Know about Marketing Environmental Analysis.

Everything -to- know- about- marketing- environmental-analysis

We are an ever-evolving species. Every evolution is a culmination of responses to adapt to changing environmental factors. We adapt as per the seasons, socio-political changes, technological advancements, and whatnot, to keep up with the changes. But nothing is as dynamic as a marketing environment. A famous trend today becomes obsolete tomorrow. So, why should our marketing strategies be any different? If anything, our marketing strategies must be flexible to changes, predictive in accounting for future trends, and fail-proof when things go south.

And this is where environmental analysis in marketing comes into the picture. With marketing environmental analysis, businesses can prepare better for the rise and fall of the market, chart out fail-proof marketing strategies, and align every aspect of a marketing campaign to the organization’s goals and vision. Marketing environmental analysis will help evolve your business, assist you in adapting your business model to changing scenarios and protect your investments from unforeseen changes. As the saying goes, it is survival of the fittest, and marketing environment analysis will certainly help you dominate this competitive ecosystem.

Marketing environmental analysis plays a vital role in the success of a business. This helps in identifying all the elements associated with the business and the roles each of these elements plays in the success of the business. Therefore, environmental analysis in marketing is not only imperative but mandatory for the long-term success of any business.

What is Marketing Environmental Analysis?

Environmental analysis in marketing is a strategic tool used by marketers and business developers to identify the internal & external, controllable and uncontrollable factors that influence the performance of the organization. Marketing environmental analysis includes all the factors outside marketing that affect the ability of a business to build and maintain successful relationships with the customers. By conducting a marketing environmental analysis, a business can identify strengths and opportunities and reduce weaknesses and threats.

Environmental analysis in marketing is usually a precursor to all marketing strategies. It is the findings via marketing environmental analysis that will be taken into consideration and function as guidelines to help create and optimize the best business strategy. By monitoring the factors that affect the marketing environment, marketers can predict changes, maximize opportunities, and optimize business strategies to fetch better and improved results.

What are the factors involved in Marketing Environmental Analysis?

There are two types of marketing environmental factors:

  1. Micro Environment                           2. Macro Environment

Micro-Environmental Factors: These refer to all factors that directly influence the marketing activities of a company. These are also known as the internal marketing environmental factors. Because these are internal factors, they are controllable factors. Factors that fall under this category are:

  • Customer: Before we prepare up for any business strategy or plan, the key consideration is the target audience, that is, the customers to whom we are catering. Ninety-nine times out of a hundred, the success of a product or a service depends on how we reach out to our audience. By analysing customer behavior, we can furnish tailor-made marketing campaigns.

A few of the questions we need to consider while analysing the customer are: Are we reaching out to the right audience? Are our customers happy? Do our products/services fulfil the needs of our customers? Are the customers loyal to us? Do they have a timely purchase schedule?

Factors to monitor:

  • Identifying the right target audience for the product/service.
  • Satisfying the needs of our customers.
  • Establishing the purchasing power of our target audience.
  • Keeping an eye out for their buying behavior. For example, what is the frequency of the purchase? Where do they conduct the transactions? (Could be online or from a local store)

Did you know Amazon’s personalization for better conveniences created a tell-tale example of customer-centric services?
Amazon enables users to put forward their recommendations. This simple yet powerful strategy enabled Amazon to drive up its sales by 35%. As per, this simple feature enabled over 86% of the customers to play a significant role in purchasing while 56% of shoppers returned to the site with personalized recommendations. How does it work? Amazon encourages the customers to put forward their recommendations based on their purchasing history, items in the cart, items viewed recently.

By publishing these recommendations, they can drive their sales to new heights. Here, Amazon is not only prioritizing the user experience but also using the same to bring in new customers. Just like word-of-mouth marketing, Amazon added the recommendation feature for the customer and by the customer.

