Chapter 3

The online macro-environment

Prof Dr Rafiuddin Ahmed

M: 8801760928099
 Learning Objectives
After reading this chapter, you should be able to:
● Identify how the macro-environment affects an
organization's digital marketing
strategy, planning, implementation and performance
● Consider legal, moral and ethical constraints of
digital marketing
● Identify aspects of each of the macro-
environmental forces that are particularly
relevant to digital marketing.
 Introduction
In the previous chapter, we reviewed the influences on customers which shape the online
marketplace or trading environment. In this chapter, we review how broader, macro-economic
forces can influence digital marketing. These are forces which affect the trading environment but
companies operating have limited direct influence over.

In the marketing literature, there are widely used mnemonics, which aim to act as an
aide-memoire for the macro-environmental forces, e.g. PEST, SLEPT and PESTLE, where
each letter represents a slightly different arrangement of the following macro forces:
● Political forces
● Economic forces
● Social forces
● Technological forces
● Legal forces
● Environmental forces
 Changes in technology which influence marketing opportunities; create new product
Technological Forces development opportunities; introduce new ways to access target markets through
channel integration; create new forms of access platforms and applications.

cause variation in economic conditions; affect trading opportunities; influence

Economic Forces consumer spending and business performance; have significant implications for digital
marketing planning.

cultural diversity among digital communities, which influences use of the Internet and
Social Forces
the services businesses provide online.

national governments and transnational organizations have an important role in

Political Forces determining the future adoption and control of the Internet and the rules by which it is
governed.

determine the methods by which products can be promoted and sold online. Laws and
Legal Forces ethical guidelines that seek to safeguard individuals’ rights to privacy and businesses’ to
free trade.
An indication of the challenge of assessing the macro-environment factors is presented
in Figure 3.1. This figure of the ‘waves of change’ shows how fluctuations in the
characteristics of different aspects of the environment vary at different rates through
time.
The rate of environment change
Strategic agility , a concept strongly associated with knowledge management theory and based on
developing a sound process for reviewing marketplace opportunities and threats and then
selecting the appropriate strategy options.

Strategic agility is important for digital marketers to understand and they should con-
sider how to ensure:

1. collection, dissemination and evaluation of different information sources from the

micro- and macro-environment;
2. processes for generating and reviewing the relevance of new strategies based on creating
new value for customers;
3. research into potential customer value against the business value generated;
4. implementation of prototypes of new functionality to deliver customer value;
5. measurement and review of results from prototypes to revise further to improve
proposition or to end a trial.
Technological Forces
A short introduction to Internet technology
Internet
The physical network that links computers across the globe. It consists of the infrastructure of
network servers and communication links between them that are used to hold and transport the
vast amount of information.

World Wide Web

The World Wide Web is a medium for publishing information and providing services on the Internet.
It is accessed through web browsers , which display site content on different web pages . The
content making up websites is stored on web servers.

Web server
Used to store the web pages accessed by web browsers. They may also contain databases of
customer or product information, which can be queried and retrieved using a browser.

Web browser
Browsers such as Google Chrome, Mozilla Firefox, Apple Safari and Microsoft Internet Explorer
provide an easy method of accessing and viewing information stored as HTML web documents on
different web servers.
Streaming media server
A specialist server used to broadcast audio (e.g. podcasts) or video (e.g. IPTV or
webcast
presentations). Served streams can be unicast (a separate copy of stream is served for
each recipient), multicast (recipients share streams) or peer-to-peer.

Uniform (universal) resource locator (URL)

A web address used to locate a web page on a web server.

Web addresses are structured in a standard way as follows: www.domain-

name.extension/ filename.html
The ‘domain-name’ refers to the name of the web server and is usually selected to be
the same as the name of the company, and the extension will indicate its type. The
‘extension’ is also commonly known as the generic top-level domain (gTLD). Common
gTLDs are:
● .com represents an international or American company (e.g. www.travelocity.com);
● .org are not-for-profit organizations (e.g. www.greenpeace.org);
● .mobi was introduced in 2006 for sites configured for mobile phones;
● .net is a network provider (e.g. www.amakai.net).
 URL strategy
A defined approach to forming URLs including the use of capitalization, hyphenation and
sub-domains for different brands and different locations. This has implications for promoting
a website offline through promotional or vanity URLs, search engine optimization and
findability.

