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Journal of Marketing Management

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Marketing Performance Measures:

History and Interrelationships
Bruce H. Clark
Published online: 01 Feb 2010.

To cite this article: Bruce H. Clark (1999): Marketing Performance Measures: History and
Interrelationships, Journal of Marketing Management, 15:8, 711-732

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 Journal of Marketing Management 1999, 15, 711-732

Marketing Performance Measures:

Bruce H. ClarkI
History and Interrelationships
This article reviews the history of measuring the
peifonnance of marketing in the fimJ, organised
around three themes: the movement from financial to
nonfinancial output measures, the expansion from
measuring only marketing outputs to measuring
marketing inputs as well, and the evolution from
Northeastern unidimensional to multidimensional measures of
University peifonnance. Evaluation of this history suggests a
need for the marketing community to develop a set of
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measures small enough to be manageable but large

enough to be comprehensive. The paper examines the
interrelationships among four important measures
and suggests research issues and approaches to aid in
UJistask.

Introduction

Measuring marketing perfom1ance is attracting academic and managerial

attention with an urgency and scope previously unprecedented in the field's
history. This represents the convergence of four trends. First after a decade of
downsizing, major corporations are reaching the point of diminishing retums on
increasing profits by reducing headcount and increasing operational efficiency.
This has led to a refocusing on marketing as a driver of future sales, and
therefore profit growth (Sheth and Sisodia 1995). Second, there has been
increasing demand from investors for infonnation related to the quality of the
marketing effort which traditionally has been both under- and poorly reported in
finn financial statements (Mavrinac and Siesfeld 1997; Haigh 1998). Third,
popular new overall conceptions of business perfonnance measurement such as
the Balanced Scorecard (Kaplan and Norton 1992) have attracted attention to
the issue of which marketing measures should be included in overall
assessments of business perfonnance. Finally, senior marketing managers
themselves have become fmstrated with traditional perfom1ance measures that
they believe, undervalue what they do, leading to calls for research from a variety
of quarters (e.g.Marketing Science Institute 1998).
The purpose of this paper is to layout the history of marketing perfom1ance
measurement at a very broad level, and to suggest that what marketing as a field

1 Correspondence: Bruce Clark, Assistant Professor, Marketing Group, 202 Hayden Hall,
Northeastern University, Boston, MA 02115 USA, Phone: 1-617-373-4783, FAX: 1-617-
373-8366, e-mail: bclark@cba.neu.edu
ISSN0267-257X/99/080711 +21 $12.00/0 ©Westbum Publishers Ltd.
 712 Bruce H. Clark

needs is fewer measures and more understanding of the interrelationships

among those measures. I identify three discernible historical trends and their
consequences, explore the interrelationships among four key marketing
perfonnance measures, and discuss the search for a few good leading indicators
of marketing perfom1ance, with implications for research and practice.

A History

Marketing perfom1ance measurement has, of course, been practiced and studied

for decades. A review of this history suggests marketing performance measures
have moved in three consistent directions over the years: first from financial to
non-financial output measures; second, from output to input measures; and
third, from unidimensional to multidimensional measures (see Figure 1 and
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Table 1 for summary views).

Table 1. Literature Review Summary

Single Financial Output Measures

Profit Goodman (1970, 1972), Sevin (1965)
Sales Revenue Feder (1965)
Cash Flow Buzzell and Chussil (1985), Day and Fahey (1988)
Non-financial Measures
Market Share Buzzell and Gale (1987), Jacobson (1988), Szymanski,
Bharadwaj, and Varadarajan (1993)
Quality of Bucklin (1978)
Services
Adaptability Bhargava, Dubelaar, and Ramaswami (1994), Walker and
Ruekert (1987)
Customer Anderson and Sullivan (1993), Anderson, Farnell, and Rust
Satisfaction (1997), Danaher and Matson (1994), Farnell (1992), Farnell,
Johnson, Anderson, Cha, and Bryant (1996), Halstead,
Harbnan, and Schmidt (1994), Hauser, Simester, and
Wernerfelt (1994), Oliva, Oliver, and MacMillan (1992),
Peterson and Wilson (1992), Piercy and Morgan (1995),
Seines (1993), Spreng, MacKenzie, and Olshavsky (1996),
Teas (1993), Teas and PalanI997), Voss, Parasuraman, and
Grewal (1998), Yi (1990)
Customer Loyalty Anderson and Sullivan (1993), Dick and Basu (1994),
Farnell, Johnson, Anderson, Cha, and Bryant (1996), Jones
and Sasser (1995), Oliva, Oliver, and MacMillan (1992),
Reichheld (1994), SeInes (1993)

Confd/ ...
 Marketing Performance Measures 713

Non-fmancial Measures Cont'd/ ...

