The amount of income someone earns will influence how much they spend. If consumer incomes increase, general spending is also likely to increase. An increase in spending will help businesses expand, lower unemployment and improve the economy. However, if consumer incomes fall, spending is likely to decrease. This means that businesses will not perform as well, unemployment will rise and the economy will be less stable. The interest rate represents the cost of borrowing money or the amount a saver receives in interest.
Usually stated as a percentage, the rate reflects how much is earned or paid in interest. Changes in interest rates affect both savers and borrowers. A tax is a financial charge made by a government on individuals, consumers and businesses. While ethics deal with the relationship between buyer and seller, there are also instances when the activities of marketing influence society as a whole. For example, when you purchase a new refrigerator, there is a need to discard your old refrigerator.
If thrown in a trash dump, the old refrigerator may pose a safety risk, contaminate the soil, and contaminate the aesthetics of the countryside.
Society is thus required to bear part of the cost of your purchase. Marketers must understand the different demographic groupings that exist and the demographic changes that are constantly occurring. Identify common demographic traits used by marketers and demographic changes in the current marketplace.
Demographics describe the observable characteristics of individuals living in the culture. Demographics include our physical traits, such as gender, race, age, and height; our economic traits, such as income, savings, and net worth; our occupation-related traits, including education; our location-related traits; and our family-related traits, such as marital status and number and age of children.
It is important that marketers understand the demographic segment that they are focusing on. One differentiation is by generation—two of the biggest demographic groups are the baby boomers and generation X.
These historically have been of great importance and focus to marketers. More recently, generations Y and Z have emerged, and marketers must ensure they understand how to target them most effectively. One challenge with the younger generations is that many of them are yet to understand their own tastes and desires. There is no average family, no ordinary worker, no everyday wage and no traditional middle class.
Still, marketing managers must understand consumers intimately. As we see next, some trends are old, others are new. For instance, the aging of the population has been going on for several decades, but births and birth rates in recent years have been much higher than expected.
Immigration is also greater than predicted, and so is the backlash against it. In the US, interstate migration to the south and west are old trends. What is new is heavier movement in the US from the northeast rather than from the midwest and rapid growth in the mountain states. Higher Education : The level of education in society is a demographic that impacts producers and consumers.
Marketers must be able to anticipate and adapt to future trends and technological advancements in order to stay ahead of the competition. The micro environment refers to the forces that are close to the company and affect its ability to serve its customers. It includes the company itself, its suppliers, marketing intermediaries, customer markets, competitors, and publics. The technological environment is perhaps one of the fastest changing factors in the macro environment.
This includes technological developments in areas ranging from antibiotics and medicine, to nuclear and chemical weaponry, and credit cards. The corporate aspect of the micro environment refers to the internal environment of a company. This includes all departments, such as management, finance, research and development, purchasing, operations, and accounting.
Each of these departments has an impact on marketing decisions. For example, research and development have input as to the features a product can perform. Accounting approves the financial side of marketing plans and budgets. The suppliers of a company are also an important aspect of the micro environment. For instance, delivering supplies late can result in customer dissatisfaction. Marketing managers must watch supply availability and other trends involving with suppliers to ensure that product will be delivered to customers within the time frame required to maintain a strong customer relationship.
As industries such as pharmaceuticals and national defense expand, they create new markets and new uses for products. Such advances require companies to compete effectively, stay abreast of the latest trends, and update their product technologies as they become outdated. Technology is the knowledge of how to accomplish tasks and goals. Technology affects marketers in several ways.
First, aggressively advancing technology is spawning new products and processes at an accelerating rate that threatens almost every existing product. Second, competition continues to intensify between old and new organizations as many substitute technologies compete with established products. Third, product innovations that result in superior performance or cost advantages are the best means for protecting and building market position without sacrificing profit margins. History provides many examples of companies that have lost their competitive advantage because a competitor came into the market with a product that had superior cost advantage or performance characteristics.
These examples are not limited to small or weak companies. Hybrid cars have become increasingly popular. There are thousands of forecasters who claim to be able to predict or at least determine the direction of future markets.
One that has an excellent track record is Roper Starch, a research firm that has been looking at trends for over 50 years. The Roper Report identified four concepts that may help marketers understand Americans in the next decades:. Privacy Policy.
Skip to main content. The Marketing Environment. Search for:. External Factors. General Economic Conditions Marketers must be aware of the business cycle, and react appropriately according to which stage of the cycle the economy is in. Key Takeaways Key Points There are four phases of the business cycle: prosperity, recession, depression, and recovery. During recession and depression, the economy is on a downward tilt.
Consumers are spending less and saving more, making the job of marketers more difficult and more risky. During recovery and prosperity, consumers are spending once more. However, the job of marketers remains challenging. Marketers must be aware of what stage of the business cycle the economy is in. This is very difficult to predict, but research and awareness can lead to calculated risks. Key Terms business cycle : A long-term fluctuation in economic activity between growth and recession depression : A period of major economic contraction; officially, four consecutive quarters of negative, real GDP growth according to NBER.
Learning Objectives Illustrate the relationship between consumer purchasing power, pricing and the economy. A CPI can be used to index the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values.
Key Terms purchasing power : The amount of goods and services that can be bought with a unit of currency or by consumers. Political Environment Companies doing business outside of the US should be aware that the political environment can differ greatly. This compensation may impact how and where listings appear.
Investopedia does not include all offers available in the marketplace. Related Terms Economic Recovery Definition An economic recovery is a business cycle stage following a recession that is characterized by a sustained period of improving business activity.
The Conference Board CB The Conference Board CB is a not-for-profit research organization which distributes vital economic information to its peer-to-peer business members. What Is a Macro Environment? Goldilocks Economy Definition A Goldilocks economy has steady economic growth, preventing a recession, but not so much growth that inflation rises by too much. Economics Economics is a branch of social science focused on the production, distribution, and consumption of goods and services.
Partner Links. Related Articles. Macroeconomics Employment Report. Macroeconomics U-3 vs. U-6 Unemployment Rate: What's the Difference? Macroeconomics Economic Indicators for Canada. Economics Is Economics a Science? Investopedia is part of the Dotdash publishing family. For more discussion of the link between entrepreneurial activity, small businesses, and innovation, see Baumol Note that the analysis here is not derived from simulating a macroeconomic model, and, as such, should be taken as broadly illustrative, ballpark estimates of the impact on GDP.
Also, the analysis here is of a temporary surge in spending or tax reduction, while the estimates provided in the CEA analysis are for a permanent increase. We assume that the temporary increase is equivalent to a permanent increase followed by later permanent decreases.
To the extent that expectations drive the final results in the macro models surveyed by the CEA report, our estimates will differ from the estimates derived from any individual model. For illustrative purposes, federal interest payments are here assumed to remain at current levels as a percent of debt over the year horizon.
This assumption is relaxed in the analysis below to incorporate higher interest costs as interest rates are expected to increase from current levels, consistent with CBO estimates. The interest costs mapped here assume the one-time spending increase permanently adds to the national debt, and include the impact of higher revenues. The data used here are a quarterly smoothing of the annual data provided by the CBO. Acemoglu, Daron and Joshua Angrist. How large are human capital externalities?
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