As small business owners, we like to imagine ourselves immune to market forces. After all, we have the willpower to run the show. Why should we have to answer to anyone else? The truth, as always, is more complicated than that. We’re captains of ships in choppy waters, skilled and determined but at the mercy of our environments.
Mercifully, when it comes to small business marketing, the forces that act upon us are not like the ones faced by our distant ancestors. We don’t face great storms, famines, or the capricious whims of gods. We do, however, subject ourselves to several market forces when we go into business. It’s up to us to respond to these forces in sensible ways, adapting our marketing strategies around reality and not how wish reality was.
Below, I’ve outlined seven market forces that will affect the way you market your small business. We’ll talk about each one in depth in the paragraphs to come.
The Seven Market Forces
- Social Market Forces
- Demographic Market Forces
- Cultural Market Market Forces
- Economic Market Forces
- Technological Market Forces
- Political and Legal Market Forces
- Competitive Market Forces
What is a Market Force Anyway?
Let’s borrow the definition of market force from the Business Dictionary:
Forces of demand and supply representing the aggregate influence of self-interested buyers and sellers on price and quantity of the goods and services offered in a market. In general, excess demand causes prices and quantity of supply to rise, and excess supply causes them to fall.
Rolls right off the tongue. In laymen’s terms, a market force is something that tweaks supply or demand. Anytime supply or demand is tweaked, you need to be concerned about that as a small business marketer. One way to address changes in the market is to stick to the same basic message, but deliver it in a different way. Sometimes you need to change up your message, but keep selling the same products or services. Still other times, you need to sell something else entirely.
As I see it, there are seven major market forces that can change your life as a small business marketer. Let’s talk about them.
Social Market Forces
Ask any old-timer and they’ll tell you. “Times sure have changed.” They may be talking about technology developing at a prodigious rate. More likely, they are referring to the ways people and the ways we interact have changed. In the last eighty years in the USA alone, we’ve gone from World War II to mass interconnectedness. The world Baby Boomers grew up in is a lot different than the one Millenials like me grew up in. You can see that on a grand scale in generational attitudes!
If you want to sell stuff, you have to be able to read the room. Social market forces are all about our collective beliefs, attitudes, and experiences. You need to have a sense of how people are reacting to the world they live in. Turn on the radio, listen to podcasts, watch some TV & movies, and talk to people! You don’t want to be a couch potato, but you need to be able to see the trends happening. You need to understand that you are in the middle of history – not the beginning nor the end.
Examples of Social Market Forces
Here are a few examples that are hot right now, as I write this, in January 2019.
- Women are rising into more positions of power and their stories are being paid attention to more. In recent memory, we’ve had both the #MeToo movement and a record number of women elected to the US Congress.
- Many American workers are reporting that they have less free time. I also sense a budding discontent with smartphones and other connected devices, but I don’t have a supporting article…yet!
- Climate change fears are growing. Disasters like Hurricanes Irma and Maria, wildfires in California, heat waves in Western Europe, and droughts in the American Southwest have made people think twice about the climate. While this doesn’t appear to have changed people’s spending habits yet, it might in the near future if the mercury keeps rising!
Demographic Market Forces
Defining demographics is a big part of marketing. Demography helps us sort people by age, gender, nationality, religion, education, and ethnicity. Creating distinctions between different groups with different tastes can provide us with a useful framework for evaluating products or for testing our marketing strategies.
As the overall demography of your customer base or industry changes, you may need to try different techniques to engage them. I’ll use one of my favorite marketing case studies of all time to illustrate. Old Spice – up until 2010, an “old man’s brand” – engaged then-young Millenial audiences with advertising campaigns about the Old Spice Man. This was known as “The Man Your Man Could Smell Like” and it is a surrealistic masterpiece of an ad. It is genuinely hilarious. Old Spice was losing their market because they were aging. That campaign helped them reach out to a younger audience who would be keeping their armpits dry for decades to come.
