Journal of Business Research 62 (2009) 636643

Contents lists available at ScienceDirect

Journal of Business Research

Marketing accountability: Linking marketing actions to nancial results

David W. Stewart
A. Gary Anderson Graduate School of Management, Anderson Hall 122, 900 University Avenue, University of California, Riverside, Riverside, CA 92521, United States

a r t i c l e

i n f o

Article history:
Received 1 December 2007
Received in revised form 1 January 2008
Accepted 1 February 2008

a b s t r a c t
This plenary address to the Society for Marketing Advances calls on the marketing discipline to be
accountable, link its contributions to nancial performance, and assert the value it contributes to the rm. The
paper suggests a process for developing causal links among marketing activities, intermediate marketing
outcomes, and nancial performance metrics.
2008 Elsevier Inc. All rights reserved.

Keywords:
Marketing
Firm
Cash ow
Accountability
Marketing effectiveness
Return on marketing investment

I am honored and humbled to be named the 2007 Elsevier

Distinguished Marketing Scholar by the Society for Marketing Advances.
It is always pleasant to be recognized for one's contributions to the
discipline, and an award that recognizes long-term contributions is
especially gratifying. I very much appreciate the award and the
opportunity to address my peers. This type of recognition also has the
effect of freeing one to speak and write about important and
controversial topics and to offer insights intended to provoke thought.
Thus, this paper addresses an issue of critical importance to the
marketing discipline and for the larger sphere of management. This
issue is marketing accountability.
Calls for marketing to become more accountable and to demonstrate what marketing contributes to the rm and to the larger society
are not new (Ramond, 1976; Sevin, 1965). Decades late, such calls are
occurring with increasing frequency and vigor (Chaves, 2006; CMO
Council, 2004a,b; Nail, 2004; Nail et al., 2002; Sheth and Sisodia,
2002; Bush et al., 2002: Rust et al., 2004; Srivastava and Reibstein,
2005; Stewart, 2006, 2008; Young et al., 2006). Twenty to twenty-ve
percent of the expenditures of many rms relate to marketing. Its very
size makes the marketing budget a target of interest to Boards of
Directors and senior management. In a recent interview I conducted,
the CFO of a Fortune 100 company commented, I've squeezed all the

This paper builds from the plenary address delivered to the Society for Marketing
Advances on November 8, 2007 in San Antonio, Texas.
Tel.: +1 951 827 4237; fax: +1 951 827 3970.
E-mail address: david.stewart@ucr.edu.
URL: http://agsm.ucr.edu/.
0148-2963/$ see front matter 2008 Elsevier Inc. All rights reserved.
doi:10.1016/j.jbusres.2008.02.005

cost I can from operations. Now it's time to look at marketing. In

another interview the CFO said, Marketing is not strategic. It's just
tactics, and we just control the cost. These are not positive comments about marketing and suggest trouble on the horizon. If the
marketing discipline cannot demonstrate its value, it will continue to
be merely a set of tactical activities for which costs must be controlled.
Marketing will certainly not take its place at the strategic planning
table without hard evidence of what it contributes to the rm's
bottom line.
This article is a plea to the marketing discipline to take control of its
own destiny, to address need for accountability in marketing, and to
develop measures and processes that will allow marketing to take its
place at the strategic planning table. The article begins by providing an
overview of the state of current practice with respect to marketing
accountability. It then addresses the important role of standards and
standardized measures, and also turns its attention to three types of
return on marketing and measurement. Finally, the article proposes an
audit process for selecting and linking marketing metrics to nancial
performance and for validating these marketing metrics against
measures of nancial performance.
1. Why nancial accountability is important
Powell (2002, p. 6) denes return on marketing as the revenue or
margin generated by a marketing program divided by the cost of that
program at a given risk level. This denition is not necessarily a measure
of brand loyalty or brand equity, or a measure of awareness or preference.
Powell's proposal is an economic, or nancial, measure. Return on
marketing must be a nancial metric because: (1) nance is the language

