Marketing control involves gathering information on marketing performance and comparing the achieved performance against planned or budgeted performance, using predetermined standards and yardsticks.
It provides feedback; it regulates; and it exercises a restraining influence or a redirecting influence.
1. Meaning of Marketing Control 2. Scope of Marketing Control 3. Importance 4. Characteristics 5. Process
6. Techniques 7. Annual Plan Control 8. Determinants 9. Activities 10. Control of Marketing Plan 11. Designing a Marketing Control System.
Marketing Control: Meaning, Scope, Importance, Characteristics, Process, Techniques, Determinants, Activities and Other Details
Marketing Control – Meaning
Marketing control is a crucial part of the marketing job. It is the tool for ensuring that the marketing programmes and activities of the firm always get directed towards the marketing objectives of the firm. Marketing control provides the means of testing whether the desired goals and results are actually being achieved or not. It is an ongoing monitoring of the marketing activity in all its aspects.
Inherent in the process is the assumption that the desired results are known beforehand. And knowledge of the desired results will advance, involves planning. In this sense, planning and control are closely interrelated. In fact, “Planning -Happening -Evaluating – Controlling” are the four interrelated phases of the marketing job.
Whenever we want to do anything, we have certain objectives before us and we plan our efforts beforehand to achieve those objectives. Throughout the causes of activity, we observe the progress of work to compare the actual results or standards. If the difference between the actual result and the desired result is too much, then certain steps are to be taken to lesson this difference.
All measures by which an effort is made to bring the actual result and the desired results together are known as control. Thus, the main aim of control is to see that actual results are as close to the desired standards as possible. In management, the term control has been defined by different authors in different ways.
According to Koontz and O’Donnell it is “the measurement and correction of the performance of subordinates”. Phelps and Westing define control as an “exercise, directing, guiding or restraining power over people or other events.” Philip Kotler defines control as “the process of taking steps to bring actual results and desire results closer together.”
In simple words, control of marketing operations may be defined as the managerial function of monitoring and feedback of actual marketing performance and its measurement and solution against the preplanned performance standards with a view to identify deviations, correct the deviations and provide inputs for plan reformulation.
Control involves the following:
1. Observation of activity by the management actual results.
2. Some of the actual results which are not according to the desired standards are not acceptable to the management.
3. The management has certain devices by which the difference between die actual results and the standards desired can be controlled.
Marketing Control – Scope
Marketing control involves gathering information on marketing performance and comparing the achieved performance against planned or budgeted performance, using predetermined standards and yardsticks. It provides feedback; it regulates; and it exercises a restraining influence or a redirecting influence.
It ensures that the marketing activity does not derail or go off the track; it acts as a radar system for marketing, recording and signalling the ups and downs and deviations in the marketing performance; it also provides the required clues for the timely correction of deviations. In a dynamic environment, marketing programmes cannot be implemented effectively without continuous controlling and corrective adjustments.
Marketing control takes care of this requirement. It paves the way for the maximization of profitability and the maximization of productivity of all the marketing activities.
1. Annual Plan Control:
It refers to the steps taken during the year to check on going performance against marketing plan and to apply corrective measures when necessary. The heart of annual plan control is the establishment of a system of management by objectives, which consists of four elements. First, the annual plan must establish a clear set of marketing goods for each responsibility centre in the firm.
Second, provision must be made for periodic performance measurement against the goals to spot any serious performance gap. Third, performance gap should be subjects to casual analysis to determine when they have accused i.e., whether the environment has changed the goals were set to high, or the implement of the plan are not doing this job. Fourth, management must take corrective measures to close the gap between goods and performance.
The model of control is applied to every level of the organisation. Managers use five performance tools to check the progress in reaching the goals in the annual plan, viz., sales analysis, market share analysis, marketing expenses to sale ratio’s, financial analysis and corrective measures.
Besides annual plan control companies carry a periodic research to determine to actual profitability of their different products, territories, customer groups, trade channels and other marketing variables. This task requires an ability to assign marketing and other costs to specific marketing entities and activities.
Marketing profitability analysis is a tool for helping the marketing executives to determining whether any current marketing activities should be eliminated, added or altered in scale. The starting point for marketing profitability analysis is the company’s profit and loss statement.
The marketing executive’s interest would be developing analogous profit statements by functional marketing break-downs such as products, customers or territories. To do this the natural ‘expense’ decisions such as salaries, rent, supplies would have to be reclassified into ‘functional’ expense designation.
3. Efficiency Control:
Efficiency control is the task of increasing the efficiency such marketing activities as personal selling, advertising, sales promotion and distribution. Marketing managers regularly watch certain key ratios that indicate how efficiently these functions are being performed and they also implement studies to find ways to improve performance.
4. Strategic Control:
Strategic control is the task of marketing to ensure that the company’s marketing objectives, strategies and systems are optimally adapted to the current and forecasted marketing environment. In this connection the use of two tools is worth mentioning i.e., marketing effectiveness rating review and marketing audit.
