Marketing intensity and firm performance: Contrasting the insights based on actual marketing expenditure and its SG&A proxy

Dmitri G. Markovitch, Dongling Huang and Pengfei Ye

Journal of Business Research, 2020, vol. 118, issue C, 223-239

Abstract: Voluminous research documents marketing’s ability to produce results. However, there is limited direct evidence relating firm marketing expenditure to profitability, or marketing efficiency. The challenge arises from poor data availability on marketing decisions in firms and questionable surrogates commonly used in place of marketing expenditure. In response, we collect actual marketing expenditure data in a representative sample of firms and investigate the relationship between marketing intensity and common measures of current and future performance. We find the impact to be positive. We contrast these results with findings based on selling, general and administrative expense (SG&A), which is a popular marketing proxy. We show that using SG&A may lead to questionable inferences about the impact of marketing spending on accounting performance. We propose an alternate, less noisy, approximation to total marketing expenditure and investigate the focal relationship among our sampled firms which do not disclose their marketing costs.

Keywords: Marketing expenditure; Marketing intensity; Marketing spending; Firm performance; Profitability; SG&A; Tobin’s q (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:118:y:2020:i:c:p:223-239

DOI: 10.1016/j.jbusres.2020.06.032

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