Linking Marketing Metrics to Financial Performance - Emory ...

value, the first step might be tobetter understand how marketingactions influence marketplaceperformance, as suggested bySrivastava, Shervani, and Fahey(1998). This framework is outlined inFigure 2. First, marketinginvestments should result in brandsand customer-installed bases andother market-based assets such aschannel and other partnerships. Therelevant metrics at this level ofmeasurement would be measures ofthe strength of these relationships(e.g., brand awareness, preferences,risk perceptions, trust, loyalty).These relationships will typically leadto favorable marketplaceconsequences that serve to augmentcash flows via a combination of priceand share premiums, faster marketpenetration, reduced distribution,sales and service costs, andincreased loyalty and retention.While this was a good start andseveral of these links have beenestablished, one must yet convertthese measures to the language andmetrics used by both financial andsenior managers.Naturally, companies must balanceinvestments that nurture both shorttermperformance and long-termgrowth and risk. These dimensionscorrespond to the components ofshareholder value proposed bySrivastava, Shervani, and Fahey(1998) that have shaped much ofmarketing thinking on shareholdervalue creation: enhancing cash flows(managing profitability), acceleratingcash flows (managing growth) andreducing vulnerability and volatilityof cash flows (managing risk). Werecognize these components asessential blocks in developing ourframework in the next section.2.3 The Chain of MarketingProductivityRust et. al. (2004) have proposed achain-of-effects framework tounderstand how marketing activitieslink to the overall condition andstanding of the firm (Figure 3, nextpage). This chain begins withformulation of a specific marketingstrategy (e.g., an advertisingcampaign) that results in a set oftactical marketing actions (e.g.,creating TV spots for the campaign).Specific tactical actions theninfluence individual customercentered elements (e.g.,satisfaction), which in aggregateimpact marketing assets (e.g.,customer equity). Customercentered elements further impact themarket (e.g., via market share), andalong with marketing assets,influence a firm’s relative position inthe market. This is posited to impactfinancial measures (e.g., ROI) aswell as financial positions (e.g.,profits). The final culmination ofthese effects is on the firm value,primarily in terms of marketcapitalization. The fundamentalnotion behind this framework is thateffects are proposed to besequential, and that financialmeasures such as ROI are drivingoverall firm value.3. Linking Marketing Metrics toFinancial Measures and Firm ValueBased on the foundations laid bySrivastava et. al. (1998, 2001) andRust et. al. (2004), we now turntowards developing a conceptualframework that extends the existingframeworks with a sharper focus onthe intangible assets driving a firm’slong term value and more specificlinkages between marketing metrics,financial measures, and theseZyman Institute of Brand Science 11