A clean URL which fits many of these aims is www.domain.com/folder-name/document-

name. Care must be taken with capitalization since Linux servers parse capitals differently
from lower-case letters.
How does the internet work?
● The Internet is a large-scale client-server
system.
● Client PCs request services from server
computers that deliver content, media, and
applications.
● Connections to the Internet are enabled via
Internet Service Providers (ISPs) and
connected to a larger infrastructure called
backbones.
Infrastructure components of the Internet

Static Page Dynamic Page Transaction Log File

Fixed content, does not It is generated in real- Records all file requests
query databases. time with data pulled made to the server.
from databases.
Web Page Standards
Content

• The combination of information, graphics, and

interactive elements that make up a web page.
• Standards for Text, graphics, and multimedia standards
are managed by the W3C (World Wide Web
Consortium).
Text information- HTML (Hypertext Markup
Language)
The standard for creating web pages. Defines content
HTML structure, using tags like `<title>`, `<strong>`, and others.

CSS
(Cascading
Used to style web pages, separating content from design
Style elements.
Sheets)
Text information and data – XML (eXtensible
Markup Language)

Metadata Literally, data about data – a format describing the structure and
content of data.

XML or A standard for transferring structured data, unlike HTML which

eXtensible is purely presentational. . For example, product information on a
Markup
Language web page could use the XML tags < Name>, <Description>, <Color>,
and <Price>.
Graphical images (GIF, JPEG and PNG files)
GIF (Graphics A graphics format and compression algorithm best used for simple
Interchange graphics. GIF files are limited to 256 colors and are best used for
Format)
small, simple graphics, such as banner adverts.
JPEG (Joint A graphics format and compression algorithm best used for
Photographic photographs. JPEG is best used for larger images where image
Experts Group)
quality is important, such as photographs.

Animated graphical information (Flash and

plug-ins)
An add-on program to a web browser providing extra functionality
Plug-ins such as animation. The best-known plug-in is probably that for
Adobe Acrobat which is used to display documents in .pdf format
(www.adobe.com)
Difference between Intranets and
Extranets

Intranets Extranets
A network within a single Formed by extending the
company that enables access to intranet beyond a company to
company information using the customers, suppliers,
familiar tools of the Internet such collaborators or even
as email and web browsers. Only competitors. This is again
staff within the company can password-protected to prevent
access the intranet, which will be access by general Internet users
password-protected
The relationship between intranets,
extranets and the internet text editor
Web Application frameworks and
Application servers
Web Application Framework Application Servers
A standard programming Software processes
framework based on which is accessed by a
reusable library functions standard programming
for creating dynamic interface (API) of a web
websites through a application framework to
programming language. serve dynamic website
functionality in response
to requests received from
browser
 Digital Security
Why Digital Security Matters?

01 Growing concern for internet users

Essential for building consumer trust in e-

02 commerce

Understanding risks helps marketers safeguard

03 operations
Security risks involved in an e-commerce transaction

Compromised • Risk: Confidential information stolen via keylogging or malware

User Devices • Impact: Passwords, sensitive data exposed

Data • Risk: Credit card details stolen during transmission using packet sniffing software
Interception • Impact: Financial loss and identity theft

Server • Risk: Customer credit card details stolen from merchant’s server through hacking
Hacking • Impact: Large-scale data breaches

Insider • Risk: Customer details accessed by employees or through social engineering

Threats • Impact: Data leaks, privacy violation

Identity • Risk: Merchants or customers are not who they claim to be, leading to fraudulent transactions
Fraud • Impact: Financial loss and reputational damage
The main website security risks
1. Validation of input and output data
2. Direct data access (and theft)
3. Data poisoning
4. Malicious file execution
5. Authentication and session management
6. System architecture and configuration
7. Phishing
8. Denial of service
9. System information leakage
10. Error handling
Approaches to developing secure system
1. Digital certificates
• Secret-key or symmetric encryption involves both parties having an identical (shared)
key known only to them. Only this key can be used to encrypt and decrypt messages.

