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Marketing 101
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What Affects Marketing?

What Affects Marketing?  Marketing does not happen in a vacuum and is affected by many factors that can cause an organization to adjust their marketing program numerous times before they get it right.  In the long run a marketing campaign can be affected by five factors; social, economics, technology, competition, regulations.

 

Social forces that affect marketing

Demographics

Demographics, includes population trends, which is the shift in the age of the general population.  Right now the baby boomers (those born from 1946 until 1964) exert the most influence over markets, attitudes and society, but all that will change as the 21st century progresses.

 

In the not to distant future the affect that Generation X  (those born between 1965 and 1976) and Generation Y (those born after 1976) has on the purchasing and production of products and services will increase as the baby boomers grow older.

 

Demographics also includes population shift, which is nothing more than movement of people into and out of one geographic location or another.  An example of this is the migration of northern retires to the southern states.

 

Social Factors

One notable demographic trend is the changing racial and ethnic makeup of America such as the growing Hispanic population and the declining Irish and German populations.  With the changing cultural balance comes all new influences on market and products.

 

With a change in the racial and ethnic makeup of America will also come a change in culture as new values, ideas and attitudes are learned and shared by the different social groups.

 

In the last thirty years there has also been in the in the society over the last twenty or has come a change attitudes and roles of men and women which has also created a different approach to marketing to men and women.

 

One social factor that probably has had the most affect on marketing is the changing value system in America.  Each generation has it’s own set of values. All age groups ran protection of the family and honesty at the two most important values.  While consumers under 20-value friendship as the third most important value, people in the 21-29 and the 30-39-age range value rank heath and fitness and self esteem as third.

 

The trend in marketing over the last few years has changed to reflect those values with many commercials showing families enjoying life together and friends having a good time doing everything from mountain climbing to sitting in the local Starbucks laughing and enjoying a cup of coffee together.

 

Economic factors that affect marketing

Macroeconomic Conditions

Inflation and Recession affect marketing because they have an adverse affect on the consumer’s ability to purchase the goods or services that are being advertised.

 

In inflationary periods the price of the materials to produce the good increases so the price the manufactured goods will also increase.  If the price of the product increases faster then the rate of income of the consumer then the sales of the goods or services will decrease.

 

In recessionary periods business decreases and with the decrease comes layoffs and job loss, which means there are more people on unemployment with less money to spend.

 

 

 

Consumer Income is made up of two parts; the gross income (money before taxes) and the disposable income (money left after taxes).  If the rate of taxes increases faster the rate of income then consumers have less money to spend. 

 

 

However as the technology such as the internet, has changed the marketplace; good and services have become better with more durable goods that use less energy and faster services which means spending less to get the job done, the consumer may find that they have more disposable income left because they will not be paying out as much for necessary goods and services.

 

The final component of consumer income is discretionary money, which is the money that is left over from the disposable income that consumer use to buy non-necessary items, or luxury items.   Discretionary money is the target of marketing.  If you can sway your customer’s emotions to your product or service they will spend their money.

 

One thing that the government can do to help in times of recession or inflation to help free up some discretionary funds is to reduce taxes or increase tax refunds.  This will give consumers more money to spend and will stimulate the economy,

 

Competition

There are four basic types of competition

 

Given time firms may move from 1 to 4

Examples of competition 1 to 4

1) Pure competition, many sellers with identical products

 

Mom and Pop stores, family fishing boat

2. Monopolistic competition, many sellers with similar products

 

McDonald’s, Wal-Mart

3. Oligopoly, a few companies control the industry

 

GM, AT&T, Sprint

4. Monopoly, when one firm sells the product.

 

Public utilities

 

Each of the industries in the table exhibits traits that either allow or inhibit new firms from entering their industry.  There are certain barriers that can be put into place that make it tougher for new competition from coming along especially when it comes to the Oligopolies and Monopolies such as all existing companies banning together to force the new company out of business.

 

An example of this would be back in the 40’s when the Tucker Auto Company was put out of business because of pressure from the Big 3 (Chrysler, GM an Ford which led to a Federal Investigation and the demise of the company)

 

Also as you reach the Oligopoly and Monopoly level the higher the fixed costs, research requirements and knowledge it takes to run the firm so the less firms there will be that can enter into competition with the existing firms.

 

Regulatory Forces that affect marketing

Government regulations, which are the restrictions federal, state and local officials place on business with regards to operations of that business affect marketing because you must be aware of what you cannot do and say in a marketing campaign. 

 

Government regulations are put into place to protect both the business, by ensuring competition and fair business practices as well as the consumer by protecting them from unfair trade and ensuring their safety.

 

Competition allows for marketing of products and services while production of a safe product at a fair price insures customers will respond to marketing and buy the product or ask for the service.

 

One important government agency that must be recognized is the Federal Reserve.  The Federal Reserve is responsible for monitoring the state of the economy and adjusting interest rates accordingly.   During recessions the FED will lower the prime interest rate, which is the rate at which banks loan money to businesses, in order to stimulate the economy.  Lower interest rates also entice households to make purchases of durable goods which will in turn help large firms to increase production and call back laid off workers.

 

The FED is also responsible for open market operations, which essentially is the process if inflating or reducing the amount of money in circulation, which helps to get households back to work and the unemployment rate down.

 

 

Conclusion

These are just some of the factors that marketers must be aware in order to set a strategic view for their companies.  One way to compensate for any of these factors is to diversify a product mix in order to insure that the company is less susceptible to economic and demographic fluctuations.