Brand Equity Aaker and Jacobson (1994), Ambler and Barwise (1998),
Barwise (1993), Keller (1993, 1998), Haigh (1998), Lassar,
Mittal, and Shanna (1995), SeInes (1993), Simon and
Sullivan (1993)
Input Measures
Marketing Assets Piercy (1986), Srivastava, Shervani, and Fahey (1998)
Marketing Audit Brownlie (1993, 1996), Kotler, Gregor, and Rodgers (1977),
Rothe, Harvey, and Jackson (1997)
Marketing Bonoma (1985, 1986), Bonoma and Crittenden (1988)
Implementation
Market Day and Nedungadi (1994), Deshpande and Farley (1998a,
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Orientation 1998b), Han, Kim, and Srivastava (1998), Kohli and

Jaworski (1990), Kohli, Jaworski, and Kumar (1993), Jaworski
and Kohli (1996), Narver and Slater (1990, 1998), Slater
and Narver (1994), Wrenn (1997)
Multiple Measures
Efficiency Bonoma and Clark (1988), Dunn, Norbum, and Birley
(1994), Kotler
Effectiveness (1977), Sheth and Sisodia (1995), Walker and Ruekert
(1987)
Multivariate Bhargava, Dubelaar, and Ramaswami (1994), Spriggs (1994)
~Q!ysis

Moving from Financial to Non-Financial Output Measures

Early work in the finn-level measurement of marketing perfonnance was
largely directed at examining the productivity of a finn's marketing efforts at
producing positive financial outputs. These studies typically were designed to
provide guidance to managers regarding how to best allocate their marketing
resources, drawing on both marketing knowledge and perspectives from finance
and accounting.
One branch of this literature developed extensive profitability analyses of
marketing efforts. Sevin (1965) and Goodman (1970, 1972) are classics in this
field, laying out in great detail how to relate financial outputs to marketing
inputs. Feder (1965) borrowed from the marginal revenues-marginal costs
concept in microeconomics to suggest how to allocate marketing resources most
efficiently.Later work expanded from using profitability as an output to use more
sophisticated measures from the finance literature, examining cash flows and the
net present value of different marketing strategies (Buzzell and Chussil, 1985;
Day and Fahey, 1988). In their review of finn-level marketing productivity studies,
Bonoma and Clark (1988) found that the most frequent measures of output
were, in order, profit, sales (unit and value), market share, and cash flow.
 714 Bruce H. Clark

Figure 1. The Expanding Domain of Marketing Performance Measures

Non-Financial
Measures

• Customer
Satisfaction
• Customer Loyalty
• Brand Equity
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Single Financial
Output Measures

• Profit
• Sales
• Cash Flow

Input Measures Multiple Measures

• Marketing Audit • Marketing Audit

• Marketing • Efficiency/
Implementation Effectiveness
• Market • Multivariate
Orientation Analysis

The 1980s brought an expanded conception of output that included non-

financial measures. This was partly driven by the realization that what has
sometimes been called "the black box" (e.g. Piercy, 1997) of mediating factors
between marketing inputs and financial outputs is itself worthy of study. Bonoma
and Clark (1988) uncovered many moderating factors in the marketing
productivity literature, suggesting that the process of transformation between
marketing inputs and outputs is highly contingent on other variables.
Market share attracted tremendous attention as an output variable in this
period. Work by consultants at the Boston Consulting Group (Henderson, 1973)
and academics working on the Profit Impact of Market Strategies (PIMS) project
(Buzzell and Gale, 1987) concluded that market share was a strong predictor of
 Marketing Perfomlance Measures 715

cash flow and profitability. This, combined with the spectacular success at the
time of Japanese finns that emphasized market share as a perfonnance measure,
drove much examination of market share as the best measure of marketing
perfonnance. Unfortunately, in retrospect the market share-profitability
relationship has proven both controversial and complicated Qacobson, 1988;
Szymanski, Bharadwaj, and Varadarajan, 1993).
Aside from market share, other non-financial measures advocated as outputs
included services and level of new product development/innovation. Bucklin
(1978) is particularly adamant in his claim that the quality of services provided
must be included in any marketing productivity measure. Rather than consider
only the benefit to a customer of using a product, Bucklin attempts to account
for the services that add to simple foml utility, discussing logistical services (e.g.
delivery),infonnational services (e.g. product infonnation), and product functional
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services (e.g.warranties, packaging).

Adaptability or innovativeness of a finn's marketing has received continuous
attention as a perfonnance measure (Bhargava, Dubelaar, and Ramaswami,
1994; Walker and Ruekert, 1987). Typically cast in tenns of the finn's new
product or marketing innovations, the idea behind measuring adaptability as an
output of marketing is that in the face of a changing environment, finns that are
unable to adapt will fail (Walker and Ruekert, 1987).
In the last 10 years, three new non-financial output measures have attracted
extensive research attention: customer satisfaction, customer loyalty, and brand
equity. I will briefly review each measure in tum.

