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Lessons on Marketing Environment | Marketing Teacher

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Online Marketing Courses For Learners, Teachers and Professionals of Marketing

Table of Contents

1. Business Environment
2. Customer relationships
3. External Influences – Consumer Culture
4. External Influences – Family Influences (Birth Order)
5. External influences – Introduction
6. External Influences – Social Environment and Social Class
7. Introduction to Marketing Research
8. Marketing Contexts
9. Marketing Environment
10. Microenvironment
11. PEST Analysis
12. PESTEL Model
13. Primary Marketing Research
14. Secondary Marketing Research
15. SWOT Analysis – POWER SWOT

1. BUSINESS ENVIRONMENT

What is the business environment?

The business environment is made up from the microenvironment and the macroenvironment. Our previous lessons on the marketing environment summarises both topics. The business environment will now be considered in a more practical manner. There are forces in the business environment that will impact your business, which are out of your business’s control. You would undertake market scanning and some secondary research to help the business adapt to the influence of these external factors.
Corporate annual reports and accounts.
Local Chambers of Commerce and business groups.
Professional and trade federations such as the American Marketing Association, and the Chartered Institute of Marketing.
National and International Media such as the Nihon Keizai Shimbun (Japan), Financial Times (UK), The Wall Street Journal, IL Sole 24 Ore (Italy) Handelsblatt (Germany) and Poslovni dnevik (Serbia) – ordered by circulation.
Websites belonging to these organizations are also really useful but you could also refer to Yahoo! Finance, CNN Money, Google Finance, MSN MoneyCentral, BusinessWeek, Bloomberg, Forbes, MarketWatch, BusinessInsider, CNBC, Motley Fool, The Street and Biz Journals.
Governments are often sources of secondary data about all sorts of topics from housing to social trends. You can look at the website of a particular country or approach their local embassy.
Market scanning is undertaken to assess the impact upon the customer and the organization from environmental factors that are largely out of its control. Here you scan the market in the same way that an X-ray machine scans a body or in the way that your computer scanner copies a document. Another way to think about market scanning is that you use an imaginary pair of binoculars; you hold them to your eyes and turn your head left and right to scan the horizontal to look for changes in the broader business environment.
For example in the United Kingdom there is a movement from analogue television to digital television. This will render perfectly operational analogue TVs useless, but will create new opportunities for companies that manufacture digital TVs. By scanning the market businesses are able to flex to factors that are beyond its immediate control.

Sources of secondary data.

So you need to go and scan some sources of data. Data is subdivided into primary data and secondary data. Primary data is new data collected by you to solve a specific problem. Secondary data already exists. For the pros and cons of primary and secondary data, you will need to see the lesson on marketing research. For now let’s look at some useful sources of secondary data.

Electronic databases include:

• Market Research databases such as Business Insights (Datamonitor 360), eMarketer, Frost and Sullivan, Global Market Information Database (GMID Euromonitor), Key Note, and Mintel.
• Company information such as FAME, Emerging Market Information Service (EMIS), Kompass Worldwide, Onesource, and ORBIS.
• Business News and Journals such as Business Source Complete, ABI Inform Global, Business and Industry (Gale), Factiva and the Wall Street Journal.
• Business and Economic sources such as CountryData (Economist Intelligence Unit) and the Economist Intelligence unit itself.

2. CUSTOMER RELATIONSHIPS

The Customer Relationship

Think about some of the relationships that are important to you. You have parents and friends, and you have workmates and acquaintances. To a greater or lesser extent you have a relationship with all of these people. Say you have a number of roles, such as student, professional, son or daughter, teacher, employer, employee, partner and so on. The customer relationship works in a similar way.
In the past there would have been a simple exchange process which would have seen the delivery of the customer value. However marketers want to retain you as loyal customers. They want to keep you satisfied. So there is a customer relationship which delivers goods and services with which you are satisfied between you and the marketing company. This is a basic customer relationship.
However there is a developing and more substantial field called relationship marketing. Let’s have a look at what relationship marketing is.
The process of identifying and establishing, maintaining, enhancing, and when necessary terminating relationships with customers and other stakeholders, at a profit, so that the objectives of all parties involved are met, where this is done by a mutual giving and fulfilment of promises.
Gronroos (2000).
The Gronroos definition is quite strategic in many ways. When trying to learn about relationship marketing it looks a little complex at first glance. In fact relationship marketing can have both a very practical but also a deeply academic foundation. Let’s look at something a little more practical that we can put straight into use.
The relationship marketing perspective is based on the notion that on top of the value of products and/or services that are exchanged, the existence of the relationship between the two parties creates additional value for the customer and also the supplier or service provider.
Gronroos (2004).
So this more straightforward definition reasons that relationship marketing is a perspective rather than a process, which is based upon some straightforward concepts i.e. the exchange process and the relationship between buyer and seller, and the value delivered to them both. The marketing mix is the bridge between buyer and seller.
There is sometimes a little confusion between relationship marketing and Customer Relationship Management (CRM). They are quite similar with the main difference being that CRM is an IT concept or strategy. CRM and relationship marketing together give the marketer customer information and data which can be used for long-term value delivery and an exchange process which satisfies customer needs.
The relationship marketing approach can also be used not only for external customers, but also for internal customers or what is known as internal marketing. Essentially one focuses upon employees and work colleagues and building relationships.

