Marketing Mix II: Marketing Environment – SS1 Marketing Lesson Note (Second Term)

The marketing environment is all the factors and forces, inside and outside a business, that affect how it markets its products.

Behavioural objectives

By the end of the lesson, students should be able to:

1. Define the marketing environment.
2. Distinguish between the micro-environment and the macro-environment.
3. List the components of the micro-environment.
4. Describe the different types of customers.
5. Explain the political, economic, social, technological and cultural factors of the macro-environment.
6. State the four stages of the economic cycle.

What is the marketing environment?

The marketing environment is everything an organisation must consider when it develops and presents a product to the market.

• Purpose: marketers study it to find out which forces influence the market and why the market reacts to them.
• Effect on strategy: the environment in which a new product will be sold is a major factor in choosing the marketing strategy.
• In practice: a real marketing plan includes a good deal of research into these environments.

What factors affect the marketing environment?

The marketing environment is made up of internal and external forces that influence marketing.

• Internal forces: departments other than marketing, such as the finance department and the human resource department.
• External forces: competitors, suppliers, and economic or political situations.

Marketers group these forces into two categories: the micro-environment and the macro-environment.

What is the difference between the micro-environment and the macro-environment?

The micro-environment is made up of the forces close to the company that affect its ability to serve customers. The macro-environment is made up of the wider forces outside the company’s control.

What is the micro-environment?

The micro-environment consists of the forces close to the company that affect its ability to serve its customers.

There are five components: suppliers, market intermediaries, customers, competitors and the public.

Who are suppliers?

Suppliers are the people and firms that provide the inputs a business needs, and they can change its competitive position and marketing ability.

• Raw material suppliers: provide the materials used in production.
• Energy suppliers: provide power and fuel.
• Suppliers of labour: provide workers.
• Suppliers of capital: provide money, such as banks and investors.

A supplier has the greatest bargaining power in these situations:

1. The supplying firm is a monopoly or an oligopoly.
2. The supplier does not have to compete with substitute products when selling to the buyer group.
3. The buyer is not an important customer of the supplier.
4. The supplier poses a real threat of forward integration.

Who are market intermediaries?

Market intermediaries are individuals or firms that help a producer promote, sell and distribute goods to final consumers.

• Middlemen: wholesalers, retailers and agents.
• Distribution agencies: firms that store and move goods.
• Market service agencies: firms that provide services such as advertising and research.
• Financial institutions: banks and other bodies that finance or insure the trade.

Who are customers?

Customers are the people and organisations that buy a firm’s goods and services, and there are five types.

• Ultimate customers: individuals and householders who buy for their own use.
• Industrial customers: organisations that buy goods and services to produce other goods and services.
• Resellers: intermediaries such as wholesalers, retailers and distributors who buy goods to resell at a profit.
• Government and other non-profit customers: they buy goods and services and make them available to the people for whom they are produced.
• International customers: individuals and organisations in other countries, such as consumers, producers, resellers and governments.

Who are competitors?

Competitors are firms that sell goods and services of the same or similar kind in the same market.

• Price competition: firms compete by charging different prices.
• Product differentiation: firms make their products look or perform differently from others.
• Response: a firm needs an efficient marketing system, which builds customer confidence and gives better results.

What is the public?

A public is any group that has an actual or potential interest in, or impact on, a company’s ability to achieve its objectives.

• Wider audience: the company must satisfy the people at large, as well as its competitors and consumers.
• Future growth: good relations with the public support the company’s growth.
• Public relations: this is a broad marketing activity that the company must manage carefully.

What is the macro-environment?

The macro-environment is made up of all the factors that can influence an organisation but are outside its control.

These are the political, economic, social, technological and cultural factors.

What is the political environment?

The political environment is the laws, procedures, practices and policies made by government to regulate and support business, together with the stability of the government.

• Laws and agencies: it includes all laws, government agencies and lobbying groups that influence or restrict individuals and organisations.
• Different levels of law: some products are regulated by both state and federal laws.
• Target market limits: some products cannot be marketed to certain groups, for example cigarettes must not be marketed to children.
• Other restrictions: there are rules on subliminal messages and monopolies.
• Government stability: an unstable government makes business planning harder.
• Monitoring: laws change often, so a marketer must keep watching them.

What is the economic environment?

The economic environment is the set of economic factors that affect consumers’ purchasing power and spending habits.

• Main factors: inflation, national income and the economic system of the country.
• Consumer factors: salary levels, credit trends and pricing patterns.
• Business cycle: changes in the cycle affect how much people buy.
• Marketer’s task: campaigns, product offerings and prices must suit the current stage of the cycle.

The economic cycle has four stages:

1. Prosperity: incomes are good and consumers spend more.
2. Recession: spending falls and demand weakens.
3. Depression: consumer spending is at its lowest.
4. Recovery: the economy improves and spending begins to rise again.

What is the social environment?

The social environment is the values, norms and institutions of a society that shape the buying decisions of consumers.

• Values and norms: what the society accepts as right and normal.
• Groups: interest groups, reference groups and social class.
• Effect: these forces affect the basic values, behaviour and preferences of buyers.

What is the technological environment?

The technological environment is the changes and advances in processes, equipment and devices that a marketer or organisation uses to do its work.

• Speed of change: it is one of the fastest-changing factors in the macro-environment.
• Scope: it covers developments in medicine, transport, communication and payment, such as automobiles and credit cards.
• New markets: technology can create new markets and new uses for products.
• Staying ahead: a company must update its technology as it becomes outdated.
• Avoiding loss: companies must follow trends to take part in new developments and avoid losses from outdated technology.

What are cultural factors?

Cultural factors are the ways of life of a people, such as their language, aesthetics and perception.

• Language: an advertisement must be understood by the people it targets.
• Aesthetics: ideas of beauty and taste differ between communities.
• Perception: people may see the same product or message differently.
• Adjustment: a marketer should adapt to the culture of the people to operate successfully.

Evaluation

1. Define the marketing environment.
2. Name the two categories into which marketing personnel divide the marketing environment.
3. List the five components of the micro-environment.
4. State the four stages of the economic cycle.
5. Explain how the political environment can affect a marketer.

Assignment

List and describe the five types of customers in the micro-environment, giving one example of each.