Topic 1 Definition of marketing, marketing management, concepts and process 8

Topic 2: Analysing the marketing environment

1. Presentation
This chapter explains the first of the five stages of the marketing process: analysing
and understanding the market and customers’ needs in an environment which is often
complex and changeable.
Apart from the customer, there are many players who may work for or against the
company’s interests (suppliers, competitors, intermediaries, etc.), as well as elements
in the environment which may present opportunities or threats (these elements may
be economic, cultural, technological, demographic, etc.).
All these aspects can affect the company’s ability to attract customers and build a
stable relationship with them. Therefore, in order to develop an effective marketing
strategy, the company first needs to understand the environment in which it operates.

2. The marketing environment

The environment in which a company finds itself comprises non-marketing agents and
forces which influence the ability of marketing management to build and maintain
stable relationships with their target customers. For this reason, the company must be
alert to new developments and changes in its environment, take them into account,
adapt to them, and even lead such changes.
Within the company, the marketer must monitor trends and changes for threats and
opportunities, with the help of the appropriate tools (market research and marketing
intelligence), and should also spend much of their time studying the environment of
their company and their competitors.
Both factors will enable them to anticipate new challenges and opportunities in the
market and be prepared to adapt their company’s marketing strategy.
The marketing environment comprises the micro-environment and the macro-
environment.

2.1. The micro-environment

Agents close to the company which influence its ability to serve its customers: the
company itself, suppliers, marketing intermediaries, consumer markets, competitors
and stakeholders.

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 Marketing will be successful if it builds effective relationships with the other
departments in the company, suppliers, and the other agents in the micro-
environment, because all of them make up the company’s value-creating network.

When designing the company’s marketing plan, the marketer must take into account
the rest of the departments, which make up the internal environment and influence
their decisions.
Suppliers are important agents because they provide the company with the resources
it needs to produce its goods and services. Hence, any problems with the suppliers can
affect the company, especially its marketing department.
Marketing intermediaries help the company promote, sell and distribute its products
to customers; they include storage and physical distribution companies, as well as
marketing services (market research, advertising agencies, graphic design studios,
etc.).
To be successful, a company must offer its customers greater value and satisfaction
than its competitors. Therefore, as well as taking into account the customers’ needs,
the marketing professional must achieve a strategic advantage over its peers.
The marketing micro-environment is also influenced by stakeholders; by this we mean
any group which impacts the company’s ability to reach its financial, media,
governmental, civil, internal, general or local goals.
Customers are the most important group of agents in the company micro-
environment, as the entire organisation revolves around them and the goal of
establishing successful relationships with them.
While on the subject of customers, we must also refer to a broader concept, which will
be the context within which the marketing department operates: the market. We
understand “the market” to be the set of people, individuals or in organisations, who

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 need a given product or service, who want to buy it or may want to in the future, and
who have the financial and legal capacity to do so.
From the marketing perspective, we refer to five types of customer markets:

• Consumer markets: individuals and households who acquire products or

services for personal consumption.
• Industrial markets: buying goods and services for use in their production
process.
• Reseller markets: buying goods and services to resell for profit.
• Government markets: public bodies which buy goods and services to produce
public services.
• International markets: buyers in other countries.

2.1. The macro-environment

The broader social forces which affect the micro-environment: demographic,
economic, natural, technological, political and cultural factors. These factors make up
the opportunities and threats which a company may face. Some of them are
unpredictable and uncontrollable, but others can be predicted and handled by skilled
management.
Companies which can predict, understand and adapt to their environment can remain
successful, but those which cannot may find themselves in difficulties, even in the case
of major corporations.

Demographic factors are relevant for marketing professionals because they refer to
individuals who make up the markets. Therefore, they must pay attention to trends,

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 changes and developments which could affect their business: family structure,
migrations, ageing population, etc.
A functioning market requires individuals with purchasing power; the factors affecting
consumers’ purchasing power and spending patterns make up the economic
environment. These factors have a major impact on buying habits and consumer
spending.
Natural factors refer both to the natural resources which companies need (for
example, their operation could be affected by a shortage of raw materials) and to
unexpected natural phenomena which can affect them, such as natural or climate
disasters. The latter are unpredictable, but companies must be ready to deal with
them if they happen, both to avoid problems and to respond to any which might
represent an opportunity.
Technology might be the force which has had the most impact on companies and
marketing in recent years. Technological factors are bringing major changes in the
markets, enabling the development of new products and creating new opportunities
(credit cards, internet, mobile phones, telemedicine, online sales, smartphones, etc.)
Meanwhile, the impact of new technologies has led to a new way of understanding
marketing: digital marketing involves the use of digital tools and resources to reach
customers more directly and in a more personalised way.
In many companies, marketing decisions are very much affected by changes in socio-
political factors. These factors include legislation, government organisations and
pressure groups.
They are particularly relevant for companies operating in regulated markets (e.g.,
pharmaceutical products, telecommunications, etc.), and to a lesser extent to all other
companies, as they are all subject to some degree to legislation, new regulations due
to changes of government, changes due to unstable political situations, etc.
Finally, companies may be affected by cultural factors, meaning the basic values,
perceptions, preferences and behaviour of a society. Everyone grows up in a given
society which shapes their belief system, basic values, needs and tastes, all
characteristics which affect decision-making in marketing (for example, different family
models, leisure activities or food in different countries).

3. Managing the marketing environment

There is a significant saying in marketing about companies and how they manage their
environment:
“There are three types of company: those that make things happen, those that watch
them happen, and those that wonder what happened.”

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 The first type is proactive: they develop strategies and take action to change their
environment, organise media events to get their message to the public, work to
encourage legislation which lets them operate, etc., in other words, these companies
manage the information they have about their environment, which enables them to
anticipate events and adapt the environment to suit their interests.
These companies and their products are the ones that usually create new industries
and markets (Amazon, Google, Facebook, Cabify, etc.).
Meanwhile, the other two are reactive, merely watching and reacting when things
have already happened, and in the worst-case scenario by the time they realise what
has happened they have no valid solutions.

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 Topic 3: Managing marketing information

1. Presentation
To design marketing strategies, we need to know and understand the market, and to
have relevant information on vital elements of it, such as consumers, products and
competitors.
Knowing these aspects means obtaining data. Therefore, we are now going to analyse
how companies can obtain this information and, more importantly, how they manage
it – in other words, how they gain knowledge about the market to enable them to
make the right decisions.

2. The marketing information system

Knowledge of the market and consumers is vital for marketers, as it enables them to
design good marketing programmes and to make the right decisions.
Information has no intrinsic value without analysis; the value is found in the
knowledge we extract from it and how marketers use it for making decisions.
These days it is easy to obtain market information; thanks to the new technologies,
companies can obtain information from many sources. Consumers themselves
generate tonnes of data through their mobile phones, tablets, social networks, apps, e-
commerce, videos, geolocation, etc.
In fact, we have gone from market information being hard to find, to having too much
of it. Therefore, now the challenge is knowing how to extract the most relevant
information and use it to produce useful knowledge.
To manage this information, companies usually have a marketing information system:
people and procedures which look for information needs, obtain the necessary
information and transform it into useful information for the company’s decision-
makers.

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