  • Organization: Organization is an integral factor of an internal environment. It is the organization that defines the value system, establishes the missions & objectives, and specifies the organizational structure. It is also the organization that is responsible for setting up the work culture, hiring efficient and quality human resources, and managing the technological capabilities of the team. These factors determine how effective the business will be.
  • Supplier: Suppliers have a direct bearing on the marketing performance of a business. It is imperative for the success of any business to get access to the right raw materials with industry-standard quality. That too, at the right price. Suppliers are treated as partners to provide customer value and provide meaningful resources to produce the necessary goods and services. Any discrepancy in the suppliers results in the collapse of the entire supply chain. And in turn, the demise of the business.
  • Market: As a part of marketing environmental analysis, market study and research play a significant role in shaping the overall performance of the organization. There are countless types of markets available. For example, there is a consumer market, manufacturing market, intermediary market, and so on. Each market type has specific processes, and a good first-hand knowledge of the market will help curate perfect marketing campaigns.
  • Intermediaries: Intermediaries are your distributors that help sell & promote your products/services to the final buyer. As a result, they have a direct consequence on how your business is perceived by the audience. If the intermediaries do not push or recommend your product/service to the end-user, the entire marketing exercise goes down the drain.
    However, lately, businesses have started selling and promoting their products on their own. For example, Dell and Apple use their websites to sell and promote their new releases.
  • Competitors: Knowing what your competitor is up to is “Marketing 101”. Brands & businesses must gain extensive knowledge of what their competitors are offering, identify the opportunities and then capitalize on them with ground-breaking services. If your competitor has launched a new feature, you must deliver your coveted feature to stay relevant and avoid the risk of falling behind in the race.

“Cola-wars is the epitome of competitor analysis. The long-time rivalry between these two soft-drink companies fueled the best marketing campaigns and resulted in huge sales. From creative packaging of the bottles to slashing the prices, Cola-War between Coca-Cola and PepsiCo drove both the labels to new levels of fame & branding. And although, it may seem that Cola-Wars was an extreme form of consumerism, nevertheless, keeping an eye out on your competitors helps in brand-building.”

Macro-Environmental Factors: These refer to all the external factors that indirectly affect the performance of the company. Because these factors are external, as opposed to micro-environmental factors, macro-environmental factors are uncontrollable factors. Factors that lie out of the hands of an organization but affect the overall marketing performance. Macro-environmental factors are:

  • Demography: By studying the population and its distribution with regards to attributes like age, gender, education, occupation, birth & death rate can help you understand the audience and therefore assist you in curating marketing strategies complementing the demography.
  • Economic Environment: Understanding the economic background of your demography is vital. For example, while pricing your products, you must know the purchasing capacity of your target audience. Other factors like GDP, availability of credit, interest rates, inflation, income, savings, and rate of unemployment affect how your product/service performs. Take, for example, solar cells and energy. Because the cost of production, installation, and maintenance is extremely high, developing countries are finding it difficult to switch to this cleaner energy. And although there is a surplus when it comes to the production of solar cells in developed countries, developing countries are not yet able to afford them. Therefore, every marketing strategy should consider the economic environment of the organization and that of its target audience. Value marketing involves ways to offer financially cautious buyers, greater value by combining quality and service at a fair price.
  • Socio-Cultural Environment: These are intrinsic values embedded into our societies. Hence, our marketing strategy must prohibit cultural in-appropriation at all costs. The social values, ethics, traditions, beliefs, and even lifestyle of our consumers indirectly affect marketing performance. For example, if you are a chef and want to own a restaurant, you would have faced a stiffer and sterner challenge 40 years back as compared to today. Back then, going out to a restaurant was a major expense. But today, the F&B industry is booming like never before and it is a weekend norm to spend on a feast. Digital and online presence are yet another cultural shift that we experienced in the last two decades. And as a marketer, we should be responsive and observant to pounce and capitalize on these changes.
  • Natural Environment: More pertinent to manufacturing industries, the natural environment comprises the natural resources required as raw materials. Adherence to environmental safety, proper disposal of waste, disinfectant drives, and reducing carbon footprint are regulated and mandatory. Organizations, as a part of their Corporate Social Responsibility, take these initiatives to ensure all the protocols are in place.