Marketing Control – Importance
1. Matching of Marketing Efforts with Environmental Changes:
Regular monitoring of performance and other environmental changes helps the company in updating its marketing effort in time with environmental changes. It becomes all the more important in the context of rapid changes in technological, social and political fields and in consumers preferences and public policy postures.
2. Deletion of Deviation in Performance:
A marketing control system helps the management in identifying deviations from the planned programme. It finds out the fault and lacuna in performance and takes corrective action at the proper time.
3. Identifying Responsibility for Failure:
An appraisal of performance helps the management in identifying the responsibility for weak performances. The person responsible for performance below specific standards gets an opportunity for self-assessment and others are relieved of an inefficiency and ineffectiveness.
4. Organizational Complexity:
The vertical marketing system has more or less come to stay as a phenomenon of modern marketing. The size of the organization and its growth makes control more complex and yet essential. The span of control enlarges with the size of the enterprises and creates of problem of control. Therefore, a realistic, effective and yet simple marketing control system as a prerequisite of effective marketing management.
5. Assisting Plan Reformation:
The feedback provided by the marketing control system helps in reappraising performance standards, marketing policies and programmes. Such reappraisal helps in the realistic reformulation of the marketing plan.
Marketing Control – 7 Main Characteristics of an Effective Control System
Important characteristics of an effective control system are as under:
1. Control should be Objective:
Appraisal of the performance of a subordinate should not be a matter of subjective determination. In other words, controls should be definite and objective. Employees will respond favourably to objective standards and impartial appraisal of their work performance.
2. Control System should Give Immediate Feed Back:
Feedback is the process of adjusting future actions based upon information about past information. An essential requirement of an ideal control system is immediate feedback of information about deviations in performance.
The control mechanism should be flexible in the sense that it should respond favourably to the conditions. In consequence of unforeseen circumstances, when plans are changed, control should reflect corresponding changes to remain operative under the new conditions. The basic idea is that control should remain workable under dynamic business conditions including the failure of the control system itself.
Control is exercised through managerial positions, and as such it should be according to the organizational structure. Each managerial position should be provided with adequate authority to exercise self-control and take corrective action.
A control system should be economical in the sense that the cost of its installation and maintenance should be justified by its benefits; simply stated control must be with in its cost. Thus, a small company can hardly afford the extensive system of control practiced by large companies.
It is essential that those who administer the control should understand it. Control specialists very often recommended sophisticated and advanced techniques of control on the pretext of providing their expertise, and tend to overlook the question of there being understood by the marketing executives of the company.
An important characteristics of the effective control system is that it should indicate deviations and suggest corrective actions promptly and in time. Merely recording of deviations and errors and fixing responsibility for their occurrence is not sufficient, if it is not followed by suitable actions to prevent recurrence.
Marketing Control – 7 Step Process for Designing a Control System
Marketing control provides the means of testing whether the desired goals and results are actually being achieved or not. It is an ongoing monitoring of the marketing activity in all aspects. Marketing control involves gathering information on marketing performance and comparing the achieved performance against the planned or budgeted performance using predetermined standards and yardsticks.
In a dynamic environment, the marketing programs cannot be implemented effectively without continuous monitoring, controlling and corrective adjustments. Marketing control is an integral part of management control.
Marketing Control System:
In designing a control system, the following steps are involved:
1. Starting with the predetermined objectives.
2. Setting clear measures of performance.
3. Defining the levels at which different controls are to be active.
4. Developing an effective monitoring system to provide the feedback to the different levels.
5. Choosing the tools and techniques of control.
6. Observing, analysing, interpreting and evaluating the variance.
7. Developing a mechanism that can correct existing activity so as to achieve the predetermined norm / objective.
The control system design must ensure that major variance are automatically distinguished and highlighted. It must also be capable of correctly interpreting the variance; the true meaning of the variance should be brought out by the control process. Further, the control process should facilitate the focusing of attention on exceptions.
While using marketing information for marketing control, it is however essential that control data, planning data and general purpose statistics are properly distinguished from one another out of the various marketing information outputs. Only then marketing information can be used as an effective control tool.
Marketing Control – Top 6 Techniques
There are several tools and techniques with which marketing control is exercised by a business firm.
The important ones among them are briefly discussed:
Technique # 1. Marketing Audit:
Marketing audit is a continuous, systematic and objective study of the total marketing efficiency of the firm. Marketing audit is concerned with the long-term business interests and challenges of the firm rather than the short-term achievements. Marketing audit seeks to review even basic assumptions of strategy. For the major part, marketing audit is qualitative and strategic.
Technique # 2. Marketing Cost Analysis:
Marketing cost analysis helps in reducing the marketing costs; identify costs of performing specific marketing functions/activities, throws up alternative ways of performing these functions/activities and provides an evaluation of relative cost benefits of various alternatives to improve the market.
It helps drop unprofitable customers, products, channels and markets and enables the firm to identify and concentrate on relatively high profitable customer’s product and markets; appraise the true cost and true value of each marketing service provided by the firm, such as delivery, presale service, credit facilities, etc.
