Acknowledgement

This assignment was prepared for the purpose of getting the understanding about marketing audit and its

important part is concerned. I’m really grateful to our Strategic Marketing Management Lecture Mr.

------------------------------------------for giving advice for this assignment. As well as I thank to all those who

helped in the preparation of this assignment.

Thank you for all

Marketing audit: Simple definition

Marketing audit refers to the strategic tool used to review the effectiveness of a marketing
program. A marketing audit is a comprehensive, systematic, periodic evaluation of a
company's marketing capabilities. The audit examines the goals, policies, and strategies of
the marketing function as well as the methods of the organization and the personnel who
carry out the goals, policies, and strategies of the marketing function. Marketing audits are
performed on a regular basis by an unbiased, independent company and are used to improve a
company's overall marketing performance or to establish new marketing plans. It is
conducted not only at the beginning of the process, but also at a series of points during the
implementation of the plan. The marketing audit considers both internal and external
influences on marketing planning, as well as a review of the plan itself.

A more elaborate approach to marketing audit.

The element most common to marketing strategies and tactics among companies in the 1980's is the
rate at which they become out of date. The rapid changes in interest rates, employment, fuel costs,
international exchange rates, technology, competitive offerings, consumer tastes, as well as the
many other elements in the macro environment quickly make today's marketing activities obsolete.
Unfortunately, all too often many companies do not readily recognize how these changes have
diminished the effectiveness of their otherwise carefully nurtured marketing programmes. For
example, they see falling sales and undertake changing salesmen's compensation schemes or
reorganizing sales territories. Alternatively, the distribution channel or pricing policies may receive
the focus of attention as sales languish. The element or elements of the marketing mix to get
evaluated closely is often the result of a managerial hunch or predisposition to believe that a certain
functional area is primarily responsible for the faultering performance. Rarely do the managers step
back and question the basic assumptions underlying the grand strategic design or see how the
system is operating as an integrated whole. A special evaluation procedure, however, has been
developed to do this. It is called a marketing audit.
Nathan D. Kling, (1993) "The Marketing Audit: An Extension of the Marketing Control Process",
Managerial Finance, Vol. 11 Iss: 1, pp.23 – 26

How to prepare a marketing audit

There are a number of tools and audits that can be used, for example SWOT analysis for the
internal environment, as well as the external environment. Other examples include PEST and
Five Forces Analyses, which focus solely on the external environment.

In many ways the marketing audit clarifies opportunities and threats, and allows the
marketing manager to make alterations to the plan if necessary.

This lesson considers the basics of the marketing audit, and introduces a marketing audit
checklist. The checklist is designed to answer the question, what is the current marketing
situation? Lets consider the marketing audit under three key headings:

 The Internal Marketing Environment.

 The External Marketing Environment.
 A Review of Our Current Marketing Plan.

1.The Internal Marketing Environment.

What resources do we have at hand? (i.e. The FIVE 'M's):

 MEN (Labor/Labour).
 MONEY (Finances).
 MACHINERY (Equipment).
 MINUTES (Time).
 MATERIALS (Factors of Production).

 How is our marketing team organised?

 How efficient is our marketing team?
 How effective is our marketing team?
  How does our marketing team interface with other organisations and internal
functions?
 How effective are we at Customer Relationship Management (CRM)?
 What is the state of our marketing planning process?
 Is our marketing planning information current and accurate?
 What is the current state of New Product Development? (Product)
 How profitable is our product portfolio? (Product)
 Are we pricing in the right way? (Price)
 How effective and efficient is distribution? (Place)
 Are we getting our marketing communications right? (Promotion)
 Do we have the right people facing our customers? (People)
 How effective are our customer facing processes? (Process)
 What is the state of our business's physical evidence? (Physical Evidence)

2. The External Marketing Environment.

As a market orientated organisation, we must start by asking - What is the nature of our
'customer?' Such as:

 Their needs and how we satisfy them.

 Their buyer decision process and consumer behaviour.
 Their perception of our brand, and loyalty to it.
 The nature of segmentation, targeting and positioning in our markets.
 What customers 'value' and how we provide that 'value?.'

What is the nature of competition in our target markets?

 Our competitors' level of profitability.

 Their number/concentration.
 The relative strengths and weaknesses of competition.
 The marketing plans and strategies of our competition.

What is the cultural nature of the environment(s)?

 Beliefs and religions.

 The standards and average levels of education.
 The evolving lifestyles of our target consumers.
 The nature of consumerism in our target markets.

What is the demography of our consumers? Such as average age, levels of population, gender
make up, and so on. How does technology play a part?

 The level of adoption of mobile and Internet technologies.

  The way in which goods are manufactured.
 Information systems.
 Marketing communications uses of technology and media.

What is the economic condition of our markets?

 Levels of average disposable income.

 Taxation policy in the target market.
 Economic indicators such as inflation levels, interest rates, exchange rates and
unemployment.

Is the political and legal landscape changing in any way?

 Laws, for example, copyright and patents.

 Levels of regulation such as quotas or tariffs.
 Labour/labor laws such as minimum wage legislation.

3. A Review of Our Current Marketing Plan

 What are our current objectives for marketing?
 What are our current marketing strategies?
 How do we apply the marketing mix? (Including factors covered above in (a))
 Is the marketing process being controlled effectively?
 Are we achieving our marketing budget?
 Are we realising our SMART objectives?
 Are our marketing team implementing the marketing plan effectively?

