Methods of Conducting a Marketing Audit

Methods of Conducting a Marketing Audit

Marketing audit is an examination of the marketing activities of company. It must be conducted by impartial persons.

Auditors must be properly qualified, trained and experienced enough to do the audit. They must have a complete knowledge and exposure of marketing.

Image below depicts the methods of conducting a marketing audit.

Following methods are used to conduct a marketing audit:

1. Outside auditor : Company appoints an outside auditor to conduct a marketing audit.
2. Task force audit : Company selects a team of its own senior executives to conduct a marketing audit.
3. Self audit : In this method, marketing manager of a company conducts a marketing audit.
4. Audit from above : Here, a senior executive of company (for example, a Director) is appointed to conduct a marketing audit.

Now let's discuss, “How is marketing audit conducted?”

1. Outside auditor

In this method, the company can appoint an outside auditor to conduct a marketing audit. An outside-auditor must be professional, a consultant or an agency.

Outside auditors conduct marketing audits for many companies. They have enough skills and experience. They are also more independent, impartial and objective oriented. They give good suggestions for improvement.

Therefore, it is better to use an outside auditor.

Auditor studies information and submits a report to the company. The company has to pay him fees for his services.

2. Task force audit

In ‘Task Force Audit’ method, the company appoints a team of its own executives for conducting a marketing audit. These executives are highly experienced. They conduct the marketing audit independently. They submit their report to the top level of management.

3. Self audit

In ‘Self Audit’ method, the company appoints the marketing manager to conduct a marketing audit. Here, the marketing manager has to conduct a marketing audit himself. This is called self-audit. He has to critically-examine the marketing performances. He has to find out the plus and minus points. Then he has to submit his report to top level of management.

Self audit must be conducted impartially by the marketing manager.

4. Audit from above

In ‘Audit From Above’ method, the company appoints a senior executive to conduct a marketing audit. This executive is mostly a director or a person who has complete knowledge about marketing. This is a type of internal audit.

It is always better to use an outside auditor for conducting a marketing audit. Internal methods have many limitations and hence must be avoided.

Scope, Areas or Types of Marketing Audit

Scope, Areas or Types of Marketing Audit

There are no fixed guidelines regarding the scope, areas or types of marketing audit. In other words, the scope of marketing audit is not fixed. It changes from company to company. Each company can make its own marketing audit plan. However, the scope of marketing audit must include the following areas or types:

The six important types of marketing audit are:

1. Marketing Environment Audit.
2. Marketing Strategy Audit.
3. Marketing Organization Audit.
4. Marketing Systems Audit.
5. Marketing Productivity Audit.
6. Marketing Function Audit.

Now let's discuss each main area or type of marketing audit.

1. Marketing Environment Audit

Marketing Environment Audit consists of the external environment of company. It includes natural environment, economic environment, political environment, demographic environment, etc. The marketing audit analyses the marketing consumer, competitors, suppliers, so on. This audit helps the company to make marketing strategies.

2. Marketing Strategy Audit

Marketing Strategy Audit is a critical analysis of marketing objectives and strategies. It finds out whether the company's marketing objectives are clear and proper. It also examines the marketing strategies of the company. This audit is done to find out the utility of the marketing strategies.

3. Marketing Organization Audit

Marketing Organization Audit is a systematic study of the company's organizational resources like manpower, organization, structure, employee training and development, Research and Development facilities, motivation, communication and working relations.

4. Marketing Systems Audit

Marketing Systems Audit finds out the company's ability of collecting and analyzing data. It looks for the company's ability to plan and control the marketing activities. It also studies the company's marketing information system, planning and control system, etc.

5. Marketing Productivity Audit

Marketing Productivity Audit finds out the profitability of the company's products. It examines the markets. It also examines the measure to improve cost-effectiveness.

6. Marketing Function Audit

Marketing Function Audit is a complete study of marketing functions in relation to the product, price, promotion and place of distribution. So, it is an audit of the marketing mix (4 P's) of the company.

Explain the Characteristics of Marketing Audit

Explain the Characteristics of Marketing Audit

The eight important characteristics of marketing audit are depicted below.

The salient features or characteristics of marketing audit are as follows:

1. Marketing audit is a comprehensive study of all marketing activities.
2. It is a systematic-process that follows a step-by-step procedure.
3. It is a periodic activity and must be conducted regularly.
4. It is conducted by an independent person who is not from company.
5. It is a critical review of marketing activities of company.
6. It is an evaluation of marketing activities of company.
7. It finds out marketing opportunities and weaknesses of company.
8. It is a preventative and curative marketing medicine.

Now let's briefly discuss or explain each characteristic of marketing audit.

1. Comprehensive study

Marketing audit is a comprehensive or complete study of all the marketing activities of company. It studies the marketing environment, marketing objective, marketing plans, policies and strategies, etc.

