UNDERSTANDING & APPLICATIO N OF MARKETING AUDIT

Th e R e port Pr epa re d b y, CM /20 05/ 183 L. H. S. R a nat hun ga

Su bj ec t: St rat eg ic Ma rk et in g Ma na ge men t (B MKT 3 2054 ) Le ct ur er: Mr . Aj it h P. Med is
nd Se me ste r: 3rd Ye a r 2nd Se me ste r, 2 009

Department of Marketing Management University of Kelaniya

ACKNOW LEDG EMENT

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. Ajith P. Medis 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.

P a g e |1 CONTENT Acknowledgment Introduction Introduction to Marketing Audit Components of Marketing Audit Marketing Environmental Audit Marketing Strategy Audit Marketing Organization Audit Marketing System Audit Marketing Productivity Audit Marketing Functions Audit Tools and Techniques of Marketing Audit SWOT Analyses PEST Analyses Five Forces Analyses The Marketing Audit Process Where to focus Company Marketing Efforts References 02 03 06 06 07 08 08 09 09 10 10 14 17 20 21 23 The Marketing Audit .

company can easily identify for what area or areas the company should focus on. The next part is the marketing audit process. By doing a marketing audit. marketing organization audit. The Marketing Audit . marketing productivity audit and marketing function audit. The next part is components of marketing audit. The final part in this report is where to focus company marketing efforts. The first part is introduction to marketing audit. PEST analysis and five forces analysis. marketing system audit.P a g e |2 INTROD UCTION This assignment is focused on to understand the meaning of marketing audit and some relating parts. tools and techniques that used by marketing audit. These three tools are explained briefly under that part. marketing audit process and the part that focus on marketing effort for where. there are six components under marketing audit such as marketing environmental audit. here discuss about the marketing audit and its characteristics and benefits and advantages that can be obtained by performing a marketing audit. It consists of main two parts and it describe very briefly in this part. and all the components are discussed in this part. The third part is tools and techniques that can be used by marketing auditor to evaluate the marketing performance of an organization. In this assignment has been included components of marketing audit. Mainly there are three tools such as SWOT analysis. marketing strategy audit.

for example SWOT analysis for the internal environment. Here the marketing audit is used some tools to evaluate marketing performance of an organization. The external environment is examined on both micro and macro levels. Other examples include PEST and Five Forces Analyses. According to definition of Phillip Kotler. can be identified some characteristics of marketing audit. The marketing audit considers both internal and external influences on marketing planning. the marketing audit also analyzes the internal environment. In addition to this analysis of the external environment. The marketing audit has been defined by Phillip Kotler as a comprehensive. as well as a review of the plan itself. The marketing audit can be viewed as an “umbrella” that covers efforts to assess customer needs and wants and to understand community patterns. including scanning for developing trends. but also at a series of points during the implementation of the plan. systematic. The Marketing Audit .P a g e |3 INTROD UCTION TO MARKETING AUDIT The marketing audit is a fundamental part of the marketing planning process. It is conducted not only at the beginning of the process. independent and periodic examination activities and resources in order to determine problem areas and opportunities and to recommend a plan of action. as well as the external environment. which focus only on the external environment.

In that situation most of the organization has chosen to operate a business. The latter would be called a functional audit if it covered only the sales force. The marketing audit involves an orderly sequence of diagnostic steps covering the organization's marketing environment. It promises benefits for the organization that is seemingly successful. perplexity or difficulty  Pl an of a c ti on – process of doing or performing From this overall definition and sum of its parts. The marketing audit should normally be carried out periodically instead of only when there is a crisis. The marketing audit is normally conducted by an inside or outside party who has sufficient independence from the marketing department to attain top management's confidence and the needed objectivity. The diagnosis is followed by a corrective action plan involving both short-run and long-run proposals to improve the markets. internal marketing system. as well as the one that is in deep trouble. both within and without  Ob je ct iv es – worked toward or striven for . The marketing audit covers all the major marketing issues facing an organization.  Syst e ma ti c. and measurable  St rat e gie s – plans of action  Ac ti vi ti es – specified and supervised fields of action  R esou rc es – an available supply that can be drawn on when needed  Pro bl em a re as – situations that present uncertainty .  In de pen de nt . it can be seen that the marketing audit provides a very complete assessment the environment. and specific marketing activities.P a g e |4 Ch a r a ct e r i st ic s of M a rk e t i ng Au d i t  C ompre he nsi ve. and not only one or a few marketing trouble spots.  Pe rio di c. or pricing. Other character is tics  Envi ron men t – the circumstances or conditions surrounding the agency. The Marketing Audit . or some other marketing activity.

