Lecture 3

• The marketing environment, ethics, and social responsibility are all important to understand for business success.

Understanding the Competitive Marketing Environment

• Essential to understand industry trends
• Marketers must collect external marketing data to identify and interpret potential trends
• Trends represent significant opportunities or threats to a company
• The goal is to understand what date tells you from your business entity

Competitive Environment Assessment

• Companies must consistently assess marketers of products that can be substituted for one another
• Companies must consistently assess marketers competing for the consumer’s purchasing power
• Companies must consistently assess marketers of directly competitive products
• Every company in a competitive environment tries to crush the others

Marketing Campaign Effectiveness

• Some marketing campaigns are extremely successful while others are not
• Campaigns can help increase the subscriber base and establish itself as a premium service provider
• Sprint launched a campaign that was directly aimed at Verizon
• Sprint campaign "We will cut your bill in half" to switch to sprint
• The National Advertising Division of US Govt investigated Sprints claims around that campaign
• Sprint did not include activation and tax fees which was found not possible
• Sprint’s market share fell from 13.9% to 10.5% at the time of T-Mobile acquiring them in 2019.
• Attacks rarely work and customers are angry after the realization that claims are false.

Marketing Decisions - Bottom Line

• In the end, a company's marketing decisions influence their bottom line
• Brand awareness, recognition, and loyalty should be fiercely protected
• Sprint's efforts in marketing were focused on damage control
• T-Mobile acquired Sprint on July 26, 2019, for $26 billion
• T-Mobile’s M/S for Q1 ‘22, was 24.1%, lower than Q3 of 2018.
• T-Mobile’s M/S for Q2 ‘23, was 23.4%

Types of Competition

• Direct competition happens among marketers of similar products.
• An example of direct competition are cell phone carriers such as Verizon, AT&T, T-Mobile, and Sprint
• Indirect competition involves products that are easily substituted
• An example of indirect competition is fast food where pizza competes with chicken, hamburgers and tacos.

Competitive Strategy

• Competitive strategy includes the methods through which a company deals with its competitive environment
• When developing a strategy, a company must ask three the following questions
  • Should we compete?
  • In what markets should we compete?
  • How should we compete?
• Whether or not a company should compete depends on the company’s resources, objectives, and expected profit potential
• Determining in what markets a company should compete requires a clear knowledge of the company’s resources
• The goal of determining how a company should compete is to make product, distribution, promotion, and pricing decisions to achieve a competitive advantage

Government Regulation Historical Phases

• Anti-monopoly in the late 19th and early 20th centuries
• Protecting competitors during the Great Depression of the 1930s
• Consumer protection starting around 1950
• Industry deregulation began in the late 1970s and continues to the present

Government Regulations

• The newest regulatory frontier is cyberspace
• Privacy and child protection issues are at the forefront of the difficult enforcement challenges
• Federal and state regulators are constantly investigating ways to police the Internet and online services
• Cybercrime is active with exploitation of children and rampant stealing of identities

Stages in the Business Cycle:

• Depression: Consumer spending sinks to its lowest level
• Recession: Consumers focus on basic, functional products
• Recovery: Consumer purchasing power increases
• Prosperity: Consumer spending is brisk and service sector growth

Government Regulatory Agencies

• The Federal Trade Commission (FTC) enforces laws regulating unfair business practices and stops false and deceptive advertising
• Other federal regulatory agencies consist of The Consumer Product Safety Commission, Federal Communication Commission, Environmental Protection Agency and Food and Drug Administration

Economic Environment Factors

• Gross Domestic Product (GDP) is the sum of all goods and services produced by a nation in a 12-month cycle
• Economic Environmental Factors include factors that influence consumer buying power and marketing strategies
• Business cycle consists of stages in the product life cycle of a company
• Elements outside the business can affect companies’ profitability and decision making

Inflation

• A devaluation of currency
• Reduces the products that can be purchased due to rapidly rising price increases
• Deflation causes a freefall in business profits, lower returns on investments, widespread job layoffs, higher crime rates, and low morale
• Deflation generally occurs after recessionary periods

Economic Environment Factors

• Unemployment factors in the Proportion of people in the economy actively seeking, but not finding employment and rises during recessions while declining during recovery and prosperity
• Income is related to the amount of discretionary income people have to spend after buying necessities, as well as influences consumer buying power with changing consumer buying preferences throughout their lives.

Ethical Issues in Product Strategy

• Product quality (or lack thereof), planned obsolescence, brand similarity, and packaging all raise ethical issues
• Unethically, packaging can be oddly sized to make price comparison difficult
• Bottles can have concave bottoms to appear to have more liquid in them than actually available
• Larger packages may be more noticeable on the shelf but contents might be less then 100%
• Ethically questionable when chips bags that are 50% full

Ethics in Distribution

• Distribution is the total number and classes of trade where products are sold
• The distribution channel that an organization has creates a an ethical issue
• Companies look at their distribution “mix” just as they do their product “mix”
• MAP, UPP, are examples of trying to control

Ethics in Promotions

• Truth in advertising is the bedrock of ethics in promotions
• Marketing to children has come under increased scrutiny
• Promoting specific products to college students can raise ethical questions
• These promotional areas are increasingly litigated against

Ethics in Pricing

• Pricing is the very most regulated element of a firm's marketing activities
• High interest rates target consumers that already have high credit card debt
• Companies offer “subprime” interest rate credit cards that give a much higher interest rates
• Consumers having financial issues are hurt my ethical pricing practices