Technique # 3. Credit Control:
Business firms are often forced to extend credit to increase sales. As a part of credit control, it must be ensured that customers and the channel do not exploit the credit policy of the firm. Credit has two dimensions – (i) the interest on the money involved in credit transaction and (ii) the risk of bad debts. Bad debts must be seen and understood as an important part of the cost of credit.
Credit rating ensures that the creditworthiness of the client or dealer, as the case may be, is assessed objectively before the firm proceeds with the risk of extending credit facility to a buyer.
Technique # 4. Market Share Analysis:
Market share analysis can be utilised for evaluating the market / business performance of a firm; for setting targets for the firm and for developing long term sales forecasts for the firm. Market share has to be measured on rational grounds. Comparisons may be made with the most efficient firms in the industry, or the industry leader, or a group of growing firms.
Comparisons can also be made against industry average performance. The general economic conditions which have a bearing on the industry’s performance have to be given due weightage.
Technique # 5. Budgetary Control:
Budgetary control essentially involves preparation of control statements at specified intervals of time, showing the budgeted figures, the achieved figures and the variance. Review and remedial action is the other part of a budgetary control. In marketing, sales volume, sales expenses and profits are the main aspects to be controlled through the budgetary control device.
Technique # 6. Ratio Analysis:
As far as marketing is concerned, ratio analysis seeks to measure the effectiveness and profitability of the various marketing functions and activities by the use of certain ratios. Ratio analysis focuses attention on relative figures. Return on Investment (ROI), Return on the Net Worth (RONW), Inventory to Turnover Ratio are examples. Proper integration of marketing and financial control tools is essential for meaningful and effective marketing control.
The aim of this control is to ensure that the organisation achieves its targeted sales, profits and other goals for the said annual period. The basis of annual-plan control is managerial objectives – that is to say, specific goals, such as – sales and profitability that are established on a monthly or quarterly basis. Organisations use five tools to monitor plan performance.
1. Sales Analysis.
2. Market Share Analysis.
3. Marketing Expense to Sales Analysis.
4. Financial Analysis.
5. Market Based Scorecard Analysis,
1. Sales Analysis:
This involves measuring the actual sales in comparison to the set targets or goals.
The Two specific tools used in the sales analysis are:
i. Sales Variance analysis and
ii. Micro sales analysis.
i. Sales Variance Analysis:
Sales variance analysis measures the relative contribution of different factors to a gap in sales performance.
Suppose as per the annual plan an organisation is supposed to sell 12,000 note books for the entire year at the rate of Rs. 70/- per book, for a total revenue of Rs. 8,40,000/-. At the end of the two months it is seen that only 500 books are sold at a rate of Rs. 50/- per book to generate a total revenue of Rs. 25000/-.
Here the organisation needs to know how much of the sales variance is due to the price; and how much is due to the quantity.
So we know –
12,000 notebooks @ Rs. 70 Rs. 8, 40,000
But end of 2 months –
Only 500 sold at Rs. 50 Rs. 25,000
Variance due to decline in price is (70 – Rs. 50) (500) = Rs. 10,000
Variance due to decline in volume is (Rs. 70) (2000 – 500) = Rs. 1, 05,000
ii. Micro Sales Analysis:
The sales of specific products, territories, sales persons etc., who have failed to perform up to the expected set target level.
2. Market Share Analysis:
Organisations need to know how they are performing in relation to their competitors.
This can be done in three ways:
i. Overall Market Share:
It is the organisation’s sales expressed as a percentage of the total market sales.
ii. Served Market Share:
It is the organisation’s sales expressed as a percentage of the total sales to its served market. The served market comprises of all buyers who are willing and able to buy its products. The served market share is always larger than the overall market share.
iii. Relative Market Share:
It can be expressed as a market share in relation to the biggest competitor. If the relative market share is over 100%, it means that the organisation is a market leader.
Customer penetration is the percentage of all customers who buy from the organisation.
Customer Loyalty is the purchases from the organisation by its customers, expressed as a percentage of their total purchases from other suppliers of the same products. Customer Selectivity is the size of the average customer purchase from the organisation, expressed as the size of the average customer purchase from an average organisation.
Price Selectivity is the average price charged by the organisation, expressed as a percentage of the average price charged by all the organisations. A reduction in the overall market share means that the organisation is not performing well on any of the above four parameters.
3. Market-Expense-to-Sales Ratio:
It is necessary to monitor that an organisation is not overspending to achieve its sales targets. For this the marketing expense to sales ratio must be monitored. There are several components of this ratio like expense-to-sales ratio, sales force-to-sales ratio, advertising-to- sales ratio, sales administration-to-sales ratio and marketing research-to-sales ratio.
4. Financial Analysis:
The expense-to-sales ratio should be analysed in the overall financial framework to determine how and where the organisation is making its money; which simply means, look into the areas which are profitable.
Financial analysis can be used by the Management to identify those factors that affect the organisation’s rate of return on its net worth.
