The Impact of Marketing Expenditures on Financial Performance: A Cross-Industry Analysis Using Activity-Based Costing (ABC)

This paper discusses the correlation between the amount of money spent on marketing and financial performance, specifically use of the Activity-Based Costing system (ABC) as an instrument to better quantify the Return on Marketing Investment. Conventional accounting systems tend to generalize marketing prices and this causes inefficiency and cost driver insight deficiency. Through the use of ABC, companies can allocate indirect costs of marketing to particular product, services or customer segments to make more accurate strategic decisions. This paper will look at the impact of various marketing investment activities like digital campaign promoting, brand building, customer relationship building on several metrics of profitability like ROI, gross margin and customer lifetime value (CLV) using a cross-industry sample of companies. The analysis, based on a mix of financial statement analysis, industry reports and structured interviews of marketing and finance professionals, is held in May, 2023. Findings indicate that companies that use ABC along with the fine-grained marketing analytics do much better towards cost visibility and efficiency in resources allocation. In addition, some marketing initiatives, especially those that are focused on customer retention and high personalization based on the use of data, have a more robust relationship with the longer-term financial performance. The results point out to the necessity of combined planning between the accounting and marketing units, which will open the road to a more strategic and sustainable business activity.