Understand the components of your marketing micro-environment

  

Date Posted: 11/9/2012 4:06:41 AM

Posted By: sashoo  Membership Level: Silver  Total Points: 382

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The micro-environment consists of the actors in the firm’s immediate environment that affect its capability to operate effectively in its chosen markets. Those actors include customers, competitors, distributors and suppliers.

Customers

Customers are at the center of the marketing philosophy and effort, and it is the task of marketing management to satisfy their needs and expectations better than the competition. The starting point is an understanding of them—the techniques for gathering and analyzing customer and other marketing information, and how to group consumers to form market segments that can be targeted with specific marketing mix offerings.

Changing customer tastes, lifestyles, motivations and expectations need to be monitored so that companies supply the appropriate targeted marketing mix strategies that meet their needs. Marketers should also seek out the latest customer needs that currently have not been met. The discovery of these can result in lucrative un-served markets in which first-mover advantage can be a vital asset, as demonstrated by 3M’s Post-it brand.

Competition

Competitors have a major bearing on the performance of companies. For example, when competitors price-cut, the attractiveness of the market can fall and their ability to innovate can ruin once highly profitable brands, as was the case when the Apple iPod superseded the Sony Walkman in the portable music business. Marketing history is littered with brands that were once successful (e.g Olivetti typewriters, Amstrad computers and Lotus software) but are now defunct because rivals developed and marketed better alternatives. No longer is it sufficient to meet customer needs and expectations—success is dependent on doing it better than the competition.

Marketing-oriented companies not only monitor and seek to understand customers but also research competitors and their brands to understand their strengths, weaknesses, strategies and response patterns.

Distributors

Some companies, such as those providing services, dispense with the use of distributors. Preferring to deal directly with end-user customers.

The others use the services of distributors such as wholesalers and retailers to supply end users. These channel intermediaries perform many valuable services, including breaking bulk, making products available to customers where and when they want them, and providing specialist services such as maintenance and installation.

Distributors can reduce the profitability of suppliers by putting pressure on profit margins. For example, large retailers such as Wal-Mart and Tesco have enormous buying power and can demand low prices from their suppliers, a fact that has been criticized in the media when applied to small farmers.

Distribution trends need to be monitored. For example, the trend towards downloading music has hit traditional music outlets that sell CDs, and the growth of the Internet-based sellers such as Amazon has impacted on traditional bricks-and-mortar booksellers. As the attractiveness of distribution channels changes, so suppliers must alter their strategies to keep in touch with customers.

Suppliers

The fortunes of companies are not only dependent on customers, competitors and distributors, they are also influenced by their suppliers. Increases in supply costs can push up prices, making other alternatives more attractive. For example, increases in the price of aluminium make plastic more attractive. Also, as with distributors, powerful suppliers can force up prices. The rise in the price of gas has been blamed on powerful European suppliers who, it is alleged, restricted supply in order to force prices higher.

Companies need to monitor supply availability, such as shortages due to labor strikes or political factors, as these can cause customer dissatisfaction and lost sales. They also need to be sensitive to alternative input materials that can be substituted for those of existing suppliers if the latter’s prices rise or availability diminishes significantly.

The importance of suppliers is reflected in discussion of their relationship with customers, which focuses on organizational buying behavior. Many customers are increasingly forming partnerships with selected suppliers in order to enhance value delivery.

All the elements of the micro-environment need to be monitored and assessed so that opportunities can be exploited and threats combated. This forms an essential ingredient in maintaining strategic fit between a company and its marketing environment.

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