Internal Environment

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Marketing Audit Tools: The Internal Environment

Do you know as much about your own marketing strategy and operations as you should? This is your opportunity to put your own marketing under the microscope – the internal marketing audit takes a close examination of your current business situation and how your marketing affects each area of it.

A marketing audit is a comprehensive, systematic, independent and periodic evaluation of a company’s marketing assets. It is an effective tool for reviewing the competence of a marketing strategy, analysing the objectives, policies and strategies of the company’s marketing department as well as the manner and the means employed in attaining these goals.

This section demonstrates what is required for a marketing audit that examines a company’s internal environment. My framework of analysis (FME) has three dimensions:

  1. Financial Analysis and Performance
  2. Marketing Strategy and Plan Evaluation (current and previous)
  3. Environment of the Internal Marketing Department

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, and 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 the marketing mix.

The marketing audit also studies the current marketing plan, focuses on objectives, strategies and the marketing mix used to achieve these goals. It also evaluates budgeting, staffing, training, development, experience and learning. The current marketing plan concerns also the market share, financial targets such as profit and margins, cash flow, debt and other indicators that need to be balanced.

1.  Financial Analysis And Performance

Companies sell products and services with one purpose: to make profit. At this stage one must analyse the performance of the whole product range and services. Do we make money?

You must do the following analyses:

  • Market share analysis (per product, region, country)
  • Product performance (use BCG matrix, PLC for example)
  • Cost analysis of products/services
  • Pricing analysis vs. competition
  • Analyse sales by each characteristic, application and market segment:
    • Geographical
    • Process or application
    • Frequency of purchase
    • Benefit received
    • Form of customer organization
    • Demographic factors
    • Lead time required
    • Buyer’s job function
    • Guarantee claims
    • Cost per sale
    • Frequency of orders
    • Cost per delivery
    • Reason for purchase
    • Industry or trade
    • Credit of requirements
    • Size of order
    • Size of customer operation
    • Psychographic factors
    • Full-line or limited purchase
    • Seasonal/cyclical
    • Servicing requirements
    • Order source (e.g. OEM distributor)
    • Value added
  • Sales breakdown in percentage terms:
    • To new users/customers
    • For new usage among existing customers
    • As replacement sales
  • What is the maximum and average order size for the products/service under review?
  • How does profitability vary by order size?
  • Does cross-selling occur?
  • Value chain analysis to identify gaps in servicing the customer

In addition, a company’s financial resources include all forms of funding: capital, debt, loans, vendor finance and creditors. Return on capital employed is perhaps the final arbiter of how successful a business is. Financial resources are crucial to the development and survival of a business. Most strategic marketing plans have some kind of growth objective. Any new business activity, even within an existing business, requires funding. Growth, even organic growth, usually results in a need for funding, if only increased working capital. A good marketing audit analyses financial information, such as:

  • Asset turnover ratio
  • Debtor days
  • Average stock turnover period
  • Return on capital employed (ROCE)
  • Return on investment (ROI)
  • Return on sales (ROS)
  • Gross profit
  • Return on assets (RONA)
  • Cash flow ration

2.  Marketing Strategy And Plan Evaluation (Current And Previous)

The internal marketing audit helps us to create an image of the company’s mission statement, objectives, corporate culture, profitability, efficiency etc.

  • What are our current objectives for marketing?
  • What are our current marketing strategies?
  • How do we apply the marketing mix? (Including factors covered above)
  • Is the marketing process being controlled effectively?
  • Are we achieving our marketing budget?
  • Are we realising our SMART objectives?
  • Are our marketing team implementing the marketing plan effectively?

A marketing strategy audit is vital, as it makes sure the marketing is in line with marketing AND corporate goals.  Under the marketing strategy audit, the auditor evaluates performance by evaluating the marketing goals and objectives, in relation to the company mission and the strategy for the organization. Under strategy evaluation, the auditor may consider the following type of questions:

  • Has management articulated a clear marketing strategy for achieving its marketing objectives?
  • Is the strategy convincing?
  • Is the company using the best basis for market segmentation?
  • Does the company have clear criteria for rating the segments?
  • Has the company developed an effective positioning and marketing mix for each target segment?
  • Have we met our objectives?
  • Has the current marketing mix fulfilled its role?
  • What are our features and benefits? Are they still valid?
  • What are our points of distinction compared to the competition?
  • How far are we (GAP analysis)?
  • Have we targeted our market correctly?
  • Is our segmentation strategy correct?
  • Have we positioned ourselves based on KSFs?
  • Has our communication plan generated its objectives?
  • What communications have been more effective?
  • What do customers think of our communications?
  • What would make our communications more effective in the future?
  • What communication opportunities are we missing?
  • Has our sales plan generated the desired turnover?
  • What are the company’s product line objectives?
  • Which products should be phased out?
  • Which products should be added to?
  • 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 is the organization’s advertising objectives?
  • Is there adequate market coverage and service?
  • Should the company consider changing its distribution channels?
  • Is the right amount being spent on advertising?

3.  Environment Of The Internal Marketing Department

The marketing organization audit is mainly concerned with the effectiveness of the organization’s activities as well as efficiency of company operations. Here all the activities and main management functions are considered such as manufacturing, purchasing, financing as well as research and development. Here the marketing auditor must make sure that the company is achieving effectiveness within the organization as well as the marketplace.

What resources do we have at hand? (Use The FIVE ‘M’s):

  • MEN (Labor/Labour)
  • MONEY (Finances)
  • MACHINERY (Equipment)
  • MINUTES (Time)
  • MATERIALS (Factors of Production)

During this stage answer the following questions:

  • How is our marketing team organised?
  • How efficient is our marketing team?
  • How effective is our marketing team?
  • How does our marketing team interface with other organisations and internal functions?
  • How effective are we at customer relationship management (CRM)?
  • What is the state of our marketing planning process?
  • Is our marketing planning information current and accurate?
  • What is the current state of new product development? (Product)
  • How profitable is our product portfolio? (Product)
  • Are we pricing in the right way? (Price)
  • How effective and efficient is distribution? (Place)
  • Are we getting our marketing communications right? (Promotion)
  • Do we have the right people facing our customers? (People)
  • How effective are our customer facing processes? (Process)
  • What is the state of our business’s physical evidence? (Physical Evidence)

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.

Remember that a marketing audit has a single purpose: To find what works and doesn’t work.  It is not about judging people working with your company. It’s about doing things right.

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