Marketing Expenses Research Articles

The impact of customer-specific marketing expenses on customer retention and customer profitability

We study the effects of customer-specific marketing expenses on customer retention and customer profitability in a business-to-business setting. Using data from a company providing hygiene services, we look at the impact of a hitherto unstudied type of expense targeted at individual customer relationships: the offering of free equipment to customers. The data allow tracking the activities performed in more than 4,500 customer relationships over a period of 4 years. Retention rates are higher for customers targeted with free equipment, but this effect results from an interaction with customer size. First-order dynamic panel data analyses show that the impact of targeted marketing expenses on customer dollar profit is positive for large customers, but there is no effect for smaller customers. Thus, targeted marketing expenses seem to be a tool for relationship maintenance rather than customer development: they help in retaining large customers that generate more profit, but they do not seem to work in developing new customers into larger, more profitable ones.

The Relationship of Sales and Marketing Expenses to Hotel Performance in the United States

While hotel organizations are investing considerable sums of money for marketing at the unit level, research investigating the relative benefits of the different areas where those funds can be invested is lacking. This exploratory study endeavors to fill that void. Since different types of hotels have differing operating characteristics, this study examines marketing expenditures for various hotel tiers, using the Smith Travel Research chain scale categorizations. The study finds that marketing expenditures have differential effects according to the type of hotel and the particular type of marketing expenditure. These analyses explore implications of various types of marketing expenses on both hotel unit revenue and profitability.

Spillover Effects of Marketing in Mutual Fund Families

textabstractThis paper investigates the presence of spillover effects of marketing in mutual fund families. We find that funds with high marketing expenses generate spillovers, and enhance cash inflows to family members with low marketing expenses. In particular, low-marketing funds that are operated by a family with high marketing expenses have substantially larger inflows after positive returns than otherwise similar funds that are operated by a family with low marketing expenses, while they have smaller outflows after negative returns. One way to interpret the spillovers is that they are a by-product of individual fund marketing whereby the entire family is made more visible to investors. An alternative explanation of this observation is that funds with low marketing expenses are directly subsidized by family members with high marketing expenses. We develop and perform a set of tests to evaluate these two alternative hypotheses. The results of all tests support the subsidization hypothesis, and suggest that at least part of the spillovers can be attributed to favoritism. These results suggest that conflicts of interest between investors and fund families have been exacerbated by competition in the mutual fund industry.

Impact of on-field football success on the off-field financial performance of AFL football clubs

In this study, we examine the factors that contribute to the financial performance of clubs in the Australian Football League over the period from 1993 to 2002. Primarily, we examine the association between the on-field football success of clubs and their level of off-field financial performance. We find that match attendance is positively related to both short-term and long-term success of football clubs and also to the uncertainty as to the match outcome (i.e. the expected closeness of the match). We also find that club membership is highly persistent and is positively related to both the past football success of the club and the marketing expense incurred. Finally, we find that there is a significant association between the level of marketing revenue and the level of on-field success in the prior 2 years.

Efficiency, effectiveness and productivity of marketing in services

How can a service firm right-size marketing expenses and yet strive to maximize revenue? This paper represents the first attempt to model these efficiency and effectiveness issues using a 49-unit Asia–Pacific hotel chain as illustration. We employ a triangular DEA model with total expenses (controlling for number of rooms) as the raw input, marketing expenses as intermediate output/input and revenues from room rentals and F&B as final outputs. We infer that efficiency tails off when more than 12% of the budget is expended on marketing activities. In terms of effectiveness, we find that all the units rated as relatively inefficient can accrue increasing returns to scale in revenues from marketing activities. By contrast, in the productivity stage linking the raw inputs to the revenues, we observe mostly decreasing returns to scale. Our results highlight the crucial role of marketing in service organizations.

Development Of The Customer Marketing ™ Method: An Application Of Analytical CRM

Analytical CRM involves acquiring and updating knowledge about customer needs, motivation and behaviour and requires a structured method to be implemented in a multidimensional database. The presentation describes The Customer MarketingTMMethod CM in short and the CM application within the Customer Focus Suite of SPSS Showcase CFS in short -, in the analytical CRM environment. CM, originated by Jay Curryl and others and implemented by Sergio Meaccil and others (see references), covers all topics of the marketing and sales process: customer focus and its impact on company profile, understanding customer expectations and requirements, measuring and monitoring customer performance. CM measures customer satisfaction and loyalty and customer performance within a defined process of marketing techniques for customer value segmentation and definition of marketing actionslpkms for existing vs new customers through an appropriate mix of acquisition and retention cycles. Customer behaviour is measured using pyramids historical, actual and planned – and the related migration matrixes that monitor the movement of the customers among the value categories. The 10 steps approach to measure Customer Value within the CFS of SPSS will be described by choosing value measurement metric and sorting customer list; by defining customer categories and boundaries; by managing potential revenue growth and by defining the appropriate marketing actions/plans, allocating marketing expenses and resources and measuring the related actual performance vs the expected ones. 1 Customer Marketing Method-CM The organisation has to be structured around the customer, communicate efficiently and effectively with its customers and prospects. That’s why the process starts from the enhancement of the customer focus areas, then improving © 2002 WIT Press, Ashurst Lodge, Southampton, SO40 7AA, UK. All rights reserved. Web: www.witpress.com Email witpress@witpress.com Paper from: Data Mining III, A Zanasi, CA Brebbia, NFF Ebecken & P Melli (Editors). ISBN 1-85312-925-9

