Marketing Performance Measurement Systems: Does Comprehensiveness Really Improve

Performance?
Author(s): Christian Homburg, Martin Artz and Jan Wieseke
Source: Journal of Marketing , May 2012, Vol. 76, No. 3 (May 2012), pp. 56-77
Published by: Sage Publications, Inc. on behalf of American Marketing Association

Stable URL: https://www.jstor.org/stable/41714489

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 Christian Homburg, Martin Artz, & Jan Wieseke

Marketing Performance
Measurement Systems: Does
Comprehensiveness Really Improve
Performance?
Comprehensive performance measurement systems such as the balanced scorecard have received considerable
attention in marketing. However, whether and under which circumstances comprehensiveness as a performanc
measurement system property is desirable and contributes to firm performance is still a subject of debate in
research and practice. To address this issue, the authors use dyadic field data from marketing managers and
management accounting executives and extend prior work by developing and testing a more complex,
contingency-based model. The empirical results confirm the developed framework. In particular, the results show
that the relationship of comprehensiveness in a marketing performance measurement system to firm performanc
is conditional. Marketing alignment and market-based knowledge mediate this relationship, depending o
marketing strategy, marketing complexity, and market dynamism. These insights explain mixed findings of previous
research and provide important implications for research and managerial practice.

Keywords : marketing performance measurement system, comprehensive performance measurement, nonfinanci

performance measures, balanced scorecard, marketing control

Eighty percent of the marketing executives responding to regard is the design of an appropriate set of performance
the survey were unhappy with their current ability to mea- measures for marketing control, or market performance
sure performance. Only 17% of the respondents reported
measurement system (MPMS) (Neely, Gregory, and Platts
that their organization had a comprehensive system, but
1995). Several conceptualizations of performance measure-
these companies appeared to outperform others in ...
profitability. (CMO Council 2009 survey results, cited in
ment systems have been proposed both within and outside
Stewart 2009, p. 637) the marketing literature, such as the balanced scorecard
(Kaplan and Norton 1992), marketing dashboards (Pau weis
et al. 2009), and the Tableau de Bord (Epstein and Manzoni
keting management, many firms have spent consid- 1998). Despite their different labels, these concepts all
Guided keting erableerable
by resources
resourcesmanagement,
extending anddemands extending
improving for many greater and firms accountability improving have spent their consid- in mar- mar-
their mar- imply a high degree of comprehensiveness, usually under-
keting performance measurement systems (hereinafter, stood to be a set of measures that provides a certain breadth,
MPMS) (Rust, Lemon, and Zeithaml 2004). As the intro- reflects strategy, and yields information about cause-and-
ductory quotation illustrates, an important task in this effect relationships.1 However, despite these investments,
anecdotal and empirical evidence shows that many projects
Christian Homburg is Professor of Business Administration and Marketing
for improving performance measurement fail, and resulting
and Chair of the Marketing Department, University of Mannheim, Germany, performance effects often remain below expectations
and Professorial Fellow, Department of Management and Marketing, Uni- (Ittner, Larcker, and Randall 2003; Neely and Bourne
versity of Melbourne, Australia (e-mail: homburg@bwl.uni-mannheim.de). 2000). A possible explanation is that the benefits of compre-
Martin Artz is a postdoctoral researcher, University of Mannheim, Ger-
many (e-mail: martz@bwl.uni-mannheim.de). Jan Wieseke is Professor of
Business Administration and Marketing and Chair of the Marketing !In prior work, different terms and labels have been used for
Department, Ruhr-University of Bochum, Germany (e-mail: jan. wieseke @ this construct, and the literature does not provide a clear terminol-
ruhr-uni-bochum.de). The article is based on the doctoral dissertation of ogy. For example, the terms "strategic performance measurement"
the second author. All authors contributed equally to the article. The (e.g., Chenhall 2005), "integrative performance measurement"
authors thank Markus Glaser, Alexander Hahn, Till Haumann, Martin Klar- (Fleming, Chow, and Chen 2009), and "contemporary perfor-
mann, Brendan O'Dwyer, Don O'Sullivan, Dirk Totzek, Sander van Triest, mance measurement" (Hyvönen 2007) have been used. However,
seminar participants at the University of Amsterdam, the University of all these terms overlap with one of their underlying components
Bochum, three anonymous M reviewers, and Ajay K. Kohli for helpful (strategic performance measurement with strategy fit; integrative
comments and suggestions for improvement. The authors also thank Cor- performance measurement with cause-and-effect relationships) or
nelia Ebertin for research assistance. Ajay Kohli served as area editor for consider a normative judgment (i.e., contemporary). Thus, we pre-
this article. fer the term "comprehensiveness," as Hall (2008, 2011), Chenhall
(2005), O'Sullivan and Abela (2007), and Stewart (2009) suggest.

© 201 2, American Marketing Association Journal of Marketing

ISSN: 0022-2429 (print), 1 547-71 85 (electronic) 56 Volume 76 (May 201 2), 56-77

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hensiveness in a performance measurement system accrue
only under specific contingent circumstances (Ittner and
Larcker 2001; Morgan, Clark, and Gooner 2002). Some
authors even claim that rather than being a helpful instru-
ment for management control, comprehensive performance
measurement systems are merely a management fashion
(Norreklit 2000; Voelpel, Leibold, and Eckhoff 2006).
Remarkably, prior empirical literature contains little
evidence either in favor of or against the contingency
hypothesis. Several recent contributions in marketing have
focused on single, specific market-related performance
measures, such as customer satisfaction, and their relation-
ship to firm performance. Less work has analyzed which
marketing performance measurement (MPM) practices
actually increase firm performance, despite their relevance
to both marketing academia (Marketing Science Institute
2008) and practice (CMO Council 2009). A recent excep-
tion is an investigation showing that the ability to measure
marketing performance significantly improves a firm's
financial performance in the high-technology sector (O' Sul-
livan and Abela 2007).
Studies outside the marketing literature report mixed and
inconclusive empirical evidence. As Table 1 shows, investi-
gations using the same key informant for measuring compo-
nents of comprehensiveness and firm performance hypothe-
size and empirically find a direct, positive relationship.2
However, more advanced studies, which mitigate common
method variance by using two or more data sources and rely-
ing on a broader measurement of comprehensiveness, find
no direct relationship between the two constructs. Accord-
ingly, summarizing the literature about the financial perfor-
mance outcomes, Ittner (2008, p. 261) concludes that "the
evidence indicates that the strength of the statistical relations
... declines as the sophistication of analysis increases."
Consequently, researchers have called for several
improvements in studies analyzing this association. In par-
ticular, they advocate a dyadic data approach, a broader
measurement of different components of comprehensive-
ness, the validation of subjective performance assessments
by objective archival data sources, and- probably most
important- the development of more sophisticated research
models that take into account indirect effects on firm per-
formance and contingent factors (Clark, Abela, and Ambler
2006b; Ittner 2008; O 'Sullivan and Abela 2007). However, to
our knowledge, no study thus far has integrated these aspects.
The current study addresses this neglect and examines
whether and under which circumstances comprehensive-
ness in an MPMS (hereinafter, CMPMS) influences firm
performance. We circumvent methodological problems
typically associated with survey research in this field by
using a dyadic data design, a broader measurement of the
various components of comprehensiveness, and a set of
short- and long-term measures of firm performance that are
either objectively measured or validated by additional
archival data. Beyond this, our study contributes to the lit-
erature in the following two ways.
First, we develop and test an indirect-effects model of
CMPMS on firm performance and identify marketing align-
ment and market knowledge as the two main intermediate
performance outcomes of an MPMS. As Table 1 shows,
prior studies have emphasized the importance of both con-
structs, though they have not been integrated explicitly into
empirical analyses. Our empirical findings confirm our
framework: Specifically, the influence of CMPMS on firm
performance is indirectly associated with marketing align-
ment and market knowledge.3
Second, using these results as a baseline for further
analyses, we hypothesize and test for contingency-based
relationships between CMPMS and both intrafirm perfor-
mance outcomes. We find strong empirical support for per-
formance outcomes depending on marketing strategy, mar-
keting complexity, and market dynamism. In particular, we
find no association of CMPMS with marketing alignment
or market knowledge for low values of these three modera-
tors. Thus, CMPMS is not universally beneficial for every
firm, a result that contributes to an explanation of the mixed
findings in previous research.
Further analyses regarding the subcomponents of
CMPMS yield concrete insights for practitioners. In par-
ticular, we provide specific implications as to which sub-
component (breadth, strategy fit, or cause-and-effect rela-
tionships) should be prioritized under which contingent
state, explain the underlying trade-offs pertaining to mar-
keting alignment and market knowledge, and show how
managers can use our results for estimating economic
returns of performance measurement design in marketing.
Our results may further help increase marketing's account-
ability within the firm (Verhoef and Leeflang 2009).
Conceptual Background and
Framework
CMPMS
The central construct in our study is the degree of CMPMS ,
which is the breadth of performance measures for marketing
control that reflect marketing strategy and show marketing-
relevant cause-and-effect relationships (Chenhall 2005;
Hall 2008). Thus, the construct consists of three compo-
nents, namely, (1) breadth, (2) strategy fit, and (3) cause-
and-effect relationships. These three components reflect the
key dimensions of comprehensiveness in performance mea-

