Marketing Basics 4:
Conducting an Environmental Scan of Your Target Market

In order to act effectively, know where you are and what you want to do.

[April 24, 2006]

This series of articles is being written by the graduate students of Prof. Guy Decatrel in his class, MKT602: Marketing Management, at National University's Fresno campus. The students are: Jessica Bueno, Daniel Champion, Sara Chism, Lupe Garcia, Gill Gurshakti, Robert Kosanouvong, Arman Kyurinyan, Pa Lee, LaKishia McCreary, Victor Ramayrat. Additional ISP-specific information is supplied by telecom consultant Peter Radizeski.

Once a target market has been established, environmental scanning is a tool that can help determine a company's strategies. Environmental scanning consists of analyzing a variety of external dynamics. It is a search for information about relevant external forces to see how these may affect a business. These include economic, demographic, political-legislative, social and cultural, competitive dynamics, and technology affecting the business market. Detailed, these may look like the following points:

1) Economic:

1. Prosperity, recession, or recovery?
2. Inflation dynamics
3. Interest rate trends
4. Unemployment

2) Demographic:

1. Refers to the changing nature of the target market population
2. What are some current trends?
3. What are the implications of these changes?
4. Is there a changing ethnic mix?
5. Have buying habits and needs changed?

3) Political / Legislative

1. Government relationships with large players
2. Policies set by government agencies
3. General fiscal/monetary policies

4) Social and Cultural:

1. Lifestyles and values
2. Attitudes and emphasis on service quality and value
3. Demand for new services and conveniences such as filtering or spam / virus control

5) Competitive:

1. Direct competitors
2. All services competing for the same market

6) Technological:

1. New forms of competition, like power companies?
2. Impacts how people use their time
3. Convenience and transparency

A thorough analysis, such as that provided by an environmental scan, helps a company identify opportunities and/or challenges that may arise from changes in its external environment. This investigation gives a business time to react to change or to new findings, and to create strategies that will allow it to compete successfully.An environmental scan can supply relevant information to support decisions about service, pricing, competitive, and promotions strategy.

Not only is it important to determine customers' wants and needs, it is important to understand how needs change, how technology is changing wants and needs, and how legislation affects competitive activity. For instance, the FCC and Supreme Court rulings in 2005 drastically changed the landscape (and opportunities) for both CLECs and ISPs.

It is, similarly, important to have information about the demographic makeup of your market to know what services to emphasize, how to price them, as well as the most effective promotional means. Doing so will likely result in designing services that will satisfy customers.

Additionally, knowing about competitive activity can enable you to differentiate your services and provide an understanding of how to position your business in the market. This is a key component that ISPs need understand and utilize. One of the goals of this effort is to ensure that customers view your business in a positive light and understand what you can deliver. If it is aware of how competitors are promoting their services, an ISP may exploit competitors' strengths and weaknesses as well as opportunities and threats.

Perception is reality
A customer's mind can only maintain one perception for your company. You do not want the perception that you are projecting to be in combat with another perspective. Considering all of these factors, knowing in advance, and doing the proper planning and implementation, can provide opportunities to position and brand your business and be the first company in your customers' minds when it comes to ISP services.

Some examples:

• Hertz owns the rental car market, but Avis has made its name by being number two and trying harder.
• California, Florida, and Texas have large Hispanic populations. This opens the possibility of a niche market for local ISPs.
• People think of Bell as the Phone Company. People may perceive you as the Internet Company.

Don't shut down your radar
An environmental scan (ES) alerts an ISP, at the start, to the types of information that could have relevance for planning purposes. Additionally, the ES structure clarifies how a trend could relate to the business, thus informing it about potential implications. Its benefits can include:Understanding market opportunities and threats

• Ability to satisfy current or potential customer wants and needs
• Sales improvement
• Provides a causal map and factors affecting business
• Informed decision making

Environmental scanning is necessary, valuable, and involved. Scanning should be an ongoing and permanent process. Understanding the relationships of the dynamics identified provides a broad view of the business environment. It makes it possible for companies to focus on realistic and effective competitive strategies that win market share and grow their businesses.

—End