Marketing Environment: Explanation, Components, and Importance
There are many factors which affect the performance of a business. They can be internal such as employees, material, and budget or external such as customers, suppliers, and your competitors.
The combination of these forces is commonly referred to as Marketing Environment.
You, as a business leader, have the ability or power to control only the internal factors.
On the other hand, you have to continually change your marketing strategy for the factors beyond your control that are the external factors.
These factors also fluctuate from time to time, making it necessary for you to adapt your marketing campaigns accordingly.
WHAT IS MARKETING ENVIRONMENT?
All the external and internal elements sway the business performance in their own unique way. Similarly, they can vary at any moment without any prior warning.
Your capability, as a business manager, to develop and maintain a profitable and long-lasting relationship with the clients actually depends upon the influence and variables of the marketing environment.
In fact, there is an assortment of such factors and most of them are unmanageable. You can only hope that they remain constant for a long time for your business to flourish.
Here is a general diagram of the marketing environment.
It is actually the duty of the company’s marketing team to develop strategies that can withstand the shifting environment and help the company to continue earning the profit.
Any failure in this regard can have serious consequences for the business and its profitability.
You can exercise full control over the internal factors.
They usually include materials, machines, workers, and owners.
Similarly, the suppliers, business processes, leave and medical policy, salaries, the general public, customers, competitors, and business intermediaries also fall in this category.
The external factors can be further classified into two different groups that are the micro factors and the macro factors.
The earlier factors are also related to the business, but they are usually external such as manufacturing, distribution, and promotion of products and services.
Macro factors are those which affect society in general. They may come in many forms such as the economy, demographics, socio-cultural environment, and political, technological and social scenarios of the business’s home country.
According to Philip Kotler, the father of modern marketing:
“A company’s marketing environment consists of the factors and forces outside of marketing that affect marketing management ability to build and maintain successful relationships with target customers.”
THE COMPONENTS OF MARKETING ENVIRONMENT
As mentioned above, there are many factors which constitute the marketing environment.
While the business has full control over the internal environment, the external environment is totally beyond its control in most cases.
The following video explains some components of the marketing environment.
The following lines explain both these types of marketing environments in detail.
The Internal Marketing Environment
As the name suggests, all the factors which are within the control of business comprise the internal environment.
These forces also have the capacity to affect the operations of any company, especially sales and marketing.
You can categorize these factors under the famous 5Ms of the business which are as follows.
You need to keep in mind that much of your marketing success normally comes from internal planning.
Therefore, all the internal factors play a pivotal role in whether or not your marketing strategy is going to succeed.
You have to identify all the aspects of your marketing strategy you can control while addressing all the external factors. It will help you create the right communication and marketing plan.
It is the only way to launch your products and services and get them approved by the public.
This video brilliantly elaborates internal marketing environment in great detail.
There are, in fact, a lot of factors which constitute the internal environment. We are going to throw some light on the most important of these factors.
Your corporate objectives are the most important factor when it comes to marketing and other business operations.
It is pertinent to note that the corporate objectives are totally different from the marketing objectives. You need to set marketing objectives in order to attain your corporate goals.
For instance, your corporate goal could be to become the largest tire manufacturer in the world in the next ten years but this cannot be your marketing goal.
The marketing goal could be reaching to a larger audience and promoting your products to them.
If your campaigns are good enough, they will attract more people to your business and it will eventually achieve its corporate objectives.
In simple words, the corporate objectives do influence your marketing campaigns. However, corporate objectives and marketing objectives are not analogous. You set marketing objectives to attain bigger business goals, whatever they may be.
Finance or Money
Finance or money is an integral part of the 5Ms of a business. The financial budget of any business directly affects its sales and marketing activities. Based on the money at your disposal, you decide where and how you are going to spend it.
For example, most small businesses cannot afford a full-fledged in-house marketing team. As a result, they normally resort to hiring outside contractors such as graphic designers, web developers, and social media specialists.
Sometimes, they totally outsource their advertisement, promotions and public relations campaigns.
On the other hand, larger companies such as Sony and Samsung have unlimited money. They hire some of the best marketing brains in the world and spend billions of dollars on their marketing campaigns.
It is difficult for smaller companies to compete with industry giants in terms of spending money. They can only defeat them by bringing innovation and creativity to their campaigns.
Human Resource or Men
The quality, experience, and efficiency of your workforce are crucial to the success of your marketing campaigns. This is especially true if you are some sort of service provider.
In order to have a decisive advantage over your competitors, you need to have a motivated and well-trained workforce.
Only such a team can deliver the highest levels of productivity and customer service, necessary to produce quality products and to successfully market them.
A company’s business culture is another key factor. It can make or break your marketing strategy. A customers’ oriented business will always look for new ways to satisfy their customers and meet their needs at any cost.
You can end up setting unrealistic and unachievable marketing goals if you are a product-oriented organization.
