1.3 Factors Comprising and Affecting the Marketing Environment

Components of the Internal Environment

The internal environment in marketing refers to those elements within the organization that define the atmosphere within the company’s structure. These factors include what’s known as the 5Ms of marketing and organizational culture.

The 5Ms of marketing (sometimes also called the 5M framework) is a marketing/management model that defines the elements of a marketing strategy that must be addressed in order to be successful. The five elements (sometimes known as the organization’s assets) include minds, minutes, machinery, materials, and money.¹⁹ Let’s take a closer look at each of these factors:

• Minds (Staffing): This “M” might well be considered the most important factor because it’s people who make sure the rest of the 5Ms are utilized in a productive manner to achieve the goals of the organization.²⁰
• Minutes (Time): Time is another valuable asset. We’ve all heard the saying that time is money, and this is true within the marketing arena. For example, in formulating and implementing a new strategy, marketing needs to assess factors such as whether existing production processes are as efficient and effective as they can be, the length of time it takes the organization to introduce a new product to the market, and how responsive the organization is to competitive pressures.²¹
• Machinery (Equipment): Machinery consists of the equipment and/or physical assets used to process materials into finished or semifinished products.
• Materials (Production): Materials consist of the inputs needed to produce goods and services.
• Money (Finance): Perhaps second only to staffing, money is a very critical resource because it’s used to acquire and/or hire other resources.

Organizational culture is comprised of the shared values, attitudes, expectations, norms, and practices that guide the actions of all within the company. Think about organizational culture as “the way we do things around here,” and the culture can help or hinder an organization. For example, a good culture embodies positive traits that lead to improved performance and profit. On the other hand, a dysfunctional culture that’s toxic and/or inefficient can hinder even the most successful organization.²²

For an example of a positive organizational culture, consider Zappos, where happiness is at the core. Founder Tony Hsieh wrote a book on the topic and has said, “We’re willing to give up short-term profits or revenue growth to make sure we have the best culture.”²³ Hsieh was not afraid to put his money where his mouth was, either. In support of maintaining an outstanding company culture and a productive workforce, he instituted a policy that would pay new, unhappy employees $2,000 to quit following their four-week training period.²⁴

By contrast, consider what a dysfunctional culture can do to an organization. During the summer of 2020, The Ellen DeGeneres Show was called out for having a toxic work environment. Eleven employees spoke out publicly about the negative organizational culture. There were allegations of sexual misconduct, intimidation, and racism.²⁵ Ratings faltered as a result of the allegations, and DeGeneres ultimately decided to end her daytime talk show.

But how does organizational culture impact marketing? Here are three very tangible ways that your company’s culture can make a positive impact on marketing:

• Branding and marketing efforts emanate from the organization’s core values and culture and guide the organization’s marketing message. Therefore, if your marketing message doesn’t match the reality of the business, it’s akin to that old adage of “putting lipstick on a pig.”²⁶ You’re talking the talk but not walking the walk.
• A strong culture strengthens your marketing message because it gives prospective customers a better idea of the values of your business, and customers who know what you believe and value are much more likely to do business with you. For example, research has demonstrated that 86 percent of buyers are willing to pay more for a positive customer service experience.²⁷ Once again, think about the culture at Zappos. One of the ways in which the company has developed a strong following of loyal customers is through its policy that call-center employees are empowered to do “whatever it takes” to make the customer happy. Call-center employees don’t use scripts for calls, and there are literally no time limits on calls.²⁸
• A strong organizational culture is also key in attracting and retaining employees. In his quest for a happier, more positive work environment, Hsieh implemented several policies at Zappos that he felt contributed to this environment, including a relaxed dress code, discounted food and drink, relaxation areas, and more.²⁹ TOMS (featured in Companies with a Conscience later in this chapter) is another excellent example of this.

Components of the External Environment

There are two elements within the external marketing environment: the microenvironment and the macroenvironment. Although the factors within these environments are not directly within the marketer’s control, they still influence the decisions made by marketers. We’ll first examine the factors in the microenvironment, as shown in Figure 1.7.

Figure 1.7 Components of the Microenvironment (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

The microenvironment consists of five predominant factors.

• Suppliers. Suppliers (sometimes also called vendors) are those partners from whom we receive the parts and products necessary for our business. Let’s assume that your company produces microwave ovens. Some of your suppliers may be providers of transformers, the turntable, control panels, magnetrons, etc. As long as you have options in terms of the component suppliers, the bargaining power of each supplier is relatively weak. However, if two suppliers merge and decide to raise the price of the component the new entity supplies, that vendor now wields increased power.
• Market Intermediaries. Often, products are distributed by third-party sellers such as retailers, wholesalers, and others in the distribution channel. The reputation of these market intermediaries plays an important role in the marketing of the product or service, both positive and negative, so companies need to select and monitor market intermediaries on an ongoing basis. We’ll learn more about the roles of these intermediaries in Distribution: Delivering Customer Value, but let’s provide a couple of definitions and examples to help you better understand some of the parties in the distribution channel. Retailers (like Walmart or Target) purchase large quantities of goods from producers and then sell smaller quantities to end customers for personal use or consumption. Wholesalers purchase large quantities of products from producers and then sell to smaller businesses such as retail stores. A good example of a wholesaler is Gexpro, which sells electrical supplies for the construction industry.
• Customers. Understanding who your customers are will enable you to effectively reach them, whether online, locally in retail stores, or internationally.
• Competitors. Successful marketing strategies must be implemented after consideration of your competition. Knowing who your competition is and what they are and are not offering allows you to find the gap in the market. You want to be where the competition is not, at least in the sense of offering something unique to a targeted market.
• General Public. Because companies provide their offerings in communities that support them, they have an obligation to satisfy those communities. There’s an old saying that “perception is reality,” so marketers’ actions must be evaluated through the perceptual lens of those communities, because the public’s perception of you—your reputation—is essential to your success.³⁰