Customer Satisfaction.
Perhaps no recent measure of business perfonnance has attracted as much
attention as customer satisfaction. With a large and continuing academic
research stream (see Halstead, Hartman and Schmidt, 1994 and Vi, 1990 for
reviews) and substantial adoption by industry (the 1997 Marketing News
Customer Satisfaction Research Directory listed over 200 research fimls with
satisfaction practices), customer satisfaction measures have become important
benchmarks in many industries. .
The traditional disconfimlation paradigm of customer satisfaction proposes
that customers have prepurchase expectations about the products they buy, and
are more satisfied depending on how well the consumption experience exceeds
(disconfin11S)those expectations. Having a satisfied customer base is considered
an important marketing asset because it should lead to increased loyalty,with its
consequent revenue implications and lower marketing costs.
While straightforward in theory, customer satisfaction measurement in
practice has proven more complex. First, at least in North America, most
customers are satisfied. Peterson and Wilson (1992) review a large number of
studies where the distribution of customer satisfaction responses is highly
skewed towards the positive. This finding presents two problems. Managerially, a
high satisfaction rating may have little' consequence if customers are equally
satisfied with competing products; if everyone gets an 85% score, then no finn
 716 Bmce H. Clark

has a competitive advantage. Methodologically, Peterson and Wilson (1992)

observe that the highly skewed distribution reduces the likelihood that a
significant correlation between satisfaction and other perfonnance variables will
be observed; low variance in the satisfaction measure makes it unlikely that any
clear relationship with other variables will be revealed.
Empirical research evidence regarding the disconfinnation paradigm has also
been quite mixed, leading to a proliferation of satisfaction frameworks (e.g.
Anderson and Sullivan, 1993; Teas, 1993; Voss, Parasuraman and Grewal, 1998).
The expectations constmct has proven particularly problematic, in that different
studies appear to define it differently (Teas and Palan, 1997), leading one to
wonder exactly what managers should be measuring. Recent research also
suggests that there may be multiple satisfaction processes (Spreng, MacKenzie
and Olshavsky, 1996) and that one should consider measuring satisfaction on an
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attribute-by-attribute basis (Donaher and Mattson, 1994; Halstead, Hartman and

Schmidt, 1994).
Further, satisfaction measurement programs appear particularly difficult to
implement. Piercy and Morgan (1995) note substantial internal barriers to the
measurement process. Measures also appear more subject to manipulation than
objective items such as unit sales. Once customer contact personnel (e.g.
salespeople) or organizations (e.g. retailers) know they will be graded on
satisfaction ratings, there is a tremendous incentive to manipulate the findings
(Hauser, Simester, and Wernerfelt, 1994).

Customer Loyalty.
Partly in response to problems with customer satisfaction as a measure,
customer loyalty measures have attracted increasing attention as a measure of
good marketing. Behavioural measures of brand purchase and repurchase have
existed for years in the marketing literature (e.g. Uncles, Ehrenberg and
Hammond, 1995), but there has been a recent emphasis on expanding beyond
purely behavioural conceptions of loyalty (Dick and Basu, 1994). Advocates of
loyalty note that financial perfonnance ultimately reflects whether customers
repurchase from a firnl over time, regardless of satisfaction. One of the most
prominent spokespersons for this position, Frederick Reichheld (I994), suggests
that good marketing attracts the right customers: ones whose loyalty the finn is
able to earn and keep. A loyal customer base, it is argued, should increase
revenue per customer as satisfied customers buy more volume, a broader range
of products, and/or pay a premium for the company's products. It also should
lower marketing costs; current customers are cheaper to retain, and word-of-
mouth from current customers should make new customers easier to acquire. A
common financially-based measure of the worth of a loyal customer base is to
calculate the "lifetime value" of the customers in this base (Wyner, 1996).

Brand Equity.
Many researchers and managers believe that a powerful brand (one with high
"equity") is among the greatest marketing assets a finn can have (see Barwise,
 Marketing PerfOnllanCe Measures 717

1993; Keller, 1998 for reviews). Strong brands, it is argued, (1) allow finns to
charge price premiums over unbranded or poorly branded products; (2) can be
used to extend the company's business into other product categories; and (3)
reduce perceived risk to customers (and, perhaps, investors).
There have been two approaches to measuring brand equity. The behavioural
approach looks at customer response to the brand, either in tenns of perceptions
or purchase. One definition of behaviourally-based brand equity is the differential
effect of brand knowledge on customer response to marketing of the brand
(Keller, 1993). Customers in these studies typically respond more favourably to
strong brands than to unbranded or poorly branded products. The financial
approach to brand equity attempts to divine the financial value of the brand to
finns and their investors. A widely cited approach in this area was developed by
Simon and Sullivan (1993), who define brand equity as the incremental cash
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flows that accme to branded products over and above the cash flows that would
result from the sale of unbranded products.
There is little question that brands can make a powerful difference in how
customers respond to brands and brand extensions (Barwise, 1993; Keller, 1998).
There is growing evidence that brand equity has an influence on investors as well
(Aaker and Jacobson, 1994; Simon and Sullivan, 1993), which has led to changes
in financial reporting ntles in the UK (see Ambler and Barwise, 1998 for a
discussion of brand valuation and brand equity). Barwise (1993) notes, however,
that we actually know relatively little about the impact of a brand on the branded
product's long-tenn profitability. Further, the relationship between the
behavioural and financial approaches to brand equity are at present not well-
integrated (see Ambler and Barwise, 1998 for a discussion of definitions). Finally,
while brand equity appears a powerful measure of perfonnance, it also is one
that is hard to use as a short-tenn perfonnance measure for managers. It can
take years and huge marketing expenses to create a powerful brand; conversely,
this asset can take substantial time to dissipate even in the face of reduced
marketing support

