Chapter 16: THE MARKETING AUDIT

CHAPTER 16

The Marketing Audit

PROSPERITY HAS NO FIXED LIMITS. — HENRY MORGENTHAU

THE PURPOSE of a marketing audit is to gather the data and provide the analysis that allows a marketeer to properly evaluate progress in implementing the marketing plan. It allows a company to ensure that it is reaching the benchmarks it set for itself. The following is a guideline for the preparation of a marketing audit:

The Marketing Audit

I. LOCAL MARKET SURVEY

Make detailed lists for the following categories:

A.Economic 1.The major changes in the local economy since the market plan was devised 2.Actions the company has taken in response to these developments

B.Demography 1.Major changes to the local demographics 2.Responses to those changes

C.Technology 1.Changes that have occurred in product technology that have affected the marketing plan or will do so in the foreseeable future 2.The company’s reaction to those technological developments

D.Environmental 1.Any changes that will affect the company’s impact on the local environment 2.Any environmental activity or changes that may influence the marketing plan E.Government 1.All developments in local politics that may affect the marketing plan 2.Any laws that have been passed or are being considered that could impact the plan in the long- or short-term 3.Description of the company’s current relationship with the local government 4.Potential problems or changes in that relationship F.Labor 1.All information regarding changes in the attitudes of local labor 2.Reactions of expatriate personnel to local standards and employees G.Advertising and promotions: 1.Statistics supporting the effectiveness of advertising schemes 2.Information about the company’s promotional efforts 3.Information that profiles the company’s public relations image H.Culture 1.Current local opinions regarding foreign business

2.Any changes in the local lifestyle, culture, or values that might affect the plan 3.Status of relationship with the local community I. Marketplace 1.Statistics regarding the current size of the local market 2.Growth trends of the market 3.All segments currently being served 4.Potential segments J. Consumers 1.Description of consumer buying habits 2.Consumer opinions regarding: a.Product b.Postal service c.Pricing d.Competitive products e.Sales personnel f.Brand image K.Competition 1.Names of direct and indirect competitors along with their respective a.Size b.Market share c.Ad and promotional schemes d.Effectiveness of positioning e.Pricing strategies f.Brand image 2.Impact of the company’s market entry upon competition 3.Description of possible future competitors and reasons for market entry L.Resources 1.Effectiveness of current suppliers of materials 2.Reasons for original selection as suppliers 3.Potential problems in supply linkages 4.Pricing structure and potential changes 5.Back up systems and possible alternative suppliers

M.Financing 1.Current level of financing 2.Anticipated needs for remainder of plan implementation 3.Potential resources 4.Potential exchange risks and counter strategies 5.Current status of accounts payable and receivable

N.Distribution channels 1.Members of channel with an analysis of their efficiency 2.Alternative cost saving or service improving systems 3.Any potential changes to the retailing component 4.Any potential changes to the transportation component 5.Current status of warehouse facilities II. STRATEGIC 1.Mission of the company 2.Objectives of the marketing plan 3.The following questions should be answered in detail: a.Are the company’s goals reflected in the objectives of the marketing plan? b.Does the marketing plan reflect the company’s resources and the level of competition? c.Has management put forth clear strategies for achieving the objectives? d.Does the marketing strategy match the local state of the economy? e.Does the marketing strategy account for a realistic product cycle?

f.Has the company pursued its originally targeted market segment? g.If so, have results matched forecast? h.Has the company pursued additional segments? i.What have been the results of those pursuits? j.Has the company achieved the positioning as set forth in the marketing plan? k.If not, what are the reasons for not having attained the original positioning? l.Have sufficient financial and material resources been put at the disposal of the team? m.If not, what additional resources need to be allocated? n.Can those additions be fiscally justified? o.Is the current strategy sufficient to meet the objectives of the plan? p.Have those objectives changed? q.What changes to the strategy need to be made in order to achieve the objectives? III.STRUCTURAL 1.Define the current structure of the marketing team, including the lines of communication and levels of authority. 2.The following questions should be answered in detail: a.Does the structure of the marketing effort reflect an efficient flow of information from producer to end-user? b.Does the structure reflect a task or departmental orientation? c.Does the current structure match the one originally proposed in the marketing plan? d.If not, why not? e.Does the structure take into account all internal business relationships? f.How can the lines of communication be characterized? g.Does management have authority to control the structure? h.What are the current conflicts among the internal sections of the structure? i.How can they be improved? j.What potential conflicts can arise among the internal business groups? k.How can these problems be avoided? l.What are the current conflicts with the external sections of the structure? m.How can they be improved? n.What conflicts could arise with the external business groups? o.How can these problems be avoided? IV.TACTICAL

A.Research 1.Did the company have sufficient access to information to make proper marketing decisions at inception of the plan? 2.If not, what areas were lacking? How has this affected the implementation of the plan? 3.What is the current method for acquiring marketing data? 4.Have sufficient personnel and finances been allocated? 5.What steps have been taken to improve information gathering?

