How to conduct a PESTEL analysis

 

What is PESTEL and how do Digital Marketers use it?

PESTEL or PESTLE is a simple acronym framework for assessing the key features of a business’ environment. It helps us to identify business opportunities, such as government initiatives to promote a certain industry; or potential threats, such as a nationwide skills gap that may lead to problems with hiring.

Before any kind of marketing strategy or tactical plan can be put into action, it is a great idea to conduct a detailed situational analysis. PESTEL is a great tool that can help you structure such a situational analysis. It is important to note that as situations can and do frequently change, this process should be repeated at regular stages to identify any changes in the macro environment. By successfully monitoring and respond to changes in the macro-environment your business operates within you will be able to differentiate your organisation from your competition and potentially create a competitive advantage.

In PESTEL analysis, each feature identified is filed under one of the following headings:

Political
Economic
Social
Technological
Environmental
Legislative

These are the categories of external factor deemed likeliest to affect a business’ fortunes. They can also be applied to a digital marketing team’s activities. You may also find references to PEST which is a shortened version of the same process that drops the Legislative and Environmental elements.  Here are some examples of the sort of factors that would typically fall under each PESTEL category:

Political

  • Regulation of competition
  • Industry regulation
  • Fiscal policy
  • Business incentives
  • Apprenticeships
  • Grants
  • Elections


Economic

  • Interest rates
  • Consumer confidence
  • Exchange rates (e.g. If the pound rises against the dollar, will we remain competitive with rival marketing agencies in the US?)
  • GDP
  • Investor confidence in related companies (e.g. how would falling investor confidence in Facebook affect our social media marketing campaign?)
  • The emergence of new models – e.g. freemium.


Social

  • Changing demographics (e.g. how will increased longevity affect demand for our services?)
  • Impact of pressure groups (will our corporate social responsibility requirements change?)
  • Consumer trends
  • Behavioural change
  • Changing public opinions (e.g. how has the high level of news surrounding GDPR changed public opinion towards email marketing?)


Technological

  • New/disruptive tech
  • Device and platform use (e.g. is use of mobiles vs desktops changing? Is growth in active Instagram users outstripping growth in active Snapchat users?)
  • New manufacturing processes and tools
  • New data/information practices
  • New technology-led business processes (e.g. dynamic pricing)

Environmental 

  • Sustainability
  • Financial practices
  • Ethical sourcing
  • Carbon emissions
  • Data handling and user privacy practices


Legislative

  • Employment law (e.g. minimum wage, living wage)
  • Health and safety regulations
  • Environmental regulation
  • GDPR and other data laws

Obviously, you can customise a list like this as you see fit for your business and operating environment. These lists are really just a tool to help analyse and monitor the macro-environmental (external marketing environment) factors in a systematic way. It’s important when undertaking such a PESTEL Analysis that the factors affecting the organisation are not just identified but are also assessed for the level of impact they may have on your organisation. The result of these assessments can then be used used to identify threats and weaknesses which in turn can be used as part of a SWOT analysis.

A step-by-step guide to running a PESTEL analysis

The first step to a successful PESTEL analysis is identifying the external factors that affect your project, and listing each one under the appropriate PESTEL heading. You’ll need to involve a variety of stakeholders in order to create a balanced representation of your organisation’s environment. You might ask for ideas from:

  • Team members
  • Subject area experts, e.g. lawyers, tech consultants, consumer research companies
  • Customers

Sourcing original ideas from stakeholders is a great way to catalyse insights into your company’s context. However, we’d advise backing up this approach by working through a list of common PESTEL factors, as this reduces the risk of missing important points from your analysis.

Once you have all been through all of these angles and noted relevant factors listed under their respective headings, the PESTEL analysis itself is complete.

Moving forward, you can use the lists that have been created to inform different aspects of your strategy and activities. If you’re launching a new website, take the technological factors from your PESTEL analysis into account; if you’re planning a marketing campaign designed to help customers relate to the brand, refer to the social factors from your PESTEL analysis for inspiration; and so on. You will find there are very few decisions that cannot be made easier by making reference to your PESTEL findings.

 

Forecasting change 

PESTEL analysis should consider both the present situation and the likely future developments that will affect the business. With this in mind, you may find it helpful to split your findings under each PESTEL category into current factors and scheduled or predicted future factors.

If a new regulation is set to come into force at a certain date, that’s an easy win in your PESTEL analysis. Or, perhaps your competitor has announced the release date of a new product to rival your own. That’s also something you should into account.

Some future PESTEL factors are far harder to predict – especially world events and social trends. In such cases, you may find it useful to add a quantum layer to your analysis by making a note of multiple likely outcomes.

News feeds and data sources

There’s no better source of PESTEL intelligence than your own ongoing monitoring of whatever impacts your business the most.

If you’re running a PESTEL analysis for a digital marketing company, or for a digital marketing team within a company, that would mean keeping up with:

  • News from the Department for Digital, Culture, Media and Sport (or your country’s equivalent governmental department).
  • Financial news and reports about the territories you operate in and the demographics you sell to.
  • Social trends, inferred from trending social media topics; behavioural data from industry press.
  • Reports on technology usage, e.g. device or social platform usage; tech release news.
  • News on digital marketing legislation.
  • News on matters of digital ethics; public outcries such as the Cambridge Analytica scandal.
  • Other news and reports with a special relevance to your company. For instance, Target Internet is a digital marketing education company and therefore should keep up to date on news and reports relating to digital learning.

If you prefer not to focus on digital marketing, substitute the above suggestions for roughly equivalent news and reports which relate to your company, or to business more broadly.

Trying to stay on top of several types or news and business intelligence is a big job – but thankfully, digital help is at hand.

Instead of manually searching for relevant content on a daily basis, we recommend using a news aggregator application to create a live feed of relevant news to your phone, tablet or laptop.

Target Internet’s CEO, Daniel Rowles, does this using Feedly, which brings together content based on your preferred news sources, chosen keywords and more. It can also be used collaboratively by teams – an approach we would heartily recommend as a way of compiling your PESTEL factors.

Adding data-derived insights is a great way to add clout to your PESTEL analyses – and for this we recommend the following sources:

The World Economic Forum’s regular, free-to-access reports. Here are a few recent examples:

Accenture reports are an excellent source of technology insights, made with business strategy in mind. They’re perfect for PESTEL analysis.

Deloitte reports provide peerless social and business insights.

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