2. Systematic process

Marketing audit is a systematic process. It follows a step-by-step procedure.

1. It studies marketing environment.
2. It studies the internal marketing system.
3. It examines the marketing activities.
4. It finds out the problems.
5. It makes an action plan to remove the problems.

The main aim of marketing audit is to improve the effectiveness of marketing.

3. Periodic activity

A company must conduct a marketing audit regularly or periodically. It must conduct the marketing audit even if it has no problems. This is because it helps the company to analyze the post performance and to make future marketing strategies.

A company must not conduct a marketing audit only if it has problems or when it suffers a loss. It must be a compulsory and not an optional activity.

Marketing audit is like a postmortem of failure.

4. Independently conducted

Marketing audit is independent. That is, it is conducted by an autonomous person. It is not conducted by a person who is working in the marketing department. Mostly, it is conducted by an outside agency.

5. Critical review of marketing activities

Marketing audit is a critical review of marketing activities of the company. It finds out the defects, deficiencies, problems and weakness in company's marketing activities. It also gives suggestions about how to remove these defects or deficiencies.

6. Evaluates marketing activities

Marketing audit is an explanation or evaluation of marketing activities of company. It evaluates company's objective, plans, policies, programs, etc.

7. Finds out opportunities and weaknesses

Marketing audit finds out the marketing opportunities and weakness of the company. It helps the company to take advantage of the marketing objectives. It also helps the company to remove all its weakness.

8. Preventative and curative marketing medicine

Marketing audit is a preventative and curative marketing medicine. It prevents marketing problems. It also cures (solves) marketing problems.

What is Marketing Audit? Definition Meaning

Definition of Marketing Audit

The definition of marketing audit as stated by Abe Schuchman is as follows:

“Marketing audit is a systematic, critical and impartial review and appraisal of the total marketing operation: of the basic objectives and polices and the assumptions which underlie them as well as the methods, procedures, personnel and organization employed to implement the policies and achieve the objectives.”

Abe Schuchman gave this definition of marketing audit in his writings on its first extended discussions. He wrote this discussion for the American Marketing Association (AMA) in 1951.

Meaning of Marketing Audit

The meaning of marketing audit is depicted in the following chart.

Marketing audit is an analysis, examination, review or evaluation of marketing activities of a company. It evaluates marketing environment, objectives, plans, policies and strategies of a company. After evaluation, it identifies various defects, vulnerabilities, deficiencies, problems, and other weaknesses encountered in the company's marketing activities. It suggests measures and/or recommendations to overcome, solve or remove these limitations. It also seeks out new marketing opportunities for a company. Overall, it tries to enhance (improve) the marketing performance of a company.

Marketing audit is an extensive, systematic, independent and regular examination process of a company's marketing activities.

1. It is an extensive or comprehensive process because it covers all (entire) marketing activities of a company.
2. It is a systematic or methodical process since it strictly follows all involved steps or procedures properly.
3. It is an independent or autonomous process conducted by an external person. This person is not from the marketing department of a company.
4. It is a periodic process because it is conducted continuously after some fixed interval of time.

Marketing audit is very beneficial for the success of a company. It examines, “How well the marketing department of a company works or functions.” It compares the marketing plans of a company with its actual marketing performance. It finds out the strengths and weaknesses of a company's product. It suggests measures to remove the product's weaknesses. It guides a company to adapt its marketing strategies with the changing marketing environment. It helps a company to update its marketing strategies and control its marketing expenses. In short, a company cannot survive without conducting a proper marketing audit.

Additional topics on marketing audit are continued in the following articles:

1. Characteristics of marketing audit.
2. Types of marketing audit.
3. Methods of conducting a marketing audit.

Marketing audit evaluates the following three main (key) responsible areas:

1. External marketing environment : Here, the marketing audit mainly focuses on customers and competition in the business.
2. Internal marketing environment : Here, the marketing audit studies the structure of company's marketing team and its effectiveness.
3. Evaluation of current marketing strategy : Here, the marketing audit continuously reviews current marketing strategy of a company. It also takes help of lessons learned from its past marketing plans.

Distinguish Between MIS and Marketing Research (MR)

Distinguish Between MIS and Marketing Research (MR)

Following image depicts the ten main points which are used to make a comparison or distinction between MIS and Marketing Research (MR).

Image credits © Prof. Mudit Katyani.

Difference between MIS vs MR is based on the following ten points:

1. Meaning of MIS and MR.
2. Their basic or main purpose.
3. Wide or narrow scope.
4. General or specific nature.
5. Number of reports provided.
6. Future or past orientation.
7. Frequency of data collection.
8. Number of problems to solve.
9. Continuous or non-continuous operational method.
10. Based on use of computers or not.

