In today’s world, due diligence has become a necessary step in the investment process. Although conditionally, several types of due diligence can be distinguished: technical, marketing, environmental, legal, economic, tax, etc. In this article, we will analyze the marketing due diligence checklist.
The purpose of marketing due diligence
According to experts, the need for comprehensive due diligence is growing year by year, and the proportion of services in the total volume of audit services is also growing. One of the reasons for the demand, a trend-forming factor, is an increase in the quality level of the procedure by consulting companies.
Of course, the initiator of the study is usually the investor. In some cases, however, the persons interested in that complex audit can do so, the company’s shareholders or its top management. In its larger course, it is very important to have up-to-date information about the object of financing, its actual value as well as possible legal and tax consequences of such an acquisition. Thus, due diligence procedure is an obligatory stage in any serious business deal.
Marketing due diligence includes the study of a system of measures aimed at coordinating production with the market situation and ensuring sustainable sales; product, pricing and communication policy, product promotion systems, personnel management, etc.
The complex due diligence procedure promptly ensures the collection of independent information about the object of sale and allows you to obtain an expert assessment of the degree of effectiveness of the planned operation. Thanks to this, a potential investor will be able to get the most complete picture of the upcoming risks and profits after the transaction. Besides, to automate this procedure and make it more transparent, modern companies use virtual data rooms. Digital data room is a cloud-based platform designed for secure file-sharing and collaboration in real-time.
What are the common marketing due diligence questions?
The main purpose of investing is to find additional ways to make a profit. Even before the investment procedure, entrepreneurs must make sure that the object of interest has sufficient commercial potential. Marketing due diligence studies the conjuncture of the market, which is aimed at the economic activity of the company. A marketing audit is aimed at reviewing and evaluating the activities of an enterprise in a competitive market environment. Research is being carried out following the checklist:
- exploring additional opportunities for growth in consumer demand;
- the possibilities of identical firms in the market are evaluated;
- sales markets are studied, prospects for the development of the chosen field of activity are assessed;
- the pricing strategy of the manufactured product is analyzed;
- business reputation is assessed;
- considers the possibility of acquiring various resources;
- analyzes the current position of the company in the market with development prospects;
- the quality of the company’s marketing policy, the availability of the necessary assortment, and the solution of problems with delivery are assessed.
Due diligence in the field of marketing allows you to assess the growth prospects of the investment object:
- analysis of the competitive environment;
- analysis of sales channels and schemes;
- market analysis – trends, volumes;
- market position analysis;
- assessment of the existing network of suppliers, distribution, partners, etc.;
- carrying out marketing research on the subject of the target audience and assessing the existing customer base.
Besides, marketing research is aimed at identifying potential risks that impede the further development of the company. These factors include the fall in consumer demand, the strengthening of the positions of the nearest competitors. The price level is also estimated against the background of reduced consumption.