If you want to compete with your rivals in terms of cost efficiency, quality, and productivity, you have to pay special attention to your operations and procedures.
For instance, you can easily achieve your marketing and revenue targets through effective capacity management.
Similarly, it is imperative for you to provide the latest tools and machines for your staff if you want to have any chance of success.
No matter how skillful and talented your team is, you cannot get the desired results if your men are using obsolete technology.
Product development is a constantly evolving process. Resting on your laurels can have serious consequences for your business.
You have to strive incessantly to introduce changes and improvements to your products to make them more appealing to your target audience.
Keeping your customer’s taste and changing requirements in mind is of utmost importance, especially when you are competing with so many other companies.
Launching a great product will not only present you as an authority in your respective industry, but it will also encourage your marketing team to promote your products with more zeal and zest.
Another important part of the internal marketing environment is innovation.
You must introduce innovation to everything within your business to compete with other companies and the marketing campaigns are no exception.
Innovation in marketing helps you get one step ahead of your competitors. Innovation can take many shapes such as new initiatives in the marketing strategy, extensive training of the marketing team and steps taken for their welfare.
Embracing new marketing technologies and tools is yet another method to keep up with your rivals and even beat them.
Your business is in grave danger if it lacks innovation, especially in its product development and marketing departments. It means your business will be dull, stagnant, boring, and lacking the ability to withstand changes constantly occurring in the industry.
The marketing team should also try to comprehend what the company’s shareholders (owners, partners, investors) want to achieve. What are their goals and objectives and how they plan to attain them? This particular knowledge can sometimes be extremely helpful and goal driven.
It is imperative for you as a marketer to consider the company’s employees as stakeholders as well. You have to learn what is important to them, what they think, what they want and how do they work.
The Current Marketing Strategy
Businesses need to regularly rethink and evaluate marketing strategies and their degree of success.
For instance, you can ponder over how compatible your current strategy is with your marketing environment and overall goal and objectives.
Obviously, a successful marketing strategy only needs subtle tweaking from time to time. On the contrary, you may have to substantially revise an unsuccessful strategy to make it work.
The External Marketing Environment
As mentioned above, the external business environment is comprised of factors which are beyond the control of a business. A marketer has little to no control over these factors.
They can also vary at any time without any prior warning, often leaving the marketers in the lurch. As a result, marketers have to constantly update and revise their strategies to keep up with marketing trends.
This video by Alanis Business Academy defines the external business environment.
Marketing experts further divide the external marketing environment into two main types.
Also referred to as the task environment, the factors constituting the micro external marketing environment are somewhat under the control of a marketer.
These factors are usually directly related to business, enabling the marketers to leverage them in the company’s favor to some extent.
They normally include customers, competitors, the general public, business partners, marketing intermediaries, and suppliers, etc.
Customers are essential for every business to survive. You cannot possibly sell your products and services if you have no loyal customer base.
The purpose of every business is to fulfill the needs and demands of a specific section of society.
Customers of every business have their own unique demands and requirements. Therefore, all the marketing strategies are customers oriented in some way or another.
Marketers strive to understand what their customers desire through these marketing campaigns. Based on their findings, they come up with the best possible products to serve their customers.
Employees are a part of the internal as well as the external marketing environment. Perhaps, they are the most important component of any business.
Your employees work diligently and contribute significantly to the success of your business. Your company is destined to fail if you do not have a highly trained and skillful team at your disposal.
If your employees have easy access to training and motivation sessions, they will be more efficient and skillful. Continuous professional development plays a pivotal role in imparting the necessary marketing skills to your team.
This is only possible if you organize high-quality training and development classes for them on a regular basis.
In order to manufacture products of the highest standard, you have to acquire high-quality material from your suppliers. Hence, suppliers are the jugular vein of any business. You simply cannot deny their importance for the success of your business.
It is crucial to identify all the relevant suppliers in your industry and to develop good relationships with them.
Subsequently, you can do business with any or all of them as long as they fulfill your firm’s requirements.
Retailers and Distributors
Just like suppliers, retailers and distributors are essential for keeping your business afloat. As a matter of fact, your marketing operations can only succeed if you have good channel friends to take care of your products.
They are in direct contact with your customers. Therefore, they can give you valuable information and suggestions about what your customers want from you.
You have to keep abreast with the latest developments and trends in the industry. One way of attaining this goal is to keep a close eye on your competitors.
In fact, there are many benefits to competitive analysis.
For example, you will have a good look at their marketing strategy and the methods they use to attract more customers.
You can also modify your strategy and incorporate some of the techniques your competitors are using to a great effect.
The objective of every company is to maximize the wealth of their owners or other shareholders if it has any.
You should devise marketing activities which can considerably increase the return on their investment.
All the businesses must also fulfill their social responsibility towards the society in which they operate.
