The marketing audit - Marketing Management

Even more wide ranging than a marketing effectiveness rating is a full marketing audit. The major purpose of a marketing audit is to examine and evaluate periodically, in the light of current circumstances, the marketing objectives and policies that have been guiding the company. A marketing audit is essentially a systematic, critical and impartial review and appraisal of the total marketing operation – of the basic objectives and policies of the operation and the assumptions which underlie them, as well as of the procedures, personnel and organization employed to implement these policies and achieve the objectives.

The audit should also include a careful analysis of the company’s marketing environment. Recommendations for improving marketing performance should be a major outcome from the audit process.

Any company carrying out an audit will be faced with two kinds of variable. First, there are variables over which the company has not direct control. These usually take the form of environmental variables. Second, there are variables over which the company has complete control that are called operational variables.

The process of auditing is usually associated with the financial side of the business and is conducted according to a defined set of accounting standards, which are well documented and easily understood. The total business, moreover, can also be audited, although this process is more complicated and demands considerable powers of judgement. A marketing audit is part of this larger audit and is concerned with the collection and analysis of information and data essential to effective problem solving. As Lancaster and Massingham2 point out, the marketing audit should be concerned not only with marketing performance, but with the overall marketing philosophy in the company. For it to be beneficial an audit should be carried out on a regular basis and the company should not wait until things start to go wrong.

Carrying out the audit

We have now come full circle in the marketing planning process. The text began by discussing the importance of analysing the environment, followed by an internal appraisal of the company itself. We stressed the importance of both customers and competitors and can now remind ourselves of some of these factors by looking at how they form part of the marketing audit.

Auditing the environment

Three distinct elements of the environment are relevant to the marketing audit:

  1. business/economic and market factors;
  2. competitors;
  3. customer needs and wants.

In the context of the marketing audit, we describe some of the factors that will need to be assessed under each category of environmental factors.

Business/economic and market factors

The following elements should be examined during a marketing audit:

  • Demographic trends are important, since it is people who make up markets. A change in size of the population, its age distribution or its regional distribution may have implications for the type of industry the company is in.
  • Markets require purchasing power as well as people. The company should audit the main economic trends. For example, high inflationary pressure may lead to a change in customer expenditure patterns, or an impending shortage of raw materials vital to the firm’s business may result in the firm increasing its costs.
  • One of the most dramatic forces shaping business destiny is technology. Each new technology creates major long-run consequences. The marketer should audit changes occurring in product or process technology that can affect the company.
  • Any changes in the political/legal environment should also be audited. This environment is made up of laws, government agencies and pressure groups that may influence and constrain organizations and/or individuals.
  • There is a substantial amount of legislation regulating businesses, which protects companies from each other, protects the larger interest of society against unbridled business behaviour and protects customers from unfair business practices.
  • The society that people grow up in shapes their basic beliefs, values and norms. The major cultural vales of the population are expressed in people’s relationships to themselves, others, institutions and society. Companies need to anticipate cultural shifts to identify threats, e.g. people vary in their attitudes towards corporations, government agencies and other institutions. Most people accept these institutions, but there may be a point when they become critical of them and less trusting. A company finding itself in such a position needs to find new ways to win back confidence, perhaps by reviewing advertising communications.
  • In addition to these major forces, an examination of trends in the markets the company serves is necessary to reveal what is happening to the market size. It may be increasing or declining, with major segments behaving differently.

Competitors

As a first step in auditing its competitive environment, a company must find out who are its direct and indirect competitors, their objectives, strengths and weaknesses. The industry structure, its growth and the number of competitors in the industry help determine the degree of rivalry between the different firms. The determination of a threat of entry of new firms and the threat of substitute products provides a basis for analysing indirect and possible future competition. However, barriers such as economies of scale tend to deter new entrants. The bargaining power of suppliers refers to the ability of the industry’s raw material suppliers to demand higher prices or better terms, and the bargaining power of buyers refers to the ability of the industry’s customers to effect price reductions using their combined strength. These are important factors that can instigate competition. The interaction of these forces determines the intensity of competition within the industry, and should be audited on a regular basis.