Moving from Output to Input Measures

Recent emphasis on measures such as customer satisfaction, customer loyalty
and brand equity is part of a general move away from ultimate financial output
measures such as profit and sales and toward measures earlier in the input-to-
output sequence. In particular, one can look at initial marketing activities (inputs)
that lead to intennediate outcomes such as the three measures above that in
tum lead to financial outputs. The intenllediate outcomes can be thought of as
the marketing assets (Piercy, 1986; Srivastava, Shervani and Fahey, 1998) that
are leveraged to produce superior financial perfonnance.
One of the earliest attempts to assess the underlying marketing inputs that
lead to superior perfOnllanCe was the marketing audit concept (see Brownlie,
1993; Rothe, Harvey, and Jackson, 1997 for reviews). The goal of a marketing
audit is to systematically evaluate the appropriateness of the actjvities and assets
a finn uses in its marketing, given the finll'S situation. While initially conceived in
 718 Bruce H. Clark

the 1950s, the audit was strongly popularized by Kotler and his colleagues
(Kotler, Gregor, and Rodgers, 1977). They advocate an evaluation of the
environment, to understand the situation the finn is in, and then examination of
strategy, organization, systems, and productivity of marketing. Further work can
then be focused on specific marketing functions. While an area of much research
and successful case studies, it is unclear how widespread audits are in practice.
They also typically do not result in exact perfon11ance measures so much as
diagnoses for organizational improvement (Brownlie, 1996).
Bonoma (1985, 1986) also weighs in on the question of what constitutes good
marketing practices. He focuses on the finn's marketing skills and marketing
structures (e.g. systems and procedural support), and argues that good marketing
is the product of the interaction between the two.
The most recent systematic evaluation of the quality of marketing inputs has
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resulted from the market orientation concept This perspective - also variously
described as marketing-oriented and market-driven (see Jaworski and Kohli,
1996; Wrenn, 1997 for reviews) - measures activities that develop and use
intelligence about the market While definitions across studies vary (e.g. Day and
Nedungadi, 1994; Kohli and Jaworski, 1990; Narver and Slater, 1990), common
components of being market oriented include systematic gathering, analysis,
dissemination and use of market infonnation within the organization. Day and
Nedungadi (1994) in particular note the importance of maintaining a balanced
perspective between customers and competitors.
Empirical evidence suggests that being good at generation. dissemination and
application of market infom1ation within the organization can be a significant
advantage (e.g. Day and Nedungadi, 1994; Jaworski and Kohli, 1993; Narver and
Slater, 1990), but overall findings on the relationship between market orientation
and perfonnance have been mixed (Han, Kim and Srivastava, 1998). This has led
to a search for moderators or new explanatory factors in the relationship (e.g.
Han et aI., 1998; Slater and Narver, 1994). Aside from affecting business
perfom1ance, Wrenn (1997) reviews studies suggesting marketing orientation
also positively affects both customer and employee perceptions of the finn.
As with brand equity, the variety of operationalizations of market orientation
make it difficult to use as a perfonnance measure in practice. As many of the
measures of orientation list specific organizational activities (e.g. 'We have
interdepartmental meetings at least once a quarter to discuss market trends and
developments," Kohli, Jaworski, and Kumar, 1993), one may wonder if a focus on
measuring market orientation as a perfonnance measure might lead to ritual
activities that allow fin11Sto "tick the box" without realizing the true benefits. This
relates to the issue of whether market orientation represents a behaviour or a
culture (Deshpande and Farley, 1998a; Narver and Slater, 1998).

Moving to Multidimensional Measures

Early in the history of measuring marketing perfom1ance, it was common to
use one or a handful of financial or volume measures to track the output of
marketing. This changed in the, 1970s, beginning with the multidimensional
 Marketing Perforn1ance Measures 719

marketing audit (e.g. Kotler, Gregor and Rodgers, 1977). In the 1980s, Bonoma
and Clark (1988) and Walker and Ruekert (1987) independently suggested
schemes of marketing perfonnance measurement tl1at assessed marketing
efficiency and effectiveness. Bonoma and Clark (1988) described tl1e fonner as a
productivity measure, comparing outputs to inputs, and tl1e latter as a
comparison of outputs to goals, drawing on Dmcker's (1974) distinction between
efficiency as "doing tl1ings right" and effectiveness as "doing the right tl1ing."
Walker and Ruekert (1987) added a measure of adaptability to changes in tl1e
environment, while Bonoma and Clark (1988) included a measure of tl1e hostility
of tl1e external environment.
Paradigms from tl1e management literature have influenced tl1e move to
multidimensional measures as well. Kumar, Stem and Achrol (1992) draw on
four perspectives from tl1e organizational effectiveness literature to research
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reseller perfonnance. Kotler's dimensions of marketing effectiveness (Kotler,