Now let's distinguish MIS and Marketing Research (MR) on above points.

1. Meaning :
   1. MIS means to collect, analyze and supply relevant marketing information to the marketing managers. The marketing managers use this information for taking effective marketing decisions. It is a permanent and continuous process.
   2. Marketing Research (MR) is a systematic process of collecting and analyzing information to solve a specific marketing problem.
2. Purpose :
   1. The main purpose of MIS is to provide relevant information to marketing managers and enable them to make effective marketing decisions.
   2. However, the main purpose of Marketing Research (MR) is to solve a specific marketing problem.
3. Scope :
   1. The scope of MIS is wide. Marketing Research (MR) is one of its component. It is not only used to solve problems but also helps to prevent problems in the future.
   2. The scope of Marketing Research (MR) is narrow. It is one small part of MIS. It solves a specific present marketing problem.
4. Nature :
   1. MIS is more nonspecific or general in nature. It can solve many types of marketing problems.
   2. Marketing Research (MR) is more specific or particular in nature. At one time, it can only solve a single type of marketing problem.
5. Reports :
   1. MIS gives four types of reports namely, plan-reports, periodic-reports, triggered-reports and demand reports.
   2. Marketing Research (MR) provides only one report called as ‘MR Report.’
6. Orientation :
   1. Orientation of MIS is more future-oriented when compared to MR.
   2. However, the orientation of Marketing Research (MR) is more past and present one when compared to MIS. It concentrates more on earlier and latest information. It uses this information to solve a current marketing problem.
7. Problems :
   1. MIS deals with and attempts to solve many different marketing problems at one time. For this, it collects, stores, analyze and supply relevant market information to the marketing managers.
   2. Marketing Research (MR) only deals with a single marketing problem at one time. It doesn't solve multiple marketing problems simultaneously.
8. Data :
   1. In MIS, the data is collected more frequently, usually almost daily. This is a must for every company.
   2. In Marketing Research (MR), the data is not collected as frequently as MIS. It is collected on a required basis.
9. Operation :
   1. MIS is a permanent and continuous system. Here, the inflow of market information never stops. Data is constantly collected and stored for further analysis. It is properly analyzed, studied and well-organized before supplying to the marketing managers. MIS has a starting but no ending point.
   2. Marketing Research (MR) is not a continuous system. Here, data is collected only when a company faces a specific marketing problem. It has a starting and ending point.
10. Computers :
    1. MIS is heavily based on the use of computers. Here, computing technologies are widely used to ease and facilitate data collection, its storage, analysis, retrieval and supply of relevant information to marketing managers of the company.
    2. Unlike MIS, Marketing Research (MR) hardly makes use of computers. It uses computers only for analyzing some information and is not entirely based on computing technologies.

Essential Requisites of a Good MIS

Essential Requisites of a Good MIS

The following image depicts the eight essential requisites of a good MIS.

Image credits © Prof. Mudit Katyani.

The essentials of a good Marketing Information System (MIS) is listed below:

1. MIS must be unified and centralized.
2. It must facilitate decision making.
3. It must provide quick and accurate information.
4. It must be economical.
5. It must be selective.
6. It must be future oriented.
7. It must supply information regularly.
8. It must use new techniques.

Now let's discuss and find out, “How a good MIS must be?”

1. Unified and centralized : MIS must be unified and centralized. It collects and stores different types of market information. All of this information must be unified and centralized. That is, all the marketing information must be brought together (unified) and kept at one central place (centralized). So, it must be at the central-office. This will result in easy access and quick reference. The managers will be able to find all the required information at one place.
2. Facilitate decision making : MIS must facilitate decision making. That is, it must guide the marketing managers in decision making. It must provide required information to the managers to help in taking decisions. This information must be of a good quality. That is, it must be relevant, reliable, and up-to-date. This will result in an accurate decision-making process. So, it must not only be a data bank. It must play a positive role in the decision-making process.
3. Quick and accurate information : MIS must provide quick and accurate information. Today, managers have to take quick-decisions because the marketing is moving very fast. If they don't take quickest decisions, then they will lose many marketing opportunities. Therefore, it must provide quick information to the managers. This information must also be accurate, regular and continuous. It must be a user-oriented one. It must collect, classify, verify, store and supply information quickly and accurately.
4. Economical : MIS must be economical. That is, it must not be very costly. The expenditure on it must be minimum. It must not exceed its value. It must give maximum benefits to the company at a minimum cost. It will be economical only if it is selective. It must be particular in collecting, analyzing, storing and supplying information. It must use a minimum number of employees in its operation. It must be economical because it is not directly productive. It is a service and support function.
5. Selective : MIS must be selective. That is, it must not collect all the market information. It must only collect relevant information. It must collect information, which is very essential and useful for decision making. If it is not selective there will be a waste of time, energy, storage space and money.
6. Future oriented : MIS must be forward looking i.e. future-oriented. It must not be a past-oriented one. It must give more importance to future-oriented information. It must provide information for solving problems, which may come up in the future. The company will be successful if their marketing managers are future-oriented. The marketing managers can be so only if the MIS is also future oriented.
7. Supply information regularly : MIS must supply information regularly. The business environment is changing constantly. So, the marketing managers have to take marketing decisions continuously. Therefore, they require a regular and continuous flow of market information. This information must be provided by MIS. So, it must supply information regularly to the marketing managers.
8. Use new techniques : MIS must use new techniques for collecting, analyzing, storing and supplying information. It must use computers and micro-films. It must use new communication techniques. It must also make the use of the Internet and latest software programs. These newer techniques will increase the efficiency and accuracy of MIS. MIS will also become more economical by using new techniques.