The main factors that affect the organisation’s rate of return on the net worth and their calculations are as follows:
i. Profit Margin = Net profits/Net Sales.
ii. Asset Turnover = Net Sales/ Total Assets.
iii. Return on assets = Net Profit/Total Assets.
iv. Financial Leverage = Total Assets/ Net Worth.
v. Rate of return on net worth = Net Profits/ Net Worth.
Basically the rate of return on the net worth is a product of the organisation’s return on its assets and the financial leverage.
To increase the rate of return on the net worth, the organisation must increase either of these two factors:
i. Return on assets or
ii. The financial leverage.
For this the organisation will be required to analyse the composition of its assets and see if the asset management can be improved.
Return on assets can be improved by improving the profit margin. For improving the profit margin, the organisation must increase profits by increasing the sales or by cutting the costs in some way.
Similarly return on assets can also be improved by improving the asset turnover ratio. This can be done by increasing the sales or reducing the assets (e.g., inventory, receivables etc.) that are held at a given level of sales.
5. Market Based Score Card Analysis:
The measures that we have studied so far are mostly financial in nature. However, financial factors are not the only indicators of the Organisation’s health. The organisation can also look at other different measures like the Market based Score Card.
The Market Based Score Card is made up of two kinds of scorecards:
i. Customer Performance Score Card.
ii. Stakeholder Performance Score Card.
The Customer Performance Score Card will look at various measures such as:
i. New Customers.
ii. Dissatisfied Customers.
iii. Lost Customers.
iv. Target Market Awareness.
v. Relative Product Quality.
vi. Relative Service Quality.
vii. Target Market Preference.
The Organisation should set a benchmark or target figures, for each of these parameters, and monitor them, to ensure that they are as desired.
The stakeholder score card will look at monitoring the stakeholders of the organisation like:
Their opinion should be monitored from time to time and dissatisfaction should be registered and taken care of.
Marketing is an integrated effort of various attributes linked with the corporate objective of the organisation. The environment which encompasses the marketing activity is volatile and keeps changing in reference to the business policy of the competing firms, fashion, legal interventions and innovations.
Thus, in the modern era, most of the companies put growing efforts on organising their marketing avenues in response to significant changes in the market. In this process, it is essential to know the consumer orientation at the very beginning. The research and development wing of the company need to attend on the new ideas and engineer them to manufacture the products desired by the consumers.
Some of the essential determinants in the process are:
i. Consumer feedback.
ii. Product improvement.
iii. Distribution and purchase.
iv. Marketing set-up.
v. Zero defects.
In a marketing organisation, there should be a continuous flow of information from the consumers which encourages the learning process for the manufacture to improve the product. The ideas generated through the feedback of consumers need to be evaluated in order to accelerate the product improvement process. However, the company should develop a proper match with the supply and distribution system to ensure the availability of the products to the consumers.
Marketing Control – 2 Important Activities
“Marketing is a learning game. You make a decision. You watch the results. You learn from the results. Then you make better decisions”. “Those who learned from their mistakes are the best marketers”.
Lots of things can go wrong in a Marketing Plan. Segmenting may be wrong, targeting could be unclear, differentiation may be insignificant, positioning may not be specific and marketing mix aspects may need change, therefore to ensure that these elements are on the correct track sound marketing evaluation and control systems are necessary.
To achieve them are two important controlling activities:
1. Evaluate and Interpret Current Results:
In a tremendously competitive environment a company needs to monitor, evaluate and interpret its performance over a shortest the possible period of time and to that end it’s best to do so on a monthly basis. Monthly accounts are a virtual standard everywhere in this information age.
Three different sets of information that can be produced are:
i. The Financial Scorecard:
A company’s financial statements are the best documents to develop a financial scorecard. Budgets can be compared with actual achievements on a monthly basis with current month, previous month and month of the previous year. It will also show variances in elements of the cost of sales and overheads as well as return on sales.
Budgeted gross profits may not be achieved and the reason found would be an increase in cost of fuel against budget. This when observed through the financial scorecard can be corrected or reduced by either cutting down on usage, shifting to alternative fuel or other suitable means. Alternatively if packing material cost has gone up it may be mundane to find alternative suppliers or enter into long-term contracts. The actions that can be taken are limitless but it is possible to do so only if the information is available to evaluate and interpret an organisation’s performance.
ii. The Marketing Scorecard:
The marketing scorecard is based on market related performance and can be done quarterly and annually. Most of this information is available inside the company.
Total market growth for a particular category will indicate whether the market for the category is growing. This will help in evaluating strategic choice and deciding on marketing strategy. Some may not want to continue to serve shrinking markets and may wish to diversify or sell it to a competitor.
Accurate information of whether there is growth in a brand within the total market can be ascertained. Many successful brands may record a higher growth surpassing even the market growth and its competition, which would mean that it is not only keeping abreast with the overall market growth but also gaining shares from competition.
Brand market share is an indication of the success of the brand. One business may be content with a small share of a large market whilst another would be pursuing a large share of a small market. All this depends on the individual marketing objective and corporate strategy. For example, the corporate strategy of a SBU will be to get 30% market share for a specific brand, this will be a marketing objective for the marketing planner who will initiate their own marketing strategy and tactics towards achieving that objective.