3. EXTERNAL INFLUENCES – CONSUMER CULTURE

Consumer Behaviour

External Influences – Consumer Culture

a. Culture includes knowledge, belief, art, law, morals, customs, and any other capabilities and habits acquired by humans as members of society.
d. Factors that Define a Culture
• i. Individual/Collective: The culture in the US is an individualistic society, where people generally look out for themselves; The Japanese culture focuses on the collective, and people work to better society as a whole.
• ii. Extended/Limited Family: In the US, families move away from each other and generally don’t live together in the same house; In many Asian and European countries, parents, kids, grandparents and even aunts and uncles live together in the same house.
• iii. Adult/Child: Different cultures will define when someone is an adult. In the US it is 18 years old, but in some South American countries it is 14 or 15 years old. In the Hebrew culture a boy becomes a man at 13 during his Bar Mitzvah ceremony. In the Hispanic culture a girl becomes an adult at 15th birthday party.
• iv. Masculine/Feminine: Cultures define the roles of men and women differently, including their rank, and prestige in society.
• v. Youth/Age: The value placed on Elders depends on the culture
• vi. Cleanliness: In the US, cleanliness is very important, in fact most of the products advertised on American TV claim to improve cleaning; In other cultures showering on a daily basis is unnecessary.
• vii. Tradition/Change: Some societies prefer traditions over making changes.
• viii. Hard work/Leisure: In some cultures hard work is valued over leisure time.
• ix. Postponed gratification/Immediate gratification: American culture is centered on immediate gratification “I want it now!”
• x. Sensual gratification/Abstinence: The Netherlands is a society that openly talks about and advertises sexual activity; in Muslim societies those topics are taboo, and women who get pregnant before marriage are often shunned.
b. How does culture affect consumer behavior? Whatever a person consumes will determine their level of acceptance in their society. If someone does not act consistently with cultural expectations, they risk not being accepted in society.
c. What happens when a company ignores culture? McDonald’s is one of the most popular restaurants in the world. At their American based restaurants they serve beef hamburgers, but when they decided to open restaurants in India, they used lamb meat for their hamburgers, because the Indian people do not eat cow meat; if McDonald’s had ignored this cultural difference they would not have been successful in India! That was the problem when The Walt Disney Company opened EuroDisney outside Paris; it was almost a failure because Disney ignored the culture. The French people drink wine at very young ages and prefer sugar on their popcorn, not salt, like Americans. Disney did not accommodate their theme park until they realized that the French people were indeed their target market, so they changed the name of the park to Disneyland Paris and made modifications to their menus and also to the wait lines in the park.
Behavior Meaning in the US Meaning in other cultures
Consuming wine and beer Those under the age of 21 are not allowed to drink alcohol In European countries it is common for children to drink wine/beer at family meals; when in a bar in Korea you pour drinks for your friends and family first, then wait for them to pour your drink
Drinking coffee Generally adults drink it in the morning because of the caffeine, and giving coffee to a child is not accepted In Turkey, coffee is a special drink that you serve to guests; in Italy coffee is enjoyed after a family meal; in China tea is the drink of choice
Cooking pork ribs Grilled outside at a backyard party Jewish and Muslims do not eat pork
Kissing To express romantic feelings about someone In many cultures kissing is acceptable when greeting a friend
Using the number 7 Lucky number Unlucky number in Kenya, Singapore and Ghana

4. EXTERNAL INFLUENCES – FAMILY INFLUENCES (BIRTH ORDER)

Where a child places in the birth order can have an effect on how they see themselves, and therefore affects their consumer behavior. The middle child often seems to have the most negative impressions of his lot in life.
Oldest Child
• Is only child for period of time; used to being center of attention.
• Believes must gain and hold superiority over other children.
• Being right, controlling often important.
• Strives to keep or regain parents’ attention through conformity. If this failed, chooses to misbehave.
• May develop competent, responsible behavior or become very discouraged.
• Sometime strives to protect and help others.
• Confident.
• Determined.
• Born Leader.
• Organized.
• Eager to Please.
• Likes to Avoid Trouble.
Second Oldest Child
• Never has parents’ undivided attention.
• Always has sibling ahead who’s more advanced.
• Acts as if in race, trying to catch up or overtake first child. If first child is "good," second may become "bad." Develops abilities first child doesn’t exhibit. If first child successful, may feel uncertain of self and abilities.
• May be rebel.
• Often doesn’t like position.
• Feels "squeezed" if third child is born.
• May push down other siblings.
Middle Child of Three Siblings
• Has neither the rights of oldest nor privileges of youngest.
• May feel like they don’t have place in family.
• Becomes discouraged and "problem child" or elevates self by pushing down other siblings.
• Is adaptable.
• Learns to deal with both oldest and youngest sibling.
Youngest Sibling
• Feels every one bigger and more capable.
• Expects others to do things, make decisions, take responsibility.
• Becomes boss of family in getting service and own way.
• Develops feelings of inferiority or becomes "speeder" and overtakes older siblings.
• Remains "The Baby." Places others in service.
• If youngest of three, often allies with oldest child against middle child.
• Persistent
• Affectionate
• Crave the Spotlight
Younger children always want to be able to do the things older siblings are allowed to do. And older siblings may feel that the younger siblings get away with things they were not able to when they were the same age. Here are the levels of birth order:
• Only Child
• Oldest Child
• Second Oldest Sibling
• Middle Child of Three Siblings
• Youngest Sibling
Only Child
• Pampered and spoiled
• Is center of attention; often enjoys position. May feel special.
• Relies on service from others rather than own efforts.
• Feels unfairly treated when doesn’t get own way.
• Likelier to hold a professional position.
• Concerned with meeting parents’ expectations.
• Confident.
• Pays Attention to Detail.
• Good in School.
• Overly Critical.

