1. The Marketing Environment Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook 3 3 Part One Marketing and Its Environment

2. Copyright © Houghton Mifflin Company. All rights reserved. 3–23–2 Chapter Learning Objectives To recognize the importance of environmental scanning and analysis To understand how competitive and economic factors affect organizations’ ability to compete and customers’ ability and willingness to buy products To identify the types of political forces in the marketing environment To understand how laws, government regulations, and self- regulatory agencies affect marketing activities To explore the effects of new technology on society and on marketing activities To analyze sociocultural issues that marketers must deal with as they make decisions

3. Copyright © Houghton Mifflin Company. All rights reserved. 3–33–3 Chapter Outline Examining and Responding to the Marketing Environment Competitive Forces Economic Forces Political Forces Legal and Regulatory Forces Technological Forces Sociocultural Forces

4. Copyright © Houghton Mifflin Company. All rights reserved. 3–43–4 Examining and Responding to the Marketing Environment Environmental Scanning –The process of collecting information about forces in the marketing environment Observation Secondary sources Market research Environmental Analysis –The process of assessing and interpreting the information gathered through environmental scanning Accuracy Consistency Significance

5. Copyright © Houghton Mifflin Company. All rights reserved. 3–53–5 Examining and Responding to the Marketing Environment (cont’d) Responding to Environmental Forces –Reactive approach Passive view of environment as uncontrollable Current strategy is cautiously adjusted to accommodate environmental changes –Proactive approach Actively attempts to shape and influence environment Strategies are constructed to overcome market challenges and take advantage of opportunities

6. Copyright © Houghton Mifflin Company. All rights reserved. 3–63–6 Competitive Forces

7. Copyright © Houghton Mifflin Company. All rights reserved. 3–73–7 TABLE 3.1

8. Copyright © Houghton Mifflin Company. All rights reserved. 3–83–8 Competitive Forces (cont’d) Monitoring Competition –Helps determine competitors’ strategies and their effects on firm’s strategies –Guides development of competitive advantage and adjusting firm’s strategy –Provides ongoing information about competitors –Assists in maintaining a marketing orientation

9. Copyright © Houghton Mifflin Company. All rights reserved. 3–93–9 Economic Forces Business Cycle –A pattern of economic fluctuations that has four stages: Prosperity Recession Depression Recovery Positive Economic Indicators Time

10. Copyright © Houghton Mifflin Company. All rights reserved. 3–10 Economic Forces (cont’d)

11. Copyright © Houghton Mifflin Company. All rights reserved. 3–11 Economic Forces (cont’d) Buying Power –Resources, such as money, goods, and services, that can be traded in an exchange –Income Disposable income Discretionary income –Wealth

12. Copyright © Houghton Mifflin Company. All rights reserved. 3–12 American Customer Satisfaction Index Source: “American Customer Satisfaction Index, “ University of Michigan Business School, May 21, 2001, www.bus.umich.edu/research/nqrc/natscores.html. FIGURE 3.1

13. Copyright © Houghton Mifflin Company. All rights reserved. 3–13 Economic Forces (cont’d) Willingness to Spend –An inclination to buy because of expected satisfaction from a product, influenced by the ability to buy and numerous psychological and social forces –Expectations influencing the willingness to spend: Future employment Income levels Prices Family size General economic conditions (e.g., rising prices)

14. Copyright © Houghton Mifflin Company. All rights reserved. 3–14 Political Forces Reasons for Maintaining Relations with Elected Officials and Politicians –To influence the creation of laws and regulations affecting industries and specific businesses –Governments are potentially large customers –Political officials can assist in securing foreign markets –Campaign contributions of corporate-related individuals and political action committees may provide influence –Lobbyists work to communicate businesses’ concerns about issues affecting their industries and markets

15. Copyright © Houghton Mifflin Company. All rights reserved. 3–15 Legal and Regulatory Forces Sherman Antitrust Act (1890) Clayton Act (1914) Federal Trade Commission Act (1914) Robinson-Patman Act (1936) Wheeler-Lea Act (1938) Lanham Act (1946) Celler-Kefauver Act (1950) Fair Packaging and Labeling Act (1966)

