Chapter 3

Federal Trade Commission (FTC)

(1) It regulates a variety of business practices and focuses in particular on curbing false advertising, misleading pricing, and deceptive packaging and labeling. (2) It can issue complaints and cease-and-desist orders, and can require companies to run corrective advertising. (3) It also assists businesses in complying with laws.

Although many marketers view political forces as beyond their control and simply adjust to conditions arising from those forces, other organizations seek to influence political forces through public protests or campaign contributions.

1. A recent Supreme Court decision nullified a law limiting corporate political campaign contributions. 2. Companies can also participate in the political process through lobbying to persuade public and/or government officials to favor a particular position in decision making.

Demographic and Diversity Characteristics

1. Changes in a population's demographic characteristics—age, gender, race, ethnicity, marital and parental status, income, and education—have a significant bearing on relationships and individual behavior because they lead to changes in how people live and consume products. a. One demographic change affecting the U.S. marketplace is the increasing proportion of older consumers. b. The number of singles is also on the rise and they have different spending patterns than couples and families with children. c. The U.S. is about to enter another baby boom and these children are more diverse than previous generations. d. Immigration is increasing the multicultural nature of U.S. society 2. These and other changes create unique problems and opportunities for marketers. A more diverse customer base means marketing practices must be modified and diversified to meet changing needs.

Cultural Values

1. Changes in values have dramatically influenced people's needs and desires for products; these values change at varying speeds. 2. Issues of health, nutrition, and exercise have increased in importance, affecting behavior, lifestyles, and product choices. 3. The major source of cultural values is the family. Families are changing, though children remain important parts of the decision-making process. 4. Green marketing helps organizations establish long-term consumer relationships by maintaining, supporting and enhancing the natural environment. Companies are working to confront such problems as waste disposal, recycling, and reducing packaging.

Consumerism

1. Consumerism involves organized efforts by independent individuals, groups, and organizations seeking to protect consumers' rights. 2. These individuals and groups achieve their objectives by writing letters and e-mails to companies, lobbying government agencies, broadcasting public service announcements, and boycotting companies whose activities they deem irresponsible.

Regulatory Agencies

1. Federal regulatory agencies influence many marketing activities, including product development, pricing, packaging, advertising, personal selling, and distribution. These agencies often have the power to enforce specific laws and to establish operating rules and regulations to guide some types of industry practices. 2. Many states, cities, and towns have regulatory agencies that enforce laws and regulations regarding marketing practices within their jurisdictions. 3. State consumer protection laws offer an opportunity for state attorneys general to deal with marketing issues related to fraud and deception. Most states have consumer protection laws.

Self-Regulatory Forces

1. In an attempt to be good corporate citizens and to prevent government intervention, some businesses try to regulate themselves. A number of trade associations have developed self-regulatory programs 2. Many were developed to stop or slow the development of laws and government regulations.

Adoption and Use of Technology

1. It is important for organizations to determine when a technology is changing an industry and to define the strategic influence of the new technology. 2. The extent to which a firm can protect inventions stemming from research also influences its use of technology. 3. Through technology assessment, managers try to foresee the effects of new products and processes on the organization's operations, on other business organizations, and on society in general.

Encouraging Compliance with Laws and Regulations

1. Legal violations usually begin when marketers develop programs that unknowingly overstep legal bounds. 2. The current trend is away from legally based organizational and compliance programs to providing incentives that foster a culture of ethics and responsibility that encourages compliance with laws and regulations.

Monitoring Competition

1. Marketers need to monitor the actions of major competitors to determine what specific strategies competitors are using and how those strategies affect their own strategies. 2. It is not enough to analyze available information; an organization must develop a system for gathering ongoing information about competitors.

Marketing organizations must maintain good relations with elected political officials because

1. Political officials well disposed toward particular organizations or industries are less likely to create or enforce laws and regulations unfavorable to these companies. 2. Political officials can influence how much a government agency purchases and from whom. 3. Political officials can play key roles in helping organizations secure access to foreign markets.

Responding to Environmental Forces

1. Some marketers view environmental forces as uncontrollable and remain passive and reactive to the environment. 2. Other marketers believe that environmental forces can be shaped (through economic, psychological, political, or promotional skills), and these marketers are, to a certain extent, proactive. 3. Which approach is most appropriate for a particular organization depends on its managerial philosophies, objectives, financial resources, customers, human skills, and other environmental forces.

Impact of Technology

1. Technology determines how society satisfies its physiological needs and has vastly improved communications. 2. Mobile devices and consumers' increasing use of the Internet have changed how people communicate and how marketers reach consumers. 3. Negative impacts of technology include concerns over privacy and intellectual property protection. 4. The effects of technology relate to such characteristics as dynamics, reach, and the self-sustaining nature of technological progress. a. The dynamics of technology involve the constant change that often challenges the structures of social institutions. b. Reach refers to the broad nature of technology as it moves through society. c. The self-sustaining nature of technology relates to the fact that technology acts as a catalyst to spur even faster development. 5. The expanding opportunities for e-commerce—the sharing of business information, the ability to maintain business relationships, and the ability to conduct marketing transactions via digital networks—are changing the relationship between marketers and consumers.

Types of Competitive Structures

1. The number of organizations which supply a product may affect the strength of competition 2. A monopoly exists when an organization offers a product that has no close substitute, making it the sole source of supply. 3. An oligopoly exists when a few sellers control the supply of a large proportion of a product. 4. Monopolistic competition exists when an organization with many potential competitors attempts to develop a marketing strategy to differentiate its product. 5. Pure competition, if it existed, would involve a large number of sellers, no one of which could significantly influence price or supply.

