The Power of Inertia: Conservatism in Marketing Resource Allocation

Marcel Corstjens

INSEAD

Andris Umblijs

McKinsey

Chao Wang

Deloitte

INTRODUCTION

There are two types of marketing-budget decisions:

  • The total budget decisions
  • The allocation of the budget across various marketing vehicles.

In this study, the authors focus on budget allocation. Determination of total budget tends to be taken at a higher level in the organization and to have fewer upside opportunities (Doyle and Saunders, 1990; Bradley and Kissel, 2006).

It is interesting to note that in most industries, there exists a clear hierarchy in terms of the marketing vehicles deployed. These hierarchies tend to be industry-specific. In the prescription-pharmaceutical industry, for example, companies consistently allocate a massive 60-percent to 70-percent share of their considerable marketing budgets to the sales force (Gagnon and Lexchin, 2008). Personal selling also is the dominant marketing tool in much business-to-business (B2B) marketing. For both a B2B telecommunications company and a B2B IT infrastructure company in this study’s dataset, the sales force received by far the largest share of the total marketing investment.