Archive for the ‘Marketing’ Category
The history of government regulation in the United States can be divided into four phases. The first phase was the antimonopoly period of the late 19th and early 20th centuries. During this era, major laws such as the Sherman Antitrust Act, Clayton Act, and Federal Trade Commission Act were passed.to maintain a competitive environment by reducing the trend toward increasing concentration of industry power in the hands of a small number of competitors. Laws enacted more than 100 years ago still impact business in the 21st century.
The recent Microsoft case is a good example of antitrust legislation at work. The U.S. Justice Department accused the software powerhouse of predatory practices designed to crush competition. By bundling its own Internet Explorer Browser with its Windows operating system (that
runs 90 percent of the world’s personal computers), Microsoft grabbed significant market share from rival Netscape. It also bullied firms as large as America Online to drop Netscape Navigator in favor of the Microsoft browser. Microsoft countered that its bundling decisions were simply efforts to offer customer satisfaction through added value. But as a recent joke reported, “In the U.S. government’s fight with Bill Gates, I’m for the federal government. I always like to root for the little guy.”1’
The second phase, aimed at protecting competitors, emerged during the Depression Era of the 1930s, when independent merchants felt the need for legal protection against competition from larger chain stores. Among the federal legislation enacted during this period was the Robinson-Patman Act. The third regulatory phase focused on consumer protection. Although the objective of consumer protection underlies most laws—with good examples including the Sherman Act, FTC Act, and Federal Food and Drug Act—many of the major consumer-oriented laws have been enacted during the past 40 years. The fourth phase, industry deregulation, began in the late I970s and has continued to the present. During this phase, government has sought to increase competition in such industries as telecommunications, utilities, transportation, and financial services by discontinuing many regulations and permitting firms to expand their service offerings to new markets.
The newest regulatory frontier is cyberspace. The Federal Trade Commission (FEC) is investigating ways to police the Internet and online services. The immediate goal is to protect consumers who buy goods and services online from fraud and deceptive advertising. Although the federal government has been slow to regulate am—junk e-mail—many states have enacted legislation and many more have introduced bills to protect consumers. Lawmakers in California, Washington, and Virginia have made it a criminal offense to send spam with false or misleading headlines, enforcing penalties ranging from fines to incarceration. But as one anti-spam activist has pointed out, “The Internet is global and laws in any one jurisdiction are not going to stop it.
The FEC and state regulators search out fraudulent schemes, like own-your-own business scams and sales promotions that, at first glance, appear to be casual chat rooms. Meta-tags are the newest shell game in town. When creating a site, a firm inserts the name of bigger competitors in a code called “meta-tags” that is read by search engines but remains invisible to casual viewers. When consumers look for a big company, they are taken to a roadside stop owned by the little company, as well. In 1999, California courts banned the use of meta-tags to lure traffic to a site because the practice breeds confusion among consumers)3 Now that the Internet is an established medium, laws to control fraud and misrepresentation in cyberspace are inevitable. Privacy and child protection issues may present the most difficult enforcement challenge of the Internet. With the passage of the Children’s Online Privacy Protection Act, Congress took the first step in regulating what children are exposed to on the Internet. The primary focus is a set of rules regarding how and when marketers need to get parental permission before obtaining marketing research information from children over the XMeb)4 Many Internet marketing decision makers are taking proactive steps to protect the consumer. For example, IBM’s Web sites post a clear privacy policy; America Online promises never to disclose information about members to outside companies; and Microsoft is developing technology that lets people automatically skip sites that do not meet their privacy standards) lists and briefly describes the major federal laws affecting marketing. Legislation affecting specific marketing practices, such as product development, packaging, labeling, product warranties, and franchise agreements. Marketers must also monitor state and local laws that affect their industries. Many states, for instance, allow hard liquor to be sold only in liquor stores; such laws limit the distribution of low alcohol cocktails made with rum, vodka, whiskey, and bourbon. California’s stringent regulations for automobile emissions require special pollution control equipment on cars sold in the state.