D.W. Stewart / Journal of Business Research 62 (2009) 636643

of the company, (2) companies publicly report and are evaluated based
on nancial measures, (3) nancial metrics are a way to compare
alternative and otherwise noncomparable actions across markets,
products, and customers, (4) nancial metrics provide accountability,
(5) nancial metrics promote organizational learning and crossfunctional teamwork because they provide a common language, and
(6) nancial metrics are the way to answer questions about the optimal
marketing mix when one is dealing with quite distinct and different
marketing activities and intermediate marketing outcomes.
Marketing has no shortage of measures. Unfortunately, disappointment with marketing metrics is enormous. Woods (2004, p. 14) states,
The challenge for marketers is to dene measurement metrics; and,
indeed, there's been a mixed success across all industries. In a
comprehensive review of the use of scanner data, Bucklin and Gupta
(1999, p. 262) conclude that, We have pretty good results in looking
at return on promotion and price tactics. However, we've had very
limited success with product strategy, advertising, and distribution
management; and, unfortunately, these are the areas where we spend
the most of our marketing dollars. The CMO Council (2004a, p. 2)
concludes that Marketingknown more as art than sciencehas
been the last of the corporate functions to formally develop and adopt
processes and standards that can be tracked and measured
quantitatively.
2. The state of industry practice
A number of recent surveys examine industry practices with respect
to marketing accountability and measurement. The American Productivity and Quality Center (APQC) has conducted surveys with the
Advertising Research Foundation (ARF) in 2001 and 2003. The Chief
Marketing Ofcers (CMO) Council carried out a survey in 2004, and the
Association of National Advertisers (ANA), along with Forrester, has
conducted surveys every couple of years, in 2002, 2004, and 2006. The
consistency of ndings across these surveys is remarkable.
2.1. APQC/ARF surveys
The APQC/ARF surveys (2001, 2003) report an increasing pressure
to deliver quantiable returns on marketing expenditures and a need
for reliable, valid, and relevant metrics that are linked to nancial
performance. These surveys report that the development of econometric marketing mix models often enables organizations to achieve
competitive advantage and increase protability, but the results of
such models are limited by the quality of the data (measures) that
provide their foundation. Respondents to these surveys generally
agreed that ROI-based marketing has demonstrated very positive
results and large paybacks. Respondents in these surveys also
indicated that company-wide ROI approaches to examining marketing
outcomes facilitate learning, and that knowledge systems built around
ROI enhance teamwork. On the other hand, the surveys nd a general
dissatisfaction among the majority of respondents with the systems,
processes, and measures for evaluating nancial returns on marketing
activities in their organizations.
2.2. CMO Council survey
The CMO Council also conducted a survey of more than 1000
individuals at the C-level, including 320 Chief Marketing Ofcers (CMO
Council, 2004a). The companies included in this survey represented
$400 billion in annual sales and spent up to 25% of their revenue on
marketing. In addition, the companies shared a focus on technology.
The ndings show that more than 90% of the marketing executives
surveyed viewed marketing performance metrics as a signicant
priority. The ndings also show that management and boards have
been increasing their demands for accountability from marketing
executives. The ndings also show that an accelerating drive for

