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Marketing Return on Investment: Seeking Clarity for Concept and Measurement
Abstract
As the need for accountable marketing spending continues to grow, companies must develop sound metrics and measures of marketing’s contribution to firm profitability. The leading metric has been return on marketing investment (MROI), following the widespread adoption of ROI metrics in other parts of the organisation. However, the ROI metric in marketing is typically interpreted and used in a variety of ways, which causes ambiguity and suboptimal marketing decision making. This paper seeks to remove the ambiguity around MROI to guide better measurements and analytics aligned to financial contribution. The authors first provide a formal definition of MROI and review variations in the use of MROI that are the root cause of ambiguity in interpretation. The authors come to the conclusion that MROI estimates would be more transparently described if those providing the estimates used the following form: Our analysis measured a (total, incremental, or marginal) MROI of (scope of spending) using (valuation method) over time period. The paper proceeds to describe five case studies that illustrate the various uses of MROI, covering different marketing initiatives in different business sectors. The authors describe the important links between marketing lift metrics (such as response elasticities) and MROI. The final section of the paper focuses on the connection between MROI and business objectives. While management’s prerogative is to maximise short- and long-run profits, that is not equivalent to maximising MROI. The authors demonstrate that MROI plays a different role in the process of marketing budget setting (a marketing strategic task) versus allocating a given budget across different marketing activities (a marketing operations task). They highlight the role of setting MROI hurdle rates that recognise not only marketing’s ability to drive revenue, but also the firm’s cost of capital. The authors hope that their recommendations will help the marketing profession achieve a common understanding of how to assess and use what they believe is its most important summary productivity metric, MROI.
... Based on the need to develop solid metrics to define marketing's contribution to company profitability, the concept of Marketing Return on Investment (MROI) was developed (Farris et al., 2015). Generally speaking, MROI is an indicator used to measure the effectiveness of marketing within an organization and understand how it contributes to the overall success of the business (Skačkauskienė et al., 2023), and is increasingly the metric used to evaluate organizations' marketing investments, guide strategic decisions (Farris et al., 2015) and has been applied for various purposes, such as assessing the cost of capital to be invested, the progress of marketing projects, the productivity of marketing and its potential to generate revenue, supporting the review and definition of the budget, as well as the proper allocation of resources in projects (Farris et al., 2015). ...
... Based on the need to develop solid metrics to define marketing's contribution to company profitability, the concept of Marketing Return on Investment (MROI) was developed (Farris et al., 2015). Generally speaking, MROI is an indicator used to measure the effectiveness of marketing within an organization and understand how it contributes to the overall success of the business (Skačkauskienė et al., 2023), and is increasingly the metric used to evaluate organizations' marketing investments, guide strategic decisions (Farris et al., 2015) and has been applied for various purposes, such as assessing the cost of capital to be invested, the progress of marketing projects, the productivity of marketing and its potential to generate revenue, supporting the review and definition of the budget, as well as the proper allocation of resources in projects (Farris et al., 2015). ...
... Based on the need to develop solid metrics to define marketing's contribution to company profitability, the concept of Marketing Return on Investment (MROI) was developed (Farris et al., 2015). Generally speaking, MROI is an indicator used to measure the effectiveness of marketing within an organization and understand how it contributes to the overall success of the business (Skačkauskienė et al., 2023), and is increasingly the metric used to evaluate organizations' marketing investments, guide strategic decisions (Farris et al., 2015) and has been applied for various purposes, such as assessing the cost of capital to be invested, the progress of marketing projects, the productivity of marketing and its potential to generate revenue, supporting the review and definition of the budget, as well as the proper allocation of resources in projects (Farris et al., 2015). ...
This chapter aims to discuss about the potential Return on Investment (ROI) measures from Artificial intelligence (AI) investments that business can leverage. It discusses the concepts and describes the dimensions, features and tools of AI investments in Marketing business, to assist the readers to understand about the topic. The authors also describe the major drivers of ROI measures for business applications and discusses the concerns and limitations of tangible measures. So, this document contributes to the literature on ROI (in)tangibles measures that leverage AI investments and features issues in digital marketing, at large and potentially offers a theoretical grounding for many empirical and theoretical future studies.
