Transcript Scanning the Marketing Environmentx

McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
LEARNING OBJECTIVES (LO)
AFTER READING CHAPTER 3, YOU SHOULD BE ABLE TO:
LO1
LO2
LO3
Explain how environmental scanning
provides information about social,
economic, technological, competitive,
and regulatory forces.
Describe how social forces such as
demographics and culture can have an
impact on marketing strategy.
Discuss how economic forces such as
macroeconomic conditions and
consumer income affect marketing.
3-2
LEARNING OBJECTIVES (LO)
AFTER READING CHAPTER 3, YOU SHOULD BE ABLE TO:
LO4
Describe how technological changes
can affect marketing.
LO5
Discuss the forms of competition that
exist in a market and key components
of competition.
LO6
Explain the major legislation that
ensures competition and regulates the
elements of the marketing mix.
3-3
LO1

ENVIRONMENTAL SCANNING
Environmental Scanning
 SWOT
• Tracking Environmental Trends
• Example: Coffee Marketers
• An Environmental Scan of Today’s
Marketplace
3-4
Social-Cultural Environment
1.
2.
3.
The relationship between the
marketer and society and its culture
U.S. population is getting older,
birthrates are falling and it is
becoming more diverse
Marketers must be sensitive to
society’s demographic shifts and
changing values
Social-Cultural Environment
Cultural Diversity
1.
2.
3.
4.
U.S. diverse society composed of various
sub-markets
Each has unique values, cultural
characteristics, consumer preferences, and
purchasing behavior
Social-cultural context exerts more
influence on marketing decision-making in
international sphere
Marketers redesign packages and modify
products and advertising messages to suit
tastes and preferences of different cultures
Social-Cultural Environment
Consumerism
Social force that aids and protects
the buyer by exerting legal, moral,
and economic pressures on
business
Increasing consumer activism in
recent years
Firms must weigh consumer
demands with profit objectives
1.
2.
3.
•
Dilemma: pleasing customers vs.
remaining viable
Social-Cultural Environment
Consumerism
President JFK’s rules of thumb on
consumer rights:
1. Right to choose freely
2. Right to be informed
3. Right to be heard
4. Right to be safe
Framework for consumers-rights
legislation
Social-Cultural Environment
Ethics
1.
Concerns matters of right and
wrong:
Responsibility of individuals and firm to
do
what is right
1.
Increased emphasis on marketing
ethics
2.
Means promising customers and
business partners not to sacrifice
quality and fairness for profit
Ethical Questions in Marketing
Product
•Planned obsolescence
•Product quality and safety
•Product warranties
•Fair packaging and labeling
•Pollution
Promotion
•Bait-and-switch advertising
•Promotional allowances
•Bribery
Distribution
•Exclusive territories
•Dumping
•Dealer rights
•Predatory competition
•Marginal outlines
Ethical
Issues
Price
•Price fixing
•Price discrimination
•Price increases
•Deceptive pricing
Social-Cultural Environment
Social Responsibility
1.
Consists of marketing philosophies,
policies, procedures and actions that have
enhancement of society’s welfare as a
primary objective
2.
An obligation to give equal weight to
profits. Consumer satisfaction and social
well-being in evaluating firm’s
performance:
Qualitative as well as quantitative
3.
Means promising customers and business
partners not to sacrifice quality and
fairness for profit
FIGURE 3-1 Environmental forces affect the
organization, its suppliers, and its customers
3-12
FIGURE 3-2 An environmental scan of
today’s marketplace shows the many
important trends that influence marketing
3-13
LO2
SOCIAL FORCES
DEMOGRAPHICS

Social Forces

Demographics
• World Population
• U.S. Population
3-14
FIGURE 3-3 Distribution of the world’s
population
3-15
LO2
SOCIAL FORCES
DEMOGRAPHICS—GENERATIONAL COHORTS

Baby Boomers: 1946 - 1964

Generation X: 1965 - 1976

Generation Y: 1977 - 1994

Millennials: 1995 +

Generational Marketing
3-16
Olay, Hyatt, and Motorola
Which generational cohort is being reached?
3-17
LO2
SOCIAL FORCES
DEMOGRAPHICS—THE AMERICAN HOUSEHOLD

Marital Status

Cohabitation

Blended Family
3-18
SOCIAL FORCES
LO2
DEMOGRAPHICS—POPULATION SHIFTS

Regional Shift in the U.S.

