MARKETING PLANNING

(1)

Describe and differentiate between internal and external marketing audit.

As observe in the above diagram, marketing audit is a tool to analyze the current situation of the market during the process of marketing planning and it is a continuous process to monitor the planned marketing objectives have been achieved or not. Marketing Audit Kotler et al define marketing audit is a comprehensive, systematic, independent, and periodic examination of a company's -- or business unit's -- marketing 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. Inside audit and outside audit The audit could be an inside audit conducted by a person or group inside the company but outside the operation being evaluated. Or it could be an outside audit conducted by a management consulting firm or practitioner. Marketing audit a continuous process 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.
1

MARKETING PLANNING

Marketing audit on a regular basis is a strong reference point, reflecting evolution in external business environment, internal experience and strategy development. Needs for marketing audit: Declining sales Falling margin Lost market share Underutilized production capacity The marketing audit can be internal and external. Internal Marketing Audit 1. Marketing Strategy Audit Marketing objective and goals The appropriateness of the marketing objectives to guide marketing planning and performance measurement. i.e. Market Share Objectives - To gain 25% of the market for sports shoes by September 2018 Business Mission Is the business mission clearly stated in market-oriented terms? Is it feasible? That is, the mission should be clearly focus and attainable. Strategy Has the management articulated a clear marketing strategy for achieving its marketing objectives? For instance targeting profitability to increase during specific period of time, thus the strategy should be measures to increase sales and cut down cost of production, hence increasing profit. Moreover, analyze if the strategy is appropriate to the stage of product life cycle. Furthermore, the budgeting and allocation of resources are important to assess so as there are no wastages or shortages for achieving the objective.

MARKETING PLANNING

2. Marketing Organizational Audit Formal structure Does the marketing director have adequate authority and responsibility for company activities that affect customers' satisfaction? Are the marketing activities optimally structured along functional, product, segment, end-user and geographical lines? Functional Efficiency 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? Are there any groups in marketing that need more training, motivation, supervision or evaluation? Interface Efficiency Are there any problems between marketing and manufacturing, R&D, purchasing, finance, accounting and/or legal that need attention?

3. Marketing Systems Audit Are systems supporting marketing efforts? Marketing information systems Is the marketing intelligence system producing accurate, sufficient and timely information about marketplace developments with respect to customers, prospects, distributors and dealers, competitors, suppliers and various publics? Are company decision makers asking for enough marketing research, and are they using the results? Is the company employing the best methods for market measurement and sales forecasting? Marketing planning systems Is the marketing planning system well conceived and effectively used? Do marketers have decision support systems available? Does the planning system result in acceptable sales targets and quotas? Marketing control systems Are control procedures adequate to ensure that the annual plan objectives are being achieved?

MARKETING PLANNING

Does management periodically analyze the profitability of products, markets, territories and channels of distribution? Are marketing costs and productivity periodically examined? New product development systems Is the company well organized to gather, generate and screen new product ideas? Does the company do adequate concept research and business analysis before investing in new ideas? Does the company carry out adequate product and market testing before launching new products?

4. Marketing Productivity Audit Profitability is key in business, but this involves understanding both profit and cost structure. Profitability analysis What is the profitability of the company's different products, markets, territories and channels of distribution? Should the company enter, expand, contract or withdraw from any business segments? Cost effectiveness analysis Do any marketing activities seem to have excessive costs? Can cost-reducing steps be taken?

5. Marketing Function Audit Using marketing mix to analyze functions. The marketing mix comprises of framework comprising of Product, Price, Place (Distribution) and Promotion. Products What are the company's product-line objectives? Are the objectives sound? Should the product line be stretched or contracted upward, downward, or both ways? Which products should be phased out? Which products should be added to? What are the buyers' knowledge and attitudes toward the company's and competitors' product quality, features, styling, brand names, etc? What areas of product and brand strategy need improvement? Prices What are the company's pricing objectives, policies, strategies and procedures? To what extent are the prices set on cost, demand and competitive criteria? Do the customers see the company's prices as being in line with the value of its offer? What does management know about the price elasticity of demand, experience-curve effects and competitors' prices and pricing policies? To