637

greater effectiveness and continuous improvement exists. Eighty

percent of the marketing executives responding to the survey were
unhappy with their current ability to measure performance. Only 17%
of the respondents reported that their organization had a comprehensive system, but these companies appeared to outperform others
in revenue growth, market share, and protability. Marketing also
enjoys greater CEO condence in companies with a comprehensive
system for performance management.
The greatest satisfaction among CMOs in the survey is with measures
of direct response marketing (the types of marketing activities where
the results tend to be fairly instantaneous and relatively easy to
measure): direct mail, e-mail campaigns, web site statistics, and
telemarketing. The least satisfaction among CMOs is with measures of
branding, channel management, sales and marketing collateral, and
advertising. These are the softer brand-building areas where marketing
spends so much of its resources, and where academics have spent most
of their time focusing on the development of measures.
The most important metrics among the CMOs in the survey include:
(1) revenue, (2) qualied sales lead generation, (3) sales and channel
feedback, (4) return on investment for marketing programs, and
(5) customer retention, loyalty, and satisfaction. All of these are
measures of marketing outcomes that represent either economic
outcomes or are relatively easy to link to marketing outcomes. The
least important measures for the CMOs in this survey include the
measures that marketing academics spend most of their time analyzing:
perceptual surveys and traditional measures of brand equity (measures
of awareness and association). These types of measures are much more
difcult to link to economic performance, which is very likely the reason
for the lack of satisfaction among the CMOs.
The CMO survey results indicate that the challenge is process: a
lack of standard processes and automated systems that can capture
data (data repository) in a consistent fashion exists. Most organizations today have built in-house systems for their own purposes, and
those in-house systems are often not consistent from division to
division in the organization. The practices within the organization and
across organizations often lack consistency, and the survey respondents indicate a very strong desire for third-party solutions that could
solve problems of measurement and data analysis for them. They also
note a need for guidelines for processes and metrics, for models for
linking customer purchase behavior to marketing programs, as well as
for an executive dashboard that provides an easy way to determine
the outcomes of marketing activities.
Taken together, the APQC/ARF and the CMO surveys possess common
threads: the need for standards and metrics; the need for organizational
and process changes; the perceived importance of marketing mix
modeling; the importance of the role of third-party providers of metrics;
and the criticality of hard economic outcome measures.
2.3. ANA/Forrester survey
ANA and Forrester conducted a number of surveys on return on
marketing investment. One of these, published in 2004, surveyed 300
ANA members and reports no consensus on how to dene or measure
return on investment on advertising. In fact, it reports that denitions
differ even within the same organization. Return on marketing
investment has at least 15 different denitions, often in the same
organization. This particular survey was a follow-up to earlier surveys,
but there was little change relative to the survey two years earlier. A
subsequent survey in 2006 reveals relatively little change in the state
of practice. Not surprisingly, the ANA survey concludes that measurement is difcult, expensive, requires time, resources, thought, and
tracking (the ability to identify activities that occur today and link
them to their effects that may occur at some point in the future).
Dening marketing return on investment is the issue. Many
denitions of return on marketing investment are currently in
practice. No doubt this situation is one explanation why CFOs, CEOs,

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D.W. Stewart / Journal of Business Research 62 (2009) 636643

and members of the board have great skepticism about marketing

activities. CFOs and CEOs do not suggest that marketing is ineffective
but skepticism exists about the degree that marketing can demonstrate its success and its contribution to knowledgeable decision
making regarding strategic options for the rm. The ANA survey
reports that marketing mix modeling is rapidly gaining adherents, and
advertisers would like to see measurement move to external thirdparty organizations that can help establish standard.
Thus, a shared frustration coincides with a remarkable consistency
in industry practice. Desire for standards and appreciation for
marketing mix modeling is growing. A key question, though, is
whether or not marketing mix modeling is, in fact, the answer. Such
modeling certainly can be useful. Prior data analyses suggest a mixed
record of success with marketing mix modeling. Bucklin and Gupta
(1999) note that marketing mix modeling is very useful in identifying
the effects of promotions and price (relatively short-term tactical
changes), but modeling success with product strategy, advertising,
and distribution management issues is not substantial. Indeed, reports
on marketing mix modeling are misleading, particularly marketing
mix modeling involving the use of expenditures (dollar expenditures
on advertising or other marketing programs) or gross rating points.
Such research is very similar or analogous to doing dosage research in
the pharmaceutical industry but not knowing what the drug is.
Modeling the impact of dosage without knowledge of the drug
produces meaningless results. Similarly, modeling advertising spending without really knowing the message yields nonsensical results.
Indeed, this situation may well be one reason that advertising effects
tend to appear modest.
2.4. Data, measurement, and models
Data are often a problem in the types of research marketers
undertake. Data often limit models. Studies often fail to measure what
is important. The reliability of data can vary considerably by source, and
researchers tend to measure what they can measure. Just because
measures or some data are available does not necessarily mean that they
are valid in any useful sense. Indeed, a great deal of what researchers
measure at the consumer level may have little relationship to the
economic consequences of marketing activities. Models are not
substitutes for good measures. Models can be useful; but, in the absence
of good measures, they yield poor results. Models also tend to look
backward in time; they can be very helpful in understanding history.
However, forward calibration is infrequent; and forward calibration is
what CFOs and CEOs need as they make investment decisions. They
would like to be able to know with some degree of certainty that an
expenditure today will produce specic types of results and economic
returns in the future.
Adding to the difculty, data streams often lack temporal and
geographic synchrony, which makes modeling all the more difcult.
Frequently what is tested or measured does not match with the
actions that take place in the market. For example, testing a particular
ad in rough form and then nding that the ad has changed in
signicant ways when it is actually run in the marketplace occurs
frequently. Or as another example, a researcher may test a particular
product design or product concept and then nd that the concept does
not translate exactly into a real product as specied, with the result
being that the forecast of product acceptance based on the concept
does not reect the actual acceptance in the marketplace.
Good measurement creates new challenges. Good measurement
raises questions about marketing activities, about what does and does
not work, and about the optimal allocation of resources. Good
measurement is not merely about whether there is a positive return
or protability associated with a marketing program. Rather, the critical
question is whether the particular return is maximal relative to all of the
investments the rm might make. The need for processes that respond
to good measurement is substantial. Such processes require speed. Good