• Public-key or asymmetric encryption. Asymmetric encryption is so called since the keys

used by the sender and receiver of information are different. The two keys are related by
a numerical code, so only the pair of keys can be used in combination to encrypt and
decrypt information.

Asymmetric encryption
2. Digital signatures
Digital signatures can be used to create commercial systems by using public-key encryption to achieve
authentication: the merchant and purchaser can prove they are genuine.

3. The public-key infrastructure (PKI) and certificate authorities

Digital signatures and public-key encryption require ensuring that the public key actually belongs to the
intended person. Trusted Third Parties (TTPs), like Certificate Authorities (CAs), issue digital certificates to
verify this. Certificates contain identification info, the public key, and details like issuance date. CAs, such as
VeriSign, help ensure the authenticity of public keys used in secure communication.

4. Secure Sockets Layer protocol (SSL)

SSL is the most common security mechanism used on transactional websites in association with CAs like
VeriSign that issue an SSL certificate verifying the identity of the certificate owner.

5. Secure Electronic Transaction (SET)

Secure Electronic Transaction (SET) is a security protocol based on digital certificates, originally developed
by a consortium led by Mastercard and Visa, which allows parties to a transaction to confirm each other’s
identity
 Technology Convergence
Merging of distinct technologies and functionalities into a single system or platform

1.Tools Of Digital marketers

2. Easily Access

3. Low Cost Marketing

SMS Applications
1. Database Building
2. Location-based services
3. Sampling or Trial
4. Sales promotions
5. Rewarding with offers
6. Short codes
7. Offers paid-for WAP services and
content
Mobile Apps
• Digital communication tools
• When to build own apps
• Free apps or paid app
• Category of application to target
• Way to promote apps
• Path to refine apps with feedback
Social location based Marketing
through Mobile
Social location-based marketing leverages social media tools that allow users to share their
location, enabling businesses to deliver targeted offers, messages, and collect data on
consumer behavior. While offering incentives like rewards for check-ins, businesses must also
carefully consider the privacy implications of using this technology.

QR Codes
Quick Response code A two-dimensional matrix bar code. These are a popular type of two-
dimensional code used for direct response.
• Easily scan by Mobile
• Opportunities for integrating customers
• Using as promotional initiatives
Wi-Fi
• High speed local area network
• No need for cabling
• Potential to access through large area like airports and
shopping centers

Bluetooth
Wireless standard for transformation of data with a potential for different local
marketing as,
• Viral communication
• Local activity
• Location based service , like getting electric coupon while passing through a
store
 Emerging Technology
New devices Increasing Users
• Internet TV or IPTV
• Radio and television apps available on internet With improvement of technology people are being
• Devices being improved with high internet more connected to it . Internet access has been
speed connected so deeply to their lives.

New Challenge New opportunity

For existing so many apps and platforms it’s • Technology has enable marketers to create
being tough for the marketers to identify and new offerings for the market
locate their target markets . • Customized marketing
• Easy access to information
 Assessing the marketing value of
technology Innovation
04
01 03 Adopt
instantly
02 Evaluation
Ignore Adopt the technique
Evaluate the without detailed
technique in a
Managers will
ignore the
Keep Eye structured manner
evaluation
technique if it is and then make
complicated Managers
decision
Ignore for now
but keep an eye
on the result of
competitor
Gartner’s Hype Cycle
 Hype Cycle as a graphic representation of the maturity, adoption and business application of
specific technologies. This cycle includes these 5 steps