B.Planning 1.What system does the company use to forecast sales? 2.Has this system proved to be accurate? 3.If not, what are the alternatives?

4.What systems are in use for: a.Measuring market share? b.Designing sales quotas? c.Determining prices? d.Monitoring the competition? e.Segmenting the market? 5.Have these systems proven to be sufficient? If not, what alternatives can be brought on line? C.Management Oversight 1.How often does management monitor: a.Prices? b.Competition? c.Distribution? 2.How often does management monitor the sales force? 3.Has this brought measurable improvements? 4.By what method does management monitor and control product quality? 5.What problems have been uncovered? 6.What solutions are in place? 7.Has quality improved after these solutions were put in place? 8.How often are marketing costs monitored? 9.What cost-saving measures have been put in place? 10.What quality-improving measures have been put in place? 11.How often does management monitor customer satisfaction? 12.What steps have been taken to improve customer satisfaction? 13.What effect, if any, has this had on market share? D.Product Development 1.What system does the company use to determine what new products should be developed? 2.What financial resources are devoted to research and development? 3.Is this a sufficient amount? 4.What products has the system developed since the implementation of the marketing plan? 5.What system is used to test these new products in the marketplace? 6.What has been the reaction of the marketplace to these products? 7.Have any of the recently developed products been “rolled out” in the actual marketplace? 8.What have been the results? V. ELEMENTS

This section looks at the suitability of the marketing components as separate issues.

A.Products 1.Does the current product line meet original objectives? 2.Has sufficient customer surveying been done to determine if the product line is meeting market needs? 3.What are the specific opinions that customers have regarding the product line? 4.Should the line be expanded or contracted? 5.Is the company financially prepared to develop new products?

B.Pricing 1.Has current pricing met the objectives of the marketing plan? 2.Do consumers find the pricing to be competitive? 3.Do consumers believe they receive the correct value for the price? 4.Has the elasticity of demand been tested in the marketplace? 5.What were the results? 6.What input do external members of the distribution chain have upon the price to the end-user?

7.Is this effect considered exorbitant? 8.What discounting methods are open to the company? 9.Will discounting improve market share? 10.What cost changes will be affecting pricing in the near future? 11.If costs are rising, will consumers be sympathetic to these cost increases? 12.If costs are declining, will the savings be passed along to consumers or retained as profit? 13.Does the company need to redesign its pricing structure? C.Distribution 1.Is the current distribution deemed sufficient? 2.Which members of the chain are the least efficient? 3.Can the company keep distribution completely internal? 4.Will this increase efficiency? 5.Does the end-user absorb excessive distribution costs? D.Sales team 1.What is the composition of the sales team? 2.Have they proven to be effective? 3.Do they have clearly stated objectives? 4.How are the sales quotas developed and distributed? 5.Does the team need to be expanded to meet sales goals? 6.Have they received sufficient training? 7.Do they have sufficient product knowledge and sales technique? 8.Are they properly compensated by marketplace standards? 9.Are they local or expatriate? 10.What percentages of each? 11.What steps are taken by management to maintain morale? 12.Are they regularly evaluated? 13.How do competitive sales forces rank compared to the sales team?

E.Public relations 1.What image does the company currently have in the marketplace? 2.Does the public’s image of the product line match the objectives of the company? 3.Are there sufficient financial resources devoted to advertising, promotions, and goodwill development? 4.What external factors are affecting the company’s image? 5.Can these external factors be controlled? If so, how? VI. PROFITABILITY

Present financial statements that detail the profit or loss of each product for the market in comparison to the forecast from the original marketing plan. All costs from the marketing effort should be taken into account, although some (e.g., goodwill, pre-entry research) may be amortized over an extended period. VII. REPORTING

The report should be presented objectively, and even when the audit is performed internally, it should have the tone of external observation. Mediumsized companies may consider assigning segments of the audit to various departments to investigate areas outside of their normal authority. Small companies may wish to conduct the audit in a seminar fashion, with results being presented at a management meeting.