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Wednesday, July 14, 2010

NEW STUDY BY CENTER FOR MARKETING AND INNOVATION STUDIES SHOWS COMBINATION OF MARKETING AND INNOVATION PAYS OFF FOR BUSINESSES

I have just finished the first part of a project that has consumed me for much of the year. I developed something I’ve called the MKG + INV 100, a list of 100 firms with high levels of spending on both marketing and innovation during the 2009 calendar year. I believe this is the first study to examine the role that marketing and innovation together play in creating firm value. 

 

Automakers Ford, Honda and Nissan lead the list. Computer programming and data processing firms, such as Microsoft, Yahoo, eBay, Activision and Intuit dominated the MKG +INV 100 with a total of 29 entries, and drug companies, such as Pfizer, GlaxoSmithKline and Bristol-Myers Squibb also featured strongly with 17 entries.  

 

I was very surprised by just how much value a combined marketing and innovation strategy added – I found that the Return on Assets (ROA) for the MKG + IN 100 was 4.79 percent, Return on Sales (ROS) 6.97 percent, and Return on Equity (ROE) 12.55 percent. To allow for comparison, I calculated performance ratios for a control group of firms that did not spend anything on marketing or innovation. The ROA for the control group was only 0.51 percent, the ROS 3.02 percent and the ROE 4.26 percent.

 

It makes sense that an organization should pursue a strategy that combines marketing and innovation because in order to create value, an organization needs to be capable of developing ground breaking innovations. But at the same time, the firm needs to identify market opportunities, successfully launch new products by demonstrating to consumers how new products meet unmet consumer needs or better satisfy existing needs, build consumer demand for the new products and develop and nurture brands once the new products are in the market.

 

The findings confirm what Peter Drucker once famously said: "Because its purpose is to create a customer, the business has two - and only two - functions: marketing and innovation. Marketing and innovation create value, all the rest are costs.”

 

The report, including the list of the MKG  + INV 100, a selection of results and an outline of the research method, can be downloaded from The CenterForMarketingAndInnovationStudies.com

 

Jenny Darroch is on the faculty at the Drucker School at Claremont Graduate University. She is also the founding Director of the Center for Marketing and Innovation Studies. See www.CenterForMarketingAndInnovationStudies.com and www.MarketingThroughTurbulentTimes.com

 

Key words:  marketing, innovation, firm performance, Ford, Honda, Nissan, Microsoft, Yahoo, eBay, Activision, Intuit, Pfizer, GlaxoSmithKline, Bristol-Myers Squibb, Peter Drucker, new product development.

 

 

3:55 pm pdt 


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