Chapter 3 outline

  • Marketing Environment
    • Inputs
      • human
      • financial
      • natural resources/raw materials
      • information
    • Outputs
      • goods
      • services
      • ideas
    • Forces
      • competitive
      • economic
      • political
      • legal and regulatory
      • technological
      • sociocultural
    • Environmental Scanning
      • "The process of collecting information about forces in the marketing environment. Scanning involves observation, secondary sources such as business, trade, government and general-interest publications; and market research."
      • the internet is a popular scanning tool
      • able to observe current trends
      • gives companies "the edge"
      • however, need to be able to interpret info -> analysis
    • Environmental Analysis
      • "The process of assessing and interpreting the information gathered through environmental scanning"
      • should allow identification of potential threats/opportunities linked to environmental changes.
      • helps assess/develop current/future marketing strategies
    • Environmental Forces
      • 2 approaches
        • accepting them as uncontrollable (passive-reactive)
        • attempting to influence/shape them (proactive)
      • proactive marketing managers may apply economic, psychological, political and promotional skills to gain access to/operate within a market that is blocked by traditional environmental constraints
  • Competitive Forces
    • when a manager defines their target market, they simultaneously define a set of competitors.
    • all firms compete with each other for consumer dollars
    • competition
      • "other firms that market products that are similar to or can be substituted for its products in the same geographic area. split into 4 types: brand, product, generic, total budget"
      • brand competitors
        • "market products with similar features and benefits to the same customers at similar prices" (ex: diet coke vs. diet pepsi)
        • brand competitors are most significant because buyers see the products as direct substitutes for one another
      • product competitors
        • "compete in the same product class but market products with different features, benefits and prices" (Powerade vs. Water)
      • generic competitors
        • "provide very different products that solve the same problem or satisfy the same basic customer need" (Tap water [cheap/free] vs. Powerade)
      • total budget competitors
        • "compete for the limited financial resources of the same customers" (Pepsi vs. bananas vs. gum)
    • types of competitive structures
      • monopoly
        • "exists when an organization offers a product that has no close substitutes, making that organization the sole source of supply"
        • can erect barriers to potential competitors
        • today, most are local utilities (guarded by local/state/federal government)
      • oligopoly
        • "exists when a few sellers control the supply of a large portion of a product"
        • difficult to enter market
        • big businesses (auto, steel, oil, etc)
        • one leader, with a few smaller sellers
      • monopolistic competition
        • "exists when a firm with many potential competitors attempts to develop a marketing strategy to differentiate its product"
      • pure competition
        • does not exist! (closest example is farmer's markets)
        • "if it existed at all, would entail a large number of sellers, none of which could significantly influence price or supply. products would be homogeneous and entry in to the market would be easy"
  • Economic Forces
    • Changes in general economic conditions affect/are affected by
      • supply and demand
      • buying power
      • willingness to spend
      • consumer expenditure levels
      • intensity of competitive behavior
    • business cycle
      • "a pattern of economic fluctuations that has 4 stages: prosperity, recession, depression and recovery"
      • prosperity
        • "unemployment is low, total income is high. assuming low inflation rate, this means higher buying power"
      • recession
        • "unemployment rises and total buying power declines. stifles both consumer and business spending"
        • consumers look for basic, functional products
        • promotional efforts should emphasize value and utility
      • depression
        • "unemployment is extremely high, wages are very low, total disposable income is at a minimum and consumers lack confidence in the economy (prolonged recession)"
      • recovery
        • "moves from recession/depression to prosperity. high unemployment starts to decline, total disposable income increases and willingness to buy increases. ability to buy increases"
        • buying power




          • "depends on economic conditions and the size of the resources - money, goods and services that can be traded in an exchange - that enable the individual to make purchases"
          • major financial sources
            • income
              • "the amount of money received through wages, rents, investments, pensions and subsidy payments for a given period"
              • disposable income
              • "amount of money left after payment of taxes"
              • used for spending or saving
              • size determined by
                • total amount of income
                  • affected by wage levels
                • rate of unemployment
                • interest rates
                • dividend rates
            • discretionary income
            • "disposable income available after purchase of necessities (food, clothing, shelter)"
            • used to purchase entertainment, vacations, cars, education, pets, appliances, furniture, etc..
          • credit
          • wealth
          • "the accumulation of past income, natural resources and financial resources"
          • exists in many forms
            • cash
            • securities
            • savings accounts
            • jewelry
            • real estate (etc...)