5. EXTERNAL INFLUENCES – INTRODUCTION

What are external influences in consumer behavior?

a. What a consumer eats, wears, and believes are all learned and influenced by the culture they live in, their family, childhood and social environment. All of these are external factors that affect purchases.
Examples include: Religious, Political, Family, Friends, Co-workers, Clubs and Associations.
People are social and they want to belong to special groups. Group members share common interests, influence each other, and share rules and values. Primary groups are those with the most influence, such as family members; secondary groups have less interaction than the primary group, such as clubs and organizations. As children grow into teenagers, their parents become less of an influence and peer groups become more of an influence. All groups exert what is called social power; some groups have more power than others over consumers’ decisions.
• Values
• Community
• Family Life Cycle
Type of Social Power Description Example
Referent A person likes a group and acts like them so the group will accept them A teenager wants to join a popular group, so they begin to dress like them and listen to their groups’ chosen music
Legitimate Membership comes with agreements and there will be consequences for nonconformity A boss has authority over his employees and can fire them if they don’t do an adequate job
Expert Groups have knowledge that others want to gain Consumers who want to be members of The American Medical Association seek to gain their knowledge of health and wellness
Reward Groups with power to give rewards to members A school soccer team can give trophies to their best players (members)
Coercive A group can penalize members for not following the rules In the army, soldiers who do not report for duty on time can be forced to do manual labor or even get kicked out of the army

c. External influences can also include situational influences, sometimes called atmospherics—sensory items in an environment that may change buying patterns, such as music, color, smell, and lighting. If a store plays loud rock music, they may attract young adults, but drive away older consumers. Color is a huge influence on behavior, but is also dependent on culture, since different cultures perceive colors differently. In the US white is a color worn at weddings, and in China, red is the color of choice for weddings. Many bakeries will pump the smell of their treats outside the store, so that passersby will be more likely to want to come in.
d. Before making a purchase, consumers will go through an external information search. They will go through this search in order to evaluate the alternatives and narrow down their list of choices. It includes:
• Personal experience—have they purchased this product before? How do they feel about it?
• Websites/Internet search—researching the quality of the product
• Knowledge—someone with little or no knowledge of the product will need lots of information!
• Friends/reference groups—consumers ask friends, family and coworkers about their experiences with the product.
• Advertising and promotions
e. A purchase may be ultimately made due to Heuristics. This is a personal set of values that everyone has and it causes consumers to buy what they are comfortable buying, such as purchasing from specific countries of origin, or products that they are brand loyal to.
Here is a list of the external influences that affect consumer behavior:
• Age
• Race
• Gender
• Education level
• Cross-cultural influences
• Sub-cultures (Hispanic-American)
• Social status (upper, middle, lower)
• Customs, Beliefs, Expectations, Traditions, Habits
• Reference groups are groups that have shared beliefs, interests and behaviors and influence a consumer’s behavior:

6. EXTERNAL INFLUENCES – SOCIAL ENVIRONMENT AND SOCIAL CLASS

Social Environment

Reference groups have an influence on purchasing behavior, but the level of influence will depend on where the product will be consumed—in public or in private—and whether the product is a want or a need.
PROFILE OF THE AMERICAN CLASS STRUCTURE
CLASS % Pop INCOME EDUCATION LEVEL OCCUPATION DESCRIPTION
Upper-Upper .3% $5 million and up Graduate Degree CEO, Executives, Senator Inherited wealth, aristocratic, fund charities, “old money”, participate in politics
Upper 1.2 $2 million Graduate Degree Executive, professional Entrepreneurs, Sports Stars, Entertainers
Lower-Upper 12.5 $250,000 Graduate Degree, medical degree Executive, Professional, Doctor Education is important, involved in arts
Middle Class 32 $100,000 College Degree Office workers, managers Insecure due to economic fluctuations, live in the suburbs
Working Class 38 $50,000 High school Teacher, plumber, Skilled workers, may be in danger of falling into a lower class
Lower 9 $20,000 Some High School Janitor, farmer Poorly educated, low income, work as laborers
Lower-Lower 7 $9,000 and under Grade School Minimum wage or unemployed Unskilled, may be unemployed for long periods of time, receive government support
GROUP INFLUENCE ON PRODUCT AND BRAND SELECTION
Need Want
Public Example: fast food lunch
A product used in public that you need
weak group influence for product selection, strong group influence for brand selection Example: yacht
A product used in public that you want
strong group influence for product selection, strong group influence for brand selection
Private Example: bed sheets
A product used in private that you need
weak group influence for product selection, weak group influence for brand selection Example: hot tub
A product used in private that you want
strong group influence for product selection, weak group influence for brand selection
Social Class
Populations can be subdivided into groups who members share similar hobbies, opinions, and activities. Americans have two lifestyles—the one they are in and the one they strive to be in, which is usually better than their current situation. It is important for a marketer to understand the subdivisions of society in order to better choose target markets for their products and services.

7. INTRODUCTION TO MARKETING RESEARCH

Introduction to Marketing Research

Market research and marketing research are often confused. ‘Market’ research is simply research into a specific market. It is a very narrow concept. ‘Marketing’ research is much broader. It not only includes ‘market’ research, but also areas such as research into new products, or modes of distribution such as via the Internet. Here are a couple of definitions:


The Marketing research Process.

Marketing research is gathered using a systematic approach. An example of one follows:
1. Define the problem. Never conduct research for things that you would ‘like’ to know. Make sure that you really ‘need’ to know something. The problem then becomes the focus of the research. For example, why are sales falling in New Zealand?
2. How will you collect the data that you will analyze to solve your problem? Do we conduct a telephone survey, or do we arrange a focus group? The methods of data collection will be discussed in more detail later.
3. Select a sampling method. Do we us a random sample, stratified sample, or cluster sample?
4. How will we analyze any data collected? What software will we use? What degree of accuracy is required?
5. Decide upon a budget and a timeframe.
6. Go back and speak to the managers or clients requesting the research. Make sure that you agree on the problem! If you gain approval, then move on to step seven. 7. Go ahead and collect the data.
8. Conduct the analysis of the data.
9. Check for errors. It is not uncommon to find errors in sampling, data collection method, or analytic mistakes.
10. Write your final report. This will contain charts, tables, and diagrams that will communicate the results of the research, and hopefully lead to a solution to your problem. Watch out for errors in interpretation.

