Are marketing strategies correlated with financial outputs? A longitudinal study

Abstract

Purpose The relevance of marketing to explain financial success has been seldom investigated. In this scene, the purpose of this study is to analyze whether the correlations between four marketing strategies and seven financial measures has increased (or not) over time. Design/methodology/approach To reach these objectives, secondary information about 500 companies operating in the USA was analyzed. This information was listed on the US Standard & Poor’s 500-company index (SPX Charts, 2019). Data were collected for eight different periods of time (from year 2009 to year 2016) and for 11 different industries. Multiple regression analysis and ANOVA tests were used. Findings First, two marketing investment decisions out of four (brand value and price) have displayed a significant and incremental change over time. The other marketing investment decisions (brand rank, communication and service) have not increased their importance with time. Second, in two investment decisions (brand value and price), correlations found with financial measures have strengthened over time. Research limitations/implications This study was conducted on large US public companies. Studying other sectors within the USA such as small capitalization firms or privately owned firms can lead to future discoveries, while looking at similar companies in different countries, could provide compare and contrast opportunities. Second, no qualitative data were obtained in this study, leaving potential for gaps in knowledge that could be remedied by qualitative analysis. Third, given that all marketing investment was considered of equal value in the present paper, future research could be done to avoid this limitation. Practical implications From a practical approach, the authors want to eliminate the dissonance between marketing and accounts as far as the lack of “marketing accountability” (Webster et al., 2003, p. 27) has lead marketing to “lost its seat at the table” (Kumar and Shah, 2009, p 119). That is, they want to call the attention to the relevance of investing in diverse marketing tools at the same time from an accounting approach, showing how these tools can be used to improve financial results. Kumar (2015) explains how, as companies strive to cut costs, meet annual revenue targets and maximize efficiency, less attention is being placed on the importance of forward-looking marketing strategies. The authors would like to show how favorable financial results are linked to diverse marketing investments. As Arslanagic-Kalajdzic et al. (2018) have underlined, there is a need for building, improving and sustaining marketing accountability within the firm and its relevance for value. Originality/value From an academic approach, the added value is to adopt a longitudinal perspective to analyze the evolution of marketing investment over time and its interesting results, given that, until now, most of the studies have focused on a specific period (Anderson et al., 2004; Fornell et al., 2006). Previous works have scarcely noticed that by better understanding how marketing investments impact regularly used financial variables, stakeholders can better assess the inner workings of a company (Ambler et al., 2001). Bridging this academic gap from a longitudinal perspective will enable marketing workers and accounting workers to act cohesively to cultivate successful companies.

The Impact of Marketing on the Business Performance of Companies: A Literature Review

“…When looking at financial indicators, it was seen that besides ROA, ROE, ROS, Tobin's Q, Stock Market Return parameters, indicators such as share value, net income margin and total market value were included in studies. The fact that the results were completely positive in terms of the relationship between the marketing activities used in this period and the financial indicators reveals how appropriate the decisions regarding the marketing activities were (Dutordoir et al 2015;Dogan & Mecek, 2015;Oh et al, 2016;Dorfleitner et al, 2019;Sydney-Hilton & Vila-Lopez, 2019).…”

“…Marketing expenditures are not only shortterm expenditures but also long-term investments for a company since marketing activities contribute to the firm's brand equity that will improve the profit margin, current and future earnings (Graham & Frankenberger, 2011). Payoffs of advertising expenditures can be viewed as uncertain and accruing over a long time, but advertising expenditures, namely marketing investments on brand equity have significant impact on financial measures (Grullon et al, 2004;Mian et al, 2018;Sydney-Hilton &Vila-Lopez, 2019). In a company, marketing expenditures may exceed capital expenditures and although companies do not disclose marketing expenditures as consistently as financial expenditures, marketing expenditures are effective on future sales and market value of a company (Herremans & Ryans, 1995;Sydney-Hilton &Vila-Lopez, 2019).…”

“…Further studies can examine the impact of marketing expenditures on business performance on a sectoral basis and make comparisons between different industries. Considering the highly competitive business environment and the availability of information for consumers, there is a need to integrate marketing decisions in financial forecasting models (Sydney-Hilton &Vila-Lopez, 2019). Developing a forecasting model that includes marketing investments will be beneficial for both researchers and managers.…”

What Makes a Worthwhile Hotel Loyalty Program?

“…Nevertheless, opinions are divided as to whether loyalty programs work. Some theoretical and empirical research supports the view that loyalty programs produce positive outcomes [24], while others note that companies lose credibility by overemphasizing on loyalty programs [25]. According to Nunes and Drèze [19], effective loyalty programs need to accomplish five primary objectives, and different strategies may be adopted to achieve different goals.…”

Is marketing investment similar cross-industry?

“…A stream of research has started to investigate how marketing and accountability could be successfully linked. This group of researchers has begun to link marketing to finance through what is called the marketingaccounting interface (Madden, 2006;Mizik and Nissim, 2011;Kosan, 2014;Stewart and Gugel, 2016;Sydney-Hilton and Vila-Lopez, 2019;Blachetta and Kleinaltenkamp, 2019). From this approach, multidisciplinary-based groups and mixed frontiers of disciplines seem to be promising line of research (Bigné-Alcañiz, 2016).…”