If you want your business to succeed, a powerful marketing department is essential, new research finds.
Strong marketing departments help businesses thrive in both the short term and the long term, according to a study recently published in the Journal of Marketing.
"Structurally, the marketing department not only improves performance by increasing a firm's capability to perform marketing activities, but also directly increases performance, because they influence the strategic decisions made by the top management team and direct their attention to marketplace issues," Hui (Sophia) Feng, the study's lead author and assistant professor of marketing at Iowa State University, said in a statement.
Researchers designed the study to measure marketing department power, and a company's ability to build and leverage brand equity and customer relationships, by developing a new scale using publicly available data for more than 600 firms in the United States over a 16-year period.
To determine the marketing department's power, researchers compared head count, compensation, number of responsibilities and rank of job titles of marketing executives to executives in each business's top management team.
The study discovered that despite a worry that marketing departments have been losing influence in recent years, its power has actually increased. [5 Proven Marketing Tactics to Gain (and Keep) Local Customers ]
"Not only did it increase for firms that didn't have a marketing department before and created one later, but also for firms that already have a marketing department," Feng said.
To help measure whether specific company outcomes, such as sales, are a direct result of advertising or social media campaigns, researchers compared how well businesses used available resources to build brands and customer relationships, and their ability to turn those resources into cash flow. This allowed the study's authors to estimate an organizations' return on investment in building and leveraging its brand and customer relationships.
The research revealed that strong marketing department power is associated with strong short-term and long-term firm performance.
Feng said the study show that businesses should not be short-sighted and cut marketing budgets and staff because of a crisis or poor quarterly figures.
"Managers need to look beyond one quarter or one year and see marketing is important," Feng said.
Although there are both short- and long-term benefits of strong marketing departments, company leaders need to keep in mind that it does take time and resources to build brands and customer relationships and that the return on that investment is not immediate. However, once the brand is established, businesses can leverage it to generate more cash flow, the research shows.
Feng said the study's results have a clear message for businesses.
"It's very straightforward — invest more in marketing and give marketing a stronger voice in the top management team," she said. "It's convincing evidence for marketing professionals to justify an increase in the budget and staff, request more seats and influence in the firm's top management team, and show that powerful marketing departments create value both in the short-term profitability and long-term shareholder value."
The study was co-authored by Neil Morgan and Lopo Rego, professors at Indiana University's Kelley School of Business.