2Table 1 does not show performance outcomes of comprehen- 3We also test for a direct effect regressing different measures of
sive performance measurement tested in case-study settings, firm performance directly on CMPMS. Consistent with prior
because the results of these studies are neither general izable research
nor using a dyadic data set design (see Table 1), we do not
comparable to our research question. Because we assume that per- find a direct, significant empirical relationship. However, although
formance effects of comprehensive performance measurementour arefindings are in line with prior literature and in favor of a miss-
contingent, it is not surprising that these studies provide no consis-
ing association, the null hypothesis of no effect cannot be rejected
tent picture (e.g., Banker, Potter, and Srinivasan 2000; Davis on andthe basis of these analyses. We thank an anonymous reviewer
Albright 2004; Griffith and Neely 2009). for raising this important point.

Marketing Performance Measurement Systems 1 57

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58 / Journal of Mark

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sûrement systems (Bisbe, Batista-Foguet, and Chenhall tingencies and the other suggesting that its implementation
2007) and are integral to well-known concepts such as the depends on firm-internal and firm-external contingencies.
balanced scorecard (Kaplan and Norton 1992), marketing As Figure 1 shows, we suggest that CMPMS affects
dashboards (Pau weis et al. 2009), and the Tableau de Bord firm performance through two mediating constructs: mar-
(Epstein and Manzoni 1998). Prior performance measure- keting alignment, which refers to the extent to which man-
ment literature provides extensive reviews and discussions agers execute their tasks and projects in line with strategic
of these concepts.4 marketing objectives (Vorhies and Morgan 2005), and mar-
The first component, breadth, is the extent to which the ket knowledge, which describes the extent to which struc-
MPMS provides a diverse picture of the marketing function tured organizational knowledge about the market exists
through a variety of financial and nonfinancial as well as (Moorman and Miner 1997). Notably, as Table 1 shows, all
leading and lagging measures of marketing performance prior studies testing a direct effect of comprehensiveness in
(Ittner, Larcker, and Randall 2003; Pau weis et al. 2009). performance measurement on firm performance base their
The second component, strategy fit, refers to the extent to line of reasoning on mediating routes referring to manage-
which the performance measurement system reflects strategic
rial alignment and/or knowledge-enhancing processes with-
out empirically testing these indirect relationships.5
marketing targets (Banker, Chang, and Pizzini 2004). The
We also test for contingent effects of CMPMS on firm
third component, cause-and-effect relationships, describes
performance by incorporating three moderators that con-
the extent to which the MPMS provides information about
ceptual work suggests moderate outcomes of performance
causes and effects within marketing-relevant parts of the
measurement (Ittner and Larcker 2001; Kelly 2007) and
value chain, thus "making the business model explicit" that studies in other contexts have tested as determinants or
(Pauwels et al. 2009, p. 5).
moderators of performance measurement systems (Ittner
For example, service firms that endorse the idea of a
and Larcker 2001). In particular, we include differentiation
comprehensive MPMS include all three facets (Kamakura
strategy (Van der Stede, Chow, and Lin 2006), marketing
et al. 2002). In these firms, performance measures reflect
complexity (Bruns and Waterhouse 1975), and market
strategic targets of the service-profit chain (i.e., achieving
dynamism (Krafft 1999). 6
greater customer satisfaction with service) and thus show a
Differentiation strategy refers to the extent to which
high degree of strategy fit. Furthermore, these firms rely not firms compete through a differentiation approach in their
only on lagging financial metrics such as sales and costs but marketing strategy (Porter 1980). Marketing complexity is
also on leading metrics such as employees' satisfaction the intricacy of marketing processes resulting from the
scores or customers' willingness to pay, showing a high diversity of the product portfolio. Compared with compa-
degree of breadth. Finally, these firms integrate performance nies with a similar product portfolio, firms with a broad
measures in a way that allows tracking of the consequences range of products and services tend to have more complex
of changes in employee-related performance measures (e.g., organizational practices and structures in functional areas
employees' qualification levels, employees' satisfaction such as production, marketing, sales, and customer service
scores) on customer-related performance measures (e.g., (Novak and Eppinger 2001). Finally, market dynamism
customer satisfaction scores, customer loyalty scores) and refers to the frequency of changes in a firm's product mar-
finally on financial performance outcomes (e.g., period sales, ket. Market dynamism should increase information asym-
service subsidiary's period profit). In this way, they provide metry between marketing managers and top management
information about interrelationships within their value and create environmental uncertainty for the whole firm
chain and reflect possible cause-and-effect relationships. (Indjejikian and Matějka 2006).
In addition to our main constructs of interest, we incor-
Framework and Constructs
porate numerous control variables. In particular, we control
Figure 1 shows the framework of our study. The focus for MPM
of quality, the degree of decentralization and formal-
our analysis is how CMPMS influences firm performance, ization in marketing, firm size, and competitive intensity.
which reflects the firm's short-term financial performance
(measured as industry-adjusted return on sales [ROS] and 5Given the theoretical mechanisms suggested by prior work in
return on assets [ROA] in our study) and long-term Tablenon-1 , marketing alignment and market knowledge are unlikely
to be moderators. Empirically, we modeled both as moderators
financial performance (measured as market success in our
and did not find an empirical effect.
study). In what follows, we develop hypotheses and empiri- theoretically, we can exclude these three moderating con-
cally test the predictions of two literature streams: one rec-as mediators because all three constructs are clearly exoge-
structs
ommending the implementation of comprehensiveness nousinin our model. Market dynamism is not influenceable for a
firm
performance measurement systems regardless of firm in a competitive market setting. Furthermore, implementation
con-
and control choices are likely to predetermine strategy and the
complexity of interorganizational processes (Bruns and Water-
4A full review of this literature and a discussion of these three house 1975; Olson, Slater, and Huit 2005). This view is also mir-
underlying dimensions are beyond the scope of this article. Among rored by Jaworski (1988, p. 26): "The internal environment con-
others, Chenhall (2005), Hall (2008), Neely, Gregory, and Platts sists of elements within the firm's jurisdiction.... [I]t has a role in
(1995), Pauwels et al. (2009), and Speckbacher, Bischof, and determining the type of control system that evolves and, in turn,
Pfeiffer (2003) provide excellent reviews. Bisbe, Batista-Foguet, moderating the effects of the control system in use." Empirically,
and Chenhall (2007) explicitly suggest conceptualizing compre- the Sobel test does not show significant mediation effects (p > .30
hensiveness with the three components we use. for all three moderators).