Sources of Data – Primary and Secondary

There are two main sources of data – primary and secondary. primary research is conducted from scratch. It is original and collected to solve the problem in hand. secondary research, also known as desk research, already exists since it has been collected for other purposes.
We have given a general introduction to marketing research. Marketing research is a huge topic area and has many processes, procedures, and terminologies that build upon the points above. (See also lesson on primary marketing research and secondary marketing research).
"Marketing research is the function that links the consumer, customer, and public to the marketer through information – information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. Marketing research specifies the information required to address these issues, designs the methods for collecting information, manages and implements the data collection process, analyzes, and communicates the findings and their implications."
American Marketing Association (AMA) – Official Definition of Marketing Research
How do the professionals do marketing research?
Obviously, this is a very long and involved definition of marketing research.
"Marketing research is about researching the whole of a company’s marketing process."
Palmer (2000).
This explanation is far more straightforward i.e. marketing research into the elements of the marketing mix, competitors, markets, and everything to do with the customers.

8. MARKETING CONTEXTS

Marketing in Different Organizational Contexts

The marketing mix and the services marketing mix should be adapted for different organizational and business contexts. The examples below consider the contexts of FMCG, B2B, services marketing, voluntary and not-for-profit marketing and online marketing. Try to think of your own examples for each business context.

Service Organization

Service organizations are more likely to use the services marketing mix, which is also known as the 7Ps of marketing. So let’s consider a well-known service organization and evaluate how it adapts and modifies the marketing mix. For this example let’s look at Bupa which provide healthcare such as hospital care, health insurance, health assessments, care homes, dental care and other health services. Bupa also has some B2B services to businesses.
• Bupa’s products are all private sector health related services.
• Pricing is relatively expensive in comparison with the public sector which tends to be subsidised through taxation in many countries, for example Spain.
• The services are delivered through healthcare professionals and privately owned hospitals and dental surgeries. Obviously place/distribution depends on which service you are consuming and where you are.
• Bupa invests large sums in marketing communications in order to attract business from a number of profitable segments. So the business would use TV advertising, newspaper advertising and direct mail campaigns amongst others.
• The process begins when you first have a health assessment and might end if you are unfortunate enough to need to use your healthcare insurance.
• People would include the individuals that manage your healthcare as well as those that actually deliver the service such as nurses, dentists and doctors.
• Physical evidence is the building in which the healthcare is delivered.

Voluntary and not-for-profit organizations

Voluntary and not-profit-organizations also apply the marketing mix in a slightly different way. Volunteering might include helping to clear land the good of the whole community or visiting elderly people in your area to care for them. Not-for-profit organizations will often run on donations or government funding, since they are not free but instead aim to breakeven. Examples include charities and local voluntary groups. For this example let’s consider the Olympic movement. Okay the Olympics is well-known for attracting huge investment from brands for sponsorship. However the Olympics depends on volunteers for many of its activities including media, editorial and press relations, international relations and all of the activities that go on at competition venues and Olympic villages – from laundry to restaurants.
• The product would be the service that is provided free of charge by each individual.
• The price would be the value to the person volunteering after having done some good for the wider community.
• The place would be the location where the volunteering was delivered such as at an event at the Olympic village.
• Promotion would be how the individual actually registered interest to volunteer (and in the case of London 2012 this was by Internet), although the Olympic movement is a huge exploiter of the public relations machine, as well as other media.
• The people are the volunteers, the athletes and the public.
• The process would be how the volunteer was recruited, trained and their experience of volunteering. Would they do it again?
• The physical evidence is represented by the venues themselves and the city in which the games are located.

Online Businesses

Finally let’s look at how an online business would adapt the marketing mix for its own target market. In fact as you are more than aware there are very many diverse online businesses, and they themselves cross between the various organizational types from voluntary organizations to FMCG companies as we have considered above. The post-dot-com era has seen many new types of businesses such as the auction site eBay and online retailer Amazon. There will also be emerging social media businesses and time will tell as to the level and nature of their success – if any.
The example we will look at here is the online business ASOS which is a very successful online clothing and fashion retailer.
o Their products are the latest fashions as seen on screen! They market a very wide range of products including sunglasses, men’s and women’s clothes, and footwear.
o Pricing is comparatively reasonable in relation to competitors. The company markets products similar but not the same as much higher priced branded fashion.
o The goods are sold online.
o Much of ASOS’s original marketing was done online, although more recently the other elements of the marketing communications mix have been used.
These are all examples of how the marketing mix can be adapted to suit different marketing contexts and business sectors.

FMCG

FMCG stands for Fast moving Consumer goods. Examples of FMCG products would include chocolate bars, toothpaste, newspapers, razors and similar items. In essence these are products that are regularly bought by consumers – hence fast moving. There is little in the way of a buyer decision process once a person is brand loyal, and decisions tend not to be made by teams or Decision-making Units (DMUs). Here’s an example of how the marketing mix is applied and adapted to FMCG products.
Wrigley’s chewing gum is an example of an FMCG product.
o The product has a number of varieties for example spearmint and peppermint.
o It is priced at a relatively low amount to ensure that the product can be regularly consumed as a day to day item.
o The chewing gum is sold in a wide variety of retail outlets including supermarkets, local stores, vending machines, petrol stations and others.
o The branding is developed and its marketing communications mix applies many tools for example sales promotion and television advertising.

