Chapter 03 – Scanning the Marketing Environment
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CHAPTER CONTENTS
PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES ……………………………………. 3-2
LEARNING OBJECTIVES (LO) …………………………………………………………………………….. 3-3
KEY TERMS …………………………………………………………………………………………………………… 3-3
LECTURE NOTES
• Chapter Opener: Fortune’s Businessperson of the Year ………………………………………. 3-4
• Environmental Scanning (LO 3-1) ……………………………………………………………………. 3-5
• Social Forces (LO 3-2) ……………………………………………………………………………………. 3-7
• Economic Forces (LO 3-3) ……………………………………………………………………………… 3-16
• Technological Forces (LO 3-4) ……………………………………………………………………….. 3-18
• Competitive Forces (LO 3-5) ………………………………………………………………………….. 3-20
• Regulatory Forces (LO 3-6) ……………………………………………………………………………. 3-23
APPLYING MARKETING KNOWLEDGE ……………………………………………………………. 3-30
BUILDING YOUR MARKETING PLAN ……………………………………………………………….. 3-34
VIDEO CASE (VC)
• VC-3: Geek Squad: A New Business for a New Environment …………………………….. 3-35
APPENDIX D CASE (D)
• D-3: Jamba Juice: Scanning the Marketing Environment ……………………………………. 3-40
IN-CLASS ACTIVITIES (ICA)
• ICA 3-1: An Environmental Scan for Truvía …………………………………………………….. 3-43
• ICA 3-2: Competitive Intelligence……………………………………………………………………. 3-52
CONNECT APPLICATION EXERCISES ……………………………………………… 3-60
• Economic Forces Click and Drag*
• Scanning the Marketing Environment Click and Drag*
• Geek Squad Video Case Video Case
• iSeeit! Video Case: Macroenvironmental Scanning Video Case
Chapter 03 – Scanning the Marketing Environment
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• Performing an Environmental Scan of Today’s Marketplace Click and Drag*
*Note: An alternate version of each Click and Drag exercise is available in Connect for students with
accessibility needs.
Chapter 03 – Scanning the Marketing Environment
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POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
Textbook Figures Slide
Figure 3-1 Environmental forces affect the organization, as well as its suppliers and customers … 3-7
Figure 3-2 An environmental scan of today’s marketplace shows important trends …………………… 3-8
Figure 3-3 Racial and ethnic groups (excluding Caucasians) are concentrated in geographic
regions of the United States ………………………………………………………………………………. 3-16
Figure 3-4 The Index of Consumer Sentiment (ICS) is closely related to economic conditions ….. 3-21
Marketing Matters, Making Responsible Decisions, and/or Marketing inSite
Making Responsible Decisions—Balancing Profits and Purpose—Millennial Style ………………… 3-13
Marketing Insights About Me: American FactFinder: Your Source for Economic Information ……. 3-23
Video Links
3-1: Starbucks Roastery ……………………………………………………………………………………………………… 3-6
3-2: McDonald’s Video …………………………………………………………………………………………………….. 3-17
3-3: Colgate Super Bowl Ad ………………………………………………………………………………………………. 3-19
3-4: FTC Video …………………………..……………………………………………………………………………………. 3-35
3-5: Geek Squad Video Case ………………………………………………………………………………………………. 3-39
Chapter 03 – Scanning the Marketing Environment
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POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
In-Class Activities (ICA) Slide
ICA 3-1: An Environmental Scan for Truvía …………………………………………………………………………. 3-45
ICA 3-2: Competitive Intelligence ……………………………………………………………………………………….. 3-48
LEARNING OBJECTIVES (LO)
After reading this chapter students should be able to:
LO 3-1: Explain how environmental scanning provides information about social, economic,
technological, competitive, and regulatory forces.
LO 3-2: Describe how social forces such as demographics and culture can have an impact on
marketing strategy.
LO 3-3: Discuss how economic forces such as macroeconomic conditions and consumer income
affect marketing.
LO 3-4: Describe how technological changes can affect marketing.
LO 3-5: Discuss the forms of competition that exist in a market and key components of
competition.
LO 3-6: Explain the major legislation that ensures competition and regulates the elements of the
marketing mix.