The Determinants of Successful Micro‐IPOs: An Analysis of Issues Made under the Small Corporate Offering Registration (SCOR) Procedure

In this article we extend the existing IPO literature to the case of micro‐IPOs by analyzing a sample of Small Corporate Offering Registration (SCOR) documents from the U.S. state of Washington. Through theory, we identified variables that should impact the probability of success or failure in a SCOR offering and then empirically tested them. Empirical support was found for the relevance of (1) marketing mechanisms and expenses; (2) ownership and governance factors; (3) business life cycle stages; and (4) signaling factors consistent with our theoretical predictions.

Student Trust and its Antecedents in Higher Education

Introduction The Problem In the last two decades, the higher education environment has undergone drastic changes. The U.S. National Center for Educational Statistics (NCES) reports that enrollments declined between 1992 and 1995, following a healthy growth period (2% to 5%) during 1985-1992 (NCES, 1997). This decline concerned administrators, causing many of them to market their programs more aggressively. Enrollments then stabilized and have increased steadily since 1996. This recent growth trend is likely to continue as 240,000 additional students are expected to attend college for each of the next ten years (Der Werf, 1999a). However, because of the strategies employed to reverse enrollment declines, the intensity of competitive activity among colleges and universities increased. Increased competition led institutions to spend even more money to recruit and retain students. Per student expenditures, measured in 1994-95 constant dollars, rose from $11,900 in 1986 to $14,500 in 1997 (NCES, 1997). These additional expenditures were funded through debt financing, which increased in 1998 by over $7 billion (Der Werf, 1999a; 1999c). Expenditure increases are anticipated during periods of declining enrollments, but they are not expected to continue as enrollments rise, and although a portion of these expenditures is designated for future increases in enrollment, a close examination of the expense accounts corroborates the increased competitive intensity among institutions of higher education (McCollum, 1999). According to the Institute for Higher Education Policy (IHEP), the primary reason underlying expenditure increases is related to two broad factors, namely: increased marketing efforts to recruit and retain students and greater competition for other sources of revenue (e.g., philanthropic funds) (Gose, 1999; IHEP, 1999). Analyses conducted by McPherson and Schapiro (1998) confirm that institutional aid accounts for one of the largest categories of spending increases per FTE student, benefitting both private and public educational institutions (Gose, 1999). Increased marketing expenditures are used to manage enrollment mechanisms and to maximize the and quantity of student populations and the revenue generated (IHEP, 1999). In addition, McPherson and Schapiro (1998) provide evidence that institutions increased spending to differentiate their programs from competitors by enhancing their prestige and quality images. While these expenditures benefitted institutions by reducing tuition sensitivity and by increasing demand, they contributed significantly to higher debt levels. Appropriations from government sources have not kept pace with increasing expenditures, forcing schools to depend more heavily upon other sources of revenue (Selingo, 1999). Between 1992 and 1995, revenue from government sources increased only 12.4% and 22.7% for public and private schools (NCES, 1997). Reduced appropriations, along with public criticism of tuition increases, necessitated increased fund-raising efforts and the accompanying, associated marketing expenses (Davis, 1997; IHEP, 1999). As a result, revenue from gifts, endowments, and other sources rose by 68.3% and 48.7%, respectively, for public and private schools from 1992 to 1995 (NCES, 1997). Faced with rising marketing expenditures, institutions have primarily relied on three cost cutting strategies to control costs: greater use of cost deferral strategies, such as hiring freezes and reduced maintenance; strategic cost reductions, such as pooled purchasing and changes in benefit structures; and cost restructuring, such as eliminating low enrollment courses and replacing full-time faculty with part-time faculty (IHEP, 1999). Though useful in the short run, strategies such as reducing the proportion of full-time faculty, which plummeted from 78% in 1970 to 60% in 1993, and regulating the salary of instructional faculty, that declined from 1970 to 1995 in constant dollars, may be counterproductive in the long run. …

How to measure customer relationship management success

The term customer relationship management (CRM) can be best understood in contrast to database marketing (DBM). DBM began in the mid-1980s and was developed by marketers. CRM started in the 1990s and was developed by IT and sales staff. CRM uses massive and expensive data warehouses that keep all data available in a corporation. DBM uses inexpensive databases that just keep those data needed for effective marketing. DBM aims at improving customer loyalty. CRM aims at improving company targeting of communications. CRM aims at identifying actionable customer segments and reducing marketing expenses by focusing on those segments. DBM aims at increasing customer loyalty, retention, referrals, sales and profits.