B2B Organization

A business-to-business organization is one which markets to organizations and companies rather to consumers. An example of a B2B organization is Oracle, the owner of Sun Microsystems.
Oracle provides databases, middleware, applications, and server and storage systems for many large organizations. Their slogan is ‘Hardware and Software, Engineered to Work Together.’ In this instance Oracle also use the marketing mix, but in a different way to Wrigley’s chewing gum.
o There are many products and core lines which are sold off the shelf or more likely they are adapted the needs of particular businesses that Oracle deals with. Oracle tailors its products to the individual needs of its business customers.
o Pricing tends to be premium or skimming since there is a lot of added value through service and solutions.
o Oracle’s products are marketed directly to large organizations or via a series of selected partners whom are able to deliver the same customer experience.
o Oracle’s uses similar marketing communications channels as Wrigley’s, although it is more likely to employ relations sponsorship to maintain Oracle’s brand profile.

9. MARKETING ENVIRONMENT

The marketing environment surrounds and impacts upon the organization. There are three key elements to the marketing environment which are the internal environment, the microenvironment and the macroenvironment. 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.

Macroenvironment

The macroenvironment 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.
Again for Walmart the wider global macro environment will certainly impact its business, and many of these factors are pretty much uncontrollable. Walmart trades mainly in the United States but also in international markets. For example in the United Kingdom Walmart trades as Asda. Walmart would need to take into account local customs and practices in the United Kingdom such as bank holidays and other local festivals. In the United Kingdom 2012 saw the 60th anniversary of Queen Elizabeth II’s reign which was a national celebration.
The United States and Europe experience different economic cycles, so trading in terms of interest rates needs to be considered. Also remember that Walmart can sell firearms in the United States which are illegal under local English law. There are many other macroeconomic influences such as governments and other publics, economic indicators such as inflation and exchange rates, and the level nature of the local technology in different countries. There are powerful influencers such as war (in Afghanistan for example) and natural disasters (such as the Japanese Fukushima Daiichi nuclear disaster) which inevitably would influence the business and would be out of its control.
To summarise, controllable factors tend to be included in your internal environment and your microenvironment. On the other hand less controllable factors tend to be in relation to your macro environment. Why not list your own controllable versus uncontrollable factors for a business of your choice?



Internal Environment

The internal environment has already been touched upon by other lessons on marketing teacher. For example, the lessons on internal marketing and also on the functions within an organization give a good starting point to look at our internal environment. A useful tool for quickly auditing your internal environment is known as the Five Ms which are Men, Money, Machinery, Materials and Markets. Here is a really quick example using British Airways. Looking internally at men, British Airways employees pilots, engineers, cabin crew, marketing managers, etc. Money is invested in the business by shareholders and banks for example. Machinery would include its aircraft but also access to air bridges and buses to ferry passengers from the terminal to the aircraft. Materials for a service business like British Airways would be aircraft fuel called kerosene (although if we were making aircraft materials would include aluminium, wiring, glass, fabric, and so on). Finally markets which we know can be both internal and external. Some might include a sixth M, which is minutes, since time is a valuable internal resource.
Let’s look at an example of how the internal environment would impact a company such as Walmart. We are looking at the immediate local influences which might include its marketing plans, how it implements customer relationship management, the influence of other functions such as strategy from its top management, research and development into new logistics solutions, how it makes sure that it purchases high-quality product at the lowest possible price, that accounting is undertaken efficiently and effectively, and of course its local supply chain management and logistics for which Walmart is famous.

Microenvironment

The microenvironment is made from individuals and organizations that are close to the company and directly impact the customer experience. Examples would include the company itself, its suppliers, other marketing input from agencies, the markets and segments in which your business trades, your competition and also those around you (which public relations would call publics) who are not paying customers but still have an interest in your business. The Micro environment is relatively controllable since the actions of the business may influence such stakeholders.
Walmart’s Micro environment would be very much focused on immediate local issues. It would consider how to recruit, retain and extend products and services to customers. It would pay close attention to the actions and reactions of direct competitors. Walmart would build and nurture close relationships with key suppliers. The business would need to communicate and liaise with its publics such as neighbours which are close to its stores, or other road users. There will be other intermediaries as well including advertising agencies and trade unions amongst others.

10. MICROENVIRONMENT

What is the microenvironment?

This lesson covers the microenvironment in greater detail. It considers the interface between a business and its microenvironment. Let’s just review what microenvironment is again based upon the earlier lesson on the marketing environment which contains the topic. Our microenvironment is the totality of people and other connected groups of people/organisations that are very close to the business, and which all have a direct and measurable impact upon the customer experience.

Distributors

Distributors are the intermediaries between the manufacturer and the consumer. Distributors are marketing companies too, and participate in the marketing process. Distributors are important channels since large manufacturing brands do not wish to distribute all the way to the final consumer. For example Coca-Cola cannot have a direct supplier relationship with every consumer (although it does have a strong brand relationship with consumers). Intermediaries perform this important distribution role.
There are a number of different levels of distribution. A window manufacturer might sell directly to the homeowner whereby there are no intermediaries. Often intermediaries would be a wholesaler, a retailer, or an agent. Each of these are covered in more detail in the lesson on place and the marketing mix.

Employees

Employees are those people that are employed to work for an organisation. Employees are an important because they drive value through customer satisfaction and embody the marketing concept. They are the vital interface between a brand and its customers. People buy from people and your employers build close customer relationships. Of course managing people and organizational behaviour/behavior are management disciplines in their own right. Employees would need to be recruited and trained, motivated and developed, all of which would support the functions and philosophy of marketing.
So as we said in our earlier lesson, examples of the influencers would include your company itself, your suppliers, any marketing or advertising agencies with whom you have a close working relationship, the segments and markets which you target and your competition.
Don’t forget to review your stakeholders which are those people and organisations that interconnect with your business that might not be paying for your products or services i.e. not your customers. Stakeholders are the publics with whom you interact for example your neighbours, and other interested parties. The key to the microenvironment is that it is relatively controllable and we have some influence over how things happen, whereas with the macroenvironment we have far less influence.

What are the elements of a business’s microenvironment?

