Exam 1 Chapter 3: The Marketing Environment

Culture (Social Forces)

incorporates the set of values, ideas, and attitudes that are learned and shared among the members of a group Changing Values • US past values- achievement, work, efficiency, material comfort • US present values- personal control, continuous change, equality, individualism, self-help, competition, future orientation, action • Change in consumption ○ Past- many purchases made using debt ○ Present- consumers more cautious § Value consciousness: the concern of a product or service for a given price Result of recent recession and global economic crisis

Marketing Environment

* Constraining: limit your market goal - Adapt, ex. lobbying - Modify, lead broad consumer change * Multi-level: macro, micro, internal (less>more control) - Macro forces: (1) social, (2) economic, (3) technological, (4) regulatory, (5) natural - Micro forces: (1) consumers, (2) competitors, (3) stakeholders, (4) suppliers, (5) channels - Internal factors: top management, personnel, other depts * Current/future

Strategic Environmental Scanning

* Sectors: macro v. micro sectors * Actors: look @ actors within each sector * Sources: how will change impact the company? * Interpretation: extrapolate/historical analogy what it means for the future

Tracking environmental trends arises from 5 sources

1) Social 2) Economic 3) Technological 4) Competitive 5) Regulatory

Components of Competition

Factors that drive competition: (1) drive, (2), the bargaining power of buyers and suppliers, existing rivalries, and substitution possibilities Entry • Assessing the likelihood of new entrants ○ More producers = increase industry capacity = lower prices ○ Barriers to entry: business practices or conditions that make it difficult for new firms to enter the market § Include capital requirements, advertising expenditures, product identity, distribution access, or the cost to customers switching suppliers Power of Buyers and Suppliers • Buyers are powerful when they are few in number, there are low switching costs, or the product represents a significant share of the buyer's total costs (price competition) • Suppliers gain power when the product is critical to the buyer + when switching costs are high Existing Competitors and Substitutes • Competitive pressures depend on the rate of industry growth • Slow-growth = competition is more heated for any possible gains in market share High fixed costs = pressure to fill production capacity, ex. Airlines Small Businesses as Competitors • In US, small businesses employ 48% of all private sector employees Generate 66% of new jobs and 46% of GDP

Nature

energy, climate change, greenmarketing/sustainability

Demographics (Social Forces)

describing a population according to selected characteristics such as age, gender, ethnicity, income, and occupation Ex. Population Reference Bureau, United Nations, US Census

Population Explosion (Social Forces)

rapid growth of world population ○ 7.6 billion people in the world today ○ Population likely to exceed 9.9 billion by 2050 ○ Growth primarily in developing countries

Key Issues in Technological environment

rate of change media fragmentation (multi-screen behavior)

Regulation

restrictions state and federal laws place on business with regard to the conduct of its activities ○ Ensures competition and fair business practices for businesses Protects consumers from unfair trade and ensures safety

Three Screens of Advertising (Tech forces)

television (decreasing), telephone (increasing), computer

Competition

the alternative firms that could provide a product to satisfy a specific market's needs • Pure competition: many sellers and each has a similar product • Monopolistic competition: many sellers compete with substitutable products within a price range • Oligopoly: when a few companies control the majority of industry sales ○ Few sellers = reduced profits for all producers • Pure monopoly: occurs when only one firm sells the product Common for products and services considered essential- water, electricity, and cable service

Economy

the income, expenditures, and resources that affect the cost of running a business and a household

Technology

the inventions or innovations from applied science or engineering research

Environmental Scanning

the process of continually acquiring information on events occurring outside the organization to identify and interpret potential trends

Racial and Ethnic Diversity (Social Forces)

• 1/3 US residents are Af Am, Native Am, Asian AM, or Pacific Islander • 5 million ppl are > 1 race • Hispanics are 17% of the population • Multicultural marketing: combinations of the marketing mix that reflect the unique attitudes, ancestry, communication preferences, lifestyles of different races Requires in-depth marketing research that allows accurate understanding of each culture

Generational Cohorts (Social Forces)

• Baby boomers: the 76 million children born between 1946 and 1964 ○ Wealthiest generation in US history bc of their participation in the work force ○ Account for 50% of consumer spending ○ Main reason for graying of US • Generation X: the 55 million people born between 1965 and 1980 ○ Baby bust ○ Self-reliant, supportive of racial and ethnic diversity, better educated than any previous generation ○ Not prone to extravagance ○ The first generation to have less than the previous one in terms of net worth ○ Dominant in the market • Generation Y: millennials, the 62 million Americans born between 1981 and 1996 ○ Echo-boom: period of increasing births due to baby boomers having children ○ Influences forms of communication related to smartphones ○ Interested in personal experiences, work-life balance, attracted to purposeful work ○ The largest living generation • Generation Z: consumers born between 1997 and 2010 ○ Values formed by the Great Recession, ISIS, Sandy Hook, marriage equality, the first black president, and a growing interest in populism Hardworking, financially responsible, independent multitaskers

Technology's Impact on Consumer Value (Tech forces)

• Cost of tech decreasing = customer value assessment focusing more on quality, service, and relationships • Development of new products • Can change existing products and the ways they are produced Ex. Recycling and precycling

Distribution-Related Legislation (Regulatory forces)

• Exclusive dealing: an arrangement a manufacturer makes with a reseller to handle only its products and not those of a competitor ○ Illegal under the Clayton Act when it substantially lessens competition • Requirement contracts: require a buyer to purchase all or part of its needs for a product from one seller for a time period ○ Depend on the court's interpretation • Exclusive territorial distributorships: when a manufacturer grants a distributor the sole rights to sell a product in a specific geographic area • Tying arrangement: when a seller requires the purchaser of one product to also buy another item in the line Illegal when the seller can restrain trade