Marketing Performance Measurement Systems 1 59

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 FIGURE 1
Overview of Framework

Notes: [M] = data provided by marketing managers, [MA] = data provided by management accounting executives, [V] = data validated by man-
agement accounting executives' responses and data from the AMADEUS database, and [AMADEUS] = archival data taken from the
AMADEUS database.

that usually pay off in the medium and long run. For mar-
As additional controls, we include differentiation strategy,
marketing complexity, and market dynamism. The Appendix keting activities and assets, which, traditionally, are particu-
provides detailed information about construct definitions,
larly vulnerable to short-term myopia (Mizik and Jacobson
items for measurement, the respective data source, and2007),
the we expect greater CMPMS to increase alignment
literature on which the construct measurement is built. with marketing strategy.
Second, we expect CMPMS to affect marketing align-
ment through psychological mechanisms. Greater CMPMS
Hypotheses Development enhances marketing managers' understanding of the rele-
CMPMS and Its Effects on Marketing Alignment
vant drivers of marketing and firm performance by its
and Market Knowledge breadth of performance measures and its fit to marketing

Our framework and prior work summarized in Table 1 sug-

strategy and by providing information about potential
cause-and-effect relationships (Pau weis et al. 2009). In this
gest that the influence of CMPMS on firm performance is
way, CMPMS allows marketing managers to see the "big
indirect, through marketing alignment and market knowl-
edge. Three theoretical explanations might hold forpicture"
the of the firm's business model, a perspective that
effect of CMPMS on marketing alignment. may increase intrinsic task motivation (Spreitzer 1996) and,
in turn, alignment (Hall 2008, 2011).
First, consistent with the adage that "what gets mea-
sured, gets done," economic theory suggests that strategy-Finally, the performance measurement literature sug-
congruent behavior will improve when performance mea- gests that greater CMPMS better reflects the association
sures are more comprehensive (Hauser, Simester, betweenand strategic marketing targets and managerial actions
(Kaplan and Norton 1992), enhances strategic communica-
Wernerfelt 1994). The close fit between strategic marketing
tion, and contributes to strategic consensus among man-
targets, including leading indicators of marketing perfor-
agers (Noble and Mokwa 1999). As a consequence, man-
mance and antecedents to marketing assets, gives managers
agers receive timely feedback on the stage of marketing
incentives to balance short-term goals and strategic targets

60 1 Journal of Marketing, May 2012

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strategy implementation, allowing them to take corrective
action to ensure proper execution. Therefore, we hypothe-
size the following:
Hj! CMPMS is positively associated with marketing alignment.
With regard to market knowledge, we also expect a
positive association. The rationale is that organizations
learn through managers' identification of cause-and-effect
relationships in their environment (Argyris and Schön
1978). However, prior work in the dynamic decision-making
literature shows that when a time delay occurs between
managerial actions and firm outcomes, people experience
significant difficulties learning the lagged causal relation-
ships from outcome feedback (Diehl and Sterman 1995;
Kelly 2007). These difficulties arise because, given interfer-
ence from simultaneous events, people usually lack the cog-
nitive capacity to process all the cause-and-effect relation-
ships. In these circumstances, outcome feedback per se is
not typically effective for identifying lagged causal rela-
tionships (Kelly 2007; Sengupta and Abdel-Hamid 1993).
We expect a higher degree of CMPMS to link temporally
separated cause-and-effect variables and provide broad and
strategically relevant feedback on managerial actions and
their customer- and competitor-related outcomes (De Luca
and Atuahene-Gima 2007), helping managers infer causal-
ity and to learn. Thus, we hypothesize the following:
H2: CMPMS is positively associated with market knowledge.
Furthermore, we expect marketing alignment to posi-
tively influence a firm's short- and long-term performance.
Poor managerial strategy implementation, with a resulting
lower financial performance, was the original reason for the
development of "modern" comprehensive performance
measurement systems such as the balanced scorecard
(Kaplan and Norton 1992). The marketing literature empha-
sizes that strategy implementation can be a bottleneck to
benefiting from market opportunities (White, Conant, and
Echambadi 2003). Therefore, in line with empirical findings
of a strong positive association between marketing strategy
implementation and firm performance (Slater, Huit, and
Olson 2010; Vorhies and Morgan 2005; White, Conant, and
Echambadi 2003), we formulate the following hypothesis:
H3: Marketing alignment is positively associated with firm
performance.
Finally, we expect market knowledge to positively
influence a firm's short- and long-term performance. Prior
work in marketing has emphasized the importance of mar-
ket knowledge for firm success: A higher degree of market
knowledge "should lead ... ultimately to superior growth
and profitability" (Slater and Narver 1995, p. 66). Empirical
evidence shows positive associations between market
knowledge and, for example, new-product development
success (Moorman and Miner 1997) as well as between
market knowledge and overall firm performance (Wiklund
and Shepherd 2003). Therefore, we propose the following:
H4: Market knowledge is positively associated with firm
performance.
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CMPMS and Firm Performance: Moderated
Effects
Thus far, our hypotheses follow prior work that universally
calls for more CMPMS, independently of external firm con-
tingencies (Kaplan and Norton 1992). However, prior work
in marketing (Clark, Abela, and Ambler 2006a; Pauwels et
al. 2009) and management accounting (Hoque and James
2000; Ittner and Larcker 2001) has argued that the
described benefits of comprehensiveness may hold only in
specific circumstances. In this case, the hypothesized rela-
tionships developed in Hi and H2 hold only "on average"
but differ for different contingent states. Specifically, we
argue that firms with low contingent values of differentia-
tion strategy, marketing complexity, and market dynamism
do not benefit from a high degree of CMPMS and thus
should not strive for this attribute in their performance mea-
surement system. For these firms, so-called traditional
MPMS might be fully sufficient (Clark 1999).
Moderator 1: differentiation strategy. Regarding differ-
entiation strategy, we expect that firms with a high degree
of differentiation especially benefit from CMPMS in terms
of both marketing alignment and market knowledge. For
firms following this strategic approach, intangible market-
ing assets such as innovativeness or strong customer rela-
tionships are critical and are expected to be part of the per-
formance measurement system for superior performance
effects. Indeed, empirical evidence shows that firms follow-
ing a differentiation strategy increase the weight of non-
financial performance measures in the management control
systems to explicitly take these intangible assets into con-
sideration (Ittner, Larcker, and Rajan 1997).
Firms that employ a differentiation strategy along with a
special focus on intangible marketing assets can benefit
from using a broad performance measurement system that
fits the marketing strategy and shows cause-and-effect rela-
tionships between marketing intangibles (Fleming, Chow,
and Chen 2009). A high degree of CMPMS directs manage-
rial attention to value drivers that are critical for differenti-
ating firms and thus supports marketing strategy execution.
In line with this prediction, greater comprehensiveness
improves resource allocation in firms that show typical ele-
ments of a differentiation approach, such as a strong focus
on innovativeness or superior customer relationships (Kelly
2007). Thus, CMPMS should be positively associated with
marketing alignment at high contingent values of differenti-
ation strategy.
Regarding market knowledge, we also expect that firms
more strongly focused on differentiation especially benefit
from CMPMS. This benefit should occur because market
learning results from information processing pertaining to
market players, such as customers and competitors, and
marketing intangibles, such as brand values and customer
satisfaction (Jaworski and Kohli 1993). We expect greater
CMPMS to support comprehensive feedback about changes
in these relationships and levels of market-based assets and
marketing intangibles (Kelly 2007).
In contrast, if a firm's attention is more internally ori-
ented (e.g., the firm focuses less on differentiation and more
on low product costs), CMPMS might not influence mar-
Marketing Performance Measurement Systems 1 61
keting alignment and market knowledge. For these firms, a Simester, and Wernerfelt 1994). In this case, a useful
performance measurement approach, such as focusing on approach is to add weight to input and nonfinancial perfor-
efficiency-related metrics, might be more appropriate. mance measures in performance evaluations to reduce dys-
Thus, we hypothesize the following: functional behavior (Van der Stede, Chow, and Lin 2006).