Customer retention is an important aspect today. The world is focused on retaining existing customers rather than gaining new customers, purely due to -the cost of acquiring new customers. The marketing scorecard will give this information as a percentage of the customers retained during the month, quarter or year. This will help the business to take corrective action in keeping with its objectives.
New customers in the case of FMCG are a little difficult to ascertain but it’s easier in the case of non-FMCG and the service industry. Ultimately the effort will be to provide superior value to customers and delight them.
Dissatisfied customers can be obtained through customer complaints, but the danger lies in cases where customers who would not want to complain but resort to the most detrimental action to the business, migrate to competition.
Relative product quality cannot be obtained through the internal information process. A qualitative research has to be carried out to ascertain this. A consumer panel is the most suitable method where a comparative study of the product’s quality can be carried out amongst them and rated accordingly. Depending on this the business can make adjustments to provide desirable optimum quality.
Relative service quality to trade can be ascertained in the case of FMCG in comparison with competition on aspects such as deliveries, sales visits, logistics, and payment and credit facilities. In the case of the service industry as there is direct access to the final customer whilst delivering the service it is possible to ascertain relative service quality in comparison to the competition.
A relative new product sale in the case where a new product is launched or even an improved product is re-launched is vital and available in relation to competitive products. This can be conducted through marketing research and audit programmes. Separate marketing researchers may not be necessary as the company’s sales personnel can obtain this information. Usually, a launch or a re-launch is supported by a promotional plan, and a big bang to create awareness and trial. At this stage the competitors are very likely to react.
iii. The Stakeholder Scorecard:
Purpose of a business is to create profitable customers. The destiny of a business is to deliver a reasonable profit to its shareholders. To do this the business has around it strategic partners who are stakeholders.
a. Employees – internal stakeholders
b. Suppliers – connected stakeholders
c. Marketing intermediaries – connected stakeholders
d. Community – external stakeholders
They are the four pillars of the business, which is owned by shareholders. These stakeholders help create value and it is they who deliver value not only to the customer but to the shareholder too. They are a vital part of the business and their participation and commitment is indispensable. Hence, they have to be delighted as much as the customers outside. Recognising their importance, Professor Robert Kaplan of the Harvard University called it the balanced scorecard.
The balanced scorecard tracks the level of satisfaction so that in the event there is any unpleasantness the management must initiate action to overcome them. The purpose of the stakeholder scorecard or balanced scorecard is to ascertain, initiate, create and implement a win-win situation in the relations and contentment of the internal partners and those external to it.
2. Marketing Audit:
The dictionary meaning of Audit is — a formal examination or settlement of accounts. This itself connotes that audit is one that is carried out after an event, could be soon after or much later. The financial accounts of a company are audited at the end of a financial year. Marketing audit is similar and is carried out after the launch of a marketing programme. A marketing audit concerns marketing activity and focuses on marketing issues.
Professor Philip Kotler defines a marketing audit as follows:
“A 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”.
He also developed a marketing audit instrument, which examined seven marketing components:
i. Macro environment
ii. Task environment
iii. Marketing strategy
iv. Marketing organisation
v. Marketing systems
vi. Marketing productivity
vii. Marketing functions
A marketing audit of the above components will ensure proper control in the implementation of the Marketing Plan.
The Macro-environment is an external force that can bring about several changes to a business; these changes may provide opportunities or threats.
a. Demographic – A set of influences that has a significant impact on the Marketing Plan. A business that targeted the middle and low income families which included adults, children, sports persons, pregnant and lactating mothers for a nutrition supplement changed strategy and focused on children when they found in their marketing audit that the core consumers were school going and smaller children.
b. Economic – Inflationary conditions may bring about requests for credit and delayed payments by the trade. Consequently they can affect the cash flow of a business and create other financial implications. Business has to change direction to meet this crisis. Perhaps giving upfront discounts for cash sales may be an idea or better still a free issue of product. A free issue is given at cost but valued at the price to trade.
c. Natural Environment – From time to time the laws about the natural environment and pollution keep changing as needed by the society. A business with social responsibility must comply and respond to such demands and thus internal changes may be necessary to meet them.
d. Technological – Production process has undergone several changes; the typewriter is almost a thing of the past. The telex is almost forgotten. Packaging has gone through drastic change pursuing better and cost effective solutions.
e. Political and Legal – Changes in law and regulation can result in opportunities or disaster. Lower excise duty of Beer would result in price cuts and promote consumption.
f. Social and Cultural – Lifestyles and current trends influence people. In some countries people do not cook in their homes and eat out. This is an opportunity to the restaurant industry and fast food.
All the elements above are external and not controllable by the company. The need to identify them and interpret them correctly is important.
ii. Operational Environment:
The task environment is also external to the business but it is an environment with which the business works.
There may be changes in the market place such as the markets the business plans to serve; market segments that have been identified may confront change. A marketing audit will enlighten the business on the real ground conditions so that where necessary corrective action can be taken.
Customer profile and buying behaviour, their attitudes to the business and its product portfolio, company’s pricing strategy and distribution are important to analyse to ensure the plan is in the right direction and are delighting customers.
