Don O’Sullivan & Andrew V. Abela
Executive Summary
Marketing practitioners are under increasing pressure to demonstrate their contribution to firm performance. It has been widely argued that an inability to account for marketing’s contribution has undermined its standing within the firm. To respond to this pressure, marketers invest in developing performance measurement abilities; however, to date, there have been no empirical studies of whether ability to measure marketing performance has any actual effect either on firm performance or on marketing’s stature. This study tests whether the ability to measure marketing performance contributes to actual firm performance or to marketing’s stature within the firm, which is operationalized as chief executive officer satisfaction with marketing. The study explores two potentially distinct aspects of the ability to measure marketing performance: measuring performance across a range of marketing activities (e.g., advertising, trade promotion, direct mail) and assessing marketing performance using a comprehensive set of metrics (e.g., financial, nonfinancial). The results of a survey of senior marketing managers in high-tech firms, supported by secondary data on firm profitability and stock returns, indicate that ability to measure marketing performance has a significant impact on firm performance, profitability, and stock returns and on marketing’s stature within the firm.
These findings have several important managerial implications. Development of marketing performance measurement ability requires that marketers divert part of their budget and attention away from actual marketing programs and toward measurement efforts; this would be counterproductive if it did not improve performance. The study provides support for such a diversion of resources for firms that operate in the high-tech sector. Given that marketing performance measurement ability offers demonstrable benefits, the question arises as to what should be measured and how. This study identifies four factors that make up the activities aspect of performance measurement ability: direct marketing, public relations, brand, and management. Particularly noteworthy is that each of these factors alone has a relatively weak relationship to firm performance and to chief executive officer satisfaction with marketing. The implication of this is that efforts to drive improvement in the ability to measure a single marketing activity, no matter how important the activity is to the firm, are less valuable than a comprehensive effort to develop the ability to measure performance across the entire range of marketing activities employed.
Biography
Don O’Sullivan is College Lecturer in Marketing in the Department of Management and Marketing at the University College Cork in Ireland and Visiting Associate Professor of Marketing at Melbourne University Business School. He holds a PhD and a master’s degree in Business Studies from University College Cork. Previously, he held the position of Director of Strategic Marketing at TecBrand, a marketing services agency focused on the high-technology sector. His research interests include marketing performance measurement, the relationship between marketing and shareholder value, and the marketing practices of high-technology firms.
Andrew V. Abela is Assistant Professor of Marketing in the Department of Business and Economics at the Catholic University of America in Washington, DC. He holds a PhD from the Darden School of Business at the University of Virginia and an MBA from the Institute for Management Development in Lausanne, Switzerland. Before his academic career, he was managing director of the Marketing Leadership Council, a management consultant with McKinsey & Co., and a brand manager at Procter & Gamble. His work has been published in European Journal of Marketing, Journal of Business Ethics, Journal of Marketing Theory and Practice, Journal of Strategic Marketing, and Marketing Management. His research interests include marketing performance measurement, marketing ethics, and internal communication of marketing intelligence.
Journal of Marketing, Vol. 71, No. 2, April 2007
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