The Marketing Environment Chapter 3

Environmental Scanning What is environmental scanning? What is environmental scanning? “The process of continually acquiring information on events occurring outside the organization.” “The process of continually acquiring information on events occurring outside the organization.” Why is it important? Why is it important?

Environmental Forces Social Social Economic Economic Technological Technological Competitive Competitive Regulatory Regulatory

Social Forces Demographic characteristics of the population and its values. Demographic characteristics of the population and its values. Who is in the population and what is important to them? Who is in the population and what is important to them? Defined as Defined as Demographics Demographics Culture Culture

The Mature Household 55 years old or older 55 years old or older 23% of the population 23% of the population 75% of country’s wealth 75% of country’s wealth Healthcare is important issue Healthcare is important issue Cautious consumers Cautious consumers Source: Mower & Minor. “Consumer Behavior: A Framework.” Prentice-Hall, New Jersey, 2001.

Baby Boomers Born between Born between Largest group in population Largest group in population 30% of the population 30% of the population Want to age gracefully Want to age gracefully Rise in cosmetic/health products Rise in cosmetic/health products More brand loyal than younger groups More brand loyal than younger groups Source: Mower & Minor. “Consumer Behavior: A Framework.” Prentice-Hall, New Jersey, 2001.

Generation X Born between Born between million in U.S. 17 million in U.S. “A lost generation” “A lost generation” “Cut teeth” on technology “Cut teeth” on technology Value religion, rituals, materialism Value religion, rituals, materialism “Global teens”: Similar experiences across national boundaries “Global teens”: Similar experiences across national boundaries Source: Mower & Minor. “Consumer Behavior: A Framework.” Prentice-Hall, New Jersey, 2001.

Generation Y Born after 1976 Born after % of the population 28% of the population Grew up with technology Grew up with technology Sons and daughters of Baby Boomers Sons and daughters of Baby Boomers Politically active Politically active Less racially sensitive Less racially sensitive Source: Mower & Minor. “Consumer Behavior: A Framework.” Prentice-Hall, New Jersey, 2001.

Tweens Be“tween” being a child and a teenager Be“tween” being a child and a teenager Ages 8-12 Ages 8-12 Brand conscious Brand conscious But not necessarily brand loyal But not necessarily brand loyal

Other Social Trends Family structure Family structure Decline in “traditional” family Decline in “traditional” family Population Location Population Location

Racial and Ethnic Groups Hispanic and African American populations are growing Hispanic and African American populations are growing Ethnic groups tend to be highly concentrated Ethnic groups tend to be highly concentrated

Social Forces- Culture “The set of values, ideas, and attitudes of a homogeneous group of people passed down from one generation to the next” “The set of values, ideas, and attitudes of a homogeneous group of people passed down from one generation to the next” Marketers must be aware of shifts Marketers must be aware of shifts Change of women’s role in society Change of women’s role in society Changes in values Changes in values

Economic Forces “Deals with the income, expenditures, and resources that affect the cost of running a business or household” “Deals with the income, expenditures, and resources that affect the cost of running a business or household” Macroeconomic Macroeconomic Microeconomic Microeconomic

Macroeconomic Forces Deals with entire market- aggregate of all “players” within it. Deals with entire market- aggregate of all “players” within it. If consumers feel they will be better off, they will buy more. If consumers feel they will be better off, they will buy more. As a result, the Consumer Sentiment Index increases As a result, the Consumer Sentiment Index increases If consumers feel they will be worse off, they will opt to save money or be hesitant to spend it. If consumers feel they will be worse off, they will opt to save money or be hesitant to spend it. The Consumer Sentiment Index decreases The Consumer Sentiment Index decreases

Microeconomic Forces Gross income Gross income Total amount of money earned annually by an individual Total amount of money earned annually by an individual Disposable Income Disposable Income Money remaining after paying taxes Money remaining after paying taxes Discretionary Income Discretionary Income Money remaining after paying taxes and for necessities Money remaining after paying taxes and for necessities

Technological Forces Becoming increasingly important Becoming increasingly important As technology becomes more commonplace, prices fall. As technology becomes more commonplace, prices fall. Designs new products or improves existing ones Designs new products or improves existing ones Improves systems and flow of information Improves systems and flow of information Internet Internet Intranet Intranet Extranet Extranet

Competitive Forces “Alternative firms that could provide a product to satisfy a specific market’s need” “Alternative firms that could provide a product to satisfy a specific market’s need” Perfect competition Perfect competition Monopoly Monopoly Oligopoly Oligopoly Monopolistic competition Monopolistic competition

Competitive Forces Porter’s Model Porter’s Model Barriers to Entry Barriers to Entry Buyer Power Buyer Power Supplier Power Supplier Power Degree of Rivalry Degree of Rivalry Substitutes Substitutes

Regulatory Forces “Restrictions state and federal laws place on business with regard to the conduct of its activities.” “Restrictions state and federal laws place on business with regard to the conduct of its activities.” Protecting Competition Protecting Competition Sherman Anti-Trust Sherman Anti-Trust Tariffs? Tariffs?

Regulatory Forces Product-Related Legislation Product-Related Legislation Company Protection Company Protection Consumer Protection Consumer Protection Consumerism Consumerism Protection for Both Protection for Both Trademarks Trademarks Pricing-Related Legislation Pricing-Related Legislation “Price-fixing” “Price-fixing”

Regulatory Forces Place-Related Legislation Place-Related Legislation Exclusive dealing Exclusive dealing Requirement contracts Requirement contracts Exclusive territorial distributorships Exclusive territorial distributorships Tying arrangement Tying arrangement Promotion-Related Legislation Promotion-Related Legislation Federal Trade Commission Federal Trade Commission

Regulatory Forces Governmental v. Self-regulation Governmental v. Self-regulation Non-compliance Non-compliance Enforcement Enforcement South Africa markets South Africa markets