KEY TERMS
baby boomers
environmental scanning
barriers to entry
Generation X
blended family
Generation Y
competition
gross income
consumerism
Internet of Things (IoT)
marketspace
culture
multicultural marketing
demographics
regulation
discretionary income
self-regulation
disposable income
social forces
economy
technology
electronic commerce
value consciousness
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LECTURE NOTES
Fortune’s Businessperson of the Year: “I’m in this to Build Something Cool!”
• Facebook:
a. Was founded by Mark Zuckerberg in 2004 from his Harvard dorm room.
b. Has over 1.8 billion customers, or nearly 25% of the world’s population.
• The rapid growth of Facebook is due to its ability to adapt to a rapidly changing
marketing environment.
• Facebook and the Influence of Environmental Forces
a. Social forces. Changed as people:
• Look for new ways to communicate, obtain information, and offer opinions.
• Communicate with photos, group and video chats, and instant messaging.
b. Economic forces.
• Influenced the demand for Facebook as the cost of the technology declined.
• Made social networking affordable for consumers.
c. Technological forces.
• Software integration, server speed, and data storage make Facebook fast and
convenient.
d. Competitive forces.
• Rivalry with Google, Twitter, and Snapchat.
• Ability of users to easily switch platforms and join new social networks.
e. Legal and regulatory forces. Facebook:
• Obtained rights to the name.
• Developed privacy guidelines.
• Facebook in the Future
a. Facebook wants to:
• Become more intuitive, help users answer questions and solve problems.
• In some parts of the world, allow anonymous users so as to encourage free
speaking.
b. Expand into international markets, such as China.
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c. Testing drones and purchased virtual reality headset company Oculus VR.
• Many businesses operate in environments where important forces change—
anticipating and responding to these changes is key to marketing success and failure.
I. ENVIRONMENTAL SCANNING [LO 3-1]
Environmental scanning is the process of continually acquiring information on events
occurring outside the organization to identify and interpret potential trends.
[Video 3-1: Starbucks Roastery]
A. Tracking Environmental Trends
• [Figure 3-1] Environmental trends typically arise from five sources: social,
economic, technological, competitive, and regulatory forces.
• An environmental scan uncovers trends that affect the marketing actions of a firm.
Example: Coffee consumption.
a. The percentage of adults who drink coffee:
• Declined from 64% percent in 2012 to 57% today.
b. Changes in coffee consumption are likely to influence coffee manufacturers,
coffee shops, and supermarkets.
• Manufacturers are offering new flavors and seasonal blends.
• Predicting the future of those trends involves making assumptions about the
number of years the trends will continue and their rate of increase or decline.
• Environmental scanning also involves explaining trends for the five forces.
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• Example: Explanation of coffee consumption trends.
a. Due to the decline in coffee consumption:
• Manufacturers are offering new flavors and seasonal blends.
• Coffee shops are offering online ordering systems and cold brew coffee.
b. Identifying and interpreting trends and developing explanations are essential
to successful environmental scanning.
[ICA 3-1: An Environmental Scan for Truvía]
B. An Environmental Scan of Today’s Marketplace
• [Figure 3-2] Identifies key trends from an environmental scan that impacts
today’s marketplace for the five environmental forces.
a. Social forces.
• Consumers interested in new social media.
• Growing reliance on peers who are brand advocates or influencers.
• Expect companies to be transparent, authentic, and socially responsible.
b. Economic forces.
• Rising costs of education, and student loan debt, cause millennials to live
with parents.
c. Technological forces.
• Artificial intelligence.
• Virtual reality and augmented reality.
• Intelligent devices.
d. Competitive forces.
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e. Regulatory forces.
• Issue of “fake” news.
• These trends affect consumers and the organizations that serve them.
II. SOCIAL FORCES [LO 3-2]
• Social forces of the environment include the demographic characteristics of the
population and its culture.
• Changes in these forces can have a dramatic impact on marketing strategy.
A. Demographics
• Demographics describe a population according to selected characteristics such as
age, gender, ethnicity, income, and occupation.
• Organizations such as the Population Reference Bureau and the United Nations
profile the world population.
• The U.S. Census Bureau provides information about the American population.
