Key Takeaways
- Macroeconomics can provide a bird’s-eye view of how much money there is in the economy and where it’s going. And it’s the marketer’s job to ensure some of that money comes to their business.
- A PEST analysis can help marketers analyze the macro environment and prepare for how their customers might behave. PEST stands for political, economical, sociocultural, and technological.
- Don’t base marketing decisions on a single macroeconomic trend. Remember that the same macroeconomic trend can affect different business models differently, and different macroeconomic trends impact different industries in different ways.
There you are. Supposedly working but instead checking your Apple News because it’s 10:30 a.m. and you earned it. But before you can get the latest celeb tea or dive into a hard-hitting BuzzFeed editorial investigating hedgehogs, you’re met with a barrage of trending news you never asked for.
And it’s bleak.
Spending is down. Interest rates are up. War is seemingly everywhere. Affordable homes are definitely nowhere. And you didn’t win the lottery.
But it isn’t all bad news if you can read between the lines. Or, better said, look beyond them.
In this article, let’s explore how macroeconomic trends affect marketers and how you can capitalize on them right now.
What Is Macroeconomics?
Macroeconomics seeks to quantify three things:
- Aggregate production.
- Price levels.
- Spending.
Together, these can provide a bird’s-eye view of how much money there is in the economy and where that money is going.
Helping to determine those three things is a who’s who of factors you might remember from your Economics 101 class, including:
- Gross domestic product.
- Inflation.
- Interest rates.
- Employment.
- Monetary policy.
- Fiscal policy.
- Plus a ton more.
Macroeconomics is the study of all this — how big-picture forces shape and move the economy as a whole.
Why Macroeconomics Matters to Marketers
Every industry, every company, every consumer is impacted by the larger economy. Sometimes negatively. Sometimes positively. Whatever the outcome, the economy as a whole impacts how people behave.
Which is also something that marketers do.
That’s why macroeconomics matters to marketers.
If macroeconomics is all about understanding where money is going, it’s a marketer’s job to ensure some of that money comes the way of their business.
Using PEST to Understand Macroeconomics
Let’s be honest. Businesses, and marketers especially, tend to live in a bubble. They base a majority of decisions on a select few KPIs, direct competitors, and industry trends. And they often have tunnel vision for profit margins and ROI. But there’s a much bigger world out there influencing bottom lines.
It’s called the macro environment.
Analyzing the macro environment is an important part of any (successful) marketing strategy. One of the best ways to analyze the macro environment is a PEST analysis.
PEST stands for:
- Political.
- Economical.
- Sociocultural.
- Technological.
By analyzing those four areas, a marketer can better prepare for how their customers will behave. So we need to stop scrolling past those top stories being spoon-fed to us on Apple News or wherever it is you actively avoid learning about current events and start paying attention. These stories are covering trends in the macro environment — trends that are influencing key macroeconomic factors that impact your business.
For more information, you can check out this full guide to PEST analysis.
7 Macroeconomic Trends Every Marketer Should Watch
There’s a lot of macroeconomic data we can track. Some key data points I recommend marketers keep an eye on include the following:
- Gross domestic product (GDP): The measure of total economic output and the value of all goods and services produced by a country. (Reference the U.S. Bureau of Economic Analysis for quarterly reports tracking GDP.)
- Consumer spending: The total money spent on goods and services by individuals and households. Declining trends in spending often indicate an economic downturn or recession. (The BEA tracks consumer spending monthly.)
- Inflation: The rate at which prices are rising. When inflation is high, consumers purchase less. Inflation is deemed high by the Federal Reserve when it starts trending over 2%. (Use this chart to track the U.S. inflation rate.)
- Interest rates: The cost of borrowing money. The Fed will often raise interest rates when inflation is high. This reduces consumption and business, making it difficult to grow. (Use this chart to track the U.S. federal fund interest rates.)