1977) have been incorporated into rigorous empirical studies (e.g. Dunn,
Norburn and Birley, 1994). Multivariate data analysis techniques such as factor
analysis and Data Envelopment Analysis have been adopted to identify tl1e
underlying dimensions of perfonnance (e.g. Bhargava, Dubelaar and Ramaswami,
1994; Spnggs, 1994). While multiple measures are clearly psychometrically
desirable to obtain tl1e most complete picture possible of marketing
perfom1ance, tl1eyraise difficult issues for managers, a point to which I will return
below.

Evaluating the Trends

Having seen evidence regarding tl1e historical trends in marketing perfonnance

measures, one can ask if tl1ese trends are good for scholars, managers or botl1.
The answer appears to be a qualified yes for both audiences.
That we have moved as a field to examine non-financial measures as well as
financial is clearly an improvement. The asset-based marketing perspective in
particular (e.g. Piercy, 1986) demonstrates tl1e inadequacy of financial outputs as
tl1e sole measure of marketing perforn1ance. Indeed, tl1e reason non-financial
measures were adopted in tl1e first place was tl1e instinct of managers and
academics tl1at some important elements of marketing perfonnance (e.g. brand
strengtl1) were left uncaptured by traditional financial measures. Areas such as
customer satisfaction and brand equity have been unusual in tl1at scholarly
research and practitioner interest have coincided far more powerfully tl1an is
usual in our discipline. This is all to the good.
Deeper understanding of tl1e quality of marketing inputs in the fonn of
marketing processes has had less clear impact. Inherently difficult to study
because of tl1e complexity of processes and tl1e large number of external and
internal constituencies involved, defining "good marketing activities" has more
often been tl1e subject of conceptual or qualitative treatments (e.g. Bonoma,
1985; Bonoma and Crittenden, 1988) tl1an rigorous statistical research. Concepts
such as tl1e marketing audit and market orientation, while powerful in tl1eory,
 720 Bruce H. Clark

appear difficult to transfer to the managerial realm. Both ideas have empirical
studies backing up a link to overall business perfonnance, but, as noted above,
this link is by no means a simple linear relationship, depending rather on a
variety of potential moderating factors. Further, it is difficult to tell how
widespread either practice is because some finns may adopt elements of either
approach without ever using the words "marketing audit" or "market orientation."
In sum, this trend has led to richer, deeper understanding of marketing process,
but compared to objective financial measures its complexity makes it relatively
intractable for managers and more statistically-inclined researchers.
The trend toward multidimensional measures has arguably been wonderful
for researchers and horrible for practitioners. Psychometrically and theoretically,
researchers know that a multidimensional model of marketing perfonnance is
likely to be more "true" in that it will capture more facets of perfonnance than
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any single dimension can. Unfortunately, successively more complicated schemes

dramatically increase the burden on managers attempting to measure
perfomlance in the world. Given bounded rationality, any individual manager can
only juggle so many concepts in his or her mind at once. Yet organizations are
finding themselves overwhelmed with measures. Meyer (1998) notes that it is
common for corporations to have fifty to sixty "top-level" perfomlance measures
(p. xvi). In the marketing context, .Ambler and Kokkinaki (1998) conclude that
"marketing is already assessed against plenty of measures," (p. 35) but that the
weighting of measures is incorrect Figuring out which of many measures are
"really important" may drive the conscientious manager to despair. While one
might be able to reduce these measures to a more manageable set by means of
multivariate statistical techniques, these techniques seem unlikely to be part of
everyday management More generally, it is not clear that management is
interested in elegant multidimensional schemes. Ambler and Kokkinaki (1998)
find that financial measures dominate UK executives' assessment of marketing
perfonnance; Clark (1999) finds sales the most frequent measure used among
US executives. Even in our own field, researchers who use perfonnance as a
dependent variable most frequently rely on sales and market share (Ambler and
Kokkinaki, 1997). One of the original appeals of the balanced scorecard
approach to total business perfonnance measurement was that it organized
measures under a small set of dimensions of business perfonnance with which
any manager can work (Kaplan and Norton, 1992). Marketing scholars must
similarly present management with a handful of measures that are simple
enough to be usable but comprehensive enough to give an accurate perfonnance
assessment