Shifts Within States
• Suburbs
• Exurbs
• Penturbia
3-19
SOCIAL FORCES
LO2
Statistical Areas

Metropolitan Statistical Area


At least one urbanized area of 50,000
or more people and adjacent territory
that has a high degree of social and
economic integration
Shifts Within States

At least one urban cluster of at least
10,000 but less than 50,000 people
and adjacent territory that has a
high degree of social and economic
integration
3-20
LO2
SOCIAL FORCES
DEMOGRAPHICS—POPULATION SHIFTS

Statistical Areas (SA): Illinois
• Combined SA: NE Illinois
• Micropolitan SA: Dixon, IL
• Metropolitan SA: St. Louis, MO & SW IL
• Metropolitan Division: Chicagoland
3-21
SOCIAL FORCES
LO2
DEMOGRAPHICS—RACIAL & ETHNIC DIVERSITY

Composition

Trends
• African Americans
• Hispanics
• Asian Americans

Multicultural
Marketing
3-22
FIGURE 3-4 Racial and ethnic groups
(excluding whites) are concentrated in
geographic regions of the United States
3-23
SOCIAL FORCES
• Culture – set of values, ideas, and attitudes that
are learned and shared among members of a group
 The Changing Attitudes and Roles of Men
and Women
Career mothers
Increased participation in organized sports
Internet has made gender, race, and ethnicity
disappear
Most believe men and women should share most
responsibilities equally
Slide 3-20
LO3
ECONOMIC FORCES
MACROECONOMIC CONDITIONS

Economy
• Inflation
• Recession
• Consumer Sentiment
3-25
ECONOMIC FORCES
• Economy
– Income, expenditures, and resources that affect
the cost of running a business and household
• Macroeconomic Conditions
– Inflationary economy
– Recessionary economy
Slide 3-25
FIGURE 3-6 Distribution of U.S. household
income: 2006
3-27
LO3
ECONOMIC FORCES
CONSUMER INCOME

Gross Income

Disposable Income

Discretionary Income
3-28
ECONOMIC FORCES
• Consumer Income
 Gross Income
Total amount of money made in one year by
a person, household, or family unit
 Disposable Income
Money consumer has left over, after paying taxes,
to use for food, housing, clothing and transportation
 Discretionary Income
Money that remains after paying taxes and necessities
and is used for luxury items, e.g., vacations
(luxury vs. necessity)
Slide 3-25
ECONOMIC FORCES
Department of Labor’s Annual
Consumer Expenditures Survey
monitors consumer expenditures:
•17 percent of average consumer’s income is spent
on food and clothing
•33 percent is spent on housing
•36 percent is spent on transportation, healthcare,
and insurance
•14 percent is a consumer’s discretionary income
Slide 3-16
ECONOMIC FORCES
Discretionary Income
Department of Labor’s Annual Consumer
Expenditures Survey:
•The percentage of income spent on food and housing
declines as incomes rise, which increases discretionary
income
•Bureau of Labor Statistics: percentage of income put
into savings is less than 4 percent
Slide 3-16
LO4
TECHNOLOGICAL FORCES
ITS FUTURE AND IMPACT ON CUSTOMER VALUE

Technology

Impact on Customer Value
• Plummeting Costs of Tech-Based Products
• New Products Developed
• Production of Existing Products Changed
 Recycling
 Precycling
3-32
LO4
TECHNOLOGICAL FORCES
ELECTRONIC BUSINESS TECHNOLOGIES

