Introduction: Demographic Environment
The demographic environment is one of the crucial macroeconomic forces that influence marketing decisions and planning. Freedman (2020) suggests that demographics is a powerful tool for marketing strategy development because it helps identify the target segments based on critical characteristics, backgrounds, and needs. Thus, companies use demographic data to adjust marketing practices effectively and create successful campaigns.
Notably, demographic variables include helpful information and characteristics regarding customers. For instance, a company may analyze the age groups, gender, marital status, race, occupation, income level, among others (Freedman, 2020). Moreover, the obtained information will assist in determining the target segments that are better suitable for a company. In addition, companies concentrate on a group of people interested in purchasing their products or services. Thibodeaux (2019) presents a case of a company that manufactures luxury cars.
The ideal customer demographic for the company would be people from thirty to fifty years old with high socioeconomic status. The market division into smaller groups of potential customers with similar characteristics is called demographic segmentation.
Consequently, demographic segmentation is used in marketing to narrow the potential audience and create a customer base. Age is a commonly used segmentation variable that influences consumer behavior considerably (Rai, 2019). For instance, customers from various age groups demonstrate different behaviors. Rai (2019) emphasizes that younger customers may value the label and appearance of the product over the quality, while older customers prefer to choose more carefully. In addition, younger customers “are more open to experience and are less concerned with prices” (Rai, 2019, p. 24).
Essentially, using the demographic environment force, the company may predict the consumer behavior model. Gender is also an influential demographic factor that impacts the behavior model. For instance, Rai (2019) suggests that men are more risk-taking compared to women. In addition, women are more concerned with product quality. Thus, the demographic variables are crucial to analyze in order to understand the behavioral buying patterns.
Economic Environment
Significantly, environmental variables affect the business buyer behavior and consumer behavior models. The economic environment is characterized as the economic factors that influence customers. Therefore, this macroenvironment force is vital to analyze because the company performance is dependent on economic aspects that influence customers’ behavior (Market Business News, n.d.). The economic environment factors include unemployment, inflation, taxes, savings rates, and GDP growth. The success of a company in a potential market significantly depends on the overall well-being of the economy since unfavorable economic conditions can affect the demand for goods and services of the organization. In contrast, economic well-being provides opportunities for business growth.
Consequently, when choosing the country as a target market, the company should evaluate the economic environment and predict whether customers will purchase their services or products. Hence, the economic climate affects both the organization’s success and the consumer’s decision-making process (Oxford College of Marketing, n.d.).
The companies may also adjust the prices following the target market’s economic environment. For instance, Ahmed (2019) notes that consumers tend to purchase more when they feel confident about their country’s economy and financial stability. Nevertheless, if the economic situation in the chosen country is terrible, there is a shortage of food. Therefore, marketers should be extremely sensitive when promoting limited products at a high cost (Ahmed, 2019). Consequently, a company must consider all economic factors influencing purchasing behavior when entering a specific foreign market. Therefore, by correctly assessing the economic environment, marketing managers can identify the potential of the target country and reveal opportunities for company growth.
Natural Factors
Natural factors refer to natural disaster potential, climate impact, availability of raw materials, air quality, and sustainability. Decker (2019) defines the natural factors as the significant macroenvironment force which may demonstrate both challenges and opportunities for businesses. Moreover, natural factors may impact the consumer’s behaviors and preferences. For instance, people exhibit green purchasing behavior in countries with deep environmental concerns, such as Nordic countries.
They prefer to buy eco-friendly products and services, use bio-packaging and recycle products after use. According to Tighe (2020), approximately seventy-three percent of Swedes emphasized that their purchasing behavior is affected by climate change and sustainability concerns. Hence, the Swedish customers are willing to pay more for green products and purchase from firms that focus on environmental protection and people’s well-being.
To conclude, marketers should consider the natural trends and ecological factors to formulate practical marketing activities and provide a higher value for potential customers. Natural factors information helps companies to evaluate the situation by addressing environmental, ethical, and biological concerns. Accordingly, companies should conduct risk assessments of natural factors to depict customers’ needs. Thus, companies that take natural factors into account when designing their products, marketing strategies, and recycling plans to minimize environmental damage win the trust of green-minded buyers.