H5: CMPMS is positively associated with (a) marketing align-

ment and (b) market knowledge in the case of a high
extent of differentiation, whereas in the case of a low
extent, no effect occurs.
Moderator 2: marketing complexity. Similarly, when
marketing complexity is high, we expect that high CMPMS
has an effect on both marketing alignment and market
knowledge. Regarding marketing alignment, a greater
CMPMS helps managers cope better with interdependen-
cies in strategy implementation by making the marketing
value chain and resulting interdependencies explicit
(Bou wens and Abernethy 2000). It provides structure and
concrete guidelines pertaining to managerial role expecta-
tions, which are less precisely defined in the case of high
firm interdependencies. In this state, a comprehensive mea-
surement approach "provides feedback to understand and
successfully manage the increasing level of complex inter-
dependencies that occur" (Chenhall 2005, p. 400) and
increases managerial alignment by allowing managers to
execute strategy implementation more appropriately.
Regarding market knowledge, inferring causal relation-
ships and, in turn, enhancing market knowledge are
expected to be more difficult when marketing complexity is
high (Bou wens and Abernethy 2000). In particular, accord-
ing to our reasoning in H2, we expect that managers face
more problems identifying and inferring cause-and-effect
relationships than in the case of lower interdependencies
(Campbell 1988). In this regard, greater CMPMS should be
especially helpful because more precise feedback can be
more easily tied to the respective managerial action and fos-
ters learning even in the case of high interdependencies
(Menon and Varadarajan 1992).
In contrast, we do not expect any benefits of CMPMS if
marketing complexity is low. In this event, a more compre-
hensive MPM should not lead to greater marketing alignment,
because less CMPMS might be fully sufficient. A prominent
example is the so-called Cola War between Pepsi and Coke,
in which the brand's market share was the only key metric
to align marketing managers of the respective firm (Simons
and Dávila 1998). Thus, we hypothesize the following:
H6: CMPMS is positively associated with (a) marketing align-
ment and (b) market knowledge in the case of high mar-
keting complexity, whereas in the case of low complexity,
no effect occurs.
Moderator 3: market dynamism. Finally, we expect that
firms operating in a highly dynamic market benefit from
greater CMPMS in terms of marketing alignment and mar-
ket knowledge. With respect to marketing alignment, strong
market dynamism enhances the degree of information people. As an incentive to participate, we offered a bench
asymmetry between a firm's top management and its mar-
keting managers. Economic models suggest that greater university working paper series. We received 201
information asymmetry creates difficulty in aligning man- responses, resulting in an overall response rate of approxi-
agers' personal targets with those of the firm (Hauser, mately 13%. On average, job experience for the marketing
Moreover, if market dynamism is high, aggregated and
lagged financial performance measures become noisier and
less useful in evaluating managerial performance (Krafft
1999).
Regarding market knowledge, frequent changes in
competitive or customer behavior, as implied by strong
market dynamism, may lead to changes in market-related
cause-and-effect relationships (Mittal, Kumar, and Tsiros
1999). However, if these relationships change, as changes
in correlations between managerial actions and customer
satisfaction might indicate, greater CMPMS allows for
more precise inferences of these changes and is expected to
enhance market knowledge (Hall 2008). This line of rea-
soning is consistent with findings in the dynamic decision-
making literature that learning in a dynamic setting requires
a broad feedback base, consisting of relationships between
the decision maker, its actions, and its environment (Sen-
gupta and Abdel-Hamid 1993).
In the case of low market dynamism, information asym-
metries are lower and cause-and-effect relationships
between marketing constructs are more stable over time. In
this state, a less comprehensive MPM might be sufficient to
enhance the degree of marketing alignment and market
knowledge. Thus, we hypothesize the following:
H7: CMPMS is positively associated with (a) marketing align-
ment and (b) market knowledge in the case of high market
dynamism, whereas in the case of low dynamism, no
effect occurs.
Method
Data Collection , Sample Description , and Measure
Assessment
We employed a survey methodology for our data collection
Our unit of analysis is the business unit within a firm or, i
no specialization into different business units exists, the
entire firm. We conducted a large-scale mail survey acros
several industry and service sectors to capture a broad var
ety of market settings. We obtained a firm sample from a
commercial provider and limited the target population to
firms with a relevant amount of marketing and sales activi
ties. In 1500 cases, we identified a top manager who wa
responsible for all marketing and sales activities within th
firm ("marketing manager") and a top executive from th
management accounting department who was responsible
for performance measurement in marketing and sale
("management accounting executive"). Subsequently, w
sent a questionnaire with a personalized letter to thes
marking report and practitioner-oriented papers from our

62 1 Journal of Marketing, May 2012

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managers (management accounting executives) was 17 (16) TABLE 2
years.7 Sample Distributions by Industry, Key Informant,
and Firm Size
Tests for self- selection biases. We performed several
analyses to test for self-selection biases. First, we tested for A: Sample by Industry3
nonresponse bias, as Armstrong and Overton (1977) suggest.
No construct between early and late responders differed at Sample Sample
Industry Survey (%) Archival (%)
the p < .05 level. We also analyzed whether the firms we ini-
tially contacted and the responding firms systematically dif- Automotive 10.4 12.2
fered in terms of industry or firm size. Chi-square goodness- Financial services 13.4 12.2
Chemicals 9.0 8.9
of-fit tests revealed no systematic differences between the
Pharmacy 2.0 3.2
population and our main sample in terms of industry affilia-
Retailing 9.4 6.5
tion and number of employees (both ps > .40). Finally, we Mechanical engineering 11.4 13.8
collected archival data available for a subset of firms to vali-
Consumer goods 10.4 10.5
date ROS as our measure of financial performance and to Utilities 7.5 9.7
obtain ROA for use in our analyses. Table 2 shows the distri- Metal production 5.0 6.5
Electronics 7.0 6.5
bution of our final sample and the archival data subsample
Logistics and transportation 5.0 6.5
with respect to industry, key informant, and firm size.
Building and construction 4.5 2.4
General measurement approach. We used two types of Information technology 2.0 .8
measures in our survey: reflective and formative measures. and telecommunication
Other 3.0 .3
If observed variables were manifestations of underlying
constructs, we used a reflective measurement model and B: Sample by
assessed the scales' psychometric properties with confirma-
tory factor analyses (Anderson and Gerbing 1988). If a con- Sample Sample
Key Informant Survey (%) Archival (%)
struct is a summary index of observed variables, a formative
measurement model is more appropriate (Diamantopoulos Head of sales / division 22.1 22.8
and Winkelhofer 2001). In such cases, observed variables Head of marketing 14.4 14.2
cover different facets of the construct and can be expected Chief of management accounting 37.6 35.8
not to have significant intercorrelations.
Head of marketing / sales control 11.0 11.8
Chief executive officer 11.4 11.0
Scale development and assessment. For the main con- Other 3.5 4.5
structs of our study, we could rely only partly on established
C: Sample by F
scales in prior work. Thus, we conducted qualitative field
interviews with several executives from marketing and Sample Sample
management accounting. These interviews guaranteed that Key Informant Survey Archival
our construct design was appropriate, that all relevant < 500 employees 23.9 22.8
aspects were included, and that practitioners found the sur- 500-999 employees 27.9 26.8
vey questions understandable. 1000-2499 employees 19.4 20.3
With respect to our central construct, CMPMS, we 2500-4999 employees 14.4 16.3
relied on related empirical studies in management account- 5000-9999 employees 7.5 6.5
10,000-50,000 employees 6.5 7.3
ing (Chenhall 2005; Hall 2008) and adapted them to a mar-
> 50,000 employees .4 .0
keting context by incorporating conceptual insights from
aPanel A: Sample based on n = 201 firm
marketing literature (Clark, Abela, and Ambler 2006a;
(archival ROA data). The null hypothes
Pau weis et al. 2009). We measured marketing alignment tion cannot be rejected at the p = .68 le
with three items indicating the extent to which managers bPanel B: Sample based on n = 402 key
strive for marketing strategy implementation (Kaplan and (survey) and 246 key informants of n
data). The null hypothesis of same sam
Norton 1992; Vorhies and Morgan 2005). We measured rejected at the p = .95 level.
cPanel C: Sample based on n = 201 fir
firms (archival ROA data). The null hyp
7We collected the data for this study in two waves. We collected
tribution cannot be rejected at the p =
the first part before paper submission and the second part during
the review process. We matched both data sets for our analyses. To market knowledge with four items
ensure that both data sets are not structurally different, we used
the absolute level of knowledge (M
Mplus 6.0 to estimate a model in which both parts of the data are
constrained to be equal. We could not reject the model (p > .10), and two of which covered the capa
and it shows excellent values of fit (%2/d.f. = 1 .07, comparative fit for deviations from achieved targe
index = .97, and root mean square error of approximation = .024), ing planning literature especially s
indicating that both data sets are not substantially different. In a We measured firm performance
second test, we compared all pairwise correlations of both data
First, we assessed financial perfor
sets. We found that only one correlation changes its significance
level (p < .05), and this correlation refers to only two control over the last three years relative t
variables. Third, we replicated all analyses using a control dummy (hereafter ROS) (Homburg and P
variable for the type of data set and obtained stable results. subjective evaluation assessed on a

