McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
LEARNING OBJECTIVES (LO)
AFTER READING CHAPTER 3, YOU SHOULD BE ABLE TO:
LO1
LO2
LO3
Explain how environmental scanning
provides information about social,
economic, technological, competitive,
and regulatory forces.
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.
3-2
LEARNING OBJECTIVES (LO)
AFTER READING CHAPTER 3, YOU SHOULD BE ABLE TO:
LO4
Describe how technological changes
can affect marketing.
LO5
Discuss the forms of competition that
exist in a market and key components
of competition.
LO6
Explain the major legislation that
ensures competition and regulates the
elements of the marketing mix.
3-3
WEB 2.0 IS ALL ABOUT YOU!
3-4
LO1

ENVIRONMENTAL SCANNING
Environmental Scanning
• Tracking Environmental Trends
• Example: Coffee Marketers
• An Environmental Scan of Today’s
Marketplace
3-5
FIGURE 3-1 Environmental forces affect the
organization, its suppliers, and its customers
3-6
FIGURE 3-2 An environmental scan of
today’s marketplace shows the many
important trends that influence marketing
3-7
LO2
SOCIAL FORCES
DEMOGRAPHICS

Social Forces

Demographics
• World Population
• U.S. Population
3-8
FIGURE 3-3 Distribution of the world’s
population
3-9
LO2
SOCIAL FORCES
DEMOGRAPHICS—GENERATIONAL COHORTS

Baby Boomers: 1946 - 1964

Generation X: 1965 - 1976

Generation Y: 1977 - 1994

Millennials: 1995 +

Generational Marketing
3-10
Olay, Hyatt, and Motorola
Which generational cohort is being reached?
3-11
LO2
SOCIAL FORCES
DEMOGRAPHICS—THE AMERICAN HOUSEHOLD

Marital Status

Cohabitation

Blended Family
3-12
SOCIAL FORCES
LO2
DEMOGRAPHICS—POPULATION SHIFTS

Regional Shift in the U.S.

Shifts Within States
• Suburbs
• Exurbs
• Penturbia
3-13
LO2
SOCIAL FORCES
DEMOGRAPHICS—POPULATION SHIFTS

Statistical Areas (SA): Illinois
• Combined SA: NE Illinois
• Micropolitan SA: Dixon, IL
• Metropolitan SA: St. Louis, MO & SW IL
• Metropolitan Division: Chicagoland
3-14
SOCIAL FORCES
LO2
DEMOGRAPHICS—RACIAL & ETHNIC DIVERSITY

Composition

Trends
• African Americans
• Hispanics
• Asian Americans

Multicultural
Marketing
3-15
FIGURE 3-4 Racial and ethnic groups
(excluding whites) are concentrated in
geographic regions of the United States
3-16
SOCIAL FORCES
LO2
CULTURE

Culture

The Changing Attitudes and Roles
of Men and Women

Changing Values
• Value Consciousness
3-17
LO3
ECONOMIC FORCES
MACROECONOMIC CONDITIONS

Economy
• Inflation
• Recession
• Consumer Sentiment
3-18
FIGURE 3-5 The Vehicle Buying Attitudes
component of the Index of Consumer
Sentiment (ICS)
3-19
FIGURE 3-6 Distribution of U.S. household
income: 2006
3-20
LO3
ECONOMIC FORCES
CONSUMER INCOME

Gross Income

Disposable Income

Discretionary Income
3-21
GOING ONLINE
ESRI: How Typical is Your Hometown?
3-22
LO4
TECHNOLOGICAL FORCES
ITS FUTURE AND IMPACT ON CUSTOMER VALUE

Technology

Impact on Customer Value
• Plummeting Costs of Tech-Based Products
• New Products Developed
• Production of Existing Products Changed
 Recycling
 Precycling
3-23
Pioneer, Dragon, and Rhapsody
What products might be replaced with these?
3-24
LO4
TECHNOLOGICAL FORCES
ELECTRONIC BUSINESS TECHNOLOGIES

Marketspace

Electronic Commerce

Intranet

Extranets
3-25
LO5
COMPETITIVE FORCES
ALTERNATIVE FORMS OF COMPETITION

Pure Competition

Monopolistic Competition

Oligopoly

Pure Monopoly
3-26
FIGURE 3-A Continuum of competition
3-27
LO5
COMPETITIVE FORCES
COMPONENTS OF COMPETITION

Barriers to Entry

Power of Buyers and Sellers

Existing Competitors and Substitutes

Small Businesses as Competitors
3-28
USING MARKETING DASHBOARDS
Assessing Competition is a Key to Success
The Effect of Price Reductions on Sales Increases
3-29
LO6
REGULATORY FORCES
FEDERAL LEGISLATION

