Regulatory Political Forces of Marketing Strategy

There is no denying the fact that Companies that have relied on the defence industry have had to adapt their technologies to new markets in order to survive. ECC of Wayne, PA has recently begun producing vending machines for Snapple beverages...they had traditionally relied on winning defence contracts. The industry develops new legislation, like gasoline tax, welfare reform, and health care reform. Legal interpretation by the courts had been given in due course. We can exemplify on creation and activities of regulatory agencies. In the context of USA, Reagan era vs Clinton era where Health care reform impacting on small business.  Pressure on the tobacco industry indicating threatening to regulate cigarettes like other drugs..."underage sales prohibited" will appear on Philip Morris tobacco products. Philip Morris agrees to stop placing billboard ads in stadiums that can be viewed on TV....24yr TV advertising ban. Actions may strengthen the market leaders, Philip Morris. Luxury Tax 10% excise tax on boats over $100,000. The luxury tax, that was supposed to aid in the redistribution of wealth, as far as taxing the wealthy to help finance government programs---actually harmed industries that marketed products that were to be taxed...i.e. the boat industry. Tax was created in 1989 and repealed in 1992.Government purchases about 20% GNP, government is therefore a significant purchaser of many organizations products.

Wayne firm gets boost where Regulatory system of an industry sets  Legal Forces  created by the political force In statute of the following types:
Three types

• Anti Trust
• Consumer Protection
• Deregulation

The following are important acts to be familiar with:

• Sherman Act (1890) Competition...restraining trade and monopolizing markets
• Clayton Act (1914) Competition...limit specific activities, price discrimination, tying/exclusive agreements etc.
• Federal Trade Commission Act (1914) Created FTC Competition
• Robinson-Patman Act (1936) Competition

Booksellers say five publishers...

Five publishers are being sued by the ABA under the Robinson Patman Act which states:
It is unlawful to discriminate in prices charged to different purchasers [who compete with each other] of the same product, where the effect may substantially lessen competition or help create a monopoly.

There is no question as to the fact that charging different prices for no economic reason would lessen competition, therefore the issue is whether the publishers are being discriminatory. They were offering different prices that may well be justified by quantity discounts which are legal.

• Wheeler-Lea Act (1938) Consumer Protection...unfair and deceptive acts
• Celler-Kefauver Act (1950) Competition acquisition of competitors shares if...
• Consumer Goods Pricing Act (1975) Competition...price maintenance among mf. and resellers
• Trademark Counterfeiting Act (1980) Consumer protection, counterfeit goods
• Nutritional Labeling and Education Act (1990) Consumer protection...health claims, labeling May 1994, marketers had to follow new guidelines for explaining the contents of products on labels:
  Juice drinks...specify actual juice content
  Ben & Jerry's :(
  Pringles Right Crisps vs. Light Crisps.
• Clean Air Act (1990) Emissions credits now being given to companies that reduce their pollution below a specified threshold, can trade these credits to companies that have been unable to fall below the requirements, so that they avoid heavy fines etc.

Regulatory Forces

Governing Legal forces
Business can be governed at the following level:

• Federal Level
• State Level
• Local Level
• Self-regulation

Examples of Federal Regulatory agencies:

• Federal Trade Commission FTC...Governs commerce
• Federal Communications Commission FCC Governs the airwaves...Howard Stern etc.
• Food & Drug Administration FDA...Governs new labeling law etc.
• Bureau of Alcohol and Tobacco ATF...Recent conflict with the marketers of ice beer focusing on alcohol content.

Economic forces indicating  Business life cycles:

• Prosperity
• Recession
• Depression
• Recovery

Marketers may need to adjust their marketing mix as the economy passes through different stages.
Different between a depression and recession = the number of months certain economic figures decline etc., but different economists use different indicators.
Political force...Government uses fiscal and monetary policy to control the economy.
Fed: Alan Greenspan increased interest rates to try to curb excessive growth that would lead to inflation, has now reduced the rates since the economy has not shown the signs of anticipated inflation.
Interest rates have a big impact on COST OF MONEY...Business investment....consumer spending.
Consumer buying power determined by income (Interest, Rent, wages):

• Pre-tax Income--Gross Income
• After Tax income--Disposable income
• After purchasing necessities--Discretionary income

Consumer demand and spending patterns are effected by the economy and the perception of the future. Need to determine:

• Consumer buying power
• willingness to purchase, a function of employment security etc. Credit, increases current buying power over future buying power.

