One component of the external environment marketing managers must understand and react to is the economic environment. Briefly describe the four economic areas of greatest concern to U.S. marketers and the marketing implications of trends in these four areas.

Question

What will be an ideal response?

Answer 1

RISING INCOMES. Incomes are rising in the United States, primarily due to dual-income families. Increases in disposable and discretionary income allow families and individuals to afford the "good life." Marketers can now concentrate efforts on higher-quality, higher-priced goods and services.

PURCHASING POWER: This is also known as the cost of living. When income is higher than the cost of living, people have more discretionary income to spend on non-essential items.

INFLATION. In recent years, the United States has not experienced high inflation; instead, prices do not rise quickly, employment levels are high, and purchasing power is up. Again, this allows marketers to concentrate efforts on higher-priced goods and services. During periods of inflation, marketers should be aware that brand loyalty decreases and consumers stock up on bargain products; consequently, pricing strategies should be monitored carefully.

RECESSION. This period of economic activity is when income, production, and employment fall, which reduces demand. Marketers can counter these effects with value-improved products, customer service, replacement parts, and price freezes.