Demonstrating the Value of Marketing
Dominique M. Hanssens & Koen H. Pauwels
Why is it a challenge to demonstrate the Marketing value to a firm?
• Marketing uses attitudinal (e.g., brand awareness), behavioral (e.g., brand loyalty), and financial (e.g., sales
revenue) performance metrics, which do not correlate highly with each other.
• Confusion about Marketing Effectiveness and Efficiency
• Hard and Soft metrics, offline and online metrics are not integrated
Why is marketing value assessment so challenging? Marketing value assessment, defined as the identification and
measurement of how marketing influences business performance as well as the accurate calculation of return on
marketing investment (ROMI)
1. The term Marketing refers to several things
2. Relation between metrics is complex and nonlinear
3. Many dashboard do not tell how marketing inputs relate to product performance
4. Data and decisions remain in silos within the firm
5. Lack of effective communication within the firm
Chain of Marketing Productivity: create and stimulate favorable customer attitudes ® boost customer demand ®
generates sales and profits ® enhance market position and financial value
As companies grow, they need guidelines for:
1 reconciling different marketing objectives combine profits, total sales volume, and local market
share objectives in an overall goal function for the model
to optimize.
2 distinguishing between marketing effectiveness and Effectiveness refers to the ability to reach the goal;
efficiency efficiency refers to the ability to do so with the lowest
resource usage.
3 defining the scope of marketing key determinant of its objectives and of the
effectiveness/efficiency decisions
4 distinguishing between marketing budget and budget Need of a broad definition of marketing in the organization
allocation and a commensurate broad inclusion of business
functions in the generation of demand models for
marketing resource allocation.
Assessing Marketing Value
Marketing value measurement has both a methodological and a knowledge component.
Methods: Models, Surveys, and Experiments
Marketing impact can be assessed empirically in two ways: by modeling historical data (secondary data) and by running
surveys and experiments (primary data).
, The use of historical data sources has benefited tremendously from improvements in consumer and marketing
databases and from developments in statistics (mainly econometrics) and computer science. On the data side, recent
history has seen the emergence of scanner databases; customer relationship management databases; and digital search,
social media, and mobile-marketing databases.
Criticism of models estimated on historical data stems mainly from their limitations in capturing “reasons why” (as
shown in surveys) or causal connections (as shown in experimental manipulations).
Field experiments are often costly to conduct, limited to changing only one or a few decision variables at a time, and
require trust in the organization that disappointing outcomes will not be held against the manager.
The best insights on marketing value will come from the combined use of secondary and primary data.
Taken together, models, surveys, and experiments provide the benefits of highest decision impact at a moderate
cost and risk.
At the same time, surveys and other methods should be used to provide insight into the “why” and “how” of customer
behavior.
Connecting Soft Metrics and Hard Metrics
Finance practice (Hard Metrics) / Marketing Practice (Soft Metrics)
A key question is how to integrate soft (attitude) and hard (behavior)
More research is needed to learn the best ways to model the consumer decision journey and shed light on whether there
are models that are more appropriate than the decision funnel
Dynamic system models reveal dual causality among survey-based attitudes and online actions, leading
to the framework in Figure 2.
A recent meta-analysis in digital marketing reveals that the sales elasticity of electronic word of mouth averages.
The findings are likely to be nuanced and to vary depending on the category (high involvement or low involvement) and
existing brand strength.
Dealing with Risk
Risk considerations have had little systematic coverage in marketing academia or practice.
• Finance literature has focused mainly on systemic risk (i.e., risk faced by all companies in the market),
• Marketing literature offers insights into idiosyncratic risk (i.e., risk tied to unique circumstances of the specific
company).
•
In conclusion, when marketing plans do not materialize as anticipated, the reasons can be various. Only when an
organization can identify the reasons that apply to its own history can it take the right corrective actions.
Risk analysis in marketing planning is more important to organizations than the paucity of prior research suggests and, as
such, it is one of the most promising areas for further research.
This is especially important if marketing is to become an integral part of strategic and financial planning
Marketing Dashboards
• enforces consistency in measures and measurement procedures across departments and business units.
• helps monitor performance.
• communicates performance and the things an organization values.
• allows for more effective communication with marketing partners.