Marketing Performance Measure

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literature suggests that a single-item measure is appropriate ing managers' responses, because they are expected to have
because the participating marketing managers had to evalu- deep knowledge of and leadership experience in the market-
ate a concrete construct they confront in their everyday work ing organization.9 As Table 3 shows, all Cronbach's alphas,
(Bergkvist and Rossiter 2007). We used a three-year average composite reliabilities, and average variances extracted are
to explicitly rule out any influence of firm-specific exoge- above or slightly below the threshold values discussed in
nous shocks on our results. We asked for ROS relative to the the literature (Bagozzi and Baumgartner 1994). Further-
industry average because our study includes firms from moremore, our measures indicate discriminant validity according
than 13 industries. Because different product market char- to the criterion of Fornell and Larcker (1981).
acteristics lead to very different, industry-specific profit mar-
gins, we believed that comparing absolute ROS over differ- Model Estimation and Hypotheses-Testing
Procedure
ent industries could bias our analyses (Short et al. 2007). 8
We validated the ROS performance measure reported For our analyses, we used two model estimation techniques.
by marketing managers in several ways. First, we calcu- For the main model, we employed a covariance-based full
lated different measures of convergence between the mar- information estimation procedure using the software pack-
keting managers' reported ROS and those reported by man- age Mplus 6.0. This approach allows for the simultaneous
agement accounting executives. We obtained a bi variate estimation of all paths in one single model and provides
correlation of r = .67 (p < .0001). We further obtained a established goodness-of-fit indicators for model validation.
value of .89 for the computed rwg index (James, Demaree, To test H5-H7, we used regression analyses with inter-
and Wolf 1984), a value of .68 for the intraclass correlation action terms, which allowed us to test the specific nature of
(Glick 1985), and a value of .23 for the average deviation interaction effects appropriately (Cohen et al. 2003). We
index measure (Kumar, Stern, and Anderson 1993). All formulated the following two regressions:
measures indicate a high degree of consistency. Second, we (1) Marketing alignment = a + ßj x CMPMS
obtained a comparable ROS measure from the AMADEUS
+ ß2 X differentiation strategy
database for 115 firms of our sample (57%) by subtracting
the industry mean ROS over the past three years from the + ß3 x marketing complexity
objective individual firm mean ROS over the past three + ß4 x market dynamism
years. This procedure reveals a correlation of r = .64 (p < + ß5 x CMPMS x differentiation strategy
.0001) between both measures. These convergence analyses
+ ß6 x CMPMS x marketing complexity
support the validity of the ROS measure.
Our second measure of firm performance is market suc- + ß7 x CMPMS x market dynamism
cess (Vorhies and Morgan 2005). In contrast to ROS, it cap- + ßn x controls + 8, and
tures long-term performance aspects of market performance
and is measured by two items: the creation of customer sat- (2) Market knowledge = a + ßj x CMPMS
isfaction and the achievement of a targeted market share + ß2 x differentiation strategy
(see the Appendix). As for our dependent variable ROS, we
+ ß3 x marketing complexity
measured market success as a three-year average compared
+ ß4 x market dynamism
with competition (Vorhies and Morgan 2005).
Our third measure of firm performance is ROA, mea- + ß5 x CMPMS x differentiation strategy
sured as the three-year industry-adjusted ROA. As with the + ß6 x CMPMS x marketing complexity
ROS measure in our validation analysis, we subtracted the
+ ß7 x CMPMS x market dynamism
industry mean ROA over the past three years from the firm
+ ßn x controls + £.
mean ROA over the past three years using data from the
AMADEUS database (n = 123). We calculated the respective first partial derivative, which
For our moderators and controls, we relied on estab- shows the following standardized empirical values for both
lished scales. The Appendix provides detailed information equations:
about construct definitions, items for measurement, the
¿^Marketing Alignment
respective data sources, and the literature on which the con-
aCMPMS
struct measurement is based. Using items developed from
field interviews and literature reviews, we measured the = .20 + .1 1 [ß5 ] x differentiation strategy
components of CMPMS on the basis of responses of man-
-I- .04 [ß6 ] x marketing complexity
agement accounting executives because their daily business
includes monitoring the use and quality of those systems. + .09 [ß7 ] x market dynamism, and
Furthermore, we measured both marketing alignment and
market knowledge as well as all other controls by market-
9We empirically tested whether our results are robust to a mea-
surement of CMPMS by marketing managers and a measurement
8To check this argument, we downloaded financial data for of performance outcomes and controls by management accounting
1 ,073,614 firm-years from the AMADEUS database. We calculated executives. The results regarding the core constructs remain quali-
absolute ROS measures using our industry classification showntatively
in unchanged, and Chow's (1960) test does not show any
Table 3. Average ROS values by industry vary between 3.3% (retail-
significant differences on the core constructs and only on one con-
ing) and 13.1% (information technology and telecommunication). trol variable (differentiation strategy).