1. The World Population at a Glance.
a. There are about 7.4 billion people in the world.
b. By 2050, the population is likely to grow to 9.7 billion.
• The major increases (or population explosion) will occur in the developing
countries of Africa and Asia.
c. The age structure of the world’s population is also shifting.
• The number of people 60+ will triple, reaching 2.1 billion by 2050.
• This varies by country as Japan, South. Korea, Bosnia, Singapore, China,
Portugal, and Greece expect to have older populations than the U.S.
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d. Global income levels and living standards have risen, although wide
differences still exist between countries.
e. Global population trends have many marketing implications.
• The relative size of countries like India and China represent huge markets
for many product categories.
2. The U. S. Population.
a. The U.S. population:
• Is becoming larger, older, and more diverse.
• Current U.S. population is estimated to be 325 million.
b. This will lead to niche markets based on age, life stage, family structure,
geographic location, and ethnicity.
c. By 2030, the number of people 65+ in the U.S. will exceed 88 million (21%).
d. The term minority as it is currently used is likely to become obsolete as the
size of most ethnic groups will double during the next two decades.
3. Generational Cohorts. [Definition of a cohort: A group of people banded
together or treated as a group—Oxford-American Online Dictionary]
a. Baby boomers.
• Include the generation of 73 million children born between 1946 and
1964.
• Are retiring at a rate of 10,000 every 24 hours—and they will all be 65 or
older by 2030.
b. Generation X.
• Includes the 50 million people born between 1965 and 1976.
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• Is also known as the baby bust due to the yearly decline in the number of
births.
• Is self-reliant, supportive of diversity, and better educated.
• Is more cautious, pragmatic, and traditional.
• Is likely to pursue lifestyles, products, and services that are different from
previous generations.
c. Generation Y.
• Includes Americans born between 1977 and 1994, the years many baby
boomers began having children.
• Is also called the echo-boom.
• Exerts influence on music, sports, computers, video games, and all forms
of communication and networking.
d. Generation Z (Millennials). The term refers to younger members of
Generation Y born between 1995 and 2010. They embrace diversity,
inclusivity, and prefer a natural look.
e. Marketers have developed generational marketing programs for each
generational cohort since members of each generation have distinctive
attitudes and consumer behavior.
MAKING RESPONSIBLE DECISIONS
Balancing Profits and Purpose—Millennial Style
• Millennials are determined to redefine the workplace as an outlet for both profit and
meaning. They are idealistic, energetic, transparent, and eager to get started.
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4. The American Household.
a. Married couples:
• Consisted of 75 percent of all households in 1960.
• Consist of 48 percent today.
b. The fastest growing types of households are those with:
• An adult child who has moved back home with his or her parents,
unmarried partners, and same-sex partners.
c. Young people:
• Are postponing marriage and parenthood.
• Are cohabiting to pool resources to cope with extended unemployment.
d. The increase in cohabitation may be one reason the national divorce rate has
recently declined.
e. However, the number of couples who divorce exceeds 40 percent, and divorce
among baby boomers—called gray divorce—appears to be increasing.
f. The majority of divorced people remarry.
• This has given rise to the blended family, one formed by merging two
5. Population Shifts.
a. The U.S. population is shifting to western and southern states.
• Recent Census Bureau estimates indicate the populations of:
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– Texas, Utah, Nevada, Idaho, and Florida grew at fastest rates in the
nation.
b. Populations are also shifting within states.
• In the early 1900s, the population shifted from rural areas to cities.
• From the 1930s to the 2000s, the population shifted:
• Due to the recession of the past few years:
– There has been a reverse in the trend as…
– Urban areas are seeing growth again.
• Today:
– 30 percent of Americans live in central cities.
c. The Census Bureau has developed a classification system to describe the
locations of the population that consists of four types of statistical areas:
• Metropolitan statistical area.
– Has at least one urbanized area of 50,000 or more people.
• Micropolitan statistical area.
– Has at least one urban cluster of at least 10,000 but less than 50,000
people.
• Metropolitan divisions. If a metropolitan statistical area has a population
of 2.5 million or more, it may be subdivided into smaller areas.