Likewise, the nationality, gender, religion, education, and ethnicity of your demographic will change the way you communicate. Whether you’re trying to reach out to a target audience or keep existing customers engaged, keep in mind that much of consumer behavior is driven by communication. It’s not enough to make the right product for the right people. You need to speak to the right people in the right way, too. Understanding demographic forces helps a lot in that respect.
Cultural Market Forces
Social market forces and cultural market forces have a lot of overlap. Society is shaped by culture, and culture by society. However, when I refer to culture, I refer to globalization in the marketplace. If you’re a resident of the USA like me, you’re not just shopping from your fellow Americans. You’re also shopping from Europe, China, and other distant lands.
The way Americans experience life is different than the way Russians, Australians, Brits, Colombians, Zimbabweans, and the Chinese experience life. Our basic values, attitudes, and perceptions are different. In the US, we value democracy, freedom, working hard, and a uniquely American form of extroversion. In Japan, it’s a much more collectivist society, with everybody focusing on pitching in and doing their part, often leaving individualistic desires unexpressed. Neither of these ways of life are inherently good or bad. They’re just different, and marketers – crafters of messages – have to know about these ways of life so the messages can be well-received.
It’s not just about nationality, though. These market forces run deep into subcultures. Subcultures can be as large as religions or racial groups, but they can also be really granular, too. There is a subculture of people who are competitive yo-yoers. There is another subculture within that subculture of people who prefer a certain type of bearing in their yo-yos. Understanding how subcultures break down and interact is also very important to your small business.
Economic Market Forces
At the time that I’m writing this article, the DOW and S&P recently dropped by a lot. The S&P 500, in particular, fell by about 16%. I haven’t seen that since my teens. It wasn’t bad enough to raise unemployment rates, but the headlines sure were bleak. It freaked out a lot of people, including me when I looked at my 401(k) balance! Needless to say, changes to the stock market, unemployment rate, and income distribution can have dramatic impacts on business.
During lean times, customers may not be as eager to spend money on luxury products or services. The opposite is true during boom times. Not everything works on a grand global scale, though. Changes in local taxes or tariffs can change what you need to charge. You might be forced to market a more expensive product, or alternatively, fight off competitors who created a cheaper product!
Also worth remembering is that economic factors can affect entire generations. For example, the Millenial generation is the first one in a long time to be poorer than their parents. While you can argue different reasons for that, many attribute that to the Great Recession. When you see economic factors changing people’s basic values and attitudes, it ceases to be simply an economic factor. It ascends to being a social factor, and when the generation begins to hold elected office, a political factor.
Technological Market Forces
Augmented reality, 3D printing, smart homes, data mining, the blockchain, solar panels, artificial intelligence, and wireless power. These are just a few of the cutting-edge technologies that are either in the works or being researched at the time I am writing this article. The pace at which technology changes is very fast. Though cliche, it bears repeating because we have been experiencing a non-stop change in technology since the Industrial Revolution.
Technology giveth and technology taketh away. Many products and services that exist now would not have existed a few years ago. Marketers often have the challenge of teaching people how to use new products or services. They have to reach out to early adopters.
On the flip side, you have old technologies that are fighting obsolescence. For example, I bet the Uber CEO stays up at night wondering what he’s going to do when Elon Musk – or whoever – finally perfects the self-driving car. Will the company buy a self-driving fleet? Or will they have to exit the market or be acquired? The way technology develops often determines how markets move.
Technology isn’t all about computers and stuff that sounds like it came out of Star Trek. It’s also a way of thinking. Process improvements are also technology. Traditional cab drivers still exist, but Uber made the user experience better and pushed a lot of cab companies out of existence. Toyota wrecked the American automotive market share by merit of just-in-time manufacturing and savvy automation.
Political and Legal Market Forces
Who doesn’t love politics? Every law – federal, state, or local – was developed by a political body of some sort. The same is true for regulations. Some examples include discrimination laws, consumer laws, antitrust laws, employment laws, and health and safety laws.
