Marketing audit – The first formal step in the marketing planning process

MARKETING AUDIT

The first formal step in the marketing planning process is that of conducting the markerting audit. Ideally at the time of producing the marketing plan, this should involve bringing together the source material which has already been collected throught the year. As part of the normal work of the marketing department.

Kotler define marketing audit at lenght as a systematic, independend, comprehensive and periodic examination of a company’s or business units markerting environment, objectives, strategies and activities with a view to determining problem areas and opportunities and recommending a plan of action to improve the company’s marketing performance.

It ensures that those who will have to implement the results of the planning process understand and are commited to, the assumptions which lie behind it. A marketing audit should be as stated in the definition

1. Comprehensive

The marketing audit covers all the major marketing activities of a business. It should be called a functional audit if it covers only the saleforce, pricing or some other marketing activities. A comprehensive marketing audit is usually more effective in locating the real source of problem.

2. Systematic

The marketing audit is an orderly examination of the organisation’s macro and micro marketing environments, marketing objectives and strategies, marketing systems and specific activities. The audit indicates the most needed improvements, incorporating them into a corrective action plan with short and long-run steps to improve overall effectiveness.

3. Independent

Marketers can conduct marketing audit in six ways and these are self audit, audit from across, audit from above, company auditing office, company task-force audit and outsider audit. The best audit comes from outside consultants who have the necessary objectivity, broad experience in a number of industries, some familiarity with the industry being audited, and undivided time and attention.

4. Periodic

Typically firms initiate marketing audits only after sales have turned down, sales force morale has fallen, and other problems have occurred. Companies are thrown into crisis partly because they failed to review their marketing operations during good times.

A periodic marketing audit can benefit companies in good health as well as those in trouble. A marketing audit starts with meeting between the company officers and the marketing auditors to work out on agreement on the audit’s objectives coverage, depth, data sources, report format an time frame. It includes a detailed plan of who is to be interviewed, the questions to be asked and where and when to minimise time and cost. The cardinal rule in marketing auditing is not to rely solely on company managers for data and opinions ask customers, dealers and other outside groups.

It is apparent that a marketing audit can be a complex process, but the aim is simple. It is only to identify those existing external and internal factors which will have a significant impact on the future plans of the company. It is crear that the basis material to be input to marketing audit should be comprehensive. The best approach to accumulate this material continuously, as and when it becomes available; since this avoids the otherwise heavy workload involved in collecting it as part of the regular, typically annual, planning process itself.

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The analysis of the material will require significant effort. What is important, and will need to be taken into account in the marketing plan will eventually emerge from the overall process, will be different from each product or service in each situation. One of the most important skills to be learned in marketing is that of being able to concentrate on just what is important. The process of marketing planning encompases all of the marketing skills. However a number of these may be particularly relevant at this stage.

POSITIONING

The starting point of marketing plan must be a customer. It it a matter of difinition that his or her needs should drive the whole marketing process. The techniques of positioning and segmentation therefore usually offer the best starting point for what has to be achieved by the whole planning process.

PORTFOLIO PLANNING

In addition the cordinated planning of the individual products and services can contribute towards the balanced portfolio.

80:20 RULE

To achieve other maximum impact, the marketing plan must be clear, concise and simple. It needs to concentrate on the 20% of product or sevice and on 20% of customers which will account for 80% of the volume and 80% of the profit.

MARKETING MIX 4PS

The 4ps can sometimes divert attention from the customer, but the framework they offer can be very useful in building the action plan.

SWOT ANALYSIS

On technique which is particularly useful in the analysis of the material contained in which the marketing audit, is that of SWOT analysis. It groups some of the key pieces of information into categories internal and external factors and then by their dual positive and negative aspects. Strenght and opportunities as the former aspects with weaknessses and threats representing the later.

Internal Factors:

Strength and weakness internal to the organisation. Its strategies and its position in relation to its competitors

External Factors:

Opportunities and threts presented by the external environment and the competition.

CUSTOMER ANALYSIS

The purpose of an enterprise is to create and keep a customer. Strategy development or review starts with external analysis, an analysis of the factors external to a business that can affect strategy. To conduct an external analysis the market or submarket boundaries need to be specified.

In most strategic marketing-planning contexts, the first logical step is to analyse the customer. Customer analysis consists of addressing the three sets of strategic question and this are about the following.

1. Segmentation which is often the key to developing a sustainable competitive advantage based on differentiation, low cost, or a focus strategy. The market can be segmented based on customer charateristics like sex, age, occupation, lifestyle and or based on product or service related approaches like usage, application.