MARKETING PLANNING

what extent are price policies compatible with the needs of distributors and dealers, suppliers and government regulations? Place (Distribution) What are the organization's advertising objectives? Is there adequate market coverage and service? How effective are distributors, dealers, manufacturers' representatives, brokers, agents and others? Should the company consider changing its distribution channels? Promotion Including advertising, sales promotion, publicity and direct marketing. What are the organizations advertising objectives? Are the objectives sound? Is the right amount being spent on advertising? Are the ad-themes and copy effective? What do customers and the public think about the advertising? Are the advertising media well chosen? Is the internal advertising staff adequate? Is the sales promotion budget adequate? Is there effective and sufficient use of sales promotion tools such as samples, coupons, displays and sales contests? Is the public relations staff competent and creative? Is the company making enough use of direct, online and database marketing? Sales Force What are the sales force's objectives? Is the sales force large enough to accomplish the company's objectives? Is the sales force organized along the proper principles of specialization (territory, market, and product)? Are there enough (or too many) sales managers to guide the field sales representatives? Do the sales compensation level and structure provide adequate incentive and reward? Does the sales force show high morale, ability and effort? Are the procedures adequate for setting quotas and evaluating performance? How does the company's sales force compare to competitor's sales forces?

MARKETING PLANNING

External Marketing Audit 1. Macro-environmental Audit It is about where the company is and what it is. The Macro-environmental component examines six main areas, the detail depending on the involvement of the business and involvement required by the industry. The audit covers the following broad areas: Demographics What major demographic developments and trends pose opportunities or threats to the

company? What actions has the company taken in response to these developments and trends?

Economic What major developments in income, prices, savings and credit will affect the company? What actions has the company taken in response to these developments and trends?

Environmental What is the outlook for the costs and availability of natural resources and energy needed by

the company? What concerns have been expressed about the company's role in pollution and conservation,

and what steps has the company taken/planned? Technology What major changes are occurring in product and process technology? What is the company's position in these technologies? What major generic substitutes might replace the company product/s?

Political What changes in laws and regulations might affect marketing strategy and tactics? What is happening in the areas of pollution control, equal employment opportunity, product

safety, advertising, price control, etc, that affects the marketing strategy?

MARKETING PLANNING

Cultural What is the public's attitude towards business and toward the company's products? What changes in customer lifestyles and values might affect the company?

2. Task Environment Audit The degree the business is competitive in marketplace. How competitive is the marketplace? What are competitors doing, and are they doing it well? What might they be preparing to do? These are all vital to understand in preparing for the battle. Evaluate the following: Markets What is happening to market size, growth, geographical distribution and profits? What are the major market segments? Customers What are the customers' needs and buying processes? How do customers and prospects rate the company and its competitors on reputation, product quality, service, sales force and price? How do different customer segments make their buying decisions? Competitors Who are the major competitors? What are their objectives, strategies, strengths, weaknesses, sizes and market shares? What trends will affect future competition and substitutes for the company's products? Distribution & dealers What are the main trade channels for bringing products to customers? What are the efficiency levels and growth potentials of the different trade channels? Suppliers What is the outlook for the availability of key resources used in production? What trends are occurring among suppliers?

MARKETING PLANNING

Facilitators & marketing firms What is the cost and availability outlook for transportation services, warehousing facilities and financial resources? How effective are the company's advertising agencies and marketing research firms? Publics Which publics represent particular opportunities or problems for the company? What steps has the company taken to deal effectively with each public?

Difference between internal and external marketing audit Internal marketing audit is controllable and external macro-environmental marketing audit is uncontrollable. The company can only react to the PESTEL factors but can take decision upon its objectives and strategy, control the organizational function, marketing mix and costs. A business is significantly affected by the PESTEL factors but no sole business can affect them.

Advantages of Marketing Audit: Production-oriented and Technical-oriented Companies. An auditor can perform an important service in recognizing that a company's problem lies in its production orientation, and in guiding management toward a market orientation. Troubled Divisions. Multidivisional companies usually have some troubled divisions. Top management may decide to use an auditor to assess the situation in a troubled division rather than rely solely on the division management's interpretation of the problem. High-Performing Divisions. Multidivisional companies might want an audit of their top dollar divisions to make sure that they are reaching their highest potential and are not on the verge of a sudden reversal. Such an audit may also yield insights into how to improve marketing in other divisions.

