Marketing Chapter 3

Chapter 3 Environmental scanning - The process of collecting information about forces in the marketing environment - Scanning involves observation; secondary sources such as business, trade, government, and general-interest publications; and marketing research. - gives companies an edge over competitors in allowing them to take advantage of current trends. Environmental analysis - The process of assessing and interpreting the information gathered through environmental scanning - manager evaluates the information for accuracy, tries to resolve inconsistencies in the data, and, if warranted, assigns significance to the findings. two general approaches to environmental forces: accepting them as uncontrollable or attempting to influence and shape them competition - Other organizations that market products that are similar to or can be substituted for a marketer’s products in the same geographic area competitors into 4 different types: Brand competitors - Firms that market products with similar features and benefits to the same customers at similar prices Product competitors - Firms that compete in the same product class but market products with different features, benefits, and 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 Monopoly - A competitive structure in which an organization offers a product that has no close substitutes, making that organization the sole source of supply Oligopoly - A competitive structure in which a few sellers control the supply of a large proportion of a product - Products facing oligopolistic competition may be homogeneous, such as aluminum, or differentiated, such as packaged delivery services. Monopolistic competition - A competitive structure in which a firm has many potential competitors and tries to develop a marketing strategy to differentiate its product Pure competition - A market structure characterized by an extremely large number of sellers, none strong enough to significantly influence price or supply - closest thing to an example of pure competition is an unregulated farmers’ market, where local growers gather to sell their produce. Commodities such as soybeans, corn, and wheat have their markets subsidized or regulated by the government - Pure competition is an ideal at one end of the continuum, and a monopoly is at the other end. business cycle - A pattern of economic fluctuations that has four stages: prosperity, recession, depression, and recovery - business cycle consists of four stages: prosperity, recession, depression, and recovery. Prosperity - A stage of the business cycle characterized by low unemployment and relatively high total income, which together ensure high buying power (provided the inflation rate stays low) - economic outlook remains prosperous, consumers generally are willing to buy. Recession - A stage of the business cycle during which unemployment rises and total buying power declines, stifling both consumer and business spending - buying power decreases, many customers may become more price and value conscious, and look for basic, functional products. When buying power decreased during the most recent recession, department store sales dropped. Depression - A stage of the business cycle during which unemployment is extremely high, wages are very low, total disposable income is at a minimum, and consumers lack confidence in the economy - depression usually lasts for an extended period, often years, and has been experienced by Russia, Mexico, and Brazil in the 2000s. recovery - A stage of the business cycle during which the economy moves from recession or depression toward prosperity buying power - The size of the resources, such as money, goods, and services that can be traded in an exchange, that enable the individual to make purchases - major financial sources of buying power are income, credit, and wealth. Income - For an individual, the amount of money received through wages, rents, investments, pensions, and subsidy payments for a given period - money is allocated among taxes, spending for goods and services, and savings disposable income - After-tax income disposable income is a ready source of buying power, the total amount available in a nation is important to marketers. - Several factors determine the size of total disposable income: o One is the total amount of income, which is affected by wage levels, the rate of unemployment, interest rates, and dividend rates. Because disposable income is income left after taxes are paid, the number and amount of taxes directly affect the size of total disposable income. When taxes rise, disposable income declines; when taxes fall, disposable income increases. - discretionary income - Disposable income available for spending and saving after an individual has purchased the basic necessities of food, clothing, and shelter - Changes in total discretionary income affect sales of these products, especially automobiles, furniture, large appliances, and other costly durable goods. Wealth - The accumulation of past income, natural resources, and financial resources Income, credit, and wealth equip consumers with buying power to purchase goods and services. - 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 - Factors that affect consumers’ general willingness to spend are expectations about future employment, income levels, prices, family size, and general economic conditions. - Willingness to spend ordinarily declines if people are unsure whether or how long they will be employed, and it usually increases if people are reasonably certain of higher incomes in the future 3-5 Federal Trade Commission (FTC) - An agency that regulates a variety of business practices and curbs false advertising, misleading pricing, and deceptive packaging and labeling - FTC opened a preliminary probe into whether Google was using its Android operating system to require handsets to prominently display its maps, search, and other features - Better Business Bureau (BBB) - A system of nongovernmental, independent, local regulatory agencies supported by local businesses that helps settle problems between customers and specific business firms National Advertising Review Board (NARB) - A self-regulatory unit that considers challenges to issues raised by the National Advertising Division (an arm of the Council of Better Business Bureaus) about an advertisement 3-6 3-7 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 - present marketers with both challenges and opportunities. Consumerism - Organized efforts by individuals, groups, and organizations to protect consumers’ rights - movement’s major forces are individual consumer advocates, consumer organizations and other interest groups, consumer education, and consumer laws.