Page 91 - Foundations of Marketing

58 Part 1 | Strategic Marketing and Its Environment

them in adjusting current marketing strategies and planning new ones. When an airline
such as Southwest acquires a competitor such as AirTran, then there is the potential for
less competition.
In monitoring competition, it is not enough to analyze available information; the firm
must develop a system for gathering ongoing information about competitors. Understanding
the market and what customers want, as well as what the competition is providing, will assist
7
in maintaining a market orientation. Information about competitors allows marketing man-
agers to assess the performance of their own marketing efforts and to recognize the strengths
and weaknesses in their own marketing strategies. Data about market shares, product move-
ment, sales volume, and expenditure levels can be useful. However, accurate information on
these matters is often difficult to obtain. We explore how marketers collect and organize such
data in Chapter 4 .
buying power Resources,
such as money, goods, and
services, that can be traded in Economic Forces
an exchange
Economic forces in the marketing environment influence both marketers’ and customers’
disposable income decisions and activities. In this section, we examine the effects of buying power and willing-
After-tax income
ness to spend, as well as general economic conditions.
discretionary income
Disposable income available
for spending and saving after Buying Power and Willingness to Spend
an individual has purchased
the basic necessities of food, The strength of a person’s buying power depends on economic conditions and the size of the
clothing, and shelter resources—money, goods, and services that can be traded in an exchange—that enable the
individual to make purchases. The major financial sources of buy-
ing power are income, credit, and wealth.
For an individual, income is the amount of money received
through wages, rents, investments, pensions, and subsidy pay-
ments for a given period, such as a month or a year. Normally,
this money is allocated among taxes, spending for goods
and services, and savings. Marketers are most interested in
the amount of money left after payment of taxes because this
disposable income is used for spending or saving. Because
disposable income is a ready source of buying power, the
total amount available in a nation is important to marketers.
Several factors determine the size of total disposable income,
including the total amount of income—which is affected by
wage levels, the rate of unemployment, interest rates, and divi-
dend rates—and the number and amount of taxes. Disposable
income that is available for spending and saving after an
individual has purchased the basic necessities of food, cloth-
ing, and shelter is called discretionary income. People use
discretionary income to purchase entertainment, vacations,
automobiles, education, pets, furniture, appliances, and so on.
Breitling sells products that would be purchased with discre-
tionary income. It uses celebrity soccer player David Beckham
Courtesy of Breitling which helps it to justify its $ 11,200 price tag for its Breitling
in its advertisements to lend an air of prestige to its watches,
Transocean Chronograph Unitime traveler’s watch. Changes

especially automobiles, furniture, large appliances, and other
Discretionary Income in total discretionary income affect sales of these products,
Consumers may use their discretionary income to purchase costly durable goods.
the Breitling Transocean Chronograph Unitime, touted as the Credit is also important because it enables people to spend
ultimate watch for travelers. future income now or in the near future. However, credit increases

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