Customer needs and wants

we emphasized that to achieve a profitable and durable penetration of a market, a company must base its marketing strategy upon a thorough understanding of customer needs and wants. It must also make itself familiar with the buying processes utilized by the customer and factors that influence customer choice. This requirement holds for all companies no matter what their products or the markets to which their efforts are directed. We should remember that industrial or organizational customers will not be buying on their own behalf, but on behalf of an organization, and will respond to a different set of circumstances from an individual. It is always the needs of the ultimate user that must be recognized and satisfied with the product/service. Monitoring of needs in an attempt to identify opportunities and any unsatisfied needs is also required.

The internal audit

The internal part of the marketing audit should be a comprehensive and detailed look at how effectively marketing is currently responding to the environment and its potential to do so in the future. The audit should encompass:

  • marketing objective and strategies;
  • the organizational structure for marketing, including interfaces with other functions;
  • marketing systems and procedures, including those for marketing information and control;
  • marketing mix elements, i.e. how effective are product, price, place and promotion?
  • sales, market share and profitability analysis.

There is no definitive checklist for a marketing audit. Each company must determine for itself what constitutes the detail of an appropriate audit. However, to illustrate in more detail the scope of an audit, we give an illustrative checklist for a marketing audit.

1 Business and economic environment

Economic Inflation
Unemployment
Energy prices
Price volatility Political/fiscal/legal Availability of materials, etc.
Nationalization
Privatization
Trade unions
Taxation
Duties/levies
Regulatory constraints, e.g. labelling, quality, safety Social/cultural Demographic issues, e.g. age distribution
Changes in consumer lifestyle
Environmental issues, e.g. pollution
Education
Immigration/emigration
Religion etc. Technological New technology/processes
Energy saving techniques
New materials/substitutes
New equipment
New products

2 The market

Total market Size Growth (value/volume)
Trends (value/volume) Characteristics Developments, etc. Products Principal products bought
How they are used
Where they are used
Packaging
Accessories PricesPrice levels/range
Terms and conditions of sale
Trade practices
Special discounts
Official regulations Physical distribution Principal methods
Batch sizes
Mechanical handling
Protection Distribution channels Principal channels
Purchasing patterns
Geographical disposition
Stocks
Turnover
Incentives
Purchasing ability
Needs
Tastes
Profits
Prices paid Communications Principal methods
Sales force
Advertising
Exhibitions
Public relations
Promotions
New developments Industry practices Inter-firm comparisons
Trade associations
Trade regulations/practices
Links with government
Historical attitudes
Image

3 Competition

Industry structure Companies in the industry
Their make-up
Their market standing/reputation
Their capacity to produce, market, distribute
Their diversification
Their origins and ownership
New entrants
Mergers and acquisitions
Bankruptcies
International links
Strengths/weaknesses Industry profitability Historical data
Current performance
Relative performance of competitors
Structure of operating costs
Level on investment
Return on investment
Pricing/volume
Sources of funding

4 Internal audit

SalesTotal(value/volume)
By geographical location
By industry/market segment
By customer
By product Markets Market share
Profit margins
Marketing procedures
Organization structure
Sales/marketing control data Marketing mix variables Market research
Product development
Product range
Product quality
Unit of sale
Stock levels
Distribution
Dealer support
Pricing/discounts/credit
Packaging
Samples
Exhibitions
Selling
Sales aids
Point of sale
Advertising
Sales promotion
Public relations
After-sales service
Training and development Systems and procedures Marketing planning system, i.e. is it effective?
Marketing objectives; are they clear and consistent with corporate objectives?
Marketing strategy; are they appropriate for objectives?
Structure, i.e. are duties and responsibilities clear?
Information, i.e. adequacy of marketing intelligence and its presentation?
Control, e.g. suitable mechanisms?
Communication, e.g. its effectiveness? In all areas?
Interfunction efficiency between functions/departments?
Profitability, e.g. regular monitoring and analysis?
Cost effectiveness, e.g. are functions/products continually reviewed in attempts to reduce excess cost?

We can see from this list that the marketing audit is far reaching and potentially complex. It encompasses not only marketing performance but also the underpinning objectives and strategies of the company. It is important to ensure that the elements of the audit match the elements of the marketing strategies that underpin it. The implication here is that the precise nature of the marketing audit and the elements contained therein should be company specific, reflecting the individual strategy of the company. We must be careful though in the application of audit ‘checklists’ which are useful but should be used with care and discretion in selecting those elements that are appropriate to a particular company and its situation.


All rights reserved © 2018 Wisdom IT Services India Pvt. Ltd DMCA.com Protection Status

Marketing Management Topics