Electronic Commerce

Intranet

Extranets
3-33
LO5
COMPETITIVE FORCES
ALTERNATIVE FORMS OF COMPETITION

Pure Competition

Monopolistic Competition

Oligopoly

Pure Monopoly
3-34
Free-Market Competition
Monopolistic
Oligopoly
Competition
One
Many
Perfect
Competition
Monopoly
Sellers
FIGURE 3-A Continuum of competition
3-36
Three Questions of Determining a
Competitive Strategy
1. Should we compete?
2. If so, in what markets?
3. How should we compete?
1st Competitive Strategy Question
Should We Compete?
● Depends
● Firm’s
on
resources.
● Objectives.
● Expected profit potential.
2nd Competitive Strategy Question
What Markets Should We Compete In?
● Acknowledge
firms limited resources
● Allocate
these resources to the areas of greatest
opportunity
● Acquisitions,
mergers, and joint-ventures
3rd Competitive Strategy Question
How Should We Compete?
● Make
product decisions
about:
● Pricing,
● Distribution,
● Promotional,
● Product
quality, and
● Customer service…
…to give firm competitive
advantage in marketplace.
LO5
COMPETITIVE FORCES
COMPONENTS OF COMPETITION

Barriers to Entry

Power of Buyers and Sellers

Existing Competitors and Substitutes

Small Businesses as Competitors
3-41
COMPETITIVE FORCES
• Components of Competition
– Companies must consider factors that
drive competition.
– Factors may be used to create a barrier to
entry, increase brand awareness, or
intensify a fight for market share.
Slide 3-41
COMPETITIVE FORCES
• Entry
– A firm must assess the likelihood of new
entrants because additional producers
increase industry capacity and tend to
lower prices
Slide 3-41
COMPETITIVE FORCES
• Barriers to Entry
– Can be in the form of capital requirements,
advertising expenditures, product identity,
distribution access, or switching costs.
– The higher the expense of the barrier, the
more likely it will deter new entrants.
Slide 3-41
COMPETITIVE FORCES
• Power of Buyers and Suppliers
– Powerful buyers exist when:
• They are few in number,
• There are low switching costs; or
• The product represents a significant share of
the buyer’s total costs, which leads the buyer to
exert pressure for price competition.
– A supplier gains power when the product is
critical to the buyer.
Slide 3-41
COMPETITIVE FORCES
• Existing Competitors and Substitutes
– Competitive pressures among firms
depend on the rate of industry growth.
– In slow growth settings, competition is
more heated for any possible gains in
market share.
– High fixed costs also create competitive
pressures for firms to fill production
capacity.
Slide 3-41
COMPETITIVE FORCES
• Small Businesses as Competitors
– Small businesses make up the majority of the
competitive landscape
– There are about 23 million in the U.S. and employ
over 50 percent of all private sector employees.
– They generate 60 to 80 percent of all new jobs
annually and account for 50 percent of GDP.
– There is a strong correlation between national
economic growth and the level of new small
business activity.
Slide 3-41
Four Phases of Government Regulation
Anti-Monopoly Period
1.
•
•
Maintain competitive environment
Sherman Antitrust Act, Clayton Act, FTC Act
Protecting Competitors
2.
•
Protect independent merchants against competition
from larger chain stores
Protecting Consumers
3.
•
Truth in Lending Act
Deregulation
4.
•
•
•
Begun in 1970s and continues today
Increase competition in industries such as telecom &
airlines
Newest regulatory frontier is cyberspace
Regulatory Bodies Affecting Marketing
The Federal Trade Commission
1.
•
•
•
Has broadest power of any agency to influence marketing
activities
Regulates unfair business practices, false of deceptive advertising
With DOJ, can stop mergers
Other federal Regulatory agencies
2.
•
•
•
•
•
FCC
FDA
Consumer Products Safety Commission
EPA
SEC
Other Regulatory Forces
3.
•
•
Private consumer interest groups
Self-Regulatory Groups – Better Business Bureau and the Direct
Marketing Association
LO6
REGULATORY FORCES
FEDERAL LEGISLATION

