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Decision makers' use of Return on Marketing Investment metrics in the decision-making process
Halmstad University, School of Business, Engineering and Science.
Halmstad University, School of Business, Engineering and Science.
2018 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

There is extensive literature written about how to calculate Return on Marketing Investment

(ROMI) and its importance for marketing managers. However, there are not many studies made

on how and when Return on Marketing Investment metrics are used in real life and if and how

it is used to argue the value of a marketing activity. We have in this study with comparative

cases investigated if and how ROMI metrics are used by managers outside the marketing

department in their decision-making process. We based our case selection on how well they

represented "Mad men to Math men" presented in Gilan and Hammarberg (2016)'s book "Get

Digital or Die Trying." Mad men refers to old school "gut feeling" marketing decision making

and "Math men" refers to modern digital marketers with decision making based on numbers

and statistics. This study is made from the decision makers point of view with the purpose to

gain a better understanding of if and how ROMI calculations are used in the decision-making

process of senior management outside of the marketing department. This comparative case

study consists of eight in-depth interviews, four in each company. The interviewees are all

senior management outside of the marketing department. Our findings include that these two

companies work very differently in how they make decisions in marketing investments. In

Company 1 the marketing budget is decided by senior management outside of the marketing

department, and this management may also cut the marketing budget if they see it necessary.

In Company 2 the Segment Managers are responsible for the amount of the budget they would

like to invest in marketing activities, and therefore they have more incentive to calculate the

return of each investment and compare it with the return on other investments available to them.

One of the reasons for the different ways of working can be a result of the different

responsibility structure over the marketing budget. There is also a difference in how the two

companies measure the success of the investment; Company 1 measure success in pure financial

return and Company 2 measure success in increased market shares as well as financial return.

Company 2 are using ROMI metrics to a greater extent than Company 1, who does not use any

ROMI metrics. Marketers can in this study get an idea of how using ROMI metrics can help

argue their case for further investments in marketing or cutting the budget for the marketing

department. With the use of ROMI metrics, marketers can also evaluate which marketing

activities are more efficient and thereby decide if they should continue with these activities or

not. This study also shows that there is still, in some companies, a divide and conflict between

the finance department and the marketing department. By shifting the responsibility of the

marketing budget like in the case of Company 2, the adverse effect of this division on the

marketing investments can be reduced. It can also be beneficial for the company to focus more

on market shares than on sales and numbers. As digital marketing is growing stronger, the

calculations of ROMI will become easier.

Keywords: Return on Marketing Investment (ROMI), decision-making process, senior

management, marketing department, finance department, ROMI metrics, real-life ROMI,

comparative case study, Mad men, Math men

Place, publisher, year, edition, pages
2018. , p. 53
Keywords [en]
Return on Marketing Investment
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hh:diva-37151OAI: oai:DiVA.org:hh-37151DiVA, id: diva2:1220234
Educational program
The International Marketing Programme, 180 credits
Supervisors
Available from: 2018-08-20 Created: 2018-06-18 Last updated: 2018-08-20Bibliographically approved

Open Access in DiVA

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CiteExportLink to record
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Citation style
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