... We introduce a novel definition of regret, wherein the rewards obtained are dependent on the pulled arms, while the selected fidelities solely affect the accuracy of the observed rewards. The new regret definition covers applications like product management and advertisement distribution [13,10] where the distributed advertisement (ad) determines the actual (but unknown) reward while the cost (fidelity) spent by the company on evaluating the impact of this ad decides the accuracy of the observed rewards (see Remark 4.1). The difference of our regret definition and the one studied by Kandasamy et al. [19] is discussed in Remark 4.2. ...
... Remark 4.1 (Applications of the new regret definition). One typical application of the regret minimization problem under MF-MAB is a variant of the advertisement distribution problem [13,10]. In this problem, the objective is to maximize the total return from all the distributed ads within a fixed marketing budget (e.g., in terms of money). ...
We study the multi-fidelity multi-armed bandit (MF-MAB), an extension of the canonical multi-armed bandit (MAB) problem. MF-MAB allows each arm to be pulled with different costs (fidelities) and observation accuracy. We study both the best arm identification with fixed confidence (BAI) and the regret minimization objectives. For BAI, we present (a) a cost complexity lower bound, (b) an algorithmic framework with two alternative fidelity selection procedures, and (c) both procedures' cost complexity upper bounds. From both cost complexity bounds of MF-MAB, one can recover the standard sample complexity bounds of the classic (single-fidelity) MAB. For regret minimization of MF-MAB, we propose a new regret definition, prove its problem-independent regret lower bound and problem-dependent lower bound , where K is the number of arms and is the decision budget in terms of cost, and devise an elimination-based algorithm whose worst-cost regret upper bound matches its corresponding lower bound up to some logarithmic terms and, whose problem-dependent bound matches its corresponding lower bound in terms of .
... Customer Conversion Rates: Customer conversion rates are assessed using items adapted from Farris et al. (2015), which measure the percentage of leads that convert into paying customers for each channel. The items are presented on a Likert scale ranging from 1 (very low conversion rate) to 5 (very high conversion rate). ...
This study investigates the effectiveness of different customer acquisition channels—social media, content marketing, SEO, paid advertising, influencer partnerships, and email marketing—on key performance metrics such as return on investment (ROI), customer conversion rates, and customer lifetime value (CLV) for tech start-ups. Additionally, it explores the moderating role of advanced analytics in enhancing these channels' performance. Using a quantitative research design, data were collected from 200 respondents from tech start-ups via a structured questionnaire. The results indicate that SEO and email marketing have the strongest positive impact on ROI, conversion rates, and CLV, followed by social media and content marketing. Paid advertising and influencer partnerships, though effective, had comparatively smaller effects. The study also confirms that advanced analytics significantly enhances the effectiveness of all acquisition channels, particularly SEO and social media. These findings provide critical insights for tech start-ups, suggesting that prioritizing organic channels like SEO and email marketing, combined with data-driven decision-making, can yield higher returns. Theoretical implications include an expanded understanding of multi-channel strategies in start-ups, while practical implications highlight the importance of advanced analytics in optimizing customer acquisition efforts. Future research could explore how start-ups in diverse industries can further optimize these strategies.
... Estas métricas basadas en el rendimiento, pueden ser usadas para alimentar suposiciones en el cálculo del ROE (Huang et al., 2021) (Farris et al., 2015). Algunas métricas de rendimiento actuarán como impulsores de los beneficios cuando se establezca una correlación directa entre la métrica y los beneficios reales. ...