Competitive forces

All firms compete for consumers dollars.

Handout...War on Smoking is Music to...

It is not only important to focus on your direct competitors (gum marketers) but also all marketers that target your customers and therefore compete with you for their income.

Competitive Structures:

• Monopoly: One marketer in the marketplace. Governed by Sherman Anti Trust Act.
  Sometimes it is to the consumers benefit to have a monopoly; when competition would raise the price to the consumer (high barriers of entry to the marketplace being passed along etc.), i.e. Utilities...DP&L.
  DP&L must get permission from the Public Services Commission (regulatory agency) before it can raise prices etc.
• Oligopoly: A few marketers (perhaps 3 or 4) dominate the market place. Examples: Cigarettes...Marlboro example, in 1 day, reduced the price by 20%, all competitors immediately followed. Airline Industry...$50 cap on commissions led by Delta, within one week all major airlines followed.

Handout...Microsoft's Rivals Urge It to Seperate...

Looks at the commercial on-line service industry and the threat of Microsoft to the balance of the industry.

• Monopolistic Competition: many marketers competing in the market place. Most common market structure. Need to establish a differential advantage, i.e., trade mark, brand name, some reason for consumers to purchase your product as opposed to your competition's product.
• Perfect Competition: all competitors are equal and have equal access to the market place. Very rare!! Commodities, unregulated agriculture market. Distribution is key.

Technological Forces

From research performed by businesses, universities and non-profit organizations.
Consumers technological knowledge influences their desires for goods and services.
Examples of +ve results of changing technology:

• Change in transportation methods have enabled the development of out of town shopping centers.
• Inventory control systems make companies more efficient, this cost efficiency can be passed onto the consumer. It has helped develop relationships with suppliers and their supplied.
• Improved standard of living achieved by increased leisure time :)
• Fax machines
• Medicine
• Being able to read this :)

Examples of -ve consequences of technological change:

• Environmentally unclean pollution
• Unemployment (employment shifts leading to temporary unemployment.)
• Misuse of information

Patent protection leads to a barrier to entry, monopoly. Without it companies may be unwilling to launch new products that incorporate new technologies for fear of copying, therefore nothing is gained.

Nature

Examples:

• Hurricane ANDREW
• Floods
• Severe winter
• Humid Summer...Drought

Environmental Responses

Two ways to respond to the environment:

• Reactive response- Change your marketing mix in response to environmental changes.
  Most common type of response.
• Proactive response- Try to change the environment. Example would be lobbying.

What is Consumer Buying Behavior?

Definition of Buying Behavior:
Buying Behavior is the decision processes and acts of people involved in buying and using products.

Need to understand:

• why consumers make the purchases that they make?
• What factors influence consumer purchases?
• The changing factors in our society.

Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze buying behavior for:

• Buyers reactions to a firms marketing strategy has a great impact on the firms success.
• The marketing concept stresses that a firm should create a Marketing Mix (MM) that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy.
• Marketers can better predict how consumers will respond to marketing strategies.

Stages of the Consumer Buying Process

Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity...discussed next.

The 6 stages are:

1. Problem Recognition(awareness of need)--difference between the desired state and the actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat.
   Can be stimulated by the marketer through product information--did not know you were deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.
2. Information search--
• Internal search, memory.
• External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc.

A successful information search leaves a buyer with possible alternatives, the evoked set.

Hungry, want to go out and eat, evoked set is

• Chinese food
• Indian food
• burger king
• Klondike  kates etc
2. Evaluation of Alternatives--need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, Indian gets highest rank etc.
   If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives.
3. Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc.
4. Purchase--May differ from decision, time lapse between 4 & 5, product availability.
5. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc.
   After eating an indian meal, may think that really you wanted a chinese meal instead.

Handout...Pillsbury 1-800#s

1-800 #s gives the consumer a way of communicating with the marketer after purchase. This helps reduce cognitive dissonance when a marketer can answer any concerns of a new consumer.

Types of Consumer Buying Behavior

Types of consumer buying behavior are determined by:

• Level of Involvement in purchase decision. Importance and intensity of interest in a product in a particular situation.
• Buyers level of involvement determines why he/she is motivated to seek information about a certain products and brands but virtually ignores others.

