Marketing Audit: Concept and Steps

After reading this article you will learn about Marketing Audit:- 1. Concept of Marketing Audit 2. Steps Involved in Marketing Audit.

Concept of Marketing Audit:

Marketing as a discipline is a critical component covering two broad aspects: marketing functions and marketing policies.

The first aspect covers all those efforts and activities which are necessary for the journey of goods from the producer to the ultimate consumer.

The second aspect deals with policies and strategies for achieving success in the competitive market-place through consumer satisfaction and services.

Thus marketing audit scenario can be outlined in a chart below:

Steps Involved in Marketing Audit:

The marketing audit involves assessment of the business environment, both internal and external—in relation to the past, present, and projected future—in which an organisation operates. This audit evaluates the strengths and weaknesses and opportunities and threats (SWOT) of each of the product lines in relation to its markets and consumers.

It consists of three parts: Product factors analysis, Product performance analysis and Business operations audit.

1. The Product Factors Analysis:

The product factors analysis, in marketing audit, is a qualitative evaluation of each significant product line and its markets. It is done by a comparative evaluation between the line of business and all competitive products. The findings of this analysis are interpreted in terms of SWOT for each product line.

The audit is done in the following six steps:

Step 1—Marketing:

1. Current size & share of mar­ket served

2. Annual compound growth rate of market served (say, 3 years)

3. Internal sales growth rate compounded for the past pe­riod (3 years, say)

4. Demand forecast/elasticity’s

Step 2—Competition:

1. Competitors including the entity accounting for the larg­est sales in market served

2. Relative market share com­pared to largest competitor

3. Market share position changes-own/competitors for last 5 years

Step 3—Technical:

1. State of the arts and sciences

2. Entity’s own technical skills

3. Relative technical position compared to competitors

4. Competitors’ technical ad­vantage

Step 4—Operational:

1. Gross margin

2. Productivity growth rate

3. Average age of existing pro­ducing equipment

4. Specific production advan­tage over competitors

Step 5—Financial:

1. Cash flow

2. After-tax return on sales

3. Return on assets

4. Capacity utilisation

5. Contribution per product line

Final Step:

1. Reviewing past performance & future potentials

2. Ascertain current strengths & weaknesses

3. Assessing threats & opportu­nities

2. The Product Performance Analysis:

The product performance analysis, in marketing audit, is a quantitative assessment of each significant product and its markets. It starts with a critical estimate of the measures of performance during the past few years. Historical performance data are used for this exercise.

In this quantitative assessment, the specific data categories included are: product identification, product life, market size, market growth rate, sales volume, after-tax earnings, after-tax cash flow. With these information, performance measures for each year are calculated. They usually include: market share, annual product sales growth, return on sales, return on assets, assets turnover.

3. The Business Operations Audit:

The business operations audit, the last part of the marketing audit, reviews the overall operations of an enterprise from the Standpoints of functional operations, such as warehousing, transportation, selling, etc., and general management.

To conclude, the marketing audit “is the window through which we can best view the future and develop strategies which are the essence of planning. It provides the means to determine goals which will facilitate achievement of maximum results from the business”. It helps to identify the actions necessary to develop strategies and tactics to be employed in achieving the desired goals.