Customers' needs and wants are moving targets. While revealing the various drawbacks the audit process also leads to efficiency. top management and investors to ensure that they are doing the right things to help drive growth for their organizations. periodic and a comprehensive procedure of checking out the marketing activities of a concern. channels.  Marketing audits often lead to strategic marketing change.  Marketing audit helps to marketing executives.  A marketing audit can help a company refine its business practices and improve its productivity and profitability. This process can also be used to lay down an improved marketing plan.  The audit provides the marketers with an in depth view of the marketing activities that are going around in the concern.  A marketing audit is a careful examination and evaluation of marketing practices and results. customers.P a g e |5 Ad va nta ge s of M a rk e t in g Au d it A marketing audit can be defined as a systematic.  An audit helps the company determine the value of a sale and a sales lead. It brings out a complete picture of the entire operations of the concern. Some of the other benefits and advantages of marketing audit are as follows. Careful assessment of the changing environment. and marketing programs require testing and retesting to find the most profitable formula.  There are no permanent "right" answers in marketing. The Marketing Audit . and competitors may lead to a reassessment of firm direction. It offers a baseline for performance measurements and a framework for effective business planning to maximize positive external perception and demand generation. A marketing audit is the way to achieve success by providing an interim report card to help the company and their staffs tap into inherent resource.

following two environments are concerned. The marketing audit follows the following areas as components of marketing audit:  Environmental Audit   Macro Environmental Audit Task Environmental Audit      Marketing Strategy Audit Marketing Organization Audit Marketing System Audit Marketing Productivity Audit Marketing Functions Audit Mark eti ng E nvi ron ment Audi t The auditor is firstly started their audit by looking at the factors that affect all companies operating in marketplace. Then the marketing audit will move to examine the company’s marketing objectives and strategies. because these are very important under the marketing audit. and also looking at their customers and their profits. The marketing auditor may move to examine one or two key functions in more detail that are important to the marketing performance of the company.P a g e |6 C OMPONENT OF THE MARKETING AU DIT Marketing audit should start with the market place at beginning and should explore the changes that are happening in the marketplace. Under marketing environment audit.  The macro-environment  The task environment The Marketing Audit . organization and systems.

product safety.market size. the macro environment covers some environmental factors.changes in laws and regulations might affect marketing strategy and tactics and the changes in the areas of pollution control. savings and credit will affect the company under that. Suppliers. the detail depending on the involvement of the business and involvement required by the industry.changes occurring in product and process technology and company's position in these technologies. like. Mark eti ng St rat egy Audi t The marketing strategy audit is vital for company. The task environment audit is evaluated under Markets . the auditor may concern following type of questions: The Marketing Audit . Under strategy evaluation. equal employment opportunity. and the marketing audit is make sure that the company’s marketing strategy is fit with company’s marketing goals and objectives as well as corporate goals and objectives.major demographic developments and trends pose opportunities. Environmental factors. Technological factors . Facilitators & marketing firms and Publics. Political factors . Under marketing audit. sales force and price. Under the marketing strategy audit. Competitors. service. Demographics . Economical factors developments in income. the auditor evaluate marketing performance by evaluating marketing goals and objectives. Distribution & dealers. growth. T ask -Env ironm ent Audit How competitive is the marketplace? What are competitors doing. price control.public's attitude towards business and toward the company's products and changes in customer lifestyles and values might affect the company. under customers customers' needs and buying processes and also product quality. advertising. geographical distribution and profits and major market segments. and are they doing it well? What might they be preparing to do? These are all vital to understand in preparing yourselves for the battle. company mission the move to the strategy of organization. prices. that affects the marketing strategy of company. Cultural .P a g e |7 Ma cro-E nvi ronment al Audit The Macro-environmental component examines six main areas.

