SCANNING THE MARKETING ENVIRONMENT CHAPTER SCANNING THE MARKETING ENVIRONMENT

AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: Explain how environmental scanning provides information about social, economic, technological, competitive, and regulatory forces. Describe how social forces such as demographics and culture and economic forces such as macroeconomic conditions and consumer income affect marketing.

AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: Describe how technological changes can affect marketing. Discuss the forms of competition that exist in a market, key components of competition, and the impact of competition on corporate structures.

AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: Explain the major legislation that ensures competition and regulates the elements of the marketing mix.

IT’S SHOW TIME!

Apple iPod Video How has the entertainment world changed?

ENVIRONMENTAL SCANNING IN THE NEW MILLENNIUM An Environmental Scan of Today’s Marketplace

FIGURE 3-1 Environmental forces affecting the organization, as well as its suppliers and customers

FIGURE 3-2 An environmental scan of today’s marketplace

SOCIAL FORCES Social Forces Demographics The World Population at a Glance The U.S. Population Generational Cohorts Baby Boomers Millennials Generation X Generational Marketing Generation Y

Olay Total Effects Which generational cohort is being reached?

American Express Which generational cohort is being reached? This advertisement is an example of how companies are responding to the economic trend toward money management as many workers approach retirement. The copy reads “Imagine feeling prepared for retirement.”

DKNY Kids Which generational cohort is being reached?

Motorola Which generational cohort is being reached?

SOCIAL FORCES Demographics Population Shifts Statistical Areas Metropolitan Statistical Area Micropolitan Statistical Area Metropolitan Divisions Combined Statistical Areas

SOCIAL FORCES Demographics Culture Racial and Ethnic Diversity Multicultural Marketing Culture Changing Values

FIGURE 3-3 Racial and ethnic concentrations in the United States (excluding whites)

1. Describe three generational cohorts. Concept Check 1. Describe three generational cohorts. A: (1) Baby boomers is the generation born between 1946 and 1964. (2) Generation X is the 15 percent of the U.S. population born between 1965 and 1976. (3) Generation Y is the 72 million Americans born between 1977 and 1994.

2. Why are many companies developing multicultural marketing programs? Concept Check 2. Why are many companies developing multicultural marketing programs? A: (1) The racial and ethic diversity of the U.S. is changing rapidly due to the increases in the African American, Asian, and Hispanic populations, which increases their economic impact. (2) An accurate understanding of the culture of each group is essential if marketing efforts are to be successful.

Concept Check 3. How are important values such as “health and fitness” reflected in the marketplace today. A: Millions of Americans are trying to live a healthier lifestyle. In response, companies have developed vitamins, exercise equipment, fitness drinks, magazines, and other products to target these consumers.

Macroeconomic Conditions ECONOMIC FORCES Economy Macroeconomic Conditions Consumer Income Gross Income Disposable Income Discretionary Income

FIGURE 3-4 Income distribution of U. S. households

What happens when discretionary income rises? Cunard Queen Mary What happens when discretionary income rises?

TECHNOLOGICAL FORCES Technology Technology of Tomorrow Technology’s Impact on Customer Value

Memorex Thumb Drive What products might be replaced with this?

Napster What products might be replaced with this?

What products might be replaced with this? LG Plasma Screen TV What products might be replaced with this?

Bayer How does technology change the marketplace? The technological trend created by advances in cancer drugs is illustrated by this Bayer ad. Their Science for a Better Life” campaign describes Bayer HealthCare’s efforts to “improve both cancer diagnosis and the monitoring of cancer therapy.”

Electronic Business Technologies TECHNOLOGICAL FORCES Electronic Business Technologies Marketspace Electronic Commerce Intranet Extranets

Alternative Forms of Competition COMPETITIVE FORCES Competition Alternative Forms of Competition Pure Competition Monopolistic Competition Oligopoly Pure Monopoly Small Businesses as Competitors

FIGURE 3-A Continuum of competition This figure compares the four forms of competition on three dimensions.

Concept Check 1. What is the difference between a consumer’s disposable and discretionary income? A: Disposable income is the money a consumer has left after paying taxes to use for food, clothing, and shelter. Discretionary income is the money that remains after paying taxes for necessities.

2. How does technology impact customer value? Concept Check 2. How does technology impact customer value? A: (1) Consumers assess value on the basis of other dimensions, such as quality, service, and relationships, due to the decline in the cost of technology. (2) Technology provides value through the development of new products. (3) Technology has changed the way existing products are produced through recycling and precycling.

