Joanna Seddon, Managing Partner, Presciant
I’ve been arguing for years that companies are missing out on growth opportunities by neglecting to link brand and marketing to money (see my white paper, Brand in the Boardroom). Now, finally, the financial value of brands is being taken more seriously by the marketing community, led by MASB, together with the ANA. We at Presciant are thrilled, and delighted to be involved in the initiative. MASB needs more brands to pilot a new approach. We hope that you will participate!
People invest in brand and marketing because this makes money. Brand and marketing investment impacts all four traditional drivers of cash flows: volume, price, mix and costs. It pushes the demand curve upwards. Most importantly of all, it adds a fifth, non-traditional driver: optionality, the creation of preference over competitor offerings, which propels sustainable and longer term financial value growth.
Measuring this is critical. The brand value created by marketing should be a KPI companies live by and central to how managers are rewarded. It should be obvious. But it’s not.
Brand valuation is bogged down in antiquated accounting practices, remarkably little used, and when it is used, often misused. In most countries, brand valuation can only be officially recorded at the time of an acquisition. Brands are usually undervalued on purpose, for fear of incurring later impairment costs, in case of the brand being sold or absorbed. Brand value can be lowered, but never raised.
The Marketing Accountability Standards Board, MASB, is taking this on, supported by the ANA and its CMO Council. The first thing they discovered was a ‘false positive’. When surveyed, a quarter of CMOs claim they have done brand valuation. It’s not true. On investigation, almost none of them have. Marketers confuse valuation with other types of measurement, such as brand health tracking, NPS, customer satisfaction and loyalty scores. These metrics are useful, and can feed into a brand valuation, but on their own have nothing financial about them.
Over the past 18 months or so, the MASB team of academic, financial, and brand and marketing experts has put together a best practices approach to measuring the financial value created by brand. It’s not rocket science. The fact that if you invest in brand and marketing it can accelerate growth and make you money is pretty obvious. The drivers through which brands create value are also well known (see above).
MASB , with input from its partners and board members (including our firm, Presciant) have created a brand valuation approach that is simple for all companies to adopt and repeat on an annual basis. It is designed to become a foundational measurement tool that does two things:
- Quantify how good a job the company has done in putting its brand to work to grow revenues, profits and financial value and deliver a simple set of KPIs
- Be a decision-making tool. Identify what actions the company should take to increase the value it gets from its brand assets, how big its marketing budget should be, and what ROI can be expected.
MASB is already piloting this and needs more brands to volunteer for an initial valuation, tailored to one or more individual brand or business. The process is quick, easy and low-cost. The work is done by experts.
I’m a MASB member, representing Presciant. If you want to know more, please get in touch with me or email email@example.com
For the full MASB white paper, The Financial Value of Brands Imperative, please click here.
For more information, please visit: www.presciant.com