16. Copyright © Houghton Mifflin Company. All rights reserved. 3–16 Legal and Regulatory Forces (cont’d) Magnuson-Moss Warranty (FTC) Act (1975) Consumer Goods Pricing Act (1975) Antitrust Improvements Act (1976) Trademark Counterfeiting Act (1980) Trademark Law Revision Act (1988) Nutrition Labeling and Education Act (1990) Telephone Consumer Protection Act (1991) Federal Trademark Dilution Act (1995) Digital Millennium Copyright Act (1995) Children’s Online Privacy Protection Act (2000)

17. Copyright © Houghton Mifflin Company. All rights reserved. 3–17 Legal and Regulatory Forces (cont’d) Procompetitive Legislation –Laws designed to: preserve competition prevent the restraint of trade and the monopolizing of markets prevent illegal competitive trade practices Consumer Protection Legislation –Laws enacted to protect customers from: adulterated and mislabeled food and drugs deceptive trade practices and the sale of hazardous products the invasion of personal privacy and the misuse of personal information by firms

18. Copyright © Houghton Mifflin Company. All rights reserved. 3–18 Legal and Regulatory Forces (cont’d) Encouraging Compliance with Laws and Regulations –Movement is toward greater organizational accountability for misconduct of employees. Regulatory Agencies –Federal Trade Commission (FTC) influences marketing activities most; can seek civil penalties and require corrective advertising Self-Regulatory Forces –Better Business Bureau –National Advertising Review Board (NARB)

19. Copyright © Houghton Mifflin Company. All rights reserved. 3–19

20. Copyright © Houghton Mifflin Company. All rights reserved. 3–20 Technological Forces Technology –The application of knowledge and tools to solve problems and perform tasks more efficiently Impact of Technology –Dynamic means constant change –Reach refers to how technology quickly moves through society. –The self-sustaining nature of technology as the catalyst for even faster development

21. Copyright © Houghton Mifflin Company. All rights reserved. 3–21 Technological Forces (cont’d) Adoption and Use of Technology –Failing to adopt new technology can cause a loss of market leadership. –Protecting the firm’s inventions is critical. –Using a technology assessment allows the firm to foresee the effects of new products and processes on the firm.

22. Copyright © Houghton Mifflin Company. All rights reserved. 3–22 Top Ten Activities for Wireless Web Device Users FIGURE 3.2 Source: “New Survey Indicates Wireless Web Penetration Highest among Young Affluent Males,” TNS Intersearch, press release, Feb. 7, 2001, http://www.intersearch.tnsofres.com/.

23. Copyright © Houghton Mifflin Company. All rights reserved. 3–23 Sociocultural Forces –The influences in a society and its culture(s) that change people’s attitudes, beliefs, norms, customs, and lifestyles Demographic Diversity and Characteristics –Increasing proportion of older consumers –Rising number of single adults –Entering another baby boom –Increasingly multicultural U.S. society

24. Copyright © Houghton Mifflin Company. All rights reserved. 3–24 U.S. Population Projections by Race Source: Bureau of the Census, Statistical Abstract of the United States, 2000 (Washington, DC: Government Printing Office, 2001), p. 17. FIGURE 3.3

25. Copyright © Houghton Mifflin Company. All rights reserved. 3–25 Sociocultural Forces (cont’d) Cultural Values –Primary source of values is the family –Values influence: Eating habits (healthier foods) Alternative health and medical treatment choices Attitudes toward marriage Concern for the natural environment Consumerism –Organized efforts by individuals, groups, and organizations to protect consumers’ rights

26. Copyright © Houghton Mifflin Company. All rights reserved. 3–26 After reviewing this chapter you should: Recognize the importance of environmental scanning and analysis. Understand how competitive and economic factors affect organizations’ ability to compete and customers’ ability and willingness to buy products. Be able to identify the types of political forces in the marketing environment. Understand how laws, government regulations, and self- regulatory agencies affect marketing activities. Know the effects of new technology on society and on marketing activities. Be able to analyze sociocultural issues that marketers must deal with as they make decisions.

