How Marketing Contributes to the Bottom Line

David W. Stewart
University of California, Riverside


INTRODUCTION

Marketing is one of the last of the wild frontiers in American business today, a place where "cowboys" with wild ideas can literally create fortunes out of thin air. Given access to huge corporate budgets, marketing promises to take (not so) small investments and bring back huge returns. Through the late 1990s, marketing budgets and the organizations that consumed them spent more and more, promising larger market share, higher sales, and greater customer loyalty that would, in theory, generate greater cash flow for the corporation and its shareholders.

But like the "wild west" era of American history, the ending of the dot.com boom signaled the close of the old marketing frontier, where marketing practitioners could promise big results without having any real way to quantify them. Sometimes, but all too rarely, they could point to greater market share or higher unit profitability to claim success for the marketing campaign. More often the returns on marketing expenditures were measured by showing greater awareness, changes in customer beliefs and attitudes, or similar measures. But how efficiently was that money being spent and what is the relationship of these marketing metrics to the financial performance of the firm? What other information could they give the executive suite to prove their value to the company? Though good executives asked these questions in times of plenty, as corporations try to spend their resources more efficiently in the 21st century, marketing professionals like cowboys of old are having a hard time adapting to this new frontier.