They can change their strategies that may affect the consumer off take or slow down distribution of the products. They may invest more on promotional activities and threaten the progress of the previously planned marketing programme. Marketing audit will provide all the necessary information about competitors’ actions and strategies.
Ascertain how distributors and dealers respond to ‘push’ tactics of a business, margins and merchandising. Stocking patterns of one’s own as well as competitive products, frequency of visits required, and average stock holding are important information that can be achieved through a marketing audit.
Suppliers help keep a continuous supply to ensure uninterrupted production. Hence it is necessary to see whether the right supply chain is in place. If this isn’t the Strategic Marketing Plan will fail.
Facilitators such as – logistics providers, marketing research and marketing communications agencies are very important stakeholders of the company.
General public — is there a public relations plan of the business, is it necessary? If so, which groups should be influenced to gain support for the business?
iii. Marketing Process:
The business should find out whether the marketing process, which it planned, is correct and whether it is bringing results or does it need adjustment.
The following key areas need to be considered:
a. Business Mission – The clarity and comprehension of the business mission is important to both internal people and those outside. Is the mission market driven and aimed to serve markets or erroneously product oriented without any focus on the markets it plans to serve? The audit must address this.
b. Goals and Objectives – They must be clearly stated, must be SMART and appropriate and be achievable.
c. Strategy & tactics – The Business Must Evaluate STDP – segmenting, targeting, differentiating and positioning, as they have to be done correctly. The elements of the marketing mix must be planned appropriately and be effective. The resource allocations need to be looked at to ensure it is adequate to accomplish the marketing objectives and strategies.
Once the marketing process audit is carried out the business is in a position if found necessary to make changes or modifications. This too can be undertaken on a quarterly basis or short term to ensure it is reaching its destiny.
iv. Marketing Organisation:
To implement and control the marketing plan the right marketing organisation is necessary.
The following aspects need to be audited to ensure that the right organisation in place:
a. The Organisation Structure:
Marketing is a team game, which involves several key players and their support staff. An experienced leader, empowered to make decisions and lead his or her team to victory, must head the team. Often it would be Director Marketing or General Manager Marketing reporting to the Managing Director or CEO.
Some companies may outsource Marketing Research; they will have Category Managers or Brand Managers to take care of product categories or brands respectively. Sales and Distribution Director or General Manager Sales will head the sales and distribution division reporting to the Managing Director or CEO.
The National Sales Manager, Provincial Sales Mangers and District Sales Managers will lead the Sales Force made up of Sales Representatives and other sales personnel. The structure of the marketing organisation should be established according to the needs of the organisation and not as an emulation of another or competitive organisation.
Today, some companies are outsourcing Brand Management whilst some of the smaller ones hand over the entire distribution to external distribution companies. There is no scientific formula for setting up an organisation structure but it must be one that will be market driven responding to market needs and wants and also result oriented. Marketing audit must ascertain this important aspect as to whether the marketing organisation is properly structured.
b. Functional Efficiency:
How does the Marketing Department perform is the next area of concern. The inter-relations of the Brand Managers, Field Sales Management and Sales Administration are vital and must be of the highest professional levels.
c. Interface Efficiency:
Often marketing people have problems with finance, production and the logistics divisions purely due to lack of proper direction. Delayed reimbursements of expenses by the finance people, rejection of market returns and damages by the production people, short deliveries and stock outs by the logisticians are the main causes for disharmony. These aspects must be subject to audit and systems put in place to avoid recurrence. Inter-departmental harmony is an essential prerequisite to a good marketing organisation.
A marketing audit on the organisation is the starting point to build up a strong well-knit organisation internally and it is only then they can as a team face the challenges of the external environment.
v. Marketing Systems:
This audit concerns systems, information, planning, control and new product development or product improvement.
a. Marketing Information System:
The importance of information has been observed in the 12 ‘P’ MODEL where the planning process commenced with the first P – Marketing Probe, that is geared to provide vital information. Therefore, the purpose of the audit is to ascertain whether the information system is appropriate, and substantial to determine key issues make the right assumptions. If the marketing information isn’t right all decisions can be wrong. Information provides knowledge and knowledge helps to evaluate a situation and take suitable action to make things work.
b. Marketing Planning System:
A business may have all the right information, the statistics, interpretation and so forth, but the light at the end of the tunnel is in the right planning system which will enable to create the right plan. The right plan is invaluable to any business. No business must venture without a proper plan. Instead of having several plans a business can have a single Marketing Plan to cover a period of 3 years updated annually or when the necessity arises, and it should incorporate both the strategic and tactical elements instead of doing a separate Strategic Plan and an Annual Plan.
c. Marketing Control System:
There are two elements to the marketing system, the planning aspect and the implementation aspect, if neither has the right controls it can be in jeopardy. This is why there is an important control systems evaluation and audit to ensure that progress will be in the correct direction.
d. NPD and Product Improvement System:
A true innovation would be one that would proclaim to the world “take a pill a day and you don’t have to eat” or “this drink can make you 15 years younger”. Innovation in this sense is not very easy. Naturally, a business would rather be concerned about a brand or value proposition’s improvement rather than innovation.
