Efficiency, effectiveness and productivity of marketing in services
How can a service firm right-size marketing expenses and yet strive to maximize revenue? This paper represents the first attempt to model these efficiency and effectiveness issues using a 49-unit Asia–Pacific hotel chain as illustration. We employ a triangular DEA model with total expenses (controll...
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Published in | European journal of operational research Vol. 170; no. 1; pp. 265 - 276 |
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Main Authors | , , |
Format | Journal Article |
Language | English |
Published |
Amsterdam
Elsevier B.V
01.04.2006
Elsevier Elsevier Sequoia S.A |
Series | European Journal of Operational Research |
Subjects | |
Online Access | Get full text |
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Summary: | How can a service firm right-size marketing expenses and yet strive to maximize revenue? This paper represents the first attempt to model these efficiency and effectiveness issues using a 49-unit Asia–Pacific hotel chain as illustration. We employ a triangular DEA model with total expenses (controlling for number of rooms) as the raw input, marketing expenses as intermediate output/input and revenues from room rentals and F&B as final outputs. We infer that efficiency tails off when more than 12% of the budget is expended on marketing activities. In terms of effectiveness, we find that all the units rated as relatively inefficient can accrue increasing returns to scale in revenues from marketing activities. By contrast, in the productivity stage linking the raw inputs to the revenues, we observe mostly decreasing returns to scale. Our results highlight the crucial role of marketing in service organizations. |
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ISSN: | 0377-2217 1872-6860 |
DOI: | 10.1016/j.ejor.2004.04.050 |