El objetivo de esta investigación es analizar el efecto de la gestión de la experiencia del cliente en el retorno de la inversión en innovación. A través del modelo PLS-SEM se comprobó cómo la capacidad de la empresa, mentalidad cultural y dirección estratégica determinan la gestión de la experiencia del cliente, así como el gasto en innovación, crecimiento orgánico y desempeño financiero son determinantes del retorno de la inversión en innovación. La investigación es transversal- exploratoria, y fue posible validar una escala de medida aplicada a 90 empleados de las instituciones de banca comercial. Se logró comprobar que existe una fuerte relación entre la gestión estratégica de la experiencia del cliente y el retorno de la inversión en innovación; el crecimiento del negocio y uso de aplicaciones móviles orientadas al cliente respaldan las decisiones de inversión de las instituciones bancarias con un mayor desempeño financiero.
... They were proven to be associated with achieving better performance results, which, however, depend on the employee (manager), the company, the type of industry and, of course, the way of deciding on the marketing mix. There is also a consistency between the results of the current study and the findings of Farris et al. (2015), in which the return on investment has a positive impact on the present value of future profits and meets the criterion of financial success. ...
Marketing is one of the key elements of the success of all companies, including the wine sector. Given the importance of wine producers for agriculture, it is important to define and monitor key performance indicators in marketing (KPIs) for a successful stay in the market and a competitive position at home and abroad. Today, the increase in competitive advantage includes mainly marketing, innovation and information and communication technologies. New digital tools and innovations have changed the way we approached data and decisions. A modernly adapted and effective strategic marketing strategy represents for wine companies an understanding mainly of their possibilities as well as the possibilities to influence the customer. This article evaluates the key performance indicators in marketing (KPI) and its relationship and impact on the financial situation of wine producers in Slovakia. The research sample includes 80 respondents. We obtained the primary data through a questionnaire, which was filled in by the leaders of wine companies. We verified the accuracy by means of descriptive statistics and multiple linear regression and Kruskall-Wallis test. We have verified the reliability of the data with the Cronbach alpha test. We have formulated scientific assumptions for in-depth analysis: hypothesis 1 – assumes that key performance indicators have a significant influence on financial situation of selected companies, hypothesis 2 – the use of ICT in marketing is statistically related to the key performance indicators. The results showed a statistically significant impact of KPIs on the financial situation of companies. We have identified significance in customer satisfaction and loyalty, brand awareness and return of investment. However, we were unable to statistically confirm the impact of other indicators (sales growth, market share, gaining new customers). We also identified significant differences in the use of ICT in marketing with key performance indicators in hiring new customers and return on investment. This research contributes positively to the importance of brand building in the eyes of customers as well as customer service, building loyalty and satisfaction, which returns to the loyal approach of customers to the repurchase of wine products and provides advice for professionals. Return on investment helps in more accurate business decisions that can be used when purchasing new equipment (technology), hiring employees, or properly assessing the profitability of marketing strategies.
... Expressing sales as a function of spending variables with diminishing marginal returns [9] is one of the fundamental properties in an attribution or marketing response model. In practice, Han and Gabor [11], and Lewis and Wong [19] adopted a similar strategy for their budget allocation, bidding, and attribution. ...
Both Bayesian and varying coefficient models are very useful tools in practice as they can be used to model parameter heterogeneity in a generalizable way. Motivated by the need of enhancing Marketing Mix Modeling at Uber, we propose a Bayesian Time Varying Coefficient model, equipped with a hierarchical Bayesian structure. This model is different from other time varying coefficient models in the sense that the coefficients are weighted over a set of local latent variables following certain probabilistic distributions. Stochastic Variational Inference is used to approximate the posteriors of latent variables and dynamic coefficients. The proposed model also helps address many challenges faced by traditional MMM approaches. We used simulations as well as real world marketing datasets to demonstrate our model superior performance in terms of both accuracy and interpretability.
... To account for the direct and indirect value contributions of a content piece as well as for the dynamics involved in indirect value contributions, we follow mainstream ROI literature in marketing (e.g., Farris et al. 2015;Srinivasan and Hanssens 2009) and decompose the potential impact of content during both processes into attributional and performance metrics. Thus, we not only gain a more elaborate view of the value creation chain leading to the three revenue streams but also are able to plan and forecast the cash flow in relation to the platform portfolio. ...
