PEST Analysis in Marketing Definition and Understanding

In Business, marketing activities are greatly influenced by internal and external factors. The internal factors are controllable while the external factors are uncontrollable. Businesses must assess and respond to external environment factors to minimize the risk associated with these factors. When these internal and external factors are combined are known as marketing environment. Pest Analysis in Marketing is a tool that scan external environment changes that affect business operations.

What is Marketing Environment?

Definition. Marketing Environment consists both internal and external factors that affect the management ability to reach target customers and build successful relationships.

Internal environment consists all those factors within the organization that influence the business activities. For example, Employees, Company Culture, Money, Machinery.

External Environment consist both macro environment and macro environment

  1. Micro environment consists all those factors close to the marketing environment and influences its operation and activities. For example, employees, competitors, partners, customers, public etc.
  2. Macro environment consists 6 factors i.e. political, economic, social, technical, legal and environment also known as PESTLE factors. These are external factors and affect every business in the industry on broader view. If not responded, can badly influence the business.

What is PEST Analysis in Marketing

Definition. PEST is the acronym of four letter each denotes different category into which you can place many of the key external issues facing by a business. In PEST Analysis P stand for Political, E Stand for Economic environment, S stand for Social, T stands for Technological factors help to understand market trends.

PEST Analysis in marketing is a framework to assess external environment in which business is operating. Marketers use this tool to understand opportunities and threats in the environment when starting a new project or launching products and services. It also measures the expected constraints on a marketing strategy.

In any business, marketing department is an integral part of its products and services. It a strategy is developed and implemented successfully, a business can attain their desired targets, goals and objectives. Companies around the world conduct environmental analysis to assess the business environment that affects the whole industry.

Understanding PEST Factors

Without conducting proper research, it will be difficult for marketers to run successful marketing campaigns. Deep digging and understanding market trends are possible when implement and use PEST analysis tool effectively.

Political Factors

The political factors work as government agent to control business environment. Both the favorable and unfavorable political conditions may affect the marketing campaigns and overall business operation. Government laws also control competition in the industry, it might encourage and give incentive to new business and cut down incentives to regular business.

Political factors can extremely impact the nature of business environment by making laws and regulation by government.

Economic Factors

Economic factors refer to market and trade cycles, currency fluctuations, taxation, specific industry changes etc. When developing a marketing strategy, marketers must consider the role of economic factors and consumer spending. Business owners and marketers must know economic factors that affect consumer buying power.

For example, take a local economic factor, i.e., new taxes on food businesses and restaurants that affect the eating habits of consumers. A tax rate on restaurants and food businesses by local government can decline the revenue generation. The same type of tax can be benefited to grocery stores by developing a strategy that encourages people to cook at home.

Now, it will be clear that economy has influence on marketing both negatively and positively. Similarly, marketers can also be affected positively and negatively by strong and weak economy.

Social Factors

Social factors securitize the social environment of the market. These factors include demographic characteristics of the population, values, culture, lifestyle. Cultural aspects also include political, social organizations, aesthetics, education, laws, reference groups and family.

Mostly, these factors are linked but each has a different effect on the consumer buying behavior. Socio-cultural factors have a great influence to develop and implement a successful marketing strategy of a company.

For example, nowadays, woman has a decision-making role in shopping and an integral part of marketing campaigns. A small business owner can develop a successful campaign, adopting focused advertising strategy by targeting women, moms, leaders and interest groups who has great influence in community.

Technological Factors

The technological factors are related to all the different ways that businesses can provide value to their customers by using technology. Business owners and marketers should consider technological changes and must adopt these changes to provide value to customers. Basically, the main focus of businesses is looking for ways to differentiate themselves from competitors.

For example, Netflix provides DVD by mail, video on demand and streaming media. Netflix is able to use technology in terms of logistics by introducing streaming media in 2013. Streaming was a shift in technology that time and was not around. Netflix invested heavily by adopting technology to stream their content to consumers. Netflix is spending almost $2 Billion on marketing in the year 2018.

Currently, there are various platforms in terms of technology like Facebook, Google Adwords, Instagram that can be used for advertising of products and services.

Conclusion

PEST Analysis in marketing framework let you assess internal and external factors to understand the business environment and develop a sound marketing strategy.

PEST factors provide you with a broader view of marketing environment for detailed planning that will enable you to take advantages of opportunities by minimizing the risk.

If the business owners and marketers want to develop strategic plans to meet organizational goals, they must perform PEST analysis. By doing this, they can also better understand market conditions and build successful marketing campaigns.

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