UNIT IV

Marketing control and marketing audit – types and methods of conducting

marketing audit – marketing risks – methods of dealing with marketing risks.

MARKETING CONTROL

Definition:
“Marketing control is a process of comparing actual performance of marketing
department with standards to find our degree of deviation, and, if necessary, corrective
actions are taken”.

“Marketing control involves verifying and rectifying marketing performance.”

NATURE OF MARKETING CONTROL:

1. Control can be exercised only with reference to and on the basis of plans.

2. The managerial functions cannot be completed effectively without performing the

control function.

3. Control is in fact a follow-up action to the other functions of management.

4. It is an on-going process. That is, as long as an organization exists, some sort of

control is required.

5. Control is forward-working because past cannot be controlled.

6. Control is a process of measurement, comparison and verification.

7. The essence of control is action.

8. Control is dynamic and not static.

9. Control aims at preventing unacceptable or incorrect performance.

10. Control is a check-up measure. It comes in the end so as to ensure the proper
implementation of plans.

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OBJECTIVES OF MARKETING CONTROL:

1. Control reveals deficiency in planning: thus, plans and policies can be improved.

2. Control helps managers to discharge their responsibilities.

3. Control consists in verifying whether everything occurs in conformity with the plan
adopted, the instruction issued and the principles established.

4. A sound control system not only reveals deviations but suggests -the corrective actions
required overcoming the deficiencies.

5. Control keeps the subordinates under check and creates discipline among them.

6. Effective control ensures efficiency and effectiveness in the organization.

7. A control system ensures the achievement of objectives.

PROCESS OF MARKETING CONTROL:

1. Fixation of Standard:
The first step in control process is the setting up of control standards. Standards represent
the criteria against which actual performance is measured. Standards serve as the
benchmarks because they reflect the desired results or acceptable level of performance.

2. Measurement of Performance:
After the fixation of standards, the actual performance of various individuals is measured.
This involves setting up the methods of collecting accurate and up-to-date information on
the progress of work. All measurements should be clear, comparable and reliable.
Measurement of performance against standards should be on a future basis so that
deviations are anticipated and necessary corrective actions are taken to prevent them.

3. Comparing Performance with Standards:

This refers to the comparison of the actual performance with the standards. It should be
remembered here that appraisal of actual performance becomes quite easy if the standards
are properly determined and methods of measuring performance are clearly stated. It is
also important to note that while making appraisal of performance, the manager should
concentrate mainly on those matters where major deviations are noticed.

4. Analysis of Deviations:
All deviations need not be brought to the notice of top management. A range of
deviations should be established and only cases beyond this range should be reported.
This is known as control by exception. When the deviation between standard and actual
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performance is beyond the prescribed limit, an analysis of deviations is made to identify
the causes of deviations. Then the deviations and causes are reported to the managers
who are authorized to take action.

5. Talking Corrective Action:

More reporting of actual performance or its comparison with predetermined standards is
not sufficient. Unless timely action is taken to adjust operations to standards, control
process is incomplete. Corrective action may involve setting of new goals, change in
organisation structure, and improvement in staffing and new techniques of directing.

TYPES OF MARKETING CONTROL:

1. Annual Plan Control:
This is the most basic of all controls used in marketing organizations. The main purpose
of this control is to monitor and take corrective action to examine whether planned sales
results are being achieved. The responsibility for this lies with the marketing
departmental head and all others in the top management.

2. Profitability Control:
Besides annual-plan control, companies carry on periodic research to determine the actual
profitability of their different products, territories, customer groups, trade channels, order
size etc. The task requires an ability to assign marketing and other costs to specific
marketing entities and activities.

3. Efficiency Control:
Suppose a profitability analysis reveals that the company is earning poor profits in
connection with certain products, territories or markets. The question is whether there are
more efficient ways to manage the sales force, advertising, sales promotion. Distribution
etc.

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4. Strategic Control:
Organizations’ should examine critically their policies, objectives, marketing strategy,
and competitive advantage and growth opportunities regularly so that their direction and
growth and overall marketing effectiveness is not impaired or reduced. The scanning of
marketing environment has become much more relevant and significant in view of
uncertain’ economic conditions, fast changing technology, customer life-style,
demographic changes etc.

ADVANTAGES OF MARKETING CONTROL:

1. A good control system provides timely information to management which is very
useful in taking corrective actions. Control reveals deficiency in planning so that suitable
action can be taken to improve plans and policies.

2. Control facilitates delegation and decentralization of authority. It helps to expand the

span of supervision.

3. It forces the individuals to integrate their efforts and to work as a team for the
achievement of standards.

4. It measures progress towards the goal and brings to light the adjustments, if any,
required in day-to-day operations.

5. Control enables management to verify the quality of various plans. Control helps to
review, revise and update the plans. Without an efficient control system even the best
plans may not work out as expected.