measures are not very useful if the organization cannot respond and take
corrective action where necessary, or exploit opportunities that may
arise in the marketplace.
Marketing does not lack measures. Marketing has many, many
measures. Standard measures and metrics are what marketing lacks.
Marketing lacks metrics that are explicitly linked to nancial performance in predictable ways. Marketing also lacks formal processes for
auditing marketing metrics models in many areas. Marketing tends to be
highly idiosyncratic. Marketing lacks standard processes, and improving
a process is possible only after reaching agreement on its denition.
A common excuse for the lack of standards in marketing is that
markets are idiosyncratic across products, across customers, and even
across time with respect to the same product and customer. This view
leads to the conclusion that marketing must be constantly reinventing
itself and therefore any effort to establish standard measures and
processes is a waste of time and effort. Another excuse for failure to
establish standard metrics and processes is that competitive advantages may arise from an individual rm developing unique expertise
with respect to proprietary measures and processes. Marketing
requires creativity, and rms may develop competitive advantages
through unique processes. But the conclusion is incorrect that these
propositions prevent the creation of standards.
2.5. An analogy: the quality movement
Marketing in 2008 is where quality was 50 years ago. Then, marketers
considered production and operations highly idiosyncratic and largely
viewed them as a cost. Scrap and rework were low-cost substitutes for
quality. Marketing lacked consistent metrics and standardized processes.
And just as we hear today that identifying standard processes that work
across many industries is difcult, so it was at the beginning of the quality
movement when critics suggested that applying the same metrics and
processes to industries as different as jet engines, pharmaceuticals, hotel
chains, and consumer package goods was impossible.
However, the quality movement has spent time and effort proving
itself over the past 50 years. Quality researchers have developed
standard metrics; standard processes are now available; and linkages
between quality metrics and processes and nancial performance
exist through demonstrated cost savings and higher returns in the
market. The quality movement now has substantial value. Now is the
time for marketing to do the same.
The importance of establishing standards is one of the lessons
marketers can learn from the quality movement. Standards are necessary as the basis for actions, accountability, and improvement. Even in
idiosyncratic environments, creating metrics and processes are possible
that are standard across rms and industries, that reduce costs and
increase returns, that increase value to the rm and the customer, and
that provide a basis for continuous improvement. The quality movement
demonstrates this in the area of production and operations. The same
achievements in marketing are possible and must be done.
The need is for marketing standards. Bucklin and Gupta (1999, p. 270)
offer the following conclusion: We found packaged goods companies to
be bombarded with a variety of methods from third-party consultants,
the details of which are often not disclosed to clients or outsiders. This
creates methods confusion and makes it impossible to compare results
and resolve controversies. This problem is most acute in the area of
advertising. We believe that it may be quite helpful to actively promote
open discussion and debate to establish method standards. This
conclusion is a call for standards in marketing.
3. The role of standards and standardized measures
Standards play an important role in virtually all of our lives. We
take for granted many of the standards that are present in our world.
We assume that electricity works in the same way wherever we are in
the United States. We take for granted that mechanical parts such