For digital video subscription platforms, creating and managing content portfolios are critical to acquire new customers, retain existing customers, leverage cross-sales, and generate advertising revenues. We treat content portfolios as a form of pure bundling which may vary in composition and attractiveness over time. Therefore, evaluating the value contribution of each content piece is essential to manage a platform’s portfolio efficiently and to understand how a specific content piece contributes to the bundle’s attractiveness. In this article, we develop an ROI content-valuation framework for a digital film subscription platform. This framework describes how a single piece of content diffuses through consumers’ journeys and influences subscription fees through acquisition and retention as well as revenues from cross-sales and advertising. This conceptual approach allows us to address the heterogeneity across content and platform contingencies such as exclusive availability and platform specifics, and link them to revenue streams. Building on this framework, we offer avenues for future research andprovide potential lead performance indicators together with their operationalization, enablingall parties involved in the production, marketing, distribution, and sales of contentto determine the platform-specific value of a content piece.
... Medição da performance financeira através das vendas, rentabilidade das vendas, cash-flow e retorno do investimento em marketing/romi. A literatura tem recomendado a utilização destes indicadores quando se pretende relacionar o marketing com a performance financeira (Katsikeas et al., 2016;Stewart, 2009;Farris, Hanssens, Lenskold e Reibstein, 2015). ...
A avaliação da performance de marketing é um tema vital em muitas empresas. Nesse contexto, uma questão fundamental consiste em como conceptualizar e operacionalizar, com rigor, os instrumentos que conduzam a formas mais holísticas e equilibradas de avaliar a performance de marketing, não apenas para efeitos de monitorização e melhoria, mas também para comunicar estratégias. Infelizmente, apesar da existência de um número crescente de métricas individualizadas, os estudos de modelização do fenómeno apresentados na literatura são escassos e a grande maioria não é suportada empiricamente. O presente trabalho desenvolve e testa um modelo integrado de avaliação da performance de marketing baseado na filosofia e nos princípios do Balanced Scorecard. Os dados foram obtidos através de um questionário respondido por 107 empresas portuguesas. Os resultados, analisados com base no método de equações estruturais, confirmam a robustez teórica do modelo e sugerem a sua viabilidade para avaliar a atuação de marketing. Nesse sentido, este estudo constitui um aprofundamento da temática em causa e fornece um instrumento destinado a orientar a seleção de um conjunto relevante de indicadores que auxilie as empresas a basearem análises de tipo avaliativo e decisões sobre alocação de recursos.
... Los KPI's del marketing digital surgen como una necesidad de controlar y monitorear el gasto o su crecimiento producido en campañas de marketing, siendo capaz de desarrollar medidas confiables de la contribución del marketing en la rentabilidad de la empresa (Farris, Hanssens, Lenskold, & Reibstein, 2015), tienen cuatro propósitos que se encuentran ligados a generar información sobre el mercado, dichos propósitos son: establecer una marca, difundir información crítica, generar un mayor alcance entre la audiencia y crear un compromiso con el público u otras empresas (Neiger, y otros, 2012). ...
After the arrival of social networks and the interconnection that it caused among its users, the generation of businesses within these platforms was inevitable, the main one of them selling advertising, in Ecuador the sale of advertising through social networks amounts to a amount exceeding thirty million dollars only for companies in the commerce sector, therefore, this paper analyzes the efficiency of advertising spending through the condition of Dorfman-Steiner for eighty-eight companies in the commerce sector during 2018, generating indicators of Management for digital marketing (KPI's) using Machine Learning techniques for the processing of data from the social network twitter and relating them to the financial results of these companies during the same period, through a multiple linear regression. In the analysis performed, a significant effect was found by the indicators towards the Dorfman-Steiner condition for companies with a small number of tweets, the greatest effects found were given through the interaction between the indicators concluding that, to reduce the level Advertising spending should be aimed at the propagation and popularity of the content that is published, taking into account the quality of the content that is disclosed.
