Managing a Holistic Marketing Organization for the Long Run | chapter 23 699

Table 23.7 Marketing Metrics

Sales Metrics Distribution Metrics

• Sales growth • Number of outlets
• Market share • Share in shops handling
• Sales from new products • Weighted distribution
• Distribution gains
Customer Readiness to Buy Metrics • Average stock volume (value)
• Awareness • Stock cover in days
• Preference • Out-of-stock frequency
• Purchase intention • Share of shelf
• Trial rate • Average sales per point of sale
• Repurchase rate
Communication Metrics
Customer Metrics • Spontaneous (unaided) brand awareness
• Customer complaints • Top-of-mind brand awareness
• Customer satisfaction • Prompted (aided) brand awareness
• Ratio of promoters to detractors • Spontaneous (unaided) advertising awareness
• Customer acquisition costs • Prompted (aided) advertising awareness
• New-customer gains • Effective reach
• Customer losses • Effective frequency
• Customer churn • Gross rating points (GRP)
• Retention rate • Response rate
• Customer lifetime value
• Customer equity
• Customer profitability
• Return on customer

production costs, evaluate customer and geographic profitability, and educate marketing staff on the financial im-
plications of marketing decisions.

Strategic Control Each company should periodically reassess its strategic approach to the marketplace
with a good marketing audit. Companies can also perform marketing excellence reviews and ethical/social
responsibility reviews.
The Marketing Audit The average U.S. corporation loses half its customers in five years, half its employees
in four years, and half its investors in less than one year. Clearly, this points to some weaknesses. Companies that
discover weaknesses should undertake a thorough study known as a marketing audit.74
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.
Let’s examine the marketing audit’s four characteristics:
1. Comprehensive—The marketing audit covers all the major marketing activities of a business, not just a few
trouble spots as in a functional audit. Although functional audits are useful, they sometimes mislead management.
Excessive sales force turnover, for example, could be a symptom not of poor sales force training or compensation
but of weak company products and promotion. A comprehensive marketing audit usually is more effective in
­locating the real source of problems.
2. Systematic—The marketing audit is an orderly examination of the organization’s macro- and micromarket-
ing environments, marketing objectives and strategies, marketing systems, and specific activities. It identifies
the most-needed improvements and incorporates them into a corrective-action plan with short- and long-
run steps.

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 700 PART 8 | Conducting Marketing Responsibly for Long-term Success

3. Independent—Self-audits, in which managers rate their own operations, lack objectivity and independence.
The 3M Company has made good use of a corporate auditing office, which provides marketing audit services
to divisions on request.75 Usually, however, outside consultants bring the necessary objectivity, broad experi-
ence in a number of industries, familiarity with the industry being audited, and undivided time and attention.
4. Periodic—Firms typically initiate marketing audits only after failing to review their marketing operations
during good times, with resulting problems. A periodic marketing audit can benefit companies in good health
as well as those in trouble.
A marketing audit starts with agreement between the company officer(s) and the marketing auditor(s) on the
audit’s objectives and time frame and a detailed plan of who is to be asked what questions. The cardinal rule for
marketing auditors is: Don’t rely solely on company managers for data and opinions. Ask customers, dealers, and
other outside groups. Many companies don’t really know how their customers and dealers see them, nor do they
fully understand customer needs.
The marketing audit examines six major components of the company’s marketing situation. Table 23.8 lists the
major questions.

Table 23.8 Components of a Marketing Audit

Part I. Marketing Environment Audit

Macroenvironment
A. Demographic What major demographic developments and trends pose opportunities or threats to this company? What actions has the
company taken in response to these developments and trends?
B. Economic What major developments in income, prices, savings, and credit will affect the company? What actions has the company
been taking in response to these developments and trends?
C. Environmental What is the outlook for the cost 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?
D. Technological What major changes are occurring in product and process technology? What is the company’s position in these technol-
ogies? What major generic substitutes might replace this product? What are the digital implications of how the company
conducts its business and its marketing?
E. Political What changes in laws and regulations might affect marketing strategy and tactics? What is happening in the areas of sustain-
ability, equal employment opportunity, product safety, advertising, price control, and so forth, that affects marketing strategy?
F. Cultural What is the public’s attitude toward business and toward the company’s products? What changes in customer lifestyles
and values might affect the company?

Task Environment
A. Markets What is happening to market size, growth, geographical distribution, and profits? What are the major market segments?
B. Customers What are the customers’ needs and buying processes? How do customers and prospects rate the company and its com-
petitors on reputation, product quality, service, sales force, and price? How do different customer segments make their
buying decisions?
C. 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?
D. Distribution What are the main trade channels for bringing products to customers? What are the efficiency levels and growth poten-
and Dealers tials of the different trade channels?
E. Suppliers What is the outlook for the availability of key resources used in production? What trends are occurring among suppliers?
F. Facilitators and What is the cost and availability outlook for transportation services, warehousing facilities, and financial resources? How
Marketing Firms effective are the company’s advertising agencies and marketing research firms?

