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How to Conduct Marketing Due Diligence (+Checklist)

Kison Patel
CEO and Founder of DealRoom
Kison Patel

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

CEO and Founder of DealRoom

Marketing due diligence is the investigative process conducted by a buyer of the market or commercial proposition of a target business.

The commercial proposition of a business is concerned with how the business sells its products or services, to whom, and where. 

The role of marketing due diligence is to assess how effectively the company sells its output, and how that would fit within its own marketing strategy.

For this reason, understanding a company’s commercial proposition is essential to understanding its inherent value.

Marketing due diligence - also referred to as commercial due diligence - is the component of due diligence concerned with a company’s commercial positioning and potential for growth. 

Conducting marketing due diligence is always associated with the following:

marketing due diligence

1. Reviewing the company’s business plan and strategy: 

Analyzing strategic plan in the current environment of a business, both internally and externally is very important.

It establishes future goals and targets and describes the strategies it will implement to reach them.

The main questions here are:

  • Are the objectives feasible?
  • Is there a clear path outlined to achieve the objectives?

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2. Assessing digital marketing as a core marketing component:

Nowadays analyzing digital marketing performance is important as ever before, given the fact how critical digital channels are to most deals.

Digital marketing due diligence involves gathering data about a company’s digital performance and competitors. And identifying them could be quite challenging.

Tools like the SE Ranking competitor analysis tool are very helpful for this purpose. It helps find SEO and PPC rivals and analyze business digital performance such as ranked pages, running ads, top keywords, and competition overall.

The main questions here are:

  • Does the company employ digital marketing effectively?
  • How does it measure digital marketing metrics?
  • What are the competitors and how company performs compared to them?

3. Assessing marketing strategy: 

When assessing marketing strategy performance, compare actual results in key indicators such as sales, profitability, and customer acquisition to strategic goals. Questions here:

  • Does the company have a clear idea of who its target market is?
  • Does it know how to sell to these customers effectively?

4. Analyzing the competitive landscape:

A competitive landscape analysis is a structured way of identifying and researching competitors.

Knowing who they are, what are their marketing strategy and competitive differentiators, and understanding their budgets on marketing will give you an idea of how strong or weak the company is compared to them.

Questions here:

  • Who are the competitors, direct and indirect?
  • What advantages, if any, does the company have over them?

5. Assessing customers:

Customer due diligence provides you with details on who are the customers of a company,  what values customers appreciate about the organization, what values they would like to see given more emphasis, and what values are important to them in their daily lives.

Questions are:

  • Why do customers buy from the company? 
  • Is this something that could easily be repeated by other companies?

So, why is marketing due diligence important?

Selling goods and services is the keystone of success for any company. Marketing due diligence tells the buy-side (or the sell-side), how effective this is currently being done, and how it is likely to evolve into the future.

A company may be operationally perfect, have a solid set of financial results, and excellent people in place. If it cannot put forward a strong commercial proposition, it will all have been for nothing.

Sell-side marketing due diligence

As DealRoom is often keen to underline, even business owners that have no immediate desire to sell their company should conduct due diligence, otherwise known as an internal audit.

In addition to looking at typical areas we associate with due diligence such as the company’s financial statements and internal controls, it is advisable to conduct marketing due diligence. 

In the same way that a buyer will take a critical lens to the company’s commercial activities, the management team in would be sell-side companies should begin by asking: “why aren’t we selling more?”.

Questions to focus on include:

  • Can we sell more to our biggest customers?
  • Are we selling in the right channels?
  • Are there patterns we can observe (and capitalize on) in sales?
  • Are some of our products or service lines reducing commercial focus?
  • Is the messaging  behind our products and services right?

Buy-side marketing due diligence

There’s a paradox at play in marketing due diligence for buyers: Sometimes, a company with excellent goods or services becomes even more attractive if it has botched its commercial side.

The reason for this is self-evident:

A buyer that recognizes the potential in an undersold product or service stands to extract significant value from acquiring the company and implementing a better marketing strategy.

For the target companies that have a strong commercial strategy in place, the buy-side marketing due diligence will focus on how sustainable the commercial strategy is.

For example, while there may still be potential for products in newer industries, the future commercial outlook in more mature industries is likely to be far less optimistic.

These are the issues that buy-side marketing due diligence looks to get to grips with.

