MARKETING MANAGEMENT - Marketing Environment
The Economic Environment - Marketing Environment
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Marketing’s economic environment consists of forces that influence consumer buying power and marketing strategies.
The
Economic Environment
Marketing’s economic environment consists of forces that influence consumer buying power and marketing strategies. They include the stage of the business cycle, inflation, unemployment, resource availability and income.
Historically, a nation’s economy tends to follow a cyclical pattern consisting of four stages: prosperity, recession, depression and recovery. Consumer buying differs in each stage of the business cycle and marketers must adjust their strategies accordingly.
1. In times of prosperity, consumer spending maintains a brisk pace. Marketers respond by expanding product lines, increasing promotional efforts and expanding distribution in order to raise market share and raising prices to widen their profit margins.
2. During recessions, consumers frequently shift their buying patterns to emphasize basic, functional products that carry low price tags. During such times, marketers should consider lowering prices, eliminating marginal products, improving customer service, and increasing promotional outlays to stimulate demand. Consumer spending sinks to its lowest during a depression.
3. In the recovery stage of the business cycle, the economy emerges from recession and consumer purchasing power increases. While consumers’ ability to buy increases, caution often restrains their willingness to buy. They may prefer to save than to spend or buy on credit. In this stage marketers can attract consumers by offering incentives like price –off, buy one and get another free, and so on.
Business cycles, like other aspects of the economy, are complex phenomena that seem to defy the control of marketers. Success depends on flexible plans that can be adjusted to satisfy consumer demands during the various business cycle stages.
Inflation devalues money by reducing the products it can buy through persistent price increases. It would restrict purchases less severely if income were to keep pace with rising prices, but often it does not. Inflation increases marketers’ costs such as expenditures for wages and raw materials and the resultant higher prices may therefore negatively affect sales. Inflation makes consumers conscious of prices, especially during periods of high inflation.
This influence can lead to three possible outcomes, all of them are important to marketers.
(1) Consumers can elect to buy now, in the belief that prices will rise later. Attractive offers by marketers will tempt them to buy. Marketers should design offers to like discounts, extra good or price vouchers for future purchase and so on.
(2) They can decide to alter their purchasing patterns- This results in switching from high price product to low price substitutes. This can be stopped by offering he product in small packages, gift schemes for buying a certain number of times, bonus or bumper prizes schemes etc.
(3) They can postpone certain purchases. Marketers can counter this by offering buy now and get one pack free, extra large packs at same price, gift vouchers to buy related products, combi packs ( two products offered together) and so on.
(iii) Unemployment Unemployment is defined as the proportion of people in the economy who do not have jobs and are actively looking for work. It rises during recessions and declines in the recovery and prosperity stages of the business cycle. Like inflation, unemployment affects marketing by modifying consumer behavior. Instead of buying, consumers may choose to build their savings. Marketers can attract the low income consumers by offering low priced products, small packs of high priced ones, discounts and installment schemes.
(iv) Income Income is another important determinant of marketing’s economic environment, because it influences consumer buying power. By studying income statistics and trends, marketers can estimate market potential and develop plans for targeting specific market segments. For marketers, a rise in income represents a potential for increasing overall sales. But they are most interested in the disposable income, which is the amount of money that people have to spend after they have paid for necessities. Consumers’ disposable income varies greatly by demographic variables such as age group and educational levels. High income groups look for high price- high quality products (Surf excel, Lux, Colgate Tartar) where as low income groups prefer (Nirma, Lifebuoy, Dabur dantamanjan). Accordingly marketers have to develop and offer products. For people with less disposable income ‘buy now pay later’ or ‘instlament schemes’, ‘save and buy schemes’ etc.
(v) Resources availability Resources are not unlimited. Brisk demand may bring in orders that exceed manufacturing capacity or outpace the response time required to gear up a production line. A shortage may also reflect a lack of raw materials, component parts, energy or labour. Regardless of the cause, shortages require marketers to reorient their thinking. One reaction is demarketing, the process of reducing consumer demand for a product to a level that the firm can reasonably supply. Demarketing is found in case of petroleum products in India.
