Measuring marketing productivity : linking marketing expenditure to sales

[摘要] ENGLISH ABSTRACT: Over the past two decades company performance has become the mantra of corporate theory. It followsthat marketers have recently become understandably preoccupied with measuring the performance ofmarketing activity. In fact, the pressure for financial accountability has led to widespread concern overthe role of the marketing function within a company. Some go as far as contemplating the demise ofmarketing professionals unless marketers develop an understanding of the marketing-finance interfaceand are able to enter into a dialogue with top management regarding the value that marketing adds tothe company.Modern financial theory prescribes that the primary financial objective of any company should beshareholder value maximisation. Value based management (VBM) involves the appropriate allocationof scarce resources using prioritisation and cost-benefit analyses of different strategies to ensure thatmanagers remain focused on shareholder value creation. The VBM philosophy embraces fourfundamental driving forces impacting on the creation of value, the first of which is the profitablegrowth of sales. Since marketers are the custodians of brand sales the recognition of sales as a valuedriver places marketing at the centre of the value culture.The role of the marketing function is to create customer value that will translate into marketing assets(brand equity) and by doing so serves to add value to a company. The brand value chain summarisesthe process through which marketers can create value by carefully investing in various marketingtactics (or expenditures). These expenditures are encapsulated by the marketing mix. Simply, themarketing mix can be described as the sum of all expenditures intended to build brand equity and canbe classified into four components known as the 4Ps (product, price, place and promotion).Concern has been raised that marketers focus too much attention on the stages in the brand value chainwhere marketing strategy is formulated and too little attention on the latter stages where the strategy islinked back to the value created through the implementation thereof. Despite the plethora of marketingmetrics available the key to measuring the impact of marketing activity lies in maintaining a balancebetween non-financial, efficiency metrics and financial effectiveness metrics. To this end, there is a need for the development of aggregate-level models that link marketing tactics (expenditures) to tofinancial impact (e.g. sales) in order to communicate the value created by marketing.As a first step toward the objective of developing such models, it is important to understand the natureof the relationship between marketing expenditures (in terms of the 4Ps) and sales). Therefore, theprimary objective in this study was to establish whether there is a relationship between the expendituresof different marketing components (4Ps) and sales.To this end, the proposition formulated elucidated that the variance in sales of a product is attributableto fluctuations in marketing expenditures. A meta analysis study was undertaken and two SouthAfrican fast moving consumer goods brands' financial data were investigated for the period of July2001 to the end of June 2005. The marketing expenditures incurred for each of the respective brandswere dissected and allocated according to the 4Ps of marketing.The metohod applied to investigate the relationship between marketing expenditures and salesoriginated through the adoption of multiple regression analysis between the indepent variables(marketing expenditures) and the dependent variable (sales). However, due to the fact that the datawere collected over time it was anticipated that the time-related characteristics in the data might haveoffended inherent assumptions on which multiple regression analysis is based. Therefore, a time seriesregression analysis was subsequently adopted to account for time-related characteristics such as trendor seasonality. Counteracting dummy variables were included in the regression analysis to betterunderstand the effect of trend and seasonality.In the case of Brand A, it was necessary to include dummy variables to counteract the effect of trend inthe regression analysis., the results revealed that there is a statistically significant relationship betweenthe expenditures of different marketing components (4Ps) and sales. Only distribution expenditures andprice (along with trend) explained unique variance in sales.In the case of Brand B, it was necessary to include dummy variables for both trend and seasonalitybefore the model was suitable for analysis. Once again, the results revealed a statistically significantrelationship between the expenditures of different marketing components (4Ps) and sales. However for Brand B, only production expenditures (along with trend and seasonality) explained unique variance insales.Therefore, in conclusion of the results found there were important findings to note. Firstly, wheninvestigating data colllected over time it is imperative to understand the impact of time-relatedcharacteristics in the data and subsequently adopt the appropriate model to investigate relationships inthe data. Secondly, despite a statistically significant relationship detected between marketingexpenditures and sales the different components of the 4Ps have varying prominence for differentbrands and the appropriate allocation of resource will depend on the nature of the product and thestrategy in mind.

[发布机构] Stellenbosch University