Understanding Interrelationships among Measures

Much work in recent years on non-financial measures has been to understand

their relationship to financial measures (e.g. Han et a!., 1998; Anderson, Fomell
and Rust, 1997). The presumption behind many of these non-financial measures
is that they are leading indicators of long-nm shareholder value (e.g.Srivastava et
 Marketing Perfonnance Measures 721

aL, 1998). A powerful brand, for example, should not only generate profits on the
current accounting statements, but will help generate future profits.
A question one may ask in this context is whether we need all the non-
financial measures proposed. For example, if a fim1 has good customer
satisfaction measures, does it also need loyalty measures? The key to developing
a comprehensive but usable set of measures must be to understand the
interrelationships among the various marketing perfonnance measures proposed.
To the extent different measures are all correlated with profit or sales, that they
are uncorrelated with one another seems unlikely. If, on the other hand,
measures are highly correlated, they then can be collapsed into multiple
indicators of a single constmct (Churchill, 1979). Perhaps most likely is the
situation where various measures are independent but correlated, with causal
relationships among them.
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At a relatively simple level, consider the interrelationships among four

concepts that have drawn research attention in the last 10 years: market
orientation, customer satisfaction, customer loyalty and brand equity. Each has
been proposed as an important indicator of marketing perfonnance that should
in tum affect overall business perfonnance. Following is a brief summary of what
we as a field know about the interrelationships among these four, with an eye
toward future research that might indicate which measures are most valuable to
particular finns.

Market Orientation and Customer Satisfaction

Jaworski and Kohli (1996) observe that market orientation should be
positively related to customer satisfaction. Gathering and responding to good
market intelligence should lead to products that do a better job of meeting
customer needs. Unfortunately, they note, there is little empirical study to
support this proposition. If market orientation does improve overall business
perfonnance, customer satisfaction would be a logical mediating variable through
which such a relationship would occur. Indeed, such a mediating relationship
might explain why the direct effect of market orientation on business
perfonnance has been difficult to document consistentJy. In the long nm, one
might see negative feedback from customer satisfaction to market orientation
through perfonnance: a company with a satisfied customer base might have
success, which in tum might lead to complacency and a dulling of the fim1's
market orientation (see Miller, 1994 on the perils of success).

Market Orientation and Customer Loyalty

Fundamentally, the same logic as under the market orientation-satisfaction
link should apply here. The question is whether the link would be direct or
indirect through satisfaction. As loyalty in the absence of satisfaction may occur
only in the absence of competitive alternatives (see below), the indirect link
seems more likely.

Market Orientation and Brand Equity

No one, to my knowledge, has proposed a causal link between market
 722 Bruce H. Clark

orientation and brand equity, but speculation suggests that some positive
relationship might exist A market oriented finn, with good knowledge of
customers, presumably can design and support a stronger brand than an
internally-focused, ignorant firn1. While this effect may be indirect through
satisfaction, one can argue that a direct link might exist before purchase as the
well-designed brand is attractive and affects customer behaviour even prior to
any satisfaction experience. Once again, a disconnection may occur between
brand equity and market orientation if high brand equity leads to complacency
and a lower market-orientation.

Brand Equity and Customer Satisfaction

Looking at brand equity from a psychological perspective, a brand name
evokes a particular set of knowledge about the brand from memory (Keller,
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1993). This knowledge structure (e.g. image, associations, attitudes) will differ
among brands and between branded and non-branded products, with
consequences for customer behaviour.
It seems straightforward that customer satisfaction in one period should affect
brand equity in the next A satisfying experience with a brand should increase the
favourability of the associations a customer has to the brand. Interestingly, SeInes
(1993) finds this relationship in only one of the four industries he examines.
Another intriguing possibility is that brand equity in one period may affect
customer satisfaction in the next period, both through its impact on expectations
and on perceived experience with the brand. Regarding expectations, brand
knowledge should affect the expectations aspect of customer satisfaction in two
dimensions: certainty and level. First, a strong brand will probably produce well-
defined expectations, because the knowledge structure about the brand will be
elaborate. By comparison, a product with a weak brand or no brand will evoke
little knowledge and thus more uncertain expectations. Measures of satisfaction
with strong brands should be more reliable than with weak brands, because the
expectations construct will be more clearly defined. Second, a brand, however
strong, will produce some level of expectations about the product Keller (1993)
defines positive brand equity as that evoking more favourable responses than a
corresponding unbranded product A strong brand might influence expectations
in a higher direction, making satisfaction more difficult to achieve.
Regarding experience, favourable brand equity may have an influence on
perceived experience with using the brand; one might rate more highly an
experience with a well-liked brand than one would with a corresponding
unbranded product, simply because the accumulated (positive) experience with
the brand outweighs any single experience. A positive expectation created by a
strong brand may also influence the perceived experience through an
assimilation effect, such that perceived quality adjusts slightly in the direction of
expectations (cf.Anderson and Sullivan, 1993).