... For example, if a paid tweet gets an engagement of 10,000 at a cost of US$100, the CPE = 100/10,000 = US$0.01. In another paper, Farris et al. 19 sought to provide clarity regarding a widely used metric, return on marketing investment (MROI), which is defined as the proportion of incremental financial value generated by marketing to the cost of marketing. The authors identified three critical dimensions of MROI estimates: (i) valuation method, (ii) scope/granularity of marketing mix elements and (iii) range of spending evaluated. ...
Digital and social media marketing activities are vital to fostering consumer engagement, nurturing consumer–brand relationships and generating market intelligence. Yet the relationships among firms’ digital marketing investments (eg paid search budget), social media presence and online firm performance are not well understood. This study focuses on the US e-commerce industry, identifying segments of the top 500 US e-commerce firms based on their paid search budget, social media presence and e-commerce performance measures, such as their web traffic, web sales, conversion rates and average ticket sizes. It then explores the relative impact of paid search budget and social media presence on e-commerce performance. Results show that there are two clusters of e-commerce firms: high spenders with high presence and low spenders with low presence. While the former constitute only 5 per cent of the industry, they have 27 per cent more repeat customers, three times higher return on investment, and make half of the industry’s web sales. Results also show that compared with social media presence, paid search budget is three to four times more effective in driving web traffic and eight times more effective in driving web sales. The results provide important strategic implications for marketing and brand managers for their digital marketing investments and social media presence.
... Conceptual and empirical models of marketing effectiveness show diminishing returns (e.g., Kireyev, Pauwels, and Gupta 2016;Little 1979), implying that ROI (efficiency) is maximized at levels of marketing spending that are below profit maximizing (effectiveness) (Pauwels and Reibstein 2010). We propose that the goal should be to maximize the total effectiveness when a certain threshold is achieved, even if that reduces the overall efficiency (Farris et al. 2015). However, our proposal may be more applicable to large organizations, which have plenty of resources and opportunities, than to small ones. ...
Marketing departments are under increased pressure to demonstrate their economic value to the firm. This challenge is exacerbated by the fact that marketing uses attitudinal (e.g., brand awareness), behavioral (e.g., brand loyalty), and financial (e.g., sales revenue) performancemetrics, which do not correlate highly with each other. Thus, onemetric could view marketing initiatives as successful, whereas another could interpret them as a waste of resources. The resulting ambiguity has several consequences for marketing practice. Among these are that the scope and objectives of marketing differ widely across organizations. There is confusion about the difference between marketing effectiveness and efficiency.Hard and softmetrics and offline and onlinemetrics are typically not integrated. The two dominant tools for marketing impact assessment, response models and experiments, are rarely combined. Risk inmarketing planning and execution receives little consideration, and analytic insights are not communicated effectively to drive decisions. The authors first examine how these factors affect both research and practice. They then discuss how the use of marketing analytics can improve marketing decision making at different levels of the organization. The authors identify gaps in marketing's knowledge base that set the stage for further research and enhanced practice in demonstratingmarketing's value.
Focusing on China's distinct market, this chapter delves into how healthcare marketing has evolved in the digital age. It analyzes how developments in AI, big data analytics, augmented reality, blockchain, and mobile technologies are fueling a transition toward a consumer-centric health culture. This chapter explores the changing demands and preferences of the Chinese healthcare market, the importance of value-driven marketing tactics, and the function of customer relationship management. Ethical concerns, pricing concerns, and success metrics are also discussed. This chapter is a must-read for anybody with even a passing interest in the rapidly growing field of digital healthcare, since it provides a thorough overview of the history, current applications, and future directions of digital healthcare in China.
