Drivers of Organic Sales Growth

Growth PathsBahadir, S. C.; Bharadwaj, S.; Parzen, M. · 2009International Journal of Research in Marketing
Topicsorganic growth·sales growth·pooled studies·advertising·innovation·market orientation·omitted variable bias

Picture two growth plans on the table. One pours the budget into advertising the current lineup; the other splits it between new-product innovation and the advertising to tell people about it. Pooling many studies from 1960 to 2008, this research finds innovation drives organic growth more strongly than any other marketing lever, with advertising the second-strongest. The signal is not "advertise harder." It is "create something worth communicating, then communicate it."

Innovation and advertising are the two strongest marketing levers for organic growth, and they work best funded together.

Before you split a growth budget, this matters: pooling decades of studies, innovation is the strongest driver of organic growth among marketing levers, and advertising the second strongest. Read together, the evidence says value created through innovation still needs advertising to communicate it. Fund both, not one instead of the other.

Data chart

Innovation drives organic growth more than any other marketing lever

Innovation0.60Advertising0.38Interorganizational Networks0.26 (n.s.)Market Orientation0.20 (n.s.)

Innovation is the strongest marketing lever for organic growth, with advertising next; the rest are not reliable effects on their own.

Action guide

  1. Fund innovation and advertising together, not as substitutes.Since innovation drives organic growth more strongly than any other marketing lever and advertising is next.
  2. Weight where you compete toward stable, less volatile markets.Because market volatility has a reliable, sizeable drag on organic growth.
  3. Require internal and vendor growth models to include marketing factors.Since leaving them out distorts the estimates for eight of eleven drivers.
  4. Pressure-test US-based innovation evidence before assuming it transfers abroad.Because innovation's growth payoff drops sharply outside the USA.
  5. Treat firm scale as a possible aid to organic growth, not a brake.Given the reliable positive effect for firm size in this evidence.

Evidence

  • Among marketing levers, innovation drives organic growth most strongly; advertising is the next strongest.
  • Older firms tend to grow more slowly; firm age has the single most negative effect on growth of any factor studied.
  • Larger firms show a reliable positive effect on growth, countering the view that scale slows growth.
  • Volatile, fast-changing markets hold back growth; heavy competition also drags on growth, but that effect is small and not a reliable one.
  • Innovation's payoff for growth appears larger in the US than outside it.
  • Leaving marketing factors out of a growth model distorts the estimates for eight of the eleven drivers studied.

Key takeaway

For organic growth, innovate first and advertise to capitalize on it; the two levers reinforce each other.

Source

Bahadir, S. C., Bharadwaj, S., & Parzen, M. (2009). A meta-analysis of the determinants of organic sales growth. International Journal of Research in Marketing, 26(4), 263–275. https://doi.org/10.1016/j.ijresmar.2009.06.003

Read the paper ↗

Evidence strength: Strong (a pooling of studies covering 1,460 growth-responsiveness estimates across 11 drivers, studies 1960–2008). These are responsiveness figures aggregated across decades and industries, not firm-specific returns, and the magnitudes depend on how each underlying study was measured.