Here the marketing auditor task is to make sure whether the systems are properly worked or not. And also following types of questions are considered by marketing auditors:  Are there good communications and working relations between marketing and sales?  Is the product-management system working effectively?  Are product managers able to plan profits or only sales volumes? Mark eti ng Sy ste ms Audi t Here the marketing auditor is considered whether the company is using appropriate marketing systems to collect the information. financing as well as research and development. control the operations and to maintain smoothly their day to day activities and whether these systems are properly worded within the company or not. the marketing auditor must consider under marketing systems audit. plan the activities.P a g e |8  Has the management articulated a clear marketing strategy for achieving its marketing objectives?  Is the strategy convincing?  Is the company using the best basis for market segmentation?  Does the company have clear criteria for rating the segments?  Has the company developed an effective positioning and marketing mix for each target segment? Mar k eti ng O r gani zat i o n Audit The marketing organization audit is mainly considered effectiveness of the organization activities as well as efficiency of operation of company. Such as marketing information systems. The Marketing Audit . purchasing. Most of the organizations are today having different type of marketing systems to collect the information and control the operation. These systems have its own functions. Here all the activities and main management functions are considered such as manufacturing. marketing planning systems. Those are the main things. Here the marketing auditor must make sure that the company is actually achieved the effectiveness within the organization and also within the marketplace. marketing control systems and new product development systems.

expand. place and promotion such as  What are the company's product-line objectives?  Which products should be phased out?  Which products should be added to?  What are the company's pricing objectives. price. Here marketing auditor evaluates marketing performance by asking questions under product. The marketing auditor is used profitability analysis and cost effectiveness analysis for their evaluation process.P a g e |9 Mark eti ng P roduct i vi t y Audi t Most of the companies are operating to earn so much of profits. territories and channels of distribution?  Should the company enter. Under the marketing productivity audit. the auditor is using marketing mix elements to analyze company functions such as product. So the marketing productivity audit is very important to evaluate the marketing performance. price. strategies and procedures?  To what extent are the prices set on cost. contract or withdraw from any business segments?  Do any marketing activities seem to have excessive costs?  Can cost-reducing steps be taken? Mark eti ng F unct i o n Audi t Under the marketing function audit. The marketing productivity audit is focused on evaluate the company profits and revenue. demand and competitive criteria?  Do the customers see the company's prices as being in line with the value of its offer?  What are the organizations’s advertising objectives?  Is there adequate market coverage and service?  Should the company consider changing its distribution channels?  Is the right amount being spent on advertising?  What do customers and the public think about the advertising? The Marketing Audit . place and promotion. markets. policies. following type question asked by marketing auditor:  What is the profitability of the company's different products.

most of the companies are used this SWOT analysis as tools to evaluate the marketing performance of an organization. It is not only carried out at the beginning of the marketing planning process but also it can be implemented during the marketing planning process. They can include assets. However. skills.P a g e | 10 MARKETING AUDIT TOOLS AND TECHNIQUES Marketing audit is very important and crucial part in the marketing planning process. This tool is very much important to marketers and is used at the beginning of the marketing audit process. The SWOT analysis can be express as below: Strengths and weaknesses are internal factors that create value or destroy value. Weaknesses. Strengths and weaknesses are internal factors. or resources that a company has at its disposal. The Marketing Audit . Opportunities and Treats analysis. The following analysis tools are utilized during a marketing audit: SWOT Analysis The one of the most importance tools in the marketing audit is SWOT analysis or can be express as Strength. The SWOT has lot of advantage as well as it has some disadvantages. compared to its competitors. Opportunities and threats are external factors. They can be measured using internal assessments or external benchmarking. and threats. opportunities. Here there are number of marketing audit tools and techniques that are used during the marketing planning process to evaluate the marketing performance of an organization. weaknesses. SWOT stands for strengths. Some of disadvantage of SWOT analysis are that it is very subjective and cannot be relied on too much. The marketing audit can be influenced on marketing planning process through various external and internal factors.

