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Marketing due diligence
The company, the CEO,
shareholders, the Management
team and the Marketer
Marketing due diligence introduction
z What is in the CEO’s (the person who pays your salary) brain?
z According to Smith et al. (2003), the answer to the above is Tightly focused on
Shareholder value.
z As a marketer you should care about the number (value) and attempt to
increase it.
z The big irony is that shareholder value is largely “a guess”. The tangible assets
are only about 20% of a typical company valuation.
z All the rest (80%) is essentially an educated guess that the future revenue and
profit is worth a premium over tangible assets.
z The entire capital market revolves around this multi-trillion dollar guessing
game, involving your board of directors, the investor relations personnel, the
analysts and the big investors (Smith et al., 2003).
z All this put pressure on the marketing department.
z The answer to quantifying the remaining 80% (educated guess) of value lies in
THREE KEY PROCESSES put forward by Smith et al. (2003) and discussed
next.
1. Marketing department’s audit (how
will you increase the value?)
zHave you correctly defined the market?
zHave you defined the market segments
(including an STP market analysis)?
zHave you defined and evaluated the
competitive strength factors for each
segment?
zHave you defined and evaluated the
market attractiveness factors for the
company as a whole?
Marketing department’s audit contd.
z Have you constructed a current, quantified,
directional policy matrix? (portfolio analysis)
z Have you constructed a future (e.g., 5 years)
quantified directional policy matrix?
z Have you identified and stated the strategies
that will lead from the current situation to the
future situation?
2. Will the marketing strategy work?
z Does the strategy define true segments, not
products, channels, descriptor groups or
other false segments?
z Does the strategy define segment-specific
propositions, or does it attempt to sell the
same thing to everyone?
z Does strategy leverage strengths and
minimize weaknesses, or does it fail to
correctly assess these?
Will the marketing strategy work?
Contd.
z Is the strategy different from the competition,
or does it involve similar propositions to
similar segments?
z Does the strategy create internal or external
synergies, or does it fail to understand
these?
z Does the strategy direct tactical actions, or
does it allow for tactical uncertainty?
z Is the strategy proportional to the business
objectives, or is it expecting big results from
small changes?
Will the marketing strategy work?
Contd.
zDoes the strategy fit with market
changes, or is it designed for
yesterday’s market conditions?
zIs the strategy properly resourced, or
will it fail from inadequate funding?
zDoes the strategy make clear the basis
for competition, or is it trying to be all
things to all customers?
3. Have you allowed for risk?
zHas the relative risk of the strategy
been properly assessed, compared to
current, alternative and competitor
strategies?
zHas that risk been minimized, by
delaying investment or appropriate use
of marketing research?
zHas the level of risk been allowed for in
the required rate of return?
Have you allowed for risk? Contd.
zDoes the expected rate of return match
or exceed the required rate of return?
zHave the key elements of the strategy
that drive value creation been
identified?
zHave leading key performance
indicators been developed to measure
those value creators?
Implications for marketers
z The marketing due diligence process has important
implications/ramifications for the CEO, investors and
marketers.
z By answering the three crucial questions, it takes the
company valuation from an art to a science.
z Marketers provide the information and create and
execute the strategies that deliver the sales and
profit stream and positions for marketers where they
belong ---- in the boardroom.
z Lecture based on Smith, B., McDonald, M. and Ward, K. (2003), Marketing due
diligence, Marketing Business Magazine (The magazine for the CIM), October,
pp.18-20. see also, www.cim.co.uk