Regulation

Protecting Competition
• Sherman Antitrust Act (1890)
• Clayton Act (1914)
• Robinson-Patman Act (1936)
3-51
REGULATORY FORCES
Sherman Antitrust Act (1890)
• Monopolies
• Contracts, combinations in restraint
of trade
Slide 3-46
REGULATORY FORCES
Clayton Act (1914)
• Exclusive Dealing
• Tying Contracts
• Interlocking Directorate
Slide 3-46
REGULATORY FORCES
Robinson-Patman Act (1936)
• Prohibits price discrimination
• Applies to buyers and sellers
• Price differences that substantially
weaken competition
• B2B transactions, not consumer
Slide 3-46
REGULATORY FORCES
• Product-Related Regulation
 Company Protection
 Consumer Protection
 Company and Consumer Protection
Slide 3-47
LO6
REGULATORY FORCES
FEDERAL LEGISLATION

Product-Related: Company Protection
• Patent Law
• Copyright Law
• Digital Millennium Copyright Act (1998)
3-56
REGULATORY FORCES
• Product-Related Regulation
 Company Protection
Patent Law – Gives inventors the right to exclude
others from making, using, or selling products that
infringe the patented invention
Exclusive rights to invention for 20 years
Slide 3-47
REGULATORY FORCES
• Product-Related Regulation
 Company Protection
Copyright Law – Gives author of a literary,
dramatic, musical, or artistic work the exclusive
right to print, perform, or otherwise copy that work.
Copyright is secured automatically when work
is created.
Good for lifetime of author + 70 years.
Filed with LOC
Slide 3-47
REGULATORY FORCES
• Product-Related Regulation
 Company Protection
Digital Millennium Copyright Act (1998) – Improves
protection of copyrighted digital products and protection
from devices designed to circumvent against anti-piracy
elements of their products.
Slide 3-47
LO6
REGULATORY FORCES
FEDERAL LEGISLATION

Product-Related: Consumer Protection
• Nutritional Labeling
• Consumer Product Safety Act (1972)
• Consumer Product Safety Commission
• Consumerism
3-60
REGULATORY FORCES
• Product-Related Regulation
 Consumer Protection
Laws relating to food, drugs, and cosmetics:
Infant Formula Act (1980)
Nutritional Labeling and education Act (1980) –
New labeling requirements for dietary supplements (1997)
and guidelines for trans fats (2006).
Other consumer protection laws have a broader scope:
Fair Packaging and Labeling Act(1966)
Child Protection Act (1966)
Slide 3-47
REGULATORY FORCES
• Product-Related Regulation
 Consumerism
Grassroots movement started in 1960s to increase the
influence, power, and rights of consumers in dealing with
institutions.
Consumers today demand ecologically safe products and
socially responsible business practices.
Slide 3-47
Social-Cultural Environment
Consumerism
Social force that aids and protects
the buyer by exerting legal, moral,
and economic pressures on
business
Increasing consumer activism in
recent years
Firms must weigh consumer
demands with profit objectives
1.
2.
3.
•
Dilemma: pleasing customers vs.
remaining viable
Social-Cultural Environment
Consumerism
President JFK’s rules of thumb on
consumer rights:
1. Right to choose freely
2. Right to be informed
3. Right to be heard
4. Right to be safe
Framework for consumer-right
legislation
LO6
REGULATORY FORCES
FEDERAL LEGISLATION

Product-Related: Company and
Consumer Protection
• Landham Act (1946)
• Trademark Law Revision Act (1988)
• Doppelgangers
• U.S. Supreme Court: Trademark Colors
• Madrid Protocol (2003)
• Federal Dilution Act (1995)
3-65
REGULATORY FORCES
• Product-Related Regulation
 Both Company and Consumer Protection
Trademarks are intended to protect both the firm selling
the product and the consumer buying it.
Protects name, symbol, design, or a combination of, and
identifies goods and services of a seller.
Belong to owner forever.
Slide 3-47
REGULATORY FORCES
• Product-Related Regulation
 Both Company and Consumer Protection
Landham Act (1946) – Provides for registration of
company’s trademarks.
First user had exclusive right to use the particular word,
name, or symbol.
Company can lose its trademark if it becomes generic:
Coca-Cola, Xerox, and Kleenex
Aspirin and escalator
Slide 3-47
Kleenex, Band-Aid, and Q-Tips
Are these becoming generic trademarks?
3-68
REGULATORY FORCES
• Product-Related Regulation
 Both Company and Consumer Protection
Trademark Revision Act (1988) – Allows company to
secure rights to a name before actual use by declaring
its intent to use it.
Madrid Protocol (2003) – treaty that protects U.S.
trademark rights globally.
A company now may obtain trademarks for colors
associated with their products over time.
The Federal Dilution Act (1995) – prohibits someone
from using a trademark on non-competing product:
e.g., a “Cadillac” brush
Slide 3-47
REGULATORY FORCES
LO6
FEDERAL LEGISLATION
 Pricing-Related
 Predatory Pricing
 Distribution (Place)-Related

