Why would you want to evaluate a business product With PEST analysis in the first place?
At the very least, for marketability. A product is nothing if you can’t market to the right people. But the survival and success of a product are more than the design and usability.
If outside influences – like political factors or the state of the economy – get in the way, there’s nothing you can do. You must abide by these factors because fighting against it is completely futile.
When a new bill is passed, you can’t ignore it. You can’t impede. Because not following it will get you in legal trouble. And you don’t have the power to negate, update, or revoke it. All products are susceptible to four influences: political, economic, social, and technological.
You can use these factors to your advantage. Or you can ignore them and watch your product burn, along with your hard earned cash, reputation, and credibility.
Obviously, you don’t want the latter to happen. That’s why businesses should follow a simple PEST analysis to evaluate their products.This will ensure the product is ready for market without complications. Because if there is an issue, it’s might need more than new packaging or a product overhaul to overcome the financial loss.
How to prepare for a PEST evaluation of business products
Before anything, you must understand what exactly PEST analysis is.
It’s a strategic tool to understand the macro environment and influences that affect a product. In this case, the factors create the PEST acronym: Political, Economic, Social, and Technology.
Political factors are what you expect: Government parties, regulations, legislation, and bills. It can greatly affect all products. For example, if you use an ingredient from South America and the government bans all trade from there… well, you only have a few options.
Either swap out the ingredient for a substitute (ultimately changing the entire product), find some (illegal) way around the system – not recommended at all! – or scrap the whole product.
Of course, “change the bill/law” isn’t on the options list because it isn’t one. As a citizen of the country, you must abide by this law. Going against it would be business suicide.
How do you evaluate a product with political factors?
Make sure the product isn’t going to break any laws. For example, make sure the ingredients of a product aren’t illegal or unsellable. Or take a look at your marketing; will it impede on anyone’s rights? How closely is your product connected to the government? If you create videos slamming current political leaders, could you get into any legal trouble here?
Economic factors include everything that can affect the economy – present and future. Tariffs, taxation, interest rates, inflation, and unemployment relations are just a few of these critical influences. Typically, the amount of money you make or lose depends upon the economy. Or at least, it plays a major role.
If you move your business to another country, and now must pay 25 percent tax (as opposed to the 10 percent you were used to), that’s going to do some damage to your numbers.
Can you change the tax rate? No. You may be able to capitalize on some business advantages to knock the amount you owe down. But it’ll never shift that number lower or higher.
How do you evaluate a product with economic factors?
It may be more important to examine the business rather than the product for this step. You’ll need to factor in costs, expenses, and projected profits for a product and what’ll mean for the company.
Many companies (should) do market research before launching a product. A comprehensive examination of employment rate, population growth, and shifting trends in the economy are typically all included.
Understanding the full economic picture isn’t an option for most businesses take. Because no one likes money surprises that lead to unexpected monetary loss, like noncompliance fees.
Social factors aren’t as black and white as the other factors. It typically involves customers, buying behaviors, and various factors included in the economic section of the PEST analysis.
It’s really all about understanding your target market. You can’t really change people’s minds. While you can give them a new option (your product), unless you understand their desire, they won’t buy it.
How do you evaluate a product with social factors?
You need to get to know your customers. Creating a buyer persona can help immensely. It’s basically a template where you create a character and name them (like John or Sally) and write down info about them. This typically includes:
- Marital status
- The main problem (they have)
- How your product solves the problem
- What do they do on the weekends or on their days off?
- Where do they hang out in person and online?
You can add more, and should if you can. But the point is to get into the head of your customer and figure out why they should buy your product.
Additionally, market research helps here too. Understanding where you’re selling, how (online or physical?), who the target demographic is, and what would prevent them from buying (low income? Unemployment rate is high?), can help you evaluate your products for social factors.
Technology is interesting because when it comes to PEST analysis for your product, it’s about understanding the barriers. We employ technology every single day and consumers expect to have access to a product (and company) in a variety of ways.
Before, you only had to be on the phone or in-person. Now we can use chatbots, live chat operators, emails, and even texts. Companies who don’t use some of these new advancements could fall behind the competition. It could cause their product to be inferior, causing people to jump ship.
How do you evaluate a product with political factors?
Looking at the competition helps. Because chances are, you don’t need every single new method of technological communication. It could be expensive if no one ever uses your live chat customer service reps. And the best way to see what could be worth it is by studying what others do and use.
You want the technology you use to be worth it for the business and the customer. You want it to compliment the product. There’s no point in shipping worldwide if everyone who buys your product resides in the same state, for example.
Make a list of all the technology used or will be used for your product. Ensure they’re all necessary, and look into any gaps (study the competition or this bit).
At that point, you’ll be finished your PEST evaluation for your business product! Now you need to look over the information you’ve gathered and see where you can apply changes, if necessary.