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Marketing Help: Understanding The Marketing Environment
 
 

Understanding The Marketing Environment

When determining the best way to market a product, the marketing team must analyze the marketing environment. Obviously, the marketing team must understand the market they wish to sell to, and what is the best way to market to those customers.

There are three key steps to analyzing the best marketing environment.

1. Explain how a company's customers influence its marketing strategy.
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2. Identify and explain the factors in a company's macro-environment.

3. Understand how marketers use scenario planning to make marketing decisions and strategies.

1. Explain how a company's customers influence its marketing strategy.

Successful marketers focus on customer satisfaction and meeting the customer needs that match the company's main competencies. A marketer wants to use their strengths to best serve their customer, as without customers, the company wouldn't be in business.

Marketers must learn what their customers want, and then be able to provide a product or service that would be valuable to the customer.

To do this, a company and its marketers must understand both their micro-environment and their macro-environment.

For a company to have a customer-driven market strategy, they must use the following steps:

1. Market Segmentation

2. Market Targeting

3. Differentiation

4. Positioning

1. Market Segmentation

Market segmentation is the first step to determine a target market. Market segmentation is when an overall group is split into two or more groups, with each group being similar in certain characteristics.

2. Market Targeting

Once the markets have been segmented, the marketers will want to choose their targets. Since no one strategy will work for all customer groups, it is important to develop strategies that are for the company's target markets.

There are three strategies used to determine a company's target market.

1. Undifferentiated Targeting – This method assumes the market is one large group with no segments, and would therefore use a single marketing strategy. This might be the strategy for a company that has a product that no other company has. With no competition, the company can target the market as a whole.

2. Concentrated Targeting – This method assumes a particular market niche in which a marketing department can focus their efforts. By focusing on a particular segment, the company can learn the needs and wants of that individual market.

3. Multi-Segment Targeting – This method is used when a company needs to focus on more than one segment. A marketing department would usually need to have a different strategy for each segment. This is the most costly method for the company.

3. Differentiation

Differentiation is the ability to produce a product or service that is different from everything else the market is selling. It is a way to set a company apart from its competitors. If a differentiation strategy works, a company could charge a premium for its product.

4. Positioning

Positioning is a process that enables the marketer to know what their company should do to market its product or service to its customers. With positioning, the marketer determines the image for the product based on its intended audience. This is done using the price, the product, where it is sold, and what promotions are used. Good positioning allows the marketing team to convert an interest in a product to a sale.

Key Terms!

Market Segmentation

Market Targeting

Differentiation

Positioning

Think!

How will knowing a customer's environment affect a company's marketing plan?

2. Identify and explain the factors in a firm's macro-environment.

The macro-environments are the large forces that affect the micro-environment. These include factors such as demographics, economics, political, and cultural factors.

The micro-environments are the departments in the company that affect marketing and sales. These would include R&D, management, and customer service.

Key Terms

Macro-Environment

Micro-Environment

Here are descriptions of the various types of environments:

Demographic: This is the study of the population, and gathers statistics regarding size of areas, density, locations, and then the age, gender, race, and occupation of the people who live there.

An example of demographic information:

A company is considering adding a teen line to their existing line of clothing. But, they need to do market research to determine whether this new line would be successful. In order to do this, they would get demographic information about their desired market. They would make sure there is a large female and teenage group that would be interested in buying their new product.

Economic: This is the study of the income of certain groups of people, as well as their buying power and how they spend.

An example of economic information:

A large restaurant chain is considering placing a new restaurant in a small city in the Midwest. Marketers would want to make sure that the city could support the costly restaurant. So researchers would do an economic study that would provide them with average incomes in the city, as well as residents' spending patterns. If the city has a low average income, and the residents spend very little eating out, the restaurant wouldn't place a new restaurant in that city.

Political: This is the study of the laws of different areas and countries, and how that would influence buying patterns.

An example of political information:

A man wants to open up a gun shop in his hometown. He is a sole proprietor, so he hires a marketing firm to ascertain whether or not a gun shop would do well in the town. The town is primarily white-collar, and very liberal. Therefore, the marketing firm would tell him a gun shop would most likely not be successful in that town.

Cultural: This is the study of what affects a certain society, and the study of its values and behaviors.

An example of cultural information:

A chain of restaurants/bars is looking to expand. The restaurant sells mainly hamburgers and chicken, fish and steak meals. The bar is usually rowdy, and has many televisions in which sports are playing. A marketing team would look at the culture of a town or city before deciding to build a restaurant there. For example, they wouldn't want to build in an area that is primarily Mormon, since the religion prohibits alcohol.

Think!

What types of businesses would seek to learn about a society's cultural environment?

