Economic Factors Affecting Marketing
Marketing is a key component that determines the success of any business. It determines the brand image of your products in the market. This implies that marketing does not happen in a vacuum. Notably, the many economic factors affecting marketing may cut across all the operations of the company. When these factors come into play, an organization must adjust to get it right and remain ahead of other players in the industry. While entrepreneurs focus on meeting customer needs, they remain conscious of these prevailing factors, which may have direct impact on the performance of business. Tracking and accounting economic trends helps organizations in decision making. Let us look at some these factors in details.
Common economic factors affecting marketing in the world today
The first element that affects marketing is consumer confidence. As an economic indicator, it is a pointer to consumer optimism about economic performance in future. Consumers with higher confidence are more willing and likely to make a purchasing decision than those with low confidence. In other words, your business is likely to thrive when consumer confidence is high. When consumer confidence is high, this could present opportunities for new entrants in the market. In contrast, firms will cut costs during moments when consumer confidence is low in order to maintain profits. In terms of marketing, organizers invest more in marketing strategies like promotion when consumer confidence is high since customers are like to make a buying decision.
Besides consumer confidence, other economic factors affecting marketing revolve around people’s source of income and their ability to meet their needs. Therefore, employment rates will not only determine a company’s marketing approach but also the success of the business sector. Employment depends on economic performance. During economic boom, more job opportunities arise because companies need more workers to meet the rise in demand. This is also the best time to pump resources into marketing with the aim of winning potential consumers who have high purchasing power. On the other hand, when the economy plummets, unemployment rises and consumers lose the purchasing power. During this time, consumer spending will significantly go down because unemployed people lack excess income to spend on consumable goods and services. At this time, organizations also moderate their marketing efforts because of the low sales stemming from inability of potential consumers making a purchasing decision.
How interest rates affect Business Marketing
The business world also depends on interest rates since it determines conditions under which you can acquire credit from lenders. Interest rate is the money a lender charges a borrower. Several small businesses depend on banks and other financial institutions for loans, which serve as a source of business financing. When interest rates are high, companies with debts experience high cost of doing business. In addition, with high interest rates prevailing, consumer spending may go down since such rates discourage consumers from acquiring loans to buy goods like homes, cars, land, etc. in terms of marketing, companies make good from their efforts when rates are low since buyers have more power to purchase goods using credit.
Summary of Economic factors affecting marketing
Generally, the economic factors affecting marketing vary greatly depending on prevailing economic conditions. For example, what effects business in America is not what influences purchasing power in Europe. However, some of these factors transcend regional differences.
Another important factor that determines marketing in the business world is inflation. Inflation determines the rate at which commodity prices increase or fall. High inflation will result into high business expenses such as rent, utilities, and the cost of production materials. When the cost of doing business is high, companies increase the prices to maintain their profits and targets. Inflation reduces consumers’ purchasing power unless they get pay hikes. During such periods, marketing products yields limited results, as everyone is cautious about spending.
Importantly, marketing depends on promotion and advertising expenditure. A company could be willing to do extensive marketing but backs down because of prohibitive rates of advertisers. Similarly, during bad economic times, media outlets may have to lower their rates in order to attract clients. From this analysis, it is evident that economic factors affecting marketing are highly intertwined.
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