The perception of investors depends on the different behavioral traits. The stock market seems to be an exciting and exciting platform for investors to perform their investment activities (frydrych et al., 2014). The market has continuously grown over time in these years. However, investors are sometimes skeptical about investing because of the uncertainties and risks associated with the stock market. After going through many hurdles, the money earned over a long time is meant to be safe and risk-free. Therefore, the investors feel the risk in the stock market is high and fear investing in platforms like these. Awareness of the stock market is also essential for investing in suitable firms. There must be a fair understanding of the return on investments (roi) before investing a large sum of money into the firms (farris et al., 2015). As this is a hot topic among businesses, the study of the behavior of small investors concerning the stock market must be carried out to understand their perspective. Financial behavior is an important concept to understand if one wishes to analyze the perception of individual investors. It has been observed that some of the investors are dependent on self-made decisions while investing, whereas some are made aware by the different financial seminars or workshops. Therefore, this paper deals with empirical findings to establish a more profound understanding of the behavior of investors following the stock market. A sample of 117 small retail investors was surveyed through a structured questionnaire to know their perception of investing in the stock market and its impact on the investment process in India. The study concludes that there is a significant impact on investors' perception of investing in the stock market.
The article develops the topic of managing the marketing capability (MC) of business organizations (BO) in present radically transforming environment. The authors examine methodological problems of analysis and assessment of MC including gaps between the accelerating complexity of markets and the limited ability of business organizations to respond. The relationship between MC and actual market position of a company—its competitiveness—is considered. It was found that these methods need to be developed further taking into account new trends and circumstances, as well as the requirement for greater integrativity and consideration of the relevant factors that form the capabilities of business organizations. The proposed methodology for assessing the level of MC is based on 8 marketing sub-capabilities (MSCs): (1) the core concept of a BO marketing; (2) the functionality complex; (3) the type of marketing behavior; (4) the scope of digital marketing technologies of a BO; (5) the breadth of the marketing contour; (6) qualification of marketers and sales managers; (7) branding, incl. HR brand strength; (8) distribution network, availability of own retail chains, logistics system. Approbation of the methodology was carried out on the group of transport enterprises in Russia. The relationship between MC and target market parameters has been identified. Weak MCSs causing the capability gaps had been revealed.
O estudo tem por objetivo investigar o nível de conhecimento dos profissionais de marketing em relação a finanças e, adicionalmente, analisar como os profissionais da área analisam e mensuram a performance dos investimentos de marketing, para contribuir com o objetivo de maximização do retorno. Foi elaborado uma survey aplicada à profissionais da área marketing, com a obtenção de 27 respondentes para a análise final. Com base nos resultados, é possível verificar que mesmo com a importância da análise dos investimentos em marketing em termos financeiros, os profissionais da área possuem dificuldades para a mediação dos retornos dos investimentos, sugerindo a necessidade de uma melhor preparação e alinhamento com a área de finanças.
Aim: substantiation of methodical approaches to assessing the effectiveness of marketing developments to determine the quality of service to pharmacy visitors, the formation and evaluation of their loyalty and conducting research on the effectiveness of the implementation of these developments in the activities of pharmacies. Materials and methods: pharmacy reporting, logical, comparative analysis, grouping, content analysis, economic and statistical methods. Results. Methodical approaches to the evaluation of the effectiveness of marketing developments to determine the quality of service to pharmacy visitors, the formation and evaluation of their loyalty are substantiated. It is proposed to determine the results of marketing measures of social and psychological orientation taking into account the time lag (one year after implementation), and the interpretation of indicators through the prism of the relevant results of the control pharmacy, where no marketing developments were implemented (to eliminate seasonal fluctuations and other external factors). The average value of a check per year, the number of checks per year and the average value of a check in the month of the beginning of the implementation of these developments were chosen as indicators for assessing the effectiveness of marketing developments. It is shown that in pharmacies where marketing developments were implemented, the improvement of the researched indicators grew at a faster rate compared to the control pharmacy. Conclusions. Researches have shown the presence of socio-economic effect in pharmacies in the implementation of marketing developments to determine the quality of service to pharmacy visitors, the formation and evaluation of their loyalty. Key words: efficiency of marketing developments; measures of social and psychological orientation; time lag; control pharmacy; socio-economic effect.
