*
Geographic Segmentation
Region of the country or world
Market size
Market density
Climate
*
Notes:
Geographic segmentation of markets is based on the region,
market size, market density (number of people within a unit of
land), or climate.

*
Benefits of
Regional Segmentation
New ways to generate sales in sluggish and competitive markets
Scanner data allow assessment of best selling brands in region
Regional brands appeal to local preferences
Quicker reaction to competition
*
Notes:
Consumer goods companies use a regional approach to
marketing for the reasons shown on this slide.
Discuss the marketing of regional brands/products in various
areas of the country.
*
Demographic Segmentation
Age
Gender
Income

Ethnic background
Family life cycle
*
Notes:Demographic information is widely available and often
related to consumer behavior and buying. Some common bases
are age, gender, income, ethnic background, and family life
cycle.
Age SegmentationTweensTeensMillennialsGeneration XBaby
BoomersThe War GenerationThe Great Depression Generation
*
Marketers can segment markets by age using cohorts:
*
Gender SegmentationWomen make 85 percent of consumers
goods purchases annually.Women tend to view money and
wealth differently than men do. They don’t seek to accumulate

money, but see it as a way to care for their families, improve
their lives, and find security. Thus, financial advisors need to
use different strategies to appeal to women.Marketers of
products such as clothing and cosmetics still segment markets
by gender, and many of these marketers are going after the less-
traditional male market.
*
Notes:
Women tend to view money and wealth differently than men do.
They don’t seek to accumulate money, but see it as a way to
care for their families, improve their lives, and find security.
Thus, financial advisors need to use different strategies to
appeal to women.
*
Income SegmentationIncome level influences consumers’ wants
and determines their buying power.Retailers can appeal to:
Low-income
High-income
Both
*
*

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