Reconciling Marketing vs. Branding Return on Investment

Abstract

Marketing ROI has been a topic of considerable debate between proponents of brand management and those of marketing accountability. As the brand management discipline works to leverage marketing investments to meet the challenge of an increasingly fragmented media audience, financial stakeholders of corporations demand a greater visibility into these investments. The prolific usage of scanner data based marketing mix modeling methods of marketing ROI measurement has generated additional pressure on brand-managers to demonstrate ROI on their marketing investments. Brand-managers justify their aversity to measuring marketing investments on the same ROI hurdles as other capital outlays on the basis of the long-term nature of marketing effect on sales, whereas financial stakeholders continue to evaluate those using short-term methods like marketing-mix models. This paper proposes leveraging consumer based equity measures to measure the long-term effect of marketing on sales in addition to the short-term effects measured by marketing-mix models utilizing a novel three-stage approach that is parsimonious and yet estimates a more complete measure of marketing ROI. An additional advantage would be to quantify the long-term sales impact of brand health metrics brand-managers track on a regular basis. This would bridge the gap that exists in how brands are measured and valued and the process of marketing budget allocation that eventually drives brand value.

Keywords: Marketing ROI, Brand Equity, Marketing-Mix Model

JEL Classification: M37