3. In pure competition there are a ____ number of sellers. large Concept Check 3. In pure competition there are a ____ number of sellers. large

Protecting Competition REGULATORY FORCES Regulation Protecting Competition Sherman Antitrust Act (1890) Clayton Act (1914) Robinson-Patman Act (1936)

Product-Related Regulation REGULATORY FORCES Product-Related Regulation Company Protection Patent Law Copyright Law Digital Millennium Copyright Act (1998)

Product-Related Regulation REGULATORY FORCES Product-Related Regulation Consumer Protection Nutritional Labeling Consumer Product Safety Act (1972) Consumer Product Safety Commission Consumerism

Product-Related Regulation REGULATORY FORCES Product-Related Regulation Both Company and Consumer Protection Landham Act (1946) Trademark Law Revision Act (1988) Madrid Protocol (2003) Federal Dilution Act (1995)

Kleenex, Band-Aid, and Q-Tips Becoming generic trademarks?

Pricing-Related Legislation REGULATORY FORCES Pricing-Related Legislation Distribution-Related Legislation Exclusive Dealing Requirement Contracts Exclusive Territorial Distributorships Tying Arrangement

Advertising- and Promotion-Related Legislation REGULATORY FORCES Advertising- and Promotion-Related Legislation FTC Act of 1914 Cease and Desist Order Corrective Advertising Do Not Call Registry CAN-SPAM Act (2004) Control through Self-Regulation

Does self-regulation work? BBBOnline Does self-regulation work?

Concept Check 1. The _______________ Act was punitive toward monopolies, whereas the _______ Act was preventative. Sherman Antitrust Clayton

2. Describe some of the recent changes in trademark law. Concept Check 2. Describe some of the recent changes in trademark law. A: The Trademark Law Revision Act (1988) allows companies to secure rights to a name before its actual use by declaring an intent to use the name. Also, the U.S. Supreme Court recently ruled that a company now may obtain trademarks for colors associated with their products.

Concept Check 3. How does the Better Business Bureau encourage companies to follow its standards for commerce? A: Companies must agree to follow BBB standards before they are allowed to display the BBB logo.

USING THE WEB TO SCAN THE ENVIRONMENT GOING ONLINE

Going Online 1. What is the current (to the minute) population of the United States? What is the projected population of the United States in 2050? Current 2050

Going Online 2. What population or social trends can be identified with UN information?

FLYTE TYME PRODUCTIONS, INC.: THE BEST IDEA WINS VIDEO CASE 3

VIDEO CASE 3 Flyte Tyme Productions

VIDEO CASE 3 Flyte Tyme Productions 1. Based on the case information and what you know about today’s music industry, conduct an environmental scan for Flyte Tyme to identify key trends. For each of the five environmental forces (social, economic, technological, competitive, and regulatory), identify trends that are likely to influence it in the near future.

VIDEO CASE 3 Flyte Tyme Productions 2. About 80 percent of start-up businesses fail within five years. What reasons explain Flyte Tyme’s continuing success?

VIDEO CASE 3 Flyte Tyme Productions 3. What marketing factors and actions must Jimmy Jam and Terry Lewis consider in developing music for (a) a new, unknown artist and (b) an established artist like Janet Jackson?

VIDEO CASE 3 Flyte Tyme Productions 4. What promotional and distribution strategies should Flyte Tyme use to get its music in front of prospective buyers?

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

CONDUCTING AN ENVIRONMENTAL SCAN FOR A PANASONIC DVR IN-CLASS ACTIVITY 3-1

Panasonic Digital Video Recorder TV Ad

Panasonic DVR Print Ads (Brochure)

COMPETITIVE INTELLIGENCE: FULD & COMPANY IN-CLASS ACTIVITY 3-2

FIGURE 3-B Porter’s five competitive forces This figure displays the five competitive forces that drive competition in an industry. The model is based on Michael Porter’s work on competitive analysis.

Fuld & Company Brochure

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

Social Forces The social forces of the environment include the demographic characteristics of the population and its values.

Demographics Demographics describes a population according to selected characteristics such as age, gender, ethnicity, income, and occupation.

Baby Boomers Baby boomers is the generation of children born between 1946 and 1964.

Generation X Generation X includes the 15% of the U.S. population born between 1965 and 1976.

Generation Y Generation Y includes the 72 million Americans born between 1977 and 1994.

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

Culture Culture incorporates the set of values, ideas, and attitudes that are learned and shared among the members of a group.

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

Technology Technology refers to inventions or innovations from applied science or engineering research.

Marketspace Marketspace is an information- and communication-based electronic exchange environment mostly occupied by sophisticated computer and telecommunication technologies and digitized offerings.

Competition Competition refers to the alternative firms that could provide a product to satisfy a specific market’s need.

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

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

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