LIMITATION OF CONTROL:

1. A firm cannot control the external factors-technological changes, changes in fashions,

Government policies, social changes etc.

2. In some cases, standards of performance cannot be defined in quantitative terms, for

example, human behaviours.

3. Control is a time-consuming and expensive process.

4. Control may not be acceptable to employees.

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 MARKETING AUDIT
Definition:

The Marketing Audit refers to the comprehensive, systematic, analysis, evaluation and
the interpretation of the business marketing environment, both internal and external, its
goals, objectives, strategies, principles to ascertain the areas of problem and opportunities
and to recommend a plan of action to enhance the firm’s marketing performance.

TYPES (OR) METHODS (OR) COMPONENTS OF MARKETING AUDIT

1. Macro-Environment Audit: It includes all the factors outside the firm that influences
the marketing performance. These factors are Demographic, Economic, Environmental,
Political, and Cultural.
2. Task Environment Audit: The factors closely associated with the firm such as Markets,
Customers, Competitors, Distributors and Retailers, Facilitators and Marketing Firms,
Public etc.that affects the efficiency of the marketing programs.
3. Marketing Strategy Audit: Checking the feasibility of Business Mission, Marketing
Objectives and Goals and Marketing Strategies that have a direct impact on the firm’s
marketing performance.
4. Marketing Organization Audit: Evaluating the performance of staff at different levels
of hierarchy.

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5. Marketing Systems Audit: Maintaining and updating several marketing systems such as
Marketing Information System, Marketing Planning System, Marketing Control System
and New-Product Development System.
6. Marketing Productivity Audit: Evaluating the performance of the Marketing activities
in terms of Profitability and Cost-Effectiveness.
7. Marketing Function Audit: Keeping a check on firm’s core competencies such as
Product, Price, Distribution, Marketing Communication and Sales Force.

MARKETING RISK

Definition:

Marketing risk refers to the risk that an investment may face due to fluctuations in the
market. The risk is that the investment’s value will decrease. Also known as systematic
risk, the term may also refer to a specific currency or commodity.

TYPES OF MARKETING RISKS

1. Interest Rate Risk

2. Equity Price Risk

3. Foreign Exchange Risk

4. Commodity Price Risk

1. Interest Rate Risk

Interest rate risk is the risk that the value of a security will fall as a result of increase in
interest rates. However, in complex portfolios, many different types of exposures can
arise.

2. Equity Price Risk

Equity price risk refers to the risk arising from the volatility in the stock prices.

While talking about equity risk, it is important to differentiate between systematic risk
and unsystematic risk.

Systematic risk refers to the risk due to general market factors and affects the entire
industry. It cannot be diversified away.

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Unsystematic risk is the risk specific to a company that arises due to the company
specific characteristics. According to portfolio theory, this risk can be eliminated through
diversification.

3. Foreign Exchange Risk

Foreign exchange risk arises because of the fluctuations in the currency exchange rates.

Companies may be exposed to the foreign exchange risk in their normal course of
business because of the unhedged positions or because on imperfect hedges.

4. Commodity Price Risk

Commodity Price Risk refers to the risk of unexpected changes in a commodity price,
such as the price of oil.

These commodities may be grains, metals, gas, electricity etc.

Commodity risk affects various sections of people:

 Producers (Farmers, plantation companies, and mining companies)

 Buyers (Cooperatives, commercial traders, etc)
 Exporters
 Governments

METHODS OF DEALING WITH MARKETING RISKS

1. Brand Risk
A valuable brand is at constant risk of losing brand value due to competition and failures
such as a rebranding that results in declining brand.

2. Product Development
Risks related to developing and launching a new product. Completely new products
typically have a reasonably high failure rate at launch. Product development also
involves project risk and innovation risk.

3. Demand Risk
The risk that demands for your products or services will fall or fail to materialize. This
can occur due to shifts in customer needs and preferences. Demand can also suddenly fall
due to an innovation that makes a product obsolete.

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4. Concentration Risk
Dependence on a small number of products, regions or customers for your revenue. For
example, a firm that generates 80% of revenue from 5 customers.

5. Price Risk
Price related risk such as a price war.

6. Distribution Risk
Distribution risks such as channel conflict, loss of partners andinventory risk.

7. Operations Risk
A broad class of risks that includes anything that can potentially go wrong with your core
business processes. For example, a manufacturing problem that results in a delayed
product launch or a supply chain problem that results in poor inventory levels.

8. Reputation Risk
The risk of negative events such as poor customer service damaging your reputation.
Reputation risk can be seen as a gap between how you want to be viewed as a brand and
how you behave as a firm.

9. Sales Risk
Risks related to sales processes. For example, a high performing salesperson quits and is
able to attract many of your biggest accounts to their new company.