Understanding Marketing Environment
The marketing environment surrounds and impacts upon the organization. There are three key elements to the marketing environment which are the micro-environment and the macro-environment. Why are they important? Well marketers build both internal and external relationships. Marketers aim to deliver value to satisfied customers, so we need to assess and evaluate our internal business/corporate environment and our external environment which is subdivided into micro and macro.
The macro-environment is less controllable. The macro environment consists of much larger all-encompassing influences (which impact the microenvironment) from the broader global society. Here we would consider culture, political issues, technology, the natural environment, economic issues and demographic factors amongst others.
Businesses need to be aware of changes in the general population. Is the age distribution changing? Are household patterns changing? Major changes in ethnicity are critical to identify. Watch population shifts to see if the populations in cities, suburbs or rural area are changing to determine if segments of the population are leaving one area for another. The same holds true for geographic areas. Are people leaving one region of the country for another? Past demographic trends would include the shift from cities to suburbs in the 50s and 60s, the aging of the Baby Boomer generation currently, the growth of the Hispanic population over the last 20 years and the growing acceptance of the gay community recently.
In a recession, people lose jobs, or worry about that happening to them. This makes consumers less willing to spend their disposable income. However, in an economic expansion, job security makes people more willing to spend their disposable income. If your customers use disposable income to buy your product, knowing where you are in the economic cycle helps you plan production. Look at income distribution to see if certain segments of the population are growing wealthier and acquiring new needs. For example, a major reason that China is seen as an attractive market is a rapidly growing Chinese middle class that desires an increasing range of consumer goods.
- Social and Cultural
Every nation has a set of core cultural beliefs that are passed from generation to generation. Changes in these core beliefs affect consumer purchases. Once taboo, single-parent families are now considered mainstream and are growing, creating a whole new set of product needs. Preferences for music, entertainment, exercise, eating habits or leisure time activities change with time, creating new needs or lessening past needs.
The development of new technology can dramatically affect needs and wants. For example, the Internet completely changed the way people communicate. If you walk into any electronics retailer or department store, you will literally see hundreds of new products that were directly tied to the growth of the Internet. That shift to the Internet resulted in new consumer needs and wants, opening the door for smart companies to take advantage of that opportunity. Today, the pace of technological change constantly provides opportunities for new products.
Most of the forces discussed here will only affect certain segments of consumers and businesses. Their effects will diminish over time. A few forces, however, affect nearly every segment of our civilization, and their effects last generations. We refer to these forces as megatrends. Some historical megatrends might be the printing press, the incandescent light bulb and the telephone. Today, the Internet appears to fall into that category as well.
Microenvironment variables are close to the firm and include the suppliers, marketing intermediaries, customer markets, competition & publics. Microenvironment also refers to the internal environment of the company and affects not only marketing but also all the departments such as management, finance, research and development, Human resources, purchasing, operations and accounting.
Customers have the most direct microeconomic impact on a business. The simple fact is that you can’t successfully operate a for-profit company without attracting targeted customers. Knowing your ideal customer types and developing and presenting effective marketing campaigns are integral to building a customer base and generating revenue streams.
Your workers produce, sell or service the goods and service that drive your business. The availability of qualified, motivated employees for your business type is vital to economic success. If you operate a highly technical business, for instance, you might have to pay more in salary to attract a limited number of available, specialized workers.
- Distribution Channels and Suppliers
Sourcing goods used in production or resale and distributing your inventory to customers are important as well. Manufacturers rely on materials suppliers and resale companies rely on manufacturers or wholesalers to transport goods. To operate profitably, you need to get good value on products and supplies and, in turn, offer good value to your customers with accessible solutions.
The level of competition also impacts your economic livelihood. In theory, more competitors means your share of dollars customers spend diminishes. However, a large number of competitors in an industry usually signifies lots of demand for the products or services provided. If an industry lacks competition, you might not find enough demand to succeed in the long run.
Shareholders and investors may help fund your company at start-up or as you look to grow. Without funds to build and expand, you likely can’t operate a business. You could look to creditors, but you have to repay loans with interest. By taking on investors, you share the risks of operating and often gain support and expertise. You do give up some control, though.
- Media and the General Public
Your local community and media also affect your ongoing business image. Communities often support companies that provide jobs, pay taxes and operate with social and environmental responsibility. If you don’t do these things, you may run into negative public backlash. Local media often help your story proliferate, for better or worse.