High involvement purchases--Honda Motorbike, high priced goods, products visible to others, and the higher the risk the higher the involvement. Types of risk:

• Personal risk
• Social risk
• Economic risk

The four type of consumer buying behavior are:

• Routine Response/Programmed Behavior--buying low involvement frequently purchased low cost items; need very little search and decision effort; purchased almost automatically. Examples include soft drinks, snack foods, milk etc.
• Limited Decision Making--buying product occasionally. When you need to obtain information about unfamiliar brand in a familiar product category, perhaps. Requires a moderate amount of time for information gathering. Examples include Clothes--know product class but not the brand.
• Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or infrequently bought products. High degree of economic/performance/psychological risk. Examples include cars, homes, computers, education. Spend alot of time seeking information and deciding.
  Information from the companies MM; friends and relatives, store personnel etc. Go through all six stages of the buying process.
• Impulse buying, no conscious planning.

The purchase of the same product does not always elicit the same Buying Behavior. Product can shift from one category to the next.
For example:
Going out for dinner for one person may be extensive decision making (for someone that does not go out often at all), but limited decision making for someone else. The reason for the dinner, whether it is an anniversary celebration, or a meal with a couple of friends will also determine the extent of the decision making.

Categories that Effect the Consumer Buying Decision Process

A consumer, making a purchase decision will be affected by the following three factors:

·         Personal

·         Psychological

·         Social

The marketer must be aware of these factors in order to develop an appropriate MM for its target market.

Personal

Unique to a particular person. Demographic Factors. Sex, Race, Age etc.
Who in the family is responsible for the decision making.
Young people purchase things for different reasons than older people.

Highlights the differences between male and female shoppers in the supermarket.

Psychological factors

Psychological factors include:

• Motives--

A motive is an internal energizing force that orients a person's activities toward satisfying a need or achieving a goal.
Actions are effected by a set of motives, not just one. If marketers can identify motives then they can better develop a marketing mix.
MASLOW hierarchy of needs!!

• Physiological
• Safety
• Love and Belonging
• Esteem
• Self Actualization

Need to determine what level of the hierarchy the consumers are at to determine what motivates their purchases.

Nutriment,  a product marketed by Bristol-Myers Squibb originally was targeted at consumers that needed to receive additional energy from their drinks after exercise etc., a fitness drink. It was therefore targeted at consumers whose needs were for either love and Belonging or esteem. The product was not selling well, and was almost terminated. Upon extensive research it was determined that the product did sell well in inner-city convenience stores. It was determined that the consumers for the product were actually drug addicts who couldn't not digest a regular meal. They would purchase Nutrament as a substitute for a meal. Their motivation to purchase was completely different to the motivation that B-MS had originally thought. These consumers were at the Physiological level of the hierarchy. BM-S therefore had to redesign its MM to better meet the needs of this target market.
Motives often operate at a subconscious level therefore are difficult to measure.

• Perception--

What do you see?? Perception is the process of selecting, organizing and interpreting information inputs to produce meaning. IE we chose what info we pay attention to, organize it and interpret it.
Information inputs are the sensations received through sight, taste, hearing, smell and touch.

Selective Exposure-select inputs to be exposed to our awareness. More likely if it is linked to an event, satisfies current needs, intensity of input changes (sharp price drop).

Selective Distortion-Changing/twisting current received information, inconsistent with beliefs.

Advertisers that use comparative advertisements (pitching one product against another), have to be very careful that consumers do not distort the facts and perceive that the advertisement was for the competitor. A current example...MCI and AT&T...do you ever get confused?

Selective Retention-Remember inputs that support beliefs, forgets those that don't.
Average supermarket shopper is exposed to 17,000 products in a shopping visit lasting 30 minutes-60% of purchases are unplanned. Exposed to 1,500 advertisement per day. Can't be expected to be aware of all these inputs, and certainly will not retain many.

Interpreting information is based on what is already familiar, on knowledge that is stored in the memory.

South Africa wine....

Problems marketing wine from South Africa. Consumers have strong perceptions of the country, and hence its products.

• Ability and Knowledge--

Need to understand individuals capacity to learn. Learning, changes in a person's behavior caused by information and experience. Therefore to change consumers' behavior about your product, need to give them new information re: product...free sample etc.

South Africa...open bottle of wine and pour it!! Also educate american consumers about changes in SA. Need to sell a whole new country.

When making buying decisions, buyers must process information.
Knowledge is the familiarity with the product and expertise.