Slope of enlightenment :
Technology trigger :The first Although the press may have
phase of a hype cycle , where stopped covering the technology
product launch or other event that Trough of
some businesses continue
generates significant press and disillusionment :
through the ‘slope of
interest. Technologies
enlightenment’ and experiment to
enter the ‘trough
understand the benefits
of disillusionment’
because they fail
to meet Plateau of productivity :
Peak of inflated expectations: In expectations and Technology becomes increasingly
this phase, a frenzy of publicity quickly become stable and evolves in second and
typically generates over- unfashionable. third generations. The final height
enthusiasm and unrealistic of the plateau varies according to
expectations. whether the technology is broadly
applicable or benefits only a niche
market
 Economic Forces
Globally economic influences affect the level of success of
business. Economic forces affect supply and demand and
consequently it is important for digital markets to identify
which economic influences they need to monitor. Classic
economic factors such as growth and unemployment, interest
and exchange rates can affect every aspect of business activity
and are equally pertinent to offline and online businesses.
International market growth and emerging economies – for
example central and eastern European markets and the BRIC
economies – also have the potential to influence digital
marketing activities.
Market Growth and Employment
According to Varley (2001), ‘Modern societies are organized around
consumption and so the trends in patterns of consumption that
emerge over time are very important for marketers to observe and
understand.’ The impact of changes in demand can have far- reaching
implications for digital marketing initiatives as this will affect the
strength of market growth, so it is important to anticipate demand.
Sophisticated technology enables companies to analyze purchasing
patterns and forecast future demand. But this is only part of the
picture of consumption that drives modern global economies. It is also
important to monitor changes to trends (which affect market growth)
in order to be able to make realistic predictions about how consumers
and companies are going to behave in the future.
Market Growth and Employment
Demographics is the study of populations, which uses measurable variables to
monitor and analyze population trends. Demographic variables include:

● age profiles
● birth rates
● education levels
● gender
● household structures
● life stage (e.g. single, married, divorced)
● total income and expenditure
● working patterns and occupations
International Market Growth and Emerging Economies
Globalization
The increase of international trading and shared social and cultural values. A major
driver of Internet adoption by commercial organizations is the opportunity for market
expansion in domestic and international markets .

Economic Disruption
Gorell’s observations are that in order to be able to manage in periods of economic
change business leaders should focus on developing the ability to:
1. Anticipate and act on market uncertainty and unmet customer needs by applying a
focused business model.
2. Focus on innovations and how they can deliver value to the company’s business model.
3. Expect opportunities to emerge from uncertainty and develop strategies which can
maximize any emerging market advantage (Gorell, 2011).
Economic Disruption
The world’s best-performing companies are adept at spotting opportunities in times
of economic disruption but, according to Gorell (2011): ‘By adoption of their best
practices, almost any company can learn to out-compete their rivals by creating new
products, finding white-space markets and imagining new business models even in the
toughest of times. However, in order to achieve success companies should:

● focus on improving opportunities and innovations which already exist within the
business;
● be selective about which innovations are likely to bring early gains and carefully
manage company resources – innovations which require limited resources can be very
useful in challenging economic times;
● involve everyone in the company in working towards a common goal.
Political forces
The political environment is shaped by the interplay
of government agencies, public opinion and
consumer pressure groups and industry-backed
organizations such as TRUSTe ( www.truste.org ).
Interaction between these organizations helps to
create a trading environment with established
regulations. The political environment has many
factors which influence the trading environment,
such as taxation, investment and management of
business and public affairs.
Political Forces
● It is important for digital marketers to be aware that political action enacted through government
agencies to control the adoption of the Internet includes:
● promoting the benefits of adopting the Internet for consumers and business to improve a country’s
economic prosperity;
● sponsoring research leading to dissemination of best practice among companies, for example the
DTI international benchmarking survey;
● enacting legislation to regulate the environment, for example to protect privacy or control taxation;
● involvement in setting up international bodies to coordinate the Internet, such as ICANN (the
Internet Corporation for Assigned Names and Numbers, www.icann.com ), which has introduced
new domains such as .biz and .info .

E- government
The use of Internet technologies to provide government services to citizens.
Political Control and Democracy
Government action that can have a significant impact on the online marketplace is control of
intermediaries. This depends on the amount of regulation in a given country and in individual markets.
Taking the UK as example, regulation of different marketplaces occurs through these groups:

Financial Services Authority – controls providers of banking products such as current accounts,
savings and loans.
Ofcom – controls providers of mobile phone and broadband services.
Internet Governance
Control of the operation and use of the Internet.