D.W. Stewart / Journal of Business Research 62 (2009) 636643

639

as nuts and bolts will be interchangeable. These are the roles of

standards. They are a public good available to both buyers and sellers
and provide a means for discriminating high quality from low quality.
If buyers cannot distinguish a high-quality seller from a low-quality
seller, the high-quality seller's costs cannot exceed those of the lowquality seller; and the high-quality seller will not survive. This is
called adverse selection, or the moral hazard problem in economics.
We have a great deal of this type of problem in marketing, because
there are no well-accepted standards by which one can evaluate many
of the marketing services available to businesses and that businesses
use.
As one solution, buyers may invest a great deal of time, effort, and
resources in screening sellers. Of course, this tends to be very costly,
particularly when each buyer has to do the screening individually.
Alternatively, sellers can build reputations or guarantee a certain level of
quality; but this, too, requires cost and is fraught with some degree of
uncertainty in the marketplace. As another alternative, as is the case in a
number of domains, government may intervene and establish standards, much as it has done with broadcast of high denition television,
for example. However, there are signicant costs associated with this
type of solution to the moral hazard problem. Where standards exist,
buyers and sellers in the market can use those standards as a way of
ascertaining that sellers are providing a minimum level of quality or
service. Sellers benet because they can simply demonstrate that they
meet a standard without constantly having to prove themselves. Buyers
can use the standard as a way of assessing quality and outcomes without
having to engage in a laborious, idiosyncratic process.
The reality is that most standards have evolved by following the main
rm in the market, or as the outcome of a standards contest. In general, it
is the exception that government must intervene to establish standards.
Generally, the most effective way to establish an efcient standard is not
by rening the committee process, but by turning over more of the
standard-setting process to the market. However, this requires providers
of services and buyers to be transparent. In marketing, a great deal of
transparency is necessary with respect to measures and metrics and
processes that various third parties offer.
Ultimately, standards must link to something to be useful. Just as
standards for the generation and distribution of electricity are useful
only when they are linked to power consuming products and tools, so
too must marketing standards link to something. This something must
include the objectives of the rm, which are typically in terms of
nancial performance and growth. Marketing standards must link to
the common language of the rm, which includes nancial performance and shareholder value. Therefore marketing standards must
reect both revenue and costs.

cash ow (Young et al., 2006). Cash ow is the primary nancial metric

of the rm. Cash ow is a consistent measure across markets, products,
customers, and activities. There are a very small number of drivers of
cash ow. One can obtain cash from a source (customer acquisition and
retention, share of wallet within a category, or share of wallet across
categories). One can also produce cash through a business model
(margins, velocity, or leverage). Let us briey consider sources of cash
ow and business models that produce it.

3.1. Cash ow

or

For marketing, as for business as a whole, cash ow is the ultimate

marketing metric. Indeed, in earlier work I have dened the objectives of
marketing in terms of the identication and development of sources of

3.2. Source
There are three sources of cash. Customer acquisition and retention
involves obtaining new customers and holding current customers (i.e.
increasing and managing the customer base). Alternatively, share of
wallet within category involves increasing the frequency of purchasing
relative to competition. One can dene share of wallet within category in
terms of market share, or sometimes in terms of increasing category
consumption (increasing the size of the category). Finally, share of wallet
across categories means selling additional products or offerings to
existing customers (new offerings for existing customers or crossselling). For all three, marketers should ask themselves, What marketing activities provide outcomes with respect to the source of cash ow?
3.3. Business models
The DuPont model (Blumenthal, 1998; Hawawini and Viallet,
2006) suggests that cash is obtainable through emphasis on one or
more of three basic business models: margins, velocity, or leverage.
Margins are the prots a seller makes on each individual unit sold.
Velocity, or turns, is the frequency with which a seller sells products.
Even at a small margin, a rm may be very protable if it can turn
inventory very frequently. Finally, one may produce cash through
leverage. That is, a rm may be able to take an existing asset and
leverage this asset into new uses or new activities to produce
additional return on that activity. A good example of leverage is a
brand extension. The brand already exists; the brand does not need to
be built, and can be extended into a new category.
Business models, at least as dened by the DuPont model, suggest
that margin, velocity, or leverage will dominate the production of
cash. The reality is that margin (represented as net income divided by
revenue), velocity (revenue divided by assets), and leverage (assets
divided by equity) ultimately can t into an equation that will produce
return on equity as follows:
ROE = Net Income = Sales Revenue Sales Revenue = Assets Assets = Equity

ROE = Net Income = Equity

1
2

Every marketing action should link to a source of cash ow and a

business model. Fig. 1 illustrates such a linkage at a conceptual level. A

Fig. 1. Linking marketing actions to nancial outcomes.