Before you play the game, learn the rules! It is absurd to start playing a new game without first understanding the rules, yet some businesspeople exhibit a remarkable lack of knowledge about marketing’s political-legal environment—the laws and their interpretations that require firms to operate under certain competitive conditions and to protect consumer rights. Ignorance of laws, ordinances, and regulations or noncompliance with them can result in fines, embarrassing negative publicity; and possibly expensive civil damage suits.
Businesspeople need considerable diligence to understand the legal framework for their marketing decisions. Numerous laws and regulations affect those decisions, many of them vaguely stated and inconsistently enforced by a multitude of different authorities. The existing U.S. legal framework was constructed on a piecemeal basis, often in response to concerns over important issues of the time.
Regulations enacted at the federal, state, and local levels affect marketing practices, as do the actions of independent regulatory agencies. These requirements and prohibitions touch on all aspects of marketing decision making—designing, labeling, packaging, distribution, advertising, and promotion of goods and services. To cope with the vast, complex, and changing political-legal environment, many large firms maintain in-house legal departments; small firms often seek professional advice from outside attorneys. All marketers, however, should be aware of the major regulations that affect their activities.
Firms must spend money to create time, place, and ownership utilities. Numerous attempts have been made to measure marketing costs in relation to overall product costs, and most estimates have ranged between 40 and 60 percent of total costs. On the average, one-half of the costs involved in a product, such as a Subway sandwich, an ounce of Safari perfume, a pair of Red Line jeans, or even a European vacation, can be traced directly to marketing. These costs are not associated with fabrics, raw materials and other ingredients, baking, sewing, or any of the other production functions necessary for creatingformutility.What,then,does the consumer receive in return for this 50 percent marketing cost? What functions does marketing perform? Marketing is responsible for the performance of eight universal functions: buying, selling, transporting, storing, standardizing and grading, financing, risk taking, and securing marketing information. Some functions are performed by manufacturers, others by retailers, and still others by marketing intermediaries called wholesalers.
Buying and selling, the first two functions, represent exchange functions. Buying is important to marketing on several levels. Marketers must determine how and why consumers buy certain goods and services. To be successful, they must seek to understand consumer behavior. In addition, retailers and other intermediaries must seek out products that will appeal to their customers. Since they generate time, place, and ownership utilities through these purchases, they must anticipate consumer preferences for purchases to be made several months later. Selling is the second half of the exchange process. It involves advertising, personal selling, and sales promotion in an attempt to match the firm’s goods and services to consumer needs.
Transporting and storing are physical distribution functions. Transporting involves the physical movement of goods from the seller to the purchaser. Storing involves warehousing goods until they are needed for sale. Manufacturers, wholesalers, and retailers all typically perform these functions.
The final four marketing functions—standardizing and grading, financing, risk taking, and securing marketing information—are often called facilitating functions because they assist the marketer in performing the exchange and physical distribution functions. Quality and quantity control standards and grades, frequently set by federal or state governments, reduce the need for purchasers to inspect each item. Specific tire sizes, for example, permit buyers to request needed sizes and to expect uniform sizes.
Financing is another marketing function because buyers often need access to funds in order to finance inventories prior to sales. Manufacturers often provide financing for their wholesale and retail customers. Some types of wholesalers perform similar functions for their retail customers. Finally, retailers frequently permit their customers to buy on credit.
The seventh function, risk taking, is part of most ventures. Manufacturers create goods and services based on research and their belief that consumers need them. Wholesalers and retailers acquire inventory based on similar expectations of future consumer demand. Entrepreneurial risk takers accommodate these uncertainties about future consumer behavior when they market goods and services.
The final marketing function involves securing marketing information. Marketers gather information to meet the need for decision-oriented input about customers—who they are, what they buy, where they buy, and how they buy. By collecting and analyzing marketing information, marketers also seek to understand why consumers purchase some goods and services and reject others.