Name and describe the two marketing profitability metrics that allow a business insight into the relative marketing efficiencies of various net marketing contributions

Question

What will be an ideal response?

Answer 1

The two marketing profitability metrics are marketing return on sales (marketing ROS) and marketing return on investment (marketing ROI). These metrics allow a business to evaluate the profitability of a business and its marketing strategies and help a business better understand how marketing profitability impacts overall financial performance of a business.
(1 ) Marketing ROS — by dividing the net marketing contribution (NMC) by sales, we can control for the size of sales revenues. The higher the marketing ROS, the higher the financial performance as measured by overall return on sales, return on equity and return on invested capital.
(2 ) Marketing ROI — assesses the marketing productivity of an investment in marketing. Recognizing NMC as the measure of marketing profitability, we can standardize this marketing profitability metric by dividing the NMC by the investment in marketing, which is the marketing and sales expense. This creates a measure of marketing return on investment (ROI) that allows the manager to evaluate the efficiency of the marketing expenses used to produce a given level of marketing profitability. Marketing ROI also allows us to compare the marketing efficiency of different strategies, or compare one company to another. As with marketing ROS, companies with higher levels of marketing productivity produce higher levels of return on sales, return on equity, and return on invested capital.