Marketing’s economic environment consists of forces that influence consumer buying power and marketing strategies. They include the stage of the business cycle, inflation, unemployment, resource availability and income.
(i) Stage of business cycle:
Historically, a nation’s economy tends to follow a cyclical pattern consisting of four stages: prosperity, recession, depression and recovery. Consumer buying differs in each stage of the business cycle and marketers must adjust their strategies accordingly.
1. In times of prosperity, consumer spending maintains a brisk pace. Marketers respond by expanding product lines, increasing promotional efforts and expanding distribution in order to raise market share and raising prices to widen their profit margins.
2. During recessions, consumers frequently shift their buying patterns to emphasize basic, functional products that carry low price tags. During such times, marketers should consider lowering prices, eliminating marginal products, improving customer service, and increasing promotional outlays to stimulate demand. Consumer spending sinks to its lowest during a depression.
3. In the recovery stage of the business cycle, the economy emerges from recession and consumer purchasing power increases. While consumers’ ability to buy increases, caution often restrains their willingness to buy. They may prefer to save than to spend or buy on credit. In this stage marketers can attract consumers by offering incentives like price –off, buy one and get another free, and so on.
Business cycles, like other aspects of the economy, are complex phenomena that seem to defy the control of marketers. Success depends on flexible plans that can be adjusted to satisfy consumer demands during the various business cycle stages.
(ii) Inflation
Inflation devalues money by reducing the products it can buy through persistent price increases. It would restrict purchases less severely if income were to keep pace with rising prices, but often it does not. Inflation increases marketers’ costs such as expenditures for wages and raw materials and the resultant higher prices may therefore negatively affect sales. Inflation makes consumers conscious of prices, especially during periods of high inflation.
This influence can lead to three possible outcomes, all of them are important to marketers.
(1) Consumers can elect to buy now, in the belief that prices will rise later. Attractive offers by marketers will tempt them to buy. Marketers should design offers to like discounts, extra good or price vouchers for future purchase and so on.
(2) They can decide to alter their purchasing patterns- This results in switching from high price product to low price substitutes. This can be stopped by offering he product in small packages, gift schemes for buying a certain number of times, bonus or bumper prizes schemes etc.
(3) They can postpone certain purchases. Marketers can counter this by offering buy now and get one pack free, extra large packs at same price, gift vouchers to buy related products, combi packs ( two products offered together) and so on.
(iii) Unemployment Unemployment is defined as the proportion of people in the economy who do not have jobs and are actively looking for work. It rises during recessions and declines in the recovery and prosperity stages of the business cycle. Like inflation, unemployment affects marketing by modifying consumer behavior. Instead of buying, consumers may choose to build their savings. Marketers can attract the low income consumers by offering low priced products, small packs of high priced ones, discounts and installment schemes.
(iv) Income Income is another important determinant of marketing’s economic environment, because it influences consumer buying power. By studying income statistics and trends, marketers can estimate market potential and develop plans for targeting specific market segments. For marketers, a rise in income represents a potential for increasing overall sales. But they are most interested in the disposable income, which is the amount of money that people have to spend after they have paid for necessities. Consumers’ disposable income varies greatly by demographic variables such as age group and educational levels. High income groups look for high price- high quality products (Surf excel, Lux, Colgate Tartar) where as low income groups prefer (Nirma, Lifebuoy, Dabur dantamanjan). Accordingly marketers have to develop and offer products. For people with less disposable income ‘buy now pay later’ or ‘instlament schemes’, ‘save and buy schemes’ etc.
(v) Resources availability Resources are not unlimited. Brisk demand may bring in orders that exceed manufacturing capacity or outpace the response time required to gear up a production line. A shortage may also reflect a lack of raw materials, component parts, energy or labour. Regardless of the cause, shortages require marketers to reorient their thinking. One reaction is demarketing, the process of reducing consumer demand for a product to a level that the firm can reasonably supply. Demarketing is found in case of petroleum products in India.
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