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D.W. Stewart / Journal of Business Research 62 (2009) 636643

marketing action, say a television advertisement, produces an intermediate marketing outcome, such as an increase in brand equity.
Unfortunately, this proposition is where a great deal of measurement of
marketing outcomes stops. This is not sufcient. Rather, a need exists to
link the intermediate marketing outcome, an increase in brand equity, to
drivers of cash ow. As demonstrated in the illustration, a further need
exists to link the intermediate marketing outcome (increase in brand
equity) to a nancial outcome. In the stylized example in Fig. 1, this link
would include a price premium (margin) paid by current customers
(customer acquisition and retention). Understanding the size of the
customer base and the premium paid over time would provide a
reasonable estimate of the protability of the television commercial.
This type of analysis should be routine in marketing organizations,
and marketing students must learn to do this type of analysis. Academics
responsible for educating the next generation of marketers must be sure
students can at least tell the story about the linkages among marketing
activities, intermediate marketing outcomes, and nancial outcomes.
The ability to articulate the story is the rst step in the identication of a
testable causal model. As Fig. 2 illustrates, only a modest leap is necessary
from telling the story to a very formal model that includes validation and
testing of formal models. Fig. 2 illustrates a very formal model with
which academics would be both familiar and comfortable. The model is
also the way managers must think to be strategic in their thinking.
In order for marketing to obtain a seat at the strategic planning
table, marketing needs to reverse the direction of the arrows in Fig. 2.
While marketers must establish the link among marketing activities,
intermediate marketing outcomes, and the nancial performance of
the rm, marketers cannot be strategic while pointing to the past.
Members of the marketing discipline know how to make these links.
Marketing scholars must teach students to tell the story and assure
that they understand there are means to validate the story. A few of
the students must assure that validation occurs and these students
will rise to a seat at the strategic planning table. Teachers of these
students must recognize their role as teachers and assure that the
students are prepared for the economic realities they will face.
Researchers in marketing must also assure that they tell the full story
of their contribution to the bottom line of the rm. Members of the
Academy must actively engage in the creation of the linkages in Fig. 2.
These relationships are types of causal linkages with which marketers
are all familiar. They involve the same types of measurement and

modeling components that characterize the best scholarship. Students

must understand why and how such causal linkages are relevant to
work in marketing, and teachers must help colleagues in applied
settings do a better job of articulating and quantifying these linkages.
4. Three types of return on marketing
The proposition that marketing has many effects and these effects
are not always immediate is another excuse for failure to link
marketing activities to nancial results. Marketing activities can
produce many different types of outcomes. Marketing activities can have
long-lasting effects. For example, branding efforts today may continue to
produce a price premium well into the future. These facts do not excuse
marketing from accountability and dealing with them is nothing
mysterious. Marketing actions taken today must have an immediate
effect; assuming that a marketing activity that has no immediate effect
will suddenly produce an effect at some point in the future is ludicrous.
Some marketing activities have both an immediate and long-term effect.
Measurement does not force a short-term orientation. Most other
business disciplines understand, model, and consider long-term effects
as part of the decision making process. Uncertainty about the future does
not eliminate the need to tie actions to future outcomes and nancial
results. Anyone who has been involved in planning a major capital
expenditure, such as a new production facility, knows well that such
planning is rife with uncertainty about the future and relies on
numerous assumptions. Nevertheless, a nancial result exists at the
end of the planning process. Marketing should follow suit.
In fact, marketing does itself a disservice as a discipline when it
fails to link its activities to nancial performance. And much of the
effort to link marketing to nancial outcomes very likely underestimates the contribution of marketing. Fig. 3 illustrates at least three
distinct classes of outcomes that relate to marketing activity: shortterm (incremental) effects, long-term (persistent) effects, and real
options.
The marketing discipline has been most successful at identifying,
measuring, and modeling short-term (incremental) effects (for example,
a return to a direct mail campaign or a spike in sales associated with a
price promotion). These effects take a variety of forms: incremental sales
(relative to a base); sales not lost to a competitor; leads generated; close
rate; awareness; brand preference and choice; purchase intention; web

Fig. 2. A framework for marketing accountability.

