Peter Drucker, the management guru, once said: “If you can't measure it, you can't improve it”. A powerful statement that lies the foundation of modern management and marketing alike. If don’t measure your performance, simply you cannot improve it. If you don’t know your customers, then you cannot offer products and services that fulfils their requirements. If you don’t know what your competitors are doing, then you cannot differentiate and innovate.
Fortunately, there are tools that can actually help do exactly that: to measure so to improve. Moreover, measuring your performance allows you to take better decisions and see what it works and what it doesn’t.
A very important step in analysing and shaping your marketing strategy is to audit the marketing function and related strategies. Marketing accountability demands from marketers to be able to effectively measure the performance of their marketing strategies, tactics and overall department.
What Is A Marketing Audit?
A marketing audit is a structured approach to the collection and analysis of information and data on the internal and external environment, including information on the business and economic climate, the market, competition, and the company’s operating performance. The audit is an essential prerequisite to formulating your marketing strategy.
A marketing audit is a structured survey of an organisation’s Marketing efforts. It looks at the way Marketing is planned and managed. It asks what has been done and what else should be done. In other words:
what has worked?
and what has failed?
A market audit builds the foundation for future marketing decisions. The golden rule in performing a market audit is that you must be objective and translate market data as they truly are. This means that the audit shouldn’t just be structured around your product, service, or business but also around the customer and market signals. The audit is based on market research activities and must be completely independent from research on the performance of your product, service, or business.
Characteristics of The Marketing Audit
A valuable and successful marketing audit must have the following characteristics:
Comprehensive – The marketing audit covers all the major marketing issues facing an organisation, and not only one or a few marketing trouble spots (the latter would be called a functional audit).
Systematic – The marketing audit involves an orderly sequence of diagnostic steps covering the organization’s marketing environment, internal marketing system, and specific marketing activities. The diagnosis is followed by a corrective action plan involving both short-run and long-run proposals to improve the markets.
Independent – The marketing audit is normally conducted by an inside or outside party who has enough independence from the marketing department to attain top management’s confidence and the required objectivity.
Periodic – The marketing audit should normally be carried out periodically instead of only when there is a crisis.
How Often A Marketing Audit Should Be Performed
Because of the constantly varying business environment, marketing audit is frequently required, not only at the beginning of the planning process, but along with the implementation stage, providing also ground for evaluating possible future courses of action.
Marketing audit on a regular basis is a strong reference point, reflecting evolution in external business environment, internal experience and strategy development.
Some companies will perform a complete audit every year. Others will conduct an audit every four years, with modiﬁed versions used in between. Depending on the complexity of a given industry and the amount of growth or change it is experiencing, the timing of a marketing audit will differ. The key is to perform a complete audit in establishing your marketing approach, and then update that information as you feel it is warranted.
Marketing audits many times are ordered only after the control charts indicate that the marketing situation is no longer under control. The marketing crisis has occurred and there is panic scrambling to discover the reasons why sales are in a steep decline. A marketing audit can be a useful measure at such times providing it has not arrived too late for recommendations to affect a turn around. A better procedure, therefore, would be to have had a regular audit when things appeared to be going well in the same way an apparently healthy individual might take a regular medical exam. An audit during “good times” which would examine areas outside the scope of the normal control procedures may well discover the beginning of strategy obsolescence. How often a firm should conduct a marketing audit will vary with the firm.
The Marketing Audit Process
The complete marketing audit process involves three major steps. These include:
Pre-Audit Activities. Pre-audit activities involve determining who will conduct the audit and when it will be performed. It also involves establishing the scope, objectives and methodology.
The Audit Process. The audit process itself involves several sub steps:
Data Collection. Assembling the information about the macro-environment, the industry, the company as well as the marketing mix is the most expensive and time consuming aspect of the marketing audit.
Information Analysis. This involves evaluating the data collected in an attempt to provide an all-inclusive picture of the company’s marketing program: How well it meets the requirements of the marketing concept in providing for customer needs as well as corporate profitability, facing the competition, adapting itself to changes in the macroenvironment, and how efficient it is in doing this.
Preparing Recommendations. An audit report is prepared based on the strengths and weaknesses identified.
Post-Audit Activities. After the audit report is prepared it must be presented to management and perhaps other groups within the company. The findings and recommendations should be debated. Plans to implement recommendations complete with time table should be drawn up.
The Marketing Audit Team
Selection of the appropriate people to perform the marketing audit is also crucial to its success. The auditor(s) must have experience, know-how, and creative imagination if they are going to be able to discover the problems and foresee opportunities.
Objectivity is also important. An auditor who is drawn from the business unit that is to undergo the audit is unlikely to be able to examine dispassionately the policies and procedures he or his superior helped to create and/or have been responsible for implementing. In such a case the auditor may simply be too close to the system to see it clearly or may be reluctant for political reasons to find fault with co-worker’s or superior’s policies or their efficiency in implementing them.