Perhaps creating a sub-category and becoming the first in it may be a prudent option. The Japanese theory of Kaizen which is about continuous improvement, must be the goal of any marketing professional. Certainly not tinkering or doing unnecessary changes which would neither benefit the market nor organisation.
In essence, improvements must be to provide superior value to present and potential markets. A filling station introduced this concept where all cars that lined up for fuel got a free windscreen wash at no cost. The marketing audit must be directed to identify what more the company or the product can provide to customers, to delight them — the benchmark of any business.
A marketing system audit provides a business an opportunity to identify how best and what more can be offered to delight present and potential markets.
vi. Marketing Productivity:
Marketing is about producing results, generating revenue, making profits and a marketing productivity audit is focused in that direction.
a. Profitability Analysis:
The ultimate goal in marketing is profitable sales volume, not just sales turnover, or the large numbers the businesses sold and even the satisfied customers by doing so. All this is in vain if they weren’t profitable. Hence, constant appraisal should be made to see whether the business is getting there, profitably. A sale is about turnover and volume focus whilst marketing is profit driven.
b. Cost Effectiveness:
To achieve the former all other inputs must be cost effective. But it does not mean that one must cut the promotional budget as many do to be cost effective. The marketing productivity audit must be carried out to ascertain where costs can be trimmed.
A company in FMCG even after getting a substantial market share kept sampling the same customers over and over again, the purpose of sampling is to induce trial not to encourage repeat purchase, and marketing communications does that. Profitability and cost effectiveness are two key features in a marketing productivity audit. One cannot achieve profitability without being cost effective.
vii. Marketing Functions:
The marketing audit should be concerned with the elements of the marketing mix. The vehicle that delivers superior value to win and sustain customers is the marketing mix. The business must ascertain whether it is correct, the functions audit does that.
Whether it is a bank account or a cake of soap they are both value propositions that customers want. Marketing aids in creating form utility or producing goods and services. R&D unit can create them but it is marketing that adds the finesse by telling them what markets would want. Marketing must communicate as to what type, size, colour and design they should be produced.
Unless goods and services are at the right price one will not buy them. If BMW cuts its price by 50% the BMW customers will never buy them again. If coke increased its price by the same margin their customers might consider shifting to Pepsi. Goods and services have a price tag with which they are associated. Price must be right, not cheap; cheap is not the only criterion for purchase, its value. Hence price must be evaluated within those parameters, above all VALUE, which is the measure of worth of a value proposition.
Often referred to as PLACE in the 4/7 P theories, is an important element in the marketing mix. Its fundamental purpose is to bring the customer and the offering together and facilitate an exchange. Width and depth of distribution are other considerations or is about reaching all outlets where target customers are likely to visit and getting sufficient stock cover till the next date of delivery.
The Area Sales Managers, in addition to the tasks they would handle on the field, could carry out the marketing function audit in the form of a field audit Businesses could also outsource this service through undergraduates awaiting exam results or on their break after some familiarisation.
There is a joke of one scientist who produced a permanent hair dye but kept it under his pillow and slept. It neither helped his hair nor that of any other’s. Marketing Communications as it is referred to today is the engine to create awareness, image and initiate target markets to trial in case of new products and re-purchase in case of existing products. It is achieved through several means. What is required through the audit is to know whether all these methods such as – TV, Radio and Press communications, POPM, Personnel Selling etc., does the job or is superfluous just like the sampling campaign.
Those in service marketing can audit on the following:
(c) Physical evidence
(d) Customer care.
The purpose of any plan is to do something effectively and the purpose of the audit is to be the watchdog and see whether it is actually being done.
Marketing Control – Control of Marketing Plan
Ideally, the system should be specific enough that when it triggers the indication that some kind of a problem exists, the particular area of the problem is identified. The problem should be automatically formulated, and the control system should indicate not only that a problem exists but also what kind of a problem it is. It could indicate, for example, that the advertising medium is unsatisfactory. If this happens, the decision model should then proceed to evaluate all possible alternatives of media.
Thus the control system would identify that a problem exists and formulate the problem in the sense of indicating in what area of the marketing plan there is a deficiency, while the decision model would specify the alternative solutions and evaluate them in terms of maximum short-term profits.
This assumes away the practical problem of time lag – the brand manager must be notified in sufficient time to make the change in the plan and to execute it, a fact which was incorporated into the MIS. In this way a new marketing plan would be ready for execution. This highly idealized version of control was implicit in the MIS.
The brand manager currently does not have the luxury of such a system. He has a control system which warns him about some of his problems, but he finds out about these problems in other ways, too. Further, his control system is general; it may operate, for example, in terms of market share. Any of the three variables—advertising, price, or sales—could be the “problem.” The system is not specific enough.
Finally, his decision models will not test all alternatives. These three aspects of his decision process—becoming aware of problems, formulating the problem, and deciding upon the alternatives to be tested—are now largely intuitive. Thus a large intuitive gap exists between the brand manager knowing he has some kind of a problem and the utilization of a decision model.