MARKETING PLANNING

Young Companies. Marketing audits of emerging small companies or young divisions of large companies can help to lay down a solid marketing approach at a time when management faces a great degree of market inexperience. Nonprofit Organizations. Administrators of colleges, museums, hospitals, social agencies, and churches are beginning to think in marketing terms, and the marketing audit can serve a useful educational as well as diagnostic purpose.

Tools for Marketing Audit PESTEL Originally designed as a business environmental scan, the PEST or PESTLE analysis is an analysis of the external macro environment (big picture) in which a business operates. These are often factors which are beyond the control or influence of a business, however are important to be aware of when doing product development, business or strategy planning. SWOT Analysis It identifies how to maximize the potential strengths and opportunities of a product, service or process, while minimizing the impact of its weaknesses and threats. The analysis usually takes account of internal factors such as human resources, management, staff commitment and obstacles (strengths and weaknesses), and external factors such as a change in government policy, stakeholder resistance, complex funding agency requirements, and a reduced budget (opportunities and threats).

MARKETING PLANNING

Porter's fives forces model It is an excellent model to use to analyze a particular environment of an industry.

Five Forces Analysis can provide valuable information for three aspects of corporate planning: Statistical Analysis: The Five Forces Analysis allows determining the attractiveness of an industry. It provides insights on profitability. Thus, it supports decisions about entry to or exit from and industry or a market segment. Moreover, the model can be used to compare the impact of competitive forces on the own organization with their impact on competitors. Competitors may have different options to react to changes in competitive forces from their different resources and competences. This may influence the structure of the whole industry. Dynamical Analysis: In combination with a PESTLE Analysis, which reveals drivers for change in an industry, Five Forces Analysis can reveal insights about the potential future attractiveness of the industry. Expected Political, Economical, Socio-demographical, Technological, Legal and Environmental changes can influence the five competitive forces and thus have impact on industry structures. Useful tools to determine potential changes of competitive forces are scenarios. Analysis of Options: With the knowledge about intensity and power of competitive forces, organizations can develop options to influence them in a way that improves their own competitive position. The result could be a new strategic direction, e.g. a new positioning, differentiation for competitive products of strategic partnerships.
10

MARKETING PLANNING

(2) What are the impacts of wrongly or inconsistent marketing audit on the organization and its product and services? Identifying the right segment in the market is very important. The segment should be one which is accessible, for example, the firm can provide the goods and services which demanded by customers. Moreover, the segment should be profitable, for example, the rate of return justifies the investment and risk. Furthermore, the segment should be one which is sustainable, for example, will justify long-term involvement; therefore, selection of the segment is very crucial. The mission statement should be well designed as this influences the managers and employees in terms of having a sense of direction of the firm and to contribute in achieving organizational goal. Good mission statement should focus on a limited number of goals, stress the major companys policies and values, define the major competitive sphere within which the company will operate, take a long-term view and it should be short, memorable and meaningful. For example: Motorola the purpose of Motorola is to honorably serve the needs of the community by providing product and services of superior quality at a fair price to our customers; to do this as to earn adequate profit which is required for that total enterprise to grow; and by so doing provide the opportunity for our employees and shareholders to achieve their personal objectives Organizational culture The cultural corporate of the organization, for instance, the way people are dress, talk to one another, and greet customers, can be a major source of competitive advantage to the firm.it will affect motivation and enthusiasm of employees, emphasis on customer service, openness to innovation and change, focus on improvement and efficiency, thus, a positive corporate culture is very important for the survival of the firm, hence business should encourage this process now as it takes lots of time to put in real practice. Interface efficiency Sometimes business does poorly not because its people lack the required strength, but because they do not work together as a team. It is critical to assess the inter-departmental working relationship as part of the internal environmental audit. Goal formulation should be objectives that are specific with the respect to magnitude and time.

