What does Marketing Environment mean?
These are actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. An example of a “marketing environment” is Japan’s nationalized financial services industry, with its highly regulated but lucrative brokerage firms which Microsoft hit on the nose. Another business environment might be Canada’s telecom market where customers complain quite loudly to their communications service providers (CSPs) about poor customer service and loss of data; CSPs in turn offer better customer service as one solution to such complaints. By carefully studying the environment, marketers can adapt their strategies to meet new marketplace challenges and opportunities.
What are the types of marketing environments?
There are two major classifications of marketing environment namely i) Micro environment and ii) Macro environment.
How does Microenvironment affect Marketing?
Micro-environment constitute factors that affect the company in the internal environment and they can be controlled up to a certain extent. These internal factors include the company, suppliers, marketing intermediaries, customer markets, competitors, and the public. Marketing success, therefore, depends on managing and building a successful internal marketing environment with these factors.
The Company
Marketers must work in harmony with other internal stakeholders to create customer value and relationships. Departments like marketing, finance, top management, and customer success must come together to create a unified vision for the company which will be beneficial for their target customers. Marketers’ influence on the resource factors like people, money, and technology must be coordinated with other internal stakeholders.
Suppliers
In creating value for customers, marketers must partner with other firms of the company’s value delivery network. In this way, marketers can help companies by accessing raw materials or better pricing. This relationship is important because it reduces the toll on marketing resources and increases market reach due to less time wasted going around intermediaries.
Marketing Intermediaries
These are firms that help the company to promote, sell, and distribute its goods to final buyers, as well as, open doors to new markets. Market Intermediaries include resellers, physical distribution firms, marketing services agencies, and financial intermediaries.
Resellers
The main goal of the reseller program is to attract customers by offering greater choice and higher quality. Offering supplier-specific pricing, partnership opportunities with other providers, access to product information through magazines or websites that are published by resellers help meet these goals.
Physical Distribution Firms
Physical distribution firms/distributors are responsible for ordering inventory, balancing daily inventories, providing quality control of products supplied to physical retailers. These firms are also available for ordering products in advance, responding to customer requests or inquiries.
Marketing Services Agencies
Marketing services agencies are specialists in researching market conditions and adapting marketing strategies. These intermediaries usually offer organizations a range of marketing services including advertising media planning, direct mail strategy, design, and sales promotion programs. This is especially important when it comes to companies that have multiple companies working under one umbrella.
Financial Intermediaries
Financial intermediaries provide financial services like information, advice, and capital for companies (banks, venture capital firms). Access to these providers is important because they help borrow money that can be used towards marketing the company’s product/service.
Competitors
No one can ignore their competitors when devising their marketing strategy. Market research is representative of this as well as the ability to assess competitors’ strengths and weaknesses. Ideally, a company should be able to identify potential competitors from various angles before making decisions about its competitive activities. It is a common trend nowadays that companies conduct researches on potential competitors by gathering feedback from customers who purchased similar products or services to identify future threats especially for those who have been able to use extrinsic information such as market analysis available online to gain a sense of the competition’s possible capabilities in serving their consumers.
A competitor can also be identified through strategic alliances or by analyzing its organizational structure, products, and services it offers and how they compete with one another- all of which will put them into certain markets that would provide for competitive threats to the company.
Public
Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives can be categorized as public. Then can be classified into seven types:
Financial Publics
They are founders, shareholders, or institutional investors. They are often seen as being interested in the long-term solvency of companies they hold shares of. Publics are also enterprises that have an economic interest wherein they can benefit from the performance objectives set by a company’s management team
Government Publics
Any organization that acts in the public’s interest, but is neither private nor non-profit. The government agency can also be called either a regulatory or policymaker.
Media Publics
They have more of an interest in reporting on specific news items about a company they may have invested into it rather than owning shares of the company itself. The existence of media publics can also put pressure on a management team to ensure that its activities and priorities align with the interests of its stakeholders especially in cases where there are rumors or negative press associated with the company’s financial performance
Government Publics
They are those that have regulatory powers and the legal right to determine how a company does business and treats its workforce
Local Publics
They are those connected with workers, consumers, investors’ interests groups. Local/Civil society public interest advocacy doesn’t necessarily include government pressure but also actively involves itself in exposing conduct that appears unreasonable or unethical – such as working on social issues, negotiations with the government to support its political agenda.
Internal Publics
They are those that can occur within a company such as divisions, small groups, and departments of management. These groups usually have different opinions regarding various aspects of the business
External Publics
They may be either individuals or societal interests who influence companies by pressuring them through boycotts and mass media output on their actions/deeds
Development Publics are those that develop new projects and products. These groups include environmentalists, humanitarians, international organizations such as the United Nations or World Bank who offer financial support in exchange for a project ‘sustainability’ which usually comprises a commitment to creating jobs within their region.
How does Macroenvironment affect Marketing?
Macro-environment constitutes factors that affect the company in the external environment and they cannot be controlled by the organization. These external factors include demography, economic, natural, technological, political, and cultural. Some of this external marketing environment are uncontrollable and unforeseeable. Marketing organizations that understand them can adapt to them and develop fruitful customer relationships. PESTEL analysis is a tool to analyze the macro-environmental factors and their implications on your business operations.
Demographic Environment
Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. Changing demographics mean changes in markets and marketing strategies. For example:
- In 1996, the average age of a consumer was 35.4 years old. By 2010 ranged from 25-34 to 22-33 for women and 27 – 36 for men with a median estimated at 29.
- In 2010, 15% of Americans will be 65 or older. By the year 2050, this number is expected to increase by 85.
The demography groups can be broadly classified into 4 categories: i) Baby boomers, ii) Generation X, iii) Millennials(Gen Y), and iv) Gen Z.
