1. McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

2. Explain how environmental scanning provides information about social, economic, technological, competitive, and regulatory forces. LO1 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. LO3 LO2 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 3, YOU SHOULD BE ABLE TO: 3-2

3. Describe how technological changes can affect marketing. Discuss the forms of competition that exist in a market and key components of competition. LO4 LO5 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 3, YOU SHOULD BE ABLE TO: Explain the major legislation that ensures competition and regulates the elements of the marketing mix. LO6 3-3

4. WEB 2.0 IS ALL ABOUT YOU! 3-4

5. An Environmental Scan of Today’s Marketplace ENVIRONMENTAL SCANNING LO1  Environmental Scanning Environmental Scanning Tracking Environmental Trends Example: Coffee Marketers 3-5

6. FIGURE 3-1 FIGURE 3-1 Environmental forces affect the organization, its suppliers, and its customers 3-6

7. FIGURE 3-2 FIGURE 3-2 An environmental scan of today’s marketplace shows the many important trends that influence marketing 3-7

8.  Demographics Demographics SOCIAL FORCES DEMOGRAPHICS LO2 World Population U.S. Population  Social Forces Social Forces 3-8

9. FIGURE 3-3 FIGURE 3-3 Distribution of the world’s population 3-9

10.  Baby Boomers: 1946 - 1964 Baby Boomers: 1946 - 1964  Generation X: 1965 - 1976 Generation X: 1965 - 1976  Generation Y: 1977 - 1994 Generation Y: 1977 - 1994  Millennials: 1995 +  Generational Marketing SOCIAL FORCES DEMOGRAPHICS—GENERATIONAL COHORTS LO2 3-10

11. Olay, Hyatt, and Motorola Which generational cohort is being reached? 3-11

12.  Marital Status  Cohabitation  Blended Family Blended Family SOCIAL FORCES DEMOGRAPHICS—THE AMERICAN HOUSEHOLD LO2 3-12

13.  Regional Shift in the U.S.  Shifts Within States SOCIAL FORCES DEMOGRAPHICS—POPULATION SHIFTS LO2 Suburbs Exurbs Penturbia 3-13

14.  Statistical Areas (SA): Illinois SOCIAL FORCES DEMOGRAPHICS—POPULATION SHIFTS LO2 Metropolitan Division: Chicagoland Micropolitan SA: Dixon, IL Metropolitan SA: St. Louis, MO & SW IL Combined SA: NE Illinois 3-14

15.  Composition  Trends SOCIAL FORCES DEMOGRAPHICS—RACIAL & ETHNIC DIVERSITY LO2 African Americans Hispanics Asian Americans  Multicultural Marketing Multicultural Marketing 3-15

16. FIGURE 3-4 FIGURE 3-4 Racial and ethnic groups (excluding whites) are concentrated in geographic regions of the United States 3-16

17.  Culture Culture  The Changing Attitudes and Roles of Men and Women  Changing Values SOCIAL FORCES CULTURE LO2 Value Consciousness 3-17

18. Consumer Sentiment ECONOMIC FORCES MACROECONOMIC CONDITIONS LO3  Economy Economy Inflation Recession 3-18

19. FIGURE 3-5 FIGURE 3-5 The Vehicle Buying Attitudes component of the Index of Consumer Sentiment (ICS) 3-19

20. FIGURE 3-6 FIGURE 3-6 Distribution of U.S. household income: 2006 3-20

21. ECONOMIC FORCES CONSUMER INCOME LO3  Gross Income Gross Income  Disposable Income Disposable Income  Discretionary Income Discretionary Income 3-21

22. GOING ONLINE ESRI: How Typical is Your Hometown? 3-22

23.  Technology Technology Production of Existing Products Changed  Impact on Customer Value Plummeting Costs of Tech-Based Products New Products Developed TECHNOLOGICAL FORCES ITS FUTURE AND IMPACT ON CUSTOMER VALUE LO4  Recycling  Precycling 3-23

24. Pioneer, Dragon, and Rhapsody What products might be replaced with these? 3-24

25.  Marketspace Marketspace  Electronic Commerce Electronic Commerce TECHNOLOGICAL FORCES ELECTRONIC BUSINESS TECHNOLOGIES LO4  Intranet Intranet  Extranets Extranets 3-25

26.  Pure Competition  Monopolistic Competition COMPETITIVE FORCES ALTERNATIVE FORMS OF COMPETITION LO5  Oligopoly  Pure Monopoly 3-26

27. FIGURE 3-A FIGURE 3-A Continuum of competition 3-27

28.  Barriers to Entry Barriers to Entry  Power of Buyers and Sellers COMPETITIVE FORCES COMPONENTS OF COMPETITION LO5  Existing Competitors and Substitutes  Small Businesses as Competitors 3-28

29. USING MARKETING DASHBOARDS Assessing Competition is a Key to Success The Effect of Price Reductions on Sales Increases 3-29

30.  Regulation Regulation  Protecting Competition Robinson-Patman Act (1936) Sherman Antitrust Act (1890) Clayton Act (1914) REGULATORY FORCES FEDERAL LEGISLATION LO6 3-30

31.  Product-Related: Company Protection Digital Millennium Copyright Act (1998) Patent Law Copyright Law REGULATORY FORCES FEDERAL LEGISLATION LO6 3-31

