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New study shows combination of marketing and innovation pays off for businesses
A new study by the Center for Marketing and Innovation Studies shows that organizations practicing a combined marketing and innovation strategy outperform organizations that do not.
Jenny Darroch, professor of marketing at the Drucker School of Management at Claremont Graduate University and Founding Director of the Center for Marketing and Innovation Studies, developed the MKG + INV 100 based on data for the 2009 calendar year. The list contains 100 firms with high levels of spending on both marketing and innovation.
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.
The study appears to be the first to examine the role that marketing and innovation together play in creating firm value.
“What surprised me was just how much value a combined marketing and innovation strategy added,” Darroch said.
Darroch 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, Darroch 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%, the ROS 3.02% and the ROE 4.26%.
“It makes sense that an organization should pursue a combined strategy because in order to create value, an organization needs to be capable of developing ground breaking innovations,”
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 http://www.CenterForMarketingAndInnovationStudies.com
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About Claremont Graduate University: Founded in 1925, Claremont Graduate University is one of the top graduate schools in the United States. Our nine academic schools conduct leading-edge research and award masters and doctoral degrees in 22 disciplines. Because the world’s problems are not simple nor easily defined, diverse faculty and students research and study across the traditional discipline boundaries to create new and practical solutions for the major problems plaguing our world. A Southern California based graduate school devoted entirely to graduate research and study, CGU boasts a low student-to-faculty ratio.