Technological Factors
Analyzing technological factors influences the success of the company and understanding the behavioral patterns of potential customers directly. For example, the level of technological development of a country will help to identify consumer preferences. For example, the development and penetration of the Internet directly affect the choices of the shopping channel, be it a physical store or online commerce.
Foroudi et al. (2018) suggest that in tech and internet-savvy societies, customers expect innovative and highly technological products and services from companies and organizations. Thus, technological factors also include the level of innovation, the latest technologies access, and the extent to which they are used in the market.
The crucial goal of marketers is to evaluate technological trends to decide on the more suitable way of products and services promoting and distributing, such as online, in-store, or mobile. In addition, the assessment of the technological factors illustrates the possibilities for advertisement. According to Fourdi et al. (2018), businesses should analyze the innovative technologies usage level to predict the consumer dynamics and enable the desirable shopping experience. For instance, the recent development of 5G networks continues to modify buyer behaviors.
Consequently, marketers should consider the technological development of the target market to apply appropriate marketing approaches. In addition, the increased connectivity could change the ways customers purchase products and services, evolving from mobile applications to Artificial Intelligence and Internet of Things sensors (Forbes, 2020). Consumer and channel-usage behaviors change expeditiously; thus, companies should be able to adapt quickly to the technological evolution to develop successful marketing strategies. It is essential to add that high rates of technological development facilitate the entry of innovative companies into developed markets and allow them to gain a competitive advantage by offering the latest products and services.
Political Factors
Political factors are identified according to the political environment of the particular market. Pathak (2021) argues that political factors refer to political stability, trade restrictions, tariffs, tax, and environmental policies. The political aspects are crucial because they explain to which extend the government in a target country may affect companies and industries (Pathak, 2021). For instance, various countries demonstrate particular tariff trade barriers, tax systems, and export and import restrictions. The products and services prices are influenced by political factors such as tax reforms.
In addition, companies may estimate the spending habits and patterns of the potential customers based on the political situation in the country. According to BBC (n.d.), governments decide on corporate tax, environmental laws, business rates, and minimum wage. Thus, the consumer behavior and business buyer behavior models depend on political factors. As an example, if the country is experiencing political instability, people are demonstrating saving behaviors. If the government focuses on green policies and sustainability promotion among citizens, people prefer to purchase eco-friendly products. In addition, companies may indicate if customers choose to buy locally manufactured or foreign products in accordance with import and export policies and tariffs.
Cultural and Social Factors
Cultural and social factors have a strong influence on the marketing decisions of companies. For example, it is imperative to understand cultural preferences, traditions, and religious beliefs in order to promote products and services through appropriate advertising and promotion. Moreover, cultural and social factors influence the propensity of potential buyers to take risks and the willingness to experiment when purchasing new products. A community’s religious beliefs can help marketers develop marketing campaigns and adapt marketing materials to fit a particular culture.
Businesses should consider sociocultural factors that influence target customers to achieve success when entering a new market. Johnston (n.d.) acknowledges that ethnicity, education, language, income, lifestyle, age, and culture are fundamental aspects to investigate. Hence, various ethnic groups demonstrate unique values and preferences that influence marketing decisions. The target country’s language should be used for the marketing message to reach the potential customers (Johnston, n.d.).
Nugroho and Irena (2017) acknowledge that cultural and social influences have a remarkable impact on consumer purchasing behavior. Cultural factors consist of values, norms, attitudes that formulate human behavior and pass from generation to generation (Nugroho & Irena, 2017). Therefore, cultural factors influence customers’ habits and set attitudes towards various characteristics of products and services.
Essentially, Hofstede’s cultural dimensions may assist marketers in recognizing the consumers’ behavioral motifs. According to Hofstede Insights (n.d.), six crucial dimensions affect customers’ needs and preferences: power distance, individualism versus collectivism, masculinity versus femininity, uncertainty avoidance, long-term versus short-term orientation, and indulgence versus restraint. For instance, the uncertainty avoidance index formulates customers’ behaviors relating to their level of innovations tolerance. In some cultures, people feel uncomfortable with foreign products and afraid of uncertainty, whereas, in other cultures, customers are more open-minded and readier to take risks. The indulgence versus restraint index demonstrates the social dependency on strict norms and traditions.