The marketing due diligence checklist

DealRoom has helped hundreds of buyers and sellers with their marketing due diligence.

Below is a sample checklist for anyone looking to get the process underway:

1. Review the company’s business plan and strategy

  1. Does it show a clear path to sustainable profits?
  2. Is there anything that gives the company a competitive advantage?
  3. Are its goals clearly defined (and quantifiable)?
  4. Are its goals realistic given current performance?

2. Analyze the company’s competitive framework

  1. How is the company positioned relative to its competitors? (discount, mid-range, or luxury, for example).
  2. What are the dynamics of its market and how are they likely to evolve?
  3. Has the company been able to develop a niche within the industry, and is that niche sustainable?
  4. How are the company’s sales relative to its competitors and how are these dynamics changing (and why)?

3. Assess the company’s marketing strategy

  1. What is the company’s message? Is the message well understood by the market?
  2. Where is the company’s brand recognition?
  3. Is the company aiming its products or services at a particular customer or group of customers?
  4. What channels is it using (and could they be expanded)?
  5. Is there anything about the company’s target market that could generate cross-selling synergies with the buyer’s products or services?

4. Pricing and margins

  1. Conduct price sensitivity analysis
  2. What pricing strategy does the company employ (e.g. target pricing, margin pricing, etc.)
  3. How sustainable is the price likely to be in the future? Are there any issues that could make prices fluctuate in the future (e.g., rising raw material costs).

5. The customer

  1. Gain an overview of the customer base - are there any trends that emerge from analyzing them? (e.g. mostly SMEs, individual traders, etc.)
  2. Conduct interviews with some clients if possible to understand their relationship with the company.
  3. Is there potential for cross-selling the buyer’s products or services to these customers or even the potential to cannibalize sales?
  4. How could the proposition be improved for these customers?
  5. How sustainable (loyal) is this customer base?
master due diligence playbook

Conclusion

Companies with below average products and good commercial vision invariably perform better than companies with above average products and poor commercial vision.

This in itself should be enough to motivate buyers and sellers to conduct thorough marketing due diligence.

Talk to DealRoom about how our due diligence platform can help you through the process of boosting your company’s commercial proposition.

dealroom

Marketing due diligence is the investigative process conducted by a buyer of the market or commercial proposition of a target business.

The commercial proposition of a business is concerned with how the business sells its products or services, to whom, and where. 

The role of marketing due diligence is to assess how effectively the company sells its output, and how that would fit within its own marketing strategy.

For this reason, understanding a company’s commercial proposition is essential to understanding its inherent value.

Marketing due diligence - also referred to as commercial due diligence - is the component of due diligence concerned with a company’s commercial positioning and potential for growth. 

Conducting marketing due diligence is always associated with the following:

marketing due diligence

1. Reviewing the company’s business plan and strategy: 

Analyzing strategic plan in the current environment of a business, both internally and externally is very important.

It establishes future goals and targets and describes the strategies it will implement to reach them.

The main questions here are:

  • Are the objectives feasible?
  • Is there a clear path outlined to achieve the objectives?

{{cta-block3="/cta"}}

2. Assessing digital marketing as a core marketing component:

Nowadays analyzing digital marketing performance is important as ever before, given the fact how critical digital channels are to most deals.

Digital marketing due diligence involves gathering data about a company’s digital performance and competitors. And identifying them could be quite challenging.

Tools like the SE Ranking competitor analysis tool are very helpful for this purpose. It helps find SEO and PPC rivals and analyze business digital performance such as ranked pages, running ads, top keywords, and competition overall.

The main questions here are:

  • Does the company employ digital marketing effectively?
  • How does it measure digital marketing metrics?
  • What are the competitors and how company performs compared to them?

3. Assessing marketing strategy: 

When assessing marketing strategy performance, compare actual results in key indicators such as sales, profitability, and customer acquisition to strategic goals. Questions here:

  • Does the company have a clear idea of who its target market is?
  • Does it know how to sell to these customers effectively?

4. Analyzing the competitive landscape:

A competitive landscape analysis is a structured way of identifying and researching competitors.

Knowing who they are, what are their marketing strategy and competitive differentiators, and understanding their budgets on marketing will give you an idea of how strong or weak the company is compared to them.