Brand Equity and Customer Loyalty

Favourable brand equity should affect customer loyalty. Customers are
 Marketing Perfonnance Measures 723

presumably more loyal to well-regarded brands than to poorly-regarded ones;

whether this link is direct or mediated by customer satisfaction is open to
question (see below). Seines (1993) found a direct positive link across four
industries (see also Lassar, Mittal and Shanna, 1995). Behaviourally, Fader and
Schmittlein (1993), found that brands with high market shares exhibited much
greater brand loyalty than did brands with low market shares.
It seems less likely that simple loyalty in the fonn of consistent repurchase has
an effect on the favourability of brand equity. Rather, loyalty should reinforce
whatever level of brand equity already exists. Every purchase incident should
reinforce (and possibly elaborate) the current knowledge structure the customer
holds regarding the brand, making it more accessible in memory. The only
influence on the level might occur through an exposure effect, such that
familiarity increases liking (Bomstein, 1989).
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Customer Satisfaction and Customer Loyalty

Unlike some of the other links, this link has received extensive research
attention, the conclusion of which is that customer satisfaction has a positive
direct impact on customer loyalty (Fornell, 1992; Seines, 1993; Anderson and
Sullivan, 1993; Jones and Sasser, 1995; Fornell, Johnson, Anderson, Cha and
Bryant, 1996). There is evidence, however, that the fonn and strength of this link
varies across industries. Some analysts suggest that the strength of this
relationship may vary by the degree of competitiveness within the industry, such
that the relationship is stronger in more competitive industries (Fornell, 1992;
Jones and Sasser, 1995). Seines (1993) suggests the ambiguity of the product
may moderate this relationship. In products where evidence about the quality of
a product experience is ambiguous, brand may matter more and satisfaction less
in detemlining loyalty because the satisfaction j~ldgments will be poor. This
relationship has also been posited to be nonlinear, both overall and varying by
industry (Oliva, Oliver and MacMillan, 1992; Anderson and Sullivan, 1993). Less
well-documented is the idea that loyalty may affect satisfaction through familiarity
with the product Halstead et al. (1994) observe that some level of familiarity is
necessary before a customer can fonn expectations about a product

Looking for a few Good Leading Indicators

When measuring marketing perfonnance began, financial output measures

dominated the field. As marketing perfonnance measures evolved, we added a
host of non-financial and input measures to the measurement mix. Financial
outputs will probably always be used as indicators of marketing perfonnance, but
they are snapshots of the present and say little about the marketing health of the
company in the future. Unfortunately, the proliferation of potential leading
indicators is managerially problematic; for example, the American Marketing
Association's, 1999 Customer Satisfaction and Quality Measurement Conference
is entitled "Making Sense of Multiple Measurements."
Looking for a few good leading indicators suggests two research agendas. On
 724 Bruce H. Clark

a micro level, one should attempt to reduce the number of items used to
measure particular constnlCts, while still retaining enough for reliability.
Psychometrically, there are a variety of standard data reduction techniques
available for this endeavor, such as factor analysis. In a structural equation
modeling context, Baumgartner and Homburg (1996, p. 144) suggest that three
items per latent constnlct is a minimum standard for reliable measurement.
Regarding the number of constructs managers should attempt to track, simple
psychological limits on the number of items people can juggle in memory
suggests seven is a plausible maximum (Miller, 1956; Lynch and Srull, 1982) -
below I will suggest four specific measures.
Beyond this, the academic community sometimes encourages proliferation of
measurement schemes, as each scholar suggests his or her own items for a
particular constnlct. For some constructs, we have enough of a history that we
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should be moving in the opposite direction: using a standard set of measures

rather than inventing new measures for each study. Research developing
parsimonious syntheses of larger sets of measures would be particularly useful,
both for managers and for academics who might be measuring multiple
constructs in a single study. Deshpande and Farley (1998b), for example,
examine three different sets of measures of the market orientation construct and
develop a short synthesized inventory that incorporates the core infonnation
researchers and managers need to capture. More of this kind of research is
needed.
On a more macro level, the challenge for marketing scholars is to understand
the nature of causality among multiple constructs, both for advancement of
theory and to advise managers regarding which measures will be most useful for
their businesses. Regarding the four constructs discussed in the previous section,
Figure 2 summarizes the hypothesized relationships. These, and other constnlcts,
should be examined jointly to detennine their relationship and mutual influence
(see SeInes, 1993, for example).
The challenges in this endeavor are fourfold. First one must establish the
direction of causal relationships. Second, one must identify the fonn of the
relationship Oinear, nonlinear, etc,), Third, one must establish the strength of the
relationships in practical tenns. Finally, one must understand the temporal
relationships among these measures to truly use them as predictors of overall
business health.
In tenns of research approaches, to tndy demonstrate these causal links,
researchers will need to model systems of equations using longitudinal data.
Stnlctural equations modeling is a technique that may be useful in this context
(Diamantopoulos, 1994). One likely source of data would be customer databases
in transaction-intensive industries such as finance, telecommunications, or air
travel. Companies could be assessed on market orientation scales, and customers
could be interviewed or surveyed regarding customer satisfaction and brand
equity. Customer loyalty would be available through the database records. Using
this kind of data, scholars can examine the direction, shape, and dynamics of the
relationships.
 Marketing Perfonnance Measures 725
Figure 2. Hypothesized Interrelationships among Key Measures
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Market
Orientation