Now let’s go on to consider the building blocks that make up our microenvironment. More specifically we are going to consider our customers, our stakeholders, our suppliers, our distributors, and our employees, all of whom make up our microenvironment.

Customers

Customers are vital to our business because without paying customers we have no business. When we define marketing we often talk about customer needs, how we identify needs, satisfy them and anticipate them into the future. Today when tend to focus less on products and services and more on customer i.e. customer orientation. We think less of the Product Life Cycle (PLC) and more about the Customer Life Cycle (CLC) whereby we attempt to recruit and retain customers, and then extend products and services to them throughout their lives. So know your customers well.

Stakeholders

Stakeholders are those members of the microenvironment that have a direct influence on your business although they are not generally paying customers. Employees (see below) are stakeholders in your business. The government or governments of countries in which you trade are all stakeholders. Your local community or neighbours are stakeholders, for example think of the local community’s influence when a car firm wants to build a new factory, or when an airport wants to build a new runway.

Competitors

Competitors influence your actions. If a competitor launches a new product for example, you will review your own marketing plan. Competitors, whom are part of your microenvironment and compete for your customers, might try to take your best employees and might distribute through the same channels as your company.
On some occasions you might collaborate with a competitor. There are examples of alliances and joint ventures in the car industry such as those between Toyota, Peugeot and Citroen in Europe.

Suppliers

Suppliers are those companies that supply your business with goods and services to which you add value through transformation. From a manufacturing point of view suppliers would supply raw materials and components which are transformed into finished goods. From a retail perspective suppliers would deliver produce which is broken down from bulk, packaged and merchandised in stores to attract customers and consumers. Today suppliers are a vital part of the supply chain, which sees valued-added at all stages from conception to consumption (and post-purchase evaluation).

11. PEST ANALYSIS

What is PEST Analysis?It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning.

Technological Factors.
Technological

Technological factors are a multifaceted influencer. Let’s just think about the sorts of technology that you come in touch with almost daily. Smart phones such as Android and iPhone are now common – all – garden, and we are used to being able to access information and communication technology instantly no matter where we are. During studies or at work we have access to information on quick PCs and over the Internet, with faster broadband connections arriving in many parts of the world.
Technology also surrounds business processes. As we saw from our lesson on the functions within an organisation all departments use information technology or technology in one form or another. Our manufacturing operations will use technology to produce goods and services. Our logistics and warehousing functions use forklifts and lorries as well as order tracking technology and software. The customer service department will use communication technology to talk to customers but will also have access to internal systems, such as technology to simplify credit control and stock control for example. There are many, many more examples of technology.
Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:
1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?
2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?
3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?
4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?
The organization’s marketing environment is made up of:
• 1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc.
• 2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc.
• 3. The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural forces, and Technological forces. These are known as PEST factors.

Political Factors.

The political environment revolves around the current government in a particular country in which we manufacture or trade, and also laws/legislation operate within your home market as well as overseas. If your government is socialist then perhaps there is a policy to tax more and to invest in the public sector. On the other hand if you have a more conservative or Republican government then the free-market is left to take control, taxation is less and there is often a smaller public sector.
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:
1.How stable is the political environment?
2.Will government policy influence laws that regulate or tax your business?
3.What is the government’s position on marketing ethics?
4. What is the government’s policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

Economic Factors.

The economic environment is a direct influence on all businesses. Obviously if you are studying marketing there is a huge element of economics within the topic itself, and you should be no stranger to the principles of economics. As we saw from our lesson on the marketing environment there is a macroenvironment, and internal environment and the microenvironment.
More specifically you’ll be at looking elements such as where a business is in terms of the current business cycle, and whether or not you are trading in a recession.
Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:
1. Interest rates.
2. The level of inflation Employment level per capita.
3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.

Sociocultural Factors.

The sociocultural environment embodies everything which is social and cultural within a nation or society. There are plenty of examples of society and culture on the marketing teacher website, so we recommend that you go to our lesson store and look through some of the consumer behaviour pages. Some notable examples would include the influence of learning, memory, emotion and perception, motivation, lifestyle and attitude and consumer culture. Have a look at the six living generations in America, social environment and class, the impact of your birth order on how you behave as a consumer and take a look at the eight types of online shoppers.
In a more general sense consider influences such as the increase in life expectation of Western consumers, and demographics which is the study of populations.
The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:
1.What is the dominant religion?
2.What are attitudes to foreign products and services?
3.Does language impact upon the diffusion of products onto markets?
4.How much time do consumers have for leisure?
5.What are the roles of men and women within society?
6.How long are the population living? Are the older generations wealthy?
7.Do the population have a strong/weak opinion on green issues?

12. PESTEL MODEL

As we know from our lesson on the marketing environment the wider macroenvironment impacts upon how marketing managers make decisions. During this lesson we’re going to look at how we audit and evaluate our external business environment. There are a number of acronyms which are popular for doing this including PEST (Political/Economic/Sociocultural/Technological), PESTEL (Political/Economic/Sociocultural/Technological/Environmental/Legal), SLEPT (Societal/Legal/Economic/Political/Technological), STEP (Society/Technological/Economic/Political) and others which include LE-PEST-C and SPECTACLES. They are all pretty much the same. Below are details of how to complete a PESTEL analysis, supported by some examples.

Sociocultural

The sociocultural environment embodies everything which is social and cultural within a nation or society. There are plenty of examples of society and culture on the marketing teacher website, so we recommend that you go to our lesson store and look through some of the consumer behaviour pages. Some notable examples would include the influence of learning, memory, emotion and perception, motivation, lifestyle and attitude and consumer culture. Have a look at the six living generations in America, social environment and class, the impact of your birth order on how you behave as a consumer and take a look at the eight types of online shoppers.
In a more general sense consider influences such as the increase in life expectation of Western consumers, and demographics which is the study of populations.