D.W. Stewart / Journal of Business Research 62 (2009) 636643

641

Fig. 3. Types of return on marketing activities.

visits; permission subscriptions; call center contacts; and store visits. All
of these represent intermediate marketing measures that are linkable to
cash ow. Marketing has been relatively successful in linking many of
these types of short-term, intermediate marketing measures to
economic performance. Such short-term (incremental) effects also
lend themselves as candidates for a shared standard for measures and
measurement that other industries would recognize and that would
serve marketing well.
A second form of return on marketing investment arises from longterm (persistence) effects (DeKimpe and Hanssens, 1995). These
effects occur in the present but fundamentally alter the market over
the long term, or at least for some period into the future. Activities
designed to build brand equity are good examples. One outcome of
creating a strong brand is the creation of a persistent sense of value
that creates a willingness among customers to pay a price premium
for the product into the future. This effect does not suddenly occur out
of nowhere after there being no effect for long periods of time. This
effect instead takes place now, but has effects that persist into the
future. Such long-term effects also could be candidates for a shared
standard measure across industries.
Long-term impact is more difcult to measure, although noble
efforts to do so are in the literature (Barwise, 1995; Marketing Science
Institute, 2003). One of the problems in analyzing long-term effects is
that in order to assess the long-term impact of marketing actions,
marketers must know the starting point or baseline (which could be
market share, sales volume, brand equity, brand preference, or
customer loyalty and retention), and then what increase may have
occurred as a result of marketing actions relative to that baseline. A
change in baseline that persists over time is a long-term effect. The
expenditures and activities creating this effect continue to have an
inuence in the market long after initial impact.
The third type of return on marketing investment may well be
among the most important but the least understood and least wellidentied within the marketing discipline. Arguably much of what
marketing does is create opportunities for the rm. A brand creates
opportunities for brand extensions and for price premiums in the
future. A web site creates opportunities for communicating with
consumers in the future and creates opportunities for distribution and
sales through the web site. These types of future opportunities created
through marketing activities are referred to in nance as real options.
Real options essentially represent opportunities that the rm may or
may not pursue in the future (optionality); but they are opportunities

that, nonetheless, have real value. Examples include an Internet site that
facilitates future actions; cooperative ads that yield greater distribution or
shelf space; or investing in a customer, maybe an opportunity for future
sales, either in the aftermarket through cross-selling, replacement,
repurchase, referral. Brand is a special case of a real option. Brand
provides opportunities that may or may not be exercised in the future, but
they do have value (Luehrman, 1998a,b). Marketers should spend much
more time talking to their rms about real options. Options are unique to
the rm. No rm has the same sets of options, but one must recognize that
as much as half of the value of a rm is derived from options (Pindyck,
1988). Economists suggest that much of the value of businesses, of
commercial rms, resides in the unexercised options that they hold in
their portfolio. To the extent that marketing activities create options, they
are contributing to the value of the rm. Valuing such options may be
difcult but marketers need to identify this type of contribution and
clearly articulate to senior managers and board members.
Given these broad classes of outcomes and the need to link
marketing outcomes to nancial performance, a need exists to
causally link specic marketing actions and intermediate marketing
outcomes to each of these three types of returns to marketing. Such
causal-linkage research requires an audit process for linking and
selecting marketing metrics and nancial performance.
5. Marketing metric audit protocol
A marketing metric audit protocol is a formal process to:
(1) identify the drivers of cash ow (nancial results), (2) link
marketing activity to intermediate marketing metrics, (3) link those
marketing metrics to drivers of cash ow, and (4) identify and test
assumptions related to these linkages (engage in the identication of
the causal linkages and the validity of measures of marketing activities
and marketing outcomes with respect to nancial outcomes).
The rst step of the process involves identifying cash ow drivers
for the business, the sources of cash and the business model (how the
rm generates that cash). Every business has at least one source of
cash and one business model. In many rms a dominant source and a
dominant model exist.
The second step involves identifying intermediate marketing
outcomes that should clearly link to those sources of cash ow and
those business models. Ultimately, those intermediate marketing
outcomes arise from a marketing activity or set of activities. A causal
linkage exists between a marketing activity, intermediate marketing

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outcomes, and metrics related to nancial performance and cash ow.