      • having buying power does not mean consumers will buy, need willingness to spend
          • willingness to spend
          • "inclination to buy because of expected satisfaction from a product"
          • related to ability to buy
  • Political Forces
  • Legal and Regulatory Forces
    • Procompetitive Legislation
      • Enacted to end various antitrade practices
        • Sherman Antitrust Act (1890)
          • prevent businesses from restraining trade and monopolizing markets
      • Illegal anticompetitive practices
        • stealing trade secrets/confidential info
        • trademark/copyright infringement
        • price fixing
        • false advertisement
        • deceptive selling methods
          • "bait-and-switch"
      • Lanham Act (1946) and Trademark Dilution Act (1995)
        • protect trademarks against infringement
    • Consumer Protection Legislation
      • Passed to deal with consumer safety
        • warning labels- protect against potential or actual harm
        • keeping hazardous products away from children/out of clothes/toys
      • deal with information disclosure
      • some focus on marketing details
        • tested on animals, etc...
    • Encouraging Compliance with Laws and Regulations
      • some businesses push the limits of vague laws to see how far they can go before prosecution
      • new trend
        • providing incentives for those that comply
        • keeping ahead of regulations to avoid prosecution/deadlines
        • keeping employees liable for their effects on the business
          • code of ethics that employees must live up to
    • Regulatory Agencies
      • influence many marketing agencies
        • product development
        • pricing packaging
        • advertising
        • personal selling
        • distribution
      • Federal Trade Commission (FTC)
        • "an agency that regulates a variety of business practices and curbs false advertising, misleading pricing and deceptive packaging and labeling"
        • most heavily influences marketing activities
        • when FTC finds something wrong:
          • files complaint stating business is in violation and takes appropriate action
          • if ignored- can order "cease and desist"
          • can force corrective advertising
    • Self-Regulatory Forces
      • Better Business Bureau (BBB)
        • "a system of nongovernmental, independent, local regulatory agencies supported by local businesses that helps settle problems between customers and specific business firms"
        • best known SRF
        • 2 ways to affect bad businesses
          • warn consumers of bad practices through media (newspaper, television, radio)
          • if part of the BBB, can be kicked out
      • National Advertising Review Board (NARB)
        • "a self regulatory unit that considers challenges to issues raised by the National Advertising Division (NAD) (an arm of the council of BBBs) about an advertisement"
      • advantages of SRFs
        • less expensive than government programs
        • guidelines are more realistic/operational
        • effective SRFs reduce need to expand government bureau
      • limitations of SRFs
        • set of guidelines for members only- does not affect non-members
        • lack the tools/authority to enforce guidelines
        • often less strict than government agencies
  • Technological Forces
    • Technology
      • "the application of knowledge and tools to solve problems and perform tasks more efficiently"
    • grows out of research performed by
      • businesses
      • universities
      • government agencies
      • nonprofit organizations
    • more than half of the research is paid for by the federal government
    • Impact of Technology
      • because of technology, marketers can now reach vast numbers of people more efficiently through variety of media
        • cell phones, email, etc
      • experts suggest that 89% of brands will employ text/multimedia messages on cells to reach target markets
      • PCs in 3/4 of US consumers' homes
      • Effects of technology relate to such characteristics as dynamics, reach and self-sustaining nature of technology progress
        • dynamics of technology involves the constant change that often challenges the structures of social institutions including:
          • legal system
          • social relationships
          • religion
          • education
          • business
          • leisure
        • reach refers to the broad nature of technology
        • self sustaining relates to the fact that technology acts as a catalyst to spur even faster development
    • Adoption and Use of Technology
      • Companies lose status as market leaders because they fail to keep up with technological changes
      • how secure a product is from imitation depends on how easily others can copy it without violating its patent
      • technology assessment
        • managers try to foresee the effects of new products and processes on
          • their operations
          • other business organizations
          • society in general
  • Sociocultural Forces
    • "the influences in a society and its culture(s) that change people's attitudes, beliefs, norms, customs and lifestyles"
    • Demographic and Diversity Characteristics
      • characteristics:
        • age
        • gender
        • race
        • ethnicity
        • marital/parental status
        • income
        • education
      • changes in demographics affecting marketing activies
        • increases in
          • older consumers
          • singles
          • immigration
          • babies
    • Cultural Values
      • increase in health conscious attitudes (since 1980s)
        • food
        • exercise
        • safe sex
      • increase in desire for happiness
        • 2nd/3rd marriages
          • trying til you get it right
          • kids still important though
    • Consumerism
      • "involves organized efforts by individuals, groups and organizations to protect consumers' rights"
      • Movement's major forces
        • individual consumer advocates
        • consumer organizations and other interest groups
        • consumer education
        • consumer laws
      • To achieve objectives consumers and avocates
        • write letters/e-mails to companies
        • lobby government agencies
        • broadcast public service announcements
        • boycott companies whose activities they deem irresponsible