Regulation

Protecting Competition
• Sherman Antitrust Act (1890)
• Clayton Act (1914)
• Robinson-Patman Act (1936)
3-30
LO6
REGULATORY FORCES
FEDERAL LEGISLATION

Product-Related: Company Protection
• Patent Law
• Copyright Law
• Digital Millennium Copyright Act (1998)
3-31
LO6
REGULATORY FORCES
FEDERAL LEGISLATION

Product-Related: Consumer Protection
• Nutritional Labeling
• Consumer Product Safety Act (1972)
• Consumer Product Safety Commission
• Consumerism
3-32
LO6
REGULATORY FORCES
FEDERAL LEGISLATION

Product-Related: Company and
Consumer Protection
• Landham Act (1946)
• Trademark Law Revision Act (1988)
• Doppelgangers
• U.S. Supreme Court: Trademark Colors
• Madrid Protocol (2003)
• Federal Dilution Act (1995)
3-33
Kleenex, Band-Aid, and Q-Tips
Are these becoming generic trademarks?
3-34
LO6
REGULATORY FORCES
FEDERAL LEGISLATION

Pricing-Related

Distribution (Place)-Related
• Exclusive Dealing
• Requirement Contracts
• Exclusive Territorial Distributorships
• Tying Arrangement
3-35
LO6
REGULATORY FORCES
FEDERAL LEGISLATION

Advertising and Promotion-Related
• FTC Act of 1914
 Cease and Desist Order
 Corrective Advertising
• Do Not Call Registry
• CAN-SPAM Act (2004)

Self-Regulation
3-36
VIDEO CASE 3
GEEK SQUAD: A NEW BUSINESS
FOR A NEW ENVIRONMENT
3-37
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
VIDEO CASE 3
Geek Squad
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?
3-39
VIDEO CASE 3
Geek Squad
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.
3-40
VIDEO CASE 3
Geek Squad
4. What promotional activities would
you recommend to encourage
consumers who use independent
installers to switch to Geek
Squad?
3-41
SUPPLEMENTAL
LECTURE NOTE 3-1
TRENDS THAT MAY CHANGE
MARKETING IN THE FUTURE
3-42
SUPPLEMENTAL
LECTURE NOTE 3-2
WILL SELF-REGULATION
BALANCE THE NEED
FOR REGULATION?
3-43
IN-CLASS ACTIVITY 3-1
AN ENVIRONMENTAL SCAN
FOR A PANASONIC
HIGH DEFINITION TV
3-44
Panasonic Viera 50” HDTV
3-45
3-46
IN-CLASS ACTIVITY 3-2
COMPETITIVE INTELLIGENCE
3-47
FIGURE 3-B Porter’s components of
competition
3-48
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
Social Forces
Social forces are the
demographic characteristics of
the population and its values.
3-50
Demographics
Demographics describe a
population according to selected
characteristics such as age,
gender, ethnicity, income, and
occupation.
3-51
Baby Boomers
Baby boomers are the
generation of children born
between 1946 and 1964.
3-52
Generation X
Generation X includes the 15
percent of the population born
between 1965 and 1976. Also
called baby bust.
3-53
Generation Y
Generation Y includes the 72
million Americans born between
1977 and 1994. Also called
echo-boom or baby boomlet.
3-54
Blended Family
A blended family is a family
formed by merging two previously
separated units into a single
household.
3-55
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
Culture
Culture consists of the set of
values, ideas, and attitudes that
are learned and shared among
the members of a group.
3-57
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
Economy
The economy pertains to the
income, expenditures, and
resources that affect the cost of
running a business and
household.
3-59
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
Disposable Income
Disposable income is the money
a consumer has left after paying
taxes to use for food, shelter,
clothing, and transportation.
3-61
Discretionary Income
Discretionary income is the
money that remains after paying
for taxes and necessities.
3-62
Technology
Technology consists of the
inventions or innovations from
applied science or engineering
research.
3-63
Marketspace
Marketspace consist of
information- and communicationbased electronic exchange
environment mostly occupied by
sophisticated computer and
telecommunication technologies
and digitized offerings.
3-64
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
Intranet
An intranet is an Internet-based
network used within the
boundaries of an organization.
3-66
Extranets
Extranets are Internet-based
technologies used to permit
communication between a
company and its suppliers,
distributors, and other partners.
3-67
Competition
Competition consists of the
alternative firms that could provide
a product to satisfy a specific
market’s needs.
3-68
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
Regulation
Regulation consists of the
restrictions state and federal laws
place on business with regard to
the conduct of its activities.
3-70
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
Self-Regulation
Self-regulation is an alternative
to government control where an
industry attempts to police itself.
3-72