The launch of Levi Strauss & Co. “use and reuse jeans” redefined how marketing campaigns run. Recycled jeans with a simple tagline: Clothing that is built to last, and style that endures. The campaign aimed to reduce carbon footprints by recycling and reusing jeans. In the press release that followed, Levi Strauss & Co. explained that over half of the garments made are annually buried and disposal is a major issue. This clothing line reiterates how can we extend the lifespan of the jeans: washing the jeans less often, repairing & reinforcing the jeans, or even donating the jeans people are no longer wearing instead of disposing of them randomly can go a long way to reduce the carbon footprint.

What is more? They are also cleaning the plastics from the ocean and reusing the plastics to make jeans. Such initiatives go a long way in building a brand image.

  • Technological Environment: One of the most dynamic factors is the technological environment. New and emerging technologies are coming up every second of every minute. Also, as individual customers, they too have migrated to smartphones and online shopping. Failing to track ongoing technological progress will make it extremely difficult for your business to survive, let alone thrive. Both in terms of hardware & software, gadgets, and tools, using the latest version is obligatory to keep up with the market.
  • Political & Legal Environment: Logistical, political, and legal environments place stringent protocols for businesses to follow. Breaching any of these might cause unwanted chaos and complications.


What are the primary features of Marketing Environmental Analysis?

Five key features shape and characterize the modern marketing environment:

  1. Specific & General Forces: While specific forces are your internal factors driving a specific plan of action for a specific result, general forces are your external factors that indirectly affect your process & performance.
  2. Complexity: It is the intricate interplay between the factors that influence your marketing strategies. Markets are getting progressively trickier by the day and require a detailed analysis to drive a higher ROI.
  3. Vibrancy: The marketing environment is dynamic and fast-paced. The outlines that define these environments are not stable and change over time. And while all the factors may not be within our control, comprehending the vibrancy of the market will surely give an edge to marketers.
  4. Uncertainty: Covid-19 has been a revelation and serves as an ideal example of how uncertain markets can get. It is with marketing environmental analysis that marketers gain powerful insights into future trends and prepare well in advance. Marketing environmental analysis will help to immune your business against any unforeseen changes and prepare you better for whatever comes next!
  5. Relativity: Any marketing strategy should be relevant to your target audience. Relativity gives you better sales, higher customer retention, and a better brand recall value.

Why should we conduct Marketing Environmental Analysis?

Because the marketing environments are dynamic and transient, it keeps developing every day and changes swiftly. By using this strategic analytical tool, you can gain a certain edge over your competitors, stay ahead of the curve and be a market leader. The objectives of any marketing environmental analysis are as follows:

  1. Become accustomed to the changes in the market.
  2. Acquire qualitative information and datasets to devise comparable strategies.
  3. Market Environmental Analysis develops market understanding. You can modify and improve your services/products based on the requirements of the market.
  4. Get acquainted with govt policies.
  5. This also helps in the efficient allocation of resources as per requirement.
  6. The key to any marketing environment analysis is to identify opportunities and reduce threats.

How to conduct Marketing Environmental Analysis?

So, now that you know the basics of marketing environmental analysis, the next question is: How do we do it?

The first step toward conducting a full-fledged marketing environmental analysis is to perform “Environmental Scanning.” Environmental scanning is the method of assembling information about events and their interactions within an organization’s internal & external environments.

Environmental scanning helps the management in determining the future direction of the organization and in the decision-making process. It is a continuous and dynamic process. As a part of environmental scanning, four essential attributes to track are:

  1. Events
  2. Trends
  3. Issues
  4. Expectations

Several techniques can be employed to conduct a thorough Marketing Environmental Analysis:

  1. SWOT Analysis
  2. PESTEL Technique
  3. ETOP Model of Analysis
  4. QUEST Model of Analysis

SWOT Analysis:

Strengths: These are the characteristics of a business that give it advantages over its competitors. We should Improve our strengths.
Weakness: These are the disadvantages of a business relative to its competitors. We should REMOVE our weaknesses.