This study addresses the following question: For a given managerial, firm, and industry setting, which individual metrics are effective for making marketing-mix decisions that improve perceived performance outcomes? We articulate the key managerial takeaways based on testing a multi-stage behavioral framework that links decision context, metrics selection, and performance outcomes. Our statistical model adjusts for potential endogeneity bias in estimating metric effectiveness due to selection effects and differs from past literature in that managers can strategically choose metrics based on their ex-ante expected effectiveness. The key findings of our analysis of 439 managers making 1287 decisions are that customer-mindset marketing metrics such as awareness and willingness to recommend are the most effective metrics for managers to employ while financial metrics such as target volume and net present value are the least effective. However, relative to financial metrics, managers are more uncertain about the ex-ante effectiveness of customer-mindset marketing metrics, which attenuates their use. A second study on 142 managers helps provide detailed underlying rationale for these key results. The implications of metric effectiveness for dashboards and automated decision systems based on machine learning systems are discussed.
Purpose
While metrics are becoming increasingly important for marketing’s relevance, there is also a need to understand how they, as enablers of learning, affect marketing’s adaptive capabilities that ensure its long-term success. Therefore, this study aims to test the association of marketing and financial metrics use and the metric-based orientations of training and compensation, with two key marketing routines – exploitation, i.e. the perfecting of existing activities while allowing for incremental adaptations and exploration or experimentation accompanied by radical adaptation.
Design/methodology/approach
The study gathers data from 205 managers and uses partial least squares structural equation modeling to test the hypothesized relationships.
Findings
Marketing metrics encourage both forms of marketing adaptation. Financial metrics use discourages exploration. Market orientation and long-term orientation strengthen (weaken) the positive (negative) relationship between marketing (financial) metrics use and marketing exploration. Metric-based training is more positively associated with both adaptive capabilities than a metric-based compensation orientation, albeit weakly.
Research limitations/implications
The study’s central proposition – that different metrics or metric orientations are associated with distinct types of knowledge, interpretations, mindsets, motivations and cultural contexts – provides a deeper theoretical understanding of the pathways by which a metric emphasis affects marketing adaptation.
Practical implications
Marketing managers should emphasize marketing metrics and training more than compensation, to promote marketing exploitation/exploration, while exercising caution in overstressing financial metrics given their negative association with exploration. This latter negative relationship can be weakened (as can the positive one between marketing metrics and exploration be strengthened) with increased market orientation and long-term orientation.
Originality/value
This study addresses the research gap regarding the relationship between metrics as a configurational element of marketing organization and marketing adaptation.
Marketing techniques are well-accepted practices in today’s nonprofit organizations. Still, existing research on nonprofit marketing focuses on a small number of cases, and little is known about the sector-wide marketing practices. This study examines how a nonprofit’s marketing endeavors, measured by the percentage of expenses spent on marketing, vary across organizations, depending on such organizational contingencies as revenue mix, service type, and organizational activities. The analysis of the 2012 Statistics of Income Sample data shows that the proportion of marketing expense in total expenditure is positively associated with the proportions of commercial income and charitable contributions in total revenue and negatively with the proportion of government grants. The results also reveal that the proportion of marketing expense is more strongly associated with commercial revenue than with donation revenue, which implies that the current marketing practices have a stronger emphasis on increasing sales of goods and services. The findings also show significant differences across service types, as arts and environmental organizations spend more on marketing while health and human service organizations spend less than others.
Gains tables and lift charts are commonly used in direct marketing analytics to evaluate the performance of a predictive model on a target sample. A gains table shows how the average (and cumulative average) response values in the sample change with the scores from the predictive model. These numbers can be used to estimate and maximise a model's effectiveness for direct marketing campaigns. This paper introduces the R package known as 'gains': a free, publicly available tool to construct gains tables and lift charts. Instructions for installing and loading the package in R software are provided, and the package's use is illustrated using real data from an apparel retailer's e-mail marketing campaign. The use of gains tables raises important questions for model selection, and the paper concludes by discussing future research in this area.
We consider marketing-mix models that explicitly include financial performance criteria. These financial metrics are not only comparable across the marketing mix, they also relate well to investors’ evaluation of the firm. To that extent, we treat marketing as an investment in customer value creation and communication that ultimately leads to shareholder value.