64 1 Journal of Marketing, May 2012

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Marketing Performance Measur

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 0Marketing Knowledge market success (ß = .147,/? < .05 for marketing alignment,
aCMPMS and ß = .135,/? < .05 for market knowledge), and ROA (ß =
.175,/? < .05 for marketing alignment, and ß = .155,/? < .05
= .20 + .06 [ß5 ] X differentiation strategy
for market knowledge). Notably, a comparison of these stan-
+ .04 [ß6 ] X marketing complexity dardized coefficients shows a slightly higher association for
marketing alignment than for market knowledge. Given the
+ .06[ß7]x market dynamism.
significance of all four paths, we conducted a post hoc test
for the significance of the full indirect chain and found evi-
In a next step, we tested for slope significances for three
levels of the respective moderator: at one standard deviation
dence for full empirical mediation (p < .01).
below the mean (-la), at the mean level (Mean), and at one The effects of control variables reflect prior expecta-
standard deviation above the mean (+1g) (Kumar, Heide, tions. For example, MPM quality is significantly, positively
and Wathne 2011). For interpretative reasons, we mean- related to both marketing alignment and market knowledge,
centered all scales, which allows for a reasonable interpreta- whereas decentralization is significantly, negatively related
tion of the individual slopes because all other constructs and to managerial alignment and formalization as an alternative
interaction terms show a value of 0 at their sample mean control mechanism is significantly, positively related to
value. We measured all reflective constructs consisting ofmanagerial alignment (Bergen, Dutta, and Walker 1992).
several items, including CMPMS, by an item-parceling Furthermore, market dynamism is negatively associated
approach, as is typical in regression analyses (Bagozzi andwith market knowledge. Finally, we find that differentiation
Edwards 1998). The correlation between a simple factor strategy is positively associated with all three measures of
firm performance, a result that researchers have often
score and the result of the item-parceling approach for
CMPMS is r = .97 (p < .001). Furthermore, we checked that observed in samples containing firms in highly developed
countries (Kim and Lim 1988; Van der Stede, Chow, and
our specified regressions did not suffer from multicollinear-
Lin 2006).
ity or heteroskedasticity (Wooldridge 2002). To test for
multicollinearity, we calculated variance inflation factors Because of our cross-industry setting, R-square levels
are between .12 and .19 and thus are lower, as in regres-
for each of our regressions, all of which are below 2.0, indi-
cating no severe heteroskedasticity problems in our analy- sions of comparable studies that examine performance mea-
ses (Cohen et al. 2003). We tested for heteroskedasticity surement effects in single industries (Ittner, Larcker, and
using White's (1980) test. We cannot reject the null hypoth- Randall 2003; O'Sullivan and Abela 2007). However,
esis that the variance of the residuals is homogenous in any because the intention of this study is not to fully explain
regression (p > .30), indicating no heteroskedasticity in any marketing alignment, market knowledge, or firm perfor-
of our regressions. mance but rather to test specific hypotheses, R-square lev-
Finally, we tested for potential common method vari- els are of lower importance.
ance between all constructs the marketing managers pro- Third, we tested H5-H7, which propose contingent
vided (Podsakoff et al. 2003). We performed the method effects of differentiation strategy, marketing complexity,
that Lindell and Whitney (2001) propose and adjusted the and market dynamism. The plots and the significance tests
correlation matrix by the lowest positive pairwise correla- for the slopes appear in Figure 2. Although coefficient sizes
tion value. The result is a partial correlation adjustedare slightly lower in the regression analyses, the results of
matrix. No pairwise correlation lost significance, indicating partial derivative analyses, including all interaction terms and
no evidence of a common method bias.10 sample values, confirm our results from Table 4. On the sam-
ple mean value of all three moderators, the associations of
CMPMS to marketing alignment (ß = .20, upper bound p <
Empirical Results .01) and market knowledge (ß = .20, upper bound p < .05)
Table 4 shows empirical results for the main model. Overall,
are positive and significant.
all three models regarding different performance measures
In addition, we can confirm H5-H7. In particular, we
(ROS, market success, and ROA) show acceptable goodness-
find the association between CMPMS and marketing align-
of-fit indexes. Hi and H2 address the influence of CMPMS
ment to be positive and significant for a high degree (+la)
on marketing alignment and market knowledge. We find
of all three moderators (/? < .01). In contrast, the relation-
support for both hypotheses with similar coefficients (e.g.,
ship between CMPMS and marketing alignment is not sig-
ß = .190, p < .01 for marketing alignment, and ß = .185; /7 <
nificant for a low degree (-la) of differentiation strategy
.01 for market knowledge; see Table 4, Models 1 and 2).
and market dynamism and is of borderline significance for
We confirm H3 and H4, which hypothesize positive effects
marketing complexity (/? = .098). Regarding CMPMS and
of marketing alignment and market knowledge on firm per-
market knowledge, we also find an effect for a high degree
formance, measured as ROS (ß = .190,/? < .01 for market-
(+la) of all three moderators (/? < .01) and no effect for a low
ing alignment, and ß = .144,/? < .05 for market knowledge),
degree of marketing complexity and market dynamism
(-la). Moreover, we find very moderate significance for a
,0In particular, no bi variate correlation changes its significance
low level of differentiation strategy (/? = .093).
level (for p < .05, two-tailed) except the correlation between
decentralization and market dynamism (change from p < .05 to p < Because of the borderline significance for low values of
.10). Thus, all significant correlations remain significant after marketing complexity on the CMPMS-marketing alignment
adjustment. relationship and of market dynamism on the CMPMS-market

66 1 Journal of Marketing, May 2012

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Marketing Performance Measurement System

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knowledge relationship, we further examined both links for egy and market dynamism, we do not find a significant
even lower values of both moderators (in particular -1 .5 x effect of cause-and-effect relationships on marketing align-
a rather than -1 x a). In both cases, statistical significance ment (p > .10), but we find a strong effect for low values of
decreased, leading to no contingent effects for both moder- market dynamism (p < .05). The results pertaining to
ators (p = .16 for marketing complexity, and p = .24 for breadth reveal that this subcomponent does not show a
differentiation strategy). strong positive association with marketing alignment, inde-
pendently of moderators' values. Only for high values of
Post Hoc Analyses Regarding Subcomponents of differentiation strategy and market dynamism did we find a
CMPMS
moderate significance (p < .10).
To examine which of the three subcomponents of CMPMS Regarding market knowledge, analysis shows that its
mainly influence its performance effects under different association with CMPMS is mainly driven by the subcom-
contingent states and to derive normative statements for ponent cause-and-effect relationships, which is highly sig-
managerial practice, we further analyzed contingent effectsnificant for medium and high values of all moderators (p <
.05) and even moderately significant for low values of dif-
of breadth, strategy fit, and cause-and-effect relationships.
In doing so, we used the same procedure as indicatedferentiation
in strategy (p < .10). For strategy fit, we find a
Equations 1-4. In particular, we regressed marketing align-positive effect only at a high level of marketing complexity.
ment and market knowledge on breadth, strategy fit, and For breadth, we find no significant effects independently of
cause-and-effect relationships, as well as all controls andthe respective moderator.
interactions between all three subcomponents and all threeRemarkably, all slopes are estimated at mean values of the
remaining two subcomponents, indicating that, for example,
moderators, leading to a total of nine interaction terms per
regression. We estimated slope values and their signifi-
the effects of strategy fit should be interpreted at a mean level
cances again for low (-Ig), mean, and high (+la) valuesof
ofbreadth and cause-and-effect relationships. We comment
all three moderators. Table 5 lists the results. on and discuss implications of these differentiated results
for research and managerial practice in detail subsequently.
In general, the pattern of results confirms those reported
in Figure 2. All three subcomponents of CMPMS provide
benefits at mean or high levels of differentiation strategy,
Endogeneity Checks and Additional Analyses
marketing complexity, and market dynamism. We further We also addressed potential endogeneity concerns referring
find that marketing alignment is mainly affected by strategy
to a potential recursive relationship between market knowl-
fit and the cause-and-effect relationships of performance edge and CMPMS . We employed an instrumental variables
approach using the number of performance measures
measures. Notably, for high values of differentiation strat-

TABLE 5
Results of Contingent Effects of the Three CMPMS Components of Breadth, Strategy Fit, and Cause-a
Effect Relationships (Moderated Regression Slope Analysis Showing Marginal Effects)
Dependent Variable: Dependent Variable:
Marketing Alignment Market Knowledge
Cause-and- Cause-and-
Extent of Strategy Effect Strategy Effect
Contingent Breadth Fit Relationships Breadth Fit Relationships
Contingency Variable Variable (A) (B) (C) (D) (E) (F)
Differentiation Strategy
(1) Low (-1a) -.036 .105 .151 -.066 .052 .193*
(2) Mean .027 .115* .111* -.043 .065 .217***
(3) High (+1 a) .092* .124** .070 -.022 .079 .241**
Marketing Complexity
(4) Low (-1a) .150 -.006 .002 .142 -.079 .078
(5) Mean .024 .115* .106* -.043 .065 .208**
(6) High (+1 a) -.101 .237** .213** -.229 .209** .338***
Marketing Dynamism
(7) Low (-1a) -.156 .049 .305** .022 .056 .127
(8) Mean .024 .115* .111* -.043 .065 .217***
(9)

'Significant at the 1
''Significant at the 5
'''Significant at the
Notes: Sample based
Alignment/3 Bread
and-Effect Relation
than nonsignificant
(Cohen et al. 2003,

68 / Journal of Ma

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 FIGURE 2
Results of Hypotheses Testing (Moderated Regression Slope Analysis Showing Marginal Effects)

'Significant at the 10% level.