Taxation
How to change tax laws to reflect globalization through the Internet is a problem that
many governments are grappling with. The fear is that the Internet may cause
significant reductions in tax revenues to national or local governments if existing laws do
not cover changes in purchasing patterns.

Tax Jurisdiction
Tax jurisdiction determines which country gets the tax income from a transaction. Under
the current system of international tax treaties, the right to tax is divided between the
country where the enterprise that receives the income is resident (‘residence’ country)
and that from which the enterprise derives that income (‘source’ country).
 Legal Forces
Laws develop in order to provide a framework of control and
regulations that aim to enable individuals and businesses to go
about their business in a legal and ethical manner. How-ever,
laws are open to interpretation and there are many legal and
ethical considerations in the online trading environments.

Digital marketers should be compliant with the law and adhere to

ethical standards but the rate of technological innovation is rapid
and consequently the law is often unclear.
A. Data protection and privacy law
Privacy refers to a moral right of individuals to avoid intrusion into their personal affairs by third parties. Privacy of personal data,
such as our identities, likes and dislikes, is a major concern to consumers, particularly with the dramatic increase in identity
theft.
The main information types used by the digital marketer which are governed by ethics and legislation, are:

Contact Information Profile Information Platform Usage Information

This is the name, postal address, This is information about a customer's Through web analytics systems it is
email address and, for B2B characteristics that can be used for possible to collect information on type
companies, website address. segmentation. They include age, sex and of computer, browser and screen
social group for consumers, and company resolution used by site users (see
characteristics and individual role for Chapter 7).
business customers (see Chapter 6).

Behavioural Information Behavioural Information (Across

(One single site) multiple sites)
This is purchase history and the whole of the This can potentially show how a user accesses
buying process. Web analytics (Chapter 10) multiple sites and responds to adverts across sites.
can be used to assess the web and email Typically this data is collected and used through an
content accessed by individuals. anonymous profile based on cookie or IP addresses
which is not related to an individual.
The guidelines on the eight data protection principles which marketers
need to consider are produced by Information Commissioner (1998), on
which this overview is based. These principles state that personal data
should be:

1. Fairly and lawfully processed : Personal data shall be processed fairly and lawfully and, in
particular, shall not be processed unless at least one of the conditions in Schedule 2 is met; and in the case of
sensitive personal data, at least one of the conditions in Schedule 3 is also met. This requires:
• appointment of a data controller who is the person with defined responsibility for data protection within a
company;
• clear details in communications such as on a website or direct mail of how a data subject can contact the
data controller or a representative;
• before data processing, 'the data subject has given his consent' or the processing must be necessary
either for a 'contract to which the data subject is a party
• sensitive personal data requires particular care,
• no other laws must be broken in processing the data.
2. Process for limited purpose :
Personal data shall be obtained only for one or more specified and lawful purposes, and
shall not be further processed in any manner incompatible with that purpose or those
important issues are:

• Whether future communications will be sent to the individual (explicit consent is required for this in
online channels; this is clarified by the related Privacy and Electronic Communications Regulation Act
which is referred to below);
• Whether the data will be passed on to third parties (again explicit consent is required);
• How long the data will be kept.
3. Adequate, relevant and not excessive :
Personal data shall be adequate, relevant and not excessive in relation to the purpose or
purposes for which they are processed.

4. Accurate :
Personal data shall be accurate and, where necessary, kept up to date.
5. Not kept longer than necessary :
Personal data processed for any purpose or purposes shall not be kept for longer than is necessary for that
purpose or those purposes. The guidelines state: To comply with this principle, data controllers will need to
review their personal data regularly and to delete the information which is no longer required for their purposes
6. Processed in accordance with the data subject's rights :
Personal data shall be processed in accordance with the rights of data subjects under this Act.
7. Secure :
Appropriate technical and organizational measures shall be taken against unauthorized or unlawful
processing of personal data and against accidental loss or destruction of, or damage to, personal data.

