Firms set budgets to fund marketing activities. The importance of well designed marketing campaigns is undisputed, but overspending in marketing erodes profits and harms social welfare. From the regulator’s perspective, it is not feasible to interfere with firms’ decision on marketing expenditure. Firms will only align their behaviour to regulators’ goal, when it is beneficial for them to do so. Therefore, the goal of this research was to find a way that helps firms to set a level of marketing expenditure, which is in line with regulators’ expectation, while taking into consideration firms’ inherent incentive to maximize profit. The solution is to identify marketing expenditures that is optimal for firms.
In my study, I employed a pragmatic approach. Instead of generating normative criteria for optimal marketing expenditure, I aimed to help firms to design a better budgeting process. By studying the ‘task environment’ where a marketing budget is proposed, negotiated, executed and reviewed, I was able to 1) obtain insights on factors that lead to overspending in marketing 2) give feasible and actionable advices to firms that suffered from inefficient marketing expenditure spending. As aforementioned, the implications of my research are beneficial to both firms and the society as a whole.
The direct impact of this study enables firms to save from excessive spending in marketing and result in higher profit. More importantly, the indirect impact saves consumer from price increase due to overspending in marketing expenditure.
Conclusions of the action:
a). A completed paper in the Journal of Marketing or Journal of Marketing Research, the expected date of submission is February 2018 (after thorough discussion and feedback from my colleagues).
Further results are:
b). 10 in-depth interviews with marketing and financial executives
c). A comprehensive steering committee of this project includes colleagues from the Erasmus School of Economics, IESE and Wim van der Stede (LSE), and from the counterparts of MSI/AMA in the controlling side – such as FEI Financial Executives International, AICPA – American Institute of CPAs and IMA – The Association of Accountants and Financial Professionals in Business, for quality control and dissemination.
d). One day Symposia on Marketing Expenditure at Erasmus University Rotterdam (EUR) with both academicians and industrial practitioners to disseminate our research output. The event is planned in January 2018.