- Unemployment rate: The percentage of the population that is unemployed. High unemployment indicates a decrease in consumer spending. (Use this chart to track the U.S. civilian unemployment rate and this chart to track unemployment by state.)
- Government spending: The amount a government spends. When government spending is high or increases, it can boost the economy but also lead to higher inflation. (View how much the U.S. government has spent.)
- Economic growth: The rate at which the economy is contracting or expanding, often in relation to its levels of aggregate production. When the economy is growing, consumers have more disposable income and spending increases. The GDP growth rate is a good indicator of economic growth. (Track the U.S. GDP growth rate here.)
There are more, for sure. The more a marketer tracks, the more informed their strategy will be. But it can also be overkill, so these are a great starting point.
If you’re looking to get even more proactive, you can keep tabs on the Federal Reserve’s monetary policy (which focuses on interest rates and access to credit) and the U.S. government’s fiscal policy (which dives into taxation, borrowing, and spending). Internationally focused businesses should also reference International Monetary Fund fiscal policies, as well as any country-specific policies where they operate.
How Macroeconomic Trends Impact Marketing
Sure, delving into macroeconomics might stretch the normal purview of your average marketing strategy a bit. But the goal here is to make your marketing strategy anything but normal. That said, it might help to ground some of what we’ve covered so far onto something a little more familiar.
And there’s nothing more familiar than the 4 C’s and 4 P’s of marketing.
In case you need a refresher:
Customer / Product
Cost / Price
Convenience / Place
Communication / Promotion
Let’s see how macroeconomic trends impact marketing when viewed through these principles.
Macroeconomics’ Effect on Consumers and Products
Macroeconomics helps businesses understand their value compared to a consumer’s budget (as opposed to microeconomics, which helps businesses understand their value compared to the competition). Marketing acquires customers using a strong value proposition that satisfies the wants and needs of a consumer within the confines of their perceived budget.
When consumer spending is high, consumers are more likely to buy non-essential products. When unemployment is high, there’s often an increase in demand for income-generating and skill-oriented services. Identify what attracts your customers to your products, and modify your offering to align with those interests.
Macroeconomics’ Effect on Cost and Price
There is a marketing sweet spot where consumer purchasing power parallels increasing profit margins. Monitoring macroeconomic trends can help you consistently toe the line. But it’s not easy. If inflation is high, a business may resort to raising its prices to stay profitable. But higher prices decrease a consumer’s desire to spend. So it’s easy to get caught in a self-destructive loop, especially during economic downturns.
What do you do? Well, for one, rarely should you raise your prices just because your competitors are. That’s how industries self-implode. Nor should you raise prices just because your profit margins are down. That’s how companies self-implode. Raise prices because it makes financial sense to your business and to your customers within the broader economic environment. If you see inflation skyrocketing, see whether you can make cost adjustments before you dive into price adjustments. Once you’ve optimized your internal structure, optimize your pricing structure to ensure a balance between sales and purchases that everyone can enjoy.
Macroeconomics’ Effect on Convenience and Place
In prosperous economies, consumers seek convenience and are more likely to make impulse purchases. In such times, marketing strategies that focus on ease of access, fast delivery, and instant gratification excel. Conversely, in economic downturns, consumers are cost-conscious, seeking value over convenience. In such times, marketing efforts that emphasize affordability excel.
Marketers must identify the right place at the right time based on macroeconomic trends and then tailor their strategies accordingly.
Macroeconomics’ Effect on Communication and Promotion
During economic upswings, businesses often allocate more resources to promotions that emphasize brand image, lifestyle, and aspirational messaging because consumer confidence is higher and purchasing power is strong. In contrast, during economic downturns, marketers might need to focus on value-driven promotions that emphasize savings and address consumer concerns about financial security.
But consumers aren’t the only ones this relates to. Macroeconomic factors like interest rates can also impact the affordability of marketing campaigns themselves, particularly when businesses operate in global markets. Recognizing macroeconomic shifts and aligning communication strategies accordingly is essential for keeping marketing efforts profitable.