Like it or not, you have to follow laws and regulations. Many of you are familiar with the labor laws you need to keep up with to make sure you’re paying people in the right way. You’re probably also familiar with basic tax and accounting laws. Naturally, you know that as a marketer you can’t outright lie or fabricate reviews. This is all very straightforward. Antitrust laws, on the other hand, probably seem awfully abstract. I’d like for you to consider two points.
The Odd Intersections of Marketing and Law
First, you probably have at least one big competitor. It could even be Amazon. The point is, somebody in your industry is probably big enough to get in serious legal trouble – far beyond what you can imagine a mom-and-pop shop getting into. They may have political clout and may be held accountable for things much bigger than you. Remember that when you’re reading into your bigger competitors’ market moves. The context is crucial!
Second, you’d be surprised how many regulations apply to your business. That’s why marketers need to research before they put together packaging and other public-facing materials! For example, I’ve made some board games. Turns out, if you put an age under 14+ on the box, you need to have product safety testing done. That costs a lot of money, but you need it to be compliant with EN 71 and ASTM F963 – child safety regulations for the European Union the United States. You also have to put required warnings on the box, and do so in a way that doesn’t look ugly for marketing purposes!
Competitive Market Forces
Last but not least, you can’t control what your competition does. Yet their actions have a large influence on you. The other forces above are very important, but this is probably the force you’ll research the most.
Your competition can affect you in a multitude of ways, to such an extent that it would be impossible to list them all here. I will provide a few examples here below:
Products and Services
The products your competition provides can change your strategy in a few profound ways. If they’re really similar to yours, it might be hard to differentiate yourself from them. Likewise, if their products are really unlike yours, the market as a whole might be moving in a different direction. The quality of the products provided affects you too. If the quality of your competitors’ products is bad, you’ve got a chance to do better. In the opposite scenario, you’ve got big shoes to fill and need to find another way to compete.
Pricing is also a big factor. People will compare your prices to others whether you’d like for them to or not. If you’re a small business competing against a larger one, it’s unlikely that you’ll be able to produce similar products for a lower price, so you’ll have to compete on something else. That’s where marketing and user experience become really important. In a crowded field with many competitors, you need to decide whether it’s most useful to price lower, higher, or roughly the same as your competition.
Entry and Exit Barriers & Overall Market Growth
If there are major barriers to entry, you won’t see much new competition. The pace of innovation is likely to be slow. Likewise, if there are major barriers to exit, some competitors will stay in the business longer than they ought to. In business, things often superficially look fine – because of marketing and public relations – right up until the moment they are not. It helps to be able to see past that.
Additionally, overall market growth changes the dynamics of competition too. If the market is growing quickly, there are a lot of new customers who don’t necessarily have a brand loyalty yet. Perhaps existing customers are spending more money! Either one can be a good thing if you play your cards right. On the flip side, sluggish market growth or even a market decline can lead to a long, drawn-out war for market share between companies.
New Entrants, Substitutes, and Complements
New companies have a way of shaking up business, and especially marketing. Keep an eye on not only the products and services of new entrants but the number of new entrants as well. Though a glut of new entrants can be frightening, it’s also a good sign that you’re in a booming market. When there are tons and tons of new entrants, you can stand out among the crowd by making products or services with an excellent product-market fit.
Substitute products can be a real pain if you’re used to doing things a certain way. They can also be an opportunity if you can either start creating the substitutes or conclusively show that your products are definitely better than the substitutes. More cheerily, complementary products can help an industry grow. For example, smartphone manufacturers can also make a little money selling chargers, earphones, and cases.
There are several market forces that will affect your small business. We can’t control everything that happens to us or our businesses, but we can be astute observers and create plans nonetheless. By reviewing these market forces on a regular basis, you can be more prepared to make effective strategic marketing decisions.
What’s the biggest market force acting on your small business? Let me know in the comments below!