Technological

Technological factors are a multifaceted influencer. Let’s just think about the sorts of technology that you come in touch with almost daily. Smart phones such as Android and iPhone are now common – all – garden, and we are used to being able to access information and communication technology instantly no matter where we are. During studies or at work we have access to information on quick PCs and over the Internet, with faster broadband connections arriving in many parts of the world.
Technology also surrounds business processes. As we saw from our lesson on the functions within an organisation all departments use information technology or technology in one form or another. Our manufacturing operations will use technology to produce goods and services. Our logistics and warehousing functions use forklifts and lorries as well as order tracking technology and software. The customer service department will use communication technology to talk to customers but will also have access to internal systems, such as technology to simplify credit control and stock control for example. There are many, many more examples of technology.

Environmental

Environmentalism and marketing connect where marketing may affect the environment when serving consumers with products and services. There is an environmental movement which puts pressure on businesses, governments and everyday people to be green. There are a number of examples of how companies can be greener internally and externally, from addressing manufacturing today, to designing a much more sustainable future. A manufacturer might reduce the amount of waste produced as a result of the manufacturing process or a restaurant might reduce the amount of packaging or food waste. An environmental approach is set in today’s tactics, but will eventually be embedded in the strategic vision of the business.

Legal

When marketing overseas your business will need to take into account laws in the local market. For example cars sold in mainland Europe and the United States tend to be left-hand drive, whilst cars which are marketed in Japan and the United Kingdom right-hand drive. This is a local requirement. Different countries have different laws in relation to maximum speed limits and safety ratings on vehicles, as well as many other bylaws and codes.

Political

The political environment revolves around the current government in a particular country in which we manufacture or trade, and also laws/legislation operate within your home market as well as overseas. If your government is socialist then perhaps there is a policy to tax more and to invest in the public sector. On the other hand if you have a more conservative or Republican government then the free-market is left to take control, taxation is less and there is often a smaller public sector.

Economic

The economic environment is a direct influence on all businesses. Obviously if you are studying marketing there is a huge element of economics within the topic itself, and you should be no stranger to the principles of economics. As we saw from our lesson on the marketing environment there is a macroenvironment, and internal environment and the microenvironment.
More specifically you’ll be at looking elements such as where a business is in terms of the current business cycle, and whether or not you are trading in a recession.

13. PRIMARY MARKETING RESEARCH

Primary marketing research is collected for the first time. It is original and collected for a specific purpose, or to solve a specific problem. It is expensive, and time consuming, but is more focused than secondary research. There are many ways to conduct primary research. We consider some of them:
Advantages of telephone interviews
• Can be geographically spread
• Can be set up and conducted relatively cheaply
• Random samples can be selected
• Cheaper than face-to-face interviews
Disadvantages of telephone interviews
• Respondents can simply hang up
• Interviews tend to be a lot shorter
• Visual aids cannot be used
• Researchers cannot behavior or body language

1.2 Face-to-face Interviews.

Face-to face interviews are conducted between a market researcher and a respondent. Data is collected on a survey. Some surveys are very rigid or ‘structured’ and use closed questions. Data is easily compared. Other face-to-face interviews are more ‘in depth,’ and depend upon more open forms of questioning. The research will probe and develop points of interest.
Advantages of face-to-face interviews
• They allow more ‘depth’
• Physical prompts such as products and pictures can be used
• Body language can emphasize responses
• Respondents can be ‘observed’ at the same time
Disadvantages of face-to-face interviews
• Interviews can be expensive
• It can take a long period of time to arrange and conduct.
• Some respondents will give biased responses when face-to-face with a researcher.

1.3 The Internet

The Internet can be used in a number of ways to collect primary data. Visitors to sites can be asked to complete electronic questionnaires. However responses will increase if an incentive is offered such as a free newsletter, or free membership. Other important data is collected when visitors sign up for membership.
Advantages of the Internet
• Relatively inexpensive
• Uses graphics and visual aids
• Random samples can be selected
• Visitors tend to be loyal to particular sites and are willing to give up time to complete the forms
Disadvantages of the Internet
• Only surveys current, not potential customers.
• Needs knowledge of software to set up questionnaires and methods of processing data
• May deter visitors from your website.

1.4 Mail Survey

In many countries, the mail survey is the most appropriate way to gather primary data. Lists are collated, or purchased, and a predesigned questionnaire is mailed to a sample of respondents. Mail surveys do not tend to generate more than a 5-10% response rate. However, a second mailing to prompt or remind respondents tends to improve response rates. Mail surveys are less popular with the advent of technologies such as the Internet and telephones, especially call centers.

2.0 Mystery Shopping

Companies will set up mystery shopping campaigns on an organizations behalf. Often used in banking, retailing, travel, cafes and restaurants, and many other customer focused organizations, mystery shoppers will enter, posing as real customers. They collect data on customer service and the customer experience. Findings are reported back to the commissioning organization. There are many issues surrounding the ethics of such an approach to research.

3.0 Focus Groups.

Focus groups are made up from a number of selected respondents based together in the same room. Highly experienced researchers work with the focus group to gather in depth qualitative feedback. Groups tend to be made up from 10 to 18 participants. Discussion, opinion, and beliefs are encouraged, and the research will probe into specific areas that are of interest to the company commissioning the research.
Advantages of focus groups
• Commissioning marketers often observe the group from behind a one-way screen
• Visual aids and tangible products can be circulated and opinions taken
• All participants and the research interact
• Areas of specific interest can be covered in greater depth
Disadvantages of focus groups
• Highly experienced researchers are needed. The are rare.
• Complex to organize
• Can be very expensive in comparison to other methods

4.0 Projective techniques.

Projective techniques are borrowed from the field of psychology. They will generate highly subjective qualitative data. There are many examples of such approaches including: Inkblot tests – look for images in a series of inkblots Cartoons – complete the ‘bubbles’ on a cartoon series Sentence or story completion Word association – depends on very quick (subconscious) responses to words Psychodrama – Imagine that you are a product and describe what it is like to be operated, warn, or used.