Supply Chain Structures On The Internet: Marketing-Operations Coordination

The widespread adoption of the Internet has resulted in the possibility of disintermediation of information flow and physical goods flow: a company selling a product no longer has to own/deliver it to the customer. As a result, supply chain structures arise in which the retailer is primarily concerned with customer acquisition, and the wholesaler takes care of inventory and fulfillment. This form of doing business on the Internet is identical to the practice of drop-shipping that some catalog companies employ. A recent survey indicates that more than 30% of online-only retailers use drop-shipping as a primary way to fulfill orders. Since marketing and operations functions under such arrangement are performed by separate companies, new ineffeciencies arise that result in suboptimal system performance. In this paper, we analyze the interaction between a wholesaler and a single retailer for drop-shipping supply chains. Three distinct drop-shipping models are considered: with a powerful wholesaler, with a powerful retailer and with a wholesaler and a retailer having an equal power. Further, we conduct a comparative analysis between the drop-shipping supply chains, a vertically integrated supply chain, and the traditional structure in which the retailer both holds inventories and acquires customers. Optimal solutions are obtained for both the traditional and drop-shipping models, and we show that both solutions are system sub-optimal. We demonstrate how decision power in the chain affects decision variables and profits. It is found that both channel members prefer drop-shipping agreements over the traditional agreements for a wide range of problem parameters. One of our main results is that none of the mechanisms described in the literature on channel coordination (except for those that allow side payments) are able to induce a optimal system behavior in the presence of customer acquisition expenses. We therefore propose a new coordination scheme where, in addition to using a returns contract (for the traditional supply chain structure) or a penalty scheme (for the drop-shipping structure), the wholesaler subsidizes a part of the retailer's marketing expenses. Extensive comments are provided on the comparative benefits of traditional and drop-shipping supply chains.

Matinees, Summers and Opening Weekends

Matinees, Summers and Opening Weekends

Total relationship management (TRM) and total quality management (TQM)

Companies operate and compete in a highly and aggressive global climate. This climate has led to an increased emphasis on quality. TQM focuses on the integration and co‐ordination, as well as on the continuous improvement of all activities and processes. Total relationship management (TRM) is a very recent marketing strategy and philosophy. It focuses on and is concerned with all integrated internal and external activities within and between organizations. TQM in marketing can have a major impact upon an organization by improving customer relationships and satisfaction, reducing marketing expenses, increasing sales as well as providing a competitive edge. This paper, is a theoretical and conceptual one, provides marketing and management implications on how to integrate TQM and TRM in order to achieve better quality of the relationships, product/service and the process. The aim of this paper is to shed light on how these approaches, i.e. TRM and TQM, can be integrated, and to suggest how the work on TQM can add impetus to successful TRM. First, the definition and the main philosophy behind TRM are discussed. The common grounds of TQM and TRM are identified. Then some TQM tools are suggested to be used by TRM approach to improve its functions.

Building a longitudinal contact strategy™

Companies dealing with a large customer base and especially those with infrequent purchase or service interactions face the challenge of developing and maintaining a long-term relationship with customers. In addition to offering products for sale, marketing communications can add significantly to the customer relationship and brand-building process. Traditionally, customer contact is maintained using a campaign-oriented, effort-by-effort approach to selecting customers for contact. This paper suggests development of a Longitudinal Contact Strategy TM to plan customer contacts over a substantial time horizon. Data analysis can be used to determine (a) what to say to the customer, (b) when to make the contact, and (c) how much to spend on each customer. Results can be measured by comparing the cumulative marketing expense to the cumulative revenue produced.

Premiums without Benefits: Waste and Inefficiency in the Commercial Health Insurance Industry

The U.S. system of health insurance is wasteful and inefficient. For every dollar the commercial health insurance industry paid in claims in 1988, the industry spent 33.5 cents for administration, marketing, and other overhead expenses. Thus, not including profits, the commercial insurance industry spent 14 times as much on administration, overhead, and marketing per dollar of claims paid as did the Medicare system, and 11 times as much per dollar of claims paid as the Canadian national health system. Had an efficient public program such as Medicare or the Canadian system provided the same amount of benefits, consumers and businesses served by commercial insurers would have saved $13 billion. The sources of waste include excessive marketing costs and administrative costs bloated by discriminatory underwriting practices that segregate the profitable groups and individuals--people who are healthy, young, and in "safe" professions--from everyone else.

