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Are There Any Reasons Why Marketing Cannot be Audited in the Same Way as Financial Accounts?

Are There Any Reasons Why Marketing Cannot be Audited in the Same Way as Financial Accounts?

The strategic control, defined as “the process by which managers ensure that resources are used effectively and efficiently in the accomplishment of organisational objectives” (Keegan, 1999), should be seen as a powerful engine of the company’s strategic choices. This process is also the way companies are able to set and move forward the process of marketing planning. Assuming that the strategic choices are correct, it is important to verify if there is coherence in relation to the changing markets, the economic conditions and the competitive behaviour.

The increasing speed and turbulence of the business environment and a shorter product life cycle are testifying the necessity, for every firm, to develop a critical review of the overall marketing goals and effectiveness. Waiting for problems to become evident or tragic situations to occur is the attitude of below-average companies and is likely to drive them out of the market boundaries. Firms have to implement a strategic control instrument that defines problems and offer possibilities and clues. The Marketing Audit “a comprehensive, systematic, independent, and periodic examination of a company’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 market performance” (Kotler, 2000) is the answer. The Marketing Audit is therefore the way companies assess the effectiveness and efficiency of all their marketing procedures preparing a solid base for a strategic development.

Giving Kotler’s definition, it is easy to understand which features make the audit a truly strategic instrument within the marketing framework. First of all, covering all the major marketing activities in the company, the marketing audit is a comprehensive method. Therefore, its broad vision and analysis makes the process exhaustive. However, when it is limited to a part of the marketing activity, it has to be defined as functional. Concerning the methodology, a clear sequence of steps that will lead to an unambiguous aim has to be prepared. This systematic and formal path allows the auditor to focus easily on each different area, as happens in the financial audits. Thirdly, the independence of the marketing audit process reflects a need of objectivity. Actually, if somebody is directly involved in the marketing procedures, they are likely to drive the audit process into a desired direction. Through the internal or external approach, instead, the audit is kept on a different level from the audited area. A final characteristic applies, principally, to those companies that decide to evaluate their position only in the view of a critical situation. In fact, the marketing audit delivers useful results only if it is conducted periodically. It is also important when the company is achieving growing success, in order to assess which strategies would have reached better results.

The marketing audit consists of the examination of the main factors that are relative to the companies marketing situation. The first step takes into account the marketing environment. Through a PEST analysis, checking the macro and the specific environmental characteristics that are deeply linked with the company’s framework, the audit is able to spot particular trends that affect the business activity.

Once the first critical analysis is well satisfied, auditors are able to evaluate the marketing strategy. This activity seizes the goals and relates them with the strategy the company is implementing. Only in this way is it possible to verify how much correspondence there is between objective, opportunities and resources. For example, a chemical company had as objective a growth in a particular product line at 15 percent. However, the competition in that segment was fierce and the total market showed no growth. The audit spotted this incoherence and proposed to reconsider the particular line for a maintenance objective, looking for growth in other segments.

A well-structured marketing audit has to assess the extent of effectiveness in the marketing organisation and the quality of interaction between marketing and the other corporate functions. Unfortunately, a great problem in European companies (the Italian first of all) is the lack of customer-orientation. This makes the analysis more difficult and it assumes a loose connection between the marketing division and organisation.

The Marketing System represents the way the firm gathers all sort of information so as to make the best marketing decision. Therefore, another step in the audit is the examination of the different means of collecting information and the way they are processed. A marketing audit in a corporate division, for instance, has revealed that decisions on which product to eliminate from the product-mix were taken by the head of the division, following exclusively their intuitive feelings.

Although all these analysis have a ‘wide’ sight, the auditor cannot avoid evaluating the profitability of the company. Only if the business creates profit can the marketing strategy be effective. PDSC (Pacific Decision Science Corporation – an American consulting and systems implementation company), for example, uses marketing cost accounting principles in order to measure the marginal profit contribution of the marketing strategy.

Eventually, in order to gather a complete corporate image, the auditors need to investigate the key marketing functions where some problems may be recognised within poorly performing areas.

If a clear conclusion is to be reached, and improvements have to be added to the company’s strategy, the marketing audit needs to follow a precise plan. Unfortunately the entire process involves problems and pitfalls that may affect the results. The first stage is the agreement on the audit objects, the definition of the approach and the explanation of the scope. In this way the auditor will have a global view of the company and the company will have a better understanding of the audit. As the company sets the objectives and an executive commissions the audit, the findings may lack objectivity. “The company that wants a truly independent audit should discuss with the independent auditor the importance of objectivity” (Keegan, 1999). Another problem relative to this issue may arise when the auditor is not fully competent in understanding the industrial framework. In this case the findings may be too poor and limited to a partial view. As a matter of fact, some industries to be audited need a deep and long experience. In order to avoid the waste of resources some companies have organised their internal audit process in a very interesting way. General Electric, for example, has a corporate consulting division that helps all the subsidiaries in solving marketing problems. One of its tasks is to audit the different world divisions in a very independent and systematic manner. 3M, instead of organising a central department responsible for the marketing auditing, has an unusual marketing plan audit procedure. Every time a division’s marketing manager considers a strategic control useful, he calls for an audit. The audit team is composed of different professionals, from other corporate divisions, that evaluates the marketing strategy and suggests possible solutions.

Although the auditors can collect a vast amount of data directly from the Internet, and therefore without moving from their office, the biggest part of their job is played on the field, gathering data directly from interviews. However, during this procedure, different problems may arise. Managers in the function under audit tend to feel threatened by the auditor. For this reason, the results may be biased and the data collected may drive the auditor in the wrong direction. Moreover, new data sources may appear during the audit and therefore the auditors need to be ready to investigate new areas. Similarly, they need to evaluate how important and relevant the findings are that have been gathered from interviews. It often happens that personnel use the marketing audit to express their negative feelings about the company.