Natural: This is the study of the effects involved in the natural environment, such as pollution and sustainability.

An example of natural information:

A car company has invented a totally electric car. It is a new technology that doesn't require any gasoline. When deciding where to market this car, the marketers would gather information about the natural resources of the area. For example, if they want to sell heir cars in an area with very low-cost gasoline, they might not be successful.

Technological: This is the study of how technological a society is, and its access to the Internet.

An example of technological information:

An online marketer has a new program geared for elderly people. It would allow older Americans to converse with each other, similar to how they converse in nursing homes or coffee shops. The marketer would gather information to determine whether older Americans have the Internet, and how often they use it.

Think!

What type of company would want to know about a society's technological environment?


Key Terms

Types of Environments

Demographic

Economic

Political

Cultural

Natural

Technological

In order for a marketer to be successful, they must know what it going on in their targeted markets. For example, a fast-food hamburger joint decides to open a restaurant in a primarily Hindu area. Would the restaurant be successful? No, of course not.

Marketers must be aware of their environment, and sensitive to the issues of those environments to be successful.

They also must have accurate demographic information. Demographics will pull the following information:

  • Age

  • Income

  • Religion

  • Education Level

  • Gender

  • Ethnicity

  • Size of Market

Each one of these demographics will affect how a customer might buy a product. For instance, is the product or service mainly for men or women? Is the product provocative? If so, you wouldn't market in a heavily religious area. Knowing this information will help the marketer better serve their customers.

In addition, in today's advanced technological society, marketers are better able than ever to gather information.


3. Understand how marketers use scenario planning to make marketing decisions and strategies.

Scenario planning uses the information gathered from the macro environment to determine the best way to sell and market to their customers.

1. Assessing strengths and weaknesses of a market.

Strengths would be the positive aspects of a market to a company, both tangible and intangible. A company is able to control these strengths. What does the company do well? What resources are at its disposal? What advantages does the company have over its competitors?

Strengths can be assessed by company department, such as the marketing department or finance department. Strengths can be the company's employees, and their experience, backgrounds, and educational level.

It can also include any assets the company has, such as cash, equipment, accounts receivables, patents, or any other intellectual property.

Strengths are all of the positive aspects of a company that offer value and put the company at an advantage over other companies.

Weaknesses would be aspects of the business that are within control, but are detrimental to the success of the business. These weaknesses make it difficult to be competitive. It also gives you opportunities for improvement.

Weaknesses could be inexperienced employees or a bad location for your business. It could mean outdated computer or phone systems. All of these aspects are under the control of the company, but they choose not to change them.

Weaknesses are all of the negative aspects of a company that reduce its value to a customer, and place it at a disadvantage to other competitors. The sooner a company identifies its weaknesses, the sooner it can make improvements.

2. Assesses opportunities and threats to a market.

To assess the opportunities to a market, a company must identify the external factors that make it attractive to the market. These are the opportunities that exist in the company's market, or in its environment, that the company could benefit from.

These opportunities are how a company can use its marketing strategies to be successful. These opportunities can be due to market growth or changes in lifestyle or cultural situations, the key is for the company to take advantage of these opportunities.

Threats are the factors that are beyond a company's control, and that threaten to hurt the business or its marketing strategy. These threats are external, meaning the company has no control over them. However, a company can be prepared to deal with these threats.

Threats occur when a company is challenged by unfavorable trends that cause the company to lose revenue. Other threats include an increase in the price of supplies, economic downturns, bad press, or a change in consumer behavior. It is important for a company to identify any potential threats so they can be prepared should they happen, and have a back-up plan.

If a company is able to identify potential threats, the better they are able to deal with them should they happen. It is also good to have a contingency plan.

The strengths and weaknesses, and opportunities and threats, are referred to as SWOT.

Key Term

SWOT =

Strengths

Weaknesses

Opportunities

Threats

3. Identify different scenarios.
SWOT can be used to determine how a business or marketing plan might work in different scenarios. Using SWOT analysis can help a business assess:

Whether a company is viable

  • A new method of sales distribution

  • A new product or brand

  • A new business idea

  • A strategic marketing decision, such as launching a new product

  • A potential partnership

  • Deciding whether to change a supplier

  • Deciding whether to outsource a department

  • Deciding whether to make an investment opportunity

  • Deciding whether to hire more employees

  • Deciding whether to open more stores, or relocate

Key Points!

1. Strengths are INTERNAL factors that are favorable for the company's goals

2. Weaknesses are INTERNAL factors that are not favorable for the company's goals

3. Opportunities are EXTERNAL factors that are favorable for the company's goals

4. Threats are EXTERNAL factors that are not favorable for the company's goals

 
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