 Levels of staffing.
 Staff training and development.
 Experience and learning.

What is our market share? (total sales/trends/sales by product or customer or channel) Are we
achieving financial targets? (profit and margins/ liquidity and cash flow/ debt: equity ratio/
using financial ratio analysis)

Definition of some of the key terms used above.

Five forces analysis

Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities
with other tools for environmental audit, such as PEST analysis, but tends to focus on the single,
stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of
products. For example, Dell would analyse the market for Business Computers i.e. one of its SBUs.
Five forces analsysis looks at five key areas namely the threat of entry, the power of buyers,
the power of suppliers, the threat of substitutes, and competitive rivalry.

The threat of entry.

 Economies of scale e.g. the benefits associated with bulk purchasing.
 The high or low cost of entry e.g. how much will it cost for the latest technology?
 Ease of access to distribution channels e.g. Do our competitors have the distribution
channels sewn up?
 Cost advantages not related to the size of the company e.g. personal contacts or
knowledge that larger companies do not own or learning curve effects.
 Will competitors retaliate?
 Government action e.g. will new laws be introduced that will weaken our competitive
position?
 How important is differentiation? e.g. The Champagne brand cannot be copied. This
desensitises the influence of the environment.

he power of buyers.
 This is high where there a few, large players in a market e.g. the large grocery chains.
 If there are a large number of undifferentiated, small suppliers e.g. small farming
businesses supplying the large grocery chains.
 The cost of switching between suppliers is low e.g. from one fleet supplier of trucks
to another.

The power of suppliers.

The power of suppliers tends to be a reversal of the power of buyers.

 Where the switching costs are high e.g. Switching from one software supplier to
another.
 Power is high where the brand is powerful e.g. Cadillac, Pizza Hut, Microsoft.
 There is a possibility of the supplier integrating forward e.g. Brewers buying bars.
 Customers are fragmented (not in clusters) so that they have little bargaining power
e.g. Gas/Petrol stations in remote places.

The threat of substitutes

 Where there is product-for-product substitution e.g. email for fax Where there is
substitution of need e.g. better toothpaste reduces the need for dentists.
 Where there is generic substitution (competing for the currency in your pocket) e.g.
Video suppliers compete with travel companies.
 We could always do without e.g. cigarettes.

Competitive Rivalry
 This is most likely to be high where entry is likely; there is the threat of substitute
products, and suppliers and buyers in the market attempt to control. This is why it is
always seen in the center of the diagram.

Strengths, Weaknesses, Opportunities and Threats

(SWOT).
SWOT analysis is a tool for auditing an organization and its environment. It is the first stage
of planning and helps marketers to focus on key issues. SWOT stands for strengths,
weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors.
Opportunities and threats are external factors.

In SWOT, strengths and weaknesses are internal factors.

For example:

A strength could be:

 Your specialist marketing expertise.

 A new, innovative product or service.
 Location of your business.
 Quality processes and procedures.
 Any other aspect of your business that adds value to your product or service.
A weakness could be:

 Lack of marketing expertise.

 Undifferentiated products or services (i.e. in relation to your competitors).
 Location of your business.
 Poor quality goods or services.
 Damaged reputation.

In SWOT, opportunities and threats are external factors.

For example:

An opportunity could be:

 A developing market such as the Internet.

 Mergers, joint ventures or strategic alliances.
 Moving into new market segments that offer improved profits.
 A new international market.
 A market vacated by an ineffective competitor.

A threat could be:

 A new competitor in your home market.

 Price wars with competitors.
 A competitor has a new, innovative product or service.
 Competitors have superior access to channels of distribution.
 Taxation is introduced on your product or service.

What is PEST Analysis?

It is very important that an organization considers its environment before beginning the
marketing process. In fact, environmental analysis should be continuous and feed all aspects
of planning.

he organization's marketing environment is made up of:

1. The internal environment e.g. staff (or internal customers), office technology, wages and
finance, etc.

2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our
competitors, etc.

3. The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural
forces, and Technological forces. These are known as PEST factors.

Political Factors.
The political arena has a huge influence upon the regulation of businesses, and the spending
power of consumers and other businesses. You must consider issues such as:

1.How stable is the political environment?

2.Will government policy influence laws that regulate or tax your business?

3.What is the government's position on marketing ethics?

4. What is the government's policy on the economy?

5. Does the government have a view on culture and religion?

6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or

others?
Economic Factors.
Marketers need to consider the state of a trading economy in the short and long-terms. This is
especially true when planning for international marketing. You need to look at:

1. Interest rates.

2. The level of inflation Employment level per capita.

3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so
on.

Sociocultural Factors.
The social and cultural influences on business vary from country to country. It is very
important that such factors are considered. Factors include:

1. What is the dominant religion?

2. What are attitudes to foreign products and services?

3. Does language impact upon the diffusion of products onto markets?

4. How much time do consumers have for leisure?

5. What are the roles of men and women within society?

6. How long are the population living? Are the older generations wealthy?

7. Do the population have a strong/weak opinion on green issues?

Technological Factors
Technology is vital for competitive advantage, and is a major driver of globalization.
Consider the following points:

1. Does technology allow for products and services to be made more cheaply and to a better
standard of quality?

2.Do the technologies offer consumers and businesses more innovative products and services
such as Internet banking, new generation mobile telephones, etc?

3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets,
auctions, etc?

4.Does technology offer companies a new way to communicate with consumers e.g. banners,
Customer Relationship Management (CRM), etc?