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Marketing - Marketing Metrics - Measuring Marketing Effectiveness 


Marketing Spending and the Volatility of Revenues and Cash Flows While effective marketing spending is known to improve a brandís financial performance, it can also increase the volatility of performance, which is not a desirable outcome. This paper analyzes how revenue and cash-flow volatility are influenced by own and competitive marketing spending volatility, by the level of marketing spending, by the responsiveness of own marketing spending, and by competitive reactivity. We develop hypotheses about the influence of these variables on revenue and cash-flow volatility that are rooted in market response theory. Based on a broad sample of 99 pharmaceutical brands in four clinical categories and four European countries, we test these hypotheses and assess the magnitude of the different sources of marketing-induced performance volatility.
The results support our hypotheses and demonstrate that effective marketing may incur negative financial side effects such as greater financing costs or higher opportunity costs of cash holdings. Thus common volatility-increasing marketing practices such as advertising pulsing are effective at the top-line, but may turn out to be ineffective at the bottom-line. doc-file






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Status: 21. November 2012