4 Main Components of Marketing Information System (MIS)

Components of Marketing Information System MIS

Marketing Information System (MIS) collects, analyses, and supplies a lot of relevant information to the marketing managers. It is a valuable tool for planning, implementing and controlling the marketing activities.

The role of MIS is to identify (find out) what sort of information is required by the marketing managers. It then collects and analyzes the information. It supplies this information to the marketing manager at the right time. MIS collects the information through its subsystems. These subsystems are called components.

The four main components of Marketing Information System (MIS) are:

1. Internal Records,
2. Marketing Intelligence,
3. Marketing Research (MR), and
4. Marketing Decision Support System.

The basic components of MIS are depicted and explained below.

Image credits © Prof. Mudit Katyani.

1. Internal records : The first component of MIS is ‘Internal Record’. Marketing managers get lots of information from the internal-records of the company. These records provide current information about sales, costs, inventories, cash flows and account receivable and payable. Many companies maintain their computerized internal records. Inside records help marketing managers to gain faster access to reliable information.
2. Marketing intelligence :
   1. The second component of MIS is ‘Marketing Intelligence’. It collects information from external sources. It provides information about current marketing-environment and changing conditions in the market. This information can be easily gathered from external sources like; magazines, trade journals, commercial press, so on. This information cannot be collected from the Annual Reports of the Trade Association and Chambers of Commerce, Annual Report of Companies, etc. The salesmen’s report also contains information about market trends.
   2. The information which is collected from the external sources cannot be used directly. It must be first evaluated and arranged in a proper order. It can be then used by the marketing manager for taking decisions and making policies about marketing.
   3. So, marketing intelligence is an important component of MIS.
3. Marketing research : The third important component of MIS is ‘Marketing Research’. MR is conducted to solve specific marketing problems of the company. It collects data about the problem. This data is tabulated, analyzed and conclusions are drawn. Then the recommendations are given for solving the problem. Marketing research also provides information to the marketing managers. However, this information is specific information. It can be used only for a particular purpose. MIS and MR are not substitutes of each other. The scope of MIS is very wide. It includes ‘MR’. However, the scope of MR is very narrow.
4. Marketing decision support system : The fourth component of MIS is ‘Marketing Decision Support System’. These are the tools which help the marketing managers to analyze data and to take better marketing decisions. They include hardware, i.e. computer and software programs. Computer helps the marketing manager to analyze the marketing information. It also helps them to take better decisions. In fact, today marketing managers cannot work without computers. There are many software programs, which help the marketing manager to do market segmentation, price fixing, advertising budgets, etc.

Features of Marketing Information System MIS

Features of Marketing Information System MIS

The main characteristics or features of Marketing Information System (MIS):

Image credits © Prof. Mudit Katyani.

1. Continuous system : MIS is a permanent and continuous system of collecting information. It collects information continuously.
2. Basic objective : The basic objective of MIS is to provide the right-information at the right-time to the right-people to help them take right decisions.
3. Computer based system : MIS is a computer-based system. It uses computers for storing, analyzing and supplying information. It also uses micro-films for storing information. Therefore, it is very quick and accurate.
4. Future-oriented : MIS is future-oriented. It provides information for solving future problems. It is not past-oriented.
5. Used by all levels : MIS is used by all three levels of management, i.e. top, middle and lower. It is used for making marketing plans, policies and strategies. This is used to solve marketing problems and to take advantage of business opportunities.
6. Sources : MIS collects information from both, internal and external sources. For example, information is collected from company records, publications, etc.
7. Collects marketing information : MIS collects all types of marketing information. It collects information about the consumer competition, marketing environment, government policies, etc. It supplies this information to the marketing managers.
8. Helps in decision making : MIS supplies up-to-date and accurate information. It helps marketing managers to take quick and right decisions.