Identifying key opportunities in indian industries to optimise marketing spending across business cycles

Abstract

This Study of factors affecting marketing budgeting decisions in the Indian context can be divided broadly into three parts – literature study on the subject matter, secondary data research for the select Industries and companies including comparison of Indian players with a similarly profiled international firm and primary research based on interviews with marketers across Industries. While marketing journals and texts in the field have been consulted for literature study; CMIE Prowess data base and company annual report have been extensively used for secondary research. For primary research divergent industries e.g. Education, Insurance, Healthcare, Manufacturing and Food have been covered.

The Study findings can be broadly summarized as 1. Laggards (in profitability) show reactionary marketing spending patterns as compared to leaders’ proactive marketing infrastructure building ones. 2. Companies which spend less on marketing spend might also exhibit better profitability by means of greater profitable product mix, positioning themselves up the marketing value chain and by employing contract sales force. 3. Industry enjoys lesser return per rupee expensed in marketing operations in overseas as compared to domestic markets. 4. The companies with large clients and high repeat business also report higher revenue growth and lower marketing costs. 5. Being more aggresive in marketing spending during the adverse business cycles does not seem to generate profitablity to the companies in constrution equipemets Industry contrary to popular wisdom. This can be explained as sometimes R & D expenses are included in selling and general administrative (SG &A ) in this Industry. Companies which are, in general, laggards in R & D expenses cannot expect better returns on their marketing expenses in a short period of time as compared to the competition. 6. The companies which derive their revenues more from corporate or hospitality industry construction within the real estate Industry show better profitability because the SEZ developer enjoys tax incentives from the Government (100% income tax exemption for a block of 10 years in 15 years)1. The limitation of the study is that segment wise comparison to establish closer interactions between companies’ budgeting methodologies and expected returns could not be established mainly because of unavailability of segment wise analysis on Prowess. Besides although international firms to compare the domestic players have been carefully chosen; no segment wise comparison has been done.