April 20, 2006
McAlister Discusses the Value of Marketing at Faculty Research Series
By Laura Griffin

In this year’s final installment of the Faculty Research Presentation Series sponsored by the Undergraduate Business Council, Marketing Professor Leigh McAlister discussed her research on the importance of marketing to a company’s long-term strategy.

Video: Watch a clip from Prof. McAlister's talk.

She explained that many organizations judge the success of marketing based only on marketing’s ability to increase sales above the baseline level in a given period. In fact, marketing spending from the past contributed to building that baseline level of sales.

In a similar way, marketing spending this period contributes to building the baseline level of sales for future periods in addition to increasing sales above the baseline level in this period.

McAlister demonstrated that marketing’s value comes through its measurable contribution to baseline sales, its measurable contribution to sales increases above the baseline, and, most importantly, through its measurable contribution to the stock price of the firm.

“If Proctor & Gamble stopped marketing Tide, it’s not as if Tide’s sales would completely drop off to nothing immediately,” said McAlister, during her talk April 17. Procter & Gamble’s consistent marketing over many years, she said, has resulted in a level of brand value that would endure long after marketing ceased.

In studying the marketing dollars spent by dozens of companies, McAlister found that successful companies such as Coca-Cola, Pepsi and Sara Lee look past how marketing affects sales and instead focus on how marketing affects the price of the company's stock. She said that for every dollar Coca-Cola, Pepsi and Sara Lee spend on marketing, the price of their stock goes up four dollars.

“That investment is driving the value of the firm,” said McAlister, coauthor of “Grocery Revolution: The New Focus on the Consumer.”

A marketing professor at The University of Texas at Austin since 1986, McAlister served from 2003-05 as executive director of the Marketing Science Institute, a nonprofit that works to bridge the gap between academia and business by getting important research into the hands of business people who can use it.

Encouraging the undergraduate students in the audience to think about an academic career, McAlister said graduate work gave her the opportunity to make a contribution to marketing theory and practice with her research, while also allowing her to touch lives by teaching.

“What I hope after today is that some of you give serious consideration to getting a Ph.D.,” McAlister said.

E-mail this page

Print this page