Inexperience buyers often use prices as an indicator of quality more than those who have knowledge of a product.
Non-alcoholic Beer example: consumers chose the most expensive six-pack, because they assume that the greater price indicates greater quality.

Learning is the process through which a relatively permanent change in behavior results from the consequences of past behavior.

• Attitudes--

Knowledge and positive and negative feelings about an object or activity-maybe tangible or intangible, living or non- living.....Drive perceptions

Individual learns attitudes through experience and interaction with other people.
Consumer attitudes toward a firm and its products greatly influence the success or failure of the firm's marketing strategy.

Oldsmobile vs. Lexus, due to consumers attitudes toward Oldsmobile (as discovered by class exercise) need to disassociate Aurora from the Oldsmobile name.

Exxon Valdez-nearly 20,000 credit cards were returned or cut-up after the tragic oil spill.

Honda "You meet the nicest people on a Honda", dispel the unsavory image of a motorbike rider, late 1950s. Changing market of the 1990s, baby boomers aging, Hondas market returning to hard core. To change this they have a new slogan "Come ride with us".

Attitudes and attitude change are influenced by consumers personality and lifestyle.

Consumers screen information that conflicts with their attitudes. Distort information to make it consistent and selectively retain information that reinforces our attitudes. IE brand loyalty.

There is a difference between attitude and intention to buy (ability to buy).

• Personality--

All the internal traits and behaviors that make a person unique, uniqueness arrives from a person's heredity and personal experience. Examples include:

1.       Compulsiveness

2.       Self confidence

3.       Friendliness

4.       Adaptability

5.       Ambitiousness

6.       Dogmatism

7.       Authoritarianism

8.       Introversion

9.       Extroversion

10.   Aggressiveness

11.   Competitiveness.

Traits effect the way people behave. Marketers try to match the store image to the perceived image of their customers.

There is a weak association between personality and Buying Behavior, this may be due to unreliable measures. Nike ads. Consumers buy products that are consistent with their self concept.

• Lifestyles--

Recent US trends in lifestyles are a shift towards personal independence and individualism and a preference for a healthy, natural lifestyle.

Lifestyles are the consistent patterns people follow in their lives.

EXAMPLE healthy foods for a healthy lifestyle. Sun tan not considered fashionable in US until 1920's. Now an assault by the American Academy of Dermatology.

Here Comes the Sun to Confound Health Savvy Lotion Makers..

Social Factors

Consumer wants, learning, motives etc. are influenced by opinion leaders, person's family, reference groups, social class and culture.

• Opinion leaders--

Spokespeople etc. Marketers try to attract opinion leaders...they actually use (pay) spokespeople to market their products. Michael Jordon (Nike, McDonalds, Gatorade etc.)

Can be risky...Michael Jackson...OJ Simpson...Chevy Chase

• Roles and Family Influences--

Role...things you should do based on the expectations of you from your position within a group.
People have many roles.
Husband, father, employer/ee. Individuals role are continuing to change therefore marketers must continue to update information.

Family is the most basic group a person belongs to. Marketers must understand:

• that many family decisions are made by the family unit
• consumer behavior starts in the family unit
• family roles and preferences are the model for children's future family (can reject/alter/etc)
• family buying decisions are a mixture of family interactions and individual decision making
• family acts an interpreter of social and cultural values for the individual.

The Family life cycle: families go through stages, each stage creates different consumer demands:

• bachelor stage...most of BUAD301
• newly married, young, no children...me
• full nest I, youngest child under 6
• full nest II, youngest child 6 or over
• full nest III, older married couples with dependant children
• empty nest I, older married couples with no children living with them, head in labor force
• empty nest II, older married couples, no children living at home, head retired
• solitary survivor, in labor force
• solitary survivor, retired
• Modernized life cycle includes divorced and no children.

In view of the above it is evident that Regulatory system of marketing is very important to control all the activities of the marketing strategy and its plan of action. Cost effective is another phenomenon with which productivity ratio is found out. Sometimes Breakeven analysis is inevitable to know the current position of the industrial trend of proposition. Two Income Marriages Are Now the Norm- because 2 income families are becoming more common, the decision maker within the family unit is changing...also, family has less time for children, and therefore tends to let them influence purchase decisions in order to alleviate some of the guilt. (Children influence about $130 billion of goods in a year) Children also have more money to spend themselves.