"Significant at the 1% level.
Notes: Sample based onn = 201 firms. Evaluated with bootstrapped confidence intervals using 1000 random resampling iterations. The table
shows standardized slopes estimated with OLS as the first partial derivatives 3 Marketing Alignment/d CMPMS and d Market Knowl-
edge/3 CMPMS.

reported by management accounting executives as andecrease or seem to be not fully perceived by key users of
instrument for CMPMS. The instrument fulfills the criterionperformance measurement (Maitz and Kohli 1996).
of relevance (incremental explanatory power to the first- Third, and beyond incorporating a long-term measure of
stage regression at p < .001) and of exogeneity in that thefirm performance (market success), we examine how our
Durbin-Wu-Hausman test fails to reject the null hypothesismain performance variable ROS is related to firms' market
that CMPMS is exogenous (p = .82). Furthermore, thevalue.11 In particular, as Table 6 shows, we analyze its
effect of CMPMS on market knowledge that we find using
effect on the market-to-book ratio using the fixed-effect
the instrumental variables approach (ß = .22; p < .05) is
estimator as suggested by a Hausman test (Wooldridge
2002). We use COMPUSTAT data from 1998 to 2010 and
similar to that which we report in Table 4. Consequently, we
do not believe that endogeneity caused by a potential recur-
exclude firm years with missing or implausible values. The
sive relationship is a significant issue. full sample construction process is available in the Web
Second, we analyzed a potential moderating role ofAppendix (see www.marketingpower.com/jm__webappendix).
MPM quality on the influence of CMPMS on both market-As Table 6 shows and as we expected, ROS is related sig-
ing alignment and market knowledge (Ittner and Larckernificantly to the firm's market-to-book ratio in all regres-
2001). We regressed both variables on CMPMS, the inter- sions (p < .0001). However, the size of the coefficient
action between CMPMS and MPM quality, and all controls between .216 and .321 is particularly noteworthy, indicating
used in Equations 1 and 2. We find a positive, though notthat ROS as a measure of current performance has a consid-
significant, interaction in both moderated regressions. erable impact on a firm's market value.
These results indicate that at a certain level of quality in an
MPMS, the marginal benefits of measurement quality 11 We thank an anonymous reviewer suggesting this analysis.

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 TABLE 6
Association Between ROS and Firm's Market Value

Sample 1 Sample 2
Market-to-Book Market-to-Book Market-to-Book Market-to-Book

ROS .237* .321* .216* .271*

Market-to-book (t - 1 ) .106* .043*
Constant included Yes Yes Yes Yes
F-value 19.18* 271.29* 586.76* 672.71*
Number of observations 58,254 48,862 43,066 36,920
Number of groups (firms) 9392 7952 8219 7168
'Significant at the 1% level.
Notes: All regressions results are based on a fixed-effects estimator. Sam
com/jm_webappendix). Unstandardized coefficients are shown. ROS
of equity.

Discussion Our results also confirm the view that, in general, firms
should align performance measurement with the internal
Summary of Findings and Academic Contribution
and external environment, though prior work has been
silent with regard to which specific environmental con-
The development and use of an appropriate set of marketing
structs (Hoque and James 2000; Ittner and Larcker 2001;
performance measures is a crucial task in marketing man-
Morgan, Clark, and Gooner 2002). Furthermore, our results
agement. Given the mixed empirical evidence and recent
contradict the view that comprehensive performance mea-
calls for comprehensive performance measurement sys-
surement systems are merely a management fashion, a
tems, the empirical findings of our study are especially
recent critiques have proposed (Norreklit 2000; Voelpel
valuable because they provide a more differentiated picture
Leibold, and Eckhoff 2006). Moreover, our empirical
of how frequently discussed properties of performance
results are consistent with those of several quantitative cas
measurement contribute to firm performance.
studies in management accounting that provide empirical
First, our investigation shows that marketing alignment
evidence from one firm. For example, in the hotel industry
and market knowledge are two important mediating
which is typically characterized by a high degree of both
variables between MPM and firm performance. This result
differentiation and market dynamism, an increase in finan-
is surprising because prior work has not investigated under-
cial performance occurred after the implementation of an
lying mechanisms related to how MPM influences firm per-
incentive plan that included nonfinancial performance mea
formance (O' Sullivan and Abela 2007). While prior work
sures (Banker, Potter, and Srinivasan 2000).
has proposed the underlying indirect mechanisms (Table 1),
Third, the post hoc analyses shown in Table 5 provide
this study is the first to shed light on the chain of effects
detailed results regarding the individual effects of the three
from MPM to firm performance. The findings point to the
subcomponents of CMPMS on both marketing alignment
need for more complex research models for analyzing per-
and market knowledge under different states of the three
formance measurement aspects in marketing (Morgan,
moderators.
Clark, and Gooner 2002). Moreover, this study integrates
Breadth
different streams in the marketing literature that argue for . We find that breadth of performance measures
has no
either strategy implementation (Morgan, Clark, and Gooner performance effects in terms of market knowledge
and only
2002) or enhanced learning as a potential outcome of per- modest performance effects in terms of marketing
formance measurement (Clark, Abela, and Ambleralignment.
2006b; Surprisingly, breadth provides only positive
(though
O'Sullivan and Abela 2007). An implication for future moderate) associations with marketing alignment
stud-
ies examining the performance measurement of firms in theiscase
to of high differentiation strategy and market
consider potential indirect effects. dynamism. These results extend single-industry findings of
previous studies (Ittner, Larcker, and Randall 2003; O'Sul-
Second, we find strong empirical support for perfor-
mance outcomes of CMPMS depending on marketing livanstrat-
and Abela 2007) to a cross-industry setting and chal-
egy, marketing complexity, and market dynamism. lenge prior work in marketing calling for broader and more
In par-
diversified measurement approaches (Rust, Lemon, and
ticular, we find associations of CMPMS with marketing
Zeithaml 2004).
alignment or market knowledge for mean and high but not
for low values of these three moderators. In other words,
Strategy fit. We also find that strategy fit of perfor-
our moderation analyses provide evidence thatmance CMPMS measures has strong effects on marketing alignment
does not pay off for firms that do not follow a differentia-
for mean and high levels of all three moderators. In line
tion strategy, that have a low level of marketing complexity,
with our hypotheses, these results confirm the view that
and that operate in a market with low dynamism.implementation
In these of marketing strategy is more successful if
settings, investment in a higher degree of comprehensive-
it is reflected in performance measures (Kaplan and Norton
ness in performance measurement systems does not seem
1992). to
Notably, the findings do not hold for low contingent
be economically meaningful. values of differentiation strategy, marketing complexity,