Identifying the conceptual link of marketing activities to intermediate
metrics to cash ow drivers is important. For example, a rm might
nd that leads generated should be related to customer acquisition
and retention, or that coupon redemption relates to share of wallet
within the category (that is, market share grows as people use their
coupons). The rm may also nd that leads generated produces
greater velocity and has an impact, therefore, not only on the source of
cash but on the business model. During this process of creating causal
links distinguishing between measures of efciency (like cost per
thousand and cost per lead) and measures of effectiveness (like
redemption rate for coupons and market share) is important. The
focus must rst be on measures of effectiveness. Only if something is
effective does efciency even matter.
The third step involves identifying the conceptual and causal links.
Once the identication of all these linkages is complete, they can be put
together into a causal model with a marketing activity giving rise to
specic outcomes that are measurable with specic metrics. Those
metrics then must link to cash ow drivers through a validation and
testing process. Every marketing action should have one or more
identiable outcome metric. Marketers should question the need for the
associated marketing activity if no logical link exists between a
marketing outcome and a cash ow driver. Validation or test is
appropriate when the causal linkage between a marketing outcome
and one or more cash ow drivers is uncertain, especially if the costs of
the marketing activity are high.
Every intermediate marketing outcome metric needs validation
against short-term or long-term cash ow drivers and, ultimately, cash
ow. This validation will cost money but will facilitate forward
forecasting and improvement, which should be the criteria for
validation. No mystery exists here. We know the characteristics of a
sound metric. Sound metrics are relevant (they address and inform
specic pending actions), predictive (they accurately predict the
outcome of pending actions), objective (they are not subject to personal
interpretation), calibrated (they mean the same across conditions and
across cultures), reliable (they are dependable and stable over time),
sensitive (they identify meaningful differences and outcomes), simple
(they have uncomplicated meanings and clear implications), transparent (they are subject to independent audit), and quality assured (there is
a formal ongoing quality assurance process). Marketing today needs a
set of standardized metrics and well-accepted processes that meet these
criteria and that can be identied as standards through transparency
and validation within the industry as a whole.
6. Conclusion
Accountability in marketing is no longer an option. Marketing will be
held accountable. The only question is whether marketers will take
responsibility for that accountability, or whether accountability will be
imposed upon them by others. In the latter case, it is likely that the
imposition of accountability on marketing will reduce marketing to a
tactical function. That is, a function that does not have a seat at the table
when considering strategy and deliberating important decisions.
Marketers merely become tacticians carrying out specic activities
that persons in other elds have planned, whether these are nance,
strategy, or general management.
Much unnecessary confusion about accountability exists. Accountability is difcult in practice, but is not difcult to understand. It is
conceptually simple. However, the rst issue that marketing must
address is the question, What is the ultimate metric? Accountability is
ultimately about economic outcomes and nancial results, and marketing must be prepared to embrace this notion in order to control its own
destiny and develop its own standards for accountability. Marketing
needs standard measures that relate to short-term incremental results
and longer-term effects, and these measures need to link to cash ow.
Marketers must have these types of measures if they seek to assist the

rm. Such measures will allow marketers to forecast future outcomes,

evaluate past actions, and make more optimal allocation decisions with
respect to resources, particularly in rms that are managing noncomparable portfolios of products and markets. Standard metrics will allow
marketers to better evaluate alternative action plans and to address the
types of questions that CFOs and CEOs are asking.
Finally, without standard measures marketers simply will not be
able to improve over time. They need to be able to assess how they are
performing relative to the past and whether or not their performance
has improved. The solution to the need for standard measures and
metrics within marketing will arise in the competitive market. If rms
invest in standardized metrics and a formal audit process, the
providers of metrics and measures in the marketplace need to provide
signicant transparency with respect to the measures and metrics that
they offer. Firms must share information with respect to the validity of
measures or metrics. Some might suggest that this is giving away
trade secrets or information of competitive value. Perhaps this is so;
but when one contrasts the effort, energy, and resources necessary to
engage in the idiosyncratic development of measuresno matter how
good they may ultimately beagainst alternative uses of those same
resources to develop new products, rms very clearly would better
serve the rm, shareholders, and customers if rms embraced
standard measures and metrics as a way of evaluating marketing
performance and spent their time serving the customer.
Marketing needs to be accountable now. Marketing accountability
is long overdue. The time is now to go forward and take action. This
article provides a broad framework for doing so. Marketing needs an
organization or set of organizations to take the mantle and move
forward.
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