Legal and Regulatory Forces

A. A number of federal laws influence marketing decisions and activities (see Table 3.2). B. Procompetitive legislation refers to laws designed to preserve competition and prevent unfair trade practices. C. Consumer protection legislation includes federal and state consumer protection laws that deal with consumer safety, hazardous materials, information disclosure, and specific marketing practices.

Examining and Responding to the Marketing Environment

A.The marketing environment consists of external forces that directly or indirectly influence an organization's acquisition of inputs (human, financial, natural resources and raw materials, and information) and creation of outputs (goods, services, or ideas). B.These influences can create opportunities and threats for marketers, so marketers try to forecast what will happen. C.Environmental Scanning and Analysis

Economic Conditions

Changes in general economic conditions affect (and are affected by) supply and demand, buying power, willingness to spend, consumer expenditure levels, and the intensity of competitive behavior.

Economic Forces

Economic forces in the marketing environment influence both marketers' and customers' decisions and activities.

business cycle

Fluctuations in the economy follow a general pattern

Willingness to Spend

People's willingness to spend (their inclination to buy because of expected satisfaction from a product) is related to their ability to buy.

Political Forces

Political, legal, and regulatory forces of the marketing environment are closely interrelated.

Environmental scanning

The process of collecting information about forces in the marketing environment. a. Scanning involves observation, secondary sources such as business, trade, government, general-interest publications, and marketing research. b. Environmental scanning can give marketers an edge over competitors in taking advantage of current trends.

Buying Power

The strength of a person's 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. Marketers need to be aware of current levels of and expected changes in buying power because they directly affect the types and quantities of goods and services that consumers purchase.

National Advertising Review Board (NARB)

a self-regulatory entity that considers cases in which an advertiser challenges issues raised by the National Advertising Division about an advertisement. Though it has no official enforcement powers, the NARB can publicize questionable practices and file complaints with the FTC.

Better Business Bureau

a system of nongovernmental, independent, local regulatory agencies that are supported by local businesses and aid in settling problems between specific business organizations and customers. a. The Council of Better Business Bureaus is a national organization composed of all local Better Business Bureaus. b. The National Advertising Division of the Council of Better Business Bureaus operates a self-regulatory program that investigates claims of alleged deceptive advertising.

Types of competition

a. Brand competitors market products with similar features and benefits to the same customers at similar prices. b. Product competitors compete in the same product class, but their products have different features, benefits, and prices. c. Generic competitors provide very different products that solve the same problem or satisfy the same basic customer need. d. Total budget competitors compete for the limited financial resources of the same customers.

Willingness to spend is affected by several factors:

a. Buying power b. A product's price and its value c. The amount of satisfaction received from a product already owned d. Expectations about future employment, income levels, prices, family size, and general economic conditions

Major sources of buying power are income, credit, and wealth.

a. Income is money received through wages, rents, investments, pensions, and subsidy payments for a given period. (1) Disposable income, or after-tax income, is used for spending or saving. It is affected by wage levels, rate of unemployment, interest rates, dividend rates, and tax rates. (2) Discretionary income is disposable income available for spending and saving after an individual has purchased the basic necessities of food, clothing, and shelter. (3) Credit enables people to spend future income now or in the near future, but it increases current buying power at the expense of future buying power. (a) Credit must be available. (b) Willingness to obtain credit is affected by the interest rates. (c) Credit is also affected by the terms, such as down payment size and amount of monthly payments required. (4) Wealth is the accumulation of past income, natural resources, and financial resources.

four stages of the business cycle

a. Prosperity is a stage of the business cycle characterized by low unemployment and relatively high total income, which together cause high buying power. Marketers often expand their product offerings to take advantage of increased buying power. They may intensify distribution and promotion efforts to capture greater market share. b. Recession is a stage of the business cycle during which unemployment rises and total buying power declines, stifling both consumer and business spending. (1) Marketers should focus on marketing research during a recession to determine precisely what functions buyers want and integrate these functions into their product. (2) Promotion efforts should emphasize value and utility. c. Depression is a business cycle stage in which unemployment is extremely high, wages are very low, total disposable income is at a minimum, and consumers lack confidence in the economy. d. Recovery is a stage of the business cycle in which the economy moves from depression or recession to prosperity. Marketers should be as flexible as possible to be able to adjust their strategies as economic gloom subsides and buying power increases.

Self-regulatory programs have both advantages and disadvantages over laws and regulatory agencies.

a. Self-regulatory programs have the advantages of being less expensive to establish and implement, have more realistic and operational guidelines, and reduce the need to expand government bureaucracy. b. Self-regulatory programs are limited because they are not mandatory for nonmembers, may lack the tools or authority to enforce guidelines, and may be less strict than those established by government agencies.

Sociocultural forces

are the influences in a society and its culture(s) which bring about changes in attitudes, beliefs, norms, customs, and lifestyles.

Most significant competition?

brand competitors because buyers typically see the different products of these organizations as direct substitutes.

competition

other organizations that market products similar to its own or products which can be substituted for its products in the same geographic area.

Technology

the application of knowledge and tools to solve problems and perform tasks more efficiently. 1. It develops out of research conducted by many different kinds of organizations. 2. Rapid technological change is expected to accelerate. 3. Technology influences buyers' and marketers' decisions.

Environmental analysis

the process of assessing and interpreting the information gathered through scanning. a. Marketers evaluate the information for accuracy, try to resolve inconsistencies in the data, and assign significance to the findings. b. Environmental analysis enables marketers to identify potential threats and opportunities linked to environmental changes.