Brand
Equity

---- ••••~~ causal relationships

..- - - - - - - - feedback relationships

Regarding shape, in several cases nonlinear or contingent relationships have

been identified, with consequences for both academic modelling and managerial
measurement Economics certainly suggests the general principle that any effect
eventually suffers diminishing returns (i.e. a concave function), but research in
customer satisfaction suggests that in certain competitive situations one may see
increasing returns to satisfaction (e.g.Jones and Sasser, 1995). Another possible
nonlinear fom1 would be an s-shaped relationship.
Regarding dynamics, to identify leading indicators one is interested in the
speed with which an effect occurs in the presence of a causal agent, and the
speed with which an effect diminishes when the causal agent is removed. For
example, how quickly does customer satisfaction affect customer loyalty? If
 726 Bruce H. Clark

customer satisfaction subsequently declines, how long will it be before customer

loyalty diminishes as well? Speed here may depend on interpurchase times.
Someone who has just purchased a car is not likely to be in the market again for
a few years, while a customer's relationship with a financial institution may
involve multiple transactions in the course of a year. In the fonner case, the effect
of satisfaction on loyalty will not be seen for years, while in the latter it may
appear within months.
Cross-industry studies will be important both to identify contingent factors
and to better infonn managers in particular industries which measures may be
most useful. Industry competitiveness appears a particularly likely moderating
variable in relationships among measures (e.g. Fornell, 1992; Slater and Narver,
1994). Because of the importance of temporal relationships, research should
look for feedback loops among the measures, as shown in Figure 2; it is likely
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that A may cause B in one period, but B may influence A in the next.
Finally, aside from the econometric approach, experimental studies may also
be useful in examining some relationships. The relationship between satisfaction
and brand equity could probably be approached in this fashion. One might also
incorporate repurchase intention as a measure of loyalty in experimental
approaches, but market orientation will be harder to approach in this fashion.

What Do I Do While I'm Waiting?

The previous sections suggest a substantial research agenda that will eventually
bear fruit for managers. The question naturally arises, what should managers do
while they are waiting for this research?
Allowing that we still have much to learn, it seems clear that managers should
continue to track financial measures such as sales and profits. Publicly-traded
finns are required to report these measures, and internally, one is more likely to
receive budgets from financially-oriented managers if one can show previous
financial success.
Beyond this, I believe satisfaction and loyalty measurement are the areas in
which most managers should concentrate in the near tenn. Satisfaction assesses
customer perceptions of the finn's offerings, while loyalty tracks actual customer
purchasing behaviour. Between these two measures, finns should get at least a
rough indication of competitive strengths and weaknesses and future financial
return on marketing efforts.
Satisfaction should be assessed relative to customers' satisfaction with
competing products. Rather than overall satisfaction, finns should measure
satisfaction with each of the different attributes/benefits customers value. A
weighted sum of these items, based on the importance customers place on
attributes, will produce a more reliable composite than simple overall items, and
should also identify competitive strengths and weaknesses in the finn's offerings.
One fiml I have worked with grades customer satisfaction (A, B, C, etc.)
depending on how its customer satisfaction scores compare to the scores of
competitors. Piercy (1997) has a number of helpful suggestions on how to
 Marketing Performance Measures 727

measure and use customer satisfaction within the organization.

Regarding loyalty, surveys of repurchase intention can be beneficial, but,
where possible, finns should assess loyalty through a database of transactions.
For companies with many customers, a good summary measure of loyalty is the
percentage of customers lost in a time period. For companies with fewer
accounts, salespeople often have good infonnation on loyalty. This can
sometimes be quantified in terms of number of rebids lost Other transaction-
based elements of a loyalty constmct might include frequency, recency, and
amount of purchase, and breadth of purchase in a finn's line.
For both of these measures it is critical to compare the summary measures to
two referents. First, what are the trends over time in customer satisfaction and
loyalty? As Dickson (1997, p. 12) observes, the change or "delta" in measures is
often far more infonnative in tenns of managing marketing than looking at
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measures on a stand-alone basis. Second, each of these measures should be

broken out by market segment Averages taken across segments can mask
significant differences in the threats and opportunities facing managers. For a
given market segment, then, one would hope to see a chart or table with four
numbers measured over time: sales, profit, relative customer satisfaction, and
customer loyalty. These, in tum, can identify areas for further research or
marketing efforts.

Conclusion

This paper has attempted to layout what we know about the history and
interrelationships among key marketing measures. The three historical trends
identified - toward non-financial output measures, marketing input measures,
and multiple measures - have improved our understanding of marketing
perfomlance. The challenge left for further research is to identify the few good
leading indicators that managers can track for the future.

Acknowledgments

The history portion of this paper benefited from comments on a paper presented
at the, 1998 Conference on Business Perfonnance Measurement at Cambridge
University. This paper has also benefited from the comments of two anonymous
reviewers.

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