User:Richard J Williams

Marketing Due Diligence
--Richard J Williams 12:31, 5 February 2007 (UTC) Due diligence is the process of challenging, appraising or reviewing a business plan, proposal or set of accounts to determine the accuracy, viability and achievability. Marketing due diligence is the process of appraising the strategy and marketing elements of the plan or proposal, in particular to take a view on the projected sales and profits.

If the strategy and understanding of the customers (the market) are not right then it does not matter how efficiently the business makes a product or provides a service or how well trained the staff are - if there is not enough demand at the right price then the plan will fail. It is possible with good implementation to hide a poor strategy for a time but it will ultimately fail. Flawed strategy means stakeholders and shareholders will loose money and employees will loose jobs.

For many years due diligence has typically been undertaken by banks before providing a large loan, by venture capitalists and government departments before providing investment or grants, or by accountants and merchant banks before the completion of mergers and acquisitions.

There is now a trend for marketing due diligence to be applied to re-assure senior management that they are protecting or enhancing shareholder value and to demonstrate good governance. Malcolm McDonald, Brian Smith and Keith Ward in their book "Marketing Due Diligence" propose that CEOs should demand greater marketing effectiveness and that marketing due diligence is important to achieve marketing effectiveness.

In the past the emphasis of due diligence has focused on the financial side of a business or plan - not enough effort has been put into how sales projections and the assumptions behind them challenged with enough rigour. Institutions have therefore increasingly put more effort into assessing the marketing viability and sales achievability of business plans and proposals. Richard Williams who has 18 years experience of marketing due diligence projects in the UK, USA and Asia says that some organisations have applied marketing due diligence appraisal for twenty years.

Marketing due diligence helps to reveal if there is hidden value in a proposal and whether there are unforeseen threats that require sensitivity (a percentage mark-up or mark-down to the volume and or value of the projections to test the viability) A downward sensitivity (will the business is viable with a lower level of sales in specific product lines) or an upward sensitivity (what additional investment might be required if the business exceeds its sales projections).

The best people for undertaking marketing due diligences are people who have experience developing strategy (where the business is now, where does it want to be in 3 to 5 years time, how will it get there) and know how to prepare detailed sales projections (not just broad assumptions of year on year growth based on a finger in the wind).

There is typically an inbuilt optimism amongst sales and marketing people who prepare sales projections and pricing. Marketing specialists are best able to interpret and then to challenge the team, having researched the market in order to make a sound judgement on what is real and possible.

The issues that impact on the success of a plan include: ·	Whether there is a market for the product/service ·	Are the market trends consistent with the plan - are there technical changes ·	Are the market share implications of the plan reasonable ·	How have the sales projections been developed - is it a simple annual increment or are they based on specific expectations of a formal pipeline of sales or the expected results of specific promotional campaigns ·	Is the marketing (including sales) team capable of delivering the plan ·	Does the plan take account of competitors

Most people with an MBA or with a marketing education such as the Members of the Chartered Institute of Marketing in the UK will be aware of the basic principles of a marketing audit. The marketing due diligence process is an extension of the audit process. The approach in a marketing audit is to provide recommendations and observations to drive the creation of a new strategy or the adjustment of the old. With due diligence the process is to assess the viability achievability of an existing strategy and plan. If the plan has not been developed with sufficient thoroughness then the weaknesses will be highlighted.

The Marketing Audit is defined by Kotler, a leading marketing academic, as: 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 performance.

Philip Kotler [] provides a range of questions under the following headings which constitute a marketing audit. For more information this see "Marketing Management by Kotler.

Marketing Environment Audit ·	Political/legal/fiscal ·	Economic/demographic ·	Social/cultural ·	Technological ·	Ecological

The Task Environment Audits ·	Markets and Trends ·	Competitors ·	Distributors and dealers ·	Suppliers ·	Advertising and PA agencies

Marketing Strategy Audit ·	The business mission ·	Corporate and Marketing objectives ·	Marketing Strategy

The marketing organization audit ·	Who is responsible for strategy ·	Is the marketing function led by a person with sufficient authority and responsibility over those areas of Functional efficiency

The marketing systems audit ·	Information systems ·	Planning systems ·	Control systems ·	New product systems

The marketing productivity audit ·	Profitability analyses ·	Cost-effectiveness analysis

Marketing Functions Audit ·	Products ·	Price ·	Distribution ·	Sales force ·	Advertising and promotion