Fortunately control is receiving increasing attention, both because the problem is becoming greater and the techniques for dealing with it have improved. The problem is more urgent, for one reason, because the marketing environment has become more dynamic, especially with the increased flow of new product developing out of the expanded research expenditures.
Thus a market requires more careful and regular monitoring. Also, as companies have grown, they have more people to control or evaluate. Because the brand manager supervises so few people, however, he is almost entirely concerned with evaluating his plan and obtaining diagnostic insights rather than with controlling people. For this reason we have said nothing about controlling people here.
When such a problem exists, it can obviously arise either because the plan was incorrect in the sense that it did not “fit” that uncontrollable environment or because the plan was correct but improperly executed. To incorporate the evaluation of the execution into the system greatly complicates it. Finally, the power of adequate control has probably become better recognized.
New control techniques are helping to define the practical problem of control more clearly. These techniques have developed out of quality control and servomechanism or feedback theory generally. Control, which involves a considerable and rapid flow of data, raises some sophisticated statistical questions. We can expect more attention to the control problem in marketing.
Marketing Control – Designing a Marketing Control System
The broad pattern of steps in management control detailed above apply to marketing control as well. The control design must ensure that major variances are automatically distinguished and highlighted. It must also be capable of correctly interpreting the variances; the true meaning of the variances should be brought out by the control process. And the control information should lead to action. The control reports should be brief, lucid and pertinent.
There must also be a mechanism in the control design that translates the control information on variances into corrective courses of action. And, the control process should facilitate the focusing of attention on exceptions. The whole process should be oriented-to the present and the future rather than to the past. While control may involve appraisal of past performance, its main burden is current action and future course of action.
In the nature of things, any deviation between the plan and the actual can be identified only after the event has occurred. As such, the interval between noticing the deviation and taking corrective action becomes very crucial the control process. If the intervals is long, control becomes a fractions. Once planning IS completed and c implementation is underway, the feedback should start flowing fast.
In other words, the essence of control is speedy feedback and speedy action that adjusts the operations to the prefixed norms. It is through feedback that control is achieved, and feedback and action have to be viewed as two sides of the same coin, the two components of a unified job, viz. control. Feedback is essential for timely understanding of the actual performance against the norms/targets. Action is essential for modifying the direction and level of performance so that it falls in line with the predetermined norms.
Marketing control as we shall see, uses a variety of techniques. But whatever be the technique used, marketing control basically has a single purpose, viz. monitoring the key result areas in marketing management, some of the key result areas that are monitored by various marketing controls are-
iv. Marketing costs
vi. Productivity in each marketing activity
There are several tools and techniques with which marketing control is exercised by a business firm.
The important ones among them are listed below:
i. Marketing Audit.
ii. Marketing Cost Analysis.
iv. Market Share Analysis,
v. Budgetary Control.
vi. Ratio Analysis.
vii. Contribution Margin Analysis.
viii. Marketing Information Inputs and Warning Signals.
Marketing Audit Marketing audit is a continuous, systematic and objective study of the total marketing efficiency of the firm, It critically evaluates the marketing policies and marketing activities of the firm, and measures the external and direction of its growth Marketing audit is concerned with the long-term business interests and challenges of the firm rather than short-term achievements.
No firm can ever take the stand that everything is fine with its marketing. It is essential for the firm to assess whether the marketing policies, programmes, systems and methods established in the past are now valid and would be effective for the future. Marketing audit ensures such assessment.
The strength of marketing audit lies in the fact that while other control techniques aim at a piecemeal evaluation of various marketing functions, marketing audit aim at a total evaluation of the entire marketing system and process. It leads to specific plans for improving the marketing efficiency of the firm. It also measures the evaluates the effectiveness of all other marketing control techniques employed by a firm. In this sense, marketing audit can be described as a control of controls.
The marketing chief of any firm has to give maximum attention to marketing cost control and if he has to effectively control the marketing costs, he has to comprehend the components of the marketing costs and the methods available for their control. He must have an effective system to track them down. He must also analyse them systematically.
For, without systematic analysis of the marketing costs, it will not be possible to control these costs, and without such cost control, marketing control is meaningless. Today, in most firms, marketing cost analysis has become a prominent marketing control technique. Benefits Flowing from Marketing Cost Analysis a variety of benefits are derived by the firm from a careful and systematic marketing cost analysis.
It helps improve the competitive position of products of the firm in the market. If costs are reduced, prices can be kept competitive. lt helps drop unprofitable customers, products, channels and markets and enables the firm identify and concentrate on relatively profitable products, customers, channels and markets. The firm may even take a decision to carry on with the unprofitable customers, products and markets.
But with marketing cost analysis, the decision is a conscious one, to support the long-term interests of the firm. Helps appraise the true cost and true value of each marketing service provided by the ‘firm -such as delivery, presale and after-sale service, credit facilities, etc.It helps set responsibility for individual executives in the controlling of costs and ensures cost related performance.