The Marketing Environment consists of a complex set of interacting forces and influences outside the marketing department of an organization. The Marketing Environment affects the organization’s ability to build and maintain mutually beneficial relationships with its target customers. Through continuous monitoring its Marketing Environment a company must be able to anticipate change and act in a pro active way rather than leaving it to a reactive reaction. It must also keep up to date by realizing any effective changing forces. It does this by monitoring SWOT i.e. Strengths, Weaknesses, Opportunities and Threats. Obviously wanting to maximize on Strengths and Opportunities and eliminate Weaknesses and Threats. Marketers must use marketing intelligence and market research when monitoring the Marketing Environment.
The Marketing Environment can be divided into two main categories; the Micro and the Macro Environment.
The Micro Environment
This can also be divided. Internal Environment and Forces close to the organization.
The Internal Environment. This consists of Top Management and Other departments.
The Top management is responsible for setting the organizations overall mission, objectives, strategies and policies to guide all the organizations departments and employees. The success of the company is dependant on the competence of the Top managers.
Other departments must co-ordinate their efforts as to maximize potential and avoid conflicts. The smoother the departments work together the better the overall outcome is going to be. All employees should realize the importance of being market-orientated and of delivering customer satisfaction.
Forces close to the organization. This consists of Competitors, Marketing Intermediaries, Suppliers of resources, Customers and Publics.
Competitors: must offer superior value & satisfaction than their competitors and make it widely known throughout the target market. Companies must make an effort to attract their target customers and retain them by delivering customer satisfaction. These companies must watch their competitors closely as to retain their market share and maybe win some of the competitor’s market share.
Marketing Intermediaries: These are firms that assist the company hiring them to promote, sell and distribute its products to target customers. Resellers will help find target customers or sell to them. Transportation firms help companies stock and transport goods. Agencies providing marketing services are marketing research agencies, advertising agencies, and marketing consulting firms. Financial intermediaries are organizations that will sell financial services to companies.
Suppliers of resources: A company must be very careful as to watch for any changes (shortages, delays, labour strikes etc) as they are damaging to the companies sales and reputation. The organization is as efficient as its suppliers.
Customers: Firstly a company must identify its target market. Then develop the right 4P’s to build long term customer relationships. An organizations target customers may be part of different markets. Consumer markets which are people who buy for personal use, these are called final consumers. Business Markets are companies that buy goods or services in order to use them for production in order to resell at a profit, these are called business customers. Government markets rent goods or services to carry out the main functions of the government.
Institutional markets are schools & hospitals that provide goods or services to those in the organization. International markets are any of the customer markets but are situated overseas. Each market has its own particular features. Organizations must study the market/s to which they are selling to so as to understand its/their characteristics; including the way buying decisions are made.
Publics: are groups that have an actual or potential interest in or on the companies ability to achieve its objectives. These publics include Media, Financial, Local, Internal, General, Citizen Action, or Government.
The Macro Environment
The Macro Environment can be considered as forces. These forces can be split into four categories: Demographic forces, Natural forces, Political forces and Social forces.
This is the study of the population. Demographic trends include Growing world population, Ageing population, Increasing Diversity, Changes in family structure, and a more Educated population.
Growing world population: The number of needs increases as the population increases. These increased needs backed by purchasing power create market opportunities. These opportunities must be exploited.
Ageing population: If the older segment of the population increases opportunities for companies that target this segment of the market. Likewise it creates threats companies that target a young market. These companies can react by offering a product suitable for an older market on top of their original product.
Increasing diversity: The nationality and racial make up of the country/ies where they are selling their products should be considered. People’s wants are generally due to their nationality or race. Due to advancements in technology and transportation this has and is likely to continue increasing.
Changes in family structure: Nowadays families have gotten smaller. This means that the usual budget for food etc is obviously going to get smaller i.e. with a higher standard of living an increase in purchases of various products is probable. Women working have also increased so with money in their pocket a new segment of potential customers has been created. There is also a shift in husband and wife roles so now household products should also be aimed at husbands as well as wives.
A more educated population: As a result of this the demand for quality products, book, formal clothing etc has increased.
These are forces to do with natural resources. These forces can be split into four categories: Raw material shortage, Increased pollution, Increased government intervention and Environmentalism.
Raw Material Shortage: Non renewable resources pose a serious threat. Companies face problems such as increasing costs and protests. Some day they’ll have to find substitute materials to use in production. Renewable resources also pose a problem if depletion rate supersedes its renewal rate. Companies using these resources face the same problems. Seemingly infinite resources are being destroyed due to pollution. Companies causing such harm face bad word of mouth and a bad reputation.
Increased pollution: This poses a health as well as other threats to the general society. These industries must face bad word of mouth.
Increased government intervention: This intervention in resource management varies across countries. Government laws and regulations must be monitored by companies as to not break laws and face consequences.
Environmentalism: These cause pressure; sometimes so much that they actually damage a company’s reputation and influence government intervention. Now companies go beyond and develop a plan that is known as an environmentally sustainable strategy and develop ecologically safer products.
These are forces such as laws, government agencies and pressure groups. These forces vary with country and possibly time. There job is to protect organizations from each other, consumers from organizations and their deceptive practices etc, and society as a whole. Businesses are not only limited by laws and regulations but ethical and social codes are also considered. Most Businesses adopt the Societal Marketing Concept.
These are forces that affect consumers’ spending ability and spending patterns. These are split into Changes in Average Income, Changes in Income Distribution, and Changing Consumer Spending Patterns.
Changes in Average Income: means that a high average income level by means of a raise can lead to an increase in demand for quality products and a fall for cheaper, more inferior products. Obviously a fall in average income can lead to the opposite. Companies must therefore be very aware of the changing in incomes and adjust to the accordingly.
Changes in Income Distribution: The segments are rich, middle income, and low income and people living on welfare. These segments sizes are likely to change over time. Once again the company must be monitoring this to spot changes to identify the trends in its target market/s. Companies can choose to offer two or more variations of their product in order to satisfy all parts of the Income Distribution chain ex. Books.
Changing Consumer Spending Patterns: Patterns are changing every day. As income increases products such as food etc are spent on less than housing, transportation etc. This is what help businesses decide on whether to expand in the same line of products or find an alternative line.
Beliefs and values are divided into: core beliefs and values and beliefs which are difficult to change, and secondary beliefs and values which are easier to change.
A company must either find a way of adjusting its product to fit the core beliefs and values or try and change the secondary beliefs through marketing activities etc. These beliefs are mainly attributes of ones society. A person holds views on:
1. her/himself – people buy products that match their personalities.
2. other people – people want to interact with society, therefore there is a demand for products that improve their relationships with others ex. Clubs etc.
3. various institutions – a positive attitude towards an institution means that people will trust this institution. Companies do this buy adopting the Societal Marketing Concept.
4. his/her society – people prefer buying products made in their own company.
5. the natural environment – if people feel close to nature a demand in products such as health food will increase. i.e. if the company harms the environment this will reflect badly.
6. the universe and spirituality – if religious convictions and practice falls, materialism takes over. If it doesn’t fall companies promote their products with a spiritual theme.
Any organization needs to research such views and adjust each of the 4P’s accordingly.
A new technology implies new market opportunities for some organizations and threats for others. Companies once realizing this must keep up to date in order for technology to help them become more efficient, thus making them more successful.