2. Customer mativation what lies behind their perchase decision and how does that differ by segment. Customer motivation analysis starts with the task of identifying motivations for a given segment. Although a group of managers can identify motivation a more valid list is usually obtained by getting customers to discus the product or service in a systematic way.

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3. Unmet needs are strategically important because they represent opportunities for firms to increase their markets share or break into a market. They can also represent threats to established firms in that they can be a lever for competitors to disrupt an established position. One reaction to the identification of an unmet need is for a firm to develop a product or product modification that will be responsive.

COMPETITOR ANALYSIS

Induce your competitors not to invest in these products markets and services where you expect to invest the most that is the fundamental rule of strategy by Bruce Henderson founder of BCG. Competitive analysis is the second phase of external analysis. The analysis focus on the identification of threats, opportunities or strategic question created by emerging or potential competitors moves, weaknesses or strenght. It starts with identfying current and potential competitors and they are two ways of identifying current competitors.

1. Examines perspective of the customer who must make choices among competitors.

2. Identification approach attempts to place competitors into strategic groups on the basis of their competitive strategy.

In additional to current competitors, it is important to consider potential market entrants such as firms that might engage in the following:

A. Market expansion perhaps the most obvious source of potential competitors is firms operating in other geographic regions or in other countries.

B. Productor service expansion thus exploiting a common market to take advantage of technological and didtribution overlap. eg Insurance companies doing banking.

C. Backward integration customers are another potential source of competition.

MARKET ANALYSIS

It builds on customer and copmetitor analysis to make some strategic judgements about market and its dynamics. One objectives of market analysis is to determine the attractiveness of a market to current and potential participants. The nature and content of an analysis of a market and its relevant product markets will often include the following dimensions:

1. Actual and potential market size.

The starting point for the analysis of a market is the total sales level. It is then often useful to consider the potential markets a new use, new user group, or more frequent usage could change dramatically the size and prospects for the market.

2. Market growth.

If all remains constant growth means more sales and profit even without increasing market share. It can also mean less price pressure when demand increases faster than supply, and firms are not engaged in experience curve pricing, anticipating future lower cost.

3. Market Profitability.

Firms develop a strategy that will bring above-average profits. Porter’s approach to estimating the profitability of a market is called industry strucure analysis. The basic idea is that the attractiveness of an industry or market as measured by the long-term return on investiment of the average firm depends largely on five factors that influence profitabilt

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A. The intensity of competion.

B. The existence of potential competitors who will enter if profits are high.

C. The bargaining power of customers.

D. The bargaining power of suppliers.

E. Threat of substitute services.

4. Distribution system.

An analysis of distribution systems should include three types of question and these are;

· What are the alternative distribution channels.

· What are the trends. What channels are growing in important. What new channels have emerged or are likely to.

· Who has the power in the channel and how is that likely to shift.

Access to an effective and efficient distribution channel is often a key success factor. Channel alternatives can vary in several ways one is the degree of directness. The firms closest to the end user have the most control over marketing and usually assume the highest risk.

5. Cost structure:

understanding of the cost structure of a market can provide insights into present and future key success factors. The first step is to conduct an analysis of the value chain to determine whore value is added to the service. It may be possible to develop control over a resource or technology. Competitors will aim to be the lowest cost competitor in a high value-added stage of the value chain. Another market cost structure consideration is the extent to which experience curve strategies are feasible, can firms develop sustainable cost advantage based on volume.

ENVIRONMENTAL ANALYSIS

Technology: One dimension of environmental analysis is technological trends or technological events occuring outside the market or industry that have the potential to impact strategies. They can represent opportunities to those in a position to capitalise and a new alternative technology could pose a significant threat. Impact of new technology certainly it can be important even critical to manage the transition to anew technology successful one , does not necessarily mean that businesses based on the prior technology will suddenly become unhealthy. Government: Additional and removal of legislative or regulatory constraints can pose major strategic threats and opportunities. The impact of government efforts in deregulation in banking has had enormous implications for the firms involved.

Economics: The evaluation of some strategies will be affected by judgements made about the economy, particulary inflation and general economic health as measured by unemployment and economic growthj. A forecast of the relative valuation of currencies can be relevant for industries with multinational competitors. Thus an analysis of the balance of payment and other factors affecting currency valuation might be needde.

Culture trends can present both threats and opportunities for a wide varietyof firms, as the following examples illustrate. The use of more contemporary values in the advertising for threatened traditional values.

Demographics

Demographic trends can be a powerful underlying force in a market. Among the influential demographic variables are age, income, education and geographic location. The movement of businesses and population into differnt areas of the country has implication for many service organisation such as brokerage houses, real estate venture and insurance companies.


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