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6. Racial and Ethnic Diversity. [Figure 3-3]
a. The racial and ethnic mix of the U.S. population has changed significantly.
b. About one-third of U.S. residents are from African American, Native
American or Alaska Native, Asian American, or Native Hawaiian or Pacific
Islander groups.
c. The 2010 Census:
• Allowed respondents to choose more than one of the five race options.
• More than 5 million people reported more than one race.
d. Hispanics.
• Will grow to 78 million or 22 percent of the population by 2030.
[Video 3-2: McDonald’s Video]
e. Asian Americans.
• Include Asian Indians, Chinese, Filipinos, Japanese, Koreans, and
Vietnamese.
• Will grow to 23 million or 6 percent of the population by 2030.
f. African Americans.
• Will grow to 49 million or 14 percent of the population by 2030.
• Will collectively spend $1.2 trillion each year
g. The multiracial category currently makes up 1.7 percent of the population and
is expected to grow to 3.6 percent by 2030.
h. Multicultural marketing programs:
• Are combinations of the marketing mix that reflect the unique attitudes,
ancestry, communication preferences, and lifestyles of different races.
i. Analysis of demographic data:
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• Suggests that racial and ethnic groups tend to be concentrated in
geographic regions.
• Allows companies to combine their multicultural marketing efforts with
regional marketing activities.
B. Culture
• Culture incorporates the set of values, ideas, and attitudes that are learned and
shared among the members of a group.
• Marketers monitor national and global cultural trends since they influence
consumer-buying patterns.
1. The Changing Attitudes and Roles of Men and Women.
a. Since the 1970s:
• The attitudes and roles of men and women in the marketplace have
changed during the past 30 years.
• If this continues, the buying patterns of men and women will eventually be
very similar.
b. In the 1970s and 1980s, ads began to create a bridge between genders.
c. In the 1990s, marketing to women focused on the challenge of balancing
family and career interests.
d. Today, there is equality in the marketplace.
e. Generation Y represents the first generation of women who have no collective
memory of this dramatic change.
f. Several factors have contributed to the change in attitudes:
• Many young women had career mothers who provided a reference point
for their lifestyle choices.
g. Many U.S. companies are seeking growth from both genders instead of only
one as in the past. Ex: Under Armour attracting women with clothing
specifically designed for them; Lululemon trying to attract men by opening
men’s yoga clothing stores.
h. The general trend is toward fewer gender distinctions when developing
products and services, particularly in marketing directed at young consumers.
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[Video 3-3: Colgate Super Bowl Ad]
2. Changing Values.
a. Cultural values:
• Vary over time and between countries.
• Are useful in understanding behaviors of consumers.
b. Today, commonly held values include:
• Personal control. • Self-help.
c. Contrasting values outside the United States, for example, include:
• Belief in fate. • A focus on group welfare.
• The importance of tradition. • Acceptance of birthright.
• The importance of rank and status.
d. An increasingly important value for consumers in the United States and
around the globe is sustainability and protecting the environment; 82% of
today’s shoppers consider themselves environmentally friendly.
e. Companies are also changing their business practices to respond to trends in
consumer values, such as:
• Coca Cola—Alleviating global water scarcity.
f. Increasingly, consumers around the world are committed to brands with a
strong link to social action.
g. A change in consumption orientation is driven by:
• High unemployment and lower real estate prices with…
h. 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.
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• The recent recession led consumers to cut back on brand-name products so
that they could still afford discretionary products.
• Marketers have responded by:
– Opening new stores in more convenient locations.
– Offering special online deals.
LEARNING REVIEW
3-1. Describe three generational cohorts.
3-2. Why are many companies developing multicultural marketing programs?
3-3. How are important values such as sustainability reflected in the marketplace
today?
Chapter 03 – Scanning the Marketing Environment
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III. ECONOMIC FORCES [LO 3-3]
The economy pertains to the income, expenditures, and resources that affect the cost of
running a business and household.
A. Macroeconomic Conditions
• Companies monitor inflationary or recessionary economic states based on GDP
(gross domestic product), employment, and price changes (inflation or deflation).
a. In an inflationary economy:
• The cost to produce and buy products and services rises as prices increase.
• If prices rise faster than consumer incomes, purchases decline.