Advertising and Promotion Related Legislation (Regulatory forces)

• FTC Act of 1914: established the FTC, which is concerned with deceptive or misleading advertising and unfair business practices and has the power to (1) issue cease and desist orders and (2) order corrective advertising • Cease and desist order: when the FTC orders a company to stop practices the commission considers unfair • Corrective advertising: FTC can require a company to spend money on advertising to correct previous misleading ads • Deceptive Mail Prevention and Enforcement Act (1999): provides specifications for direct-mail sweepstakes • Telephone Consumer Protection Act (1991): provides requirements for telemarketing promotions ○ Created the National Do Not Call Registry • Children's Online Privacy Protection Act, EU Data Protection Act, CAN-SPAM Internet Tax Freedom Act

Macroeconomic conditions (Economic forces)

• GDP, unemployment, price changes (inflation or deflation) • Inflationary economy: the cost to produce and buy products and services escalates as prices increase ○ If prices rise faster than consumer incomes, quantity demanded decreases Consumer expectations about the economy affect consumer spending

Consumer Income (Economic Forces)

• Gross income/money income: the total amount of money made in one year by a person, household, or family unit - Has remained relatively stable when accounting for inflation • Disposable income: the money a consumer has left after paying taxes to use for necessities such as food, housing, clothing, and transportation -Taxes rise or fall faster than income = changes in disposable income - Dramatic price changes also affect spending Discretionary income: the money that remains after paying for taxes and necessities - nominal income = money value - real income = adjusted for inflation - increasing income inequality - index of consumer confidence: had upward trend, but tanking as of 2014

Technology Enables data analytics (tech forces)

• Marketspace: an information and communication based electronic exchange environment occupied by sophisticated computer and telecommunication technologies and digital offering • Electronic commerce: the activities that use electronic communication in the inventory, promotion, distribution, purchase, and exchange of products and services • Intranets: internet-based technology that allows companies to communicate within the organization • Extranets: " to communicate with suppliers, distributors, and other partners such as advertising agencies • Internet of Things (IoT): products embedded with connectivity-enabled electronics to be connected to a network almost anywhere Resulting information has led to an explosion in interest in advanced analytics that can predict consumer preferences and behavior

Product-Related Legislation

• Patent law: gives inventors the right to exclude others from making, using, or selling products that infringe the patented invention • Federal copyright law: gives the author the exclusive right to print, perform, or otherwise copy that work ○ Secured automatically when the work is created • Digital Millennium Copyright Act (1998): improved protection of copyrighted digital products • Consumer-oriented federal laws ○ Infant Formula Act, Nutritional Labeling and Education Act ○ Fair Packaging and Labeling Act, Child Protection Act ○ Consumer Product Safety Act (1972): establishes the Consumer Product Safety Commission to monitor product safety and establish uniform product safety standards ○ Consumerism: a grassroots movement started in the 1960s to increase the influence, power, and rights of consumers in dealing with institutions • Lanham Act (1946): provides for registration of a company's trademarks Trademark Law Revision Act (1988): companies can secure rights to a name before actual use

The US Population (Social Forces)

• Population becoming larger, older, and more diverse • Current population- 328 million, predicted to exceed 389 by 2050 ○ Means niche markets based on age, life stage, family structure, geographic location, and ethnicity will become increasingly important "Minorities" predicted to become 50% of the population by 2044

Population Shifts (Social Forces)

• Regional shift to southern and western states in the US ○ Result of natural population change ○ State-to-state migration, international migration ○ Recently, population shift from suburbs to exurbs • Census Bureau's statistical areas: ○ Metropolitan statistical area: has at least one urbanized area of 50,000 or more people and adjacent territory that has a high degree of social and economic integration § Metropolitan division: a subdivision of a metropolitan statistical area that has 2.5 million or more ppl ○ Micropolitan statistical area: at least one urban cluster of at least 10,000 but less than 50,000 and adjacent territory that has a high degree of social and economic integration Combined statistical areas: group of metropolitan and micropolitan statistical areas

Price-Related Legislation

• Related to price fixing and price discounting Sherman Act did not outlaw price fixing, but is seen as per se illegal

Control through self-regulation (regulatory forces)

• Self-regulation: where an industry attempts to police itself • Two problems w/ self-regulation ○ Non-compliance and enforcement ○ Self-regulation too strong = may violate the Robinson-Patman Act • Better Business Bureau (BBB): a voluntary alliance of companies whose goal is to help maintain fair practices, ○ Uses "moral suasion" to encourage members to comply w/ its standards

Protecting Competition (Regulatory forces)

• Sherman Antitrust Act (1890): forbids (1) contracts, combinations, or conspiracies in restraint of trade and (2) actual monopolies or attempts to monopolize any part of trade or commerce ○ Clayton Act (1914): forbids certain actions that are likely to lessen competition, even if no actual harm has yet occurred Robinson-Patman Act (1936): makes it unlawful to discriminate in prices charged to different purchasers of the same product, where the effect may substantially lessen competition or help to create a monopoly

The American Household (Social Forces)

• Trends- drop in married couples living together, more households with adult children living at home, unmarried partners, and same-sex partners • For the first time ever, more young adults living with their parents than number living with a spouse or partner • Postponing marriage, babies, not even getting married • Gray divorce: the increasing amount of baby boomers getting divorced Blended family: result of divorce and remarrying

Technology of Tomorrow (Tech forces)

○ New authentication technology ○ Digital ledger/block chain: facilitates instant and efficient digital advertising by connecting advertisers directly with media platforms ○ Smart speakers, digital assistants, and artificial intelligence Wearable technology