Since most marketers are engaged in activities designed to entice customers to spend their money, it makes sense that economic conditions represent a powerful external force. Economic analysis looks at how a defined group produces, distributes and consumes goods and services. These groupings can range from those defined very broadly (e.g., country) to those defined narrowly (e.g., small town).
Of course, the production, distribution, and consumption of products are also of high interest to marketers and, in fact, many leading scholars of marketing first studied economics before moving to marketing. In very simple terms (and with apologies to both marketers and economist), the major difference between the marketer and the economist is that marketers are engaged in activity that make things happen to individual customers (e.g., create demand for products), while economists are engaged in activity showing the results marketers’ decisions have on a group (e.g., study how much is being spent by certain groups). Additionally, economists whose job it is to study a group may use hundreds of economic variables when assessing how a group is responding. Marketers tend to evaluate far fewer economic variables preferring to concentrate on those variables that affect spending behavior of consumers and businesses.
For marketers, the economic variables of most interest include:
- Income – how much is being earned
- Spending – what consumers and businesses are doing with their money
- Interest Rates – the cost of borrowing money
- Inflation – how prices for products and services are changing
- Cost of Living – the financial requirements of living in a certain geographic area
- Employment Rates – the percentage of employable people who are working
- Exchange Rates – how the value of currencies are changing between countries and regions