The proliferation of marketing media, especially since the advent of digital media, has created an urgent need for marketers to understand their relative importance in generating revenue for their brands. Ultimately, this understanding should result in managers’ ability to project returns from their media investments. This chapter will focus on quantitative methods that enable such media return calculations. We begin with a definition of “return on media” and show how it connects to the need of estimating top-line lift, i.e., consumer response to media, from various data sources. We introduce the standard media-mix response model and discuss the estimation of media response elasticities. We extend these models to include brand-building and customer-equity effects and intermediate-performance variables. Finally, we address return to media in the digital era, with specific reference to path-to-purchase models, and we describe how media returns are derived from sales response models.
The purposes of this research were, first, to examine the dimensionality of hospitality customer relationships and, second, to develop a multi-dimensional customer relationship scale validated with both antecedent measures of marketing effectiveness and effect measures of financial performance. While hospitality marketing research has frequently focused on the relationships between various marketing actions and different dimensions of customer relationships, there is a lack of research examining customer relationships as a multi-dimensional construct. For both the hotel and restaurant industries, scale development procedures with confirmatory factor analyses were used to identify the dimensions of customer relationships: engagement, motivation, commitment, cross-buying, word of mouth, and defection. The nomological validity of these dimensions was tested using the antecedent of service quality and the effect of customer lifetime financial value. The paper concludes by articulating, first, the theoretical and practical applications of the proposed scale and, second, an agenda for future research.
For too long, marketers have not been held accountable for showing how marketing expenditures add to share-holder value. As time has gone by, this lack of accountability has undermined marketers' credibility, threatened the standing of the marketing function within the firm, and even threatened marketing's existence as a distinct capa-bility within the firm. This article proposes a broad framework for assessing marketing productivity, cataloging what is already known, and suggesting areas for further research. The authors conclude that it is possible to show how marketing expenditures add to shareholder value. The effective dissemination of new methods of assessing mar-keting productivity to the business community will be a major step toward raising marketing's vitality in the firm and, more important, toward raising the performance of the firm itself. The authors also suggest many areas in which further research is essential to making methods of evaluating marketing productivity increasingly valid, reli-able, and practical.
Probably not, if your company is like most
To increase marketing's accountability, Journal of Marketing, Marketing Science Institute, and the Institute for the Study of Business Markets have advocated development of marketing metrics and linking marketing-mix activities with financial metrics. Although the marketing field has made progress, researchers have paid less attention to what drives managerial use of marketing and financial metrics and whether metric use is associated with marketing-mix performance. The authors propose a conceptual model that links firm strategy, metric orientation, type of marketing-mix activity, and managerial, firm, and environmental characteristics to marketing and financial metric use, which in turn are linked to performance of marketing-mix activities. An analysis of 1287 marketing-mix activities reported by 439 U.S. managers reveals that firm strategy, metric orientation, type of marketing-mix activity, and firm and environmental characteristics are more useful than managerial characteristics in explaining use of marketing and financial metrics and that use of metrics is positively associated with marketing-mix performance. The results help identify conditions under which managers use fewer metrics and how metric use can be increased to improve marketing-mix performance.
Marketing ROI: The Path to Campaign, Customer and Corporate Profitability
- J D Lenskold
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Campaign, Customer and Corporate Profitability',
McGraw Hill, New York.
Marketing Metrics: The Definitive Guide to Measuring Marketing Performance
- P W Farris
- N T Bendle
- P E Pfeifer
- D J Reibstein
Farris, P. W., Bendle, N. T., Pfeifer, P. E. and
Reibstein, D. J. (2010) 'Marketing Metrics: The
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Applied Marketing Analytics
The Peer-Reviewed Journal
Volume 1 Number 3
Using survival analytics to estimate lifetime value 221
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Darren Bridger and Thom Noble
Using survival analytics to estimate lifetime value
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Block Marketing return on investment: Seeking clarity for concept and measurement 267
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Vijay Viswanathan, Don E Schultz and Martin Block
Marketing return on investment: Seeking clarity for concept and measurement
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