You should formulate marketing strategies which eventually result in the collective benefit and welfare of the society which your business is part of.
The government is another important factor which you should take seriously. It is the government which forms different policies such as the education policy, house policy, employment policy, price policy and of course, the business policy.
All these policies definitely have some level of influence on your marketing strategy. It is your own responsibility to keep track of these policies and develop your marketing campaign accordingly.
These are the forces which do not directly influence the business, but they have a general effect on the industry. The macro environment has the following parts.
Businesses that ignore to incorporate demography of their targeted audience in their marketing strategy are meant to fail. After all, your business is all about the people and how to serve them.
Before making your marketing strategy, you must study the target populace and its age structure, conveyance, purchasing power and so on and so forth.
This is essential because different factions of the populace rely on different things and factors. Similarly, they have their own customs, traditions, and ways of living.
You can launch the products which meet the most basic needs of the buyers if you measure each of the above variables and combine the result. It is rightly said that:
“To comprehend the business sector you must comprehend its demography.”
Some of the most important economic factors that influence marketing efforts are investment rates, monetary values, inflation rate, exchange rate, the balance of power and fiscal strategies, etc. For instance, individuals will only buy your products when they have money to spend.
The financial environment either expands the disposable income of an individual or decreases it, greatly influencing his purchasing behaviors.
The value of money decreases during inflation, making it harder for people to buy more products. Likewise, you should also consider the average income of a person.
A couple will have greater purchasing power if both partners work.
You may be able to sell your products effortlessly to such people as compared to single parents with negligible income.
The physical environment includes factors like the accessibility of raw materials, availability of water, atmosphere, climate, and environmental change.
Your organization should implement its marketing strategy according to the constraints set by nature.
Nature does offer resources but in a constricted manner. It is important for you to use these resources proficiently.
You have to find the best use of resources to manufacture products which are accessible to all and sundry. Natural resources are exhaustible and therefore, you should use them carefully otherwise, you will eventually run out of them.
Political and Legal Factors
The market environment experiences many changes whenever a new political party comes into power.
The new government may increase or decrease tax and duties. It may also totally change the business codes and practices, trade policies and marketing regulations.
Your company has to comply with new rules and regulations willingly or unwillingly.
Any defiance in this regard can result in hefty fines and penalties.
Subsequently, your marketing strategy should also observe the relevant code of conduct to avoid any fiscal punishment or sanctions.
Social and Cultural Factors
Cultural and social elements influence our decision when it comes to buying something. Businesses have to take special care while creating commercials to avoid hurting the sentiments of the people they consider as their target audience.
They also have a greater responsibility towards society in general. Nowadays, people also expect companies to construct parks, hospitals, and public conveniences.
Some companies also sponsor education and health care. It has become increasingly important for organizations to invest in the general welfare of the public.
Otherwise, people will not buy from them, no matter how good their marketing strategy is.
Another thing organizations cannot ignore while structuring their marketing strategy is culture. Every marketing manager must thoroughly investigate and study the culture in which he wants to promote the products.
For example, there are many cultural groups in Pakistan such as Punjabis, Sindhis, Balochs, Pakhtoons and Kashmiris.
The marketing manager must observe various cultural practices and distinctions before finalizing his marketing campaign.
The ever-changing technology has put the businesses into bigger trouble. They have to keep themselves updated with the latest technological developments to manufacture products which people actually like or want.
Those companies which do not take these changes seriously quickly go to oblivion where Nokia is the best example.
Similarly, innovative and technologically advanced products have become synonymous with better living standards.
IMPORTANCE OF MARKETING ENVIRONMENT
It is vital for an organization to study and comprehend the marketing environment. In fact, it is necessary for its very survival. Some of the benefits you can avail by grasping your marketing environment are as under.
The importance of the marketing environment as explained by Remy Lemmens, a Strategic Advisor and Program Manager at Gemeente Goes.
Identification of Opportunities
It helps you identify new opportunities and leverage them for the benefit of your organization as well as your employees and customers.
For example, if you learn that your customers like your products more than that of your rivals, you can offer them big discounts to capitalize on this opportunity.
Identification of Threats
The marketing environment analysis does not only identifies opportunities for you, but it also enables you to identify threats to your business. It gives you warning signs, enabling you to take necessary precautionary measures.
For example, you can take many different steps to counter the threat of a multinational company entering into the industry.
You may carry out an aggressive promotional campaign or reduce the price of your products to compete with whatever your new competitor has to offer.
It Helps in Managing Change
Study of your marketing environment can assist you to cope with both the sudden and expected changes.
You can also incorporate some of the changes in advance to effectively put your competitors on the back foot
A marketing manager must consider the internal and external marketing factors while formulating his marketing strategy.
Marketing environment plays a pivotal role in important business activities such as marketing and product development.
You must review it on a regular basis to keep your marketing strategy relevant and profitable.
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