Measuring Marketing Productivity: Current Knowledge and Future Directions
The authors of this article wrote it much cited in 2004 in Journal of Marketing. My goal in this blog post is to summarize it and (hopefully) make it easier to understand. So keep in mind that all credit goes to the authors and all mistakes interpretive and other kinds are to be credited to me
For a long time, marketers have never had to justify the financial resources available to them to increase their profitability. We have come to wonder if the marketing does play a real role in the company, what weakens its credibility within the company. This article proposes a broad framework for assessing marketing productivity, cataloging what is an already known and suggesting area for further research. The authors conclude that it is possible to show how marketing expenditures add to shareholder value. Thus the aim of this article is to show how to measure and assess tangibly the effects of marketing on the profitability of the company by describing what is already know and suggest areas for further research.
To begin, the authors consider essential to explain what “marketing productivity” means. The authors are based on the costs allocated to marketing. They then raise the question of how these costs affect the performance or market share of the company among competitors. It is important to understand how they influence what customer know, believe, feel, and ultimately how they behave. To measure these intermediate outcomes, nonfinancial measures such as attitudes and behavioral intentions are used. The main issue they address in this article is how nonfinancial measures of marketing effectiveness drive the financial performance measures such as sales, profits, and shareholder value in both the short and the long run.
Then the article is organized around the marketing productivity illustrated in Figure 1 in the article.
The authors then talk about the chain of marketing productivity by knowing how these non-Financials Measures will create value for the company?
They start talking about the marketing strategy of the business, product strategy, promotion strategy … that will be represented by marketing actions such as advertising campaigns, loyalty programs, and initiatives for the brand and other initiatives that have impact.
Then they evoke the tactical levers that have influence on customer satisfaction and the attitude towards the brand. These are marketing assets which can determine the market share of the company and therefore have an influence on the position of the company and the market share will lead to profits and return on investment … and finally influence on the value of the company (that’s why it’s called the chain of marketing productivity).
The authors add that today the real business value is based on intangible assets such as brand, market networks, and the intellectual property. The author asks the question “What kind of expenditure has a greater impact on the value of a firm’s customer base” new advertising campaigns or quality of service?
To find the answer of this question we have first to understand the five dimensions that can measure the consumer’s mind. We have: Customer awareness, associations Customer, Customer attitudes, Customer attachment, and Customer experience. Then authors spotlight the two main marketing assets that are brand equity, customer equity explaining how to measure their influence on the value of the company’s short and long term through the chain cited just before.
The environment the article exposes that no single enterprise is isolated or alone on marketing initiative, implying that the marketing is never direct and without external hindrances.
Indeed, the web of connections surrounding a company specifies its marketing plan and adapts it. Otherwise, the customer isn’t the only one factor to inﬂuence a marketing campaign.
Secondly the article explains that the competition marks a necessary element in a marketing plan’s evolution. Otherwise marketers can adopt a defense strategy which consists to draw its marketing strategy in function of competitors.
Next the article moves on to a basic description strategic marketing specifications, their basis as well as how they’re deployed. We can see that, marketing strategy is mostly based on surveys and studies of the consumers ‘currents tendencies. Channels to offer goods are then decided and prioritized.
At this point of the article, we have the different impacts of marketing strategies on a consumer.
The article presents two different such effects (one perceptional, compromising their ability to appraise a product, and one of «summary judgments». We then have a short overview over the Brand’s impact on the consumer, referring to quantitative analysis of that brand.
The authors conclude that financial metrics are no longer adequate for justifying marketing expenditures, we now need nonfinancial metrics.
Furthermore, there is a need for greater emphasis on aggregate-level models that link tactics to financial impact and for account for customer heterogeneity.
We have also to consider that firm performance is fundamentally affected by competition. Finally, the evaluation of marketing productivity ultimately involves projecting the differences in cash flows that will occur from implementation of a marketing action.
Comments base on my work experience
I have found this article very interesting. It is true that it often difficult to assess the marketing influence on the profitability of a company. But what we have to retain is that its impacts are not usually countable. To assess the impact of marketing people must evaluate uncountable aspect like Brand awareness, customer equity or attitude etc… I can evaluate this in my company because i work in a monopolist company but many investments is usually make in marketing. This may seem paradoxical because we are in a monopolist company. The influence is not directly seeing in company profit but we can evaluate it on client satisfaction, the visibility of the company and we really see the importance of marketing. Definitely a company has to consider nonfinancial advantages of discipline like marketing.
Discussion about my marketing thinking evolution during the program
My thinking about marketing has really grown during the master program. Coming from scientifique sector, I effectively saw the marketing like a discipline that people can avoid in a company but with this year of marketing I really notice its importance. Even it not reflected in company results, marketing is a reliable indicator about how clients accept or adhere to company business. I today work on a business creation in very competitive industry and i know that it is marketing that will allow me to quickly achieve key success factors and maintain my business in the sector. Today I agree that marketing is a very serious discipline which has its entire place in a company and I think that as any other scientific discipline marketing need to be learned before to be practice.
At the end of this program my level in marketing has really envolve. My first marketing class has quickly change my mind about it and today i really enjoy reading others marketing articles. I specially like the papers of AMA American Marketing Association.
Abdul Hady MOUYIDOU
Student 2013/2014 of the advanced master of energy marketing and management