I talk a lot on this site about the problem of marketing assets not being captured. This omission is a significant problem in understanding what marketing does as we can’t easily see the long term value that marketing creates.
A connected, but different, problem is that what is spent on marketing is usually a bit of a mystery to those outside the company. Dimitri Markovitch and his colleagues raise this problem in an article in the Journal of Business Research. They argue, and I believe they are self-evidently correct, that our ability to understand marketing from outside the company is hampered by lack of good information. Marketing spend is typically put in a big bucket in the financial accounts called sales and general administration (SG&A). It is easy to think of SG&A as everything the accountants putting the accounts together don’t care about that much.
The authors create estimates of marketing spending and link their estimates to firm performance. For understandable reason, to get published, they wanted to show a link to firm performance. Unfortunately, their measures of firm performance are of dubious value. The financial accounting limitations they point to in respect of SG&A are exactly the same problems that undermine their performance metrics of Tobin’s q and ROA (Return on Assets).
As I said I appreciate why they had to do more to gain a publication. That said, I find their initial work estimating marketing spend and, crucially, drawing attention to the problem of outsiders just not knowing what is being spent on marketing to be much more interesting and compelling. To my mind their key contribution is to draw attention to how little we really know about marketing expenditures. There is “…poor data availability on marketing decisions in firms and questionable surrogates commonly used in place of marketing expenditure” (Markovitch, Huang and Ye, 2020, page 222). Marketers, I believe have to work to getting our data better eitehr through lobbying accountants or other methods. When we do we will find it much easier to show effectiveness.
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Read: Dmitri G. Markovitch, Dongling Huang, and Pengfei Ye. “Marketing intensity and firm performance: Contrasting the insights based on actual marketing expenditure and its SG&A proxy.” Journal of Business Research 118 (2020): 223-239.