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 So me we ak ne sses o f a n or ga niz a ti on a re a s fol lo ws:  Lack of marketing expertise  Undifferentiated products or services (i. A company cannot control them.e.P a g e | 11 Internal Strengths Weaknesses SWOT Opportunity Threats External So me str en gth s of an org ani z at io n a re as f oll ow s:  Your specialist marketing expertise  A new. But they emerge from either the competitive dynamics of the The Marketing Audit . in relation to competitors)  Location of your business  Poor quality goods or services  Damaged reputation Opportunities and threats are external factors that create value or destroy value.

 Competitors have superior access to channels of distribution. So me op por tun it ie s of an org an iz at io n a re as fol low s:  A developing market such as the Internet  Mergers. or even company own skills and experience. technical. To do this auditor match external opportunities and threats with company internal strengths and weaknesses. TW O S M at ri x The auditor can use this TWOS analysis to analyze external environment (threats and opportunities). as illustrated in the matrix follows: The Marketing Audit . legal or cultural factors (PEST). innovative product or service. economic.  A competitor has a new. social. TOWS Matrix. a department or a team. Auditor can also use them to think about a process. 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 So me t hre at s of an org an iz at io n a re as f oll ow s:  A new competitor in your home market. helps the auditor to think about the options that company could pursue.  Taxation is introduced on your product or service. The auditor can use this technique to think about the strategy of whole organization. and internal environment (weaknesses and strengths).  Price wars with competitors. political.P a g e | 12 industry/market or from demographic. a marketing campaign.

Internal Weaknesses (W) 1. 3. WO WT "Mini-Maxi" Strategy "Mini-Mini" Strategy Strategies that minimize weaknesses Strategies that by taking advantage minimize weaknesses and avoid threats. opportunities.How can company use their strengths to take advantage of the opportunities?  Strengths and Threats (ST) . 4. 2.P a g e | 13 TO WS St rategic A lte rnat ives M atrix External Opportunities (O) 1. minimize threats. Internal Strengths SO ST (S) "Maxi-Maxi" Strategy "Maxi-Mini" Strategy 1. of opportunities. External Threats (T) 1. 4. 2. strengths to maximize strengths to 4. This helps the auditor to identify strategic alternatives that address the following additional questions:  Strengths and Opportunities (SO) . 4. 2.How can company minimize their weaknesses and avoid threats? The Marketing Audit . 3.How can company use their opportunities to overcome the weaknesses company is experiencing?  Weaknesses and Threats (WT) . 3.How can the company take advantage of their strengths to avoid real and potential threats?  Weaknesses and Opportunities (WO) . Strategies that use Strategies that use 3. 2.

and the spending power of consumers The Marketing Audit . This analysis tool is extremely important to any marketing audit.P a g e | 14 PE ST A naly si s Here a marketing analysis should be taken into consideration all the environmental factors and will give it a careful analysis. The PEST analysis can be express as follows. P E PEST Analysis Political Environment S T Social Technological Pol iti cal Factors Political factors can have a direct impact on the way business operates. Political refers to the big and small ‘p’ political forces and influences that may affect the performance of. simple or complex. The PEST analysis tool is a valuable framework for identifying opportunities and threats in the macro (external) environment. as it drives the company to investigate what factors may help or impede them to carry out business and marketing activities. The internal factors consist of the staff and queries related to them. This PEST analysis has various factors that have an effect on the marketing planning process. The external would be the external customer and the various distributors and the political and economic factors are also taken into consideration. These environmental factors may be internal or external. Decisions made by government affect the operations of units within the company to a varying degree. or the options open to the unit concerned. The political factors have a huge influence upon the regulation of public and private sector businesses. It works through the various components of the macro environment and prompts the company to look at the specific areas in depth.

