How to Conduct Marketing Due Diligence
The value of mergers and acquisitions in the UK nearly tripled in 2021 from £15.5 to £46.0 billion. Regardless of which side of these deals you’re on, due diligence is the key to a successful outcome.
When looking at investment options, due diligence can help you to identify and seize marketing opportunities. Even more importantly, it’s the best way to avoid potentially disastrous situations.
In short, it’s a systematic way to analyse the stability and viability of a proposed deal. The process is employed for corporate acquisitions and digital acquisitions. It’s also used when considering investment partnerships and many other situations.
In nearly any case, you’ll go through a phase of marketing due diligence as part of that systematic analysis. Here, you’ll learn more about how to conduct marketing due diligence and how to get the data you need to make it highly effective.
The Basics of Marketing Due Diligence
Marketing due diligence is the process of investigating and assessing a company’s marketing capabilities and performance. It is conducted as part of a larger financial or due diligence effort.
The goal of marketing due diligence is to give buyers and or investors an understanding of the target company’s strengths and weaknesses. It should:
- validate and assess the go-to-market strategies
- verify and define the Real Addressable Market
- identify gaps in leadership or expertise that may need to be managed
- uncover potential red flags
- Consider the resources required to deliver the proposed strategy
When you’re planning a marketing due diligence analysis, there are several key areas to review as deeply as possible.
Evaluate the Go-To-Market Strategy
One of the functions of marketing due diligence is to evaluate the go-to-market strategies. This includes verifying the market opportunity, target market, and competition. It also involves validating your marketing channels, messaging, and projections.
During this part of the process, you’ll need to find ways to take an unbiased look at your go-to-market plans. It’s important to have a lot of high-quality data about the market, products, end users, and competition.
Once you understand the business marketing plan for go-to-market, apply it to the horizon. Analyse the ROI and the time between launches and profit lines in each marketing channel.
There are other pieces to consider while you’re in this phase of your marketing due diligence assessments, too. For example, which channels a company uses and which ones they do not use to tell you about their overall marketing strategy. Also, find out where they gather data and what they do with it. This can uncover strengths and weaknesses in productivity.
Understand Your Real Addressable Market
At its most basic, the addressable market is the group of people or companies who could possibly buy the products or services offered by the company in question.
But that doesn’t tell the whole story.
To determine your Real Addressable Market, you’ll consider who is most likely to want or able to buy the products or service . Define a timeframe within which you want to consider possible sales.
Then, you’ll review the prospective customers’ financial viability. You want to look for those who have the resources to purchase within the timeframe window. Rely on data-driven clues to decide if purchases are likely or unlikely.
Be sure to consider outlier factors, too. Historical loyalty to other brands and geographical distance may play a part.
Often, when you conduct marketing due diligence research, you’ll find that the Real Addressable Markets are much smaller than anticipated. This is a benefit because you can work with fewer prospects in more strategic ways.
Creating highly-focused engagement with those buyers that are most important indicates a strong marketing plan. It shows an effort to concentrate on a smaller number of more viable prospects.
This marketing plan saves money and reduces the risks for investors. It also allows you to incorporate what you know about them into your overall marketing strategy.
Scalability and Cost of Growth
A company’s marketing scalability is just one aspect of its overall scalability. This phase of your marketing due diligence will look specifically at the scalability of the marketing department and the current marketing plan.
The cost and opportunity to scale depend on a wide array of factors. Some of the factors can be directly controlled and others cannot.
Your marketing due diligence should be uncovering the digital infrastructure and skillsets in play. What’s uncovered here will help to inform both scalability and cost of growth.
Some of the things you need to know about the prospective company:
- Are they working from the cloud for data storage and security?
- How experienced is their marketing team overall?
- What marketing channels are they using to reach the market?
- Do they have an extensive skilled IT department to support their marketing strategy?
- What kind of budget would be needed to hit bigger targets?
- Are they monitoring sustainability?
- Where is money being wasted right now?
- What additional training or tools are needed?
- What is the journey of a prospect through the marketing pipeline?
It can be costly to bring an outdated system up to modern standards. The cost may be worthwhile if you can prove the potential is higher than expected.
It can also be costly to revamp a marketing department or a marketing strategy. Be sure to compare the potential outcome of scaling against the potential outcome of revamping.
Look Beyond Marketing Data and Results
Assessing the marketing results and data efforts should be the most important metric in your marketing due diligence process. However, the real people involved in the marketing department should be considered, as well.
For this part of your evaluation, you need to scrutinise the experience of team members and decision-makers. Even knowing which sources they use to find current marketing tips is valuable insight. Review the communication processes and whether they have ongoing training.
They should have a driver who stays at the forefront of business marketing. They should know how and when to outsource if needed. They should always be testing, but how they test matters.
Similar to the potential costs of updating infrastructure, you must evaluate whether the marketing team is the right size and skill level for the overall company marketing needs. If they are too advanced, this could be a waste of resources. If they are not advanced enough, it could be a factor in future problems.
Get Comprehensive Data Collection
When working with data, you must use a balanced approach. Data can provide a lot of insights. It can prove or disprove a theory.
It can shine a light on things you hadn’t considered before. Strong data should make sense in the context of your queries. It should also be able to stand on its own without context.
That’s a lot to ask of spreadsheets and numbers so data can take you down the wrong path if you’re not careful. Not all data is useful and sometimes it’s just inaccurate. Plus, if your data is too narrow or too broad, it will not give you the clarity you need.
This is why it’s important to consult with experts who will give you truly valid data in the right scope to support your marketing due diligence process. The experts you partner with should be able to apply the data to your specific business strategy and provide unbiased feedback that informs your marketing strategy.
At Larato, we’ve developed a proprietary market intelligence platform called Inside Track for exactly this reason. Inside Track is an industry solution that gives you forensically detailed intelligence. It goes beyond the data to profile organisations with deeper insights than you’ll get with other tools or services.
When conducting marketing due diligence with Inside Track, you’ll be able to determine the validity of the propositions. You’ll also be more informed about the risks so that you can pivot quickly and adjust your bids confidently.
Create a Strong Report
Once you’ve completed your marketing due diligence evaluations, you’ll have a better understanding of the marketing operations. All of this information will need to be compiled into a report or presentation so that it can be incorporated into the broader due diligence assessment.
You should be able to speak concisely about the marketing strategies in place with special details regarding what’s working and what isn’t. Include everything you uncovered about the marketing team and how well (or not) they conduct their business.
Apply hard numbers to the cost of correcting whatever isn’t working in all aspects of your report. Likewise, apply hard numbers to the potential for any successes that can be projected firmly.
Your report should conclude with as little bias as possible. This gives you the best chance at making a strategic bid. It’s also the best way to know when to pass on an opportunity where the outcome isn’t likely to be worth the resources.
Get Marketing Due Diligence from an Unbiased Party
The truth is, it’s difficult to be unbiased when you have something to gain from making a deal. Larato’s approach to due diligence is one component of how we’ve helped businesses across the UK develop over £800 million in new revenue.
Request a call with our experts to discuss your marketing due diligence or learn more about Inside Track today.