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Brokering knowledge in the management field - INBAM 2012 - Part 1
Edited by Domingo Ribeiro Soriano [University of Valencia, Spain]
Introduction
One of the biggest frustrations facing marketers and CEO's of companies is the inability to quantify the effectiveness of marketing spending. Executives understand and accept that the company's products and services need to be advertised and promoted in order to generate sales. The issue is what is the appropriate amount to spend and how does one determine whether the returns justify the spending? Because of the inability of marketers to quantify the benefits of the marketing budget, this is the first item to be cut near the end of the fiscal year when the company has difficulty meeting its profit objectives. The marketers have a difficult time justifying why the budget should not be cut as they cannot demonstrate, in quantifiable terms, what is the exact loss to the company as a result of the budget cut. In particular, this problem is exacerbated if the company is undergoing declining sales and profits. When a firm is not performing well, the senior executives try to protect the bottom line by cutting variable expenses first - with marketing budgets invariably becoming the first target. The immediate impact is not visible and other expenses, such as people, are much more difficult to reduce quickly.
Not much research has been done that have used specific examples of marketing performance measurement in a turnaround situation. This paper attempts to address this issue by looking at the paper of Pizza Hut Korea. Pizza Hut Korea had been a successful business from its introduction in 1985 to the early 2000s. Since then, it has experienced declining sales and loss of customers. A new CEO has joined the company in early 2008 and has implemented many changes to turn the business around, including a disciplined marketing performance measurement tool called Return On Marketing Investment (ROMI). This paper uses interviews with company senior executives, internal data covering sales and performance information as well as extensive consumer research data, and external data to compile a perspective on the relationship of marketing performance measurement and its role in helping to turn around a declining business ([14] Pizza Hut Korea, 2002-2011, [15] 2011).
A detailed...