70 1 Journal of Marketing, May 2012

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and market dynamism. With regard to market knowledge, measures. Further research could also address the role of
we find statistical associations only in the case of high mar- measurement quality in a more differentiated manner- for
keting complexity, when the strategic fit of performance example, by considering attributes such as timeliness, pre-
measures seems to support managers by focusing on the ciseness, or sensitivity (Ittner and Larcker 2001).
most strategically relevant information for learning, thus Second, our study does not determine which specific
mitigating complexity (Chenhall 2005). Our results also apply metrics are key leading indicators of performance and
the experimental evidence of Farell, Kadous, and To wry should be incorporated into an MPMS. In this regard, prior
(2008) to a real- world setting. These authors find that pro- research has shown that an optimal set of concrete perfor-
viding participants with strategic performance indicators mance measures is very firm specific (Griffith and Neely
reduces their task complexity simply by reducing their set 2009). Addressing such a research question would require a
of strategic choices. single-firm case-study setting to take manager- and firm-
Cause-and-effect relationships. In general, cause-and- specific circumstances into consideration (Banker, Potter,
effect relationships of performance measures show stronger and Srinivasan 2000) and would entail advanced econometric
effects than both other components. The results clearly indi- methods of causality testing (Lautman and Pauwels 2009).
cate the usefulness of market knowledge for mean and high Third, our study does not apply long-term, stock-market-
based measures of firm performance, such as stock returns
states of all three moderators and even for low values of dif-
ferentiation. These results emphasize the importance of or market capitalization, because of its focus on the busi-
causal business modeling for individual and organizational ness unit level of firms, for which these measures are not
learning (Kelly 2007) and extend experimental findings generally available. Thus, our measures of financial perfor-
showing that providing managers with cause-and-effect mance (ROS, ROA) might neglect long-term performance.
relationships improves performance, even independently of We address this issue by measuring long-term performance
their accuracy (Kelly 2010). through market success, which has the additional advantage
The effects pertaining to marketing alignment differ of being more closely linked conceptually to the marketing
strongly with regard to the underlying moderator. We find function (Vorhies and Morgan 2005). In Table 6, we further
only moderate associations for a mean level of differentia- show that ROS, although often criticized as a measure of
tion strategy and expected associations for mean and high current performance, has a considerable impact on a firm's
contingent states of marketing complexity. Again, providing long-term performance (market-to-book ratio). Although
the Hausman test shows that the fixed-effects estimator is
cause-and-effect relationships seems to support marketing
managers in the case of high task complexity, but for imple- the most preferable one, the results should be interpreted
menting a differentiation strategy, strategy fit of perfor- with caution because the simple analyses shown in Table 6
mance measures seems to be more important. For market are not free from potential multicollinearity problems
between ROS and the fixed effects.
dynamism, our results are surprising. Here, cause-and-
effect relationships are more beneficial for low rather than Fourth, our study does not consider institutional out-
high market dynamism, which challenges H7a. A possible comes of MPM. In particular, without testing specific
explanation is that "a firm's causal models do not remain design characteristics, prior research has suggested that
static" (Kelly 2010, p. 578), and firms face difficulties in measuring and reporting marketing performance is crucial
achieving a timely adjustment of cause-and-effect relation- for marketing's influence on decisions within the firm
ships if market dynamism is high. This explanation might (O'Sullivan and Abela 2007; Verhoef and Leeflang 2009).
especially hold true if cause-and-effect relationships are The findings from this study indicate that further research
derived from models that require a long time series to esti- could analyze which specific attributes of an MPMS (e.g.,
mate. Taken as a whole, the evidence shows that cause-and- breadth, strategy fit, cause-and-effect relationships, or mea-
effect relationships improve market knowledge at a certain surement quality) are associated with greater decision influ-
level of all three moderators (and independently of their accu- ence of the marketing function.
racy) but, in general, do not improve marketing alignment.
Managerial Implications
Limitations and Avenues for Further Research
In addition to offering a more differentiated explanation of
In addition to our findings, several study restrictions
why are
the implementation of sophisticated performance mea-
noteworthy. First, we consider the organizational level the approaches stays below expectations in many firms
surement
unit of analysis. Thus, we cannot examine potentially(Neely
nega- and Bourne 2000), the post hoc findings in Table 5
tive effects of comprehensiveness that might play a deliver
role at comprehensive guidelines for implementation (for a
an individual managerial level. For example, researchmore
out-detailed discussion, see the Web Appendix at www.
side the marketing literature has shown that managersmarketingpower.com/jm_webappendix).
are Notably, all coeffi-
systematically biased toward financial measures (Banker,
cients in Table 5 are estimated at a mean level of the respec-
Chang, and Pizzini 2004) and might suffer from informa-
tive other two subcomponents. Therefore, for example, the
results do not allow for the conclusion that breadth is not
tion overload as the number of measures increases (Schick,
Gordon, and Haka 1990). Further research could examine
beneficial for market knowledge at all but only that it is not
the effects of comprehensiveness in performance measure-
incrementally beneficial beyond a mean level of strategy fit
and cause-and-effect relationships. With that caveat, the
ment systems on individual decision making (Kelly 2010)
results offer the following implications.
and explicitly investigate an optimal number of performance

Marketing Performance Measurement Systems 1 71

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 First, the results show differentiated effects regarding
marketing alignment and market knowledge. Managers who
design their performance measurement system with the
intention of increasing marketing alignment should focus
first on improving the strategy fit of performance measures
and then on providing cause-and effect-relationships. If
managers are interested in acquiring market knowledge
within their marketing organization, they should focus on
cause-and-effect relationships.
Second, the results provide specific implications with
regard to the contingent moderator values. Firms following
a strong differentiation strategy should consider the strategy
fit of performance measures and increase the breadth to
improve marketing alignment. For improving market
knowledge, our results emphasize the importance of devel-
oping cause-and-effect relationships. Firms facing a high
degree of marketing complexity should concentrate on both
strategy fit and cause-and-effect relationships. Firms facing
strong market dynamism should focus on breadth and strat-
egy fit of performance measures to increase marketing
alignment and on cause-and-effect relationships to improve
market knowledge.
Third, and surprisingly, the results show that in some
circumstances, increasing breadth, strategy fit, or cause-
and-effect relationships does not provide any benefits. For
example, increasing breadth or strategy fit of performance
measures does not typically pay off in increased market
knowledge and only moderately pays off in marketing
alignment. These findings are particularly notable because
they provide a much more differentiated picture of market-
ing practice. In many circumstances, a lean performance
measurement approach might be adequate, and comprehen-
sive performance measurement systems such as the balanced
scorecard should not be adopted as a "full package solution."
Fourth, the standardized coefficients can estimate eco-
nomic returns of performance measurement design in mar-
keting. Given that costs of increasing the three subcompo-
nents are firm specific, managers can use these results to
estimate the marginal benefits of increasing breadth, strategy
fit, or cause-and-effect relationships. For example, improving
strategy fit at high levels of differentiation strategy shows a
35% stronger effect than increasing breadth (.204/181).
Increasing cause-and-effect relationships at high levels of
marketing complexity has a 62% stronger payoff with
regard to market knowledge than improving strategy fit
(.338/ .209).
Fifth, our results might be particularly useful for
increasing marketing's level of accountability in the firm.
The marketing literature contains numerous suggestions
that an appropriately designed MPMS will likely to raise
marketing's standing at the top management level and
enhance its decision influence on corporate strategy (O' Sul-
livan and Abela 2007; Verhoef and Leeflang 2009).
Overall, agreement exists in the practice-oriented mar-
keting literature that the topic of MPM has, after long
neglect, reappeared on the agenda of many firms. Our study
contributes to the understanding of whether and when this
new focus is justified.

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Marketing Perfor

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