Questions here:

  • Who are the competitors, direct and indirect?
  • What advantages, if any, does the company have over them?

5. Assessing customers:

Customer due diligence provides you with details on who are the customers of a company,  what values customers appreciate about the organization, what values they would like to see given more emphasis, and what values are important to them in their daily lives.

Questions are:

  • Why do customers buy from the company? 
  • Is this something that could easily be repeated by other companies?

So, why is marketing due diligence important?

Selling goods and services is the keystone of success for any company. Marketing due diligence tells the buy-side (or the sell-side), how effective this is currently being done, and how it is likely to evolve into the future.

A company may be operationally perfect, have a solid set of financial results, and excellent people in place. If it cannot put forward a strong commercial proposition, it will all have been for nothing.

Sell-side marketing due diligence

As DealRoom is often keen to underline, even business owners that have no immediate desire to sell their company should conduct due diligence, otherwise known as an internal audit.

In addition to looking at typical areas we associate with due diligence such as the company’s financial statements and internal controls, it is advisable to conduct marketing due diligence. 

In the same way that a buyer will take a critical lens to the company’s commercial activities, the management team in would be sell-side companies should begin by asking: “why aren’t we selling more?”.

Questions to focus on include:

  • Can we sell more to our biggest customers?
  • Are we selling in the right channels?
  • Are there patterns we can observe (and capitalize on) in sales?
  • Are some of our products or service lines reducing commercial focus?
  • Is the messaging  behind our products and services right?

Buy-side marketing due diligence

There’s a paradox at play in marketing due diligence for buyers: Sometimes, a company with excellent goods or services becomes even more attractive if it has botched its commercial side.

The reason for this is self-evident:

A buyer that recognizes the potential in an undersold product or service stands to extract significant value from acquiring the company and implementing a better marketing strategy.

For the target companies that have a strong commercial strategy in place, the buy-side marketing due diligence will focus on how sustainable the commercial strategy is.

For example, while there may still be potential for products in newer industries, the future commercial outlook in more mature industries is likely to be far less optimistic.

These are the issues that buy-side marketing due diligence looks to get to grips with.

The marketing due diligence checklist

DealRoom has helped hundreds of buyers and sellers with their marketing due diligence.

Below is a sample checklist for anyone looking to get the process underway:

1. Review the company’s business plan and strategy

  1. Does it show a clear path to sustainable profits?
  2. Is there anything that gives the company a competitive advantage?
  3. Are its goals clearly defined (and quantifiable)?
  4. Are its goals realistic given current performance?

2. Analyze the company’s competitive framework

  1. How is the company positioned relative to its competitors? (discount, mid-range, or luxury, for example).
  2. What are the dynamics of its market and how are they likely to evolve?
  3. Has the company been able to develop a niche within the industry, and is that niche sustainable?
  4. How are the company’s sales relative to its competitors and how are these dynamics changing (and why)?

3. Assess the company’s marketing strategy

  1. What is the company’s message? Is the message well understood by the market?
  2. Where is the company’s brand recognition?
  3. Is the company aiming its products or services at a particular customer or group of customers?
  4. What channels is it using (and could they be expanded)?
  5. Is there anything about the company’s target market that could generate cross-selling synergies with the buyer’s products or services?

4. Pricing and margins

  1. Conduct price sensitivity analysis
  2. What pricing strategy does the company employ (e.g. target pricing, margin pricing, etc.)
  3. How sustainable is the price likely to be in the future? Are there any issues that could make prices fluctuate in the future (e.g., rising raw material costs).

5. The customer

  1. Gain an overview of the customer base - are there any trends that emerge from analyzing them? (e.g. mostly SMEs, individual traders, etc.)
  2. Conduct interviews with some clients if possible to understand their relationship with the company.
  3. Is there potential for cross-selling the buyer’s products or services to these customers or even the potential to cannibalize sales?
  4. How could the proposition be improved for these customers?
  5. How sustainable (loyal) is this customer base?
master due diligence playbook

Conclusion

Companies with below average products and good commercial vision invariably perform better than companies with above average products and poor commercial vision.

This in itself should be enough to motivate buyers and sellers to conduct thorough marketing due diligence.

Talk to DealRoom about how our due diligence platform can help you through the process of boosting your company’s commercial proposition.

dealroom

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