and influence outsourcing decisions. New technology is changing the way business operates. T echnol ogic al Fact ors New approaches to doing new and old things and tackling new and old problems do not necessarily involve technical factors. recession or recovery will also affect consumer confidence and behavior. and upon the financial resources. upon service provision.P a g e | 15 and other businesses. Soc ial /Cul tural Fac tors Social factors will include the demographic changes. technological factors are vital for competitive advantage. factors can for example lower barriers to entry. however. work and think and cultural aspects of the macro environment. Whether an economy is in a boom. The Internet is having a profound impact on the strategy of organizations. trends in the way people live. reduce minimum efficient production levels. and are a major driver of change and efficiency. rate of technological change. and the state of the internal/external economy in the short and long-term. The unit may need to consider: economic growth. career attitudes. interest rates. The Marketing Audit . Technological revolution means a faster exchange of information beneficial for businesses as they can react quickly to changes within their operating environment. Technological. These factors affect customer needs and the size of potential markets such as population growth rate. This will impact upon the nature of the competition faced by the company and particular units within the company. internal/external emphasis on safety and internal/external attitudes to change. For examples automation. inflation rate and inflation rate. Ec onom i c Fact or s All businesses are affected by economical factors nationally and globally. Political factors include government regulations and legal issues and define both formal and informal rules. perception of technological change within the unit and stakeholder expectation. Economic factors affect the purchasing power of potential customers. technology incentives. age distribution.

it leads to economics of large scale with the help of mass purchasing and sales. This is also very effective analysis to audit the marketing performance of an organization. Rivalry among competitors T he threat of subs tit ute product s The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand). In this analysis the marketer basically goes through five basic areas of concern. The areas can be identified into five areas as threat of substitute products. rivalry among competitors. ows. So this analysis can be express as follows.   buyer propensity to substitute relative price performance of substitutes The Marketing Audit . bargaining power of customers and bargaining power of suppliers.P a g e | 16 F ive For ce Ana lyse s This Five Force analysis is very effective analysis that enables the marketer to have a clear picture of the competition and it can measure the attractiveness of the industry. There are some advantages in this analysis. threat of new entrants .

rights. This results in many new entrants. labor. this is the major determinant of the competitiveness of the industry.g. Unless the entry of new firms can be blocked by incumbents.P a g e | 17 T hreats of new entr ants Profitable markets that yield high returns will draw firms. and services (such as expertise) to the firm can be a source of power over the firm.  The existence of barriers to entry (patents.)  Economies of product differences  Brand equity Riv alr y among c ompet itors For most industries.  Buyer concentration to firm concentration ratio  Degree of dependency upon existing channels of distribution T he ba rgai ning power of suppl iers Suppliers of raw materials. etc. or e. etc. marketing. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation.  Supplier switching costs relative to firm switching costs  Degree of differentiation of inputs  Presence of substitute inputs  Supplier concentration to firm concentration ratio The Marketing Audit . which will effectively decrease profitability. Suppliers may refuse to work with the firm.  Number of competitors  Rate of industry growth  intermittent industry overcapacity T he ba rgai ning power of cus tomers The ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes. the profit rate will fall towards a competitive level (perfect competition). components. charge excessively high prices for unique resources.

P a g e | 18 The Marketing Audit P rocess Auditors must prepare for the marketing audit by holding discussions with the CEO and executive staff. and briefly reviewing some financial and marketing data. and analyses that help them understand the firm's marketing strategy and business processes. reports. advertising. The first part begins with a meeting between the auditors and business unit management. organization chart. T he Mark eti ng Audit P roces s Par t I Review background materials: financial results. credit operations. business plans. shipping. time frame and expected audit output. and cost differentials that distinguish the business from competition. procedures. order entry. then others are designated for potential interviews and provision of operating and financial information. The auditors typically tour manufacturing and other operations areas to better understand product features. quality levels. The auditors collect memos. and reviews of the unit's financial statements. research and development. and manufacturing engineering. The auditors explain objectives. Audits are often in two parts. and organizational plans exhibit as follows. The auditors also review customer service. and required participation from each manager. Interview management and tour facilities Ride with salespeople and visit customers Hold interim meetings to discuss findings and likely alternatives Par t II Gather additional information:   Additional management and salesperson interviews Interview and written surveys with customers and trade The Marketing Audit . Participation usually comprises an initial two-hour interview. product literature.