27. Copyright © Houghton Mifflin Company. All rights reserved. 3–27 Chapter 3 Supplemental Slides

28. Copyright © Houghton Mifflin Company. All rights reserved. 3–28 Key Terms and Concepts The following slides (a listing of terms and concepts) are intended for use at the instructor’s discretion. To rearrange the slide order or alter the content of the presentation –select “Slide Sorter” under View on the main menu. –left click on an individual slide to select it; hold and drag the slide to a new position in the slide show. –To delete an individual slide, click on the slide to select, and press the Delete key. –Select “Normal” under View on the main menu to return to normal view.

29. Copyright © Houghton Mifflin Company. All rights reserved. 3–29 Important Terms Environmental Scanning –The process of collecting information about forces in the marketing environment Environmental Analysis –The process of assessing and interpreting the information gathered through environmental scanning Competition –Other organizations that market products that are similar to or can be substituted for a marketer’s products in same geographic area

30. Copyright © Houghton Mifflin Company. All rights reserved. 3–30 Important Terms Brand Competitors –Firms that market products with similar features and benefits to the same customers at similar prices Generic Competitors –Firms that provide very different products that solve the same problem or satisfy the same basic customer need Total Budget Competitors –Firms that compete for the limited financial resources of the same customers Business Cycle –A pattern of economic fluctuations that has four stages: prosperity, recession, depression, and recovery

31. Copyright © Houghton Mifflin Company. All rights reserved. 3–31 Important Terms Buying Power –Resources, such as money, goods, and services, that can be traded in an exchange Willingness to Spend –An inclination to buy because of expected satisfaction from a product, influenced by the ability to buy and numerous psychological and social forces

32. Copyright © Houghton Mifflin Company. All rights reserved. 3–32 Important Terms Sherman Antitrust Act (1890) Clayton Act (1914) Federal Trade Commission Act (1914) Robinson-Patman Act (1936) Wheeler-Lea Act (1938) Lanham Act (1946) Celler-Kefauver Act (1950) Fair Packaging and Labeling Act (1966)

33. Copyright © Houghton Mifflin Company. All rights reserved. 3–33 Important Terms Magnuson-Moss Warranty (FTC) Act (1975) Consumer Goods Pricing Act (1975) Antitrust Improvements Act (1976) Trademark Counterfeiting Act (1980) Trademark Law Revision Act (1988) Nutrition Labeling and Education Act (1990) Telephone Consumer Protection Act (1991) Federal Trademark Dilution Act (1995) Digital Millennium Copyright Act (1995) Children’s Online Privacy Protection Act (2000)

34. Copyright © Houghton Mifflin Company. All rights reserved. 3–34 Important Terms Technology –The application of knowledge and tools to solve problems and perform tasks more efficiently Sociocultural Forces –The influences in a society and its culture(s) that change people’s attitudes, beliefs, norms, customs, and lifestyles Cultural Values –Primary source of values is the family Consumerism –Organized efforts by individuals, groups, and organizations to protect consumers’ rights

35. Copyright © Houghton Mifflin Company. All rights reserved. 3–35 Transparency Figure 3D Ranking Products Consumers Would Cut Back on if Spending Decreased Source: USA Today, October 1, 2001 p. 3D. Used by permission.

36. Copyright © Houghton Mifflin Company. All rights reserved. 3–36 Transparency Figure 3E Average U.S. Family Income According to the 2000 Census, the average U.S. family earned $63,410 annually, and the breakdown of earnings was: Less than $15,00010.4% $15,000–$34,99923.3% $35,000–$49,99916.8% $50,000–$74,99922.0% $75,000–$99,99912.3% $100,000–$149,9999.7% $150,000+5.5% Source: 2000 U.S. Census.

37. Copyright © Houghton Mifflin Company. All rights reserved. 3–37 Transparency Figure 3G Purchasing Behavior of Engaged vs. Single Women Source: American Demographics, May 2001, p.13. Adapted with permission..

38. Copyright © Houghton Mifflin Company. All rights reserved. 3–38 Transparency Figure 3H U.S. Poverty Rates for Minorities Source: USA Today, October 10, 2001 p.A1. Used by permission.