The Value of Marketing Expertise

Mehmet Pa\c{s}a and Steven M. Shugan
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Mehmet Pa\c{s}a: McKinsey & Company, Istanbul, Turkey
Steven M. Shugan: College of Business Administration, The University of Florida, Gainesville, Florida 32611-2017

Management Science, 1996, vol. 42, issue 3, 370-388

Abstract: This paper has three objectives: (1) to construct a theoretical model that aids in evaluating marketing expertise, (2) to use that theoretical model to identify factors influencing the value of marketing expertise, and (3) to empirically test the model by observing how different market conditions influence whether companies emphasize marketing expertise. We accomplish these objectives as follows. First, we use decision theory to find an expression for the expected value of marketing expertise. We do not use decision-analysis in the normative tradition. Nor do we assume that firms actually use formal decision-analysis. Rather, we assume that firms are rational and that decision theory describes their actions. Given that assumption, we predict how firms should evaluate marketing. Here, marketing expertise helps a firm make better marketing decisions (at least on average). Hence, the value of marketing expertise increases as marketing decisions become more important. Second, consistent with decision theory, we predict that marketing decisions become more important with increases in the instability of the marketing environment (i.e., predictability), the profit impact of marketing decisions (i.e., opportunity profit), and the loss from marketing mistakes (i.e., potential loss). Third, we construct empirical measures of our theoretical constructs with data from 592 firms. Our empirical results are consistent with our predictions and reveal factors influencing the value of marketing expertise. For example, greater market instability and market presence increase the value of marketing expertise, while larger organization size, organization instability, and competition decrease its value.

Keywords: marketing; value; expertise; decision analysis (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (7)

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