The Macro Environment is the larger context a business operates in. Therefore, the role of the macro environment in marketing is of immense importance. Consequently, it is absolutely critical for marketers to understand what the role of the macro environment in marketing is, why it is important, and how to work with it. In this article, we want to explore in a bit more detail why the macro environment is such a critical thing to understand and what you can do to best work with the environment your business operates in.
What is the Macro Environment?
Before taking a closer look at the importance of the macro environment in marketing, let’s review what the macro environment actually is.
The macro environment refers to the key external and uncontrolled elements that impact an organization’s decision making and effect its performance and strategy. This includes economic variables, demography, legal, political, and social influences, technological developments, and environmental factors.
The macro environment is generally made up of six distinct forces. Demographic, economic, political, ecological, socio-cultural, and technological influences are among them. This is simple to remember: The DESTEP model, also known as the DEPEST model, aids in remembering the key macro environmental variables.
Why is it so important for Marketing?
As indicated before, the macro environment is of great importance from a marketing perspective. However, the importance of the macro environment in marketing is often underestimated.
The primary reason for the key role of the macro environment in marketing is the fact that it is one of the primary influences on both the company’s ability to operate as well as on consumer demand.
First of all, the macro environment consists of all those forces that directly or indirectly influence an organization’s acquisition of inputs and its generation of outputs (Pride & Ferrell). This clearly has a strong impact on the way the business can operate. For instance, if political or legal forces forbid the company to sell its products, the company obviously has a major problem and cannot operate properly anymore.
Secondly, the macro environment shapes consumer demand. For instance, think about economic factors. If the economy is down, selling goods and services obviously may become much more difficult as consumer spending decreases. This of course also depends on the types of products in question.
As you can see, the macro environment is a critical concept to understand. A company should never enter a new geographical market before having completed a thorough analysis of the macro environment.
As a result, these factors should be a key influence when developing the marketing strategy. Read on to learn more.
How to work with the Macro Environment in Marketing
The macro environment is a key influence on how the company can operate and in which form it will find consumer demand.
Let’s consider the economic environment to give you an example.
Depending on the state of the economic environment, the company should:
- Develop the right products that meet consumer demand and are affordable to them. For instance, in an economic downturn, a car manufacturer may focus more on entry-level models.
- Price the products appropriately, using an adequate pricing strategy, and potentially apply discounts to attract consumer demand. For instance, if the economy is down, the company may want to introduce discount schemes to stimulate demand.
- Shape marketing messages in an optimal way that is most appealing to consumers. For instance, if the economy is booming, consumerism and the demand for luxury is usually booming as well. The company may want to focus on factors such as status symbols in the communication of product benefits.
Another example is the socio-cultural force. Companies often ignore or underestimate this force and tap into cultural blunders. Based on the specific culture you find in a region, you should reconsider your marketing strategy and check for any points that may lead to cultural blunders. However, you should also consider redesigning your products to meet consumer expectations, and especially adapt your marketing messages to appeal to the regional culture.
The same exercise can be done with all six forces in the macro environment.
Analyzing the Macro Environment to Design the Optimal Marketing Strategy
As you can see from the examples above, the macro environment shapes the marketplace and should therefore be the key guiding factor when developing a marketing strategy.
Therefore, when thinking about entering a market, consider each of the elements in the marketing strategy carefully (e.g., along the 7Ps of marketing).
However, analyzing the macro environment before entering a new market or region is not enough. As you can imagine, the macro environment is not constant but often subject to change. While some of the forces in the macro environment are changing rather slowly (e.g., the socio-cultural environment), others may change rapidly in some situations (e.g., political or legal forces when there is a change in government or government strategy).
Therefore, constantly monitoring the macro environment is of critical importance. Given the role of the macro environment in marketing, you should watch any developments closely and if necessary readjust your marketing strategy early. For instance, if there is a change in regulations visible, the company should consider adjustments to its product early. If there is an economic downturn, try to spot it early and consider developing entry-versions of its products and introducing discount schemes.
Whenever analyzing the macro environment, companies should follow the DESTEP or DEPEST model and investigate each force step by step. In addition to the individual forces, the company should also examine interdependencies between the six forces. Finally, next to analyzing the macro environment, further analyses should be conducted, for instance on the competitive intensity in the marketplace. For this, models such as Porter’s Five Forces or Porter’s Diamond can be helpful.
Learn more about Macro Environment Analysis – how to analyze the macro environment.
Closing Words
The macro environment plays a key role in marketing. It can be a key influence on the way the company can operate as well as on consumer demand. Therefore, before entering a new market or region, the company should carefully analyze the six forces in the macro environment and develop an optimal marketing strategy. Afterwards, any developments in the macro environment should be closely watched to readjust the marketing strategy when needed.