11

MARKETING PLANNING

Establishment of proper objective to achieve goals. Program formulation and implementation. Even a great marketing strategy can be sabotaged by poor implementation. If the unit has decided to attain technological leadership, it must plan programs to strengthen its R&D department, gather technological intelligence, develop leadingedge produces, train the technical sales force and develop ads to communicate its technological leadership. According to McKinsey & company, strategy is one of the 7 elements all of which starts with s the first 3 are strategy, structure, and systems are considered the hardware of success while the next 4 are style, skill, staff and shared values are the software. When these elements are present, companies are more usually successful at strategy implementation. Feedback and control - A companys strategies fit with the environment will inevitably erode, because the market environment changes faster than the companys 7 s. Peter Drucker pointed out that it is more important to do things right to be effective than do the things right to be efficient. The most successful companies excel at both. Thus, to survive the company must be able to control the internal factors at the same time respond to external factors. Innovation in marketing is critical. In a volatile market, firm should implement a continuous process of adding new features to the product, developing new product, and as such keep pace with competitors and gain new, more or maintain the market share. Innovation audit might be a useful indicator. Product In developing and emerging markets such as India and Brazil, competition takes place mostly at expected product level, a set of attributes and conditions buyers normally expect when they purchase the product, e.g. Hotel guests expect a clean bed, fresh towels, and working lamps and so on. However, in developed countries, brand positioning and competition takes place at augmented product level, e.g. Todays hotel guest expect cable or satellite television with a remote-control and high-speed Internet access or 2 phone lines. Each augmentation adds costs; however, augmented benefits soon become expected benefits and a necessary point of parity. This means that competitors must search for still other features and benefits. Hence, not reacting to the market might cause business failure.

12

MARKETING PLANNING

Design is a factor that will often give company its competitive edge. Design is the totality of features that affect how a product looks and functions in terms of customer requirement. E.g. Finlands Nokia was the 1st to introduce user-changeable covers for cell-phones, the first to have elliptical-shaped, soft and friendly forms, and the first with big screens, all contributing to its remarkable ascent. Thus, knowing the needs and interests of the consumers is of prime importance for manufacturer, marketing firms, service providers and retailers. They should continuously seek new design to create differentiation and establish a more complete connection with consumers. Hence, businesses should regularly invest in R&D to maintain or increase its market share. Pricing Inefficient marketing practices include not tracking sales of product within specific markets, not measuring demand against product availability and avoiding the comparison between the businesss product and those of the competition. Without this information, businesses are unable to establish accurate and fair pricing in the marketplace. If pricing is too high, revenue will suffer. If pricing is too low, then profitability drops. Inefficient marketing cerates random pricing which can slow revenue and to the extreme make the company lose its market share completely and force to close down due to generate sales and cover its costs. In addition, the price should be in line with the pricing objective. For instance, a business targeting maximum market skimming, should keep continuously unveil new technology, e.g. Sony is a frequent practitioner of market skimming pricing, in which the prices start high then slowly drops overtime. Moreover, targeting product-quality leadership, then the product or services should be characterized by high level of perceived quality, tastes and status with a price, just high enough not to be out of consumers reach. Brands such as Starbucks coffee, Mercedes and BMW cars, Taj luxury hotels have positioned themselves as leaders in quality with premium pricing and a very loyal customer base. In contrast, companies aiming maximum market share believe that a higher sales volume will lead to lower unit costs and higher long run profit. Thus, setting lower price assuming the market is price sensitive, hence using market penetration pricing strategy.

13

MARKETING PLANNING

Promotion Done right, marketing communications can have huge payoff. Marketing communications also performs many functions for consumers. They can tell or show how and why a product is used, by what person and where and when. In this new communication environment, advertising is often a central element but not the only one in building brand equity and driving sales. Along with advertising, firm may use sales promotion, personal selling, direct marketing, and so on. The firm has to take its budget into consideration. However, the products styling and price, the shape and color of packaging, the salespersons manner and dress, the store dcor all communicate something to the buyer. Nowadays, the trend is toward placing Ads and promotion online. Thus, effective marketing communication can yield increase sales, profit, and build customer relationship. Place Successful value creation needs successful delivery. In managing intermediaries, the firm must decide how much effort to devote to push versus pull marketing. The channels chosen affect all other marketing decisions. The companys pricing depends on whether it uses mass merchandisers or high-quality boutiques. A marketing channel performs the work of moving goods from producers to consumers. Customers increasingly prefer faster and faster delivery channels, if they do not get what they need and want at the period of time, thus customers might switch to competitors products, hence causing loss of customers, potential market share and profits. The newest channels for communicating & selling directly to customers are electronics. Salespersons Todays customers expect salesperson to have deep product knowledge, to add ideas to improve customers operations, and to efficient and reliable. Marketers believe that the higher the salespersons motivation, the greater the effort and resulting performance, rewards, and satisfaction. Hence, business should reinforce intrinsic and extrinsic rewards of all types. If the salespersons are inferior, then it causes loss of potential customers which could in turn lower returns. Thus, here the firm should identify if training is needed.