There are commonly six alternative sources of auditors and, by implication, as many methods of conducting marketing audits:
Self-audit. A company can ask the executive who is directly in charge of an activity to appraise its strengths and weaknesses.
Audit from across. A company can assign persons in a related activity on the same function level to prepare an audit of the neighbouring activity.
Audit from above. The audit can be conducted by the executive to whom the manager reports.
Company auditing office. The company can establish an office with the responsibility for conducting all company marketing audits.
Company task-force audit. The company can appoint a team of company executives with varied backgrounds and experience to conduct the audit.
Outside audit. The company can hire an outside individual or agency to conduct the marketing audit.
It has been suggested by a number of authorities that the least effective of these methods is the self-audit while the most effective is the outside audit. Outside consultants provide the needed impartiality and generally are able to bring a broader range of experience as well as the most up to date audit methodologies into play. It is however recommended the use of a hybrid approach whereby the experience and objectivity of the outside consultant be coupled with the perspective of the internal personnel in a joint audit team.
Auditing the External Environment
Businesses are subject to many forces over which they have limited control: government economic policy, attitudinal changes among consumers and the development of new technology, to name a few. Environmental analysis examines such forces to predict the environment in which a business may have to operate.
It is the role of the marketing department to keep close contact with all these uncontrollable forces. To be successful in marketing, we must learn to accommodate them, and if possible, to take advantage of them in our marketing plans and policies. These uncontrollable forces are the parameters of the overall industry:
Macro Environment: All marketing activities are subject to government laws and the rulings of regulatory agencies. Marketers are responsible for remaining aware of and abiding by such regulations. The most common tool used in the industry is Porter’s PEST (or PESTLE) analysis.
Industry Environment: Each industry has its own characteristics and requirements. Industries are evolving and changing and depend on the Macro-environment as well as the global competition. An industry analysis will give you an understanding of the success factors and also if there is the potential to grow or not.
Micro Environment: Micro environments are closer to the firm and its interactions with your target market, customers and competition.
The analysis of the external environment can be used to define direction in strategic planning and in addition to carry out the SWOT analysis for your company. In the next article we will demonstrate the tools to carry out an internal analysis as part of your marketing audit process.
Auditing The Internal Environment
An internal environment audit focuses on the resources the company has at hand as labour, finance, equipment, time and other factors of production. It also analyses the marketing team concerning structure, efficiency, effectiveness, correlation with internal functions and other organizations. The internal marketing planning process, its accuracy and actuality, the product portfolio, new products, pricing and distribution are areas the marketing internal audit is concerned in. It also focuses on market share, sales, profit margins, costs and effectiveness of marketing mix.
The marketing audit also studies the current marketing plan, focused on objectives, strategies and the marketing mix used to achieve these goals. It also evaluates budgeting, staffing, training, developing, experience and learning. The current marketing plan concerns also the market share, financial targets as profit and margins, cash flow, debt and other indicators that need to be balanced.
This is your opportunity to put your own marketing under the microscope – do you know as much about your own situation as you should? This internal audit takes a close examination of your current business situation, how profitable is your company and how this may affect your marketing effectiveness and marketing mix. Also, what are your marketing objectives? Are these clearly identified and stated, and if so, are they consistent with your overall company objectives and appropriate for the company’s competitive position, resources, and opportunities?
The thorough audit and analysis of your marketing activities gives you the opportunity to objectively review what you’re currently doing and determining if you are doing it right. Based on this review you can then identify the next steps forward in implementing and maintaining a solid marketing strategy.
Auditing the Marketing Environment
Analyzing the objectives, policies and strategies of the company’s marketing department, as well as the manner and the means employed in attaining these goals. A marketing audit is also important when analyzing:
The Marketing Organization
The Marketing Systems
Marketing organization audits are a systematic study of the company’s organizational resources like manpower, structure, employee training and development, research and development facilities, motivation, communication and working relations. Senior marketers and CMOs are advised to cooperate with the HRM department to carry out such an audit. You could also integrate the marketing organization audit with your employees’ individual appraisal scheme.
The marketing systems audit measures the company’s ability for collecting and analyzing data. It looks at the company’s ability to plan and control the marketing activities. It also studies the company’s marketing information system, planning and control system, etc. A marketing information system provides the basis for marketing planning. It includes data on economic and business trends, consumer buying behaviour, market developments, competitive products and prices as well as data generated by market research.
Marketing is confronted with a transformation like nothing before; new technologies, intensive competition from every single corner, disruptive start-ups and strategies. This requires companies to adapt or create innovative concepts, theory and methodologies to address new phenomena as they emerge.