Opportunity: Elements that allow the company to formulate and implement a strategy to increase profitability. We should IDENTIFY & GRAB our opportunities.

Threats: These are the factors that endanger business integrity and business profitability. We should REDUCE our threats.


PESTEL Technique:

In this technique, you analyze, research, and study each of these factors in detail to draw your marketing conclusion.

Political: Factors included are govt policy, political stability, corruption, foreign trade, tax policy, labor law, and trade restrictions.

Economic: Factors included are economic growth, exchange rates, interest rates, inflation rates, disposable income, and unemployment rates.

Social: Factors included are population growth rate, age distribution, career, safety emphasis, health consciousness, lifestyle, attitudes, and cultural barriers.

Technology: Factors included are technology innovation, tech incentives, automation, R&D activity, tech awareness, tech changes, and tech friendliness.

Environmental: Factors included are weather, climate change, environmental policies, pressure from NGOs, and sustainability programs.

Legal: Factors included are discrimination laws, antitrust laws, employment laws, consumer protection laws, copyright patent laws, health & safety laws, contract acts, etc.

ETOP Model of Analysis: ETOP analysis stands for Environment, Threat & Opportunity profile is the process by which organizations monitor their relevant environment to identify the opportunities & threats affecting their businesses to take strategic decisions. 

QUEST Model of Analysis: Pioneered by Burt Nanus & Selwyn Enzer in the early 1980s, QUEST stands for Quick Environmental Scanning Technique, a procedure designed to assist, execute, and plan changes side by side and its implication on organizational strategies.

Advantages of Marketing Environmental Analysis:

By studying the market environments, you can build and foster a fully customized environment for your business to grow and flourish. The marketing landscape is always changing. You might have new working members, changing client preferences and demands, or a not-so-distant Covid-19 pandemic that altered the working environment completely.

By keeping an eye on your marketing settings, your company may initiate marketing decisions before it is too late. Tracking your marketing environment has further advantages, such as:

  1. Identify Opportunities: Moment marketing is all based on grabbing timely opportunities. This form of marketing also helps in building a network with customers. Such strategies can only be implemented after a sound marketing environmental analysis.
  2. Reduce Threats: Cost leakages in the supply chain? Obsolete technology causing data redundancy? Reduce threats at the earliest before they take a toll on your business.
  3. Manage Changes: Because marketing environmental analysis is an everyday process, hence, keep optimizing your strategy, analyze the insights and modify your campaigns accordingly.

Challenges surrounding Marketing Environment Analysis:

Analysis of marketing environments is a rigorous task. It requires detailed research, extensive surveys, and years of experience. And despite your best practices, it can get arduous. It is only natural to hit roadblocks once you start your analysis. No matter how well you monitor, how accurately you predict the trends, or even use predictive tools to keep an eye out, some changes cannot be forecasted or controlled.

And because the environments are diverse, it may so happen that one technique or strategy does not apply to some environments as compared to others. The best way to get around these problems is to stay nimble, on your feet, flexible, and ready to change and optimize as called upon.

However, a marketing environmental analysis is bound to give you a few definite outlines to center your strategy around.

How to optimize your Marketing Environmental Analysis with Valasys Media?

Valasys Media enables businesses to classify, examine, and enhance their marketing environments in the following ways:

  • Offering a significant stage for communications & networking between teams.
  • Designing and sustaining efficient marketing workflows.
  • Analyzing the data and insight gathered from diverse sources to plan ramifications.
  • Painting a bigger picture for you to comprehend your business future with a sound strategy.

Are you in control of your business? Or is your business controlled by the marketing environment? Take control of your marketing environment today. Contact us for a free consultation and let us perform a detailed marketing environmental analysis for your business.  





Alok Chakraborty
Alok Chakraborty
With years of experience in the lifestyle, hospitality, and fashion industries, Alok has curated content for Forbes India, JW Marriott, Tech Mahindra, and the University of Berkeley. A die-hard Manchester United fan, an avid reader, and a crime-documentary binger, he merges his passion with his flair for writing. Alok pairs up his research with critical analysis.

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