8. Not transferred to countries without adequate protection :

Personal data shall not be transferred to a country or territory outside the European Economic Area, unless that
country or territory ensures an adequate level of protection of the rights and freedoms of data subjects in relation
to the processing of personal data.
Anti-spam legislation

Laws have been enacted in different countries to protect individual privacy and with the intention of
reducing s
pam or unsolicited commercial email (UCE).

Spam: Unsolicited email (usually bulk-mailed and untargeted).

Opt-in : A customer proactively agrees to receive further information
Opt-out :a customer declines the offer to receive further information.
Cold list: Data about individuals that are rented or sold by a third party
House list: Data about existing customers used to market products to encourage further phrase.
B. Disability and discrimination law
Laws relating to discriminating against disabled users who may find it more difficult to use websites because of
audio, visual or motor impairment are known as accessibility legislation.

C. Brand and trademark protection

Online brand and trademark protection covers several areas, including use of a brand name within domain names and use of
trademarks within other websites and in online adverts.
Domain name: Domain name The process of reserving that can be used to refer to the company website.

Pay-per-click: Pay-per-click search marketing refers to when a company pays for text ads to be displayed Of the search
results pages when a specific key phrase is entered by the search page users.

D. Intellectual property rights

A trademark is a unique word or phrase that distinguishes your company. The mark can be registered as plain Designed text,
artwork or a combination. In theory, colors, smells and sounds can also be Trademarks
E. Contract law
We will look at two aspects of forming an electronic contract - the country of origin principle and distance selling laws.

Country of origin principle- The contract formed between a buyer and a seller on a website will
be subject to the laws of a particular country. In Europe, many such laws are specified at the regional
(European Union) level, but are interpreted differently in different countries.

Distance Selling Laws - Distance selling laws have taken some time to be updated to reflect online trading,
particularly of digital products. For example, new EU rules on consumer rights initially kind 4. These change
protect consumers were intended to:

• Eliminate hidden charges and costs on the internet.

• Increase price transparency
• Banning pre-ticked boxes on websites
• Better consumer protection in relation to digital products
F. Online advertising law
Advertising standards that are enforced by independent agencies such as the UK's
Advertising Standards Authority Code also apply in the Internet environment (although
they are traditionally less strongly policed, leading to more 'edgy' creative executions
online which are intended to have a viral effect).
• Unsolicited email marketing communications must be obviously identifiable as marketing
communications without the need to open them.
• Marketing communications must not falsely claim or imply that the marketer is acting as a
consumer (i.e. marketers should not leave reviews about their companies or competitors on
behalf of their business).
• Marketers and publishers must make clear that advertorials are marketing communications - for
example, by heading them 'advertisement feature'. This guidance is necessary since the increase
in native advertising has meant that many pieces of content masquerading as ads haven't been
disclosed.
Social Forces
Social forces are closely linked with culture and have significant implications for digital marketing. Broadly
speaking, the key factors which make up these forces are: social communities based on demographic profile,
social exclusion, and cultural factors.

Social exclusion
The social impact of the Internet has also concerned many commentators because the Internet has the
potential effect of accentuating differences in quality of life, both within a society in a single country and
between different nations, essentially creating 'information haves' and 'information have-nots'. Social
exclusion is a part of society is excluded from the facilities available to the remainder.
Governments should focus on three aspects of e-inclusion:
1. The access divide (or 'early digital divide'), which considers the gap between those with and those without
access. Governments will encourage competition to reduce costs and give a wider choice of access through
different platforms
2. The usage divide ('primary digital divide'), concentrating on those who have access but are non-users.
Governments promote learning of basic Internet skills through ICT courses to those with the highest risks of
disengagement.
3. The divide stemming from quality of use (secondary digital divide'), focusing on differentials in participation
rates of those people who have access and are users. Training can also be used to reduce this divide.7
Cultural Forces
The local language and culture of a country or region can dramatically affect the requirements
of users of a web service.

Environmental and green issues related to Internet usage

The future state of our planet is a widely held social concern that is closely related to economic issues.
Although technology is generally seen as detrimental to the environment - think long- and short-haul flights,
TVs and electronic gadgets burning fuel when left on standby - there are some arguments that e-commerce
and digital communications can have environmental benefits.
Thank You!