THE MARKETING AUDIT – TIPS AND ADVICE
Streets Marketing offers a Marketing Audit service.
The benefits of a Marketing Audit
The Marketing Audit is a great marketing tool for any business, no matter what size. It provides an overview of where a business is now – the Situational Analysis.
It’s a comprehensive, systematic, independent and periodic examination of a company’s marketing environment, objectives, strategies, and activities to determine problem areas and new opportunities. A time to analyse past and present marketing activities and performance, it provides the basis for evaluating future marketing goals, strategy and plans.
The results from this – the diagnosis – is then followed by a “corrective” plan of action, involving both short and long-term goals for improving the company.
The business environment is forever changing therefore, the marketing audit should be used as a reference tool, with constant updates.
The audit can be split into two categories: Internal Audit or Micro Analysis, and External Audit or Macro Analysis.
Internal Audit – Micro Analysis
This is your opportunity to look at your business and ask yourself – how much do I know about my business?
Look at it in terms of:
- Sales – total, split by geography, industry, customer, product.
- Market shares compared to your competitors.
- Profit margins – are you charging too little or too much?
- Costs – can supplies be purchased elsewhere?
- Market research and information – do you know enough about your customers?
- Effectiveness of the marketing mix – analyse previous campaigns in terms of enquiries and sales – what has or has not worked.
The key outcomes from this audit can then be summarised in the current market position and market overview sections of your marketing plan.
Next, you look at the external factors, the External Audit or Macro Analysis – using various marketing theories:
The marketing tool – The Pestel Analysis
This is a tried and tested tool for presenting information about the macro environment. It’s a way of capturing information about the factors you have to consider when in business.
At the top of screen or whiteboard start with a clear definition of the market. Then either draw another matrix or write your headings on the left of the page.
P stands for political change – how will this affect your business in terms of: political stability, future legislation, trade regulations, employment laws, consumer protection, competition regulation, if these change how will it affect you and your business now and in the future?
E stands for economic change – growth, interest rates, taxation, exchange rates, inflation, unemployment, customer drivers – if these change how will it affect your business?
S stands for socio-cultural – demographic change, population, age distribution, social mobility, lifestyle changes, living conditions, education, health, ethical issues, languages.
T stands for technological change – research and development, government research spending, internet, mobile communications.
E stands for environmental change.
L stands for legal change – changes in the law in the UK and worldwide.
The marketing tool – Porter’s 5 Forces Analysis
This marketing tool analysis is good for looking at a new market for attractiveness and profitability or for looking at the current market situation you are in.
It’s also strategically important because you can use the results to maximise your advantages and identify potential pitfalls.
Five Forces Analysis
What it means
There are five forces that influence what happens in every industry and every market:
FORCE 1: Existing competitors.
FORCE 2: The threat of potential new competitors.
FORCE 3: Substitutes for products offered.
FORCE 4: The power of suppliers.
FORCE 5: The power of customers.
FORCE 1: Existing competitors:
Generally competitive rivalry will be high if there is:
- Little product differentiation between competitors.
- If competitors are similar sizes.
- If there are low market growth rates.
- If it’s expensive to exit the market.
- If the strategies of the competitors appear to be the same.
FORCE 1: Existing competitors:
Strategic response for consideration:
- Don’t compete on price.
- Look to other markets for growth.
- Avoid overcapacity.
- Differentiate your products.
- Buy a competitor.
FORCE 2 : New competitors:
- These will assess the market to see how easy it is to enter.
Tell-tale signs are:
- Low customer loyalty.
- Low investment costs and achievable manufacturing volumes.
- Easy access to suppliers.
- Few legislative barriers.
FORCE 2: Strategic response for consideration:
- Strengthen your brand.
- Work closely with distribution and/or suppliers.
- Take cost out of your operation so that you can be more competitive.
- Protect your intellectual property with patents etc.
FORCE 3: Substitutes:
Alternative products to those currently offered are a threat if the substitute is:
- Easy to switch to.
- If the price of the substitute falls.
- If customers are willing to change.
FORCE 3: Strategic response for consideration:
- Emphasise (real or perceived differences).
- Make it more costly to switch.
- Find out what your customers prefer.
- Enter the substitute market yourself.
FORCE 4: Suppliers:
The suppliers of raw materials have varying degrees of power in a marketplace, depending on:
- The cost associated with switching suppliers.
- The number of suppliers available.
- If there is no substitute for the raw material.
FORCE 4: Strategic response for consideration:
- Invest in supply chain management and training.
- Develop partnerships with suppliers.
- Explore ways of increasing their dependency on you.
- Take over a supplier.
FORCE 5: Customer or buying power:
This can be seen best in markets where:
- The product is not strategically important to the customer.
- Products are bought in bulk.
- Switching products is very cheap.
- They are very price sensitive.
- Substitutes are readily available.
FORCE 5: Strategic response for consideration:
- Increase loyalty.
- Introduce incentives.
- Deal direct rather than through distributors.
- Avoid purchase decisions based on price.
The Swot Analysis
This is a simple matrix on which you capture the data that applies to both your business and the competition.
It looks at:
Strengths and weaknesses refer to your products or services – internal issues; opportunities and threats to the external marketplace.
Your SWOT is best completed with the help of as many people from different functions, including, sales, marketing, accounts, customer care/service, product development, management and customers. Remember this is quite a subjective tool so be specific in your observation and keep comments short and simple.
It’s a good idea to use the SWOT in combination with a completed PEST and 5 Forces Analysis as these provide the context for your SWOT.
Look at each in terms of the points listed:
- Product Offers.
- Retail outlets.
- Limited sale activity.
- Price war.
How competitive is the market? Evaluate the following:
- The threat of new entrants to your industry.
- The threat of substitute products.
- The bargaining power of suppliers.
- The rivalry amongst current competitors.
- Who are your major competitors? The size? Their market share?
- What reputation do they have?
- How do they distribute their products, what are their production capabilities?
- What is their marketing like – do they diversify?
- What are their key strengths and weaknesses?
- The market environment.
- Total market size, growth and trends
- Market characteristics, growth and trends.
- Products, prices.
- Physical distribution channels.
- Industry practices.
- The next step is to gather all of the information up, analyse it, discuss it with team, write a plan and share it with the team.
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