Dominique M. Hanssens & Koen H. Pauwels
Why is it a challenge to demonstrate the Marketing value to a firm?
• Marketing uses attitudinal (e.g., brand awareness), behavioral (e.g., brand loyalty), and financial (e.g., sales
revenue) performance metrics, which do not correlate highly with each other.
• Confusion about Marketing Effectiveness and Efficiency
• Hard and Soft metrics, offline and online metrics are not integrated
Why is marketing value assessment so challenging? Marketing value assessment, defined as the identification and
measurement of how marketing influences business performance as well as the accurate calculation of return on
marketing investment (ROMI)
1. The term Marketing refers to several things
2. Relation between metrics is complex and nonlinear
3. Many dashboard do not tell how marketing inputs relate to product performance
4. Data and decisions remain in silos within the firm
5. Lack of effective communication within the firm
Chain of Marketing Productivity: create and stimulate favorable customer attitudes ® boost customer demand ®
generates sales and profits ® enhance market position and financial value
As companies grow, they need guidelines for:
1 reconciling different marketing objectives combine profits, total sales volume, and local market
share objectives in an overall goal function for the model
to optimize.
2 distinguishing between marketing effectiveness and Effectiveness refers to the ability to reach the goal;
efficiency efficiency refers to the ability to do so with the lowest
resource usage.
3 defining the scope of marketing key determinant of its objectives and of the
effectiveness/efficiency decisions
4 distinguishing between marketing budget and budget Need of a broad definition of marketing in the organization
allocation and a commensurate broad inclusion of business
functions in the generation of demand models for
marketing resource allocation.
Assessing Marketing Value
Marketing value measurement has both a methodological and a knowledge component.
Methods: Models, Surveys, and Experiments
Marketing impact can be assessed empirically in two ways: by modeling historical data (secondary data) and by running
surveys and experiments (primary data).
, The use of historical data sources has benefited tremendously from improvements in consumer and marketing
databases and from developments in statistics (mainly econometrics) and computer science. On the data side, recent
history has seen the emergence of scanner databases; customer relationship management databases; and digital search,
social media, and mobile-marketing databases.
Criticism of models estimated on historical data stems mainly from their limitations in capturing “reasons why” (as
shown in surveys) or causal connections (as shown in experimental manipulations).
Field experiments are often costly to conduct, limited to changing only one or a few decision variables at a time, and
require trust in the organization that disappointing outcomes will not be held against the manager.
The best insights on marketing value will come from the combined use of secondary and primary data.
Taken together, models, surveys, and experiments provide the benefits of highest decision impact at a moderate
cost and risk.
At the same time, surveys and other methods should be used to provide insight into the “why” and “how” of customer
behavior.
Connecting Soft Metrics and Hard Metrics
Finance practice (Hard Metrics) / Marketing Practice (Soft Metrics)
A key question is how to integrate soft (attitude) and hard (behavior)
More research is needed to learn the best ways to model the consumer decision journey and shed light on whether there
are models that are more appropriate than the decision funnel
Dynamic system models reveal dual causality among survey-based attitudes and online actions, leading
to the framework in Figure 2.
A recent meta-analysis in digital marketing reveals that the sales elasticity of electronic word of mouth averages.
The findings are likely to be nuanced and to vary depending on the category (high involvement or low involvement) and
existing brand strength.
Dealing with Risk
Risk considerations have had little systematic coverage in marketing academia or practice.
• Finance literature has focused mainly on systemic risk (i.e., risk faced by all companies in the market),
• Marketing literature offers insights into idiosyncratic risk (i.e., risk tied to unique circumstances of the specific
company).
•
In conclusion, when marketing plans do not materialize as anticipated, the reasons can be various. Only when an
organization can identify the reasons that apply to its own history can it take the right corrective actions.
Risk analysis in marketing planning is more important to organizations than the paucity of prior research suggests and, as
such, it is one of the most promising areas for further research.
This is especially important if marketing is to become an integral part of strategic and financial planning
Marketing Dashboards
• enforces consistency in measures and measurement procedures across departments and business units.
• helps monitor performance.
• communicates performance and the things an organization values.
• allows for more effective communication with marketing partners.