Baby Boomers
After world war II, the baby boom produced 78 million lasting until 1964. Older Baby Boomers (aged 52-64 in 2010), however, make up only 17% by 2050.
Gen X
They are 49 million people born between 1965 and 1976 in the “birth dearth” following the baby boom. Aged 31 − 46 years old in 2010 would account for 41%.
Millennials (Gen Y)
The 83 million children of the baby boomers born between 1977 and 2000 are considered Millennials. They will constitute 42% of the total population.
Gen Z
Aged 21 and below in 2010, Gen Z will make up 15% of the American population.
The marketers have to be careful in not antagonizing the rest of the demographic group while crafting marketing strategies for one. Moreover, demography may not be a good factor to segment your target audience.
Economic Environment
These are the economic factors that affect the purchasing power of the consumers thereby the spending patterns. The factors include: inflation, unemployment, and the cost of living (oil prices) play a major role in changing customers’ spending capacity.
Inflation
It is defined as the increase in the general price level, the reduced purchasing power of the currency, etc. making people spend less or not at all due to their caution towards inflation. Inflation can be minimized if companies could report their earnings as per the local currency, reflecting the foreign exchange fluctuations which translate into cost increase for them and consequently reduced purchasing power of the dollar to make people spend more – this is called multiple price increases. Supermarkets, clothing industry – can take advantage of this situation to increase profit margin – stocking up on items with high demand as a solution. However, they should be watchful as people may not enjoy paying more for the same item.
Unemployment
It is measured by the seasonally adjusted rate per thousand population, averaged over the past three years. Using conservative estimates, the unemployment rate in 2006 was 9.5%, higher than the post-recession period average of 8.4%. The latest report on Labor Markets indicated that there were 15.7 million unemployed people outside agriculture who wanted a job but did not have one in August 2007 almost twice more than the 5.8 million in August 2006, following 3 years of high growth at the same period before the crisis hit. The unemployment rate was largely associated with labor market conditions which include non-seasonally adjusted unemployment rates for unemployed people who want a job and can work (unemployment gap) along with the participation rate (employment to population ratio) and other measures.
Cost of living
It is determined by the level of consumer price index and food & non-alcoholic beverage prices, and value-added tax (VAT). The key issue for determining the cost of living is finding a proper measurement base, as it concerns quality requirements. The interest rates set by the central bank acts as the linchpin for the economic environment.
Natural Environment
It includes the physical environment and the natural resources which are needed as inputs by marketers or that are affected by marketing activities. Environmental sustainability concerns have grown steadily over the last three decades. This has called for a more inclusive model of marketing such as societal marketing orientation style of marketing management.
Example: Kyoto Protocol
It is the international agreement for limiting greenhouse gas emissions aimed at avoiding dangerous warming of the atmosphere. It was adopted in 1997 by countries belonging to the United Nations Framework Convention on Climate Change (UNFCCC). There are now 114 members that joined this treaty. It is later then followed by the Paris Climate Accord.
Technological Environment
These are the forces that create new technologies, creating new products and market opportunities. Every new technology replaces old technology and satisfies the customer’s needs faster and better. Technological factors evolve rapidly and are driven by the demands of the customers.
Example: Smartphones
This type of mobile phone was first developed in 2009 and was first used by consumers with good internet data speed around 10 years ago. The mobile phone industry has been gradually replacing many tangible products, such as landlines and telexes with mobile phones. Today mobile phones play a major role in our lives: we cannot live without them, we use them to work and study, etc.
Political and Social Environment
Political Environment
Laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society contribute political environment. The role of government in this regard is very important because Government regulation restricts or allows market players.
Example: Employment Laws
The Federal Governments sets out guidelines for both management and specific sectors to ensure that workers are compensated fairly and safe working conditions are maintained. Accordingly, many state governments have also provided a legal environment to prevent the exploitation of workers.
Social Environment
The social environment is the community that provides us with rules and standards of behavior among people. This also includes providing support, comfort, guidance, and taking part in their welfare activities (helping to solve problems). Socialization is an important feature that makes life easier by building up for people an overall understanding of themselves, their family, and other people in society. It is also important that you must feel comfortable enough with the community setting during your stay to be able to form good relationships between different kinds of people which can give us great experiences.
Example: Community and Family
When we look at community and family it is necessary to be able to find the differences. It will help that you can appreciate those things that make our society as a whole well organized because people who build peace, harmony, and a joyful atmosphere within their families stay well-balanced in life.
Cultural Environment
These are institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors. Cultural values can be classified into core values and secondary values.
Core Values
They are not open to change and are a part of people’s identity. They are passed down from generation to generation.
Example: The core value of culture is the concept that “you should help parents”. The child also gains acceptance and respect within society, but by obeying parental authority.
Secondary Values
Secondary values are a little bit flexible and open to change. They are influenced by six factors namely i) People’s view of themselves, ii) People’s view of others, iii) People’s view of the organization, iv) People’s view of society, v) People’s view of society, and vi) People’s view of society.
Example: A secondary value of culture is the concept “you always stick to your word”. This partly reflects society’s view and is made by many people throughout history.
Conclusion
Marketing strategy is a process that involves many elements. The marketing environment is one of the most important factors that can help you find new openings in the minds of your customers and position your product better. Customer behavior changes from time to time, so the marketing team should be able to adjust their marketing strategy accordingly. Start by answering these questions: Is there any new environmental change that you can use to your advantage? How is the competitive landscape changing and how do you stand out from the crowd? A marketing plan is a complex process that involves various components. You can’t just target one thing and expect the magic to happen. The environment in which you operate has a significant impact on your marketing operations and strategy, so it’s important to understand what is happening around you and how it will affect your marketing efforts.