Methods for Improving Marketing ROI

By using specific tools to optimize marketing budgets, executives can help grow sales and boost the bottom line.

Title:
Allocating Marketing Resources

Authors:
Sunil Gupta and Thomas J. Steenburgh

Publisher:
Harvard Business School, Marketing Research Paper No. 08-069

Date Published:
January 2008

U.S.-based companies spent nearly US$300 billion on marketing and advertising in 2006, but few have figured out how to optimize marketing spending for profitability and revenue growth. The authors of this paper examine a number of tools, methods, and approaches designed to help marketers determine the best way to allocate their resources, such as econometrics that measure historical data and simulation analyses that test the potential outcome of multiple marketing strategies. The researchers also provide a framework for improving product lines, media mix, and marketing ROI across countries using a two-phase approach: a demand-forecasting phase, in which managers determine the effect of marketing on consumer demand, and an optimization phase, in which they assess the economic impact of marketing efforts and determine competitive reactions. Using these strategies will help marketers target consumers who are likely to respond to a marketing message and avoid those who are not.

Bottom Line:
By using specific tools to optimize marketing budgets, executives can help grow sales and boost the bottom line.