Exclusive Dealing

Exclusive Territorial Distributorships

Tying Arrangement
3-70
LO6
REGULATORY FORCES
FEDERAL LEGISLATION
Advertising and Promotion-Related
 FTC Act of 1914
 Cease and Desist Order
 Corrective Advertising
 Do Not Call Registry
 CAN-SPAM Act (2004)
Self-Regulation
3-71
Environmental Scanning
Environmental scanning is the
process of continually acquiring
information on events occurring
outside the organization to identify
and interpret potential trends.
3-72
Social Forces
Social forces are the
demographic characteristics of
the population and its values.
3-73
Demographics
Demographics describe a
population according to selected
characteristics such as age,
gender, ethnicity, income, and
occupation.
3-74
Baby Boomers
Baby boomers are the
generation of children born
between 1946 and 1964.
3-75
Generation X
Generation X includes the 15
percent of the population born
between 1965 and 1976. Also
called baby bust.
3-76
Generation Y
Generation Y includes the 72
million Americans born between
1977 and 1994. Also called
echo-boom or baby boomlet.
3-77
Blended Family
A blended family is a family
formed by merging two previously
separated units into a single
household.
3-78
Multicultural Marketing
Multicultural marketing consists
of combinations of the marketing
mix that reflect the unique
attitudes, ancestry, communication
preferences, and lifestyles of
different races.
3-79
Culture
Culture consists of the set of
values, ideas, and attitudes that
are learned and shared among
the members of a group.
3-80
Value Consciousness
Value consciousness is the
concern for obtaining the best
quality, features, and performance
of a product or service for a given
price that drives consumption
behavior.
3-81
Economy
The economy pertains to the
income, expenditures, and
resources that affect the cost of
running a business and
household.
3-82
Gross Income
Gross income is the total amount
of money made in one year by a
person, household, or family unit.
Also known as money income at
the Census Bureau.
3-83
Disposable Income
Disposable income is the money
a consumer has left after paying
taxes to use for food, shelter,
clothing, and transportation.
3-84
Discretionary Income
Discretionary income is the
money that remains after paying
for taxes and necessities.
3-85
Technology
Technology consists of the
inventions or innovations from
applied science or engineering
research.
3-86
Marketspace
Marketspace consist of
information- and communicationbased electronic exchange
environment mostly occupied by
sophisticated computer and
telecommunication technologies
and digitized offerings.
3-87
Electronic Commerce
Electronic commerce is any
activity that uses some form of
electronic communication in the
inventory, exchange,
advertisement, distribution, and
payment of goods and services.
3-88
Intranet
An intranet is an Internet-based
network used within the
boundaries of an organization.
3-89
Extranets
Extranets are Internet-based
technologies used to permit
communication between a
company and its suppliers,
distributors, and other partners.
3-90
Competition
Competition consists of the
alternative firms that could provide
a product to satisfy a specific
market’s needs.
3-91
Barriers To Entry
Barriers to entry consist of
business practices or conditions
that make it difficult for new firms
to enter the market.
3-92
Regulation
Regulation consists of the
restrictions state and federal laws
place on business with regard to
the conduct of its activities.
3-93
Consumerism
Consumerism is a grassroots
movement started in the 1960s
to increase the influence, power,
and rights of consumers in
dealing with institutions.
3-94
Self-Regulation
Self-regulation is an alternative
to government control where an
industry attempts to police itself.
3-95