sales results. First. Auditors surface these views by using unattributed quotes when reporting findings. salespeople are notoriously irreverent regarding "what's really going on" at headquarters. many questions are asked of several managers to elicit different perspectives. Manager candor is particularly important when two or more powerful executives hold opposing views. they conduct a library search for independent published material on the firm. firm competitiveness. auditors usually take two parallel steps. Following these steps. Good auditors project a professionalism in understanding the business and maintaining confidences that allows business unit managers to "open up" on controversial topics. After initial interviews. Managers discuss their responsibility areas in depth. rivalries. All interview data are confidential. Visits with salespeople provide invaluable "soft" data. and where the organization is functioning well and poorly. Competent auditors continually draw upon their experience to probe the consistency. and industry. Hold work sessions to develop marketing strategy and next steps for implementation. including manager disagreements. marketing budgets Perform analysis and develop alternatives. competition. sales and purchase processes.P a g e | 19     Internal written survey Outside expert interviews Competitor interviews Product costs and profits. auditors gather clues in several areas including market needs.to three-hour working session. Through this process. they become familiar with the sales force and customer buying behavior by making joint customer calls. the auditors analyze and organize information and report key issues and observations to the management team in a two. and favoritisms. Managerial interviews are conducted. Surfaced The Marketing Audit . Second. appropriateness and sufficiency of the firm's marketing plans and actions.

Finally.P a g e | 20 issues are discussed and preliminary ideas for eventual audit outcome and alternative action courses are laid out. Management is formally surveyed to compare its views on the firm and competition with customer viewpoints. The audit concludes with the presentation of findings and recommendations. and actions is formed. The second part of the audit is typically more time consuming than the first part. all data must be analyzed. detailed analysis of internal financial. The goal is to gain a common understanding of audit findings so a consensus on future marketing needs. opportunities. analysis of competitive products. interviews with industry experts. It comprises customer and trade surveys. first privately to the CEO and one or two executive staff. and then at a day-long meeting with the entire management group. and operating information. further secondary data gathering. evaluation of marketing strengths and weaknesses. The Marketing Audit . and second managerial interviews. sales.

the audit will help company to identify the key groups of People Company is reaching and plan company promotional efforts to reinforce the image that company want. in easily accessible ways to the right people.The services or outputs company offers. The Marketing Audit . The audit helps company to address their action goals by organizing information to help company see if the company is providing the right services at the right prices.   P ri ce .   P roducti on – company capacity for meeting demand. company marketing team should identify target areas for the marketing efforts.P a g e | 21 WHERE TO FOCUS COMPANY MARKETING EFFORTS After establishing marketing goals. P lace . a marketing audit assesses the marketing mix. To meet company image goals. P opula tions . or the combination of efforts that an organization makes to increase knowledge about and demand for its target populations. To do this. or a combination of:   A marketing audit to understand the current internal marketing status of organization Market research to find out from company target population what their perceptions organization and other organizations are Performing a marketing audit.The locations where company product is available and ways in which company population can access company product.The communication techniques and messages company uses to motivate people to respond. P romoti on . The key elements of the marketing mix that company should assess are:   P roduct . and if the company has the capacity to produce the quantities of services demanded.The amount company charges for each service. company should conduct either.The groups with whom company makes exchanges of services for resources.

company should be able to identify where company need more information.P a g e | 22 For the audit. As a result of the marketing audit. company and their marketing team will look at service records. the community. and collect information from staff. where company needs to make adjustments in the current mix. If company decides to assess a number of departments. Company can conduct an in-depth audit where company gather a great deal of information over six months or perform a quicker audit to identify troublesome areas. and what features and benefits company should promote. The Marketing Audit . clients. company will want to perform a separate audit for each. and others who know company’s target populations well. make observations in the facility.

Rodgers.P a g e | 23 REFERENCES  Auditing the Marketing Function: William H. 3 edition: Richard M. Hamilton Consultants Philip Kotler.  Marketing/planning library and information services. Osborne. William Gregor and William Rogers rd th edition. implementation and control. Wilson.S. Weingand  The Marketing Audit Comes Of Age: Philip Kotler. Products. Planning. how to use them. Hamilton Consultants Gerard A. 6 McDonald  Strategic Marketing Management. how to prepare them. 2nd edition: Darlene E. Northwestern University  Marketing Plan. David Parmerlee.: Malcolm The Marketing Audit . and Marketing Plans. Colin Gilligan (2005)  Auditing Markets.

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