14

MARKETING PLANNING

Supplier Companies are looking at their suppliers supplier and are increasingly reducing the number of supplier. Ford, Motorola and Honey well have cut the number of suppliers by 20% to 80%. They want their chosen supplier to be responsible for a larger component system and to achieve continuous quality and performance improvement at the same time; they want the supplier to lower prices each year by a given %. Hence, having suppliers working closely with the business can be very cost effective. Demographics Explosive population growth has major implications for business. A growing population does not mean a growing market, unless these markets have sufficient purchasing power. Noneless, companies that carefully analyze their market can find major opportunities. Example, the less develop regions of the world currently account for 76% of the world population and are growing at 2% per year, whereas the population in more developed countries are growing at 0.6% per year. Literacy level of population For marketer, literacy levels have important implications for a host decisions. The literacy levels of younger members of the society also reinforce the importance of younger people as consumers and as influencers of family consumption decisions. Economic environment The available purchasing power in an economy depends on current income, prices, savings, and dept and credit availability. Marketers must pay careful attention to trends affecting purchasing power, because they can have a strong impact on business, especially for companies whose product are geared to high income and price-sensitive customers as this may have direct effect upon the survival of the business. Socio-cultural environment Society shapes the beliefs, values and norms that largely define consumers tastes and preferences. Dress code, for instance, vary from region to region. Significant variationin food habit is another aspect that reflects the diversity in India. Understanding the diversity is critical to

15

MARKETING PLANNING

marketing success. For instance, McDonald has special menus for the Indians - McSpicy chicken, McSpicy Paneer, BigSpicy Paneer wrap, Chicken Maharaja-Mac and so on.

McDonald's failed to win over Bolivians and closed its stores For 14 years, McDonald's attempted to court Bolivians into making a habit out of eating their processed menu items -- only to experience an overwhelming, nation-wide rejection. And as a result, for the first time ever, the cogs of McDonald's international burger-slinging machine have ground to a halt, forcing the company to close its doors in Bolivia in 2002. Interviews with cooks, sociologists, nutritionists and educators who all seem to agree, Bolivians are not against hamburgers, just against fast food, a concept widely unaccepted in the Bolivian community. Fast-food represents the complete opposite of what Bolivians consider a meal should be. To be a good meal, foods have to be prepared with love, dedication, certain hygiene standards and proper cook time. Natural environment Great opportunities await companies and marketers who can create solutions that reconcile prosperity with environmental protection. New regulations hit certain industries very hard. Steel companies and public utilities have had to invest billions of dollars in pollution-control equipment and more environmentally friendly fuels. Hence, businesses are opting for solar, nuclear, wind to produce energy for their own consumption. In Mauritius, legislation that caters for protection and enhancement of environment is under section 7 The Environmental Protection Act; Beach Authority Act; Biological and Toxin Weapons Convention Act. Technological environment It is the essence of market capitalism to be dynamic and tolerate the creative, destructiveness of technology as the price of progress. Marketers should monitor the following 4 trends: the accelerating pace of change, the unlimited opportunities for innovation, varying R&D budgets, and the increase regulation technological change. Inability to keep pace with technological change in the market will result in loss of market share and profit.