5.0 Product tests.

Product tests are often completed as part of the ‘test’ marketing process. Products are displayed in a mall of shopping center. Potential customers are asked to visit the store and their purchase behavior is observed. Observers will contemplate how the product is handled, how the packing is read, how much time the consumer spends with the product, and so on.

6.0 Diaries.

Diaries are used by a number of specially recruited consumers. They are asked to complete a diary that lists and records their purchasing behavior of a period of time (weeks, months, or years). It demands a substantial commitment on the part of the respondent. However, by collecting a series of diaries with a number of entries, the researcher has a reasonable picture of purchasing behavior.

7.0 Omnibus Studies.

An omnibus study is where an organisation purchases a single or a few questions on a ‘hybrid’ interview (either face-to-face or by telephone). The organisation will be one of many that simply want to a straightforward answer to a simple question. An omnibus survey could include questions from companies in sectors as diverse as heath care and tobacco. The research is far cheaper, and commit less time and effort than conducting your own research.
We have given a general introduction to marketing research. Marketing research is a huge topic area and has many processes, procedures, and terminologies that build upon the points above. (See also lesson on market research and secondary marketing research)
1. Interviews
2. Mystery shopping
3. Focus groups
4. Projective techniques
5. Product tests
6. Diaries
7. Omnibus Studies

1.0 Interviews.

This is the technique most associated with marketing research. Interviews can be telephone, face-to-face, or over the Internet.

1.1 Telephone Interview.

Telephone ownership is very common in developed countries. It is ideal for collecting data from a geographically dispersed sample. The interviews tend to be very structured and tend to lack depth. Telephone interviews are cheaper to conduct than face-to-face interviews (on a per person basis).

14. SECONDARY MARKETING RESEARCH

Secondary marketing research, or desk research, already exist in one form or another. It is relatively cheap, and can be conducted quite quickly .However, it tends to have been collected for reasons other than for the problem or objective at hand. So it may be untargeted, and difficult to use to make comparisons (e.g. financial data gather on Australian pensions will be different to data on Italian pensions).
We have given a general introduction to marketing research. Marketing research is a huge topic area and has many processes, procedures, and terminologies that build upon the points above. (See also lesson on market research and primary marketing research)
There are a number of such sources available to the marketer, and the following list is by no means conclusive:
• Trade associations
• National and local press Industry magazines
• National/international governments
• Websites
• Informal contacts
• Trade directories
• Published company accounts
• Business libraries
• Professional institutes and organisations
• Omnibus surveys
• Previously gathered marketing research
• Census data
• Public records

15. SWOT ANALYSIS – POWER SWOT

Marketing Teacher’s Approach to SWOT Analysis.Why is there a need for an advanced approach to SWOT Analysis?
SWOT analysis is a marketing audit that considers an organization’s strengths, weaknesses, opportunities and threats. Our introductory lesson gives you the basics of how to complete your SWOT as you begin to learn about marketing tools. As you learn more about SWOT analysis, you will become aware of a number of potential limitations with this popular tool. This lesson aims to help you overcome potential pitfalls.
E = Emphasize detail.
Detail, reasoning and justification are often omitted from the SWOT analysis. What one tends to find is that the analysis contains lists of single words. For example, under opportunities one might find the term ‘Technology.’ This single word does not tell a reader very much. What is really meant is:
‘Technology enables marketers to communicate via mobile devices close to the point of purchase. This provides the opportunity of a distinct competitive advantage for our company.’
This will greatly assist you when deciding upon how best to score and weight each element.
R = Rank and prioritize.
Once detail has been added, and factors have been reviewed for weighting, you can then progress to give the SWOT analysis some strategic meaning i.e. you can begin to select those factors that will most greatly influence your marketing strategy albeit a mix of strengths, weaknesses, opportunities and threats. Essentially you rank them highest to lowest, and then prioritize those with the highest rank e.g. Where Opportunity C = 60%, Opportunity A = 25%, and Opportunity B = 10% – your marketing plan would address Opportunity C first, and Opportunity B last. It is important to address opportunities primarily since your business should be market oriented. Then match strengths to opportunities and look for a fit. Address any gaps between current strengths and future opportunities. Finally attempt to rephrase threats as opportunities (as with global warming and climate change above), and address weaknesses so that they become strengths. Gap analysis would be useful at this point i.e. where we are now, and where do we want to be? Strategies would bridge the gap between them.
Some of the problems that you may encounter with SWOT are as a result of one of its key benefits i.e. its flexibility. Since SWOT analysis can be used in a variety of scenarios, it has to be flexible. However this can lead to a number of anomalies. Problems with basic SWOT analysis can be addressed using a more critical POWER SWOT. POWER is an acronym for Personal experience, Order, Weighting, Emphasize detail, and Rank and prioritize. This is how it works.
P = Personal experience.
How do you the marketing manger fit in relation with the SWOT analysis? You bring your experiences, skills, knowledge, attitudes and beliefs to the audit. Your perception or simple gut feeling will impact the SWOT.
O = Order – strengths or weaknesses, opportunities or threats.
Often marketing managers will inadvertently reverse opportunities and strengths, and threats and weaknesses. This is because the line between internal strengths and weaknesses, and external opportunities and threats is sometimes difficult to spot. For example, in relation to global warming and climate change, one could mistake environmentalism as a threat rather than a potential opportunity.
W = Weighting.
Too often elements of a SWOT analysis are not weighted. Naturally some points will be more controversial than others. So weight the factors. One way would be to use percentages e.g. Threat A = 10%, Threat B = 70%, and Threat C = 20% (they total 100%).

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