• Example:
– College tuition and fees have increased 160 percent since 2000
while…
b. In a recessionary economy:
• Activity is slow or declining.
• Businesses decrease production, unemployment rises, and consumers have
less money to spend.
• The U.S. economy has experienced recessions from:
– 1973−1975. – 1990−1991. – 2007−2009.
– 1981−1982. – 2001.
• Consumer spending is two-thirds of U.S. economic activity and is affected by
consumer expectations of the future.
a. Two popular monthly surveys track the responses of consumers to specific
questions about their expectations.
• The Conference Board, a nonprofit business research organization,
conducts the Consumer Confidence Index.
b. Manufacturers and retailers of cars, furniture, and major appliances closely
monitor these indices.
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B. Consumer Income
A consumer’s ability to buy is related to income, which consists of gross, disposable,
and discretionary components.
1. 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.
a. Inflation-adjusted income has been between $47,130 and $57,909 since 1970.
b. About 51 percent of U.S. households have annual incomes between $25,000
and $99,999.
MARKETING INSIGHTS ABOUT ME
American FactFinder: Your Source for Economic Information
• One way to begin an environmental scan is to compare economic and demographic
data about a particular segment of the population to what is “typical” or “average” for
the entire population.
2. Disposable Income.
a. Disposable income is the money a consumer has left after paying taxes to use
for necessities such as food, housing, clothing, and transportation.
b. If taxes rise faster or fall than incomes, consumers will either have less or
more disposable income.
c. Dramatic changes in prices of products can require spending adjustments.
• As the price of gasoline declined, consumers found themselves increasing
their spending in other categories.
• The changes in home prices have a psychological impact on consumers
who:
d. During a recession, spending, debt, and the use of credit all decline.
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3. Discretionary Income.
a. Discretionary income is money that remains after paying for taxes and
necessities.
b. The problem in defining what is discretionary versus disposable income is
determining what is a luxury what is a necessity product or service.
c. The Department of Labor monitors consumer expenditures through its annual
Consumer Expenditure Survey. Recent reports indicate that consumers spend:
• 13 percent on food. • 3 percent on clothing.
• 33 percent on housing. • 25 percent on transportation & health care.
d. The percentage of income spent on food and housing declines as incomes rise,
which increases discretionary income.
e. Discretionary expenditures also increase by reducing savings.
f. The Bureau of Labor Statistics reports that:
• During the 1990s and 2000s, the savings rate had declined to 2 percent.
• In 2008:
• Recent data indicate that the savings rate is now 5.5 percent.
IV. TECHNOLOGICAL FORCES [LO 3–4]
• Technology refers to inventions or innovations from applied science or engineering
research.
• Each new wave of technological innovation can replace existing products and
companies in our society.
A. Technology of Tomorrow
Some of the most recent dramatic technological changes are:
1. Artificial intelligence capabilities will impact many marketing functions.
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4. Wearable technology will take new forms, from biometric monitors to visual
displays, to exoskeletons to enhance mobility.
• Other technologies are likely to replace or become substitutes for existing
products and services such as telephones, gasoline-powered vehicles, and
traditional medical equipment.
Some trends are already realized in today’s marketplace. Examples include:
• IBM partnered with Salesforce.com to use artificial intelligence to
enhance customer service software.
• Amazon began delivery by automated drone in the United Kingdom.
B. Technology’s Impact on Customer Value
Advances in technology have important effects on marketing:
• The cost of technology is decreasing dramatically. As a result, consumers now
assess value based on other dimensions, like quality, service, and relationships.
• Technology also provides value through the development of new products, which
may replace existing ones. More than 3,800 companies recently unveiled 20,000
new products at the Consumer Electronics Show in Las Vegas.
• Technology can also change existing products and the ways they are produced.
a. Many companies use technological developments to recycle products through
the manufacturing process several times.
b. The National Association for PET Container Resources estimates that 30
percent of all plastic bottles are now recycled.
c. The practice of precycling includes efforts to avoid creating waste.
• Some manufacturers reduce the amount of packaging.
C. Technology Enables Data Analytics
• The marketspace is an information- and communication-based electronic
exchange environment mostly occupied by sophisticated computer and
telecommunication technologies and digitized offerings.