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 Managing a Holistic Marketing Organization for the Long Run | chapter 23 701

Table 23.8 (Continued)

G. Publics Which publics represent particular opportunities or problems for the company? What steps has the company taken to
deal effectively with each public?
Part II. Marketing Strategy Audit
A. Business Mission Is the business mission clearly stated in market-oriented terms? Is it feasible?
B. Marketing Are the company and marketing objectives and goals stated clearly enough to guide marketing planning and perfor-
Objectives mance measurement? Are the marketing objectives appropriate, given the company’s competitive position, resources,
and Goals and opportunities?
C. Strategy Has the management articulated a clear marketing strategy for achieving its marketing objectives? Is the strategy
­convincing? Is the strategy appropriate to the stage of the product life cycle, competitors’ strategies, and the state of
the economy? Is the company using the best basis for market segmentation? Does it have clear criteria for rating the
segments and choosing the best ones? Has it developed accurate profiles of each target segment? Has the company
developed an effective positioning and marketing mix for each target segment? Are marketing resources allocated
­optimally to the major elements of the marketing mix? Are enough resources or too many resources budgeted to
­accomplish the marketing objectives?
Part III. Marketing Organization Audit
A. Formal Structure Does the marketing vice president or CMO 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?
B. Functional Are there good communication and working relations between marketing and sales? Is the product-management system
Efficiency working effectively? Are product managers able to plan profits or only sales volume? Are there any groups in marketing
that need more training, motivation, supervision, or evaluation?
C. Interface Are there any problems between marketing and manufacturing, R&D, IT, purchasing, finance, accounting, and/or legal
Efficiency that need attention?
Part IV. Marketing Systems Audit
A. Marketing Is the marketing information system producing accurate, sufficient, and timely information about marketplace devel-
Information opments with respect to customers, prospects, distributors and dealers, competitors, suppliers, and various publics?
System 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?
B. Marketing Is the marketing planning system well conceived and effectively used? Do marketers have decision support systems
Planning System available? Does the planning system result in acceptable sales targets and quotas?
C. Marketing Are the control procedures adequate to ensure that the annual-plan objectives are being achieved? Does management
Control System periodically analyze the profitability of products, markets, territories, and channels of distribution? Are marketing costs
and productivity periodically examined?
D. New-Product Is the company well organized to gather, generate, and screen new-product ideas? Does the company do adequate
Development ­concept research and business analysis before investing in new ideas? Does the company carry out adequate product
System and market testing before launching new products?
Part V. Marketing Productivity Audit
A. Profitability What is the profitability of the company’s different products, markets, territories, and channels of distribution? Should the
Analysis company enter, expand, contract, or withdraw from any business segments?
B. Cost-Effectiveness Do any marketing activities seem to have excessive costs? Can cost-reducing steps be taken?
Analysis

(Continued)

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 702 PART 8 | Conducting Marketing Responsibly for Long-term Success

Table 23.8 (Continued)

Part VI. Marketing Function Audits

A. Products What are the company’s product line objectives? Are they sound? Is the current product line meeting the objectives?
Should the product line be stretched or contracted upward, downward, or both ways? Which products should be
phased out? Which products should be added? What are the buyers’ knowledge and attitudes toward the company’s
and ­competitors’ product quality, features, styling, brand names, and so on? What areas of product and brand strategy
need improvement?
B. Price What are the company’s pricing objectives, policies, strategies, and procedures? To what extent are 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 what extent are price policies compatible with the needs of distributors and dealers,
­suppliers, and government regulation?
C. Distribution What are the company’s distribution objectives and strategies? 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?
D. Marketing Is the company making enough use of mass, digital, and personal communications? What are the organization’s com-
Communications munication objectives? Are they sound? Is the right amount being spent on communications? What do customers and
the public think about the communications? Are media well chosen? Is the internal communications staff adequate?
Is the communication budget adequate?
E. 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, 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 competitors’
sales forces?

The Marketing Excellence Review The three columns in Table 23.9 distinguish among poor, good, and
excellent business and marketing practices. The profile management creates from indicating where it thinks the
business stands on each line can highlight where changes could help the firm become a truly outstanding player in
the marketplace.

The Future of Marketing

Top management recognizes that marketing requires more accountability than in the past. “Marketing Memo:
Major Marketing Weaknesses” summarizes companies’ major deficiencies in marketing and how to find and
­correct them.
To succeed in the future, marketing must be more holistic and less departmental. Marketers must achieve wider
influence in the company, continuously create new ideas, and strive for customer insight by treating customers
­differently but appropriately. They must build their brands more through performance than promotion. They must
go electronic and win through building superior information and communication systems.
The coming years will see:
• The demise of the marketing department and the rise of holistic marketing
• The demise of free-spending marketing and the rise of ROI marketing
• The demise of marketing intuition and the rise of marketing science
• The demise of manual marketing and the rise of both automated and creative marketing
• The demise of mass marketing and the rise of precision marketing

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