What is PESTEL and How Can It Help Your Business?
17th May 2022
Before every campaign you or your company launch, it is important to complete a situational analysis. A situational analysis is where you evaluate where your strengths and weaknesses lie internally, and where there are threats or opportunities facing your business externally (SWOT).
What is a PESTEL analysis?
The tool, PESTEL, is an acronym (political, economic, social, technological, environmental, and legal), that dives deeper into the external environment: factors that not only might affect your business but society as a whole.
It is very hard to control the macro environment, but marketers can absolutely attempt to influence it or take advantage where they can, to aid the survival of the business.
Naturally, this includes any political factors that may have an impact on the industry you operate in. These governmental actions could control taxation, policies, restrictions, political influence, conflicts, stability etc. If your government increases income tax, for example, could this cause potential customers to spend less?
Then, we have the hot topic of 2016: Brexit. As a direct result, in 2022, it is a lot more complicated for the UK to trade with countries within the European Union (even more so for companies whose business model mostly relies on imports and exports). Some head offices may now decide to move location in order to maintain the benefits the trade union offers, while some local businesses in the UK may be able to use Brexit as an advantage.
Additionally, the conflict between Ukraine and Russia has caused petrol prices to rise; some countries have set sanctions and stopped trading with Russia altogether. Meanwhile, Ukraine, being one the biggest exporters of oil seeds, could create a shortage of sunflower oil in retailers, now that production is unable to continue.
Economic factors consist of how the current state of the economy could impact your business. During a recession, for example, production of products or services may slow, and people could be displaying recessionary behaviour.
Alternatively, if the economy is doing particularly well, customers could more likely purchase more luxury items and use credit if they have high job security. This is often referred to as the Boom and Bust Cycle, which occurs every few years. Supply and demand will fluctuate. Marketers may have to compete with prices to attract customers.
Social factors are largely based on culture, beliefs, wider demographics, behaviour and more. Marketers will need to adapt how they promote certain products or services depending on the country they are trading in.
Social aspects can be defined as the unofficial expectations within consumers due to societal norms. For example, the standard of customer service expectations in the UK may be considered impolite in some States if the US where customer service is held at a very high standard. This may be due to the expectation that tips cover the majority of employees wages!
What’s more, people are generally a lot wealthier than they were a few decades ago. Mobile and desktops phones are almost accessible to all, giving much more power to the consumer to evaluate alternatives online.
Attitudes change when people think about ethics and the environment. Marketers may have to adapt to meet these needs or get left behind. Demography, increase in populations and wider individualistic personalities means we have to be more mindful of how we target markets. The older generation are statistically shown to have very different attitudes and values to young millenials and Gen Z, and within those groups, target markets can be split into further sub-categories.
Technology is always changing and advancing. A marketer needs to adapt to these changes or it leaves potential to be left behind. It is expected that the large majority of people have a mobile phone. When optimising websites or content it is important to make sure they work well for mobiles as well as desktops.
In addition, before streaming was the norm, consumers often went to Blockbuster for their entertainment needs. Blockbuster famously declined a deal from Netflix – which may sound crazy now, but Netflix were nowhere near as prominent at the time! If the deal went ahead and Blockbuster invested in online streaming, they may still be around today. And conversely, Netflix are now industry giants. However, how long will that last? Netflix for a long time had monopoly over the market. With more and more streaming services popping up like Disney/Star and HBO max, attracting wider audiences by the day, Netflix may have to get creative in order to keep existing customers and attract new ones.
Also, how will the Metaverse impact future marketing? What impact will it have on social cultural norms? For better or worse, we may need to invest more on the potential impact of future trends in the technological sphere.
In 2022, environmental factors are a growing motivator and concern for consumers – particularly in the light of Cop26, which set deadlines for companies and organisations that need to meet net zero targets. A company’s sustainability policy – or lack thereof – may well influence the buying choices of customers: “Company X is known for dumping hazardous chemicals, therefore, I will not buy from them”. You may have seen toilet roll companies, for example, increasing their claims that they plant more trees than they cut down. In retailers, some consumers may be put off buying any product that uses any unnecessary plastic packaging or anything that cannot be recycled easily. Charging for the plastic carrier bags was one particularly successful tactic to try and reduce environmental impact.
As a marketer, it is important to know and understand the legal commitments within your industry, whether national or international. Often, vaping is considered a less harmful alternative to smoking traditional cigarettes, and is legal in most countries. However, in places like Thailand, it could land you jail time. So, it will not be possible to trade vape products in Thailand.
A piece of legislation that European Union countries have to adhere to is General Data Protection Regulation (GDPR). These are strict guidelines on how organisations can collect, store and use customer data. Failure to comply can lead to hefty fines and could harm reputation that took years to develop. A famous example is Cambridge Analytica, where personal information was collected without consent. On this topic, Mark Zuckerburg has threatened to pull Facebook and Instagram from the EU if they cannot collect user data. It doesn’t look like this will go ahead but if it does, how will that affect marketing in the future? How will social media companies that rely on Facebook advertising survive? Will the EU develop their own social media platforms similar to China?
How Social Chameleon Can Help
Whether your company is a startup or at global scale, it is important to consider the deeper analysis on the external marketing environment PESTEL can offer. It creates insight on potential threats and opportunities. Sometimes, when overlooked, it can cost a business, as sometimes it can determine the downfall to bankruptcy – or, alternatively, their ultimate success. For more marketing tips, have a look at our blog page.
At Social Chameleon, we have been working with businesses to transform their digital marketing strategy for nearly a decade, and our team of experts can help you to design a marketing strategy that works for your business. Get in touch with our team at email@example.com, or by filling out the enquiry form on our contact page.