Additionally, the social aspect illustrates the influential factors within society. Davis (2021) states that customers’ attitudes, interests, and opinions are heavily influenced by their social background, which includes family, friends, colleagues, and the media. Significantly, the growth of sales and revenue depends on consumers’ perception of the product or service. Thus, marketers should analyze the cultural and social factors before entering a new market to reach the target audience and win their trust.
A great example of marketing strategy development based on cultural habits is McDonald entering Saudi Arabia. More (2020) asserts that the strict religious beliefs of customers affect brand promotion and advertising strategies. For instance, during Ramadan, which is a holy month for Muslims, brands are not allowed to advertise food. Nevertheless, Mcdonalds’ found an excellent solution by creating the Iftar Sand Clock, namely a virtual hourglass, which counts the time of the fasting period (More, 2020). Moreover, the sand clocks are made in the shape of “a Big Mac, a McFlurry, and fries” (Moore, 2020, para. 2). Therefore, this clever marketing idea and cultural understanding enhanced sales growth and promoted the brand.
Conclusion
Notably, the macro environment forces include demographics, economic, natural, technological, political, cultural, and social factors crucial to consider when developing marketing strategies and planning. In addition, these critical factors influence consumer behavior and business buyer behavior models by formulating customers’ preferences, perceptions, and needs. In order to develop the right marketing strategy and increase the value of their offerings to potential buyers, companies need to analyze all external factors that can affect the development of their business in the selected market.
For instance, based on demographic factors, a company can segment the market and select the target audience that will be most interested in purchasing brand offerings. Economic, political, and natural factors are essential tools in assessing the market situation regarding economic development, political stability, and consumer attitudes towards various environmental initiatives and societal trends. Ultimately, cultural and social factors are vital to promoting products and services based on the unique characteristics of the target market’s culture and their social dimensions. To summarize, macroeconomic forces analysis is an integral part of marketing and management principles.
Reference List
Ahmed, A. (2019) Economic factors affecting marketing. Small Business. Web.
BBC. (n.d.) External factors. BBC. Web.
Davis, B. (2021) What are the social and cultural factors that affect the business? MVOrganizing. Web.
Decker, F. (2019) Natural environment factors that affect business. Small Business. Web.
Forbes. (2020) A decade of connectivity transformed consumer behavior. Here’s how 5G could spark the evolution. Forbes. Web.
Foroudi, P., Gupta, S., Sivarajah, U. and Broderick, A. (2018) ‘Investigating the effects of smart technology on customer dynamics and customer experience’. Computers in Human Behavior, 80, pp. 271-282. Web.
Freedman, M. (2020). What are demographics in marketing?. Business News Daily. Web.
Hofstede Insights. (n.d.). National culture. Hofstede Insights. Web.
Johnston, K. (n.d.). Sociocultural factors that affect marketing. Small Business. Web.
Market Business News. (n.d.) What is the economic environment? Definition and examples. Market Business News. Web.
More, S. (2020) In a clever move McDonald’s created a live hourglass In Saudi Arabia for Ramadan. Mad Over Marketing. Web.
Nugroho, A.R. and Irena, A. (2017) ‘The impact of marketing mix, consumer’s characteristics, and psychological factors to consumer’s purchase intention on brand “w” in surabaya’. Ibuss management, 5(1), pp. 55-69. Web.
Oxford College of Marketing. (n.d.) The impact of micro and macro environment factors on marketing. Oxford College of Marketing. Web.
Pathak, R. (2021) What is PESTEL analysis? Everything you need to know about it. Analytic Steps. Web.
Rai, B. (2019) ‘The effect of demographic factors on consumer purchase intention in buying television set in Kathmandu Valley: An empirical study’. Silver Jubilee Issue PRAVAHA, 25 (1), pp. 23-32. Web.
Thibodeaux, W. (2019) Advantages & disadvantages of a demographic environment. Small Business. Web.
Tighe, D. (2020). Impacts of sustainability on buying decisions in Nordics 2018. Statista. Web.