The Marketing Environment
Marketing strategies are not determined unilaterally by any business, not even by marketers as experienced as Coca-Cola and Proctor & Gamble. Instead they are strongly influenced by powerful outside forces. Every marketing program must recognize the factors in a company's external environment. The following will describe five of these environmental factors: the political-legal, social-cultural, technological, economic, and competitive environments.
Political and Legal Environment
Political activities, both foreign and domestic have profound effects on marketing. Legislation on the use of cell phones in cars and the Clean Air Act have determined the destinies of entire industries. Marketing managers therefore try to maintain favorable political-legal environments in several ways to gain public support for products and activities , marketers use ad campaigns to raise public awareness of local, regional, or national issues. Companies contribute to political candidates and frequently support their activities of political action committees (PACs) maintained by their respective industries.
Social and Cultural Environment
More people are working in home offices, the numger of single-parent families is increasing, and food preferences reflect a growing concern for healthy lifestyles. These and other trends reflect the values, beliefs, and ideas that shape U.S. society. Changing the social values force companies to develop and promote new products for both individual consumers and industrial consumers. For example, although most of us value privacy, Web surfers are discovering that a loss of privacy is often a price for the convenience of Internet shopping. Dot-com sites regularly collect personal information that they use for marketing purposes and that they often sell to other firms like iNetPrivacy that offer new products such as Anonymity 4 Proxy software, which allows you to surf the net anonymously.
New technologies create new new goals (the satellite dish) and services (home television shopping). New products make old products obsolete. (compact discs are replacing audio tapes), and many products change our values and lifestyles. In turn lifestyle changes often stimulate new products, not directly related to the new technologies themselves. Cell phones,for example, not only facilitate business communication but free up time for recreation and leisure. The internet is a new medium for selling, buying, and distributing products from your own home to customers around the world.
Since they determine spending patterns by consumers, businesses, and governments, economic conditions influence marketing plans for product offerings, pricing, and promotional strategies. Marketers are concerned with such economic variables as inflation, interest rates, and recession. Therefore they must monitor the general business cycle, which typically features a pattern of transition from periods of prosperity to recession to recovery. Not surprisingly, consumer spending increases as consumer confidence in economic conditions grow during periods of prosperity. Traditionally, economic analysis focused on the national economy. Increasingly however, as nations from more complex economic connections, the global economy is becoming more prominent in the thinking of marketers everywhere. At Wal-Mart for example, 17% of all sales revenue comes from retailer's international division. Although overall international international sales were up 41% for 2001, sales in some Latin American countries stalled. Why? Because economic conditions in such markets as Argentina and Brazil differ significantly from those in Mexico, which, in turn, differ from those in China, South Korea, and Germany.
In a competitive environment, marketers must convince buyers that they should purchase one company's products rather than those of some other seller. Because both consumers and commercial buyers have limited resources, every dollar spent on one product is no longer available for other purchases. Each marketing program, therefore, seeks to make its product the most attractive. Theoretically, a failed program loses the buyer's dollar forever (or at least until it is time for the next purchase decision). Marketers must decide how to position products for three types of competition:
- Substitute products are dissimilar from those of competitors but can fulfill the same need. For example, your cholesterol level may be controlled with either a physical fitness program or a drug regimen. The fitness program and the drugs compete as substitute products.
- Brand competition occurs between similar products, such as the auditing services provided by the large accounting firms of Ernst & Young and KPMG Peat Marwick. The competition is based on buyer's perceptions of the benefits of products offered by particular companies.
- International competition matches the products of domestic marketers is against those of foreign competitors - a flight on Swissair verses Delta Airlines. The intensity of international competition has, of course, been heightened by the formulation of alliances such as the European Union and NAFTA.