marketers need is market sensing or the ability to sense

the market and we indicated there were two

sub competencies within that -- environmental analysis

and researching consumer behavior. today we're going to focus

on environmental analysis overview

and then also focus more specifically

on the competition aspect of the environmental analysis

so when we talked

last time we

focused on defining marketing

as something that creates value

and relationships to meet customer needs.

we indicated that a key aspect of marketing

was exchange between a customer

and organization in the form of the marketing mix which involves the product

the price the place or distribution

and the promotion. we also differentiated between

marketing and promotion, advertising and selling.

while advertising and selling

are part of promotion which is part of marketing

I think you can see how marketing is much

more and much broader than just promotion

or just advertising and selling. i

want to focus today on things going on

outside the marketing organization

that we would want to sense or continuously scan and analyze.

and so the marketing environment is comprised of several forces

competitive and economic forces

regulatory legal and political forces

technological forces, social

cultural and demographic forces and also the natural environment.

so today we're going to focus pretty much

on explaining the importance of

analyzing the competitor environment

for your organization now.

its interesting because some people might think

their product to so unique that they don't have any competition

and that's pretty much is an inaccurate statement. almost

every product has some form a competition

which we would define as a substitute

or similar products what they would buy instead

if they didn't have your product so

Shocker indicate that competition

is a matter of decree rather than

dichotomy in other words, instead of yes

are no do you have competition, pretty much

assume that you do but what the degree or type of competition

that you have. I'm also noting here

a couple additional information sources

for this concept. so let's look

at the different degrees or

levels of competition. the first type

would be product form

or brand competition. the second

type would be product category competition.

another type would be generic competition

and the fourth type would be a total budget

competitor. so let's describe the difference

by using the product category

soft drinks or pop or cola

depending upon what area in the country you are from.

in product form

or brand competition your competitors could come from the same product

category

so in this case we are talking about two

soft-drink that have similar features

in this case to soft drinks

that are both cola so coca-cola and Pepsi

would be considered brand or product

form competitors. now even if you don't have a product

in the same product category with similar features

you might have a product in the same product category,

in our example soft-drink, that have different

features in this case coca-cola

and Mountain Dew. we would call coca-cola and Mountain Dew

product category competitors because they're in the same product category

even though they have different features. even if you don't have any product

category competitors, in other words there's

nothing in your same product category

there might be something in a

different product category that meets the same

need in this case both coca-cola

and bottled water. while they're not both

soft-drink they do both satisfy

thirst so coca-cola and bottled water

would represent what we would call generic competitors.

even if you don't have something

that satisfies the same need every product

out there competes for the consumer dollar

and so therefore because consumers

only have a limited amount of what's called discretionary

income. every product basically

competes for that dollar so in this case

if you were both hungry and thirsty

and you went to the vending machine you would have to choose

between coca-cola and skittles even though they don't meet the same basic

need. even though

they're not the same product category

they are still what we would call budget competitors.

let's illustrate Shocker's quote even more.

competition is a matter of degree --

brand product category generic

-- rather than a simple

yes or no. whether or not you have competition.

it is very important

is to understand the industry in which you operate

and so most industries

will have what would be called a trade association

-- it's a collection of member

competitors in a product category.

we're gonna look a little bit at the

International Bottled water Association

in a minute. let's hold off on that concept --

trade associations until after we discuss

another concept in terms of industry competition --

another concept would be

how many competitors you have in your industry

if you are the only competitor in your industry

you have what's called a monopoly.

if there are only a few competitors

in your industry you would operate in what's called

an oligopoly. if you have many competitors

in your industry and therefore they're all trying to make

their product appear different by various features and benefits

you would operate what's called monopolistic

competition. there's also a fourth

level competition within the industry called pure competition.

honestly it it rarely exists because

there are very large number of competitors with standardized products

and so the only way they

really compete is based upon price.

an exaqmple here might be most agricultural products

but most products that are marketed we try

not to be standardized. in other words they try to make

their product special

or differentiated from their competitors

and therefore trying to convince people to buy their product

versus a competitor's product. one thing I want to do

at this point is re visit this concept of

trade associations and I'm going to visit the

International Bottled Water Association.

later you'll be doing a primary and secondary research project

based upon information that you can get

from the bottled water Association. one of the things that is

often available from a trade association

are statistics about your industry

and I'm focusing here on

something from the bottled water Association industry

from 2011 and one of the things they're looking at or

types of data that you might get here would be to

look at the demand for your

product category over time. and you can see here in the bottle

Water Association that after 2007,

in 20008 and 2009,

were there was a decline in the

consumption of bottled water

per capita in terms of gallons. it's picking up again in 10 and 11

and part of the reason for that to happen has to do with the topic

at this lecture series --

things that are happening in the external

environment. and we can discuss sales more at a later time.

it's important that you understand

your industry and your competitive industry.

one other thing that we want to discuss when we talk about

an industry is the potential size

of your market and also your share

of that particular market so let's move on to those concepts.

first of all let's discuss the concept of

market potential or

industry potential. it is the total amount

of a given product category-- whether it be

bottled water soft-drink or another product category--

it's for example the total amount

of a given product category that can be

sold in a given time period

generally we would look at a year in a given

geographic area. so it's interesting

to look at the market or industry

potential of e-cigarettes and the growth in that market

from 2007 until 2013.

interestingly the market more than doubled

between 2012 and 2013

and so what causes the market potential

for a product category to grow?

and generally speaking the

answer to that would be the various forces

in the marketing environment that we talked about earlier.

those competitive economic regulatory

technological social and cultural forces

or even changes in the natural environment.

so let's apply that concept to

this e-cigarette market what are some of the reasons

for e-cigarette growth? well first of all social

I think most

understand now that it's considered

socially unacceptable to smoke

in many environments because are the health

reasons and especially because of the second hand smoke

concerns in addition to just how people in our society

and culture feel about traditional smoking.

there's also been new regulatory

influences or forces that

have affected the demand for regular cigarettes

or e-cigarettes.

in many areas there have been bans against smoking

indoors. additionally

there have been economic influences. since the economic recession of 2008

since the increasing cost of traditional cigarettes and the taxation of

those items it has become increasingly

expensive to smoke and

consumers only have so much discretionary

income. there've also been

technological influences on the cigarette market.

with the Advent of New

technology for smoking we've seen a tremendous growth

in that market.so I'm not suggesting that

e-cigarettes are something that you should pursue or should not pursue --

i don't want to get into that -- but I wanted to use that particular market

to illustrate this concept about growth

in market potential -- the total amount of a given product category

that can be sold in a given time frame in a given

geographic area. another way to look at

market potential is to look at the

what's called the primary demand for a product category.

so when we talk about primary demand we're talking about the demand

for a product category regardless

of the brand. with e-cigarette

let's illustrate

a new concept and that is that market share

and the market share would be the ratio of

your brand

or company to sales of

all that particular product category

industry-wide. so market share

is a ratio of the sales of your brand

compared to the market potential

or the primary market --if we looked at the e-cigarette market

for example you can see that 61 percent

of the market potential for that

product category is held by

one competitor and if you look at the additional

top two competitors you'll see that

almost 75 percent of the E cigarette market

is controlled by 3 brands

that represents each of these three brands'

market share -- the ratio of their sales

to industry-wide sales.

we would call that demand selective

demand or demand for a specific

Brand. one of the things

that you're faced with often as a marketer

is the concept and how do we sell more?

how do we help our company to continue to grow

by selling more? and we have to think of that

more thoroughly than just saying

okay I wanna sell more let's run an ad. it's not that simple.