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Transcript
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