Maintaining Existing Clients

Existing clients account for the majority of most companies' business. Obtaining new clients is difficult and expensive. Therefore, it is imperative to maintain existing clients. This paper addresses procedures used by SME, and four other engineering firms to maintain effective relations with their clients; presents marketing costs; and provides recommendations for improving procedures for maintaining existing clients. Five major steps were judged necessary to develop and maintain clients: client identification, client information, developing and maintaining client trust, superior service, and follow‐up. Two firms found the marketing expense applied to new clients was about 1.6 to 2.1 times the expense applied to existing clients.

Corporate ventures into industrial markets: Dynamics of aggressive entry

This article reports a study of the effect of aggressive entry by firms venturing into new industrial markets. There are three main sets of results: First, there is a significant correlation between the competitive attractiveness of the target industry and the initial share objective set by the corporation venturing into that industry. Second, the downstream share objective, set at the launch of the venture is significantly correlated with several key marketing strategy and investment strategy options made by the firm at the start of operations. Third, if most of these key strategy decisions are made under the assumption that a high share position will rapidly be achieved, their resulting performance, in terms of both market share and ROI, is superior to firms which enter with less aggressive share aspirations. These results are particularly appealing to the large established firm which has the resources and thus can both afford to absorb the cost of failure and afford to make significant front-end investments in aggressive initial marketing expenses and investments in initial plant capacity. For such firms a feasible strategy for a new venture into an industrial market could be to: if possible (but not essential) seek industries/markets to enter which are less likely to provoke rivalrous responses; set aggressive market share targets; invest aggressively in initial plant capacity; develop aggressive sales force, sales promotion, advertising, service quality, and/or pricing programs relative to competitors, as appropriate to the particular industry being entered. The reason we suggest that the programs be aggressive as appropriate is that different strategic options are likely to be more effective in one industry than another. For instance, aggressive advertising and sales promotions could be more effective for consumables, while aggressive sales calling programs and superior service delivery could be the more effective route for capital goods businesses.

Buying Bonds for Business

Tax-free Industrial Revenue Bonds (IRBs) have become a very popular method of stimulating economic development among local communities. IRBs impose few direct costs upon the issuing jurisdictions while the perceived benefits, to business people and communities, are substantial. However, important social costs are associated with the use of IRBs: reduced federal tax revenues, dilution of the municipal bond market, legal and administrative expenses, and lowered real national output. A study of the use of IRBs in Ohio between 1974 and 1978 showed that few social benefits were generated to offset the real social costs of the program. IRB investments were not directed toward high unemployment areas, and the jobs they created did not appear to yield disproportionately direct benefits to the low-income segments of the issuing jurisdictions. These findings suggest that the federal government should effectively abolish the IRB program by removing I RBs' tax-exempt status. If this proves politically impossible, then IRBs should be directed instead toward severely distressed areas. This form of targeting is consistent with the role envisioned for IRBs in the Reagan administration's enterprise zone concept.

Learner Verification of Instructional Materials

Learner verification and revision (LV&R) is an empirical approach to increasing the probability that an instructional product will facilitate the learning it has been designed to transmit. The process aims to improve a product's instructional effectiveness incrementally during prepublication development, day-to-day postpublication use, and future revisions and editions. The process involves two interrelated activities: 1. Empirical and parsimonious investigations of whether the specific verbal and pictorial communications that constitute a given instructional material are, in fact, communicating to learners well enough for them to understand and to learn what the material is designed to teach. (This is done best by directly observing, testing, and interviewing small numbers of selected learners, using information from teachers, as needed.) 2. Use of this direct feedback from learners as a basis for making specific changes (revisions) in, (a) the content, format, method, etc., of the material itself (textual revision), and (b) the way the materials are being used (contextual revision). These investigations and revisions are not limited to the formative period of a product's life. is an extension of formation evaluation to a product's market life. While it is primarily the responsibility of publishers, may be, and is, carried out by teachers forced to make contextual revisions to make a product work with certain students. Therefore, contrary to the views of some of its advocates, and almost all of its adversaries, is not a means of proving to prospective purchasers that the product Rather, is a means of improving the extent to which an instructional product may be understood and used effectively by learners. The technology for proving that a product works-as well as or better than other products-is well established and broadly used by various developers and commercial publishers. It is also of limited, if not questionable, value. Validation is based on large-scale testing of a product in a representative sampling of schools. It usually entails a rather large financial investment (commonly viewed as a marketing expense) by the product's publisher. Because many commercial publishers refer to as LV&R, publishing validation reports as LV&R reports, they speak of as being too expensive. As a rule, studies report gains in group mean scores from pretest to posttest. These mean gain scores are, in essence, proof that the product works. Yet, if anything is proved by these expensive studies, it is that in any group of representative schools there is a sufficient number of high ability students who will learn enough from almost any instructional