Managing External Forces Tutorial

Managing External ForcesThe bulk of material covered up to this point the Principles of Marketing Tutorials is intended to give those new to marketing a basic understanding of the decisions marketers make as they work to successfully satisfy customer needs. Now that we have laid out the important marketing decision areas, we begin a new section that examines additional issues facing marketers as they manage their marketing efforts.

Up until this point our attention has focused mostly on decisions marketers control such as product design, advertising message, type of distribution, setting price, etc. In this tutorial we explore factors that are outside of the marketer’s control but play a major role in shaping marketers’ strategies and tactics.

The external forces we discuss present both opportunities and threats with some holding the potential to dramatically alter how an industry conducts its business. For example, newspaper marketers are experiencing a major shift in how consumers obtain their news in large part due to technological innovation (e.g., Internet, cell phones). Newspapers that understand this key external factor have embraced it as an opportunity and have expanded their delivery of news to meet the needs of customers using these new technologies. Other newspapers, which have been slow to recognize new methods for distributing news, now face serious threats to their survival as customers by-pass them in favor of new media outlets. The lesson here is that marketers must continually monitor and respond to external forces.

As we noted, most external forces are beyond the direct control of the marketing organization. By “direct control” we mean marketers lack the power to determine the direction and intensity of a change in these forces. Instead, marketers must treat external forces as something to be monitored and responded to when necessary.

While marketers lack direct control over external forces, in some cases they can exercise a small amount of influence over these factors. For instance, Apple’s iPod has played an important role in changing how consumers listen to music, and for some, how they acquire information (e.g., news podcasts). But while Apple is credited with being the catalyst for changing a social behavior (an external force) they represent just one of several organizations (e.g., music publishers, manufacturers of other music players) and others (e.g., bloggers, podcasters, news media) whose actions were necessary for behavior to change across a large group. Thus, while one company can market products and services with the intention of changing how a target market behaves, it is nearly impossible for one company alone to control the change.

For marketers the key to dealing with external forces is to engage in continual market research. For larger companies this may involve dedicated research personnel, who watch these factors as part of their day-to-day responsibilities. A research staff dedicated to monitoring external forces may offer marketers the ability to better predict changes and respond well in advance of a change. For example, researchers may be able to predict how the economy (an external force) will change over the next one to two years and through this information allow the marketing organization to respond (e.g., new products, reduced price, etc.).

For small organizations that do not have the luxury of market research staff, monitoring change is difficult and often means they react after a change has occurred. However, new innovative products (an external force) are making the monitoring task much easier allowing small companies to respond quicker than in the past.

Demography involves the study of characteristics of a population and how these change over time. The characteristics that are of most interest to marketers fall into two categories:

  • Total Population – These characteristics take a very broad view of the population as a whole in terms of size (e.g., number of people, number of businesses) and location (e.g., geographic region).
  • Personal Variables – These characteristics look at how the population is changing based on individual factors such as gender, age, income, level of education, family situation (e.g., single, married, co-habitation), sexual preference, ethnicity, occupation, and social class.

We saw in Part 6: Targeting Markets demographics is a key variable used to segment both consumer and business markets. In particular, demographic variables are an important component in creating customer profiles. These profiles are based on both demographic and non-demographic (e.g., customer behavior, attitudes, lifestyles) factors and are used for grouping customers into definable market segments from which a marketer then selects its target markets. Since demographics is tied directly to identifying target markets, monitoring how demographics change is critical for making marketing decisions.

Most demographic shifts do not occur rapidly so marketers will not see dramatic changes in a short period of time in the manner that other external forces can impact an organization (e.g., impact of a new law). However, over the long term, demographics can reshape a target market requiring marketing organizations to rework their marketing strategy in an effort to appeal to a changing market.

For our discussion we will highlight seven important external forces:

  • Demographics
  • Economic Conditions
  • Governmental Environment
  • Influential Stakeholders
  • Cultural and Societal Change
  • Innovation
  • Competitors

Each external force is described in detail though these are not presented in order of importance. In fact, the importance of each force may vary depending on the marketing organization and the industry in which they compete. For instance, a company manufacturing technology products may feel innovative forces are more important than demographic changes. While a financial services firm may more aggressively monitor and react to economic conditions.

While demographic change occurs slowly, marketers can begin to see indicators of potential change by identifying small trends that may suggest a larger shift over time. By paying close attention to these trends organizations can prepare their long-term marketing strategy to be ready when the shift becomes more apparent.

To illustrate how a marketer may respond, let’s consider the demographic characteristic birthrate. In some countries the overall birthrate is declining while the average age of the population is growing (i.e., people living longer). For a company targeting the youth market with sporting products this trend may suggest that in coming years they will see a shrinkage in demand for their products within the youth market as the population of this market declines. On the other hand demographic data may signal to the company that another market (i.e., older market), which they may not have previously targeted, may hold potential for new products. If it is predicted that the shift will occur over several years the marketer can slowly move into the new market by offering products geared toward older adults.