The biggest problem comes from the executive who commissions the marketing audit. Usually, when managers call for an audit, they expect far too much from the outcomes and the resources it seems to offer. They believe it has to develop surprising results or propose new incredible prospects. On the other hand, the auditor may encounter scepticism and opposition when the time comes to expose the results. Therefore, the marketing audit has to be closed with a clear presentation of the findings where the auditor indicates the further necessary steps the company must follows in order to implement its strategy. The audit is valuable only if it delivers a critical insight of the company’s marketing strategy.

The marketing audit allows companies to understand, in an objective way, their strategic position and take advantages of the mistakes done in the past or the opportunities that will take place in the future. To some extent the main characteristics, the key steps and the areas of the marketing audits are the same as the financial audits. Being a practical tool, with a fairly schematic procedure, then “there is no reason why marketing cannot be audited in the same way as accounts, in spite of its more innovative, subjective nature” (Baker, 1999). In fact, the marketing audit is to the marketing department what a financial audit is to the accounting department. Having said this, the outcomes and the suggestions derived from a marketing audit are completely different from a financial audit. “Whereas two certified public accountants will handle an audit assignment using approximately the same methodology, two marketing auditors are likely to bring different conceptions of the auditing process to their task” (Kotler and al., 1989).

Concerning the methodology, it is clear how the two instruments rely on the same approach. The real difference, however, is based on the analysis. Financial audits tend to “be an investigation of the company’s financial statement, designed to determine the fairness of the presentation” (Meigs, 1998). On the other hand, marketing audits are likely to match the organisation’s strategy with the environment and operational and strategic aspects with the marketing programs. As an extreme example, part of the financial audit may be included in the marketing audit. In fact, the analysis of the company’s profitability is already a financial step. For instance, a company may decide to hire a marketing controller in order to analyse its marketing costs and profitability. This person would be able to prepare a sort of financial audit for the marketing strategy.

The problem with the marketing audit is not in its shape but instead in the way it is able to implement the marketing strategy. If the company reduces it as a merely financial exercise, therefore just checking the accuracy of information, the result is more than evident. The company gathers an interesting quantity of data that does not suggest any strategic issue. Instead it has to bring a continuous process of developing reformulation and recovery strategies. This process must propel, like a fuel, the company’s strategic planning.

The marketing audit has a broad scope and it aims to bring to the managers a clearer view of the whole business. Considering the definition of financial audit it is easy to see that its scope is narrower. The financial audit checks how the directors have dealt with the assets of the company on behalf of the shareholders. That is to say that it analyses the form of the financial statement in order to express opinion on it. Marketing audits are far more comprehensive. In fact, it intends to answer the questions: “are we doing the right things?” and “are we doing things right?” The financial audit can only answer the question “did we do the things right?”

Finally, another way to see differences between the two is based on the legal obligations placed on them. The marketing audit is a completely free instrument. Companies should use it not because of the law but because they know it is the right way to improve the firm’s strategy. Financial audits are compulsory for companies with an annual turnover of more than Ј 350,000. Therefore, it is not a matter of strategy but a matter of certification. Account manager must use the financial audit to certify that they reached the annual result following the established rules.

In conclusion, it is arguable that marketing can be audited in the same way as financial accounts. In fact, it allows the company to evaluate its marketing strategy as well as the financial audit allows evaluating accounts. However, managers have to be aware of the different outcomes that the two instruments will bring forward. The similarity in methodology does not mean either the same findings or the same conclusions. This is also true considering that the process of discussion, analysis and assimilation, that managers undertake after the audit, represents the most valuable part of the marketing audit. Unfortunately still too many companies use the marketing audit as an analytical tool. The result of this attitude is a great waste of resources along with the missed objective of the strategy implementation. If the organisation’s managers are flexible enough to see the marketing audit as a true and complete instrument, for the continuing marketing strategy improvement and development, they will understand their business and the path to follow to achieve better results.

Pendlebury M. W., Maurice W. – COMPANY ACCOUNTS: analysis, interpretation and understanding – 5th ed. - London: Thomson Learning, 2001

Kotler P. – MARKETING MANAGEMENT – Millennium ed. – London: Prentice Hall, 2000

Kerin, R. A. – STRATEGIC MARKETING PROBLEMS: cases and comments – 9th ed. – Upper Saddle River, N.J.: Prentice-Hall, 2000

Baker M. J. – THE MARKETING BOOK - 4th ed. - Oxford: Butterworth-Heinemann, 1999

Keegan W. J. – GLOBAL MARKETING MANAGEMENT – 6th international ed. - London: Prentice-Hall, 1999

Gandellini G. – IL NUOVO MARKETING STRATEGICO – 3th ed. – Milano: Franco Angeli, 1996

McDonald M. – THE MARKETING AUDIT: translating marketing theory into practice – Oxford: Butterworth Heinemann, 1993


Kotler P., Gregor W.T., Rodgers W.H. – THE MARKETING AUDIT COMES OF AGE – Sloan Management Review, 1989

Internet sources

Financial times: http://news.ft.com/home/uk/
American Marketing Association: http://www.marketingpower.com/
GE, General Electrics: http://www.ge.com/
3M, Minnesota Mining and Manufacturing Company: http://www.3m.com/
PDSC: http://www.pdsc.com/frameset.html
The Copernican University: http://www.copernicusmarketing.com/

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