32.  Product-Related: Consumer Protection Consumer Product Safety Commission Nutritional Labeling Consumer Product Safety Act (1972) Consumerism REGULATORY FORCES FEDERAL LEGISLATION LO6 3-32

33.  Product-Related: Company and Consumer Protection Trademark Law Revision Act (1988) Landham Act (1946) Madrid Protocol (2003) Federal Dilution Act (1995) U.S. Supreme Court: Trademark Colors Doppelgangers REGULATORY FORCES FEDERAL LEGISLATION LO6 3-33

34. Kleenex, Band-Aid, and Q-Tips Are these becoming generic trademarks? 3-34

35.  Pricing-Related Exclusive Dealing Requirement Contracts  Distribution (Place)-Related Exclusive Territorial Distributorships Tying Arrangement REGULATORY FORCES FEDERAL LEGISLATION LO6 3-35

36.  Self-Regulation Self-Regulation REGULATORY FORCES FEDERAL LEGISLATION LO6 FTC Act of 1914 Do Not Call Registry  Advertising and Promotion-Related CAN-SPAM Act (2004)  Cease and Desist Order  Corrective Advertising 3-36

37. GEEK SQUAD: A NEW BUSINESS FOR A NEW ENVIRONMENT VIDEO CASE 3 3-37

38. VIDEO CASE 3 Geek Squad 1. What are the key environmental factors that created an opportunity for Robert Stephens to start the Geek Squad? 3-38

39. 2. What changes in the purchasing patterns of (a) all consumers, and (b) women made the acquisition of Geek Squad particularly important for Best Buy? VIDEO CASE 3 Geek Squad 3-39

40. 3. Based on the case information and what you know about consumer electronics, conduct an environmental scan for Geek Squad to identify key trends. For each of the five environmental forces (social, economic, technological, competitive, and regulatory) identify trends likely to influence Geek Squad in the near future. VIDEO CASE 3 Geek Squad 3-40

41. 4. What promotional activities would you recommend to encourage consumers who use independent installers to switch to Geek Squad? VIDEO CASE 3 Geek Squad 3-41

42. TRENDS THAT MAY CHANGE MARKETING IN THE FUTURE SUPPLEMENTAL LECTURE NOTE 3-1 3-42

43. WILL SELF-REGULATION BALANCE THE NEED FOR REGULATION? SUPPLEMENTAL LECTURE NOTE 3-2 3-43

44. AN ENVIRONMENTAL SCAN FOR A PANASONIC HIGH DEFINITION TV IN-CLASS ACTIVITY 3-1 3-44

45. Panasonic Viera 50” HDTV 3-45

46. 3-46

47. COMPETITIVE INTELLIGENCE IN-CLASS ACTIVITY 3-2 3-47

48. FIGURE 3-B FIGURE 3-B Porter’s components of competition 3-48

49. Environmental Scanning Environmental scanning is the process of continually acquiring information on events occurring outside the organization to identify and interpret potential trends. 3-49

50. Social Forces Social forces are the demographic characteristics of the population and its values. 3-50

51. Demographics Demographics describe a population according to selected characteristics such as age, gender, ethnicity, income, and occupation. 3-51

52. Baby Boomers Baby boomers are the generation of children born between 1946 and 1964. 3-52

53. Generation X Generation X includes the 15 percent of the population born between 1965 and 1976. Also called baby bust. 3-53

54. Generation Y Generation Y includes the 72 million Americans born between 1977 and 1994. Also called echo-boom or baby boomlet. 3-54

55. Blended Family A blended family is a family formed by merging two previously separated units into a single household. 3-55

56. Multicultural Marketing Multicultural marketing consists of combinations of the marketing mix that reflect the unique attitudes, ancestry, communication preferences, and lifestyles of different races. 3-56

57. Culture Culture consists of the set of values, ideas, and attitudes that are learned and shared among the members of a group. 3-57

58. 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. 3-58

59. Economy The economy pertains to the income, expenditures, and resources that affect the cost of running a business and household. 3-59

60. 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. 3-60

61. Disposable Income Disposable income is the money a consumer has left after paying taxes to use for food, shelter, clothing, and transportation. 3-61

62. Discretionary Income Discretionary income is the money that remains after paying for taxes and necessities. 3-62

63. Technology Technology consists of the inventions or innovations from applied science or engineering research. 3-63

64. Marketspace Marketspace consist of information- and communication- based electronic exchange environment mostly occupied by sophisticated computer and telecommunication technologies and digitized offerings. 3-64

65. 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. 3-65

66. Intranet An intranet is an Internet-based network used within the boundaries of an organization. 3-66

67. Extranets Extranets are Internet-based technologies used to permit communication between a company and its suppliers, distributors, and other partners. 3-67

68. Competition Competition consists of the alternative firms that could provide a product to satisfy a specific market’s needs. 3-68

69. Barriers To Entry Barriers to entry consist of business practices or conditions that make it difficult for new firms to enter the market. 3-69

70. Regulation Regulation consists of the restrictions state and federal laws place on business with regard to the conduct of its activities. 3-70

71. Consumerism Consumerism is a grassroots movement started in the 1960s to increase the influence, power, and rights of consumers in dealing with institutions. 3-71

72. Self-Regulation Self-regulation is an alternative to government control where an industry attempts to police itself. 3-72