16

MARKETING PLANNING

Political Environment This refers to the extent of government influences on the business. Political stability and alliances with other countries might be a potential opportunity to the firm. For instance, Mauritius is a parliamentary democracy based on Westminster model and elections are held every 5 years. There is a clear consensus on the political front that the paradigm for sustainable growth rests upon the fundamental principle of democracy, good governance, fiscal discipline, sound monetary policies, market friendly approach and close partnership with the private sector. There is good administration of law and order and good diplomatic relationship on the international arena. Legal Environment This plays an important role in the operation of the business. The firm has to adhere to the rules and regulation of the country. For instance, in Mauritius: Labour Rights Equal Opportunities Act; Sex Discrimination Act; Training and Employment of Disabled Persons Act; Employment Relations Act Consumer Protection - Fair Trading Act; Consumer Protection Act Another example: Legal, Cultural, and Ethical Challenges that Nike Faces in Global Business (Vietnam) Most people could easily define Nike and are familiar with the products offered, like the customized options available in the Nike store online, Nike Sportswear, Nike Women, Nike Basketball, and Nike Football. The company outsourced its manufacturing plants to several countries in order to lessen costs and become more efficient in productivity. The company was labeled as forcing children to slave away in hazardous conditions for belowsubsistence wages. As a result, protestors of globalization and human rights activists criticized Nike for taking advantage of the workers overseas and placing them in a destructive working environment. Influencing the Power of Five Forces After the analysis of current and potential future state of the five competitive forces, managers can search for options to influence these forces in their organizations interest. Although industry-specific business models will limit options, the own strategy can change the impact of

17

MARKETING PLANNING

competitive forces on the organization. The objective is to reduce the power of competitive forces. Reducing the Bargaining Power of Suppliers: Partnering Supply chain management Supply chain training Increase dependency Build knowledge of supplier costs and methods Take over a supplier

Reducing the Treat of New Entrants Increase minimum efficient scales of operations Create a marketing / brand image (loyalty as a barrier) Patents, protection of intellectual property Alliances with linked products / services Tie up with suppliers Tie up with distributors Retaliation tactics

Reducing the Competitive Rivalry between Existing Players Avoid price competition Differentiate your product Buy out competition Reduce industry over-capacity Focus on different segments Communicate with competitors

Reducing the Bargaining Power of Customers Partnering Supply chain management Increase loyalty Increase incentives and value added

18

MARKETING PLANNING

Move purchase decision away from price Cut/put powerful intermediaries (go directly to customer)

Reducing the Threat of Substitutes Legal actions Increase switching costs Alliances Customer surveys to learn about their preferences Enter substitute market and influence from within Accentuate differences (real or perceived)

Generic Strategies to help counter the Five Forces Strategy can be formulated on three levels: Corporate level Business unit level Functional or departmental level. The business unit level is the primary context of industry rivalry. Michael Porter identified three generic strategies (cost leadership, differentiation, and focus) that can be implemented at the business unit level to create a competitive advantage. The proper generic strategy will position the firm to leverage its strengths and defend against the adverse effects of the five forces.

19

MARKETING PLANNING

The marketing audit is one important approach to evaluating the marketing performance of a company or one of its business units. Marketing audits are distinguished from other marketing exercises in being comprehensive, independent, systematic, and periodic. A full marketing audit covers the company's (or division's) external environment, objectives, strategies, organization, systems, and functions. If the audit covers only one function, such as sales management or advertising, it is best described as a marketing function audit rather than a marketing audit. If the exercise is to solve a current problem, such as entering a market, setting a price, or developing a package, then it is not an audit at all.

The audit can be performed by a competent outside consultant or by a company auditing office at headquarters. The possible findings of an audit include detecting unclear or inappropriate marketing objectives, appropriate strategies, inappropriate levels of marketing expenditures, needed improvements in organization, and needed improvements in systems of information, planning, and control. marketing

Many companies today are finding that their remises for marketing strategy are growing obsolete in the face of a rapidly changing environment. This is happening to company giants such as General Motors and Sears as well as to smaller firms who have not provided a mechanism for recycling their marketing strategy. The marketing audit is not the full answer to marketing strategy recycling, but it does offer one major mechanism for pursuing this desirable and necessary task.

20

MARKETING PLANNING

References: Marketing book (Philip Kotler et al), 13 edition Marketing teacher Tutor2u Business dictionary EIILM marketing planning book

21